SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement") is entered into as of the
8th day of November, 2001, by CROWN GROUP, INC. ("Crown"), a Texas corporation,
and FINOVA CAPITAL CORPORATION ("Lender"), a Delaware corporation.
RECITALS:
A. This Agreement involves obligations of Florida Finance Group, Inc.
("Florida Finance"), a Florida corporation; Liberty Finance Company ("Liberty"),
a Florida corporation; Smart Choice Receivables Holding Company ("Smart Choice
Holdings"), a Delaware corporation; First Choice Auto Finance, Inc. ("First
Choice"), a Florida corporation (Florida Finance, Liberty, Smart Choice Holdings
and First Choice are referred to herein collectively as the "Florida Finance
Borrowers"); Paaco Automotive Group, L.P. ("Paaco"), a Texas limited partnership
and successor by conversion to Paaco Automotive Group, Inc., a Texas
corporation; Premium Auto Acceptance Corporation ("Paaco Acceptance"), a Texas
corporation (Paaco and Paaco Acceptance are referred to herein collectively as
the "Paaco Borrowers"); Smart Choice Automotive Group, Inc. ("Smart Choice"), a
Florida corporation; and SC Holdings, Inc. ("SC Holdings"), a Florida
corporation (Smart Choice and SC Holdings are referred to herein collectively as
the "Guarantors").
B. The Florida Finance Borrowers are indebted to Lender, as set forth
(i) in that Second Amended and Restated Loan and Security Agreement (the
"Florida Finance Loan Agreement") dated as of November 9, 1998, as amended by
that Third Amended and Restated Schedule to Second Amended and Restated Loan and
Security Agreement dated as of September 25, 2000, and (ii) in the "Loan
Documents," as defined in the Florida Finance Loan Agreement (such Loan
Documents are referred to in this Agreement as the "Florida Finance Loan
Documents").
C. The Paaco Borrowers are indebted to Lender, as set forth (i) in
that First Amended and Restated Loan and Security Agreement (the "Paaco Loan
Agreement") dated as of March 8, 1999, as amended by that Third Amended and
Restated Schedule to First Amended and Restated Loan and Security Agreement
dated as of September 25, 2000, and (ii) in the "Loan Documents," as defined in
the Paaco Loan Agreement (such Loan Documents are referred to in this Agreement
as the "Paaco Loan Documents").
D. Pursuant to that Amended and Restated Guaranty (the "Guaranty")
executed by Crown dated as of November 18, 1999, Crown has guaranteed the
payment and performance of (i) all debts and obligations of the Florida Finance
Borrowers arising under the Florida Finance Loan Documents (the "Florida Finance
Obligations"), and (ii) all debts and obligations of the Paaco Borrowers arising
under the Paaco Loan Documents (the "Paaco Obligations"), subject to certain
limitations set forth in the Guaranty.
E. Crown has raised certain issues contesting its liability under the
Guaranty, and Lender and Crown wish to settle and compromise the liability of
Crown.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Definitions. As used below in this Agreement, (i) terms defined in
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the recitals above shall have the meanings therein set forth, and (ii) the
following capitalized terms shall have the meanings assigned below:
"Affiliate" means, with respect to any Person, another Person who (i) owns
an equity interest in the first Person, of any degree, (ii) is owned, as to
equity interest, by the first Person, in any degree, (iii) Controls the first
Person, (iv) is Controlled by the first Person, or (v) is Controlled by a Person
who also Controls the first Person.
"Claims" means any and all accounts, covenants, agreements, obligations,
claims, debts, liabilities, offsets, demands, costs, expenses, actions or causes
of action of every nature, character and description, whether arising at law or
equity or under statute, regulation or otherwise, and whether liquidated or
unliquidated, contingent or noncontingent, known or unknown, suspected or
unsuspected, which arise from or are related to the credit or equity
relationships between Lender and any or all of the various Obligors or Crown, as
the case may be.
"Control" means the ability to substantially direct the policies of a
Person, whether directly or indirectly, and whether such influence exists by
right or by economic compulsion.
"Crown Parties" means Crown and its respective predecessors, successors and
assigns and their present and previous agents, attorneys, representatives,
Affiliates, officers, directors, shareholders and each of them; provided,
however, the Crown Parties do not include any Obligors.
"Lender Parties" means Lender, its participants, predecessors, successors
and assigns and their present and previous agents, attorneys, representatives,
Affiliates, officers, directors, and each of them.
"Obligors" means the Florida Finance Borrowers, the Paaco Borrowers and the
Guarantors.
"Person" means any natural person and any legal entity with the ability to
enter into contracts.
2. Recitals. The parties warrant and represent that the matters stated
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in the Recitals of this Agreement are true.
3. Settlement of Guaranty Liability. Concurrently with the execution
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of this Agreement, Crown agrees (a) to grant to Lender the Smart Choice Stock
Option (as hereinafter defined) and (b) to pay Lender the sum of One Million and
No/100 Dollars by wire transfer (the "Settlement Payment"), and Lender agrees to
accept the same in full compromise and satisfaction of the obligations of Crown
under the Guaranty. Crown warrants and represents that the funds
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constituting the Settlement Payment do not include any amounts received directly
from any of the Obligors for purposes of paying the Settlement Payment, and that
Crown has not received any payments from any of the Obligors, except for (a) the
payment of One Million and No/100 Dollars ($1,000,000.00) from Paaco received in
partial payment of Paaco's debt owed to Crown (the "Crown Sub-Debt"), (b)
management fees of $10,000 per month, (c) reimbursement for reasonable and
necessary expenses incurred by Crown on behalf of the Obligors and (d) interest
on the Crown Sub-Debt. Lender's wiring instructions for receipt of the
Settlement Payment are set forth on Exhibit "A" attached hereto and incorporated
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herein by reference.
4. Assistance Respecting Forbearance Agreement. Crown has reviewed
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that Forbearance Agreement (the "Forbearance Agreement") dated as of the date
hereof, 2001, entered into by the Obligors and Lender. Crown warrants,
represents and agrees that (i) to the best of Crown's knowledge, information and
belief, each warranty and representation made by any of the Obligors in the
Forbearance Agreement is true in all material respects, (ii) Crown (as the 70%
owner of Smart Choice) will vote its Smart Choice shares for the sale of the
stock of the Paaco Borrowers to Lender as provided in Section 10 of the
Forbearance Agreement and will otherwise use its full influence as 70% owner of
Smart Choice in good faith to cause the Obligors to comply with their
obligations to Lender undertaken in the Forbearance Agreement.
5. Option for Purchase of Smart Choice Stock. As a further inducement
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to cause Lender to enter into this Agreement, Crown hereby grants to Lender an
option (the "Smart Choice Stock Option") to purchase all 6,857,907 shares of the
common stock of Smart Choice now owned by Crown, for the total option exercise
price of One Dollar ($1.00) (this is not a per share price, but a total price).
Lender may exercise the Smart Choice Stock Option at any time, but in full only,
by written notice to Crown given within one hundred twenty (120) days of the
date of this Agreement (or, if any legal proceeding stays the ability of Lender
to exercise the Smart Choice Stock Option within the intended option period,
within thirty (30) days after such restrictions have been finally removed, if
such date would be later than the intended expiration). Upon receipt of the
foregoing exercise notice from Lender, Crown shall promptly (and in any event
within five (5) days) deliver the stock so purchased, which shall be fully paid
and nonassessable and free and clear of all encumbrances or legends, except for
a legend in customary form reflecting that the stock has not been registered
under any applicable securities laws. The closing of the purchase of such stock
would be evidenced by customary documents of assignment and deliveries,
including warranties of title. Lender's right to exercise the Smart Choice Stock
Option shall be suspended upon Lender's exercise of the Paaco Option under the
Forbearance Agreement and shall terminate upon Lender's successful closing under
the Paaco Option.
6. Amendment and Restatement of Subordination Agreement. As a further
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inducement to cause Lender to enter into this Agreement, concurrently with the
execution hereof, Crown, Lender and Paaco have entered into that First Amended
and Restated Subordination Agreement relating to debt of Paaco to Crown (the
"Subordination Agreement").
7. Capacity of Crown. Crown hereby warrants and represents that it is
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a duly organized corporation in good standing under the laws of the State of
Texas.
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8. No Conflicting Law or Agreement. Crown hereby warrants and
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represents that its execution, delivery and performance of this Agreement do not
constitute a breach of or default under, and will not violate or conflict with,
any provisions of its constituent documents; of any contract, financing
agreement, lease, or other agreement to which it is a party or by which its
properties may be affected; or any law, regulation, judgment, order or decree to
which it is subject or by which its properties may be affected; nor will the
same result in the creation or imposition of any encumbrance upon any of its
properties.
9. No Consent Required.
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(a) Crown hereby warrants and represents that its execution,
delivery, and performance of this Agreement do not require the consent or
approval of or the giving of notice to any person or entity except for those
consents which have been duly and finally obtained and are in full force and
effect.
(b) Lender hereby warrants and represents that its execution,
delivery, and performance of this Agreement do not require the consent or
approval of or the giving of notice to any person or entity except for those
consents which have been duly and finally obtained and are in full force and
effect.
10. Other Documents. Concurrently with the execution and delivery
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hereof, Crown shall deliver the following documents to Lender, in form and
substance acceptable to Lender and its counsel:
(a) Certificate of existence for Crown as available, issued by the
Secretary of State of Texas.
(b) Certificate from the Secretary of Crown certifying the adoption of
resolutions by Crown's Board of Directors approving the execution, delivery and
performance of this Agreement and the incumbency of its officers.
(c) Opinion letter of Crown's general counsel in the form of Exhibit
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"B" attached hereto and incorporated herein by reference.
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(d) The Subordination Agreement.
11. Unconditional Full Release of All Claims and Defenses by Crown. In
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consideration of Lender's execution of this Agreement, the sufficiency of which
is acknowledged, and excepting only the contractual obligations of Lender under
this Agreement and under the Subordination Agreement, Crown hereby releases and
forever discharges each of the Lender Parties of and from any and all Claims
that Crown may have against any of the Lender Parties as of the execution of
this Agreement. Crown further agrees that it shall forever refrain and forbear
from commencing, instituting or prosecuting any lawsuit, action, or other
proceeding, whether judicial, administrative or otherwise, or otherwise
attempting to collect or enforce, any such released Claims and agrees to
indemnify, defend (with counsel satisfactory to Lender) and hold harmless the
Lender Parties against any and all loss, liability, claim or expense, including
reasonable attorneys' fees, that any of them might incur as a result of any
breach of this Section
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by any of the Crown Parties or the assertion of any Claims that exist as of the
date of this Agreement by any of the Crown Parties.
12. Unconditional Full Release of All Claims and Defenses by Lender.
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In consideration of Crown's execution of this Agreement and the consideration
referenced in Section 1 hereof, the sufficiency of which is acknowledged, and
excepting only the contractual obligations of Crown under this Agreement and
under the Subordination Agreement, Lender hereby releases and forever discharges
each of the Crown Parties of and from any and all Claims that Lender may have
against any of the Crown Parties as of the execution of this Agreement. Lender
further agrees that it shall forever refrain and forbear from commencing,
instituting or prosecuting any lawsuit, action, or other proceeding, whether
judicial, administrative or otherwise, or otherwise attempting to collect or
enforce, any such released Claims and agrees to indemnify, defend (with counsel
satisfactory to Crown) and hold harmless the Crown Parties against any and all
loss, liability, claim or expense, including reasonable attorneys' fees, that
any of them might incur as a result of any breach of this Section by any of the
Lender Parties or the assertion of any Claims that exist as of the date of this
Agreement by any of the Lender Parties.
13. No Alienation of Claims.
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(a) Crown hereby warrants and represents that it has not granted
or purported to grant to any other Person any interest whatsoever in any Claims,
as security or otherwise, and that their execution hereof does not require the
consent of or notice to any third party in order to be fully effective as to any
Claims that may have existed in favor of Crown at any time.
(b) Lender hereby warrants and represents that it has not granted
or purported to grant to any other Person any interest whatsoever in any Claims,
as security or otherwise, and that their execution hereof does not require the
consent of or notice to any third party in order to be fully effective as to any
Claims that may have existed in favor of Crown at any time.
14. Valid Consideration; Binding Agreement.
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(a) Crown hereby warrants, represents and acknowledges that this
Agreement has been executed and delivered by Crown for adequate consideration
and value under all applicable laws and that this Agreement is valid, binding
and enforceable in accordance with its terms.
(b) Lender hereby warrants, represents and acknowledges that this
Agreement has been executed and delivered by Lender for adequate consideration
and value under all applicable laws and that this Agreement is valid, binding
and enforceable in accordance with its terms.
15. Expenses. Crown agrees to pay all costs of enforcement, including
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reasonable attorneys' fees, that Lender may incur in enforcing this Agreement
against Crown, provided that Lender prevails in litigation for such enforcement.
Lender agrees to pay all costs
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of enforcement, including reasonable attorneys' fees, that Crown may incur in
enforcing this Agreement against Lender provided that Crown prevails in
litigation for such enforcement.
16. Notices. All notices, demands, and requests which may be given or
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which are required to be given by either party to the other, and any exercise of
a right of termination provided by this Agreement, shall be in writing and shall
be deemed effective when either: (1) personally delivered to the intended
recipient; (2) sent by certified or registered mail, return receipt requested,
addressed to the intended recipient at the address specified below; (3)
delivered in person to the address set forth below for the party to which the
notice was given; (4) deposited into the custody of a nationally-recognized
overnight delivery service such as Federal Express Corporation, Xxxxx, or
Purolator, addressed to such party at the address specified below; or (5) sent
by facsimile, telegram, or telex, provided that receipt for such facsimile,
telegram, or telex is verified by the sender and followed by a notice sent in
accordance with one of the other provisions set forth above. Notices shall be
effective on the date of delivery or receipt or, if delivery is not accepted, on
the earlier of the date that delivery is refused or three (3) days after the
date the notice is mailed. For purposes of this Section, the addresses of the
parties for all notices are as follows (unless changes by similar notice in
writing are given by the particular person whose address is to be changed):
If to Lender: Finova Capital Corporation
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0000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxx, Xx.
Fax #:480/000-0000
With a copy to: Boult, Cummings, Xxxxxxx & Xxxxx, PLC
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Suite 1600
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx III
Fax #: 615/000-0000
If to Crown: Crown Group, Inc.
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0000 X. XxxXxxxxx Xxxx.
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx, Chief Financial Officer
Fax #: 000-000-0000
With a copy to: Crown Group, Inc.
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0000 X. XxxXxxxxx Xxxx.
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: X. X. Xxxxxxx, III
Executive Vice President and General Counsel
Fax #: 000-000-0000
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17. Voluntary Agreement. Crown hereby warrants and represents that it is
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represented by legal counsel of its choice; has investigated fully its
alternatives to the execution and performance of this Agreement; has had ample
time to review this Agreement and consult with its counsel; is fully aware of
the terms contained in this Agreement; and has knowingly, voluntarily and
without coercion or duress of any kind entered into this Agreement and the
documents executed in connection with this Agreement.
18. Consent to Jurisdiction; Exclusive Venue. The parties hereto agree
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to the jurisdiction and venue elections set forth in the Guaranty respecting all
matters arising from or related to this Agreement.
19. Not Partners; No Third Party Beneficiaries. Nothing contained herein
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or in any related document shall be deemed to render Lender a partner of Crown
for any purpose. This Agreement has been executed for the sole benefit of Lender
and Crown and there are no third party beneficiaries hereof.
20. Assignment. This Agreement shall be binding upon and inure to the
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benefit of the respective successors and assigns of Crown and Lender.
21. Entire Agreement. This Agreement and the other written agreements
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among the parties represent the entire agreement between the parties concerning
the subject matter hereof, and all oral discussions and prior agreements are
merged herein.
22. Amendment and Waiver in Writing. No provision of this Agreement can
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be amended or waived, except by a statement in writing signed by the party
against which enforcement of the amendment or waiver is sought.
23. Severability. Should any provision of this Agreement be invalid or
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unenforceable for any reason, the remaining provisions hereof shall remain in
full effect.
24. Applicable Law. The validity, construction and enforcement of this
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Agreement shall be determined according to the substantive laws of Arizona
without regard to conflicts principles.
25. Gender and Number. Words used herein indicating gender or number
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shall be read as context may require.
26. Captions Not Controlling. Captions and headings have been included
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in this Agreement for the convenience of the parties, and shall not be construed
as affecting the content of the respective sections.
27. Waiver of Jury Trial. CROWN AND LENDER HEREBY KNOWINGLY AND
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VOLUNTARILY WAIVE ANY RIGHT TO A TRIAL BY JURY WITH REGARD TO ANY ACTION,
PROCEEDINGS, CLAIMS OR COUNTERCLAIMS, WHETHER IN CONTRACT OR IN TORT, AT LAW OR
IN
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EQUITY, OF ANY TYPE OR NATURE WHATSOEVER ARISING UNDER OR CONCERNING THIS
AGREEMENT.
This Settlement Agreement is executed as of the date first written above.
CROWN GROUP, INC., a Texas
corporation
By:_______________________________________
X. X. Xxxxxxx, III, Executive Vice
President and General Counsel
LENDER:
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FINOVA CAPITAL CORPORATION, a
Delaware corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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EXHIBIT "A"
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Wiring Instructions
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Citibank
New York, New York
ABA #021 000 089
Account Name: FINOVA Capital Corp.
Account Number: 4068-0485
Reference: Rediscount Finance - Florida Finance
ZQX(F73C1)ZQX
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EXHIBIT "B"
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Opinion of Counsel
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November _____, 2001
Finova Capital Corporation
0000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxx Xxxxxxxxxx, Xx.
RE: Settlement Agreement (the "Agreement") dated as of November _____,
2001, by and between Crown Group, Inc. ("Crown"), a Texas corporation,
and Finova Capital Corporation ("Lender"), a Delaware corporation
Gentlemen:
I am General Counsel of Crown. In connection with the Agreement, I have prepared
and/or examined the following documents:
1. Executed copy of the Agreement, dated November ___, 2001.
2. The Articles of Incorporation of Crown, together with amendments
thereto.
3. The Bylaws of Crown.
4. Resolutions of the Board of Directors of Crown, adopted by unanimous
consent dated October 31, 2001, as certified by the Secretary of Crown on
October 31, 2001, as then being complete, accurate and in effect, authorizing
the execution and delivery of and performance under the Agreement.
5. Certificate of Good Standing for Crown dated November 1, 2001, issued
by the Texas Comptroller of Public Accounts.
6. Certificate of Existence for Crown dated November 1, 2001, issued by
the Secretary of State of the State of Texas.
The opinions which follow are subject to the following assumptions, limitations
and qualifications:
A. I have assumed the genuineness of all signatures, other than of Crown,
the authenticity of all documents submitted to me as originals, and the
conformity with the original documents of all documents submitted to me as
reproduced copies, and the authenticity of all such latter documents.
B. I have assumed the organization, existence, good standing and capacity
of all persons and entities other than Crown, and that such parties, other
than Crown, have the right, power and authority to execute and deliver the
Agreement and to perform thereunder.
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C. I have assumed that Lender's obligations under the Agreement are
within the powers of Lender and have been duly and validly authorized and
that the Agreement has been duly executed and validly delivered by Lender.
D. As to various questions of fact material to this opinion, I have made
such factual inquiries of Crown, and have examined such other documents and
made such examinations of applicable laws, as I have deemed necessary for
purposes of the opinions expressed herein. However, where I state that a
matter is to the best of my knowledge, I have relied upon the written
statements of Crown, with no inquiry as to the facts other than as
necessary to establish that such reliance was reasonable on my part.
E. No opinion is expressed as to the availability of equitable remedies,
including specific performance or the enforceability of any legal remedies
insofar as such remedies may be subject to overriding considerations of
public policy, or the effect of applicable bankruptcy, insolvency,
rearrangement, moratorium, reorganization, liquidation, conservatorship,
fraudulent conveyance and other laws affecting creditors' rights generally.
F. The opinions expressed herein are limited to the laws of the Xxxxx xx
Xxxxx xxx xx xxx Xxxxxx Xxxxxx as presently in effect. I call your
attention that the Agreement provides that it is to be governed by the laws
of the State of Arizona.
Based upon such examinations and investigations, and such other investigations
and examinations as I have deemed necessary for the purposes of the opinions
expressed herein, and subject to the assumptions stated above in paragraphs A
through F, inclusive, and in my capacity as general counsel for Crown, I am of
the opinion that:
1) Crown is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and has
the full legal power and authority to own its property and to carry on its
business as currently conducted.
2) Crown has the power and authority to execute, deliver and perform the
Agreement. The execution, delivery and performance of the Agreement by Crown,
have been duly and validly authorized by all necessary actions on the part of
Crown.
3) The execution, delivery and performance by Crown of the Agreement will
not (i) conflict with or violate any provision of the Articles of Incorporation
or Bylaws of Crown; (ii) require any license, approval or other action by any
governmental authority that has not been obtained; or (iii) result in any
violation of the provisions of any law or, to my knowledge, any order of any
court or governmental agency by which Crown may be bound or to which Crown or
any of its property may be subject.
All capitalized terms used herein, not otherwise defined herein, shall have the
meanings given such terms in the Agreement.
This opinion may be relied upon only by Lender, its successors and assigns. It
may not be quoted or relied on by, nor may copies be delivered to, any other
person or used for any other purpose without my prior written consent. This
opinion speaks only as of the date hereof, and I have no responsibility to
update it after its delivery. This letter expresses my legal opinions as to the
foregoing matters based on my professional judgment at this time. It is not,
however, to be construed as a guarantee, nor is it a warranty that a court
considering such matters would not rule in a manner contrary to the opinions set
forth above.
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Very truly yours,
CROWN GROUP, INC.
By:_______________________________________
X. X. Xxxxxxx, III, Executive Vice
President and General Counsel
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