EXHIBIT 7.1
This Agreement is entered into as of the 16th day of December, 1997 by and
between Xxxxx X. Xxxxxx ("XXXXXX"), Strategic Acquisition Partners, LLC, a
Nevada limited liability company ("PARTNERS") and Xxxxxxx X. Xxxxxxx,
individually and on behalf of Turkey Vulture Fund XIII, Ltd., an Ohio limited
liability company (collectively, "XXXXXXX").
WHEREAS, Xxxxxx and Xxxxxxx have agreed to provide credit enhancement to
Partners (the "GUARANTEES"), to induce American National Bank and Trust Company
of Chicago ("ANB") to extend to Partners a loan in the aggregate principal
amount of $20,000,000 (the "BANK LOAN");
WHEREAS, Partners intends to enter into a Credit Agreement (the "CREDIT
AGREEMENT") with Central Reserve Life Corporation, an Ohio corporation ("CRLC"),
pursuant to which Partners would extend a loan to CRLC in the aggregate
principal amount of $20,000,000;
WHEREAS, (i) as a condition precedent to Partners making its loan to CRLC,
CRLC would issue warrants to purchase 800,000 shares of common stock, without
par value, of CRLC at a purchase price of $6.00 per share, and (ii) subject to
approval by the shareholders of CRLC, CRLC would issue warrants to purchase an
additional 200,000 shares of common stock, without par value, of CRLC at a
purchase price of $6.00 per share (the warrants referred to in (i) and (ii),
collectively, the "WARRANTS") to Xxxxxx or his designees; and
WHEREAS, Partners is a party to that certain Stock Purchase Agreement,
dated November 26, 1997, between Partners and CRLC (the "PURCHASE AGREEMENT").
NOW THEREFORE, for good and valuable consideration, the parties hereto
hereby agree as follows:
At the closing of the transactions contemplated by the Credit Agreement, 70% of
the Warrants shall be issued to Xxxxxx or his designees, and 30% of the Warrants
shall be issued to Xxxxxxx or his or its designees.
The parties hereto covenant and agree, in their capacities as shareholders of
CRLC, to vote all of their respective shares of CRLC common stock in favor of
the transactions contemplated by the Purchase Agreement. At the closing of the
transactions contemplated by the Purchase Agreement (the "CLOSING"), (i) Xxxxxxx
covenants and agrees to pay 30% of the purchase price as defined in the Purchase
Agreement (the "PURCHASE PRICE") in accordance with the provisions of Section
2.2 thereof upon receipt of a certificate representing 30% of the Stock, as
defined in the Purchase Agreement (the "STOCK") and 30% of the warrants pursuant
to the Warrant Agreement, as defined in the Purchase Agreement (the "WARRANT
AGREEMENT"), (ii) Partners covenants and agrees to pay 70% of the Purchase Price
in accordance with the provisions of Section 2.2 thereof upon receipt of a
certificate representing 70% of the Stock and 70% of the warrants pursuant to
the Warrant Agreement and (iii) Xxxxxx covenants and agrees to use his best
efforts to cause Partners to comply with the foregoing. In addition, the
parties hereto covenant and agree to comply with all of their respective
obligations under the documents (including, without limitation, any guarantee
obligation) evidencing the Bank Loan.
In the event Xxxxxxx or Xxxxxx breaches its or their covenants set forth in
clauses (i) and (ii) of the second sentence of paragraph 2 hereof, the party in
breach shall promptly assign, transfer and convey to the other party (free and
clear of all liens, encumbrances or Adverse Claims) Warrants to purchase 300,000
shares of common stock of the Company following such breach. Neither Xxxxxxx nor
Xxxxxx shall transfer Warrants so that after giving effect to such transfer such
party will have Warrants to purchase less than 300,000 shares of common stock of
the Company, in the aggregate, prior to the earlier to occur of (i) the Closing
or (ii) the valid termination of the Purchase Agreement in accordance with its
terms. Each party covenants and agrees to execute and deliver such additional
instruments, documents and certificates and take such other actions necessary to
accomplish any of the foregoing.
Partners shall promptly pay to ANB all receipts of interest and principal
collected by it under the Credit Agreement and related documents; provided that
if the applicable interest rate under the Credit Agreement exceeds the
applicable interest rate under the ANB Loan, Partners shall pay to ANB the
interest due on the ANB Loan and shall pay to Xxxxxxx 30% of the excess of
interest payments actually received from the Company over the interest payments
due on the ANB Loan. Partners hereby indemnifies and holds harmless Xxxxxxx
for any loss arising out of Xxxxxxx'x liability to ANB relating to the Bank Loan
to the extent that Partners fails to comply with the covenant contained in the
previous sentence.
Partners agree to pay Xxxxxxx 30% of any fees collected by it under Section 7.5
of the Purchase Agreement promptly upon receipt by it of any such fees.
Notwithstanding the terms of their respective Guaranties, Xxxxxx and Xxxxxxx
shall indemnify and hold harmless each other against any amount either of them
actually pays under their respective Guarantees to ANB in excess of the
following percentages of the total amount actually paid under the Guarantees:
(i) Xxxxxx 70% and (ii) Xxxxxxx 30%. Each of Xxxxxx and Xxxxxxx assumes and
shall be responsible to each other in proportion to the foregoing percentages of
said percentage assumption and responsibility, Xxxxxx and Xxxxxxx shall
indemnify and hold harmless each other from any and all fees and expenses
(including reasonable attorney fees and collection costs) actually paid by
either of them in excess of the percentages set forth above.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Illinois.
This Agreement may be executed by any one or more of the parties hereto in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument. The
execution of counterparts shall not be deemed to constitute delivery of this
Agreement by any party until all of the parties have executed and delivered
their respective counterparts.
Each party agrees that the other party will have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief without prejudice to any other rights and remedies that it may
have for breach of this Agreement.
This Agreement shall bind and inure to the benefit of the parties named herein
and their respective successors and assigns. Neither party shall assign this
Agreement, or any part hereof, without the consent of the other.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first above written.
__________________________________
Xxxxx X. Xxxxxx
__________________________________
Xxxxxxx X. Xxxxxxx
Turkey Vulture Fund XIII, Ltd.
By: _____________________________
Xxxxxxx X. Xxxxxxx
Manager
Strategic Acquisition Partners, LLC
By:
Xxx Xxxxx
Manager
