Exhibit 2.1
Agreement and Plan of Merger, dated August 8, 2002,
among Newtek Capital, Inc., Wilshire New York
Partners III, L.L.C., Comcap Holding Corp.,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the Majority
Stockholders of Comcap Holding Corp. and The
Green Family Entities, and to be joined by SBA Holdings, Inc.
AGREEMENT AND PLAN OF MERGER
among
NEWTEK CAPITAL, INC.,
WILSHIRE NEW YORK PARTNERS III, L.L.C.,
COMCAP HOLDINGS CORP.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
THE MAJORITY STOCKHOLDERS OF COMCAP HOLDINGS CORP. and
THE GREEN FAMILY ENTITIES, and
to be joined in by
SBA HOLDINGS, INC.
Dated
August 8, 2002
AGREEMENT AND PLAN OF MERGER
This Agreement And Plan of Merger ("Agreement"), together with all the
Exhibits, Schedules and other attachments is effective as of August 8, 2002
("Effective Date") and is made among Newtek Capital, Inc., a New York
corporation ("Newtek"), Wilshire New York Partners III, L.L.C., a New York
limited liability company and wholly-owned subsidiary of Newtek ("Wilshire"),
Comcap Holdings Corp., a Delaware corporation ("Comcap"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇") and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), as the majority common
stockholders of Comcap and the twelve trusts or corporations and one individual
related to the Green family holding preferred stock and or a note issued by
Comcap and identified on Exhibit A and referred to herein as the "Green Trusts"
(▇▇▇▇▇▇▇▇, the Green Trusts and ▇▇▇▇▇▇▇ are collectively referred to in this
Agreement as the "Comcap Stockholders"). Newtek, Wilshire, Comcap and the Comcap
Stockholders may be referred to in this Agreement individually as a "Party" and
collectively as the "Parties."
PRELIMINARY STATEMENTS
SBA Holdings, Inc., a New York corporation ("SBA Holdings") has been
organized by ▇▇▇▇▇▇▇ ▇▇▇▇ for the purpose of engaging in the business of making
and dealing in loans to small businesses under programs generally available
through the United States Small Business Administration ("SBA"); Newtek and
Wilshire have entered into an agreement to acquire seventy five percent (75%),
on a fully diluted basis, of all of the equity of SBA Holdings in exchange for a
capital contribution to SBA Holdings of $2 million and the rights of Newtek and
Wilshire to the acquisition of Comcap pursuant to this Agreement. SBA Holdings
also intends to issue an additional twenty percent (20%), on a fully diluted
basis, of its equity to a third party financial partner in exchange for an
additional $2 million.
The Boards of Directors of Newtek, SBA Holdings and Comcap, the
Managers of Wilshire, and the stockholders of SBA Holdings have approved and
authorized the acquisition of Comcap by Newtek through the merger of SBA
Holdings with and into Comcap, pursuant to the terms hereof (the "Merger").
Pursuant to the terms of this Agreement, all of the Comcap Common
Stock and Comcap Preferred Stock, Series A and Series B (collectively, the
"Comcap Stock"), outstanding at the Closing (as defined in herein), shall be
exchanged for shares of Newtek Common Stock, par value $0.02 per share ("Newtek
Common Stock"), as more fully provided in this Agreement.
Comcap is the sole stockholder of Commercial Capital Corporation, a
Delaware corporation ("CCC") and CCC Real Estate Holding Co., LLC, a Delaware
limited liability company ("Comcap Real Estate"); and Comcap, CCC and Comcap
Real Estate are referred to herein collectively as the Comcap Companies.
AGREEMENT
Now, therefore, in consideration of the premises and the mutual and
dependent promises set forth, the Parties agree as follows:
Article I
ACQUISITION
Section 1.01 Merger. As promptly as practicable following the satisfaction
or waiver of
the conditions to the Parties' respective obligations hereunder, at the
Effective Time (as defined in Section 1.02) and pursuant to the terms hereof,
Comcap shall be merged with SBA Holdings. Comcap shall be the surviving
corporation of the Merger (the "Surviving Corporation"). At the Effective Time,
the separate existence of SBA Holdings shall cease and all of the rights,
privileges, powers, franchises, properties, assets, liabilities and obligations
of Comcap and SBA Holdings shall be vested in and assumed by Surviving
Corporation.
Section 1.02 Effective Time. The Merger shall be effected by filing
certificates of merger, in the form attached hereto as Exhibit B, with the
Secretaries of State of Delaware and New York in accordance with Delaware and
New York law to become effective on the day of the Closing provided for in
Section 1.09 hereof. "Effective Time" shall mean the later of: (a) the actual
time of filing of the certificate of merger with the Secretary of State of
Delaware; and (b) the actual time of filing of the certificate of merger with
the Secretary of State of New York.
Section 1.03 Certificate of Incorporation and By-laws. The Certificate of
Incorporation and By-laws of the Surviving Corporation shall be the Certificate
of Incorporation and By-laws of Comcap as in effect immediately prior to the
Effective Time, until thereafter amended as provided therein and by applicable
law.
Section 1.04 Directors of Surviving Corporation. The directors of SBA
Holdings immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-Laws of Surviving Corporation.
Section 1.05 Officers of Surviving Corporation. The officers of SBA
Holdings immediately prior to the Effective Time shall be the initial officers
of Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
Section 1.06 Conversion of Comcap Common and Preferred Stock.
(a) At the Effective Time, each share of Comcap Common Stock
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into and exchangeable for 0.05616 shares of Newtek Common Stock.
(b) At the Effective Time, each share of Comcap Preferred Stock,
Series A issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and exchangeable for 4.6206 shares of Newtek Common
Stock.
(c) At the Effective Time, each share of Comcap Preferred Stock,
Series B issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and exchangeable for 0.31867 shares of Newtek Common
Stock.
(d) As additional consideration to the holders of the possible
rights to "put" their shares of Comcap Common Stock to Comcap, Newtek will
distribute 2.8808 shares of Newtek Common Stock to the said holders for each
share of Comcap Common Stock, for an aggregate of 48,551 shares of Newtek Common
Stock provided that each and every such
recipient shall have executed a waiver satisfactory in form to Newtek of any
possible rights with respect to said Comcap Common Stock.
(e) All shares of Newtek Common Stock issued in connection with
the Merger shall be referred to as "Merger Shares." The aggregate number of
Merger Shares to be issued shall be 463,450 shares of Newtek Common Stock, and
shall be distributed as shown on Exhibit C. No fractional shares of Newtek
Common Stock shall be issued and all shares of such stock to be issued will be
rounded to the nearest whole number.
(f) Certificates representing twenty percent (20%) of the Merger
Shares issued to the Comcap Stockholders (the "Escrow Shares") shall be placed
in escrow at the Closing pursuant to an escrow agreement in the form of Exhibit
D (the "Escrow Agreement"), to be released to the Comcap Stockholders only under
the circumstances described herein and therein.
Section 1.07 Escrow. The Escrow Shares, which are to be placed in escrow on
behalf of the Comcap Stockholders pursuant to the terms of the Escrow Agreement
shall be released from escrow or returned to Newtek, pursuant to the terms of
Sections 7.01 and 7.03 of this Agreement and the provisions set forth in the
Escrow Agreement. The Comcap Stockholders shall have the right to vote and
receive dividends with respect to the Escrow Shares but to the extent that
dividends are declared and paid or accrued, as the case may be, with respect to
the Escrow Shares, such dividends shall be held in escrow along with the Escrow
Shares and delivered to the said holders at the time of and in proportion to the
delivery of the Escrow Shares.
Section 1.08. SBA Holdings Common Stock. Each share of common stock of SBA
Holdings issued and outstanding immediately prior to the Effective Time shall be
converted into one (1) share of common stock of the Surviving Corporation at the
Effective Time.
Section 1.09 Closing; Surrender of Certificates.
(a) The parties shall agree to a mutually acceptable closing date,
time and location ("Closing") that must be not later than ten (10) calendar days
after receipt of all necessary regulatory approvals, including any mandatory
waiting periods.
(b) At the Closing, the Comcap Stockholders and all other holders
of Comcap Stock shall: (i) surrender certificate(s) evidencing all the Comcap
Stock ("Certificate(s)") to Wilshire in exchange for either the Merger Shares or
placement of the Escrow Shares in escrow as provided herein; and (ii) deliver to
Newtek and Wilshire written waivers and releases of Newtek, Wilshire and the
Surviving Corporation (in form as attached hereto as Exhibit E) for any unpaid
cumulative dividends, distributions or other claims with respect to the Comcap
Stock or otherwise due and owing to such stockholders through the date of
Closing.
Section 1.10 The Green Trusts' Note. At Closing, The Green Trusts shall, in
consideration of the receipt of the Merger Shares provided for the Comcap
Preferred Stock, Series A, agree to cancellation of the Demand Promissory Note
dated December 14, 2000 issued by Comcap, in the original principal amount of
$285,714.28, and in consideration of the receipt of the Merger Shares provided
for the Comcap Preferred Stock, Series B, agree to cancellation of the Demand
Promissory Note dated December 14, 2000 issued by Comcap, in the original
principal amount of $1,714,285.72, as well as the cancellation or waiver of all
other obligations
to the Green Trusts from Comcap or CCC, including accrued interest, penalties
and dividends accrued or payable.
Section 1.11 Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in Section 906 of the Business
Corporation Law of The State of New York, as amended, and Section 259 of the
Delaware General Corporation Law, as amended.
Section 1.12 Additional Actions.
(a) If, at any time after the Effective Time, Surviving
Corporation shall consider or be advised that any further assignments or
assurances in law or any other acts are necessary or desirable to vest, perfect
or confirm, of record or otherwise, in Surviving Corporation, title to and
possession of any property or right of Comcap acquired or to be acquired by
reason of, or as a result of, the Merger, or otherwise to carry out the purposes
of this Agreement, Comcap and its proper officers and directors, solely in their
official capacity as officers and directors, shall be deemed to have granted to
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of such
property or rights in Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the proper officers and directors of Surviving
Corporation are fully authorized in the name of Comcap or otherwise to take any
and all such action.
(b) By the execution hereof, the Comcap Stockholders (as defined
above) agree to vote their shares of Comcap Common Stock and Comcap Preferred
Stock in favor of the merger contemplated herein at such time as the matter is
put to a vote of the Comcap stockholders.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMCAP AND
THE COMCAP STOCKHOLDERS
In order to induce Newtek, SBA Holdings and Wilshire to enter this
Agreement, Comcap and the Comcap Stockholders, severally and not jointly,
represent and warrant that the statements contained in this Article II are true
and complete as of the date of this Agreement and will be true and complete as
of the Effective Time (as though made then and though the Effective Time:
Section 2.01 Organization and Standing.
(a) Comcap is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
conduct its business as it is currently conducted. Comcap is not in default of
any provision of its Certificate of Incorporation, By-laws or other agreement
relating to corporate governance or organization. Comcap is qualified to do
business in each jurisdiction where the nature of its activities would require
it to qualify, except where the failure to qualify would not have a material
adverse effect on Comcap's or the Comcap Companies' business, financial
condition or results of operations, individually or taken as a
whole, or on the ability of the Parties to consummate the transactions
contemplated by this Agreement ("Comcap Material Adverse Effect").
(b) CCC is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
conduct its business as it is currently conducted. CCC is not in default of any
provision of its Certificate of Incorporation, By-laws or other agreement
relating to its governance or organization. CCC is qualified to do business in
each jurisdiction where the nature of its activities would require it to
qualify, except where the failure to qualify would not have a Comcap Material
Adverse Effect.
(c) Comcap Real Estate is a limited liability company duly
organized, existing and in good standing under the laws of the State of Delaware
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to conduct its business as it is currently conducted.
Comcap Real Estate is not in default of any provision of its Certificate of
Incorporation, By-laws or other agreement relating to its governance or
organization. Comcap Real Estate is qualified to do business in each
jurisdiction where the nature of its activities would require it to qualify,
except where the failure to qualify would not have a Comcap Material Adverse
Effect.
Section 2.02 Corporate Power and Authority. Comcap has all requisite
corporate power and authority to enter into and perform this Agreement. Comcap
has duly executed and delivered this Agreement and this Agreement is a legal,
valid and binding obligation of Comcap, enforceable in accordance with its
terms, subject only to the approval and adoption of any items required to be
adopted by Comcap's board of directors and stockholders. Each Comcap Stockholder
represents and warrants that this Agreement is valid and binding on him
according to its terms and shall be binding on his heirs, personal
representatives or assigns.
Section 2.03 Conflicts; Consents and Approvals. Except as set forth on
Schedule 2.03, Comcap's execution or performance of this Agreement will not:
(a) result in a breach or default or entitle any third party
to terminate or accelerate any of the terms, conditions or provisions of the
respective Certificates of Incorporation or By-laws of Comcap, CCC or Comcap
Real Estate, or any agreement or obligation of Comcap, CCC or Comcap Real
Estate; or
(b) violate any order, writ, injunction, decree, statute,
rule, or regulation applicable to Comcap, CCC or Comcap Real Estate or their
properties or assets.
Section 2.04 Ownership of Comcap Companies' Stock and Capitalization.
(a) Schedule 2.04 sets forth the authorized, issued and
outstanding capital stock of the Comcap Companies (collectively, the "Comcap
Companies' Stock") and the names and address of the holders thereof. All shares
of the Comcap Companies' Stock are legally and beneficially owned as set forth
on Schedule 2.04.
(b) All shares of the Comcap Companies' Stock: (a) are duly
and validly authorized and issued, fully paid and non-assessable, with no
liability attaching to the ownership thereof, (b) are not subject to, and were
not issued in contravention of, any preemptive or similar rights pursuant to any
provision of law, the Comcap Companies' respective Certificates of Organization
or By-laws or any agreement, contract or other obligation to which any of the
Comcap Companies or Comcap Stockholders is a party or is subject, and (c) were
issued in
accordance with all applicable federal and state securities' laws. The rights,
privileges and preferences of the Comcap Companies' Stock are as stated in the
respective Certificates of Incorporation of Comcap, CCC and Comcap Real Estate.
Except as set forth in Schedule 2.04, there are no outstanding options,
subscriptions, warrants, puts, calls, agreements, understandings, claims or
other commitments or rights of any type relating to the issuance, sale or
transfer by any of the Comcap Companies or the Comcap Stockholders of any
securities or interests of the Comcap Companies, nor are there outstanding any
securities which are convertible into or exchangeable for shares or equity
interests of any of the Comcap Companies.
(c) Except as set forth on Schedule 2.04, Comcap has no
outstanding or authorized warrants, options, purchase rights, subscription
rights, exchange rights or other contracts or commitments which could require
Comcap to issue, sell or otherwise cause to be outstanding any of its capital
stock.
Section 2.05 No Transfer Restrictions. Except as set forth in Schedule
2.05, there are no outstanding agreements, restrictions, contracts, commitments
or demands of any character to which any Comcap Stockholder is a party or of
which any Comcap Stockholder is aware which relate to or restrict the transfer
of any of the shares of the Comcap Companies' Stock. Upon consummation of the
Merger as contemplated by this Agreement, Wilshire will acquire good and
marketable title to the Comcap Stock, free and clear of all liens, pledges,
claims, security interests, encumbrances charges or restrictions of any kind,
other than (i) those non-contractual transfer restrictions generally applicable
under Delaware, New York and federal securities laws with respect to non-public
transactions, and (ii) those set forth on Schedule 2.05.
Section 2.06 Litigation. Except for the matter described in Schedule
2.06, there is no legal action or any proceeding or investigation ("Action")
pending or, to the knowledge of Comcap, threatened against any of the Comcap
Companies, which could have a Comcap Material Adverse Effect or a material
adverse effect on Comcap's ability to execute and perform this Agreement.
Section 2.07 Brokerage and Finder's Fees. Neither Comcap nor any of its
directors, officers or employees has incurred, or will incur, any brokerage,
finder's or similar fee in connection with the Merger or this Agreement which is
the obligation of any of the Comcap Companies.
Section 2.08 Regulatory Matters. CCC is the sole holder of a certain
Small Business Lending Company License (the "SBA License") issued pursuant to
the U.S. Small Business Administration's (the "SBA") Section 7(a) Guaranteed
Loan Program. Except as set forth on Schedule 2.08, Comcap or CCC have not
received any written or oral information from the SBA or any other
administrative or regulatory governmental agency that grounds do or may exist
for revocation of the SBA License nor is Comcap aware of the existence of any
such grounds, and Comcap has complied, and is in compliance in all material
respects, with all terms and conditions relating to the issuance of the SBA
License and the continuance of business activities thereunder.
Section 2.09 Environmental Matters. The Comcap Companies have at all
times operated their respective businesses in compliance with all Environmental
Laws, and no expenditures are or will be required in order to comply therewith.
Except as disclosed in Schedule 2.09, the Comcap Companies have not received any
notice or communication that relates to or alleges any actual or potential
violation or failure to comply with any Environmental
Laws that will result in a Comcap Material Adverse Effect. In this Agreement
"Environmental Laws" means all applicable laws and regulations, including any
licensing, permits or reporting requirements, and any action by a Federal state
or local government entity pertaining to the protection of the environment,
protection of public health, protection of worker health and safety, or the
handling of hazardous materials, including without limitation, the Clean Air
Act, 42 U.S.C. (S) 7401, et seq., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. (S) 9601, et seq.,
the Federal Water Pollution Control Act, 33 U.S.C. (S) 1321, et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. (S) 690-1, et seq. ("RCRA"),
and the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et seq.
Section 2.10 Insurance. The Comcap Companies have been and are insured
with respect to all aspects of their businesses in amounts and against any risks
sufficient to comply with the law. Comcap has provided Newtek a true, correct
and complete list of all insurance policies, including key man insurance, and
bonds in which any of the Comcap Companies is named as an insured party or for
which it has paid any premiums ("Policies"), and the list correctly states the
name of the insurer, the name of each insured party, the type and amount of
coverage, deductible amount, if any, and the expiration date and premium amount
of each policy or bond. All the Policies are listed on Schedule 2.10, are
attached thereto, are currently in full force and effect and the Comcap
Companies have received no notice of cancellation or termination for any policy.
All premiums due and payable on the Policies have been paid.
Section 2.11 Comcap's Officers and Employees. Except as disclosed in
Schedule 2.11, to the knowledge of Comcap and the Comcap Stockholders, no
present or former director or officer of Comcap or 5 percent or more Comcap
Stockholder has any financial interest, direct or indirect, in any vendor,
client, or account of, or other outside business which has transactions with,
any of the Comcap Companies involving consideration in excess of $10,000, in the
aggregate. Neither Comcap nor any 5 percent or more Comcap Stockholder has any
agreement or understanding with any person associated with or employed by any of
the Comcap Companies which would influence that person not to remain associated
with or employed by any of the Comcap Companies after the Closing or from
serving Comcap after the Closing in a capacity similar to the capacity presently
served.
Section 2.12 Audited and Unaudited Financial Statements. Comcap has furnished to
Newtek Financial Statements (as defined below) of Comcap, CCC and Comcap Real
Estate. The Financial Statements (including the related notes, where applicable)
fairly present the assets, liabilities, results of the operations and changes in
stockholders' equity and financial position of Comcap, CCC and Comcap Real
Estate for the respective periods or as of the respective dates therein set
forth; and the Financial Statements (including the related notes, where
applicable) have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
indicated in the notes thereto. The books and records of the Comcap Companies
are true and complete in all material respects and have been, and are being,
maintained in all material respects in accordance with applicable legal and
accounting requirements. "Financial Statements" as used in this Section 2.12
means (i) the audited balance sheets (including related notes and schedules, if
any) of the Comcap Companies as of December 31, 2000 and December 31, 2001, and
the unaudited balance sheets as of June 30, 2002, and the statements of
operations, changes in stockholders' equity and cash flows (including related
notes and schedules, if any) of the Comcap Companies for the years ended
December 31, 2000 and December 31, 2001, together with the audit report of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. on the December 31, 2000 balance sheets. The unaudited
balance sheet of Comcap as of June 30, 2002 is referred to as the "Latest
Balance Sheet" and June 30, 2002 is the "Latest Balance Sheet Date."
Section 2.13 Undisclosed Liabilities. The Comcap Companies have no
liabilities or obligations of any nature except those of less than $1,000.00 and
those:
(a) disclosed on Schedule 2.13;
(b) reflected in the Latest Balance Sheet which have not
been paid or discharged since the Latest Balance Sheet Date; or
(c) current liabilities (including provisions for current and
deferred income tax) incurred since the Latest Balance Sheet Date, in
transactions entered into in the ordinary course of business as it has been
conducted in the past six months, consistent with past practices which are
properly reflected on the books and which are not inconsistent with this
Agreement; or
(d) obligations to be performed in the ordinary course of
business, consistent with past practice, under the Contracts (as defined in
Section 2.22) or under agreements not required to be disclosed pursuant to
Section 2.22.
Section 2.14 Absence of Certain Changes. Since the Latest Balance Sheet
Date, other than those disclosed on Schedule 2.14, there has not been:
(a) any Comcap Material Adverse Effect, or anything which
reasonably could be expected to result in a Comcap Material Adverse Effect,
including, without limitation, a material adverse change relating to a
relationship with an existing investor, borrower, or agent;
(b) any declaration relating to a distribution or payment to
any Comcap Stockholder or any direct or indirect redemption, repurchase or other
acquisition by Comcap of any Comcap Stock or any agreements to purchase or
acquire any Comcap Stock, or the issuance of any option, warrant or right to
acquire any Comcap Stock;
(c) any transaction entered into or carried out by any of the
Comcap Companies other than in the ordinary and usual course of Comcap's
business consistent with past practices;
(d) any borrowing or agreement to borrow funds, or incurring
of any other obligation or liability of any type, except those incurred in the
usual and ordinary course of the business of the Comcap Companies consistent
with past practices, nor has any of the Comcap Companies endorsed, assumed or
guaranteed any payment or performance of a loan or obligation of any other
entity;
(e) any material change in the accounting procedures or
practices of any of the Comcap Companies or changes in the method of application
of those procedures or practices;
(f) any mortgage or other encumbrance of any type whatsoever
imposed or agreed to be imposed on or with respect to the property or assets of
any of the Comcap Companies;
(g) any disposition of any type whatsoever of any of the
properties, rights or assets of any of the Comcap Companies;
(h) any loan, advance or equity investment made by any of the
Comcap Companies to any entity except in the ordinary and usual course of
business;
(i) any modification of any type whatsoever of any provision
of an agreement with any entity other than in accordance with the terms of the
agreement or in the usual and ordinary course of business;
(j) any labor dispute or disturbance adversely affecting the
Comcap Companies' business operations or condition (financial or otherwise),
including, without limitation, the filing of any petition or charge of unfair or
discriminatory labor practice with any governmental or regulatory authority,
efforts to effect a union representation election, actual or threatened employee
strike, work stoppage or slowdown;
(k) any material damage, destruction or property loss, whether
or not covered by insurance, affecting adversely the properties or business of
any of the Comcap Companies; or
(l) any contract or agreement entered into by any of the
Comcap Companies that is not able to be terminated on 30 days or fewer advance
notice without payment of a penalty or premium less than $100.
Section 2.15 Taxes.
(a) Except as disclosed in Schedule 2.15, the Comcap Companies
have timely paid or accrued all federal, state, local and foreign taxes,
assessments, fees and other governmental charges required to be paid or accrued
as of the date hereof ("Taxes"), and have filed all federal, state, local and
foreign tax returns and tax reports that each is required to file (the
"Returns"), the Returns and reports are true, correct and complete and have not
been amended, and all taxes for which Comcap or the Comcap Subsidiaries are
liable arising under the Returns and reports have either been fully paid or are
adequately reserved for in the Financial Statements, and will be timely paid
when due. No claim has been made by authorities in any jurisdiction where any of
the Comcap Companies did not file tax returns that it is or may be subject to
taxation by that jurisdiction. All tax payments relating to employees, including
income tax withholding, FICA, FUTA, unemployment and workers' compensation
payments due and payable as of the date of this Agreement have been fully and
timely paid or accrued.
(b) Except as set forth in Schedule 2.15, Comcap has delivered
to Newtek copies of all federal, state, local, and foreign tax returns filed
with respect to the Comcap Companies for taxable periods ended on or before
December 31, 2000 and December 31, 2001. Except as disclosed in Schedule 2.15,
there have been no audits by taxing authorities prior to the date of Closing
with respect to any tax year for which assessment is not barred by any
applicable statute of limitations. None of the Comcap Companies has waived any
applicable statute of limitations or other defense for filing a tax return or
for paying any taxes or assessments of a deficient or unpaid taxes. Each of the
Comcap Companies has paid or settled all deficiencies resulting from any audits.
To Comcap's knowledge there is no pending or threatened federal, state, local or
foreign tax audit or assessment nor any agreement by any of the Comcap Companies
with any federal, state, local or foreign taxing authority that may affect the
tax liability of any of the Comcap Companies.
(c) Except as disclosed in Schedule 2.15, Comcap has properly
reflected in the Financial Statements at or through the date of such Financial
Statements in accordance with GAAP consistently applied, all taxes due as of
such date and not already paid and any required
reserves related to such taxes that are attributable to the existence or
operations of the Comcap Companies.
(d) Except as disclosed in Schedule 2.15, none of the Comcap
Companies has been a member of an affiliated, consolidated, combined or unitary
group for purposes of taxes and have no liability under Treasury Regulation
1.1502-6. None of the Comcap Companies are obligated to pay the tax liability of
any other entity or to indemnify any other person with respect to any tax.
Section 2.16 Compliance with Law. Except as set forth in Schedule 2.16,
each of the Comcap Companies has complied, and is in compliance in all material
respects, with all laws, orders, and regulations, and all judgments, decisions
and orders of any government entity applicable to it ("Applicable Laws"), except
where failure to comply would not have a Comcap Material Adverse Effect. Each of
the Comcap Companies has all licenses, permits, approvals and certifications or
similar items of any type necessary for the conduct of its business as currently
conducted ("Permits"). Schedule 2.16 lists all Permits other than the SBA
License, each of which is valid and in full force and effect and, to the
knowledge of Comcap, such status will be unaffected by the Closing. To Comcap's
knowledge and except with respect to the SBA License: (i) none of the Comcap
Companies is in violation of any of the Permits, and (ii) there is no pending or
threatened proceeding which could result in the revocation, cancellation or
inability to renew any Permit.
Section 2.17 Proprietary Rights.
(a) Schedule 2.17 sets forth a true and correct list of all,
patents, inventions, trade secrets, proprietary rights, computer software,
trademarks, trade names, service marks, trade names, copyrights and franchises
owned or licensed by any of the Comcap Companies, including software licenses
("Proprietary Materials"), the loss of which could have a Comcap Material
Adverse Effect.
(b) Except as set forth in Schedule 2.17, Comcap, CCC or
Comcap Real Estate either owns or has the right to use (pursuant to perpetual,
fully paid-up licenses) the Proprietary Materials used in connection with or
necessary to the operation of its business, without infringing on or otherwise
acting adversely to the rights or claimed rights of any person. Except as set
forth in Schedule 2.17, none of the Comcap Companies is obligated to pay any
royalty or other consideration to any person in connection with the use of the
Proprietary Materials. No claim has been asserted against any of the Comcap
Companies to the effect that the Comcap Companies' use of any Proprietary
Materials infringes the rights of any person.
(c) Except as set forth on Schedule 2.17:
(i) the Comcap Companies have not transferred or
encumbered the Proprietary Materials in any way;
(ii) to Comcap's knowledge, none of the Comcap Companies
have infringed in any way the proprietary rights of any other person or entity;
(iii) to Comcap's knowledge, the Proprietary Materials are
not subject to any pending or threatened challenge, investigation, proceedings,
inquiries, reviews, and claims of infringement, unfair competition, or other
claims of any entity;
(iv) none of the Comcap Companies has given any
indemnification against patent, trademark or copyright infringement to any
entity nor is Comcap restricted by any third party because of any alleged
infringement from using any of the Proprietary Materials Comcap uses in its
business.
Section 2.18 Restrictive Documents or Laws. Other than as set forth on
Schedule 2.18, the Comcap Companies are subject to no restrictions in any
agreement or in any law, order, judgment or decree not of general application
which adversely affects, or that reasonably could be expected to adversely
affect their respective (a) business in any way; (b) continued business
operations after the Closing on substantially the same basis as it is currently
operated; or (c) the performance by Comcap of this Agreement.
Section 2.19 Bank Accounts, Depositories, Powers of Attorney. A true,
correct and complete list of the names and locations of all banks or other
depositories where any of the Comcap Companies has accounts or safe deposit
boxes with the names of the persons authorized to have access in anyway to these
items is set forth in Schedule 2.19. Except as set forth in Schedule 2.19, no
person has power of attorney with respect to any of the Comcap Companies.
Section 2.20 Title to and Condition of Properties. Except as set forth
in Schedule 2.20, the Comcap Companies have good, valid and marketable title or
ownership, held free and clear of any encumbrance whatsoever to all of their
respective assets and properties of every kind, tangible or intangible, wherever
located now used in the present conduct of their businesses. All such properties
are suitable for their current uses without violating any Applicable Laws, or
any private restrictions. Except as set forth in Schedule 2.20, no financing
statement under the Uniform Commercial Code or similar law has been filed in any
jurisdiction naming any of the Comcap Companies or any of their predecessors,
and none of the Comcap Companies are subject to any agreement or obligation
authorizing any party to file a financing statement of any sort. All tangible
personal property owned, leased or used by any of the Comcap Companies is
suitable for the purpose or purposes for which it is being used and has been
maintained in all material respects in accordance with the terms of any
applicable lease and no term of a lease will be materially affected by the
Merger.
Section 2.21 ERISA.
(a) Except as set forth in Schedule 2.21, Comcap is not a
party to an "employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA") which (i) is subject to any
provision of ERISA and (ii) is or was at any time maintained, administered or
contributed to by Comcap and covers any employee or former employee of Comcap
and under which Comcap or any ERISA Affiliate (as defined hereafter) has any
liability. These plans are referred to collectively in this Agreement as the
"Employee Plans." For purposes of this Section, "Affiliate" of any person or
entity means any other person or entity which, together with that person or
entity, could be treated as a single employer under Section 414(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), or is an "affiliate,"
whether or not incorporated, as defined in Section 407(d)(7) of ERISA, of the
person or entity.
(b) Schedule 2.21 identifies each employment, severance or
other similar arrangement or policy and each plan or arrangement (written or
oral) (other than those disclosed on Schedule 2.28) providing for insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, severance benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits or for deferred compensation,
profit-sharing,
bonuses, stock options, stock appreciation or other forms of
incentive compensation, or post-retirement insurance, compensation or benefits
which (i) is not an Employee Plan, (ii) is entered into, maintained or
contributed to, as the case may be, by Comcap or any of its ERISA Affiliates,
and (iii) covers any employee or former employee of Comcap or any of its ERISA
Affiliates. These contracts, plans and arrangements as are described above,
copies or descriptions of all of which have been furnished or made available
previously to Newtek are referred to collectively in this Agreement as the
"Benefit Arrangements." Each Benefit Arrangement has been maintained in
substantial compliance with its terms and with requirements prescribed by any
and all statutes, orders, rules and regulations that are applicable to that
Benefit Arrangement.
(c) Except as set forth in Schedule 2.21, there is no
liability in respect of post-retirement health and medical benefits for retired
employees of Comcap or any of its ERISA Affiliates other than medical benefits
required to be continued under applicable law, determined using assumptions that
are reasonable in the aggregate, over the fair market value of any fund, reserve
or other assets segregated for the purpose of satisfying such liability
(including for such purposes any fund established pursuant to Section 401(h) of
the Code). Comcap has reserved its right to amend or terminate any Employee Plan
or Benefit Arrangement providing health or medical benefits in respect of any
active employee of Comcap or ERISA Affiliates under the terms of any applicable
plan and written descriptions thereof given to employees. With respect to any of
Comcap's Employee Plans which are "group health plans" under Section 4980B of
the Code and Section 607(1) of ERISA, there has been material compliance with
all requirements imposed there under such that Comcap and its ERISA Affiliates
have no (and will not incur any) loss, assessment, tax penalty, or other
sanction with respect to any such plan.
(d) Except as set forth in Schedule 2.21, there has been no
amendment to, written interpretation or announcement (whether or not written) by
Comcap or any of its ERISA Affiliates relating to any Employee Plan or Benefit
Arrangement which would increase the expense of maintaining the Employee Plan or
Benefit Arrangement above the level of the expense incurred in respect to the
Employee Plan for the year ended immediately prior to the Closing Date.
(e) Other than as set forth in Schedule 2.21, Comcap is not a
party to or subject to any employment contract or arrangement providing for
annual future compensation, or the opportunity to earn annual future
compensation (whether through fixed salary, bonus, commission, options or
otherwise) of more than $25,000 to any officer, consultant, director or
employee.
(f) The execution of this Agreement and consummation of the
Merger does not constitute a triggering event under any Employee Plan or any
other employment contract, whether or not legally enforceable, which (either
alone or upon the occurrence of any additional or subsequent event) will or may
result in any payment (of severance pay or otherwise), acceleration, increase in
vesting, or increase in benefits to any current or former participant, employee
or director of Comcap other than an event that (i) is specifically disclosed on
Schedule 2.21 or (ii) is not material to the financial condition or business of
Comcap.
(g) Any reference to ERISA or the Code or any section thereof
shall be construed to include all amendments thereto and applicable regulations
and administrative rulings issued there under.
Section 2.22 Contracts. Schedule 2.22 lists all agreements of any type
(written or oral) of any of the Comcap Companies (i) which are in the aggregate
material to their financial condition, operations, assets or business, (ii) to
which any present or former 5 percent or more stockholder of Comcap, director or
officer of Comcap, or any person related by blood or marriage to any such person
("Related Parties"), is a party; (iii) to which any person controlling,
controlled by or under common control with any Related Parties is a party; or
(iv) to which any employee, agent or consultant of Comcap is a party. All such
agreements ("Contracts") are, with respect to those set forth in clause (i),
valid and binding on the parties thereto, are in full force and effect, and are
enforceable in accordance with their terms, and with respect to those set forth
in clauses (ii), (iii) and (iv), are in full force and effect, and are valid and
binding on, and enforceable in accordance with their terms against, Comcap, CCC
or Comcap Real Estate, as the case may be, and, to the knowledge of Comcap and
the Comcap Stockholders, the other parties thereto, in both cases except to the
extent enforceability may be limited by (a) applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws governing
creditors' rights or (b) general principles of equity, whether considered in a
proceeding at law or in equity. To Comcap's knowledge, neither it nor any other
party to a Contract is in violation of or in default nor has anything occurred
which would or could constitute a default under a Contract.
Section 2.23 Affiliated Transactions. Schedule 2.23 lists all amounts
in excess of $1,000 in the aggregate payable to any of the Comcap Companies by
any Related Party ("Related Party Receivables") and all amounts payable by any
of the Comcap Companies to any Related Party ("Related Party Payables") as of
the date of this Agreement. The list includes the payor, payee, amount, terms of
repayment, maturity date and any set off rights of the payor of each Related
Party Receivable and Related Party Payable. Except as disclosed in Schedule 2.23
and subject to the $1,000 exclusion, to the knowledge of Comcap and the Comcap
Stockholders, no Related Party has any financial interest, direct or indirect,
in any vendor, client, or account of, or other outside business which has
transactions with, any of the Comcap Companies. Comcap has no knowledge of any
agreement or understanding with any Related Party which would influence that
person not to remain associated with or employed by the Surviving Corporation
from and after the Closing or from serving the Surviving Corporation after the
Closing in a capacity similar to the capacity presently held with Comcap.
Section 2.24 No Conflict or Default. Other than as set forth in
Schedule 2.24, Comcap's execution and performance of this Agreement will not:
(i) violate any Applicable Laws or Permits, (ii) cause a lien, security interest
or encumbrance of any nature whatsoever with respect to the properties or assets
of any of the Comcap Companies, or (iii) give any entity an interest or rights,
including rights of termination, acceleration or cancellation, with respect to
any of the properties, assets, Contracts or business of the Comcap Companies.
Section 2.25 Books of Account; Records. The stock records books, minute
books, and other records relating to the assets, properties, contracts and
outstanding legal obligations of the Comcap Companies are complete and correct
in all material respects and have been maintained in accordance with good
business practices.
Section 2.26 Subsidiaries. Except as set forth in the Financial
Statements or with respect to Comcap's interests in CCC and Comcap Real Estate,
none of the Comcap Companies has any controlling or ownership interest in any
other entity ("Subsidiary").
Section 2.27 Employment Agreements; Severance. Except for the
employment agreements listed in Schedule 2.27, none of the Comcap Companies is a
party to any employment or severance agreement. The consummation of the Merger
will not result, either immediately or through the passage of time or the
occurrence of a contingency, in any payment becoming due from any of the Comcap
Companies to any officer or employee of the Comcap Companies.
Section 2.28 Complete Disclosure. The representations and warranties of
Comcap and the Comcap Stockholders in this Agreement or the related Schedules
and Exhibits delivered by or on Comcap's behalf do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements herein or therein, in light of the circumstances in which
they are made, not misleading.
Section 2.29 SBA Matters.
(a) CCC is an approved "small business lending company" as
prescribed by the rules and regulations of the SBA (the "SBA Rules and
Regulations") and, since CCC began issuing Loans pursuant to the SBA License,
except as listed on Schedule 2.29, has been in full compliance with all SBA
Rules and Regulations. CCC is in good standing to originate loans for the SBA in
all jurisdictions in which the business conducted by it makes such qualification
necessary, and no event has occurred which would make CCC unable to comply with
SBA eligibility requirements or which would require notification to the SBA.
Except as listed on Schedule 2.29, CCC is not in violation or breach of any
provision of the SBA License or the SBA Guaranty Agreement.
(b) Schedule 2.29 lists all of the jurisdictions in which CCC
has achieved CLP or PLP status under the SBA Rules and Regulations, and also
lists every jurisdiction for which CCC has commenced the application process for
such status. Except as listed on Schedule 2.29, no application of CCC for CLP or
PLP status has been rejected by the SBA and no such status, once granted, has
been resolved or has been threatened with revocation.
(c) Schedule 2.29 lists every audit the SBA has conducted
pursuant to the SBA Rules and Regulations and, except as listed on Schedule
2.29, the SBA has neither failed CCC nor found any material defect in CCC's
procedures, operations, or financial statements during the course of any such
audit.
(d) Neither CCC nor any Comcap Subsidiary, or their respective
officers or directors, is subject to any cease-and-desist, written directive or
other order issued by, or is a party to any written agreement, consent
agreement, memorandum of understanding or written commitment with, or has
adopted any board resolutions at the request of, any governmental entity that
restricts the conduct of its business or, except as listed on Schedule 2.29,
that in any manner relates to its capital adequacy, its credit policies, its
management or its business, nor except as listed on Schedule 2.29 has CCC or any
Comcap Subsidiary been advised by any governmental entity that it is considering
issuing or requesting any such regulatory restriction.
(e) CCC has duly filed with the SBA in correct form all
reports required to be filed under the SBA Rules and Regulations, and CCC has
delivered to Newtek accurate and complete copies of such reports.
Section 2.30 Loans.
(a) Schedule 2.30 sets forth an accurate description of all
loans as of the date hereof and as of the Closing Date owned by CCC or any
Comcap Company or in which CCC or any Comcap Company has an interest or for
which CCC or any Comcap Subsidiary has issued a commitment.
(b) All loans owned by CCC or any Comcap Company or in which
CCC or any Comcap Company has an interest comply in all material respects with
all laws, rules and regulations, including but not limited to, the SBA Rules and
Regulations, applicable usury statutes, underwriting and recordkeeping
requirements and the Truth in Lending Act, the Equal Credit Opportunity Act, and
the Real Estate Settlement Procedures Act, and other applicable consumer
protection status and the regulations thereunder.
(c) All loans owned by CCC or any Comcap Company or in which
CCC or any Comcap Company has an interest have been made or acquired by CCC or
such Comcap Company in accordance with the approved loan policies of the Board
of Directors and all of such loans are to the knowledge of Comcap collectible,
except to the extent reserves have been made against such loans in the financial
statements referred to in Section 2.12 hereof. Each of CCC and Comcap Real
Estate holds mortgages contained in its loans portfolio for its own benefit to
the extent of its interest shown therein; such mortgages evidence liens having
the priority indicated by their terms, subject, as of the date of recordation or
filing, to such exceptions as are not material to the collectibility of such
loans; and all loans owned by CCC and each Comcap Company are with full recourse
to the borrowers, and CCC and each Comcap Company has taken no action which
would result in a waiver or negation of any rights or remedies available against
the borrower or guarantor, if any, on any loan. All applicable remedies against
all borrowers and guarantors are enforceable except as may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights and except as may be limited by the exercise of judicial discretion in
applying principles of equity. Except for its obligations pursuant to the
warranty provisions of Form 1086, all loans purchased or originated by CCC or
any Comcap Company and subsequently sold by CCC or any Comcap Company have been
sold without recourse to CCC or any Comcap Company and without any liability
under any yield maintenance or similar obligation. True, correct and complete
copies of loan delinquency reports as of the Closing Date prepared by CCC and
each Comcap Company, which reports include all loans delinquent or otherwise in
default, are attached as Schedule 2.30. True, correct and complete copies of the
currently effective lending policies and practices of CCC and the Subsidiaries
also are attached to Schedule 2.30.
(d) Except for its obligations pursuant to the warranty
provisions of Form 1086, each outstanding loan participation sold by CCC or any
Comcap Company was sold with the risk of non-payment of all or any portion of
that underlying loan to be shared by each participant (including CCC or any
Comcap Company) proportionately to the share of such loan
represented by such participation without any recourse of such other lender or
participant to CCC or any Comcap Company for payment or repurchase of the amount
of such loan represented by the participation or liability under any yield
maintenance or similar obligation. CCC and any Comcap Company have properly
fulfilled their respective contractual responsibilities and duties in any loan
in which it acts as the lead lender or servicer and has complied in all material
respects with its duties as required under applicable regulatory requirements.
(e) CCC and each Comcap Company have properly perfected or
caused to be properly perfected all security interest, liens, or other interests
in any collateral securing any loans made by it.
(f) Except as set forth on Schedule 2.30 none of the Comcap
Companies have any loans which have been identified by the SBA as requiring
"repair" nor except as set forth are there any properties which have been
repossessed or otherwise acquired in conjunction with a loan in default or at
the time of imminent default.
ARTICLE III
NEWTEK'S REPRESENTATIONS AND WARRANTIES
To induce Comcap and the Comcap Stockholders to enter this
Agreement, Newtek represents and warrants to Comcap and the Comcap Stockholders
that:
Section 3.01 Organization and Standing. Newtek is a corporation duly
organized, existing and in good standing under the laws of the State of New
York, with full power and authority (corporate and other) to conduct its
business as currently conducted. Wilshire is a limited liability company duly
organized, existing and in good standing under the laws of the State of New
York, with full power and authority (corporate and other) to conduct its
business as currently conducted. SBA Holdings is a corporation validly
organized, existing and in good standing under the laws of the State of New
York, with full power and authority (corporate and other) to conduct its
business as currently conducted and as it will be conducted after the Closing.
Each of Newtek, SBA Holdings and Wilshire is duly qualified to do business and
is in good standing in each jurisdiction where their respective activities would
require qualification, except where the failure to qualify would not have a
material adverse effect upon Newtek's, SBA Holdings' or Wilshire's (as the case
may be) respective business, financial condition or results of operation,
individually or taken as a whole, or on the ability of the Parties to consummate
the transactions contemplated by this Agreement (each, a "Newtek Material
Adverse Effect"). Newtek and SBA Holdings are not in default of any provision of
their respective Certificate of Incorporation or Bylaws. Wilshire is not in
default of any provision of its Articles of Organization or Operating Agreement.
Section 3.02 Capitalization and Security Holders. The authorized
capital stock of Newtek consists of 39,000,000 shares of Common Stock, of which
23,312,517 shares are issued and outstanding, and 1,000,000 shares of Preferred
Stock, of which none are issued and outstanding. Each outstanding share of
Newtek Common Stock has been duly authorized and validly issued and is fully
paid and non-assessable, and no Newtek Common Stock has been issued in violation
of preemptive or similar rights.
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Except as set forth in Schedule 3.02, there are no outstanding options,
subscriptions, warrants, puts, calls, agreements, understandings, claims or
other commitments or rights of any type relating to the issuance, sale or
transfer by Newtek or, to Newtek's knowledge, any stockholder of Newtek, of any
securities or interests of Newtek, nor are there outstanding any securities
which are convertible into or exchangeable for shares, equity interests of
Newtek. The issuance and sale of all securities of Newtek have been in full
compliance in all material respects with the registration requirements of all
applicable federal and state securities laws or pursuant to valid exemptions.
Section 3.03 Corporate Power and Authority. Each of Newtek, SBA
Holdings and Wilshire has all requisite corporate power and authority to enter
into and perform this Agreement and to carry out its obligations under this
Agreement. This Agreement and the transactions contemplated by this Agreement
have been duly and validly authorized by all necessary corporate and stockholder
or member action on the part of Newtek, SBA Holdings or Wilshire. This Agreement
has been duly executed and delivered and constitutes the legal, valid and
binding obligation of Newtek and Wilshire.
Section 3.04 Consents and Approvals. Except as set forth with respect
to Wilshire on Schedule 3.04, Newtek's and Wilshire's execution, delivery or
performance of this Agreement does not and will not require any consents or
approvals of, filings with, or action by any third party.
Section 3.05 Audited and Unaudited Financial Statements. Newtek has
furnished to Comcap the Newtek Financial Statements (as defined below). The
Newtek Financial Statements (including the related notes, where applicable)
fairly present (subject, in the case of the unaudited statements, to audit
adjustments normal in nature and amount and the addition of customary notes) the
assets, liabilities, results of the operations and changes in stockholders'
equity and financial position of Newtek for the respective periods or as of the
respective dates therein set forth; and the Financial Statements (including the
related notes, where applicable) have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied during the periods
involved, except as indicated in the notes thereto. "Newtek Financial
Statements" as used in this Section 3.05 means: (i) the consolidated balance
sheets (including related notes and schedules, if any) of Newtek as of December
31, 2000 and December 31, 2001, and the statements of operations, changes in
stockholders' equity and cash flows (including related notes and schedules, if
any) of Newtek for the years ended December 31, 2000 and December 31, 2001,
together with the audit report of PricewaterhouseCoopers, LLP thereon.
Section 3.06 Undisclosed Liabilities. For purposes of this Agreement, a
"Newtek Affiliate" includes only those entities identified as subsidiary
companies of Newtek in its most recent filings with the SEC and does not include
"Partner Companies" identified therein. Neither Newtek nor any Newtek Affiliate
has any liability or obligation of any nature except those:
(a) set forth in the Newtek Financial Statements which have
not been paid or discharged since the date thereof;
(b) contractual obligations arising after the date of this
Agreement; and
(c) current liabilities (including provisions for current and
deferred income tax) incurred since December 31, 2001, in transactions entered
into in the ordinary course of
25
business consistent with past practices which are properly reflected on their
books and which are not inconsistent with Newtek's other representations,
warranties in this Agreement.
Section 3.07 Absence of Certain Changes. Since December 31, 2001, other
than as set forth in the Newtek Financial Statements or in filings with the SEC
made prior to the Effective Date, there has not been any:
(a) Newtek Material Adverse Effect, or anything which
reasonably could be expected to result in an Newtek Material Adverse Effect;
(b) declaration, setting aside or payment of a dividend or
distribution (in cash or in kind) to any Newtek Stockholder, nor any direct or
indirect redemption, purchase or other acquisition by Newtek of any capital
stock or the issuance of any options, warrants, rights or agreements to purchase
or acquire such stock;
(c) transaction entered into or carried out by Newtek or any
Newtek Affiliate other than in the ordinary and usual course of Newtek's
business consistent with past practices;
(d) borrowing or agreement to borrow funds by Newtek or any
Newtek Affiliate, or incurring by Newtek or any Newtek Affiliate of any other
obligation or liability (contingent or otherwise), except liabilities incurred
in the usual and ordinary course of such entity's business consistent with past
practices, or any endorsement, assumption or guarantee of payment or performance
of any loan or obligation of any other person by Newtek; or
(e) material change in Newtek's accounting procedures or
practices or its method of application of these principles or practices.
Section 3.08 Taxes. Newtek and the Newtek Affiliates have paid all
federal, state, local and foreign taxes, assessments, fees and other
governmental charges they are legally required to pay. Newtek and Newtek
Affiliates have filed all federal, state, local and foreign tax returns and tax
reports they are legally required to file and the returns and reports are true,
correct and complete and have not been amended, and all taxes arising under the
returns and reports have been either fully paid or adequately reserved for in
the Financial Statements, and will be timely paid when due.
Section 3.09 Compliance with Law. Except where the failure to comply
would not have a Newtek Material Adverse Effect, Newtek and each Newtek
Affiliate has materially complied with all laws, statutes, ordinances, orders,
rules, and all judgments, decisions and orders entered, by any federal, state,
local or foreign court or governmental authority or instrumentality applicable
or relating to Newtek or its businesses or properties ("Newtek Applicable
Laws"). Newtek and each Newtek Affiliate has all governmental, self-regulatory
and other non-governmental franchises, licenses, permits, consents,
authorizations, approvals and certifications necessary for the conduct of its
business as currently conducted (collectively, the "Newtek Permits"). Newtek and
each Newtek Affiliate is not in violation of any of the Newtek Permits, and
there are no pending or, to the knowledge of Newtek no threatened proceedings
which could result in the revocation, cancellation or inability of Newtek to
renew any Newtek Permit.
Section 3.10 Brokerage and Finder's Fees. Newtek and Wilshire have not
incurred nor will incur any brokerage, finder's or similar fee in connection
with the transactions contemplated by this Agreement.
26
Section 3.11 No Conflict or Default. Newtek's and Wilshire's execution,
delivery or performance of this Agreement will not violate any Newtek Applicable
Laws or Newtek Permits, or conflict with or result in the breach of any
provision of Newtek's or SBA Holdings' Certificate of Incorporation, Bylaws, or
Wilshire's Articles of Organization or Operating Agreement, or other
organizational document, nor of any material Contract, writ, order, judgment,
injunction, decree, restriction, legal obligation or instrument to which Newtek,
SBA Holdings' or Wilshire is a party or by which Newtek, SBA Holdings, Wilshire
or any of their respective assets or properties are or may be bound or affected,
or constitute a default (or an event which, with the giving of notice, the
passage of time, or both would constitute a default), or result in the creation
or imposition of any lien, security interest, charge or encumbrance, or
restriction of any nature whatsoever with respect to any of Newtek's, SBA
Holdings' or Wilshire's properties or assets, or give to others any interest or
rights, including rights of termination, acceleration or cancellation in or with
respect to any of the properties, assets, Contracts or business of Newtek, SBA
Holdings or Wilshire.
Section 3.12 Litigation. There is no legal action or any proceeding or
investigation ("Action") pending or, to the knowledge of Newtek, threatened
against Newtek or any Newtek Affiliate which could have a Newtek Material
Adverse Effect or a material adverse effect on Newtek's ability to execute and
perform this Agreement.
Section 3.13 Complete Disclosure. The representations and warranties by
Newtek in this Agreement or the related Schedules and Exhibits delivered by or
on Newtek's behalf, do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements herein
or therein, in light of the circumstances in which they are made, not
misleading.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Mutual Covenants.
(a) General. Each Party shall use its best efforts to take all
actions promptly and do all things necessary, proper or advisable to perform as
required by this Agreement, including without limitation using all commercially
reasonable efforts to cause the satisfaction of the all conditions set forth in
this Agreement for which the Party is responsible as soon as reasonably
practicable and to prepare, execute, acknowledge or verify, deliver, and file
the additional documents, and take or cause to be taken the additional actions,
as any Party may reasonably request to carry out the purposes or intent of this
Agreement.
(b) Approvals and Consents. Each Party shall use its best
efforts to take promptly any additional action that may be necessary, proper or
advisable in connection with any other notices, filings, authorizations,
consents or approvals of any court, administrative agency or commission, or
other governmental entity or other third party, including but not limited to the
U.S. Small Business Administration, that it may be required to give, make or
obtain in connection with the completion of performance of this Agreement.
(c) Cooperation. On and after the Closing, each Party shall
execute any and all further documents and writings and perform any other
commercially reasonable actions reasonably requested by the other Party to
perform this Agreement. Comcap shall instruct its
27
officers and employees not to take any action that is reasonably likely to
discourage any of Comcap's lessors, licensors customers, suppliers or other
business relationships from maintaining the same relationships with Comcap after
the Closing as existed prior to the Closing.
(d) Confidential Information. No Party shall at any time
directly or indirectly copy, disseminate or use, for such Party's own benefit or
the benefit of any third party, any information that has been disclosed in
confidence by the other Party ("Confidential Information"), regardless of how
the Confidential Information was acquired, except for the disclosure or use of
the Confidential Information: (x) upon the advice of counsel required by law or
legal process or (y) authorized in writing by the Party that owns the
Confidential Information. The Parties may disclose each other's Confidential
Information to their respective responsible officers, directors or employees
(collectively, "Employees") with a bona fide need-to-know, but only to the
extent necessary to carry out the purpose for which the Confidential Information
was disclosed. Newtek and Comcap each agree to instruct all such Employees not
to disclose such Confidential Information to third parties, without the prior
written permission of the Party disclosing such Confidential Information.
Notwithstanding anything to the contrary contained in this paragraph,
Confidential Information does not include information: (i) generally available
to the public other than as a direct or indirect result of a disclosure by a
Party in violation of this Agreement; (ii) that is already in the receiving
Party's possession at the time of the disclosing Party's disclosure of such
Confidential Information, except as a result of the receiving Party's or any
third party's breach of a legal obligation; (iii) that becomes known to the
Party through disclosure by sources other than another Party having the legal
right to disclose such information; or (iv) is independently developed by the
Party without reference to or reliance upon the Confidential Information, where
the burden of proof will be on the Party to demonstrate independent development
from its written records. Each Party acknowledges that all of the Confidential
Information is and shall remain the exclusive proprietary property of the Party
that discloses it, whether or not disclosed in connection with this Agreement.
If this Agreement is terminated, upon the written request of the
disclosing Party, the receiving Party shall return to the disclosing Party,
within ten days, all Confidential Information and all copies thereof whether in
writing or other tangible form. Where impractical to return copies, such copies
shall be destroyed. Within such ten-day period, an affidavit of the receiving
Party shall be delivered to the disclosing Party attesting to the return and
destruction of all Confidential Information.
Each Party acknowledges and agrees that remedies at law for a violation
or attempted violation of any of the obligations in this Section 4.01(d) would
be inadequate and would cause immediate irreparable harm to the other Parties,
and agrees that in the event of any such violation or attempted violation, each
Party is entitled to a temporary restraining order, temporary and permanent
injunctions, and other equitable relief, without the necessity of posting any
bond or proving any actual damage, in addition to all other rights and remedies
which may be available.
(e) Notices of Certain Events. Newtek and Comcap shall
promptly notify the other of any:
(i) notice or other communication from any entity
alleging that their or any other entity's consent is or may be required in
connection with any provision of this Agreement;
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(ii) notice or other communication from any
governmental or regulatory agency or authority relating in any way to this
Agreement; and
(iii) actions commenced or threatened in any way
relating to it or its property, or any disputes, conflict or circumstance
providing the basis for any dispute or conflict, which if in existence on the
date of this Agreement would have been required to be disclosed pursuant to this
Agreement or which relates directly or indirectly to the consummation of the
Merger.
(f) Obligation to Update Schedules. Until the Closing, each
Party shall promptly disclose to the others any information contained in the
representations and warranties or Schedules which at any time is materially
incomplete or is no longer materially correct or any material adverse
development affecting the results of either Newtek's or Comcap's respective
operations; provided, however, that no disclosure to this Agreement shall be
deemed to modify, amend or supplement the representations and warranties of a
Party or the Schedules attached unless the Party to whom the representations and
warranties are made has consented in writing.
Section 4.02 Reasonable Access by Newtek and Wilshire Pending Closing.
Comcap shall give to Newtek, Wilshire, their respective counsel, accountants,
financial advisers and lenders, and other representatives, after reasonable
notice, reasonable access, during normal business hours, throughout the period
prior to the Closing, to all of the properties, books, contracts, commitments
and records relating exclusively to the Comcap Companies' business, and Comcap
shall reasonably cooperate with Newtek, Wilshire and their respective
accountants in connection with the preparation of timely and complete audited
and unaudited financial statements; and, during such period, Comcap shall make
available to Newtek and Wilshire a copy of each material report, schedule,
correspondence and other document delivered to, filed with or received by it
pursuant to the requirements of the U.S. Small Business Administration and any
other Federal or state regulatory agency, in connection with this Agreement.
Newtek and Wilshire each agrees that any information provided pursuant to this
Section shall be Confidential Information subject to the provisions of Section
4.01(d) above.
Section 4.03. Rule 144; Resale Registration. Newtek covenants that it
shall use its best efforts to file the reports required to be filed by it under
the Exchange Act, and it shall take such further action as any former holder of
Comcap Stock may reasonably request, all to the extent required from time to
time to enable such former holder of Comcap Stock to sell shares of Newtek
Common Stock delivered hereunder without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rules or regulations hereafter adopted by the SEC. Upon the written
request of any former holder of Comcap Stock, Newtek shall deliver to such
holder a written statement as to whether it has complied with such requirements.
In addition, Newtek covenants to use its best efforts to file with the
Securities and Exchange Commission within sixty (60) days of the Closing Date,
and to have declared effective as soon as possible, a registration statement to
permit the resale of up to twenty percent (20%) of the Merger Shares held by
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and up to twenty percent (20%) of the Merger Shares held pursuant
to Section 1.06(d) of this Agreement.
Section 4.04. Exclusivity. Until (i) the Closing, or (ii) the
termination of this Agreement in accordance with Article VI, Comcap and the
Comcap Stockholders agree not to solicit, directly or indirectly, nor encourage
any inquiries or proposals from, nor enter into any
29
agreements with, any person or entity other than Newtek for the purchase of the
assets or stock of Comcap, or the merger or consolidation of Comcap, or to enter
into discussions with, or furnish any non-public information concerning Comcap
to any such person or entity in connection with any such proposal. Comcap and
the Comcap Stockholders shall promptly notify Newtek of any serious proposal or
inquiry to purchase the assets or stock of Comcap, or for the merger or
consolidation of Comcap. For purposes of this Section 4.04, a "serious proposal
or inquiry" means (a) any direct or indirect contact from any person or entity
believed to have adequate financial resources to consummate a transaction, and
(b) who indicates a serious intent to acquire the assets or stock of Comcap, or
merge or consolidate with Comcap.
Section 4.05. Conduct of Business Prior to Closing. Comcap and the Comcap
Stockholders agree that between the date hereof and Closing, Comcap shall,
except as may be otherwise permitted or required by this Agreement:
(a) not take, suffer or permit any action or omit to take any
action which would cause any of the representations and warranties of Comcap and
the Comcap Stockholders contained in this Agreement to become untrue;
(b) conduct Comcap's business in a good and diligent manner in
the ordinary course of its business (as such business has been conducted for the
six month period prior to the date hereof) and not originate or purchase any
loans or issue commitments therefor;
(c) not enter into any contract, agreement, commitment or other
arrangement with any party, other than contracts in the ordinary course of its
business, and not amend, modify or terminate any of the Contracts, without the
prior written consent of Newtek;
(d) use its reasonable best efforts to preserve Comcap's business
organization intact, to keep available the service of its employees and to
preserve its relationships with customers, Federal lending regulators and others
with whom it deals;
(e) maintain in full force and effect all policies of insurance
currently maintained by Comcap;
(f) keep Comcap's business premises and all of its equipment and
tangible personal property in good operating repair and perform all necessary
repairs and maintenance;
(g) comply with all provisions of any Contract applicable to it
as well as with all applicable laws, rules and regulations;
(h) not dispose of any assets of Comcap except in the ordinary
course of business;
(i) not engage in any transaction which involves the expenditure
or commitment of more than $10,000 individually or $25,000 in the aggregate
without the prior written consent of Newtek, which consent will not be
unreasonably withheld;
(j) continue to maintain all of Comcap's usual business books and
records in accordance with past practices;
30
(k) not amend the Certificates of Incorporation, By-laws or other
organic documents of any of the Comcap Companies;
(l) not declare or make any dividend or other payment on or with
respect to any of the Comcap Companies' capital stock, redeem or otherwise
acquire any shares of such capital stock or issue any capital stock or any
option, warrant or right relating thereto or convertible into capital stock ,
except pursuant to outstanding options and warrants;
(m) not waive any material right or cancel any material claim of
any of the Comcap Companies;
(n) not increase the compensation or rate of compensation payable
to any of Comcap's employees or hire any new employees, or enter into any new
agreements with respect to severance, termination or similar payments, without
the prior written consent of Newtek;
(o) maintain the Comcap Companies' corporate existences and not
merge or consolidate any of the Comcap Companies with any other entity;
(p) not place any additional encumbrances on any of the assets of
Comcap without the prior written consent of Newtek;
(q) not borrow any money or become contingently liable for any
obligation or liability of others and not incur any debt, liability or
obligation of any nature to any party except for obligations arising from the
purchase of goods or the rendition of services in the ordinary course of
business;
(r) not create any off balance sheet liabilities, assets or
commitments, or enter into any interest rate swap agreements;
(s) not take any action or omit to take any action which would
constitute grounds for revocation of the SBA License.
ARTICLE V
CONDITIONS
Section 5.01 Mutual Conditions. The Parties' obligations to consummate the
Merger and to perform this Agreement are subject to all of the following
conditions:
(a) No Action. No Action before any court or governmental body is
pending or threatened wherein a judgment, decree or order would restrain,
prohibit or invalidate any of the transactions contemplated by this Agreement or
cause the Merger to be declared unlawful or rescinded.
(b) Corporate Action. All corporate action necessary to authorize
the execution and delivery of this Agreement and consummation of the Merger
(including without limitation, and if deemed legally required by counsel to
Comcap or Newtek, respectively, the approval of this Agreement by the requisite
vote of the stockholders of Comcap or Newtek or members of Wilshire) has been
duly and validly taken.
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(c) Governmental Approvals. Any governmental or other approvals
or review of this Agreement, the Merger or the transactions contemplated by this
Agreement required under any applicable laws, statutes, orders, rules,
regulations, or policies, or any related guidelines to consummate the
transactions contemplated by this Agreement have been received, including,
without limitation, and the approval of the SBA to the change in ownership of
CCC, without the imposition of any condition to that approval which is, in
Newtek's or Wilshire's reasonable judgment, excessively burdensome in connection
with the future operation of Comcap or CCC. A condition to the SBA's approval
shall not be deemed to be excessively burdensome if it merely requires the
contribution of additional capital to SBA Holdings in order to meet an
applicable minimum regulatory capital requirement and/or the retention of
additional qualified personnel by SBA Holdings.
Section 5.02 Conditions to Obligations of Newtek. Newtek's obligation to
consummate the Merger and to perform this Agreement is subject to the
fulfillment of all of the following conditions unless waived by Newtek in
writing:
(a) Representations and Warranties. The representations and
warranties of Comcap and the Comcap Stockholders set forth in this Agreement are
true and correct as of the Closing as though made at and as of the Closing
except where any untruth or inaccuracy will not, either individually or in the
aggregate, have a Comcap Material Adverse Effect.
(b) Performance of Agreement. Comcap and the Comcap Stockholders
shall have performed and observed in all material respects all obligations and
conditions to be performed or observed by it or them under this Agreement at or
prior to the Closing.
(c) Due Diligence Investigation. Newtek, in its sole discretion,
shall be fully satisfied with the results of its legal and financial due
diligence investigation of the Comcap Companies.
(d) Officers' Certificate. Comcap shall have furnished to Newtek
a certificate, dated the date of the Closing and signed by the President of
Comcap on behalf of Comcap that the conditions set forth in Sections 5.02(a) and
(b) have been fulfilled, and attaching a good standing certificate for Comcap
and certified copy of the Certificate of Incorporation, and all amendments
thereof, of Comcap, issued by the Secretary of State of Delaware, each dated as
of a date within fifteen days prior to the Closing Date;
(e) Releases. The Comcap Stockholders, as well as all current
directors and officers of Comcap shall have provided Newtek with a release, in
the form of Exhibit E, of any and all claims they may have against Comcap
through the date of the Closing, with only those exceptions as are acceptable to
Newtek.
(f) Opinion of Counsel. Newtek has received an opinion, addressed
to it and dated the date of Closing, from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, counsel for
Comcap, to the following effect:
(i) each of the Comcap Companies are incorporated or organized,
validly existing and in good standing under the laws of the State of Delaware,
and have full power and authority to carry on their businesses as now conducted
and to own or lease or operate their properties;
32
(ii) this Agreement has been duly authorized by all
necessary corporate action on the part of Comcap and constitutes a valid and
binding obligation of Comcap;
(iii) the execution and performance of this Agreement will
not conflict with or result in a violation of, or constitute a default under,
any provision of the Certificate of Incorporation or Bylaws of any of the Comcap
Companies, or with any judgment, order or decree applicable to any of the Comcap
Companies;
(iv) no consent, approval, order, authorization,
declaration or filing of or with any governmental authority or other person is
required in connection with the execution and performance of this Agreement by
Comcap, except for the consents, approvals, orders or authorizations as shall
have been obtained or declarations and filings as shall have been made prior to
the date of Closing; and
(v) each of the securities or other rights issued by
Comcap for which Newtek Common Stock is to be exchanged have been validly
issued.
In rendering the opinion, Comcap's counsel may rely (without independent
investigation) to the extent necessary or appropriate, as to matters of fact,
upon representations and certificates of public officials and of any executive
officer or officers of the Comcap Companies.
(g) Material Adverse Changes. Since the Latest Balance Sheet
Date, there has occurred no change in the operations, prospects, assets,
business, or condition (financial or otherwise) of any of the Comcap Companies
which would have a Comcap Material Adverse Effect.
(h) Continuation of Business. Since the Latest Balance Sheet
Date, and except as otherwise provided in this Agreement, each of the Comcap
Companies have operated their businesses in the normal course, consistent with
past practice, and have not suffered any damage, destruction, loss or
occurrence, whether covered by insurance or not, which would result in a Comcap
Material Adverse Effect.
(i) Accountant's Letter. Newtek shall have received from Comcap's
independent certified public accountants a letter providing limited assurances
to Newtek with respect to the Comcap Financial Statements, with terms and
conditions to be mutually agreed upon by the Parties.
(j) Financial Advisors' Opinion. Newtek shall have received an
opinion with respect to the price to Newtek of the Merger (with terms and
conditions satisfactory to Newtek) from its financial advisors.
(k) Lender Approvals and Consents. Comcap shall have received
satisfactory and binding commitments from CCC's primary warehouse lenders,
Global Alliance Finance Company, LLC ("GAFCO"), (a subsidiary of Deutsche Bank),
and The Merchants Bank of New York ("Merchants") to the following effects: (i) a
reduction in the outstanding indebtedness owed to GAFCO of at least $4 Million;
and (ii) an agreement to extend both credit lines.
(l) Debt Forgiveness. Comcap and CCC shall have received the
approval of GAFCO for the forgiveness of indebtedness, as specified in Section
5.02 (k) above, and shall supply evidence that such transaction shall have been
completed prior to the Closing.
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(m) Option Holders' Waiver. Newtek and Wilshire shall have
received from the holders of all outstanding options, rights, grants or awards
entitling said holders to the purchase of equity interests or shares of Comcap
or any Comcap Subsidiary an irrevocable waiver of said rights.
(n) Termination of Agreements. Comcap shall have furnished
evidence reasonably satisfactory to Newtek, Wilshire and their counsel that the
Company's obligations under those agreements which Newtek shall have in writing
designated to Comcap no less than ten (10) days prior to the Closing shall have
been terminated on terms and conditions mutually agreeable to Newtek and Comcap.
Such terminations may be conditioned upon or effective upon the Closing. In
particular, and without limitation, the parties to the Stockholders' Agreement
dated January 21, 2000 shall confirm in writing the termination of that
agreement, which termination may be coincident upon the Closing of the
transactions contemplated herein.
(o) Deliveries. All documents or instruments required to be
delivered by Comcap, the Comcap Stockholders or other holders of Comcap Stock at
or prior to the Closing, shall have been delivered to Newtek or Wilshire, as the
case may be.
(p) Employment Agreements. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇ shall have executed employment agreements with the Surviving Corporation,
in the forms attached hereto as Exhibit F.
(q) Termination of 401(k) Plan. Comcap shall have furnished
evidence reasonably satisfactory to Newtek, Wilshire and their counsel that the
Commercial Capital Corporation Profit Sharing Plan shall have been terminated on
terms and conditions mutually agreeable to Newtek and Comcap. Such terminations
may be conditioned upon or effective upon the Closing.
Section 5.03 Conditions to Obligations of Comcap. Comcap's and the Comcap
Stockholder's obligations to consummate the Merger and to perform this Agreement
is subject to the fulfillment of all of the following conditions, unless waived
by Comcap in writing:
(a) Representations and Warranties. Newtek's representations and
warranties set forth in this Agreement are true and correct as of the Closing as
though made at the Closing except where any untruth or inaccuracy will not,
either individually or in the aggregate, have a Newtek Material Adverse Effect.
(b) Performance of Agreement. Newtek shall have performed and
observed in all material respects all obligations and conditions to be performed
or observed by it under this Agreement at or prior to the Closing.
(c) Officers' Certificate. Newtek has furnished a certificate,
dated the date of the Closing and signed by the President of Newtek on behalf of
Newtek that the conditions set forth in Sections 5.03(a) and (b) have been
fulfilled, and attaching a subsistence certificate for Newtek issued by the
Department of State of New York, dated as of a date within fifteen days prior to
the date of Closing;
34
(d) Financial Statements. Newtek has delivered the Financial
Statements to Comcap.
(e) Material Adverse Changes. There has occurred no change in the
operations, prospects, assets, business, or condition (financial or otherwise)
of Newtek which would have a Newtek Material Adverse Effect.
(f) Continuation of Business. Except as otherwise provided in
this Agreement, Newtek has operated its businesses in the normal course,
consistent with past practice, and has not suffered any damage, destruction,
loss or occurrence, whether covered by insurance or not, which would result in a
Newtek Material Adverse Effect.
(g) Opinion of Counsel. Comcap has received an opinion, addressed
to it and dated as of the Closing, from Cozen ▇'▇▇▇▇▇▇, counsel for Newtek, to
the following effect:
(i) Newtek is incorporated, validly existing and in good
standing under the laws of the State of New York and has full power and
authority to carry on its business as now conducted and to own or lease its
properties;
(ii) this Agreement has been duly authorized by all
necessary corporate action on the part of Newtek and is a valid and binding
obligation of Newtek;
(iii) the execution and performance of this Agreement will
not conflict with or result in a violation of, or constitute a default under,
any provision of the Certificate of Incorporation and Bylaws of Newtek, or any
judgment, order or decree applicable to Newtek; and
(iv) no consent, approval, order, authorization,
declaration or filing with any governmental authority or other entity is
required in connection with Newtek's execution and delivery of this Agreement,
except for the consents, approvals, orders or authorizations obtained or
registrations, declarations and filings made prior to the date of Closing.
In rendering its opinion, Newtek's counsel may rely (without independent
investigation) to the extent counsel deems necessary or appropriate, as to
matters of fact, upon representations and certificates of public officials and
of the officers of Newtek.
(g) Release. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have
received satisfactory and binding commitments from GAFCO and Merchants to
release each of them from all personal guarantees and all claims, demands,
losses and damages arising from their respective relationships with the such
individuals or the Comcap Companies.
(h) Employment Agreement. The Surviving Company shall have
executed an employment agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in the form attached
hereto as Exhibit F, which agreement shall state that it is intended to replace
and supersede all other agreements between ▇▇. ▇▇▇▇▇▇▇ and the Surviving Company
other than the promissory note referenced on Schedule 2.23, which note is to be
specifically ratified by ▇▇. ▇▇▇▇▇▇▇. In addition, Newtek shall have provided to
▇▇. ▇▇▇▇▇▇▇ a stock option award under its 2000 Stock Incentive and Deferred
Compensation Plan of a fully vested option to buy 50,000 shares of Newtek Common
Stock exercisable for five (5) years at the market value of the shares as of the
date of the award.
35
(i) Deliveries. All documents or instruments required to be delivered
by Newtek, Wilshire, or third parties at or prior to the Closing, shall have
been delivered to Comcap or the Comcap Stockholders.
ARTICLE VI
TERMINATION, AMENDMENT, WAIVER AND SURVIVAL
Section 6.01 Termination. This Agreement may be terminated at any time
prior to the Closing as follows: (a) by mutual written consent of Comcap and
Newtek; (b) by either Comcap or Newtek if the other has breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement which is incapable of
being cured or is not cured within thirty (30) days of written notice; (c) by
Newtek if any of the conditions set forth in Sections 5.01 or 5.02 have not been
satisfied on or prior to Closing; (d) by Comcap if any of the conditions set
forth in Section 5.01 and 5.03 have not been satisfied on or prior to Closing;
or (e) by either Comcap or Newtek if Closing has not occurred for any reason by
November 1, 2002.
Section 6.02 Effect of Termination. In the event of termination of this
Agreement by either Comcap or Newtek pursuant to Sections 6.01(a), 6.01 (c),
6.01(d) or 6.01(e), this Agreement shall be void and have no effect, without any
liability or obligation of the part of Comcap, any of the Comcap Stockholders or
Newtek. If terminated by Newtek pursuant to Section 6.01(b), Comcap and the
Comcap Stockholders, severally but not jointly, agree to pay Newtek One Hundred
Thousand Dollars ($100,000) within fourteen (14) days of the date of such
termination, as liquidated damages to Newtek for time and expenses incurred in
connection with the anticipated Merger and other damages arising out of the
termination. Comcap and the Comcap Stockholders acknowledge and agree that it
would be difficult to ascertain the actual amount of such damages to Newtek, and
One Hundred Thousand Dollars ($100,000) represents a reasonable and fair
estimate by the Parties of the amount thereof. Notwithstanding the termination
of this Agreement and regardless of the reason therefor, this Section 6.02 and
Sections 4.01(d) and 8.09 shall survive the termination of this Agreement and
remain in full force and effect.
Section 6.03 Survival of Representations and Warranties. Any investigation,
review or audit made by or on behalf of Comcap, the Comcap Stockholders or
Newtek and Wilshire, or the availability of information shall not affect the
covenants, representations and warranties contained in this Agreement, and such
covenants, representations and warranties shall survive the Closing of the
Merger.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification of Newtek. Subject to the conditions and
provisions set forth herein, Comcap hereby agrees to indemnify, defend and hold
harmless Newtek, Wilshire any Affiliate of either, and the officers, directors,
managers, employees, agents and representatives of each (collectively, the
"Newtek Indemnified Parties"), and the Comcap Stockholders, severally and
jointly, hereby agree to indemnify, defend and hold harmless the Newtek
Indemnified Parties, from and against all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonable attorneys'
fees and expenses (a "Claim" or collectively
36
"Claims"), asserted against or imposed upon or incurred by any of the Newtek
Indemnified Parties, but only in excess of the aggregate amount of Seventy Five
Thousand Dollars ($75,000):
(a) resulting from, or by reason of any facts constituting, a breach
of any covenant, agreement, representation or warranty of Comcap or the Comcap
Stockholders contained in this Agreement or a schedule or certificate required
pursuant to this Agreement;
(b) resulting from any undisclosed liability or claim relating to the
operation of the Comcap Companies prior to the Closing;
(c) resulting from any action taken by any of the Newtek Indemnified
Parties to enforce successfully the provisions of this indemnification; or
(d) resulting from any denial of liability in whole or part by SBA on
or any repair of a guarantee of a loan made, pursuant to any SBA loan program,
prior to the Closing date, which loan goes into default within the
Indemnification Period (as defined in Section 7.03, below).
The indemnity under this Section 7.01 extends only to the net amount of any
Claim sustained by any of the Newtek Indemnified Parties after deducting there
from any tax benefit actually recognized by such party as a result of such
action, assessment, loss, damage, liability, cost or expense and any amount
which any of the Newtek Indemnified Parties recovers as proceeds of insurance in
respect of such Claim, net of any cost of collection, deductible, reimbursement
obligation or other cost directly related to the insurance claim for such Claim.
Notwithstanding anything herein to the contrary, if the Comcap Stockholders
shall be required to indemnify any of the Newtek Indemnified Parties, with
respect to the same item of damage and amount, the satisfaction of such
indemnity to one of them shall discharge the Comcap Stockholders' obligations to
the others to the extent of the amount paid.
For the purpose of this Article VII, the term "Affiliate" shall mean any
officer, director, ten percent or more owner of Newtek or Wilshire, or any
company which controls, is under common control with or is controlled by Newtek
or Wilshire.
Section 7.02 Indemnification of the Comcap Stockholders. Subject to the
conditions and provisions set forth herein, Newtek hereby agrees to indemnify,
defend and hold harmless the Comcap Stockholders from and against all Claims
asserted against or imposed upon or incurred by any of them
(a) resulting from, or by reason of any facts constituting, a breach
of any covenant, agreement, representation or warranty of Newtek contained in
this Agreement or a schedule or certificate required pursuant to this Agreement,
(b) actions taken pursuant to Section 5.02(n) of this Agreement; or
(c) resulting from any action taken by any of the former holders of
Comcap Stock to enforce successfully the provisions of this indemnification.
The indemnity under this Section 7.02 extends only to the net amount of any
Claim sustained by the Comcap Stockholders after deducting there from any tax
benefit actually recognized by such holder as a result of such action,
assessment, loss, damage, liability, cost or expense (after taking into account
the effect if any, of timing differences resulting from the acceleration of the
deferral of items of gain or loss) and any amount which any Comcap
37
Stockholder recovers as proceeds of insurance in respect of such Claim, net of
any cost of collection, deductible, reimbursement obligation or other cost
directly related to the insurance claim for such Claim.
Section 7.03. Limitation of Liability of Comcap Stockholders. The
obligations and liabilities of the Comcap Stockholders hereunder with respect to
indemnification for Claims by Newtek shall be subject to the following
limitations:
(a) The Comcap Stockholders shall be obligated to indemnify Newtek
only with respect to those Claims as to which Newtek has given such holders
written notice on or prior to October 1, 2006 (the period between Closing and
October 1, 2006 is referred to herein as the "Indemnification Period").
(b) All claims for indemnification pursuant to Section 7.01 hereof
shall be recovered by Newtek solely by (i) the return to Newtek of the Escrow
Shares delivered to the Comcap Stockholders hereunder pursuant to Section 1.06
by the reduction of the number of remaining Escrow Shares, up to the total
81,607 shares. No Comcap Stockholder shall be obligated as a result of its
indemnification obligations hereunder to return to Newtek more than such
holder's pro rata portion of the Escrow Shares.
(c) For purposes of determining the number of shares of Escrow Shares
recoverable from the Comcap Stockholders, and thus reducible from escrow,
sufficient to satisfy a Claim by a Newtek Indemnified Party subject to
indemnification hereunder, the value of a share of an Escrow Share shall be
equal to the Average Indemnification Price (as hereinafter defined) of the
Newtek Common Stock. For purposes hereof, "Average Indemnification Price" means
the average of the closing prices of the Newtek Common Stock, as such prices are
reported by the Wall Street Journal, on the 30 trading days immediately
preceding: (i) the date of the award (with respect to any recovery hereunder
determined by judicial proceeding), (ii) the date that is 30 days after the
Comcap Stockholders were given notice of such Claim pursuant to Section 7.05(b)
(with respect to any recovery hereunder where the Comcap Stockholders are deemed
not to dispute the Claim or the amount because they have not responded as
provided in Section 7.05(b)).
(d) Any recovery by a Newtek Indemnified Party from the Comcap
Stockholders of Escrow Shares to satisfy a Claim hereunder shall be done so as
to reduce each Comcap Stockholder's interest in the Escrow Shares on a pro rata
basis, based on the respective ownership interests in the Escrow Shares held by
the Comcap Stockholders as of the date following Closing.
Section 7.04. Limitation of Newtek's Liability. The obligations and
liabilities of Newtek with respect to indemnification for Claims by a Comcap
Stockholders shall be subject to the following limitations:
(a) Newtek shall be obligated to indemnify the Comcap Stockholders
only with respect to those Claims as to which the said holders have given Newtek
written notice during the Indemnification Period ending October 31, 2005.
(b) All claims for indemnification pursuant to Section 7.02 hereof
shall be limited in amount to the proportionate share of the fair market value
of Comcap as of the Closing date pursuant to GAAP represented by the ownership
of the Comcap Stockholders. No indemnification shall be required to be made by
Newtek hereunder unless the amount of Comcap
38
Stockholder Claims exceeds $25,000 in the aggregate, in which case Newtek's
indemnification obligations shall apply to the aggregate amount of such Claims
in excess of $25,000.
Section 7.05 Process of Indemnification. The obligations and liabilities of
a party for which indemnification is sought (an "indemnifying party") by a
person or entity seeking indemnification (an "indemnified party") under this
Article VII shall be subject to the following conditions:
(a) Notice from Indemnified Party. The indemnified party shall
promptly notify the indemnifying party and the agent appointed pursuant to the
Escrow Agreement (the "Escrow Agent") in writing of the assertion of any Claim
or the discovery of any fact upon which the indemnified party intends to base a
Claim hereunder. Such notice shall set forth the amount of the Claim and specify
the alleged basis of the Claim. The delay or failure of an indemnified party to
provide notice hereunder shall not in any way limit the indemnified party's
indemnification rights hereunder except to the extent that the indemnifying
party shall have been materially adversely affected by such delay or failure and
except that in any event such notice shall be made within the Indemnification
Period.
(b) Recovery by Indemnified Party. If the indemnifying party does not
dispute the basis or amount of any Claim within 30 days of receiving written
notice thereof, the indemnified party shall have the right promptly to recover
indemnity as and to the extent provided herein. If the indemnifying party
disagrees with the basis of the Claim or the amount of damages caused thereby,
then within 30 days of receiving written notice thereof, the indemnifying party
shall give notice to the indemnified party and the Escrow Agent of such
disagreement and, in that case, the Escrow Agent shall retain the Escrow Shares
and the indemnified party shall have no right to recover indemnity hereunder
until such time, if at all, as (a) a court of competent jurisdiction issues a
final, non-appealable order specifying the amount of the indemnified party's
recovery, in which case the indemnified party shall have the right promptly to
recover the amount so specified (subject to the limitations contained in
Sections 7.03 or 7.04 hereof) and (b) the indemnified party and the indemnifying
party agree in writing to the amount of the recovery, in which case the
indemnified party shall have the right promptly to recover the amount so agreed.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Notices. All notices and other communications under this
Agreement to any Party shall be in writing and shall be deemed given when
delivered to that Party, sent by facsimile transmission (with electronic
confirmation) to that Party at the facsimile number for that Party set forth
below, mailed by U.S. mail (postage prepaid and return receipt requested) to
that Party at the address for that Party set forth below, or delivered by
Federal Express or any similar express delivery service for delivery to that
Party at that address:
If to Comcap or a Comcap Stockholder:
Comcap Holdings Corp.
▇▇ ▇▇▇▇ ▇▇/▇▇/ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
39
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chairman
fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇▇▇▇ Square
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Newtek or Wilshire:
Newtek Capital, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇ 1002
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Cozen ▇'▇▇▇▇▇▇.
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇, Esq.
fax: ▇▇▇-▇▇▇-▇▇▇▇
Any Party may change its facsimile number or address for notices under this
Agreement at any time by giving the other Parties written notice of the change.
Section 8.02 Non-Waiver. No failure by a Party to insist upon strict
compliance with a term or provision of this Agreement, to exercise any right, or
to seek a remedy is a waiver of the right to insist upon such strict compliance,
to exercise that or any other right, or seek that or any other remedy at any
other time. This Agreement may not be modified by custom or practice in the
trade, by the actions of the Parties or in any other manner except in writing
signed by the party against whom enforcement is sought.
Section 8.03 Headings. The headings of the various Articles and Sections of
this Agreement are not part of the context of this Agreement, are merely labels
to assist in locating such Articles and Sections, and shall be ignored in
construing this Agreement.
Section 8.04 Counterparts. This Agreement may be executed in multiple
counterparts, each of which is an original, but all of which taken together are
one and the same Agreement.
Section 8.05 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) constitutes the entire agreement between the Parties with
respect to its subject matter and supersedes all prior or contemporaneous
discussions, negotiations, agreements and understandings (both written and oral)
among the Parties with respect to such subject matter.
40
Section 8.06 No Third-Party Beneficiaries. Nothing in this Agreement,
express or implied shall give any legal entity, other than the Parties, any
rights, remedies or other benefits.
Section 8.07 Governing Law. This Agreement is governed by and shall be
construed in accordance with the laws of the State of New York, without regard
to New York's principles of conflicts of law. The Parties irrevocably submit to
the jurisdiction and venue of any Federal or State court in New York over any
dispute arising out of this Agreement and agree that all claims related to any
dispute related to this Agreement shall be heard and determined in any
applicable New York court. The Parties irrevocably waive, to the fullest extent
permitted by law, any objection they may have to the venue of any dispute
brought in any such court or any defense of inconvenient forum for the
maintenance of the dispute. The Parties irrevocably consent to process being
served upon them in any site, action or proceeding before any such court by
delivering as provided for notices in Section 8.01 of this Agreement. All rights
and remedies of each Party under this Agreement are cumulative and are in
addition to all other rights and remedies available to the Party from time to
time, whether under this Agreement otherwise.
Section 8.08 Binding Effect; Assignment. This Agreement is binding upon,
inures to the benefit of and is enforceable by and against the Parties and their
respective heirs, personal representatives, successors and permitted assigns.
Neither this Agreement nor any of the rights, interests or obligations under
this Agreement may be transferred or assigned by any of the Parties without the
prior written consent of the other Parties and any attempted assignment in
violation of this provision is void.
Section 8.09 Expenses. Except as otherwise specifically provided in this
Agreement:
(a) Comcap and the Comcap Stockholders shall pay their costs and
expenses associated with the transactions contemplated by this Agreement,
including without limitation the fees and expenses of legal counsel, accountants
and financial advisors.
(b) Newtek and Wilshire shall pay their own costs and expenses
associated with this Agreement, the Merger, and the other the transactions
contemplated by this Agreement, including without limitation the fees and
expenses of legal counsel, accountants and financial advisors, and JRC
Consulting.
Section 8.10 Public Announcements. Neither Newtek or Wilshire, on the one
hand, nor Comcap or the Comcap Stockholders, on the other hand, shall, without
the prior written consent of the other, make any public announcement or
statement with respect anything related to this Agreement, except as may be
necessary to comply with applicable requirements of the federal or state
securities laws or any governmental order or regulation or any obligations
pursuant to any listing agreement with any national securities exchange.
Section 8.11 Severability. If any provision of this Agreement determined by
a court or other government entity to be unenforceable, the Parties shall
cooperate in good-faith to rewrite such provision so that it is enforceable to
the maximum extent permitted by applicable law, and the Parties shall abide by
the provisions as re-written. If any provision of this Agreement cannot be
rewritten, the provision shall be severed from this Agreement, but every other
provision of this Agreement shall remain in full force and effect.
Signature Page Follows
41
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the Effective Date:
COMCAP HOLDINGS CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Title: President and Chief Executive Officer
NEWTEK CAPITAL INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Title: Chairman and Chief Executive Officer
WILSHIRE NEW YORK PARTNERS III, L.L.C.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Title: Manager
SBA HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
Title: President and Chief Executive Officer
COMCAP STOCK HOLDER GREEN CHARITABLE FOUNDATION,
INC.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------- ----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
By: S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Its: President
42
COMCAP STOCK HOLDER COMCAP STOCKHOLDER
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------- ---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ FOUNDATION, INC. COMCAP STOCKHOLDER
By: /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------- ---------------------------------------
Its: President ▇▇▇▇▇▇▇ ▇▇▇▇▇ COLIN
RESIDUAL TRUST U/W/O ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
By: /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Its: Trustee
STRYKER & ▇▇▇▇▇
By: /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Its: Partner
THE 1998 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ TRUST
By: /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Its: Trustee
▇▇▇▇▇ ▇▇▇▇▇ ISSUE LEAD TRUST
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Colin
-------------------------------
Its: Trustee
▇▇▇ ▇▇▇▇▇ ISSUE LEAD TRUST
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Colin
-------------------------------
Its: Trustee
43
TRUST FOR ISSUE OF S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Its: Trustee
TRUST FOR S. ▇▇▇▇▇▇▇ ▇▇▇▇▇ U/W/O ▇▇▇▇▇ ▇. ▇▇▇▇▇
By: /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Its: Trustee
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ISSUE LEAD TRUST
By: /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Its: Trustee
▇▇▇▇▇ ▇. ▇▇▇▇▇ ISSUE LEAD TRUST
By: /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Its: Trustee
THE GREEN FUND, INC.
By: /s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Its: Treasurer
44
LIST OF EXHIBITS
EXHIBIT A: THE GREEN FAMILY ENTITIES AND STOCKHOLDERS (omitted)
EXHIBIT B: CERTIFICATES OF MERGER (omitted)
EXHIBIT C: ALLOCATION OF NEWTEK STOCK AMONG COMCAP STAKEHOLDERS (omitted)
EXHIBIT D: ESCROW AGREEMENT
EXHIBIT E: STOCKHOLDER RELEASE
EXHIBIT F: EMPLOYMENT AGREEMENT FORMS FOR MESSRS. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ AND
▇▇▇▇▇▇▇ ▇▇▇▇
45
EXHIBIT A
THE GREEN FAMILY ENTITIES AND STOCKHOLDERS
(omitted)
46
EXHIBIT B
(omitted)
47
EXHIBIT C
ALLOCATION OF NEWTEK STOCK
AMONG COMCAP STAKEHOLDERS
(omitted)
48
EXHIBIT D
ESCROW AGREEMENT
(attached)
49
ESCROW AGREEMENT
This ESCROW AGREEMENT is made and entered into as of July __, 2002,
among NEWTEK CAPITAL, INC., a New York corporation ("Newtek"), COMCAP HOLDINGS
CORP. ("Comcap"), a Delaware corporation, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("Freemen"), as the majority common stockholders of Comcap
("Comcap Majority Stockholders") and the TWELVE TRUSTS OR CORPORATIONS AND ONE
INDIVIDUAL related to the Green family holding preferred stock or a note issued
by Comcap (as fully set forth in the Merger Agreement and referred to herein as
the "Green Trusts Parties") and ______________, a _____________ corporation, as
escrow agent ("Escrow Agent").
RECITALS
A. Newtek, Comcap, the Comcap Majority Stockholders and the
Green Trusts Parties have entered into an Agreement and Plan of Merger (the
"Merger Agreement") dated ______________, 2002.
B. Newtek, Comcap, the Comcap Majority Stockholders and the
Green Trusts Parties desire to make provision for the disposition of 82,980
shares (the "Escrowed Merger Shares") of Newtek common stock, par value $0.02
per share ("Newtek Common Stock") subject to certain contingencies as fully set
forth in the Merger Agreement, which is incorporated by reference and attached
hereto, and as set forth herein.
C. The Escrow Agent has agreed to serve as such on the terms
and conditions contained herein, to hold the Escrowed Merger Shares and to
release the shares, all as provided herein.
D. Newtek and Comcap are referred to herein as the
"Indemnified Parties" and the Comcap Majority Stockholders and the Green Trusts
Parties are referred to herein as the "Indemnifying Parties."
AGREEMENTS
In consideration of the recitals and mutual covenants and
agreements set forth herein, the parties hereby covenant and agree as follows:
1. Appointment. Newtek, Comcap, Comcap Majority Stockholders
and the Green Trusts Parties appoint the Escrow Agent as escrow agent as set
forth below. The Escrow Agent hereby accepts its appointment and agrees to act
as escrow agent under the terms and conditions contained in this Escrow
Agreement.
2. Issuance and Delivery of Shares. The Escrowed Merger Shares
shall be issued to and in the name of the Comcap Majority Stockholders and the
Green Trusts Parties as set forth in the Merger Agreement, however, certificates
representing the Escrowed Merger Shares shall be delivered to the Escrow Agent
to be held in escrow subject to the terms of this Escrow Agreement, and such
Escrowed Merger Shares shall be released to the Comcap Majority
50
Stockholders and the Green Trusts Parties or returned to Newtek only as set
forth in Section 4, below.
3. Escrow. The Escrow Agent agrees to hold the Escrowed Merger
Shares received by the Escrow Agent in accordance with Section 2 until the
release of the Escrowed Merger Shares pursuant to Section 4.
4. Release of the Escrowed Merger Shares. The Escrow Agent
shall not release any part of the Escrowed Merger Shares to any party except as
provided in Section 4 (a), (b) or (c).
(a) If either of the Indemnified Parties assert a claim for
indemnification under Article VII of the Merger Agreement, they shall provide
notice to the Escrow Agent as set forth in Section 7.05 of the Merger Agreement
(see: Sample Notice of Claim, attached hereto as Exhibit A) as to the basis of
their claim and their calculation of the amount of claim based upon the terms of
Section 7.03 of the Merger Agreement. The Indemnified Parties shall deliver a
copy of said Notice of Clam to each of the Indemnifying Parties. If within 30
days of receiving notice of the basis for and amount of the Indemnified Parties'
claim, none of the Indemnifying Parties dispute the basis or amount of the
claim, then within 10 calendar days following the expiration of such 30 day
period, the Escrow Agent shall provide any necessary notifications to Newtek's
transfer agent to cause certificates for the appropriate number of shares to be
prepared for return to Newtek for cancellation.
(b) If within 30 days of receiving the Notice of Claim, the
Indemnifying Parties or any one of them disagree with the basis of the claim or
the amount of damages caused thereby as fully set forth in Section 7.05(b) of
the Merger Agreement, then within 30 days of receiving the Notice of Claim, the
Indemnifying Parties shall give notice to the Escrow Agent and the Indemnified
Parties of such disagreement and, in that case, the Indemnified Parties shall
have no immediate right to recover indemnity hereunder until such time, if at
all, as (i) a court of competent jurisdiction issues a final, non-appealable
order specifying the amount of the Indemnified Parties recovery, in which case
the Indemnified Parties shall have the right promptly to recover the amount so
specified (subject to the limitations contained in Sections 7.03 or 7.04 of the
Merger Agreement); or (ii) when the Indemnified Parties and the Indemnifying
Parties jointly notify the Escrow Agent of their written agreement concerning
the amount of the recovery.
(c) In the event any Escrowed Merger Shares remain in the
possession of the Escrow Agent after October 1, 2006, which Shares are not
subject to any Notice of Claim, such Escrowed Merger Shares shall within ten
(10) days be returned to the Indemnifying Parties pursuant to the terms of the
Merger Agreement and the Escrow Agent will be relieved of all further
obligations hereunder.
5. The Escrow Agent's Fees. The Escrow Agent has waived the
payment of any fees hereunder.
6. Escrow Agent's Obligations. The Escrow Agent shall have no
duties or responsibilities other than those expressly set forth in this Escrow
Agreement. The Escrow Agent shall not be responsible or accountable for the
correctness of any information provided to it by the Indemnified Parties, or any
action taken on the basis of such information, including,
51
without limitation, any disbursement of Escrowed Merger Shares by the Escrow
Agent pursuant to Section 4(a) or (b) and shall not be required in any event to
verify independently the correctness of any information provided to it. The
Escrow Agent shall be entitled to rely, without any investigation whatsoever,
upon any communications received from the Indemnified Parties, and the Escrow
Agent shall be entitled to deem the signatories of the communications submitted
to it hereunder as being those purported to be authorized to sign such and shall
be entitled to rely on the genuineness of the signatures of such signatories
without inquiry and without sustaining evidence of any kind. The Escrow Agent
shall have the right to consult with counsel and shall be fully protected and
shall not be liable with respect to any action, taken or omitted by the Escrow
Agent in good faith and on advice of counsel, and shall be fully protected and
shall not be liable for any error of judgments or for any act done or omitted by
it in good faith, except for its own gross negligence or willful misconduct. The
Escrow Agent shall have no duties to anyone except those signing this Escrow
Agreement. In addition:
(a) if any property held under this Escrow Agreement is
attached, garnished, or levied upon by any court order, or the delivery thereof
shall be stayed or enjoined by an order of court, or any order, judgment or
decree shall be made or entered by any court order affecting the property
deposited under this Escrow Agreement, or any part thereof, the Escrow Agent is
expressly authorized in its sole direction, to obey and comply with all writs,
orders or decrees so entered or issued, which it is advised by legal counsel of
its own choosing is binding upon it, whether with or without jurisdiction, and
in case the Escrow Agent obeys or complies with any such writ, order or decree
it shall not be liable to any of the parties hereto or to any other person, firm
or corporation, by reason of such compliance notwithstanding such writ, order or
decree be subsequently reversed, modified, annulled, set aside or vacated;
(b) if the Escrow Agent becomes involved in litigation on
account of the Escrowed Merger Shares or of this Escrow Agreement, it shall have
the right to retain counsel and shall, unless such litigation results from the
Escrow Agent's own gross negligence or willful misconduct, (i) have a lien on
the Escrowed Merger Shares for one half of its damages, reasonable attorneys'
fees, disbursements, and expenses in connection with such litigation; and be
entitled to reimbursement therefor out of such property, and (ii) have the right
to be reimbursed by the Indemnified Parties for the other half of such damages,
reasonable attorney's fees, disbursements and expenses.
7. Indemnification, Taxes, assessments. The Indemnified
Parties agree to indemnify and hold harmless and reimburse the Escrow Agent from
and against any taxes, assessments, liabilities, claims, damages, actions, suits
costs and expenses (including attorney's fees) or other charges suffered or
incurred by the Escrow Agent in connection with the performance of its services
hereunder, unless caused by the Escrow Agent's gross negligence or willful
misconduct. The provisions of Sections 6 and 7 shall survive the termination of
this Escrow Agreement and the resignation or removal of the Escrow Agent.
8. Miscellaneous.
(a) This Escrow Agreement and the incorporated provisions
of the Merger Agreement constitute the entire agreement of the parties hereto
with respect to the
52
subject matter hereof, and this Escrow Agreement may not be modified or amended
except by written instrument executed by all the parties hereto.
(b) This Escrow Agreement shall be binding upon the parties
hereto and their respective successors and assigns, and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
(c) This Escrow Agreement shall be governed by and
construed in accordance with the laws of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of New York or any
other jurisdiction) that would cause the application of the law of any
jurisdiction other than New York.
(d) All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made upon receipt, if delivered personally, on the next business day following
delivery to a nationally recognized overnight courier service, on the third
business day following deposit in the U.S. mail if mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like changes of address) or the next business day following electronic
transmission to the facsimile number specified below with receipt acknowledged.
If to Newtek Capital, Inc:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to Comcap Holdings Corp.:
Facsimile No.:
If to Comcap Majority Stockholders:
Facsimile No.:
If to the Green Trusts Parties:
If to the Escrow Agent:
9. Escrow Dispute. In the event of any disagreement between
the Indemnified Parties and the Indemnifying Parties resulting in adverse claims
and demands being made in connection with or for the Escrowed Merger Shares, the
Escrow Agent shall be entitled, as its option, to hold the Escrowed Merger
Shares until such time as a mutual agreement has been reached among all the
parties or until disbursement is legally authorized by final judgment
53
or decree of any court of competent jurisdiction, or to deposit the Escrowed
Merger Shares with any court of competent jurisdiction pending the resolution of
the disagreement. In the event any disagreement between the Indemnified Party
and the Indemnified Parties results in litigation, arbitration or other similar
proceeding, the prevailing party shall be entitled to recover from the other
party its reasonable attorneys fees and costs.
10. Termination. This Escrow Agreement shall terminate and be
of no further force and effect upon the disbursement of all of the Escrowed
Merger Shares in accordance with the provisions hereof.
11. Resignation. The Escrow Agent, acting at any time
hereunder, may resign at any time by giving 30 days' prior written notice of
resignation to the Indemnified Parties and the Indemnifying Parties, such
resignation to be effective on the date specified on such notice. Upon the
effectiveness of such resignation, the Escrow Agent shall deliver the
certificates representing the Escrowed Merger Shares to such succeeding Escrow
Agent or to such persons as the parties designate in writing to the Escrow Agent
prior to the effectiveness of the resignation. In the event no such designation
has been provided, the Escrow Agent shall deposit the Escrowed Merger Shares
with any court of competent jurisdiction. Prior to the effectiveness of the
resignation of the Escrow Agent, the Escrow Agent shall remain obligated to
perform all duties required of it under this Escrow Agreement.
12. Counterparts. This Escrow Agreement may be executed in two
or more counterparts, each of which shall be deemed an original.
[Signature Page follows]
54
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written.
NEWTEK CAPITAL, INC.
By __________________________________
Title:_______________________________
ESCROW AGENT:
BY:__________________________________
Duly Authorized
COMCAP HOLDINGS CORP.
By:__________________________________
Title:_______________________________
COMCAP STOCK HOLDER
_____________________________________
Print Name:__________________________
COMCAP STOCK HOLDER
_____________________________________
Print Name:__________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
_____________________________________
55
S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
_____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇ FOUNDATION, INC.
By:__________________________
Its:_________________________
RESIDUAL TRUST U/W/O ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
By:__________________________
Its:_________________________
STRYKER & ▇▇▇▇▇
By:__________________________
Its:_________________________
THE 1998 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ TRUST
By:__________________________
Its:_________________________
▇▇▇▇▇ ▇▇▇▇▇ ISSUE CHARITABLE TRUST
By:__________________________
Its:_________________________
▇▇▇ ▇▇▇▇▇ ISSUE CHARITABLE TRUST
By:__________________________
Its:_________________________
56
TRUST FOR ISSUE OF S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
By:__________________________
Its:_________________________
TRUST FOR S. ▇▇▇▇▇▇▇ ▇▇▇▇▇ U/W/O ▇▇▇▇▇ ▇. ▇▇▇▇▇
By:__________________________
Its:_________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ CHARITABLE LEAD TRUST
By:__________________________
Its:_________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇ CHARITABLE LEAD TRUST
By:__________________________
Its:_________________________
THE GREEN FUND, INC.
By:__________________________
Its:_________________________
57
EXHIBIT A
NOTICE OF CLAIM FOR INDEMNIFICATION
(Date)__________
Escrow Agent
Attention:
Re: Escrow Agreement dated July__, 2002
Dear Mr.____:
1. Reference is made to that certain Escrow Agreement dated as of July __,
2002. All terms used but not defined herein shall have the respective meanings
given such terms in the Escrow Agreement.
2. This shall serve as notice that the undersigned _______________________
(specify officer title)
of Newtek Capital, Inc. [or Comcap Holding Corp. or its successor] hereby
asserts a claim for indemnification and certifies that the basis for the claim
and the amount of the claim is as follows:
3. I hereby certify that simultaneous notice is being provided to the
Indemnifying Parties as set forth in section 4 of the Escrow Agreement. You are
hereby directed to follow the procedures set forth in section 6 of the Escrow
Agreement, Recovery by Indemnified Party, in determining whether to release
indemnity.
IN WITNESS WHEREOF, the undersigned has executed this statement on the
date indicated above.
NEWTEK CAPITAL, INC.
[or COMCAP HOLDING CORP.]
By:_______________________________
Its:______________________________
58
EXHIBIT E
STOCKHOLDER RELEASE
(attached)
59
RELEASE AND WAIVER
The undersigned, a "Comcap Stockholder" under the terms of that
Agreement and Plan of Merger, dated August 7, 2002 (the "Agreement"), in
conjunction with and conditioned upon the Closing as set forth in said
Agreement, hereby releases Comcap Holdings Corp., its subsidiaries, affiliates,
officers, directors, employees and agents, and their successors, of and from all
claims, demands and liabilities of any kind or nature from the beginning of the
world through the date hereof.
Dated:________________, 2002
____________________________________
60
EXHIBIT F
EMPLOYMENT AGREEMENT FORMS
FOR MESSRS. ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(attached)
61
SMALL BUSINESS FUNDING, INC.
-----------------------------
Employment Agreement with
▇▇▇▇ ▇. ▇▇▇
-----------------------------
PREAMBLE. This Agreement entered into this 23rd day of August, 2002, by and
between Small Business Funding, Inc. (the "Company") and ▇▇▇▇ ▇. ▇▇▇ (the
"Executive"), effective immediately.
WHEREAS, the Executive has many years of experience in the matters related to
the business of the Company, particularly small business lending and related
programs under the sponsorship of the U.S. Small Business Administration; and
WHEREAS, the Company wishes to employ the Executive as its full time executive
officer and elect him as a director; and
WHEREAS, the parties desire by this writing to set forth the employment
relationship of the Company and the Executive.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
When used anywhere in the Agreement, the following terms shall have
the meaning set forth herein.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.
(c) "Company" shall mean SMALL BUSINESS FUNDING, INC., and any
successor to its interest.
(d) "Disability" shall mean the inability of the Executive to perform
his duties under this Agreement due to physical or mental incapacity which shall
(i) have lasted at least three (3) months and (ii) shall be certified by a
qualified physician experienced in such matters, as selected and paid for by the
Company.
62
(e) "Effective Date" shall mean date for the commencement of the
Executive's duties hereunder which shall be the date of completion of the merger
of SBA Holdings with Comcap Holdings, Inc. or such earlier date as the parties
may agree in writing.
(f) "Executive" shall mean ▇▇▇▇ ▇. ▇▇▇.
(g) "Good Reason" shall mean any of the following events, which has
not been consented to in advance by the Executive in writing: (i) a material
reduction in the Executive's base compensation as the same may have been
increased from time to time; (ii) the failure by the Company to continue to
provide the Executive with compensation and benefits provided for on the
Effective Date, as the same may have been increased from time to time, or with
benefits substantially similar to those provided to him under any of the
executive benefit plans in which the Executive now or hereafter becomes a
participant, or the taking of any action by the Company which would directly or
indirectly reduce any of such benefits or deprive the Executive of any material
fringe benefit enjoyed by him; or (iii) the assignment to the Executive of
duties and responsibilities materially different from those associated with his
position on the Effective Date.
(h) "Just Cause" shall mean the Executive's willful misconduct,
breach of fiduciary duty involving personal profit, failure to perform stated
duties, conviction of a felony or material breach of any provision of this
Agreement.
(i) "SBA Holdings" shall mean SBA Holdings, Inc., a New York
corporation, the sole stockholder of the Company.
2. Employment. The Executive is employed as the full time Chief Executive
Officer of the Company. The Executive shall devote his full time and attention
to such duties as are set forth on the attached Position Description (as the
same shall be modified from time to time by the Board) and shall render such
other administrative and management services for the Company and its
subsidiaries as are currently rendered and as are customarily performed by
persons situated in a similar executive capacity and consistent with the duties
of the Company. The Executive shall also promote, by entertainment or otherwise,
as and to the extent permitted by law, the business of the Company and its
subsidiaries. The Executive's other duties shall be such as the Board may from
time to time reasonably direct, including normal duties as an officer of the
Company. The Executive shall not engage in the active pursuit of any business,
including consulting services for third parties, other than in conjunction with
or as a part of the business of the Company.
3. Base Compensation. The Company agrees to pay the Executive during the term
of this Agreement a salary at the rate of $250,000 per annum, payable in cash
not less frequently than monthly.
4. Stock Options. The parent of the Company, Newtek Capital, Inc., shall
undertake in a separate letter agreement of even date to provide you with
incentive stock options under its 2000 Incentive Stock and Deferred Compensation
Plan; specifically, 77,000 options, with a five year term and with a strike
price equal to the market value of the underlying Newtek Common stock on the
date of grant.
63
5. Other Benefits; Expenses.
(a) Participation in Retirement, Medical and Other Plans. The
Executive shall participate in any plan that the Company maintains for the
benefit of its employees if the plan relates to (i) pension, profit-sharing, or
other retirement benefits, (ii) medical insurance or the reimbursement of
medical or dependent care expenses, or (iii) other group benefits, including
disability and life insurance plans.
(b) Expenses. The Executive shall be reimbursed for all reasonable
out-of-pocket business expenses which he shall incur in connection with his
services under this Agreement upon substantiation of such expenses in accordance
with the policies of the Company.
(c) Living Expense. The Executive shall be entitled to a cash payment
of One Thousand Five Hundred Dollars ($1,500) per month to be applied towards
his living expenses in order to facilitate his presence in the New York City
area.
(d) Travel Expense. The Executive shall be entitled, in addition to
travel on the business of the Company, to reimbursement for the expense of
commuting from the Washington, DC area to the New York area; provided, however,
that such reimbursement shall not exceed $1,200.00 per month.
6. Term. The Company hereby employs the Executive, and the Executive hereby
accepts such employment under this Agreement, for the period commencing on the
Effective Date and ending three (3) years thereafter (or such earlier date as is
determined in accordance with Section 11) (the "Term"), provided, however, that
the Company may terminate the Term at the end of two (2) years by giving the
Executive written notice of its intent to do so at least ninety (90) days prior
to the end of the second year.
7. Non-Competition and Protection of Confidential Information
(a) Executive agrees that Executive's services hereunder are of a
special, unique, extraordinary and intellectual character and Executive's
position with the Company places Executive in a position of confidence and trust
with the clients or customers of the Company and its corporate affiliates
("Affiliates"). It is agreed that throughout the Term and for the respective
periods specified in (1), or (2) below following the termination hereof,
Executive shall not directly or indirectly:
(1) for two (2) years, attempt in any manner to persuade any client
or customer of the Company or the Affiliates to cease to do
business or to reduce the amount of business which any such
client or customer has customarily done or contemplates doing
with the Company or the Affiliates, whether or not the
relationship between the Company or the Affiliates and such
client or customer was originally established in whole or in part
through its or Executive's efforts; or
(2) for two (2) years, employ or attempt to employ or assist anyone
else to employ any person who is then or at any time during the
six months preceding termination was in the employ of the Company
or the Affiliates.
64
It is further agreed that throughout his employment with the Company and for one
year (1) thereafter, Executive shall not directly or indirectly enter the employ
of or render any services to any person, firm or corporation that is engaged
directly or thorough an affiliate or otherwise in conducting a business similar
to that of the Company but not as a management or similar consultant.
(b) It is also agreed that Executive will not at any time (whether
during the Term or after termination of this Agreement), disclose to anyone any
confidential information or trade secret of the Company or the Affiliates or of
any client or customer of the Company or the Affiliates, or utilize such
confidential information or trade secret for his or its own benefit, or for the
benefit of third parties except pursuant to a lawful order of a court of
competent jurisdiction. The term "confidential information or trade secret of
the Company or the Affiliates" does not include any information which becomes
generally available to the public other than by breach of this provision.
(c) If Executive commits a breach or threatens to commit a breach, of
any of the provisions of subparagraphs (a) or (b) above, the Company, shall have
the right to have the provisions of this Agreement specifically enforced by any
court having equity jurisdiction without being required to post bond or other
security and without having to prove the inadequacy of the available remedies at
law, it being acknowledged and agreed that any such breach or threatened breach
will cause irreparable injury to the Company and that money damages will not
provide an adequate remedy to the Company. In addition, the Company may take all
such other actions and remedies available to it under law or in equity and shall
be entitled to such damages as it can show it has sustained by reason of such
breach.
(d) Nothing contained in this Section 7 shall be deemed to prevent or
limit the Executive's right to invest in the capital stock or other securities
of any business dissimilar from that of the Company or, solely as a passive or
minority investor and with the prior approval of the Board, in any business
similar to that of the Company.
8. Standards. The Executive shall perform his duties under this Agreement in
accordance with such standards as the Board may establish from time to time. The
Company will provide Executive with the working facilities and staff customary
for similar executives and necessary for him to perform his duties.
9. Vacation and Sick Leave. At such reasonable times as the Board shall in its
discretion permit, the Executive shall be entitled, without loss of pay, to
absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time; provided that:
(a) The Executive shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for senior
management Executives of the Company.
(b) The Executive shall not receive any additional compensation from
the Company on account of his failure to take a vacation, and the Executive
shall not accumulate
65
unused vacation from one fiscal year to the next, except in either case to the
extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Executive shall
be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment with the Company for such additional periods of
time and for such valid and legitimate reasons as the Board may in its
discretion determine. Further, the Board may grant to the Executive a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.
(d) In addition, the Executive shall be entitled to an annual sick
leave benefit as established by the Board.
10. Indemnification. The Company shall indemnify and hold harmless Executive
from any and all loss, expense, or liability that he may incur due to his
services for the Company during the full Term of this Agreement and shall have
the option to maintain insurance for such purposes.
11. Termination and Termination Pay. The Executive's employment hereunder may
be terminated under the following circumstances:
(a) Just Cause. The Board may, based on a good faith determination
and only after giving the Executive written notice and a reasonable opportunity
to cure, immediately terminate the Executive's employment at any time, for Just
Cause. The Executive shall have no right to receive compensation or other
benefits for any period after termination for Just Cause.
(b) Without Just Cause. The Board may, by written notice to the
Executive, immediately terminate his employment for a reason other than Just
Cause, in which case the Executive shall be paid an amount equal to the balance
of the compensation provided by this Agreement.
(c) Resignation by Executive with Good Reason. The Executive may at
any time immediately terminate employment for Good Reason, in which case the
Executive shall be entitled to receive the following compensation and benefits:
(i) the salary provided pursuant to Section 3 hereof, up to the expiration date
(the "Expiration Date") of the Term, including any renewal term, of this
Agreement, and (ii) the cost to the Executive of obtaining all health, life,
disability and other benefits which the Executive would have been eligible to
participate in through the Expiration Date based upon the benefit levels
substantially equal to those that the Company provided for the Executive at the
date of termination of employment.
(d) Resignation by Executive without Good Reason. The Executive may
voluntarily terminate employment with the Company during the Term of this
Agreement, upon at least 60 days' prior written notice to the Board of
Directors, in which case the Executive shall receive only his compensation,
vested rights, and Executive benefits up to the date of his resignation without
Good Reason.
(e) Retirement, Death, or Disability. If the Executive's employment
terminates during the Term of this Agreement due to his death or Disability, the
Executive (or
66
the beneficiaries of his estate) shall be entitled to receive the compensation
and benefits that the Executive would otherwise have become entitled to receive
for the balance of the Term, but not to exceed six (6) months. If the Executive
shall have been unable to perform the duties of his position for a period of
three (3) months, the Executive shall, if so requested by the Company, submit to
an examination to determine the existence of a Disability.
12. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company.
(b) Since the Company is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Company.
13. Corporate Authority. Company represents and warrants that the execution and
delivery of this Agreement by it has been duly and properly authorized by the
Board and that when so executed and delivered this Agreement shall constitute
the lawful and binding obligation of the Company.
14. Amendments. No amendments or additions to this Agreement shall be binding
unless made in writing and signed by all of the parties, except as herein
otherwise specifically provided.
15. Applicable Law. Except to the extent preempted by Federal law, the laws of
the State of New York shall govern this Agreement in all respects, whether as to
its validity, construction, capacity, performance or otherwise.
16. Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
17. Survival. It is agreed by the parties that Section 7, "Non-Competition and
Protection of Confidential Information" shall survive the termination of this
Agreement.
18. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
[signature page follows]
67
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first hereinabove written.
Witnessed by: SMALL BUSINESS FUNDING, INC.
_________________________ By _________________________________
Its: _______________________________
Witnessed by: EXECUTIVE
_________________________
____________________________________
▇▇▇▇ ▇. ▇▇▇
SBA HOLDINGS, INC.
By: __________________________________
Its: _________________________________
68
POSITION DESCRIPTION
▇▇▇▇ ▇. ▇▇▇, CHAIRMAN AND CEO
SMALL BUSINESS FUNDING, INC.
1. Perform all duties traditionally associated with the position of Chief
Executive Officer (CEO), including the selection and hiring of necessary
employees and agents of the Company.
2. Serve as Chairman of the Underwriting & Loan Committee and provide
supervision to appropriate staff services.
3. Develop, institute and maintain company policies and procedures, including
appropriate mechanisms to ensure ongoing compliance with company policies and
procedures, and federal, state, and local regulatory requirements.
4. Hire and manage employees and independent contractors, appropriate
underwriters, processors and marketers of Small Business Administration (SBA)
loans.
5. Report to Board no less frequently than on a quarterly basis.
6. Retain the services of accountants and lawyers to protect corporate assets,
ensure adequate financial disclosure and reporting and to report to the Board.
7. Insure the adequacy of corporate, D&O, and other commercially reasonable or
appropriate insurance coverage.
8. Manage and direct a program of securitization of the loans of the Company,
as directed by the Board.
9 Maintain and establish lending and warehouse credit facilities.
10. Manage and direct the process of raising equity capital for the business as
necessary.
11. Maintain and establish a positive relationship with the SBA in Washington,
D.C. and regional offices.
12. Attempt to cause the Company to re-qualify and be certified under the
"Preferred Lender Program."
13. Utilize the attached Business Plan as the basis for the management of the
Company and prepare monthly, quarterly and annual reports to the Board of the
extent of compliance with said Plan and the changes in said Plan required by the
business of the Company.
14. Supervise the corporate affairs of SBA Holdings, as a non-operating holding
company, to the extent required by the business of SBA Holdings and the Company.
69
SMALL BUSINESS FUNDING, INC.
-----------------------------
Employment Agreement with
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
PREAMBLE. This Agreement entered into this 23rd day of August 2002, by and
between Small Business Funding, Inc. (the "Company") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (the
"Executive"), effective immediately.
WHEREAS, the Executive has many years of experience in the matters related to
the business of the Company, particularly small business lending and related
programs under the sponsorship of the U.S. Small Business Administration; and
WHEREAS, the Company wishes to employ the Executive as its full time chief
operating officer and elect him as a director; and
WHEREAS, the parties desire by this writing to set forth the employment
relationship of the Company and the Executive.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
When used anywhere in the Agreement, the following terms shall have
the meaning set forth herein.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.
(c) "Company" shall mean SMALL BUSINESS FUNDING, INC., and any
successor to its interest.
(d) "Disability" shall mean the inability of the Executive to
perform his duties under this Agreement due to physical or mental incapacity
which shall (i) have lasted at least three (3) months and (ii) shall be
certified by a qualified physician experienced in such matters, as selected and
paid for by the Company.
70
(e) "Effective Date" shall mean the date for the commencement of
the Executive's duties hereunder which shall be the date ofcompletion of the
merger of SBA Holdings with Comcap Holdings, Inc.
(f) "Executive" shall mean ▇▇▇▇▇▇▇ ▇. ▇▇▇▇.
(g) "Good Reason" shall mean any of the following events, which has
not been consented to in advance by the Executive in writing: (i) a material
reduction in the Executive's base compensation as the same may have been
increased from time to time; (ii) the failure by the Company to continue to
provide the Executive with compensation and benefits provided for on the
Effective Date, as the same may have been increased from time to time, or with
benefits substantially similar to those provided to him under any of the
executive benefit plans in which the Executive now or hereafter becomes a
participant, or the taking of any action by the Company which would directly or
indirectly reduce any of such benefits or deprive the Executive of any material
fringe benefit enjoyed by him; or (iii) the assignment to the Executive of
duties and responsibilities materially different from those associated with his
position on the Effective Date.
(h) "Just Cause" shall mean the Executive's willful misconduct,
breach of fiduciary duty involving personal profit, failure to perform stated
duties, conviction of a felony or material breach of any provision of this
Agreement.
(i) "SBA Holdings" shall mean SBA Holdings, Inc., a New York
corporation, the sole stockholder of the Company.
2. Employment. The Executive is employed as the full time Chief Operating
Officer of the Company. The Executive shall devote his full time and attention
to such duties as are set forth on the attached Position Description (as the
same shall be modified from time to time by the Board) and shall render such
other administrative and management services for the Company and its
subsidiaries as are currently rendered and as are customarily performed by
persons situated in a similar executive capacity and consistent with the duties
of the Company. The Executive shall also promote, by entertainment or otherwise,
as and to the extent permitted by law, the business of the Company and its
subsidiaries. The Executive's other duties shall be such as the Board or the
Company's Chief Executive Officer may from time to time reasonably direct,
including normal duties as an officer of the Company. The Executive shall not
engage in the active pursuit of any business, including consulting services for
third parties, other than in conjunction with or as a part of the business of
the Company.
3. Base Compensation. The Company agrees to pay the Executive during the term
of this Agreement a salary at the rate of $200,000 per annum, payable in cash
not less frequently than monthly.
4. Stock Options. The parent of the Company, Newtek Capital, Inc.,
shall undertake in a separate letter agreement of even date to provide you with
incentive stock options under its 2000 Incentive Stock and Deferred Compensation
Plan; specifically, 77,000 options, with a five year term and with a strike
price equal to the market value of the underlying Newtek Common stock on the
date of grant.
71
5. Other Benefits; Expenses.
(a) Participation in Retirement, Medical and Other Plans. The
Executive shall participate in any plan that the Company maintains for the
benefit of its employees if the plan relates to (i) pension, profit-sharing, or
other retirement benefits, (ii) medical insurance or the reimbursement of
medical or dependent care expenses, or (iii) other group benefits, including
disability and life insurance plans.
(b) Expenses. The Executive shall be reimbursed for all reasonable
out-of-pocket business expenses which he shall incur in connection with his
services under this Agreement upon substantiation of such expenses in accordance
with the policies of the Company.
(c) Living Expense. The Executive shall be entitled to a cash
payment of One Thousand Five Hundred Dollars ($1,500) per month to be applied
towards his living expenses in order to facilitate his presence in the New York
City area.
(d) Travel Expense. The Executive shall be entitled, in addition to
travel on the business of the Company, to reimbursement for the expense of
commuting from the Washington, DC area to the New York area; provided, however,
that such reimbursement shall not exceed $1,500.00 per month.
6. Term. The Company hereby employs the Executive, and the Executive hereby
accepts such employment under this Agreement, for the period commencing on the
Effective Date and ending three (3) years thereafter (or such earlier date as is
determined in accordance with Section 11) (the "Term"), provided, however, that
the Company may terminate the Term at the end of two (2) years by giving the
Executive written notice of its intent to do so at least ninety (90) days prior
to the end of the second year.
7. Non-Competition and Protection of Confidential Information
(a) Executive agrees that Executive's services hereunder are of a
special, unique, extraordinary and intellectual character and Executive's
position with the Company places Executive in a position of confidence and trust
with the clients or customers of the Company and its corporate affiliates
("Affiliates"). It is agreed that throughout the Term and for the respective
periods specified in (1), or (2) below following the termination hereof,
Executive shall not directly or indirectly:
(3) for two (2) years, attempt in any manner to persuade any client
or customer of the Company or the Affiliates to cease to do
business or to reduce the amount of business which any such
client or customer has customarily done or contemplates doing
with the Company or the Affiliates, whether or not the
relationship between the Company or the Affiliates and such
client or customer was originally established in whole or in
part through its or Executive's efforts; or
(4) for two (2) years, employ or attempt to employ or assist anyone
else to employ any person who is then or at any time during the
six months preceding termination was in the employ of the
Company or the Affiliates.
72
It is further agreed that throughout his employment with the Company and for one
year (1) thereafter, Executive shall not directly or indirectly enter the employ
of or render any services to any person, firm or corporation that is engaged
directly or thorough an affiliate or otherwise in conducting a business similar
to that of the Company, but not as a management or similar consultant.
(b) It is also agreed that Executive will not at any time (whether
during the Term or after termination of this Agreement), disclose to anyone any
confidential information or trade secret of the Company or the Affiliates or of
any client or customer of the Company or the Affiliates, or utilize such
confidential information or trade secret for his or its own benefit, or for the
benefit of third parties except pursuant to a lawful order of a court of
competent jurisdiction. The term "confidential information or trade secret of
the Company or the Affiliates" does not include any information which becomes
generally available to the public other than by breach of this provision.
(c) If Executive commits a breach or threatens to commit a breach, of
any of the provisions of subparagraphs (a) or (b) above, the Company, shall have
the right to have the provisions of this Agreement specifically enforced by any
court having equity jurisdiction without being required to post bond or other
security and without having to prove the inadequacy of the available remedies at
law, it being acknowledged and agreed that any such breach or threatened breach
will cause irreparable injury to the Company and that money damages will not
provide an adequate remedy to the Company. In addition, the Company may take all
such other actions and remedies available to it under law or in equity and shall
be entitled to such damages as it can show it has sustained by reason of such
breach.
(d) Nothing contained in this Section 7 shall be deemed to prevent or
limit the Executive's right to invest in the capital stock or other securities
of any business dissimilar from that of the Company or, solely as a passive or
minority investor and with the prior approval of the Board, in any business
similar to that of the Company.
8. Standards. The Executive shall perform his duties under this Agreement in
accordance with such standards as the Board may establish from time to time. The
Company will provide Executive with the working facilities and staff customary
for similar executives and necessary for him to perform his duties.
9. Vacation and Sick Leave. At such reasonable times as the Board shall in its
discretion permit, the Executive shall be entitled, without loss of pay, to
absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time; provided that:
(a) The Executive shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for senior
management Executives of the Company.
(b) The Executive shall not receive any additional compensation from
the Company on account of his failure to take a vacation, and the Executive
shall not accumulate
73
unused vacation from one fiscal year to the next, except in either case to the
extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Executive shall
be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment with the Company for such additional periods of
time and for such valid and legitimate reasons as the Board may in its
discretion determine. Further, the Board may grant to the Executive a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.
(d) In addition, the Executive shall be entitled to an annual sick
leave benefit as established by the Board.
10. Indemnification. The Company shall indemnify and hold harmless Executive
from any and all loss, expense, or liability that he may incur due to his
services for the Company during the full Term of this Agreement and shall have
the option to maintain insurance for such purposes.
11. Termination and Termination Pay. The Executive's employment hereunder may
be terminated under the following circumstances:
(a) Just Cause. The Board may, based on a good faith determination
and only after giving the Executive written notice and a reasonable opportunity
to cure, immediately terminate the Executive's employment at any time, for Just
Cause. The Executive shall have no right to receive compensation or other
benefits for any period after termination for Just Cause.
(b) Without Just Cause. The Board may, by written notice to the
Executive, immediately terminate his employment for a reason other than Just
Cause, in which case the Executive shall be paid an amount equal to the balance
of the compensation provided by this Agreement.
(c) Resignation by Executive with Good Reason. The Executive may at
any time immediately terminate employment for Good Reason, in which case the
Executive shall be entitled to receive the following compensation and benefits:
(i) the salary provided pursuant to Section 3 hereof, up to the expiration date
(the "Expiration Date") of the Term, including any renewal term, of this
Agreement, and (ii) the cost to the Executive of obtaining all health, life,
disability and other benefits which the Executive would have been eligible to
participate in through the Expiration Date based upon the benefit levels
substantially equal to those that the Company provided for the Executive at the
date of termination of employment.
(d) Resignation by Executive without Good Reason. The Executive may
voluntarily terminate employment with the Company during the Term of this
Agreement, upon at least 60 days' prior written notice to the Board of
Directors, in which case the Executive shall receive only his compensation,
vested rights, and Executive benefits up to the date of his resignation without
Good Reason.
(e) Retirement, Death, or Disability. If the Executive's employment
terminates during the Term of this Agreement due to his death or Disability, the
Executive (or
74
the beneficiaries of his estate) shall be entitled to receive the compensation
and benefits that the Executive would otherwise have become entitled to receive
for the balance of the Term, but not to exceed six (6) months. If the Executive
shall have been unable to perform the duties of his position for a period of
three (3) months, the Executive shall, if so requested by the Company, submit to
an examination to determine the existence of a Disability.
12. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company.
(b) Since the Company is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Company.
13. Corporate Authority. Company represents and warrants that the execution and
delivery of this Agreement by it has been duly and properly authorized by the
Board and that when so executed and delivered this Agreement shall constitute
the lawful and binding obligation of the Company.
14. Amendments. No amendments or additions to this Agreement shall be binding
unless made in writing and signed by all of the parties, except as herein
otherwise specifically provided.
15. Applicable Law. Except to the extent preempted by Federal law, the laws of
the State of New York shall govern this Agreement in all respects, whether as to
its validity, construction, capacity, performance or otherwise. THE PARTIES
HEREBY AGREE, IN ANY DISPUTE UNDER THIS AGREEMENT, THAT TO THE FULLEST EXTENT
PERMITTED BY LAW THEY EACH WAIVE THE RIGHT TO A TRIAL BY JURY.
16. Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
17. Survival. It is agreed by the parties that Section 7, "Non-Competition and
Protection of Confidential Information" shall survive the termination of this
Agreement.
18. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
[signature page follows]
75
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first hereinabove written.
Witnessed by: SMALL BUSINESS FUNDING, INC.
_________________________ By _________________________________
Its:________________________________
Witnessed by: EXECUTIVE
_________________________ ____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
SBA HOLDINGS, INC.
By _________________________________
Its:________________________________
76
POSITION DESCRIPTION
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, CHIEF OPERATING OFFICER
SMALL BUSINESS FUNDING, INC.
1. Perform all duties traditionally associated with the position of Chief
Operating Officer (COO).
2. Serve as a member of the Underwriting & Loan Committee.
3. Develop, institute and maintain company policies and procedures, including
appropriate mechanisms to ensure ongoing compliance with company policies and
procedures, and federal, state, and local regulatory requirements.
4. Hire and manage employees and independent contractors, appropriate
underwriters, processors and marketers of Small Business Administration (SBA)
loans.
5. Working with the CEO, report to Board no less frequently than on a
quarterly basis.
6. Assist in maintaining and establishing lending and warehouse credit
facilities.
7. Assist in the process of raising equity capital for the business as
necessary.
8. Maintain and establish a positive relationship with the SBA in Washington,
D.C. and regional offices.
9. Attempt to cause the Company to re-qualify and be certified under the
"Preferred Lender Program."
10. Utilize the attached Business Plan as the basis for the management of the
Company and prepare monthly, quarterly and annual reports to the Board of the
extent of compliance with said Plan and the changes in said Plan required by the
business of the Company.
77
SMALL BUSINESS FUNDING, INC.
-------------------------
Employment Agreement
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
PREAMBLE. This Agreement entered into this ____ day of July 2002, by and between
Small Business Funding, Inc. (the "Company") and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the
"Executive"), effective immediately.
WHEREAS, the Executive has many years of experience in the matters related to
the business of the Company, particularly small business lending and related
programs under the sponsorship of the U.S. Small Business Administration; and
WHEREAS, the Company wishes to employ the Executive as its full time President
and an executive officer and elect him as a director of the Company; and
WHEREAS, the parties desire by this writing to set forth the employment
relationship of the Company and the Executive.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
When used anywhere in the Agreement, the following terms shall have
the meaning set forth herein.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.
(c) "Company" shall mean SMALL BUSINESS FUNDING, INC., and any
successor to its interest.
(d) "Disability" shall mean the inability of the Executive to perform
his duties under this Agreement due to physical or mental incapacity which shall
(i) have lasted at least three (3) months and (ii) shall be certified by a
qualified physician experienced in such matters, as selected and paid for by the
Company.
78
(d) "Effective Date" shall mean the date of execution referenced in
the Preamble of this Agreement.
(e) "Executive" shall mean ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
(f) "Good Reason" shall mean any of the following events, which has
not been consented to in advance by the Executive in writing: (i) a material
reduction in the Executive's base compensation as the same may have been
increased from time to time; (ii) the failure by the Company to continue to
provide the Executive with compensation and benefits provided for on the
Effective Date, as the same may have been increased from time to time, or with
benefits substantially similar to those provided to him under any of the
executive benefit plans in which the Executive hereafter becomes a participant,
or the taking of any action by the Company which would directly or indirectly
reduce any of such benefits or deprive the Executive of any material fringe
benefit enjoyed by him, or (iii) the failure of the Executive to be maintained
in office (other than for Just Cause) as a director of the Company or SBA
Holdings.
(g) "Just Cause" shall mean the Executive's willful misconduct,
breach of fiduciary duty involving personal profit, failure to perform stated
duties, conviction of a felony or material breach of any provision of this
Agreement.
(h) "SBA Holdings" shall mean SBA Holdings, Inc., a New York
corporation, the sole stockholder of the Company.
(i) "Term" shall mean the one (1) year period beginning upon the
Effective Date and ending on the first anniversary of said date, unless the Term
is earlier terminated as provided herein.
2. Employment. The Executive is employed as the full time President and an
executive officer of the Company. The Executive shall devote his full time and
attention to such duties as are set forth on the attached Position Description
(as the same shall be modified from time to time by the Board) and shall render
such other administrative and management services for the Company and its
subsidiaries as are customarily performed by persons situated in a similar
executive capacity and consistent with the duties of the Company. The Executive
shall be elected as a director of the Company and of its parent, SBA Holdings,
and shall also promote, as and to the extent permitted by law, the business of
the Company and its subsidiaries. The Executive's other duties shall be such as
the Company's Board may from time to time reasonably direct, including normal
duties as an officer of the Company. The Executive shall not engage in the
active pursuit of any business other than in conjunction with or as a part of
the business of the Company.
3. Base Compensation.
(a) The Company agrees to pay the Executive during the term of this
Agreement a salary at the rate of $225,000 per annum, payable in cash not less
frequently than monthly.
(b) The Company agrees, if the Term is not extended beyond the first
anniversary of the Effective Date, or if the Term shall be earlier terminated
pursuant to Section 10, other than
79
for Just Cause, then Executive shall be paid an amount equal to the annual Base
Compensation ("Severance"), from either the date of Termination or the date of
non-renewal.
4. Other Benefits; Expenses.
(a) Participation in Retirement, Medical and Other Plans. The
Executive shall participate in any plan that the Company maintains for the
benefit of its employees if the plan relates to (i) pension, profit-sharing, or
other retirement benefits, (ii) medical insurance or the reimbursement of
medical or dependent care expenses, or (iii) other group benefits, including
disability and life insurance plans.
(b) Life and Disability Insurance. The Company shall maintain the
life insurance and disability insurance insuring the Executive as maintained
previously by the predecessor of the Company during the Term, provided that the
annual cost of such insurance does not exceed $17,120.89.
(c) Expenses. The Executive shall be reimbursed for all reasonable
out-of-pocket business expenses which he shall incur in connection with his
services under this Agreement upon substantiation of such expenses in accordance
with the policies of the Company.
5. Term. The Company hereby employs the Executive, and the Executive hereby
accepts such employment under this Agreement, for the period commencing on the
Effective Date and ending one (1) year thereafter (or such earlier date as is
determined in accordance with Section 10) (the "Term").
6. Non-Competition and Protection of Confidential Information
(a) Executive agrees that Executive's services hereunder are of a
special, unique, extraordinary and intellectual character and Executive's
position with the Company places Executive in a position of confidence and trust
with the clients or customers of the Company and its corporate affiliates
("Affiliates"). It is agreed that throughout the Term and for the respective
periods specified in (1), or (2) below following the termination hereof,
Executive shall not directly or indirectly:
(5) for two (2) years, attempt in any manner to persuade any client
or customer of the Company or the Affiliates to cease to do
business or to reduce the amount of business which any such
client or customer has customarily done or contemplates doing
with the Company or the Affiliates, whether or not the
relationship between the Company or the Affiliates and such
client or customer was originally established in whole or in part
through its or Executive's efforts; or
(6) for two (2) years, employ or attempt to employ or assist anyone
else to employ any person who is then or at any time during the
six months preceding termination was in the employ of the Company
or the Affiliates.
It is further agreed that throughout his employment with the Company and for six
(6) months thereafter, Executive shall not directly or indirectly enter the
employ of or render any services to
80
any person, firm or corporation that is engaged directly or thorough an
affiliate or otherwise, in conducting a business similar to that of the Company.
(b) It is also agreed that Executive will not at any time (whether
during the Term or after termination of this Agreement), disclose to anyone any
confidential information or trade secret of the Company or the Affiliates or of
any client or customer of the Company or the Affiliates, or utilize such
confidential information or trade secret for his or its own benefit, or for the
benefit of third parties except pursuant to a lawful order of a court of
competent jurisdiction. The term "confidential information or trade secret of
the Company or the Affiliates" does not include any information which becomes
generally available to the public other than by breach of this provision.
(c) If Executive commits a breach or threatens to commit a breach, of
any of the provisions of subparagraphs (a) or (b) above, the Company, shall have
the right to have the provisions of this Agreement specifically enforced by any
court having equity jurisdiction without being required to post bond or other
security and without having to prove the inadequacy of the available remedies at
law, it being acknowledged and agreed that any such breach or threatened breach
will cause irreparable injury to the Company and that money damages will not
provide an adequate remedy to the Company. In addition, the Company may take all
such other actions and remedies available to it under law or in equity and shall
be entitled to such damages as it can show it has sustained by reason of such
breach.
(d) Nothing contained in this Section 6 shall be deemed to prevent or
limit the Executive's right to invest in the capital stock or other securities
of any business dissimilar from that of the Company or, solely as a passive or
minority investor and with the prior approval of the Board, in any business.
7. Standards. The Executive shall perform his duties under this Agreement in
accordance with such standards as the Board may establish from time to time. The
Company will provide Executive with the working facilities and staff customary
for similar executives and necessary for him to perform his duties.
8. Vacation and Sick Leave. At such reasonable times as the Board shall in its
discretion permit, the Executive shall be entitled, without loss of pay, to
absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time; provided that:
(a) The Executive shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for senior
management Executives of the Company.
(b) The Executive shall not receive any additional compensation from
the Company on account of his failure to take a vacation, and the Executive
shall not accumulate unused vacation from one fiscal year to the next, except in
either case to the extent authorized by the Board.
81
(c) In addition to the aforesaid paid vacations, the Executive shall
be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment with the Company for such additional periods of
time and for such valid and legitimate reasons as the Board may in its
discretion determine. Further, the Board may grant to the Executive a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.
(d) In addition, the Executive shall be entitled to an annual sick
leave benefit as established by the Board.
9. Indemnification. The Company shall indemnify and hold harmless Executive
from any and all loss, expense, or liability that he may incur due to his
services for the Company during the full Term of this Agreement and shall have
the option to maintain insurance for such purposes.
10. Termination and Termination Pay. The Executive's employment hereunder may
be terminated under the following circumstances:
(a) Just Cause. The Board may, based on a good faith determination
and only after giving the Executive written notice and a reasonable opportunity
to cure, immediately terminate the Executive's employment at any time, for Just
Cause. The Executive shall have no right to receive compensation or other
benefits for any period after termination for Just Cause.
(b) Without Just Cause. The Board may, by written notice to the
Executive, immediately terminate his employment for a reason other than Just
Cause, in which case the Executive shall be paid an amount equal to the balance
of the compensation provided by this Agreement and the Severance payment
provided by Section 3(b).
(c) Resignation by Executive with Good Reason. The Executive may at
any time immediately terminate employment for Good Reason, in which case the
Executive shall be entitled to receive the following compensation and benefits:
(i) the base compensation provided pursuant to Section 3 hereof, up to the
expiration date (the "Expiration Date") of the Term, including any renewal term,
of this Agreement, (ii) the Severance payment provided by Section 3(b) and (iii)
the cost to the Executive of obtaining all health, life, disability and other
benefits which the Executive would have been eligible to participate in through
the Expiration Date based upon the benefit levels substantially equal to those
that the Company provided for the Executive at the date of termination of
employment.
(d) Resignation by Executive without Good Reason. The Executive may
voluntarily terminate employment with the Company during the Term of this
Agreement, upon at least 60 days' prior written notice to the Company, in which
case the Executive shall receive only his compensation and benefits up to the
date of his resignation.
(e) Retirement, Death, or Disability. If the Executive's employment
terminates during the Term of this Agreement due to his death or Disability, the
Executive (or the beneficiaries of his estate) shall be entitled to receive the
compensation and benefits that the Executive would otherwise have become
entitled to receive for the balance of the Term, but not to exceed six (6)
months. If the Executive shall have been unable to perform the duties of his
82
position for a period of three (3) months, the Executive shall, if so requested
by the Company, submit to an examination to determine the existence of a
Disability.
11. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company.
(b) Since the Company is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Company.
12. Corporate Authority. Company represents and warrants that the execution and
delivery of this Agreement by it has been duly and properly authorized by the
Board and that when so executed and delivered this Agreement shall constitute
the lawful and binding obligation of the Company.
13. Amendments. No amendments or additions to this Agreement shall be binding
unless made in writing and signed by all of the parties, except as herein
otherwise specifically provided.
14. Applicable Law. Except to the extent preempted by Federal law, the laws of
the State of New York shall govern this Agreement in all respects, whether as to
its validity, construction, capacity, performance or otherwise.
15. Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
16. Survival. It is agreed by the parties that Section 6, "Non-Competition and
Protection of Confidential Information" shall survive the termination of this
Agreement.
17. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
18. SBA Holdings. By its execution below, SBA Holdings confirms the
authorization to commit to elect the Executive to its Board of Directors.
[signature page follows]
83
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first hereinabove written.
Witnessed by: SMALL BUSINESS FUNDING, INC.
_________________________ By _________________________________
Its: _______________________________
Witnessed by: EXECUTIVE
_________________________
____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
SBA HOLDINGS, INC.
By: _________________________________
Its: ________________________________
84
POSITION DESCRIPTION
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, PRESIDENT
SMALL BUSINESS FUNDING, INC.
1. Perform all duties traditionally associated with the position of President
of a company.
2. Participate as a member of the Underwriting & Loan Committee of the Board
and as a member of the board of SBA Holdings.
3. Report to Board no less frequently than on a quarterly basis.
4. Subject to direction from the Board, maintain and establish a positive
relationship with the SBA in Washington, D.C. and regional offices; be available
to visit the relevant SBA offices.
5. Subject to direction from the Board, attempt to cause the Company to
re-qualify and be certified under the "Preferred Lender Program."
6. Be available for participation in selected small business lending trade
organizations, including participation in conferences and meetings thereof.
7. Subject to the supervision of the Board, address problem issues with past
and future employees and employment related issues.
8. Subject to supervision of the Board, address loan defaults and related loan
work-out situations.
9. Subject to supervision of the Board, address matters related to tenancy and
landlord issues.
85
[SCHEDULES OMITTED]
86
