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EXHIBIT 1
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AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
This AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT (this "Agreement"),
dated as of December 31, 1997, is between and among HARBERT EQUITY FUND I,
L.L.C., a Georgia limited liability company with offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Purchaser"), and CROWN NORTHCORP,
INC. a Delaware corporation with offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇ (the "Seller"), and with respect to Section 5 hereof, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an
individual with a office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"),
and ▇▇▇▇▇▇ HOLDING COMPANY, LTD., an Ohio limited liability company with an
office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇").
WITNESSETH:
WHEREAS, the Purchaser and the Seller entered into that certain Stock
Purchase Agreement, dated as of March 7, 1997, between and among the Purchaser
and the Seller, as amended on October 2, 1997 (together with the schedules and
exhibits thereto, the "Original Agreement"), pursuant to which, among other
things, the Purchaser (A) has purchased certain shares of the common stock, par
value $0.01 per share, of the Seller ("Seller Common Stock"), and (B) is
obligated to purchase additional shares of the Seller Common Stock upon the
occurrence of certain events relating, among other things, to the proposed
consummation by the Seller of certain acquisitions and the creation of a fund
satisfying certain criteria; and
WHEREAS, the Purchaser desires to exercise its options to purchase
securities issued by the Seller pursuant to Sections 2.5 and 3.5 of the Original
Agreement, as amended hereby; and
WHEREAS, the Seller desires the Purchaser to purchase securities issued
by the Seller pursuant to Sections 2.5 and 3.5 of the Original Agreement, as
amended hereby;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the adequacy, sufficiency, and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed thereto in the
Original Agreement.
SECTION 2. EXERCISE BY THE PURCHASER OF THE OPTION. Subject to the
conditions precedent set forth in Section 3 hereof, the Purchaser hereby
exercises the Second Closing Option and the Third Closing Option (collectively,
the "Option").
SECTION 3. AMENDMENT OF ORIGINAL AGREEMENT Notwithstanding anything to
the contrary in the Original Agreement:
(i) the terms "Second Closing Option Shares" and "Third Closing
Shares," wherever used in the Original Agreement, shall be deemed to refer to
one share of the Series AA Preferred
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Stock, par value $.01 per share, of the Seller (the "Transferred Stock" or the
"Series AA Preferred Stock"), which Series AA Preferred Stock shall be issued
under a Certificate of Designation relating thereto which contains the terms and
conditions set forth in Exhibit A hereto and shall otherwise be in form and
substance reasonable acceptable to the Purchaser;
(ii) the closing of the Option (the "Option Closing") shall take place
at 11:00 a.m. on January 9, 1998 at the offices of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and the terms "Second Closing"
and "Third Closing," wherever used in the Original Agreement, shall be deemed to
refer to the Option Closing;
(iii) at the Option Closing, the Seller shall issue to the Purchaser a
certificate registered in the name of the Purchaser for the Transferred Stock;
(iv) as consideration for the Transferred Stock, the Purchaser shall
deliver to the Seller $3,647,185.44 (the "Purchase Price") by certified check,
or by wire transfer of immediately available funds to an account previously
designated in writing by the Seller;
(v) the respective obligations of the Seller and the Purchaser to
consummate the purchase and sale of the Transferred Stock at the Option Closing
shall be subject to the prior satisfaction (or waiver) of the conditions set
forth in Section 2.3, 3.3, 2.4, 3.4, and 4.2 of the Original Agreement, except
that the conditions precedent set forth in Section 2.3 (a) and Section 3.3(a)
need not be satisfied by the Seller;
(vi) for purposes of the Option Closing, the term "First Closing
Shares," wherever used in Section 4.1 of the Original Agreement, shall be deemed
to refer to the Transferred Stock; and
(vii) the obligation of the Purchaser to consummate the purchase and
sale of the Transferred Stock at the Option Closing shall also be subject to the
prior satisfaction of the following conditions precedent:
(A) Seller's independent auditors shall have agreed to concur
with management's accounting for the transactions set forth in this
Amendment No. 2 as creating a "subscription receivable" and "preferred
stock not mandatorily redeemable" on the asset and equity accounts,
respectively, of the Consolidated Balance Sheet of the Seller dated as
of December 31, 1997, in the amount of the Purchase Price;
(B) the opinion of Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
("PGFM") referred to in Sections 2.3(c) and 3.3(c) of the Original
Agreement shall include, in addition to the matters set forth in
Exhibit B to the Original Agreement, the favorable opinion of such
counsel, in form and substance reasonably acceptable to the Purchaser,
that, upon completion of the Option Closing, (i) the Transferred Stock
has been duly authorized and validly issued and is fully paid and
non-assessable, and (ii) in reliance without independent investigation
upon a certificate of the Secretary of the Seller identifying all
pertinent agreements, instruments, and other documents, and based upon
PGFM's review of such agreements, instruments, and other documents, (x)
the
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Transferred Stock was not issued in conflict with the rights of any
other stockholder of the Seller or in violation of any agreement by
which the Seller is bound, and (y) the Purchaser has good title to the
Transferred Stock, free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements, and voting
trusts other than as set forth in the Operative Documents; and
(C) resolutions substantially in the form attached hereto as
Exhibit B shall have been approved and adopted by the Board of
Directors of the Seller.
The occurrence of the Option Closing shall irrevocably extinguish the
Seller's rights and obligations to issue additional securities to the Purchaser
pursuant to Sections 2.1, 2.5, 3.1, and 3.5 of the Original Agreement, and the
Purchaser's rights and obligations to purchase additional securities of the
Seller pursuant to Sections 2.1, 2.5, 3.1, and 3.5 of the Original Agreement.
SECTION 4. AMENDMENT OF THE REGISTRATION RIGHTS AGREEMENT. The
definition of the term "Shares" set forth in Section 1 of that certain
Registration Rights Agreement, dated as of March 7, 1997, between the Purchaser
and the Seller, is hereby amended to include (in addition to the Seller Common
Stock already included in that definition) any and all Seller Common Stock
received by the Purchaser in connection with the conversion of the Transferred
Stock, and the parties agree to execute such additional documents effecting such
amendment as the Purchaser may reasonably request.
SECTION 5. AMENDMENT OF THE VOTING AGREEMENT. Each of Roark, Tucker,
and the Purchaser agree that that certain Voting Agreement, dated as of March 7,
1997, among Roark, Tucker, and the Purchaser, is hereby amended to add a
requirement that the ▇▇▇▇▇▇ Parties (as defined therein) vote all shares of
Voting Securities (as defined therein) beneficially owned by them, and cause the
▇▇▇▇▇ Affiliates (as defined therein) to vote all shares of Voting Securities
beneficially owned by them, for the election as a director of the Company of
such individuals as the Purchaser may be entitled to designate in accordance
with the terms of the Transferred Stock described in Section H of Exhibit A
hereto, in the same manner as such parties are presently obligated to vote for
nominees of the Purchaser pursuant to Sections 1(a), (b), (c) and (d) of such
Voting Agreement, and Roark, Tucker, and the Purchaser agree to execute such
additional documents effecting such amendment as the Purchaser may reasonably
request.
SECTION 6. SECTION 16(b). The Seller agrees not to approve or enter
into any agreement providing for any transaction (other than the transactions to
be consummated at the Option Closing) that would make it reasonably likely that,
in the opinion of the Purchaser based on the advice of its or the Seller's
counsel, the acquisition of the Transferred Stock at the Option Closing would be
matchable with any sale by the Purchaser of securities of the Seller in any such
transaction so that the Purchaser would have any liability under Section 16(b)
of the Securities Exchange Act of 1934.
SECTION 7. ESTOPPEL. Each of the parties hereto irrevocably agrees, and
hereby represents and warrants to the other party hereto, that the Original
Agreement, as amended hereby, remains its legal, valid, and binding obligation,
enforceable against them in accordance with its respective terms (subject to
Section 3 of Amendment No. 1 to Stock Purchase
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Agreement, dated as of October 2, 1997, between and among Purchaser and Seller
and subject to Section 11 hereof).
SECTION 8. FURTHER ACTIONS. At any time and from time to time, each
party agrees, at its or his expense, to take such actions and to execute and
deliver such documents as may be reasonably necessary to effectuate the purposes
of this Agreement.
SECTION 9. MODIFICATION. This Agreement may only be modified by a
written instrument executed by each party.
SECTION 10. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested (in which case it shall be deemed to be
given five days after mailing) or by Federal Express, Express Mail, or similar
overnight delivery or courier service (in which case it will be deemed to be
given upon actual receipt by the recipient) or delivered (in person or by
telecopy, telex, or similar telecommunications equipment) against receipt to the
party to whom it is to be given at the address of such party set forth below (or
to such other address as the party shall have furnished in writing in accordance
with the provisions of this Section 10):
If to the Purchaser:
Harbert Equity Fund I, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to the Seller, ▇▇▇▇▇, or ▇▇▇▇▇▇:
C/o Crown NorthCorp, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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With a copy to:
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
SECTION 11. EFFECT. Notwithstanding anything to the contrary herein or
in the Original Agreement, if the transactions contemplated hereby are not
consummated on or before January 15, 1998 or are earlier terminated, then this
Amendment No. 2 shall be null and void ab initio and shall be of no effect
whatsoever.
SECTION 12. WAIVER. Any waiver by any party of a breach of any term of
this Agreement shall not operate or be construed to be a waiver of any other
breach of that term or of any breach of any other term of this Agreement. The
failure of a party to insist upon strict adherence to any term of this Agreement
on one or more occasions will not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver must be in writing.
SECTION 13. BINDING EFFECT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Seller, the Purchaser, and their
respective successors and assigns.
SECTION 14. NO THIRD PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights by any person not a
party to this Agreement except as contemplated by the Original Agreement, as
amended hereby.
SECTION 15. SEPARABILITY. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
SECTION 16. HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 17. COUNTERPARTS; GOVERNING LAW. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. It shall be
governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to conflict of laws. Except as contemplated by Section
9.5(a) of the Original Agreement, as amended hereby, any action, suit, or
proceeding arising out of, based upon, or in connection with this Agreement or
the transactions contemplated hereby may be brought only in a United States
District Court located in the State of Georgia and each party covenants and
agrees not to assert, by way of motion, as a defense, or otherwise, in any such
action, suit, or proceeding, any claim that it is not subject personally to the
jurisdiction of such court, that its property is exempt or immune from
attachment or execution, that the action, suit, or proceeding is brought in an
inconvenient forum,
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that the venue of the action, suit, or proceeding is improper, or that this
Agreement or the subject matter hereof may not be enforced in or by such court.
SECTION 18. ASSIGNMENTS. This Agreement may be assigned by operation of
law without the consent of any party hereto. This Agreement may not otherwise be
assigned by any party hereto without the prior written consent of the other
party hereto, which consent shall not be unreasonably delayed or withheld.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
HARBERT EQUITY FUND I, L.L.C.
BY: ▇▇▇▇▇▇▇ MANAGEMENT CORPORATION,
MANAGER
[SEAL]
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
CROWN NORTHCORP, INC.
[SEAL]
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and Chief Executive Officer
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AS TO SECTION 5:
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ HOLDING COMPANY, LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Member
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EXHIBIT A
THE SERIES AA PREFERRED STOCK
A. The Series AA Preferred Stock will have a par value of $.01 per share.
B. There will be one share of authorized Series AA Preferred Stock.
C. The Series AA Preferred Stock will be issued on a parity with (but not
superior to) the Seller's outstanding Series B Preferred Stock and Series C
Cumulative Preferred Stock with respect to dividends, liquidation, and
redemption.
D. The Series AA Preferred Stock will have a non-cumulative dividend of five
percent per annum.
E. The Series AA Preferred Stock will have a liquidation preference of
$3,647,185.44 plus accrued but unpaid dividends.
F. The Series AA Preferred Stock will be convertible at the Purchaser's option
at any time into 3,473,510 shares of the Seller's Common Stock, par value
$.01 per share. The Series AA Preferred Stock will be convertible at the
Seller's option into 3,473,510 shares of the Seller's Common Stock, par
value $.01 per share, upon the occurrence of both of the Trigger Events (as
hereinafter defined).
G. The Series AA Preferred Stock will be redeemable at the Seller's option at
any time upon 30 days' prior written notice to the Purchaser for a
redemption price equal to the sum of (a) $3,647,185.44, plus (b) an amount,
expressed in dollars, equal to a 12% cumulative dividend on the sum of
$3,647,185.44 from the date that the Series AA Preferred Stock is issued
until the day that it is so redeemed. The Purchaser will have the right to
convert the Series AA Preferred Stock during such 30-day notice period in
accordance with the preceding Section F.
H. If the Series AA Preferred Stock is still outstanding on June 30, 1998 and,
on that date, both of the Trigger Events (as hereinafter defined) have not
occurred, then the Purchaser shall have the right to designate such number
of individuals to serve as Directors of the Seller as shall constitute a
majority of the Seller's Board of Directors until such time as both of the
Trigger Events have occurred, it being understood and agreed that to
accomplish the foregoing the Seller may choose to expand its Board of
Directors and to appoint individuals designated by the Purchaser to fill
resulting vacancies in lieu of the resignation of existing Directors of the
Seller and it being further understood and agreed that the Purchaser will
not designate for such service any individual who does not satisfy the
requirements set forth in Section 6.2 (a) and (b) of the Original
Agreement. As used herein, the term "Trigger Events" mean (a) the
consummation of the initial public offering of the Crown Hybrid Mortgage
REIT or the completion of another fund opportunity as contemplated by
Section 3.3(a) of the Original Agreement, and (b) the Seller's average
commercial loan original volume for the then preceding three months equals
at least $16.7 million per month.