1
EXHIBIT 6(f)
STOCK PURCHASE AGREEMENT
By and Among
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇
Dated as of July 3, 1998
2
Page
(r) Intellectual Property and Intangible Assets ................................. 17
(s) Compliance With Law ......................................................... 17
(t) Tax Matters ................................................................. 18
(u) Year 2000 Compliance ........................................................ 18
(v) Disclosure .................................................................. 18
(w) No Other Representations .................................................... 19
4. Representations and Warranties of the Company ..................................... 19
(a) Capitalization ............................................................... 19
(b) Organization and Qualification ............................................... 19
(c) Licensing with the Department of Banking and Finance ......................... 19
(d) Authorization of the Company ................................................. 20
(e) Subsidiaries and Other Investments ........................................... 20
(f) Governmental Authorization ................................................... 20
(g) Non-Contravention ............................................................ 20
(h) Financial Statements; Undisclosed Liabilities ................................ 21
(i) Absence of Certain Changes ................................................... 21
(j) Properties; Leases; Tangible Assets .......................................... 23
(k) Affiliates ................................................................... 24
(l) Litigation ................................................................... 24
(m) Contracts .................................................................... 24
(n) Permits ...................................................................... 25
(o) Employment Agreements ........................................................ 26
(p) Employment Matters ........................................................... 28
(q) Intellectual Property and Intangible Assets .................................. 28
(r) Compliance With Law .......................................................... 29
(s) Tax Matters .................................................................. 29
(t) Year 2000 Compliance ......................................................... 29
(u) Disclosure ................................................................... 30
(v) No Other Representations ..................................................... 30
-ii-
3
PAGE
10. General Provisions.................................................... 36
(a) Termination by the Company or 36
by the Sellers................................................... 37
(b) Severability...................................................... 37
(c) Counterparts...................................................... 37
(d) Benefit........................................................... 37
(e) Notices and Addresses............................................. 37
(f) Attorney's Fees................................................... 38
(g) Oral Evidence..................................................... 38
(h) Additional Documents.............................................. 38
(i) Governing Law..................................................... 38
(j) Arbitration....................................................... 38
(k) Expenses.......................................................... 38
(l) Section Headings.................................................. 39
(m) Effective Investigation........................................... 39
-iv-
4
DEFINITIONS
Each of the following terms is defined in this Agreement in the respective
Section referenced adjacent to such term:
DEFINED TERM SECTION REFERENCE
Adjustment Date ............................................................. 33
Affiliate ................................................................... 10
Agreement ................................................................... 1
Annual Statements ........................................................... 9
Associate ................................................................... 10
Associated With ............................................................. 10
Assumed Purchase Price ...................................................... 5
Attributed Value ............................................................ 6
Balance Sheet ............................................................... 9
Benefit Arrangement ......................................................... 10
Benefit Plan ................................................................ 10
▇. ▇▇▇▇▇ .................................................................... 1
Closing Date ................................................................ 1
Closing ..................................................................... 1
Code ........................................................................ 15
Common Stock ................................................................ 1
Company ..................................................................... 1
Company Indemnitee .......................................................... 35
Company Material Adverse Effect ............................................. 21
Company's Indemnitees ....................................................... 35
Contract .................................................................... 8
Current Value ............................................................... 6
Distributions ............................................................... 11
Dow ......................................................................... 1
Dow Material Adverse Effect ................................................. 9
Employee Benefit Plan ....................................................... 10
Employment Agreements ....................................................... 14
Encumbrances ................................................................ 1
Equity Securities ........................................................... 7
ERISA ....................................................................... 10
Fair Market Value ........................................................... 5
Financial Statements ........................................................ 9
GAAP ........................................................................ 9
Gross Proceeds .............................................................. 6
Independent Contractors ..................................................... 16
Information Technology ...................................................... 18
Intangible Assets ........................................................... 16
Intellectual Property ....................................................... 16
Interim Statements .......................................................... 9
-v-
5
IRS..................................................... 15
Knowledge............................................... 12
▇. ▇▇▇▇▇................................................ 1
Laws.................................................... 17
Leases.................................................. 12
Liens................................................... 8
Lock-Up Letter.......................................... 2
Losses.................................................. 34
Measuring Date.......................................... 5
Notes................................................... 6
Ordinary Course of Business............................. 9
Permits................................................. 13
Personal Property Leases................................ 11
Premium................................................. 6
Proceedings............................................. 12
Public Offering......................................... 5
Real Property Leases.................................... 12
Schedule Contracts...................................... 13
SEC..................................................... 5
Securities Act.......................................... 2
Seller Indemnitee....................................... 34
Sellers................................................. 1
Sellers' Indemnitees.................................... 34
Shares.................................................. 1
USDL.................................................... 15
Volume.................................................. 6
-iv-
6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
this 31st day of July, 1998, by and among America's Senior Financial Services,
Inc., a Florida corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇. ▇▇▇▇▇")
and ▇▇▇▇▇ ▇▇▇▇▇ ("▇. ▇▇▇▇▇") (collectively the "Sellers").
WHEREAS, the Sellers own 100% of the issued and outstanding common stock
(the "Shares") of Dow Guarantee Corp. ("Dow"), a Florida corporation, which is
engaged in and fully licensed to operate a mortgage business in the State of
Florida;
WHEREAS, the Company wishes to purchase the Shares pursuant to the terms
and conditions contained in this Agreement; and
WHEREAS, the Sellers desire to sell the Shares to the Company in exchange
for an aggregate of 550,000 shares of the Company's common stock (the "Common
Stock") pursuant to the terms and conditions contained in this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
intending to be legally bound agree as follows:
I. PURCHASE AND SALE OF SHARES.
(a) Sale of Shares. Upon the terms and subject to the conditions of
this Agreement and in reliance upon the representations, warranties and
agreements herein set forth, the Sellers to sell to the Company all of the
Shares on the Closing Date, as defined. At the Closing, the Sellers shall
deliver to the Company certificates evidencing the Shares duly endorsed for
transfer and with all transfer stamps attached and such other instruments as
may be reasonably requested by the Company to transfer full legal and
beneficial ownership of the Shares to the Company, free and clear of all liens,
charges, claims, options, pledges, rights of other parties, voting trust,
proxies, shareholder or similar agreements, restrictions, adverse claims or any
other encumbrances of any nature whatsoever (collectively "the Encumbrances").
(b) Closing Date. The closing of the transactions contemplated by
this Agreement shall take place on July 31st, 1998, at 10:00 a.m. (the
"Closing" or "Closing Date") at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.A., ▇▇▇ ▇.▇.
▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ or, at such other
date, time and place as may be agreed upon by the parties.
1
7
(c) Execution of Investment Letters and Lock-Up Letters. At the
Closing, in connection with the delivery of the Shares, ▇. ▇▇▇▇▇ and ▇.
▇▇▇▇▇ shall each execute (i) an investment letter in customary form in
which each of the Sellers acknowledges that he/she is acquiring the
shares of Common Stock for investment and not with a view to
distribution, (ii) a letter acknowledging receipt of such information
concerning the Company as the Company's counsel deems appropriate, and
(iii) a letter agreeing not to sell, hypothecate or otherwise transfer
any of the shares of Common Stock issued by the Company ("Lock-Up
Letter") for a period of not less than 12 months following the effective
date of the Public Offering, as defined. Such restrictive period may be
longer than 12 months if requested by the managing underwriter of the
Public Offering as long as such restrictive period also applies to all
executive officers, directors and beneficial owners of more than 5% of
the Company's Common Stock.
(d) Registration Rights.
(i) In the event that during the period ending two years after
the Closing, the Company files a registration statement or
post-effective amendment under the Securities Act of 1933 (the
"Securities Act") which relates to a current offering of securities
by the Company (except in connection with an offering on Forms S-4
or S-8 or successor forms), such registration statement or
post-effective amendment on one occasion shall at the written
request of the Sellers relate to, and meet the requirements of the
Securities Act with respect to so as to permit the public sale of
all or some portion of the Common Stock in compliance with the
Securities Act. The Company shall give written notice to the Sellers
30 or more days prior to the filing of such registration statement
of its intention to file a registration statement under the
Securities Act relating to a current offering of the securities of
the Company. The Sellers shall give the Company written notice to
include the specified number of shares of Common Stock in such
registration statement. Such notice shall be given 20 or more days
prior to the date specified in the notice(s) as the date on which
the Company intends to file such registration statement. Neither the
delivery of such notice by the Company nor of such request by any
Seller shall in any way obligate the Company to file such
registration statement or post-effective amendment and
notwithstanding the filing of such registration statement or
post-effective amendment, the Company may, at any time prior to the
effective date thereof, determine not to offer the securities to
which such registration statement or post-effective amendment
relates, without liability to the Sellers, except that the Company
shall pay such expenses as are contemplated to be paid by it under
Section 1(d).
(ii) In each instance in which, pursuant to Section 1(d), the
Company shall take any action to permit a public offering or sale or
other distribution of the shares of Common Stock,the Company shall:
(A) Supply to any Underwriter as representative of the
Sellers
2
8
intending to make a public distribution of their Common Stock (the Sellers
acknowledge their appointment of such Underwriter as their representative), two
executed copies of each registration statement or post-effective amendment and
a reasonable number of copies of the preliminary, final and other prospectus in
conformity with requirements of the Securities Act and the Rules and
Regulations promulgated thereunder and such other documents as the Underwriter
shall reasonably request.
(B) Unless pre-empted by the National Securities Markets Improvement Act
of 1996, use its best efforts to cause the Common Stock to be registered or
qualified under such other securities acts or blue sky laws of such
jurisdictions as the Underwriter shall reasonably request and do any and all
other acts and things which may be necessary or advisable to enable the Holders
of such Common Stock to consummate such proposed sale or other disposition of
the Common Stock in any such jurisdiction; provided, however, that in no event
shall the Company be obligated, in connection therewith, to qualify to do
business or to file a general consent to service of process in any jurisdiction
where it shall not then be qualified.
(C) Keep current for a period of 90 days after the initial effectiveness
thereof all such registration statements or post-effective amendments under the
Securities Act and cooperate in taking such action as may be necessary to keep
effective such other registrations and qualifications, and do any and all other
acts and things for such period not to exceed said 90 days as may be necessary
to permit the public sale or other disposition of such shares of Common Stock by
the Sellers.
(D) Indemnify and hold harmless each such Seller and each underwriter,
within the meaning of the Securities Act, who may purchase from or sell for any
such Seller, any shares of Common Stock, from and against any and all losses,
claims, damages, and liabilities (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigation, preparing, defending
or settling any claim) arising from (i) any untrue or alleged untrue statement
of material fact contained in any such registration statement or post-effective
amendment, or any prospectus contained therein or delivered thereunder, or from
(ii) any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, unless each untrue
statement or omission or such alleged untrue statement or omission was based
upon information furnished or required to be furnished in writing to the Company
by the Sellers or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls any Seller
3
9
or underwriter within the meaning of the Securities Act;
provided, however, that the Company shall not be so
obligated to indemnify any such Seller or underwriter or
controlling person unless such Seller and underwriter shall
at the same time indemnify the Company, its directors, each
officer signing any registration statement, post-effective
amendment or any amendment thereto and each person, if any,
who controls the Company within the meaning of the
Securities Act, from and against any and all losses, claims,
damages and liabilities (including, but not limited to, any
and all expenses whatsoever reasonably incurred in
investigation, preparing, defending or settling any claim)
arising from (a) any untrue or alleged untrue statement of a
material fact contained in any registration statement or
post-effective amendment, or any amendment thereto, or
prospectus contained therein or (b) any omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, but the indemnity of such Seller,
underwriter or controlling person shall be limited to
liability (A) based upon information furnished in writing to
the Company by such Seller or underwriter or controlling
person expressly for use therein, (B) sales by a Seller in
violation of the registration provisions of any state in
which the Common Stock is sold where the Company did agree
to and successfully register or qualify such Common Stock,
and (C) sales in violation of any broker-dealer registration
requirements. The indemnity agreement of the Company herein
shall not inure to the benefit of the Sellers or any
underwriter (or to the benefit of any person who controls
such underwriter) on account of any losses, claims, damages,
liabilities (or actions or proceedings in respect thereof)
arising from the sale of any such Common Stock by such
underwriter to any person if such underwriter failed to send
or give a copy of the prospectus as the same may then be
supplemented or amended (if such supplement or amendment
shall have been furnished to the Underwriter) to such person
with or prior to written confirmation of the sale involved.
Provided further that the Company's liability to each of the
Sellers shall be limited the aggregate amount of gross
proceeds received by each of the Sellers in connection with
the sale of the Common Stock pursuant to such registration
statement or post-effective amendment.
(iii) The Company shall comply with the requirements of
Section 1(d) at its own expense, including legal, accounting,
filing, state qualification, and printing fees and costs, but
excluding counsel fees for the Sellers.
(iv) The Company's obligation under said Section 1(d) shall
be conditioned, as to each such public offering, upon a timely
receipt by the Company in writing of:
4
10
(A) Information as to the terms of such public offering
furnished by or on behalf of each Seller intending to make a
public distribution of his or her Common Stock; and
(B) Such other information as the Company may reasonably
require from such Sellers, or any underwriter for any of them, for
inclusion in such registration statement or post-effective
amendment.
2. PAYMENT OF PURCHASE PRICE.
(a) Purchase Price. As consideration for the Shares and the covenants
and agreements of the Sellers set forth herein, the Company shall deliver to the
Sellers at the Closing an amount equal to an aggregate of $2,750,000 in Common
Stock of the Company which shall for purposes of this Agreement have a value
equal to $5.00 per share (the "Assumed Purchase Price"). Of the 550,000 shares
of Common Stock delivered to the Sellers, 350,000 shares of Common Stock shall
be delivered to ▇. ▇▇▇▇▇ and 200,000 shares of Common Stock to ▇. ▇▇▇▇▇.
(b) Adjustments to Purchase Price.
(i) Initial Adjustment to Purchase Price. The Company intends to
file a registration statement with the Securities and Exchange
Commission (the "SEC") in order to raise equity capital to fund its
business plan (the "Public Offering"). At such time as the registration
statement for the Public Offering has been declared effective by the
SEC, the fair market value of the shares of Common Stock issued to the
Sellers shall be determined using the Public Offering price offered to
the public. If upon the effective date of the registration statement
for the Public Offering, the Fair Market Value of the Common Stock
issued to the Sellers is not at least $2,750,000, the Company shall
issue pro-rata to the Sellers additional shares of Common Stock (on a
63.64%/36.36% basis) so that the Sellers had, as of the closing date of
the Public Offering, $2,750,000 in Common Stock using the Fair Market
Value of the Common Stock described above.
(c) Second Adjustment to Purchase Price.
(i) One year after expiration of the Lock-Up period imposed by
the Underwriter of the public offering (the "Measuring Date"), the
Company shall again determine the Fair Market Value of the shares of
Common Stock issued to the Sellers. The Fair Market Value shall be
based upon the following formula:
(A) if the Company's Common Stock is regularly quoted on an
inter-dealer quotation system which reports the last sale prices,
the average closing price for the Common Stock over the last 20
trading days
5
11
shall be the fair market value of the Company's Common Stock (the
"Fair Market Value"); or
(B) if the last sale prices for the Company's Common Stock
are not available, Fair Market Value shall be determined based
upon (A) the average of all bid prices and all asked prices
reported in the National Quotation Bureau, Inc.'s pink sheets for
20 trading days, or (B) if bid and asked prices have not been
quoted in the pink sheets for such 20 trading days, by a polling
of all dealers which have published quotations in any of the 20
trading days. Provided, however, if any dealers have only
published bid or asked prices but did not make a two-sided market,
the quotations submitted by such dealers shall be disregarded;
(ii) In determining whether the Purchase Price should be
adjusted, the Fair Market Value shall be multiplied by the number of
shares of Common Stock then owned by the Sellers to determine current
value ("Current Value"). For each Seller there shall be added to the
Current Value (x) the gross proceeds received by the Seller from the
sale of any shares of Common Stock (the "Gross Proceeds"), and (y) the
amount the Seller could have received if he/she sold Common Stock in
the one-year following expiration of the Lock-Up period (the
"Attributed Value") as described below. The sum of the Current Value
plus Gross Proceeds and the Attributed Value for each Seller is the
Adjusted Value. The Attributed Value, if any, shall be calculated by
initially determining if the average of Fair Market Value for any
period of 60 trading days is at least 20% of the Assumed Purchase Price
(the "Premium"). During the 60-day period, if any, in which the Premium
was the highest, 20% of the average daily volume shall be attributed to
Sellers on a pro-rata 63.64%/36.36% basis (the "Volume"). The
Attributed Value for each Seller shall be the product of (A) the
Premium times (B) the Volume times (C) 60.
(iii) If the Adjusted Value does not equal $1,750,000 for ▇.
▇▇▇▇▇ and $999,000 for ▇. ▇▇▇▇▇, the Company shall issue its
non-interest bearing secured promissory notes (the "Notes") to ▇. ▇▇▇▇▇
and/or ▇. ▇▇▇▇▇ in an amount equal to $1,750,000 and $999,000,
respectively, less the Adjusted Value for each Seller as applicable.
Such Notes shall be due 180 days from the Measuring Date and secured by
a security interest covering all of the assets of Dow.
(iv) By way of example, if the Current Value is $1,500,000
($954,600 for ▇. ▇▇▇▇▇ and $545,400 for ▇. ▇▇▇▇▇), ▇. ▇▇▇▇▇ has
received 400,000, ▇. ▇▇▇▇▇ has received $40,000, the Premium is $1.50
and the Volume is 6,364 shares for ▇. ▇▇▇▇▇ and 3,636 shares for ▇.
▇▇▇▇▇. The Attributed Value would be $572,760 for ▇. ▇▇▇▇▇ and $327,240
for ▇. ▇▇▇▇▇. Therefore:
6
12
▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
Current Value $ 954,600 $ 545,400
Gross Proceeds 400,000 40,000
Attributed Value 572,760 327,240
----------------------------------------------
TOTAL $1,927,360 $ 912,640
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers, jointly and
severally, hereby represent and warrant to the Company, all of which
representations and warranties are true, complete, and correct in all respects
as of the date hereof and as of the Closing Date, as follows:
(a) Capitalization. The authorized capital stock of Dow consists of
1,000,000 Shares of which 1,000,000 Shares are outstanding. All of the
issued and outstanding Shares are validly issued and are fully paid,
nonassessable and free of preemptive rights.
(b) Ownership of Shares. ▇. ▇▇▇▇▇ and ▇. ▇▇▇▇▇ are the legal and
beneficial owners of 636,400 and 363,600 Shares, respectively, constituting
63.64% and 36.36%, respectively, of the outstanding capital stock of Dow,
free and clear of all Encumbrances. The delivery to the Company of the
Shares pursuant to the provisions of this Agreement will transfer to the
Company valid title thereto, free and clear of any and all Encumbrances.
All of the Shares have been duly authorized and were validly issued and are
fully paid and nonassessable and were not issued in violation of any
preemptive rights. The Shares represent all of the issued and outstanding
shares of capital stock of Dow. There are not, and on the Closing Date
there will not be, outstanding (i) any options, warrants, rights of first
refusal or other rights to purchase from the Sellers or Dow any capital
stock of Dow, (ii) any securities of Dow convertible into or exchangeable
for shares of such stock, or (iii) any other commitments of any kind for
the issuance of additional shares of capital stock or options, warrants or
other securities of Dow (such options, warrants, rights of first refusal or
other rights, convertible securities, exchangeable securities or other
commitments are referred to herein collectively as "Equity Securities").
There is no contract, right or option outstanding to require the Sellers or
Dow to redeem, purchase or otherwise reacquire any Shares or Equity
Securities of Dow, and there are no preemptive rights with respect to any
Shares or Equity Securities of Dow.
(c) Organization and Qualification. Dow is a corporation duly
organized, validly existing and in good standing under the Laws, as
defined, of the State of Florida. Dow has all requisite power and
authority to own those properties and conduct those businesses presently
owned or conducted by it, and is duly qualified to do business as it
7
13
is now being conducted and is in good standing as a foreign corporation
in each other jurisdiction where the property owned, leased or used by it
or the conduct of its business makes such qualification necessary. The
copies of the Articles of Incorporation and By-Laws of Dow, which have
been delivered to the Company, are complete and correct and are in full
force and effect at the date hereof.
(d) Licensing with the Department of Banking and Finance. Dow is
fully licensed with the Florida Department of Banking and Finance as a
correspondent mortgage lender and has all licenses necessary to carry on
a correspondent mortgage lending business in the State of Florida
including the business of brokering reverse mortgages. There is not now
pending any investigations or inquiries, formal or informal, by the
Florida Department of Banking and Finance concerning or relating to Dow
or either of the Sellers.
(e) Authorization of the Sellers. This Agreement has been duly
executed by the Sellers and constitutes the legal, valid, binding and
enforceable obligation of the Sellers, enforceable against each in
accordance with its terms.
(f) Subsidiaries and Other Investments. Dow has no subsidiaries.
(g) Governmental Authorization. The execution, delivery and
performance by the Sellers of this Agreement requires no action by,
consent or approval of, or filing with, any governmental authority.
(h) Non-Contravention. The execution, delivery and performance by
the Sellers of this Agreement, and consummation of the transactions
contemplated hereby, including without limitation, the transfer of the
Shares to the Company, do not and will not (i) contravene or conflict
with the Articles of Incorporation or By-Laws of Dow, (ii) contravene or
conflict with or constitute a violation of any provision of any Laws, as
defined, applicable to the Sellers or Dow; (iii) constitute a default
under or give rise to any right of termination, cancellation or
acceleration of, or to a loss of any benefit to which the Sellers or Dow
are entitled under, any material Contract, as defined, to which any is a
party or any material Permit, as defined, or similar authorization; or
(iv) under any Contract of Dow or to which either Seller is a party or
under applicable Laws, result in the imposition or creative of any
Encumbrances on the Shares or any Liens, as defined, on any asset of Dow
or impose any contractual obligation or restriction under such Contract
on the Company. As used in this Agreement, the word "Contract" means all
contracts, agreements, mortgages (including any undivided interests in
any mortgages), options, leases, license agreements, sales and purchase
orders, commitments, instruments and other obligations of any kind,
whether written or oral, inclusive of amendments, to which Dow or either
Seller is a party. As used in this Agreement, the word "Liens" shall mean
all liens, encumbrances, claims, charges, security interests, rights of
either Seller and any third party, rights of redemption, equities, and
any other restrictions of any kind or nature whatsoever, including any
leases, escrows options,
8
14
security or other deposits, rights of redemption, chattel mortgages, conditional
sales contracts, collateral security arrangements and other title or interest
retention arrangements.
(i) Financial Statements; Undisclosed Liabilities. Schedule 3(i)
contains true and complete copies of (i) the audited balance sheets and related
statements of operations and retained earnings and of cash flows for Dow for
the years ended December 31, 1996 and December 31, 1997 (the "Annual
Statements"), (ii) the balance sheets and related statements of operations for
the five-month period ended May 31, 1998 (the "Interim Statements") (the Annual
Statements and the Interim Statements, collectively the "Financial Statements").
Each of the Financial Statements has been prepared based on the books and
records of Dow in accordance with Generally Accepted Accounting Principles
("GAAP") and present fairly the financial condition, results of operations
and cash flows of Dow as of the dates indicated or for the periods indicated,
subject in the case of the Interim Statements to normal year-end audit
adjustments, which adjustments in the aggregate are not material. Except as set
forth on Schedule 3(i), there are no Liabilities, as defined, of any Dow other
than: (i) on the balance sheet contained in the Interim Statements (the "Balance
Sheet"); (ii) Liabilities specifically disclosed and identified as such in the
Schedules to this Agreement; (iii) Liabilities incurred since the date of the
Balance Sheet contained in the Interim Statements, that do not, and will not,
individually or in the aggregate, have a material adverse effect on the
business, results of operations, financial condition or future prospects of
Dow (each a "Dow Material Adverse Effect"); and (iv) Liabilities incurred since
the date of the Balance Sheet that have been incurred in the ordinary course
of business ("Ordinary Course of Business") of Dow. As used in this Agreement,
the phrase "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
(j) Absence Of Certain Changes. Since the date of the Balance Sheet,
Dow has conducted its business in the ordinary course consistent with past
practice, and without limitation, there has not been:
(i) any event, occurrence, development or state of circumstances
or facts or change in the assets, liabilities, business, operations
or financial conditions of Dow that has had or that could reasonably
be expected to have, either alone or together with all such events,
occurrences, developments, states of circumstances or facts or changes,
a Dow Material Adverse Effect;
(ii) any incurrence, assumption or guarantee of any indebtedness
of Dow, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or other similar instruments
or letters of credit (or reimbursement obligations in respect thereof)
or banker's acceptances or representing capitalized lease obligations
or the balance deferred and unpaid of the purchase price of any
property as well as all indebtedness of others secured
9
15
by a Lien on any asset of Dow and, to the extent not otherwise included, any
guarantee by Dow of any indebtedness of any other Person;
(iii) any creation, assumption or sufferance of the existence
Lien;
(iv) any transaction or commitment made, or any Contract
entered into, by Dow (including the acquisition or disposition of any assets),
or any waiver, amendment, termination or cancellation of any Contract by Dow, or
any relinquishment of any rights thereunder by Dow, or of any other right or
debt owed to Dow, other than in each such case actions taken in the Ordinary
Course of Business consistent with past practice;
(v) any (A) grant of any severance, continuation or
termination pay to any director, officer, shareholder or employee of Dow or
any Associate, as defined, of any of the foregoing, (B) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer, shareholder or
employee of Dow or any Associate of any of the foregoing, (C) increase in
benefits payable or potentially payable under any severance, continuation or
termination pay policies or employment agreements with any director, officer,
shareholder or employee of Dow or any Associate of any of the foregoing,
(D) increase in compensation, bonus or other benefits payable or potentially
payable to directors, officers, shareholders or employees of Dow or any
Associate of any of the foregoing, other than in the Ordinary Course of Business
consistent with past practice or pursuant to existing Contracts, or (E) change
in the terms of any bonus, pension, insurance, health or other Benefit Plan, as
defined, Dow or its Affiliates. As used in this Agreement, the word "Associate"
and the phrase "Associated With" means, when used to indicate a relationship
with any Person, as defined, (a) any other Person of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities issued by such other Person, (b) any
trust or other estate in which such Person has a substantial beneficial interest
or as to which such Person serves as trustee or in a similar fiduciary capacity,
and (c) any relative or spouse of such Person, or any relative of such spouse
who has the same home as such Person or who is a director or officer of such
Person or any Affiliate thereof. As used in this Agreement, the word "Affiliate"
means, with respect to any Person, any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with such
Person. As used in this phrase "Benefit Plan" means any Employee Benefit Plan or
Benefit Arrangement, as defined. As used in this Agreement, the phrase "Employee
Benefit Plan" means any employee benefit plan, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that is
sponsored or contributed to by Dow or any ERISA Affiliate thereof covering
employees or former employees of Dow.
10
16
As used in this Agreement, the phrase "Benefit Arrangement" means any material
benefit arrangement that is not an Employee Benefit Plan, including, without
limitation, (1) each employment or consulting agreement, (2) each arrangement
providing for insurance coverage or workers' compensation benefits, (3) each
incentive bonus or deferred bonus arrangement, (4) each arrangement providing
termination allowance, severance or similar benefits, (5) each equity
compensation plan, (6) each deferred compensation plan and (7) each
compensation policy and practice maintained by Dow covering the employees,
former employees, directors and former directors thereof and the beneficiaries
of any of them;
(vi) any loan to or guarantee or assumption of any loan or
obligation on behalf of any shareholder, director, officer or employee of Dow
or any of its Affiliates or of any Associate of any of the foregoing, except
business expense advances to employees of Dow occurring in the Ordinary Course
of Business, as defined;
(vii) except as required by GAAP, any material change by Dow in
its accounting principles, methods or practices or in the manner it keeps its
books and records or any material change of Dow of its current practices with
regards to inventory, sales, receivables, payables or accrued expenses which
would affect the timing of collection of receivables or the payment of payables;
(viii) any distribution, dividend, bonus or other payment by Dow
to the Sellers or any Affiliate of the Sellers or any officer, director,
shareholder or Affiliate of the Sellers or Dow (collectively, "Distributions");
and;
(ix) any payment, discharge or satisfaction of any Liabilities
of Dow, other than payments, discharges or satisfactions in the Ordinary Course
of Business; or (A) any payment, discharge or other satisfaction of any claim,
Liability or obligation owed by Dow to either or both of the Sellers or any of
their Affiliates, or (B) any prepayment of any Debt.
(k) Properties; Leases; Tangible Assets.
(i) Except for those Liens identified on Schedule 3(k)(i), Dow
owns all of the assets (real, personal or mixed, tangible or intangible)
reflected on the Balance Sheet (except those assets disposed of in the Ordinary
Course of Business after the date thereof), free and clear of all Liens;
(ii) All tangible properties and assets and premises owned or
leased by Dow are in good condition and repair and are adequate in all material
respects for the uses to which they are put, and no tangible properties or
assets necessary for the conduct of the business of Dow in substantially the
same manner as it has
11
17
been conducted are in need of replacement, maintenance or repairs,
except for routine and not materially deferred replacement,
maintenance and repair;
(iii) Schedule 3(k) sets forth a true and complete list of
all material personal property leases (the "Personal Property Leases")
and all leases of real property (the "Real Property Leases")
(collectively with the Personal Property Leases and the Real Property
Leases, the "Leases") to which Dow is a party or by which Dow is
bound. With respect to the Leases, there exist no defaults by Dow or,
to the Knowledge, as defined, of the Sellers, any default or
threatened default by any lessor or third party thereunder, that has
affected or could reasonably be expected to materially affect the
rights and privileges thereunder of Dow. As used in this Agreement,
"Knowledge" means information known to an executive officer of the
Company or if relating to the Sellers, to either Seller or to an
officer of Dow. The sale of the Shares to the Company will not
adversely affect any Leases to which Dow is a party or by which Dow
is bound; and
(iv) No real property is owned by Dow except as set forth
on Schedule 3(k).
(l) Affiliates. Except as set forth in Schedule 3(l), to the
Knowledge of the Sellers, no shareholder of Dow or any officer or director
of Dow (or any immediate family member of any such officer or director):
(i) now has or at any time subsequent to May 31, 1998 had,
directly or indirectly, an equity interest in, or holds debt of, any
Person which furnishes or sells or during such period furnished or
sold services or products to Dow or purchases or during such period
purchased from Dow any goods or services, or otherwise does or
during such period did business with Dow. Provided, however, that no
shareholder of Dow or any of their respective officers, directors or
other Affiliates shall be deemed to have such an interest solely by
virtue of the ownership of less than 5% of the outstanding voting
stock or debt securities of any publicly-held company, the stock or
debt securities of which are traded on a national stock exchange or
quoted on Nasdaq;
(ii) now is or at any time subsequent to May 31, 1998 was,
directly or indirectly, a party to any Contract to which Dow is or
during such period was a party or under which Dow is or was obligated
or bound or to which Dow's properties may be or may have been subject.
(m) Litigation. Except as disclosed on Schedule 3(m), (i) there are
no actions, claims, suits, hearings, arbitrations, proceedings (public or
private) or, to Sellers' Knowledge, governmental investigations or
inquiries, that have been brought by or against any governmental authority
or any other Person (collectively, "Proceedings")
12
18
pending or, to the Knowledge of the Sellers, threatened, against or by Dow or
against either Seller or which seek to enjoin or rescind the transactions
contemplated by this Agreement or otherwise seek to prevent the Sellers or Dow
from complying with the terms and provisions of this Agreement, and (ii) there
are no existing orders, judgments or decrees of any governmental authority
affecting Dow.
(n) Contracts.
(i) Schedule 3(n) sets forth a complete list of all material
Contracts (the "Scheduled Contracts") including, without limitation:
(A) each Contract between Dow and (1) each present or
former director, officer or other member of management or other
personnel of Dow, (2) any supplier of services or products to Dow
whose dollar volume of sales to Dow taken as a whole exceeded
$25,000 in 1997, and (3) any Person in which the aggregate
payments made to Dow under such Contract exceeded $25,000 in
1997;
(B) each other agreement or arrangement of Dow that
requires the payment or incurrence of Liabilities, or the
rendering of services, by Dow, subsequent to the date hereof of
more than $25,000 or that is reasonably expected to require
payment of more than $25,000 in the aggregate;
(C) all Contracts relating to, and evidences of or
guarantees of, or providing security for, Debt or the deferred
purchase price of property (whether incurred, assumed, guaranteed
or secured by any asset); and
(D) all partnership, joint venture or other similar
Contracts, arrangements or agreements.
(ii) Each Scheduled Contract relating to Dow is a legal, valid
and binding obligation of Dow that is party thereto and, to the
Knowledge of the Sellers, each other party thereto, enforceable
against Dow and, to the Knowledge of the Sellers, each such other
party thereto, in accordance with its terms, and neither Dow nor to
the Knowledge of the Sellers, any other party thereto, is in material
default or has failed to perform any material obligation thereunder.
Complete and correct copies of each Scheduled Contract have been
delivered or made available to the Company. There is no default or
failure to perform under other Contracts which could reasonably be
expected to have a Dow Material Adverse Effect.
13
19
(o) Permits.
(i) Schedule 3(o) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities (and all other Persons)
necessary for the operation of Dow in substantially the same manner as currently
operated or affecting or relating in any way to Dow (the "Permits").
(ii) Schedule 3(o) lists (A) each governmental or other
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver required under applicable laws to be obtained by the
Seller or Dow by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby to avoid the loss of any
material Permit or otherwise, and (B) each Scheduled Contract with respect to
which the consent of the other party or parties thereto must be obtained by the
Sellers or Dow by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby to avoid the invalidity of
the transfer of such Contract, the termination thereof, a breach or default
thereunder or any other change or modification to the terms thereof. Each Permit
is valid and in full force and effect in all material respects and, assuming all
necessary consents have been obtained prior to the Closing, are or will be
transferable and assuming the necessary consents have been obtained prior to the
Closing, none of the Permits will be terminated or become terminable or impaired
in any material respect as a result of the transactions contemplated hereby. To
the Knowledge of the Sellers, there are no facts relating to the identity or
circumstances of the Sellers that would prevent or materially delay obtaining
any of the consents.
(p) Employment Agreements.
(i) There are no employment, consulting, severance pay,
continuation pay, termination pay or indemnification agreements or other similar
agreements of any nature whatsoever (collectively, "Employment Agreements")
between or binding upon Dow, on the one hand, and any current or former
shareholder, officer, director, employee or Affiliate of Dow or any of its
respective Associates or any consultant or agent of Dow, on the other hand, that
are currently in effect;
(ii) There are no Employment Agreements or any other similar
agreements to which Dow is a party or by which it is bound under which the
transactions contemplated by this Agreement (A) will require any payment by Dow
or the Company, or any consent or waiver from any shareholder, officer,
director, employee or Affiliate of Dow or any of its respective Associates or
any consultant or agent of Dow, or the Company, or (B) will result in any
increase, acceleration, vesting or other change in the compensation, benefits or
other rights of any shareholder, officer, director, employee or Affiliate of Dow
or any of its
14
20
respective Associates or any consultant or agent of Dow under any
such Employment Agreement or other similar agreement.
(iii) Schedule 3(p) sets forth all Benefit Plans of Dow, in
which any employees or former employees and their beneficiaries of
Dow participate. Sellers have made available to the Company true and
correct copies of all governing instruments and related agreements
pertaining to such Benefit Plans.
(iv) Neither Dow nor any Affiliate or ERISA Affiliate of Dow
has ever sponsored, maintained, contributed to, or incurred an
obligation to contribute to, any Employee Benefit Plan except as
disclosed on Schedule 3(p). In connection with any Employee Benefit
Plan currently maintained by Dow, (A) there have been no accumulated
funding deficiencies (within the meaning of Internal Revenue Code
(the "Code") Section 412), whether or not waived, (B) there have been
no reportable events (within the meaning of ERISA Section 4043(b))
other than any reportable event that may arise in connection with the
transactions contemplated by this Agreement, and (C) no circumstances
exist that would warrant a termination of any such plan by the
Pension Benefit Guaranty Corporation pursuant to ERISA Section 4042.
No Employee Benefit Plan has been terminated within the last five
years in other than a standard termination under Section 4041(b) of
ERISA and all liabilities under such plans have been adequately and
properly discharged. The foregoing applies only to the extent any of
the events results in a material Liability of Dow.
(v) No agreement, commitment or obligation exists to increase
benefits under any Benefit Plan or to adopt any new Benefit Plan.
Further, no individual shall accrue or receive additional benefits,
service or accelerated rights to payments of benefits under any
Benefit Plan, including the right to receive any parachute payment,
as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a direct
result of the transactions contemplated hereby. Dow is not a party to
any agreement or arrangement that could result in the payment of any
such benefits or payments.
(vi) No Benefit Plan has participated in, engaged in or been a
party to any non-exempt Prohibited Transaction, as defined, and none
of Dow or any Affiliate has had asserted against it any material
claim for taxes under Chapter 43 of Subtitle A of the Code and
Section 5000 of the Code, or for material penalties under ERISA
Section 502(c), (i) or (l), with respect to any Employee Benefit Plan
nor, to the Knowledge of the Sellers, is there a material basis for
any such claim. No officer, director or employee of Dow has committed
a material breach of any responsibility or obligation imposed upon
fiduciaries by Title I of ERISA with respect to any Benefit Plan,
with respect to which breach Dow is or could be directly or
indirectly liable.
15
21
(vii) Other than routine claims for benefits, there is no claim
pending, or to the Knowledge of the Sellers, threatened, involving Dow by any
Person against such Plan. There is no pending, or to the Knowledge of the
Sellers, threatened, proceeding involving any Employee Benefit Plan before the
Internal Revenue Service ("IRS"), the United States Department of Labor
("USDL") or any other governmental authority that affects any Benefit Plan.
(viii) There is no material violation of any reporting or
disclosure requirement imposed by ERISA or the Code with respect to any
Employee Benefit Plan.
(ix) Each Employee Benefit Plan has at all times prior hereto
been maintained in all material respects, by its terms and in operation, in
accordance with ERISA and the Code. Dow and its respective Affiliates and ERISA
Affiliates have made full and timely payment of all amounts required to be
contributed under the terms of each Employee Benefit Plan and applicable Laws
or required to be paid as expenses under such Employee Benefit Plan, and Dow
and its Affiliates shall continue to do so through the Closing. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
is and has always been so qualified, and either has received a favorable
determination letter with respect to such qualified status from the IRS or has
filed a request for such a determination letter with the IRS within the
remedial amendment period such that such determination of qualified status will
apply from and after the effective date of any such Employee Benefit Plan.
(x) Dow has made available to the Company a copy of the most
recently filed Federal Form 5500 series and accountant's opinion, if
applicable, for each Employee Benefit Plan.
(q) Employment Matters. Annexed as Schedule 3(q) is a copy of Dow's
employee manual. (i) to the best of the Sellers' Knowledge, there are no
charges or complaints of discrimination pending before the United States Equal
Employment Opportunity Commission or any other federal, state, local or foreign
agency or tribunal against Dow; (ii) to the best of the Sellers' Knowledge, Dow
does not presently employ, and at no time during the past year did it employ,
any illegal alien; (iii) Dow is in compliance in all material respects with all
federal, state and local labor and employment-related Laws applicable to its
business; (iv) to the best of the Sellers' Knowledge, no employee or former
employee of Dow has never made any formal or informal charge or allegation
relating to sexual harassment; and (v) all individuals who are performing or
have performed services for Dow or any affiliate thereof and are or during
1996, 1997 or 1998 were classified by Dow as "independent contractors"
qualified for such classification under Section 530 of the Revenue Act of 1978
or Section 1706 of the Tax Reform Act of 1986, as applicable.
16
22
(r) Intellectual Property and Intangible Assets. Dow owns or possesses
valid and binding licenses or other rights to use, whether or not registered,
all of its Intellectual Property and Intangible Assets. As used in this
Agreement, the phrase "Intellectual Property" means all right, title and
interest in and to all patents, licenses, copyrights, trademarks, trade names,
service marks (including the trademark and name of Dow or any derivation
thereof), logos and slogans, and all of the goodwill associated therewith, and
all registrations, applications and other rights associated with the foregoing,
if any, whether registered or unregistered, now used or presently planned to be
used by Dow in connection with its business, including, without limitation,
those set forth on Schedule 3(r), including the right to ▇▇▇ for past
infringement. As used in this Agreement, the phrase "Intangible Assets" means
all right, title and interest in and to all know-how, technology, slogans, data,
studies, confidential information, restrictive covenants, computer software
(including documentation and related object and source codes), indemnity rights,
and other intangible assets now used or presently planned to be used by Dow, and
all of the goodwill associated therewith, confidentiality obligations and
similar obligations of present and former shareholders, officers and employees
of Dow. Schedule 3(r) sets forth a complete and accurate list of all such
Intellectual Property and Intangible Assets (identifying those owned and those
licensed), including all United States, state and foreign registrations or
applications for registration thereof and all agreements (including, without
limitation, agreements pursuant to which Dow has granted licenses to third
parties to use any Intellectual Property or Intangible Asset) relating thereto.
All actions necessary to maintain the registered Intellectual Property and
Intangible Assets have been taken by Dow. Dow is not required to pay any
royalty, license fee or similar compensation with respect to the Intellectual
Property or Intangible Assets in connection with the current or prior conduct of
its business. The use by Dow of any of the Intellectual Property or Intangible
Assets does not violate the proprietary rights of any other Person and no claims
have been asserted by any Person with respect to the use of the Intellectual
Property or Intangible Assets by Dow. To the best of the Sellers' Knowledge, no
Person is infringing upon the Intellectual Property or Intangible Assets. Dow
has taken reasonable security measures to protect the secrecy, confidentiality
and value of the Intellectual Property. No Person, other than Dow, owns or has
any proprietary, financial or other interest, direct or indirect, in whole or in
part, in any Intellectual Property or Intangible Asset. Except as set forth in
Schedule 3(r), Dow is not a party to any confidentiality, secrecy or similar
agreements with third parties.
(s) Compliance With Law. Dow has at all times operated in all respects
and is presently in compliance in all material respects with all applicable
federal, state, local, foreign or other laws, rules, regulations, guidelines,
orders, injunctions, building and other codes, ordinances, Permits, licenses,
authorizations, judgments, decrees of federal, state, local, foreign or other
authorities, and all orders, writs, decrees and consents of any governmental or
political subdivision or agency thereof, or any court or similar Person
established by any such governmental or political subdivision or agency thereof
(collectively, the "Laws"), including but not limited to all applicable domestic
and
17
23
foreign Laws, rules and regulations relating to the safe conduct of business,
employment discrimination, wages and hours, employment of illegal aliens,
collective bargaining, the payment of withholding and social security taxes,
product labelling, antitrust, consumer protection, occupational safety and
health, consumer product safety, the importation of goods, product liability,
currency exchange, securities and trading with the enemy matters, and to the
best of the Sellers' Knowledge no event has occurred which would constitute
reasonable grounds for a claim that non-compliance has occurred or is occurring
and any non-compliance will not have a Dow Material Adverse Effect.
(t) Tax Matters.
(i) Dow (A) has accurately prepared and timely filed or caused to
be filed with the appropriate tax authorities all material tax returns
required to have been filed by it under applicable Laws, and (B) has
paid or caused to be paid to the appropriate tax authorities all
material taxes required to have been paid by them. No tax Liens or
assessments have been filed by any tax authority against Dow or any its
property or assets.
(ii) Dow is not and has not been required to be included in any
state, local or foreign combined, unitary or consolidated tax return
filed by any Person.
(u) Year 2000 Compliance. The information technology, including
computer software, computer firmware, computer hardware (whether general or
specific purpose), and other similar or related items of automated, computerized
and/or software systems ("Information Technology") that is used or relied on by
Dow in the conduct of its business is designed to be used prior to, during and
after the calendar Year 2000. The Information Technology used during each such
time period will accurately receive, provide and process date forward-time data
(including, but not limited, to calculating, comparing and sequencing) from,
into and between the 20th and 21st Centuries, including the years 1999 and 2000,
and leap year calculations and will not malfunction, cease to function or
provide invalid or incorrect results as a result of date/time data, to the
extent that other Information Technology, used in combination with the
Information Technology of Dow, properly exchanges date/time data with it. To the
best of the Sellers' Knowledge, the Information Technology used by any mortgage
lender which Dow does business fully complies with the Year 2000 in the same
manner as described above relating to Dow.
(v) Disclosure. This Agreement and the Schedules do not contain and
will not contain an untrue statement of a material fact or omits or will omit
any information or statement of a material fact necessary in order to make the
information or statements herein or therein not misleading. After reasonable
investigation, including, without limitation, consultation with counsel, there
is no fact or condition within the Knowledge of the Sellers which materially and
adversely affects the assets, Liabilities, business, operations or financial
condition of Dow, which has not been set forth in this Agreement
18
24
or any Schedules hereto or certificate or other document delivered in
accordance with the terms hereof or any other written statement or other
document delivered to the Company by or on behalf of the Sellers.
(w) No Other Representations. Dow and the Sellers shall not be deemed
to have made any representation or warranty other than as is expressly made
in Section 3(a) through (v).
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Sellers, all of which representations and
warranties are true, complete, and correct in all respects as of the date
hereof and as of the Closing Date, as follows:
(a) Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock of which 4,485,500 shares are
outstanding. All of the issued and outstanding shares are validly issued and
are fully paid, non-assessable and free of preemptive rights. The delivery
to the Sellers of the Common Stock of the shares pursuant to the provisions
of this Agreement will transfer to the Sellers valid title thereto, free and
clear of any and all Encumbrances. All of the shares of Common Stock which
are outstanding have been duly authorized and were validly issued and are
fully paid and nonassessable and were not issued in violation of any
preemptive rights. Except as set forth on Schedule 4(a), there are not, and
on the Closing Date there will not be, outstanding any Equity Securities.
There is no contract, right or option outstanding to require the Company to
redeem, purchase or otherwise reacquire any Equity Securities of the
Company, and there are no preemptive rights with respect to any shares or
Equity Securities of the Company.
(b) Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the Laws, as defined,
of the State of Florida. The Company has all requisite power and authority
to own those properties and conduct those businesses presently owned or
conducted by it, and is duly qualified to do business as it is now being
conducted and is in good standing as a foreign corporation in each other
jurisdiction where the property owned, leased or used by it or the conduct
of its business makes such qualification necessary. The copies of the
Articles of Incorporation and By-laws of the Company, which have been
delivered to the Sellers, are complete and correct and are in full force and
effect at the date hereof.
(c) Licensing with the Department of Banking and Finance. The Company
is fully licensed with the Florida Department of Banking and Finance as a
correspondent mortgage lender and has all licenses necessary to carry on a
correspondent mortgage lending business in the State of Florida including
the business of brokering reverse mortgages. There is not now pending any
investigations or inquiries, formal or informal, by the Florida Department
of Banking and Finance concerning or relating to the Company.
19
25
(d) Authorization of the Company. The Company has full power and
authority to enter into and perform this Agreement and all corporate action
necessary to authorize the execution and delivery of this Agreement and the
performance by it of its obligations hereunder has been duly taken. This
Agreement has been duly executed by the Company and constitutes the legal,
valid, binding and enforceable obligation of the Company, enforceable against it
in accordance with its terms.
(e) Subsidiaries and Other Investments. The Company has no
subsidiaries except as set forth on Schedule 4(e) which Schedule sets forth a
complete list of each direct or indirect Subsidiary, as defined, of the Company,
its jurisdiction of organization, the authorized capital stock of each such
Subsidiary, the number of shares of outstanding capital stock of each such
Subsidiary and the owners thereof. All such issued and outstanding shares of
capital stock of each such Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable and were not issued in violation
of any preemptive rights. Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all corporate power and all material governmental
licenses, governmental authorizations, governmental consents and governmental
approvals required to carry on the business as now conducted by such Subsidiary
and to own and operate the business as now owned and operated by such
Subsidiary. Except as disclosed in Schedule 4(e), no Subsidiary holds any of
its issued and outstanding shares of capital stock in its treasury, and there
are not, and on the Closing Date there will not be, outstanding any Equity
Securities of or with respect to such Subsidiary. Except as otherwise disclosed
in Schedule 4(e), the Company or a wholly-owned Subsidiary of the Company owns,
directly or indirectly, free and clear of all Encumbrances, all of the
outstanding capital stock or other Equity Securities of each of its Subsidiaries
identified in Schedule 4(e). No Subsidiary is required to be qualified to
conduct business in any states set forth in Schedule 4(e), in which states the
relevant Subsidiary is duly qualified and in good standing.
(f) Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement requires no action by, consent or
approval of, or filing with, any governmental authority.
(g) Non-Contravention. The execution, delivery and performance by
the Company of this Agreement, and consummation of the transactions contemplated
hereby, including without limitation, the transfer of the Common Stock to the
Sellers does not and will not (i) contravene or conflict with the Articles of
Incorporation or By-Laws of the Company, true and correct copies of all of which
have been delivered to the Sellers by the Company; (ii) contravene or conflict
with or constitute a violation of any provision of any Laws, as defined,
applicable to the Company; (iii) constitute a default under or give rise to any
right of termination, cancellation or acceleration of, or to a loss of any
benefit to which the Company is entitled under, any material Contract of which
it is a party or any material permit or similar authorization; or (iv) result in
the creation or imposition, under any Contract of the Company or to which it is
a party or applicable
20
26
Laws, or any Encumbrances on the Shares or any Liens on any asset of the
Company or any Subsidiary of the Company, or impose any contractual obligation
or restriction under such Contract on the Sellers.
(h) Financial Statements; Undisclosed Liabilities. Schedule 4(h)
contains true and complete copies of the Financial Statements of the Company.
Each of the Company's Financial Statements has been prepared based on the books
and records of the Company in accordance with GAAP and present fairly the
financial condition, results of operations and cash flows of the Company as of
the dates indicated or for the periods indicated, subject in the case of the
Interim Statements to normal year-end audit adjustments, which adjustments in
the aggregate are not material. Except as set forth on Schedule 4(h), there are
no Liabilities of the Company other than: (i) on the Company's Balance Sheet;
(ii) Liabilities specifically disclosed and identified as such in the Schedules
to this Agreement; (iii) Liabilities incurred since the date of the Company's
Balance Sheet contained in the Interim Statements, that do not, and will not,
individually or in the aggregate, have a material adverse effect on the
business, results of operations, financial condition or future prospects of the
Company (each a "Company Material Adverse Effect"); and (iv) Liabilities
incurred since the date of the Company's Balance Sheet that have been incurred
in the Ordinary Course of Business of the Company.
(i) Absence of Certain Changes. Since the date of the Balance Sheet,
the Company has conducted its business in the ordinary course consistent with
past practice, and without limitation, there has not been:
(i) any event, occurrence, development or state of circumstances
or facts or change in the assets, liabilities, business, operations or
financial conditions of the Company that has had or that could
reasonably be expected to have, either alone or together with all such
events, occurrences, developments, states of circumstances or facts or
changes, a material adverse effect;
(ii) any incurrence, assumption or guarantee of any indebtedness
of the Company, whether or not contingent, in respect of borrowed money
or evidenced by bonds, notes, debentures or other similar instruments
or letters of credit (or reimbursement obligations in respect thereof)
or bank's acceptances or representing capitalized lease obligations or
the balance deferred and unpaid of the purchase price of any property
as well as all indebtedness of others secured by a Lien on any asset of
the Company (whether or not such indebtedness is assumed by the
Company) and, to the extent not otherwise included, any guarantee by
the Company of any indebtedness of any other Person;
(iii) any creation, assumption or sufferance of the existence of
any Lien;
(iv) any transaction or commitment made, or any Contract entered
into,
21
27
by the Company (including the acquisition or disposition of any
assets), or any waiver, amendment, termination or cancellation of any
Contract by the Company, or any relinquishment of any rights thereunder
by the Company, or of any other right or debt owed to the Company,
other than in each such case actions taken in the Ordinary Course of
Business consistent with past practice;
(v) any (A) grant of any severance, continuation or termination
pay to any director, officer, shareholder or employee of the Company or
any Associate, as defined, of any of the foregoing, (B) entering into
of any employment, deferred compensation or other similar agreement (or
any amendment to any such existing agreement) with any director,
officer, shareholder or employee of the Company or any Associate of any
of the foregoing, (C) increase in benefits payable or potentially
payable under any severance, continuation or termination pay policies
or employment agreements with any director, officer, shareholder or
employee of the Company or any Associate of any of the foregoing,
(D) increase in compensation, bonus or other benefits payable or
potentially payable to directors, officers, shareholders or employees
of the Company or any Associate of any of the foregoing, other than in
the Ordinary Course of Business consistent with past practice or
pursuant to existing Contracts, or (E) change in the terms of any
bonus, pension, insurance, health or other Benefit Plan of each Seller
or any of its Affiliates applicable to the Company. As used in this
Agreement, the word "Associate" and the phrase "Associated With" means,
when used to indicate a relationship with any Person, (a) any other
Person of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities issued by such other Person, (b) any trust or other estate
in which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary capacity,
and (c) any relative or spouse of such Person, or any relative of such
spouse who has the same home as such Person or who is a director or
officer of such Person or any Affiliate thereof. As used in this
Agreement, the word "Affiliate" means, with respect to any Person, any
Person directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person. As used in this
phrase "Benefit Plan" means any Employee Benefit Plan or Benefit
Arrangement, as defined. As used in this Agreement, the phrase
"Employee Benefit Plan" means any employee benefit plan, as defined in
Section 3(3) of ERISA, that is sponsored or contributed to by the
Company or any ERISA Affiliate thereof covering employees or former
employees of the Company. As used in this Agreement, the phrase
"Benefit Arrangement" means any material benefit arrangement that is
not an Employee Benefit Plan, including, without limitation, (1) each
employment or consulting agreement, (2) each arrangement providing for
insurance coverage or workers' compensation benefits, (3) each
incentive bonus or deferred bonus arrangement, (4) each arrangement
providing termination allowance, severance or similar benefits, (5)
each equity compensation plan, (6) each deferred compensation plan and
(7) each compensation policy and practice
22
28
maintained by the Company covering the employees, former employees, directors
and former directors thereof and the beneficiaries of any of them;
(vi) any loan to or guarantee or assumption of any loan or
obligation on behalf of any shareholder, director, officer or employee of the
Company or any of its Affiliates or of any Associate of any of the foregoing,
except business expense advances to employees of the Company occurring in the
Ordinary Course of Business consistent with past practice;
(vii) except as required by GAAP, any material change by the
Company in its accounting principles, methods or practices or in the manner it
keeps its books and records or any material change of the Company of its
current practices with regards to inventory, sales, receivables, payables or
accrued expenses which would affect the timing of collection of receivables or
the payment of payables;
(viii) any distribution, dividend, bonus or other payment by
the Company to the Sellers or any Affiliate of the Sellers or any officer,
director, shareholder or Affiliate of the Company (collectively,
"Distributions"); and
(ix) any payment, discharge or satisfaction of any Liabilities
of the Company, other than payments, discharges or satisfactions in the
Ordinary Course of Business consistent with past practice; or (A) any payment,
discharge or other satisfaction of any claim, Liability or obligation owed to
the Company by its Affiliates, or (B) any prepayment of any Debt.
(j) Properties; Leases; Tangible Assets.
(i) Except for those Liens identified on Schedule 4(j), the
Company owns all of the assets (real, personal or mixed, tangible or
intangible) reflected in the Balance Sheet (except those assets disposed of in
the Ordinary Course of Business after the date thereof), free and clear of all
Liens;
(ii) All tangible properties and assets and premises owned or
leased by the Company are in good condition and repair and are adequate in all
material respects for the uses to which they are put, and no tangible
properties or assets necessary for the conduct of the business of the Company
in substantially the same manner as it has heretofore been conducted are in
need of replacement, maintenance or repairs, except for routine and not
materially deferred replacement, maintenance and repair;
(iii) Schedule 4(j) sets forth a true and complete list of all
material the Leases to which the Company is a party or by which the Company is
bound. With respect to the Leases, there exist no defaults by the Company or,
to the Knowledge of the Company, any default or threatened default by any
lessor or
23
29
third party thereunder, that has affected or could reasonably be expected
to materially affect the rights and privileges thereunder of the Company.
The sale of the Common Stock to the Sellers will not adversely affect any
Leases to which the Company is a party or by which it is bound; and
(iv) No real property is owned by the Company.
(k) Affiliates. Except as set forth in Schedule 4(k) to the Knowledge, of
the Company, no shareholder of the Company or any officer or director of the
Company (or any immediate family member of any such officer or director):
(i) now has or at any time subsequent to May 31, 1998 had, directly
or indirectly, an equity interest in, or holds debt of, any Person which
furnishes or sells or during such period furnished or sold services or
products to the Company or purchases or during such period purchased from
the Company any goods or services, or otherwise does or during such
period did business with the Company. Provided, however, that no
shareholder of the Company or any of its respective officers, directors
or other Affiliates shall be deemed to have such an interest solely by
virtue of the ownership of less than 5% of the outstanding voting stock
or debt securities of any publicly-held company, the stock or debt
securities of which are traded on a national stock exchange or quoted on
Nasdaq; or
(ii) now is or at any time subsequent to May 31, 1998 was, directly
or indirectly, a party to any Contract to which the Company is or during
such period was a party or under which the Company is or was obligated or
bound or to which the Company's properties may be or may have been
subject.
(l) Litigation. Except as disclosed on Schedule 4(l), there are no
actions, claims, suits, hearings, arbitrations, proceedings (public or
private) or, to the Company's Knowledge, Proceedings pending or, to the
Knowledge of the Company, threatened, against or by the Company or which seek
to enjoin or rescind the transactions contemplated by this Agreement or
otherwise seek to prevent the Company from complying with the terms and
provisions of this Agreement, and (ii) there are no existing orders, judgments
or decrees of any governmental authority affecting the Company.
(m) Contracts.
(i) Schedule 4(m) sets forth a complete list of all Scheduled
Contracts including, without limitation:
(A) each Contract between the Company and (A) each present or former
director, officer or other member of management or other personnel of the
Company, (B) any supplier of services or products to the
24
30
Company whose dollar volume of sales to the Company taken
as a whole exceeded $50,000 in 1997, and (C) any Person in
which the aggregate payments made to the Company in 1997
under such Contract exceeded $50,000;
(B) each other agreement or arrangement of the Company
that requires the payment or incurrence of Liabilities, or the
rendering of services, by the Company, subsequent to the date
hereof of more than $50,000 or that is reasonably expected to
require payment of more than $50,000 in the aggregate;
(C) Contracts relating to, and evidences of or guarantees
of, or providing security for, Debt or the deferred purchase
price of property (whether incurred, assumed, guaranteed or
secured by any asset); and
(D) all partnership, joint venture or other similar
Contracts, arrangements or agreements.
(ii) Each Scheduled Contract relating to the Company is a legal,
valid and binding obligation of the Company that is party
thereto and, to the Knowledge of the Company, each other party
thereto, enforceable against the Company and, to the Knowledge
of the Company, each such other party thereto, in accordance
with its terms, and the Company is party thereto, and neither
the Company nor to the Knowledge of the Company, any other party
thereto, is in material default or has failed to perform any
material obligation thereunder. Complete and correct copies of
each Scheduled Contract have been delivered or made available to
the Company. There is no default or failure to perform under
other Contracts which could reasonably be expected to have a
material adverse effect.
(n) Permits.
(i) Schedule 4(n) sets forth all material Permits necessary for
the operation of the Company in substantially the same manner as
currently operated or affecting or relating in any way to the Company
(the "Permits").
(ii) Schedule 4(n) lists (A) each governmental or other
registration, filing, application, notice, transfer, consent,
approval, order, qualification and waiver required under applicable
laws to be obtained by the Company by virtue of the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby to avoid the loss of any material Permit or
otherwise, and (B) each Scheduled Contract with respect to which the
consent of the other party or parties thereto must be obtained by the
Company by virtue of the execution and delivery of this Agreement or
the consummation of the
25
31
transactions contemplated hereby to avoid the invalidity of the
transfer of such Contract, the termination thereof, a breach or
default thereunder or any other change or modification to the terms
thereof. Each Permit is valid and in full force and effect in all
material respects and, assuming all necessary consents have been
obtained prior to the Closing, are or will be transferable and
assuming the necessary consents have been obtained prior to the
Closing, none of the Permits will be terminated or become terminable
or impaired in any material respect as a result of the transactions
contemplated hereby. To the Knowledge of the Company there are no
facts relating to the identity or circumstances of the Company that
would prevent or materially delay obtaining any of the consents.
(o) Employment Agreements.
(i) There are no Employment Agreements between or binding upon
the Company, on the one hand, and any current or former shareholder,
officer, director, employee or Affiliate of the Company or any of its
respective Associates or any consultant or agent of the Company, on
the other hand, that are currently in effect;
(ii) Except as disclosed on Schedule 4(o), there are no
Employment Agreements or any other similar agreements to which the
Company is a party or by which it is bound under which the
transactions contemplated by this Agreement (A) will require any
payment by the Company, or any consent or waiver from any
shareholder, officer, director, employee or Affiliate of the Company
or any of its respective Associates or any consultant or agent of the
Company, or (B) will result in any increase, acceleration, vesting
or other change in the compensation, benefits or other rights of any
shareholder, officer, director, employee or Affiliate of the Company
or any of its respective Associates or any consultant or agent of the
Company under any such Employment Agreement or other similar
agreement.
(iii) Set forth all Benefit Plans of the Company, in which any
employees or former employees and their beneficiaries of the Company
participate. The Company has made available to the Sellers true and
correct copies of all governing instruments and related agreements
pertaining to such Benefit Plans.
(iv) Neither the Company nor any Affiliate or ERISA Affiliate
sponsors or has ever sponsored, maintained, contributed to, or
incurred an obligation to contribute to, any Employee Benefit Plan.
In connection with any Employee Benefit Plan currently maintained by
the Company, (A) there have been no accumulated funding deficiencies
(within the meaning of the Code, Section 412), whether or not waived,
(B) there have been no reportable events (within the meaning of ERISA
Section 4043(b)) other than any reportable event that may
26
32
arise in connection with the transactions contemplated by this Agreement, and
(C) no circumstances exist that would warrant a termination of any such plan by
the Pension Benefit Guaranty Corporation pursuant to ERISA Section 4042. No
Employee Benefit Plan has been terminated within the last five years in other
than a standard termination under Section 4041(b) of ERISA and all liabilities
under such plans have been adequately and properly discharged. The foregoing
applies only to the extent any of the events results in a material Liability of
the Company.
(v) No agreement, commitment or obligation exists to increase
benefits under any Benefit Plan or to adopt any new Benefit Plan. Further, no
individual shall accrue or receive additional benefits, service or accelerated
rights to payments of benefits under any Benefit Plan, including the right to
receive any parachute payment, as defined in Section 280G of the Code, or
become entitled to severance, termination allowance or similar payments as a
direct result of the transactions contemplated hereby, the Company is not a
party to any agreement or arrangement that could result in the payment of any
such benefits or payments.
(vi) No Benefit Plan has participated in, engaged in or been a
party to any non-exempt Prohibited Transaction, as defined, and none of the
Company or any Affiliate has had asserted against it any material claim for
taxes under Chapter 43 of Subtitle A of the Code and Section 5000 of the Code,
or for material penalties under ERISA Section 502(c), (A) or (B), with respect
to any Employee Benefit Plan nor, to the Knowledge of the Company, is there a
material basis for any such claim. No officer, director or employee of the
Company has committed a material breach of any responsibility or obligation
imposed upon fiduciaries by Title I of ERISA with respect to any Benefit Plan,
with respect to which breach the Company is or could be directly or indirectly
liable.
(vii) Other than routine claims for benefits, there is no claim
pending, or to the Knowledge of the Company, threatened, involving the Company
by any Person against such Plan. There is no pending, or to the Knowledge of
the Company, threatened, proceeding involving any Employee Benefit Plan before
the IRS, the USDL or any other governmental authority that affects any Benefit
Plan.
(viii) There is no material violation of any reporting or
disclosure requirement imposed by ERISA or the Code with respect to any Benefit
Plan.
(ix) Each Employee Benefit Plan has at all times prior hereto
been maintained in all material respects, by its terms and in operation, in
accordance with ERISA and the Code. The Company and its respective Affiliates
and ERISA Affiliates have made full and timely payment of all amounts required
to be contributed under the terms of each Employee Benefit Plan and applicable
Laws or required to be paid as expenses under such Employee Benefit Plan, and
the
27
33
Company and its Affiliates shall continue to do so through the Closing.
Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code is and has always been so qualified, and
either has received a favorable determination letter with respect to
such qualified status from the IRS or has filed a request for such a
determination letter with the IRS within the remedial amendment period
such that such determination of qualified status will apply from and
after the effective date of any such Employee Benefit Plan.
(x) The Company has made available to the Sellers, a copy of
the most recently filed Federal Form 5500 series and accountant's
opinion, if applicable, for each Employee Benefit Plan.
(p) Employment Matters. Annexed as Schedule 4(p) is a copy of the
Company's employee manual. (i) to the best of the Company's Knowledge, there
are no charges or complaints of discrimination pending before the United States
Equal Employment Opportunity Commission or any other federal, state, local or
foreign agency or tribunal against the Company; (ii) to the best of the
Company's Knowledge, the Company does not presently employ, and at no time
during the past year did it employ, any illegal alien; (iii) the Company is in
compliance in all material respects with all federal, state and local labor and
employment-related Laws applicable to its business; (iv) to the best of the
Company's Knowledge, no employee or former employee of the Company has never
made any formal or informal charge or allegation relating to sexual harassment;
and (v) all individuals who are performing or have performed services for the
Company or any affiliate thereof and are or during 1996 or 1997 were classified
by the Company as "independent contractors" qualified for such classification
under Section 530 of the Revenue Act of 1978 or Section 1706 of the Tax Reform
Act of 1986.
(q) Intellectual Property and Intangible Assets. The Company owns or
possesses valid and binding licenses or other rights to use, whether or not
registered, all of its Intellectual Property and Intangible Assets. Schedule
4(q) sets forth a complete and accurate list of all such Intellectual Property
and Intangible Assets (identifying those owned and those licensed), including
all United States, state and foreign registrations or applications for
registration thereof and all agreements (including, without limitation,
agreements pursuant to which the Company has granted licenses to third parties
to use any Intellectual Property or Intangible Asset) relating thereto. All
actions necessary to maintain the registered Intellectual Property and
Intangible Assets have been taken by the Company. The Company is not required
to pay any royalty, license fee or similar compensation with respect to the
Intellectual Property or Intangible Assets in connection with the current or
prior conduct of its business. The use by the Company of any of the
Intellectual Property or Intangible Assets does not violate the proprietary
rights of any other Person and no claims have been asserted by any Person with
respect to the use of the Intellectual Property or Intangible Assets by the
Company. To the Company's Knowledge, no Person is infringing upon the
Intellectual Property or Intangible Assets. The Company has taken reasonable
security measures to protect the secrecy,
28
34
confidentiality and value of the Intellectual Property. No person, other than
the Company, owns or has any proprietary, financial or other interest, direct
or indirect, in whole or in part, in any Intellectual Property or Intangible
Asset. Except as set forth in Schedule 4(q), the Company is not a party to any
confidentiality, secrecy or similar agreements with third parties.
(r) Compliance With Law. The Company has at all times operated in all
respects and is presently in compliance in all material respects with all
applicable Laws including but not limited to all applicable domestic and foreign
Laws, rules and regulations relating to the safe conduct of business, employment
discrimination, wages and hours, employment of illegal aliens, collective
bargaining, the payment of withholding and social security taxes, product
labelling, antitrust, consumer protection, occupational safety and health,
consumer product safety, the importation of goods, product liability, currency
exchange, securities and trading with the enemy matters, and to the Company's
Knowledge no event has occurred which would constitute reasonable grounds for a
claim that non-compliance has occurred or is occurring and any non-compliance
will not have a Company Material Adverse Effect.
(s) Tax Matters.
(i) The Company (A) has accurately prepared and timely filed or
caused to be filed with the appropriate tax authorities all material
tax returns required to have been filed by it under applicable Laws,
and (B) has paid or caused to be paid to the appropriate tax
authorities all material taxes required to have been paid by them. No
tax Liens or assessments have been filed by any tax authority against
the Company or any its properties or assets.
(ii) The Company is not and has not been required to be included
in any state, local or foreign combined, unitary or consolidated tax
return filed by any person.
(t) Year 2000 Compliance. The Information Technology, including
computer software, computer firmware, computer hardware (whether general or
specific purpose), and other similar or related items of automated, computerized
and/or software systems that is used or relied on by the Company in the conduct
of its business is designed to be used prior to, during and after the calendar
Year 2000. The Information Technology used during each such time period will
accurately receive, provide and process date forward-time data (including, but
not limited, to calculating, comparing and sequencing) from, into and between
the 20th and 21st Centuries, including the years 1999 and 2000, and leap year
calculations and will not malfunction, cease to function or provide invalid or
incorrect results as a result of date/time data, to the extent that other
Information Technology, used in combination with the Information Technology of
the Company, properly exchanges date/time data with it. To the Company's
Knowledge, the Information Technology used by any mortgage lender with which the
Company does
29
35
business fully complies with the Year 2000 in the same manner as described
above relating to the Company.
(u) Disclosure. This Agreement and the Schedules do not contain and
will not contain an untrue statement of a material fact or omits or will omit
any information or statement of a material fact necessary in order to make the
information or statements herein or therein not misleading. After reasonable
investigation, including, without limitation, consultation with counsel, there
is no fact or condition within the Knowledge of the Company which materially and
adversely affects the assets, Liabilities, business, operations or financial
condition of the Company, which has not been set forth in this Agreement or any
Schedules hereto or certificate or other document delivered in accordance with
the terms hereof or any other written statement or other document delivered to
the Sellers by or on behalf of the Company.
(v) No Other Representations. The Company shall not be deemed to have
made to any representation or warranty other than as is expressly made in
Sections 4(a) through (u).
5. COVENANTS PRIOR TO CLOSING.
(a) The Company's Covenants. The Company covenants that, except as
otherwise consented to in writing by the Sellers, from and after the date hereof
until the Closing or the earlier termination of this Agreement:
(i) Except as set forth in Schedule 5(a), the Company shall not
engage in any practice, take any action or enter into any transaction
outside the Ordinary Course of Business. Without limiting the
generality of the foregoing:
(A) The Company will not authorize or effect any change in
its Articles of Incorporation or By-Laws; and
(B) The Company shall not issue any note, bond or other
debt security or create, incur, assume or grant any indebtedness
or borrow money or capitalize lease obligations outside the
Ordinary Course of Business.
(ii) All real property, machinery and equipment and other
operating properties used in the business of the Company will be kept
and maintained in good repair and working order (ordinary wear and tear
excepted) on a basis consistent with past practices, and the Company
will duly observe and conform to all material terms and conditions upon
or under which any of such properties are held.
(iii) The Company will use its best efforts to maintain in full
force and
30
36
effect in all material respects all insurance coverages for its
business currently in effect and shall undertake to obtain equivalent
replacement coverage with respect to any policies hereafter canceled
or terminated.
(iv) The Company shall give the Sellers access to such
information as they request from time to time.
(b) Cooperation. The Company and the Sellers agree to cooperate with
each other in determining whether any filings are required to be made or
consents required to be obtained in any jurisdiction in connection with the
consummation of the transactions contemplated hereby and in making or causing to
be made any such filings promptly and in seeking to obtain in a timely manner
any such consents; and to use all reasonable efforts to obtain promptly the
satisfaction of the conditions to the Closing of the transactions contemplated
herein. The Company and the Sellers shall furnish to each other and to each
other's counsel all such information as may be reasonably required in order to
effectuate the foregoing.
(c) The Sellers' Covenants. The Sellers covenant that, except as
otherwise consented to in writing by the Company, from and after the date hereof
until the Closing or the earlier termination of this Agreement:
(i) Except as set forth in Schedule 5(a), Dow will not engage in
any practice, take any action or enter into any transaction outside
the Ordinary Course of Business. Without limiting the generality of
the foregoing:
(A) Dow will not authorize or effect any change in its
Articles of Incorporation or By-Laws; and
(B) Dow shall not issue any note, bond or other debt
security or create, incur, assume or grant any indebtedness or
borrow money or capitalize lease obligations outside the Ordinary
Course of Business.
(ii) All real property, machinery and equipment and other
operating properties used in the business of the Dow will be kept and
maintained in good repair and working order (ordinary wear and tear
excepted) on a basis consistent with past practices, and the Dow will
duly observe and conform to all material terms and conditions upon or
under which any of such properties are held.
(iii) Dow will use its best efforts to maintain in full force
and effect in all material respects all insurance coverages for its
business currently in effect and shall undertake to obtain equivalent
replacement coverage with respect to any policies hereafter canceled
or terminated.
(iv) The Sellers shall give the Company access to such
information as
31
37
they request from time to time.
6. CONDITIONS TO CLOSING.
(a) Conditions to the Obligations of the Company. The obligations of
the Company under this Agreement shall be subject to satisfaction of the
following conditions, unless waived by the Company:
(i) The Sellers shall deliver stock certificates properly
endorsed which constitute all of the issued and outstanding capital
stock of Dow.
(ii) There shall not have occurred since May 31, 1998, except
as set forth in Schedule 6(a), any material adverse change with
respect to the business, assets, financial condition or results of
operations of Dow.
(iii) The Sellers shall have performed in all material respects
all other agreements, and satisfied in all material respects all
other conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date.
(iv) All of the representations and warranties of the Sellers
herein shall have been true and correct in all material respects when
made, shall have continued to have been true and correct in
all material respects at all times subsequent thereto, and shall be
true and correct in all material respects on and as of the Closing
Date as though made on, as of and with reference to such date.
(v) The Sellers shall have obtained all consents and approvals
required to be obtained on their behalf or on behalf of Dow in
connection with the sale of the Shares as contemplated by this
Agreement.
(vi) Delivery of an opinion of counsel to the Sellers,
addressed to the Company and dated the Closing Date, in substance
similar to that contained on Schedule 6(a).
(vii) Each of the Sellers shall have executed an employment
agreement, copies of which are annexed as Schedule 6(a)(vii).
(b) Conditions to the Obligations of the Sellers. The obligations of
the Sellers under this Agreement shall be subject to satisfaction of the
following conditions, unless waived by the Sellers:
(i) The Company shall have performed in all material respects
all agreements, and satisfied in all material respects all conditions
on its part to be performed or satisfied hereunder at or prior to the
Closing Date.
32
38
(ii) All representations and warranties of the Company herein
shall have been true and correct in all material respects when made,
shall have continued to have been true and correct in all material
respects at all times subsequent thereto, and shall be true and
correct in all material respects on and as of the Closing Date as
though made on, as of and with reference to such date.
(iii) There shall not have occurred since May 31, 1998, except
as set forth in Schedule 6(b), any material adverse change with
respect to the business, assets, financial condition or results of
operations of the Company.
(iv) The Company shall have delivered to the Sellers the
appropriate number of shares of Common Stock of the Company as
contemplated by this Agreement.
(v) Delivery of an opinion of counsel to the Company addressed
to the Sellers and dated the Closing Date in substance similar to
that on Schedule 6(b).
(c) Conditions to the Obligations of the Company and the Sellers.
The obligations of the Company and the Sellers to consummate any of the
transactions contemplated by this Agreement shall be subject to there being no
injunction or temporary restraining order granted restraining or prohibiting
the consummation of the transactions contemplated by this Agreement, and no
action, suit or other proceeding by any federal, state, or local governmental
authority seeking such an injunction or order shall be pending or threatened.
(d) Closing Documents. If there is a Closing as contemplated by this
Agreement, the parties shall deliver to each other, in form and substance
reasonably satisfactory and consistent with this Agreement all documents
necessary including stock certificates and officers certificates as to the
accuracy of representations and warranties.
7. POST-CLOSING COVENANTS. Following the Closing, the parties hereto shall be
bound by the following covenants;
(a) Adjustments. The Adjustments contained in Section 2(b) of this
Agreement, the Company shall, to the extent applicable have been made by the
Company.
(b) Further Assurances. The Company and the Sellers from time to
time after the Closing, upon request, will execute, acknowledge and deliver
such other instruments of conveyance and transfer and will take such other
actions and execute and deliver such other documents, certifications and
further assurances as the other party may reasonably require. Each of the
parties hereto will cooperate with the other and execute and deliver to the
other parties hereto such other instruments and documents and take such other
actions as may be reasonably requested from time to time by any other party
hereto as
33
39
necessary to carry out, evidence and confirm the intended purposes of this
Agreement.
(c) Board of Directors of Dow. Following the Closing, until such time
as the adjustments to the Purchase Price provided for by Section 2 of this
Agreement have been made and the Notes, if any, are paid (the later of which
date is the "Adjustment Date"), the Board of Directors of Dow shall consists of
three persons, two of whom shall be designated by the Sellers and one of whom
by the Company.
(d) Board of Directors of the Company. Until the Adjustment Date, the
Sellers shall have the right to designate one person to serve on the Board of
Directors of the Company. The Company shall use its best efforts to either
cause such person to be elected at the meetings of its shareholders or
appointed, as the case may be.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
(a) Survival of Representation and Warranties. The representations
and warranties contained in this Agreement shall survive the Closing for a
period of two years except as otherwise provided in this Agreement.
(b) Indemnification by the Company. The Company shall defend,
indemnify, and hold harmless the Sellers and their affiliates and their
respective officers, directors, shareholders, agents and employees
(individually, a "Seller Indemnitee" and collectively the "Sellers'
Indemnitees"), from and against any and all claims, losses, deficiencies,
liabilities, obligations, damages, penalties, punitive damages, costs, and
expenses (including, without limitation, reasonable legal, accounting and
consulting fees), whether or not resulting from third party claims
(collectively, "Losses"), suffered by a Seller Indemnitee, which arise out of
or result from:
(i) any inaccuracy or misrepresentation in or breach of any of
the representations, warranties, covenants or agreements made by the Company in
this Agreement or in any document, certificate or affidavit delivered by the
Company pursuant to the provisions of this Agreement;
(ii) any other matter related to the conduct of its business by
the Company or any predecessor prior to the Closing (including, but not limited
to, all acts, omissions and conditions existing or occurring prior to the
Closing for which any of the Seller Indemnitees is alleged to be liable
pursuant to any successor or similar theory of liability).
(c) Indemnification by the Sellers. The Sellers shall defend,
indemnify, and hold harmless the Company and its affiliates and its respective
officers, directors, shareholders, agents and employees (individually, a
"Company Indemnitee" and collectively the "Company's Indemnitees"), from and
against any and all Losses, suffered by a Company Indemnitee, which arise out
of or result from:
34
40
(i) any inaccuracy or misrepresentation in or breach of any of
the representations, warranties, covenants or agreements made by the
Sellers in this Agreement or in any document, certificate or affidavit
delivered by the Sellers pursuant to the provisions of this Agreement;
(ii) any other matter related to the conduct of Dow's business
or of any predecessor prior to the Closing (including, but not limited
to, all acts, omissions and conditions existing or occurring prior to
the Closing for which any of the Company Indemnitees is alleged to be
liable pursuant to any successor or similar theory of liability).
(iii) If the Company makes a claim for indemnification under
this Agreement, the Common Stock of the Seller (or both) and her or
his transferees (unless the Common Stock has been publicly sold in the
over-the-counter market) shall be subject to immediate stock transfer
restrictions until the claim for indemnification has been finally
adjudicated and all times for appeal have expired. The Sellers consent
to the placing of an appropriate legend on all stock certificates
which shall refer to such restriction the earlier of: (A) public sale
of Common Stock (as to such certificates) in the over-the-counter
market, or (B) two years from the date of closing.
(d) Indemnification Payments. Subject to Section 8(g), all indemnity
payments, whether by the Company or the Sellers to be made under this
Agreement shall be made in immediately available funds.
(e) Procedure for Third Party Claims.
(i) Notice to the indemnifying party shall be given promptly
after receipt by any Seller Indemnitee or Company Indemnitee of actual
Knowledge of the commencement of any action or the assertion of any
claim that will likely result in a claim by it for indemnity pursuant
to this Agreement. Such notice shall set forth in reasonable detail
the nature of such action or claim to the extent known, and include
copies of any written correspondence or pleadings from the party
asserting such claim or initiating such action. The indemnifying party
shall be entitled, at its own expense, to assume or participate in the
defense of such action or claim. In the event that the indemnifying
party assumes the defense of such action or claim, it shall be
conducted by counsel chosen by such party and approved by the party
seeking indemnification, which approval shall not be unreasonably
withheld.
(ii) With respect to actions as to which the indemnifying party
does not exercise its right to assume the defense, the party seeking
indemnification shall assume and control the defense of and contest
such action with counsel chosen by it and approved by the indemnifying
party, which approval shall not be
35
41
unreasonably withheld. The indemnifying party shall be entitled to
participate in the defense of such action, the cost of such
participation to be at its own expense. The indemnifying party shall be
obligated to pay the reasonable attorneys' fees and expenses of the
party seeking indemnification to the extent that such fees and expenses
related to claims as to which indemnification is payable under Sections
8(b) or (c), as such expenses are incurred.
(iii) Both the indemnifying party and the indemnified party shall
cooperate fully with one another in connection with the defense,
compromise, or settlement of any such claim or action, including,
without limitation, by making available to the other all pertinent
information and witnesses within its control.
(f) Remedies Cumulative. The remedies provided for herein shall be
cumulative and shall not preclude assertion by any party of any other rights
or the seeking of any other remedies against any other party. Nothing
contained in Sections 8(c) and (d) shall be construed in any way to limit,
impair or modify any provisions of this Agreement or to otherwise impose any
additional liability or obligation on either party at any time for any
liability or obligation of the any other party other than such party's
obligation to indemnify as provided in this Agreement.
(g) Limits on Indemnification. Notwithstanding the provisions of
Sections 8(b) and (c) above, neither the Buyer Indemnitees nor the Seller
Indemnitees shall be entitled to receive indemnification under this
Agreement for a claim relating to a breach of a representation or warranty
contained herein until the aggregate amount of indemnification claims they
shall have asserted hereunder shall exceed $50,000.
9. BROKERAGE. Each of the parties represents that it has dealt with no
broker or finder in connection with any of the transactions contemplated by this
Agreement, and, insofar as it knows, no broker or other person is entitled to
any compensation including, without limitation, a commission or finder's fee, in
connection with any of these transactions except the Company shall be
responsible to pay for the fees and costs of its financial advisor, Vistra
Growth Partners, Inc. The parties each agree to indemnify and hold harmless one
another against any loss, liability, damage, cost, claim, or expense incurred by
reason of any compensation, including, without limitation, brokerage,
commission, or finder's fee, alleged to be payable because of any act, omission,
or statement or the indemnifying party.
10. GENERAL PROVISIONS.
(a) Termination by the Company or by the Sellers. If the transaction
contemplated by this Agreement fails to close by July 31, 1998, either the
Company on one hand or both of the Sellers, on the other hand, may terminate
this Agreement by the giving of notice.
36
42
(b) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future Laws, such provision
shall be fully severable and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
hereof and the remaining provisions hereof shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision by
its severance herefrom.
(c) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
(d) Benefit. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
successors and assigns.
(e) Notices and Addresses. All notices, offers, acceptance and any
other acts under this Agreement (except payment) shall be in writing, and shall
be sufficiently given if delivered to the addressees in person, by Federal
Express or similar receipted delivery or by facsimile delivery as follows:
The Company: America's Senior Financial Services, Inc.
▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.A.
▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
The Sellers: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇, P.A.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. #▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
37
43
or to such other address as either of them, by notice to the other may
designate from time to time. The transmission confirmation receipt from the
sender's facsimile machine shall be conclusive evidence of successful facsimile
delivery. Time shall be counted to, or from, as the case may be, the delivery
in person or by mailing.
(f) Attorney's Fees. In the event that there is any controversy or
claim arising out of or relating to this Agreement, or to the interpretation,
breach or enforcement thereof, and any action or arbitration proceeding is
commenced to enforce the provisions of this Agreement, the prevailing party
shall be entitled to an award by the court or arbitrators, as appropriate, of
reasonable attorney's fees, including the fees on appeal, costs and expenses.
(g) Oral Evidence. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated, except by a statement in writing signed by the party or parties
against which enforcement or the change, waiver discharge or termination is
sought.
(h) Additional Documents. The parties hereto shall execute such
additional instruments as may be reasonably required by their counsel in order
to carry out the purpose and intent of this Agreement and to fulfill the
obligations of the parties hereunder.
(i) Governing Law. This Agreement and any dispute, disagreement, or
issue of construction or interpretation arising hereunder whether relating to
its execution, its validity, the obligations provided herein or performance
shall be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
(j) Arbitration. Any controversy, dispute or claim arising out of or
relating to this Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in Dade County, Florida (unless the
parties agree in writing to a different location), before three arbitrators in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrators. The decision and award made by
the arbitrators shall be final, binding and conclusive on all parties hereto for
all purposes, and judgment may be entered thereon in any court having
jurisdiction thereof.
(k) Expenses. The Company and the Sellers shall each pay all of their
own expenses relating to the negotiation and preparation of this Agreement and
all other
38
44
documents relating to the consummation of the transaction contemplated by
this Agreement.
(l) Section Headings. Section headings herein have been inserted
for reference only and shall not be deemed to limit or otherwise affect,
in any matter, or be deemed to interpret in whole or in part any of the
terms or provisions of this Agreement.
(m) Effective Investigation. Any inspection, preparation or
compilation of information or Schedules, or review of the inventories,
properties, financial condition or other matters relating to the Company
conducted by or on behalf of the Sellers or relating to Dow conducted by
or on behalf of the Company pursuant to this Agreement shall in no way
limit, affect or impair the ability of the Company or the Sellers to rely
upon the representations, warranties, covenants and agreements of the
Sellers or the Company, as may be applicable, contained in this Agreement.
IN WITNESS WHEREOF the parties hereto have set their hand and seals as of
the date first above written.
AMERICA'S SENIOR FINANCIAL SERVICES
/s/ By: /s/
-------------------------------- -------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
/s/
--------------------------------
/s/ /s/
-------------------------------- ------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/
--------------------------------
/s/ /s/
-------------------------------- ------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/
--------------------------------
39
45
SCHEDULE 4(A) TO
STOCK PURCHASE AGREEMENT
------------------------
SUBSIDIARIES AND OTHER INVESTMENTS
------------------------
590,000 Class A Warrants
200,000 Class B Warrants