Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
CAPITAL TITLE GROUP, INC.,
NATIONS HOLDING GROUP
AND
CTG ONE MERGER CORPORATION
DATED JUNE 11, 2002
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is entered into as of
June 11, 2002, by and among CAPITAL TITLE GROUP, INC., a Delaware corporation
("CAPITAL") CTG ONE MERGER CORPORATION, a California corporation ("MERGER SUB"),
and NATIONS HOLDING GROUP, a California corporation ("NHG"). Capital, Merger Sub
and NHG are sometimes referred to collectively herein as the "Parties," and
sometimes individually as a "Party."
RECITALS:
A. The respective boards of directors of the Merger Sub and NHG have
determined that it is advisable to consummate the merger described in Section 2
(the "MERGER"), as a result of which all of the outstanding common stock of NHG
will be converted into the right to receive the Merger Consideration and NHG
will be wholly owned directly or indirectly by Capital, all on the terms and
subject to the conditions set forth in this Agreement.
B. Capital and NHG believe that this Agreement and the transactions
contemplated herein are in their respective best interests and the best
interests of their respective shareholders.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
DEFINITIONS
"ACTUAL CLOSING NET WORTH" means NHG's net worth determined as of the
Closing Date in accordance with GAAP, and based upon NHG's unaudited
consolidated balance sheet as of the end of the month preceding the Closing Date
adjusted to reflect any changes (if any) required under Section 3(b)(i) hereof.
"ACTUAL DEPOSIT" has the meaning set forth in Section 6(a) below.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses, in each case net
of (a) any insurance recoveries (except to the extent such recoveries increase
the cost of insurance, through retrospective adjustments or otherwise), and (b)
any Tax benefit, after taking into account any Tax detriment of any indemnity.
"AFFILIATE" means, with respect to a Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person.
"ARBITER" has the meaning set forth in Section 14(f) below.
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"AUDITORS" has the meaning set forth in Section 3(b)(ii) below.
"AUDITOR'S REPORT" has the meaning set forth in Section 3(b)(ii) below.
"BUSINESS DAY(S)" means any Day other than a Saturday, Sunday or legal
holiday under the laws of the United States or the State of California.
"CALIFORNIA CONTROLLER CLAIM" has the meaning set forth in Section
8(i)(iii) below.
"CALIFORNIA LAW" has the meaning set forth in Section 3(f) below.
"CAPITAL" has the meaning set forth in the preface above.
"CAPITAL COMMON STOCK" means shares of Capital Common Stock, $0.001 par
value, per share.
"CAPITAL DISCLOSURE SCHEDULE" has the meaning set forth in Section 9
hereof.
"CAPITAL PREFERRED STOCK" means the shares of Capital Series A Preferred
Stock, $.001 par value per share, having the rights, preferences and privileges
as set forth in the Certificate of Designations attached hereto as EXHIBIT A.
"CAPITAL SEC REPORTS" means Capital's Annual Report on Form 10-K for the
year ended December 31, 2001, all proxy statements relating to Capital's
meetings of stockholders (whether annual or special) held (or to be held) after
January 1, 2002, all other reports or registration statements filed by Capital
with the SEC after January 1, 2002, and all amendments and supplements to all
such reports and registration statements filed by Capital with the SEC.
"CASH CONSIDERATION" has the meaning set forth in Section 3(a)(i) below, as
the same may be adjusted pursuant to Section 3(b) below.
"CLOSING" has the meaning set forth in Section 2(c) below.
"CLOSING DATE" has the meaning set forth in Section 2(c) below.
"CLOSING DEADLINE" means the date that is the earlier of (A) five (5) days
after receipt of the Requisite Regulatory Approvals, or (B) October 31, 2002
(the "ORIGINAL DEADLINE"), or (if this Agreement is extended under Section
2(c)(i) hereof) the date that is the earlier of (1) five (5) days after receipt
of the Requisite Regulatory Approvals, or (2) February 10, 2003, or as either
such date may be extended under Section 3(b) hereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSTITUENT CORPORATION" has the meaning set forth in Section 2(b) below.
"DAY" means a calendar day.
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"DEPOSITS" means the Initial Deposit and the Second Deposit, collectively.
"DEPOSIT ESCROW AGENT" means Comerica Bank acting as the same under the
Deposit Escrow Agreement.
"DEPOSIT ESCROW AGREEMENT" means that certain Deposit Escrow Agreement,
dated as of even date herewith, by and among Capital, NHG and the Deposit Escrow
Agent, a copy of which is attached hereto as EXHIBIT B.
"DISSENTING SHARES" has the meaning set forth in Section 3(f) below.
"EFFECTIVE TIME" has the meaning set forth in Section 2(c) below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PAYMENTS" has the meaning set forth in Section 10(h) below.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Section
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Section
3(1).
"ENDORSED NHG STOCK CERTIFICATES" has the meaning set forth in Section 3(d)
below.
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW CLAIMS" has the meaning set forth in Section 8(i) below.
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"EXISTING NHG ACTIONS" has the meaning set forth in Section 8(i) below.
"EXISTING TITLE CLAIMS" has the meaning set forth in Section 8(i) below.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 8(g) below.
"GAAP" means, at any particular time, generally accepted accounting
principles, consistently applied on a going concern basis without regard to the
pendency of the transactions contemplated hereby and using audit scope and
materiality standards used in the past and, with respect to interim financial
statements, subject to normal year-end adjustments.
"INDEMNIFIED PARTY" has the meaning set forth in Section 14(e) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 14(e) below.
"INDEMNITY ESCROW AGENT" means Comerica Bank acting as the same under the
Indemnity Escrow Agreement.
"INDEMNITY ESCROW AGREEMENT" means an agreement substantially in the form
attached hereto as EXHIBIT C by and among the parties called for therein.
"INITIAL DEPOSIT" has the meaning set forth in Section 4(a) below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all trade secrets and
confidential business information (including ideas, research and development,
knowhow, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (e) all computer software (including data and related
documentation), (f) all other proprietary rights, and (g) all copies and
tangible embodiments thereof (in whatever form or medium).
"LIABILITY" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"LIQUIDATED DAMAGES EVENT" has the meaning set forth in Section 4(a) below.
"MATERIAL ADVERSE EFFECT" means any event, effect, development, occurrence
or circumstance, individually or when taken together with all other such events,
effects, developments, occurrences or circumstances, causing, resulting in or
having a material adverse effect on (a) the business, assets, business
relationships, properties, condition (financial or otherwise), results of
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operations or prospects of (as the case may be) NHG and the NHG Subsidiaries
(taken as a whole) or Capital and its Subsidiaries (taken as a whole), or their
respective legal right or authorization to continue to operate their respective
business, or (b) the legal ability of the Parties to consummate the transactions
contemplated by this Agreement (determined in Capital's case without regard to
any public or private financing it may obtain to consummate the acquisition
contemplated herein).
"MERGER" has the meaning set forth in Recital A above.
"MERGER CONSIDERATION" has the meaning set forth in Section 3(a)(ii) below.
"MERGER SUB" has the meaning set forth in the preface above.
"MOST RECENT AUDITED DATE" has the meaning set forth in Section 8(g) below.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
8(g)
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"NHG" has the meaning set forth in the preface above.
"NHG DISCLOSURE SCHEDULE" has the meaning set forth in Section 8 below.
"NHG'S KNOWLEDGE" means the actual knowledge of Xxxxx X. Xxx Xxxxxx or
Xxxxxx X. Xxxxxx, with no implication about the scope of the investigation, if
any, that such individuals have conducted into the matters at issue.
"NHG NET WORTH" has the meaning set forth in Section 3(b)(i) below.
"NHG SHAREHOLDERS" means the holders of NHG Shares.
"NHG SHARES" means the common stock, $1.00 par value per share, of NHG.
"NHG SUBSIDIARIES" means, collectively, United Title Company, United Title
Insurance Company, First California Title Company, Xxxxxx Information Systems,
Inc., Xxxxxx Exchange Services, Specific Property Inspection; Advantage
Software, Inc.; United Title Agency, Inc.; and Prime Star Funding.
"ORDINARY COURSE OF BUSINESS" means any action taken by a Person but only
if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(b) such an action is not required to be authorized by the board of
directors of such Person; and
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(c) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors, in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"PARTIES" or "PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof), or any other legal
entity.
"POLICIES" has the meaning set forth in Section 8(n) below.
"PURCHASE PRICE" means the aggregate of the Cash Consideration and the
Share Consideration, as the same may be adjusted pursuant to Section 3 hereof.
"REGISTRATION RIGHTS AGREEMENT" means an agreement substantially in the
form attached hereto as EXHIBIT D by and among the parties called for therein.
"REGULATORY INSURANCE APPROVALS" means the consents or approvals of the
California Department of Insurance, the Nevada Department of Business and
Industry; Division of Insurance and the Arizona State Banking Department and the
Arizona Department of Insurance that either Party is required to obtain to
consummate the Merger, which approvals shall in any event include, without
limitation, any required approval of the Merger under the California Insurance
Code.
"REQUIRED EMPLOYMENT AGREEMENTS" has the meaning set forth in Section 10(g)
below.
"REQUISITE REGULATORY APPROVALS" has the meaning set forth in Section
12(a)(vi) below.
"SEC" means the Securities and Exchange Commission.
"SECOND DEPOSIT" has the meaning set forth in Section 2(c)(i) below.
"SECTION 13 TERMINATION" has the meaning set forth in Section 13 below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's and similar
liens for debts not yet due and payable, (b) liens for Taxes not yet due and
payable or for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (c) purchase-money liens and liens securing rental
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payments under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.
"SHARE CONSIDERATION" has the meaning set forth in Section 3(a)(ii) below.
"SHAREHOLDERS' ATTORNEY-IN-FACT" has the meaning set forth in Section
2(c)(ii) below.
"XXXXXX EMPLOYMENT AGREEMENT" has the meaning set forth in Section 10(f)
below.
"SUBSIDIARY" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"SURVIVING CORPORATION" has the meaning set forth in Section 2(a) below.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs, duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax or contribution of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 14(e) below.
"TITLE CLAIMS" has the meaning set forth in Section 8(i) below.
"UNDISBURSED INITIAL DEPOSIT" has the meaning set forth in Section 4(a)
below.
"UNDISBURSED SECOND DEPOSIT" has the meaning set forth in Section 4(b)
below.
"VAN HIRTUM EMPLOYMENT AGREEMENT" has the meaning set forth in Section
10(g) below.
"WARRANTS" has the meaning set forth in Section 3(a)(ii) below.
THE MERGER.
The respective boards of directors of Capital, Merger Sub and NHG have, by
resolutions duly adopted, approved the following provisions of this Section 2 as
the plan of merger required by the laws of the State of California in connection
with the Merger:
(A) THE MERGER. At the Effective Time (as defined in Section 2(c)), in
accordance with this Agreement and applicable law, NHG shall be merged
with and into the Merger Sub, the separate existence of NHG (except as
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may be continued by operation of law) shall cease, and the Merger Sub
shall continue as the surviving corporation under the name "Nations
Holding Group" as provided in the amended Articles of Incorporation of
the Merger Sub pursuant to Section 2(d) of this Agreement. The Merger
Sub, in its capacity as the corporation surviving the Merger,
sometimes is referred to herein as the "SURVIVING CORPORATION".
(B) EFFECT OF THE MERGER. The Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, as well of a public or
a private nature, of each of the Merger Sub and NHG (collectively, the
"CONSTITUENT CORPORATIONS"); all property, real, personal, and mixed,
and all debts due on whatever account, including subscriptions to
shares, and all other choses in action, and all and every other
interest of or belonging to or due to each of the Constituent
Corporations shall be taken and deemed to be transferred to and vested
in the Surviving Corporation without further act or deed; and the
Surviving Corporation shall be responsible and liable for all
liabilities and obligations of each of the Constituent Corporations.
(C) CONSUMMATION OF THE MERGER; CLOSING. Subject to the satisfaction or
waiver of all of the conditions set forth in Section 12 below, the
consummation of the transactions contemplated by this Agreement (the
"CLOSING") shall take place at the principal executive offices of NHG
in Los Angeles, California at 10:00 a.m. on a date and time to be
mutually agreed upon by Capital and NHG, which date shall be no later
than the Closing Deadline (as defined in Section 1). The date on which
the Closing actually takes place is referred to in this Agreement as
the "Closing Date." On the Closing Date, the Parties hereto will cause
articles of merger relating to the Merger to be delivered to the
Secretary of State of the State of California in such form as required
by, and executed in accordance with, the relevant provisions of
applicable law. The Merger shall be effective at such time as such
articles of merger are duly filed with and accepted by the Secretary
of State of the State of California in accordance with applicable law
(the "EFFECTIVE TIME").
(i) CLOSING DEADLINE AND EXTENSION THEREOF. If the Closing Date has
not occurred on or before the Closing Deadline, this Agreement
shall automatically terminate and expire on the Closing Deadline,
subject to Sections 6 and 7 herein and to each Party's rights and
remedies arising from a pre-termination or pre-expiration breach
hereunder by the other Party; provided, however, if, on the
Original Deadline, the Closing has not occurred for any reason
(other than a breach by Capital of its obligations hereunder),
Capital may extend the Closing Deadline to the date that is the
earlier of (A) five (5) days after the receipt of the Requisite
Regulatory Approvals, or (B) February 10, 2003, by giving written
notice of such extension to NHG on or before the Original
Deadline and by depositing with the Deposit Escrow Agent no later
than one (1) Business Day following the Original Deadline TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000) in cash (including any
interest, earnings or distributions thereon, collectively, the
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"SECOND DEPOSIT"), which shall belong to whomever is ultimately
entitled to the Second Deposit.
(ii) POST-CLOSING ATTORNEY-IN-FACT OF NHG SHAREHOLDERS. Prior to the
Closing, the NHG Shareholders holding a majority of the issued
and outstanding capital shares of NHG shall irrevocably appoint
an individual or an entity (the "SHAREHOLDERS' ATTORNEY-IN-FACT")
to act as the NHG Shareholders' attorney-in-fact for the purpose
of (among other things) representing the NHG Shareholders in the
NHG Shareholders' post-Closing dealings with Capital and the
Indemnity Escrow Agent. On or prior to the Closing, NHG shall
provide Capital with written documentation evidencing such
appointment in form and substance reasonably acceptable to
Capital. After the Closing, Capital shall be entitled to rely on
the authority of the Shareholders' Attorney-in-Fact to act for,
in the name or on behalf of the NHG Shareholders as
attorney-in-fact for the NHG Shareholders in connection with all
post-Closing matters pertaining to this Agreement or the
Indemnity Escrow Agreement. Accordingly, whenever post-Closing
actions, notices, approvals, consents are required by, for, to or
from the NHG Shareholders, the Parties understand and agree that
the NHG Shareholders shall be acting through the Shareholders'
Attorney-in-Fact.
(D) ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. The
Articles of Incorporation and Bylaws of the Merger Sub, as in
effect immediately prior to the Effective Time shall be the
Articles of Incorporation (except that such Articles of
Incorporation shall be amended as set forth in EXHIBIT E attached
hereto) and Bylaws (except that such Bylaws shall be amended as
set forth in EXHIBIT E attached hereto) of the Surviving
Corporation immediately after the Effective Time and shall
thereafter continue to be its Articles of Incorporation and
Bylaws until amended as provided therein and under the applicable
law. The directors of the Merger Sub holding office immediately
prior to the Effective Time shall be the directors of the
Surviving Corporation immediately after the Effective Time.
Subject to Section 12(b)(xi), the officers of NHG holding office
immediately prior to the Effective Time shall be the officers
(holding the same offices as they held with NHG) of the Surviving
Corporation immediately after the Effective Time.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.
(E) CONVERSION OF SECURITIES. Subject to Section 3(b), Section
3(d)(ii) and Section 3(f), at the Effective Time, the following
events shall occur by virtue of the Merger and without any action
on the part of the Merger Sub, NHG or the holder of any of the
following securities:
(i) Each of the NHG Shares issued and outstanding immediately prior
to the Effective Time (other than shares to be canceled pursuant
to Sections 3(a)(ii) and 3(a)(iii), and other than as provided in
Section 3(f)) shall, without any action on the part of the
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holders thereof, automatically be canceled and extinguished and
be converted into and become a right to receive a pro-rata
portion of SEVENTEEN MILLION EIGHT HUNDRED FIFTY THOUSAND DOLLARS
($17,850,000) in cash, without interest (the "CASH
CONSIDERATION").
(ii) THREE HUNDRED EIGHTY-FIVE THOUSAND SEVENTY-FIVE (385,075) of the
NHG Shares issued and outstanding, and held by FinWest Group,
immediately prior to the Effective Time, shall, without any
action on the part of the holder thereof, automatically be
canceled and extinguished and be converted into and become a
right to receive ONE HUNDRED SEVENTY-ONE THOUSAND FIVE HUNDRED
(171,500) shares of Capital Preferred Stock (the "SHARE
CONSIDERATION"), plus warrants to purchase THREE HUNDRED THOUSAND
(300,000) shares of Capital Common Stock (the "WARRANTS"). The
Warrants shall have an exercise price equal to the average of the
last reported sale prices of the Capital Common Stock for the
twenty-one (21) consecutive trading days ending on the trading
day prior to the Closing Date. The Warrants shall expire on the
date that is five (5) years from the Closing Date; provided,
however, that the Warrants shall expire at such earlier date as
any third party acquires beneficial ownership of a majority of
the issued and outstanding capital stock of Capital, or all or
substantially all of the assets of Capital. The Cash
Consideration, the Share Consideration and the Warrants are
hereinafter collectively referred to as the "MERGER
CONSIDERATION." The Warrants shall be in the form attached hereto
as EXHIBIT F.
(iii) Each of the NHG Shares issued and outstanding immediately prior
to the Effective Time and held in the treasury of NHG or owned by
Capital or the Merger Sub shall automatically be canceled and
extinguished and no payment shall be made with respect thereto.
(iv) Each share of Merger Sub Common Stock, par value $.001 per share,
issued and outstanding immediately prior to the Effective Time
shall automatically be converted into and become one validly
issued, fully paid and nonassessable share of Common Stock, par
value $.001 per share, of the Surviving Corporation.
(F) PURCHASE PRICE ADJUSTMENT. The Purchase Price shall be subject to the
following adjustments:
(i) NET WORTH CLOSING ADJUSTMENT. The Purchase Price is based upon
NHG's total stockholders' equity of SEVENTEEN MILLION SIX HUNDRED
THIRTY-SIX THOUSAND EIGHT HUNDRED ELEVEN ($17,636,811) as of
December 31, 2001 ("NHG NET WORTH") (determined in accordance
with GAAP). Accordingly, the Purchase Price shall be (A) reduced
by fifty percent (50%) of the amount (if any) by which the NHG
Net Worth exceeds NHG's Actual Closing Net Worth, or (B)
increased by fifty percent (50%) of the amount (if any) by which
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NHG's Actual Closing Net Worth exceeds the NHG Net Worth. Any
increase or decrease in the Purchase Price as contemplated by
this Section 3(b) shall be effected as follows: (i) the Cash
Consideration shall be increased or decreased, as applicable, by
fifty-one percent (51%) of the amount of such increase or
decrease in the Purchase Price; and (ii) the Share Consideration
shall be increased or decreased, as applicable, by the number of
shares of Capital Preferred Stock having a liquidation preference
equal to forty-nine percent (49%) of the amount of such increase
or decrease in the Purchase Price. Prior to the Closing, Capital
shall have the right to review NHG's books and records and other
data supporting NHG's calculation of the Actual Closing Net Worth
and to participate in NHG's calculation thereof. If after review
and consultation with NHG, Capital reasonably believes that NHG's
calculation of the Actual Closing Net Worth overstates the
correct amount, the Parties shall, as soon as possible (but in
any event within thirty (30) days), consult with the Auditors
concerning their respective calculations of the Actual Closing
Net Worth, and obtain from the Auditors (at the Parties' mutual
expense) the Auditors' good faith unaudited estimate of the
Actual Closing Net Worth. The Closing Deadline shall be extended
if (and only to the extent) necessary to accommodate such a
thirty (30) day period plus five (5) additional days thereafter
to effect the Closing. If, for any reason, the Parties are unable
to obtain such a good faith estimate from the Auditors, the cash
and the Capital Preferred Stock to be deposited with the
Indemnity Escrow Agent upon the Closing (the "INDEMNITY ESCROW
DEPOSIT") shall be increased by fifty percent (50%) of the
difference between the Parties' two calculations of the Actual
Closing Net Worth. If the Parties do obtain such an estimate from
the Auditors, and if the difference between (Y) NHG's calculation
of the Actual Closing Net Worth and (Z) the sum of the Auditors'
estimate is a positive number, the Indemnity Escrow Deposit shall
be increased by an amount equal to fifty percent (50%) of that
positive number. Any such increase in the Indemnity Escrow
Deposit shall be made fifty-one percent (51%) in cash and the
balance in shares of Capital Preferred Stock having a liquidation
value equal to forty-nine percent (49%) of such increase. Except
to the extent, if any, that any of the three preceding sentences
apply, the Parties' respective rights and obligations with
respect to the Closing and otherwise hereunder shall remain
unchanged and in full force and effect.
(ii) POST-CLOSING ADJUSTMENT-PARTY'S ELECTION. A post-Closing
adjustment to the Purchase Price shall be made under this Section
3(b)(ii) in accordance with the Auditor's Report (defined below)
if, but only if, either Capital or the Shareholders'
Attorney-in-Fact, in its discretion, engages KPMG Peat Marwick,
LLP (the "AUDITORS"), independent certified public accountants,
and notifies the other Party of such engagement, within five (5)
days after the Closing, to conduct an audit of NHG's Actual Net
Worth. The Party electing to have such an audit shall pay the
cost thereof. The audit shall close off the field work for such
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audit at the date which is fifteen (15) days before the issuance
of the Auditor's Report (defined below), but no later than sixty
(60) days after the Closing. As soon as reasonably possible after
the Closing, but in any event within seventy-five (75) days after
the Closing, the Auditors will deliver to Capital and the
Shareholder's Attorney-in-Fact a closing balance sheet and
related report ("AUDITOR'S REPORT") based on the audit stating
NHG's Actual Net Worth, as the same was (or should have been)
reflected on the books of NHG as of the Closing. The nonelecting
Party, if it so elects, shall have the right to have independent
certified public accountants of its choosing (and at its sole
cost and expense) observe the audit to be conducted by the
Auditors and to inspect the work papers generated in the
preparation of the Auditor's Report.
Following receipt of the Auditor's Report, Capital and the
Shareholders' Attorney-in-Fact will be afforded a period of five (5) days
to review the Auditor's Report. At or before the end of that period,
Capital and the Shareholders' Attorney-in-Fact will either (A) accept the
Auditor's Report in its entirety, in which case NHG's Actual Closing Net
Worth will be deemed to be as set forth in the Auditor's Report, or (B)
deliver to the other Party and the Auditors written notice and a detailed
written explanation of those items in the Auditor's Report which the
notifying Party disputes. Within a further period of five (5) days from the
end of the aforementioned review period, each of Capital and the
Shareholders' Attorney-in-Fact will attempt to resolve in good faith any
disputed items. Failing such resolution, the unresolved disputed items will
be referred for final binding resolution to a second nationally recognized
firm of independent certified public accountants mutually acceptable to
Capital and the Shareholders' Attorney-in-Fact. The decision of such second
firm will be nonappealable and incontestable by either Capital or
Shareholders' Attorney-in-Fact and will not be subject to collateral attack
for any reason. For purposes of the final determination of the Purchase
Price, NHG's Actual Closing Net Worth means NHG's Actual Closing Net Worth
reflected in the Auditor' Report, as the same may be adjusted to reflect
all disputed items as finally resolved pursuant to this Section 3(b)(ii).
Each Party agrees to take such actions, including, without limitation,
issuing written instructions to the Indemnity Escrow Agent, as may be
necessary or advisable to cause any amount of the Indemnity Escrow Deposit
required to be returned to Capital as the result of any Purchase Price
adjustment pursuant to this Section 3(b) to be immediately released and
delivered to Capital by the Indemnity Escrow Agent.
(iii) CERTAIN PAYMENTS TO CERTAIN EMPLOYEES AT CLOSING. The amount, if
any, of the Employee Payments shall be withheld from the Cash
Consideration to be distributed to each NHG Shareholder in an
amount equal to such NHG Shareholder's percentage ownership
interest in the NHG Shares and shall be applied in accordance
with Section 10(h) hereof.
(G) CLOSING OF NHG TRANSFER BOOKS. At the Effective Time, the stock
transfer books of NHG shall be closed and no transfer of shares of NHG
Shares issued and outstanding immediately prior to the Effective Time
shall thereafter be made. If, after the Effective Time, valid
13
certificates previously representing such shares are presented to the
Surviving Corporation or Capital, they shall be exchanged as provided
in Section 2(d).
(H) EXCHANGE OF CERTIFICATES.
(i) Upon the surrender and exchange of a stock certificate
representing shares of NHG Shares, each NHG Shareholder shall be
entitled to receive the respective Merger Consideration to which
such Person is entitled pursuant to Section 3(a), and the
certificate(s) theretofore representing shares of NHG Shares
shall forthwith be canceled. At the Closing, NHG shall deliver to
Capital whatever stock certificates evidencing NHG shares that
NHG may have been able to obtain prior to the Closing, each in
form suitable for transfer, endorsed in blank or with executed
blank stock transfer powers ("ENDORSED NHG STOCK CERTIFICATES"),
along with stock book, stock transfer, ledger, minute book and
any corporate seal of NHG, and Capital shall deliver to the
Shareholders' Attorney-in-Fact (A) bank cashier's checks made
payable to each NHG Shareholder who is entitled to receive Cash
Consideration at the Closing and whose Endorsed NGH Stock
Certificate has been delivered to Capital at the Closing, such
checks to be in such cash amounts as such NHG Shareholders may be
entitled to based upon the number of NHG Shares evidenced by
their Endorsed NGH Stock Certificates delivered to Capital at the
Closing, and (B) a stock certificate or certificates evidencing
the Share Consideration in exchange for the delivery at the
Closing of all FinWest Group's Endorsed NHG Stock Certificates.
In the event that any stock certificates evidencing NHG Shares
(other than the stock certificates of FinWest Group) are not
delivered to Capital at the Closing, Capital shall at the Closing
deliver the Cash Consideration owing on such NHG Shares to the
Indemnity Escrow Agent for delivery to the Shareholders'
Attorney-in-Fact upon delivery to the Indemnity Escrow Agent of
such Endorsed NHG Stock Certificates not delivered to Capital at
the Closing, all in accordance with the terms of the Indemnity
Escrow Agreement, which Agreement shall (if and to the extent
necessary) be amended to provide for the exchange of Cash
Consideration for Endorsed NHG Stock Certificates not delivered
at the Closing through the indemnity escrow. Until surrendered
and exchanged as provided above, each certificate theretofore
representing shares of NHG Shares shall represent solely the
right to receive the Merger Consideration, and the NHG
Shareholder thereof shall have no right to receive the Merger
Consideration to which such Shareholder otherwise would be
entitled; provided that at and after the Closing customary
procedures allowing for payment against lost or destroyed NHG
stock certificates against receipt of customary and appropriate
certifications and indemnities shall be honored by Capital and/or
the Indemnity Escrow Agent (as the case may be). All certificates
of Capital Preferred Stock issued pursuant hereto, shall bear the
following legend:
14
"The securities evidenced by this certificate have not
been registered under the Securities Act of 1933, as
amended, and have been taken for investment purposes
only and not with a view to the distribution thereof,
and, except as stated in an agreement between the
holder of this certificate, or its predecessor in
interest, and the issuer corporation, such securities
may not be sold or transferred unless there is an
effective registration statement under said Act
covering such securities or such sale or transfer is
exempt from the registration and prospectus delivery
requirements of said Act."
(ii) No fractional shares of Capital Preferred Stock shall be issued
in connection with the Merger, including but not limited to, any
shares issued as a result of an adjustment as provided in Section
3(b)(i), and no certificates for any such fractional shares shall
be issued. In lieu of such fractional shares, any fractional
share interest in Capital Preferred Stock which a holder of NHG
Shares would otherwise be entitled to receive in the Merger
(after aggregating all fractional shares of Capital Preferred
Stock that would otherwise be issuable to such holder) shall be
rounded up to the nearest whole share if such fraction is 0.5 or
greater and shall be rounded down to the nearest whole share if
such fraction is less than 0.5.
(I) TAKING OF NECESSARY ACTION; FURTHER ACTION. Capital and the Merger
Sub, on the one hand, and NHG, on the other hand, shall use all
reasonable efforts to take all such action (including, without
limitation, action to cause the satisfaction of the conditions of the
other to effect the Merger) as may be necessary or appropriate in
order to effectuate the Merger as promptly as possible. If, at any
time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full possession of all the rights,
privileges, immunities and franchises of the Constituent Corporations,
the officers and directors of the Surviving Corporation are fully
authorized in the name of the Constituent Corporations or otherwise to
take, and shall take, all such action.
(J) DISSENTING SHAREHOLDERS.
(i) Notwithstanding anything to the contrary contained in this
Agreement, any NHG Shares that, as of the Effective Time, are or may become
entitled to exercise statutory appraisal rights under Chapter 1300 of the
California General Corporation Law (the "CALIFORNIA LAW") (such shares
being referred to herein as "DISSENTING SHARES") shall not be converted
into or represent the right to receive the Merger Consideration in
accordance with Section 3, and the holder or holders of such Dissenting
Shares shall be entitled only to such rights as may be granted to such
holder or holders under applicable California Law; PROVIDED, HOWEVER, that
if the status of any such Dissenting Shares as "dissenting shares" shall
not be perfected, or if any such Dissenting Shares shall lose their status
15
as "dissenting shares," then, as of the later of the Effective Time or the
time of the failure to perfect such status or the loss of such status, such
Dissenting Shares shall automatically be converted into and shall represent
only the right to receive (upon the surrender of the certificate or
certificates representing such Dissenting Shares) the Merger Consideration
in accordance with Section 3.
(ii) NHG shall give Capital (A) prompt notice of any written demand
received by NHG prior to the Effective Time to require NHG to purchase
shares of capital stock of NHG pursuant to California Law and of any other
demand, notice or instrument delivered to NHG prior to the Effective Time
pursuant to the California Law, and (B) the opportunity to participate in
all negotiations and proceedings with respect to any such demand, notice or
instrument. NHG shall not make any payment or settlement offer prior to the
Effective Time with respect to any such demand unless Capital shall have
consented in writing to such payment or settlement offer.
(K) STOCK OPTIONS; WARRANTS. At the Effective Time, all options and
warrants to purchase, or any other securities redeemable, convertible
or otherwise transferable into, capital stock of NHG shall be canceled
and/or terminated without any continuing obligation or liability on
the part of NHG, NHG Subsidiaries, Capital, Capital's Subsidiaries or
the Surviving Corporation with respect thereto.
DEPOSITS BY CAPITAL; CREDITS AGAINST MERGER CONSIDERATION.
(L) INITIAL DEPOSIT. Concurrently herewith, Capital shall deliver to the
Deposit Escrow Agent ONE MILLION DOLLARS ($1,000,000) in cash
(including any interest, earnings or distributions thereon,
collectively, the "INITIAL DEPOSIT"), which shall belong to whomever
is ultimately entitled to the Initial Deposit. Each Party shall take
such actions, including, without limitation, issuing written
instructions to the Deposit Escrow Agent, as may be necessary or
advisable to cause the Initial Deposit to be immediately released and
delivered to NHG by the Deposit Escrow Agent upon the date that a
Liquidated Damages Event occurs. As used herein, a "LIQUIDATED DAMAGES
EVENT" means any expiration or termination of this Agreement for any
reason, other than a failure of the condition in Section 12(b)(i)
hereof, a Section 13 Termination or either Party's failure to obtain
the Regulatory Insurance Approvals despite their best efforts to do
so; provided, however, that to the extent that the Initial Deposit (or
any portion thereof) has not been released and delivered to NHG prior
to the Closing (the "UNDISBURSED INITIAL Deposit"), the Undisbursed
Initial Deposit shall be released and delivered to the NHG
Shareholders at the Closing (if any) according to the terms of
Sections 2 and 3 of this Agreement and shall be credited against the
Cash Consideration on a dollar-for-dollar basis. All or any portion of
the Initial Deposit that has been delivered to NHG prior to the
Closing shall also be so credited against the Cash Consideration at
the Closing. Any disposition of the Initial Deposit (or any portion
thereof) pursuant to this Section 4(a) shall not prejudice any rights
or remedies which the Parties may otherwise have pursuant to this
Agreement. If the agreement expires or is terminated for any reason
other than a Liquidated Damages Event, each Party agrees to take such
actions, including, without limitation, issuing written instructions
16
to the Deposit Escrow Agent, as may be necessary or advisable to cause
the Initial Deposit to be immediately released and delivered to
Capital by the Deposit Escrow Agent.
(M) SECOND DEPOSIT. If Capital extends the Closing Deadline as provided in
Section 2(c)(i) above, Capital --------------- shall make the Second
Deposit as provided in Section 2(c)(i) above. Each Party shall take
such actions, including, without limitation, issuing written
instructions to the Deposit Escrow Agent, as may be necessary or
advisable to cause the Second Deposit to be immediately released and
delivered to NHG upon the date that a Liquidated Damages Event occurs;
provided, however, that to the extent that the Second Deposit (or any
portion thereof) has not been released and delivered to NHG prior to
the Closing (the "UNDISBURSED SECOND DEPOSIT"), the Undisbursed Second
Deposit shall be released and delivered to the NHG Shareholders at the
Closing (if any) and shall be credited against the Cash Consideration
on a dollar-for-dollar basis. All or any portion of the Second Deposit
that has been delivered to NHG prior to the Closing shall also be so
credited against the Cash Consideration at the Closing. Any
disposition of the Second Deposit (or any portion thereof) pursuant to
this Section 4(b) shall not prejudice any rights or remedies which the
Parties may otherwise have pursuant to this Agreement. If the
agreement expires or is terminated for any reason other than a
Liquidated Damages Event, each Party agrees to take such actions,
including, without limitation, issuing written instructions to the
Deposit Escrow Agent, as may be necessary or advisable to cause the
Second Deposit to be immediately released and delivered to Capital by
the Deposit Escrow Agent.
[THIS SECTION INTENTIONALLY LEFT BLANK.]
LIQUIDATED DAMAGES.
(N) DEFINITION. AS USED HEREIN, THE LIQUIDATED DAMAGES AMOUNT SHALL EQUAL
THE CASH COMPRISING THE INITIAL DEPOSIT AND THE CASH COMPRISING THE
SECOND DEPOSIT (IF ANY IS MADE) (COLLECTIVELY, THE "ACTUAL DEPOSIT").
(O) LIQUIDATED DAMAGES CALCULATION. THE PARTIES AGREE THAT IN THE EVENT
THAT THE CLOSING FAILS TO OCCUR BY REASON OF A LIQUIDATED DAMAGES
EVENT, THE DAMAGES TO NHG WOULD BE EXTREMELY DIFFICULT AND
IMPRACTICABLE TO ASCERTAIN, AND THAT THEREFORE, THE LIQUIDATED DAMAGES
AMOUNT IS A REASONABLE ESTIMATE OF THE DAMAGES TO NHG, INCLUDING
(WITHOUT LIMITATION) COSTS OF NEGOTIATING AND DRAFTING THIS AGREEMENT,
DAMAGES TO NHG'S BUSINESS AND EMPLOYEE RELATIONS, COSTS OF SATISFYING
CONDITIONS TO CLOSING, OPPORTUNITY COSTS IN KEEPING NHG OUT OF THE
MARKETPLACE, AND OTHER COSTS INCURRED IN CONNECTION HEREWITH. THE
PARTIES AGREE THAT SAID SUM SHALL BE THE SOLE DAMAGES AND THE SOLE AND
EXCLUSIVE REMEDY OF NHG, LEGAL, EQUITABLE OR OTHERWISE, WITH RESPECT
TO THE FAILURE OF THE CLOSING TO OCCUR DUE TO A LIQUIDATED DAMAGES
EVENT.
17
(P) NHG'S RIGHTS. WITHOUT LIMITING NHG'S RIGHTS TO PURSUE CAPITAL DIRECTLY
FOR CASH EQUAL TO THE LIQUIDATED DAMAGES AMOUNT, NHG SHALL BE ENTITLED
TO BE PAID, OUT OF THE ACTUAL DEPOSIT HELD AND/OR PREVIOUSLY
DISTRIBUTED TO NHG BY THE DEPOSIT ESCROW AGENT, THE LIQUIDATED DAMAGES
AMOUNT TO SATISFY CAPITAL'S OBLIGATION TO PAY LIQUIDATED DAMAGES. IF
NHG IS ENTITLED TO COLLECT LIQUIDATED DAMAGES FROM CAPITAL AND ELECTS
TO DO SO BY OBTAINING THE LIQUIDATED DAMAGES AMOUNT OUT OF THE ACTUAL
DEPOSIT, NHG SHALL RETAIN ALL OR ANY PORTION OF THE ACTUAL DEPOSIT
PREVIOUSLY DELIVERED TO NHG, AND THE DEPOSIT ESCROW AGENT SHALL
DELIVER THE REMAINDER OF THE LIQUIDATED DAMAGES AMOUNT OUT OF THE
BALANCE OF THE ACTUAL DEPOSIT THEN HELD BY THE DEPOSIT ESCROW AGENT IN
ACCORDANCE WITH THE FOLLOWING PROCEDURE. NO LATER THAN TEN (10) DAYS
AFTER THE CLOSING DEADLINE, NHG SHALL DELIVER TO THE DEPOSIT ESCROW
AGENT AND CAPITAL NHG'S AFFIDAVIT STATING UNDER PENALTY OF PERJURY
THAT THE CLOSING WILL FAIL OR HAS FAILED TO OCCUR BY REASON OF A
LIQUIDATED DAMAGES EVENT, AND THAT NHG IS ENTITLED TO THE LIQUIDATED
DAMAGES AMOUNT, AND THE DEPOSIT ESCROW AGENT SHALL AUTOMATICALLY,
AFTER EXPIRATION OF FIVE (5) DAYS FROM THE DATE OF ITS RECEIPT OF
NHG'S AFFIDAVIT, DISBURSE THE BALANCE OF THE LIQUIDATED DAMAGES AMOUNT
THEN HELD BY THE DEPOSIT ESCROW AGENT OUT OF THE ACTUAL DEPOSIT TO
NHG, UNLESS WITHIN SUCH FIVE (5) DAY PERIOD, CAPITAL DELIVERS TO THE
DEPOSIT ESCROW AGENT AND NHG CAPITAL'S AFFIDAVIT STATING UNDER PENALTY
OF PERJURY THAT THE CLOSING WILL NOT FAIL OR HAS NOT FAILED TO OCCUR
BY REASON OF A LIQUIDATED DAMAGES EVENT, AND THAT NHG IS NOT ENTITLED
TO THE LIQUIDATED DAMAGES AMOUNT. IF CAPITAL SO DELIVERS SUCH
AFFIDAVIT WITHIN SUCH FIVE (5) DAY PERIOD, THE DEPOSIT ESCROW AGENT
SHALL HOLD THE BALANCE OF THE ACTUAL DEPOSIT THEN HELD BY THE DEPOSIT
ESCROW AGENT UNTIL IT RECEIVES JOINT INSTRUCTIONS FROM BOTH PARTIES OR
EVIDENCE SATISFACTORY TO DEPOSIT ESCROW AGENT OF A FINAL COURT ORDER
OR DECREE CONCERNING THE DISPOSITION OF THE ACTUAL DEPOSIT.
(Q) SECTION'S APPLICATION LIMITATION. THE FOREGOING PROVISIONS OF THIS
SECTION 6 SHALL APPLY ONLY TO A FAILURE OF CAPITAL TO CLOSE THE SALE
TRANSACTION CONTEMPLATED HEREBY BY REASON OF A LIQUIDATED DAMAGES
18
EVENT, AND SHALL NOT APPLY TO ANY POST-CLOSING REMEDY FOR ANY DEFAULT
OR BREACH BY CAPITAL HEREUNDER OR TO ANY LIABILITY THAT NHG MAY INCUR
TO THIRD PARTIES BASED UPON ANY DEFAULT OF CAPITAL HEREUNDER,
INCLUDING, WITHOUT LIMITATION, CAPITAL'S BREACH OF ANY REPRESENTATION,
WARRANTY OR INDEMNIFICATION OBLIGATION HEREUNDER.
(R) PARTIES' INITIALS. BY PLACING THEIR INITIALS BELOW, CAPITAL AND NHG
ACKNOWLEDGE THAT THEY HAVE READ, UNDERSTAND AND AGREE TO BE BOUND BY
THIS LIQUIDATED DAMAGES PROVISION.
CAPITAL'S INITIALS: ____________. NHG'S INITIALS:___________.
CLOSING DISPOSITION OF DEPOSITS. Each Party shall instruct the Deposit
Escrow Agent to deliver to the NHG Shareholders in accordance with Sections 2
and 3 of this Agreement, at the Closing, the Actual Deposit then held by the
Deposit Escrow Agent. Subject to the foregoing sentence and to NHG's rights
under Section 6 hereof: (a) upon a termination or expiration of this Agreement,
each Party shall instruct the Deposit Escrow Agent to return to Capital the
Actual Deposit then held by the Deposit Escrow Agent; and (b) NHG shall return
to Capital any portion of the Actual Deposit previously received by NHG.
REPRESENTATIONS AND WARRANTIES OF NHG.
NHG represents and warrants to Capital that the statements contained in
this Section 8 are correct and complete as of the date of this Agreement, except
as set forth in the disclosure schedule of NHG accompanying this Agreement (the
"NHG DISCLOSURE SCHEDULE"). The NHG Disclosure Schedule shall be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 8 and contain a page number for each page included therein. Except
to the extent set forth in the NHG Disclosure Schedule, Capital shall not be
deemed for any purpose to have notice of any fact, circumstance, event or
condition which might constitute an exception to any representation or warranty
of NHG in this Agreement.
(S) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. NHG and each of the
NHG Subsidiaries is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction in which it is
incorporated. NHG and each of the NHG Subsidiaries is duly authorized
to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the
lack of such qualification would not have a Material Adverse Effect.
NHG and each NHG Subsidiary has full corporate power and authority to
carry on the businesses in which it is engaged and to own and use the
properties owned and used by it.
(T) CAPITALIZATION. The entire authorized capital stock of NHG consists of
(i) FIFTY MILLION (50,000,000) shares of voting common stock of which
SEVEN HUNDRED SIXTY THOUSAND EIGHT HUNDRED SIXTY-EIGHT (760,868)
19
shares are issued and outstanding. NHG has no Subsidiaries other than
the NHG Subsidiaries. All of the issued and outstanding NHG Shares and
all of the issued and outstanding shares of each NHG Subsidiary have
been duly authorized and are validly issued, fully paid and
nonassessable. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require
NHG or any NHG Subsidiary to issue, sell, or otherwise cause to become
outstanding any additional shares of its capital stock, except for
certain options to acquire twenty-five thousand (25,000) shares of NHG
common stock held by Xxxxxx Xxxxxx, which options shall be exercised
and extinguished at or prior to the Closing. There are no outstanding
or authorized stock appreciation, phantom stock, profit participation,
or similar rights with respect to NHG or any NHG Subsidiary. The NHG
Shares are owned of record as set forth in the NHG Disclosure
Statement. All of the NHG Subsidiaries' issued and outstanding shares
of capital stock are owned of record and beneficially by NHG, free and
clear of any and all liens, claims, encumbrances, security interests,
pledges, equities, options, charges and restrictions whatsoever, other
than restrictions imposed by federal or state law, including without
limitation, securities or insurance laws.
(U) AUTHORIZATION OF TRANSACTION. Subject to the Requisite Regulatory
Approvals, NHG has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement and the
other agreements and instruments to be executed and delivered by it
pursuant hereto and to perform its respective obligations hereunder
and thereunder. This Agreement constitutes the valid and legally
binding obligation of NHG and is enforceable in accordance with its
terms.
(V) NONCONTRAVENTION. Subject to the Requisite Regulatory Approvals,
neither the execution and the delivery of this Agreement by NHG, nor
the consummation of the transactions contemplated hereby by NHG, will
(i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which NHG or any of the
NHG Subsidiaries is subject or any provision of the charter or bylaws
of NHG or any of the NHG Subsidiaries, or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration
of, create in any Person the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which NHG or any of the
NHG Subsidiaries is a party or by which they are bound or to which any
of their assets are subject (or result in the imposition of any
Security Interest upon any of their assets), except where the
violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or Security
Interest would not have a Material Adverse Effect. Subject to the
Requisite Regulatory Approvals, neither NHG nor any of the NHG
Subsidiaries needs to give any notice to, make any filing with, or
obtain any authorization, permit, certificate, registration, consent,
approval or order of any government or governmental agency in order
20
for the Parties to consummate the transactions contemplated by this
Agreement or for NHG or the NHG Subsidiaries to continue to operate
their respective businesses following the Closing.
(W) TITLE TO ASSETS. NHG has good and marketable title to the NHG
Subsidiaries' Shares, free and clear of all liens, claims,
encumbrances, pledges, options and restrictions other than
restrictions imposed by federal or state law, including, without
limitation, securities or insurance laws. Except for properties and
assets disposed of in the Ordinary Course of Business since the date
of the Most Recent Financial Statements, each of NHG or the NHG
Subsidiaries has good and marketable title to or a valid leasehold
interest in, the properties and assets used by it, located on its
premises, or shown on the Most Recent Financial Statements or acquired
after the date thereof, free and clear of all Security Interests.
(X) CORPORATE COMPLIANCE. None of NHG or the NHG Subsidiaries is in
default under, or in violation of, any provision of its charter or
bylaws.
(Y) FINANCIAL STATEMENTS. Attached to Section 8(g) of the NHG Disclosure
Schedule are true and correct copies of the following financial
statements (collectively, the "FINANCIAL STATEMENTS"): (i) NHG's
audited consolidated balance sheets as of December 31, 2001 and 2000
and statements of operations and shareholders' equity and cash flow
for the two years (2) ended December 31, 2001 (the "MOST RECENT
AUDITED DATE"); and (ii) NHG's unaudited consolidated balance sheets
and statements of operations (the "MOST RECENT FINANCIAL STATEMENTS")
as of and for the three (3) months ended March 31, 2002. The Financial
Statements (including the Notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly in all material respects the
financial condition of NHG as of such dates and the results of
operations of NHG for such periods, and are correct and complete in
all material respects.
(Z) ABSENCE OF MATERIAL ADVERSE CHANGES. Since the Most Recent Audited
Date through the date hereof, there have not been any changes in the
business, condition (financial or otherwise), operations, title
claims, results of operations, properties, assets or prospects of NHG
and the NHG Subsidiaries (taken as a whole) which, either individually
or in the aggregate, have been or could reasonably be expected to have
a Material Adverse Effect. Without limiting the generality of the
foregoing, since the Most Recent Audited Date:
(i) none of NHG or the NHG Subsidiaries has sold, leased,
transferred, or assigned any of its assets, tangible or
intangible, other than for fair consideration in the Ordinary
Course of Business;
(ii) none of NHG or the NHG Subsidiaries has entered into any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving
more than $250,000 or outside the Ordinary Course of Business;
21
(iii) no Person (including NHG or any of the NHG Subsidiaries) has
accelerated, terminated, modified, or canceled any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $250,000 to
which NHG or any of the NHG Subsidiaries is a party or by which
any of them is bound;
(iv) none of NHG or the NHG Subsidiaries has imposed any Security
Interest upon any of its assets, tangible or intangible;
(v) none of NHG or the NHG Subsidiaries has made any capital
expenditure (or series of related capital expenditures) either
involving more than $250,000 or outside the Ordinary Course of
Business;
(vi) none of NHG or the NHG Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities
or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) either involving more than
$250,000 or outside the Ordinary Course of Business;
(vii)none of NHG or the NHG Subsidiaries has issued any note, bond,
or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized
lease obligation either involving more than $250,000 singly or
$250,000 in the aggregate;
(viii) none of NHG or the NHG Subsidiaries has delayed or postponed
the payment of accounts payable and other liabilities outside the
Ordinary Course of Business;
(ix) none of NHG or the NHG Subsidiaries has canceled, compromised,
waived, or released any right or claim (or series of related
rights and claims) either involving more than $250,000 or outside
the Ordinary Course of Business;
(x) none of NHG or the NHG Subsidiaries has granted any license or
sublicense of any rights under or with respect to any
Intellectual Property other than such licenses or sublicenses as
Advantage Software, Inc. may have granted from time to time in
the normal course of its business;
(xi) there has been no change made or authorized in the charters or
bylaws of any of NHG or the NHG Subsidiaries;
(xii) none of NHG or the NHG Subsidiaries has issued, sold, or
otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its
capital stock;
(xiii) none of NHG or the NHG Subsidiaries has declared, set aside, or
paid any dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock;
22
(xiv) none of NHG or the NHG Subsidiaries has experienced any
uninsured physical damage, destruction, or loss to its property
in excess of $250,000 in the aggregate;
(xv) none of NHG or the NHG Subsidiaries has made any loan to, or
entered into any other transaction with, any of its directors,
officers, or (except in the Ordinary Course of Business)
employees;
(xvi) none of NHG or the NHG Subsidiaries has entered into any
employment contract or collective bargaining agreement, written
or oral, which are not cancelable upon one hundred eighty (180)
or fewer days' notice or modified the terms of any existing such
contract or agreement;
(xvii) none of NHG or the NHG Subsidiaries has granted any increase in
the base compensation of any of its directors, officers, or
(except in the Ordinary Course of Business) employees;
(xviii) none of NHG or the NHG Subsidiaries has adopted, amended,
modified or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit
of any of its directors, officers, and employees (or taken any
such action with respect to any other Employee Benefit Plan
except for those required by applicable law);
(xix) none of NHG or the NHG Subsidiaries has made any other material
change in employment terms for any of its directors, officers,
and key employees;
(xx) none of NHG or the NHG Subsidiaries has made or pledged to make
any charitable or other capital contribution outside the Ordinary
Course of Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving any of NHG or the NHG
Subsidiaries; and
(xxii) none of NHG or the NHG Subsidiaries has agreed or committed to
any of the foregoing.
(AA) LITIGATION.
(i) Except as set forth in the NHG Disclosure Schedule: (i) there
presently exists no litigation, proceedings, actions, claims or
investigations at law or in equity against NHG or the NHG
Subsidiaries; and (ii) none of NHG or the NHG Subsidiaries is
subject to a notice, writ, injunction, order, or decree of any
court, agency or other governmental authority, which in the case
23
of either (i) or (ii) above, if determined adversely against NHG
or the NHG Subsidiaries, would have a Material Adverse Effect.
(ii) Section 8(i) of the NHG Disclosure Schedule contains: (A) a list
of each proceeding, action, claim or investigation at law or in
equity, either pending or, to NHG's Knowledge, threatened against
NHG or any NHG Subsidiary as of the date hereof (collectively,
the "EXISTING NHG ACTIONS"), other than claims under real
property title insurance policies, endorsements or other
assurances issued by NHG Subsidiaries licensed to do so ("TITLE
CLAIMS") or claims under escrow accounts ("ESCROW CLAIMS"); (B) a
list of each Title Claim (the "EXISTING TITLE CLAIMS") or Escrow
Claim either pending or, to NHG's Knowledge, threatened against
NHG or any NHG Subsidiary as of the date hereof; and (C) the
amount (including zero) of the reserves established with respect
to the Existing Title Claims as reflected in the Financial
Statements.
(iii) Each of the Existing NHG Actions (other than the claim of the
Controller of the State of California pursuant to its letter
dated January 24, 2002 (the "CALIFORNIA CONTROLLER CLAIM"), and
the Class Action Claims) set forth in Section 8(i) of the NHG
Disclosure Schedule are fully covered by one or more of the
insurance policies of NHG set forth in Section 8(o) of the NHG
Disclosure Schedules. Notwithstanding the foregoing, the payment
by NHG or any NHG Subsidiary of any deductible amount with
respect to an Existing NHG Action that is covered by NHG's
existing insurance policies set forth in Section 8(o) of the NHG
Disclosure Schedules shall not be deemed to give rise to any
breach of the representations and warranties set forth in this
Section 8(i).
(BB) LEGAL AND REGULATORY COMPLIANCE. Each of NHG and the NHG Subsidiaries
has complied with all Environmental, Health and Safety Laws and all
other laws (including all rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments and all
agencies thereof, except where any failure to comply would not have a
Material Adverse Effect, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any such failure so to
comply.
(CC) TAX MATTERS.
(i) NHG and each of the NHG Subsidiaries has filed all Tax
Returns that it was required to file. All such Tax Returns
were correct and complete in all material respects. All
Taxes owed by NHG and any of the NHG Subsidiaries (whether
or not shown on any Tax Return) have been paid. None of NHG
or any of the NHG Subsidiaries currently is the beneficiary
of any extension of time within which to file any Tax
Return. There are no Security Interests on any of the assets
24
of any of NHG or the NHG Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any
Tax.
(ii) None of NHG or the NHG Subsidiaries has waived any statute
of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or
deficiency.
(iii) None of NHG or the NHG Subsidiaries has filed a consent
under Code Sec. 341(f) concerning collapsible corporations.
(iv) The unpaid Taxes of NHG and the NHG Subsidiaries (A) did
not, as of the Most Recent Audited Date, exceed the reserve
for Tax Liability (other than any reserve for deferred Taxes
set forth in the Most Recent Balance Sheet), and (B) do not
exceed that reserve as adjusted for the passage of time in
accordance with GAAP.
(DD) REAL PROPERTY.
(i) All of the real property owned by NHG or any of the NHG
Subsidiaries, or in which any of them have an ownership
interest, is listed in Section 8(l)(i) of the NHG Disclosure
Schedule. Each of NHG and the NHG Subsidiaries has good and
marketable title to the real properties that it owns, as
described in such NHG Disclosure Schedule, free and clear of
all Security Interests, agreements, mortgages, covenants,
conditions, restrictions, easements, charges, claims,
assessments and encumbrances, except for: (A) rights of
lessees or sublessees in such matters that are reflected in
a written lease or sublease; (B) current taxes (including
assessments collected with taxes) not yet due and payable;
(C) encumbrances, if any, that are not substantial in
character, amount or extent and do not materially detract
from the value, or interfere with present use, or the
ability of NHG or such NHG Subsidiary to dispose, of the
property subject thereto or affected thereby; and (D) other
matters as described in the NHG Disclosure Schedule.
(ii) Section 8(l)(ii) of the NHG Disclosure Schedule lists all
real property leased or subleased to or by NHG or any of the
NHG Subsidiaries by or to a third party. NHG has delivered
or made available to Capital correct and complete copies of
the leases and subleases listed in Section 8(l)(ii) of the
NHG Disclosure Schedule (as amended to date). With respect
to each lease and sublease listed in Section 8(l)(ii) of the
NHG Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect, and NHG or the NHG Subsidiary
which is a party to such lease or sublease enjoys and is entitled to quiet
possession thereunder;
(B) neither NHG, nor any NHG subsidiary, nor to NHG's
knowledge, any other party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time,
25
would constitute a breach or default or permit termination, modification,
or acceleration thereunder;
(C) no party to the lease or sublease has repudiated any
provision thereof; and
(D) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease.
(EE) TANGIBLE ASSETS. NHG and the NHG Subsidiaries own or lease, or
otherwise are legally entitled to use, all buildings, equipment, and
other tangible personal property necessary for the conduct of their
businesses as presently conducted and as presently proposed to be
conducted. All such tangible personal property has been maintained
substantially in accordance with normal industry practice, and is
suitable for the purposes for which it presently is used and presently
is proposed to be used.
(FF) CONTRACTS. Except for real property title insurance policies,
endorsements or other assurances issued by NHG Subsidiaries licensed
to do so (collectively, "POLICIES"), Section 8(n) of the NHG
Disclosure Schedule lists the following contracts and other agreements
to which NHG or any of the NHG Subsidiaries is a party (other than
agreements with Capital or agreements that will expire or be
terminated at or prior to the Closing without any continuing
obligation or liability thereunder on the part of NHG, NHG
Subsidiaries, Capital, Capital's Subsidiaries or the Surviving
Corporation with respect thereto) (collectively, the "MATERIAL
CONTRACTS"):
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease
payments in excess of $250,000 per annum;
(ii) any agreement (or group of related agreements) for the purchase
or sale of personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of
more than one (1) year, or involve consideration in excess of
$250,000;
(iii) any agreement concerning a partnership or joint venture
agreement;
(iv) any agreement (or group of related agreements) under which NHG or
an NHG Subsidiary has created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $250,000 or under which NHG or an NHG
Subsidiary has imposed a Security Interest on any of its assets,
tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement between any of the NHG Subsidiaries and NHG or any
of NHG's Affiliates;
26
(vii) any profit-sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material
plan or arrangement for the benefit of the current or former
directors, officers, and employees of NHG or any NHG Subsidiary;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $250,000 or any agreement providing
severance benefits;
(x) any agreement under which NHG or any NHG Subsidiary has advanced
or loaned any amount to any of its directors, officers, and
employees;
(xi) any agency agreement between NHG or any of the NHG Subsidiaries,
on the one hand, and any title insurance underwriter, on the
other hand, which is currently in effect;
(xii) any agreement pursuant to which NHG or an NHG Subsidiary is
leasing or servicing a title plant;
(xiii) any agreements pursuant to which an NHG Subsidiary sold assets
having a value in excess of $250,000 during the last two (2)
years;
(xiv) any agreement under which NHG or an NHG Subsidiary is a
guarantor or otherwise is liable for any liability or obligation
(including indebtedness) of any other Person in excess of
$250,000;
(xv) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of
$250,000; or
(xvi) any other agreement the termination of which would have a
Material Adverse Effect and which could not be replaced on
substantially similar terms.
NHG has delivered or made available to Capital a correct and complete copy
of each written agreement listed in Section 8(n) of the NHG Disclosure Schedule
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 8(n) of the NHG
Disclosure Schedule. With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) neither NHG, nor any NHG Subsidiary, nor
to NHG's Knowledge, any other party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
27
(GG) INSURANCE. Section 8(o) of the NHG Disclosure Schedule lists each
insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety
arrangements, but excluding Policies) to which NHG or any of the NHG
Subsidiaries has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within calendar years 2001 and
2002. With respect to each such insurance policy: (i) the policy is
legal, valid, binding, enforceable, and in full force and effect; (ii)
the policy will continue to be legal, valid, binding, enforceable, and
in full force and effect on substantially the same terms following the
consummation of the transactions contemplated hereby; (iii) neither
NHG nor any NHG Subsidiary nor to NHG's Knowledge, any other party to
the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (iv) neither NHG nor any NHG
Subsidiary nor to NHG's Knowledge, any other party to the policy has
repudiated any provision thereof. Each of NHG and the NHG Subsidiaries
has been covered during the past five (5) years by insurance in scope
and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period.
(HH) EMPLOYEES. None of NHG or the NHG Subsidiaries is a party to or bound
by any collective bargaining agreement, nor has any of them
experienced any strikes or other collective bargaining disputes.
(II) EMPLOYEE BENEFITS PLANS. Section 8(q) of the NHG Disclosure Schedule
lists each Employee Benefit Plan that NHG or any of the NHG
Subsidiaries maintains or to which any of them contributes. Each such
Employee Benefit Plan (and each related trust, insurance contract, or
fund) complies in form and in operation in all material respects with
the applicable requirements of ERISA, the Code, and other applicable
laws.
(JJ) INTELLECTUAL PROPERTY. Each of NHG and the NHG Subsidiaries owns or
has the right to use pursuant to license, sublicense, agreement, or
permission, all Intellectual Property necessary for the operation of
its business as presently conducted. None of NHG or the NHG
Subsidiaries have, to NHG's Knowledge, interfered with, infringed upon
or misappropriated any Intellectual Property rights of third parties,
and no third party has, to the Knowledge of NHG, interfered with,
infringed upon or misappropriated any Intellectual Property rights of
NHG or any of the NHG Subsidiaries.
(KK) BROKERS' FEES. Neither NHG nor any of the NHG Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(LL) NHG DISCLAIMER. Except for the representations and warranties
expressly made by Capital herein, Capital has not made any
28
representations or warranties concerning Capital, its assets,
liabilities, financial condition, business or operations, the Capital
Preferred Stock, the Warrants or any other matter.
(MM) STOCKHOLDER VOTE REQUIRED. Under Section 1201 of the California
General Corporation Law, the NHG Shareholders can approve the Merger
in accordance with the terms of this Agreement upon the affirmative
vote or written consent of the holders of: (i) if the Merger is
approved by the California Department of Insurance under Section 838.5
of the California Insurance Code, a majority of the NHG Shares
outstanding at the record date for a meeting called for such purpose;
or (ii) all of the NHG Shares outstanding at the record date for a
meeting called for such purpose.
(NN) NHG SATISFACTION WITH DUE DILIGENCE. NHG has had ample opportunity to
conduct a full and complete inspection, analysis and examination of
Capital, including, without limitation, its books and records,
financial condition, business, operations and prospects; NHG is
completely satisfied with the results thereof; and (without limiting
NHG's rights under Section 10(c) hereof) NHG's obligation to effect
the Closing hereunder is not subject to any further inspection,
analysis or examination of Capital; provided, however, that subject to
Section 14(a) hereof, nothing in this subsection (v) is intended to,
or shall, relieve or in any way diminish any liability that Capital
may now or hereafter have for a breach of any of its representations,
warranties and/or covenants hereunder.
REPRESENTATIONS AND WARRANTIES OF CAPITAL. Each of Capital and the Merger
Sub represents and warrants to NHG that the statements contained in this Section
9 are correct and complete as of the date of this Agreement, except as set forth
in the disclosure schedule of Capital and the Merger Sub accompanying this
Agreement (the "CAPITAL DISCLOSURE SCHEDULE"). The Capital Disclosure Schedule
will be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Section 9 and contain a page number for each page
included therein. Except to the extent set forth in the Capital Disclosure
Schedule, NHG shall not be deemed for any purpose to have notice of any fact,
circumstance, event or condition which might constitute an exception to any
representation or warranty of Capital in this Agreement..
(OO) ORGANIZATION. Each of Capital, the Merger Sub and Capital's other
Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction in which it is
incorporated, and is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification
would not have a Material Adverse Effect.
(PP) AUTHORIZATION OF TRANSACTION. Each of Capital and the Merger Sub has
full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of each of Capital and the Merger Sub,
enforceable in accordance with its terms and conditions.
29
(QQ) NONCONTRAVENTION. Subject to the Requisite Regulatory Approvals,
neither the execution and the delivery of this Agreement by Capital or
the Merger Sub, nor the consummation of the transactions contemplated
hereby by Capital or the Merger Sub, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Capital or any of its
Subsidiaries is subject or any provision of the charter or bylaws of
Capital or any of its Subsidiaries or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument or other arrangement to which either Capital or
any of its Subsidiaries is a party or by which it is bound or to which
any of its assets is subject, except where the violation, conflict,
breach, default, acceleration, termination, modification,
cancellation, or failure to give notice would not have a Material
Adverse Effect. Subject to the Requisite Regulatory Approvals, neither
Capital nor the Merger Sub need to give any notice to, make any filing
with, or obtain any authorization, permit, certificate, registration,
consent, approval or order of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by
this Agreement.
(RR) BROKERS' FEES. Except for the fee payable to Xxxxxx Capital
Corporation, (any and all of which shall be paid by Capital and not
NHG), neither Capital nor the Merger Sub has liability or obligation
to pay any fees or commission to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(SS) SEC FILINGS: FINANCIAL STATEMENTS. Capital has filed all forms,
reports and documents required to be filed with the SEC and has
heretofore delivered to or made available to NHG, in the form filed
with the SEC, the Capital SEC Reports. The Capital SEC Reports (i)
were prepared in all material respects in accordance with the
requirements of the Securities Act or the Securities Exchange Act, as
the case may be, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make any statements therein, in the
light of the circumstances under which they were made, not misleading.
Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Capital SEC Reports
and Capital's latest Annual Report to Stockholders was prepared in
accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto),
and each fairly presents in all material respects the consolidated
financial position of Capital and its Subsidiaries as at the
respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments which were not or are not expected
to be material in amount.
30
(TT) CAPITAL PREFERRED STOCK. The Capital Preferred Stock and the Warrants,
when issued pursuant to this Agreement, shall have been duly
authorized and shall be validly issued, fully paid and nonassessable
and, upon receipt, will be owned of record and beneficially by FinWest
Group free and clear of any and all liens, claims or encumbrances
created or suffered by Capital or Persons claiming by, under or
through Capital, other than restrictions on transfers imposed by
applicable federal or state securities laws.
(UU) PURCHASE FOR INVESTMENT. Capital is acquiring the NHG Shares for its
own account for investment and not with a view to, or for resale in
connection with, the distribution thereof in violation of the
Securities Act or any applicable state securities law.
(VV) CAPITAL DISCLAIMER. Except for the representations and warranties
expressly made by NHG herein, NHG has not made any representations or
warranties concerning NHG or its assets, liabilities, financial
conditions, businesses or operations, the NHG Shares, the NHG
Shareholders or any other matter.
(WW) CAPITAL SATISFACTION WITH DUE DILIGENCE. Capital has had ample
opportunity to conduct a full and complete inspection, analysis and
examination of NHG, and the NHG Subsidiaries including, without
limitation, their books and records, financial condition, business,
operations and prospects; Capital is completely satisfied with the
results thereof, and (without limiting Capital's rights under Section
10(c) hereof) Capital's obligation to effect the Closing hereunder is
not subject to any further inspection, analysis or examination of NHG
or the NHG Subsidiaries; provided, however, that subject to Section
14(a) hereof, nothing in this subsection (i) is intended to, or shall,
relieve or in any way diminish any liability that NHG may now or
hereafter have for a breach of any of its representations, warranties
and/or covenants hereunder.
(XX) LITIGATION. Except as set forth in the Capital Disclosure Schedule:
(i) there presently exists no litigation, proceedings, actions, claims
or investigations at law or in equity against Capital or its
Subsidiaries; and (ii) none of Capital or its Subsidiaries is subject
to a notice, writ, injunction, order, or decree of any court, agency
or other governmental authority, which in the case of either (i) or
(ii) above, if determined adversely against Capital or its
Subsidiaries, would have a Material Adverse Effect.
(YY) LEGAL AND REGULATORY COMPLIANCE. Each of Capital and its Subsidiaries
has complied with all Environmental, Health and Safety Laws and all
other laws (including all rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments and all
agencies thereof, except where any failure to comply would not have a
Material Adverse Effect, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any such failure so to
comply.
31
(ZZ) TAX MATTERS.
CAPITAL AND EACH OF ITS SUBSIDIARIES HAS FILED ALL TAX RETURNS THAT IT WAS
REQUIRED TO FILE. ALL SUCH TAX RETURNS WERE CORRECT AND COMPLETE IN ALL MATERIAL
RESPECTS. ALL TAXES OWED BY CAPITAL AND ANY OF ITS SUBSIDIARIES (WHETHER OR NOT
SHOWN ON ANY TAX RETURN) HAVE BEEN PAID. NONE OF CAPITAL OR ANY OF ITS
SUBSIDIARIES CURRENTLY IS THE BENEFICIARY OF ANY EXTENSION OF TIME WITHIN WHICH
TO FILE ANY TAX RETURN. THERE ARE NO SECURITY INTERESTS ON ANY OF THE ASSETS OF
ANY OF CAPITAL OR ITS SUBSIDIARIES THAT AROSE IN CONNECTION WITH ANY FAILURE (OR
ALLEGED FAILURE) TO PAY ANY TAX.
NONE OF CAPITAL OR ITS SUBSIDIARIES HAS WAIVED ANY STATUTE OF LIMITATIONS IN
RESPECT OF TAXES OR AGREED TO ANY EXTENSION OF TIME WITH RESPECT TO A TAX
ASSESSMENT OR DEFICIENCY. NONE OF CAPITAL OR ITS SUBSIDIARIES HAS FILED A
CONSENT UNDER CODE SEC. 341(F) CONCERNING COLLAPSIBLE CORPORATIONS. THE UNPAID
TAXES OF CAPITAL AND ITS SUBSIDIARIES (A) DID NOT, AS OF THE DATE OF THE MOST
RECENT BALANCE SHEET FILED AS PART OF ANY REPORT WITH THE SEC, EXCEED THE
RESERVE FOR TAX LIABILITY (OTHER THAN ANY RESERVE FOR DEFERRED TAXES SET FORTH
IN THE MOST RECENT BALANCE SHEET FILED AS PART OF ANY REPORT WITH THE SEC) AND
(B) DO NOT EXCEED THAT RESERVE AS ADJUSTED FOR THE PASSAGE OF TIME IN ACCORDANCE
WITH GAAP.
(AAA) NO FINANCING CONDITION. Capital's obligations hereunder are not in
any way conditioned upon Capital's ability to obtain any debt or
equity financing for the Merger.
COVENANTS.
(BBB) GENERAL. Upon the terms and subject to the conditions hereof, each of
the Parties hereto shall use, and shall cause their respective
Subsidiaries to use, its best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this
Agreement, and otherwise to satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement. Without
limiting the generality of the foregoing:
(i) Each Party shall use its best efforts to obtain as promptly as
practicable all consents, waivers, approvals, authorizations or
orders (including, without limitation, all governmental and
regulatory rulings and approvals), and the Parties shall make all
filings (including, without limitation, all filings with
governmental or regulatory agencies), required in connection with
the authorization, execution and delivery of this Agreement by
the Parties and the consummation by them of the transactions
contemplated hereby.
(ii) With respect to the filings for Regulatory Insurance Approvals,
Capital and the Merger Sub shall make such filings as the
proposed new controlling shareholder and Merger survivor of NHG,
and shall pay all costs incurred by Capital in connection
therewith; however, any costs incurred by NHG in connection with
fulfilling its obligations to cooperate in connection with such
filings shall be paid by NHG.
(iii) NHG shall cooperate reasonably with Capital in connection with
Capital's compilation and issuance to the applicable NHG
Shareholders of the information required for Capital's compliance
with the Securities Act. Although Capital's obligations hereunder
are not in any way conditioned on Capital's ability to obtain any
debt or equity financing for the acquisition contemplated herein,
32
Capital shall use its best efforts to obtain any such financing
to the extent such financing may be needed by Capital; provided,
however, that NHG shall cooperate reasonably with Capital in
connection with Capital's compilation of the information
concerning NHG required for Capital's compliance with the
registration statement requirements of the Securities Act if
Capital elects to try to obtain financing for the acquisition
contemplated hereby through a public offering of equity or debt;
provided further, however, that NHG shall not assume any
liability for (and Capital hereby indemnifies NHG from and
against any misstatement and/or omissions contained in or
violations of law resulting from) the contents of any such
registration statement or any amendment or supplement thereto,
except to the limited extent that NHG provides Capital with
written information regarding NHG intended for inclusion in such
registration statement, amendment or supplement.
(CCC) OPERATION OF BUSINESS. None of NHG or the NHG Subsidiaries shall,
prior to the Closing, engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business,
except as may be required by law or as otherwise contemplated herein.
Without limiting the generality of the foregoing, (but except as may
be required by law or as otherwise contemplated herein), each of NHG
and the NHG Subsidiaries covenant and agree that prior to the
Effective Time, unless Capital shall otherwise consent in writing
(which consent shall not be unreasonably withheld or delayed) or as
otherwise expressly contemplated or permitted by this Agreement:
(i) NHG and the NHG Subsidiaries shall not, directly or indirectly,
do or permit to occur any of the following:
(A) authorize or effect any change in their charters or bylaws;
(B) grant any options, warrants, or other rights to purchase or
obtain any of their capital stock or issue, sell, or otherwise dispose of any of
their capital stock (except upon the conversion or exercise of options,
warrants, and other rights currently outstanding);
(C) except for the distributions of assets permitted elsewhere in
this Agreement, declare, set aside, or pay any dividend or distribution with
respect to the NHG Shares (whether in cash or in kind), or split, combine or
reclassify any outstanding NHG Shares;
(D) issue any note, bond, or other debt security or create,
incur, assume, or guarantee any indebtedness for borrowed money or capitalized
lease obligation outside the Ordinary Course of Business;
(E) impose any Security Interest upon any of its assets outside
the Ordinary Course of Business or any lien, claim, encumbrance, pledge or
option on any NHG Subsidiary capital stock;
33
(F) make any change in employment terms for any of its directors,
officers, and key employees, or grant any bonuses or other forms of direct or
indirect compensation, except in the Ordinary Course of Business;
(G) except for dispositions or distributions permitted elsewhere
in this Agreement or as contemplated pursuant to that certain term sheet, dated
January 24, 2002, involving First California Title Company, a copy of which has
been provided to Capital, dispose of any assets except in the Ordinary Course of
Business;
(H) acquire (by merger, exchange, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership, joint venture or
other business organization or division or material assets thereof;
(I) increase, terminate, amend or alter or otherwise modify any
Employee Benefit Plan; or
(J) commit to any of the foregoing.
(ii) NHG shall not (and shall not permit any NHG Subsidiary to),
directly or indirectly, (A) enter into or modify any Material
Contract, agreement or understanding to which NHG or any NHG
Subsidiary is a party; (B) enter into or modify any employment,
severance or similar agreements or arrangements with, or grant
any bonuses, salary increases, severance or termination pay to,
any officers or directors or consultants; (C) make any individual
capital expenditure, including any individual capitalizable lease
obligation, other than individual expenditures necessary to
maintain existing assets in good repair and other individual
capital expenditures in amounts not exceeding $50,000; or (D) in
the case of employees who are not officers or directors or
consultants, grant or take any action with respect to the
granting of any salary increases, severance or termination pay or
increases in other benefits, other than grants or such actions as
are in the Ordinary Course of Business of NHG and are consistent
with NHG's historic compensation practices, or grant or take any
actions with respect to the granting of any discretionary
bonuses;
(iii) NHG shall not (and shall not permit any NHG Subsidiary to) adopt
or amend any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment or other
employee benefit plan, trust, fund or group arrangement for the
benefit or welfare of any employees or any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan,
agreement, trust, fund or arrangements for the benefit or welfare
of any director;
(iv) NHG shall use its best efforts to cause its and the NHG
Subsidiaries' current insurance (or reinsurance) policies not to
be canceled or terminated or reduced in coverage amount or any of
the coverage thereunder to lapse, unless simultaneously with such
termination, cancellation, reduction in coverage amount or lapse,
34
replacement policies providing coverage equal to or greater than
the coverage under the canceled, terminated, reduced or lapsed
policies for substantially similar premiums are in full force and
effect;
(v) NHG and each NHG Subsidiary (A) shall use its best efforts to
preserve intact its business organization and good will, keep
available the services of its officers and employees as a group
and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships
with it; (B) shall not take any action which would render, or
which reasonably may be expected to render, any representation or
warranty made by it in this Agreement or in any other agreement
or instrument executed in connection with the transactions
contemplated hereby untrue at, or at any time prior to, the
Effective Time; and (C) shall notify Capital of any emergency or
other change in the normal course of its business or in the
operation of its properties and of any governmental or third
party complaints, investigations or hearings (or communications
indicating that the same may be contemplated) if such emergency,
change, complaint, investigation or hearing would be material,
individually or in the aggregate, to the business, operations or
financial condition of NHG and the NHG Subsidiaries or to NHG's,
Capital's or the Merger Sub's ability to consummate the
transactions contemplated by this Agreement;
(vi) Neither NHG nor any NHG Subsidiary shall change any of its
methods of accounting or accounting practices in any material
respect;
(vii) Neither NHG nor any NHG Subsidiary will waive or agree to waive
any applicable statute of limitations or any similar statutory or
judicial doctrine benefiting NHG;
(viii) Neither NHG nor any NHG Subsidiary shall commence or settle any
material legal action or proceeding, PROVIDED, that NHG may
settle any legal actions or proceedings which were pending as of
the date of NHG's Most Recent Financial Statements so long as the
consideration paid or agreed to be paid by NHG in connection with
such settlements does not exceed $100,000 in any individual case
(in the case of cash settlements) or cause the number of NHG
Shares issued and outstanding, after taking into account any
shares issued or canceled in connection with such settlement, to
exceed the number of NHG Shares issued and outstanding on the
date of this Agreement;
(ix) The Company shall cause its officers to report orally at
Capital's request (but in no event more frequently than weekly)
to Capital concerning the status of NHG's business; and
35
(x) Subject to the fiduciary obligations of its directors as advised
by counsel, NHG shall not, except as required by law, call any
meeting of its shareholders other than the meeting contemplated
in Section 11(a).
(xi) Neither NHG nor any NHG Subsidiary shall make or amend any
federal, state, or local Tax election, agree to waive or extend
any statute of limitations, or resolve or agree to resolve any
audit or proceeding relating to Taxes.
(DDD) FULL ACCESS. During the term of this Agreement, each Party will permit
representatives of the other Party to have full access to all
premises, properties, personnel, books, records (including tax
records), contracts, and documents of or pertaining to the permitting
Party or its Subsidiaries, other than those pertaining to such Party's
analysis of the transactions contemplated hereby or to the
negotiations of the terms and conditions hereof, or to the enforcement
of any rights or remedies hereunder, or to the parties dealings with
each other in general. Any information obtained by a Party hereunder
shall be subject to that certain Confidentiality Agreement between the
Parties, dated as of February 11, 2002, a copy of which is attached
hereto as EXHIBIT G.
(EEE) NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice to
the other Party of any material adverse development of which such
Party becomes aware causing a breach of any of its own representations
and warranties hereunder. No disclosure by any Party pursuant to this
Section 10(d), however, shall be deemed to amend or supplement the
respective Disclosure Schedule of either Party or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(FFF) INDEMNITY ESCROW AGREEMENT. Effective on and as of the Effective
Time, Capital and the Shareholders' Attorney-in-Fact and the other
parties called for therein shall execute and deliver the Indemnity
Escrow Agreement, and there shall be delivered to, and directly
deposited with, the Indemnity Escrow Agent, for the account and future
potential benefit of the NHG Shareholders, the cash and Capital
Preferred Stock called for by the Indemnity Escrow Agreement;
provided, however, that such cash and Capital Preferred Stock shall be
held and disbursed by the Indemnity Escrow Agent pursuant to the terms
and conditions of the Indemnity Escrow Agreement.
(GGG) XXXXXX EMPLOYMENT AGREEMENT. At the Effective Time, Capital shall
enter into an employment agreement (satisfactory to Capital) (the
"XXXXXX EMPLOYMENT AGREEMENT") with Xxxxxx Xxxxxx.
(HHH) VAN HIRTUM EMPLOYMENT AGREEMENT. At the Effective Time, Capital shall
enter into an employment agreement (satisfactory to Capital) with
Xxxxx X. Xxx Xxxxxx (the "VAN HIRTUM EMPLOYMENT AGREEMENT", together
with the Xxxxxx Employment Agreement, the "REQUIRED EMPLOYMENT
Agreements").
36
(III) EMPLOYEE MATTERS. The Closing shall not affect any individual's
status as an employee, officer or director of NHG or of any NHG
Subsidiary except as provided in Section 12(b)(xi) hereof; provided,
however, that the foregoing shall not be deemed to diminish the rights
of NHG, any NHG Subsidiary, or Capital as an employer after the
Closing, it being understood, for example, that neither NHG, nor any
NHG Subsidiary, nor Capital shall have any obligation to the NHG
Shareholders regarding the continued employment of any Person after
the Closing. Notwithstanding the foregoing, in any terminations,
layoffs or other actions pertaining to any employee of NHG or any NHG
Subsidiary after the Closing, Capital shall (at its sole cost and
expense), and shall cause NHG and each NHG Subsidiary to, comply with
all employment contracts, employee manuals, and applicable federal,
state and local laws, including, without limitation, those requiring
notice or prohibiting discrimination or the Worker Adjustment and
Retraining Notification Act of 1988. Furthermore, to the extent that
any severance benefits or other payments may be owed to Xx. Xxxxx X.
Xxx Xxxxxx or Xx. Xxxxxx Xxxxxx by reason of the Merger (the "EMPLOYEE
PAYMENTS"), such Employee Payments shall be payable to each of them
out of the Cash Consideration withheld as provided in Section
3(b)(iii) hereof, and shall not reduce NHG's Actual Net Worth, and
NHG, the NHG Subsidiaries, Capital or Capital's Subsidiaries, as
applicable, shall withhold from the Employee Payments paid to Messrs.
Xxxxxx and Van Hirtum any federal or state tax withholding obligations
with respect to such Employee Payments. Finally, NHG shall reacquire
all phantom stock shares on or before the Closing, without any
continuing obligation or liability on the part of NHG, NHG's
Subsidiaries, Capital, Capital's Subsidiaries or the Surviving
Corporation, and any amount payable to the holders of any such shares
shall be taken from the Cash Consideration and shall not reduce NHG's
Actual Closing Net Worth.
(JJJ) REPRESENTATIONS AND WARRANTIES DEEMED MADE AT CLOSING. All
representations and warranties of each Party in this Agreement will
also be deemed to be made as of the Effective Time as if made on that
date; except for representations or warranties expressly stated to be
as of a specified and specific date, which representations and
warranties shall be deemed to be made only as of such date.
ADDITIONAL AGREEMENTS.
(KKK) SHAREHOLDERS' MEETING. NHG shall call and hold a meeting of the NHG
Shareholders (the "NHG SHAREHOLDERS' MEETING") to submit this
Agreement, the Merger and related matters for the consideration and
approval of the NHG Shareholders or, in the alternative, obtain the
required written consent of the NHG Shareholders. In the case of a NHG
Shareholders' Meeting, the NHG Shareholders' Meeting will be called,
held and conducted, and any proxies will be solicited, in compliance
with applicable law.
37
(LLL) EXPENSES. Except as expressly provided otherwise in this Agreement,
each party to this Agreement shall bear their own costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby.
(MMM) ADDITIONAL ACTIONS. Subject to the terms and conditions herein
provided, each of the Parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions
contemplated by this Agreement, including using reasonable efforts to
obtain all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, including, but not limited to,
any submissions of information requested by governmental authorities.
(NNN) SHAREHOLDER CLAIMS. NHG shall not settle or compromise any claim
brought by any present, former or purported holder or owner of any
securities of NHG in connection with the Merger without the prior
written consent of Capital (not to be unreasonably withheld or
delayed).
CONDITIONS TO OBLIGATIONS TO CLOSE.
(OOO) CONDITIONS TO OBLIGATIONS OF THE PARTIES. The respective obligations
of each Party to effect the Merger and consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction of
the following conditions at or prior to the Effective Time:
(i) This Agreement (including without limitation the plan of merger
contained herein) and the Merger shall have been approved and
adopted by the requisite vote or written consent of the NHG
Shareholders as may be required by law and by any applicable
provisions of NHG's charter and bylaws;
(ii) Any materials distributed with respect to the NHG Shareholders'
Meeting, if held, shall not contain any untrue statement of a
material fact and shall not omit any statement required to be
contained therein or necessary to make any statement contained
therein, in the light in which made, not misleading;
(iii) There shall have been obtained each consent (other than the
Requisite Regulatory Approvals) to the consummation of the
transactions contemplated by this Agreement which is required to
be obtained from any Person under any agreement, contract or
license to which Capital, NHG or any NHG Subsidiary is a party or
by or under which it is bound or licensed, or otherwise, the
withholding of which would have a Material Adverse Effect;
(iv) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order,
38
decree, ruling, or charge would (A) legally prevent consummation
of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, (C) materially and adversely
affect either the right of Capital to own the NHG Shares or the
right of FinWest Group to own the Capital Preferred Stock and the
Warrants, or (D) materially and adversely affect the right of
either Party or its Subsidiaries (taken as a whole) to own its
respective assets and to operate its respective businesses (and
no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(v) There shall not be any action taken, or any injunction issued, or
any order, statute, rule or regulation proposed, enacted,
promulgated, issued or deemed applicable to the Merger by any
federal, state or foreign court, government or governmental
authority or agency, which may, directly or indirectly, result in
any of the consequences referred to in (iv) above;
(vi) The Parties shall have made all notices or filings required to be
made, and shall have obtained all authorizations, permits,
certificates, registrations, consents, approvals or orders
required to be obtained, and all waiting periods required to
expire shall have expired, prior to the consummation of the
transactions contemplated by this Agreement under applicable laws
of the United States or applicable laws of any state having
jurisdiction over the transactions contemplated by this Agreement
or the businesses conducted by the Parties or their Subsidiaries
(collectively, the "REQUISITE REGULATORY APPROVALS"), including,
without limitation, the Regulatory Insurance Approvals;
(vii) There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed
applicable to the transactions contemplated by this Agreement, by
any Persons, which makes the consummation of the Merger illegal;
(viii) Capital shall have entered into a mutually satisfactory
Employment Agreement with Xxxxxx Xxxxxx and a mutually
satisfactory Consulting Agreement with Xxxxx X. Xxx Xxxxxx; and
(ix) There shall not have occurred (A) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq
Small Cap Market, (B) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United
States or any limitation by United States authorities on the
extension of credit by lending institutions, (C) declaration of
war by the Congress of the United States against a foreign
nation, or (D) in the case of any of the foregoing existing at
the date hereof, a material acceleration or worsening thereof.
39
(PPP) ADDITIONAL CONDITIONS TO OBLIGATIONS OF CAPITAL AND THE MERGER SUB.
The obligations of Capital and the Merger Sub to effect the Merger and
consummate the transactions to be performed by it in connection with
the Merger are subject to satisfaction of the following conditions at
or prior to the Closing Deadline:
(i) There shall not have been, and there shall not be as of the
Effective Time, a breach by NHG of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach
has a Material Adverse Effect and has not been cured within
thirty (30) days of NHG's receipt of written notice specifying
such breach and Capital's intention to terminate this Agreement;
(ii) NHG shall have delivered to Capital a certificate dated as of the
Closing Date and signed by the Chief Executive Officer and the
Chief Financial Officer of NHG certifying as to the satisfaction
of Section 12(b)(i) above;
(iii) NHG shall have furnished to Capital (i) a copy of the text of
the resolutions by which the Board of Directors and the NHG
Shareholders approved this Agreement (including, without
limitation, the plan of merger contained herein) and the Merger;
(ii) a certificate executed on behalf of NHG by its corporate
secretary certifying to Capital that such copy is a true, correct
and complete copy of such resolutions and that such resolutions
were duly adopted and have not been amended or rescinded; and
(iii) an incumbency certificate executed on behalf of NHG by its
corporate secretary certifying the signature and office of each
officer executing this Agreement or any other agreement,
certificate or other instrument executed pursuant hereto;
(iv) NHG and the other parties called for therein shall have executed
and delivered the Indemnity Escrow Agreement, and the deposit
called for therein shall have been delivered to the Indemnity
Escrow Agent;
(v) Fin West Group shall have executed and delivered the Registration
Rights Agreement;
(vi) NHG shall not have received written objections to the Merger
pursuant to applicable law covering any of the NHG Shares
outstanding immediately prior to the Effective Time;
(vii) Capital shall have received from counsel to NHG an opinion
substantially in form and substance as set forth in EXHIBIT H
attached hereto, addressed to Capital, and dated as of the
Closing Date;
(viii) All employment agreements of NHG (but excluding any existing
employment agreements of any NHG Subsidiary or any "at-will"
agreements) shall have been canceled and terminated without any
40
continuing obligation or liability thereunder on the part of NHG,
NHG Subsidiaries, Capital, Capital's Subsidiaries or the
Surviving Corporation with respect thereto;
(ix) All options and warrants to purchase capital stock of NHG shall
have been canceled and terminated without any continuing
obligation or liability thereunder on the part of NHG, NHG
Subsidiaries, Capital, Capital's Subsidiaries or the Surviving
Corporation with respect thereto;
(x) [Intentionally deleted.]
(xi) Capital shall have received the resignations, effective as of the
Closing, of each director and officer of NHG and the NHG
Subsidiaries whom Capital shall have specified in writing no
later than fifteen (15) days prior to the Closing;
(xii) NHG shall hold at the Closing cash or cash equivalent assets of
no less than TWO MILLION DOLLARS ($2,000,000) (net of cash and
cash equivalents that United Title Insurance Company is legally
required to hold to operate as a California title insurer);
provided, however, that notwithstanding anything to the contrary
expressed or implied herein, NHG may in its discretion obtain
such loans and pledge such real or personal property, and/or
cause United Title Insurance Company to upstream such assets
(without violating any legal requirements), as NHG may deem
necessary or appropriate to meet this condition; and
(xiii) All actions to be taken by NHG in connection with consummation
of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory
in form and substance to Capital.
Capital may waive any condition specified in this Section 12(b) if it
executes a writing so stating at or prior to the Closing.
(QQQ) ADDITIONAL CONDITIONS TO OBLIGATIONS OF NHG. The obligations of NHG to
effect the Merger and consummate the additional transactions to be
performed by it in connection with the Merger are subject to
satisfaction of the following conditions at or prior to the Effective
Time:
(i) There shall not have been, and there shall not be as of the
Effective Time, a breach by Capital of any representation,
warranty, covenant or agreement set forth in this Agreement,
which breach has a Material Adverse Effect and has not been cured
within thirty (30) days of Capital's receipt of written notice
specifying such breach and NHG's intention to terminate this
Agreement;
(ii) Capital shall have delivered to NHG a certificate dated as of the
Closing Date and signed by the Chief Executive Officer and the
41
Chief Financial Officer of Capital certifying as to the
satisfaction of Section 12(c)(i) above;
(iii) Capital shall have furnished to NHG (i) a copy of the text of
the resolutions by which the corporate action on the part of NHG
and the Merger Sub necessary to approve this Agreement and the
Merger were taken, (iii) certificates executed on behalf of
Capital and the Merger Sub by their respective corporate
secretaries or one of their respective assistant corporate
secretaries certifying to NHG, in each case, that such copy is a
true, correct and complete copy of such resolutions and that such
resolutions were duly adopted and have not been amended or
rescinded, and (iii) an incumbency certificate executed on behalf
of Capital and the Merger Sub by their respective corporate
secretaries or one of their respective assistant corporate
secretaries certifying, in each case, the signature and office of
each officer executing this Agreement or any other agreement,
certificate or other instrument executed pursuant hereto;
(iv) Capital and the other parties therein shall have executed and
delivered the Indemnity Escrow Agreement;
(v) Capital shall have executed and delivered the Registration Rights
Agreement;
(vi) NHG shall have received from counsel to Capital an opinion in
form and substance as set forth on EXHIBIT I attached hereto,
addressed to NHG, and dated as of the Closing Date;
(vii) All actions to be taken by Capital in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to NHG; and
(viii) Capital's total shareholders' equity as of the end of the
calendar month immediately preceding the Closing determined on an
unaudited basis in accordance with GAAP shall be at least EIGHT
MILLION THREE HUNDRED THOUSAND DOLLARS ($8,300,000).
NHG may waive any condition specified in this Section 12(c) if it executes
a writing so stating at or prior to the Closing.
TERMINATIONS.
SECTION 13 TERMINATION. As soon as reasonably practicable after the date
hereof, the Parties shall seek to obtain the Required Employment Agreements
(satisfactory to Capital) from Xxxxx X. Xxx Xxxxxx and from Xxxxxx Xxxxxx for
their post-Closing services. If for any reason the Required Employment
Agreements are not obtained by the Parties on or before the SIXTIETH (60TH) day
following the date hereof, either Party may terminate this Agreement on or
before the SIXTY-FIFTH (65TH) day following the date hereof by delivering
42
written notice of such termination to the other Party on or before such day (a
"SECTION 13 TERMINATION"); such termination right shall, however, forever expire
if not properly exercised on or before such day. Notwithstanding anything to the
contrary contained herein, NHG shall have no liability to Capital by reason of
(a) any failure to obtain the Required Employment Agreements, or (b) any breach
by Xx. Xxx Xxxxxx or Xx. Xxxxxx of a Required Employment Agreement.
In the event of the termination or expiration of this Agreement, (i) each
Party's obligations under Sections 6 and 7 of this Agreement shall survive such
termination or expiration, and remain in full force and effect notwithstanding
such termination or expiration, and (ii) no termination or expiration hereof
shall relieve NHG or Capital from liability for any breach of this Agreement, it
being understood that Capital's liability for any such breach which results in a
Liquidated Damages Event is limited by Section 6 hereof.
REMEDIES FOR AGREEMENT BREACHES.
(RRR) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(SSS) TIME LIMITATION. Each Party's right to make any claim or bring any
legal action against the other Party based upon the other Party's
breach of its representations, warranties and agreements herein shall
forever expire if written notice of such claim or legal action (along
with a detailed written notice of the alleged facts underlying such
claim or action) is not delivered to the other Party (or the
Shareholders' Attorney-in-Fact, as applicable) on or before the THREE
HUNDRED SIXTY-FIFTH (365TH) day following the Closing Date.
(TTT) POST-CLOSING INDEMNIFICATION PROVISIONS FOR BENEFIT OF CAPITAL. In the
event (i)(A) that NHG has breached (or in the event any third party
alleges facts that, if true, would mean NHG has breached) any of its
representations, warranties or agreements contained herein, (B) that
any litigation or proceeding is pending at the Closing that names one
or more persons acting as a title insurance company, underwritten
title company, escrow agency or any similar type of business relating
to real estate settlement services as class defendants, whether or not
NHG or any NHG Subsidiary is served, named as a defendant or otherwise
involved in such action (a "CLASS ACTION CLAIM") (including, but not
limited to, any Class Action Claim disclosed in the NHG Disclosure
Schedule), or (C) of the California Controller Claim. and (ii) Capital
makes a written claim for indemnification pursuant to this Section
14(c) before the expiration of the time period set forth in Section
14(b) above, then, subject to Section 14(f), the NHG Shareholders
shall indemnify Capital from and against the entirety of any Adverse
Consequences which Capital may suffer through and after the date of
the claim for indemnification resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or the alleged breach)
by NHG, any such Class Action Claim or the California Controller Claim
(but, with respect to the California Controller Claim, only to the
extent (if any) that the amount payable under the California
Controller Claim exceeds NHG's reserve for the California Controller
43
Claim on NHG's financial statements as of the Closing. Notwithstanding
any other provision of this Agreement, (i) the NHG Shareholders shall
not be liable to Capital after the Closing for the breach of any
representation, warranty or agreement, any Class Action Claim or the
California Controller Claim hereunder until such time as the aggregate
Adverse Consequences of all such breaches and claims exceeds TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000), in which event the NHG
Shareholders (as the case may be) shall be responsible for all such
Adverse Consequences in excess of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000); and (ii) the total liability of the NHG Shareholders to
Capital hereunder for Adverse Consequences shall not exceed the
deposit under the Indemnity Escrow Agreement, which, subject to
adjustment under Section 3(b)(i) of this Agreement, shall consist of
TWO MILLION FORTY THOUSAND DOLLARS ($2,040,000) in cash and the number
of shares of Capital Preferred Stock having a liquidation preference
equal to ONE MILLION NINE HUNDRED SIXTY THOUSAND DOLLARS ($1,960,000).
(UUU) POST-CLOSING INDEMNIFICATION PROVISIONS FOR BENEFIT OF NHG
SHAREHOLDERS. In the event that (i) Capital has breached (or in the
event any third party alleges facts that, if true, would mean Capital
has breached) any of its representations, warranties or agreements
contained herein, and (ii) the NHG Shareholders make a written claim
for indemnification against Capital pursuant to this Section 14(d)
before the expiration of the time period set forth in Section 14(b)
above, then Capital shall indemnify the Shareholders' Attorney-in-Fact
and the NHG Shareholders from and against any Adverse Consequences
which the NHG Shareholders and the Shareholders' Attorney-in-Fact may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach). Capital also agrees
to indemnify the NHG Shareholders and the Shareholders'
Attorney-in-Fact from and against the entirety of any Adverse
Consequences which the NHG Shareholders and the Shareholders'
Attorney-in-Fact may suffer resulting from, arising out of, or
relating to claims based on the acts or omissions of Capital, NHG or
the NHG Subsidiaries subsequent to the Closing, provided that any such
claim is not primarily a result of or based upon the breach of any
representation, warranty or agreement of NHG contained in this
Agreement. Notwithstanding any other provision of this Agreement,
Capital shall not be liable to the NHG Shareholders and the
Shareholders' Attorney-in-Fact after the Closing for the breach of any
representation, warranty or agreement made by Capital in this
Agreement until such time as the Adverse Consequences of all such
breaches exceeds TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000), in
which event Capital shall be responsible for all such Adverse
Consequences in excess of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000).
(VVV) MATTERS INVOLVING THIRD PARTIES. Subject to Section 14(f):
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which
may give rise to a claim for indemnification against any other
Party (the "INDEMNIFYING PARTY") under this Section 14, then the
Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing; provided, however, that no delay on the part
44
of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party so
long as (A) the Indemnifying Party notifies the Indemnified Party
in writing, within fifteen (15) days after the Indemnified Party
has given notice of the Third Party Claim, that the Indemnifying
Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences that the Indemnified Party
may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification
obligations hereunder, whether through the Indemnity Escrow
Agreement or otherwise, (C) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of
the Indemnified Party, likely to establish a precedential custom
or practice materially adverse to the continuing business
interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 14(e)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third
Party Claim, (B) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnified Party
(not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 14(e)(ii) above is
or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim, to
the fullest extent provided in this Section 14, (B) the
Indemnifying Party will reimburse the Indemnified Party promptly
and periodically for the costs of defending against the Third
Party Claim (including reasonable attorneys' fees and expenses)
to the fullest extent provided in this Section 14, and (C) the
45
Indemnifying Party will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section
14.
(WWW) CLASS ACTION CLAIMS. In the event of a Class Action Claim: (i)
Capital shall have the right, with counsel of its choosing, to
defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, a Class Action Claim; (ii)
pursuant to Section 14(c), the NHG Shareholders shall reimburse
Capital promptly and periodically for one-half of the amount of
attorneys' fees and court costs incurred in defending any Class
Action Claim; and (iii) the aggregate Adverse Consequences
payable by the NHG Shareholders to Capital relating to any Class
Action Claim shall be reduced by an amount that is equal to
one-half of the attorneys' fees and court costs which would
otherwise be included in such aggregate Adverse Consequences.
Notwithstanding anything to the contrary expressed or implied
herein, Capital and its counsel shall keep the Shareholders'
Attorney-in-Fact informed of all proceedings in and developments
concerning any Class Action Claim, shall promptly deliver to the
Shareholders' Attorney-in-Fact copies of all documents,
including, but not limited to, pleadings, correspondence and
discovery documents, pertaining to such Class Action Claims or
the defense thereof as the Shareholders' Attorney-in-Fact may
reasonably request, and shall not, without the prior written
approval of the Shareholders' Attorney-in-Fact (which approval
may be given, denied or conditionally withheld in the
Shareholders' Attorney-in-Fact's sole discretion), enter into (or
fail to enter into) any settlement or confession of judgment with
respect to any Class Action Claims, or fail to use reasonable
efforts to defend any Class Action Claims through to a judgment
or fail to take or oppose any appeal therefrom. If the
Shareholders' Attorney-in-Fact's approval is denied or
conditionally withheld, Capital and the Shareholders'
Attorney-in-Fact shall proceed as follows:
A. The attorneys for Capital and for the Shareholders' Attorney-in-Fact shall
mutually designate a retired California judge (the "ARBITER") to decide whether
the action or the inaction at issue is reasonable under the circumstances in
light of the interests of both sides, with the decision of the Arbiter being
final, conclusive and binding upon both sides.
B. If for any reason such attorneys cannot mutually agree upon a single choice
of an Arbiter within fifteen (15) days after the issue is put to them, each
attorney shall select a retired California judge and such two selected retired
judges shall designate a third retired California judge who shall then act as
the sole Arbiter. Such designation of the third California retired judge shall
be final, conclusive and binding on both sides.
C. Each side shall pay the fees and costs of the individual retired judge
selected by it under item B above, and one-half of the fees and expenses of the
Arbiter.
46
MISCELLANEOUS.
(XXX) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the
other Party; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law
(including, without limitation the Securities Act or the Securities
Exchange Act) or any listing or trading agreement concerning its
publicly traded securities (in which case the disclosing Party will
use its reasonable best efforts to advise the other Party prior to
making the disclosure).
(YYY) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties, their
respective successors and permitted assigns, and the NHG Shareholders
and the Shareholders' Attorney-in-Fact. The Parties agree that upon
the Closing the NHG Shareholders and the Shareholders"
Attorney-in-Fact shall be third-party beneficiaries of this Agreement
fully entitled to enforce this Agreement, and to exercise NHG's rights
and remedies hereunder, against Capital after the Closing.
(ZZZ) ENTIRE AGREEMENT. This Agreement (including the documents, exhibits
and schedules referred to herein) constitutes the entire agreement
among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, to the
extent they are related in any way to the subject matter hereof.
(AAAA) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Party, which may be
given or withheld in its respective sole discretion, except that at
and as of the Closing, NHG shall automatically be deemed to have
assigned its rights hereunder to the NHG Shareholders, and the NHG
Shareholders shall be liable to Capital as provided in Section 14(c)
hereof.
(BBBB) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each
of which shall be deemed an original but all of which together will
constitute one and the same instrument. Delivery of an executed
counterpart of this Agreement by facsimile shall be equally as
effective as delivery of the original created counterpart of this
Agreement.
(CCCC) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(DDDD) NOTICES. EXCEPT as expressly provided to the contrary herein, any
notice, consent, report, demand, document or other item to be
delivered to a Party hereunder shall be deemed delivered and received
(a) when given in writing and personally delivered to the Person
designated below for the applicable Party, (b) one (1) day after
47
delivery to Federal Express or an other nationally known "NEXT-DAY"
delivery service with delivery charges prepaid for delivery the
following Business Day to the Person designated below for the
applicable party; (c) upon delivery by the United States Postal
Service, first-class registered or certified mail, postage prepaid,
return receipt requested, and in any such case shall be delivered to
the address or addresses indicated for such Party below, and/or to
such other Person or address as such Party may from time to time by
written notice designate to the other:
IF TO NHG: Nations Holding Group
0000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxx Xxxxxx, Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
WITH COPY TO: Xxxx & Xxxxx
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
IF TO CAPITAL: Capital Title Group, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Head, Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
WITH A COPY TO: Xxxxxx Capital Corporation
0000 Xxxx XxXxxxxx Xxxxxxxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Chairman, President and
Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
and
Squire, Xxxxxxx & Xxxxxxx L.L.P.
Two Renaissance Square
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Tel.: (000) 000-0000
Fax: (000)000-0000
48
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, facsimile, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(EEEE) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without
giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than
the State of California, except where local law is otherwise
applicable.
(FFFF) AMENDMENTS. No amendment or waiver of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by all of the Parties. (GGGG) SEVERABILITY. Any term or
provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
(HHHH) EXPENSES. Except as otherwise provided herein, each of the Parties
will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with the preparation, negotiation and
closing of this Agreement and the transactions contemplated hereby.
(IIII) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement and have had competent
counsel of their own choosing. In the event an ambiguity or question
of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. This Agreement
shall be given a fair and reasonable construction in accordance with
the intention of the Parties and without regard to or aid of
California Civil Code Section 1654 or California Code of Civil
Procedure Section 1864.
(JJJJ) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and
made a part hereof.
(KKKK) ATTORNEYS' FEES. Should either Party institute any action or
proceeding to enforce any provision of this Agreement, or for damages
by reason of an alleged breach of any provision of this Agreement, or
49
for a declaration of rights hereunder, the prevailing Party in any
such action shall be entitled to receive from the other Party all
costs and expenses, including reasonable attorneys' fees, incurred by
the prevailing Party in connection with such action or proceeding.
(LLLL) TIME OF ESSENCE. Time is of the essence of this Agreement.
(MMMM) PERIOD CALCULATIONS. Any period of time specified in this Agreement
which would otherwise end upon a non-Business Day shall be extended
to, and shall end upon, the next following Business Day.
(NNNN) FURTHER ASSURANCES. Each Party shall from time to time execute,
acknowledge and deliver such further instruments and perform such
additional acts as the other Party may reasonably request to
effectuate the intent of this Agreement.
(OOOO) OTHER DEFINITIONS. Terms defined in any other part of this Agreement
shall have the defined meanings wherever capitalized herein. As used
in this Agreement, the terms "HEREIN," "HEREOF" and "HEREUNDER" refer
to this Agreement in its entirety and are not limited to any specific
sections. Wherever appropriate in this Agreement, the singular shall
be deemed to refer to the plural and the plural to the singular, and
pronouns of certain gender shall be deemed to comprehend either or
both of the other genders. The word "including" shall mean "including
without limitation."
(PPPP) NONWAIVER. Unless otherwise expressly provided herein, no waiver by
a Party of any provision hereof shall be deemed to have been made
unless expressed in writing and signed by the waiving Party. No delay
or omission in the exercise of any right or remedy accruing to a Party
upon any breach under this Agreement shall impair such right or remedy
or be construed as a waiver of any such breach theretofore or
thereafter occurring. The waiver by a Party of any breach of any term,
covenant or condition herein stated shall not be deemed to be a waiver
of any other breach, or of a subsequent breach of the same or any
other term, covenant or condition herein contained. Except as
otherwise expressly provided herein to the contrary, (i) all rights,
powers, options, or remedies afforded to either Party hereunder or by
law shall be cumulative and not alternative, and (ii) the exercise of
one right, power, option, or remedy shall not bar other rights,
powers, options or remedies allowed herein or by law.
JURISDICTION; WAIVER OF JURY TRIAL.
(QQQQ) LOS ANGELES COURTS. CAPITAL HEREBY CONSENTS AND SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF ALL FEDERAL AND STATE COURTS IN THE
COUNTY OF LOS ANGELES IN THE STATE OF CALIFORNIA FOR PURPOSES OF ALL
LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY AGREES THAT SUCH COURTS
SHALL HAVE JURISDICTION FOR ALL LEGAL PROCEEDINGS ARISING OUT OF OR
50
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
THE RESPECTIVE PARTY AT ITS ADDRESS FOR NOTICES SET FORTH HEREIN IN
ACCORDANCE WITH THE RULES OF THE COURT. NOTHING HEREIN SHALL ADVERSELY
AFFECT THE RIGHT OF NHG TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
CAPITAL IN ANY OTHER JURISDICTION.
(RRRR) JURY TRIAL WAIVER. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY,
OR (ii) IN ANY WAY CONNECTED HEREWITH, OR THE TRANSACTIONS RELATED
HERETO, IN EACH CASE WHETHER SOUNDING IN CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT EACH PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT OR
GOVERNMENTAL BODY AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR SELLER ENTERING INTO THIS
AGREEMENT.
CAPITAL'S INITIALS: _________________; NHG'S INITIALS: __________________
51
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
CAPITAL TITLE GROUP, INC.,
a Delaware corporation
By:
-------------------------------------
Name: Xxxxxx X. Head
Title: Chief Executive Officer
CTG ONE MERGER CORPORATION,
a California corporation
By:
-------------------------------------
Name: Xxxxxx X. Head
Title: Chief Executive Officer
NATIONS HOLDING GROUP
a California corporation
By:
-------------------------------------
Name: Xxxxx X. Xxx Xxxxxx
Title: President
52
EXHIBITS AND SCHEDULES LIST
Exhibit A Certificate of Designations of Series A Preferred Stock
Exhibit B Form of Deposit Escrow Agreement
Exhibit C Form of Indemnity Escrow Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Amendments to Articles and Bylaws
Exhibit F Form of Warrant
Exhibit G Confidentiality Agreement
Exhibit H Form of Opinion of Counsel for NHG
Exhibit I Form of Opinion of Counsel for Capital
NHG Disclosure Schedule
Capital Disclosure Schedule
1. Definitions...............................................................1
2. The Merger................................................................7
(a) The Merger.......................................................7
(b) Effect of the Merger.............................................8
(c) Consummation of the Merger; Closing..............................8
(d) Articles of Incorporation and Bylaws; Directors
and Officers...................................................9
3. Conversion of Securities; Exchange of Certificates........................9
(a) Conversion of Securities.........................................9
(b) Purchase Price Adjustment.......................................10
(c) Closing of NHG Transfer Books...................................12
(d) Exchange of Certificates........................................12
(e) Taking of Necessary Action; Further Action......................13
(f) Dissenting Shareholders.........................................13
(g) Stock Options; Warrants.........................................14
4. Deposits by Capital; Credits Against Merger Consideration................14
(a) Initial Deposit.................................................14
(b) Second Deposit..................................................14
5. [This Section Intentionally Left Blank.].................................15
6. LIQUIDATED DAMAGES.......................................................15
(a) DEFINITION......................................................15
(b) LIQUIDATED DAMAGES CALCULATION..................................15
(c) NHG'S RIGHTS....................................................15
(d) SECTION'S APPLICATION LIMITATION................................16
(e) PARTIES' INITIALS...............................................16
7. Closing Disposition of Deposits..........................................16
8. Representations and Warranties of NHG....................................17
(a) Organization, Qualification, and Corporate Power................17
(b) Capitalization..................................................17
(c) Authorization of Transaction....................................17
(d) Noncontravention................................................18
(e) Title to Assets.................................................18
(f) Corporate Compliance............................................18
(g) Financial Statements............................................18
(h) Absence of Material Adverse Changes.............................19
(i) Litigation......................................................21
(j) Legal and Regulatory Compliance.................................21
(k) Tax Matters.....................................................21
(l) Real Property...................................................22
(m) Tangible Assets.................................................23
(n) Contracts.......................................................23
(o) Insurance.......................................................24
(p) Employees.......................................................25
(q) Employee Benefits Plans.........................................25
(r) Intellectual Property...........................................25
(s) Brokers' Fees...................................................25
(t) NHG Disclaimer..................................................25
(u) Stockholder Vote Required.......................................25
(v) NHG Satisfaction With Due Diligence.............................25
9. Representations and Warranties of Capital................................26
(a) Organization....................................................26
(b) Authorization of Transaction....................................26
(c) Noncontravention................................................26
(d) Brokers' Fees...................................................26
(e) SEC Filings: Financial Statements..............................27
(f) Capital Preferred Stock.........................................27
(g) Purchase for Investment.........................................27
(h) Capital Disclaimer..............................................27
(i) Capital Satisfaction With Due Diligence.........................27
(j) Litigation......................................................28
(k) Legal and Regulatory Compliance.................................28
(l) Tax Matters.....................................................28
(m) No Financing Condition.........................................28
10. Covenants................................................................28
(a) General.........................................................28
(b) Operation of Business...........................................29
(c) Full Access.....................................................32
(d) Notice of Developments..........................................32
(e) Indemnity Escrow Agreement......................................32
(f) Xxxxxx Employment Agreement.....................................32
(g) Van Hirtum Employment Agreement.................................32
(h) Employee Matters................................................33
(i) Representations and Warranties Deemed Made at Closing...........33
11. Additional Agreements....................................................33
(a) Shareholders' Meeting...........................................33
(b) Expenses........................................................33
(c) Additional Actions..............................................33
(d) Shareholder Claims..............................................34
12. Conditions to Obligations to Close.......................................34
(a) Conditions to Obligations of the Parties........................34
(b) Additional Conditions to Obligations of Capital and
the Merger Sub................................................35
(c) Additional Conditions to Obligations of NHG.....................37
13. Terminations.............................................................38
14. Remedies for Agreement Breaches..........................................38
(a) [This Section Intentionally Left Blank.]........................38
(b) Time Limitation.................................................38
(c) Post-Closing Indemnification Provisions for Benefit
of Capital....................................................38
(d) Post-Closing Indemnification Provisions for Benefit
of NHG Shareholders..........................................39
(e) Matters Involving Third Parties.................................39
(f) Class Action Claims............................................40
15. Miscellaneous............................................................41
(a) Press Releases and Public Announcements.........................41
(b) No Third-Party Beneficiaries....................................41
(c) Entire Agreement................................................41
(d) Succession and Assignment.......................................42
(e) Counterparts....................................................42
(f) Headings........................................................42
(g) Notices.........................................................42
(h) Governing Law...................................................43
(i) Amendments......................................................43
(j) Severability....................................................43
(k) Expenses........................................................44
(l) Construction....................................................44
(m) Incorporation of Exhibits and Schedules.........................44
(n) Attorneys' Fees.................................................44
(o) Time of Essence.................................................44
(p) Period Calculations.............................................44
(q) Further Assurances..............................................44
(r) Other Definitions...............................................44
(s) Nonwaiver.......................................................44
16. Jurisdiction; Waiver of Jury Trial.......................................45
(a) LOS ANGELES COURTS..............................................45
(b) JURY TRIAL WAIVER...............................................45
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND PRIVILEGES
of the
SERIES A CUMULATIVE PREFERRED STOCK
(Par Value $.001 Per Share)
of
CAPITAL TITLE GROUP, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned duly authorized officer of Capital Title Group, Inc., a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Company"), in accordance with the provisions of Section
103 thereof, and pursuant to Section 151 thereof, DOES HEREBY CERTIFY:
That the Certificate of Incorporation, as amended, of the Company
authorizes the creation of up to ten million (10,000,000) shares of the
Company's preferred stock, par value $.001 per share (such preferred stock,
together with all other preferred stock of the Company the creation of which is
in the future authorized by the Certificate of Incorporation, the "Preferred
Stock"); and
That pursuant to the authority conferred upon the Board of Directors (the
"Board") by the Certificate of Incorporation of the Company, the Board on
_____________ 2002, approved the creation, issuance and the voting powers of
shares of Preferred Stock to be issued in one or more series, and on
___________, 2002, adopted the following resolution creating a series of 171,500
shares of Preferred Stock designated as set forth below:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board by provisions of the Certificate of Incorporation (as amended) of the
Company, as amended (the "Certificate of Incorporation"), and the General
Corporation Law of the State of Delaware, the issuance of a series of Preferred
Stock, which shall consist of 171,500 shares of the ten million (10,000,000)
shares of Preferred Stock which the Company now has authority to issue, be, and
the same hereby is, authorized, and this committee of the Board hereby fixes the
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series (in addition to the powers, designations, preferences
and relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, set forth in the
Certificate of Incorporation which may be applicable to the Preferred Stock)
authorized by this resolution as follows:
1. DESIGNATION AND RANK.
(a) DESIGNATION. The designation of this series, which consists of
171,500 shares of preferred stock, is Series A Cumulative Preferred Stock (the
"Series A Preferred Stock") and the stated value shall be One Hundred Dollars
($100) per share (the "Stated Value").
(b) RANK. The Series A Preferred Stock shall rank (i) prior to the
Company's common stock, par value $.001 per share (the "Common Stock"); (ii)
prior to any class or series of capital stock of the Company hereafter created
(collectively, with the Common Stock, "Junior Securities") (unless, with the
consent of the holders of Series A Preferred Stock obtained in accordance with
Section 4 hereof, such class or series of capital stock specifically, by its
terms, ranks senior to or PARI PASSU with the Series A Preferred Stock); (iii)
PARI PASSU with any class or series of capital stock of the Company hereafter
created (with the consent of the holders of Series A Preferred Stock obtained in
accordance with Section 4 hereof) specifically ranking, by its terms, on parity
with the Series A Preferred Stock ("Parity Securities"); and (iv) junior to any
class or series of capital stock of the Company hereafter created (with the
consent of the holders of Series A Preferred Stock obtained in accordance with
Section 4 hereof) specifically ranking, by its terms, senior to the Series A
Preferred Stock ("Senior Securities"), in each case as to dividend rights and
rights upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary.
2. CUMULATIVE DIVIDENDS; PRIORITY.
(a) PAYMENT OF DIVIDENDS. The holders of record of shares of Series A
Preferred Stock shall be entitled to receive cumulative dividends at the rate of
8% of Stated Value per annum per share, which shall accrue and be payable
quarterly in arrears on the first day of March, June, September and December in
each year, commencing on the date of issuance, or, if such day is a non-business
day, on the next business day (each such date, a "Dividend Payment Date"). The
Board shall declare, and the Company shall distribute, to the extent and out of
funds legally available therefor, such accrued dividends, which shall be payable
to holders of record as they appear on the stock books of the Company at the
close of business on such record date, not more than 60 calendar days preceding
the Dividend Payment Date therefor, as is determined by the Board or a duly
authorized committee thereof (each such date, a "Record Date"). Quarterly
dividend periods (each a "Dividend Period") shall commence on and include the
first day of March, June, September and December of each year and shall end on
and include the date preceding the next following Dividend Payment Date.
Dividends on the Series A Preferred Stock shall be payable in cash; provided,
however, the Company may, in its sole discretion, pay dividends for the then
current Dividend Period (but not for delinquent dividends for prior Dividend
Periods unless authorized by the holders of at least a majority of the then
outstanding shares of Series A Preferred Stock) in shares of Common Stock if the
net income before provision for income taxes of the Company as determined in
accordance with generally accepted accounting principles ("GAAP") on a
consolidated basis, for the Dividend Period immediately preceding the Dividend
Payment Date is less than One Million Dollars ($1,000,000). Whenever the
distribution provided for in this Section 2(a) shall be payable in Common Stock,
the value of such distribution shall be determined as of the date of
declaration, as follows:
(i) if the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange or
2
listed on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the value shall be the average of the last
reported sale prices of the Common Stock on such exchange or NASDAQ on each
of the last ten (10) trading days prior to the date of determination;
(ii) if the Common Stock is traded over-the-counter, the value
shall be the average of the closing bid or sale prices (whichever is
applicable) on each of the last ten (10) trading days prior to the date of
determination; or
(iii) if there is no active public market for the Common Stock,
the value shall be the fair market value thereof, as mutually determined by
the Company and the holders of at least a majority of all then outstanding
shares of Series A Preferred Stock.
Holders of the shares of the Series A Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or securities,
other than as set forth herein.
The amount of dividends payable per share for each full Dividend
Period shall be computed by dividing by four the amount determined by applying
the 8% annual dividend rate to the $100 Stated Value of such share. Dividends on
the Series A Preferred Stock shall accrue day by day. The initial dividend
payable on June 1, 2002 and the amount of any dividend payable for any other
period shorter than a full Dividend Period shall be computed on the basis of a
360-day year composed of twelve 30-day months and the actual number of days
elapsed in the Dividend Period.
The failure of the Board to declare, or the Company to distribute, a
dividend as required under this Section 2(a) shall constitute a breach of
contract and shall entitle the holders of at least a majority of the then
outstanding shares of Series A Preferred Stock, on behalf of all of such
holders, to bring an action therefor, in addition to any and all other rights
and remedies available at law or equity to such holders. The Company shall bear
the entire cost of such litigation, including, but not limited to, the fees for
attorneys representing the holders of the Series A Preferred Stock and the
holders' out-of-pocket costs and expenses.
(b) PRIORITY AS TO DIVIDENDS. No dividends shall be declared or paid
or set apart for payment on Preferred Stock of any series ranking, as to
dividends, junior to the Series A Preferred Stock for any period unless full
dividends for the immediately preceding Dividend Period on the Series A
Preferred Stock (including any accumulation in respect of unpaid dividend from
prior Dividend Periods) have been or contemporaneously are declared and paid (or
declared and a sum sufficient for the payment thereof set apart for such
payment). When dividends are not paid in full (or declared and a sum sufficient
for such full payment is not so set apart) upon the Series A Preferred Stock and
any other Preferred Stock ranking on a parity as to dividends with the Series A
Preferred Stock, dividends declared upon shares of Series A Preferred Stock and
such other Preferred Stock ranking on a parity as to dividends shall be declared
pro rata, so that the amount of dividends declared per share on the Series A
Preferred Stock and such other Preferred Stock shall bear in all cases to each
other the same ratio that accrued dividends for the then-current Dividend Period
per share on the shares of Series A Preferred Stock (including any accumulation
in respect of unpaid dividends for prior Dividend Periods) and accrued
dividends, including required or permitted accumulations, if any, on such other
Preferred Stock, bear to each other.
3
Unless full dividends on the Series A Preferred Stock have been
declared and paid or set apart for payment for the immediately preceding
Dividend Period (including any accumulation in respect of unpaid dividends for
prior Dividend Periods) (i) no cash dividend or distribution (other than in
shares of Junior Stock) shall be declared or paid or set aside for payment on
the Junior Stock, (ii) the Company may not, directly or indirectly, repurchase,
redeem or otherwise acquire any shares of its Junior Stock (or pay any moneys
into a sinking fund for the redemption of any shares) except by conversion into
or exchange for Junior Stock, and (iii) the Company may not, directly or
indirectly, repurchase, redeem or otherwise acquire any shares of Series A
Preferred Stock or Parity Stock (or pay any moneys into a sinking fund for the
redemption of any shares of any such stock) otherwise than pursuant to a pro
rata offer to purchase or a concurrent redemption of all, or a pro rata portion,
of the outstanding shares of Series A Preferred Stock and Parity Stock.
The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company if,
under the preceding paragraph, the Company would be prohibited from purchasing
or otherwise acquiring such shares at such time and in such manner.
3. REDEMPTION.
GENERAL. At any time after _________, 2023, either the Company may, in
its sole discretion, or any holder of the Series A Preferred Stock, by written
notice to the Company, may require the Company to, redeem, out of funds legally
available therefore, 100% of all shares of Series A Preferred Stock that have
been issued, less any shares which previously have been redeemed, repurchased or
otherwise acquired and are no longer outstanding, at the redemption price of One
Hundred Dollars ($100) per share. Immediately prior to authorizing or making
such redemption with respect to the Series A Preferred Stock, the Company, by
resolution of its Board of Directors shall, to the extent funds are legally
available therefore, declare a mandatory dividend on the Series A Preferred
Stock payable on the redemption date in the amount equal to any accrued and
unpaid dividends on the Series A Preferred Stock as of such date and, if the
Company does not have sufficient funds legally available to declare and pay all
dividends accrued at the time of such redemption, any remaining accrued and
unpaid dividends shall be added to the redemption price. If the Company shall
fail to discharge its obligation to redeem all of the outstanding shares of
Series A Preferred Stock required to be redeemed pursuant to this Section 3(a)
of the Certificate (the "Mandatory Redemption Obligation"), the Mandatory
Redemption Obligation shall be discharged as soon as the Company is able to do
so. If and so long as the Mandatory Redemption Obligation shall not be fully
discharged, (i) dividends on the Series A Preferred Stock shall continue to
accrue, and (ii) the Company shall not declare or pay any dividend or make any
distribution on its securities not otherwise permitted by this Certificate.
(a) NOTICE OF REDEMPTION. Notice of any redemption, setting forth (i)
the date and place fixed for said redemption, (ii) the redemption price, and
(iii) a statement that dividends on the shares of Series A Preferred Stock to be
redeemed will cease to accrue on such redemption date shall be mailed, postage
prepaid, at least 30 days but not more than 60 days prior to said redemption
date to the Company or each holder of record of the Series A Preferred Stock to
be redeemed at his or her address as the same shall appear on the books of the
Company, as the case may be.
4
If any such notice of redemption shall have been so mailed,
and if on or before the redemption date specified in such notice all funds
necessary for such redemption shall have been set aside by the Company separate
and apart from its other funds in trust for the account of the holders of the
shares of the Series A Preferred Stock so to be redeemed (so as to be and
continue to be available therefor), then, on and after said redemption date,
notwithstanding that any certificate for shares of the Series A Preferred Stock
so called for redemption shall not have been surrendered for cancellation, the
shares of the Series A Preferred Stock so called for redemption shall be deemed
to be no longer outstanding, the dividends thereon shall cease to accrue, and
all rights with respect to such shares of the Series A Preferred Stock so called
for redemption shall forthwith cease and terminate, except only the right of the
holders thereof to receive out of the funds so set aside in trust the amount
payable on redemption thereof, but without interest, upon surrender (and
endorsement or assignment for transfer, if required by the Company) of their
certificates.
(b) STATUS OF SHARES REDEEMED OR CONVERTED. Shares of Series A
Preferred Stock redeemed, purchased or otherwise acquired for value by the
Company shall, after such acquisition, have the status of authorized and
unissued shares of Preferred Stock and may be reissued by the Company at any
time as shares of any series of Preferred Stock other than as shares of Series A
Preferred Stock.
4. VOTING RIGHTS.
(a) VOTING RIGHTS. Other than as set forth in this Certificate of
Designations or as required by law, each holder of Series A Preferred Stock
shall have no voting rights.
(b) PROTECTIVE PROVISIONS. So long as shares of Series A Preferred
Stock are outstanding, the Company shall not, without first obtaining the
approval (by vote or written consent, as provided by the Delaware General
Corporation Law) of the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock voting as a separate class:
(i) alter, amend or repeal (whether by merger, consolidation or
otherwise) any of the rights, preferences or privileges of the Series A
Preferred Stock, or alter, amend or repeal any other capital stock of the
Company if such alteration, amendment or repeal of such other capital stock
affects adversely the Series A Preferred Stock;
(ii) create or issue any new class or series of Senior
Securities;
(iii) create or issue any new class or series of Parity
Securities;
(iv) increase the authorized number of shares of Series A
Preferred Stock;
(v) increase the par value of the Common Stock; or
(vi) take any action to apply any of the Company's assets to the
payment of dividends or distributions, or the redemption, retirement,
purchase or other acquisition, directly or indirectly, of any shares of
equity securities of the Company ranking junior to the Series A Preferred
Stock, except from officers, employees, consultants and/or contractors to
5
the Company upon termination of employment or pursuant to any rights of
first refusal by the Company provided the Board of Directors approves the
repurchase.
5. CONVERSION. Shares of the Series A Preferred Stock shall not be
convertible into any class of stock, or any other security, of the Company.
6. NO SINKING FUND. No sinking fund will be established for the
retirement or redemption of shares of Series A Preferred Stock.
7. LIQUIDATION RIGHTS; PRIORITY.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of the Series A Preferred Stock shall be entitled to receive,
out of the assets of the Company, whether such assets are capital or surplus and
whether or not any dividends as such are declared, One Hundred Dollars ($100)
per share plus an amount equal to all accrued and unpaid dividends for prior
Dividend Periods, and no more, before any distribution shall be made to the
holders of the Common Stock or any other class of stock or series thereof
ranking junior to the Series A Preferred Stock with respect to the distribution
of assets. Unless specifically designated as junior or senior to the Series A
Preferred Stock with respect to the distribution of assets, all other series or
classes of Preferred Stock of the Company shall rank on a parity with the Series
A Preferred Stock with respect to the distribution of assets. After payment of
the full amount of the liquidation preference, the holders of shares of the
Series A Preferred Stock shall not be entitled to any further participation.
(b) For purposes of this Section 7, (i) any acquisition of the Company
by means of merger or other form of corporate reorganization or consolidation in
which outstanding shares of the Company are exchanged for securities or other
consideration issued, or caused to be issued, by the acquiring corporation or
its subsidiary (other than a transaction effected exclusively for the purpose of
changing the domicile of the Company) or (ii) a sale, lease, transfer or
disposition, in one transaction or series of transactions, of all or
substantially all of the assets of the Company, shall be treated as a
liquidation, dissolution or winding up of the Company and shall entitle the
holders of Series A Preferred Stock to receive at the closing amounts as
specified in Section 7(a) above in the same cash, securities or other property,
or any combination thereof (valued as provided in Section 7(c) below) to be
received by the holders of Common Stock pursuant to such transaction.
(c) Whenever the distribution provided for in Section 7(b) above shall
be payable in securities or property other than cash, the value of such
distribution shall be deemed to be the value ascribed to such securities or
other property pursuant to the transaction described in Section 7(b) above.
(d) Nothing contained in this Section 7 shall be deemed to prevent
redemption of shares of the Series A Preferred Stock in the manner provided in
Section 3.
(e) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 30 days prior to the payment date stated
6
therein, to the holders of record of the Series A Preferred Stock at their
respective addresses as the same shall appear on books of the Company.
(f) If the amounts available for distribution with respect to the
Series A Preferred Stock and all other outstanding stock of the Company ranking
on a parity with the Series A Preferred Stock upon liquidation are not
sufficient to satisfy the full liquidation rights of all the outstanding Series
A Preferred Stock and stock ranking on a parity therewith, then the holders of
each series of such stock will share ratably in any such distribution of assets
in proportion to the full respective preferential amount (which in the case of
Preferred Stock may include accumulated dividends) to which they are entitled.
8. LEGENDS. Each certificate representing shares of Series A Preferred
Stock shall bear the following legends:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS UNDER THAT
CERTAIN CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
PRIVILEGES OF SERIES A CUMULATIVE PREFERRED STOCK OF CAPITAL
TITLE GROUP, INC., AS FILED WITH THE SECRETARY OF STATE OF
DELAWARE.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED,
ASSIGNED OR TRANSFERRED EXCEPT (1) PURSUANT A REGISTRATION
STATEMENT THAT HAS BECOME EFFECTIVE AND IS CURRENT WITH
RESPECT TO THESE SECURITIES, OR (2) PURSUANT TO A SPECIFIC
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, BUT
ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER THAT
THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE
PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE
"BLUE SKY" OR SIMILAR SECURITIES LAW."
7
IN WITNESS WHEREOF, the undersigned has executed this Certificate
of Designations and does affirm the foregoing as of this ____ day of
_______, 2002.
CAPITAL TITLE GROUP, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
8
EXHIBIT B
DEPOSIT ESCROW AGREEMENT
THIS DEPOSIT ESCROW AGREEMENT (this "AGREEMENT"), dated as of June 11,
2002, is made by and among CAPITAL TITLE GROUP, INC., a Delaware corporation
("CAPITAL"), NATIONS HOLDING GROUP, a California corporation ("NHG"), and
COMERICA BANK-CALIFORNIA, a California banking corporation (in its capacity as
escrow agent hereunder, the "ESCROW AGENT").
R E C I T A L S:
A. Concurrently with the execution and delivery of this Agreement, NHG and
Capital have entered into an Agreement and Plan of Merger of even date herewith
(the "MERGER AGREEMENT"), pursuant to which Capital has agreed, among other
things, to acquire NHG's issued and outstanding capital shares.
B. The Merger Agreement requires that Capital and NHG concurrently enter
into this Agreement with the Escrow Agent, and that Capital initially deposit
with the Escrow Agent $1,000,000 in cash for distribution to either Capital or
NHG in accordance with the terms and conditions set forth in this Agreement.
C. The Merger Agreement also provides that Capital may extend the
expiration date of the Merger Agreement by delivering an additional deposit to
the Escrow Agent on or before OCTOBER 1, 2002, of $250,000 in cash for
distribution to either Capital or NHG in accordance with the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the following
mutual covenants and promises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the Merger
Agreement.
2. APPOINTMENT OF ESCROW AGENT; ESCROW DEPOSIT. Capital and NHG hereby
constitute and appoint the Escrow Agent as, and the Escrow Agent hereby agrees
to assume and perform the duties of, the escrow agent under and pursuant to this
Agreement. Capital and NHG acknowledge that Comerica Bank is a lender to NHG and
to Capital; notwithstanding that fact, Capital and NHG agree to Comerica
Bank-California serving as escrow agent hereunder or the depository bank for the
Escrow Deposit (as defined below). The Escrow Agent acknowledges receipt from
Capital of (i) an executed copy of the Merger Agreement, and (ii) the sum of ONE
MILLION DOLLARS (U.S. $1,000,000) (the "INITIAL DEPOSIT"), which Initial Deposit
Capital is depositing with the Escrow Agent in accordance with Section 4(a) of
the Merger Agreement. If Capital exercises its right to extend the expiration
date of the Merger Agreement to JANUARY 8, 2003 pursuant to Section 2(c)(i)
thereof, Capital shall deliver to the Escrow Agent on or before OCTOBER 1, 2002
TWO HUNDRED FIFTY THOUSAND DOLLARS (U.S. $250,000) in cash (the "SECOND
DEPOSIT", and, collectively with the Initial Deposit, the "ESCROW DEPOSIT").
3. THE ESCROW. The Escrow Agent shall establish a bank account at Comerica
Bank-California and deposit therein the Escrow Deposit and all dividends
therefrom and all earnings from the investment thereof (collectively, with any
1
interest earned thereon, the "ESCROW ASSETS") which the Escrow Agent shall hold
in escrow number 49508-0025COL, which is a separate escrow that shall be
maintained pursuant to the terms of this Agreement (the "ESCROW"). The Escrow
Agent shall distribute the Escrow Assets in accordance with the terms and
subject to the conditions of this Agreement. Until distributed, the Escrow Agent
shall invest the cash portion of the Escrow Assets in the manner hereinafter set
forth in Section 4 hereof. The Escrow and the Escrow Assets therein shall not be
subject to lien, attachment, charge or encumbrance by any creditor of any party
hereto, and they shall be used solely for the purposes set forth in this
Agreement.
4. INVESTMENT OF ESCROW ASSETS; TAXES.
(a) INVESTMENT OF ESCROW ASSETS. The Escrow Agent shall invest and
reinvest all cash funds held from time to time as part of the Escrow Assets in
accordance with the instructions of Capital as confirmed in writing, in
highly-liquid, short-term investments which are readily convertible into cash,
including, without limitation, any of the following kinds of investments, or any
combination thereof: (i) bonds or other obligations of, or guaranteed by, the
government of the United States of America or any State thereof or the District
of Columbia, or agencies of any of the foregoing, having maturities of not
greater than one (1) week; (ii) commercial paper rated, at the time of the
Escrow Agent's investment therein or contractual commitment providing for such
investment, at least P-1 by Xxxxx'x Investors Service, Inc. and A-l by Standard
& Poor's Corporation and having maturities of not greater than one (1) week; or
(iii) demand or time deposits, certificates of deposit or bankers' acceptances
that have maturities of not greater than one (1) week and are issued by (A) a
depository institution or trust company incorporated under the laws of the
United States of America, any State thereof or the District of Columbia
(including the Escrow Agent), or (B) a United States branch office or agency of
a foreign depository institution or trust company; provided, however, that in
any such case, the depository institution, trust company or office or agency has
combined capital and surplus of not less than ONE HUNDRED MILLION DOLLARS (U.S.
$100,000,000). In the absence of written instructions from Capital referred to
above, the Escrow Agent shall invest and reinvest the cash portion of the Escrow
Assets in a segregated interest-bearing account at Comerica Bank-California. The
Escrow Agent is not obligated to earn any particular yield or rate of return on
the Escrow Assets.
(b) TAXES. All taxes in respect of the dividends and earnings on the
Escrow Assets shall be the obligation of and shall be paid when due by Capital,
which shall indemnify and hold NHG and the Escrow Agent harmless from and
against all such taxes. Capital represents and warrants that: (a) its tax
identification number ("TIN") on the signature page of this Agreement underneath
its signature is correct and is to be used for 1099 tax reporting purposes; and
(b) it is not subject to back-up withholding.
5. DISBURSEMENT OF ESCROW ASSETS; PROCEDURES. The Escrow Agent shall
disburse the Escrow Assets to Capital or NHG (as the case may be) in accordance
with such joint written instructions as NHG and Capital may hereafter deliver to
the Escrow Agent, EXCEPT AS FOLLOWS:
(a) If not later than ten (10) days after the Closing Deadline, NHG
shall deliver to the Escrow Agent and Capital NHG's affidavit stating under
penalty of perjury that the Closing will fail or has failed to occur by reason
2
of a Liquidated Damages Event, and that NHG is entitled to the Liquidated
Damages Amount, then the Escrow Agent shall automatically, after expiration of
five (5) days from the date of its receipt of NHG's affidavit, disburse all
Escrow Assets the Escrow Agent then held unless within such five (5) day period,
Capital delivers to the Escrow Agent and NHG Capital's affidavit stating under
penalty of perjury that the Closing will not fail or has not failed to occur by
reason of a Liquidated Damages Event, and that NHG is not entitled to the
Liquidated Damages Amount.
(b) If Capital so delivers such affidavit within such five (5) day
period, then the Escrow Agent shall not disburse any Escrow Assets until the
earlier of (i) its receipt of joint written instructions from Capital and NHG,
and (ii) its receipt of evidence satisfactory to it of a Final Judgment (as
defined below).
(c) Time is of the essence in delivering all notices and affidavits
specified in this Section 5. Capital and NHG each direct the Escrow Agent (and
the Escrow Agent shall) ignore any notice and affidavit that it is not received
by the Escrow Agent within the time periods specified herein. The Escrow Agent
shall not be liable to NHG or to Capital for disbursing Escrow Assets in strict
accordance with the terms of this Section 5 even if NHG or Capital, as the case
may be, notifies the Escrow Agent that the other party is not otherwise legally
entitled to such Escrow Assets unless the Escrow Agent takes such action after
it is served with an injunction, restraining order, or other legal process
enjoining it from doing so, issued by a court of competent jurisdiction, and has
had a reasonable opportunity to act on the injunction, restraining order, or
other legal process.
6. DISPUTE REGARDING DISBURSEMENT OF ESCROW ASSETS.
Either Capital or NHG may bring an action to resolve a dispute as to
the disposition of the Escrow Assets in any court of competent jurisdiction.
Upon receipt by the Escrow Agent of a court order or judgment by a court of
competent jurisdiction resolving the dispute, together with evidence
satisfactory to the Escrow Agent that such order or judgment has become a final
order from which no appeal has been or can be had (a "FINAL JUDGMENT"), the
Escrow Agent shall promptly disburse the Escrow Assets in accordance with the
Final Judgment. If Capital and NHG agree to a resolution of any such dispute
before a Final Judgment relating thereto, they shall by joint written notice
direct the Escrow Agent to make disbursements from the Escrow Fund as they may
agree. Upon receipt of such written notice, the Escrow Agent shall promptly
deliver the Escrow Assets in accordance with such joint instructions, and the
dispute shall be deemed to have been resolved.
7. DISBURSEMENT PROCEDURES. Unless Escrow Agent receives different
disbursement instructions in writing from Capital or NHG specifically revoking
or amending any prior disbursement instructions given to the Escrow Agent by
such party, all disbursements of the Escrow Assets hereunder shall be made by
wire transfer of immediately available funds to a bank account designated by
Capital or NHG, as the case may be, in any written notice delivered to the
Escrow Agent. The Escrow Agent shall promptly notify Capital and NHG of all
disbursements pursuant to this Agreement, and the amount thereof.
3
8. LIQUIDATION OF THE ESCROW ASSETS. Whenever the Escrow Agent shall be
required to make disbursements of or from the cash portion of the Escrow Assets,
the Escrow Agent shall pay such amounts by liquidating such investments of the
Escrow Assets as the Escrow Agent deems appropriate.
9. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT. The duties and obligations
of the Escrow Agent shall be limited to and determined solely by the provisions
of this Agreement and the certificates delivered in accordance herewith, and the
Escrow Agent is not charged with knowledge of or any duties or responsibilities
in respect of any other agreement or document, including the Merger Agreement.
In furtherance and not in limitation of the foregoing:
(a) the Escrow Agent shall not be liable for any loss of interest
sustained as a result of investments made hereunder in accordance with the terms
hereof, including any liquidation of any investment of the Escrow Assets prior
to its maturity effected in order to make a disbursement required by the terms
of this Agreement;
(b) the Escrow Agent shall be fully protected in relying in good faith
upon any written certificate, notice, direction, request, waiver, consent,
receipt or other document that the Escrow Agent reasonably believes to be
genuine and duly authorized, executed and delivered by or on behalf of a party
hereto;
(c) the Escrow Agent shall not be liable for any error of judgment, or
for any act done or omitted by it, or for any mistake in fact or law, or for
anything that it may do or refrain from doing in connection herewith; PROVIDED,
HOWEVER, that notwithstanding any other provision in this Agreement, the Escrow
Agent shall be liable for its willful misconduct or gross negligence or breach
by Escrow Agent of this Agreement as a result of its willful misconduct or gross
negligence. In no event shall the Escrow Agent be liable for indirect, special,
consequential, or punitive damages;
(d) the Escrow Agent may seek the advice of legal counsel selected
with reasonable care in the event of any dispute or question as to the
construction of any of the provisions of this Agreement or its duties hereunder,
and it shall incur no liability and shall be fully protected in respect of any
action taken, omitted or suffered by it in good faith in accordance with the
opinion of such counsel;
(e) if the Escrow Agent shall in any instance, after seeking the
advice of legal counsel pursuant to the immediately preceding clause, in good
faith be uncertain as to its duties or rights hereunder, then the Escrow Agent
shall notify Capital and NHG thereof in writing and after giving such notice it
shall be entitled to refrain from taking any action hereunder with respect to
the matter as to which there is any such uncertainty, and in such event the
Escrow Agent shall keep safely all funds and investments held in the Escrow
until the Escrow Agent shall be directed otherwise in a writing signed by
Capital and NHG or by a final, nonappealable order of a court of competent
jurisdiction; PROVIDED, HOWEVER, if the Escrow Agent has not received such
written direction or court order within one hundred eighty (180) calendar days
after requesting the same, it then shall have the right to interplead the Escrow
Assets in any court of competent jurisdiction and request that such court
determine its rights and duties hereunder; and
4
(f) the Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder either directly or by or through
agents or attorneys selected with reasonable care; nothing in this Agreement
shall be deemed to impose upon the Escrow Agent any duty to qualify to do
business or to act as fiduciary or otherwise in any jurisdiction other than the
State of California; and the Escrow Agent shall not be responsible for and shall
not be under a duty to examine into or pass upon the validity, binding effect,
execution or sufficiency of this Agreement or of any agreement amendatory or
supplemental hereto.
10. COOPERATION AND ADDITIONAL ESCROW INSTRUCTIONS. Capital and NHG shall
provide to the Escrow Agent all instruments and documents within their
respective powers to provide that are necessary for the Escrow Agent to perform
its duties and responsibilities hereunder.
11. FEES AND EXPENSES. The Escrow Agent shall be paid the following fees
for its services hereunder: (a) a start-up fee of $1,000, payable upon the
Escrow Agent's execution and delivery of this Agreement; (b) an annual fee of
$0, payable on each anniversary date of this Agreement; and (c) a fee of $50 for
each receipt and disbursement of Escrow Assets. The Escrow Agent shall also be
entitled to reimbursement for its out-of-pocket expenses reasonably incurred in
connection with the Escrow, including, without limitation, reasonable attorneys'
fees (all such fees and expenses collectively, the "ESCROW FEES"). All of the
Escrow Fees of the Escrow Agent for its services hereunder as and when billed by
the Escrow Agent shall be paid by Capital promptly upon written notification
from the Escrow Agent. The Escrow Agent shall not withdraw Escrow Assets to pay
any obligation or debt that may be owed to Escrow Agent by any of the parties
hereto except as provided in this Section 11.
12. RESIGNATION AND REMOVAL OF THE ESCROW AGENT.
(a) The Escrow Agent may resign effective thirty (30) calendar days
following the giving of prior written notice thereof to Capital and NHG. In
addition, the Escrow Agent may be removed and replaced on: (i) a date designated
in a written instrument signed by Capital and NHG and delivered to the Escrow
Agent, and (ii) payment to the Escrow Agent of all then-outstanding Escrow Fees.
Notwithstanding the foregoing, no such resignation or removal shall be effective
until a successor escrow agent has acknowledged its appointment as such as
provided in Section 12(c) below. In either event, upon the effective date of
such resignation or removal, the Escrow Agent shall deliver the property
comprising the Escrow (including, without limitation, the Escrow Assets) to such
successor escrow agent, together with such records maintained by the Escrow
Agent in connection with its duties hereunder and other information with respect
to the Escrow as such successor may reasonably request.
(b) If a successor escrow agent shall not have acknowledged its
appointment as such as provided in Section 10(c) below, in the case of a
resignation, prior to the expiration of thirty (30) calendar days following the
date of a notice of resignation or, in the case of a removal, on the date
designated for the Escrow Agent's removal, as the case may be, because Capital
and NHG are unable to agree on a successor escrow agent, or for any other
reason, the Escrow Agent may select a successor escrow agent that is a title or
escrow company licensed to do business in the State of California and having
assets of not less than Fifty Million Dollars ($50,000,000) and any such
resulting appointment shall be binding upon all of the parties to this
Agreement.
5
(c) Upon written acknowledgment by a successor escrow agent appointed
in accordance with the foregoing provisions of this Section 12 of its agreement
to serve as escrow agent hereunder and the receipt of the property then
comprising the Escrow Account, the Escrow Agent shall be fully released and
relieved of all duties, responsibilities and obligations under this Agreement,
subject to the provisions contained in Section 9(c) hereof, and such successor
escrow agent shall for all purposes hereof be the Escrow Agent.
13. TERMINATION. This Escrow Agreement shall automatically terminate at
such date as all Escrow Assets have been disbursed in accordance with the terms
hereof either to Capital or NHG.
14. NOTICES. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given if delivered personally
or by facsimile transmission or mailed, certified mail, return receipt
requested, postage prepaid, to the parties at the following addresses or
facsimile numbers:
IF TO CAPITAL: Capital Title Group, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn.: Xxxxxx X. Head,
Chief Executive Officer
Facsimile No.: (000) 000-0000
WITH A COPY TO: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Squire, Xxxxxxx & Xxxxxxx L.L.P.
Two Renaissance Square
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
IF TO NHG: Nations Holding Group
0000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxx X. Xxx Xxxxxx,
Chief Executive Officer
Facsimile No.: (000) 000-0000
WITH A COPY TO: Xxxxxxx X. Xxxxxxxx, Esq.
Xxxx & Xxxxx
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
IF TO THE ESCROW AGENT, TO: Comerica Bank-California
Special Corporate Financial Services
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxx
6
All such notices, requests and other communications will: (i) if delivered
personally to an addressee as provided in this Section 14, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 14, be deemed given upon receipt to the addressee
thereof, and (iii) if delivered by mail in the manner described above to an
addressee as provided in this Section 14, be deemed given upon receipt thereof
or three (3) business days after being deposited in the mail (whichever is
earlier), in each case regardless of whether such notice, request or other
communication is received by any other person to whom a copy of such notice is
to be delivered pursuant to this Section 14. Any party from time to time may
change its address, facsimile number or other information specifying such change
in writing to the other parties hereto.
15. AMENDMENTS; WAIVERS. This Agreement may be amended or modified, and any
of the terms hereof may be waived, only by a written instrument duly executed by
or on behalf of Capital and NHG and, with respect to any amendment that would
adversely affect the Escrow Agent, the Escrow Agent. Any such amendment or
modification shall be provided to the Escrow Agent promptly after execution
thereof. No waiver by any party of any term or condition contained in this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to a contract
executed and performed in the State of California without giving effect to the
conflicts of laws principles thereof.
17. ATTORNEYS' FEES. If legal action is instituted on this Agreement, or
the subject matter hereof, the prevailing party shall be entitled to recover all
costs of suit, including reasonable attorneys' fees.
18. BUSINESS DAY. For all purposes of this Agreement, the term "business
day" shall mean a day other than Saturday, Sunday or any day on which banks
located in the State of California are authorized or obligated to close.
19. MISCELLANEOUS. This Agreement is binding upon and will inure to the
benefit of the parties hereto and their respective permitted successors and
assigns. The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof. This
Agreement may be executed in any number of counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument. Delivery of an executed counterpart of this Agreement by facsimile
shall be equally as effective as delivery of the original executed counterpart
of this Agreement.
20. CERTIFICATE OF AUTHORITY. Concurrently with its execution and delivery
of this Agreement, Capital and NHG each shall deliver to the Escrow Agent a
completed certificate of authority in the form attached as Exhibit "A".
[Signature Page Follows]
7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
CAPITAL TITLE GROUP, INC., a Delaware
corporation
By:
------------------------------------
Name: Xxxxxx X. Head
Its: Chief Executive Officer
NATIONS HOLDING GROUP, a California
corporation
By:
------------------------------------
Name: Xxxxx X. Xxx Xxxxxx
Its: President
AGREED AND ACCEPTED THIS ____ DAY OF ___________, 2002
"ESCROW AGENT"
COMERICA BANK-CALIFORNIA
By:
-------------------------------------------
Xxxxxxxx X. Xxxxxx
Vice President
8
EXHIBIT A
TO
DEPOSIT ESCROW AGREEMENT
FORM OF CERTIFICATE OF AUTHORITY
The undersigned hereby certifies that any one of the following persons acting
alone has the authority to execute and deliver documents on behalf of [Capital
Title Group, Inc.] [Nations Holding Group] pursuant to the Deposit Escrow
Agreement, dated as of June 11, 2002, between Comerica Bank-California, Capital
Title Group, and Nations Holding Group.
NAME POSITION MANUAL SIGNATURE
--------------------- -------------------------- -------------------------
--------------------- -------------------------- -------------------------
--------------------- -------------------------- -------------------------
[Capital Title Group] [Nations Holding
Group]
By:
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
A-1
EXHIBIT C
INDEMNITY ESCROW AGREEMENT
THIS INDEMNITY ESCROW AGREEMENT (this "AGREEMENT"), dated as of the Closing
Date (as such term is defined in the Merger Agreement defined below) is made by
and among CAPITAL TITLE GROUP, INC., a Delaware corporation ("CAPITAL"), Xxxxx
X. Xxx Xxxxxx in his capacity as attorney-in-fact (the "SHAREHOLDERS'
ATTORNEY-IN-FACT"), for the former shareholders of Nations Holding Group
("NHG"), and COMERICA BANK-CALIFORNIA, a California banking corporation (in its
capacity as escrow agent hereunder, the "ESCROW HOLDER").
R E C I T A L S:
A. Reference is made to the Agreement and Plan of Merger, dated as of June
11, 2002 (the "MERGER AGREEMENT"), pursuant to which Capital has acquired at the
Closing thereunder, for cash and shares of Capital's Preferred Stock, $.001 par
value per share ("PREFERRED STOCK") and warrants, issued and outstanding shares
of the capital stock of NHG.
B. Pursuant to the Merger Agreement, Capital and the Shareholders'
Attorney-in-Fact have also entered into this Agreement with the Escrow Holder,
and the Shareholders' Attorney-in-Fact has deposited the Escrow Deposits (as
defined below) with the Escrow Holder for distribution hereafter on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the following
mutual covenants and promises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the Merger
Agreement.
2. APPOINTMENT OF ESCROW HOLDER; ESCROW DEPOSIT. Capital and the
Shareholders' Attorney-in-Fact hereby constitute and appoint the Escrow Holder
as, and the Escrow Holder hereby agrees to assume and perform the duties of, the
escrow agent under and pursuant to this Agreement. Capital and the Shareholders'
Attorney-in-Fact acknowledge that Comerica Bank is a lender to NHG and to
Capital; notwithstanding that fact, Capital and the Shareholders'
Attorney-in-Fact agree to Comerica Bank-California serving as escrow agent
hereunder and as the depository for any cash deposited with the Escrow Holder
hereunder. The Escrow Holder acknowledges receipt of (a) an executed copy of the
Merger Agreement, (b) the cash sum of TWO MILLION FORTY THOUSAND DOLLARS
($2,040,000); and (c) an original stock certificate for NINETEEN THOUSAND SIX
HUNDRED (19,600) shares of Capital's Preferred Stock issued in the name of
FINWEST GROUP, with a liquidation preference of ONE MILLION NINE HUNDRED SIXTY
THOUSAND DOLLARS ($1,960,000) (the "CAPITAL SHARES") along with four (4)
executed stock powers with signatures guaranteed (collectively, (b) and (c)
constitute the "ESCROW DEPOSIT"). The Escrow Deposit is subject to adjustment
pursuant to Section 3(b)(i) of the Merger Agreement.
3. THE ESCROW. The Escrow Deposit (together with all Replacement
Securities) (as defined hereafter) and all earnings thereon (collectively, all
cash, including the cash sum of $2,040,000 deposited pursuant to Section 2(b)
above, and cash earnings shall be sometimes referred to herein as the "ESCROW
C-1
FUNDS") shall be held by the Escrow Holder in escrow number _____________ (the
"ESCROW"). The Escrow Deposit shall be distributed by the Escrow Holder in
accordance with the terms and subject to the conditions of this Agreement.
Neither the Escrow nor the Escrow Deposit therein shall be subject to lien,
attachment, charge or encumbrance by any creditor of any party hereto and shall
be used solely for the purposes set forth in this Agreement.
4. DIVIDENDS; ACQUISITION OR RECAPITALIZATION; TAXES; VOTING RIGHTS.
(a) DIVIDENDS. All cash dividends, interest or distributions paid or
made with respect to the Escrow Funds shall belong to the NHG Shareholders, and
shall not become a part of this Agreement. If the Escrow Holder receives any
such cash dividends, interest, or distributions, then the Escrow Holder shall
immediately distribute or endorse the same to the Shareholders' Attorney-in-Fact
in accordance with such written instructions as the Shareholders'
Attorney-in-Fact may issue from time to time.
(b) ACQUISITION OR RECAPITALIZATION. If (i) Capital is recapitalized
through the subdivision or combination of its outstanding shares of Preferred
Stock into a larger or smaller number of shares, or (ii) Capital declares a
dividend or distribution on its Preferred Stock or securities convertible into
its Preferred Stock, or (iii) the outstanding shares of Capital's Preferred
Stock are otherwise converted into or exchanged for any other consideration, in
a merger, consolidation, share exchange or otherwise, the consideration paid on
or with respect to or in exchange for the Capital Shares, then Capital shall
deliver such certificates, dividend, distribution, and other consideration to
the Escrow Holder which the Escrow Holder shall hold pursuant to this Agreement
as part of or in replacement for the Capital Shares (hereinafter, any cash or
cash equivalents so received shall be included as part of the Escrow Funds, and
all other securities so received shall be referred to as "REPLACEMENT
SECURITIES").
(c) INVESTMENT OF ESCROW FUNDS. The Escrow Holder shall invest and
reinvest all Escrow Funds in accordance with the instructions of the
Shareholders' Attorney-in-Fact as confirmed in writing in highly-liquid,
short-term investments which are readily convertible into cash, including,
without limitation, any of the following kinds of investments, or any
combination thereof: (i) bonds or other obligations of, or guaranteed by, the
government of the United States of America or any State thereof or the District
of Columbia, or agencies of any of the foregoing, having maturities of not
greater than one (1) month; (ii) commercial paper rated, at the time of the
Escrow Holder's investment therein or contractual commitment providing for such
investment, at least P-1 by Xxxxx'x Investors Service, Inc. and A-1 by Standard
& Poor's Corporation and having maturities of not greater than one (1) month; or
(iii) demand or time deposits, certificates of deposit or bankers' acceptances
that have maturities of not greater than one (1) month and are issued by (A) a
depository institution or trust company incorporated under the laws of the
United States of America, any State thereof or the District of Columbia
(including the Escrow Holder), or (B) a United States branch office or agency of
a foreign depository institution or trust company; provided that in any such
case, the depository institution, trust company or office or agency has combined
capital and surplus of not less than ONE HUNDRED MILLION DOLLARS (U.S.
$100,000,000). In the absence of written instructions from the Shareholders'
Attorney-in-Fact referred to above, the Escrow Holder shall invest and reinvest
all Escrow Funds in a segregated interest-bearing account at Comerica
Bank-California. Any earnings on the Escrow Funds, subject Section 4(a), shall
belong to the Shareholders' Attorney-in-Fact and be paid monthly to the
C-2
Shareholders' Attorney-in-Fact, at an account or accounts designated in writing
by the Shareholders' Attorney-in-Fact. The Escrow Holder is not required to earn
any particular yield or rate of return on those funds. Capital and the
Shareholder's Attorney-in-Fact hold the Escrow Holder harmless from and against
any losses or damages resulting from the Escrow Holder investing such funds in
accordance with the provisions of this section.
(d) TAXES. All taxes in respect of the dividends and earnings on the
Escrow Funds shall be the obligation of, and shall be paid when due by, the
Shareholders' Attorney-in-Fact, which shall indemnify, defend and hold Capital
and the Escrow Holder harmless from and against such taxes. The Shareholders'
Attorney-In-Fact shall deliver to the Escrow Holder information reasonably
satisfactory to the Escrow Holder concerning the ultimate recipients of any
interest or other earnings on the Escrow Deposit, including tax payer
identification numbers, and the Escrow Holder shall prepare and deliver to the
Shareholders' Attorney-In-Fact such Form 1099 and analogous state tax forms (if
any) as the Shareholders' Attorney-In-Fact may reasonably request.
(e) VOTING RIGHTS. The right to vote the Capital Shares and any other
voting securities held in escrow by the Escrow Holder shall vest in the
Shareholders' Attorney-in-Fact. The Escrow Holder shall accept instructions from
the Shareholders' Attorney-in-Fact relating to the voting thereof, and shall
vote the same as the Shareholders' Attorney-in-Fact shall direct. The Escrow
Holder is directed (and the Escrow Holder agrees) not to vote the Capital Shares
in the absence of such instructions.
5. INDEMNITY CLAIMS. From time to time Capital shall have the right to
demand that Escrow Holder pay out of the Escrow Deposit any claim ("CLAIM") made
by Capital under Sections 3(b) or 14(c) of the Merger Agreement, subject,
however, to Section 5(c) below. Each Claim shall specify: (a) whether the Claim
is being made under Section 3(b) and/or 14(c) of the Merger Agreement; (b) in
reasonable detail the basis of the Claim, (c) the dollar amount of the Claim;
and (d) the number of Capital Shares required to pay the Claim. Upon receipt
thereof, the Escrow Holder shall proceed as follows:
(a) The Escrow Holder shall promptly deliver a copy of such Claim to
the Shareholders' Attorney-in-Fact. If the Shareholders' Attorney-in-Fact
disputes the payment of the Claim, it shall so notify the Escrow Holder in
writing (with a copy to Capital) within thirty (30) days after the giving of
such notice ("NOTICE PERIOD"). If the Shareholders' Attorney-in-Fact fails to
deliver such written notice to the Escrow Holder within the Notice Period, then
it shall be presumed conclusively that the Shareholders' Attorney-in-Fact has no
objection to payment of such Claim, and the Escrow Holder shall promptly
thereafter pay to Capital an amount equal to the amount of the Claim.
(b) If, within the Notice Period, the Escrow Holder receives notice
from the Shareholders' Attorney-in-Fact stating that there is a dispute with
respect to a Claim, then the Escrow Holder, the Shareholders' Attorney-in-Fact
and Capital shall proceed as follows:
(i) Capital or the Shareholders' Attorney-in-Fact may bring an
action to resolve the Claim in any court of competent jurisdiction.
Upon receipt by the Escrow Holder of a court order or judgment by a
court of competent jurisdiction resolving a Claim in favor of Capital,
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together with evidence satisfactory to the Escrow Holder that such
order or judgment has become a final order from which no appeal has
been or can be had (a "FINAL JUDGMENT"), the Escrow Holder shall
promptly pay to Capital the amount (if any) provided for in the Final
Judgment.
(ii) If Capital and the Shareholders' Attorney-in-Fact agree to a
resolution of any Claim before a Final Judgment relating to such
Claim, then they shall by joint written notice direct the Escrow
Holder to make delivery of the Escrow Deposit as they may agree. Upon
receipt of such written notice the Escrow Holder shall make prompt
delivery of the Escrow Deposit in accordance with such joint
instructions, and the Claim shall be deemed to have expired.
(c) For purposes of the above, the Escrow Holder shall pay any Claim
or Final Judgment with: (i) an amount of Escrow Funds that is equal to 51% of
any such Claim or Final Judgment, and (ii) the number of Capital Shares or
Replacement Securities having a value equal to 49% of any such Claim or Final
Judgment. The value of the Capital Shares specified in a Claim by Capital shall
be equal to the liquidation preference of the Capital Shares, and the value of
any Replacement Securities specified in a Claim by Capital shall be equal to the
value of the liquidation preference of the Capital Shares that such Replacement
Securities have replaced in the Escrow. The Escrow Holder shall not be liable
for and shall have no duties with respect to the calculation of the value of the
Capital Shares.
6. RELEASES FROM ESCROW.
(a) On the earliest of (i) the sixth (6th) day after the Closing Date
if neither Capital nor the Shareholders' Attorney-in-Fact provides written
notice to the Escrow Holder of the exercise of its audit rights under Section
3(b)(ii) of the Merger Agreement; (ii) the date that the Escrow Holder receives
written notice of the resolution of a "SECTION 3(B) CLAIM" previously made under
Section 5 hereof; or (iii) the date that the Escrow Holder receives a Final
Judgment on such Section 3(b) Claim, then the Escrow Holder shall deliver to the
Shareholders' Attorney-in-Fact the amount of Escrow Funds and Capital Shares (or
Replacement Securities) that was deposited pursuant to Section 3(b) of the
Merger Agreement LESS the amount, if any, from the Escrow Deposit delivered to
Capital to satisfy any Section 3(b) Claim. Capital and NHG shall jointly notify
the Escrow Holder of: (a) the date constituting the Closing Date; and (b) the
amount of Escrow Funds and Capital Shares (or Replacement Securities) that was
deposited pursuant to Section 3(b) of the Merger Agreement.
(b) If, on the first (1st) anniversary of the date hereof, there has
not been made a Claim pursuant to Section 14(c) of the Merger Agreement, or each
Claim that has been made pursuant to Section 14(c) of the Merger Agreement has
been satisfied (the aggregate amount thereof the "SATISFIED CLAIMS"), then the
Escrow Holder shall release to the Shareholders' Attorney-in-Fact whatever
Escrow Funds, Capital Shares or Replacement Securities the Escrow Holder may
then hold.
(c) If, on the first (1st) anniversary of the date hereof, any Escrow
Funds, Capital Shares or Replacement Securities still remain in the Escrow, the
amount thereof, if any, as exceeds the aggregate amounts of all Claims then
C-4
pending (the "PENDING CLAIMS") shall be delivered to the Shareholders'
Attorney-in-Fact.
(d) Immediately after resolution of all Pending Claims, the Escrow
Holder shall:
(i) pay in accordance with the terms hereof the Pending Claims
that have been decided in Capital's favor; and
(ii) deliver any excess Escrow Funds, Capital Shares or
Replacement Securities to the Shareholders' Attorney-in-Fact.
(e) Notwithstanding the foregoing subsections, from time to time the
Escrow Holder shall make such distributions from the Escrow as Capital and the
Shareholders' Attorney-in-Fact may jointly direct in writing.
(f) If the Shareholders' Attorney-in-Fact sells any of the Capital
Shares or Replacement Securities for cash and the Escrow Holder has received
joint instructions from Capital and the Shareholder's Attorney-in-Fact
authorizing the Escrow Holder to release to the Shareholder's Attorney-in-Fact
certificate(s) for the Capital Shares and/or the Replacement Securities equal to
the number of such shares and/or securities that were sold, then the Escrow
Holder is authorized and directed to deliver to the Shareholders'
Attorney-in-Fact a certificate(s) for the number of Capital Shares or
Replacement Securities so sold, on the condition that, concurrently with such
delivery, the Escrow Holder receives either cash or an irrevocable commitment in
a form approved by the Escrow Holder from a broker-dealer who is a member of the
National Association of Securities Dealers, Inc. to forward directly to the
Escrow Holder cash in an amount equal to the proceeds to be received by the
Shareholders' Attorney-in-Fact from such sale. If all of the foregoing
conditions are satisfied, then Capital and the Shareholders' Attorney-in-Fact
shall sign and deliver joint instructions to the Escrow Holder in conformance
with the foregoing at the time of any such sale. The cash proceeds so delivered
to the Escrow Holder shall become Escrow Funds. The Escrow Holder has no
liability for the failure of the broker-dealer to remit the cash proceeds to the
Escrow Holder.
7. DISBURSEMENT PROCEDURES. All disbursements of Escrow Funds hereunder
shall be made by wire transfer of immediately available funds to a bank account
designated by Capital or the Shareholders' Attorney-in-Fact, as the case may be,
in any written notice delivered to the Escrow Holder, unless the Escrow Holder
receives different disbursement instructions in writing from Capital or the
Shareholders' Attorney-in-Fact specifically revoking or amending any prior
disbursement instructions given to the Escrow Holder by such party. Whenever a
Claim is to be paid with Capital Shares or Replacement Securities, the Escrow
Holder shall deliver to Capital the original certificate(s) representing the
Capital Shares or Replacement Securities, together with an original assignment
of stock certificate signed by FinWest Group for each such certificate, and an
instruction, directing Capital to issue and return to the Escrow Holder an
original stock certificate(s) in the name of each of FinWest Group for the
number of share equal to (i) the number of shares represented by the certificate
present, minus (ii) the number of shares equal to Capital's percent of the Claim
(with such shares being retained by Capital). The Escrow Holder is authorized to
send certificates and assignments to Capital by overnight delivery service. The
C-5
Escrow Holder has no liability for the failure of Capital to remit stock
certificates to the Escrow Holder. The Shareholders' Attorney-in-Fact hereby
specifically authorizes and directs the Escrow Holder to deliver to Capital the
stock powers delivered to the Escrow Holder concurrently herewith by the
Shareholders' Attorney-in-Fact with respect to the delivery of any Capital
Shares pursuant to the terms of this Agreement. If the Escrow Holder exhausts
the supply of such stock powers, the Shareholders' Attorney-in-Fact covenants
that it will provide additional stock powers duly signed, with signatures duly
guaranteed, promptly upon request by the Escrow Holder. If the amount of a Claim
to be paid hereunder exceeds the amount of the Escrow Funds and Escrow Deposit
then held by the Escrow Holder, then Escrow Holder shall pay out the entire
balance of the Escrow Funds and Escrow Deposit in partial satisfaction of such
claim.
8. LIQUIDATION OF THE ESCROW FUND. Whenever the Escrow Holder shall be
required to make the payment from Escrow Funds, the Escrow Holder shall pay such
amounts by liquidating such investments of the Escrow Funds as the Escrow Holder
deems appropriate.
9. DUTIES AND OBLIGATIONS OF THE ESCROW HOLDER. The duties and obligations
of the Escrow Holder shall be limited to and determined solely by the provisions
of this Agreement and the certificates delivered in accordance herewith, and the
Escrow Holder is not charged with knowledge of or any duties or responsibilities
in respect of any other agreement or document, including the Merger Agreement.
In furtherance and not in limitation of the foregoing:
(a) the Escrow Holder shall not be liable for any loss of interest
sustained as a result of investments made hereunder in accordance with the terms
hereof, including any liquidation of any investment of the Escrow Funds prior to
its maturity effected in order to make a payment required by the terms of this
Agreement;
(b) the Escrow Holder shall be fully protected in relying in good
faith upon any written certificate, notice, direction, request, waiver, consent,
receipt or other document that the Escrow Holder reasonably believes to be
genuine and duly authorized, executed and delivered;
(c) the Escrow Holder shall not be liable for any error of judgment,
or for any act done or omitted by it, or for any mistake in fact or law, or for
anything that it may do or refrain from doing connection herewith; provided,
however, that notwithstanding any other provision in this Agreement, the Escrow
Holder shall be liable for its willful misconduct or gross negligence or breach
by Escrow Holder of this Agreement as a result of its willful misconduct or
gross negligence. In no event shall the Escrow Holder be liable for indirect,
special, consequential, or punitive damages;
(d) the Escrow Holder may seek the advice of legal counsel selected
with reasonable care in the event of any dispute or question as to the
construction of any of the provisions of this Agreement or its duties hereunder,
and it shall incur no liability and shall be fully protected in respect of any
action taken, omitted or suffered by it in good faith in accordance with the
opinion of such counsel;
(e) if the Escrow Holder shall in any instance, after seeking the
advice of legal counsel pursuant to the immediately preceding clause, in good
faith be uncertain as to its duties or rights hereunder, then the Escrow Holder
shall notify Capital and the Shareholders' Attorney-in-Fact thereof in writing
C-6
and after giving such notice it shall be entitled to refrain from taking any
action hereunder with respect to the matter as to which there is any such
uncertainty, and in such event it shall keep safely all funds and investments
held in the Escrow until it shall be directed otherwise in a writing signed by
Capital and the Shareholders' Attorney-in-Fact or by a final, nonappealable
order of a court of competent jurisdiction; PROVIDED, HOWEVER, if the Escrow
Holder has not received such written direction or court order within one hundred
eighty (180) calendar days after requesting the same, then it shall have the
right to interplead the Escrow Fund and the Escrow Deposit in any court of
competent jurisdiction and request that such court determine its rights and
duties hereunder; and
(f) the Escrow Holder may execute any of its power or responsibilities
hereunder and exercise any rights hereunder either directly or by or through
agents or attorneys selected with reasonable care; nothing in this Agreement
shall be deemed to impose upon the Escrow Holder any duty to qualify to do
business or to act as fiduciary or otherwise in any jurisdiction other than the
State of California; and the Escrow Holder shall not be responsible for and
shall not be under a duty to examine into or pass upon the validity, binding
effect, execution or sufficiency of this Agreement or of any agreement
amendatory or supplemental hereto.
10. COOPERATION AND ADDITIONAL ESCROW INSTRUCTIONS. Capital and the
Shareholders' Attorney-in-Fact shall provide to the Escrow Holder all
instruments and documents within their respective powers to provide that are
necessary for the Escrow Holder to perform its duties and responsibilities
hereunder.
11. FEES AND EXPENSES. The Escrow Holder shall be paid the following fees
for its services hereunder: (a) a start-up fee of $1,000, payable upon the
Escrow Holder's execution and delivery of this Agreement; (b) an annual fee of
$0, payable on each anniversary date of this Agreement; and (c) a fee of $50 for
each receipt and disbursement of Escrow Funds and Escrow Deposit. Capital
covenants and agrees to pay all such fees, and to reimburse Escrow Holder for
all Escrow Holder's reasonable out-of-pocket expenses reasonably incurred in
connection with the Escrow, including, without limitation, reasonable attorneys'
fees (all such fees and expenses collectively, the "ESCROW FEES"). All of the
Escrow Fees of the Escrow Holder for its services hereunder as and when billed
by the Escrow Holder shall be paid by Capital promptly upon written notification
from the Escrow Holder. The Escrow Holder shall not withdraw Escrow Funds to pay
any obligation or debt that may be owed to Escrow Holder by any of the parties
hereto except as provided in this Section 11.
12. RESIGNATION AND REMOVAL OF THE ESCROW HOLDER.
(a) The Escrow Holder may resign effective thirty (30) calendar days
following the giving of prior written notice thereof to Capital and the
Shareholders' Attorney-in-Fact. In addition, the Escrow Holder may be removed
and replaced on (i) a date designated in a written instrument signed by Capital
and the Shareholders' Attorney-in-Fact and delivered to the Escrow Holder, and
(ii) payment to the Escrow Holder of all then-outstanding Escrow Fees.
Notwithstanding the foregoing, no such resignation or removal shall be effective
until a successor escrow agent has acknowledged its appointment as such as
provided in paragraph 12(c) below. In either event, upon the effective date of
such resignation or removal, the Escrow Holder shall deliver the property
comprising the Escrow to such successor escrow agent, together with such records
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maintained by the Escrow Holder in connection with its duties hereunder and
other information with respect to the Escrow as such successor may reasonably
request.
(b) If a successor escrow agent shall not have acknowledged its
appointment as such as provided in paragraph 12(c) below, in the case of a
resignation, prior to the expiration of thirty (30) calendar days following the
date of a notice of resignation or, in the case of a removal, on the date
designated for the Escrow Holder's removal, as the case may be, because Capital
and the Shareholders' Attorney-in-Fact are unable to agree on a successor escrow
agent, or for any other reason, the Escrow Holder may select a successor escrow
agent and any such resulting appointment shall be binding upon all of the
parties to this Agreement.
(c) Upon written acknowledgment by a successor escrow agent appointed
in accordance with the foregoing provisions of this Section 12 of its agreement
to serve as escrow agent hereunder and the receipt of the property then
comprising the Escrow, the Escrow Holder shall be fully released and relieved of
all duties, responsibilities and obligations under this Agreement, subject to
the provisions contained in paragraph (c) of Section 9 of this Agreement, and
such successor escrow agent shall for all purposes hereof be the Escrow Holder.
13. TERMINATION. This Escrow Agreement shall automatically terminate at
such date as all Escrow Funds, Capital Shares and Replacement Securities have
been disbursed in accordance with the terms hereof either to Capital or the
Shareholders' Attorney-in-Fact.
14. NOTICES. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given if delivered personally
or by facsimile transmission or mailed, certified mail, return receipt
requested, postage prepaid, to the parties at the following addresses or
facsimile numbers:
IF TO CAPITAL: Capital Title Group, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn.: Xxxxxx X. Head, Chief Executive Officer
Facsimile No.: (000) 000-0000
WITH A COPY TO: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Squire, Xxxxxxx & Xxxxxxx L.L.P.
Two Renaissance Square
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
IF TO THE SHAREHOLDERS
OR THE SHAREHOLDERS'
ATTORNEY-IN-FACT, TO: Xxxxx X. Xxx Xxxxxx
0000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
WITH A COPY TO: Xxxx & Xxxxx
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
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IF TO THE ESCROW HOLDER, TO: Comerica Bank-California
Special Corporate Financial Services
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx Xxxx
All such notices, requests and other communications will (i) if delivered
personally to an addressee as provided in this Section 14, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 14, be deemed given upon receipt to the addressee
thereof, and (iii) if delivered by mail in the manner described above to an
addressee as provided in this Section 14, be deemed given upon receipt thereof
or three (3) business days after being deposited in the mail (whichever is
earlier), in each case regardless of whether such notice, request or other
communication is received by any other person to whom a copy of such notice is
to be delivered pursuant to this Section 14. Any party from time to time may
change its address, facsimile number or other information specifying such change
in writing to the other parties thereto.
15. AMENDMENTS; WAIVERS. This Agreement may be amended or modified, and any
of the terms hereof may be waived, only by a written instrument duly executed by
or on behalf of Capital and the Shareholders' Attorney-in-Fact and, with respect
to any amendment that would adversely affect the Escrow Holder, the Escrow
Holder. Any such amendment or modification shall be provided to the Escrow
Holder promptly after execution thereof. No waiver by any party of any term or
condition contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to a contract
executed and performed in the State of California without giving effect to the
conflicts of laws principles thereof.
17. BUSINESS DAY. For all purposes of this Agreement, the term "business
day" shall mean a day other than Saturday, Sunday or any day on which banks
located in the State of California are authorized or obligated to close.
18. MISCELLANEOUS. This Agreement is binding upon and will inure to the
benefit of the parties hereto and their respective permitted successors and
assigns. The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof.
C-9
19. ATTORNEYS' FEES. If legal action is instituted on this Agreement, or
the subject matter hereof, the prevailing party shall be entitled to recover all
costs of suit, including reasonable attorneys' fees.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original but all of which together will constitute one and
the same instrument. Delivery of an executed counterpart of this Agreement by
facsimile shall be equally as effective as delivery of the original executed
counterpart of this Agreement.
21. AUTHORITY OF SHAREHOLDERS' ATTORNEY-IN-FACT. Capital and the Escrow
Holder shall be entitled to rely on the irrevocable power and authority of the
Shareholder's Attorney-in-Fact to represent each of the shareholders of NHG in
all matters pertaining to this Agreement, including, without limiting the
foregoing, all communications, instructions, payments or distributions
hereunder, without further confirmation from any shareholder of NHG.
22. CERTIFICATE OF AUTHORITY. Concurrently with its execution and delivery
of this Agreement, Capital and the Shareholders' Attorney-in-Fact each shall
deliver to the Escrow Holder a completed certificate of authority in the form
attached hereto as EXHIBIT "A".
[SIGNATURE PAGE FOLLOWS]
C-10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Closing Date (as defined in the Merger Agreement).
CAPITAL TITLE GROUP, INC., a Delaware
corporation
By:
--------------------------------------
Its:
-------------------------------------
SHAREHOLDERS' ATTORNEY-IN-FACT:
By:
--------------------------------------
Name: Xxxxx X. Xxx Xxxxxx
AGREED AND ACCEPTED THIS ____ DAY OF ________________, 2002
"ESCROW HOLDER"
COMERICA BANK-CALIFORNIA
By:
--------------------------------------------------
Its:
-------------------------------------------------
Xxxxxxxx X. Xxxxxx
Vice President
C-11
EXHIBIT A
TO
INDEMNITY ESCROW AGREEMENT
FORM OF CERTIFICATE OF AUTHORITY
The undersigned hereby certifies that any of the following persons acting alone
has the authority to execute and deliver documents on behalf of [Capital Title
Group, Inc.] [_____________] pursuant to the Indemnity Escrow Agreement, dated
as of _______ __, 2002, between Comerica Bank-California, Capital Title Group,
and __________________________.
NAME POSITION MANUAL SIGNATURE
-------------------------- -------------------------
-------------------------- -------------------------
-------------------------- -------------------------
[Capital Title Group] [______________]
By:
------------------------------------------
Name:
----------------------------------------
Its:
----------------------------------------
A-1
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is entered into as of
_______ __ 2002, between CAPITAL TITLE GROUP, INC., an Arizona corporation
("CAPITAL"), and FINWEST GROUP, a California corporation ("FINWEST").
RECITALS
A. Concurrently with the execution and delivery of this Agreement, Capital
and Nations Holding Group, a California corporation ("NHG"), have entered into
an Agreement and Plan of Merger of even date herewith (the "MERGER AGREEMENT")
pursuant to which Capital has agreed, among other things, to acquire NHG's
outstanding capital stock, of which FinWest is a majority holder, in exchange
for merger consideration consisting of cash, shares of Capital's Series A
Preferred Stock, par value $.001 per share ("CAPITAL PREFERRED STOCK"), and a
warrant to purchase up to 300,000 shares of Capital's common stock, par value
$.001 per share (the "WARRANT") .
B. FinWest will receive shares of Capital Preferred Stock upon consummation
of the transactions contemplated by the Merger Agreement.
C. Pursuant to this Agreement and as contemplated by the Merger Agreement,
Capital and FinWest intend herein and hereby to document and implement the
registration rights provisions that they have agreed upon.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, Capital and FinWest hereby agree as follows:
1. DEFINITIONS. As used in this Agreement:
(a) "MERGER AGREEMENT" has the meaning set forth above in Recital A.
(b) "AGREEMENT" means this Registration Rights Agreement.
(c) "CAPITAL" has the meaning set forth above in the preface.
(d) "CAPITAL COMMON STOCK" has the meaning set forth in Section 1(p)
of this Agreement.
(e) "CLOSING" has the meaning set forth in Section 2 of the Merger
Agreement.
(f) "COMMISSION" means the Securities and Exchange Commission.
(g) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.
(h) "FINWEST" has the meaning set forth above in the preface.
(i) "NHG" has the meaning set forth above in Recital A.
(j) "PARTY" means Capital or FinWest, and "PARTIES" means Capital and
FinWest.
(k) "PERSON" means any individual, partnership, corporation, trust,
limited liability company or other entity.
(l) "PROSPECTUS" means the prospectus that is included in any
Registration Statement in which Shares have been included pursuant to this
Agreement, and all amendments and supplements to such prospectus, including any
that is included in any post-effective amendment to such Registration Statement,
and all material incorporated by reference in such prospectus.
(m) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement with the
Commission in compliance with the Securities Act and the subsequent declaration
or ordering of the effectiveness of such Registration Statement.
(n) "REGISTRATION STATEMENT" means a Form S-3 registration statement
or Form S-1 or other appropriate form of registration statement under the
Securities Act which is required to be (or may be) filed by Capital with the
Commission as contemplated by the provisions of this Agreement, including,
without limitation, the Prospectus, amendments (both pre-effective and
post-effective) and supplements to such Registration Statement, and all exhibits
and material incorporated by reference into such Registration Statement.
(o) "SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
(p) "SHARES" means (i) any shares of Capital's common stock, par value
$.001 per share ("CAPITAL COMMON Stock"), issued upon exercise of the Warrant,
(ii) subject to the exercise of the Warrant, any shares of Capital Common Stock
issued as of the date of exercise of the Warrant as a dividend with respect to
the Capital Preferred Stock, and (iii) any shares of Capital Common Stock or any
other securities issued or issuable, directly or indirectly, in respect of any
shares of Capital Common Stock described in (i) and (ii) above as a result of
any stock splits, stock dividends, reclassifications, recapitalizations, or
similar events.
(q) "VIOLATION" has the meaning set forth below in Section 6(a).
(r) "WARRANT" has the meaning set forth above in Recital A.
2. REGISTRATION REQUIREMENT. (a) At any time after the exercise of the
Warrant following receipt of FinWest's request, Capital shall register all of
the Shares with the Commission on a Form S-3 Registration Statement or Form S-1
or other appropriate form of Registration Statement if the use of a Form S-3
Registration Statement is not available to Capital. Capital shall use its best
efforts to file the Registration Statement and to cause the Registration
Statement to become effective as promptly as practicable after exercise by Fin
West of its registration right, but, in any event, not later than six (6) months
after such exercise. Capital shall keep the Registration Statement effective
until the first to occur of: (i) FinWest's sale and distribution of all of the
Shares covered by the Registration Statement in accordance with the terms and
2
conditions of the Registration Statement; and (ii) FinWest's sale or transfer of
all of the Shares in any other manner, excluding, however, FinWest's transfer of
the Shares to a permitted assignee of registration rights as described below in
Section 7, or (iii) the one (1) year anniversary of the date that the
Registration Statement was declared effective by the Commission.
(b) If Capital grants registration rights to any other holder of
preferred stock of Capital at any time FinWest holds shares of Capital Preferred
Stock, Capital shall grant such registration rights to FinWest with respect to
the Capital Preferred Stock. The rights of FinWest with respect to such
registration shall be PARI PASSU with the rights contained in the documents
evidencing the rights of the other holders of preferred stock of Capital.
3. REGISTRATION PROCEDURES. Whenever required under Section 2(a) above to
effect the registration of the Shares, Capital shall, in addition to the
requirements set forth in Section 2(a) and as expeditiously as reasonably
possible:
(a) Prepare and file with the Commission such amendments and
supplements to the Registration Statement and the Prospectus as may be necessary
to comply with the provisions of the Securities Act with respect to the
disposition of all Shares covered by the Registration Statement; provided,
however, that a reasonable time before filing any Registration Statement or
Prospectus or amendment or supplement thereto, Capital shall furnish to counsel
for FinWest copies of all such documents proposed to be filed, which documents
shall be subject to the review and comment of such counsel, and Capital shall
not file any such document (other than exhibits to the Registration Statement)
unless the document is in form and substance reasonably satisfactory to FinWest
and its counsel;
(b) Furnish to FinWest such number of copies of the Registration
Statement and the Prospectus, including the preliminary Prospectus and final
Prospectus, in conformity with the requirements of the Securities Act, and such
other documents as FinWest may reasonably request in order to facilitate the
disposition of the Shares;
(c) Use its best efforts to register and qualify the Shares covered by
the Registration Statement under such other securities or blue sky laws of such
jurisdictions as shall be reasonably requested by FinWest; provided that Capital
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions;
(d) In the event that FinWest elects to sell the Shares through an
underwritten offering, enter into and perform Capital's obligations under an
underwriting agreement, in usual and customary form, with the underwriters of
the offering;
(e) Notify FinWest of the happening of any event as a result of which
the Prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and at the
request of FinWest prepare a supplement or amendment to the Prospectus so that,
as thereafter delivered to purchasers of the Shares, such Prospectus will not
contain any untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;
3
(f) Cause all of the Shares to be listed on each securities exchange
on which similar securities issued by Capital are then listed or include the
Shares in the Nasdaq Small Cap Market or any similar system of automated
dissemination of quotations of securities then used by Capital for similar
securities;
(g) Provide a transfer agent and registrar for all of the Shares not
later than the effective date of the Registration Statement;
(h) Make available for inspection by FinWest or any underwriter
participating in any disposition pursuant to the Registration Statement and any
attorney, accountant or agent retained by FinWest or such underwriter, all books
and records of Capital reasonably requested by any such Person;
(i) Furnish, at the request of FinWest, on the date that the Shares
are delivered to the underwriters for sale in connection with a registration, if
the Shares are being sold through underwriters, or, if the Shares are not being
sold through underwriters, on the date that the Registration Statement with
respect to the Shares becomes effective, (a) an opinion, dated such date, of
counsel representing Capital for the purposes of the registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to FinWest, and (b) a
letter dated such date, from the independent certified public accountants of
Capital, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to FinWest; and
(j) Take all other actions as FinWest or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of the
Shares.
4. INFORMATION FROM FINWEST. It shall be a condition precedent to the
obligations of Capital to take any action pursuant to Sections 2(a) and 3 above
with respect to the Shares that FinWest shall furnish to Capital such
information regarding itself and the intended method of disposition of the
Shares as shall be reasonably required to effect the registration of the Shares.
5. REGISTRATION EXPENSES. All expenses other than underwriting discounts
and commissions incurred in connection with Capital's performance of this
Agreement with respect to any registration pursuant to Sections 2(a) and 3,
including (without limitation) all registration, filing and qualification fees,
printing and accounting fees and disbursements, fees and disbursements of
counsel for Capital, fees and expenses of compliance with blue sky laws,
underwriting expenses (excluding discounts and commissions), Capital's internal
expenses (including salaries and expenses of officers and employees), liability
insurance, stock exchange and NASD fees, and the reasonable fees and reasonable
disbursements of counsel for FinWest, shall be borne by Capital regardless of
whether the registration becomes effective.
6. INDEMNIFICATION. If a Registration Statement is filed pursuant to this
Agreement:
(a) To the extent permitted by law, Capital shall indemnify and hold
harmless FinWest, its shareholders, officers and directors, any underwriter (as
defined in the Securities Act) for FinWest, its officers and directors and each
Person, if any, who controls FinWest or such underwriter within the meaning of
the Securities Act or the Exchange Act, against all losses, claims, damages,
expenses and liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
4
insofar as such losses, claims, damages, expenses or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "VIOLATION"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, including any preliminary Prospectus or final Prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by Capital of the Securities Act, the Exchange Act, this
Agreement, any state securities law or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any state securities law; and Capital
shall pay, as incurred, to FinWest and each such officer, director, underwriter
and controlling Person, all legal and other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided that Capital shall not be liable in any such case
to the extent that any such loss, claim, damage, liability, expense or action
arises out of or is based on any untrue statement or omission based upon written
information furnished to Capital by FinWest or such underwriter and stated to be
specifically for use in the Registration Statement;
(b) To the extent permitted by law, FinWest shall indemnify and hold
harmless Capital, each of its directors, each of its officers who has signed the
Registration Statement and each Person, if any, who controls Capital within the
meaning of the Securities Act against all losses, claims, damages, expenses and
liabilities (joint or several) to which any of the foregoing Persons may become
subject, under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, expenses or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by FinWest
expressly for use in connection with the Registration Statement; and FinWest
shall pay, as incurred, all legal or other expenses reasonably incurred by any
Person required to be indemnified pursuant to this Section 6(b) in connection
with investigating or defending any such loss, claim, damage, liability, or
action. However, in no event shall any indemnity by FinWest under this Section
6(b) exceed the gross proceeds from the offering received by FinWest.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in the indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit the
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party shall not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld); and
the indemnifying party shall not consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to the indemnified party of a release from
all liability in respect of such claim or litigation. An indemnifying party
which is not entitled to, or elects not to, assume the defense of a claim, shall
not be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by the indemnifying party with respect to such claim, unless
in the reasonable judgment of any indemnified party a conflict of interest may
exist between the indemnified party and any other of the indemnified parties
5
with respect to such claim. The failure to notify an indemnifying party promptly
of the commencement of any such action, if and to the extent prejudicial to its
ability to defend such action, shall relieve the indemnifying party of any
liability to the indemnified party under this Section 6, but the omission so to
notify the indemnifying party will not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section 6. Any
indemnification required by this Section 6 shall be made by periodic payments
during the course of the investigation or defense as and when bills are received
or expenses incurred.
(d) If the indemnification provided for in this Section 6 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the indemnifying party, in lieu of indemnifying the indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Notwithstanding
the foregoing, in no event shall the amount of any contribution payment by
FinWest under this Section 6(d) exceed the gross proceeds from the offering
received by FinWest.
(e) The obligations of Capital and FinWest under this Section 6 shall
survive the completion of any offering of the Shares pursuant to any
Registration Statement.
7. ASSIGNMENT OF REGISTRATION RIGHTS. Subsequent to the consummation of the
transactions contemplated by the Merger Agreement, the registration rights and
other rights that are provided to FinWest under this Agreement may be assigned
by FinWest to any Person into which, or with which, FinWest merges or any Person
who acquires all or substantially all of FinWest's assets (including, without
limitation, the Shares) or at least ninety percent (90%) of FinWest's
outstanding capital stock. Such registration rights and other rights may also be
assigned by FinWest to its shareholders upon its dissolution. FinWest or such
assignee shall within thirty (30) days after the transfer, furnish Capital with
written notice of the name and address of such assignee. In the event of any
such permitted assignment of registration rights, references in this Agreement
to FinWest shall refer, in addition, to such permitted assignee.
8. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 7
above, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties hereto.
Except as provided in Section 7, neither Party may assign this Agreement or any
of its rights and obligations hereunder without the prior written consent of the
other Party.
6
(b) ENTIRE AGREEMENT. This Agreement and the Merger Agreement
constitute the entire agreement between Capital and FinWest pertaining to the
subject matter hereof and supersede any prior understandings, agreements or
representations of the Parties, written or oral, to the extent they are related
in any way to the subject matter hereof.
(c) COUNTERPARTS AND HEADINGS. This Agreement may be executed in two
counterparts, each of which shall be deemed an original but both of which
together will constitute one and the same instrument. Delivery of an executed
counterpart of this Agreement by facsimile shall be equally as effective as
delivery of the original executed counterpart of this Agreement. The section
headings contained in this Agreement are inserted for convenience only and shall
not affect in any way the meaning or interpretation of this Agreement.
(d) NOTICES. Any notice, demand, document or other item to be
delivered to a Party hereunder shall be deemed delivered and received (i) when
given in writing and personally delivered to the Person designated below for the
applicable Party, (ii) one (1) day after delivery to Federal Express or another
nationally known "next-day" delivery service with delivery charges prepaid for
delivery the following business day to the Person designated below for the
applicable party, or (iii) upon delivery by the United States Postal Service,
first-class registered or certified mail, postage prepaid, return receipt
requested, and in any such case shall be delivered to the address or addresses
indicated for such Party below, and/or to such other Person or address as such
Party may from time to time by written notice designate to the other:
IF TO FINWEST: FinWest Group
0000 Xxxxxxxxxxx Xxxxx
Xxxxxxx Xxx, XX 00000
Attention: Xxxx Xxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
WITH COPY TO: Xxxx & Xxxxx
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
IF TO CAPITAL: Capital Title Group, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Head,
Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
WITH A COPY TO: Xxxxxx Capital Corporation
0000 Xxxx XxXxxxxx Xxxxxxxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxx,
Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
7
and
Squire, Xxxxxxx & Xxxxxxx, L.L.P.
Two Renaissance Square
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Tel.: (000) 000-0000
Fax: (000) 000-0000
Either Party may send any notice, demand, claim or other communication hereunder
to the intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, demand, claim or
other communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Either Party may change the
address to which notices, demands, claims and other communications hereunder are
to be delivered by giving the other Party notice in the manner herein set forth.
(e) GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California, except where local
law is otherwise applicable. FinWest and Capital consent to personal
jurisdiction and venue in the County of Los Angeles in the State of California.
(f) AMENDMENTS. No amendment or waiver of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by both
Parties.
(g) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(h) EXPENSES. Except as otherwise provided in Section 5 above or
elsewhere in this Agreement, each Party shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with the preparation,
negotiation and closing of this Agreement and the transactions contemplated
hereby.
(i) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement and have had competent counsel of
their own choosing. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring either Party by virtue of the authorship of any of the provisions of
8
this Agreement. This Agreement shall be given a fair and reasonable construction
in accordance with the intention of the Parties and without regard to or aid of
California Civil Code Section 1654 or California Code of Civil Procedure Section
1864.
(j) ATTORNEYS' FEES. Should either Party institute any action or
proceeding to enforce any provision of this Agreement, or for damages by reason
of an alleged breach of any provision of this Agreement, or for a declaration of
rights hereunder, the prevailing Party in any such action shall be entitled to
receive from the other Party all costs and expenses, including reasonable
attorneys' fees, incurred by the prevailing Party in connection with such action
or proceeding.
(k) FURTHER ASSURANCES. Each Party shall from time to time execute,
acknowledge and deliver such further instruments and perform such additional
acts as the other Party may reasonably request to effectuate the intent of this
Agreement.
(l) OTHER DEFINITIONS. As used in this Agreement, the terms "HEREIN,"
"HEREOF" and "HEREUNDER" refer to this Agreement in its entirety and are not
limited to any specific sections. Wherever appropriate in this Agreement, the
singular shall be deemed to refer to the plural and the plural to the singular,
and pronouns of certain gender shall be deemed to comprehend either or both of
the other genders. The word "including" shall mean "including without
limitation."
(m) NONWAIVER. Unless otherwise expressly provided herein, no waiver
by a Party of any provision hereof shall be deemed to have been made unless
expressed in writing and signed by the waiving Party. No delay or omission in
the exercise of any right or remedy accruing to a Party upon any breach under
this Agreement shall impair such right or remedy or be construed as a waiver of
any such breach theretofore or thereafter occurring. The waiver by a Party of
any breach of any term, covenant or condition herein stated shall not be deemed
to be a waiver of any other breach, or of a subsequent breach of the same or any
other term, covenant or condition herein contained. Except as otherwise
expressly provided herein to the contrary, (i) all rights, powers, options or
remedies afforded to either Party hereunder or by law shall be cumulative and
not alternative, and (ii) the exercise of one right, power, option or remedy
shall not bar other rights, powers, options or remedies allowed herein or by
law.
[SIGNATURE PAGE FOLLOWS]
9
IN WITNESS WHEREOF, Capital and FinWest have executed and delivered this
Agreement as of the day and year first above written.
CAPITAL TITLE GROUP, INC.
By:
------------------------------------
Xxxxxx X. Head
Chief Executive Officer
FINWEST GROUP
By:
------------------------------------
Xxxx Xxxxxx
President
10
EXHIBIT E
AMENDMENTS TO
ARTICLES OF INCORPORATION AND BYLAWS
OF THE MERGER SUB
AMENDMENTS TO ARTICLES OF INCORPORATION
As of the Effective Time, the following amendments will be effected to the
Articles of Incorporation of the Merger Sub:
Article I of the Articles of Incorporation of this Corporation is amended
and restated to read as follows:
"The name of the corporation is NATIONS HOLDING GROUP."
Article III of the Articles of Incorporation of this Corporation is amended
and restated to read as follows:
"The name of this corporation's initial agent for service of process
in the State of California is:
Xxxxxx X. Xxxxx
000 Xxxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000"
Article IV of the Articles of Incorporation of this Corporation is amended
and restated to read as follows:
"This corporation is authorized to issue only one class of shares of
stock; and the total number of shares which this corporation is authorized to
issue is 10,000, par value $1.00 per share."
AMENDMENTS TO BYLAWS
None.
EXHIBIT F
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
CAPITAL TITLE GROUP, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: Number of Shares:300,000
Date of Issuance: ____________ ___, 2002
Capital Title Group, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, FinWest Group, a California corporation, the
registered holder hereof, or its permitted assigns (a "holder"), is entitled,
subject to the terms set forth below, to purchase from the Company upon
surrender of this Warrant, at any time or times on or after the date hereof, but
not after 11:59 P.M. Eastern Time on the Expiration Date (as defined herein), up
to Three Hundred Thousand (300,000) fully paid and nonassessable shares of
Common Stock (as defined herein), up to of the Company at the Warrant Exercise
Price (as defined herein). The number and type of shares purchasable upon the
exercise of this Warrant are subject to adjustment as provided herein.
1. DEFINITIONS.
(a) The following words and terms as used in this Warrant shall have the
following meanings:
(i) "Business Day" means any day other than Saturday, Sunday or a
Holiday (as defined herein).
(ii) "Closing Date" means _______ __, 2002.
(iii) "Common Stock" means (A) the Company's common stock, par value
$0.001 per share, and (B) any capital stock into which such Common Stock
shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.
1
(iv) "Expiration Date" means the date five (5) years from the Closing
Date, or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the State of California or
on which trading does not take place on the principal exchange or automated
quotation system on which the Common Stock is traded (a "Holiday"), the
next date that is not a Holiday; provided, however, that the Warrant shall
expire upon the completion of any transaction in which the Common Stock is
converted into the right to receive cash or securities of another party;
and provided further that the Company shall give the holder not less than
thirty (30) days prior written notice of any impending completion of any
such transaction.
(v) "Issuance Date" means, with respect to each Warrant, the date of
issuance of the applicable Warrant.
(vi) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(vii) "Principal Market" means the primary automated quotation system
or national securities exchange, if any, upon which shares of Common Stock
are listed from time to time.
(viii) "Securities Act" means the Securities Act of 1933, as amended.
(ix) "Warrant" means this Warrant and all warrants issued in exchange,
transfer or replacement thereof.
(x) "Warrant Exercise Price" shall be $______________, which equals
the average of the last reported sale or bid (as the case may be) prices of
the Common Stock on the Principal Market for the twenty-one (21)
consecutive trading days ending on the trading day prior to the Closing
Date.
(xi) "Warrant Shares" means the shares of Common Stock or other
securities issuable upon exercise of this Warrant.
(b) Except as otherwise specified herein, all references herein (i) to the
Company shall be deemed to include the Company's successors and (ii) to any
applicable law defined or referred to herein, shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time. When used in this Warrant, the words "herein," "hereof," and
"hereunder," and words of similar import, shall refer to this Warrant as a whole
and not to any provision of this Warrant, and the words "Section" and "Exhibit"
shall refer to Sections of, and Exhibits to, this Warrant unless otherwise
specified. Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
2
2. EXERCISE OF WARRANT.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any Business Day on or after the opening of
business on the date hereof and prior to 11:59 P.M. Eastern Time on the
Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as EXHIBIT A hereto (the "Exercise Notice"), of
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased; (ii) payment to the Company of an
amount equal to the Warrant Exercise Price for the specified number of Warrant
Shares (the "Aggregate Exercise Price") in cash, certified or bank funds or wire
transfer of immediately available funds; and (iii) the surrender of this Warrant
(or a Lost Warrant Affidavit in substantially the form annexed hereto as EXHIBIT
B with respect to this Warrant in the case of its loss, theft or destruction) to
a common carrier for overnight delivery to the Company. In the event of any
exercise of the rights represented by this Warrant in compliance with this
Section 2(a), the Company shall on the second Business Day following the date of
receipt of the Exercise Notice, the Aggregate Exercise Price and this Warrant
(or a Lost Warrant Affidavit in substantially the form annexed hereto as EXHIBIT
B with respect to this Warrant in the case of its loss, theft or destruction)
(the "Exercise Delivery Documents"), credit such aggregate number of Warrant
Shares to which the holder (or its designee) shall be entitled to the holder's
(or its designee's) balance account with The Depository Trust Company; provided,
however, that if the holder who submitted the Exercise Notice requested physical
delivery of any or all of the Warrant Shares, then the Company shall, on or
before the fifth Business Day following receipt of the Exercise Delivery
Documents issue and surrender to a common carrier for overnight delivery to the
address specified in the Exercise Notice, a certificate, registered in the name
of the holder (or its designee), for the number of Warrant Shares to which the
holder (or its designee) shall be entitled. Upon delivery of the Exercise Notice
and Aggregate Exercise Price referred to above, the holder of this Warrant (or
its designee) shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of this Warrant as required
by clause (iii) above or the certificates evidencing such Warrant Shares. In the
case of a dispute as to the determination of the Warrant Exercise Price of a
security or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the holder (or its designee) the number of Warrant Shares that
is not disputed and shall submit the disputed determinations or arithmetic
calculations to the holder via facsimile within one Business Day of receipt of
the holder's Exercise Notice. If the holder and the Company are unable to agree
upon the determination of the Warrant Exercise Price or arithmetic calculation
of the Warrant Shares within one (1) Business Day of such disputed determination
or arithmetic calculation being submitted to the holder, then the Company shall
immediately submit via facsimile (i) the disputed determination of the Warrant
Exercise Price to an independent, reputable investment banking firm of
nationally recognized standing, mutually acceptable to both the Company and the
holder or (ii) the disputed arithmetic calculation of the Warrant Shares to an
independent, outside accountant, mutually acceptable to both the Company and the
holder. The Company shall cause the investment banking firm or the accountant,
as the case may be, to perform the determinations or calculations and notify the
Company and the holder of the results promptly. Such investment banking firm's
or accountant's determination or calculation, as the case may be, shall be
deemed conclusive absent manifest error.
3
(b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in no event later than three (3) Business Days after delivery of the Exercise
Delivery Documents and at its own expense, issue a new Warrant identical in all
respects to this Warrant exercised except it shall represent rights to purchase
the number of Warrant Shares purchasable immediately prior to such exercise
under this Warrant exercised, less the number of Warrant Shares with respect to
which such Warrant is exercised.
(c) No fractional shares of Common Stock are to be issued upon the exercise
of this Warrant, but rather the number of shares of Common Stock issued upon
exercise of this Warrant shall be rounded up to the nearest whole number.
3. (a) Subject to adjustment pursuant to this Section 3, the number of
shares of Common Stock issuable upon exercise in whole of this Warrant shall be
Three Hundred Thousand (300,000) shares.
(b) In case at any time or from time to time the holders of the Common
Stock (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 have become
entitled to receive, without payment therefor,
(i) other or additional stock or other securities or property (other
than cash) by way of dividend,
(ii) any cash or other property paid or payable out of any source
other than retained earnings (determined in accordance with generally
accepted accounting principles), or
(iii) 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 (x) shares of Common Stock or any other stock or securities into
which such Common Stock shall have been exchanged, or (y) any other stock or
securities convertible into or exchangeable for such Common Stock or such other
stock or securities), then and in each such case a holder, upon the exercise
hereof as provided in Section 2, shall be entitled to receive the amount of
stock and other securities and property (including cash in the cases referred to
in clauses (ii) and (iii) above) which such holder would hold on the date of
such exercise if on the Issuance Date such holder had been the holder of record
of the number of shares of Common Stock purchasable upon exercise of this
Warrant, and had thereafter, during the period from the Issuance 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 in clause (ii) and (iii) above) receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 3(b) and 3(c).
4
(c) Subject to Section 2(a) of this Warrant, in case of any merger or
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)
or reclassification of its securities after the Issuance Date, then and in each
such case the holder of this Warrant, upon the exercise hereof as provided in
Section 2 at any time after the consummation of such merger or reorganization or
reclassification shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise of this Warrant prior to
such consummation, the stock or other securities or property to which such
holder would have been entitled upon such consummation if such holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in Sections 3(b), (c) and (d). In each such 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.
(d) If the Company at any time or from time to time effects a stock split
or subdivision of the outstanding Common Stock, the Warrant Exercise Price then
in effect immediately before that stock split or 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 effects a reverse stock split or
combines the outstanding shares of Common Stock into a smaller number of shares,
the Warrant Exercise Price then in effect immediately before that reverse stock
split or 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 3(d) shall
become effective at the close of business on the date the stock split,
subdivision, reverse stock split or combination becomes effective.
4. COVENANTS. The Company hereby covenants and agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.
(b) All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
(c) During the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized and reserved at
least one hundred percent (100%) of the number of shares of Common Stock needed
to provide for the exercise of the rights then represented by this Warrant and
the par value of said shares will at all times be less than or equal to the
applicable Warrant Exercise Price.
(d) The Company shall secure the listing of the shares of Common Stock
issuable upon exercise of this Warrant upon the Principal Market within the time
required by the rules and regulations of the Principal Market, and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on the Principal Market
5
within the time required by the rules and regulations of the Principal Market,
and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on the Principal Market.
(e) The Company will not, by amendment of its Certificate of Incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Warrant Exercise Price then in effect, and (ii) will take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.
(f) If the Company proposes at any time (i) to declare any dividend or
distribution upon its Common Stock, whether in cash, property, stock, or other
securities and whether or not a regular cash dividend; (ii) to offer for
subscription pro rata to the holders of any class or series of its stock any
additional shares of stock of any class or series or other rights; (iii) to
effect any reclassification or recapitalization of Common Stock; (iv) to merge
or consolidate with or into any other corporation, or sell, lease, license, or
convey all or substantially all of its assets, or to liquidate, dissolve or wind
up; or (v) to offer holders of registration rights the opportunity to
participate in an underwritten public offering of the Company's securities for
cash, then, in connection with each such event, the Company shall give holder
(A) at least twenty (20) days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (iii) and (iv) above; (B) in the case of the matters referred to
in (iii) and (iv) above at least twenty (20) days prior written notice of the
date when the same will take place (and specifying the date on which the holders
of common stock will be entitled to exchange their common stock for securities
or other property deliverable upon the occurrence of such event); and (C) in the
case of the matter referred to in (v) above, the same notice as is given to the
holders of such registration rights.
5. TAXES. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issue or
delivery of Common Stock or other securities or property in a name other than
that of the registered holders of this Warrant to be converted and such holder
shall pay such amount, if any, to cover any applicable transfer or similar tax.
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, no holder of this Warrant, solely by virtue of
such holding, shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether a reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
6
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company.
7. REPRESENTATIONS OF HOLDER. The holder of this Warrant, by the acceptance
hereof, represents that it is acquiring this Warrant and the Warrant Shares for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution of this Warrant or the
Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in Rule
501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "Accredited Investor").
8. OWNERSHIP AND ASSIGNMENT.
(a) Subsequent to the Issuance Date, this Warrant may be assigned by
FinWest Group ("FinWest") to any Person into which, or with which, FinWest
merges or any Person who acquires all or substantially all of FinWest's assets
(including, without limitation, this Warrant) or at least ninety percent (90%)
of FinWest's outstanding capital stock. FinWest or such assignee shall within
thirty (30) days after the transfer, furnish the Company with an executed
Warrant Power in substantially the form annexed hereto as EXHIBIT C and written
notice of the name and address of such assignee. In the event of any such
permitted assignment of the Warrant Shares, references in this Warrant to
FinWest shall refer, in addition, to such permitted assignee.
(b) The Company shall maintain at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the Person in whose name this Warrant has been issued,
as well as the name and address of any assignee. The Company may treat the
Person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, but in all events recognizing any assignments
made in accordance with the terms of this Warrant.
9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Company shall, on receipt of an executed
Lost Warrant Affidavit in substantially the form annexed hereto as EXHIBIT B
(or, in the case of a mutilated Warrant, the Warrant), issue a new Warrant of
like denomination and tenor as this Warrant so lost, stolen, mutilated or
destroyed.
7
10. NOTICE. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Warrant must be in writing and
will be deemed to have been delivered: (a) upon receipt, when delivered
personally; (b) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (c) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company: Capital Title Group, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Head,
Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Squire, Xxxxxxx & Xxxxxxx L.L.P.
Two Renaissance Square
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Tel.: (000) 000-0000
Fax: (000)000-0000
If to the original holder of this Warrant:
FinWest Group
0000 Xxxxxxxxxxx Xxxxx
Xxxxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx, President
Tel.: (909) 000- 0000
Fax: (000) 000-0000
With a copy to: Xxxx & Xxxxx
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
8
If to an assignee, to the address and facsimile number set forth on the notice
required by Section 8(a) above, or at such other address and facsimile as shall
be delivered to the Company by the holder at any time. Each party shall provide
five days' prior written notice to the other party of any change in address or
facsimile number. Written confirmation of receipt (i) given by the recipient of
such notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (iii) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (a), (b) or (c) above, respectively.
11. DATE. The date of this Warrant is __________ __, 2002. This Warrant, in
all events, shall be wholly void and of no effect after 11:59 P.M. Eastern Time
on the Expiration Date, except that notwithstanding any other provisions hereof,
the provisions of Section 7 shall continue in full force and effect after such
date as to any Warrant Shares or other securities issued upon the exercise of
this Warrant.
12. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of the Warrants issued pursuant to the Agreement may be amended and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the holder of Warrants.
13. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of the
several Sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
Delaware without giving effect to any choice or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Delaware, except where local law is otherwise applicable.
14. LEGENDS. This Warrant, any Warrants issued in substitution for or
replacement of this Warrant, and the Warrant Shares (and the securities
issuable, directly or indirectly, upon conversion of the Warrant Shares, if any)
shall be imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER
9
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO
THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.
[Signature Page Follows]
10
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first above written.
CAPITAL TITLE GROUP, INC.,
a Delaware corporation
By:
------------------------------------
Name: Xxxxxx X. Head
Title: Chief Executive Officer
11
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
CAPITALTITLE GROUP, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of Capital
Title Group, Inc., a Delaware corporation (the "Company"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The holder intends that payment of the
Warrant Exercise Price shall be made in cash, certified or bank funds or wire
transfer of immediately available funds, with respect to _________________
Warrant Shares; and/or
2. Payment of Warrant Exercise Price. The holder shall pay the sum of
$___________________ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: ____________ _____, ______
__________________________________
Name of Registered holder
By:_______________________________
Name:
Title:
A-1
EXHIBIT B TO WARRANT
FORM OF AFFIDAVIT OF LOSS
STATE OF )
) ss:
COUNTY OF )
The undersigned (hereinafter "Deponent"), being duly sworn, deposes and
says that:
1. Deponent is the recipient of a Warrant (the "Warrant") from Capital
Title Group, Inc. (the "Company"), dated ___________________________________ for
the purchase of ___________________________________ shares of Common Stock, par
value $0.001 per share, of the Company, at an exercise price of $_______ per
share.
2. The Warrant has been lost, stolen, destroyed or misplaced, under
the following circumstances:
3. The Warrant was not endorsed.
4. Deponent has made a diligent search for the Warrant, and has been
unable to find or recover same, and Deponent was the unconditional owner of the
Warrant at the time of loss, and is entitled to the full and exclusive
possession thereof; that neither the Warrant nor the rights of Deponent therein
have, in whole or in part, been assigned, transferred, hypothecated, pledged or
otherwise disposed of, in any manner whatsoever, and that no person, firm or
corporation other than the Deponent has any right, title, claim, equity or
interest in, to, or respecting the Warrant.
5. Deponent makes this Affidavit for the purpose of requesting and
inducing the Company and its agents to issue a new warrant in substitution for
the Warrant.
6. If the Warrant should ever come into the hands, custody or power of
the Deponent or the Deponent's representatives, agents or assigns, the Deponent
will immediately and without consideration surrender the Warrant to the Company,
its representatives, agents or assigns, its transfer agents or subscription
agents for cancellation.
B-1
7. The Deponent hereby indemnifies and holds harmless the Company from
any claim or demand for payment or reimbursement of any party arising in
connection with the subject matter of this Affidavit.
Signed, sealed and dated: _________________________
_______________________________________
Deponent
Sworn to and subscribed before me this
____ day of _____________, _________
_____________________________________
Notary Public
B-2
EXHIBIT C TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, a warrant to purchase ____________ shares of the capital stock
of Capital Title Group, Inc., a Delaware corporation, represented by warrant
certificate no. _____, standing in the name of the undersigned on the books of
said corporation. The undersigned does hereby irrevocably constitute and appoint
______________, attorney to transfer the warrants of said corporation, with full
power of substitution in the premises.
Dated: _________________, ____
________________________________________
By: ____________________________________
Its: ___________________________________
C-1
EXHIBIT G
CONFIDENTIALITY AGREEMENT
This Agreement is made as of February 11, 2002 by and between Nations
Holding Group, a California corporation ("NHG"), and Capital Title Group, Inc.,
an Arizona corporation ("CAPITAL").
RECITALS
A. NHG and Capital (singly sometimes a "PARTY," and collectively sometimes the
"PARTIES") wish to explore the possibility of a sale of NHG's outstanding shares
of common stock (collectively, the "SHARES") to Capital (the "ACQUISITION"), and
in that connection, each Party wishes to perform certain due diligence relative
to the other Party's respective assets, liabilities, business, operations,
financial condition, books and records, prior to entering into the legally
binding obligation to affect an Acquisition.
B. The parties also wish to keep their Acquisition interest, negotiations and
due diligence confidential and, accordingly, have set forth herein their
confidentiality rights and obligations.
AGREEMENT
1. CERTAIN DEFINITIONS.
(a) As used herein, "REPRESENTATIVES" means a Party's shareholders,
members, partners, directors, officers, employees, counsel, experts,
consultants, accountants and other agents.
(b) As used herein, "CONFIDENTIAL INFORMATION" means all data, reports,
financial statements, forecasts, records, statements (written or oral) and
documents of any kind or in any form (including, without limitation,
computerized or electronic form) to the extent that they contain information
directly or indirectly concerning either Party that (i) is not available to the
general public and (ii) one Party provides to the other Party or its
Representatives. However, "CONFIDENTIAL INFORMATION" shall not include
information that (i) becomes generally available to the public other than as a
result of a disclosure by the receiving Party or its Representatives; (ii) was
or becomes available to the receiving Party on a non-confidential basis prior to
its disclosure by the providing Party or any of its Representatives, provided
that the source of such information is not known by the receiving Party or its
Representatives after due inquiry to be bound by a confidentiality agreement
with the providing Party or to be otherwise prohibited from transmitting the
information to the receiving Party by a contractual, legal or fiduciary
obligation; or (iii) is independently developed by the receiving Party as proven
by its written records, and without violation of the obligations of this
Agreement.
2. PROHIBITED DISCLOSURES.
(a) Except as expressly permitted by the terms hereof, each Party and its
Representatives will not at any time, directly or indirectly, (i) disclose or
discuss in any manner any Confidential Information to or with any person or
entity or the fact that an Acquisition is being considered, or (ii) use any
Confidential Information in any manner that is not directly related to the
Acquisition, (iii) use any Confidential Information to compete with the other
Party, or in a way that is injurious to the other Party (except in connection
with claims brought by one Party against the other based on breaches by the
other Party of its future Acquisition obligations, if any). The obligations
contained in clauses (i)-(iii) above shall survive for a period of five (5)
years from the date of this Agreement. Notwithstanding the foregoing,
Confidential Information may be disclosed to the Party's Representatives who
need to know the Confidential Information for purposes of rendering services to
such Party in connection with the Acquisition, it being understood that they
will be advised by such Party of the confidential nature of such information and
that by receiving such information they are agreeing to be bound by this
Agreement. Each Party shall be liable to the other Party for any use or
disclosure of Confidential Information by any of its Representatives in a manner
that does not comply with the terms and conditions of this Agreement.
(b) Notwithstanding anything to the contrary contained herein, neither
Party nor any of its Representatives shall communicate with, or otherwise
contact, any suppliers, customers, shareholders, employees or Representatives of
the other Party concerning the Acquisition (other than those listed on Exhibit A
attached hereto) unless and until specifically authorized to do so in writing by
the other Party.
(c) In the event that negotiations regarding an Acquisition terminate for
any reason, each Party will, and will cause its Representatives to (i) return
promptly to the other Party the written Confidential Information and all copies
thereof (or portions thereof) in the possession of such Party or its
Representatives, and (ii) keep all Confidential Information in the possession of
such Party or its Representatives confidential and subject to the terms of this
Agreement
3. LEGALLY REQUIRED DISCLOSURE. If a Party is legally required (by
interrogatories, requests for information or documents, subpoena, court order,
civil investigative demand or other legal process) to disclosure any
Confidential Information in a manner that is not otherwise permitted hereunder,
such Party will provide the other Party with prompt notice of any such
requirements so that the other Party may seek an appropriate protective order.
The Parties will cooperate with one another to obtain such protective order. All
references to a Party in this Section shall be deemed to include such Party's
Representatives.
4. INDEMNIFICATION. Each Party hereby indemnifies, holds harmless and agrees
to defend (with counsel reasonably acceptable to the other Party) the other
Party against any and all damages, losses, liabilities, claims, costs and
expenses (including, without limitation, reasonable attorney's fees) that are
incurred by the other Party as a result of the breach of this Agreement by such
Party or its Representatives.
5. EQUITABLE RELIEF. Each Party agrees that monetary damages alone would not
be a sufficient remedy for any breach of this Agreement by the other Party or
any of its Representatives and that the aggrieved Party shall also be entitled
to specific performance and injunctive or other equitable relief. Such equitable
relief shall be in addition to any and all other relief and remedies to which
the aggrieved Party is entitled under applicable law.
2
6. SCOPE OF AGREEMENT. Nothing in this Agreement constitutes an offer to buy
or to sell any interest in NHG or the Shares, or obligates either Party to
consummate an Acquisition for any specified period of time. Except as otherwise
specifically provided for in a future definitive agreement between the Parties
(if any), each Party understands and agrees that the other Party has not made,
is not making, and will not make any representation or warranty as to the
accuracy or completeness of the Confidential Information. Except as provided
elsewhere in this Agreement or another future written agreement signed by the
Parties after the date hereof, the obligations of each Party and its
Representatives that are described in this Agreement shall survive the
termination or consummation of any Acquisition.
7. GOVERNING LAW. This Agreement shall be governed and construed in accordance
with the laws of the State of California without giving effect to its conflicts
of laws, principles or rules.
8. ENTIRE AGREEMENT MODIFICATIONS. This Agreement constitutes the entire
agreement between the Parties hereto pertaining to the subject matter hereof and
supersedes all prior negotiations, agreements and understandings of the Parties
with respect to the subject matter hereof. This Agreement may not be modified,
amended, supplemented or otherwise changed except by a writing executed by all
of the Parties.
9. EXECUTION OF COUNTERPARTS. This Agreement, and any amendment hereto, may be
executed in two or more counterparts, each of which when so executed and
delivered shall be deemed an original, but all of which taken together shall
constitute but one and the same instrument.
NATIONS HOLDING GROUP
By: /s/ Xxxxx Xxx Xxxxxx
------------------------------------
XXXXX XXX XXXXXX
Chief Executive Officer
CAPITAL TITLE GROUP
By: /s/ Xxxxxx X. Head
------------------------------------
XXXXXX X. HEAD
Chief Executive Officer
3
EXHIBIT H
LEGAL OPINIONS OF COUNSEL TO NATIONS HOLDING GROUP
1. Each of NHG and each NHG Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
2. NHG has the corporate power and corporate authority to own its
properties and assets, to carry on its business as presently conducted, and to
enter into the Transaction Documents and perform its obligations thereunder.
3. Each of the NHG Subsidiaries has the corporate power and corporate
authority to own its properties and assets, and to carry on its business as
presently conducted.
4. Each of FinWest Group ("FinWest") and the Shareholders' Attorney-in-Fact
has (as the case may be) the corporate or individual power and corporate or
individual authority to enter into the Transaction Documents to which it or he
is a party and to perform its or his respective obligations thereunder.
5. Each Transaction Document to which NHG, FinWest and the Shareholders'
Attorney-in-Fact is a party has been duly authorized by all necessary corporate
action on the part of NHG, FinWest and the Shareholders' Attorney-in-Fact, as
applicable, and has been duly executed and delivered by NHG, FinWest and the
Shareholders' Attorney-in-Fact, as applicable.
6. Each Transaction Document to which NHG, FinWest and the Shareholders'
Attorney-in-Fact is a party is a legal, valid and binding obligation of NHG,
enforceable against NHG, FinWest and the Shareholders' Attorney-in-Fact, as
applicable, in accordance with its terms, except as the enforceability thereof
may be subject to or limited by (a) bankruptcy, insolvency, reorganization,
arrangement, moratorium, or other similar laws relating to or affecting rights
of creditors and (b) general equitable principles, regardless of whether the
issue of enforceability is considered in a proceeding in equity or at law.
7. The authorized capital stock of NHG consists of __________ shares of
Common Stock, of which __________ shares are issued and outstanding. To our
knowledge, NHG has no other securities, or rights to acquire other securities,
outstanding. All presently outstanding shares of capital stock of NHG have been
duly authorized and validly issued, and are fully paid and nonassessable.
8. The outstanding capital stock of each of the NHG Subsidiaries has been
duly and validly authorized and issued, and all of such capital stock is owned
by NHG, and to our knowledge is owned by NHG free and clear of any liens or
encumbrances of any nature whatsoever, other than those imposed by applicable
securities or insurance laws. To our knowledge, no NHG Subsidiary has
outstanding any option, warrant or other right to acquire any share of its
capital stock or any security convertible into a right to acquire any of its
capital stock.
9. The outstanding shares of NHG Common Stock are owned of record by the
NHG Shareholders as set forth in the NHG Disclosure Schedule, and transfer by
the NHG Shareholders of their shares of NHG Common Stock to Capital is not
subject to any preemptive or similar right contained in NHG's Articles of
Incorporation or Bylaws, or to our knowledge, in any other agreement or
document.
10. The execution and delivery of each Transaction Document to which NHG,
FinWest or the Shareholders' Attorney-in-Fact is a party, and the performance by
each of NHG, FinWest and the Shareholders' Attorney-in-Fact, as applicable, of
its terms will not breach or result in a violation of (a) their respective
charter documents, or (b) any judgment, order or decree of any court or
arbitrator known to us.
11. No consent, approval or authorization of, or designation, declaration
or filing with, any governmental authority is required of NHG, FinWest or the
Shareholders' Attorney-in-Fact in connection with the valid execution, delivery
and performance by NHG, FinWest or the Shareholders' Attorney-in-Fact of the
Transaction Documents to which NHG, FinWest or the Shareholders'
Attorney-in-Fact is a party, other than such consents, approvals,
authorizations, designations, declarations or filings as have been made or
obtained on or before the date hereof or which are not required to be made or
obtained until after the date hereof.
----------
As used in the foregoing opinions:
"Transaction Documents" means, collectively, the Agreement and Plan of
Merger, the Indemnity Escrow Agreement, the Deposit Escrow Agreement, the
Registration Rights Agreement and the Articles of Merger.
All other capitalized terms used herein shall have the meanings given to
such terms in the Agreement and Plan of Merger.
EXHIBIT I
LEGAL OPINIONS OF COUNSEL TO CAPITAL TITLE GROUP
1. Each of Capital and the Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the States of Delaware
and California, respectively.
2. Each of Capital and the Merger Sub has the corporate power and corporate
authority to own its properties and assets, to carry on its business as
presently conducted, and to enter into the Transaction Documents to which it is
a party and perform its respective obligations thereunder.
3. Each Transaction Document to which either Capital or the Merger Sub is a
party has been duly authorized by all necessary corporate action on the part of
Capital or the Merger Sub, as applicable, and has been duly executed and
delivered by Capital or the Merger Sub, as applicable.
4. Each Transaction Document is a legal, valid and binding obligation of
either Capital or the Merger Sub, enforceable against Capital or the Merger Sub,
as applicable, in accordance with its terms, except as the enforceability
thereof may be subject to or limited by (a) bankruptcy, insolvency,
reorganization, arrangement, moratorium, or other similar laws relating to or
affecting rights of creditors and (b) general equitable principles, regardless
of whether the issue of enforceability is considered in a proceeding in equity
or at law.
5. The authorized capital stock of Capital consists of_________ shares of
Common Stock, of which _________ shares are issued and outstanding, and _____
shares of Preferred Stock, of which no shares are issued and outstanding. Except
as set forth in the Capital SEC Reports or as reserved for issuance, to our
knowledge, Capital has no other securities, or rights to acquire other
securities, outstanding. All presently outstanding shares of Common Stock of
Capital have been duly authorized and validly issued, and are fully paid and
nonassessable. The Capital Preferred Stock and the Capital Common Stock to be
issued upon exercise of the Warrant have been duly authorized and, upon issuance
in accordance with the terms of the Transaction Documents, will be validly
issued, fully paid and nonassessable. The certificate(s) representing the
Capital Preferred Stock to be issued pursuant to the Agreement and Plan of
Merger is (are) in proper form and comply with the requirements of Delaware law.
6. The outstanding capital stock of the Merger Sub has been duly and
validly authorized and issued, and all of such capital stock is owned by
Capital, and to our knowledge is owned by Capital free and clear of any liens or
encumbrances of any nature whatsoever other than those imposed by applicable
securities or insurance laws. To our knowledge, the Merger Sub does not have
outstanding any option, warrant or other right to acquire any share of its
capital stock or any security convertible into a right to acquire any of its
capital stock.
7. The execution and delivery of each Transaction Document and the
performance by either Capital or the Merger Sub, as applicable, of its terms
will not breach or result in a violation of (a) the charter documents of either
Capital or the Merger Sub, or (b) any judgment, order or decree of any court or
arbitrator known to us.
8. No consent, approval or authorization of, or designation, declaration or
filing with, any governmental authority is required of Capital or the Merger Sub
in connection with the valid execution, delivery and performance by Capital or
the Merger Sub of the Transaction Documents to which Capital or the Merger Sub
is a party, other than such consents, approvals, authorizations, designations,
declarations or filings as have been made or obtained on or before the date
hereof or which are not required to be made or obtained until after the date
hereof.
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As used in the foregoing opinions:
"TRANSACTION DOCUMENTS" means, collectively, the Agreement and Plan of
Merger, the Indemnity Escrow Agreement, the Deposit Escrow Agreement, the
Registration Rights Agreement, the Warrant to Purchase Common Stock and the
Articles of Merger.
All other capitalized terms used herein shall have the meanings given to
such terms in the Agreement and Plan of Merger.
