EXHIBIT 10.1
STOCK PURCHASE AGREEMENT,
DATED AS OF AUGUST 2, 2005,
BY AND AMONG
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ASSOCIATES, INC.
AND
NATIONAL INVESTMENT MANAGERS INC.
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of August 2, 2005 (this
"Agreement"), by and among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ASSOCIATES, INC., a New Jersey
corporation (the "Company"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual ("▇▇▇▇▇"),
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, an individual ("Davies" and, together with ▇▇▇▇▇, sometimes
individually referred to as a "Shareholder" and collectively as the
"Shareholders"), and NATIONAL INVESTMENT MANAGERS INC., a Florida corporation
(the "Purchaser").
RECITALS:
▇. ▇▇▇▇▇ is the owner of (i) 152.632 issued and outstanding shares of common
stock of the Company, par value $0.01 per share (the "▇▇▇▇▇ Shares"), and (ii)
Davies is the owner of 5.2632 issued and outstanding shares of common stock of
the Company, par value $0.01 per share (the "Davies Shares" and, together with
the ▇▇▇▇▇ Shares, the "Shares").
B. The Shareholders desire to sell and transfer to the Purchaser, and the
Purchaser desires to purchase and acquire, all of the Shareholders' right, title
and interest in and to the Shares, all on the terms and provisions and subject
to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and legal adequacy of which is acknowledged, the parties agree as
follows:
Article I
DEFINITIONS
The terms defined in this Article I, whenever used in this Agreement
(including, without limitation, the exhibits and schedules attached hereto),
shall have the following meanings:
1.1 "Accounts Receivable" means all trade accounts receivable and all
notes, bonds and other evidences of indebtedness of and rights to receive
payment, including, without limitation, rebates, refunds and similar payments
and any rights of the Company with respect to any third party collection
procedures or any other actions or proceedings relating to the Business (as
defined below) which have been commenced in connection therewith and any other
item that would be characterized as an account receivable in accordance with
GAAP (as such term is hereinafter defined).
1.2 "Acquisition Transaction" has the meaning given such term in Section
6.9 of this Agreement.
1.3 "Affiliate" of any Person (as such term is hereinafter defined) means
any stockholder, member, Person or entity controlling, controlled by or under
common control with such Person, or any director, officer or Key Employee (as
defined below) of such Person, or, with respect to a Shareholder, any of the
immediate family members of the Shareholder who were at any time employed by the
Company. For purposes of this definition, the term "control", when used with
respect to any Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings that correspond to the foregoing.
1.4 "Authorizations" means all licenses, permits, franchises, approvals,
authorizations, qualifications, concessions or the like, issued or granted by
any federal, state, local or foreign Governmental Entity or Regulatory Authority
(as such terms are hereinafter defined), including, without limitation, SEC and
NASD licenses and registrations, or by any nongovernmental entity to any Person
or which in any way relate to the business, operations, activities, properties
and assets of such Person.
1.5 "Audit" shall mean such term as defined in the Letter of Intent.
1.6 "Benefit Plans" has the meaning given such term in Section 4.22 of
this Agreement.
1.7 "Broker" has the meaning given such term in Section 4.28 of this
Agreement.
1.8 "Broker Fee" has the meaning given such term in Section 4.28 of this
Agreement.
1.9 "Business Day" means a day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
1.10 "Business" means the business, activities and operations of the
Company, as presently conducted.
1.11 "Closing" has the meaning given such term in Section 3.1 of this
Agreement.
1.12 "Closing Date" has the meaning given such term in Section 3.1 of this
Agreement.
1.13 "Code" means the Internal Revenue Code of 1986, as amended.
1.14 "Company" has the meaning given such term in the first paragraph of
this Agreement.
1.15 "Contract" has the meaning given such term in Section 4.17(a) of this
Agreement.
1.16 "Davies Closing Date Payment" has the meaning given such term in
Section 2.4 of this Agreement.
1.17 "Davies Employment Letter" means the employment letter, dated as of
the Closing Date, to be delivered by the Company to Davies, in the form attached
hereto as Exhibit "G".
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1.18 "Davies Purchase Price" has the meaning given such term in Section
2.4 of this Agreement.
1.19 "Davies Seller Note" has the meaning given to that term in Section
2.4 of this Agreement.
1.20 "Disclosure Statement" shall mean the Disclosure Statement delivered
by the Shareholders to the Purchaser contemporaneously with this Agreement.
1.21 "Environment" means all air, surface water, groundwater or land,
including, without limitation, land surface or subsurface, including, without
limitation, all fish, wildlife, biota and all other natural resources.
1.22 "Environmental Law" means any and all current federal, state, local,
provincial and foreign, civil and criminal laws, statutes, ordinances, orders,
codes, rules, regulations, Environmental Permits, policies, guidance documents,
judgments, decrees, injunctions, or agreements with any Governmental Entity or
Regulatory Authority, relating to the protection of health and the Environment,
worker health and safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution,
formulation, packaging, labeling, or Release of Hazardous Substance, including,
but not limited to: the Clean Air Act, 42 U.S.C. ss.7401 et seq.; the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. ss.9601 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
ss.1251 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. ss.1801 et
seq.; the Federal Insecticide Fungicide and Rodenticide Act, 7 U.S.C. ss.136 et
seq.; the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
ss.6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq.;
the Occupational Safety and Health Act of 1970, 29 U.S.C. ss.651 et seq.; the
Oil Pollution Act of 1990, 33 U.S.C. ss.2701 et seq.; and the state analogies
thereto; and any common law doctrine, including, but not limited to, negligence,
nuisance, trespass, personal injury, or property damage related to or arising
out of the presence, Release, or exposure to a Hazardous Substance.
1.23 "Environmental Permit" means any federal, state, local, provincial,
or foreign permits, licenses, consents or Authorizations required by any
Governmental Entity or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental Entity or Regulatory
Authority under any applicable Environmental Law.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the regulations thereunder.
1.25 "Financial Statements" has the meaning given such term in Section 4.8
of this Agreement.
1.26 "Fixed Assets" has the meaning given such term in Section 4.14(a) of
this Agreement.
1.27 "GAAP" means generally accepted accounting principles in effect in
the United States of America at the time of any determination, and which are
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applied on a consistent basis. All accounting terms used in this Agreement which
are not expressly defined in this Agreement shall have the meanings given to
those terms by GAAP, unless the context of this Agreement otherwise requires.
1.28 "Governmental Entity or Regulatory Authority" means any court,
tribunal, arbitrator, executive or regulatory authority, tax authority, agency,
commission, official or other instrumentality of the United States of America,
any foreign country or any domestic or foreign state, county, city, municipality
or other political subdivision.
1.29 "Haddon" means Haddon Strategic Alliances, Inc., a New Jersey
corporation.
1.30 "Haddon Agreement" has the meaning given such term in Section 3.2 of
this Agreement.
1.31 "Hazardous Substance" means petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls, and
any other chemicals, materials, substances or wastes, in any amount or
concentration, which are now or hereafter become defined or regulated as
"hazardous substances", "hazardous materials", "hazardous wastes", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic
pollutants", "pollutants", "regulated substances", "solid wastes" or
"contaminants" or words of similar import under any Environmental Law.
1.32 "Income Tax" means any federal, state, local or foreign Tax (as such
term is hereinafter defined) that is (a) based upon, measured by or calculated
with respect to income, profits, capital stock, net worth or receipts, in each
case whether gross, net or adjusted (including, without limitation, capital
gains Taxes and minimum Taxes), or (b) based upon, measured by or calculated
with respect to multiple bases (including, without limitation, corporate
franchise Taxes) if one or more of the bases on which such Tax may be based,
measured or calculated with respect to, is described in clause (a), in each case
together with any interest, penalties or additions to any Tax in respect of any
of the foregoing, whether disputed or not, and any obligation to indemnify,
assume or succeed to the liability of any other Person in respect of the
foregoing (including, without limitation, as a transferee pursuant to Section
6901 of the Code or otherwise) as a result of Treasury Regulation ss.1.1502-6 or
any similar provision of applicable law, or as a result of a tax sharing or
similar agreement, arrangement or understanding.
1.33 "Indemnification Acknowledgment" has the meaning given such term in
Section 10.4(a)(ii) of this Agreement.
1.34 "Indemnitee" has the meaning given such term in Section 10.4(a) of
this Agreement.
1.35 "Indemnitor" has the meaning given such term in Section 10.4(a) of
this Agreement.
1.36 "Insurance Policies" has the meaning given such term in Section 4.23
of this Agreement.
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1.37 "Intellectual Property Rights" means the United States of America and
foreign patents, copyrights, trademarks, trade names, service marks, brand
names, business and product names, uniform resource locators ("URLs") or
internet domain names, internet websites and the electronic files, content and
layout related thereto, email addresses, listings in telephone books and
directories and internet directories, browser and search engines, logos,
symbols, trade dress, design or representation or expressions of any of the
foregoing, all registrations or applications for registration of any of the
foregoing, and all databases, source codes, object codes, computer programs and
computer software in any form or medium (including, without limitation, the
Systems (as such term is hereinafter defined)), in each case that are owned by
the Company and/or were, are or may be used in connection with the Business or
held for use or being developed by the Company or by others for use in
connection with the Business, and all trade secrets, industrial or manufacturing
models, processes, designs and methodologies, research and development,
inventions, know-how, customer lists, manufacturing, engineering and other
drawings and blueprints, technology, technical information, engineering data,
design and engineering specifications, inventions and other proprietary
processes and information of any kind owned by the Company or the Shareholders
and were, are or may be used in connection with the Business.
1.38 "Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee for the benefit of another Person) or capital contribution to (by
means of any transfer of cash or other property to any other Person or any
payment for property or services for the account or use of any others) any other
Person, or any purchase or acquisition by such Person of any capital stock,
bonds, securities, debentures or other securities or evidences of indebtedness
issued by, any other Person.
1.39 "Key Employee" means those employees of the Company whose names and
positions are listed on Schedule 1.3 of the Disclosure Statement and any person
who may succeed any such employee in that position.
1.40 "knowledge", "known", "best of knowledge", shall mean those matters
of which the applicable Person is "aware" and language of similar import shall
include all matters actually or constructively known or which should be known by
such Person, and which, in the case of the Company, shall include the
Shareholders after due diligence and reasonable investigation.
1.41 "Legal Requirement" of a Person means any statute, rule, regulation
or other provision of law, or any order, judgment or other direction of a court,
arbitration panel or other tribunal resolution or any Governmental Entity or
Regulatory Authority, or any other requirement, permit, registration, license or
Authorization applicable to such Person, or to any of its properties, assets or
business.
1.42 "Letter of Intent" shall mean that certain Letter of Intent, dated
May 2, 2005, among the Purchaser, the Company and ▇▇▇▇▇.
1.43 "Liens" means any liens, charges, encumbrances, options, rights of
first refusal, security interests, claims, mortgages, pledges, charges,
easements, covenants, restrictions, obligations or any other encumbrances
(including, without limitation, any conditional sale or other title retention
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agreement or any lease in the nature thereof and any agreement to grant or to
permit or suffer to exist any of the foregoing) or third party rights or
equitable interests of any nature whatsoever.
1.44 "Losses" has the meaning given such term in Section 10.2 of this
Agreement.
1.45 "Material Adverse Effect" shall mean a material adverse effect on the
assets, properties, operations, prospects or condition (financial or otherwise)
of the Company
1.46 "Minimum Working Capital" has the meaning given such term in Section
7.11 of this Agreement.
1.47 "NASD" means National Association of Securities Dealers, Inc.
1.48 "Non-Competition Agreement" means the Non-Competition Agreement, to
be entered into and dated as of the Closing Date, between the Purchaser and each
Shareholder, in the form attached hereto as Exhibit "B".
1.49 "Notice of Claim" has the meaning given such term in Section
10.4(a)(i) of this Agreement.
1.50 "Office Lease" means that certain lease, as amended through the date
hereof, between the Company and ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates, LLC with respect to
the premises located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇.
1.51 "Person" means any natural individual, corporation, partnership,
joint venture, trust, limited liability company, association, organization, firm
or other entity.
1.52 "Personal Property Leases" has the meaning given such term in Section
4.14(b) of this Agreement.
1.53 "Purchaser Indemnified Person" has the meaning given such term in
Section 10.2 of this Agreement.
1.54 "Purchaser" has the meaning given such term in the first paragraph of
this Agreement.
1.55 "Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Substance into the Environment.
1.56 "Required Consents" has the meaning given to that term in Section 4.6
of this Agreement.
1.57 "▇▇▇▇▇ Associates Promissory Note" means that certain promissory
note, dated December 31, 2002, delivered by the Company to ▇▇▇▇▇, in the
original principal amount of $65,000.
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1.58 "▇▇▇▇▇ Closing Date Payment" has the meaning given such term in
Section 2.3 of this Agreement.
1.59 "▇▇▇▇▇ Employment Agreement" means the Employment Agreement, to be
entered into and dated as of the Closing Date, between the Company and ▇▇▇▇▇, in
the form attached hereto as Exhibit "A".
1.60 "▇▇▇▇▇ Purchase Price" has the meaning given such term in Section 2.3
of this Agreement.
1.61 "▇▇▇▇▇ Seller Note" has the meaning given to that term in Section 2.3
of this Agreement.
1.62 "SEC" means the United States Securities and Exchange Commission.
1.63 "Shareholder Indemnified Person" has the meaning given such term in
Section 10.3 of this Agreement.
1.64 "Shareholder Release" means the Release, to be entered into and dated
as of the Closing Date, from the Shareholders to the Companies, in the form
attached hereto as Exhibit "C".
1.65 "Shareholder" and "Shareholders" have the meanings given such terms
in the first paragraph of this Agreement.
1.66 "Site" means any real property (including, without limitation, the
Real Property) currently or previously leased, used or operated by the Company,
any predecessors of the Company or any entities previously owned by the Company,
including, without limitation, all soil, subsoil, surface waters and groundwater
thereat.
1.67 "Subsidiary" of a Person means any entity, the securities of which or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions (including,
without limitation, managers) are at the time directly or indirectly owned by
such Person or such Person otherwise has the right to vote or to direct the vote
of such securities or other ownership interests.
1.68 "Systems" means all computer hardware and software, including,
without limitation, application software data and databases, applications and
all related documentation utilized in the Business.
1.69 "Tax Return" means any federal, state, local or foreign return,
declaration, report, claim for refund or credit, document, or other information
or filing (including any schedule or exhibit thereto) that is filed or required
to be supplied to any Governmental Entity or Regulatory Authority in respect of
or relating to any Tax, and any amendment thereof, whether on a consolidated,
combined, unitary or separate basis.
1.70 "Tax" or "Taxes" means any and all taxes, charges, fees, levies,
deficiencies or other assessments of any nature whatsoever, including, without
limitation, any federal, state, local or foreign income, gross receipts,
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license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (pursuant to Section 59A of the Code or
otherwise), custom duties, capital stock, net worth, franchise, recording,
employee's income withholding, foreign withholding, social security (or its
equivalent), unemployment, disability, real property, personal property,
intangible property, sales, use, transfer, value added, occupancy, registration,
customs, recording, gains, alternative or add-on minimum, estimated or other
tax, charge, fee, levy, deficiency or other assessment of whatever kind or
nature, including any interest, penalties or additions to tax in respect of the
foregoing, whether disputed or not, and any obligation to indemnify, assume or
succeed to the liability of any other Person in respect of the foregoing
(including, without limitation, as a transferee (pursuant to Section 6901 of the
Code or otherwise), as a result of Treasury Regulation ss.1.1502-6 or similar
provision of applicable law, or as a result of a tax sharing or similar
agreement, arrangement or understanding).
1.71 "Third Party Claim" means a claim or demand made by any Person who is
not a party to this Agreement against an Indemnitee.
1.72 "Working Capital Statement" has the meaning given such term in
Section 2.5(a) of this Agreement.
Article II
SALE AND PURCHASE OF THE SHARES
2.1 Purchase of Shares. Upon the terms and provisions and subject to the
conditions hereof, and based upon the representations, warranties, covenants and
agreements of the Shareholders contained in this Agreement and the exhibits and
schedules attached hereto and thereto, at the Closing, (i) ▇▇▇▇▇ shall sell,
transfer, assign, convey and deliver to the Purchaser, and the Purchaser shall
purchase and acquire from ▇▇▇▇▇, the ▇▇▇▇▇ Shares, free and clear of all Liens,
and (ii) Davies shall sell, transfer, assign, convey and deliver to the
Purchaser, and the Purchaser shall purchase and acquire from Davies, the Davies
Shares, free and clear of all Liens.
2.2 Excluded Assets and Liabilities.
(a) The ▇▇▇▇▇ Associates Note shall, as a condition to Purchaser's
obligation to consummate the transactions contemplated by this Agreement, be
paid, settled or discharged at or prior to Closing by the Shareholders.
(b) At Closing, the Purchaser shall assign to the Shareholders the
accounts receivable of the Company as of the Closing Date, in accordance with
Section 2.5 below.
(c) The parties acknowledge and agree that, at Closing, the cash of
the Company shall be retained by the Sellers, subject to the Cash Advance to be
made to the Company as set forth in Section 2.5 below.
2.3 ▇▇▇▇▇ Shares Purchase Price. In consideration for the sale, transfer,
assignment, conveyance and delivery to the Purchaser of the ▇▇▇▇▇ Shares (free
and clear of any and all Liens) being purchased by the Purchaser hereunder and
the representations and warranties, covenants and agreements of the Shareholders
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set forth herein and upon the terms and subject to the conditions contained
herein, the Purchaser shall pay to ▇▇▇▇▇ a purchase price (the "▇▇▇▇▇ Purchase
Price") of up to an aggregate of Two Million Nine Hundred Thousand Dollars
($2,900,000.00). The ▇▇▇▇▇ Purchase Price shall be payable as follows:
(a) Two Million Thirty Thousand Dollars $2,030,000 (the "▇▇▇▇▇
Closing Date Payment") shall be payable at Closing in immediately available
funds by Purchaser via wire transfer to an account designated by ▇▇▇▇▇; and
(b) the balance of the ▇▇▇▇▇ Purchase Price shall be payable by
delivery to ▇▇▇▇▇ of the Purchaser's unsecured convertible promissory note, in
the form of Exhibit "E" annexed hereto, in the original principal amount equal
to Eight Hundred Seventy Thousand Dollars ($870,000.00) (the "▇▇▇▇▇ Seller
Note").
2.4 Davies Shares Purchase Price. In consideration for the sale, transfer,
assignment, conveyance and delivery to the Purchaser of the Davies Shares (free
and clear of any and all Liens) being purchased by the Purchaser hereunder and
the representations and warranties, covenants and agreements of the Shareholders
set forth herein and upon the terms and subject to the conditions contained
herein, the Purchaser shall pay to Davies a purchase price (the "Davies Purchase
Price") of up to an aggregate of One Hundred Thousand Dollars ($100,000.00). The
Davies Purchase Price shall be payable as follows:
(a) Seventy Thousand Dollars ($70,000.00) (the "Davies Closing Date
Payment") shall be payable at Closing in immediately available funds by
Purchaser via wire transfer to an account designated by Davies; and
(b) the balance of the Davies Purchase Price shall be payable by
delivery to Davies of the Purchaser's unsecured convertible promissory note, in
the form of Exhibit "F" annexed hereto, in the original principal amount equal
to Thirty Thousand Dollars ($30,000.00) (the "Davies Seller Note").
2.5 Post-Closing Purchase Price Adjustments.
(a) At or prior to Closing, the Shareholders shall provide to the
Purchaser a written statement (the "Working Capital Statement"), in form and
substance satisfactory to the Purchaser, setting forth the amount of the
Company's Working Capital as of the Closing Date by category (including cash,
accounts receivable ("Closing Date Receivables"), accounts payable and accrued
liabilities (such accounts payable and accrued liabilities referred to
collectively as the Closing Date Payables") in reasonable detail, together with
the projected cash requirements of the Company for the 60-day period following
the Closing, which the Shareholders shall represent is sufficient to enable the
Company to carry on business operations independently and pay all overhead costs
in the ordinary course and in a manner consistent with past practice for a
period of sixty (60) days from the Closing Date (the "Cash Requirement").
(b) Immediately prior to the Closing, the Shareholders shall cause
the Company to pay all outstanding accounts payable included within the Closing
Date Payables, and shall deliver to the Purchaser an amount equal to the accrued
liabilities included within the Closing Date Payables.
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(c) At Closing, the Shareholders shall cause the Company to retain
cash in an amount equal to the Cash Requirement (the "Cash Advance"). The Cash
Advance shall be returned by the Company to the Shareholders no later than one
hundred twenty (120) days after the Closing Date (the "Cash Advance Repayment
Date"), subject to adjustment for undisclosed or outstanding Closing Date
Payables as set forth in this Section 2.5 below.
(d) At the Closing, the Company shall assign to the Shareholders the
Closing Date Receivables set forth on the Working Capital Statement. During the
period from the Closing Date through the date that is one hundred twenty (120)
days after the Closing Date, the Company shall use commercially reasonable
efforts to collect the Closing Date Receivables for the benefit of the
Shareholders, provided that the Company shall not be required in connection with
any such collection efforts to institute any action, suit or proceeding, or
incur any cost or expense, or to take any action other than normal and customary
collection procedures. The Company shall not be liable to the Shareholders for
any uncollected Closing Date Receivables as to which it undertakes commercially
reasonable collection efforts, as set forth above.
(e) An amount equal to the sum of any Closing Date Payables that are
either unpaid as of the Cash Advance Repayment Date or not disclosed on the
Working Capital Statement shall be either (i) deducted from the Cash Advance to
be repaid on the Cash Advance Repayment Date or (ii) offset against Closing Date
Receivables collected by the Company, with the Shareholders liable for any
remaining unpaid Closing Date Payables on a pro rata basis, based on their
respective stock ownership in the Company immediately prior to the Closing. Any
such unpaid shortfall may be offset by the Purchaser against the first payments
due under the Seller Notes.
2.6 Piggyback Registration of Shares Obtained by Conversion of Seller
Notes. The Purchaser shall effect the registration of the shares of Purchaser
common stock issuable upon the conversion of the ▇▇▇▇▇ Seller Note and the
Davies Seller Note (the "Note Conversion Shares") as follows:
(a) If at any time the Purchaser proposes to register any the shares
of its common stock, $0.001 par value per share ("NIM Shares"), under the
Securities Act of 1933, as amended (the "Securities Act"), either for its own
account or for the account of others, on a registration form that would also
permit the registration of the Note Conversion Shares (or any NIM Shares
received by the Shareholder arising from a stock dividend, stock split,
reorganization, reclassification, merger, exchange or similar occurrence) (other
than a registration covering NIM Shares issued pursuant to an employee benefit
plan, or a registration on Form S-4 for the purpose of offering such securities
to another business entity or the shareholders of such entity in connection with
the acquisition of assets or shares of capital stock, respectively, of such
entity), the Purchaser shall, each such time, promptly give each Shareholder
written notice of such proposal. Within 30 days after such written notice is
given, each Shareholder shall give notice to the Purchaser as to the number of
shares of the Note Conversion Shares, if any, which such Shareholder requests to
be registered simultaneously with such registration by the Purchaser. The
Purchaser shall include in such registration statement the Note Conversion
Shares that each Shareholder requests to be registered under the Securities Act
and shall take such actions as shall be necessary to maintain the effectiveness
of such registration for a period of two hundred seventy (270) days.
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(b) Notwithstanding the foregoing, if such registration statement
was initiated by the Purchaser to effect a primary public offering of its
securities and, if at any time after giving written notice of its intention to
so register securities and before the effectiveness of the registration
statement filed in connection with such registration, the Purchaser determines
for any reason either not to effect such registration or to delay such
registration, the Purchaser may, at its election, by prior written notice to
each Shareholder: (i) in the case of a determination not to effect registration,
relieve itself of its obligation to register the Note Conversion Shares in
connection with such registration; or (ii) in the case of a determination to
delay registration, delay the registration of the Note Conversion Shares for the
same period as the delay registration of such other securities. Each Shareholder
may, at any time before the effective date of the registration statement
relating to such registration, revoke such request by written notice of such
revocation to the Purchaser, in which case the Purchaser shall cause the Note
Conversion Shares to be withdrawn from such registration statement. In
furtherance and not in limitation of the foregoing, in connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required to include any of the Note Conversion Shares in
such underwriting unless each Shareholder accepts the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company, provided, however, that
if securities are being offered for the account of persons or entities as well
as the Company, such reduction shall not represent a greater fraction of the
number of Note Conversion Shares intended to be offered by a Shareholder than
the fraction of similar reductions imposed on such other persons or entities
(other than the Company).
(c) In connection with any registration of Note Conversion Shares,
each Shareholder and the Company shall enter into indemnification arrangements
customary for a registration of this nature.
Article III
CLOSING
3.1 The Closing. The closing of the purchase and sale of the Shares
hereunder and the other transactions contemplated hereby (the "Closing") shall
take place at 10:00 a.m. local time on August __, 2005 or on such other date and
time as may be agreed to in writing by the Purchaser and the Shareholders (the
"Closing Date"), at the offices of the Purchaser's counsel, ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP or such other location as may be agreed to in writing by
the Purchaser and the Shareholders. All transactions contemplated hereunder to
occur on the Closing Date shall be deemed to have occurred simultaneously at
12:01 a.m. (local time) on the Closing Date.
3.2 Obligations of the Shareholders. At the Closing and subject to the
terms, provisions and conditions contained herein, the Shareholders shall and
shall cause the Company to take all actions and do all things necessary to sell,
transfer, assign, convey and deliver the Shares to the Purchaser, free and clear
11
of any and all Liens, and to consummate the transactions contemplated hereby,
including, without limitation, delivery or causing to be delivered to the
Purchaser the following:
(a) the ▇▇▇▇▇ Shares, as evidenced by certificate nos. 1 and 2, duly
endorsed in blank or accompanied by stock powers duly executed in blank and
bearing all necessary stock transfer tax stamps affixed thereto, sufficient to
transfer the ▇▇▇▇▇ Shares to Purchaser on the books of the Company;
(b) the Davies Shares, as evidenced by certificate no. 3, duly
endorsed in blank or accompanied by stock powers duly executed in blank and
bearing all necessary stock transfer tax stamps affixed thereto, sufficient to
transfer the Davies Shares to Purchaser on the books of the Company;
(c) the Non-Competition Agreement, executed by the Shareholders;
(d) the ▇▇▇▇▇ Employment Agreement, executed by ▇▇▇▇▇;
(e) the Shareholder Release, executed by the Shareholders;
(f) a certificate dated as of the Closing Date, executed by the
Secretary of the Company, certifying that attached thereto are true, correct and
complete copies of the Certificate of Incorporation and By-Laws of the Company;
(g) executed originals of all Required Consents and all consents and
Authorizations necessary or required to be obtained in order to consummate the
transactions contemplated hereby;
(h) evidence satisfactory to the Purchaser of the payment by the
Company of all Taxes due and payable as of the Closing Date;
(i) all of the Company's books, records and other data and
materials;
(j) evidence of the closing of the transactions contemplated by the
Stock Purchase Agreement, of even date herewith, among the Purchaser, Rosen,
Davies, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Strategic Alliances, Inc. (the "Haddon
Agreement");
(k) evidence of the payment in full or satisfaction in full of the
▇▇▇▇▇ Associates Promissory Note;
(l) the Working Capital Statement, certified by the President of the
Company;
(m) the opinion of counsel referred to in Section 7.11 hereof; and
(n) such other certificates, documents, receipts and instruments as
the Purchaser or its legal counsel may request.
3.3 Obligations of the Purchaser. At the Closing and subject to the terms,
provisions and conditions contained herein, the Purchaser shall deliver to the
Shareholders the following:
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(a) the ▇▇▇▇▇ Closing Date Payment and the Davies Closing Date
Payment;
(b) the ▇▇▇▇▇ Seller Note and the Davies Seller Note;
(c) a certificate dated as of the Closing Date, executed by an
officer of the Purchaser certifying that attached thereto is a true, correct and
complete copy of the resolutions adopted by the board of directors of the
Purchaser relating to authorizing the execution, delivery and performance of
this Agreement and the other Purchaser Documents and the consummation of the
transactions contemplated hereby and thereby and the incumbency of the officers
of the Purchaser executing this Agreement and the other Purchaser Documents; and
(d) the Non-Competition Agreement, executed by the Purchaser;
(e) the ▇▇▇▇▇ Employment Agreement and the Davies Employment Letter,
executed by the Company; and
(f) evidence of the closing of the transactions contemplated by the
Haddon Agreement.
Article IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, jointly and severally, hereby represent and
warrant to the Purchaser as follows:
4.1 Capitalization; Ownership of Shares; No Liens on Shares. The
authorized capital stock of the Company consists of 1,000 shares of common
stock, par value $.01 per share, of which 157.8952 shares are issued and
outstanding, 152.632 of which are held beneficially and of record by ▇▇▇▇▇, free
and clear of all Liens, and 5.2632 of which are held beneficially and of record
by Davies, free and clear of all Liens. All such issued and outstanding Shares
are duly authorized, validly issued, fully paid and nonassessable. None of the
Shares were issued or will be transferred under this Agreement in violation of
any preemptive or preferential rights of any Person. There are no options,
warrants, calls, subscriptions, conversions or other similar rights, agreements
or commitments to acquire from either Company or the Shareholders any shares of
capital stock or any other securities convertible into, exchangeable for or
evidencing the right to subscribe for any shares of capital stock of either
Company; none of the Shares are subject to any restrictions on transfer thereof;
and each Shareholder has the full power and authority to convey, and will convey
to Purchaser at Closing, good and marketable title to such Shareholder's Shares,
free and clear of all Liens.
4.2 Organization; Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey, and has the power and authority to own and lease its assets and
properties and to conduct the Business as it is now being conducted. The Company
is duly qualified or licensed to do business and is in good standing as a
foreign corporation under the laws of those jurisdictions listed on Schedule 4.2
of the Disclosure Statement, constituting each jurisdiction in which the conduct
13
of the Business or the ownership or leasing of its assets and properties
requires such qualification. Attached to Schedule 4.2 of the Disclosure
Statement are true, correct and complete copies of the Certificate of
Incorporation, as amended, certified by the Secretary of State of the State of
New Jersey, and the By-Laws of the Company.
4.3 Authority; Enforceability. Each Shareholder and the Company have the
requisite legal capacity to execute, deliver and perform, as applicable, this
Agreement, the Shareholder Releases, the ▇▇▇▇▇ Employment Agreement and the
Non-Competition Agreement to which such Person is, or will be, a party. This
Agreement has been duly executed and delivered by each Shareholder and the
Company and this Agreement constitutes the legal, valid and binding obligations
of the Shareholders and the Company, enforceable against the Shareholders and
the Company in accordance with its terms.
4.4 No Conflict.
(a) Except as set forth on Schedule 4.4(a) of the Disclosure
Statement, the execution, delivery and performance of this Agreement by the
Company and the Shareholders and the consummation of the transactions
contemplated hereby do not and will not (i) violate or conflict with any
provision of the Certificate of Incorporation of the Company and the By-Laws of
the Company; (ii) violate, conflict with, result in a breach of or constitute
(with or without notice or lapse of time or both) a default under, give rise to
a right of termination, amendment or cancellation of, accelerate the performance
required by, or result in any payment under, any Contract, instrument or other
writing of any nature whatsoever to or by which the Company or either
Shareholder is a party or is bound, or to which the Business is subject; (iii)
violate, conflict with or result in a breach of any Legal Requirement; or (iv)
result in the creation of any Lien on any of the Company's assets.
(b) The execution, delivery and performance by the Shareholders of
this Agreement, the Shareholder Release, the ▇▇▇▇▇ Employment Agreement and the
Non-Competition Agreements, and the consummation of the transactions
contemplated hereby and thereby, and the execution, delivery and performance by
the Company of this Agreement and the consummation of the transactions
contemplated hereby, do not and will not (i) violate, conflict with, result in a
breach of or constitute (with or without notice or lapse of time or both) a
default under, give rise to a right of termination, amendment or cancellation
of, accelerate the performance required by, or result in any payment under, any
Contract, instrument or other writing of any nature whatsoever to or by which
either Shareholder or the Company is a party or bound, or by which any of the
Company's assets or the Business is subject; (ii) violate, conflict with or
result in a breach of any Legal Requirement applicable to either Shareholder or
the Company; or (iii) result in the creation of any Lien on any of the Company's
assets.
4.5 Litigation; Compliance with Law.
(a) Schedule 4.5(a) of the Disclosure Statement contains a true,
complete and correct list of all actions, suits, proceedings (including, without
limitation, all arbitrations and alternative dispute resolution proceedings), or
governmental investigations pending or, to the best knowledge of the
Shareholder, threatened against the Company or any of its properties or assets
or any of the Company's officers, directors or employees or the Shareholders
which in any way arises out of or relates to the Business or any of the
Company's assets, in each case, at any time during the last three (3) years.
14
Except as set forth in Schedule 4.5(a) of the Disclosure Statement, there is no
claim, action, suit, proceeding (including, without limitation, all arbitrations
and alternative dispute resolution proceedings) or governmental investigation
before any court, arbitrator or Governmental Entity or Regulatory Authority
pending or, to the best knowledge of the Shareholders, threatened against the
Company or the Shareholders or which relates to or arises out of the Business or
any Legal Requirement relating to the Business, the Company's relationships with
any of its customers or the transactions contemplated by this Agreement, nor
does the Company or the Shareholders have any knowledge of any reasonably likely
basis or set of circumstances for any such action, suit, proceeding, claim or
investigation: (i) the result of which could materially and adversely affect the
Business, the Company's relationships with any of its customers or the
transactions contemplated hereby; (ii) questions the validity of this Agreement;
(iii) could impair the ability of the Shareholders to consummate the
transactions contemplated hereby; (iv) could materially adversely affect and
impact the Purchaser's rights to, or enjoyment of, the Company's assets and the
Business following the Closing; or (v) seeks to delay, prohibit, or restrict in
any manner any action contemplated hereby.
(b) Except as set forth on Schedule 4.5(b) of the Disclosure
Statement, none of the Company's assets or the Company or any of the Company's
officers, directors or employees or the Shareholders, in each case with respect
to the Business or the Company's assets, is subject or a party to, or bound by
or otherwise affected by, any judgment, order, decree, restraint or other
directive of or stipulation with any court or other Governmental or Regulatory
Authority or tribunal, or in violation of any other Legal Requirement, and the
Shareholders have no knowledge of any reasonable basis for a claim that such a
violation exists. The Shareholders are not aware of any proposed Legal
Requirement that might affect any of the operations or prospects of the Business
or any of the Company's assets.
(c) The Shareholders have furnished, or have caused the Company to
furnish, to the Purchaser true, correct and complete copies of (i) all pleadings
in, and material correspondence with respect to, the actions, suits,
proceedings, claims or governmental investigations set forth on Schedule 4.5(a)
of the Disclosure Statement, (ii) responses to accountant audit inquiry letters
from attorneys with respect to the Company since 2002; and (iii) insurance
company loss run reports indicating the claim experience of the Company in
respect of personal injury, worker's compensation, general liability, errors and
omissions and automobile liability claims for the period during the three (3)
years preceding the Closing Date.
(d) Neither the Company nor the Shareholders are in violation of any
federal, state or local statute, law, regulation, ordinance or administrative
order affecting the operation of the Business. No complaints have been filed
with any Governmental Agency or Regulatory Authority, or threatened in writing,
against the Company or its Affiliates of either Shareholder within the past
thirty-six (36) months. Neither the Company nor the Shareholders have received
any written or oral notice or demand relating to a violation or claimed
violation under any applicable federal, state or local laws, rules, ordinances,
policies or regulations.
4.6 Consents; Third Party Options.
(a) Except as set forth in Schedule 4.6 of the Disclosure Statement
(the "Required Consents"), no filing or registration with, notice to or
authorization, consent or approval or other action (including, without
15
limitation, the grant of any waiver) of any Governmental Entity or Regulatory
Authority or any other Person is required to be obtained by the Company or the
Shareholders in connection with (i) the sale to the Purchaser of the Shares;
(ii) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby and thereby; and (iii)
following the Closing, the enjoyment and possession by the Purchaser of all of
the rights and privileges with respect to the Company's assets and the Business
which the Company has enjoyed or possessed prior to the Closing, including,
without limitation, all rights and privileges under existing Contracts with
clients and customers.
(b) There are no existing Contracts, options, commitments with or
rights granted to any Person to acquire (whether directly by merger, or
otherwise) the Business or any of the Company's assets or any interest therein.
4.7 No Subsidiaries. The Company does not own, directly or indirectly, any
shares of capital stock of any corporation or any equity investment in any
Person, limited liability company, partnership, association or other business
organization. The Company has no Subsidiaries.
4.8 Financial Statements. Attached as Schedule 4.8 to the Disclosure
Statement are true and complete copies of (i) the audited balance sheets of the
Company as of December 31, 2003 and 2004, and the related combined statements of
operations, stockholders' equity and cash flows (together with the related
notes) for the years ended December 31, 2003 and 2004, as audited by ▇▇▇▇▇▇▇▇▇
▇▇▇▇ & & Company, P.C., and (ii) the unaudited balance sheet and the related
statement of income (together with the related notes) as of and for the six (6)
month period ended June 30, 2005 (all of the foregoing, collectively, the
"Financial Statements"). The Financial Statements (x) fairly present the
financial position of the Company as of the dates thereof and the results of its
operations, cash flows and stockholders' equity for each of the periods then
ended; (y) have been prepared in accordance with GAAP; and (z) have been
prepared from and are in agreement with the books and records of such Company
and include all adjustments, consisting only of normal recurring accruals which
the Company believes are necessary for a fair presentation of financial position
of the Company. Since December 31, 2004 there has been no change in any
accounting (including Tax accounting) policies, practices or procedures of the
Company. Except as set forth on Schedule 4.8 of the Disclosure Statement, no
uncollectible accounts receivable are reflected on any of said balance sheets in
excess of the reserves set forth thereon for uncollectible items.
4.9 Absence of Undisclosed Liabilities.
(a) Except as set forth on Schedule 4.9(a) of the Disclosure
Statement, the Company has no liabilities or obligations, except those set forth
or adequately reserved against on the balance sheets contained in the Financial
Statements (or disclosed in the notes thereto), other than those incurred in the
ordinary course of business and in a manner consistent with past practices.
(b) All capital expenditures of the Company from and after January
1, 2005 are set forth on Schedule 4.9(b) of the Disclosure Statement. All
16
liabilities and obligations of the Company incurred since January 1, 2005 have
been incurred in the ordinary course of business, in a manner consistent with
past practice and are not materially adverse to the assets, operations or
prospects of the Company. The Shareholders have no knowledge of any basis for
the assertion against the Company of any other liability or loss contingency.
For purposes of this Section 4.9(b), all references to the Company's liabilities
shall include, without limitation, all liabilities, whether direct or indirect,
absolute, contingent or matured, known or unknown, asserted or unasserted, and
liquidated or unliquidated.
4.10 No Material Adverse Change. Since January 1, 2005, the Company has
operated its business diligently and only in the ordinary course of business,
and there has been no material adverse change in the business, operations,
properties, assets, liabilities, commitments, earnings, financial condition or
prospects of the Company, except as specifically disclosed in the footnotes, if
any, to the Financial Statements. Without limiting the foregoing, except as set
forth on Schedule 4.10 of the Disclosure Statement, since January 1, 2005, the
Company has not:
(i) suffered any damage, destruction or loss of physical
property (whether or not covered by insurance) in excess of $25,000;
(ii) incurred or agreed to incur any indebtedness for borrowed
money;
(iii) suffered any substantial loss or waived any substantial
right;
(iv) sold, transferred or otherwise disposed of, or agreed to
sell, transfer or otherwise dispose of, any assets other than in the ordinary
course of business;
(v) mortgaged, pledged or subjected to any charge, lien, claim
or encumbrance, any of its properties or assets;
(vi) increased, or agreed to increase, the compensation or
bonuses or special compensation of any kind of any of its officers, employees or
agents, other than normal merit and/or cost-of-living increases pursuant to
customary arrangements consistently followed, or adopted or increased any
benefit under any insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any such officer, employee or agent;
(vii) lost any material customer or client or knows of any
threatened cancellation of a customer or client relationship; or
(viii) entered into any transaction not in the ordinary course
of its business.
4.11 Taxes.
(a)
(i) The Company has duly and timely (A) filed with the
appropriate Governmental Entity and Regulatory Authority all Tax Returns
required to be filed by, including or relating to the Company, its income,
17
operations, payroll and business, with respect to all periods ending on or prior
to the date hereof, which Tax Returns are true, correct and complete; and (B)
paid the amount of Tax showing as payable on such Tax Returns for all periods
ending on or prior to the Closing Date.
(ii) The Company has duly and timely paid all Taxes due and
payable on or before the date hereof and properly accrued on the Financial
Statements and books and records in accordance with GAAP all Taxes in respect of
all periods up to and including the date hereof that are not yet payable and has
not incurred any liability for Taxes that was not fully reflected or properly
accounted for on the Financial Statements.
(iii) Each Shareholder has duly and timely (A) filed with the
appropriate Governmental Entity and Regulatory Authority all Tax Returns
required to be filed by such Shareholder with respect to all periods ending on
or prior to the date hereof, which Tax Returns are true, correct and complete;
and (B) paid the amount of Tax showing as payable on such Tax Returns for all
periods ending on or prior to the Closing Date.
(iv) The Company has complied in all material respects with
all applicable Legal Requirements, rules, and regulations relating to the
collection, withholding and payment of Taxes. No Governmental Entity or
Regulatory Authority has proposed, asserted or assessed (tentatively or
otherwise) any adjustment that could result in an additional Tax for which the
Company is or may be liable or which could result in a Lien on any of the
Company's assets that has not been finally settled and fully paid. There is no
pending, proposed or, to the knowledge of the Company and the Shareholders,
threatened audit, examination, investigation, dispute, deficiency assessment,
refund litigation, claim, or other administrative or judicial proceeding
relating to any Tax for which the Company is or may be liable and which could
result in a Lien on any of the Company's assets.
(v) None of the Company's assets is "tax-exempt use property"
or "tax-exempt bond-financed property" within the meaning of Section 168(g) and
(h), respectively, of the Code.
(vi) There are no closing agreements within the meaning of
Section 7121 of the Code or any similar provision of applicable law, ruling
requests, requests to consent to change a method of accounting, Code Section 481
adjustments, subpoenas or requests for information with or by any Governmental
Entity or Regulatory Authority that could reasonably be expected to affect any
Tax for which the Company or either Shareholder is or may be liable and which
could result in a Lien on any of the Company's assets.
(vii) Schedule 4.11(vii) of the Disclosure Statement sets
forth a list of each jurisdiction in which the Company files or is presently
required to file a Tax Return and the type of Tax Return filed, and except as
set forth thereon, no Governmental Entity or Regulatory Authority where such
entity does not file a Tax Return with respect to a particular Tax has made a
claim or assertion that such entity is subject to such Tax in such jurisdiction
or is required to file a Tax Return with respect to such Tax in such
jurisdiction. Federal Income Tax Returns of the Company have been audited and
the audits thereof completed or the statute of limitations has run for all
fiscal years ending on or prior to December 31, 2001.
18
(viii) All applicable sales taxes and use taxes due in
connection with the Company's assets and leased properties (including those set
forth on the balance sheets contained in the Financial Statements and those
fixed assets or leases acquired from that date through the Closing Date) have
been paid in full.
(b) The Company is an (i) "S corporation" as defined in Section 1361
of the Code for federal income Tax purposes from May 23, 2002 to the date
hereof, and (ii) an "S corporation" (or its equivalent) for state and local
income and franchise tax purposes from May 22, 2002 to the date hereof in each
jurisdiction in which it is or was required to or has filed an income or
franchise Tax Return. Schedule 4.11(b) of the Disclosure Statement sets forth a
list of each state in which the Company conducts business or operations or has
employees or assets. The "S" corporation election was valid for all periods in
effect.
(c) The Company has not engaged in any transaction that is a "tax
shelter" as defined in Section 6111 of the Code.
4.12 Personal Property. Except as set forth on Schedule 4.12 of the
Disclosure Statement the Company has good, valid and marketable title to or, in
the case of leases and licenses, valid and subsisting leasehold interests or
licenses in, all of its properties and assets of whatever kind (whether real,
personal, mixed, tangible or intangible), in each case free and clear of any and
all Liens. All assets, properties and rights relating to the Business of the
Company are owned by the Company, and neither the Shareholders nor any of the
Shareholders' respective Affiliates or family members has any ownership interest
therein. The Company's assets (including, without limitation, the facilities,
furniture and office equipment of the Company) that are owned, together with
those used or occupied under lease or used under license, are free from material
defects, are in good operating condition and a good state of maintenance and
repair, subject only to normal wear and tear in the ordinary course of business,
and are suitable for the continued conduct of the Business in a manner
consistent with past practices. The Company's assets include all rights and
property necessary for the conduct of the Business by the Purchaser in the
manner it is presently conducted by the Company.
4.13 Real Property.
(a) The Company does not own any real property.
(b) The Company has a valid leasehold interest in the real property
described in the Office Lease, free and clear of all Liens, and the Office Lease
is in full force and effect and enforceable in accordance its terms. The rent
and other charges payable under the Office Lease are consistent with current
market rates. A true, correct and complete copy of the Office Lease (including,
without limitation, all amendments and subleases, if applicable) is attached to
the Disclosure Statement as Schedule 4.13. The Company has not assigned, pledged
or otherwise transferred, and has not sublet the premises demised by such Office
Lease or granted to any Person the right to possession, use or occupancy of the
premises leased thereunder. No event has occurred or failed to occur which (with
the giving of notice or the passage of time, or both) would constitute a default
under the Office Lease. All brokerage commissions payable by the Company and/or
the Shareholders with respect to the Office Lease have been fully paid.
19
4.14 Fixed Assets; Personal Property Leases.
(a) Schedule 4.14(a) of the Disclosure Statement contains a true,
complete and correct list and brief description of the fixed assets of the
Company including equipment, computers, furniture, leasehold improvements,
vehicles and other items of personal property owned, used or leased by the
Company and all interests therein which are part of the Company's assets ("Fixed
Assets"). The Company has good, valid and marketable title to its Fixed Assets,
free and clear of any and all Liens, except for those Liens set forth on
Schedule 4.14(a) of the Disclosure Statement. All of the Fixed Assets are in
good operating condition, state of maintenance and repair and working order,
subject to normal wear and tear.
(b) Schedule 4.14(b) of the Disclosure Statement sets forth a list
(including, without limitation, all amendments) of all leases relating to
personal property (the "Personal Property Leases"), including, without
limitation, the dates of the Personal Property Leases, the personal property
leased thereunder, the name of the lessees and lessors, the commencement date
and expiration date of such Personal Property Leases, the annual rent payable by
the lessee under such Personal Property Leases, the security deposited with the
lessor or sublessor under any such Personal Property Lease and the amount of the
purchase option under any such Personal Property Lease. Attached to Schedule
4.14(b) of the Disclosure Statement are true, correct and complete copies of the
Personal Property Leases. The Personal Property Leases are in full force and
effect and to the best knowledge of the Shareholders are enforceable in
accordance with their respective terms with respect to the counterparties
thereto. Except as set forth in Schedule 4.14(b) of the Disclosure Statement,
the Personal Property Leases have not been amended or modified. The Company has
not assigned, pledged or otherwise transferred, or subjected, by consent or
sufferance, to any Lien, any of its rights under any Personal Property Lease and
the Company has not granted any rights to sublet any Personal Property Lease.
The Company is in possession of all the personal property that is subject to the
Personal Property Leases. No event has occurred or failed to occur which (with
the giving of notice or the passage of time or both) would constitute a default
under any Personal Property Lease, and to the knowledge of the Shareholders no
such default is threatened. No lessor or lessee under any Personal Property
Lease has notified the Company or the Shareholders of the exercise of any option
or right to: (i) cancel or terminate such Personal Property Lease or shorten the
term thereof; (ii) lease additional personal property; or reduce or relocate the
personal property leased under such Personal Property Lease; (iii) purchase any
personal property subject to a Personal Property Lease; or (iv) renew or extend
such Personal Property Lease. The Company's equipment and other personal
property (whether leased or owned) are in good operating condition and repair,
subject to ordinary wear and tear.
4.15 Intellectual Property Matters. Set forth on Schedule 4.15 of the
Disclosure Statement is a list of the Intellectual Property Rights, specifying
as to each, as applicable: (i) the nature of the Intellectual Property Right;
(ii) the user of the Intellectual Property Right; (iii) all licenses,
sublicenses and other agreements (true, correct and complete copies of any such
licenses, sublicenses or other agreements are attached to Schedule 4.15)
relating in any manner to any Intellectual Property Right; and (iv) the filing
and registration information with respect to each Intellectual Property Right
that is registered with the United States Patent and Trademark Office, the
United States Copyright Office, or any other Governmental Authority or
20
Regulatory Authority. There are no trade secrets, inventions, technology,
proprietary processes, formulae or information that are owned by the Company or
the Shareholders or any of their respective Affiliates or family members, or any
Key Employees, which are used in or in connection with the Business that are not
set forth on Schedule 4.15 of the Disclosure Statement. There are no royalties,
fees or other amounts payable by or to the Company with respect to any of the
Intellectual Property Rights. The Company's prior use of the Intellectual
Property Rights has not, and the Company's present use of the Intellectual
Property Rights does not, infringe or otherwise violate any rights (including,
without limitation, rights of privacy) of any Person, and neither Shareholder
has received any notice of a claim of infringement or knows of any reasonable
basis for a claim that such an infringement or violation exists. The Company has
ownership of (free and clear of any and all Liens) or rights by license, lease
or other agreement to use (free and clear of any and all Liens) without the
payment of any fees or the incurrence of any costs) the Intellectual Property
Rights that are necessary to permit the use of the Company's assets and to
conduct its Business. Neither the Shareholders nor any of the Shareholders'
Affiliates or family members or any present or former employee of the Company
owns or has a propriety or financial interest, directly or indirectly, in any of
the Intellectual Property Rights. Neither the Company nor the Shareholders are
parties in any pending action, suit or proceeding that involves a claim of
infringement or any other claim related to any Intellectual Property Right and,
to the best of the knowledge of the Shareholders, there is no threatened action,
suit or proceeding that involves a claim of infringement or any other claim
relating to any Intellectual Property Right. None of the Intellectual Property
Rights is subject to any outstanding Legal Requirement. No Intellectual Property
Right is subject to any outstanding order, judgment, decree, stipulation or
agreement restricting its use by the Company or restricting the licensing
thereof to any Person by the Company or which could affect the transfer of the
Intellectual Property Rights to the Purchaser free and clear of any and all
Liens.
4.16 Computer Software. Schedule 4.16 of the Disclosure Statement contains
a list of all Systems, specifying hardware and software used in the operation of
the Business. The Company has the right to use, by license, lease or other
agreement, its Systems free and clear of any and all Liens and has obtained
licenses for all users or appropriate site licenses, as set forth on Schedule
4.16 of the Disclosure Statement. True, correct and complete copies of such
licenses, leases or other agreements are attached to Schedule 4.16 of the
Disclosure Statement. The Systems perform in accordance with the documentation
and written material used in connection therewith, free from any material
defects, and the source codes and object codes of the underlying computer
software and programs are in machine-readable form and contains all current
revisions and modifications. The Shareholders have heretofore delivered to the
Purchaser full, correct and complete copies of all user and technical
documentation relevant to the Systems. The Company has taken all appropriate
measures to protect the confidential nature of the Systems in accordance with
the applicable license, lease or other agreement governing the use of such
Systems. The documentation for the Systems is publicly available or, to the
extent proprietary, the Company has appropriate documentation for such software
and programming.
4.17 Contracts; Customers and Suppliers.
(a) Attached to Schedule 4.17(a) of the Disclosure Statement is a
complete list of all contracts, leases, licenses or other instruments,
agreements or binding commitments, whether or not in written form, to which the
21
Company (or any of its properties or assets) or either Shareholder (in
connection with the Business) is a party, is bound, or otherwise subject or
otherwise is related to its Business and which provides for or falls within any
of the following categories (collectively, the "Contracts"):
(i) Contracts with any service provider or client, including,
without limitation, agent and broker contracts;
(ii) Contracts with any broker-dealer, investment advisor,
insurance/annuity company or agency or clearing agency;
(iii) Contracts with any mutual fund, hedge fund or 401(K)
service providers;
(iv) Contracts granting, or consenting to the existence of,
any Lien on or in any of the Company's assets in favor of any Person;
(v) Collective bargaining arrangements or other Contracts with
any labor union;
(vi) Contracts for capital expenditures or the acquisition or
construction of any Fixed Assets in excess of $25,000;
(vii) Contracts relating to the borrowing of money or the
incurrence of any indebtedness for borrowed money, or the issuance of any letter
of credit, or the guaranty of another Person's indebtedness or Contracts of
suretyship;
(viii) Contracts granting to any Person a right of first
refusal, first offer, option or similar preferential right to purchase or
acquire any of the Company's properties, assets or securities;
(ix) Contracts limiting, restricting or prohibiting the
Company from conducting any business anywhere in the world;
(x) Joint venture or partnership agreements or other similar
Contracts;
(xi) Contracts of employment or for the retention of
consultants or advisors or the furnishing of services by any third party;
(xii) Contracts which indemnify any other Person or which
provide for charitable contributions or which are in the nature of a severance
agreement or which would otherwise entitle any Person not a party to this
Agreement to receive a payment based upon the consummation of the transactions
contemplated hereby; or
(xiii) any other Contract which is material to the operations
of the Business or any of the Company's assets.
Each Contract (assuming due authorization and execution by the
22
counterparty to the Contract): (i) is in full force and effect; (ii) is a valid
and binding obligation of the Company enforceable in accordance with its terms;
(iii) does not give rise to a Lien on any of the Company's assets; and (iv) has
been entered into on an arm's-length basis in the ordinary course of business
and consistent with past practices. There is no default under or breach by the
Company (which, with or without the giving of notice or lapse of time or both)
would constitute a default under any Contract and, to the knowledge of the
Shareholders there is no default under or breach by any counterparty to a
Contract (which with or without the giving of notice or lapse of time or both)
would constitute a default under any Contract. No Contract will be adversely
affected or terminated by consummation of the transactions contemplated hereby.
Attached to Schedule 4.17(a) of the Disclosure Statement are true, correct and
complete copies of all Contracts and summaries of oral Contracts, if any.
(b) Schedule 4.17(b) of the Disclosure Statement contains a list of
each of the Company's clients with related dollar volume of revenues for
calendar year 2004 and the six-month period ended June 30, 2005. Neither the
Company nor either Shareholder is engaged in any dispute with any client or
service provider, nor does either the Company or either Shareholder have
knowledge of any matter or fact which could reasonably be expected to result in
a dispute with any client or service provider. To the knowledge of the
Shareholders, no customer or service provider is considering termination,
non-renewal or any modification of its arrangements with the Company prior to or
following the Closing.
4.18 Assets Under Management. Schedule 4.18 of the Disclosure Statement
sets forth a list, by dollar amount, of assets under management by the Company
as of December 31, 2004 and June 30, 2005, respectively, segregated by asset
management program.
4.19 Accounts Receivable. Schedule 4.19 of the Disclosure Statement is a
list of the Accounts Receivable of the Company as at June 30, 2005. Except as
set forth on Schedule 4.19 of the Disclosure Statement, all Accounts Receivable:
(i) arose in bona fide, arm's length completed transactions and in the ordinary
course of business consistent with past practices, and are fully collectible;
(ii) constitute only valid, undisputed claims; (iii) are not subject to any
deductions (other than pursuant to the Company's regular pricing policies with
its customers and clients which have been disclosed in writing to the
Purchaser), credits (other than pursuant to the Company's regular pricing
policies with its customers and clients which have been disclosed in writing to
the Purchaser), counterclaims, disputes (including, without limitation, any
threatened dispute of which either Shareholder has knowledge) or offsets; and
(iv) are not more than ninety (90) days past their applicable due date.
4.20 Authorizations. Schedule 4.20 of the Disclosure Statement sets forth
true, correct and complete copies of all Authorizations, including all
Authorizations held in the name of either Shareholder or any other Person other
than the Company, that relate to the operations of the Business, including,
without limitation, all securities licenses and registrations held by the
Shareholders and employees of the Business. All Authorizations are current, in
full force and effect, and have not been terminated, revoked or withdrawn. Each
Shareholder, the Company and each officer and employee of the Company, owns,
holds, possesses or lawfully uses all Authorizations which are in any manner
necessary for the conduct of the Business as now or previously conducted and for
the ownership and use of the Company's assets, free and clear of any and all
Liens or other restrictions. Neither the Company nor either Shareholder is in
23
default, nor has the Company or either Shareholder received any notice of any
claim of default or non-compliance, with respect to any Authorization and, to
the knowledge of the Shareholders, no event has occurred, which with the giving
of notice or passage of time or both, would cause or give rise to any default,
revocation or other termination event with respect to any Authorization. All
such Authorizations that are material to the operation of the Business, as
indicated on Schedule 4.20 of the Disclosure Statement, are renewable by their
terms or in the ordinary course of business without the need to comply with any
special qualification procedures or to pay any amounts other than routine filing
fees, and will not be adversely affected or terminated by consummation of the
transactions contemplated hereby. None of the Authorizations have been amended,
assigned, pledged or otherwise transferred.
4.21 Employees; Labor Matters. Schedule 4.21 of the Disclosure Statement
contains a list of the Company's employees employed in the Business, including a
description of each employee's position, compensation and benefits. The Company
has not hired or terminated any employees outside the ordinary course of the
Business since January 1, 2005, and the employees terminated, if any, by the
Company since that date are listed on Schedule 4.21 of the Disclosure Statement.
Except as set forth on Schedule 4.21 attached hereto, neither the Company nor
the Shareholders know of any efforts within the last three (3) years to attempt
to organize the Company's employees or any other union activities including
organizational, protected and concerted activities. Except for grievances which
are described on Schedule 4.21 of the Disclosure Statement, no strike, slowdown,
picketing, work stoppage or other labor dispute involving the Company has
occurred during the last three (3) years and, to the best knowledge of the
Shareholders, none is threatened or presently contemplated. No Key Employee of a
Company employed in the Business has indicated that he or she is considering
terminating his or her employment. To the best of knowledge of the Shareholders,
the Company has complied with Legal Requirements relating to its employees,
including, without limitation, the Occupational Safety and Health Act of 1970
within the United States of America and comparable workplace-safety laws of all
other jurisdictions and all rules, regulations and orders thereunder, all
applicable laws and related rules and regulations of the United States of
America and foreign jurisdictions affecting labor union activities, civil rights
or employment, including without limitation, the Civil Rights Act of 1964, the
Age Discrimination in Employment Act of 1967, the Equal Employment Opportunity
Act of 1972, ERISA, the Equal Pay Act, the National Labor Relations Act, the
Family Medical Leave Act, the Americans with Disabilities Act of 1990 and the
Civil Rights Act of 1964 and any other federal, state, local or foreign laws
concerning employment and comparable workplace-safety laws, labor union
activities, civil rights or employment. All of the facilities of the Company are
in compliance with the Americans with Disabilities Act of 1990.
The Company is not a party to any collective bargaining agreement,
no collective bargaining agent has been certified as a representative of any
such employees and no representation campaign or election is now in progress
with respect to any such employees and to the knowledge of the Shareholders no
such campaign is threatened. There are no pending, or to the knowledge of the
Shareholders, threatened, charges or complaints of unfair labor practice,
employment discrimination or any similar matters against or relating to the
Company. To the knowledge of the Shareholders, the transactions contemplated
hereunder will not have an adverse effect on the Company's relationship with its
employees.
24
4.22 Employee Benefits.
(a) Except as set forth in Schedule 4.22 of the Disclosure
Statement, the Company does not maintain, contribute to, or have any obligation
to contribute to, any employee benefit plans ("Benefit Plans"), as defined in
Section 3(3) of the ERISA. Except as set forth on Schedule 4.19 of the
Disclosure Statement, the Company does not sponsor, maintain or support, is not
otherwise a party to, and has no liability or contingent liability under any of
the following:
(i) cash bonus or incentive pay arrangements (current or
deferred, earned or contingent);
(ii) debt forgiveness or low-interest (or interest-free)
loans;
(iii) stock bonus plan arrangements (including, but not
limited to, arrangements known as ESOPs and/or TRASOPs);
(iv) employee stock purchase plans;
(v) shadow or phantom stock arrangements;
(vi) stock appreciation rights, whether separate from or
associated with stock options;
(vii) performance share plans;
(viii) individual life insurance policies (including but not
limited to, "key man" and "split dollar" arrangements);
(ix) group life insurance programs;
(x) retired life reserve programs;
(xi) surviving spouse's or survivor's benefits;
(xii) wage or salary continuation programs;
(xiii) severance benefit plans;
(xiv) short- or long-term disability income programs;
(xv) travel insurance coverage;
(xvi) accidental death and/or dismemberment benefits;
(xvii) medical expense reimbursement plans (insured or
self-insured);
(xviii) medical/surgical insurance;
(xix) major medical expense programs;
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(xx) health maintenance organization benefits;
(xxi) optical and/or dental care benefits;
(xxii) prepaid legal services;
(xxiii) section 501(c) (9) "voluntary employee beneficial
associations";
(xxiv) day care centers;
(xxv) educational expense benefit plans or tuition subsidies;
(xxvi) layoff and/or vacation pay plans, or time banks;
(xxvii) furnishing goods or services on a discount or
subsidized basis;
(xxviii) non-cash incentive programs (such as trading stamp,
travel or merchandise award programs;
(xxix) "cafeteria plans";
(xxx) recreation programs at total or partial employer
expenses;
(xxxi) early retirement incentive of Social Security
supplement payments;
(xxxii) retiree payments and bonuses (gratuitous, traditional
or contractual); or
(xxxiii) other benefits or policies in the nature of
compensation or otherwise of economic value to employees, their dependents or
survivors.
4.23 Insurance. Schedule 4.23 of the Disclosure Statement sets forth a
true, complete and correct list of all policies of insurance of any kind or
nature covering any of the Company's assets or which in any way relate to the
Business (collectively, the "Insurance Policies") including, without limitation,
policies of life, fire, theft, casualty, errors and omissions, workmen's
compensation, business interruption, employee fidelity and other casualty and
liability insurance, indicating the type of coverage, the name of insured, the
insurer, the premium, the expiration date of each policy and the amount of
coverage. All such Insurance Policies: (a) are with insurance companies
reasonably believed by the Shareholders to be financially sound and reputable;
(b) are sufficient for compliance with all Legal Requirements and all applicable
Contracts; (c) are in full force and effect, valid and enforceable in accordance
with their respective terms, and no notice of cancellation has been received and
there is no existing default or event which, with the giving of notice or lapse
of time or both, would constitute a default under any such Insurance Policies
has occurred, and to the knowledge of the Shareholder, no such default or event
26
is threatened; and (d) provide full insurance coverage for the Company's assets,
operations of the Company and the conduct of the Business for all risks normally
insured against by Persons carrying on businesses similar to the business of the
Company. The Shareholders have heretofore furnished the Purchaser with true,
correct and complete copies of such Insurance Policies.
4.24 Transactions with Affiliates; No Conflicting Shareholder Interests.
Except as set forth in Schedule 4.24 of the Disclosure Statement, the Company
has not had any direct or indirect dealings or engaged in any business
transactions with the Shareholders or any Affiliates or family members of either
the Company or the Shareholders. The Company has no obligations to or claims
against any of its Affiliates or against the Shareholders or their respective
Affiliates. In furtherance and not in limitation of the foregoing, except as set
forth on Schedule 4.24 of the Disclosure Statement, the Company does not (i) owe
any indebtedness to any of its officers, directors, or employees, or to the
Shareholders (other than accrued salaries or benefits payable in the ordinary
course of business) or (ii) have indebtedness owed to it from any of its
officers, directors, or employees, or to the Shareholders, excluding
indebtedness for reasonable travel advances or similar advances for expenses
incurred on behalf of and in the ordinary course of business of the Company and
consistent with the Company's past practices.
4.25 Books and Records. The books and records of the Company to be
transferred to the Purchaser pursuant to Section 3.2 hereof are complete and
correct in all material respects and properly and accurately reflect all
transactions engaged in by the Company with respect to the Business and have
been maintained in accordance with GAAP applied on a consistent basis.
4.26 Improper Payments. Neither the Company nor any of its officers and
agents, Affiliates or any Person associated with or acting on behalf of the
Company, the Shareholders or any of their respective Affiliates or family
members, has made any illegal or improper payment to, or provided any illegal or
improper benefit or inducement for, any governmental official, customer or other
Person, in an attempt to influence any such Person to take or to refrain from
taking any action relating to the Business, the operations of the Company or any
of the Company's assets or to engage in any action by or on behalf of the
Company or the Shareholders or any of their respective Affiliates or family
members in any way or paid any bribe, payoff, influence payment, kickback or
other unlawful payment.
4.27 Additional Information Regarding Banking and Customer Matters.
Schedule 4.27 of the Disclosure Statement lists (i) all lockboxes maintained by
the Company and all authorized signatories therefor, specifying their respective
authority, and contains the terms of such lockboxes including, but not limited
to, notice provisions; (ii) any open letters of credit and/or pre-arranged wire
transfers between the Company and its customers; and (iii) personal or other
guaranties given to the Company by or on behalf of its customers.
4.28 No Brokers. Other than in connection with any arrangements involving
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (the "Broker"), whose fees (the "Broker Fee") shall be the
sole obligation of the Purchaser, all negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by the Company and
the Shareholders directly with the Purchaser and without the intervention of any
other Person acting on behalf of the Company or the Shareholders and in such
manner as not to give rise to any claim against the Purchaser or any of its
Affiliates for any finder's fee, brokerage commission or like payment, and if
any such fee, commission or payment is payable, it shall be the sole
responsibility of the Shareholders.
27
4.29 Powers of Attorney. The Company has not granted any powers of
attorney to any third party that in any way relates to the Company's assets, the
Company's liabilities or its Business.
4.30 Disclosure. No representation, warranty or other statement by the
Company or the Shareholders set forth herein or contained in any other document
or certificate furnished to the Purchaser, or any of the Purchaser's officers,
legal counsel, accountants, representatives or other agents in connection with
the transactions contemplated hereby, contains or will contain an untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
Article V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Shareholders as
follows:
5.1 Organization; Good Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has all material licenses, permits, authorizations and the power and
authority to own and lease its assets and properties and to conduct its business
as it is now being conducted. The Purchaser is duly qualified or licensed to do
business and is in good standing as a foreign corporation under the laws of the
jurisdictions in which the conduct of its business or the ownership or leasing
of its assets and properties requires such qualification.
5.2 Authority; Enforceability. The Purchaser has the corporate power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Purchaser have been duly authorized by all necessary
corporate action on the part of the Purchaser. This Agreement and each of the
other Purchaser Documents has been duly executed and delivered by the Purchaser
and this Agreement and each of the other Purchaser Documents constitutes (or
when executed and delivered will constitute) legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms.
5.3 No Conflict. The authorization, execution, delivery and performance by
the Purchaser of this Agreement and the other Purchaser Documents and the
consummation of the transactions contemplated hereby and thereby do not and will
not (a) violate or conflict with any provision of the Purchaser's charter or
bylaws; (b) violate, conflict with, result in a breach of or constitute (with or
without notice or lapse of time or both) a default under, give rise to a right
of termination, amendment or cancellation of, accelerate the performance
required by, or result in any payment under, any Contract, instrument or other
writing of any nature whatsoever to or by which the Purchaser is a party or is
bound, or by which any of its properties or assets is subject; or (c) violate,
conflict with or result in a breach of any Legal Requirement applicable to the
Purchaser.
5.4 Litigation. There is no action, suit, proceeding (including, without
limitation, all arbitrations and alternative dispute resolution proceedings) or
28
governmental investigation of or pending or, to the knowledge of the Purchaser,
threatened against the Purchaser which relates to the transactions contemplated
by this Agreement, nor does the Purchaser have any knowledge of any reasonably
likely basis or set of circumstances for any such action, suit, proceeding,
claim or investigation, the result of which could materially and adversely
affect the Purchaser or the transactions contemplated hereby or could impair the
ability of the Purchaser to consummate the transactions contemplated hereby.
5.5 Consents. No filing or registration with, notice to, or authorization,
consent or approval of, or other action (including, without limitation, the
grant of any waiver) of any Governmental Entity or Regulatory Authority or any
other Person is required to be obtained by the Purchaser (i) in connection with
the purchase from the Shareholders of the Shares; and (ii) the execution,
delivery and performance of this Agreement and the other Purchaser Documents and
the consummation of the transactions contemplated hereby and thereby.
5.6 No Brokers. Other than the Broker, whose Broker Fee shall be the
responsibility of the Purchaser, all negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by the Purchaser
directly with the Company and the Shareholders and without the intervention of
any other Person on behalf of the Purchaser, and in such a manner as not to give
rise to any claim against the Company or the Shareholders or any of their
respective Affiliates for any finder's fee, brokerage commission or like
payment, and if any such fee, commission or payment is payable, it shall be the
sole responsibility of the Purchaser.
Article VI
COVENANTS
6.1 Conduct of the Business.
(a) During the period from the date of this Agreement through the
Closing Date, the Shareholders shall and shall cause the Company to: (i) conduct
the Business and own, operate and use the Company's assets in the ordinary
course consistent with past practice; (ii) use their best efforts to preserve
the present business organizations and relationships of the Company (including,
without limitation, with customers, clients, vendors, suppliers, employees and
others) with respect to the Business and the Company's assets and all of the
goodwill associated therewith; (iii) use their best efforts to keep available
the services of the present employees of the Company who are actively involved
in the Business; (iv) use their best efforts to preserve the material rights and
franchises of the Company which are part of the Company's assets; (v) not take
any action that could reasonably be expected to or would have an adverse effect
on the Business or any of the Company's assets or would materially impair,
hinder or adversely affect the ability of the Company or the Shareholders to
consummate the transactions contemplated hereby, the ▇▇▇▇▇ Employment Agreement
or the Non-Competition Agreement; (vi) deliver to the Purchaser a copy of each
written notice sent or received under the any Personal Property Lease; (vii)
deliver to the Purchaser a copy of each written notice or communication from any
Governmental Entity or Regulatory Authority relating to the Company or its
Business; (viii) perform all material obligations under the Personal Property
Leases and Contracts; and (ix) deliver to the Purchaser all material notices and
communications with respect to the Business from customers, clients, suppliers,
vendors and third parties.
29
(b) Without limiting the generality of the foregoing, from the date
of this Agreement through the Closing Date, the Shareholders shall not and shall
not permit the Company to: (i) sell, pledge, transfer, dispose of or encumber or
suffer or permit to exist any Lien on any of the Company's assets; (ii) hire any
new employees or fire any current employees without cause, or increase any
compensation or benefit payable or provided to any employee who is employed by
the Company, except pursuant to a Legal Requirement or Contract and which
increase, if any, shall not be greater than in accordance with the Company's
past practices; (iii) enter into, amend or terminate any Contract without the
prior written consent of the Purchaser or take or fail to take any action within
the reasonable control of the Shareholder or Company that would constitute a
breach of or default under (without regard to any notice or passage of time or
both) any Contract; (iv) enter into, amend, modify or adopt any Benefit Plan,
except as may otherwise be required pursuant to any applicable Legal
Requirement; (v) waive any claims or rights of value with respect to any of the
Company's assets or the Business, other than in the ordinary course of business
consistent with past practices; (vi) change any accounting principle, or method,
practice or procedure, or make, amend or revoke any Tax election; (vii) amend,
waive, surrender or terminate or agree to the amendment, waiver, surrender or
termination of any Personal Property Lease or Contract or Authorization without
the prior written consent from the Purchaser, which consent will not be
unreasonably withheld or delayed; (viii) exercise any right or option under any
Personal Property Lease or any Contract or extend or renew any Personal Property
Lease or any Contract; (ix) make any distribution or dividend of any kind
including of any of the Company's assets to the Shareholders or any other
Person,; (x) incur any indebtedness for borrowed money other than borrowings for
working capital purposes under existing credit facilities in the ordinary course
of business and consistent with past practices; (xi) purchase any property or
assets from any Shareholder or any Shareholders' Affiliates; (xii) make any
loan, advances or capital contributions to, or investments in, any other Person
(other than customary loans or advances to employees in accordance with past
practices); (xiii) pay, discharge or satisfy before it is due any claim or
liability, or fail to pay any such item in a timely manner; (xiv) accelerate or
otherwise change in any material manner the Company's practice of collecting
accounts receivable; or (xv) enter into any Contract, agreement, commitment or
arrangement to do, or take, or agree (orally or in writing) or otherwise to take
or consent to, any of the foregoing actions.
6.2 Due Diligence.
(a) The Shareholders shall give the Purchaser and the Purchaser's
officers, employees, legal counsel, accountants and other representatives free
and full access to and the right to inspect, during normal business hours, all
of the premises, properties, assets, records, contracts and other documents of
the Company relating to the Business or the Company's assets, and shall permit
them to consult with the officers, employees, accountants, legal counsel and
agents of the Company or the Shareholders for the purpose of making such
investigation as the Purchaser shall consider appropriate. Prior to the Closing,
the Shareholders shall, or shall cause the Company to, furnish to the Purchaser
all such documents and copies of documents and records and information which
relate to the Business or the Company and copies of any working papers relating
thereto as the Purchaser shall from time to time reasonably request.
(b) Prior to and after the Closing, the Shareholders shall promptly
advise the Purchaser in writing of the commencement or threat against either
30
Company or the Shareholders of any claim, action, suit or other proceeding that
relates to or might reasonably be expected to affect the Business or the
Company.
(c) Prior to the Closing, the Shareholders shall and shall cause the
Company to use their respective best efforts to take any action where the
failure or omission to take such action would cause (x) any representation or
warranty made by any of them in this Agreement to be untrue or incorrect as of
the Closing or (y) any of the conditions to the Closing set forth herein not to
be satisfied.
6.3 Obtaining Consents. Prior to the Closing, the Shareholders shall, or
shall cause the Company to, make all filings with, and shall use commercially
reasonable efforts to obtain all consents (including the Required Consents),
Authorizations, qualifications and orders from, all Governmental Entities and
Regulatory Authorities and other Persons necessary or required to be obtained by
any of them in order to consummate the transactions contemplated by this
Agreement, the ▇▇▇▇▇ Employment Agreement and the Non-Competition Agreement and
the other agreements contemplated thereby. The Shareholders shall promptly
furnish the Purchaser with all necessary information in connection with this
Section 6.3.
6.4 Publicity. Prior to the Closing, the Purchaser and the Shareholders
shall not, and the Shareholders shall not permit the Company to, issue or make,
or cause to have issued or made, the publication or dissemination of any press
release or other public announcement or disclose any matter relating to the
existence of this Agreement and the transactions contemplated hereby, except:
(a) after consultation with and having obtained the prior written approval of
the other parties; (b) except as may be required pursuant to any Legal
Requirement (after consultation with the other party or parties, to the extent
practical) or pursuant to applicable subpoena; or (c) by the Purchaser, the
Company or the Shareholders to their respective lawyers or accountants and other
professional advisors who need to know such information and who, as a condition
precedent to disclosure, agrees to keep the existence and terms of this
Agreement confidential and not to disclose the same except in accordance with
this Section 6.4. After the Closing, only the Purchaser may issue a press
release or otherwise make a public statement or announcement with respect to
this Agreement or the transactions contemplated hereby or the existence of this
Agreement.
6.5 Further Assurances. Before and after the Closing, each of the parties
hereto shall execute such documents and other instruments and perform such
further acts as may be required or reasonably requested by any other party
hereto to carry out the provisions hereof and the transactions contemplated
hereby. Each party shall, on or prior to the Closing Date, use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions precedent to
the consummation of the transactions contemplated hereby.
6.6 Transfer and Retention of Records. Except as permitted in connection
with the performance of the Shareholders' duties to the Company, as the case may
be, pursuant to their respective employment arrangements, after the Closing, the
Shareholders will not, nor permit any of their agents or representatives to,
retain any document, databases or other media embodying any confidential or
proprietary information relating to the Company's assets or the Business or use,
publish or disclose to any third person any such confidential or proprietary
information.
31
6.7 Employee Matters; Bonus Plan.
(a) The Purchaser shall not be obligated to continue to employ any
specified number of the Company's current employees.
(b) Following the Closing, during the period that the ▇▇▇▇▇ Seller
Note is outstanding, representatives of the Purchaser shall discuss with ▇▇▇▇▇
any proposed changes in the staffing of the Company prior to implementation of
such changes, provided that the final determination as to such staffing changes
shall be made by the Purchaser.
(c) Following the closing, the Purchaser shall cause the Company to
implement the bonus plan annexed hereto as Exhibit "H".
6.8 Supplements. If any representation, warranty or statement of any of
the parties hereto made herein or hereon, or in any schedule attached hereto,
shall be false or incorrect or become false or incorrect prior to the Closing,
the Shareholders, on the one hand, and the Purchaser, on the other hand shall
deliver to the other party (or parties, as applicable) a supplement that is
sufficient to make such representation, warranty or statement, as so
supplemented, true and correct. It is understood and agreed that the delivery of
such a supplement to the other party (or parties, as applicable) shall not in
any manner constitute a waiver or limitation on the receiving party of such
receiving party's rights or remedies under this Agreement or otherwise or have
any effect on the satisfaction of the conditions set forth in Section 7.1 or
Section 8.1 hereof, as applicable, or be deemed to be a modification of any
representation, warranty or statement or in any way release any other party (or
parties, as applicable) with respect to any liability for any such
representation, warranty or statement.
6.9 No Solicitation. From the date hereof through the Closing or the date
of termination of this Agreement, the Shareholders and the Shareholder's
Affiliates, investment bankers, advisors, attorneys or other agents will not,
and shall not permit the Company to, directly or indirectly, solicit, initiate,
facilitate or encourage (including, without limitation, by way of furnishing or
disclosing non-public information) any inquiries or the making of any proposal
with respect to any merger, consolidation, recapitalization or other business
combination (each an "Acquisition Transaction") involving the Company or the
sale, transfer or assignment of all or any of the Company's assets or any of the
capital stock of the Company or negotiate, explore or otherwise engage in
discussions with any Person (other than the Purchaser and its representatives)
with respect to any Acquisition Transaction or enter into any agreement,
arrangement or understanding, formal or informal, written or oral, with respect
to any such Acquisition Transaction. The Shareholders shall promptly notify the
Purchaser about any communication or solicitation received by the Company, the
Shareholders or any of their respective Affiliates, investment bankers,
advisors, attorneys or other agents from any Person (other than the Purchaser
and its representatives) with respect to an Acquisition Transaction.
6.10 Risk of Loss. The Shareholders shall give to the Purchaser prompt
written notice of any damage or destruction with respect to any of the Company's
personal property or assets. If prior to the Closing any portion of the
Company's assets shall be damaged or destroyed by fire or other casualty, and
32
the result thereof, in the opinion of the Purchaser is materially adverse to the
Business, the Purchaser shall have the right, exercised in Purchaser's sole
discretion, to terminate this Agreement by giving notice to the Shareholders
following receipt by the Purchaser of the notice received from the Shareholders
pursuant to this Section.
6.11 Tax Matters.
(a) The Shareholders shall and shall cause the Company to:
(i) duly and timely file or cause to be filed all Tax Returns
required to be filed by, including or relating to the Company or the
Shareholders for all periods through and including the Closing Date which Tax
Returns shall be true, correct and complete;
(ii) duly and timely pay or cause to be paid all Taxes that
are required to be paid on or before the Closing Date or which relate to periods
ending on or before the Closing Date, and shall properly accrue on its Financial
Statements and books and records in accordance with GAAP for the payment of any
Taxes that are not yet payable; and
(iii) comply in all material respects with all Legal
Requirements and all other rules and regulations relating to the collection,
withholding and payment of Taxes.
(b) The Shareholders (i) shall cause to be prepared and duly and
timely filed all Tax Returns relating to any excise, sales, use, real or
personal property or other transfer, recording fees and charges and similar
Taxes required to be filed as a result of any of the transactions contemplated
by this Agreement; and (ii) shall be solely responsible for the payment of such
Taxes. The Shareholders shall give the Purchaser a copy of each Tax Return
referred to in Section 6.11(a) hereof, together with all related work papers,
for its review at least fifteen (15) Business Days in the case of an Income Tax
Return and at least five (5) Business Days in the case of any other Tax Return
prior to filing such Tax Return. The Purchaser's receipt of any Tax Return,
review and comments thereon shall not waive any right the Purchaser or its
Affiliates may have under this Agreement.
6.12 Insurance. From the date hereof through the Closing Date, the Company
and the Shareholders shall maintain in full force and effect the Insurance
Policies listed on Schedule 4.23 of the Disclosure Statement (including all
necessary renewals thereof) and pay all premiums required to effectuate such
maintenance.
Article VII
CONDITIONS PRECEDENT TO CLOSING
OBLIGATIONS OF THE PURCHASER
All obligations of the Purchaser pursuant to this Agreement to
consummate the transactions contemplated hereby at the Closing shall be subject
to the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived in writing by the Purchaser
(in its sole discretion):
7.1 Representations and Warranties Accurate. All representations and
warranties of the Shareholders contained in this Agreement shall be true and
33
accurate in all respects on and as of the Closing Date as if made again at and
as of such date (without regard to any supplement that may be delivered pursuant
to Section 6.8 hereof).
7.2 Performance by the Company and the Shareholders. The Company and each
Shareholder shall have performed and complied with all terms, provisions,
agreements, covenants and conditions required by this Agreement to be performed
and complied with by them at or prior to the Closing.
7.3 Certificate. The Purchaser shall have received a certificate in the
form annexed hereto as Exhibit "I", dated the Closing Date, signed by the
Shareholder to the effect that the conditions set forth in this Article VII have
been fully satisfied.
7.4 Legal Prohibition. No action, suit, investigation, inquiry or other
proceeding by any Governmental Entity or Regulatory Authority or other Person
shall have been instituted or threatened in writing which (i) has a material
adverse effect on the Business, the Company's assets or liabilities or the
Purchaser; (ii) arises out of or relates to this Agreement or the transactions
contemplated hereby; or (iii) questions the validity hereof or any of the
transactions contemplated hereby, or seeks to enjoin the consummation of the
transactions contemplated hereby or seeks to obtain substantial damages in
respect thereof. On the Closing Date, there shall be no effective permanent or
preliminary injunction, writ, temporary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein not be consummated as so provided.
7.5 Closing Deliveries. The Purchaser shall have received all deliveries
to be made to it pursuant to this Agreement, including, without limitation,
those specified in Section 3.2 hereof.
7.6 Absence of Material Adverse Changes. There shall not have occurred
since the date hereof (i) any material adverse change in the operations,
condition (financial or otherwise) or results of operations or the prospects of
the Business or the Company's assets; or (ii) any other event, loss, damage,
condition or state of facts of any nature whatsoever which can reasonably be
expected to have a material adverse effect on the Business or the Company's
assets or liabilities.
7.7 Consents. The Company and the Shareholders shall have obtained all
consents, approvals or waivers set forth on Schedule 4.6 of the Disclosure
Statement (including, without limitation, the Required Consents), all without
cost or other adverse consequences to the Purchaser, the Company and the
Business.
7.8 Due Diligence. The Purchaser shall have completed its due diligence
review of the Company, the Business and the Company's assets and determined that
the results of such review are satisfactory to the Purchaser in its sole
discretion.
7.9 UCC Matters. The Company shall have obtained and filed (or caused to
be filed) such financing statements as are required in order to terminate any
and all Liens affecting the Shares or the Company's assets or the Business, and
shall furnish the Purchaser with such documents as the Purchaser may reasonably
request to confirm the foregoing, or, if acceptable to the Purchaser's
lender(s), shall provide evidence of satisfaction of such Liens with a
commitment to file such termination statements promptly after Closing.
34
7.10 Opinion of Counsel. The Purchaser shall have received an opinion of
counsel to the Company and the Shareholders in substantially the form of Exhibit
"J" annexed hereto.
Article VIII
CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS OF THE SHAREHOLDERS
All obligations of the Shareholders pursuant to this Agreement to
consummate the transactions contemplated hereby at the Closing, shall be subject
to the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived in writing by the
Shareholder.
8.1 Representations and Warranties Accurate. All representations and
warranties of the Purchaser contained in this Agreement and the other the
Purchaser Documents shall be true and accurate in all respects on and as of the
Closing Date as if made again at and as of such date.
8.2 Performance by the Purchaser. The Purchaser shall have performed and
complied with all terms, provisions, agreements, covenants and conditions
required by this Agreement to be performed and complied with by it prior to the
Closing.
8.3 Certificate. The Shareholders shall have received a certificate, in
the form annexed hereto as Exhibit "K", dated the Closing Date, signed on behalf
of the Purchaser by an executive officer of the Purchaser, to the effect that
the conditions set forth in Sections 8.1 and 8.2 have been fully satisfied.
8.4 Legal Prohibition. On the Closing Date, there shall be no effective
permanent or preliminary injunction, writ, temporary restraining order or any
order of any nature issued by a court of competent jurisdiction directing that
the transactions provided for herein not be consummated as so provided.
8.5 Closing Deliveries. The Shareholders shall have received all
deliveries to be made to them pursuant to this Agreement, including, without
limitation, those specified in Section 3.3 hereof.
8.6 Consents. Except to the extent that the requirement of delivery to the
Purchaser by the Company or the Shareholders of a consent, approval or waiver
has been waived by the Purchaser in writing, the Company and the Shareholders
shall have obtained all consents, approvals or waivers set forth on Schedule 4.6
of the Disclosure Statement (including, without limitation, the Required
Consents), all without material cost or other adverse consequences to the
Shareholders, the Purchaser, the Company and the Business.
35
Article IX
TERMINATION
9.1 Termination. Anything herein to the contrary notwithstanding, this
Agreement may be terminated at any time prior to the Closing Date:
(a) by the mutual written consent of the Company and the
Shareholders, on the one hand, and the Purchaser, on the other hand;
(b) by the Purchaser, by written notice given to the Shareholders,
if (i) at any time prior to the Closing, the Company or either Shareholder shall
default in the due observance or the due and timely performance of any of the
terms or provisions of this Agreement on their part to be observed or performed;
(ii) any of the conditions set forth in Article VII shall have become incapable
of fulfillment and shall not have been waived in writing by the Purchaser; or
(iii) at any time prior to the Closing, if the Purchaser determines, in its sole
discretion, that the results of its due diligence review of the Business are not
satisfactory to the Purchaser;
(c) by the Shareholders, by written notice given to the Purchaser,
if (i) at any time prior to the Closing, the Purchaser shall default in the due
observance or the due and timely performance of any of the terms and provisions
of this Agreement on its part to be observed or performed; or (ii) any of the
conditions set forth in Article VIII shall have become incapable of fulfillment
and shall not have been waived in writing by the Shareholders; or
(d) by either the Purchaser or the Shareholders:
(i) if a court of competent jurisdiction or any Governmental
Entity or Regulatory Authority shall have issued an order, decree or ruling or
taken any other action (which order, decree or ruling the parties hereto shall
use their best efforts to lift), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable; or
(ii) if the Closing Date shall not have occurred on or before
August 5, 2005; provided, however, that the right to terminate this Agreement
shall not be available to any party whose breach of any representation, warranty
or covenant in this Agreement made or to be observed or performed by such party
has been the cause of, or resulted in, the failure of the Closing to occur on or
before such date.
9.2 Effect of Termination. In the event of termination pursuant to Section
9.1 of this Agreement, written notice thereof shall forthwith be given by the
terminating party to the other parties to this Agreement and this Agreement
shall terminate, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) Upon request therefor, each party will redeliver all documents,
work papers and other material furnished to such party by any other parties
relating to the transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing the same; and
36
(b) No party hereto (or any of their respective stockholders,
directors, officers, employees, control persons, representatives or Affiliates)
shall have any liability or further obligation to any other party to this
Agreement resulting from the termination of this Agreement; provided, however,
that in the event of any termination of this Agreement by the Purchaser pursuant
to Sections 9.1(b)(i) or (ii) (other than a breach of the conditions set forth
in Sections 7.4, 7.6, 7.7 or 7.9), the Shareholders and the Company shall
reimburse the Purchaser for all Audit costs.
Article X
INDEMNIFICATION
10.1 Survival of Representations and Warranties. All representations,
warranties, covenants and agreements of the Shareholders and Purchaser contained
in this Agreement shall survive the Closing, (notwithstanding any examination or
investigation made by or on behalf of any party hereto) for a period of
twenty-four (24) months following the Closing Date. Notwithstanding the
foregoing, effective as of the Closing, any and all representations, warranties,
covenants or obligations of the Company shall expire and the Company shall be
released from any obligation or liability hereunder.
10.2 Indemnification by the Shareholders. On the condition that the
Closing is effected, the Shareholders, jointly and severally (subject to the
limitations contained in Section 10.8), shall indemnify and hold harmless the
Purchaser and its Affiliates (including the Company), and each of their
respective directors, officers, employees, agents, representatives, stockholders
and controlling parties and all of their successors and assigns (each a
"Purchaser Indemnified Person") from and defend each of them from and against
and will pay each Purchaser Indemnified Person for any and all demands, claims,
actions, liabilities, losses, damages (including, without limitation, special,
consequential and punitive damages), costs, penalties and expenses (including,
without limitation, interest, costs of investigation and defense and the
reasonable fees and expenses of attorneys and other professionals and experts),
whether or not involving a Third Party Claim (after taking into account any
insurance recovery from any of the Purchaser's insurance policies that insures
against the foregoing, but without regard to any Tax benefit that may be
obtained as a result thereof) (collectively, "Losses") asserted against, imposed
upon or incurred by any such Purchaser Indemnified Person, directly or
indirectly, resulting from or arising out of or in connection with or relating
to any of the following:
(a) any inaccuracy or breach of any representation or warranty of
the Company or the Shareholders contained herein;
(b) any inaccuracy or breach of any representation or warranty of
▇▇▇▇ ▇▇▇▇▇▇▇ in the Haddon Agreement, excluding the representations and
warranties in Article XI thereof (Securities Law Matters Representations);
(c) any breach of any agreement, covenant or obligation of the
Company or the Shareholders contained herein;
37
(d) any liability, obligation or responsibility of the Company or
the Shareholders or which in any way relates to the Business or the Company's
assets (including, without limitation, any liability for Taxes or withholdings)
arising out of the operation of the Company prior to the Closing Date which
liability, obligation or responsibility is not expressly disclosed in this
Agreement or in the Schedules hereto, including any claims on account of Closing
Date Payables not disclosed on the Working Capital Statement;
(e) any liability, obligation or responsibility of Haddon or ▇▇▇▇
▇▇▇▇▇▇▇ or which in any way relates to the business or assets of Haddon
(including, without limitation, any liability for Taxes or withholdings) arising
out of the operation of Haddon prior to the Closing Date which liability,
obligation or responsibility is not expressly disclosed in the Haddon Agreement
or in the Schedules thereto;
(f) any and all claims, actions, suits or any administrative,
arbitration, governmental or other proceedings or investigations against any
Purchaser Indemnified Person or in which any Purchaser Indemnified Person
becomes involved that relate to the Company, Haddon, the Shareholders, ▇▇▇▇
▇▇▇▇▇▇▇, the Business or the business of Haddon in which the principal event
giving rise thereto occurred prior to the Closing Date or which result from or
arise out of any action or inaction prior to the Closing Date of the Company,
Haddon, or any director, officer, employee, agent, representative or
subcontractor of the Company or Haddon or either Shareholder or ▇▇▇▇ ▇▇▇▇▇▇▇ or
a state of facts prior to Closing Date, and which is not expressly disclosed in
this Agreement or in the Schedules hereto or in the Haddon Agreement or in the
Schedules thereto; and
(g) any claim, action, suit or other proceeding asserting that any
sales tax is payable in connection with the transactions contemplated hereby or
under the Haddon Agreement.
The Shareholders acknowledge and agree that the Purchaser shall not be
required to seek indemnification from ▇▇▇▇ ▇▇▇▇▇▇▇ prior to seeking
indemnification from the Shareholders for any Losses attributable to ▇▇▇▇
▇▇▇▇▇▇▇ or Haddon under this Article X.
10.3 Indemnification by the Purchaser. On the condition that the Closing
is effected, the Purchaser shall indemnify and hold harmless the Shareholders
and the Shareholders' respective successors and permitted assigns (each a
"Shareholder Indemnified Person"), from and defend each of them from and against
and will pay each Shareholder Indemnified Person for any and all Losses asserted
against, imposed upon or incurred by any such Shareholder Indemnified Person,
directly or indirectly, resulting from or arising out of or in connection with
or relating to any of the following:
(a) any inaccuracy or breach of any representation or warranty of
the Purchaser contained herein;
(b) any breach of any agreement, covenant or obligation of the
Purchaser contained herein;
38
(c) any liability, obligation or responsibility of the Company or
which in any way relates to the Business or the Company's assets (including,
without limitation, any liability for Taxes or withholdings) arising solely out
of the operation of the Company after the Closing Date, excluding any such
liability, obligation or responsibility arising out of the action or inaction
of, or attributable to the actions of, either Shareholder, whether in such
Shareholder's capacity as an employee of either Company or any of its Affiliates
or otherwise; and
(d) any liability, obligation or responsibility of the Company to
the extent disclosed on the Working Capital Statement.
10.4 Indemnification Procedures - Third-Party Claims.
(a) The rights and obligations of a party claiming a right to
indemnification under this Article X (each an "Indemnitee") from another party
hereto (each an "Indemnitor") in any way relating to a Third Party Claim shall
be governed by the following procedures of this Section 10.4:
(i) The Indemnitee shall give prompt written notice to the
Indemnitor of the commencement of any action, suit or proceeding, or any written
threat thereof, or any state of facts which the Indemnitee reasonably determines
will give rise to a claim by the Indemnitee against the Indemnitor based on the
indemnity agreements contained in this Article X, which notice shall set forth
the nature and basis of the claim and the amount thereof (or a reasonable
estimate of such amount), to the extent known and any other reasonably relevant
information in the possession of the Indemnitee (a "Notice of Claim"). No
failure to give a Notice of Claim shall affect the indemnification obligations
of an Indemnitor hereunder, except to the extent such failure materially
prejudices such Indemnitor's ability to successfully defend the matter giving
rise to the indemnification claim.
(ii) In the event that an Indemnitee furnishes an Indemnitor
with a Notice of Claim, then upon the written acknowledgment by the Indemnitor
given to the Indemnitee within thirty (30) days after the Indemnitor's receipt
of the Notice of Claim, that the Indemnitor is undertaking and will prosecute
the defense of the claim under the indemnity agreements contained in this
Article X and confirming that as between the Indemnitor and the Indemnitee, the
claim covered by the Notice of Claim is the obligation of the Indemnitor, with
respect to which the Indemnitor is obligated to indemnify and hold harmless the
Indemnitee hereunder and that the Indemnitor will be able to pay the full amount
of potential liability in connection with such claim (including, without
limitation, any action, suit or proceeding and all proceedings on appeal which
legal counsel for the Indemnitee shall deem appropriate) (an "Indemnification
Acknowledgment"), then the claim covered by the Notice of Claim may be defended
by the Indemnitor; provided, however, that the Indemnitee is authorized to file
any motion, answer or other pleading that may be reasonably necessary or
appropriate to protect its interests during such thirty (30) day period. In the
event the Indemnitor does not furnish an Indemnification Acknowledgment to the
Indemnitee within such time period, or does not offer reasonable assurances to
the Indemnitee as to Indemnitor's financial capacity to satisfy any final
judgment or settlement, the Indemnitee may, upon written notice to the
39
Indemnitor, assume control of the defense (with legal counsel chosen by the
Indemnitee) and defend, settle or dispose of the claim, at the sole cost and
expense of the Indemnitor. Notwithstanding receipt of an Indemnification
Acknowledgment, the Indemnitee shall have the right to employ its own legal
counsel in respect of any such claim, action, suit or proceeding, but the fees
and expenses of such legal counsel shall be at the Indemnitee's own cost and
expense, unless (A) the employment of such legal counsel and the payment of such
fees and expenses both shall have been specifically authorized by the Indemnitor
or (B) the Indemnitee shall have reasonably concluded, based upon a written
opinion of legal counsel to the Indemnitee, a copy of which shall be furnished
to the Indemnitor, that there may be conflicts in the defenses available to the
Indemnitee which are different from or additional to those available to the
Indemnitor (if the Indemnitor is also a party or potential party to the claim)
or the claim is one which could have a material adverse effect on the business,
operations, assets, properties or prospects of the Indemnitee in which case the
costs and expenses incurred by the Indemnitee shall be borne by the Indemnitor.
(iii) The Indemnitee or the Indemnitor, as the case may be,
depending upon who is controlling the defense of the action, suit or proceeding,
shall keep the other fully informed of such claim, action, suit or proceeding at
all stages thereof, whether or not the other is represented by legal counsel.
Subject to the Indemnitor furnishing the Indemnitee with an Indemnification
Acknowledgment in accordance with Section 10.4(ii) hereof, the Indemnitee shall
cooperate with the Indemnitor and provide such assistance, at the sole cost and
expense of the Indemnitor, as the Indemnitor may reasonably request in
connection with the defense of any such claim, action, suit or proceeding,
including, but not limited to, providing the Indemnitor with access to and use
of all relevant corporate records and making available its officers and
employees for depositions, pre-trial discovery and as witnesses at trial, if
required. In requesting any such cooperation, the Indemnitor shall have due
regard for, and attempt to not be disruptive of, the business and day-to-day
operations of the Indemnitee and shall follow the requests of the Indemnitee
regarding any documents or instruments which the Indemnitee reasonably believes
should be given confidential treatment or is subject to a privilege.
(b) The Indemnitor shall not settle any claim, action, suit or
proceeding which Indemnitor has undertaken to defend, in accordance with the
procedures set forth in this Article X, without the Indemnitee's prior written
consent (which consent shall not be unreasonably withheld or delayed), unless
there is no obligation on the part of the Indemnitee to contribute to any
payment made to settlement of the claim, action, suit or proceeding, the
Indemnitee receives a general and unconditional release with respect to the
claim (which shall be in form, substance and scope reasonably acceptable to the
Indemnitee), there is no finding or admission of violation of any Legal
Requirement by, or effect on any other claims that may be made against the
Indemnitee and the relief granted in connection therewith requires no action on
the part of and has no effect on the Indemnitee or its business or reputation.
If the Indemnitee is controlling the defense of the claim, action, suit or
proceeding, the Indemnitee shall not settle the claim, action, suit, or
proceeding without the Indemnitor's prior written consent (which consent shall
not be unreasonably withheld or delayed).
(c) Any claim made by a Purchaser Indemnified Person or a
Shareholder Indemnified Person that may be made under more than one subsection
under Section 10.2 or Section 10.3, as applicable, may be made under the
subsection that the claiming party may elect in its sole discretion,
notwithstanding that such claim may be made under more than one subsection.
40
10.5 Procedure for Indemnification -- Direct Indemnification Claims. A
claim for indemnification for any matter not relating to a Third Party Claim may
be asserted by notice directly by the Indemnitee to the Indemnitor.
10.6 Offset Rights - Seller Notes. The parties acknowledge and agree that
any and all amounts due and payable under the ▇▇▇▇▇ Seller Note and/or the
Davies Seller Note shall be subject to offset by the Purchaser on a
dollar-for-dollar basis for any amounts determined to be due and payable by the
Shareholders to any Purchaser Indemnified Person under this Article X, with the
amount of each such offset to be allocated between the ▇▇▇▇▇ Seller Note and/or
the Davies Seller Note ratably in proportion to (a) the Shareholders' respective
liability for any such indemnification payment and (b) if both are liable, their
respective ownership interests in the Company. To secure the Purchaser's right
to such offset, the parties acknowledge and agree that, commencing on the date
of a Shareholder's receipt of a Notice of Claim, the Purchaser shall deposit
with an escrow agent mutually satisfactory to the parties any payments under the
Seller Notes thereafter due and payable that are subject to offset as set forth
in the preceding sentence, in direct order of maturity, until such deposits
equal the claim of the Purchaser Indemnified Person set forth in the Notice of
Claim, which escrowed funds shall be released upon the final disposition of such
claimed Loss. The offset rights in this Section 10.6 shall expire on the second
anniversary of the Closing Date.
10.7 Right to Indemnification Not Affected by Knowledge or Waiver.
(a) The right to indemnification hereunder, payment of Losses or
other remedy based upon breach of any representation, warranty, covenant,
agreement or obligation of a party hereunder shall not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date (including, without limitation,
the due diligence investigation engaged in by the Purchaser and its
representatives), with respect to the accuracy or inaccuracy of or compliance or
noncompliance with, any such representation, warranty, covenant, agreement or
obligation.
(b) The waiver of any condition to a party's obligation to
effectuate the Closing and consummate the transactions contemplated hereby,
where such condition is based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant, agreement or
obligation, will not affect the right to indemnification, payment of Losses or
other remedy based on such representation, warranty, covenant, agreement or
obligation.
10.8 Limitations.
(a) Neither party shall have any obligation to indemnify the other
party with respect to any claimed Loss for which a claim has not been made
within two (2) years after the Closing.
(b) Each Shareholder's obligation to indemnify the Purchaser with
respect to a claimed Loss for which a claim has been made after the earlier of
(i) the date of filing of the Purchaser's Form 10-KSB for its fiscal year ending
December 31, 2006 and (ii) March 31, 2007, but within two years after the
41
Closing, shall be limited to the Seller Notes offset rights of the Purchaser set
forth in Section 10.6 hereof.
(c) Neither party shall have any right to indemnification payment to
Section 10.2(a) or Section 10.3(a) until aggregate Losses thereunder for such a
party exceeds $50,000, in which event such party shall be entitled to such
indemnification from the first dollar of Losses. The amount of any payment or
reimbursement for a Loss shall be net of any insurance proceeds or
indemnification amounts actually received or to be received by the Indemnitee in
respect of such Loss.
(d) The aggregate obligations of the Shareholders pursuant to this
Article X and Section 10.2A of the Haddon Agreement shall not exceed (i) with
respect to ▇▇▇▇▇, the ▇▇▇▇▇ Purchase Price and (ii) with respect to Davies, the
Davies Purchase Price.
(e) ▇▇▇▇▇ and ▇▇▇▇▇▇ shall comply with the indemnifications
provisions of this Article X irrespective of any dispute among ▇▇▇▇▇, ▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇▇, as among themselves, as to the allocation of responsibility or
liability therefor, and such persons shall not name or otherwise join the
Purchaser or any of its Affiliates in any action or proceeding relating to the
foregoing.
Article XI
MISCELLANEOUS
11.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party hereto shall pay its own costs and expenses incurred in connection
with or incidental to the preparation and negotiations of this Agreement, the
carrying out of the provisions of this Agreement and the consummation of the
transactions contemplated hereby (including, without limitation, attorneys' fees
and expenses). If the Closing is consummated, the Shareholders will pay all
sales, real estate transfer, capital gains and income Taxes incurred by the
Shareholders as a result of the sale contemplated by this Agreement.
11.2 Amendment. This Agreement may not be modified, amended, altered or
supplemented, except by a written agreement executed by each of the parties
hereto.
11.3 Entire Agreement. This Agreement, including the Disclosure Statement
schedules and exhibits hereto, and the instruments and other documents delivered
pursuant to this Agreement, contain the entire understanding and agreement of
the parties relating to the subject matter hereof and supersedes all prior
and/or contemporaneous understandings and agreements of any kind and nature
(whether written or oral) among the parties with respect to such subject matter,
all of which are merged herein.
11.4 Waiver. Any waiver by the Purchaser, on the one hand, and the
Shareholders, on the other hand, of any breach of or failure to comply with any
provision or condition of this Agreement by the other party shall not be
construed as, or constitute, a continuing waiver of such provision or condition,
or a waiver of any other breach of, or failure to comply with, any other
provision or condition of this Agreement, any such waiver to be limited to the
42
specific matter and instance for which it is given. No waiver of any such breach
or failure or of any provision or condition of this Agreement shall be effective
unless in a written instrument signed by the party granting the waiver and
delivered to the other party hereto in the manner provided for hereunder in
Section 11.5. No failure or delay by either party to enforce or exercise its
rights hereunder shall be deemed a waiver hereof, nor shall any single or
partial exercise of any such right or any abandonment or discontinuance of steps
to enforce such rights, preclude any other or further exercise thereof or the
exercise of any other right.
11.5 Notices. All notices, demands, consents, requests, instructions and
other communications to be given or delivered or permitted under or by reason of
the provisions of this Agreement or in connection with the transactions
contemplated hereby shall be in writing and shall be deemed to be delivered and
received by the intended recipient as follows: (a) if personally delivered, on
the Business Day of such delivery (as evidenced by the receipt of the personal
delivery service), (b) if mailed certified or registered mail return receipt
requested, five (5) Business Days after being mailed, (c) if delivered by
overnight courier (with all charges having been prepaid), on the Business Day of
such delivery (as evidenced by the receipt of the overnight courier service of
recognized standing), or (d) if delivered by facsimile transmission, on the
Business Day of such delivery if sent by 6:00 p.m. in the time zone of the
recipient, or if sent after that time, on the next succeeding Business Day (as
evidenced by the printed confirmation of delivery generated by the sending
party's fax machine). If any notice, demand, consent, request, instruction or
other communication cannot be delivered because of a changed address of which no
notice was given (in accordance with this Section 11.5), or the refusal to
accept same, the notice, demand, consent, request, instruction or other
communication shall be deemed received on the second Business Day the notice is
sent (as evidenced by a sworn affidavit of the sender). All such notices,
demands, consents, requests, instructions and other communications will be sent
to the following addresses or facsimile numbers as applicable:
If to the Company (prior to Closing) or ▇▇▇▇▇:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
Fox Rothschild LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: ▇▇▇ ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
If to Davies:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
43
With a copy to:
Fox Rothschild LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: ▇▇▇ ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
If to the Company (after Closing) or the Purchaser:
National Investment Managers Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇ ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
With copies to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇ ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
or to such other address as any party may specify by notice given to the other
party in accordance with this Section 11.5.
11.6 Governing Law; Jurisdiction.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN THAT STATE, WITHOUT REGARD TO ANY OF ITS PRINCIPLES OF CONFLICTS OF LAWS OR
OTHER LAWS WHICH WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED WITHOUT REGARD
TO ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS AGREEMENT TO BE DRAFTED. EACH
OF THE PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES
UNCONDITIONALLY AND IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE
44
COURTS OF THE STATE OF NEW YORK LOCATED IN THE COUNTY OF NEW YORK AND THE
FEDERAL DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN THE
COUNTY OF NEW YORK WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND EACH
OF THE PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY OBJECTION TO
VENUE IN ANY SUCH COURT, AND AGREES THAT SERVICE OF ANY SUMMONS, COMPLAINT,
NOTICE OR OTHER PROCESS RELATING TO SUCH SUIT, ACTION OR OTHER PROCEEDING MAY BE
EFFECTED IN THE MANNER PROVIDED IN SECTION 11.5.
11.7 Information and Confidentiality. Each party hereto agrees that such
party shall hold in strict confidence all information and documents received
from any other party hereto, and if the Closing does not occur, each such party
agrees to promptly return to the other parties hereto all such documents then in
such receiving party's possession without retaining copies; provided, however,
that each party's obligations under this Section 11.7 shall not apply to (a) any
information or document in the public domain other than because of the wrongful
actions of the disclosing party; (b) information known by or documents in the
possession of the receiving party prior to the date of disclosure by the
disclosing party; (c) information independently developed by the receiving party
without the use or assistance of the disclosing party's information.
11.8 Severability. The parties agree that should any provision of this
Agreement be held to be invalid, illegal or unenforceable in any jurisdiction,
that holding shall be effective only to the extent of such invalidity, illegally
or unenforceability without invalidating or rendering illegal or unenforceable
the remaining provisions hereof, and any such invalidity, illegally or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. It is the intent of the
parties that this Agreement be fully enforced to the fullest extent permitted by
applicable law.
11.9 Binding Effect; Assignment. This Agreement and the rights and
obligations hereunder may not be assigned by any party hereto without the prior
written consent of the other parties hereby; provided that the Purchaser, in its
sole discretion, may assign this Agreement and any of its rights or obligations
hereunder to: (i) its ultimate parent, a subsidiary or any of its Affiliates,
without in any way releasing the Purchaser from its obligations hereunder; or
(ii) any lender or other person providing financing for the transactions
contemplated hereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns and the heirs, estate and legal representatives of the Shareholder.
11.10 Headings. The section headings contained in this Agreement
(including, without limitation, section headings and headings in the exhibits
and Disclosure Statement schedules) are inserted for reference purposes only and
shall not affect in any way the meaning, construction or interpretation of this
Agreement. Any reference to the masculine, feminine, or neuter gender shall be a
reference to such other gender as is appropriate. References to the singular
shall include the plural and vice versa.
11.11 Third Parties. Except as expressly permitted by Section 11.9 hereof,
nothing herein is intended or shall be construed to confer upon or give to any
45
Person, other than the parties hereto and the Indemnified Persons, any rights,
privileges or remedies under or by reason of this Agreement.
11.12 Counterparts. This Agreement may be executed in counterparts, and by
the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, and all of which, when taken
together, shall constitute one and the same document. This Agreement shall
become effective when one or more counterparts, taken together, shall have been
executed and delivered by all of the parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
46
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written.
SHAREHOLDERS:
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
COMPANY:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ASSOCIATES, INC.
By: ________________________
Name:
Title:
PURCHASER:
NATIONAL INVESTMENT MANAGERS INC.
By: ________________________
Name:
Title:
[SIGNATURE PAGE - SHRA STOCK PURCHASE AGREEMENT]