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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) DECEMBER 30, 1996
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CROWN NORTHCORP, INC.
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(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-22936 22-3172740
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1251 DUBLIN ROAD, COLUMBUS, OHIO 43215
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (614) 488-1169
-----------------------------
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective December 31, 1996, Crown NorthCorp, Inc. (the "Company")
entered into a Stock Purchase Agreement with National City Corporation
("NCC") (the "Merchants Agreement") whereby Crown, through CNC/DUS
Newco, Inc., a Delaware corporation and a wholly owned subsidiary of
Crown ("Newco"), agreed to purchase from NCC all of the issued and
outstanding stock of Merchants Mortgage Corporation, an Indiana
corporation and a wholly owned subsidiary of NCC ("Merchants"). The
Merchants Agreement was amended by an agreement dated January 9, 1997
(the "Merchants Amendment"). The Merchants Agreement and the Merchants
Amendment are attached hereto as Exhibits 1 and 2 respectively and
incorporated by reference herein.
Effective May 22, 1996, the Company entered into a Stock Purchase
Agreement with the stockholders of Reinlein/Lieser/McGee Holding
Corporation, a Missouri corporation ("Holding") and R/L/M Employee
Benefit Corporation, a Missouri corporation ("Benefit") (the "R/L/M
Agreement") whereby Crown, through Newco, agreed to purchase all of the
issued and outstanding stock of both Holding and Benefit. The
stockholders of both Holding and Benefit were Karl H. Reinlein, George
F. Lieser and John R. McGee, both individually and in his capacity as
trustee (collectively, the "R/L/M Stockholders"). Holding and Benefit
were the two general partners of Reinlein/Lieser/McGee, a Missouri
general partnership ("R/L/M"). The R/L/M Agreement was amended by an
agreement dated January 9, 1997 (the "R/L/M Amendment"). The R/L/M
Agreement and the R/L/M Amendment are attached hereto as Exhibits 3 and
4 respectively and incorporated by reference herein.
Merchants and R/L/M serviced multifamily mortgage loans primarily for
the Delegated Underwriting and Servicing Program (the "DUS Program")
administered by the Federal National Mortgage Association ("FNMA").
Merchants, Holding, Benefit and R/L/M are sometimes collectively
referred to herein as the "Acquired Entities." The transaction
contemplated by the Merchants Agreement, as amended, was consummated
December 31, 1996. The transaction contemplated by the R/L/M Agreement,
as amended, was consummated January 10, 1997. Following the Merchants
and R/L/M transactions, Merchants, Holding, Benefit and Newco were
merged with and into the Company.
Pursuant to the Merchants Agreement, as amended, in exchange for all of
the issued and outstanding stock of Merchants, NCC received from the
Company (i) $11,048,898 in cash, (ii) 2,000 shares of the Company's
Series B Preferred Stock (the "Series B Preferred") and (iii) 500
shares of the Company's Series C Convertible Preferred Stock (the
"Series C Preferred"). As is further set forth in the Merchants
Amendment, after accounting for the cash acquired from Merchants and
cash collateralizing the Series B Preferred Stock, the Company received
$1,298,652 in cash upon the consummation of the Merchants transaction.
The principle followed in determining the amount of
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consideration under the Merchants Agreement, as amended, was arm's
length negotiation.
As is further set forth in the terms for the Series B Preferred Stock
(appearing on Exhibit A to the Merchants Agreement), the 2,000 shares
of Series B Preferred Stock have a liquidation preference of $1,000 per
share. Five hundred of these shares are to be redeemed on December 31,
1997, 600 shares on December 31, 1998 and 900 shares on December 31,
1998 provided that the Company shall not be required to redeem any
shares of Series B Preferred Stock to the extent that, as a result of
the redemption, the Company would fail to satisfy the net worth
requirements FNMA has set for the Company in conjunction with the DUS
Program. The Company has deposited $2,000,000 in a non-interest bearing
account at National City Bank of Indiana to secure the Company's
obligations to redeem the Series B Preferred Stock. Tucker Holding
Company, Ltd. ("Tucker"), an Ohio limited liability company which holds
approximately 48% of the common stock of the Company, has pledged stock
of the Company owned by Tucker to further secure the redemption of the
Series B Preferred Stock. No dividends are payable on the Series B
Preferred Stock.
As is further set forth in the terms for the Series C Preferred Stock
(appearing on Exhibit B to the Merchants Agreement), the 500 shares of
Series C Preferred Stock have a liquidation preference of $1,000 per
share and carries a non-cumulative dividend of 8% of the liquidation
preference per annum. Each share of the Series C Preferred Stock is
convertible into 666.67 shares of the common stock of the Company at
such time as the average price of the Company's common stock over a
thirty-day period equals or exceeds $1.50 per share. If the holder does
not so convert to the Company's common stock, the Company may redeem
shares of the Series C Preferred Stock at a redemption price equal to
the liquidation preference plus any unpaid dividends thereon. If not
previously redeemed, one-half of the outstanding shares of the Series C
Preferred Stock is redeemable on December 31, 2001; the remainder is
redeemable on December 31, 2002.
Pursuant to the R/L/M Agreement, as amended, in exchange for all of the
issued and outstanding stock of both Holding and Benefit, the R/L/M
Stockholders received from the Company $1,129,350 in cash. Two hundred
thousand dollars of this consideration has been placed in escrow and is
recoverable by the Company to the extent that, on or before December
31, 2000, the Company experiences losses in excess of $100,000 with
respect to certain assets identified in the R/L/M Agreement. The
principle followed in determining the amount of consideration under the
R/L/M Agreement, as amended, was arm's length negotiation.
The Company obtained the $1,881,286 of funds required to acquire the
Acquired Entities through loans from The Fifth Third Bank of Columbus
("Fifth Third"). A $500,000 loan from Fifth Third is evidenced by a
variable rate cognovit promissory note dated January 10, 1997, a copy
of which is attached hereto and incorporated by reference herein as
Exhibit 5. This loan bears interest at Fifth Third's prime
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commercial rate, has a default rate of prime plus 500 basis points,
matures February 1, 2002, requires monthly payments of interest only
through February 1, 1998 and monthly payments of principal and interest
for the remainder of the term and a balloon payment of $100,000 at the
end of the term. Repayment of this note is secured by a cash security
agreement, a copy of which is attached hereto and incorporated by
reference herein as Exhibit 6. An additional $1,381,286 loan from Fifth
Third is evidenced by a variable rate cognovit promissory note dated
January 10, 1997, a copy of which is attached hereto and incorporated
by reference herein as Exhibit 7. This loan bears interest at Fifth
Third's prime commercial rate plus fifty basis points, has a default
rate of prime plus 500 basis points, matures February 1, 2002, and
requires equal monthly payments of principal and interest commencing
March 1, 1997. Repayment of this note is secured by a non-cash
collateral security agreement, a copy of which is attached hereto and
incorporated by reference herein as Exhibit 8.
On behalf of the Company, Fifth Third has also provided its letter of
credit in the initial amount of $2,257,387 (the "Fifth Third LOC"). The
Fifth Third LOC names FNMA as the beneficiary and collateralizes the
Company's obligations to FNMA under the DUS Program. In conjunction
with the Fifth Third LOC, the Company has executed and delivered to
Fifth Third a variable rate cognovit promissory note (letter of credit
demand note) dated January 10, 1997 in the amount of $2,257,387, a copy
of which is attached hereto and incorporated by reference herein as
Exhibit 9. Repayment of this note is secured by an LC Security
Agreement, a copy of which is attached hereto and incorporated by
reference herein as Exhibit 10.
ITEM 5. OTHER EVENTS
On December 30, 1996, the Company issued 576,924 shares of the common
stock of the Company to Asdale Limited ("Asdale"). This issuance
increased the number of outstanding shares of the Company's common
stock to 8,776,723 shares. The Company received from Asdale in
consideration for these shares the sum of $375,000, representing $0.65
per share, payable as follows: $236,393 to retire Asdale's loan
($225,000 in principal plus accrued interest) to the Company's European
subsidiary and $138,607 in cash.
In conjunction with the issuance discussed in the preceding paragraph,
the Company has entered into a registration rights agreement with
Asdale, a copy of which agreement appears on Exhibit 11 attached hereto
and incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
Prior to the merger, the financial statements of the Acquired
Entities were not in the format required by Regulation S-B. The Company
has determined that it is impracticable to provide with this Report the
required financial statements of the
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Acquired Entities prepared in accordance with Regulation S-B. The
Company will file the required financial statements by amendment to
this Report as soon as practicable but no later than March 25, 1997.
(b) Pro Forma Financial Information
The Company has determined that it is impracticable to provide
the required pro forma financial statements with this Report. The
Company will file such pro forma financial statements by amendment to
this Report as soon as practicable but no later than March 25, 1997.
(c) Exhibits
1. Stock Purchase Agreement dated December 31, 1996 by and among
Crown NorthCorp, Inc., CNC/DUS Newco, Inc. and National City
Corporation.
2. Amendment to Stock Purchase Agreement dated January 9, 1997 by
and among Crown NorthCorp, Inc., CNC/DUS Newco, Inc. and
National City Corporation.
3. Stock Purchase Agreement dated May 22, 1996 by and among Crown
NorthCorp, Inc., CNC/DUS Newco, Inc., Reinlein/Lieser/McGee
Holding Corporation, R/L/M Employee Benefit Corporation, Karl
H. Reinlein, George F. Lieser and John R. McGee.
4. Amendment to Stock Purchase Agreement dated January 9, 1997 by
and among Crown NorthCorp, Inc., CNC/DUS Newco, Inc.,
Reinlein/Lieser/McGee Holding Corporation, R/L/M Employee
Benefit Corporation, Karl H. Reinlein, George F. Lieser and
John R. McGee.
5. Promissory note, dated January 10, 1997, by the Crown
NorthCorp, Inc. in favor of The Fifth Third Bank of Columbus.
6. Cash security agreement, dated January 10, 1997, by the Crown
NorthCorp, Inc. in favor of The Fifth Third Bank of Columbus.
7. Promissory note, dated January 10, 1997, by the Crown
NorthCorp, Inc. in favor of The Fifth Third Bank of Columbus.
8. Non-cash collateral security agreement, dated January 10,
1997, by the Crown NorthCorp, Inc. in favor of The Fifth Third
Bank of Columbus.
9. Letter of credit demand note, dated January 10, 1997, by Crown
NorthCorp, Inc. in favor of The Fifth Third Bank of Columbus.
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10. LC Security Agreement, dated January 10, 1997, by Crown
NorthCorp, Inc. in favor of The Fifth Third Bank of Columbus.
11. Registration Rights Agreement, dated December 30, 1996,
between Crown NorthCorp, Inc. and Asdale Limited.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CROWN NORTHCORP, INC.
By: /s/ Stephen W. Brown
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Stephen W. Brown
Secretary
Date: January 24, 1997
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INDEX TO EXHIBITS
1. Stock Purchase Agreement dated December 31, 1996 by and among
Crown NorthCorp, Inc., CNC/DUS Newco, Inc. and National City
Corporation.
2. Amendment to Stock Purchase Agreement dated January 9, 1997 by
and among Crown NorthCorp, Inc., CNC/DUS Newco, Inc. and
National City Corporation.
3. Stock Purchase Agreement dated May 22, 1996 by and among Crown
NorthCorp, Inc., CNC/DUS Newco, Inc., Reinlein/Lieser/McGee
Holding Corporation, R/L/M Employee Benefit Corporation, Karl
H. Reinlein, George F. Lieser and John R. McGee.
4. Amendment to Stock Purchase Agreement dated January 9, 1997 by
and among Crown NorthCorp, Inc., CNC/DUS Newco, Inc.,
Reinlein/Lieser/McGee Holding Corporation, R/L/M Employee
Benefit Corporation, Karl H. Reinlein, George F. Lieser and
John R. McGee.
5. Promissory note, dated January 10, 1997, by the Crown
NorthCorp, Inc. in favor of The Fifth Third Bank of Columbus.
6. Cash security agreement, dated January 10, 1997, by the Crown
NorthCorp, Inc. in favor of The Fifth Third Bank of Columbus.
7. Promissory note, dated January 10, 1997, by the Crown
NorthCorp, Inc. in favor of The Fifth Third Bank of Columbus.
8. Non-cash collateral security agreement, dated January 10,
1997, by the Crown NorthCorp, Inc. in favor of The Fifth Third
Bank of Columbus.
9. Letter of credit demand note, dated January 10, 1997, by Crown
NorthCorp, Inc. in favor of The Fifth Third Bank of Columbus.
10. LC Security Agreement, dated January 10, 1997, by Crown
NorthCorp, Inc. in favor of The Fifth Third Bank of Columbus.
11. Registration Rights Agreement, dated December 30, 1996,
between Crown NorthCorp, Inc. and Asdale Limited.
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EXHIBIT 1
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of December 31, 1996 by and among Crown NorthCorp, Inc., a Delaware
corporation ("Crown"), CNC/DUS Newco, Inc., a Delaware corporation ("Newco") and
National City Corporation, a Delaware corporation ("NCC").
BACKGROUND INFORMATION
A. Crown owns all of the issued and outstanding capital stock of Newco.
B. NCC currently owns all of the issued and outstanding common stock
(the "Shares") of Merchants Mortgage Corporation, an Indiana corporation
("Merchants").
C. The parties hereto want Newco to acquire the Shares on the terms and
conditions set forth in this Agreement (the "Transaction"). In exchange for the
Shares, NCC will receive cash and stock as described in this Agreement.
D. Crown, as the sole stockholder of Newco and the directors of Newco
have approved the Transaction pursuant and subject to this Agreement.
THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"Affiliate": when used with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with the Person specified.
"Annual Gross Servicing Revenue": as described in Section 2.03(d).
"Bank Regulatory Authority": a Regulatory Authority having jurisdiction
over NCC by reason of its status as a bank holding company.
"Burdensome Condition": any action taken, or credibly threatened, by
any Regulatory Authority or other Person to investigate or challenge the
legality of the Transaction under any
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Federal or state law or that would otherwise deprive any party of any material
benefit under this Agreement, which action may include (i) the pendency of a
governmental investigation (formal or informal), (ii) the institution of
litigation or the threat thereof, (iii) an order by a Regulatory Authority of
competent jurisdiction preventing consummation of the Transaction or placing any
material conditions or limitations upon such consummation or (iv) the issuance
of any subpoena, civil investigative demand or other request for documents or
information that is unreasonably burdensome in the reasonable judgment of the
applicable person.
"Closing": the closing of the Transaction set forth in Article II of
the Agreement.
"Closing Date": the date on which the Closing shall occur.
"Contract" means any unexpired agreement, license, lease for real
property or personal property, permit, arrangement, commitment, understanding or
contract, whether written or oral, expressed or implied, contingent, fixed or
otherwise.
"Custodian": State Street Bank and Trust Company, a Massachusetts
banking corporation.
"DUS": FNMA's Delegated Underwriting and Servicing mortgage purchase
product line, as described in the DUS Guide.
"DUS Contract": the Delegated Underwriting and Servicing Addendum to
Mortgage Selling and Servicing Contract entered into between FNMA and Merchants
effective as of March 1, 1994, which is an amendment and restatement of a
Delegated Underwriting and Servicing Addendum dated May 25, 1988.
"DUS Guide": FNMA's Delegated Underwriting and Servicing Guide, as
amended from time to time.
"DUS Loss Sharing Agreement": the Delegated Underwriting and Servicing
Master Loss Sharing Agreement between FNMA and Merchants effective as of March
2, 1994 (executed by FNMA as of March 1, 1994 but effective one day thereafter),
which is an amendment and restatement of various prior DUS Loss Sharing
Agreements.
"DUS Reserve Agreement": the Delegated Underwriting and Servicing
Reserve Agreement among FNMA, Merchants and the Custodian effective as of March
1, 1994, which is an amendment and restatement of a prior DUS Reserve Agreement
of unknown date.
"ERISA": the Employment Retirement Income Security Act of 1974, as
amended.
"FNMA": the Federal National Mortgage Association, a Regulatory
Authority.
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"FRB": the Federal Reserve Board, a Regulatory Authority.
"GAAP": generally accepted accounting principles.
"GNMA": the Government National Mortgage Association, a Regulatory
Authority.
"HUD": the Department of Housing and Urban Development, a Regulatory
Authority.
"IRC": the Internal Revenue Code of 1986, as amended.
"Loan Servicing Portfolio": as itemized on Schedule 2.03 and serviced
by Merchants.
"Material Contract": is one potentially representing at least 5% or
more of annual revenues, excluding payoffs in the Loan Servicing Portfolio or
fluctuations of escrows in the normal course of business. Any reference to any
fact, event, change or effect being "material" with respect to any party shall
mean a fact, event, change or effect that is or, insofar as can reasonably be
foreseen, will be material to the business, properties, assets, liabilities,
financial condition or results of operations of such party taken as a whole.
"Net Residential Loans": as described in Section 4.02(d).
"Person": shall mean any individual, firm, corporation, partnership,
trust, joint venture, Regulatory Authority or other entity, and shall include
such successors or assigns of such entity as are permitted pursuant to the terms
of this Agreement.
"Purchase Price": the sum in Section 2.03 hereof.
"Regulatory Approval": any approval of, or declaration, notice or
filing with (in cases where there is not specific approval to be obtained and
such declaration, notice or filing is all that is required), any Regulatory
Authority.
"Regulatory Authority": any administrative agency, commission or other
governmental or quasi-governmental agency or instrumentality of competent
jurisdiction.
"Series B Preferred Stock": as described in Section 2.03(b).
"Series C Convertible Preferred Stock": as described in Section
2.03(c).
Section 1.02 Other Defined Terms. Unless otherwise defined in the
Agreement, all capitalized terms not specifically defined in Section 1.01 above
shall have the meanings ascribed to them in the DUS Contract.
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ARTICLE II
PURCHASE, SALE AND EXCHANGE OF THE SHARES
Section 2.01 Purchase and Sale of the Shares. At the Closing, NCC shall
sell to Newco and Newco shall purchase from NCC the Shares in exchange for (i)
$11,048,898 cash, (ii) the Series B Preferred Stock and (iii) the Series C
Convertible Preferred Stock (collectively, the "Purchase Price"), subject to
adjustments as set forth in Section 2.03(d) and payable as set forth in Section
2.04 hereof.
Section 2.02 Closing Date. The Closing Date shall be December 31, 1996
or such other date established by the parties in accordance with Section 7.09
hereof following the satisfaction or waiver of the last of the conditions set
forth in Article III to be met to the satisfaction of, or waived by, each party.
The Closing shall occur in the manner agreed to by the parties.
Section 2.03 Purchase Price; Adjustments. In consideration of the
Transaction, Crown and Newco shall pay to NCC the Purchase Price, subject to
adjustment as set forth in subparagraph (d) below, as follows:
(a) Cash at Closing. $11,048,898
(b) Issuance of Series B Preferred Stock. Crown shall issue NCC 2,000
shares of Crown's Series B preferred stock, which shall have the certain rights
and preferences set forth in Exhibit A attached hereto and incorporated herein
by reference. In conjunction with the issuance of the Series B Preferred Stock,
a cash collateral account assignment shall be issued at Closing to NCC in the
form appearing on Exhibit A-1 attached hereto and incorporated by reference
herein. With respect to an "Offering," as defined in Exhibit A, to the extent
and in the manner permitted by applicable securities laws, Crown will keep the
holders of the Series B Preferred Stock apprised of the status and anticipated
closing date of an Offering. Further, for so long as any of the Series B
Preferred Stock remains outstanding, without having obtained the prior written
consent of the holders of two-thirds of the outstanding shares of the Series B
Preferred Stock, Crown will not redeem any common or preferred stock of Crown,
in whole or in part, except for redemptions of up to 300 shares of Crown's
common stock (adjusted, as necessary, for any stock dividends, subdivisions,
combinations, capital reorganizations or reclassifications) held by a particular
holder. Crown agrees not to issue any additional shares of Series B Preferred
Stock without the prior written consent of the holders of two-thirds of the
outstanding shares of the Series B Preferred Stock.
(c) Issuance of Series C Convertible Preferred Stock. Crown shall issue
NCC 500 shares of Crown's Series C Convertible Preferred Stock, which shall have
the certain rights and preferences set forth in Exhibit B attached hereto and
incorporated herein by reference. Crown agrees not to issue any additional
shares of Series C Convertible Preferred Stock
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without the prior written consent of the holders of two-thirds of the
outstanding shares of the Series C Convertible Preferred Stock
(d) Adjustments. (i) The Purchase Price shall be adjusted by the
written agreement of the parties hereto to reflect loans in the Loan Servicing
Portfolio which are paid in full prior to the Closing as provided in
subparagraph (ii) below. The Purchase Price shall not be adjusted by reason of
NCC retaining the Net Residential Loans as provided in Section 4.02(d) hereof.
(ii) Appearing on Schedule 2.03 is the Annual Gross Servicing Revenue
attributable to each loan in the Loan Servicing Portfolio. In making the
adjustment contemplated by Section 2.03(d)(i), the cash at Closing (as provided
in Section 2.03(a)) shall be reduced by the product of 3.12 times the aggregate
Annual Gross Servicing Revenue attributable to the loans paid in full prior to
Closing.
Section 2.04 Payment of Purchase Price. Crown shall make or cause Newco
to make the payments and stock issuances provided in Section 2.03. All cash
payments shall be in immediately available funds by wire transfer to the account
of NCC.
Section 2.05 Deliveries at the Closing. The following deliveries
required under this Agreement shall be made concurrently at the Closing:
(a) Crown and Newco to NCC. The cash portion of the Purchase Price in
the manner set forth in Sections 2.03 and 2.04 hereof.
(b) Crown to NCC. Stock certificates for the Series B Preferred Stock
and for the Series C Convertible Preferred Stock.
(c) NCC to Newco. Stock certificates for the Shares, duly endorsed in
blank or accompanied by stock powers duly executed in blank with signatures
guaranteed and any other documents required to transfer title to the Shares to
Newco, free and clear of all liens, restrictions, encumbrances, charges, adverse
interests and claims other than those on sale or distribution imposed by
compliance with applicable securities law.
Section 2.06 Partial Repayment of Purchase Price. Notwithstanding any
other provisions of this Article II, NCC agrees to repay to Newco that portion
of the Purchase Price attributable to loans in the Loan Servicing Portfolio for
which payment in full is received on or before the forty-fifth day following
the Closing Date. Upon receipt of a loan repayment described in the preceding
sentence, Newco shall present NCC with a statement of the partial repayment of
the Purchase Price due computed by multiplying by 3.12 the Annual Gross
Servicing Revenue of loans repaid in the manner described in this Section 2.06
and subtracting from that product prepayment or other fees received by Newco in
conjunction with the repayment. Statements shall be payable by NCC within thirty
days after receipt. Any balances unpaid after thirty days shall accrue interest
at the rate of 18% per annum from such thirtieth
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day.
ARTICLE III
CONDITIONS TO CLOSING
Section 3.01 Conditions to Each Party's Obligations. The respective
obligation of each party to consummate the transactions to be performed by it
under this Agreement is subject to the satisfaction or waiver, as of the Closing
Date, of the following conditions:
(a) Performance. Each other party shall have performed or complied with
in all material respects their respective covenants and agreements contained
herein.
(b) Representation. Each representation and warranty made by each other
party in this Agreement shall be true and correct in all material respects on
the Closing Date as if made on and as of the Closing Date.
(c) Legality. No change shall have occurred in any law, rule or
regulation that would prohibit consummation of the Transaction.
(d) Litigation; Burdensome Condition. No court, agency or other
authority shall have issued any order, decree or judgment to set aside,
restrain, enjoin or prevent the consummation of the Transaction or to impose a
Burdensome Condition. No action, suit or proceeding before any court or any
Regulatory Authority shall have been commenced, and no action, suit or
proceeding by any Regulatory Authority shall have been threatened, against any
of the parties to this Agreement, or any of the principals, officers or
directors of any of them, seeking to restrain, prevent or materially change the
Transaction or questioning the validity or legality of the Transaction or
seeking damages in connection with the consummation of the Transaction.
(e) Proceedings Satisfactory. All corporate and legal proceedings
required to be taken in connection with the consummation of the Transaction and
all documents and papers relating to the consummation of the Transaction shall
be reasonably satisfactory in form and substance to each party and its counsel.
(f) Closing Documents. Each party shall have received any and all
certificates or other closing documents required under this Agreement or
reasonably requested by such party and such documents shall be reasonably
satisfactory to the parties.
(g) Regulatory Approvals. All Regulatory Approvals necessary for the
consummation of the Transaction shall have been obtained or made and all waiting
periods imposed by any Regulatory Authority or law shall have expired. Without
limiting the generality of the preceding sentence, Regulatory Approvals shall
include:
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(i) FNMA. Newco receiving evidence satisfactory to Newco, in its sole
discretion, that FNMA has granted DUS loan origination and servicing rights to
Newco as of the Closing Date on terms acceptable to Newco. Newco anticipates
that such satisfactory evidence may include but not be limited to (A) an
addendum or amendment to the DUS Contract mutually satisfactory to FNMA and
Newco, (B) FNMA's written consent to the assignment to Newco of any and all
right, title and interest that Merchants has or may have in and to the DUS Loss
Sharing Agreement, (C) FNMA's written consent to the assignment to Newco of any
and all right, title and interest that either Merchants or NCC has or may have
in and to the DUS Reserve Agreement, including but not limited to rights to
"Collateral," as that term is defined in the DUS Reserve Agreement and (D) a
certification from the Custodian acknowledging the matters set forth in the
preceding clause (C) and stating that it is now the Collateral for the benefit
of Newco and FNMA subject to the terms of the DUS Reserve Agreement.
(ii) HUD. Newco receiving evidence satisfactory to Newco, in its sole
discretion, that HUD has approved the transfer to Newco as of the Closing Date
of any and all loan origination and servicing rights granted by HUD to
Merchants.
(iii) Bank Regulatory Authority. NCC receiving evidence satisfactory to
NCC, in its sole discretion, that it has received all Regulatory Approvals from
Bank Regulatory Authorities authorizing NCC to enter into the Transaction.
(iv) FNMA Conditional Approval. Without limiting the generality of
Section 3.01(i), Crown and Newco satisfying, prior to Closing, all of the
conditions set forth in a letter from FNMA to Crown dated October 17, 1996
conditionally approving both the Transaction and a separate transaction.
(h) Receipt of Regulatory Approvals. Promptly upon receipt of any
Regulatory Approval, Crown and Newco on the one hand and NCC on the other shall
(i) advise the other party of the receipt of a Regulatory Approval and (ii)
cooperate with the other party to confirm with the applicable Regulatory
Authority, to the satisfaction of such other party, that a Regulatory Approval
applicable to one party (Crown and Newco being considered one party for such
purpose) imposes no ongoing liability or responsibility on the other party
and/or removes any such ongoing liability or responsibility, including, but not
limited to, termination of the $2,500,000 letter of credit issued by NBD Bank,
N.A. at the request of Merchants in favor of FNMA.
Section 3.02 Conditions to Newco's Obligations. Newco's obligation to
consummate the Transaction is subject to the satisfaction (or waiver by Newco)
on or prior to the Closing Date of the following additional conditions:
(a) NCC Secretarial Certificates. Newco shall have received reasonably
satisfactory secretarial certificates evidencing the authority of the
appropriate NCC officer to execute and deliver this Agreement and any other
agreements referenced herein to which NCC is a
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signatory and the consummation of the Transaction.
(b) Certificates of Good Standing. Newco shall have received
certificates of the Secretary of State of Indiana, dated a recent date,
certifying as to the legal existence and good standing of Merchants as well as
similar certificates from those foreign jurisdictions in which Merchants is
qualified to transact business as set forth on Schedule 4.02.
(c) Opinion of Counsel. Newco shall have received an opinion of
in-house counsel for NCC in form and substance reasonably satisfactory to
counsel for Newco.
(d) No Material Adverse Change. There shall have occurred no material
adverse change (whether or not covered by insurance) in the business, operations
or financial condition of Merchants since March 31, 1996. Without limiting the
generality of the foregoing, as of the Closing Date, Merchants' Total
Shareholders' Equity (reflected on the Financial Statements, as hereinafter
defined) must equal $9,948,000.
(e) Tax Treatment. NCC, Crown and Newco shall have executed documents
satisfactory to Newco electing to treat the Transaction in accordance with
Section 338(h)(10) of the IRC (the "Section 338(h)(10) Election").
(f) Resignations. Changes in Business Records. Newco shall have
received the resignations of all of the officers and directors of Merchants (or
the Board of Directors of Merchants shall have removed such officers and
directors) as well as evidence satisfactory to Newco that all of Merchants'
files, systems and similar business records have been changed to reflect the
custody and control of Newco of those items. At the Closing, NCC will cause
Merchants to transfer the funds in its bank accounts to an account(s) designated
by Newco.
Section 3.03 Conditions to Obligations of NCC. The obligations of NCC
to consummate the Transaction is subject to the satisfaction (or waiver by NCC)
on or prior to the Closing Date of the following additional conditions:
(a) Resolutions. NCC shall have received certified copies of
resolutions of the Board of Directors and stockholder of Newco and the Board of
Directors of Crown authorizing the execution, delivery and performance of this
Agreement and any other agreements referenced herein to which Newco or Crown,
respectively, is a signatory and the consummation of the Transaction.
(b) Opinion of Counsel. NCC shall have received an opinion of in-house
counsel for Crown and Newco in form and substance reasonably satisfactory to
counsel for NCC.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of NCC with respect to the
NCC. NCC hereby makes each of the following representations and warranties to
Crown and Newco:
(a) Title to Stock. At the Closing, NCC shall be the lawful owner of
the Shares, free and clear of all liens, restrictions, encumbrances, charges,
adverse interests and claims, other than those on sale or distribution imposed
by compliance with applicable securities law, with full power, right, and
authority to sell the Shares pursuant to this Agreement. The number of shares is
350; the Shares are evidenced by Certificate Nos. 1 and 2.
(b) Authority of NCC. This Agreement has been authorized and duly
executed and delivered by NCC and this Agreement constitutes the legal, valid
and binding obligation of NCC enforceable in accordance with its terms, except
insofar as enforceability is limited by applicable bankruptcy, creditor,
insolvency or other laws of similar effect and by general principles of equity.
The execution, delivery and performance of this Agreement by NCC will not
violate or conflict with any provision of any charter document, by-law, contract
or agreement to which NCC is subject. NCC is not a party to, or subject to, or
bound by, any litigation, judgment, injunction, order or decree of any court or
governmental authority, or any arbitration award which would restrict the
performance by NCC of this Agreement or such other documents or instruments to
be executed or delivered by NCC in connection herewith which, in any such case,
would have a material adverse effect upon the transactions contemplated
hereunder.
(c) Transactions or Arrangements. Except as set forth on Schedule 4.01
and the agreements and transactions entered into in connection with this
Agreement, NCC is not presently, directly or indirectly, a party to any
transaction with Merchants, currently in effect or which will be in effect after
the Closing, including without limitation: (i) any Contract, agreement,
understanding, commitment or other arrangement providing for the furnishing of
goods or services to Merchants by rental of real or personal property from or
otherwise requiring payments to NCC or any Affiliate of NCC or to any third
party for the benefit of NCC or any Affiliate of NCC; (ii) any Contract for the
disposition by sale, lease or otherwise of any loan or for the servicing or
subservicing of any loans or for the performance of mortgage servicing under any
pooling and servicing agreement (iii) any Contract, agreement, understanding,
commitment or other arrangement relating to the employment of any Person by or
on behalf of Merchants, or any bonus, deferred compensation, collective
bargaining, termination, severance, pension, profit sharing, stock option,
employee stock purchase, retirement or other employee benefit plan maintained by
either NCC or Merchants for the benefit of Merchants or any Affiliate of
Merchants; and (iv) any loans, advances, warehousing agreements or repurchase
agreements to or from Merchants.
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Section 4.02 Representations and Warranties of NCC with respect to
Merchants. NCC hereby makes each of the following representations and warranties
to Crown and Newco:
(a) Organization and Qualification. (i) Merchants is duly incorporated
and validly existing as a corporation in good standing under the laws of the
State of Indiana, and possesses corporate power and authority to own, lease and
operate its properties and conduct its business as it is now being conducted;
(ii) Merchants is duly qualified as a foreign corporation to transact business
in the jurisdictions listed on Schedule 4.02 (which constitute all of the
jurisdictions in which its ownership or leasing of properties or the conduct of
its business requires such qualification except where the failure to be so
qualified would not have a material adverse effect on Merchants) and is in good
standing in such jurisdictions; (iii) Merchants has no subsidiaries and does not
own any capital stock (except for shares of FNMA stock) or other interest in any
other corporation or entity; (iv) true, complete and correct copies of the
Articles of Incorporation and Bylaws of Merchants have been previously delivered
to Crown; and (v) the minute books and stock record books of Merchants
containing minutes of director and stockholder meetings and stock transfer and
ownership records, respectively, are complete and correct in all material
respects.
(b) Authorized Capital Stock. The total authorized, issued and
outstanding shares of capital stock of Merchants is as set forth on Schedule
4.02. The Shares are duly authorized and are fully paid and non assessable. No
warrants, options or other rights exist for the issue or purchase of the capital
stock or other securities of Merchants, and there are not any securities
convertible into or exchangeable for the capital stock or other securities of
Merchants, or any plans, contracts or commitments providing for the issuance of
or granting of rights to acquire, any capital stock of Merchants or securities
convertible into or exchangeable for the capital stock of Merchants. Merchants
is not a party to any agreement or commitment requiring it to repurchase,
reacquire or redeem any of the Shares.
(c) Financial Statements; Absence of Undisclosed Liabilities. The
financial statements of Merchants as of and for the years ended December 31,
1993, 1994 and 1995 and for the three (3) months ended March 31,1996
(collectively the "Financial Statements"), which Financial Statements have been
delivered to Newco, have been prepared in accordance with GAAP and present
fairly the financial position and the results of operations of Merchants at the
indicated dates and for the indicated periods and have been prepared in a manner
consistent with past practices of Merchants. As of the Closing Date, Merchants'
Total Shareholders' Equity, as reflected on the Financial Statements, will equal
$9,948,000. Without limiting the generality of the foregoing, except for losses
which may arise under the DUS Loss Sharing Agreement or the co-insurance program
with HUD, Merchants has no material indebtedness, liability, claim, loss
(whether caused by a borrower default or otherwise), damage, deficiency or
obligation, liquidated or unliquidated, of any nature, whether accrued,
absolute, contingent or otherwise, whether due or to become due, which is not
reflected in the Financial Statements.
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(d) Absence of Change of Events. Since March 31, 1996, Merchants has
carried on its business in the ordinary course consistent with past practice.
Since March 31, 1996, there has not been with respect to Merchants: (i) any
material adverse change in financial condition, results of operations, business
or earnings other than the Transaction; (ii) any damage, destruction or casualty
loss, whether covered by insurance or not, materially and adversely affecting
business, operations or financial condition; (iii) any change or increase in the
rate or terms of any compensation or benefits receivable by any employee except
in accordance with established payroll administration guidelines consistent with
past practice; (iv) any entry into, or modification, amendment, renewal,
extension or termination of, a Material Contract or commitment; (v) any
violation of any laws, ordinances, orders, injunctions or decrees that would
materially and adversely effect business, operations or financial condition;
(vi) any failure to collect accounts receivable or to pay accounts payable in a
manner other than consistent with past practices; (vii) any creation or
assumption of a mortgage, pledge or other lien or encumbrance upon any of the
real or personal property owned or leased which is being transferred to Crown or
Newco hereunder; (viii) any sale, assignment, lease, transfer or other
disposition of any real or personal property owned or leased except as otherwise
disclosed to Crown or Newco; (ix) any material change in accounting or
bookkeeping methods, principles or practices; (x) any borrowing of money,
including any increase or extension of purchase money credit, or any material
increase in the liabilities from those reflected in the Financial Statements;
(xi) any dividend, distribution, declaration or payment in redemption,
repurchase or otherwise with respect to the Shares, except for such dividends or
distributions that may be necessary in order to achieve Total Shareholder's
Equity of $9,948,000; (xii) any issuance of any equity or debt security; (xiii)
any gift or charitable donation; and (xiv) any cancellation of any debts owed to
Merchants or claims held by Merchants. Notwithstanding the foregoing, the
parties hereto understand and agree that, at or prior to Closing, NCC shall
withdraw from Merchants and retain for its or an Affiliate's own account Net
Residential Loans as itemized and described on Schedule 4.02.
(e) Contractual Obligations. Except as set forth on Schedule 4.02 or
pursuant to or in connection with this Agreement, Merchants is not bound by or
subject to any Contract including but not limited to: (i) Contracts for the
purchase or sale of any fixed or capital assets, or continuing Contracts for the
purchase of any materials, supplies equipment or services, or Contracts for the
sale of any service; (ii) collective bargaining agreements, employment
contracts, management or consulting agreements or any other Contracts with
employees, agents, distributors, representatives, consultants; (iii) Contracts
with any Affiliate or with NCC; (iv) Contracts to make any gift or charitable
donation; (v) Contracts with any Person to sell Shares or to effect any merger,
consolidation or other reorganization, or to enter into any future agreement
with respect to such transactions; (vi) Contracts for the borrowing of money or
issuance of any note, bond, indenture, loan, credit agreement or other evidence
of indebtedness or direct or indirect guaranty or assumption of indebtedness,
liabilities or obligations of others; (vii) Contracts for leasing personal
property; (viii) Contracts containing covenants not to compete, which otherwise
restrict any type of business or which restrict the use or dissemination of
information or the hiring of employees; (ix) Contracts for the purchase
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or sale of any loan or loan servicing; (x) Contracts or agreements with
underwriters, agents, brokers or sales representatives; or (xi) powers of
attorney or similar authorizations granted to any person.
(f) Legal Proceedings. Merchants is not (i) subject to any pending or,
to the best of its knowledge, threatened lawsuits, administrative proceedings or
governmental investigations, (ii) in default or violation of any judgment or
order of any court or administrative agency or (iii) aware, to the best of its
knowledge, of any event which could reasonably give rise to a claim not covered
by insurance policies in full force and effect.
(g) Licenses; Compliance with Law. Schedule 4.02 sets forth, as of the
date of this Agreement, the licenses, permits, approvals and other
authorizations issued by any governmental body or agency and required for the
operation of Merchants. Merchants owns or possesses all licenses,
accreditations, permits, approvals and other authorizations necessary to carry
on its business, all of which are in full force and effect, including but not
limited to a license from FNMA. Merchants has received no notice that any such
license, accreditation, permit, approval or other authorization will not be
renewed, or will be revoked or withdrawn. Merchants is in material compliance
with all rules, laws and regulations related to the operation of its business.
(h) Agreements in Full Force and Effect. Merchants: (i) has performed
all material obligations required to be performed under all Contracts to which
it is a party or is bound, (ii) is and has at all times been in compliance in
all material respects with all representations, warranties and covenants
contained in the DUS Contract, the DUS Loss Sharing Agreement and the DUS
Reserve Agreement and (iii) is aware of no notice or claim of default with
respect to any Contract to which it is a party or is bound which would have a
material adverse effect thereon. The Contracts set forth on Schedule 4.02 are
and remain in full force and effect, to the best of its knowledge.
(i) ERISA. Merchants has no employees and does not maintain, administer
or participate in any pension benefit or welfare benefit plans of any kind or
nature, except that it is a participating employer in various NCC pension and
welfare benefit plans as defined in Sections 3(2) and 3(1) of ERISA,
respectively, maintained by NCC (the "NCC Plans"). Merchants' affiliation with
the NCC Plans will be terminated at or prior to Closing and NCC shall deliver to
Newco at or prior to Closing reasonably satisfactory certifications evidencing
(A) that such termination has occurred, (B) that, to the best of NCC's
knowledge, the NCC Plans are in material compliance with applicable provisions
of ERISA, including but not limited to the full payment when due of all amounts
required to be made as contributions to the NCC Plans and (C) that Merchants has
no financial or reporting liabilities with respect to the NCC Plans.
(j) Required Consents. Except for the Regulatory Approvals described in
Section 3.01(g)(iii) hereof, NCC is not required to obtain the consent,
approval, authorization,
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declaration, filing or registration of any party in connection with the
execution, delivery and performance of this Agreement and the consummation of
the Transaction, which consent, approval, authorization, declaration, filing or
registration if not obtained or made would materially impair the ability to
consummate the Transaction, other than written notifications to FNMA, HUD, the
Government National Mortgage Association and the Indiana Housing Authority
informing them of this Transaction.
(k) Taxes. NCC has filed or caused to be filed on behalf of Merchants
all tax returns, reports and information returns (all hereinafter referred to as
"returns") required to be filed by it on or before the date hereof by any taxing
jurisdiction to which it is or has been subject. Merchants has timely paid (or
NCC has paid on its behalf) or has set up an adequate reserve on the books of
Merchants for the payment of all taxes required to be paid in respect of the
periods covered by such returns and has set up an adequate reserve on the books
of Merchants for the payment of all Taxes with respect to Merchants to be
payable in respect of periods through the Closing Date. Merchants is not
delinquent in the payment of any Tax, assessment or governmental charge. As of
the date hereof, no deficiencies for any Taxes have been proposed, asserted or
assessed against Merchants, no requests for waivers of the time to assess any
such Tax are pending, and no audits of Merchants tax returns are currently in
progress.
For the purposes of this subsection (k), "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, payroll, franchise and withholding taxes (including
any interest, penalties or additions attributable to or imposed on or with
respect to any such assessment).
(l) Title to Properties. Merchants has, or will have at Closing, good
and marketable title to all of its properties and assets (real and personal,
tangible and intangible) necessary to the conduct of its business and reflected
in the Financial Statements, which title is or will be free of any encumbrance,
lien, charge or other restriction of any kind or character.
(m) Real Property; Leases. Merchants does not own any real property in
whole or in part nor is it a party to any lease of real property, either as
lessor or lessee.
(n) Environmental Matters. Merchants (i) is and at all times has been
in material compliance with any and all federal, state or local environmental
laws, regulations and ordinances relating to the use, generation, storage,
transportation, treatment or disposal of hazardous, toxic or polluting
substances (ii) has obtained and complied in all material respects with any and
all permits or approvals required with respect to environmental matters and
(iii) is not aware, to the best of its knowledge, of any claim, demand or
notification that it is or may be responsible with respect to any environmental
remediation.
(o) Bank Accounts. Schedule 4.02 contains a list of all bank accounts
or other relationships Merchants maintains at any financial institution. No
Persons other than
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employees or agents of Merchants or NCC are authorized to transact business with
respect to these relationships. Merchants has one (1) safety deposit box
maintained at National City Bank of Indiana which it will close at or prior to
Closing.
(p) Servicing of Loan Servicing Portfolio. (i) Each loan in the Loan
Servicing Portfolio and the servicing of such loan by Merchants complies, in all
material respects, with the terms of the DUS Guide, including, without
limitation, all applicable documents relating to such loan.
(ii) The information provided by NCC or Merchants to Crown or Newco
with respect to each loan in the Loan Servicing Portfolio is true and correct in
all material respects, including without limitation, the following loan
characteristics: loan number, aggregate unpaid principal amount, maturity date,
interest rate, monthly principal and interest constant, monthly tax and
insurance constant, escrow account balances, due date of next installment
payment of principal and interest and the composition of any reserve accounts.
(iii) To the best of its knowledge, no material breach of any
representation of warranty exists with respect to any mortgage loan the
ownership of which was transferred by Merchants to any Person.
(iv) The selling and origination representations and warranties made by
Merchants to investors under any sale or servicing agreements were true and
correct in all material respects on the date made and such of those
representations and warranties which, under the applicable sale or servicing
agreement, are "continuing" representations and warranties required to be true
on and after the date such representations and warranties were made continue to
be true and correct in all material respects.
(q) Advances. Except as set forth on Schedule 4.02, neither NCC nor
Merchants has outstanding advanced funds with respect to any loan in the Loan
Servicing Portfolio. Any advances that may be made prior to Closing shall be
accounted for in the manner set forth in Section 6.07 hereof.
(r) Access to Records. NCC and Merchants have provided Crown and Newco
complete access to all books and records of Merchants and such books and records
are complete, true and accurate in all material respects.
Section 4.03 Representations and Warranties of Crown and Newco. Crown
and Newco, jointly and severally, hereby make each of the following
representations and warranties to NCC:
(a) Authority of Crown and Newco. (i) Crown and Newco are each
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and are duly qualified and in good standing in
each jurisdiction in which the nature of the business
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conducted by them or the properties owned, leased or operated by them requires
such qualification.
(ii) This Agreement has been authorized and duly executed and delivered
by both Crown and Newco and this Agreement constitutes the legal, valid and
binding obligation of both Crown and Newco enforceable in accordance with its
terms, except insofar as enforceability is limited by applicable bankruptcy,
creditor, insolvency or other laws of similar effect and by general principles
of equity. The execution, delivery and performance of this Agreement by each of
Crown and Newco will not violate or conflict with any provision of any charter
document, by-law, contract or agreement to which either Crown or Newco is
subject. Neither Crown nor Newco is a party to, or subject to, or bound by, any
litigation, judgment, injunction, order or decree of any court or governmental
authority, or any arbitration award which would restrict the performance by
either Crown or Newco of this Agreement or such other documents or instruments
to be executed or delivered by either Crown or Newco in connection herewith
which, in any such case, would have a material adverse effect upon the
transactions contemplated hereunder.
(b) Required Consents. Except for the Regulatory Approvals described in
Section 3.01(g)(i), (ii) and (iv) hereof, neither Crown nor Newco is required to
obtain the consent, approval, authorization, declaration, filing or registration
of any party in connection with the execution, delivery and performance of this
Agreement and the consummation of the Transaction, which consent, approval,
authorization, declaration, filing or registration if not obtained or made would
materially impair the ability to consummate the Transaction.
(c) Preferred Stock. As of the Closing Date, the Series B Preferred
Stock and the Series C Convertible Preferred Stock will be duly authorized and
issued and, when issued, will be fully paid and non-assessable.
(d) Payment of Purchase Price. Crown and Newco currently have, or have
made arrangements to have, the cash necessary to pay the Purchase Price at
Closing.
(e) Investment Representation. Newco is acquiring the Shares for its
own account, for investment purposes only and not with a view to, or for sale in
connection with, any distribution of the Shares, or with any present intention
of selling all or a part of the Shares.
ARTICLE V
COVENANTS PENDING CLOSING
Section 5.01 Covenants of NCC. From the date of this Agreement until
Closing or termination of this Agreement in accordance with Section 7.09 hereof,
NCC will cause Merchants to operate and conduct its business, properties and
assets only in the ordinary course and, without limiting the generality of the
foregoing, will cause Merchants to do the
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following:
(a) No Material Change. Merchants will (i) carry on its business in the
ordinary course and in accordance with past practice; (ii) will not change its
structure or capitalization, except as contemplated in Section 4.02(d)(xi)
hereof; (iii) not make or agree to make any distribution of cash or other assets
except as provided in Section 4.02(d) hereof; (iv) not sell, pledge, lease,
mortgage, encumber or otherwise dispose of any assets other than in the normal
course of business for fair value; and (v) not enter into any contracts or
commitments of any kind involving, in the aggregate, in excess of $25,000.
(b) Servicing Transfer of Loan Servicing Portfolio. To facilitate
Newco's servicing of the Loan Servicing Portfolio, at or prior to Closing,
Merchants will deliver to Newco the data and reports itemized on Schedule 5.01
in the format specified therein.
(c) Maintenance of Loan Servicing Portfolio. Except for loan servicing
actions which arise in the ordinary course of business and consistent with past
practice Merchants will not, without the written consent of Newco, take any
action with respect to any loan in the Loan Servicing Portfolio set forth on
Schedule 2.03 which constitutes a material or significant action with respect to
the loan including, but not limited to, enforcement of any collection remedies,
other than collection letters that may need to be sent for loan payments not
received within the applicable grace period, and agreement to any forbearance or
compromise. Merchants will promptly disclose to Newco any material changes or
defaults in the Loan Servicing Portfolio.
(d) Investigation. Crown, Newco and their representatives, at all
reasonable times and upon reasonable prior notice, shall have full access to all
books, contracts and records of Merchants for the purpose of familiarizing
themselves with the operation and conduct of the business.
(e) No Solicitation. No action, directly or indirectly, will be taken
to solicit indications of interest or offers for the sale of Merchants (whether
by sale of stock, assets, merger or otherwise) to anyone other than Newco.
(f) Preserve Accuracy of Representations. NCC and Merchants will
refrain from taking any action which would render any representation or warranty
contained in this Agreement inaccurate in any material respect at and as of the
Closing Date, except for changes specified in, permitted or contemplated by,
this Agreement. NCC and Merchants will disclose to Newco any changes in the
information contained in the schedules and exhibits to this Agreement which may
make any representation or warranty inaccurate in any material respect.
Section 5.02 Covenants of Crown and Newco. Crown and Newco will refrain
from taking any action which would render any representation or warranty
contained in this Agreement inaccurate in any material respect at and as of the
Closing Date, except for changes specified in, permitted or contemplated by,
this Agreement.
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Section 5.03 Pursuit of Regulatory Approvals; Advice to Other Parties.
Crown, Newco and NCC each agree to use their best efforts to promptly obtain all
Regulatory Approvals as described in Section 3.01(g).
ARTICLE VI
OTHER COVENANTS
Section 6.01 Taxes. (a) NCC and Newco agree that Merchants will be
included in the consolidated federal income tax returns filed by NCC through the
Closing Date and NCC shall be responsible for making all required payments
associated with such return. Prior to Closing, Merchants will be required to pay
NCC for all liabilities recorded as payable to NCC, including Taxes.
(b) (i) NCC shall indemnify and hold Newco harmless against any and all
Taxes, interest and penalties of the affiliated group of which NCC is the common
parent (the "NCC Affiliated Group") or of Merchants for any taxable year or
period ending on or before the Closing Date, and NCC shall be entitled to all
refunds of such Taxes. Taxes attributable to the Section 338(h)(10) Election,
Taxes attributable to intercompany transactions recognized or taken into account
by reason of the Closing (including restoration of deferrals) under the
provisions of Section 1502 of the IRC or the regulations thereunder by NCC,
Merchants, or any other member of an affiliated group including Merchants, and
properly includable in the consolidated return described in Section 6.01(a), or
any prior consolidated return of any such group (and similar Taxes under state
and local laws), and Taxes attributable to adjustments under Section 481 of the
IRC (or any predecessor of the IRC or similar provisions of other tax laws) with
respect to pre-Closing changes of accounting methods shall be treated as Taxes
for a taxable year or period ending on or before the Closing Date.
(ii) Newco and Crown shall indemnify and hold NCC harmless against any
and all Taxes, interest and penalties of or due by Merchants or any affiliated
group of which Merchants becomes a member after the Closing Date for any taxable
year or period beginning on or after the Closing Date and Newco shall be
entitled to all refunds of such Taxes.
(iii) The tax liability of Merchants for the taxable year or period
that begins before and ends after the Closing Date shall be apportioned between
Newco and NCC, with Newco responsible for Taxes attributable to the post-Closing
portion of such period and NCC responsible for Taxes attributable to the
pre-Closing portion of such period. The determination of the Taxes attributable
to each portion shall be made by assuming that Merchants had two taxable
periods, with the pre-Closing portion representing the first such period and the
post-Closing portion representing the second such period. Exemptions,
allowances or deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned as noted in Internal Revenue
Service regulations. If there is
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no reference in the regulations, then apportionment shall be on a daily basis.
If necessary, the actual tax for such taxable year or period shall be
apportioned between the two portions of such year or period in proportion to the
ratio of Taxes that would result for such portions if such portions were
separate taxable periods.
(c)(i) Newco shall file or cause to be filed when due all returns in
respect of Taxes of Merchants for taxable years or periods ending after the
Closing Date and shall pay or cause to be paid the Taxes shown to be due on any
such return. Upon notification and satisfactory documentation from Newco, NCC
shall pay to Newco the Taxes to be paid with such return that NCC is liable for
pursuant to Sections 6.01(a) and (b) of this Agreement. Newco shall be
responsible for the audits of such returns and shall be entitled to receive, at
least fifteen days in advance of any payment that it makes in connection with
the settlement or other disposition of such proceeding, that part of any such
payment for which NCC is liable under Section 6.01(b) hereof.
(ii) NCC agrees that it shall be responsible for the preparation of all
returns in respect of Taxes for Merchants for the taxable years or periods
ending on or before the Closing Date. To the extent that any such return
requires a tax payment, NCC shall deliver such return to Newco who will pay or
cause to be paid the amount due with the return and file the return with the
proper tax authority. Newco's responsibility for the payment of such Taxes shall
be limited to amounts as to which NCC has set up an adequate reserve on the
books of Merchants as provided for in Section 4.02(k). Newco also agrees that it
will be responsible for payment of all other Taxes as to which NCC has set up an
adequate reserve on the books of Merchants as provided for in Section 4.02(k).
To the extent any taxes payable hereunder by Newco exceed such reserve, NCC
shall reimburse Newco such excess amount (or such excess amount less any equity
above the $9,948,000 that may result from adjustments) prior to the due date of
such Taxes.
(iii) Newco and NCC shall cooperate with each other in the conduct of
any audit or other proceedings involving Merchants or any entity with which it
is consolidated or combined for any tax purposes. Newco and NCC agree to keep
each other fully informed of all matters relating to any audit or judicial or
administrative proceeding, including without limitation any settlement
negotiations. In the event of an audit or contest with taxing authorities
relating to periods ending on or prior to the Closing Date, NCC and Newco shall
be jointly responsible for conducting such audit or contest and all decisions
regarding such audit or contest, including settlement or selection of a forum
for contest, shall require the approval of both NCC and Newco. In the event of
an audit or contest with taxing authorities relating to periods ending
subsequent to the Closing Date, Newco shall be solely responsible for conducting
such audit or contest and shall have the right to control and make all decisions
regarding such audit or contest, including settlement or selection of a forum
for contest, so long as Newco's control and decisions do not have a legally
binding effect of increasing the tax liability of Merchants by an amount in
excess of $100,000 for any taxable period ending on or prior to the Closing
Date.
18
<PAGE> 20
(d) For the purposes of this Section 6.01, "Taxes" shall have the same
meaning as in Section 4.02(k).
Section 6.02 Section 338 Election. Newco agrees that it shall make an
election under Section 338(g) of the IRC (and any comparable election under
state or local tax law) with respect to Merchants, and Newco agrees that it
shall make, and NCC agrees that it shall cause the common parent of the NCC
affiliated group to join with Newco in making, the Section 338(h)(10) Election
with respect to Merchants (and any comparable election under state or local tax
law). Unless otherwise agreed by the parties in writing, the Section 338(h)(10)
Election shall be made in the form attached hereto as Exhibit C and the "deemed
sale price", as defined in Treasury Regulation 1.338(h)(10)-1(f) shall be
allocated for purposes of the Section 338(h)(10) Election as further provided in
Exhibit C. NCC, Crown and Newco each agree for federal, state and local income
or franchise tax purposes to report the transactions contemplated by this
Agreement, including the tax consequences of the Section 338(h)(10) Election and
any reporting required under Section 1060 of the IRC, in a manner consistent
with the information set forth in Exhibit C. The parties shall cooperate in the
execution and timely filing of the Section 338(h)(10) Election in accordance
with the provision of Section 338 of the IRC and the provisions of Treasury
Regulation Section 1.338(h)(10)-1 (and any comparable provisions of state or
local tax law) or any successor provision.
Section 6.03 Indemnification for Breaches of Representations and
Warranties. Crown and Newco, on the one hand, and NCC, on the other, shall
indemnify and hold each other harmless from any loss, claim or damage arising
out of a breach or breaches of representations and warranties set forth in
Article IV hereof.
Section 6.04 Activities Following Closing; Indemnification.
Notwithstanding anything in this Agreement to the contrary and without limiting
the generality of this Agreement, Crown and Newco acknowledge and agree that, as
a result of the Transaction, Crown and Newco shall assume all of Merchants'
obligations under any agreements between Merchants and FNMA, GNMA, HUD and the
Indiana Housing Authority, respectively, as set forth on Schedule 4.02(b) hereof
and shall assume all of the contingent liability of Merchants, existing as of
the Closing and thereafter, arising respectively out of the loss sharing
obligations of DUS (including but not limited to any guaranty fee obligations)
or the co-insurance program with HUD or the guaranty fee obligations with
respect to Merchants' Muni Mae Loan Servicing Portfolio. Crown and Newco shall
indemnify and hold NCC and its Affiliates harmless from any loss, claim or
damage arising out of such contingent liability or arising out of the conduct of
the business of Merchants after the Closing Date or any other activity of Crown,
Newco or Merchants, or their Affiliates, occurring after the Closing Date.
19
<PAGE> 21
Section 6.05 Crown Financial Information. Crown agrees to promptly
provide such financial information relating to Crown and its Affiliates as may
be reasonably requested by NCC from time to time as long as NCC owns any of the
Series B Preferred Stock or Series C Convertible Preferred Stock. Crown and NCC
agree that, for so long as Crown is a public company, this covenant shall be
satisfied by Crown delivering to NCC, as and when filed, copies of filings Crown
makes to the Securities and Exchange Commission or to other governmental
entities which are otherwise publicly available.
Section 6.06 Heritage Apartments Loan. Crown and Newco agree and
acknowledge that NCC will retain the right to pursue any collection efforts
regarding the Heritage Apartments commercial loan (which loan is not part of the
Loan Servicing Portfolio) and will be entitled to retain any amounts recovered
in such collection efforts. Crown and Newco agree to take or cause Merchants to
take any reasonable actions after the Closing (e.g. endorsing to NCC any check
made payable to Merchants) to facilitate NCC's receipt of any such collection
proceeds.
Section 6.07 Settlement of Advances. At the Closing, Newco shall
reimburse NCC for any advance described in Section 4.02(q). If Newco is not
reimbursed for such advance by the borrower within sixty (60) days after the
Closing Date, then NCC will reimburse Newco the amount of the advance upon
demand. Thereafter, if Newco comes to receive the advance from the borrower, it
shall promptly forward the same to NCC.
Section 6.08 Release of Current Merchants Letter of Credit. Immediately
after the Closing, Crown and Newco shall execute all appropriate documents and
agreements with FNMA and the Custodian with respect to the DUS program and shall
post with the Custodian collateral in the form and manner required by FNMA and
the Custodian to collateralize their obligations under the DUS program. Crown
and Newco shall immediately forward such signed documents, agreements and
collateral to the Custodian and shall immediately take and perform all other
necessary and appropriate actions to enable the Custodian to release and cancel
the original, current Merchants Irrevocable Letter of Credit No. SB-036107
issued by NBD Bank, N.A. in the amount of $2,500,000 in favor of FNMA.
Section 6.09 Performance of Certain Year-End Obligations. Crown and
Newco agree to timely prepare and file the requisite Internal Revenue Service
Forms 1098 and 1099 for 1996 relating to the borrowers of loans serviced by
Merchants during calendar year 1996 and to timely prepare and file with HUD,
FNMA and GNMA the requisite audited financial statements for Merchants for
calendar year 1996. Crown and Newco shall be responsible for all costs and
expenses involved in preparing and filing such forms and financial statements
and agree to indemnify and hold NCC and its Affiliates harmless from any loss,
claim or damage, including, but not limited to, any information reporting
penalties, arising out of Crown's and Newco's failure to timely or accurately
prepare and file such forms and financial statements. NCC, for and on behalf of
itself and its Affiliates, agrees to cooperate with Crown and Newco as they
discharge their responsibilities under this section and to provide Crown and
Newco
20
<PAGE> 22
such access to or copies of data processing reports, financial records, loan
histories or similar data as Crown or Newco may reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Notices. Any notice, request or other document to be given
under this Agreement to any party shall be effective upon receipt (or refusal of
receipt) and shall be in writing and delivered personally or sent by telecopy,
reputable overnight courier or certified or registered mail, postage prepaid to
the parties at the following addresses (or at such other address as a party may
specify to the other parties in writing as provided herein):
If to Crown or Newco:
1251 Dublin Road
Columbus, Ohio 43215
Attention: Stephen W. Brown, Secretary
Telephone: 614/488-1169
Telecopy: 614/488-9780
If to NCC:
c/o Michael C. Rechin
One National City Center
Suite 200 E
Indianapolis, Indiana 46255
Telephone: 317/267-6267
Telecopy: 317/267-8899
with a copy to:
Chief Counsel, National City Bank of Indiana
One National City Center
Suite 845E
Indianapolis, Indiana 46255
Telephone: 317/267-7669
Telecopy: 317/267-3878
Any notice sent by telecopy shall be followed by a hard copy of such notice sent
by United States first class mail, postage prepaid, or any other manner set
forth above.
21
<PAGE> 23
Section 7.02 Survival of Representations, Warranties and Covenants. The
representations and warranties contained in Article IV and the covenants
contained in Article VI shall survive the Closing for a period of three years,
provided however, that any and all representations and warranties relating to
title to the Shares shall survive the Closing in perpetuity.
Section 7.03 Entire Agreement; Amendment. This Agreement, including the
Schedules and Exhibits to this Agreement, contain the entire agreement among the
parties with respect to the transactions contemplated hereby and supersede all
prior oral and written agreements, memoranda, understandings and undertakings
among the parties relating to the subject matter of this Agreement, except for
that certain Confidentiality Agreement dated November 9, 1995 between Crown and
Merchants which shall remain in effect until the Closing, or in perpetuity in
the event this Agreement is terminated. This Agreement may be modified or
amended only by a written instrument executed by or on behalf of all of the
parties.
Section 7.04 Brokers. The parties each acknowledge and represent to one
another that no finder or broker has acted in connection with the Transaction
and no one is entitled to receive a fee from any party to this Agreement other
than NatCity Investments, Inc. who has acted on behalf of NCC and whose fee
shall be paid by NCC.
Section 7.05 Governing Law. This Agreement shall be governed by the
laws of the state of Delaware, without regard to choice of law principles.
Section 7.06 Severability. In case any provision in this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired.
Section 7.07 Construction. The section and subsection headings used in
this Agreement are for convenience of reference only, are not a part of this
Agreement and are not to affect the construction of, or be taken into
consideration in interpreting, any provision of this Agreement. As used in this
Agreement, the masculine, feminine and neuter gender each includes the other,
unless the context otherwise dictates.
Section 7.08 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
Section 7.09 Termination.
(a) Grounds for Termination. This Agreement shall terminate prior to
the Closing Date: (i) if the Closing shall not have occurred on or prior to the
earlier of (A) fifteen days following execution of this Agreement by all parties
and Newco's receipt of the Regulatory Approvals set forth in Section 3.01(g)(i)
and (ii) or (B) December 31, 1996, unless extended
22
<PAGE> 24
by mutual agreement of the parties; (ii) by consent of all the parties at any
time prior to the Closing; (iii) by either Newco or NCC in the event any of the
conditions to the Transaction of such party set forth in Article III are not met
or cannot be met; or (iv) in the case of a material breach of this Agreement
(including an anticipatory material breach) by NCC, on the one hand, or Newco or
Crown, on the other hand (NCC and Newco/Crown are referred to as "non-breaching
party" or "breaching party," as the case may be), by the non-breaching party if
such breach or anticipatory breach is not cured or resolved to the satisfaction
of the non-breaching party within thirty (30) days after receipt of written
notice of such breach or anticipatory breach by the breaching party, which
notice specifies the conduct, if any, required to cure such breach or
anticipatory breach.
(b) Effect of Termination. In the event this Agreement is terminated by
mutual consent of the parties, there shall be no liability on the part of any
party. If this Agreement is terminated by a party pursuant to Section
7.09(a)(i), (iii) or (iv), then the parties shall retain all rights and remedies
available to them under this Agreement and applicable law.
Section 7.10 Successors and Assigns; Assignability. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties and their respective legal representatives, successors and permitted
assigns. This Agreement (i) shall not confer upon any Person other than the
parties and their respective successors and permitted assigns any rights or
remedies under this Agreement; and (ii) shall not be assignable by any party
without the consent of all other parties.
Section 7.11 Further Assurances. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the Transaction.
Section 7.12 Payment of Expenses. Each party shall be responsible for
and shall pay all expenses incurred by such party in connection with the
preparation, execution and delivery of this Agreement and the other agreements,
actions and documents referred to or contemplated by this Agreement and the
consummation of the Transaction.
Section 7.13 Public Announcements. All parties to this Agreement agree
that no party shall make any further public announcements, press releases or
other public disclosure regarding the existence of this Agreement or the
Transaction without first providing the other party with an opportunity to
review and approve such announcement, release or 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.
[Signatures appear on next page]
23
<PAGE> 25
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
CROWN NORTHCORP, INC.
By: /s/ Ronald E. Roark
------------------------------
Name: Ronald E. Roark
Title: Chairman and CEO
CNC/DUS NEWCO, INC.
By: /s/ Ronald E. Roark
------------------------------
Name: Ronald E. Roark
Title: Chairman and CEO
NATIONAL CITY CORPORATION
By:
------------------------------
Name:
Title:
S-1
<PAGE> 26
EXHIBIT A
<PAGE> 27
SERIES B PREFERRED STOCK TERMS
A. DESIGNATION. There shall be a series of Preferred Stock to be
known as Series B Non-Voting, Non-Convertible Preferred Stock, par value $0.01
per share (hereinafter referred to as "Series B Preferred Stock") consisting
of 2,000 authorized shares. After the issuance of the Series B Preferred Stock
and until the redemption of all of the outstanding shares thereof, the
Corporation shall not authorize or issue any shares of common or preferred
stock having rights or preferences with respect to liquidation or redemption
that are senior to the rights and preferences of the Series B Preferred Stock
with respect to such matters without having obtained the prior written consent
of two-thirds of the holders.
B. LIQUIDATION IN GENERAL. In the event of a Liquidation (defined
below), the holders of record of Series B Preferred Stock shall be entitled to
be paid in full the sum of $1,000 per share (the "Liquidation Preference")
before assets of the Corporation shall be distributed among or paid over to
the holders of Common Stock or other shares ranking junior to Series B
Preferred Stock (the "Junior Securities") in the distribution of assets or
upon the Liquidation of the Corporation. Written notice of a Liquidation,
stating a payment date and the place where such payments shall be made, shall
be given to the holders of record of Series B Preferred Stock, such notice to
be addressed to each such holder at such holder's address as shown on the
records of the Corporation. The liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the Corporation's consolidation
or merger with any other entity or group of entities, in which the
stockholders of the Corporation prior to such transaction do not own at least
a majority of the voting capital stock of the surviving entity after the
merger or consolidation, or the Corporation's sale or transfer of all or
substantially all of the Corporation's assets, shall be deemed a "Liquidation"
within the meaning of the provisions of this Section B.
The Series B Preferred Stock shall rank in respect of the
distribution of assets or upon the Liquidation of the Corporation, subject to
the last sentence of this paragraph, on a parity with the Series A Convertible
Preferred Stock, the Series C Convertible Preferred Stock and any other Senior
Securities (as defined below). If upon any Liquidation, the net assets
available for distribution to the holders of shares of the Series A
Convertible Preferred Stock, Series B Preferred Stock and Series C Convertible
Preferred Stock and subsequent series of Preferred Stock issued with rights
equivalent to the Series A Convertible Preferred Stock, Series B Preferred
Stock and Series C Convertible Preferred Stock (collectively referred to
herein as the "Senior Securities") shall be insufficient to pay the holders of
all of the outstanding shares of the Senior Securities the full amounts to
which they respectively shall be entitled, the holders of such shares, without
regard to classes or series, shall share in any
B-1
<PAGE> 28
distribution of assets in proportion to the amounts respectively due to them
on payment in full. In the event of a Liquidation resulting from the
Corporation's consolidation or merger with any other entity or group of
entities in which the stockholders of the Corporation prior to such
transaction do not own at least a majority of the voting capital stock of the
surviving entity after the merger or consolidation or the sale or transfer of
all or substantially all of the Corporation's assets, the Series B Preferred
Stock shall rank in respect of the distribution of assets prior to any other
Senior Securities whose terms do not specifically include within the
definition of "Liquidation" such consolidations, mergers or asset transfers.
If at any time, or from time to time, the Corporation reduces the
number of outstanding shares of Series B Preferred Stock by combining such
shares into a smaller number of shares, the Liquidation Preference then in
effect on the record date for such action shall be increased proportionately
as of such record date. If at any time, or from time to time, the Corporation
increases the number of outstanding shares of Series B Preferred Stock by
subdividing such shares into a greater number of shares, the Liquidation
Preference then in effect on the record date for such action shall be
decreased proportionately as of such record date.
C. NO DIVIDENDS. No dividends of any kind shall be paid in respect of
the Series B Preferred Stock.
D. REDEMPTION RIGHTS.
(i) Mandatory Redemption. Subject to the proviso set forth
below, the Corporation shall be required to redeem by paying the Redemption
Price (defined below) the following number of shares of Series B Preferred
Stock on each respective date set forth below for such redemption:
<TABLE>
<CAPTION>
Number of Shares of Series B Date of Redemption
---------------------------- ------------------
Preferred Stock to be Redeemed
------------------------------
<S> <C>
500 December 31, 1997
600 December 31, 1998
900 December 31, 1999
Any remaining unredeemed shares Closing Date of a Public
Offering of Common Stock
(an "Offering")
</TABLE>
Provided, however, that the Corporation shall not be required to redeem any
shares of Series B Preferred Stock to the extent that, as a result of such
redemption, the Corporation would
B-2
<PAGE> 29
fail to satisfy the now-current requirements for the Corporation to have a
certain net worth in order for the Corporation to act as a loan servicer under
the programs authorized for the Corporation by the Federal National Mortgage
Association and in which the Corporation is now participating. If, on a
particular redemption date as provided above, the total number of
corresponding shares of Series B Preferred Stock cannot be redeemed due to the
Corporation's inability to satisfy the foregoing net worth requirements after
such redemption, the Corporation will redeem as many shares of Series B
Preferred Stock on such redemption date that can be redeemed and still meet
such net worth requirements.
The "Redemption Price" for each share of Series B Preferred Stock
shall be equal to the Liquidated Preference. The Redemption Price shall be
paid in cash by wire transfer of immediately available funds to any holder of
not less than one hundred (100) shares of Series B Preferred Stock to an
account designated by such holder.
The Corporation shall deposit Two Million Dollars ($2,000,000) in a
non-interest bearing account (the "Deposit Account") at National City Bank of
Indiana to secure the Corporation's obligations to redeem the Series B
Preferred Stock. The holders of the shares of the Series B Preferred Stock
shall have control over this Deposit Account to perfect their secured interest
therein. The holders of the shares of Series B Preferred Stock shall be
entitled to withdraw from the Deposit Account the Redemption Price on any
outstanding shares of Series B Preferred Stock which the Corporation has
failed to redeem on the respective dates set forth above provided however
that, on a particular redemption date, the holders of the shares of Series B
Preferred Stock shall be entitled to withdraw from the Deposit Account only an
amount to effect such redemptions at the Redemption Price as will cause the
Corporation to still meet the net worth requirements set forth above.
The Corporation shall also cause to be pledged to National City
Corporation as the holder of Series B Preferred Stock certain additional funds
of the Corporation pursuant to a pledge agreement to be executed by the
Corporation. National City Corporation, pursuant to a pledge agreement to be
executed by the Corporation, will be entitled to exercise its rights and
remedies as the pledgee of such certain additional funds in the event that
funds in the Deposit Account are not maintained at certain designated levels.
The Corporation shall also cause to be pledged to National City
Corporation as the holder of Series B Preferred Stock, all of the shares of
the Common Stock of the Corporation owned legally and beneficially by Tucker
Holding Company, Ltd. ("Tucker") pursuant to a pledge agreement to be executed
by Tucker. National City Corporation, not earlier than the tenth business day
following a redemption date, will be entitled to exercise its rights and
remedies as the pledgee of such shares of Common Stock, including realizing
upon such shares for payment of any unpaid Redemption Price of any outstanding
shares of Series B
B-3
<PAGE> 30
Preferred Stock in the event the Corporation has failed to redeem outstanding
Shares of Series B Preferred Stock, in whole or in part, on a redemption date.
In the event that any date set for redemption is not a business day,
then such redemption shall occur on the next following business day.
(ii) Voluntary Redemption. All or part of the outstanding shares of
Series B Preferred Stock are subject to redemption, at the option of the
Corporation, at a price equal to the Redemption Price upon two (2) business
days prior written notice to the holders of Series B Preferred Stock,
specifying the aggregate number of shares of Series B Preferred Stock being
called for redemption and the date of such redemption. The Corporation shall
give notice of any voluntary redemption to the holders of shares of Series B
Preferred Stock by first class mail, postage prepaid or by overnight courier
delivery with such notice to be given not less than two business days before
the date of such redemption. In the event that any voluntary redemption is for
less than all of the outstanding shares of Series B Preferred Stock, then such
redemption shall be made on a pro rata basis from all holders of shares of
Series B Preferred Stock. On the date of any redemption, the holders of shares
of Series B Preferred Stock shall be paid in cash for the shares being so
redeemed upon surrender to the Corporation of certificate(s) evidencing such
shares.
E. CONVERSION RIGHTS.
The shares of the Series B Preferred Stock are non-convertible.
F. VOTING RIGHTS.
The Shares of the Series B Preferred Stock shall have no voting rights
with respect to directors of the Corporation or any other matter requiring
stockholder approval except with respect to those matters requiring separate
class votes as mandated by the laws of the State of Delaware.
G. PREEMPTIVE RIGHTS. The holders of the shares of Series B Preferred
Stock shall have no preemptive rights.
B-4
<PAGE> 31
EXHIBIT B
<PAGE> 32
SERIES C CONVERTIBLE PREFERRED STOCK TERMS
A. DESIGNATION. There shall be a series of Preferred Stock to be
known as Series C Non-Voting, Convertible Preferred Stock, par value $0.01
per share (hereinafter referred to as "Series C Convertible Preferred Stock")
consisting of 500 authorized shares. After the issuance of the Series C
Convertible Preferred Stock and until the redemption of all of the
outstanding shares thereof, the Corporation shall not authorize or issue any
shares of common or preferred stock having rights or preferences with respect
to payment of dividends, liquidation or redemption that are senior to the
rights and preferences of the Series C Convertible Preferred Stock with
respect to such matters without having obtained the prior written consent of
two-thirds of the holders.
B. LIQUIDATION IN GENERAL. In the event of a Liquidation (defined
below), the holders of record of Series C Convertible Preferred Stock shall
be entitled to be paid in full the sum of $1,000 per share (the "Liquidation
Preference") before assets of the Corporation shall be distributed among or
paid over to the holders of Common Stock or other shares ranking junior to
Series C Convertible Preferred Stock (the "Junior Securities") in the
distribution of assets or upon the Liquidation of the Corporation. Written
notice of a Liquidation, stating a payment date and the place where such
payments shall be made, shall be given to the holders of record of Series C
Convertible Preferred Stock, such notice to be addressed to each such holder
at such holder's address as shown on the records of the Corporation. The
liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, the Corporation's consolidation or merger with any other
entity or group of entities, in which the stockholders of the Corporation
prior to such transaction do not own at least a majority of the voting
capital stock of the surviving entity after the merger or consolidation, or
the Corporation's sale or transfer of all or substantially all of the
Corporation's assets, shall be deemed a "Liquidation" within the meaning of
the provisions of this Section B.
The Series C Convertible Preferred Stock shall rank in respect of
the distribution of assets or upon the Liquidation of the Corporation,
subject to the last sentence of this paragraph, on a parity with the Series A
Convertible Preferred Stock, the Series B Preferred Stock and any other
Senior Securities (as defined below). If upon any Liquidation, the net assets
available for distribution to the holders of shares of the Series A
Convertible Preferred Stock, the Series B Preferred Stock, the Series C
Convertible Preferred Stock and subsequent series of Preferred Stock issued
with rights equivalent to the Series A Convertible Preferred Stock, the
Series B Preferred Stock and the Series C Convertible Preferred Stock
(collectively referred to herein as the "Senior Securities") shall be
insufficient to pay the holders of all of the outstanding shares of the
Senior Securities the full amounts to which
C-1
<PAGE> 33
they respectively shall be entitled, the holders of such shares, without
regard to classes or series, shall share in any distribution of assets in
proportion to the amounts respectively due to them on payment in full. In the
event of a Liquidation resulting from the Corporation's consolidation or
merger with any other entity or group of entities in which the stockholders of
the Corporation prior to such transaction do not own at least a majority of
the voting capital stock of the surviving entity after the merger or
consolidation or the sale or transfer of all or substantially all of the
Corporation's assets, the Series C Convertible Preferred Stock shall rank in
respect of the distribution of assets prior to any other Senior Securities
whose terms do not specifically include within the definition of "Liquidation"
such consolidations, mergers or asset transfers.
If at any time, or from time to time, the Corporation reduces the
number of outstanding shares of Series C Convertible Preferred Stock by
combining such shares into a smaller number of shares, the Liquidation
Preference then in effect on the record date for such action shall be
increased proportionately as of such record date. If at any time, or from time
to time, the Corporation increases the number of outstanding shares of Series
C Convertible Preferred Stock by subdividing such shares into a greater number
of shares, the Liquidation Preference then in effect on the record date for
such action shall be decreased proportionately as of such record date.
C. NON-CUMULATIVE DIVIDENDS. The holders of record of Series C
Convertible Preferred Stock shall be entitled to quarterly cash dividends at
the annual rate of eight percent (8%) per share of Series C Convertible
Preferred Stock on the Liquidation Preference (the "Dividend Rate"). Such
dividends shall not cumulate regardless of whether earned or payable. Such
dividends shall be paid solely and only to the extent that corporate funds are
legally available for the payment thereof and only to the extent that such
dividends are declared payable by the Corporation's Board of Directors.
In the event of a Liquidation, the holders of record of Series C
Convertible Preferred Stock shall be entitled to be paid in full all dividends
declared payable by the Corporation's Board of Directors before assets of the
Corporation shall be distributed among or paid over to the holders of Junior
Securities. Before the Liquidation, the full amount of all unpaid dividends
declared payable by the Corporation's Board of Directors on Series C
Convertible Preferred Stock shall be paid before the declaration or setting
apart for payment of any dividend or other distribution on Junior Securities.
No dividend shall be paid, declared or set apart for payment on any Junior
Securities unless the Corporation has paid all dividends on or in respect of
all outstanding shares of Series C Convertible Preferred Stock which have been
declared and are unpaid.
With respect to the payment of dividends, the Series C Convertible
Preferred Stock shall rank junior in priority to the payment of dividends on
the Series A Convertible
C-2
<PAGE> 34
Preferred Stock and on parity with other Senior Securities (to the extent that
dividends are due on such other Senior Securities), and senior in priority to
all shares of Junior Securities.
D. CONVERSION RIGHTS.
(i) Voluntary Conversion. The holder of each outstanding
share of Series C Convertible Preferred Stock shall have the right during the
Conversion Period (defined below), at such stockholder's option and on and
subject to the terms and conditions hereinafter set forth, to convert such
shares of Series C Convertible Preferred Stock into fully paid and
nonassessable shares of Common Stock. Upon the conversion of Series C
Convertible Preferred Stock, dividends relating to the shares of Series C
Convertible Preferred Stock converted shall cease to cumulate and all
preferences upon Liquidation shall cease. Each outstanding share of Series C
Convertible Preferred Stock may, at the option of the holders thereof, be
converted into six hundred sixty-six and sixty-seven hundredths (666.67)
shares of Common Stock (the "Conversion Ratio"). The "Conversion Period" shall
be a forty-five (45) consecutive calendar day period commencing on the Trigger
Date (defined below). The "Trigger Date" is the last day of that thirty (30)
calendar day period in which the average per share price of the Common Stock,
as determined by the closing price on each day (i) on the OTC Bulletin Board
("OTCBB") administered by the National Association of Securities Dealers
("NASD"), as such closing price is shown on each day that the OTCBB is
conducting business in the records of the NASD Research Department (or is
available from any other reputable stock price reporting service) or (ii) if
the Common Stock is listed on an exchange, then by the closing price on each
day that the stock exchange on which the Common Stock is listed is conducting
business, as such closing price is shown in The Wall Street Journal (or is
available from any other reputable stock price reporting service), is equal to
or exceeds one dollar and fifty cents ($1.50).
(ii) Method of Conversion. In order to exercise the voluntary
conversion privilege provided in paragraph (i) above, each holder of Series C
Convertible Preferred Stock shall, during the Conversion Period, surrender
such holder's certificates representing Series C Convertible Preferred Stock
at the Corporation's office or at such other place as shall be designated by
the Corporation, duly endorsed to the Corporation. Upon the Corporation's
receipt of such certificates, the Corporation shall issue certificates
representing the appropriate number of shares of Common Stock in the
respective names of the holders of Series C Convertible Preferred Stock or in
the names of the holders' designees.
(iii) Fractional Shares. No fractional shares of Common
Stock, or scrip representing a fractional share, shall be issued upon the
conversion of any shares of Series C Convertible Preferred Stock pursuant to
this section D. If more than one share of Series C Convertible Preferred Stock
shall be surrendered for conversion at one time by the same holder, the number
of full shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series C
Convertible
C-3
<PAGE> 35
Preferred Stock so surrendered. If any fractional interest in a share of
Common Stock would otherwise be deliverable upon the conversion of any shares
of Series C Convertible Preferred Stock, the Corporation shall pay, in lieu
thereof, a cash payment equal to the fair market value of such fractional
interest.
(iv) Adjustment of Number of Shares of Common Stock.
(a) Stock Dividends: Stock Splits. If the number of
shares of Common Stock outstanding at any time after the date
of issuance of the shares of Series C Convertible Preferred
Stock is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of
Common Stock, then immediately after the record date fixed
for the determination of holders of shares of Common Stock
entitled to receive such stock dividend or the effective date
of such subdivision or split-up, as the case may be, the
Conversion Ratio shall be appropriately reduced so that the
holder of any shares of Series C Convertible Preferred Stock
thereafter converted shall be entitled to receive the number
of shares of Common Stock of the Corporation which such
holder would have owned immediately following such action had
such shares of Series C Convertible Preferred Stock been
converted immediately prior thereto.
(b) Combination of Shares. If the number of shares
of Common Stock outstanding at any time after the date of
issuance of the shares of Series C Convertible Preferred
Stock is decreased by a combination of the outstanding shares
of Common Stock, then immediately after the effective date of
such combination, the Conversion Ratio shall be appropriately
increased so that the holder of any shares of Series C
Convertible Preferred Stock thereafter converted shall be
entitled to receive the number of shares of Common Stock of
the Corporation which such holder would have owned
immediately following such action had such shares of Series C
Convertible Preferred Stock been converted immediately prior
thereto.
(v) Cancellation. All shares of Series C Convertible
Preferred Stock which shall have been surrendered for conversion as herein
provided in this Section D - Conversion Rights shall no longer be deemed to be
outstanding and all rights with respect to such shares of Series C Convertible
Preferred Stock, shall forthwith cease and terminate, except only the rights
of the holders thereof to receive shares of Common Stock or other assets or
property in exchange therefor and to receive the payment of accrued unpaid
dividends thereon from the Corporation as funds become legally available for
the payment thereof.
(vi) Reservation of Shares. The Corporation shall at all
times reserve and keep available, free from preemptive rights, out of its
treasury shares or its authorized but
C-4
<PAGE> 36
unissued shares of Common Stock, for the purpose of effecting the conversion
of the shares of Series C Convertible Preferred Stock, the full number of
shares of Common Stock then deliverable upon the conversion of all shares of
Series C Convertible Preferred Stock then outstanding.
E. REDEMPTION RIGHTS.
(i) Mandatory Redemption. The Corporation shall be required
to redeem by paying the Liquidation Preference plus the full amount of any
unpaid dividends thereon declared payable by the Corporation's Board of
Directors the following number of shares of Series C Convertible Preferred
Stock on each respective date set forth below for such redemption:
<TABLE>
<CAPTION>
Number of Shares of Series C Convertible Date of Redemption
---------------------------------------- ------------------
Preferred Stock to be Redeemed
------------------------------
<S> <C>
One-half of the outstanding shares of
Series C Convertible Preferred Stock December 31, 2001
All remaining outstanding shares of
Series C Convertible Preferred Stock December 31, 2002
</TABLE>
Such redemption payments shall be paid in cash by wire transfer of
immediately available funds to an account designated by the holder of the
Series C Convertible Preferred Stock.
In the event that any date set for redemption is not a business day,
then such redemption shall occur on the next following business day.
(ii) Voluntary Redemption. After the expiration of the
Conversion Period, all or part of the outstanding shares of Series C
Convertible Preferred Stock are subject to redemption, at the option of the
Corporation, at a redemption price equal to the Liquidation Preference plus
the full amount of any unpaid dividends thereon declared payable by the
Corporation's Board of Directors. The Corporation shall give notice of any
voluntary redemption specifying the aggregate number of shares of Series C
Convertible Preferred Stock being called for redemption and the date of such
redemption to the holders of shares of Series C Convertible Preferred Stock by
first class mail, postage prepaid or by overnight courier delivery with such
notice to be given not less than two business days before the date of such
redemption. In the event that any voluntary redemption is for less than all of
the outstanding shares of Series C Convertible Preferred Stock, then such
redemption shall be made on a pro rata basis from all holders of shares of
Series C Convertible Preferred Stock. On the date of any redemption, the
holders of shares of Series C Convertible Preferred Stock
C-5
<PAGE> 37
shall be paid in cash for the shares being so redeemed upon surrender to the
corporation of certificate(s) evidencing such shares.
F. VOTING RIGHTS.
Prior to conversion of the shares of Series C Convertible Preferred
Stock to shares of Common Stock, the shares of the Series C Convertible
Preferred Stock shall have no voting rights with respect to directors of the
Corporation or any other matter requiring stockholder approval except with
respect to those matters requiring separate class votes as mandated by the
laws of the State of Delaware.
G. ISSUE TAX. The issuance of certificates representing shares of
Common Stock upon the conversion of Series C Convertible Preferred Stock shall
be made without charge to the holders thereof for any issuance, stock transfer
or documentary stamp tax in respect thereof, provided that the Corporation
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in the name
other than that of the record holder of the Series C Convertible Preferred
Stock that is being converted.
H. PREEMPTIVE RIGHTS. The holders of the shares of Series C
Convertible Preferred Stock shall have no preemptive rights.
C-6
<PAGE> 38
EXHIBIT C
<PAGE> 39
338 (h) (10) ELECTION SCHEDULE
<TABLE>
<S> <C>
Consideration for target stock $13,548,898
Liabilities of Target corp.
Loan loss reserve $ 3,445,000
Debt $ 676,415
-----------
Total liabilities $ 4,121,415
Tax liability on sale N/A
Other relevant items
Aggregate Class III assets $ 2,511,474
Intangible amortizable Class III assets
Purchased servicing rights $ 1,133,474
amortized as per FASB 122
</TABLE>
<PAGE> 40
SCHEDULE 2.03
<PAGE> 41
SERVFEE1.WK4 ANNUALIZED SERVICING FEE SCHEDULE 01/03/97
MERCHANTS MORTGAGE PORTFOLIO - ADJUSTED FOR PAYOFFS
<TABLE>
<CAPTION>
PRIN BALANCE SERV FEE ANNUALIZED Payoff Adjmnt
<S> <C> <C> <C> <C>
EDGWOOD $141,628 0.2500% $354
FALL CREEK $1,775,468 0.1000% $1,775
JACKSON PARK $1,249,357 0.1250% $1,562
WINDSOR PARK $2,965,741 0.1250% $3,707 $11,553
CROSS LAKES $7,044,022 0.2500% $17,610
DRAKE MANOR $641,554 0.2500% $1,604
CLOVERLEAF $1,280,396 0.2500% $3,201
CAMBRIDGE PLACE $2,737,634 0.1000% $2,738
BROADRIPPLE $1,550,722 0.2500% $3,877 $12,082
SUNCREST $3,340,824 0.1000% $3,341
BRAEBURN $10,660,203 0.2500% $26,651
SILVERTREE $2,839,793 0.5000% $14,199
WINDSONG $2,276,010 0.5000% $11,380
NORTHERNVIEW $1,802,973 0.5000% $9,015 $28,094
ENGLISH VILL $4,803,238 0.2500% $12,008 $37,422
WINTHROP NORTH $936,083 0.3750% $3,510
WINTHROP SOUTH $1,560,139 0.3750% $5,851
WINTHROP BRYAN $483,643 0.3750% $1,814
WINTHROP DEFIANC $1,189,606 0.3750% $4,461
WINTHROP FINDLAY $1,794,161 0.3750% $6,728
PARK GREENWOOD $4,005,858 0.2500% $10,015
EMERSON VILLAGE $7,255,465 0.2500% $18,139 $56,527
SOLON CLUB $3,993,359 0.3750% $14,975
MANN VILLAGE $4,938,072 0.2500% $12,345
LONVALE GARDENS $5,578,020 0.2500% $13,945
LANDMARK $4,551,509 0.2500% $11,379 $35,460
ALPINE VILLAGE $2,182,699 0.2500% $5,457
HERITAGE VILLAGE $3,024,817 0.2500% $7,562
WESTOWN $3,134,632 0.2500% $7,837
GEORGETOWN $4,886,243 0.2500% $12,216 $38,068
BUCKRIDGE $2,416,944 0.2500% $6,042 $18,830
WHITEHALL $1,449,529 0.2500% $3,624
BROOKHAVEN $7,678,381 0.2500% $19,196
BRISTOL SQUARE $5,228,953 0.2500% $13,072
CAMBRIDGE $1,822,714 0.2500% $4,557 $14,201
HIDDEN ACRES $2,869,950 0.2500% $7,175
BEVERLY HILL $3,026,888 0.2500% $7,567
BRIDGEDALE TERR $1,085,112 0.3750% $4,069
ENCLAVE $8,862,412 0.2500% $22,156
WEDGEWOOD $2,042,209 0.3750% $7,658 $23,866
THOMPSON VILLAGE $5,051,904 0.2500% $12,630
PORT CROSSING $3,093,362 0.2500% $7,733
BARRINGTON SQU $4,099,831 0.2500% $10,250
CARNABY VIL $4,747,955 0.2500% $11,870
ROUND BARN $3,455,864 0.1000% $3,456
WESTVIEW $986,242 0.1875% $1,849
FOUNTAIN PARK $17,794,105 0.6250% $111,213
DOERCHESTER $7,227,791 0.2500% $18,069
------- --------
TOTAL FEE $521,440 $276,102
PURCHASE PRICE $1,625,000 $1,348,898
</TABLE>
MULTIPLIER 3.12
<PAGE> 42
SCHEDULE 4.01
1. Merchants Mortgage Corporation is a participating employer in
various National City Corporation pension and welfare benefit plans as defined
in Sections 3(2) and 3(1) of ERISA, respectively, maintained by National City
Corporation.
2. Merchants Mortgage Corporation has assigned to National City Bank
of Indiana that certain Concord Assets Group commercial loan that was
previously 100% participated to National City Bank of Indiana.
3. Merchants Mortgage Corporation is a party to a Purchase and Sale
Agreement dated April 30, 1992 with National City Mortgage Co. which it will
assign to National City Corporation or another Affiliate at or prior to the
Closing. This Agreement relates to the sale of certain residential mortgage
loan servicing from Merchants Mortgage Corporation to National City Mortgage
Co.
4. Merchants Mortgage Corporation is a party to a Cross-Default
Agreement among Merchants, the Government National Mortgage Association
("GNMA") and Merchants' affiliate, National City Mortgage Co., dated November
23, 1994. Merchants will advise GNMA that as of the Closing, Merchants and
National City Mortgage Co. are no longer affiliated companies.
5. See GNMA Custodial Agreement with National City Bank, Kentucky
described in Schedule 4.02(b) hereof.
<PAGE> 43
SCHEDULE 4.02
Foreign qualifications:
Illinois, Michigan and Ohio
Domestic qualifications:
Indiana
Authorized, issued and outstanding shares of Merchants
1,000 shares authorized at no par value; 350 shares outstanding
Net Residential Loans - See attached
Contractual obligations - See attached
Governmental licenses, permits, approvals - See attached
Bank accounts; other banking relationships - See attached
Advances - See attached
<PAGE> 44
HUD
1. Application for Approval and HUD Approval as Mortgagee dated 2/2/94 -
Multifamily mortgage loans
2. Letter dated 2/13/87 issued by HUD re: Coinsurance Program approval
3. Letter dated 1/09/84 issued by HUD re: Coinsurance Program approval
Indiana Housing Finance Authority
1. Mortgage Servicing Agreement dated August 31, 1982 among The Indiana National
Bank, as Trustee, Indiana Housing Finance Authority, Merchants Mortgage
Corporation and Fall Creek Village I.
Other
1. Letter dated August 14, 1979 from the Federal Reserve Bank of Chicago
authorizing Merchants Mortgage Corporation's activities as a subsidiary of
Merchants National Corporation (predecessor in interest to National City
Corporation) and various approval letters from the Federal Reserve
subsequent thereto, for example, to expand its geographic scope and to
engage in equity financing.
Merchants Mortgage Corporation Software and Equipment Agreements
1. Software License Agreement dated 11/17/95 between Merchants Mortgage
Corporation and Synergy Software, Inc.
2. Rider to License Agreement (Source Code Escrow)
3. Participating Licensee Acceptance (Attachment to Source Code Escrow Master
Agreement)
4. Addendum to Software License Agreement and Rider to Software License
Agreement dated 11/27/95
5. Rider to Software License Agreement dated 11/17/95
<PAGE> 45
SCHEDULE 4.02(a)
Net Residential Loans
---------------------
<TABLE>
<CAPTION>
Outstanding As of
-----------------
Name of Borrower Loan No. June 28. 1996
---------------- -------- -------------
<S> <C> <C>
Tucker 8137691 $340.270.96
McEntyre 8129423 $ 64,635.94
</TABLE>
The foregoing loans were sold by Merchants Mortgage Corporation to its
affiliate, National City Bank of Indiana, on or about July 5, 1996.
<PAGE> 46
Schedule 4.02(b)
Contractual Obligations and Governmental Licenses, Permits, Approvals
FNMA
1. Federal National Mortgage Association Mortgage Servicing Contract
effective 11/28/79
2. Federal National Mortgage Association Mortgage Selling Contract effective
11/28/79
3. The foregoing Servicing Contract and Selling Contract were apparently
combined into a single Mortgage Selling and Servicing Contract dated
January 7, 1983.
4. Addendum to Mortgage Selling and Servicing Contract effective June 26,
1984 (to sell and service Conventional Multifamily mortgage loans to FNMA)
5. Letter dated April 19, 1995 issued by FNMA re: Prior Approval lender
approval
6. Various letters from FNMA regarding authorization for Custodial Accounts
7. Merchants Mortgage Corporation's DUS Contract, DUS Loss Sharing Agreement
and DUS Reserve Agreement are more specifically described in Section 1.01
of the Stock Purchase Agreement of which this Schedule is a part.
GNMA
1. Government National Mortgage Association Selling Contract effective
November 28, 1979
2. Government National Mortgage Association Servicing Contract effective
November 28, 1979
3. Custodial Agreement for Mortgage-Backed Securities dated 1/13/94 between
Merchants Mortgage Corporation and National City Bank, Kentucky with GNMA
approval of 2/10/94
4. GNMA Approval for Commitment to Guarantee Mortgage-Backed Securities dated
February 18, 1994
5. GNMA Approval for Merchants Mortgage Corporation as Issuer of Multi-Family
Mortgage-Backed Securities dated March 17, 1983
<PAGE> 47
HUD
1. Application for Approval and HUD Approval as Mortgagee dated 2/2/94-
Multifamily mortgage loans
2. Letter dated 2/13/87 issued by HUD re: Coinsurance Program approval
3. Letter dated 1/09/84 issued by HUD re: Coinsurance Program approval
Indiana Housing Finance Authority
1. Mortgage Servicing Agreement dated August 31, 1982 among The Indiana
National Bank, as Trustee, Indiana Housing Finance Authority, Merchants
Mortgage Corporation and Fall Creek Village I.
Other
1. Letter dated August 14, 1979 from the Federal Reserve Bank of Chicago
authorizing Merchants Mortgage Corporation's activities as a subsidiary of
Merchants National Corporation (predecessor in interest to National City
Corporation) and various approval letters from the Federal Reserve
subsequent thereto, for example, to expand its geographic scope and to
engage in equity financing.
Merchants Mortgage Corporation Software and Equipment Agreements
1. Software License Agreement dated 11/17/95 between Merchants Mortgage
Corporation and Synergy Software. Inc.
2. Rider to License Agreement (Source Code Escrow)
3. Participating Licensee Acceptance (Attachment to Source Code Escrow Master
Agreement)
4. Addendum to Software License Agreement and Rider to Software License
Agreement dated 11/27/95
5. Rider to Software License Agreement dated 11/17/95
<PAGE> 48
6. Oral agreement with Automated Business Machines, Inc. for maintenance of
Check Protector equipment
The foregoing software and equipment agreements will not be assumed by Crown
or Newco. National City Corporation or an affiliate will retain or terminate
such agreements.
Letter of Credit - $2,500,000 - issued by NBD Bank, N.A.
1. Irrevocable Letter of Credit No. SB-036107 in the amount of $2,500,000.00
in favor of Federal National Mortgage Association expiring 6/1/97
2. Reimbursement Agreement dated 5/5/93 between Merchants Mortgage
Corporation and INB National Bank, a national banking association
(predecessor of NBD Bank, N.A.)
3. Amendment to Reimbursement Agreement dated 4/18/94
4. Limited Continuing Guaranty dated 4/18/94 by National City Corporation
5. Second Amendment to Reimbursement Agreement dated 4/14/95
6. Third Amendment to Reimbursement Agreement dated 4/23/96
The foregoing letter of credit, reimbursement agreement and guaranty will be
terminated on or prior to Closing.
<PAGE> 49
Schedule 4.02(c)
10/28/96 PAGE 1
<TABLE>
<CAPTION>
BK-ACCT ACCT-DESCRIP MEMO-1 MEM0-2
- -------- -------------------------- -------------------------- ----------------
<S> <C> <C> <C>
04014885 SERVICER CORPORATE ACCOUNT MMC CORPORATE CASH ACCOUNT
05073812 DISBURSEMENTS CLEARING ACCOUNT GNMA DISBURSEMENT CLEARING A/C
1223718 SPECIAL RESERVES 520270 BRAEBURN INTEREST BEARING
1267512 PRIN/INT ONLY MUNI MAE P&I ACCOUNT
1290411 SPECIAL RESERVES 565283 PARK GREENWOOD INTEREST BEARING
1292419 PRIN/INT ONLY FNMA MBS/DUS P&I
1293117 SPECIAL RESERVES 565234 WINTHROP SOUTH INTEREST BEARING
1296813 SPECIAL RESERVES 610667 ALPINE VILLAGE INTEREST BEARING
1296910 SPECIAL RESERVES 626820 BRISTOL SQUARE INTEREST BEARING
2018414 DISBURSEMENTS CLEARING ACCOUNT
2291914 SPECIAL RESERVES 588897 MANN VILLAGE INTEREST BEARING
2298315 SPECIAL RESERVES 626739 HERITAGE VILLAGE INTEREST BEARING
2298412 SPECIAL RESERVES 639195 BRIDGEDALE TERRACE INTEREST BEARING
2344612 SPECIAL RESERVES 436964 CROSS LAKES INTEREST BEARING
291314 SPECIAL RESERVES 565226 WINTHROP NORTH INTEREST BEARING
294010 SPECIAL RESERVES 565259 WINTHROP DEFIANCE INTEREST BEARING
297512 SPECIAL RESERVES 565267 WINTHROP FINDLAY INTEREST BEARING
300002876 RECEIPTS CLEARING ACCOUNT
3073911 PRIN/INT ONLY GNMA P&I ACCOUNT
3122914 SPECIAL RESERVES 438234 VALENTI - HELD INTEREST BEARING
3246612 SPECIAL RESERVES 653980 THE ENCLAVE INTEREST BEARING
3246816 PRIN/INT ONLY FNMA DUS P&I ACCOUNT
3267811 ESCROWS ONLY MUNI MAE T&I ACCOUNT
3296510 SPECIAL RESERVES 696740 THOMPSON VILLAGE INTEREST BEARING
3296714 SPECIAL RESERVES 626762 BUCKRIDGE INTEREST BEARING
337414 SPECIAL RESERVES 696773 PORT CROSSING INTEREST BEARING
35415 PRIN/INT ONLY INDIANA HOUSING P&I ACCOUNT
40088040 HOLDBACKS MANN VILLAGE - 0588897 OPERATING DEFICIT ESCROW
4074414 ESCROWS ONLY GNMA T&I ACCOUNT
4298119 SPECIAL RESERVES 588848 SOLON CLUB INTEREST BEARING
500968867 SPECIAL RESERVES 270488 FALL CREEK VILLAGE INTEREST BEARING
501773331 HOLDBACKS 270488 FALL CREEK VILLAGE INTEREST BEARING
501773742 PRIN/INT ONLY NPA P&I ACCOUNT
501773755 SPECIAL RESERVES OPA REPLACEMENT RESERVES
501786360 SERVICER CORPORATE ACCOUNT MMC CORPORATE ACCOUNT #2
502317592 HOLDBACKS INSURANCE LOSS
</TABLE>
<PAGE> 50
10/28/96 PAGE 2
<TABLE>
<CAPTION>
BK-ACCT ACCT-DESCRIP MEMO-1 MEMO-2
- ------- ---------------- ----------------------------- ----------------
<S> <C> <C> <C>
5118311 PRIN/INT ONLY OPA P&I ACCOUNT
5296411 SPECIAL RESERVES 696799 BARRINGTON SQUARE INTEREST BEARING
5296712 SPECIAL RESERVES 626747 WESTOWN INTEREST BEARING
5296819 SPECIAL RESERVES 626788 BROCKHAVEN ESTATES INTEREST BEARING
5296916 SPECIAL RESERVES 525865 WINDSONG INTEREST BEARING
5336012 SPECIAL RESERVES 707224 ROUNDBARN MANOR INTEREST BEARING
6088217 SPECIAL RESERVES 263285 EDGEWOOD/TRAYMORE INTEREST BEARING
6133719 ESCROWS ONLY OPA T&I ACCOUNT
6248714 ESCROWS ONLY FNMA DUS T&I ACCOUNT
6298515 SPECIAL RESERVES 638346 CAMBRIDGE APTS INTEREST BEARING
6344919 SPECIAL RESERVES 626770 WHITEHALL MANOR INTEREST BEARING
7290211 SPECIAL RESERVES 696815 CARNABY VILLAGE INTEREST BEARING
8224613 SPECIAL RESERVES 449850 CLOVERLEAF INTEREST BEARING
8294915 SPECIAL RESERVES 525857 SILVERTREE/EVERBROOK INTEREST BEARING
8298717 SPECIAL RESERVES 638361 HIDDEN ACRES EAST INTEREST BEARING
8298814 SPECIAL RESERVES 822239 DORCHESTOR VILLAGE INTEREST BEARING
9035018 ESCROWS ONLY INDIANA HOUSING T&I ACCOUNT
9223613 SPECIAL RESERVES 452862 BROADRIPPLE/WILRENE INTEREST BEARING
9242212 SPECIAL RESERVES 762005 WESTVIEW APTS INTEREST BEARING
9290316 SPECIAL RESERVES 565242 WINTHROP BRYAN INTEREST BEARING
9296815 SPECIAL RESERVES 638403 BEVERLY HILLS INTEREST BEARING
</TABLE>
<PAGE> 51
Schedule 4.02(d)
Advances
If principal and interest payments on FNMA loans are not paid by the
18th day of each month, Merchants must advance those payments to FNMA.
Payments on the two (2) Burnworth loans in the Loan Servicing Portfolio are
not usually received by Merchants until after the 18th and Merchants has
therefore advanced those principal and interest payments to FNMA.
<PAGE> 52
SCHEDULE 5.01
Servicing Transfer of Loan Servicing Portfolio
Data or Report Format
-------------- ------
Trial Balances Paper and diskette
Escrow Trial Balances Paper and diskette
Last Investor Remittance Reports Paper and diskette
Screen Prints of Tax and Insurance
Trailers Paper
12-month loan histories Paper and diskette
For participations (if any) addresses,
telephone numbers and wire instructions
for participants Paper
<PAGE> 1
EXHIBIT 2
<PAGE> 2
[CROWN NORTHCORP LETTERHEAD]
VIA TELECOPY
January 9, 1997
National City Corporation
c/o Michael C. Rechin
One National City Center, Suite 200-E
Indianapolis, Indiana 46255
Re: Merchants Mortgage Corporation
Dear Mr. Rechin:
Following up on our recent communications with National City
Corporation ("NCC"), this letter shall constitute an amendment to
the Stock Purchase Agreement dated as of December 31, 1996 by and
among Crown NorthCorp, Inc. ("Crown"), CNC/DUS Newco, Inc.
("Newco") and National City Corporation ("NCC") (the "Agreement").
All capitalized terms not defined herein have the meanings ascribed
to them in the Agreement.
Crown and Newco, on the one hand, and NCC, on the other, hereby
agree as follows:
1. With respect only to the Beverly Hill loan
appearing on Schedule 2.03 of the Agreement, the period set forth
in the first sentence of Section 2.06 of the Agreement shall be the
sixtieth day following the Closing Date rather than the forty-fifth
date. The parties agree that no adjustment under Section 2.06 for
any loans in the Loan Servicing Portfolio shall be made if Crown
And Newco retain the rights to the servicing income as a result of
a refinancing of such loans.
2. Without limiting the generality of Sections 4.02(c)
and (d) of the Agreement, the parties understand and agree that
Crown will receive by wire transfer tomorrow the "Ending Balances"
as set forth on Attachment No. 1.
3. If Crown redeems the Series B Preferred Stock in
full on or before August 15, 1997, then Crown shall be entitled to
deduct from the Redemption Price the sum of $110,935 in full and
final settlement of Crown's redemption obligation for the Series B
Preferred Stock.
4. Without limiting the generality of Section 6.09 of
the Agreement, the parties understand and agree that NCC will
utilize its reasonable efforts to assist Crown in performing the
loan servicing tasks and responsibilities set forth on Attachment
No. 2, provided however,
<PAGE> 3
[CROWN LOGO]
CROWN NORTHCORP
National City Corporation
January 9, 1997
Page 2
that the parties agree and understand that Attachment No. 2 shall not
be considered part of the Agreement and that Attachment No. 2 shall
only serve as an illustration of Crown's loan servicing tasks.
5. Except as expressly modified by this amendment, each and
every provision of the Agreement is and remains in full force and
effect.
If the foregoing is an accurate reflection of our understanding,
please so indicate by signing and dating the acknowledgment below and
returning it to the undersigned.
Very truly yours,
/s/Ronald E. Roark
------------------
Ronald E. Roark
Chairman and Chief
Executive Officer
Attachments
ACKNOWLEDGED AND ACCEPTED:
National City Corporation
By: /s/J.Christopher Graffeo
----------------------------
Name: J.Christopher Graffeo
Title: President & CEO
January 9, 1997
<PAGE> 4
Attachment No. 1
Merchants Mortgage Corporation
Detail of Cash
<TABLE>
Balances at January 8, 1997
<S> <C>
Account 00501786360 $ 13,179,869.84
Account 00004014885 1,056,746.00
--------------
14,236,615.84
Adjustment of Cash to Buyer 110,935.00
Balance per Balance Sheet 14,347,550.84
Purchase Price (11,048,898.00)
Cash Collateral (2,000,000.00)
--------------
Ending Balances $ 1,298,652.84
==============
</TABLE>
<PAGE> 1
EXHIBIT 3
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of MAY 22, 1996 by and among Crown NorthCorp, Inc., a Delaware
corporation ("Crown"), CNC/DUS Newco, Inc., a Delaware corporation ("Newco"),
Reinlein/Lieser/McGee Holding Corporation, a Missouri corporation ("Holding"),
R/L/M Employee Benefit Corporation, a Missouri corporation ("Benefit"), Karl H.
Reinlein ("Reinlein"), George F. Lieser ("Lieser") and John R. McGee, both
individually and in his capacity as trustee under a certain trust agreement
dated July 20, 1993 ("McGee"). Reinlein, Lieser and McGee are sometimes referred
to collectively as the "Stockholders."
BACKGROUND INFORMATION
A. Crown owns all of the issued and outstanding capital stock of Newco.
B. The Stockholders currently own all of the issued and outstanding
common stock of both Holding and Benefit (collectively, the "Shares").
C. The parties hereto want Newco to acquire the Shares on the terms and
conditions set forth in this Agreement (the "Transaction"). In exchange for the
Shares, the Stockholders will receive cash as described in this Agreement.
D. The boards of directors of Crown, Holding and Benefit have approved
the Transaction pursuant and subject to this Agreement.
E. Crown, as the sole stockholder of Newco and the directors of Newco
have approved the Transaction pursuant and subject to this Agreement.
THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"Affiliate": when used with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with the Person specified.
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"Burdensome Condition": any action taken, or credibly threatened, by
any Regulatory Authority or other Person to investigate or challenge the
legality of the Transaction under any Federal or state law or that would
otherwise deprive any party of any material benefit under this Agreement, which
action may include (i) the pendency of a governmental investigation (formal or
informal), (ii) the institution of litigation or the threat thereof, (iii) an
order by a Regulatory Authority of competent jurisdiction preventing
consummation of the Transaction or placing any material conditions or
limitations upon such consummation or (iv) the issuance of any subpoena, civil
investigative demand or other request for documents or information that is
unreasonably burdensome in the reasonable judgment of the applicable person.
"Closing": the closing of the Transaction set forth in Article II of
the Agreement.
"Closing Date": the date on which the Closing shall occur.
As used in this Agreement, "Contract" means any unexpired agreement,
license, lease for real property or personal property, permit, arrangement,
commitment, understanding or contract, whether written or oral, expressed or
implied, contingent, fixed or otherwise.
"Custodian": State Street Bank and Trust Company, a Massachusetts
banking corporation.
"DUS": FNMA's Delegated Underwriting and Servicing mortgage purchase
product line, as described in the DUS Guide.
"DUS Contract": the Delegated Underwriting and Servicing Addendum to
Mortgage Selling and Servicing Contract entered into between FNMA and the
Partnership dated as of October 6, 1994.
"DUS Guide": FNMA's Delegated Underwriting and Servicing Guide, as
amended from time to time.
"DUS Loss Sharing Agreement": the Delegated Underwriting and Servicing
Master Loss Sharing Agreement between FNMA and the Partnership dated as of
October 6, 1994.
"DUS Reserve Agreement": the Delegated Underwriting and Servicing
Agreement among FNMA, the Partnership and the Custodian dated as of October 6,
1994.
"FHA": the Federal Housing Administration.
"FNMA": the Federal National Mortgage Association, a Regulatory
Authority.
"GAAP": United States generally accepted accounting principles.
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"Holding Transfer Agreement": the Stock Purchase and Restrictive
Transfer Agreement with respect to Holding dated April 21, 1988, as amended
November 25, 1991.
Any reference to any fact, event, change or effect being "material"
with respect to any party shall mean an event, change or effect that is or,
insofar as can reasonably be foreseen, will be material to the business,
properties, assets, liabilities, financial condition or results of operations of
such party taken as a whole. Without limiting the generality of the foregoing, a
"Material Contract" is one potentially representing at least 10% or more of
annual revenues, excluding payoffs of loans or fluctuations of escrows in the
normal course of business.
"Partnership": Reinlein/Lieser/McGee, a Missouri general partnership.
"Partnership Agreement": the agreement governing the affairs of the
Partnership.
"Person": shall mean any individual, firm, corporation, partnership,
trust, joint venture, Regulatory Authority or other entity, and shall include
such successors or assigns of such entity as are permitted pursuant to the terms
of this Agreement.
"Purchase Price": the sum in Section 2.04 hereof.
"Regulatory Approval": any approval of, or declaration or filing with,
any Regulatory Authority.
"Regulatory Authority": any administrative agency, commission or other
governmental or quasi-governmental agency or instrumentality of competent
jurisdiction.
"Servicing Systems": the equipment, property and operating systems
itemized on Schedule 5.01.
Section 1.02 Other Defined Terms. Unless otherwise defined in the
Agreement, all capitalized terms not specifically defined in Section 1.01 above
shall have the meanings ascribed to them in the DUS Contract.
ARTICLE II
PURCHASE, SALE AND EXCHANGE OF THE SHARES
Section 2.01 Purchase and Sale of the Shares. At the Closing,
Stockholders shall sell to Newco and Newco shall purchase from Stockholders the
Shares for the Purchase Price of $1,239,636, subject to adjustments and payable
as set forth in Section 2.04 hereof.
Section 2.02 Partnership Dissolution. Holding and Benefit are the only
partners of the Partnership. Among other things, the Partnership presently holds
all licenses and authorities
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applicable to the DUS program. Following the Closing, the Partnership shall be
dissolved in a manner satisfactory to Newco so as to not impair the
Partnership's existing DUS licenses or authorities or the transfer or assignment
of those licenses and authorities to Newco in the manner contemplated by Section
3.02(f)(i) hereof.
Section 2.03 Closing Date. The Closing Date shall be June 10, 1996 or
such other date established by the parties in accordance with Section 7.09
hereof following the satisfaction or waiver of the last of the conditions set
forth in Article III to be met to the satisfaction of, or waived by, each party.
The Closing shall occur in the manner agreed to by the parties.
Section 2.04 Purchase Price; Reserve for Losses; Adjustments. In
consideration of the Transaction, Newco shall pay to the Stockholders the
Purchase Price of $1,239,636 cash, subject to adjustment as set forth in
subparagraph (d) below, itemized and allocated as set forth on Schedule 2.04 and
payable as follows:
(a) Credit of Earnest Money Deposit paid to Stockholders. $25,000
(b) Cash at Closing. $989,636
(c) Wantland Escrow. At Closing, an additional $25,000 will be
deposited in escrow with The Huntington National Bank, Columbus, Ohio
("Huntington") pursuant to an escrow agreement substantially similar to the form
appearing on Exhibit A. The escrow shall terminate in accordance with the
provisions of Section 6.01 hereof.
(d) Reserve for Losses. At Closing, an additional $200,000 will be
deposited in escrow with Huntington pursuant to an escrow agreement
substantially similar to the form appearing on Exhibit A. The escrow shall
terminate upon the earlier of (i) the date on which the restructuring or
refinancing of all Category B loans described on Schedule 5.01 is completed or
(ii) April 30, 2000. Prior to termination of the escrow and upon the
presentation of a certification to Huntington, Newco shall have the right to
withdraw from the escrow deposit sums equal to the aggregate losses in excess of
$100,000 Newco realizes with respect to any loan described in Section 5.01(c)
hereof. Upon termination of the escrow, Stockholders shall be entitled to all
sums remaining in the escrow account. Prior to termination of the escrow,
Stockholders shall be entitled to receive all interest on the escrow deposit as
and when earned.
(e) Adjustments. Notwithstanding Sections 4.02(d) and (e) hereof, the
Purchase Price shall be adjusted by the written agreement of the parties hereto
to reflect (i) changes to the Servicing Systems made pursuant to Section 5.01(b)
hereof, (ii) loans described in Section 5.01(c) hereof which are paid in full
prior to the Closing or (iii) more accurately reflect the status of the
Riverview loan. The Purchase Price shall not be adjusted by reason of
withdrawals prior to the Closing by the Stockholders of unrestricted cash
balances, as shown on the Partnership's internal financial statements, and the
residual value of the sale of certain
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FHA servicing rights.
Section 2.05 Payment of Purchase Price. Crown shall make or cause Newco
to make the payments provided in Section 2.04. All payments shall be in
immediately available funds by wire transfers to accounts designated by the
respective Stockholders.
Section 2.06 Deliveries at the Closing. The following deliveries
required under this Agreement shall be made concurrently at the Closing:
(a) Newco to Stockholders. The Purchase Price in the manner set forth
in Sections 2.04 and 2.05 hereof.
(b) Stockholders to Newco. Stock certificates for the Shares owned by
each of the Stockholders as set forth opposite his name on Schedule 2.04 hereto,
duly endorsed in blank or accompanied by stock powers duly executed in blank and
any other documents required to transfer title to the Shares to Newco, free and
clear of all liens, restrictions, encumbrances, charges and claims other than
those imposed under applicable securities law.
Section 2.07 Partial Repayment of Purchase Price. Notwithstanding any
other provisions of this Article II, the Stockholders agree to repay to Newco
that portion of the Purchase Price attributable to those loans described in
Section 5.01(c) hereof for which either (i) payment in full is received on or
before the forty-fifth day following the Closing Date or (ii) an application is
submitted to a Person not a party to this Agreement on or before the forty-fifth
day following the Closing Date, which application results in a loan being paid
in full within 180 days of the Closing Date. Upon receipt of loan repayments
described in the preceding sentence, Newco shall present the Stockholders with a
statement of the repayment due computed by determining from Schedule 5.01 that
portion of the Purchase Price attributable to the repaid loans and subtracting
therefrom any prepayment or other fees received by Newco in conjunction with the
repayment. Statements shall be payable by the Stockholders upon receipt. Any
balances unpaid after thirty days shall accrue interest at the rate of 18% per
annum from the statement date.
ARTICLE III
CONDITIONS TO CLOSING
Section 3.01 Conditions to Each Party's Obligations. The respective
obligation of each party to consummate the transactions to be performed by it
under this Agreement is subject to the satisfaction or waiver, as of the Closing
Date, of the following conditions:
(a) Performance. Each other party shall have performed or complied with
in all material respects their respective covenants and agreements contained
herein.
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(b) Representation. Each representation and warranty made by each other
party in this Agreement shall be true and correct in all material respects on
the Closing Date as if made on and as of the Closing Date.
(c) Legality. No change shall have occurred in any law, rule or
regulation that would prohibit a party's performance.
(d) Litigation; Burdensome Condition. No court, agency or other
authority shall have issued any order, decree or judgment to set aside,
restrain, enjoin or prevent the performance of such party's obligations or the
consummation of the Transaction or to impose a Burdensome Condition. No action,
suit or proceeding before any court or any Regulatory Authority shall have been
commenced, and not action suit or proceeding by any Regulatory Authority shall
have been threatened, against any of the parties to this Agreement, or any of
the principals, officers or directors of any of them, seeking to restrain,
prevent or change the Transaction or questioning the validity or legality of the
Transaction or seeking damages in connection with any of such transactions.
(e) Proceedings Satisfactory. All corporate and legal proceedings
required to be taken in connection with the Transaction and all documents and
papers relating to the Transaction shall be reasonably satisfactory in form and
substance to each party and its counsel.
(f) Closing Documents. Each party shall have received any and all
certificates or other closing documents required under this Agreement or
reasonably requested by such party and such documents shall be reasonably
satisfactory to the parties.
Section 3.02 Conditions to Newco's Obligations. Newco's obligation to
consummate the Transaction is subject to the satisfaction (or waiver by Newco)
on or prior to the Closing Date of the following additional conditions:
(a) Resolutions. Newco shall have received certified copies of
resolutions of the Boards of Directors of Holding and Benefit authorizing the
execution, delivery and performance of this Agreement and any other agreements
referenced herein to which either Holding or Benefit is a signatory and the
consummation of the Transaction.
(b) Certificates of Good Standing. Newco shall have received
certificates of the Secretary of State of Missouri, dated a recent date,
certifying as to the legal existence and good standing of both Holding and
Benefit.
(c) Opinion of Counsel. Newco shall have received an opinion of counsel
for Stockholders, Holding and Benefit in form and substance reasonably
satisfactory to counsel for Newco.
(d) No Material Adverse Change. There shall have occurred no material
adverse
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change (whether or not covered by insurance) in the business, operations or
financial condition of either Holding, Benefit or the Partnership since March
31, 1996.
(e) Dissolution of Partnership. Newco shall have received evidence
satisfactory to it that the Partnership has been dissolved in the manner
contemplated by Section 2.02 hereof in accordance with the Partnership Agreement
and applicable law.
(f) Regulatory Approvals. All Regulatory Approvals necessary for the
consummation of the Transaction shall have been obtained or made and all waiting
periods imposed by any Regulatory Authority or law shall have expired. Without
limiting the generality of the preceding sentence, Regulatory Approvals shall
include:
(i) FNMA. Newco receiving evidence satisfactory to Newco, in its sole
discretion, that FNMA has granted DUS loan origination and servicing rights to
Newco as of the Closing Date on terms acceptable to Newco. Newco anticipates
that such satisfactory evidence may include but not be limited to (A) an
addendum or amendment to the DUS Contract mutually satisfactory to FNMA and
Newco, (B) FNMA's written consent to the assignment to Newco of any and all
right, title and interest that either the Partnership, Holding or Benefit has or
may have in and to the DUS Loss Sharing Agreement, (C) FNMA's written consent to
the assignment to Newco of any and all right, title and interest that either the
Partnership, Holding or Benefit has or may have in and to the DUS Reserve
Agreement, including but not limited to rights to "Collateral," as that term is
defined in the DUS Reserve Agreement and (D) a certification from the Custodian
acknowledging the matters set forth in the preceding clause (C) and stating that
it is now holding the Collateral for the benefit of Newco and FNMA subject to
the terms of the DUS Reserve Agreement.
(g) Tax Treatment. Stockholders, Crown and Newco shall have executed
documents satisfactory to Newco electing to treat the Transaction in accordance
with Section 338(h)(10) of the Internal Revenue Code of 1986, as amended.
(h) Termination of Holding Transfer Agreement. Newco receiving evidence
satisfactory to it that the Holding Transfer Agreement is terminated and of no
further force or effect.
Section 3.03 Conditions to Obligations of Stockholders, Holding and
Benefit. The obligations of each of the Stockholders, Holding and Benefit to
consummate the Transaction is subject to the satisfaction (or waiver by the
applicable Person) on or prior to the Closing Date of the following additional
conditions:
(a) Resolutions. The Stockholders, Holding and Benefit shall have
received as of the effective date of this Agreement certified copies of
resolutions of the Board of Directors and stockholder of Newco authorizing the
execution, delivery and performance of this Agreement and any other agreements
referenced herein to which Newco is a signatory and the
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consummation of the Transaction.
(b) Opinion of Counsel. The Stockholders, Holding and Benefit shall
have received an opinion of counsel for Crown and Newco in form and substance
reasonably satisfactory to counsel for the Stockholders, Holding and Benefit.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of Stockholders with
respect to the Stockholders. Stockholders, jointly and severally, hereby make
each of the following representations and warranties to Crown and Newco:
(a) Title to Stock. At the Closing, each of the Stockholders shall be
the lawful owner of the Shares in the respective amounts set forth on Schedule
2.04 hereto, free and clear of all liens, restrictions, encumbrances and
charges, with full power, right, and authority to sell such shares pursuant to
this Agreement.
(b) Authority of Stockholders. This Agreement has been duly executed
and delivered by each of the Stockholders and this Agreement constitutes the
legal, valid and binding obligation of each of the Stockholders enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement by each of the Stockholders will not violate any provision of any law
to which any of the Stockholders is subject. None of the Stockholders is a party
to, or subject to, or bound by, any judgment, injunction, order or decree of any
court or governmental authority, or any arbitration award which would restrict
the performance by any of the Stockholders of this Agreement or such other
documents or instruments to be executed or delivered by any of the Stockholders
in connection herewith.
(c) Transactions or Arrangements. Except as set forth on Schedule 4.01
and the agreements and transactions entered into in connection with this
Agreement, no Stockholder is presently, directly or indirectly, a party to any
transaction with either Holding or Benefit, currently in effect or which will be
in effect after the Closing, including without limitation: (i) any contract,
agreement, understanding, commitment or other arrangement providing for the
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any Stockholder or any Affiliate of any Stockholder or to
any third party for the benefit of any Stockholder or any Affiliate of any
Stockholder; (ii) any contract, agreement, understanding, commitment or other
arrangement relating to the employment of any Stockholder by either Holding or
Benefit, or any bonus, deferred compensation, pension, profit sharing, stock
option, employee stock purchase, retirement or other employee benefit plan
maintained by either Holding or Benefit for the benefit of any Stockholder or
any Affiliate of any Stockholder; and (iii) any loans or advances to or from
either Holding or Benefit.
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Section 4.02 Representations and Warranties of Stockholders with
respect to Holding, Benefit and the Partnership. Stockholders, jointly and
severally, hereby make each of the following representations and warranties to
Crown and Newco:
(a) Organization and Qualification. (i) Holding and Benefit are each
duly incorporated and validly existing as corporations in good standing under
the laws of the State of Missouri, and each possesses corporate power and
authority to own, lease and operate its properties and conduct its business as
it is now being conducted; (ii) Holding and Benefit are each duly qualified as
foreign corporations to transact business in the jurisdictions listed on
Schedule 4.02 (which constitute all of the jurisdictions in which its ownership
or leasing or properties of the conduct of its business requires such
qualification except where the failure to be so qualified would not have a
material adverse effect on either Holding or Benefit) and is in good standing in
such jurisdictions; (iii) the Partnership is validly existing and in good
standing under the laws of the State of California and Holding and Benefit are
the only partners thereof; (iv) Neither Holding nor Benefit has any subsidiaries
and does not own any capital stock or other interest in any other corporation or
entity except the Partnership; (v) true, complete and correct copies of the
Articles of Incorporation and Bylaws of both Holding and Benefit have been
previously delivered to Crown; and (vi) the minute books and stock record books
of both Holding and Benefit containing minutes of director and stockholder
meetings and stock transfer and ownership records, respectively, are complete
and correct in all material respects.
(b) Authority of Holding and Benefit. This Agreement has been duly
executed and delivered by Holding and Benefit and this Agreement constitutes the
legal, valid and binding obligation of Holding and Benefit enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement by Holding and Benefit will not violate any provision of any law to
which Holding and Benefit are subject. Neither Holding nor Benefit is a party
to, or subject to, or bound by, any judgment, injunction, order or decree of any
court or governmental authority, or any arbitration award which would restrict
the performance by Holding or Benefit of this Agreement or such other documents
or instruments to be executed or delivered by Holding or Benefit in connection
herewith.
(c) Authorized Capital Stock. The total authorized, issued and
outstanding shares of capital stock of Holding and Benefit are as set forth on
Schedule 4.02. The Shares are duly authorized and are fully paid and non
assessable. No warrants, options or other rights exist for the issue or purchase
of the capital stock or other securities of either Holding or Benefit, any
securities convertible into or exchangeable for the capital stock or other
securities of either Holding or Benefit, or any plans, contracts or commitments
providing for the issuance of or granting of rights to acquire, any capital
stock of either Holding or Benefit or securities convertible into or
exchangeable for the capital stock of either Holding or Benefit. Neither Holding
nor Benefit is not a party to any agreement or commitment requiring it to
repurchase, reacquire or redeem any of the Shares.
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(d) Financial Statements; Absence of Undisclosed Liabilities. The
financial statements of each of the Partnership, Holding and Benefit as of and
for the year ended December 31, 1995 and for the three months ended March 31,
1996 (collectively the "Financial Statements"), which Financial Statements have
been delivered to Newco, have been prepared in accordance with GAAP (with
respect to the Partnership) or a tax basis (with respect to Holding and Benefit)
and present fairly the financial position and the results of operations of each
of the Partnership, Holding and Benefit at the indicated dates and for the
indicated periods and have been prepared in a manner consistent with past
practices of the Partnership, Holding and Benefit. Without limiting the
generality of the preceding sentence, except for losses which may arise under
the DUS Loss Sharing Agreement, neither the Partnership, Holding or Benefit has
any material indebtedness, liability, claim, loss (whether caused by a borrower
default or otherwise), damage, deficiency or obligation, liquidated or
unliquidated, of any nature, whether accrued, absolute, contingent or otherwise,
whether due or to become due, which is not reflected in the Financial
Statements.
(e) Absence of Change of Events. Since March 31, 1996, the Partnership,
Holding and Benefit have carried on their business in the ordinary course
consistent with past practice. Since March 31, 1996, there as not been with
respect to the Partnership, Holding or Benefit: (i) any material adverse change
in financial condition, results of operations, business or earnings other than
the Transaction; (ii) any damage, destruction or casualty loss, whether covered
by insurance or not, materially and adversely affecting business, operations or
financial condition; (iii) any change or increase in the rate or terms of any
compensation or benefits receivable by any employee; (iv) any entry into, or
modification, amendment, renewal, extension or termination of, a material
contract or commitment; (v) any violation of any laws, ordinances, orders,
injunctions or decrees that would materially and adversely effect business,
operations or financial condition; (vi) any failure to collect accounts
receivable or to pay accounts payable in a manner other than consistent with
past practices; (vii) any creation or assumption or a mortgage, pledge or other
lien or encumbrance upon any of the real or personal property owned or leased;
(viii) any sale, assignment, lease, transfer or other disposition of any real or
personal property owned or leased; (ix) any material change in accounting or
bookkeeping methods, principles or practices; (x) any material borrowing of
money, including any increase or extension of purchase money credit, or any
material increase in the liabilities from those reflected in the Financial
Statements; (xi) any dividend, distribution, declaration or payment in
redemption, repurchase or otherwise with respect to either the Shares or
interests in the Partnership; (xii) any issuance of any equity or debt security;
(xiii) any gift or charitable donation; and (xiv) any cancellation of any debts
owed or claims held.
(f) Contractual Obligations. Except as set forth on Schedule 4.02 or
pursuant to or in connection with this Agreement, neither the Partnership,
Holding nor Benefit is bound by or subject to any Material Contract that falls
within the following categories: (i) Contracts for the purchase or sale of any
fixed or capital assets, or continuing Contracts for the purchase of any
materials, supplies equipment or services, or Contracts for the sale of any
service; (ii)
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collective bargaining agreements, employment contracts, management or consulting
agreements or any other Contracts with employees, agents, distributors,
representatives, consultants (except as provided in Section 6.02 hereof); (iii)
Contracts with any Affiliate or with any of the Stockholders; (iv) Contracts to
make any gift or charitable donation; (v) Contracts with any Person to sell
Shares or to effect any merger, consolidation or other reorganization, or to
enter into any future agreement with respect to such transactions; (vi)
Contracts for the borrowing of money or issuance of any note, bond, indenture,
loan, credit agreement or other evidence of indebtedness or direct or indirect
guaranty or assumption of indebtedness, liabilities or obligations of others;
(vii) Contracts for leasing personal property; (viii) Contracts containing
covenants not to compete, which otherwise restrict any type of business or which
restrict the use or dissemination of information or the hiring of employees.
(g) Legal Proceedings. Neither the Partnership, Holding or Benefit is
(i) subject to any lawsuits, administrative proceedings or governmental
investigations, (ii) in default or violation of any judgment or order of any
court or administrative agency or (iii) aware of any event which could give rise
to a claim not covered by insurance policies in full force and effect except for
transactions contemplated by the DUS Loss Sharing Agreement.
(h) Licenses; Compliance with Law. Schedule 4.02 sets forth, as of the
date of this Agreement, the licenses, permits, approvals and other
authorizations issued by any governmental body or agency and required for the
operation of either the Partnership, Holding or Benefit. Each of the
Partnership, Holding and Benefit owns or possess all licenses, accreditations,
permits, approvals and other authorizations necessary to carry on its business,
all of which are in full force and effect, including but not limited to licenses
from FNMA and FHA. Neither Partnership, Holding or Benefit has received any
notice that any such license, accreditation, permit, approval or other
authorization will not be renewed, or will be revoked or withdrawn. Each of the
Partnership, Holding and Benefit is in material compliance with all rules, laws
and regulations related to the operation of its business.
(i) Agreements in Full Force and Effect. The Partnership, Holding and
Benefit: (i) have performed all material obligations required to be performed
under all Contracts to which any or all of them are parties or are bound, (ii)
are and have at all times been in compliance with all representations,
warranties and covenants contained in the DUS Contract, the DUS Loss Sharing
Agreement and the DUS Reserve Agreement and (iii) are aware of no notice or
claim of default with respect to any Contract to which any or all of them are
parties or are bound. The Contracts set forth on Schedule 4.02 are and remain in
full force and effect.
(j) ERISA. Neither the Partnership, Holding or Benefit maintains or
administers any employee benefit plans of any kind or nature.
(k) Required Consents. Except for the Regulatory Approvals described in
Section 3.02(f) hereof, neither the Partnership, Holding or Benefit is required
to obtain the consent, approval, authorization, declaration, filing or
registration of any party in connection with the
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execution, delivery and performance of this Agreement and the consummation of
the Transaction, which consent, approval, authorization, declaration, filing or
registration if not obtained or made would materially impair the ability to
consummate the Transaction.
(l) Tax Returns and Payments. The Partnership, Holding and Benefit have
filed or caused to be filed, within the times and in the manner prescribed by
law, all federal state and local tax returns, tax reports and information
returns required to be filed. All tax returns and reports so filed correctly and
accurately report all information required to be included and all taxes due have
been paid in full except as disclosed and provided for in the Financial
Statements. Neither the Partnership, Holding or Benefit is aware of any
assessments, adjustments or examinations with respect to any tax return or tax
liability.
(m) Title to Properties. Holding and Benefit have, or will have at
Closing, good and marketable title to all of its properties and assets (real and
personal, tangible and intangible) necessary to the conduct of business and
reflected in the Financial Statements, which title is or will be free on any
encumbrance, lien, charge or other restriction of any kind or character. To the
extent that the Partnership presently holds title to any such properties or
assets then, prior to Closing, Holding and Benefit shall cause the Partnership
to convey title to such properties and assets to either Holding or Benefit, or
both, by bill of sale or other means reasonably satisfactory to Newco.
(n) Real Property; Leases. The Partnership, Holding and Benefit do not
own any real property in whole or in part. Schedule 4.02 contains a complete and
accurate list of all leases to which either the Partnership, Holding or Benefit
is a party (either as lessor or lessee). Each such lease is valid and in full
force and effect, is enforceable according to its terms and is not in default in
any material respect. The Transaction will not cause a default in the terms or
conditions of any such lease.
(o) Environmental Matters. The Partnership, Holding and Benefit (i) are
and at all times have been in full compliance with any and all federal, state or
local environmental laws, regulations, ordinances relating to the use,
generation, storage, transportation, treatment or disposal of hazardous, toxic
or polluting substances (ii) have obtained and complied with any and all permits
or approvals required with respect to environmental matters and (iii) are not
aware of any claim, demand or notification that any of them is or may be
responsible with respect to any environmental remediation.
(p) Bank Accounts. Schedule 4.02 contains a list of all bank accounts,
deposit boxes or other relationships either the Partnership, Holding or Benefit
maintains at any financial institution. No Persons other than the Stockholders
or the employees of the Partnership, Holding or Benefit are authorized to
transact business with respect to these relationships.
Section 4.03 Representations and Warranties of Crown and Newco. Crown
and Newco, jointly and severally, hereby make each of the following
representations and
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warranties to the Stockholders, Holding and Benefit:
(a) Authority of Crown and Newco. This Agreement has been duly executed
and delivered by Crown and Newco and this Agreement constitutes the legal, valid
and binding obligation of Crown and Newco enforceable in accordance with its
terms. The execution, delivery and performance of this Agreement by Crown and
Newco will not violate any provision of any law to which Crown and Newco are
subject. Neither Crown nor Newco is a party to, or subject to, or bound by, any
judgment, injunction, order or decree of any court or governmental authority, or
any arbitration award which would restrict the performance by Crown or Newco of
this Agreement or such other documents or instruments to be executed or
delivered by Crown or Newco in connection herewith.
(b) Required Consents. Except for the Regulatory Approvals described in
Section 3.02(f) hereof, neither Crown nor Newco is required to obtain the
consent, approval, authorization, declaration, filing or registration of any
party in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement, which consent, approval, authorization, declaration, filing or
registration if not obtained or made would materially impair the ability to
consummate the Transaction.
ARTICLE V
COVENANTS PENDING CLOSING
Section 5.01 Covenants of Holding, Benefit and the Stockholders. From
the date of this Agreement until Closing or termination of this Agreement in
accordance with Section 7.09 hereof, the Stockholders will cause the
Partnership, Holding and Benefit to operate and conduct their business,
properties and assets only in the ordinary course and, without limiting the
generality of foregoing, will cause the Partnership, Holding and Benefit to do
the following:
(a) No Material Change. The Partnership, Holding and Benefit will (i)
carry on their business in the ordinary course and in accordance with past
practice; (ii) will not change their structure or capitalization; (iii) not make
or agree to make any distribution of cash or other assets except as provided in
Section 2.04(e) hereof; (iv) not sell, pledge, lease, mortgage, encumber or
otherwise dispose of any assets other than in the normal course of business for
fair value; and (v) not enter into any contracts or commitments of any kind
involving, in the aggregate, in excess of $25,000.
(b) Maintenance and Transfer of Servicing Systems. Appearing on
Schedule 5.01 is an itemization of Servicing Systems, which the parties agree
(i) are necessary to the business Newco is acquiring by the Transaction and (ii)
are a material portion of the consideration for the Transaction set forth in
Section 2.04. The Partnership, Holding and Benefit will keep and
13
<PAGE> 15
maintain the Servicing Systems in as good a state of operating condition and
repair as they are on the date of this Agreement and will not make any changes
in or to the Servicing Systems without the written consent of Newco.
(c) Maintenance of Loan Portfolio. Appearing on Schedule 5.01 is a
summary of loans the Partnership is presently servicing under the DUS program,
segmented into categories A, B and C together with a description of those
categories. Except as required by the DUS Guide, the Partnership, Holding and
Benefit will not, without the written consent of Newco, take any action with
respect to those loans which (i) has or may have the effect of changing the
categorization of the loan or (ii) constitutes a significant action with respect
to the loan including, but not limited to, enforcement any collection remedies
and agreement to any forbearance or compromise.
(d) Investigation. Crown, Newco and their representatives, at all
reasonable times and upon reasonable notice, shall have full access to all
books, contracts and records of the Partnership, Holding and Benefit for the
purpose of familiarizing themselves with the operation and conduct of the
business.
(e) No Solicitation. No action, directly or indirectly, will be taken
to solicit indications of interest or offers for the sale of either the
Partnership, Holding or Benefit (whether by sale of stock, assets, merger or
otherwise) to anyone other than Newco.
(f) Preserve Accuracy of Representations. The Stockholders, Holding and
Benefit will refrain from taking any action which would render any
representation or warranty contained in this Agreement inaccurate at and as of
the Closing Date, except for changes specified in, permitted or contemplated by,
this Agreement.
Section 5.02 Covenants of Crown and Newco. Crown and Newco will refrain
from taking any action which would render any representation or warranty
contained in this Agreement inaccurate at and as of the Closing Date, except for
changes specified in, permitted or contemplated by, this Agreement.
ARTICLE VI
OTHER COVENANTS
Section 6.01 Employment of Wantland. Dean Wantland is presently
employed by the Partnership. Newco will use its best efforts to negotiate a
definitive employment agreement with Wantland at or prior to Closing. The
employment agreement will call for Newco to compensate Wantland at his current
salary and with comparable employee benefits for a period of six months
following the Closing Date. If, at the end of that six-month period, Newco
either declines to offer Wantland further employment or offers Wantland
employment if he relocates, and Wantland declines the offer, then, in either
circumstance, Stockholders shall be
14
<PAGE> 16
liable to pay Wantland a $25,000 stay bonus, which sum shall be escrowed at
Closing pursuant to the provisions of Section 2.04(c) hereof.
Section 6.02 Somerset Escrow. Appearing on Schedule 6.02 is a
description of the escrow account maintained with respect to the Somerset loan.
From and after the Closing Date until said escrow account terminates pursuant to
the terms of the agreements governing it, Newco shall pay to the Stockholders
quarterly 25% of all fees Newco receives in conjunction with the administration
of said escrow account. Payment to Stockholders shall be in the respective
percentage interests set forth on Schedule 2.04.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Notices. Any notice, request or other document to be given
under this Agreement to any party shall be effective upon receipt (or refusal of
receipt) and shall be in writing and delivered personally or sent by telecopy,
reputable overnight courier or certified or registered mail, postage prepaid to
the parties at the following addresses:
If to Crown or Newco:
1251 Dublin Road
Columbus, Ohio 43215
Attention: Stephen W. Brown, Secretary
Telephone: 614/488-1169
Telecopy: 614/488-9780
If to Reinlein:
Karl H. Reinlein
7 Doubletree Lane
St. Louis, Missouri 63131
If to Lieser:
George F. Lieser
39 Marmion Way
Rockport, Massachusetts 01966
15
<PAGE> 17
If to McGee:
John R. McGee
3514 Pine Valley Drive
Sarasota, Florida 34239
Any notice sent by telecopy shall be followed by a hard copy of such notice sent
by United States first class mail, postage prepaid, or any other manner set
forth above.
Section 7.02 Survival of Representations and Warranties. The
representations and warranties contained in Article IV shall survive the Closing
for a period of six months.
Section 7.03 Entire Agreement; Amendment. This Agreement, including the
Schedules and Exhibits to this Agreement, contain the entire agreement among the
parties with respect to the transactions contemplated hereby and supersede all
prior oral and written agreements, memoranda, understandings and undertakings
among the parties relating to the subject matter of this Agreement. This
Agreement may be modified or amended only by a written instrument executed by or
on behalf of all of the parties.
Section 7.04 Brokers. The parties each acknowledge and represent to one
another that no finder or broker has acted in connection with the Transaction
and no one is entitled to receive a fee from any party to this Agreement.
Section 7.05 Governing Law. This Agreement shall be governed by the
laws of the state of Delaware, without regard to choice of law principles. Each
party agrees that any action arising out of or related to this Agreement shall
be commenced and maintained in Delaware.
Section 7.06 Severability. In case any provision in this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired.
Section 7.07 Construction. The section and subsection headings used in
this Agreement are for convenience of reference only, are not a part of this
Agreement and are not to affect the construction of, or be taken into
consideration in interpreting, any provision of this Agreement. As used in this
Agreement, the masculine, feminine and neuter gender each includes the other,
unless the context otherwise dictates.
Section 7.08 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
16
<PAGE> 18
Section 7.09 Termination.
(a) Grounds for Termination. This Agreement shall terminate: (i) if the
Closing shall not have occurred on or prior to the earlier of (A) fifteen days
following Newco's receipt of the Regulatory Approvals set forth in Section
3.02(f) or (B) June 10, 1996, unless extended by mutual agreement of the
parties; (ii) by consent of all the parties at any time prior to the Closing;
(iii) by either Newco or the Stockholders in the event any of the conditions to
the Transaction of such party set forth in Article III are not met or cannot be
met; or (iv) in the case of a material breach of this Agreement (including an
anticipatory material breach) by the Stockholders (or any of them), on the one
hand, or Newco, on the other hand (the Stockholders and Newco are referred to as
"non-breaching party" or "breaching party," as the case may be), by the
non-breaching party if such breach or anticipatory breach is not cured or
resolved to the satisfaction of the non-breaching party within five (5) days
after delivery of written notice of such breach or anticipatory breach to the
breaching party, which notice specifies the conduct, if any, required to cure
such breach or anticipatory breach.
(b) Effect of Termination. In the event this Agreement is terminated by
mutual consent of the parties, there shall be no liability on the part of any
party except for return of the deposit set forth in Section 2.04(a), plus any
interest earned thereon, by the Stockholders to Newco. If this Agreement is
terminated by the Stockholders pursuant to Section 7.09(a)(i), (iii) or (iv),
and such termination is due solely to the action or inaction on Newco, Newco
agrees that it shall be liable to the Stockholders for damages incurred by the
Stockholders by reason of the failure to consummate the Transaction, but that
the amount of such damages are not ascertainable and therefore shall be agreed
as a liquidated amount equal to the deposit set forth in Section 2.04(a) and
that the Stockholders shall retain the deposit and all interest earned thereon
as liquidated damages and Newco and Crown shall have no further liability
hereunder. In the event this Agreement is terminated by Newco pursuant to
Section 7.09(a)(i), (iii) or (iv) and such termination is due solely to the
action or inaction of any of the Stockholders, the Stockholders shall return the
deposit, plus any interest earned thereon, to Newco and neither party shall have
any further liability hereunder. Any return of the deposit to Newco following
termination of this Agreement shall be made by the Stockholders within two
business days of such termination, by certified check or wire transfer as
requested by Newco.
Section 7.10 Successors and Assigns; Assignability. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties and their respective legal representatives, successors and permitted
assigns. This Agreement (i) shall not confer upon any person other than the
parties and their respective successors and permitted assigns any rights or
remedies under this Agreement; and (ii) shall not be assignable by any party
without the consent of all other parties.
Section 7.11 Further Assurances. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable
17
<PAGE> 19
to consummate and make effective the Transaction.
Section 7.12 Payment of Expenses. Each party shall be responsible for
and shall pay all expenses incurred by such party in connection with the
preparation, execution and delivery of this Agreement and the other agreements,
actions and documents referred to or contemplated by this Agreement and the
consummation of the Transaction.
Section 7.13 Public Announcements. All parties to this Agreement agree
that no party shall make any further public announcements, press releases or
other public disclosure regarding the existence of this Agreement or the
Transaction without first providing the other party with an opportunity to
review and approve such announcement, release or 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.
[Signatures appear on next two pages]
18
<PAGE> 20
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
CROWN NORTHCORP, INC.
By: /s/ Louis J. Carelli
------------------------
Name: Louis J. Carelli
Title: PRESIDENT
CNC/DUS NEWCO, INC.
By: /s/ Louis J. Carelli
------------------------
Name: Louis J. Carelli
Title: PRESIDENT
REINLEIN/LIESER/MCGEE HOLDING CORPORATION
By: /s/ Karl H. Reinlein
------------------------
Name: Karl H. Reinlein
Title: PRESIDENT
R/L/M EMPLOYEE BENEFIT CORPORATION
By: /s/ Karl H. Reinlein
------------------------
Name: Karl H. Reinlein
Title: PRESIDENT
/s/ Karl H. Reinlein
------------------------
KARL H. REINLEIN
[Signatures continued on next page]
S-1
<PAGE> 21
/s/ George Lieser
---------------------------
GEORGE F. LIESER
/s/ John R. McGee
----------------------------
JOHN R. MCGEE
/s/ John R. McGee
----------------------------
JOHN R. MCGEE, TRUSTEE
S-2
<PAGE> 1
EXHIBIT 4
<PAGE> 2
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment") is made
and entered into as of January 9,1997 by and among Crown NorthCorp, Inc., a
Delaware corporation ("Crown"), CNC/DUS Newco, Inc., a Delaware corporation
("Newco"), Reinlein/Lieser/McGee Holding Corporation, a Missouri corporation
("Holding"), R/L/M Employee Benefit Corporation, a Missouri corporation
("Benefit"), Karl H. Reinlein ("Reinlein"), George F. Lieser ("Lieser") and John
R. McGee, both individually and in his capacity as trustee under a certain trust
agreement dated July 20, 1993 ("McGee"). Reinlein, Lieser and McGee are
sometimes referred to collectively as the "Stockholders."
BACKGROUND INFORMATION
A. The parties hereto have entered into a certain Stock Purchase
Agreement dated as of May 22, 1996 (the "Agreement"). All capitalized terms not
specifically defined herein have the meanings ascribed to them in the Agreement.
B. The parties hereto want to enter into this Amendment to modify
certain of the provisions, terms or conditions of the Agreement.
THEREFORE, the parties agree as follows:
STATEMENT OF AGREEMENT
1. The Purchase Price, as set forth in Sections 2.01 and 2.04 of the
Agreement, is hereby changed to $1,129,350.96. The cash at Closing, as set forth
in Section 2.04(b) of the Agreement, is hereby changed to $879,350.96.
2. The Closing Date, as set forth in Sections 2.03 and 7.09(a)(i)(B) of
the Agreement, is hereby changed to January 9, 1997.
3. The date set forth in both Section 2.04(d)(ii) of the Agreement and
Paragraph 6 of the escrow agreement appearing as Exhibit A to the Agreement is
hereby changed to December 31, 2000.
4. The date set forth in Sections 3.02(d) and 4.02(e) of the Agreement
is hereby changed to December 31, 1996. In Section 4.02(d) of the Agreement, the
phrase "three months ended March 31, 1996" is hereby deleted and the phrase
"twelve months ended December 31, 1996" is hereby inserted in its place.
5. Schedules 2.04 and 5.01 attached hereto and made a part hereof
supersede and
<PAGE> 3
replace those same schedules appearing in the Agreement.
6. Except as expressly modified by this Amendment, each and every
provision of the Agreement is and remains in full force and effect.
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of
the day and year first above written.
CROWN NORTHCORP, INC.
By: /s/
------------------------------
Name: Ronald E. Roark
Title: Chairman and Chief Executive Officer
CNC/DUS NEWCO, INC.
By: /s/
------------------------------
Name: Ronald E. Roark
Title: Chairman and Chief Executive Officer
REINLEIN/LIESER/MCGEE HOLDING CORPORATION
By: /s/
------------------------------
Name: Karl H. Reinlein
Title: President
R/L/M EMPLOYEE BENEFIT CORPORATION
By: /s/
------------------------------
Name: Karl H. Reinlein
Title: President
[Signatures continued on next page]
2
<PAGE> 4
/s/
--------------------------
KARL H. REINLEIN
/s/
--------------------------
GEORGE F. LIESER
/s/
--------------------------
JOHN R. MCGEE
/s/
--------------------------
JOHN R. MCGEE, TRUSTEE
3
<PAGE> 1
EXHIBIT 5
<PAGE> 2
$500,000 January 10, 1997
VARIABLE RATE COGNOVIT PROMISSORY NOTE
Crown NorthCorp, Inc., a Delaware corporation ("Maker"), promises to pay to the
order of The Fifth Third Bank of Columbus, an Ohio banking corporation
("Payee"), the principal sum of $500,000, with interest on the declining unpaid
principal outstanding at a variable rate equal to the prime rate of interest of
The Fifth Third Bank, as publicly announced by such bank from time to time as
its prime rate of interest for domestic commercial loans (the "Prime Rate").
Principal and interest under this note shall be due and payable as follows:
(a) On the date of this note, interest at the Prime Rate on the
principal balance outstanding under this note from the date of
this note through and including January 31, 1997 in an amount
equal to $2,406.25 shall be paid by Maker to Payee.
(b) Commencing on March 1, 1997 and continuing on the first day of
the next twelve consecutive calendar months thereafter through
and including February 1, 1998, interest at the Prime Rate on
the principal balance outstanding under this note shall be
paid by Maker to Payee.
(c) Commencing on March 1, 1998 and continuing on the first day of
each of the next 46 consecutive calendar months thereafter
through and including January 1, 2002, principal in an amount
equal to $8,333.33, plus accrued interest at the Prime Rate on
the declining unpaid principal balance outstanding under this
note from time to time shall be paid by Maker to Payee.
(d) The entire unpaid principal balance plus all accrued interest
under this note shall be due and payable on February 1, 2002
(the "Maturity Date").
All payments on this note shall be made by Maker to Payee on or before the
date required above and shall be made to Payee at 21 East State Street,
Columbus, Ohio 43215, or at such other address as may be designated by Payee
or the holder of this note from time to time. Maker shall have the right to
prepay this note, in whole or in part, at any time without penalty; provided
that there shall be a prepayment penalty equal to two percent (2%) of the
principal balance outstanding immediately prior to such prepayment in the
event that any such prepayment is made by Maker obtaining funds to prepay this
note, in whole or in part, from any lending institution other than Payee.
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<PAGE> 3
During the term of this note, the Prime Rate shall increase or decrease
automatically without notice. Interest calculations on this note shall be
based upon a 360-day year consisting of 12, 30-day months. In the event that
The Fifth Third Bank discontinues the practice of quoting the Prime Rate, the
rate used for the Prime Rate shall instead be the rate of interest charged by
such bank from time to time on 90-day commercial loans made to its prime
borrowers.
During the period when any Event of Default (as defined in the Loan Agreement
dated this same date (the "Loan Agreement") between Maker and Payee) exists,
the unpaid principal balance outstanding under this note plus all accrued
interest thereon, together with any late charge provided for under this note,
shall bear interest at a rate 500 basis points in excess of the Prime Rate
(the "Default Rate").
In addition to the accrual of interest at the Default Rate as provided for in
the previous paragraph, in the event that any payment provided for under this
note shall become overdue for a period in excess of 15 days, a default in the
making of such payment shall exist under this note and a late charge in an
amount equal to five percent (5%) of the defaulted payment shall become
immediately due to the Payee or holder of this note as liquidated damages for
failure to make prompt payment. Such charge shall be payable in any event not
later than the due date of the next subsequent installment of interest or
principal and interest.
This note is being made pursuant to the Loan Agreement. The payment of this
note and all interest under this note is secured by, among other security, the
Security Agreements (as defined in the Loan Agreement) and by the additional
security described in the Loan Agreement. The covenants, conditions, and
agreements contained in the Loan Agreement, the Security Agreements, and all
of the other Loan Documents (as defined in the Loan Agreement) are hereby made
a part of this note. Upon the occurrence of an Event of Default (as defined in
the Loan Agreement), the entire unpaid principal sum of this note and all
interest accrued thereon shall become due and payable immediately, without
notice at the option of the holder of this note.
This note was made and negotiated in Columbus, Ohio and all questions
concerning the validity or meaning of this note or relating to the rights and
obligations hereunder shall be construed and resolved under the laws of Ohio.
The undersigned hereby designates the Court of Common Pleas of Franklin
County, Ohio as the court of proper jurisdiction and exclusive venue of and
for any and all lawsuits or other legal proceedings relating to this note;
hereby irrevocably consents to such designation, jurisdiction, and venue; and
hereby waives any objections or defenses relating to jurisdiction or venue
with respect to any lawsuit or other legal proceeding initiated in or
transferred to the Court of Common Pleas of Franklin County, Ohio. In the
event any provision of this note is deemed to be invalid, such a determination
shall not affect the validity of the remainder of this note.
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<PAGE> 4
Waiver of Jury Trial
Maker, after consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily, and intentionally waives any right it may have to a
trial by jury in any litigation based upon or arising out of this note or any
course of conduct, dealing, statements (whether oral or written), or actions
of Maker. This waiver shall not in any way affect Payee's ability to pursue
remedies pursuant to any confession of judgment or cognovit provision
contained in this note or the other Loan Documents. Maker shall not seek to
consolidate, by counterclaim or otherwise, any action in which a jury trial
has been waived with any other action in which a jury trial cannot be or has
not been waived.
Warrant of Attorney
Maker hereby irrevocably authorizes any attorney-at-law to appear in any court
of record in the State of Ohio or in any other state or territory of the
United States at any time after this note becomes due, whether by acceleration
or otherwise, to waive the issuing and service of process, and to confess
judgment against the Maker in favor of Payee or the holder of this note for
the amount due hereunder together with interest, expenses, the costs of suit
and reasonable attorneys' fees, and thereupon to release and waive all errors,
rights of appeal and stays of execution. Such authority shall not be exhausted
by one exercise, but judgment may be confessed from time to time as any sums
and/or costs, expenses or reasonable attorneys' fees shall be due, by filing
an original or a photostat c copy of this guaranty. The Maker waives any right
to move any court for an order having an attorney or firm representing Payee
or the holder of this note removed or disqualified as counsel for Payee or the
holder of this note as a result of such attorney or firm confessing judgment
against Maker in accordance with this provision. The Maker hereby expressly
waives any conflicts of interest that may now or hereafter exist as a result
of any attorney representing Payee or the holder of this note confessing
judgment against the Maker and expressly consents to any attorney representing
Payee or the holder of this note or to any other attorney to confess judgment
against the Maker in accordance with this provision. The Maker hereby further
consents and agrees that Payee or the holder of this note may pay any attorney
confessing judgment against the Maker in accordance with this provision, a
reasonable fee for confessing judgment and that any fees so aid may be
included in the amount of such judgment.
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER
FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT OR ANY OTHER CAUSE.
CROWN NORTHCORP, INC.
By: /s/Stephen W. Brown
-------------------------
Print Name: Stephen W. Brown
Its: Secretary
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<PAGE> 1
EXHIBIT 6
<PAGE> 2
CASH SECURITY AGREEMENT
This agreement is made effective January 10, 1997, at Columbus,
Ohio, between Crown NorthCorp, Inc., an Ohio corporation ("Debtor"), having
its principal place of business at 1251 Dublin Road, Columbus, Ohio 43215 and
The Fifth Third Bank of Columbus, an Ohio banking corporation ("Secured
Party"), having its principal place of business at 21 East State Street,
Columbus, Ohio 43215, who hereby agree as follows:
Section 1. Grant of Security Interest. To secure the payment of the
$500,000 Note (defined in Section 2 below) and Debtor's obligations under the
Loan Agreement (defined in Section 2 below), Debtor grants to Secured Party a
security interest in, and pledges, assigns, and transfers to Secured Party,
all of Debtor's rights, title, and interests in and to all of Debtor's cash on
deposit with Secured Party in money market account no. 75935177 (the
"Account"), including any and all substitutions, replacements, and renewals
thereof, all interest, dividends, proceeds, or earnings therefrom, and any and
all other funds or property which Debtor is now or may hereafter be entitled
to receive therefrom (collectively, the "Collateral").
Section 2. Obligations Secured. This agreement is being made in
connection with the Loan Agreement dated this same date between Debtor and
Secured Party (the "Loan Agreement") and shall secure all obligations of
Debtor to Secured Party arising under the Loan Agreement, including without
limitation: (a) the $500,000 Note (as defined in the Loan Agreement); (b) all
of Debtor's obligations under the other Loan Documents (as defined in the Loan
Agreement); and (c) any other indebtedness to Secured Party, whether or not
any such obligations are now or hereafter evidenced by promissory notes or
other documents and irrespective of any guarantees or other security now or
hereafter given for any such obligations (collectively, the "Obligations").
Section 3. Possession of the Collateral. Upon execution of this
agreement, Debtor is delivering the Collateral to Secured Party and Secured
Party shall, subject to Section 4, below, retain possession of the Collateral
until such time as all of the Obligations have been satisfied in full.
Section 4. Withdrawals from Account; Minimum Balance. Debtor may make
withdrawals from the Account, from time to time, provided that no Event of
Default exists (as defined in the Loan Agreement), and provided further that
the Account shall have a minimum of $400,000 on deposit at all times.
Section 5. Representations and Warranties. Debtor represents and
warrants to Secured Party that: (a) no consent or approval of any third party
is necessary for the valid execution, delivery, and performance of this
agreement by Debtor; (b) Debtor has full right, power, and authority to enter
into and perform this agreement, and this agreement constitutes a
legally-binding obligation of Debtor; (c) the Collateral is free and clear of
all liens, charges, pledges, claims, security interests or any other
encumbrances (collectively, "Liens"); and (d) this agreement, along with the
Intercreditor Agreement among Debtor, Secured Party, and The Huntington
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<PAGE> 3
National Bank dated this same date (the "Intercreditor Agreement"), creates a
(i) valid first-priority security interest in the Account for $500,000 and
(ii) a valid second-priority security interest in the Account for any sums
exceeding $500,000.
Section 6. Covenants of Debtor. Debtor shall (a) keep the Collateral
free and clear of all Liens, except for the security interest created hereby
and the lien of The Huntington National Bank which lien will be subordinated
in the amount of $500,000 to the Secured Party's lien created by this
agreement as contemplated by the Intercreditor Agreement; (b) pay all taxes,
assessments, or other charges which might result in a Lien against the
Collateral; and (c) not sell, transfer, or assign any right, title, or
interest in or to the Collateral to any person or entity, without the prior
written consent of Secured Party, which consent may be arbitrarily withheld.
Section 7. Execution of Documents. Debtor shall execute any documents
and take any other actions requested by Secured Party from time to time to
perfect or protect the security interest granted or purported to be granted by
this agreement or to enable Secured Party to exercise or enforce its rights or
remedies under this agreement.
Section 8. Event of Default. Upon the occurrence of an Event of
Default, Secured Party may exercise, with respect to the Collateral, all
rights and remedies of a secured party upon default under the Uniform
Commercial Code as adopted and set forth in the Ohio Revised Code (including
without limitation Chapter 1309, Ohio Revised Code) and all other rights and
remedies under this agreement or otherwise available to Secured Party. In any
action or proceeding to enforce its rights or remedies under this agreement,
Secured Party shall be entitled forthwith to immediate exclusive possession
and control of the Collateral and to receive directly all payments due or
otherwise being made on any of the Collateral, and, upon ex parte application
by Secured Party to any court of competent jurisdiction without notice to
Debtor, shall be entitled to an order giving such immediate exclusive
possession and control to Secured Party or, if Secured Party so elects, to an
order appointing a receiver for the Collateral and without any requirement of
bond or other security and without any showing that immediate or irreparable
injury, loss, or damage will result if such an order is not issued by that
court. For purposes of this agreement, notice to Debtor prior to the date of
public sale of any Collateral or five days prior to the date after which
private sale or other disposition of any Collateral will be made shall
constitute reasonable notice of any such sale.
Section 9. Notices. All notices and other communications under this
agreement to be made to either Secured Party or Debtor shall be in writing and
shall be deemed given when delivered personally, telecopied (which is
confirmed electronically), or mailed by certified mail (return receipt
requested) or sent by Federal Express, UPS, or other nationally recognized
overnight delivery service for overnight delivery to that party at the address
for that party (or at such other address for such party as such party shall
have specified in notice to the other party):
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<PAGE> 4
(a) If to Secured Party:
The Fifth Third Bank of Columbus
21 East State Street
Columbus, Ohio 43215
Attn: Charles D. Hale
Telecopy No.: (614) 341-2606
With a copy to Secured Party's Counsel:
Baker & Hostetler LLP
65 East State Street, Suite 2100
Columbus, Ohio 43215
Attn: Paul G. Ghidotti, Esq.
Telecopy No.: (614) 462-2616
(b) If to Debtor:
Crown NorthCorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Attn: Richard A. Brock
Telecopy No.: (614) 488-9780
With a copy to:
Stephen W. Brown
Crown NorthCorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Telecopy No.: (614) 488-9780
Section 10. Governing Law. All questions concerning the validity or
meaning of this agreement or relating to the rights and obligations of the
parties with respect to performance under this agreement shall be construed
and resolved under the laws of Ohio.
Section 11. Severability. The intention of the parties to this
agreement is to comply fully with all laws and public policies, and this
agreement shall be construed consistently with all laws and public policies to
the extent possible. If and to the extent that any court of competent
jurisdiction determines it is impossible to construe any provision of this
agreement consistently with any law or public policy and consequently holds
that provision to be invalid, such holding shall in no way affect the validity
of the other provisions of this agreement, which shall remain in full force
and effect.
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<PAGE> 5
Section 12. Venue. The parties to this agreement hereby designate the
Court of Common Pleas of Franklin County, Ohio, as a court of proper
jurisdiction and exclusive venue for any actions or proceedings relating to
this agreement; hereby irrevocably consent to such designation, jurisdiction,
and venue; and hereby waive any objections or defenses relating to
jurisdiction or venue with respect to any action or proceeding initiated in
the Court of Common Pleas of Franklin County, Ohio.
Section 13. Nonwaiver. No failure by either party to insist upon
compliance with any term of this agreement or to exercise any option, enforce
any right, or seek any remedy upon any default of either party shall affect or
constitute a waiver of the first party's right to insist upon such strict
compliance, exercise that option, enforce that right, or seek that remedy with
respect to that default or any prior, contemporaneous, or subsequent default;
nor shall any custom or practice of the parties at variance with any provision
of this agreement affect, or constitute a waiver of, either party's right to
demand strict compliance with the provisions of this agreement.
Section 14. No Third Party Benefit. This agreement is intended for
the exclusive benefit of the parties to this agreement and their respective
heirs, successors, and assigns, and nothing contained in this agreement shall
be construed as creating any rights or benefits in or to any third party.
Section 15. Jury Trial Waiver. Debtor, after consulting or having the
opportunity to consult with legal counsel, knowingly, voluntarily and
intentionally waives any right it may have to a trial by jury in any action or
proceeding based upon or arising out of this agreement or any of the Loan
Documents or any course of conduct, dealings, statements, whether oral or
written, or actions of either party. Debtor shall not seek to consolidate, by
counterclaim or otherwise, any action in which a jury trial has been waived
with any other action in which a jury trial cannot be or has not been waived.
Section 16. Complete Agreement. This agreement (including any
exhibits and any documents incorporated into this agreement by reference)
contains the entire agreement among the parties and supersedes any prior
agreements, negotiations, representations, or discussions among them with
respect to the subject matter of this agreement. No additions or other
changes to this agreement shall be binding upon either party unless made in
writing and signed by both parties.
Section 17. Counterparts. This agreement may be executed in multiple
counterparts, and all such executed counterparts shall constitute one original
agreement, binding on all of the parties, whether or not both of the parties
have executed the same counterparts and whether or not the signature pages
from different counterparts have been combined, and the signature of any party
to any counterpart shall be deemed to be that party's signature to any other
counterpart and may be appended to any other counterpart.
Section 18. Captions. The captions of the various sections of this
agreement are not part of the context of this agreement, but are only labels
to assist in locating those sections, and shall be ignored in construing this
agreement.
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<PAGE> 6
Section 19. Survival. All agreements, obligations, warranties, and
representations under this agreement shall survive any modifications made by
either party to this agreement.
Section 20. Genders and Numbers. When permitted by the context, each
pronoun used in this agreement includes the same pronoun in other genders or
numbers and each noun used in this agreement includes the same noun in other
numbers.
Section 21. Successors. This agreement shall be binding upon, inure
to the benefit of, and be enforceable by and against the respective heirs,
personal representatives, successors and assigns of each party to this
agreement.
Section 22. Cumulative Effect. This agreement is intended as
additional security to Secured Party and does not supersede, waive, or
otherwise affect any other security interests, guarantees, or other agreements
between Secured Party and Debtor.
CROWN NORTHCORP, INC. THE FIFTH THIRD BANK OF
COLUMBUS
By /s/Stephen W. Brown By: /s/Charles D. Hale
------------------------- -------------------
Print Name: Stephen W. Brown Charles D. Hale
---------------- Vice President
Its Secretary
------------------------
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<PAGE> 1
EXHIBIT 7
<PAGE> 2
$1,381,286 January 10, 1997
VARIABLE RATE COGNOVIT PROMISSORY NOTE
Crown NorthCorp, Inc., a Delaware corporation ("Maker"), promises to pay to the
order of The Fifth Third Bank of Columbus, an Ohio banking corporation
("Payee"), the principal sum of $1,381,286, with interest on the declining
unpaid principal outstanding at a variable rate (the "Variable Rate") equal to
50 basis points above the prime rate of interest of The Fifth Third Bank, as
publicly announced by such bank from time to time as its prime rate of interest
for domestic commercial loans (the "Prime Rate").
Principal and interest under this note shall be due and payable as follows:
(a) On the date of this note, interest at the Variable Rate on the
principal balance outstanding under this note from the date of
this note through and including January 31, 1997, in an amount
equal to $7,050.31 shall be paid by Maker to Payee.
(b) Commencing on March 1, 1997 and continuing on the first day of
each of the next 58 consecutive calendar months thereafter
through and including January 1, 2002, principal in an amount
equal to $23,021.43, plus accrued interest at the Variable
Rate on the declining unpaid principal balance outstanding
under this note from time to time shall be paid by Maker to
Payee.
(c) The entire unpaid principal balance plus all accrued interest
under this note shall be due and payable on February 1, 2002
(the "Maturity Date").
All payments on this note shall be made by Maker to Payee on or before the date
required above and shall be made to Payee at 21 East State Street, Columbus,
Ohio 43215, or at such other address as may be designated by Payee or the holder
of this note from time to time. Maker shall have the right to prepay this note,
in whole or in part, at any time without penalty; provided that there shall be a
prepayment penalty equal to two percent (2%) of the principal balance
outstanding immediately prior to such prepayment in the event that any such
prepayment is made by Maker obtaining funds to prepay this note, in whole or in
part, from any lending institution other than Payee.
During the term of this note, the Variable Rate shall increase or decrease
automatically, without notice, upon and in the same amount as any increase or
decrease in the Prime Rate. Interest calculations on this note shall be based
upon a 360-day year consisting of 12, 30-day months. In the event that The Fifth
Third Bank discontinues the practice of quoting the Prime Rate, the rate used
for the calculation of the Variable Rate under this note shall instead be the
rate of
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<PAGE> 3
interest charged by such bank from time to time on 90-day commercial loans made
to its prime borrowers.
During the period when any Event of Default (as defined in the Loan Agreement
dated this same date (the "Loan Agreement") between Maker and Payee) exists, the
unpaid principal balance outstanding under this note plus all accrued interest
thereon, together with any late charge provided for under this note, shall bear
interest at a rate 500 basis points in excess of the Variable Rate (the "Default
Rate").
In addition to the accrual of interest at the Default Rate as provided for in
the previous paragraph, in the event that any payment provided for under this
note shall become overdue for a period in excess of 15 days, a default in the
making of such payment shall exist under this note and a late charge in an
amount equal to five percent (5 %) of the defaulted payment shall become
immediately due to the Payee or holder of this note as liquidated damages for
failure to make prompt payment. Such charge shall be payable in any event not
later than the due date of the next subsequent installment of interest or
principal and interest.
This note is being made pursuant to the Loan Agreement. The payment of this note
and all interest under this note is secured by, among other security, the
Security Agreements (as defined in the Loan Agreement) and by the additional
security described in the Loan Agreement. The covenants, conditions, and
agreements contained in the Loan Agreement, the Security Agreements, and all of
the other Loan Documents (as defined in the Loan Agreement) are hereby made a
part of this note. Upon the occurrence of an Event of Default (as defined in the
Loan Agreement), the entire unpaid principal sum of this note and all interest
accrued thereon shall become due and payable immediately, without notice at the
option of the holder of this note.
This note was made and negotiated in Columbus, Ohio and all questions concerning
the validity or meaning of this note or relating to the rights and obligations
hereunder shall be construed and resolved under the laws of Ohio. The
undersigned hereby designates the Court of Common Pleas of Franklin County, Ohio
as the court of proper jurisdiction and exclusive venue of and for any and all
lawsuits or other legal proceedings relating to this note; hereby irrevocably
consents to such designation, jurisdiction, and venue; and hereby waives any
objections or defenses relating to jurisdiction or venue with respect to any
lawsuit or other legal proceeding initiated in or transferred to the Court of
Common Pleas of Franklin County, Ohio. In the event any provision of this note
is deemed to be invalid, such a determination shall not affect the validity of
the remainder of this note.
Waiver of Jury Trial
Maker, after consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily, and intentionally waives any right it may have to a
trial by jury in any litigation based upon or arising out of this note or any
course of conduct, dealing, statements (whether oral or written), or actions of
Maker. This waiver shall not in any way affect Payee's ability
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<PAGE> 4
to pursue remedies pursuant to any confession of judgment or cognovit provision
contained in this note or the other Loan Documents. Maker shall not seek to
consolidate, by counterclaim or otherwise, any action in which a jury trial has
been waived with any other action in which a jury trial cannot be or has not
been waived.
Warrant of Attorney
Maker hereby irrevocably authorizes any attorney-at-law to appear in any court
of record in the State of Ohio or in any other state or territory of the United
States at any time after this note becomes due, whether by acceleration or
otherwise, to waive the issuing and service of process, and to confess judgment
against the Maker in favor of Payee or the holder of this note for the amount
due hereunder together with interest, expenses, the costs of suit and reasonable
attorneys' fees, and thereupon to release and waive all errors, rights of appeal
and stays of execution. Such authority shall not be exhausted by one exercise,
but judgment may be confessed from time to time as any sums and/or costs,
expenses or reasonable attorneys' fees shall be due, by filing an original or a
photostatic copy of this guaranty. The Maker waives any right to move any court
for an order having an attorney or firm representing Payee or the holder of this
note removed or disqualified as counsel for Payee or the holder of this note as
a result of such attorney or firm confessing judgment against Maker in
accordance with this provision. The Maker hereby expressly waives any conflicts
of interest that may now or hereafter exist as a result of any attorney
representing Payee or the holder of this note confessing judgment against the
Maker and expressly consents to any attorney representing Payee or the holder of
this note or to any other attorney to confess judgment against the Maker in
accordance with this provision. The Maker hereby further consents and agrees
that Payee or the holder of this note may pay any attorney confessing judgment
against the Maker in accordance with this provision, a reasonable fee for
confessing judgment and that any fees so aid may be included in the amount of
such judgment.
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE.
CROWN NORTHCORP, Inc.
By /s/Stephen W. Brown
--------------------------
Print Name: Stephen W. Brown
Its : Secretary
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<PAGE> 1
EXHIBIT 8
<PAGE> 2
NON-CASH COLLATERAL SECURITY AGREEMENT
This agreement is made effective January 10, 1997, at Columbus, Ohio,
between Crown NorthCorp, Inc., a Delaware corporation ("Debtor"), having its
principal place of business at 1251 Dublin Road, Columbus, Ohio 43215 and The
Fifth Third Bank of Columbus, an Ohio banking corporation ("Secured Party"),
having its principal place of business at 21 East State Street, Columbus, Ohio
43215, who hereby agree as follows:
Section 1. Grant of Security Interest. To secure the payment of all of
the Obligations (defined in Section 2, below), including without limitation all
of the Notes (defined in Section 2,below), Debtor grants to Secured Party a
security interest in, and pledges, assigns, and transfers to Secured Party, all
of Debtor's rights, title, and interests in and to all of the foregoing
(collectively referred to hereinafter as, the "Collateral"):
(a) All of Debtor's machinery, equipment, tools, furniture,
furnishings and fixtures including, but not limited to, all
manufacturing, fabricating, processing, transporting and packaging
equipment, power systems, heating, cooling and ventilating systems,
lighting and communications systems, electric, gas and water
distribution systems, food service systems, fire prevention, alarm and
security systems, laundry systems and computing and data processing
systems, excepting Debtor's leasehold interest in any of the above
("Equipment"); all of Debtor's inventory, including, but not limited
to, parts, supplies, raw materials, work in process, finished goods,
materials used or consumed in Debtor's business, repossessed and
returned goods (hereinafter the "Inventory"); all of Debtor's accounts,
accounts receivable, contract rights, guaranties of accounts, accounts
receivable and contract rights and security therefor, chattel paper,
income tax refunds, instruments, negotiable documents, notes, drafts,
acceptances and other forms of obligations and receivables arising from
or in connection with the operation of Debtor's business including, but
not limited to, those arising from or in connection with Debtor's sale,
lease or other disposition of the Inventory (hereinafter the
"Receivables"); and all books, records, ledger cards, computer programs
and other documents or property at any time evidencing or relating to
the Receivables; all of Debtor's general intangibles, trade names,
trademarks, trade secrets, goodwill, patents, patent applications,
copyrights, deposit accounts, licenses and franchises; and any and all
deposits or other sums at any time credited by or due from the Secured
Party to the Debtor, any and all policies, certificates of insurance,
securities, goods, accounts receivable, choses in action, cash,
property and the proceeds thereof owned by the Debtor or in which the
Debtor has an interest, which now or hereafter are at any time in the
possession or control of the Secured Party or in transit by mail or
carrier to or from the Secured Party, or in the possession of any third
party acting in the Secured Party's behalf, without regard to whether
the Secured Party received the same in pledge for safekeeping, as agent
for collection or transmission or otherwise, or whether the Secured
Party has conditionally released the same (all of the foregoing items
and types of property hereinafter the "Business Assets"); whether
Debtor's interests in the Business
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<PAGE> 3
Assets as owner, co-owner, lessee, consignee, secured party or
otherwise be now owned or existing, or hereafter arising or acquired,
and wherever located, together with all substitutions, replacements,
additions and accessions therefor or thereto, all replacement and
repair parts therefor, all documents including, but not limited to,
negotiable documents, documents of title, warehouse receipts, storage
receipts, dock receipts, dock warrants, express bills, freight bills,
airbills, bills of lading and other documents relating thereto, all
products thereof and all cash and non-cash proceeds thereof including,
but not limited to, notes, drafts, checks, instruments, insurance
proceeds, indemnity proceeds, warranty and guaranty proceeds and
proceeds arising in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Business
Assets by any governmental body, authority, bureau or agency (or any
person acting under color of governmental authority).
(b) Debtor's rights, title, and interests in and to the
Servicing Rights (as defined in the Intercreditor Agreement (defined in
Section 3, below));
(c) all servicing fees, termination fees, and proceeds from
the sale of servicing rights in the Acquired Portfolios (as defined in
the Intercreditor Agreement) and in any refinanced Acquired Portfolios
now or hereafter acquired by Debtor;
(d) $2,257,387 certificate of deposit no. 94186095 held by
Fifth Third;
(e) $500,000 of Debtor's cash on deposit with Fifth Third in
money market account no. 75935177; and
(f) all payments on and proceeds of any of the foregoing
Collateral, and including all rights to payments under any insurance
policy or any warranty, guaranty, or indemnity, payable with respect to
any of the foregoing Collateral.
Section 2. Obligations Secured. This agreement is being made in
connection with the Loan Agreement dated this same date between Debtor and
Secured Party (the "Loan Agreement") and shall secure all obligations of Debtor
to Secured Party, including without limitation all obligations arising under
(collectively, the "Obligations"): (a) the $500,000 Note, the $1,381,286 Note,
and the LC Note (all as defined in the Loan Agreement and collectively, the
"Notes"); (b) the Loan Agreement; (c) all of Debtor's obligations under the
other Loan Documents (as defined in the Loan Agreement); and (d) any other
indebtedness to Secured Party, whether or not any such obligations are now or
hereafter evidenced by promissory notes or other documents and irrespective of
any guarantees or other security now or hereafter given for any such
obligations.
Section 3. Representations and Warranties. Debtor represents and
warrants to Secured Party that: (a) other than the Huntington Liens (defined
below), Debtor owns all of the Collateral free and clear of all leases, security
interests, liens, encumbrances, charges, liabilities, or claims of any nature,
except the security interest created by this agreement; (b) other than financing
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<PAGE> 4
statements relating to the Huntington Liens, a complete list of which is set
forth in the Exhibit A attached to this agreement, no financing statements
covering all or any part of the Collateral are on file with the Secretary of
State of any state, the recorder of any county, or any other recording office;
(c) this agreement, along with the Intercreditor Agreement among Debtor, Secured
Party, and The Huntington National Bank dated this same date (the "Intercreditor
Agreement"), creates a (i) valid first-priority security interest in the
Servicing Rights, all servicing fees, termination fees, and proceeds from the
sale of servicing rights in the Mortgages and in any refinanced Mortgages now or
hereinafter acquired by Debtor, and (ii) a valid second-priority security
interest in all of the Collateral other than the collateral described in Section
3(c)(i), above, both of which secure the payment of the Obligations; and (d) all
filings or other actions necessary or desirable to perfect and protect such
security interests have been duly made or taken or shall be duly made or taken
immediately upon execution of this agreement. For purposes of this agreement,
the "Huntington Liens" shall mean the first-priority security interests and
liens of The Huntington National Bank in all of the business assets of Debtor,
as modified by the Intercreditor Agreement, which are security for the HNB
Indebtedness (as defined in the Intercreditor Agreement). Debtor warrants
further that it will cause all of the Huntington Liens to be terminated and
released of record, to Secured Party's satisfaction, on or before June 1, 1997.
Section 4. Location of Office and Collateral. Debtor warrants that: (a)
Debtor's principal office and principal place of business in the State of Ohio
is located at the address specified at the beginning of this agreement (the
"Principal Office"); (b) Debtor's principal office and principal place of
business in the States of Georgia, Texas, New Jersey, Virginia, and Missouri are
located at the respective addresses specified on the Exhibit B attached to this
agreement (each, a "State Office"); (c) Debtor will not change the location of
the Principal Office in Ohio or the location of the State Office in each of
those states listed in (b), above, without the giving of written notice to
Secured Party not less than 15 days prior to any such change.
Section 5. Use of Collateral. Except in connection with the ordinary
and usual course of its business, Debtor shall not sell, assign, pledge, or
otherwise transfer or encumber any Collateral.
Section 6. Financing Statements. Debtor hereby irrevocably authorizes
Secured Party or Secured Party's designees to execute on behalf of Debtor such
one or more financing statements, continuation statements, or amendments
thereto, and such other instruments or notices as Secured Party may consider
necessary or desirable to perfect, protect, or preserve the security interest
granted or purported to be granted by this agreement.
Section 7. Execution of Documents. Debtor shall execute any documents
and take any other actions requested by Secured Party from time to time to
perfect or protect the security interest granted or purported to be granted by
this agreement or to enable Secured Party to exercise or enforce its rights or
remedies under this agreement.
Section 8. Event of Default. Upon the occurrence of an Event of Default
(as defined in the Loan Agreement), Secured Party may exercise, subject to the
Intercreditor Agreement, with
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<PAGE> 5
respect to the Collateral all rights and remedies of a secured party upon
default under the Uniform Commercial Code as adopted and set forth in the Ohio
Revised Code (including without limitation Chapter 1309, Ohio Revised Code) and
all other rights and remedies under this agreement or otherwise available to
Secured Party. In any action or proceeding to enforce its rights or remedies
under this agreement, Secured Party shall be entitled forthwith to immediate
exclusive possession and control of the Collateral and to receive directly all
payments due or otherwise being made on any of the Collateral, and, upon ex
parte application by Secured Party to any court of competent jurisdiction
without notice to Debtor, shall be entitled to an order giving such immediate
exclusive possession and control to Secured Party or, if Secured Party so
elects, to an order appointing a receiver for the Collateral and without any
requirement of bond or other security and without any showing that immediate or
irreparable injury, loss, or damage will result if such an order is not issued
by that court. For purposes of this agreement, notice to Debtor prior to the
date of public sale of any Collateral or five days prior to the date after which
private sale or other disposition of any Collateral will be made shall
constitute reasonable notice of any such sale.
All proceeds received by the Secured Party from (A) payments due or
otherwise made on any of the Collateral, including without limitation proceeds
from the collection of Debtor's accounts receivable, and (B) the sale of any of
the Collateral shall be distributed subject to the Intercreditor Agreement to
the Secured Party.
Section 9. Notices. All notices and other communications under this
agreement to be made to either Secured Party or Debtor shall be in writing and
shall be deemed given when delivered personally, telecopied (which is confirmed
electronically), or mailed by certified mail (return receipt requested) or sent
by Federal Express, UPS, or other nationally recognized overnight delivery
service for overnight delivery to that party at the address for that party (or
at such other address for such party as such party shall have specified in
notice to the other party):
(a) If to Secured Party:
The Fifth Third Bank of Columbus
21 East State Street
Columbus, Ohio 43215
Attn: Charles D. Hale
Telecopy No.: (614) 341-2606
With a copy to Secured Party's Counsel:
Baker & Hostetler LLP
65 East State Street, Suite 2100
Columbus, Ohio 43215
Attn: Paul G. Ghidotti, Esq.
Telecopy No.: (614) 462-2616
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<PAGE> 6
(b) If to Debtor:
Crown NorthCorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Attn: Richard A. Brock
Telecopy No.: (614) 488-9780
With a copy to:
Stephen W. Brown
Crown NorthCorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Telecopy No.: (614) 488-9780
Section 10. Governing Law. Except as to issues relating to perfection
of the security interests granted by Debtor to Secured Party in states other
than Ohio, which shall be construed and resolved under the laws of such other
state, all questions concerning the validity or meaning of this agreement or
relating to the rights and obligations of the parties with respect to
performance under this agreement shall be construed and resolved under the laws
of Ohio.
Section 11. Severability. The intention of the parties to this
agreement is to comply fully with all laws and public policies, and this
agreement shall be construed consistently with all laws and public policies to
the extent possible. If and to the extent that any court of competent
jurisdiction determines it is impossible to construe any provision of this
agreement consistently with any law or public policy and consequently holds that
provision to be invalid, such holding shall in no way affect the validity of the
other provisions of this agreement, which shall remain in full force and effect.
Section 12. Venue. The parties to this agreement hereby designate the
Court of Common Pleas of Franklin County, Ohio, as a court of proper
jurisdiction and exclusive venue for any actions or proceedings relating to this
agreement; hereby irrevocably consent to such designation, jurisdiction, and
venue; and hereby waive any objections or defenses relating to jurisdiction or
venue with respect to any action or proceeding initiated in the Court of Common
Pleas of Franklin County, Ohio.
Section 13. Nonwaiver. No failure by either party to insist upon
compliance with any term of this agreement or to exercise any option, enforce
any right, or seek any remedy upon any default of either party shall affect or
constitute a waiver of the first party's right to insist upon such strict
compliance, exercise that option, enforce that right, or seek that remedy with
respect to that default or any prior, contemporaneous, or subsequent default;
nor shall any custom or practice of the parties at variance with any provision
of this agreement affect, or constitute a waiver of, either party's right to
demand strict compliance with the provisions of this agreement.
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<PAGE> 7
Section 14. No Third Party Benefit. This agreement is intended for the
exclusive benefit of the parties to this agreement and their respective heirs,
successors, and assigns, and nothing contained in this agreement shall be
construed as creating any rights or benefits in or to any third party.
Section 15. Jury Trial Waiver. Debtor, after consulting or having the
opportunity to consult with legal counsel, knowingly, voluntarily and
intentionally waives any right it may have to a trial by jury in any action or
proceeding based upon or arising out of this agreement or any of the Loan
Documents or any course of conduct, dealings, statements, whether oral or
written, or actions of either party. Debtor shall not seek to consolidate, by
counterclaim or otherwise, any action in which a jury trial has been waived with
any other action in which a jury trial cannot be or has not been waived.
Section 16. Complete Agreement. This agreement (including any exhibits
and any documents incorporated into this agreement by reference) contains the
entire agreement among the parties and supersedes any prior agreements,
negotiations, representations, or discussions among them with respect to the
subject matter of this agreement. No additions or other changes to this
agreement shall be binding upon either party unless made in writing and signed
by both parties.
Section 17. Counterparts. This agreement may be executed in multiple
counterparts, and all such executed counterparts shall constitute one original
agreement, binding on all of the parties, whether or not both of the parties
have executed the same counterparts and whether or not the signature pages from
different counterparts have been combined, and the signature of any party to any
counterpart shall be deemed to be that party's signature to any other
counterpart and may be appended to any other counterpart.
Section 18. Captions. The captions of the various sections of this
agreement are not part of the context of this agreement, but are only labels to
assist in locating those sections, and shall be ignored in construing this
agreement.
Section 19. Survival. All agreements, obligations, warranties, and
representations under this agreement shall survive any modifications made by
either party to this agreement.
Section 20. Genders and Numbers. When permitted by the context, each
pronoun used in this agreement includes the same pronoun in other genders or
numbers and each noun used in this agreement includes the same noun in other
numbers.
Section 21. Successors. This agreement shall be binding upon, inure to
the benefit of, and be enforceable by and against the respective heirs, personal
representatives, successors and assigns of each party to this agreement.
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<PAGE> 8
Section 22. Cumulative Effect. This agreement is intended as additional
security to Secured Party and does not supersede, waive, or otherwise affect any
other security interests, guarantees, or other agreements between Secured Party
and Debtor.
CROWN NORTHCORP, INC. THE FIFTH THIRD BANK OF
COLUMBUS
By: /s/Stephen W. Brown By: /s/Charles D. Hale
---------------------------- ------------------------
Print Name: Stephen W. Brown Charles D . Hale
Its: Secretary Vice President
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<PAGE> 9
EXHIBIT A
A. Ohio
1. Secretary of State
- Financing Statement No. AL97171; Dated 6/29/95
2. Franklin County Recorder
- Financing Statement No. 021339; Dated 6/29/95
B. GEORGIA
1. Georgia Statewide UCC Index
- Financing Statement No. 060199513243; Dated 7/17/95
C. New Jersey
1. Secretary of State
- Financing Statement No. 1645017; Dated 7/10/95
2. Hudson County Clerk
- Financing Statement No. 001124; Dated 7/3/95
D. Texas
1. Secretary of State
- Financing Statement No. 130148; Dated 7/3/95
2. Dallas County Clerk
- Financing Statement No. 003617; Dated 7/5/95
E. Washington D.C.
1. D.C. Recorder of Deeds
- Financing Statement No. 9500013601; Dated 7/17/95
<PAGE> 10
EXHIBIT B
1. Atlanta, Georgia Office
5600 Roswell Road
Prado East
Suite 350
Atlanta, GA 30342
2. Austin, Texas Office
Prime TEMPUS
800 Brazos Street
Suite 1030
Austin,TX 78701
3. Dallas, Texas Office
Park Central VII
12750 Merit Drive
Suite 1015
Dallas, TX 75251
4. Columbus, Ohio Office
1251 Dublin Road
Columbus, OH 43215
5. Hoboken, New Jersey Office
5 Marine View Plaza
Suite 316
Hoboken, NJ 07030
6. McLean, Virginia Office
c/o Eastern Realty
Suite 222
1568 Springhill Road
McLean, VA 22102
<PAGE> 1
EXHIBIT 9
<PAGE> 2
$2,257,387 January 10, 1997
VARIABLE RATE COGNOVIT PROMISSORY NOTE
(Letter of Credit Demand Note)
Crown NorthCorp, Inc., a Delaware corporation ("Maker"), promises to pay to the
order of The Fifth Third Bank of Columbus, an Ohio banking corporation ("Payee")
on the demand of Payee, the principal sum of $2,257,387, or so much thereof as
is disbursed by Payee under the LC (defined below), with interest on the
principal balance outstanding under this note from time to time at a variable
rate (the "Default Rate") equal to 500 basis points above the prime rate of
interest of The Fifth Third Bank, as publicly announced by such bank from time
to time as its prime rate of interest for domestic commercial loans (the "Prime
Rate").
Principal shall be deemed disbursed to Maker from Payee under this note
immediately, at such time and in such amount, as Payee makes a disbursement of
any sum (or sums) to the Federal National Mortgage Association c/o State Street
Bank and Trust Company pursuant to The Fifth Third Bank Standby Letter of Credit
No. SB10629 dated this same date, a copy of which is attached hereto as Exhibit
A (the "LC"). The Fifth Third Bank, the issuer of the LC, is an Ohio banking
corporation and the owner of all of the outstanding common stock of Payee. Upon
disbursement, interest shall accrue on all such sum (or sums) at the Default
Rate until all such sum (or sums) drawn under the LC, plus accrued interest
thereon, are paid in full by Maker to Payee.
All payments on this note shall be made by Maker to Payee immediately upon the
demand of Payee, but in all events not later than February 1, 2000, and shall be
made to Payee at 21 East State Street, Columbus, Ohio 43215, or at such other
address as may be designated by Payee or the holder of this note from time to
time.
During the term of this note, the Default Rate shall increase or decrease
automatically, without notice, upon and in the same amount as any increase or
decrease in the Prime Rate. Interest calculations on this note shall be based
upon a 360-day year consisting of 12, 30-day months. In the event that The Fifth
Third Bank discontinues the practice of quoting the Prime Rate, the rate used
for the calculation of the Default Rate under this note shall instead be the
rate of interest charged by such bank from time to time on 90-day commercial
loans made to its prime borrowers.
This note is being made pursuant to the Loan Agreement dated this same date (the
"Loan Agreement") between Maker and Payee. The payment of this note and all
interest under this note is secured by, among other security, the Security
Agreements (as defined in the Loan Agreement) and by the additional security
described in the Loan Agreement. The covenants, conditions, and agreements
contained in the Loan Agreement, the Security Agreements, and all of the other
Loan Documents (as defined in the Loan Agreement) are hereby made a part of this
note. Upon the occurrence of an Event of Default (as defined in the Loan
Agreement), the
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entire unpaid principal sum of this note and all interest accrued thereon shall
become due and payable immediately, without notice at the option of the holder
of this note.
This note was made and negotiated in Columbus, Ohio and all questions concerning
the validity or meaning of this note or relating to the rights and obligations
hereunder shall be construed and resolved under the laws of Ohio. The
undersigned hereby designates the Court of Common Pleas of Franklin County, Ohio
as the court of proper jurisdiction and exclusive venue of and for any and all
lawsuits or other legal proceedings relating to this note; hereby irrevocably
consents to such designation, jurisdiction, and venue; and hereby waives any
objections or defenses relating to jurisdiction or venue with respect to any
lawsuit or other legal proceeding initiated in or transferred to the Court of
Common Pleas of Franklin County, Ohio. In the event any provision of this note
is deemed to be invalid, such a determination shall not affect the validity of
the remainder of this note.
Waiver of Jury Trial
Maker, after consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily, and intentionally waives any right it may have to a
trial by jury in any litigation based upon or arising out of this note or any
course of conduct, dealing, statements (whether oral or written), or actions of
Maker. This waiver shall not in any way affect Payee's ability to pursue
remedies pursuant to any confession of judgment or cognovit provision contained
in this note or the other Loan Documents. Maker shall not seek to consolidate,
by counterclaim or otherwise, any action in which a jury trial has been waived
with any other action in which a jury trial cannot be or has not been waived.
Warrant of Attorney
Maker hereby irrevocably authorizes any attorney-at-law to appear in any court
of record in the State of Ohio or in any other state or territory of the United
States at any time after this note becomes due, whether by acceleration or
otherwise, to waive the issuing and service of process, and to confess judgment
against the Maker in favor of Payee or the holder of this note for the amount
due hereunder together with interest, expenses, the costs of suit and reasonable
attorneys' fees, and thereupon to release and waive all errors, rights of appeal
and stays of execution. Such authority shall not be exhausted by one exercise,
but judgment may be confessed from time to time as any sums and/or costs,
expenses or reasonable attorneys' fees shall be due, by filing an original or a
photostatic copy of this guaranty. The Maker waives any right to move any court
for an order having an attorney or firm representing Payee or the holder of this
note removed or disqualified as counsel for Payee or the holder of this note as
a result of such attorney or firm confessing judgment against Maker in
accordance with this provision. The Maker hereby expressly waives any conflicts
of interest that may now or hereafter exist as a result of any attorney
representing Payee or the holder of this note confessing judgment against the
Maker and expressly consents to any attorney representing Payee or the holder of
this note or to any other attorney to confess judgment against the Maker in
accordance with this provision. The Maker hereby further consents and agrees
that Payee or the holder of this note
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may pay any attorney confessing judgment against the Maker in accordance with
this provision, a reasonable fee for confessing judgment and that any fees so
aid may be included in the amount of such judgment.
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE.
CROWN NORTHCORP, INC.
By: /s/Stephen W. Brown
--------------------------
Print Name: Stephen W. Brown
Its: Secretary
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EXHIBIT A
************************DRAFT COPY*************************
IRREVOCABLE STANDBY LETTER OF CREDIT PLACE AND DATE OF ISSUE
L/C NUMBER SB10629 Cincinnati, Ohio 45263
Page 1 of 2 08 Jan. 1997
APPLICANT: ADVISING BANK:
CROWN NORTHCORP, INC. Fifth Third Bank
1251 DUBLIN ROAD Cincinnati, Ohio 45263
COLUMBUS, 0H 43215
BY ORDER OF: BENEFICIARY:
Same FEDERAL NATIONAL MORTGAGE
ASSOCIATION, C/O STATE STREET BANK
AND TRUST CO., CORP. TRUST DEPT.
TWO INTERNATIONAL PLACE
AMOUNT:USD2,257,387.00
Two million two hundred fifty seven
thousand three hundred eighty seven
and 00/100 United States Dollars
PLACE AND DATE OF EXPIRY:
Our counters
05 Jan. 2000
FOR THE ACCOUNT OF CROWN NORTHCORP, INC. WE HEREBY OPEN IN YOUR FAVOR OUR
IRREVOCABLE LETTER OF CREDIT NO.S310629 ("CREDIT") FOR AN AMOUNT NOT EXCEEDING
A TOTAL OF U.S. $2,257,387.00, EFFECTIVE IMMEDIATELY AND EXPIRING ON JANUARY 5,
2000 (THE "TERMINATION DATE").
FUNDS UNDER THIS CREDIT ARE AVAILABLE TO YOU OR TO STATE STREET BANK AND TRUST
COMPANY, YOUR COLLATERAL AGENT AND BAILEE, AGAINST EITHER ONE OF YOUR SIGHT
DRAFT(S) ON US, COMPLETED IN SUBSTANTIALLY THE FORM ATTACHED AS SCHEDULE A, FOR
ALL OR ANY PART OF THIS CREDIT. IF, FOR ANY REASON, WE CANNOT DETERMINE THE
ORDER IN WHICH ANY DRAFT IS PRESENTED TO US, PAYMENT WILL BE MADE ONLY TO
FEDERAL NATIONAL MORTGAGE ASSOCIATION.
<PAGE> 6
**********************Draft Copy************************
IRREVOCABLE STANDBY LETTER OF CREDIT
L/C Number S310629
Page 2 of 2
WE WILL PROMPTLY HONOR ALL DRAFTS DRAWN IN COMPLIANCE WITH THE TERMS OF THIS
CREDIT IF RECEIVED ON OR BEFORE THE TERMINATION DATE AT THE FIFTH THIRD BANK, 38
FOUNTAIN SQUARE PLAZA, CINCINNATI, OHIO 45263.
DRAFTS PRESENTED AT OUR OFFICE AT THE ADDRESS SET FORTH ABOVE NO LATER THAN
10:00 A.M. SHALL BE HONORED ON THE DATE OF PRESENTATION, BY PAYMENT IN
ACCORDANCE WITH YOUR PAYMENT INSTRUCTIONS THAT ACCOMPANY EACH SUCH DRAFT. IF
REQUESTED BY YOU, PAYMENT UNDER THIS CREDIT MAY BE MADE BY WIRE TRANSFER OF
IMMEDIATELY AVAILABLE FUNDS TO YOUR ACCOUNT AS SPECIFIED IN YOUR INSTRUCTIONS,
OR BY DEPOSIT OF SAME DAY FUNDS IN A DESIGNATED ACCOUNT THAT YOU MAINTAIN WITH
US OR AT ANOTHER FINANCIAL INSTITUTION LOCATED IN THE SAME (OR A LATER) TIME
ZONE. ALL DRAWINGS UNDER THIS CREDIT WILL BE PAID WITH OUR OWN FUNDS.
THIS CREDIT SHALL BE GOVERNED BY AND SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE
FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION N0. 500 ("UCP"), AND TO THE EXTENT NOT INCONSISTENT WITH THE UCP,
THE LAWS OF THE STATE OF OHIO.
REGARDS
THE FIFTH THIRD BANK
INTERNATIONAL DEPT.
CINCINNATI, OHIO USA
TLX 214567
<PAGE> 1
EXHIBIT 10
<PAGE> 2
LC SECURITY AGREEMENT
This agreement is made effective January 10, 1997, at Columbus, Ohio,
between Crown NorthCorp, Inc., an Ohio corporation ("Debtor"), having its
principal place of business at 1251 Dublin Road, Columbus, Ohio 43215 and The
Fifth Third Bank of Columbus, an Ohio banking corporation ("Secured Party"),
having its principal place of business at 21 East State Street, Columbus, Ohio
43215, who hereby agree as follows:
Section 1. Grant of Security Interest. To secure the payment of the LC
Note (defined in Section 2 below) and Debtor's obligations under the Loan
Agreement (defined in Section 2 below), Debtor grants to Secured Party a
security interest in, and pledges, assigns, and transfers to Secured Party, all
of Debtor's rights, title, and interests in and to Debtor's certificate of
deposit no. 94186095 (the "Certificate"), including any and all substitutions,
replacements, and renewals thereof, all interest, dividends, proceeds, or
earnings therefrom, and any and all other funds or property which Debtor is now
or may hereafter be entitled to receive therefrom (collectively, the
Collateral").
Section 2. Obligations Secured. This agreement is being made in
connection with the Loan Agreement dated this same date between Debtor and
Secured Party (the "Loan Agreement") and shall secure all obligations of Debtor
to Secured Party, arising under the Loan Agreement, including without
limitation: (a) the LC Note (as defined in the Loan Agreement); (b) all of
Debtor's obligations under the other Loan Documents (as defined in the Loan
Agreement); and (c) any other indebtedness to Secured Party, whether or not any
such obligations are now or hereafter evidenced by promissory notes or other
documents and irrespective of any guarantees or other security now or hereafter
given for any such obligations (collectively, the "Obligations").
Section 3. Possession of the Collateral. Upon execution of this
agreement, Debtor is delivering the Collateral to Secured Party and Secured
Party shall, subject to Section 4, below, retain possession of the Collateral
until such time as all of the Obligations have been satisfied in full.
Section 4. Withdrawals from Certificate. Debtor may withdraw sums from
the Certificate, from time to time, provided that the principal amount of the
Certificate shall at all times exceed or equal the face amount of the LC (as
defined in the Loan Agreement), and provided further that each such withdrawal
by Debtor shall reduce the principal amount of the Certificate by the amount of
the sum withdrawn plus the amount of any applicable prepayment penalty related
to such withdrawal.
Section 5. Representations and Warranties. Debtor represents and
warrants to Secured Party that: (a) no consent or approval of any third party is
necessary for the valid execution, delivery, and performance of this agreement
by Debtor; (b) Debtor has full right, power, and authority to enter into and
perform this agreement, and this agreement constitutes a legally-binding
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obligation of Debtor; and (c) the Collateral is free and clear of all liens,
charges, pledges, claims, security interests or any other encumbrances
(collectively, "Liens").
Section 6. Covenants of Debtor. Debtor shall (a) keep the Collateral
free and clear of all Liens, except for the security interest created hereby and
the lien of The Huntington National Bank ("HNB") which lien will be subordinated
to the Secured Party's lien created by this agreement as contemplated by the
Intercreditor Agreement dated this same date among Debtor, Secured Party, and
HNB; (b) pay all taxes, assessments, or other charges which might result in a
Lien against the Collateral; and (c) not sell, transfer, or assign any right,
title, or interest in or to the Collateral to any person or entity, without the
prior written consent of Secured Party, which consent may be arbitrarily
withheld.
Section 7. Execution of Documents. Debtor shall execute any documents
and take any other actions requested by Secured Party from time to time to
perfect or protect the security interest granted or purported to be granted by
this agreement or to enable Secured Party to exercise or enforce its rights or
remedies under this agreement.
Section 8. Event of Default. Upon the occurrence of an Event of Default
(as defined in the Loan Agreement), Secured Party may exercise, with respect to
the Collateral, all rights and remedies of a secured party upon default under
the Uniform Commercial Code as adopted and set forth in the Ohio Revised Code
(including without limitation Chapter 1309, Ohio Revised Code) and all other
rights and remedies under this agreement or otherwise available to Secured
Party. In any action or proceeding to enforce its rights or remedies under this
agreement, Secured Party shall be entitled forthwith to immediate exclusive
possession and control of the Collateral and to receive directly all payments
due or otherwise being made on any of the Collateral, and, upon ex parte
application by Secured Party to any court of competent jurisdiction without
notice to Debtor, shall be entitled to an order giving such immediate exclusive
possession and control to Secured Party or, if Secured Party so elects, to an
order appointing a receiver for the Collateral and without any requirement of
bond or other security and without any showing that immediate or irreparable
injury, loss, or damage will result if such an order is not issued by that
court. For purposes of this agreement, notice to Debtor prior to the date of
public sale of any Collateral or five days prior to the date after which private
sale or other disposition of any Collateral will be made shall constitute
reasonable notice of any such sale.
Section 9. Notices. All notices and other communications under this
agreement to be made to either Secured Party or Debtor shall be in writing and
shall be deemed given when delivered personally, telecopied (which is confirmed
electronically), or mailed by certified mail (return receipt requested) or sent
by Federal Express, UPS, or other nationally recognized overnight delivery
service for overnight delivery to that party at the address for that party (or
at such other address for such party as such party shall have specified in
notice to the other party):
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(a) If to Secured Party:
The Fifth Third Bank of Columbus
21 East State Street
Columbus, Ohio 43215
Attn: Charles D. Hale
Telecopy No.: (614) 341-2606
With a copy to Secured Party's Counsel:
Baker & Hostetler LLP
65 East State Street, Suite 2100
Columbus, Ohio 43215
Attn: Paul G. Ghidotti, Esq.
Telecopy No.: (614) 462-2616
(b) If to Debtor:
Crown NorthCorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Attn: Richard A. Brock
Telecopy No.: (614) 488-9780
With a copy to:
Stephen W. Brown
Crown NorthCorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Telecopy No.: (614) 488-9780
Section 10. Governing Law. All questions concerning the validity or
meaning of this agreement or relating to the rights and obligations of the
parties with respect to performance under this agreement shall be construed and
resolved under the laws of Ohio.
Section 11. Severability. The intention of the parties to this
agreement is to comply fully with all laws and public policies, and this
agreement shall be construed consistently with all laws and public policies to
the extent possible. If and to the extent that any court of competent
jurisdiction determines it is impossible to construe any provision of this
agreement consistently with any law or public policy and consequently holds that
provision to be invalid, such holding shall in no way affect the validity of the
other provisions of this agreement, which shall remain in full force and effect.
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Section 12. Venue. The parties to this agreement hereby designate the
Court of Common Pleas of Franklin County, Ohio, as a court of proper
jurisdiction and exclusive venue for any actions or proceedings relating to this
agreement; hereby irrevocably consent to such designation, jurisdiction, and
venue; and hereby waive any objections or defenses relating to jurisdiction or
venue with respect to any action or proceeding initiated in the Court of Common
Pleas of Franklin County, Ohio.
Section 13. Nonwaiver. No failure by either party to insist upon
compliance with any term of this agreement or to exercise any option, enforce
any right, or seek any remedy upon any default of either party shall affect or
constitute a waiver of the first party's right to insist upon such strict
compliance, exercise that option, enforce that right, or seek that remedy with
respect to that default or any prior, contemporaneous, or subsequent default;
nor shall any custom or practice of the parties at variance with any provision
of this agreement affect, or constitute a waiver of, either party's right to
demand strict compliance with the provisions of this agreement.
Section 14. No Third Party Benefit. This agreement is intended for
the exclusive benefit of the parties to this agreement and their respective
heirs, successors, and assigns, and nothing contained in this agreement shall be
construed as creating any rights or benefits in or to any third party.
Section 15. Jury Trial Waiver. Debtor, after consulting or having the
opportunity to consult with legal counsel, knowingly, voluntarily and
intentionally waives any right it may have to a trial by jury in any action or
proceeding based upon or arising out of this agreement or any of the Loan
Documents or any course of conduct, dealings, statements, whether oral or
written, or actions of either party. Debtor shall not seek to consolidate, by
counterclaim or otherwise, any action in which a jury trial has been waived with
any other action in which a jury trial cannot be or has not been waived.
Section 16. Complete Agreement. This agreement (including any
exhibits and any documents incorporated into this agreement by reference)
contains the entire agreement among the parties and supersedes any prior
agreements, negotiations, representations, or discussions among them with
respect to the subject matter of this agreement. No additions or other changes
to this agreement shall be binding upon either party unless made in writing and
signed by both parties.
Section 17. Counterparts. This agreement may be executed in multiple
counterparts, and all such executed counterparts shall constitute one original
agreement, binding on all of the parties, whether or not both of the parties
have executed the same counterparts and whether or not the signature pages from
different counterparts have been combined, and the signature of any party to any
counterpart shall be deemed to be that party's signature to any other
counterpart and may be appended to any other counterpart.
Section 18. Captions. The captions of the various sections of this
agreement are not part of the context of this agreement, but are only labels to
assist in locating those sections, and shall be ignored in construing this
agreement.
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Section 19. Survival. All agreements, obligations, warranties, and
representations under this agreement shall survive any modifications made by
either party to this agreement.
Section 20. Genders and Numbers. When permitted by the context, each
pronoun used in this agreement includes the same pronoun in other genders or
numbers and each noun used in this agreement includes the same noun in other
numbers.
Section 21. Successors. This agreement shall be binding upon, inure
to the benefit of, and be enforceable by and against the respective heirs,
personal representatives, successors and assigns of each party to this
agreement.
Section 22. Cumulative Effect. This agreement is intended as
additional security to Secured Party and does not supersede, waive, or otherwise
affect any other security interests, guarantees, or other agreements between
Secured Party and Debtor.
CROWN NORTHCORP, INC. THE FIFTH THIRD BANK OF
COLUMBUS
By: /s/ Stephen W. Brown By: /s/ Charles D. Hale
------------------------------ ------------------------------
Print Name: Stephen W. Brown Charles D. Hale
---------------------- Vice President
Its: Secretary
-----------------------------
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<PAGE> 1
Exhibit 11
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
December , 1996, is by and among ASDALE LIMITED (the "Holder"), and CROWN
NORTHCORP, INC., a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, the Holder desires to purchase from the Company certain
unregistered shares of the Common Stock 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 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
<PAGE> 3
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
the Company 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 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
2
<PAGE> 4
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
distribute through such offering on a pro rata basis (such event is hereinafter
referred to as a "Reduction Event").
3
<PAGE> 5
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 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,
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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 untrue statement of any material fact contained, on the effective
date thereof, in any Registration Statement under which such securities were
registered under the
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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' relative intent, knowledge, access
to information and opportunity to correct or
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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:
Asdale Limited
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(ii) If to the Company:
Crown NorthCorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Attn: Stephen W. Brown
Secretary
(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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ASDALE LIMITED
By:________/s/__________________
Name: Martin C.B. Mellish
Title: Attorney-in-fact
CROWN NORTHCORP, INC.
By:_________/s/_________________
Name: Stephen W. Brown
Title: Secretary
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