STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of March __,
1998, is between and among CONTIWEST CORPORATION, a Nevada corporation with
offices at 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the
"Purchaser"), and CROWN NORTHCORP, INC., a Delaware corporation with offices
at 0000 Xxxxxx Xxxx, Xxxxxxxx, Xxxx 00000 (the "Seller").
WITNESSETH:
WHEREAS, the Purchaser desires to purchase from the Seller, and the
Seller desires to sell to the Purchaser, one share of the Series BB
Convertible Preferred Stock, par value $.01 per share, of the Seller (the
"Seller Preferred Stock"), and a warrant to purchase shares of the Common
Stock, par value $.01 per share, of the Seller on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the adequacy, sufficiency, and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
THE PURCHASE AND SALE
SECTION 1.1. TERMS OF THE PURCHASE AND SALE. On the basis of and in
reliance upon the representations and warranties set forth in Section 2.1 and
Article III, and subject to the terms and conditions set forth herein:
(a) The Seller shall issue at the Closing (as hereinafter defined) to
the Purchaser a certificate registered in the name of the Purchaser for one
share (the "Closing Share") of Seller Preferred Stock.
(b) The Seller shall issue at the Closing to the Purchaser a warrant
(the "Warrant") to purchase up to 200,000 additional shares of the Common
Stock, par value $.01 per share, of the Seller ("Seller Common Stock") in the
form attached as Exhibit A hereto and hereby made a part hereof.
(c) As consideration for the Closing Share and the Warrant, the
Purchaser shall deliver at the Closing to the Seller $2,000,000 in cash, by
certified check, or by wire transfer of immediately available funds to an
account designated in writing by the Seller. The parties hereto agree that
(i) the consideration for the Closing Share shall be $1,999,990, and (ii) the
consideration for the Warrant shall be $10.
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SECTION 1.2. THE CLOSING. The closing of the transactions contemplated
by Section 1.1 (the "Closing") shall take place at such place and time on or
before March ____, 1998 as the Purchaser and the Seller agree.
SECTION 1.3. CONDITIONS TO THE OBLIGATION OF THE PURCHASER TO
CONSUMMATE THE TRANSACTIONS TO BE CONSUMMATED HEREUNDER AT THE CLOSING. The
obligations of the Purchaser to consummate the transactions to be consummated
hereunder at the Closing are subject to the following conditions (unless
waived by the Purchaser in its discretion):
(a) ACCURACY OF REPRESENTATIONS AND COMPLIANCE WITH CONDITIONS. All
representations and warranties of the Seller contained in Article II of this
Agreement shall be true and correct as of the Closing; as of the Closing the
Seller shall have performed and complied with all covenants and agreements
and satisfied all conditions required to be performed and complied with by
the Seller at or before such time by this Agreement; and the Purchaser shall
have received a certificate executed by the Chairman of the Board and Chief
Executive Officer of the Seller, dated the Closing Date, to that effect,
substantially in the form of Exhibit B.
(b) OPINION OF COUNSEL. The Seller shall have delivered to the
Purchaser on the Closing Date the favorable opinions of each of Powell,
Goldstein, Xxxxxx & Xxxxxx LLP, counsel to the Seller and Xxxxxxx X. Xxxxx,
Secretary of the Seller, each dated as of such date, collectively addressing
matters customarily addressed by counsel to an issuer with respect to
transactions of this type as determined by the Purchaser and the Seller, and
each in the form agreed upon by the Purchaser and the Seller, each in each
case acting reasonably and in good faith.
(c) OTHER CLOSING DOCUMENTS. The Seller shall have delivered to the
Purchaser on or prior to the Closing such other documents as the Purchaser
may reasonably request in order to enable the Purchaser to determine whether
the conditions to its obligations under this Agreement have been met and
otherwise to carry out the provisions of this Agreement.
(d) LEGAL ACTION. A party other than the Seller, the Purchaser, or any
of their respective affiliates shall not have instituted or threatened any
legal proceeding relating to, or seeking to prohibit or otherwise challenge
the consummation of, the transactions contemplated by this Agreement or any
of the other agreements, instruments, and other documents executed or to be
executed and delivered pursuant hereto or in connection therewith
(collectively, and including this Agreement, the "Operative Documents"), or
to obtain substantial damages with respect thereto.
(e) NO GOVERNMENTAL ACTION. There shall not have been any action
taken, or any law, rule, regulation, order, or decree proposed, promulgated,
enacted, entered, enforced, or deemed applicable to the transactions
contemplated by this Agreement or any of the other agreements, instruments,
and other documents executed and delivered pursuant hereto or in connection
herewith (collectively, the "Operative Documents"), by any federal, state,
local, or other governmental authority or by any court or other tribunal,
including the entry of a
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preliminary or permanent injunction, which, in the reasonable judgment of the
Purchaser, (i) makes any of the transactions contemplated by this Agreement
illegal, (ii) results in a material delay in the ability of the Purchaser to
consummate any of the transactions contemplated by this Agreement, (iii)
imposes limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of the Closing Share and, when issued in accordance
with the Warrant, the shares of Seller Common Stock issuable upon exercise of
the Warrant (the "Warrant Shares"), including the right to vote, when issued
in accordance with the Warrant, the Warrant Shares, on all matters properly
presented to the stockholders of the Seller, or (iv) otherwise prohibits,
restricts, or materially delays consummation of any of the transactions
contemplated by this Agreement.
(f) "BLUE-SKY" LAW COMPLIANCE. The Seller shall have received such
consents, approvals, registrations, qualifications, and other authorizations
from the state securities authorities having jurisdiction over the state in
which the Purchaser then resides as shall be necessary for the Seller to
legally issue the Closing Share and the Warrant to the Purchaser under the
state securities laws of such state.
(g) CONTRACTUAL CONSENTS NEEDED. The Seller shall have obtained at or
prior to the Closing all consents, if any, required for the consummation of
the transactions to be consummated hereunder at the Closing from any party to
any contract, agreement, instrument, lease, license, arrangement, or
understanding to which the Seller or any of its consolidated subsidiaries or
consolidated affiliates (each, a "Subsidiary", and collectively, the
"Subsidiaries") is a party, or to which any of them or any of their
respective businesses, properties, or assets are subject, or from any
governmental body, authority, or tribunal.
SECTION 1.4. CONDITIONS TO THE OBLIGATION OF THE SELLER TO CONSUMMATE
THE TRANSACTIONS TO BE CONSUMMATED HEREUNDER AT THE CLOSING. The obligations
of the Seller to consummate the transactions to be consummated hereunder at
the Closing are subject to the following conditions (unless waived by the
Seller in its discretion):
(a) ACCURACY OF REPRESENTATIONS AND COMPLIANCE WITH CONDITIONS. All
representations and warranties of the Purchaser contained in Article III of
this Agreement shall be true and correct as of the Closing; as of the Closing
the Purchaser shall have performed and complied with all covenants and
agreements and satisfied all conditions required to be performed and complied
with by the Purchaser at or before such time by this Agreement; and the
Seller shall have received a certificate executed by Authorized Signatories
of the Purchaser, dated the date of the Closing, to that effect,
substantially in the form of Exhibit C.
(b) OPINION OF COUNSEL. The Purchaser shall have delivered to the
Seller on the date of the Closing the favorable opinion of the Chief Counsel
of the Purchaser, dated as of such date, addressing the matters customarily
addressed by counsel to the purchaser with respect to transactions of this
type as agreed by the Purchaser and the Seller and in the form agreed upon by
the Seller and the Purchaser, each in each case acting reasonably and in good
faith.
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(c) OTHER CLOSING DOCUMENTS. The Purchaser shall have delivered to the
Seller at or prior to the Closing such other documents, including, without
limitation, an Investors Questionnaire, as the Seller may reasonably request
in order to enable the Seller to determine whether the conditions to its
obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
(d) LEGAL ACTION. A party other than the Seller, the Purchaser, or
any of their respective affiliates shall not have instituted or threatened
any legal proceeding relating to, or seeking to prohibit or otherwise
challenge the consummation of, the transactions contemplated by the Operative
Documents or in connection therewith, or to obtain substantial damages with
respect thereto.
(e) NO GOVERNMENTAL ACTION. There shall not have been any action
taken, or any law, rule, regulation, order, or decree proposed, promulgated,
enacted, entered, enforced, or deemed applicable to the transactions
contemplated by any of the Operative Documents, by any federal, state, local,
or other governmental authority or by any court or other tribunal, including
the entry of a preliminary or permanent injunction, which, in the reasonable
judgment of the Seller, (i) makes any of the transactions contemplated by
this Agreement illegal, (ii) results in a material delay in the ability of
the Seller to consummate any of the transactions contemplated by this
Agreement, or (iii) otherwise prohibits, restricts, or materially delays
consummation of any of the transactions contemplated by this Agreement.
(f) "BLUE-SKY" LAW COMPLIANCE. The Seller shall have received such
consents, approvals, registrations, qualifications, and other authorizations
from the state securities authorities having jurisdiction over the state in
which the Purchaser then resides as shall be necessary for the Seller to
legally issue the Closing Shares and the Warrant to the Purchaser under the
state securities laws of such state.
(g) CONTRACTUAL CONSENTS NEEDED. The Seller shall have obtained on or
prior to the Closing all consents required for the consummation of the
transactions to be consummated hereunder at the Closing from any party to any
contract, agreement, instrument, lease, license, arrangement, or
understanding to which the Seller or any Subsidiary is a party, or to which
any of them or any of their respective businesses, properties, or assets are
subject, or of any governmental body, authority, or tribunal.
(h) FAIRNESS OPINION. The Board of Directors of the Seller shall have
obtained the favorable opinion of Delta Financial Group Incorporated as to,
among other things, the fairness, from a financial point of view, of the
transactions contemplated hereby to the stockholders of the Seller, which
opinion shall be in form and substance satisfactory to the Board of Directors
of the Seller (the "Fairness Opinion").
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 2.1. REPRESENTATIONS AND WARRANTIES. The Seller represents and
warrants to the Purchaser as of the Closing as follows:
(a) ORGANIZATION AND QUALIFICATION. The Seller owns, either directly
or through one or more Subsidiaries, all the outstanding shares of capital
stock of the Subsidiaries. All of the Subsidiaries are listed on Schedule
2.1(a). Other than the Subsidiaries, neither the Seller nor any Subsidiary
has a consolidated subsidiary or consolidated affiliate corporation or owns
any material interest in any other person, firm or entity ("Person") except
as set forth on Schedule 2.1(a). Schedule 2.1(a) also correctly sets forth
as to the Seller and as to each Subsidiary its place of incorporation or
organization, principal place of business, jurisdictions in which it is
qualified to do business, and the business which it currently conducts; and
as to each Subsidiary its authorized capitalization (if applicable), its
shares of capital stock or other equity interests outstanding, and the record
and beneficial owner of those shares. Each of Seller and each of the
Subsidiaries is a corporation, limited partnership, or limited liability
company duly organized, validly existing, and in good standing under the laws
of its jurisdiction of incorporation or organization, with all requisite
power and authority, and all necessary consents, authorizations, approvals,
orders, licenses, certificates, and permits of and from, and declarations and
filings with, all federal, state, local, and other governmental authorities
and all courts and other tribunals, to own, lease, license, and use its
properties and assets and to carry on the business in which it is now
engaged, in each case except for such consents, authorizations, approvals,
orders, licenses, certificates, permits, declarations, and filings, the
absence of which, individually or in the aggregate, could not reasonably be
expected to have a material and adverse effect upon the business, financial
condition, or results of operation of the Seller and the Subsidiaries, taken
as a whole (a "Material Adverse Effect"). Each of the Seller and each of the
Subsidiaries is duly qualified to transact the business in which it is
engaged and is in good standing as a foreign corporation in every
jurisdiction in which its ownership, leasing, licensing, or use of property
or assets or the conduct of its business makes such qualification necessary,
except where the absence of such qualification or good standing could not
reasonably be expected to have a Material Adverse Effect.
(b) CAPITALIZATION. The authorized capital stock of the Seller
consists of (i) 30,000,000 shares of Seller Common Stock, of which 10,790,899
shares are outstanding as of the date hereof (excluding the Closing Shares),
and (ii) 1,000,000 shares of Preferred Stock, par value $.01 per share
("Preferred Stock"), of which (A) 1,500 shares of Series B Preferred Stock,
par value $.01 per share, (B) 500 shares of Series C Convertible Preferred
Stock, par value $.01 per share, and (C) 1 share of Series AA Convertible
Preferred Stock, par value $.01 per share, are outstanding as of the date
hereof and are convertible as set forth on Schedule 2.1(b). Each of such
outstanding shares of Seller Common Stock and each outstanding share of each
outstanding series of Preferred Stock is duly authorized, validly issued,
fully paid, and nonassessable, and was not issued in violation of any
applicable law or of any preemptive right of stockholders. All persons who,
to the Knowledge of the Seller (as hereinafter defined), own of record or
beneficially five percent or more of any class or series
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of capital stock of the Seller are set forth on Schedule 2.1(b). Except for
this Agreement and as set forth on Schedule 2.1(b), there is no commitment,
plan, or arrangement to issue, and no outstanding option, warrant, or other
right calling for the issuance of, any share of capital stock of the Seller
or of any Subsidiary or any security or other instrument convertible into,
exercisable for, or exchangeable for capital stock of the Seller or of any
Subsidiary. Except as set forth on Schedule 2.1(b), there is outstanding no
security or other instrument convertible into or exchangeable for capital
stock of the Seller or of any Subsidiary. As used herein, "Knowledge of the
Seller" means the actual knowledge of any one or more of Xxxxxx X. Xxxxx,
Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx, or Xxxxxxx Xxxxx, assuming that each
possesses the actual knowledge that an officer or director with their
responsibilities would possess after reasonable inquiry into the applicable
matter.
(c) FINANCIAL CONDITION. The Seller has delivered to the Purchaser
true and correct copies of the following: audited consolidated balance
sheets of the Seller as of December 31, 1996 (the "Last Balance Sheet) and
December 31, 1995; audited consolidated statements of income, consolidated
statements of retained earnings, and consolidated statements of cash flows of
the Seller for the years ended December 31, 1996 and December 31, 1995; and
the unaudited consolidated balance sheet (the "Unaudited Balance Sheet"),
consolidated statement of income, consolidated statement of retained
earnings, and consolidated statement of cash flows of the Seller for the nine
months ended September 30, 1997 (collectively the "Financial Statements").
Each such consolidated balance sheet presents fairly the financial condition,
assets, liabilities, and stockholders' equity of the Seller and its
consolidated subsidiaries as of its date; each such consolidated statement of
income and consolidated statement of retained earnings presents fairly the
results of operations of the Seller and its consolidated subsidiaries for the
period indicated; and each such consolidated statement of cash flows presents
fairly the information purported to be shown therein, in each case subject in
the case of such unaudited consolidated balance sheet, consolidated statement
of income, consolidated statement of retained earnings, and consolidated
balance sheet to changes resulting from year-end audit adjustments. The
financial statements referred to in this Section 2.1(c) have been prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved except as otherwise
permitted by GAAP or, with respect to financial statement footnotes, the
rules and regulations of the Securities and Exchange Commission (the
"Commission") and are in accordance with the books and records of the Seller
and its consolidated subsidiaries. Except as set forth on Schedule 2.1(c),
since September 30, 1997 (the "Reference Date"):
(i) There has at no time been a material adverse change in the
business, financial condition, or results of operations of the Seller and its
consolidated subsidiaries, considered as a whole (including, without
limitation, any adverse change in the rating of the Seller as a special
servicer by any nationally recognized rating agency);
(ii) Except as required by the terms of any outstanding series of
Preferred Stock, neither the Seller nor any Subsidiary has authorized,
declared, paid, or effected any dividend or liquidating or other distribution
in respect of its capital stock or other outstanding
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equity interests or any direct or indirect redemption, purchase, or other
acquisition of any stock of the Seller or any equity interest of any
Subsidiary;
(iii) The operations and business of the Seller and each
Subsidiary have been conducted in all respects only in the ordinary course;
and
(iv) Neither the Seller nor any Subsidiary has suffered an
extraordinary loss (whether or not covered by insurance) or waived any right
of material value.
(d) TAX AND OTHER LIABILITIES. Neither the Seller nor any Subsidiary
has any liability of any nature, whether accrued, absolute, known, unknown,
contingent or otherwise, including without limitation liabilities for
federal, state, local, or foreign taxes and penalties, interest, and
additions to tax ("Taxes") and liabilities to customers or suppliers, other
than the following:
(i) Liabilities for which full provision has been made on the
Unaudited Balance Sheet; and
(ii) Other liabilities arising since the Reference Date and prior
to the Closing in the ordinary course of business which are not inconsistent
with the representations and warranties of the Seller set forth in this
Article II. Without limiting the generality of the foregoing, the amounts set
up as provisions for Taxes on the Unaudited Balance Sheet are sufficient for
all accrued and unpaid Taxes of the Seller and the Subsidiaries, whether or
not due and payable and whether or not disputed, under tax laws, as in effect
on September 30, 1997 (the "Unaudited Balance Sheet Date"), for the period
ended on such date and for all fiscal periods prior thereto. Each of Seller
and each of the Subsidiaries has filed all federal, state, local, and foreign
tax returns required to be filed by it; has delivered to the Purchaser a true
and correct copy of each such return which was filed in the past three years;
has paid (or has established on the Unaudited Balance Sheet a reserve for)
all Taxes, assessments, and other governmental charges payable or remittable
by it or levied upon it or its properties, assets, income, or franchises
which are due and payable, in each case as of the Reference Date; and has
delivered to the Purchaser a true and correct copy of any report as to
adjustments received by it from any taxing authority during the past three
years and a statement as to any litigation, governmental or other proceeding
(formal or informal), or investigation pending, threatened, or in prospect
with respect to any such report or the subject matter of such report. Except
as set forth in Schedule 2.1(d), neither the Seller nor any Subsidiary is a
party to any contract or commitment to guarantee the payment or performance
of any liability or other obligation by any other Person, or pursuant to
which the Seller or any Subsidiary is or may become liable for the
indebtedness or other obligations of any other Person. Except as set forth
on Schedule 2.1(d), Seller is not a party to any currently effective tax
sharing agreement or arrangement or a control person for tax purposes of any
Person other than the Subsidiaries.
(e) LITIGATION AND CLAIMS. Except as set forth on Schedule 2.1(e),
there is no litigation, arbitration, claim, governmental or other proceeding
(formal or informal), or investigation pending or, to the Knowledge of the
Seller, threatened or in prospect (or any
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basis therefor to the Knowledge of the Seller) with respect to the Seller,
any Subsidiary, or any of their respective businesses, properties, or assets.
None of the matters disclosed on Schedule 2.1(e) could reasonably be
expected to have a Material Adverse Effect. Neither the Seller nor any
Subsidiary is affected by any current or threatened strike or other labor
disturbance nor to the Knowledge of the Seller is any union attempting to
represent any employee of the Seller or of any Subsidiary as collective
bargaining agent. Neither the Seller nor any Subsidiary is in violation of,
or in default with respect to, any law, rule, regulation, order, judgment, or
decree, which violation or default could reasonably be expected to have a
Material Adverse Effect; nor to the Knowledge of the Seller is the Seller or
any Subsidiary required to take any action in order to avoid such violation
or default.
(f) PROPERTIES.
(i) Each of the Seller and each of the Subsidiaries has good and
marketable title in fee simple absolute to all real properties and good title
to all other properties and assets used in its business or owned by it
(except such real and other properties and assets as are held pursuant to
leases or licenses described in Schedule 2.1(f)), free and clear of all
liens, mortgages, security interests, pledges, charges, and encumbrances
(except such as are listed on Schedule 2.1(f)).
(ii) Set forth on Schedule 2.1(f) is a true, correct, and
complete list of all real and other properties and assets owned by the Seller
and the Subsidiaries or leased or licensed by the Seller or by any Subsidiary
from or to a third party, including with respect to such properties and
assets owned by the Seller or by any Subsidiary a statement of cost, book
value and (except for land) reserve for depreciation of each item for tax
purposes, and net book value of each item for financial reporting purposes,
and, with respect to such properties and assets leased or licensed by the
Seller or by any Subsidiary, a description of such lease or license. All
such real and other properties and assets owned by the Seller or by any
Subsidiary are reflected on the Last Balance Sheet (except for acquisitions
subsequent to December 31, 1996 (the "Last Balance Sheet Date"). All real
and other tangible properties and assets owned, leased, or licensed by the
Seller or by any Subsidiary are in good and usable condition (ordinary wear
and tear excepted), except for such properties and assets as are obsolete.
(iii) The real and other properties and assets owned by the Seller
and each Subsidiary or leased or licensed by the Seller or such Subsidiary
from a third party constitute all such properties and assets which are
necessary to the business of the Seller or such Subsidiary as currently
conducted.
(iv) The current use, occupancy and operation of the real
properties owned by the Seller or any Subsidiary (the "Real Properties"), and
all aspects of the improvements thereon and thereto (the "Real Properties
Improvements"), are in compliance in all material respects with all
applicable federal, state and local laws and regulations and with all private
restrictive covenants of record, and to the Knowledge of the Seller there is
not any proposed change therein that would affect any of the Real Properties
or its use, occupancy or operation. All Real Property Improvements are
located within the lot lines (and within the mandatory
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set-backs from such lot lines established by applicable law or otherwise) and
not over areas subject to easements or rights of way. All Real Property
Improvements are in good condition and repair, suited for the operation of
the business of the Seller or the relevant Subsidiary.
(g) CONTRACTS AND OTHER INSTRUMENTS. Schedule 2.1(g) accurately and
completely sets forth the information required to be contained therein
regarding all contracts, agreements, instruments, leases, licenses,
arrangements, or understandings with respect to the Seller and each
Subsidiary, identifying whether the matter disclosed therein relates to the
Seller or to a Subsidiary named therein. The Seller has furnished to the
Purchaser (i) the certificate of incorporation (or other charter or
organizational document) and by-laws (or other governing document) of the
Seller and each Subsidiary and all amendments thereto, as currently in
effect, and (ii) the following: (a) true and correct copies of all
contracts, agreements, and instruments referred to in Schedule 2.1(g); and
(ii) true and correct copies of all leases and licenses referred to in
Schedule 2.1(g). Neither the Seller, any Subsidiary, nor (to the Knowledge
of the Seller) any other party to any such contract, agreement, instrument,
lease, or license is now or expects in the future to be in violation or
breach of, or in default with respect to complying with, any material term
thereof; each such contract, agreement, instrument, lease, or license that is
material to the business of the Seller is in full force and effect and is the
legal, valid, and binding obligation of the parties thereto and (subject to
applicable bankruptcy, insolvency, and other laws affecting the
enforceability of creditors' rights generally) is enforceable as to them in
accordance with its terms; and each such contract, agreement, instrument,
lease or license that is not material to the business of the Seller is, to
the Knowledge of the Seller, in full force and effect and is the legal,
valid, and binding obligation of the parties thereto and (subject to
applicable bankruptcy, insolvency, and other laws affecting the
enforceability of creditors' rights generally) is enforceable as to them in
accordance with its terms. Each of the Seller and each of the Subsidiaries
enjoy peaceful and undisturbed possession under all leases and licenses under
which it is operating. Neither the Seller nor any Subsidiary is in violation
or breach of, or in default with respect to, any term of its certificate of
incorporation (or other charter or organizational document) or by-laws (or
other governing document). Neither the Seller nor any Subsidiary is a member
of a customer or user organization or of a trade association.
(h) EMPLOYEES.
(i) Except as set forth on Schedule 2.1(h), neither the Seller
nor any Subsidiary has, or contributes to, any pension, profit-sharing,
option, other incentive plan, or any other type of Employee Benefit Plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), or has any obligation to or customary
arrangement with employees for bonuses, incentive compensation, vacations,
severance pay, insurance, or other benefits. The Seller has furnished to the
Purchaser: (A) true and correct copies of all documents evidencing plans,
obligations, or arrangements referred to in Schedule 2.1(h) (or true and
correct written summaries of such plans, obligations, or arrangements to the
extent not evidenced by documents) and true and correct copies of all
documents evidencing trusts, summary plan descriptions, and any other
summaries or descriptions relating to any such plans; and (B) the two most
recent annual
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reports (Form 5500's), if any, including all schedules thereto and the most
recent annual and periodic accounting of related plan assets with respect to
each Employee Benefit Plan.
(ii) All Accrued Liabilities (for contributions or otherwise)
(as defined in this Section 2.1(h)(ii)) of the Seller or any Subsidiary as of
the Closing Date to each Employee Benefit Plan and with respect to each
obligation to or customary arrangement with employees for bonuses, incentive
compensation, vacations, severance pay, insurance, or other benefits have
been paid or accrued for all periods ending prior to the date of the Closing
and no payment to any Employee Benefit Plan or with respect to any such
obligation or arrangement since the Last Balance Sheet Date has been
disproportionately large compared to prior payments. For purposes of the
preceding sentence, "Accrued Liabilities" shall include a pro rata
contribution to each Employee Benefit Plan or with respect to each such
obligation or arrangement for that portion of a plan year or other applicable
period which commences prior to and ends after the Closing Date, and Accrued
Liabilities for any portion of a plan year or other applicable period shall
be determined by multiplying the liability for the entire such year or period
by a fraction, the numerator of which is the number of days preceding the
date of the Closing in such year or period and the denominator of which is
the number of days in such year or period, as the case may be.
(iii) There has been no violation of the reporting and disclosure
requirements imposed either under ERISA or the Internal Revenue Code of 1986,
as amended, or its predecessor statute (the "Code") for which a penalty has
been or may be imposed with respect to any Employee Benefit Plan of the
Seller or of any Subsidiary and which could reasonably be expected to have a
Material Adverse Effect. No Employee Benefit Plan or related trust of the
Seller or any Subsidiary has any material liability of any nature, accrued or
contingent, including without limitation liabilities for Taxes (other than
for routine payments to be made in due course to participants and
beneficiaries, except as set forth in Schedule 2.1(h)) which liabilities
could reasonably be expected to have a Material Adverse Effect. There has
been no violation by any Employee Benefit Plan of the Seller or any
Subsidiary, which is a group health plan within the meaning of Section
162(i)(3) of the Code with the applicable requirements of Section 162(k) of
the Code. Other than the health care continuation requirements of Section
162(k) of the Code, neither the Seller nor any Subsidiary has any obligation
to provide post-retirement medical benefits or life insurance coverage to any
current or former employees. There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation
pending, threatened, or in prospect (or any basis therefor to the Knowledge
of the Seller) with respect to any Employee Benefit Plan or related trust or
with respect to any fiduciary, administrator, or sponsor (in its capacity as
such) of any Employee Benefit Plan, which could reasonably be expected to
have a Material Adverse Effect. No Employee Benefit Plan or related trust
and no such obligation or arrangement is in material violation of, or in
default with respect to, any law, rule, regulation, order, judgment, or
decree, which violation or default could reasonably be expected to have a
Material Adverse Effect nor to the Knowledge of the Seller is the Seller, any
Subsidiary, any Employee Benefit Plan, or any related trust required to take
any action in order to avoid violation or default. No event has occurred or
is threatened or about to occur which would constitute a prohibited
10
transaction under Section 406 of ERISA and which could reasonably be expected
to have a Material Adverse Effect.
(iv) Each Pension Plan maintained for the employees of the Seller
or of any Subsidiary has been qualified, from its inception, under Section
401(a) of the Code and any related trust has been an exempt trust for such
period under Section 501 of the Code. Each Pension Plan has been operated in
accordance with its terms, except where the failure to so operate could not
reasonably be expected to have a Material Adverse Effect. No investigation
or review by the Internal Revenue Service is currently pending or (to the
Knowledge of the Seller) is contemplated in which the Internal Revenue
Service has asserted or may assert that any Pension Plan is not qualified
under Section 401(a) of the Code or that any related trust is not exempt
under Section 501 of the Code. No assessment of any federal taxes has been
made or (to the Knowledge of the Seller) is contemplated against the Seller,
any Subsidiary, or any related trust of any Pension Plan and nothing has
occurred which would result in the assessment of unrelated business taxable
income under the Code. Form 5500's have been timely filed with respect to
all Pension Plans.
(v) Neither the Seller nor any Subsidiary currently contributes
to or since December 31, 1994 has effectuated either a complete or partial
withdrawal from any multi-employer Pension Plan within the meaning of Section
3(37) of ERISA or sponsored or otherwise maintained a Pension Plan subject to
Title IV of ERISA.
(vi) Schedule 2.1(h) contains a true and correct statement of the
names, relationship with the Seller or any Subsidiary, current rates of
compensation (whether in the form of salary, bonuses, commissions, or other
supplemental compensation now or hereafter payable), and aggregate annual
compensation as of January 1, 1998 of each director, officer, or other
employee of the Seller or of any Subsidiary whose aggregate compensation
currently exceeds the rate of $75,000 per annum. Since January 1, 1998,
neither the Seller nor any Subsidiary has changed the rate of compensation of
any of its directors, officers, or employees, nor has any Employee Benefit
Plan or program been instituted or amended to increase benefits thereunder.
(i) QUESTIONABLE PAYMENTS. Neither the Seller, any Subsidiary, nor any
director, officer, employee, or other person associated with the Seller or
any Subsidiary when acting on behalf of the Seller or any Subsidiary, has,
directly or indirectly: used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political
activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; made any false or
fictitious entry on the books or records of the Seller or any Subsidiary;
made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment; given any favor or gift which is not deductible for federal
income tax purposes; or made any bribe, kickback, or other payment of a
similar or comparable nature, whether lawful or not, to any person or entity,
private or public, regardless of form, whether in money, property, or
services, to obtain
11
favorable treatment in securing business or to obtain special concessions, or
to pay for favorable treatment for business secured or for special
concessions already obtained.
(j) AUTHORITY TO SELL. The Seller has all requisite power and
authority to execute, deliver, and perform this Agreement and each of the
Operative Documents to which the Seller is a party. All necessary corporate
proceedings of the Seller have been duly taken to authorize the execution,
delivery, and performance of this Agreement and each of the Operative
Documents to which the Seller is a party by the Seller. Each of this
Agreement and each of the Operative Documents to which the Seller is a party
has been duly authorized, executed, and delivered by the Seller, constitutes
the legal, valid, and binding obligation of the Seller, and is enforceable
against it in accordance with its terms. Except as set forth on Schedule
2.1(j), no consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any federal, state, local,
or other governmental authority or any court or other tribunal is required by
the Seller or any Subsidiary for the execution, delivery, or performance of
this Agreement or any of the other Operative Documents to which the Seller is
a party, by the Seller. No consent of any party to any contract, agreement,
instrument, lease, license, arrangement, or understanding to which the Seller
or any Subsidiary is a party, or to which it or any of their respective
businesses, properties, or assets are subject, is required for the execution,
delivery, or performance of this Agreement or any of the other Operative
Documents to which the Seller is a party (except such consents referred to in
Schedule 2.1(j)); and the execution, delivery, and performance of this
Agreement and each of the Operative Documents to which the Seller is a party
will not (if the consents referred to in Schedule 2.1(j) are obtained prior
to the Closing) violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both) entitle any
party to terminate or call a default under, entitle any party to rights and
privileges that such party was not receiving or ntitled to receive
immediately before this Agreement or any of the Operative Documents (if now
executed) were executed under, or create any obligation on the part of the
Seller or any Subsidiary that it was not paying or obligated to pay
immediately before this Agreement or any of the Operative Documents (if now
executed) were executed under, any term of any such contract, agreement,
instrument, lease, license, arrangement, or understanding, or violate or
result in a breach of any term of the certificate of incorporation (or other
charter or organizational document) or by-laws (or other governing document)
of the Seller or any Subsidiary, or (if each of the conditions precedent set
forth herein or in a schedule hereto are satisfied) violate, result in a
breach of, or conflict with any law, rule, regulation, order, judgment, or
decree binding on the Seller or any Subsidiary or to which it or any of its
respective businesses, properties, or assets are subject. Upon their
issuance pursuant hereto, the Closing Share and the Warrant, and upon their
issuance in accordance with the Warrant, the Warrant Shares, will be validly
authorized, validly issued, fully paid, and nonassessable and will not have
been issued in violation of any preemptive right of stockholders, and the
Purchaser will then have good title to the Closing Share and the Warrant, and
upon their issuance in accordance with the Warrant, the Warrant Shares, free
and clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts other than as set forth in the
Operative Documents. Assuming the accuracy of the representations and
warranties made by the Purchaser pursuant to Article III, the issuance of the
Closing Share and the Warrant to the Purchaser hereunder will be exempt from
registration
12
under the Securities Act and will comply with the state securities laws of
the State of New York.
(k) INTELLECTUAL PROPERTY RIGHTS. Neither the Seller nor any
Subsidiary owns any patents, patent applications and registrations,
trademarks, trademark applications and registrations, copyright applications
and registrations, trade names or industrial designs. The Seller and the
Subsidiaries license computer software as listed on Schedule 2.1(k), and to
the Knowledge of the Seller neither the Seller nor any of the Subsidiaries is
in violation of any of such licenses. The Seller and the Subsidiaries own
computer software as listed on Schedule 2.1(k), and the conduct of the
business of the Seller and the Subsidiaries and the use of such software does
not infringe upon, and neither the Seller nor any Subsidiary has received any
notice, complaint, threat, or claim alleging infringement of, any patent,
trademark, trade name, copyright, industrial design, trade secret, or any
other intellectual property right or proprietary right of any Person.
(l) INSURANCE. The Seller and the Subsidiaries are the respective
owners of the insurance policies set forth on Schedule 2.1(l), which policies
provide adequate coverage to insure the assets, properties, and businesses of
the Seller and the Subsidiaries against such risks and in such amounts as are
prudent and customary for companies similar to the Seller and the
Subsidiaries, and all of such policies are in full force and effect.
(m) RELATED PARTY TRANSACTIONS. Except as set forth on Schedule
2.1(m), neither the Seller nor any Subsidiary is directly a party to any oral
or written contract, agreement, lease, or arrangement with, or commitment to,
any Related Party (as defined below). Except as set forth on Schedule
2.1(m), no Related Party directly or indirectly owns or controls any assets
or properties used in the business of the Seller or any Subsidiary, and no
Related Party, directly or indirectly, engages in or has any significant
interest in any business which is a competitor, customer, or supplier of the
Seller or any Subsidiary. As used herein, the term "Related Party" means,
collectively, (A) any Person which, to the Knowledge of the Seller, owns 5%
or more of any class of the outstanding securities of the Seller or any
Subsidiary, (B) any director, officer, or employee of the Seller or any
Subsidiary, or (C) any Person in which any director or officer of the Seller
or any Subsidiary or any Person referred to in clause (A) above is a partner
or member, or holds a 5% or more equity interest.
(n) ENVIRONMENTAL CONDITIONS. To the Knowledge of the Seller:
(i) There is no existing or pending Environmental Law (as
hereinafter defined) with a future compliance date that will require
operational changes, business practice modifications, or capital expenditures
at any Real Property or Real Property Improvements;
(ii) All hazardous substances and solid waste on, in, or under
any Real Property or Real Property Improvements, wherever located, have been
properly removed and disposed of, and no past or current disposal, discharge,
spill, or other release of, or treatment, transportation, or other handling
of hazardous materials or solid waste on, in or under any Real
13
Property or Real Property Improvements, will subject the Seller or any
Subsidiary to corrective or compliance action or any other liability; and
(iii) There are no currently pending or overtly threatened legal
action or administrative proceedings or orders, judgments, decrees, or
rulings against or involving the Seller or any Subsidiary relating to any
alleged past or ongoing violation of any Environmental Law, nor is the Seller
or any Subsidiary subject to any liability for any such past or ongoing
violation.
As used herein, "Environmental Law" means any federal, state, local, or
municipal statute, rule, regulation, or ordinance ("Law") relating to health,
safety, or the environment, including, without limitation, any Law relating
to the manufacture, generation, processing, distribution, application, use,
treatment, transport or handling, storage of, or emissions, discharges,
releases, or threatened releases into the environment of, pollutants,
contaminants, hazardous substances, petroleum products, chemicals or
industrial waste, other solids, liquids, gases, or wastes, heat, light,
noise, radiation, electro-magnetic fields and other forms of matter and
energy of every kind and nature and the proper containment and disposal of
the same.
(o) DISCLOSURE. Neither this Agreement or any of the Operative
Documents, nor any other written document, description, certificate, or
statement furnished to the Purchaser by or on behalf of the Seller pursuant
hereto or thereto, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact, necessary to
make the statements contained herein and therein not misleading in light of
the circumstances under which they have been or will be made.
(p) BROKERAGE FEES. Neither the Seller nor any Subsidiary has created
any liability of any Person for any brokerage or finders fee in connection
with the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. The Purchaser represents
and warrants to the Seller as of the Closing as follows:
(a) ORGANIZATION. The Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada,
with all requisite power and authority to own, lease, license, and use its
properties and assets and to carry on the business in which it is now engaged
and to own securities issued by the Seller as herein contemplated. The
Purchaser is duly qualified to do business as a foreign corporation and is in
good standing in the State of New York. The Purchaser resides in the State
of New York, and is an affiliate of ContiFinancial Corporation.
14
(b) AUTHORITY TO BUY. The Purchaser has all requisite power and
authority to execute, deliver, and perform this Agreement and each of the
other Operative Documents to which it is or is to be a party. All necessary
proceedings of the Purchaser have been duly taken to authorize the execution,
delivery, and performance of this Agreement and each of the other Operative
Documents to which the Purchaser is or is to be a party by the Purchaser.
This Agreement and each of the Operative Documents to which the Purchaser is
a party has been duly authorized, executed, and delivered by the Purchaser,
is the legal, valid, and binding obligation of the Purchaser, and is
enforceable against the Purchaser in accordance with its terms.
(c) NON-DISTRIBUTIVE INTENT. The Purchaser is an "accredited investor"
(as defined in Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act")). The Purchaser is acquiring the securities to be acquired
by it at the Closing for its own account (and not for the account of others)
for investment and not with a view to the resale or other distribution
thereof. The Purchaser will not sell or otherwise dispose of such securities
(whether pursuant to a liquidating dividend or otherwise) without
registration under the Securities Act or an exemption therefrom, and the
certificate or certificates representing such securities may contain a legend
to the foregoing effect and all legends necessary or desirable, in the
judgment of the Purchaser, pursuant to any applicable state securities law,
rule, or regulation. The Purchaser understands that it may not sell or
otherwise dispose of such Shares in the absence of either a registration
statement under the Securities Act or an exemption from the registration
provisions of the Securities Act.
(d) INVESTMENT COMPANY. The Purchaser is not subject to regulation as
an investment company under the Investment Company Act of 1940, as amended.
(e) BROKER FEES. Neither the Purchaser nor any of its subsidiaries or
parents has created any liability of any Person for any brokerage or finders
fee in connection with the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS OF THE SELLER
The Seller covenants to the Purchaser as follows:
SECTION 4.1. FURNISH FUTURE INFORMATION. After the Closing, the Seller
shall deliver to the Purchaser the following so long as the Purchaser owns
any of the Closing Share, the Warrant, or the Warrant Shares:
(a) within 45 days after the end of each of the first three quarterly
fiscal periods in each fiscal year of the Seller, a consolidated balance
sheet of the Seller and its consolidated subsidiaries as at the end of such
period, and a consolidated statement of income, consolidated statement of
retained earnings, and consolidated statement of cash flows of Seller and its
consolidated subsidiaries for such period, in each case prepared from the
books and records of
15
the Seller and its consolidated subsidiaries in accordance with generally
accepted accounting principles ("GAAP") consistently applied throughout the
periods involved except as permitted by GAAP or, with respect to financial
statement footnotes, by the applicable rules and regulations of the
Commission, setting forth in each case in comparative form the figures for
the corresponding period of the previous fiscal year, all in reasonable
detail, subject to changes resulting from year-end audit adjustments;
(b) within 90 days after the end of each fiscal year of the Seller, a
consolidated balance sheet of the Seller and its consolidated subsidiaries as
at the end of such year, and a consolidated statement of income, consolidated
statement of retained earnings, and consolidated statement of cash flows of
the Seller and its consolidated subsidiaries for such year, setting forth in
each case in comparative form the figures for the previous fiscal year, all
in reasonable detail, such consolidated financial statements to be audited by
and to be accompanied by an opinion of the Seller's independent certified
public accountants of recognized national standing, which opinion shall state
that such consolidated financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied and that
the audit by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards;
(c) promptly upon their becoming available, copies of all financial
statements, reports, notices, and proxy statements sent by the Seller to its
stockholders, all regular and periodic reports filed by the Seller with any
securities exchange or with the Commission, and all press releases; and
(d) with reasonable promptness, such other material and public
information and data with respect to the Seller or any of its Subsidiaries as
from time to time may be requested by the Purchaser.
SECTION 4.2. REASONABLE BEST EFFORTS. Each of the Seller and the
Purchaser agrees to cooperate and to use its reasonable best efforts to cause
the conditions precedent to the Closing to be satisfied in a timely manner.
Without limiting the generality of the foregoing, the Seller shall use its
reasonable best efforts to obtain the Fairness Opinion and, in the event of
the termination or revocation of the Fairness Opinion prior to Closing, to
obtain a substitute fairness opinion as soon as reasonably practicable.
SECTION 4.3. RESERVATION OF AUTHORIZED SHARES. From the date hereof
through the Closing hereunder and until the expiration or surrender of the
Warrant, the Seller shall continuously hold in reserve sufficient shares of
Seller Common Stock to consummate the Closing and to perform its obligations
under the Warrant.
SECTION 4.4. USE OF PROCEEDS. The Seller agrees that the proceeds
received by the Seller as a result of the transactions contemplated hereby
will be set aside and utilized by the Seller, at the direction of the Board
of Directors of the Seller, pursuant to specific appropriations only for the
following purposes: to expand the Corporation's commercial mortgage
origination capabilities by the addition of personnel, the acquisition of
mortgage
16
banking firms, or other means; to complete a real estate investment trust or
other fund opportunity in which Purchaser and its affiliates have an interest
that is economically similar to their interest in the CHC Commercial
Holdings, Inc. REIT as agreed by the Seller and the Purchaser and its
affiliates on the date hereof; and, to the extent of up to $500,000 of such
proceeds, to fund the Corporation's commercial mortgage origination
operations as in existence on the date hereof.
ARTICLE V
COVENANTS OF THE PURCHASER
The Purchaser covenants to the Seller as follows:
SECTION 5.1. COMPLIANCE WITH SECURITIES LAWS. The Purchaser agrees to
make all filings required to be made by it under the Securities Exchange Act
of 1934 (the "Exchange Act")with respect to its holdings of securities issued
by the Seller on a timely basis.
SECTION 5.2. CHANGE OF RESIDENCE AND PRINCIPAL EXECUTIVE OFFICE. The
Purchaser agrees to promptly notify the Seller of any change in the state of
its residence or any change in the state that its principal executive office
is located prior to the Closing.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1. INDEMNIFICATION BY THE SELLER. The Seller hereby agrees
to defend, indemnify and hold harmless the Purchaser, its affiliates,
subsidiaries, and parent entities, and their respective past, current, and
future officers, directors, employees, counsel, agents, and equity holders,
and each person, if any, who controls, controlled, or will control any of
them within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act (the "Purchaser Indemnitees"), from and against any and
all losses, liabilities, damages (other than consequential or punitive
damages), costs and expenses whatsoever (including but not limited to
reasonable attorneys' fees of one counsel (and the costs of one local counsel
in each jurisdiction requiring local representation) and any and all expenses
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any claims
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), as and when incurred, arising out of, based upon, or in
connection with any misrepresentation or breach of any warranty made by the
Seller contained in any Operative Document. The foregoing agreement to
indemnify shall be in addition to any liability the Seller may otherwise
have, including without limitation liabilities arising out of any Operative
Document.
SECTION 6.2. INDEMNIFICATION BY THE PURCHASER. The Purchaser hereby
agrees to defend, indemnify and hold harmless the Seller, its subsidiaries
and affiliates, and their respective past, current, and future officers,
directors, employees, counsel, agents, and equity holders, and each person,
if any, who controls, controlled, or will control any of them within
17
the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act (the "Seller Indemnitees"), from and against any and all losses,
liabilities, damages (other than consequential or punitive damages), costs
and expenses whatsoever (including but not limited to reasonable attorneys'
fees of one counsel (and the costs of one local counsel in each jurisdiction
requiring local representation) and any and all expenses whatsoever incurred
in investigating, preparing, or defending against any litigation, commenced
or threatened, or any claim whatsoever, and any claims whatsoever, and any
and all amounts paid in settlement of any claim or litigation), as and when
incurred, arising out of, based upon, or in connection with any
misrepresentation or breach of any warranty made by the Purchaser contained
in any Operative Document. The foregoing agreement to indemnify shall be in
addition to any liability the Purchaser may otherwise have, including without
limitation liabilities arising out of any Operative Document.
SECTION 6.3. METHOD OF ASSERTING CLAIMS. In the event that any claim
or demand for which the Seller could be liable to a Purchaser Indemnitee
hereunder is asserted or sought to be collected from a Purchaser Indemnitee
by a third party, the Purchaser Indemnitee shall promptly notify the Seller
in writing of such claim or demand, specifying the nature of such claim or
demand and the amount or estimated amount thereof to the extent then
feasible, which estimate shall not be conclusive of the final amount of such
claim and demand (the "Claim Notice"). The Seller shall have 20 days from
the date that such Claim Notice is made hereunder (the "Notice Period") to
notify the Purchaser Indemnitee in writing (A) whether or not it disputes its
liability to the Purchaser Indemnitee hereunder with respect to such claim or
demand, and (B) notwithstanding any such dispute, whether or not it desires,
at its sole cost and expense, to defend the Purchaser Indemnitee against such
claim or demand.
(a) If the Seller disputes its liability with respect to such claim or
demand or the amount thereof (whether or not the Seller desires to defend the
Purchaser Indemnitee against such claim or demand as provided in subsections
(b) and (c) below), such dispute shall be resolved in compliance with Section
6.5. Pending the resolution of any dispute by the Seller of its liability
with respect to any claim or demand, such claim or demand shall not be
settled without the prior written consent of the Purchaser Indemnitee.
(b) In the event that the Seller notifies the Purchaser Indemnitee
within the Notice Period that it desires to defend the Purchaser Indemnitee
against such claim or demand then, except as hereinafter provided, the Seller
shall have the right to defend the Purchaser Indemnitee by appropriate
proceedings, which proceedings shall be promptly settled or prosecuted by it
to a final conclusion in such a manner as to avoid any risk of the Purchaser
Indemnitee becoming subject to liability for any other matter; PROVIDED,
HOWEVER, that the Seller shall not, without the prior written consent of the
Purchaser Indemnitee, consent to the entry of any judgment against the
Purchaser Indemnitee or enter into any settlement or compromise which does
not include, as an unconditional term thereof, the giving by the claimant or
plaintiff to the Purchaser Indemnitee of a release, in form and substance
satisfactory to the Purchaser Indemnitee, from all liability or obligations
in respect of such claim or litigation. If the Purchaser Indemnitee desires
to participate in, but not control, any such defense or settlement, it may do
so at its sole cost and expense through counsel of its
18
choice. If, in the reasonable opinion of the Purchaser Indemnitee, any such
claim or demand or the litigation or resolution of any such claim or demand
involves an issue or matter which could have a material adverse effect on the
business, operations, assets, properties, or prospects of the Purchaser
Indemnitee, then the Purchaser Indemnitee shall have the right to control the
defense or settlement of any such claim or demand and its reasonable costs
and expenses shall be included as part of the indemnification obligation of
the Seller hereunder; PROVIDED, HOWEVER, that the Purchaser Indemnitee shall
not settle any such claim or demand without the prior written consent of the
Seller, which consent shall not be unreasonably delayed or withheld. If the
Purchaser Indemnitee should elect to exercise such right, the Seller shall
have the right to participate in, but not control, the defense or settlement
of such claim or demand at its sole cost and expense.
(c) (i) If the Seller elects not to defend the Purchaser Indemnitee
against such claim or demand, whether by not giving the Purchaser Indemnitee
timely notice as provided above or otherwise, then the amount of any such
claim or demand, or, if the same may be defended by the Seller or by the
Purchaser Indemnitee (but the Purchaser Indemnitee shall not have any
obligation to defend any such claim or demand), then that portion thereof as
to which such defense is unsuccessful, in each case shall be conclusively
deemed to be a liability of the Seller hereunder unless the Seller has
disputed its liability to the Purchaser Indemnitee as provided in subsection
(a) above, in which case such dispute shall be resolved as provided in
Section 6.5.
(ii) In the event that a Purchaser Indemnitee should have a claim
or demand against the Seller that does not involve a claim or demand being
asserted or sought to be collected from it by a third party, the Purchaser
Indemnitee shall promptly send a Claim Notice with respect to such claim to
the Seller. If the Seller disputes its liability with respect to such claim
or demand, such dispute shall be resolved in accordance with Section 6.5; if
the Seller does not notify the Purchaser Indemnitee within the Notice Period
that it disputes such claim, the amount of such claim shall be conclusively
deemed a liability of the Seller hereunder.
(d) All claims for indemnification by a Seller Indemnitee hereunder
shall be asserted and resolved utilizing the procedures set forth above,
substituting in the appropriate place "Seller Indemnitee" for "Purchaser
Indemnitee" and variations thereof and "Purchaser" for "Seller."
SECTION 6.4. PAYMENT. Upon the determination of the liability under
Section 6.1, 6.2, or 6.3, the appropriate party shall pay to the other, as
the case may be, within 10 days after such determination, the amount of any
claim for indemnification made hereunder. In the event that the indemnified
party is not paid in full for any such claim pursuant to the foregoing
provisions promptly after the other party's obligation to indemnify has been
determined in accordance herewith, it shall have the right, notwithstanding
any other rights that it may have against any other person or entity, to
setoff the unpaid amount of any such claim against any amounts owed by it
under any of the Operative Documents. Upon the payment in full of any claim,
either by setoff or otherwise, the entity making payment shall be subrogated
to the rights of the indemnified party against any person or entity with
respect to the subject matter of such claim.
19
SECTION 6.5. MEDIATION. Subject to Section 6.6, the parties hereto
agree to attempt in good faith to resolve any controversy or claim arising
out of or relating to this Agreement or any of the Operative Documents by
mediation in such manner as shall be chosen by the parties hereto; provided,
however, that nothing shall prevent the parties from settling any dispute by
mutual agreement at any time; and provided further, however, that either
party hereto shall be entitled to litigate any such dispute before a court of
competent jurisdiction, except as otherwise provided herein, in the event
that such dispute is not resolved in such mediation within 30 days after such
mediation commences.
SECTION 6.6. OTHER RIGHTS AND REMEDIES NOT AFFECTED. The
indemnification rights of the parties hereunder are independent of and in
addition to such rights and remedies as the parties may have at law or in
equity or otherwise for any misrepresentation, breach of warranty, or failure
to fulfill any agreement or covenant hereunder on the part of any party
hereto, including without limitation the right to seek specific performance,
rescission, or restitution, none of which rights or remedies shall be
affected or diminished hereby.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. FURTHER ACTIONS At any time and from time to time, each
party agrees, at its or his expense, to take such actions and to execute and
deliver such documents as may be reasonably necessary to effectuate the
purposes of this Agreement.
SECTION 7.2. AVAILABILITY OF EQUITABLE REMEDIES. Since a breach of the
provisions of this Agreement may not adequately be compensated by money
damages, any party shall be entitled, in addition to any other right or
remedy available to it, to an injunction restraining such breach or a
threatened breach and to specific performance of any such provision of this
Agreement, and in either case no bond or other security shall be required in
connection therewith, and the parties hereby consent to the issuance of such
an injunction and to the ordering of specific performance.
SECTION 7.3. SURVIVAL. The covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive the
Closing and any delivery of any purchase price by the Purchaser, irrespective
of any investigation made by or on behalf of any party, as follows:
(a) the representations and warranties of the Seller relating to Taxes,
ERISA, the Foreign Corrupt Practices Act, and environmental laws, rules and
regulations shall survive until the expiration of the applicable statute of
limitation;
(b) all other representations and warranties contained herein shall
survive the Closing when made for a period of two (2) calendar years after
such Closing; and
20
(c) all other provisions of the Operative Documents shall survive until
the expiration of the applicable statute of limitations.
SECTION 7.4. MODIFICATION. This Agreement and the Exhibits and
Schedules hereto and the other Operative Documents set forth the entire
understanding of the parties with respect to the subject matter hereof,
supersede all existing agreements among them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party
(except as otherwise provided in Section 7.5).
SECTION 7.5. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested (in which case it shall be deemed to
be given five days after mailing) or by Federal Express, Express Mail, or
similar overnight delivery or courier service (in which case it will be
deemed to be given upon actual receipt by the recipient) or delivered (in
person or by telecopy, telex, or similar telecommunications equipment)
against receipt to the party to whom it is to be given at the address of such
party set forth below (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 7.5):
If to the Purchaser:
ContiWest Corporation
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Chief Counsel
Fax: 000-000-0000
With a copy to:
Xxxxxxx Xxxxxxxx & Xxxx
Two World Trade Center
New York, New York 10172
Attn: Xxxxxx X. X. Xxxx, Esq.
Fax: 000-000-0000
21
If to the Seller:
Crown NorthCorp, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Fax: 000-000-0000
With a copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxx, Esq.
Fax: 000-000-0000
SECTION 7.6. WAIVER. Any waiver by any party of a breach of any term
of this Agreement shall not operate as or be construed to be a waiver of any
other breach of that term or of any breach of any other term of this
Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions will not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must
be in writing.
SECTION 7.7. BINDING EFFECT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Seller, the Purchaser, and their
respective successors and assigns, and shall inure to the benefit of each
Purchaser Indemnitee, Seller Indemnitee, and their respective successors and
assigns (if not a natural person) and his assigns, heirs, and personal
representatives (if a natural person).
SECTION 7.8. NO THIRD PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement (except as provided in Section 7.7).
SECTION 7.9. SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons
and circumstances.
SECTION 7.10. HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 7.11. COUNTERPARTS; GOVERNING LAW. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which
22
together shall constitute one and the same instrument. It shall be governed
by and construed in accordance with the laws of the State of Delaware,
without giving effect to conflict of laws.
SECTION 7.12. ASSIGNMENTS. This Agreement may be assigned by operation
of law without the consent of any party hereto. This Agreement may be
assigned by the Purchaser to its affiliate without the consent of the Seller.
This Agreement may not otherwise be assigned by any party hereto without the
prior written consent of the other party hereto, which consent shall not be
unreasonably delayed or withheld.
SECTION 7.13 TERMINATION OF PRIOR AGREEMENT. The parties hereto hereby
irrevocably terminate that certain Stock Purchase Agreement, dated as of
October 2, 1997, between and among the Seller and the Purchaser, and agree
that such Stock Purchase Agreement shall be of no force and effect whatsoever.
23
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
CONTIWEST CORPORATION
[SEAL]
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: President
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President, Treasurer
& Secretary
CROWN NORTHCORP, INC.
[SEAL]
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chairman & CEO
24
EXHIBIT A
FORM OF WARRANT
WARRANT
W-__ MARCH 3, 1998
THE SECURITIES REPRESENTED BY THIS WARRANT AND ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS, BUT HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR
PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE 1933
ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES AND THE
SECURITIES ISSUED UPON EXERCISE HEREOF MAY NOT BE SOLD, PLEDGED, TRANSFERRED
OR ASSIGNED, NOR MAY THIS WARRANT BE EXERCISED, EXCEPT IN A TRANSACTION WHICH
IS EXEMPT UNDER PROVISIONS OF THE 1933 ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT; AND IN
THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION OF ANY SUCH SECURITIES.
WARRANT TO PURCHASE UP TO 200,000 SHARES OF COMMON STOCK
1. GRANT OF WARRANT.
(a) Subject to the provisions of this Warrant including, without
limitation, Section 1 (c), Crown NorthCorp, Inc., a Delaware corporation (the
"Company"), hereby agrees that CONTIWEST CORPORATION or its successors or
permitted assigns (the "Holder") is entitled, subject to the provisions of
this Warrant, to purchase from the Company, at any time or from time to time,
during the period commencing on the date hereof, up to 200,000 fully paid and
non-assessable shares of Common Stock at a price of $2.00 per share (the
"Exercise Price").
(b) The term "Common Stock" means the Common Stock, par value $.01
per share, of the Company as constituted on March 3, 1998 (the "Grant Date"),
together with any other equity securities that may be issued by the Company
in substitution therefor. The number of shares of Common Stock to be
received upon the exercise of this Warrant may be adjusted from time to time
as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter referred to as
"Warrant Stock." The term "Company" means and includes the corporation named
above as well as (i) any successor corporation resulting from the merger or
consolidation of such corporation with another corporation, or (ii) any
corporation to which such corporation has transferred its property or assets
as an entirety or substantially as an entirety.
(c) Notwithstanding any provision of this Warrant to the contrary,
the Holder's rights to purchase Warrant Shares hereunder shall vest and
expire in accordance with the following schedule, with the effect that the
Holder shall not have the right to purchase any Warrant Shares with respect
to which such rights have not vested in accordance with the following
schedule or with respect to which such rights have terminated in accordance
with the following schedule:
(i) The Holder shall have the right to purchase 20,000
shares of the Common Stock, as adjusted pursuant hereto, commencing upon the
release date of the first Annual Report on Form 10-KSB of the Company
released after the Grant Date reporting that the Company
has been profitable for any of its fiscal years occurring after the Company's
fiscal year ended December 31, 1997, which right shall terminate at 5:00
p.m., E.S.T., on the date that is one year after the date that such right so
vests.
(ii) The Holder shall have the right to purchase an
additional 20,000 shares of the Common Stock, as adjusted pursuant hereto,
commencing upon the release date of the first Annual Report on Form 10-KSB of
the Company released after the Grant Date reporting that the Company has been
profitable for any of its fiscal years occurring after the Company's fiscal
year ended December 31, 1997, provided that the credit facility created under
that certain Program Agreement, dated as of July 1, 1997, between the Company
and ContiTrade Services L.L.C. (the "Warehouse Facility") has not then been
cancelled, terminated, not renewed, or substantially reduced by ContiTrade
Services L.L.C. ("Xxxxx") (unless such action results from a default or
material breach of such credit facility by the Company) which right shall
terminate at 5:00 p.m., E.S.T., on the date that is one year after the date
that such right so vests.
(iii) The Holder shall have the right to purchase an
additional 20,000 shares of the Common Stock, as adjusted pursuant hereto,
commencing upon the release date of the first Annual Report on Form 10-KSB of
the Company released after the Grant Date reporting that the Company had
earnings per share of the Common Stock of at least 15 cents during any of its
fiscal years occurring after the Company's fiscal year ended December 31,
1997, which right shall terminate at 5:00 p.m., E.S.T., on the date that is
one year after the date that such right so vests.
(iv) The Holder shall have the right to purchase an
additional 20,000 shares of the Common Stock, as adjusted pursuant hereto,
commencing upon the release date of the first Annual Report on Form 10-KSB of
the Company released after the Grant Date reporting that the Company had
earnings per share of the Common Stock of at least 15 cents during any of its
fiscal years occurring after the Company's fiscal year ended December 31,
1997, provided that the Warehouse Facility has not then been cancelled,
terminated, not renewed, or substantially reduced by Xxxxx (unless such
action results from a default or material breach of such credit facility by
the Company), which right shall terminate at 5:00 p.m., E.S.T., on the date
that is one year after the date that such right so vests.
(v) The Holder shall have the right to purchase an
additional 20,000 shares of the Common Stock, as adjusted pursuant hereto,
commencing upon the release date of the first Annual Report on Form 10-KSB of
the Company released after the Grant Date reporting that the Company had
earnings per share of the Common Stock of at least 30 cents during any of its
fiscal years occurring after the Company's fiscal year ended December 31,
1997, which right shall terminate at 5:00 p.m., E.S.T., on the date that is
one year after the date that such right so vests.
(vi) The Holder shall have the right to purchase an
additional 20,000 shares of the Common Stock, as adjusted pursuant hereto,
commencing upon the release date of the first Annual Report on Form 10-KSB of
the Company released after the Grant Date reporting that the Company had
earnings per share of the Common Stock of at least 30 cents during any of its
fiscal years occurring after the Company's fiscal year ended December 31,
1997, provided that the Warehouse Facility has not the been cancelled,
terminated, not renewed, or substantially reduced by Xxxxx (unless such
action results from a default or material breach of such credit facility by
the
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Company), which right shall terminate at 5:00 p.m., E.S.T., on the date that
is one year after the date that such right so vests.
(vii) The Holder shall have the right to purchase an
additional 20,000 shares of the Common Stock, as adjusted pursuant hereto,
commencing upon the release date of the first Annual Report on Form 10-KSB of
the Company released after the Grant Date reporting that the Company had
earnings per share of the Common Stock of at least 40 cents during any of its
fiscal years occurring after the Company's fiscal year ended December 31,
1997, which right shall terminate at 5:00 p.m., E.S.T., on the date that is
one year after the date that such right so vests.
(viii) The Holder shall have the right to purchase an
additional 20,000 shares of the Common Stock, as adjusted pursuant hereto,
commencing upon the release date of the first Annual Report on Form 10-KSB of
the Company released after the Grant Date reporting that the Company had
earnings per share of the Common Stock of at least 40 cents during any of its
fiscal years occurring after the Company's fiscal year ended December 31,
1997, provided that the Warehouse Facility has not then been cancelled,
terminated, not renewed, or substantially reduced by Xxxxx (unless such
action results from a default or material breach of such credit facility by
the Company), which right shall terminate at 5:00 p.m., E.S.T., on the date
that is one year after the date that such right so vests.
(ix) The Holder shall have the right to purchase an
additional 20,000 shares of the Common Stock, as adjusted pursuant hereto,
commencing upon the release date of the first Annual Report on Form 10-KSB of
the Company released after the Grant Date reporting that the Company had
earnings per share of the Common Stock of at least 50 cents during any of its
fiscal years occurring after the Company's fiscal year ended December 31,
1997, which right shall terminate at 5:00 p.m., E.S.T., on the date that is
one year after the date that such right so vests.
(x) The Holder shall have the right to purchase an
additional 20,000 shares of the Common Stock, as adjusted pursuant hereto,
commencing upon the release date of the first Annual Report on Form 10-KSB
released after the Grant Date reporting that the Company had earnings per
share of the Common Stock of at least 50 cents during any of its fiscal years
occurring after the Company's fiscal year ended December 31, 1997, provided
that the Warehouse Facility has not then been cancelled, terminated, not
renewed, or substantially reduced by Xxxxx (unless such action results from a
default or material breach of such credit facility by the Company), which
right shall terminate at 5:00 p.m. E.S.T., on the date that is one year after
the date that such right so vests.
Notwithstanding any provision of this Warrant to the contrary,
however, the rights granted hereunder and to vest pursuant to subsections
(ii), (iv), (vi), (viii), and (x) of Section 1(c), whether or not vested,
shall irrevocably terminate in their entirety upon the first actual
cancellation, termination, non-renewal, or substantial reduction of the
Warehouse Facility by Xxxxx (unless such action results from a default or
material breach of such credit facility by the Company).
2. EXERCISE OF WARRANT. Subject to the limitations set forth in
Sections 1(c) and 5 hereof, this Warrant may be exercised in whole or in part
at any time or from time to time during
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the period commencing on the date hereof, to the extent permitted by Section
1(c) hereof, by presentation and surrender of this Warrant to the Company at
its principal office, or at the office of its stock transfer agent, if any,
with the Warrant Exercise Form attached hereto duly executed and accompanied
by payment (either in cash, by certified or official bank check, payable to
the order of the Company, or by wire transfer of immediately available funds
to an account designated in writing by the Company) of the Exercise Price for
the number of shares specified in such form. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder.
Upon receipt by the Company of this Warrant, together with the Exercise
Price, at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall
not then be actually delivered to the Holder.
3. RESERVATION OF SHARES. The Company will at all times reserve for
issuance and delivery all shares of Common Stock issuable upon exercise of this
Warrant. All such shares shall be duly authorized and, when issued upon such
exercise, shall be validly issued, fully paid and non-assessable and free of all
preemptive rights. No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of this Warrant, but the Company shall pay the
Holder an amount equal to the applicable Exercise Price multiplied by such
fraction in lieu of each fraction of a share otherwise called for upon any
exercise of this Warrant.
4. ADJUSTMENTS.
(a) CAPITAL ADJUSTMENTS. In case at any time or from time to time
after the Grant Date the holders of Common Stock of the Company (or any
shares of stock or other securities at the time receivable upon the exercise
of this Warrant) shall have received, or, on or after the record date fixed
for the determination of eligible shareholders, shall become entitled to
receive, without payment therefor,
(1) other or additional stock or other securities or property by
way of dividend (other than ordinary dividends payable in
cash out of the Company's earnings), or
(2) other or additional stock or other securities or property
(including cash) by way of stock-split, spin-off,
reclassification, combination of shares, or similar
corporate rearrangement,
(other than additional shares of Common Stock of the Company, or any other stock
or securities into which such Common Stock shall have been changed, or any other
stock or securities convertible into or exchangeable for such Common Stock or
such other stick or securities, issued as a stock dividend or stock-split,
adjustments in respect of which shall be covered by the terms of Section 4(c) or
4(d)), then and in each such case Holder, upon the exercise hereof as provided
herein, shall be entitled to receive the amounts of stock and other securities
and property (including cash in the cases referred to above) which such Holder
would hold on the date of such exercise if on
-4-
the Grant Date he had been the holder of record of the number of shares of
the Common Stock of the Company called for on the face of this Warrant, as
adjusted in accordance herewith, and had thereafter, during the period from
the Grant Date, to and including the date of such exercise, retained such
shares and/or all other or additional stock and other securities and property
(including cash in the cases referred to above) receivable by it as aforesaid
during such period, giving effect to all adjustments called for during such
period by Sections 4(a) and (b).
(b) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, AND MERGER. In
case of any reorganization of the Company (or any other corporation the stock or
other securities of which are at the time receivable on the exercise of this
Warrant) after the Grant Date, or in case, after such date, the Company (or any
such other corporation) shall consolidate with or merge into another corporation
or convey all or substantially all of its assets to another corporation, then
and in each such case Holder, upon the exercise hereof as provided herein at any
time after the consummation of such reorganization, consolidation, merger, or
conveyance, shall be entitled to receive, upon the exercise of this Warrant,
such stock, other securities, or other property that it would had received if
such Holder had exercised this Warrant immediately prior to the consummation of
such reorganization, consolidation, merger, or conveyance, all subject to
further adjustment as provided in Sections 4(a), 4(c), and 4(d); in each case,
the terms of this Warrant shall be applicable to the shares of stock or other
securities or property receivable upon the exercise of this Warrant after such
consummation.
(c) ADJUSTMENT FOR ISSUE OR SALE OF COMMON STOCK AT LESS THAN
PURCHASE PRICE. In case at any time or from time to time on or after the Grant
Date the Company shall issue or sell shares of its Common Stock (other than
those excepted by Section 4(c)(6) and other than by subdivision or combination
of the outstanding Common Stock) for a consideration per share less than the
Exercise Price (or, if an adjusted Exercise Price shall be in effect by reason
of an adjustment under this Section 4(c) or Section 4(d) as provided below, then
less such adjusted Exercise Price), then (i) the Exercise Price then in effect
shall be reduced to a number equal to the quotient of (x) the product obtained
by multiplying the number of shares of Common Stock of the Company outstanding
immediately prior to such issuance or sale by the Exercise Price (or, if an
adjusted Exercise Price shall be in effect by reason of a previous adjustment
under this Section 4(c) or Section 4(d), by such adjusted Exercise Price),
divided by (y) the number of shares of Common Stock outstanding immediately
after such purchase and sale, and (ii) in each such case Holder, upon the
exercise hereof as provided herein, shall be entitled to receive, in lieu of the
shares of Common Stock theretofore receivable upon the exercise of this Warrant,
a number of shares of Common Stock determined by (I) dividing the Exercise Price
then in effect, as adjusted as a result of such sale, into (II) the product
obtained by multiplying the number of shares of Common Stock called for on the
face of this Warrant, as adjusted in accordance herewith, by the Exercise Price
in effect immediately prior to such adjustment caused by such purchase and sale.
For the purpose of this Section 4(c), the following paragraphs (1) to
(6) shall be applicable:
(1) ISSUANCE OR SALE OF CONVERTIBLE SECURITIES. In case at
any time after the Grant Date the Company shall issue or sell any
stock or other securities of the Company directly or indirectly
convertible into or exchangeable for Common Stock
-5-
("Convertible Securities"), there shall be determined the price per
share for which Common Stock is issuable upon the conversion or
exchange thereof, such determination to be made by dividing (a) the
total amount received or receivable by the Company as consideration
for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof by
(b) the maximum number of shares of Common Stock of the Company
issuable upon conversion or exchange of all of such Convertible
Securities, and such issue or sale shall be deemed to be an issue
or sale for cash (as of the date of issue or sale of such
Convertible Securities) of such maximum number of shares of Common
Stock at the price per share so determined.
If such Convertible Securities shall by their terms provide for an
increase or increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company, or in the
rate of exchange, upon the conversion or exchange thereof, the
adjusted Exercise Price shall, forthwith upon any such increase
becoming effective, be readjusted (but to no greater extent than
originally adjusted) to reflect the same.
If any rights of conversion or exchange evidenced by such Convertible
Securities shall expire without having been exercised, the adjusted
Exercise Price shall forthwith be readjusted (but to no greater extent
than originally adjusted) to be the adjusted Exercise Price which
would have been in effect had an adjustment been made on the basis
that the only shares of Common Stock issued or sold were those issued
upon conversion or exchange of such Convertible Securities, and that
they were issued or sold for the consideration actually received by
the Company upon such conversion or exchange, plus the consideration,
if any, actually received by the Company for the issue or sale of
such of the Convertible Securities as were actually converted or
exercised.
(2) GRANT OF RIGHTS OR OPTIONS FOR CONVERTIBLE SECURITIES.
In case any time after the Grant Date the Company shall grant any
rights or options to subscribe for purchase or otherwise acquire
Common Stock, there shall be determined the price per share for
which Common Stock is issuable upon the exercise of such rights or
options, such determination to be made by dividing (a) the total
amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, plus the
minimum aggregate amount of additional consideration payable to the
Company upon the exercise of such rights or options, by (b) the
maximum number of shares of Common Stock of the Company issuable
upon the exercise of such rights or options; and the granting of
such rights or options shall be deemed to be an issue or sale for
cash (as of the date of the granting of such rights or options) of
such maximum number of shares of Common Stock at the price per
share so determined.
If such rights or options shall by their terms provide for an increase
or increases, with the passage of time, in the amount of additional
consideration payable to the
-6-
Company upon the exercise thereof, the adjusted Exercise Price
shall, forthwith upon any such increase becoming effective, be
readjusted (but to no greater extent than originally adjusted) to
reflect the same.
If such rights or options shall expire without having been exercised,
the adjusted Exercise Price shall forthwith be readjusted (but to no
greater extent than originally adjusted) to be the adjusted Exercise
Price which would have been in effect had an adjustment been made on
the basis that the only shares of the Common Stock so issued and sold
were those issued or sold upon the exercise of such rights or options
and that they were issued or sold for the consideration actually
received by the Company upon such exercise, plus the consideration, if
any, actually received by the Company for the granting of all such
rights or options, whether or not exercised.
(3) GRANT OF RIGHTS OR OPTIONS FOR CONVERTIBLE SECURITIES.
In case at any time after the Grant Date the Company shall grant
any rights or options to subscribe for, purchase, or otherwise
acquire Convertible Securities, such Convertible Securities shall
be deemed, for purposes of Section 4(c)(2), to have been issued and
sold (as of the actual date of the issue or sale of such rights or
options) for the total amount received or receivable by the Company
as consideration for the granting of such rights or options plus
the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of such rights or options.
If such rights or options shall by their terms provide for an increase
or increases, with the passage of time, in the amount of additional
consideration payable to the Company upon the exercise thereof, the
adjusted Exercise Price shall, forthwith upon any such increase
becoming effective, be readjusted (but to no greater extent than
originally adjusted) to reflect the same.
If any such rights or options shall expire without having been
exercised, the adjusted Exercise Price shall forthwith be adjusted
(but to no greater extent than originally adjusted) to be the
adjusted Exercise Price which would have been in effect had an
adjustment been made upon the basis that the only Convertible
Securities so issued or sold were those issued and sold upon the
exercise of such rights or options and that they were issued or
sold for the consideration actually received by the Company for
such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether
or not exercised.
(4) DILUTION IN CASE OF OTHER STOCK OR SECURITIES. In case any
shares of stock or other securities, other than Common Stock of the
Company, shall at the time be receivable upon the exercise of this
Warrant, and in case any additional shares of such stock or any
additional such securities (or any stock or any additional securities
convertible into or exchangeable for any such stock or securities)
shall be issued or sold for a consideration per share such as to
dilute the purchase rights evidenced by this Warrant, then and in each
such case the adjusted exercise Price shall forthwith be adjusted,
substantially in the manner provided for above in this
-7-
Section 4(c), so as to protect the holders of this Warrant against
the effect of such dilution.
(5) DETERMINATION OF CONSIDERATION. Upon any issuance or
sale for a consideration other than cash, or a consideration part
of which is other than cash, of any shares of Common Stock or
Convertible Securities or any rights or options to subscribe for,
purchase, or otherwise acquire any Common Stock or Convertible
Securities, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair value of
such consideration as determined in good faith by the Board of
Directors of the Company. In case any Common Stock or Convertible
Securities or any rights or options to subscribe for, purchase, or
otherwise acquire any Common Stock or Convertible Securities shall
be issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, the
consideration for the issue or sale of such Common Stock or
Convertible Securities or such other rights or options shall be
deemed to be the portion of such consideration allocated thereto by
the Board of Directors of the Company.
No adjustment pursuant to this Section 4(c) shall be made by reason
of the issuance of (a) shares of Common Stock issued pursuant to
the Company's stock option plans, stock purchase arrangements, or
employment agreements with officers, directors, or employees of the
Company, as currently in effect or as in effect in the future,
approved by the Board of Directors of the Company, (b) shares of
Common Stock issuable upon the conversion of preferred stock of the
Company outstanding on the Grant Date, (c) shares of Common Stock
issuable upon the exercise of options and warrants to purchase the
Company's Common Stock outstanding on the Grant Date, or (d) any
shares of Common Stock issuable upon exercise of any Warrant issued
pursuant to the Stock Purchase Agreement, dated as of March 3,
1998, between and among ContiWest Corporation and the Company.
(6) EXCEPTED ISSUES AND SALES. No adjustment pursuant to this
Section 4(c) shall be made by reason of the issuance of (a) shares of
Common Stock issued pursuant to the Company's stock option plans,
stock purchase arrangements, or employment agreements with officers,
directors, or employees of the Company, as currently in effect or as
in effect in the future, approved by the Board of Directors of the
Company, (b) shares of Common Stock issuable upon the conversion of
preferred stock of the Company outstanding on the Grant Date, (c)
shares of Common Stock issuable upon the exercise of options and
warrants to purchase the Company's Common Stock outstanding on the
Grant Date, or (d) any shares of Common Stock issuable upon exercise
of any Warrant issued pursuant to the Stock Purchase Agreement, dated
as of March 3, 1998, between and among ContiWest Corporation and the
Company.
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(d) STOCK SPLIT AND REVERSE STOCK SPLIT. If the Company at any
time or from time to time after the Grant Date effects a subdivision of the
outstanding Common Stock, the Exercise Price (or the adjusted Exercise Price)
then in effect immediately before that subdivision shall be proportionately
decreased and the number of shares of Common Stock theretofore receivable
upon the exercise of this Warrant shall be proportionately increased. If the
Company at any time or from time to time after the Grant Date combines the
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price (or adjusted Exercise Price) then in effect immediately before
that combination shall be proportionately increased and the number of shares
of Common Stock theretofore receivable upon the exercise of this Warrant
shall be proportionately decreased. Each adjustment under this Section 4(d)
shall become effective at the close of business on the date the subdivision
or combination becomes effective.
(e) NOTICE TO WARRANT HOLDER OF ADJUSTMENT. Whenever the number
of shares of Warrant Stock or the Exercise Price is adjusted as herein
provided, the Company shall cause to be mailed to the Holder in accordance
with the provisions of this Section 4 a notice (i) stating that an event
giving rise to an adjustment hereunder has occurred, (ii) setting forth the
adjusted number of shares of Warrant Stock and the adjusted Exercise Price
and (iii) showing in reasonable detail the computations and the facts upon
which such adjustments are based.
5. RESTRICTIONS ON EXERCISE IMPOSED BY FEDERAL AND STATE SECURITIES
LAWS. The Holder hereby acknowledges that neither this Warrant nor any of the
securities that may be acquired upon exercise of this Warrant have been
registered or qualified under the 1933 Act or under the securities laws of
any state. The Holder acknowledges that, upon exercise of this Warrant, the
securities to be issued upon such exercise may be subject to applicable
federal and state securities (or other) laws requiring registration,
qualification or approval of governmental authorities before such securities
may be validly issued or delivered upon notice of such exercise. The Holder
agrees that the issuance of such securities may be deferred until the
issuance or sale of such securities shall be lawful in all respects. The
restrictions imposed by this Section 5 upon the exercise of this Warrant
shall cease and terminate as to any particular shares of Warrant Stock (i)
when such securities shall have been effectively registered and qualified
under the 1933 Act and all applicable state securities laws and disposed of
in accordance with the registration statement covering such securities, or
(ii) when such restrictions are no longer required in order to insure
compliance with the 1933 Act and all applicable state securities laws.
6. LEGENDS. Unless (i) the shares of Warrant Stock have been
registered under the 1933 Act, or (ii) in the opinion of counsel for the
Company such legend is no longer required in order to ensure compliance with
the 1933 Act and all applicable state securities laws, upon exercise of any
of the Warrants and the issuance of any of the shares of Warrant Stock, all
certificates representing such shares shall bear on the face thereof
substantially the following legend:
The securities represented by this certificate have not been
registered or qualified under the Securities Act of 1933, as
amended (the "1933 Act"), or under the provisions of any applicable
state securities laws, but have been acquired by the registered
holder hereof for purposes of investment and in reliance on
statutory exemptions under the 1933 Act, and under any applicable
state securities laws. These securities may not be sold, pledged,
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transferred or assigned, except in a transaction which is exempt
under provisions of the 1933 Act and any applicable state
securities laws or pursuant to an effective registration statement.
7. NOTICES OF RECORD DATE, ETC. In case:
(a) The Company shall establish a record date for the holders of
its Common Stock for the purpose of entitling them to receive any dividend or
other distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or to
receive any other right;
(b) Of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, any share exchange
for shares of capital stock of another corporation or any conveyance of all
or substantially all of the assets of the Company to another corporation;
(c) Of any voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(d) The Company shall enter into a letter of intent or agreement
with respect to a transaction by which all of the outstanding shares of
Common Stock of the Company are to be acquired by a third party;
then the Company shall mail or cause to be mailed to each Holder at the time
outstanding a notice specifying, as the case may be, (i) the date on which a
record is to be taken for the purpose of such dividend, distribution or
rights, and stating the amount and character of such dividend, distribution
or rights, (ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up is
to take place, and the time, if any is to be fixed, as to which the holders
of record of Common Stock shall be entitled to exchange their shares for
securities or other property deliverable upon the completion of such
transaction, or (iii) the closing of the acquisition by a third party of all
of the outstanding shares of Common Stock. Such notice shall be mailed as
soon as practicable after the occurrence or likelihood of such event is
publicly disclosed.
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8. TRANSFER AND ASSIGNMENT.
(a) Except as set forth in Section 8(b), neither this Warrant nor
any rights hereunder may be assigned, transferred, pledged or hypothecated in
any way (whether by operation of law or otherwise). This Warrant shall not
be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of this
Warrant contrary to the provisions of this Agreement shall be null and void
and without legal effect.
(b) The Holder may assign or transfer this Warrant in whole or in
part; provided, however, that prior to such assignment or transfer the Holder
provides to the Company evidence reasonably satisfactory to the Company that
the proposed transfer will be effected in compliance with all applicable
laws, including without limitation federal and state securities laws.
9. NOTICES. All notices required hereunder must be in writing and
shall be deemed given when telefaxed, delivered personally or within three
days after mailing when mailed by certified or registered mail, return
receipt requested, if to the Company, at 0000 Xxxxxx Xxxx, Xxxxxxxx, Xxxx
00000, or at such other address of which the Holder has been advised by
notice hereunder, and if to the Holder, at the address for the registered
Holder as it appears on the books of the Company, or at such other address of
which the Company has been advised by notice hereunder.
10. RIGHTS AS A SHAREHOLDER. The Holder shall have no rights as a
shareholder with respect to any shares covered by this Warrant until the date
of issuance of such shares.
11. LOST OR DESTROYED WARRANT. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, and upon surrender and cancellation of this
Warrant, if mutilated, the Company shall execute and deliver a new Warrant of
like tenor and date. The Holder agrees with the Company that this Warrant is
issued, and all the rights hereunder shall be held subject to, all of the
conditions, limitations and provisions set forth herein.
12. APPLICABLE LAW. The Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the
State of Delaware, without reference to the conflict of law principles
thereof.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its
behalf, in its corporate name, by its duly authorized officer, as of the day and
year first above written.
CROWN NORTHCORP, INC.
By:
----------------------------------------
Print Name:
--------------------------------
Title:
-------------------------------------
[CORPORATE SEAL]
Attest:
----------------------------
Print Name:
------------------------
Title:
-----------------------------
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WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing __________ shares of Common Stock of Crown NorthCorp,
Inc., a Delaware corporation, and hereby makes payment of $____________ in
payment therefor.
-------------------------------------------
Signature
-------------------------------------------
Signature, if jointly held
Date:
---------------
******************************************************************************
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name
--------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-----------------------------------------------------------------------
Social Security or Taxpayer Identification Number
-----------------------------
******************************************************************************
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________________________ hereby sells, assigns
and transfers unto __________________________________________________________
NAME (PLEASE TYPEWRITE OR PRINT IN BLOCK LETTERS)
the right to purchase Common Stock of Crown NorthCorp, Inc., a Delaware
corporation, represented by this Warrant to the extent of shares as to which
such right is exercisable and does hereby irrevocably constitute and appoint
______________________________, Attorney, to transfer the same on the books
of the Company with full power of substitution in the premises.
Dated:
--------------
Signature
----------------------------------
Signature, if jointly held
-----------------
EXHIBIT B
SELLER'S OFFICER'S CERTIFICATE
Capitalized terms used herein but not otherwise defined herein shall
have the meanings ascribed thereto in that certain Stock Purchase Agreement,
dated as of March ____, 1998, between and among ContiWest Corporation and
Crown NorthCorp, Inc. (the "Stock Purchase Agreement").
The undersigned, being the Chairman of the Board and Chief Executive
Officer of CROWN NORTHCORP, INC., a Delaware corporation (the "Seller"), DOES
HEREBY CERTIFY, in the name and on behalf of the Company, as follows:
1. All representations and warranties of the Seller contained in
Article II of the Stock Purchase Agreement are true and correct as of the
date hereof.
2. As of the date hereof, the Seller has performed and complied with
all covenants and agreements, and satisfied all conditions required to be
performed and complied with, by the Seller at or before the date hereof by
the Stock Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has set his hand hereunto, in the
name and on behalf of the Company, as of March ____, 1998.
CROWN NORTHCORP, INC.
By:
------------------------------------
Xxxxxx X. Xxxxx
Chairman of the Board and
Chief Executive Officer
EXHIBIT C
PURCHASER'S OFFICER'S CERTIFICATE
Capitalized terms used herein but not otherwise defined herein shall
have the meanings ascribed thereto in that certain Stock Purchase Agreement,
dated as of March ____, 1998, between and among ContiWest Corporation and
Crown NorthCorp, Inc. (the "Stock Purchase Agreement").
Each of the undersigned, each being an Authorized Signatory of CONTIWEST
CORPORATION, a Nevada corporation (the "Purchaser"), DOES HEREBY CERTIFY, in
the name and on behalf of the Purchaser, as follows:
1. As of the date hereof, all representations and warranties of the
Purchaser contained in Article III of the Stock Purchase Agreement are true
and correct as of the date hereof.
2. As of the date hereof, the Purchaser has performed and complied
with all covenants and agreements, and satisfied all conditions required to
be performed and complied with, by the Purchaser at or before the date hereof
by the Stock Purchase Agreement.
3. The Purchaser is an "accredited investor," as defined in Rule
501(a) under the Securities Act, because it is a corporation with assets in
excess of $5,000,000.
4. The Purchaser is purchasing the Closing Share for its own account,
for investment purposes only, and without a view toward the resale or
distribution thereof.
5. The Purchaser's chief executive office and principal place of
business is located in the State of New York.
6. The Seller has made available to the Purchaser a reasonable time
before the Closing the opportunity to ask questions of and receive answers
concerning the Seller and the terms and conditions of the transaction to be
consummated at the Closing.
IN WITNESS WHEREOF, the undersigned has set his hand hereunto, in the
name and on behalf of the Company, as of March ____, 1998.
CONTIWEST CORPORATION
By:
------------------------------------
Name:
Title: Authorized Signatory
By:
------------------------------------
Name:
Title: Authorized Signatory
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