ASSET PURCHASE AGREEMENT
by and among
PARADIGM MORTGAGE ASSOCIATES, INC.
a Florida Company,
its Principal Shareholders
and
ACCENT ACQUISITIONS I, CO.
a Georgia corporation
Dated as of February 25, 2000
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS....................................................................1
ARTICLE II
SALE AND PURCHASE OF ASSETS
Section 2.01. Agreement To Purchase...........................................4
Section 2.02. Purchase Price..................................................5
Section 2.03. Closing.........................................................5
ARTICLE III
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01. Sole Owner......................................................7
Section 3.02. Corporate Existence.............................................7
Section 3.03. Power and Authority.............................................7
Section 3.04. Noncontravention................................................7
Section 3.05. No Subsidiaries.................................................8
Section 3.06. Financial Statements, Books and Records.........................8
Section 3.07. No Liabilities Assumed..........................................9
Section 3.08. Recent Events...................................................9
Section 3.09. Tax Matters....................................................11
Section 3.10. Title and Condition of Properties..............................12
Section 3.11. Environmental Liability........................................12
Section 3.12. Contracts......................................................12
Section 3.13. Employees, Employment Matters..................................14
Section 3.14. Employee Benefit Plans.........................................15
Section 3.15. Licenses, Permits and Approvals................................18
Section 3.16. Unlawful Payments..............................................18
Section 3.17. Insurance......................................................18
Section 3.18. Brokers' Fees..................................................18
Section 3.19. Enforceability.................................................19
Section 3.20. Claims and Proceedings.........................................19
Section 3.21. Bankruptcy or Insolvency Proceedings...........................19
Section 3.22. No Knowledge or Notice.........................................19
Section 3.23. Debts, Liabilities and Obligations.............................19
Section 3.24. No Other Agreements............................................19
Section 3.25. Compliance With Laws...........................................19
Section 3.26. No Agreements with Management..................................19
Page
Section 3.27. Name, Trade Name and Service Marks.............................20
Section 3.28. Claims by Branch Operations....................................20
Section 3.29. Loan Matters...................................................20
Section 3.30. Disclosure.....................................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY BUYER
Section 4.01. Organization...................................................21
Section 4.02. Power and Authority............................................21
Section 4.03. Noncontravention...............................................21
Section 4.04. No Broker......................................................21
Section 4.05. Bankruptcy or Insolvency Proceedings...........................21
Section 4.06. Enforceability.................................................21
Section 4.07. Payment Shares.................................................21
Section 4.08. Disclosure.....................................................21
ARTICLE V
CONDITIONS PRECEDENT..........................................................22
ARTICLE VI
CONDUCT OF SELLER PRIOR TO CLOSING
Section 6.01. Full Access....................................................23
Section 6.02. Carry on in Regular Course.....................................23
ARTICLE VII
EMPLOYMENT AGREEMENT AND NONCOMPETITION AGREEMENTS
Section 7.01. Employment Agreements..........................................24
Section 7.02. Noncompetition Agreements......................................24
ARTICLE VIII
HOLDBACK ESCROW
Section 8.01. Establishment of Holdback Escrow...............................24
ARTICLE IX
ADDITIONAL AGREEMENTS
Section 9.01. Post-Acquisition Covenants.....................................25
Page
Section 9.02. Non-Competition................................................26
Section 9.03. Waiver and Release.............................................28
Section 9.04. Indemnification................................................28
Section 9.05. Dispute Resolution Regarding Indemnification...................31
Section 9.06. Arbitration....................................................31
Section 9.07. Transition Costs...............................................32
Section 9.08. Most Recent Fiscal Year End Financial Statements...............32
ARTICLE X
DEFAULT ...............................................................32
ARTICLE XI
MISCELLANEOUS
Section 11.01. Possession.....................................................33
Section 11.02. Prorations and Adjustments; Costs..............................33
Section 11.03. Headings.......................................................33
Section 11.04. Duplicate Executions...........................................33
Section 11.05. Time of the Essence............................................33
Section 11.06. Construction...................................................33
Section 11.07. Assignment or Delegation.......................................33
Section 11.08. Severability...................................................33
Section 11.09. Entire Agreement...............................................33
Section 11.10. Notices........................................................33
Section 11.11. Nonwaiver......................................................34
Section 11.12. Schedules......................................................34
Section 11.13. Governing Law..................................................34
Section 11.14. Amendments.....................................................34
Section 11.15. Further Assurances.............................................35
Section 11.16. Confidentiality................................................35
Section 11.17. Risk of Loss...................................................35
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of the
close of business on February 25, 2000, (the "Effective Date") by and among
PARADIGM MORTGAGE ASSOCIATES, INC., a Florida corporation (the "Company"), C. W.
XXXXXX XXXXXXX and XXXX X. XXXXXX, XX., the principal shareholders of the
Company, (collectively, the "Principal Shareholders") (the Company and the
Principal Shareholders are sometimes referred to collectively as "Seller"), and
ACCENT ACQUISITIONS I, CO., a Georgia corporation and a direct, wholly-owned
subsidiary of Lahaina Acquisitions, Inc., a Colorado corporation ("Buyer").
PRELIMINARY STATEMENTS
The Company desires to sell to Buyer and Buyer desires to purchase from the
Company certain tangible and intangible personal property used by the Company in
its business, subject to the terms, covenants and conditions contained in this
Agreement.
In consideration of the mutual covenants and promises set forth herein, the
parties hereby agree as follows.
AGREEMENT
ARTICLE I
DEFINITIONS
Certain of the terms used herein shall have the following definitions:
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, costs of defense,
judgments, orders, decrees, stipulations, injunctions, damages, dues, penalties,
fines, costs, amounts paid in settlement, Liabilities, Taxes, Security
Interests, losses, expenses, and fees, including all attorneys' fees and court
costs.
"Affiliate" means, with respect to any particular Person, any Person
controlling, controlled by or under common control with such Person, whether by
ownership or control of voting securities, by contract or otherwise.
"Affiliated Group" means any affiliated group within the meaning of Section
1504 of the Internal Revenue Code of 1986, as amended.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of a Party other than any such information that (a) is generally
available to or known by the public immediately prior to the time of disclosure
(except through the actions or inaction of the Person to whom disclosure has
been made by or on behalf of such Party) or (b) has been acquired or developed
independent from such Party.
"Current Market Price" means the average of the last reported bid price of
Lahaina Common Stock as reported by the OTC Bulletin Board for the previous ten
(10) consecutive trading days.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Company or other business entity that is
included in a controlled group of the Company within which the Company is also
included, as provided in Section 414(b) of the Code; or which is a trade or
business under common control with the Company, as provided in Section 414(c) of
the Code; or which constitutes a member of an affiliated service group within
which the Company is also included, as provided in Section 414(m) of the Code;
or which is required to be aggregated with the Company pursuant to regulations
issued under Section 414(o) of the Code.
"Escrow Agent" shall mean Xxxxx Xxxx LLP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied consistently with the principles used in preparing the
Financial Statements (as defined herein) for the Most Recent Fiscal Year End.
"Indebtedness" of any Person means all obligations of such Person which in
accordance with GAAP should be classified upon a balance sheet of such Person as
liabilities of such entity, and in any event, regardless of how classified in
accordance with GAAP, shall include (a) all obligations of such Person for
borrowed money or which have been incurred in connection with the acquisition of
property or assets, (b) obligations secured by any Security Interest upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations, (c) obligations created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of the property, and (d)
capitalized lease obligations.
"Intellectual Property" means any and all of the following which is owned
by, licensed by, licensed to, used or held for use by the Company (including all
copies and embodiments thereof, in electronic, written or other media): (a) all
registered and unregistered trademarks, trade dress, service marks, logos, trade
names, internet domain names, corporate names (including the name "Paradigm
Mortgage Associates" and all derivations thereof) and all applications to
register the same (the "Trademarks"); (b) all issued U.S. and foreign patents
and
pending patent applications, patent disclosures and improvements thereto (the
"Patents"); (c) all registered and unregistered copyrights, mask work rights and
all applications to register the same (the "Copyrights"); (d) all computer
software and databases owned or used (excluding software and databases licensed
to the Company under standard, non-exclusive software licenses granted to
end-user customers by third parties in the ordinary course of such third
parties' business) by the Company or under development for the Company by third
parties (the "Software"); (e) all categories of trade secrets, know-how,
inventions (whether or not patentable and whether or not reduced to practice),
processes, procedures, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, client and supplier
lists and information and other confidential and proprietary information
("Proprietary Rights"); (f) all licenses and agreements pursuant to which the
Company has acquired rights in or to any of the Trademarks, Patents, Copyrights,
Software or Proprietary Rights (excluding software and databases licensed to the
Company under standard, non-exclusive software licenses granted to end-user
customers by third parties in the ordinary course of such third parties'
business) ("Licenses-In"); (g) all domain names including, but limited to,
"xxx.xxXxxxxxxx.xxx"; and (g) all licenses and agreements pursuant to which the
Company has licensed or transferred any rights to any of the Trademarks,
Patents, Copyrights, Software or Proprietary Rights ("Licenses-Out").
"Knowledge" means, in the case of any individual, knowledge that a
reasonable person under similar circumstances would have after investigation and
inquiry, and in the case of the Company, the knowledge (under the same standard
as described immediately above) of the directors and officers of such the
Company and the employees of such the Company having responsibility for the
particular subject matter at issue.
"Lahaina" means Lahaina Acquisitions, Inc., a Colorado corporation and the
parent corporation of Buyer.
"Lahaina Common Stock" means the Common Stock, no par value, of Lahaina.
"Liability" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), obligation or Indebtedness, including without limitation, any liability
for Taxes and any Liability relating to the Property.
"Material Adverse Effect" means a material adverse effect or impact upon
the assets, financial condition, results of operations, business or prospects of
the Company or on the ability of the Parties to consummate the transactions
contemplated hereby.
"Most Recent Fiscal Year End" means December 31, 1999.
"Ordinary Course of Business" means the ordinary course of business of the
Company consistent with past custom and practice of the Company, Buyer or Buyer
Subsidiary, respectively, as the context herein may require (including with
respect to quantity and frequency).
"Person" means any individual, trust, the Company, partnership, limited
partnership, limited liability company or other business association or entity,
court, governmental body or governmental agency.
"Plans" means: (a) all employee benefit plans as defined in Section 3(3) of
ERISA; (b) all other severance pay, deferred compensation, excess or
supplemental benefit, vacation, stock, stock option, and incentive plans,
contracts, schemes, programs, funds, commitments, or arrangements of any kind;
and (c) all other plans, contracts, schemes, programs, funds, commitments, or
arrangements providing money, services, property, or other benefits, whether
written or oral, qualified or nonqualified, funded or unfunded, and including
any that have been frozen or terminated, which pertain to any employee, former
employee, director, officer, shareholder, consultant, or independent contractor
of the Company or any ERISA Affiliate of the Company and (i) to which the
Company or any ERISA Affiliate of the Company is or has been a party or by which
any of them is or has been bound or (ii) with respect to which the Company or
any ERISA Affiliate of the Company has made any payments or contributions since
December 31, 1994 or (iii) to which the Company or any ERISA Affiliate of the
Company may otherwise have any liability (including any such plan or arrangement
formerly maintained by the Company or any ERISA Affiliate of the Company).
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, security interest, charge,
lien or other encumbrance or right of any third party.
"Subsidiary" means any company, limited liability company, limited
partnership, partnership, trust or other entity with respect to which another
person has the power, directly or indirectly through one or more intermediaries,
to vote or direct the voting of sufficient securities or interests to elect a
majority of the directors or management committee or similar governing body.
"Tax" or "Taxes" means any Federal, state, local, or foreign income, gross
receipts, sales, licenses, payroll, employment, excise, severance, stamp,
occupation, premium windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
ARTICLE II
SALE AND PURCHASE OF ASSETS
Section 2.01. Agreement To Purchase. Buyer shall purchase from the Company
the following assets and property (collectively, the "Property"):
(a) Branch Office Operations. All branch office operations (the "Branch
Operations") identified on Section 2.01(a) of the Disclosure Schedule attached
hereto as Exhibit A and by this reference made a part hereof, including, but
limited to, the Loan Officer Agreements, Loan Officer Agreements Employment
Agreements, and other agreements, documents, contracts, arrangements and
instruments relating to each Branch Operation which are listed on Section
2.01(a) of the Disclosure Schedule (collectively, the "Branch Agreements"), true
and correct copies of which have been provided to Buyer; and
(b) Tangible Personal Property. All customer lists, data bases, books,
records, displays, computer software, brochures and all other tangible personal
property owned, used or maintained by the Company which relate to or are
necessary to monitor, supervise, manage, maintain or assist the Branch
Operations identified on Section 2.01(b) of the Disclosure Schedule attached
hereto as Exhibit A (collectively the "Tangible Personal Property");
(c) Intangible Personal Property. All Intellectual Property, licenses,
permits, data bases, telephone numbers, business plans, records, marketing
plans, mailing lists, and publications used by the Company in connection with
the Branch Operations and all goodwill associated with such Intellectual
Property (collectively, the "Intangible Property");
(d) Transport Logic, Inc.. All of the Company's ownership of issued and
outstanding shares (the "TLI Shares") of capital stock of Transport Logic, Inc.,
a Nevada corporation ("TLI").
IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THE PROPERTY SHALL NOT INCLUDE
ANY CASH OR CASH EQUIVALENTS AND THAT BUYER SHALL ASSUME NO LIABILITIES OF THE
COMPANY.
Section 2.02. Purchase Price. Buyer shall pay the Company, as consideration
for the purchase of the Property, 760,000 shares of Lahaina Common Stock (the
"Payment Shares").
Section 2.03. Closing.
(a) The closing (the "Closing") of the transactions contemplated by this
Agreement shall occur upon the satisfaction or waiver of the conditions
precedent set forth in Article V of this Agreement on a date which is mutually
agreed to by the parties, but in no event later than March 31, 2000 (the
"Closing Date"). The Closing shall occur in the office of Buyer's counsel in
Atlanta, Georgia, or such other place as shall be agreed to by the parties. It
is expressly understood by the parties that the Closing shall be effective for
accounting purposes as of the Effective Date.
(b) At the Closing, the Company, the Principal Shareholders and the Buyer,
as applicable, shall execute, acknowledge and/or deliver or cause to be
delivered the following:
(i) A general Xxxx of Sale, duly executed and acknowledged, in a form
reasonably acceptable to Buyer and the Company, transferring to Buyer the
Tangible Personal Property free and clear of all Security Interests;
(ii) An Assignment Agreement, in a form reasonably acceptable to Buyer
and the Company, duly executed and acknowledged, assigning to Buyer the
Branch Agreements and the Intangible Property;
(iii) Employment Agreements (the "Employment Agreements"), duly
executed and acknowledged, in a form reasonably acceptable to Buyer and
each Principal Shareholder, as contemplated by Section 7.01 of this
Agreement;
(iv) A copy of a resolution duly adopted by the Board of Directors of
the Company, certified by its secretary, authorizing the execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein;
(v) A copy of a resolution duly adopted by the shareholders of the
Company, certified by the Company's secretary, authorizing the consummation
of the transaction contemplated herein;
(vi) The opinion of counsel to the Seller substantially in the form
set forth in Exhibit B;
(vii) Duly executed and authenticated certificates evidencing the
Payment Shares; provided, however, that (A) 400,000 of the Payment Shares
(the "Escrowed Shares") shall be deposited with the Escrow Agent and held
and distributed in accordance with the terms and conditions of an Escrow
Agreement substantially in the form attached hereto as Exhibit C, and as
more fully described in Article VIII hereof and (B) 150,000 of the Payment
Shares shall be deposited with the Escrow Agent to be held in order to
satisfy outstanding claims against the Company by Regions Bank pursuant to
an escrow agreement to be entered into by and between Seller, Regions Bank
and the Escrow Agent;
(viii) Any and all other instruments reasonably required or requested
by Buyer in connection with the Closing. (Seller shall use its best efforts
to obtain and deliver to Buyer any and all instruments and documents
reasonably required or requested by Buyer from any third party in
connection with this transaction and reasonably determined by Buyer to be
reasonably necessary for the consummation of this transaction, including,
but not limited, the consents necessary to transfer and assign the Branch
Agreements to Buyer);
(ix) The Escrow Agreement substantially in the form attached hereto as
Exhibit C;
(x) Duly executed and authenticated certificates representing the
Escrowed Shares (which will be delivered to the Escrow Agent at the
Closing);
(xi) A management agreement by and between Buyer and Seller whereby
Buyer shall manage the business operations of Seller until Buyer receives
the necessary regulatory approvals to conduct the Branch Operations; and
(xii) Certificates representing the TLI Shares, duly endorsed for
transfer to Buyer or Buyer's designee or accompanied with duly executed
blank stock powers for transfer.
ARTICLE III
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations, warranties and covenants contained in this Article III
are being made to induce Buyer to enter into this Agreement and Lahaina to issue
the Payment Shares and the transactions contemplated herein, and Buyer and
Lahaina have relied, and will continue to rely, upon such representations,
warranties and covenants. The representations, warranties and covenants
contained in this Article III will be true, correct and complete as of the
Closing Date and shall survive the Closing and the delivery and/or recording of
any document contemplated by this Agreement. Seller's liabilities under this
Article shall be governed and limited by the provisions of Section 3.07 hereof.
Seller represents, warrants and covenants to Buyer and Lahaina, and their
successors and assigns, as of the date of Closing, as follows:
Section 3.01. Sole Owner. Except as set forth in the Disclosure Schedule,
the Company is the absolute and sole owner of the Property, free and clear of
all Security Interests, and there are no agreements, covenants, conditions,
limitations or other exceptions affecting the Property which would prevent,
prohibit, delay or interfere with Buyer's intended use of the Property. At the
Closing, Seller will convey the Property to Buyer free and clear of all liens,
encumbrances and Security Interests.
Section 3.02. Corporate Existence. The Company is a the corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Florida. The Company has all requisite corporate power and authority to carry
on the business in which it is engaged and to own and use the properties owned
and used by it. True and correct copies of the Company's Articles of
Incorporation and Bylaws, in each case as amended to date, have been delivered
to Buyer. The Company is qualified to conduct business and is in good standing
under the laws of each jurisdiction wherein the nature of its business or its
ownership of property requires it to be so qualified, except where the failure
to be so qualified, would not individually or in the aggregate, have a Material
Adverse Effect. Section 3.02 of the Disclosure Schedule lists all jurisdictions
in which the Company is qualified to do business.
Section 3.03. Power and Authority. The Company has the corporate power and
authority to enter into and perform this Agreement and all other documents
contemplated by this Agreement and has taken all corporate action required to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated on its part herein. No consent or approval of any
person, entity or governmental authority or agency is required to, of or for the
execution and entering into of this Agreement or for the sale and conveyance of
the
Property, except as have been obtained. The names of all shareholders of the
Company are set forth in Section 3.03 of the Disclosure Schedule.
Section 3.04. Noncontravention. Except as set forth in Section 3.04 of the
Disclosure Schedule, the execution and delivery of this Agreement by the Company
and the Principal Shareholders and the consummation by the Company and the
Principal Shareholders of the transactions contemplated herein do not or will
not violate or result, with the giving of notice or the lapse of time or both,
in a material violation of any provision of (a) any existing law or regulation
or any order, award or decree of any court, arbitrator or governmental authority
by which they, or any of them, are or is bound, (b) any mortgage, indenture,
security agreement, contract, agreement or other undertaking to which they, or
any of them, are or is a party or by which they, or any of them, are or is bound
or (c) the Company's Articles of Incorporation or Bylaws. The Company is not
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government, governmental agency or
court, or any other Person in order for the parties to consummate the
transactions contemplated by this Agreement or in order that such transactions
not constitute a breach or violation of, or result in a right of termination or
acceleration or any encumbrance on any of the Company's assets pursuant to the
provisions of, any agreement, arrangement or understanding or any license,
franchise or permit.
Section 3.05. No Subsidiaries. The Company does not own or control any
direct or indirect equity interest or participation in any corporation,
partnership, limited liability company, trust, or other business association or
Subsidiary, other than its interest in Transport Logic, Inc.
Section 3.06. Financial Statements, Books and Records.
(a) The Company has provided Buyer with the following financial
statements, correct and complete copies of which are set forth in Section
3.06(a) of the Disclosure Schedule (collectively the "Financial
Statements"): audited balance sheet and related statements of income,
changes in shareholders' equity and cash flows for the Company as of and
for the fiscal years ended December 31, 1998 and 1997, and an unaudited
balance sheet and related statements of income, changes in shareholders'
equity and cash flow for the Company for the six months ended June 30,
1999. The Financial Statements are correct and complete and have been
prepared in accordance with GAAP, consistently applied throughout the
periods indicated (except, in the case of the Latest Balance Sheet and
related financial statements for the period then ended, for the absence of
footnotes and nominal year-end adjustments, none of which will be
material), and fairly present the financial condition and results of
operations of the Company as of the times and for the periods referred to
therein.
(b) The Company's books and records are and have been properly
prepared and maintained in form and substance adequate for preparing
audited financial statements in accordance with GAAP, and fairly and
accurately reflect all of the assets and Liabilities of the Company and all
contracts and transactions to which the Company is or was a party or by
which the Company or any of its business or assets is or was affected. The
corporate minute books of the Company, correct and complete copies of which
have been made available to Buyer, correctly reflect all resolutions
adopted and all other
material corporate actions taken at all meetings or through consents of the
directors (including committees thereof). The stock transfer books and
stock ledger of the Company are complete and correctly reflect all
issuances and transfers of the capital stock of the Company.
Section 3.07. No Liabilities Assumed. IT IS EXPRESSLY UNDERSTOOD AND AGREED
BY ALL PARTIES THAT BUYER SHALL NOT ASSUME OR BECOME LIABLE FOR ANY LIABILITY OF
THE COMPANY OR THE PRINCIPAL SHAREHOLDERS OF ANY NATURE WHATSOEVER, WHETHER
KNOWN OR UNKNOWN, ABSOLUTE, CONTINGENT OR OTHERWISE, AND WHETHER ARISING OR
ACCRUING ON, BEFORE OR SUBSEQUENT TO THE CLOSING DATE, INCLUDING, BUT NOT
LIMITED TO, THE FOLLOWING:
(a) debts and accrued Liabilities of the Company;
(b) Liabilities or obligations associated with any employee benefit
plan;
(c) payments due or to become due or any Liabilities or obligations to
any officer, director, employee or agent of the Company;
(d) payroll expenses, payroll taxes, ad valorem taxes, income taxes,
use taxes, property (real or personal) taxes, excise taxes and other Taxes,
owed by the Company to any taxing authority related to any period;
(e) accounts payable;
(f) Liabilities arising out of the Company's ownership, possession,
license, lease, operation or use of any assets, properties, rights or
businesses of the Company, including the Property;
(g) Liabilities related to any litigation matter or enforcement
proceeding;
(h) Liabilities relating to any "warehouse" line of credit of the
Company; and/or
(i) Liabilities relating to the Branch Operations.
Section 3.08. Recent Events. Since the Most Recent Fiscal Year End, the
Company has not experienced or suffered any Material Adverse Effect. Without
limiting the generality of the foregoing, except as set forth on the Latest
Balance Sheet, since the Most Recent Fiscal Year End, the Company has not:
(a) sold, leased, transferred or assigned any of its assets, tangible
or intangible, other than in the Ordinary Course of Business;
(b) accelerated, terminated, modified, canceled or committed any
breach of any contract, lease, sublease, license, or sublicense (or series
of related contracts, leases,
subleases, licenses, and sublicenses) either involving more than $10,000 or
otherwise outside of the Ordinary Course of Business;
(c) canceled, compromised, waived, or released any right or claim (or
series of related rights and claims) either involving more than $10,000 or
outside of the Ordinary Course of Business;
(d) experienced any damage, destruction, or loss to its property in
excess of $10,000 (whether or not covered by insurance);
(e) created or suffered to exist any Security Interest upon any of its
assets, tangible or intangible, outside the Ordinary Course of Business or
securing any Liabilities in the aggregate in excess of $10,000;
(f) issued, sold, or otherwise disposed of any of its capital stock,
or granted any options, warrants, or other rights to purchase or obtain
(including upon conversion or exercise) any of its capital stock, or any
securities convertible or exchangeable into any of its capital stock;
(g) declared, set aside, or paid any dividend or distribution with
respect to its capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock;
(h) entered into any transaction, arrangement or contract with, or
distributed or transferred any property or other assets to, any officer,
director, Shareholder or other insider or Affiliate of the Company (other
than salaries and employee benefits in the Ordinary Course of Business);
(i) made or committed to make any capital expenditures or entered into
any other material transaction outside the Ordinary Course of Business
involving an expenditure in excess of $10,000;
(j) amended or modified in any respect any Plan (beyond any amendments
and modifications reflected in true and complete copies of such Plans
delivered to Buyer);
(k) entered into any employment agreement or collective bargaining
agreement or granted any increase in the salary of any officer or employee
of the Company or paid or committed to pay any bonus to any officer or
employee;
(l) changed the manner in which the business has been conducted,
including, without limitation, billing of clients or collection of accounts
receivable, purchases of goods and services or payment of accounts payable;
(m) changed the accounting principles, methods or practices or any
change in the depreciation or amortization policies or rates;
(n) changed the relationships with any client, contractor or supplier
which might reasonably be expected to result in a Material Adverse Effect;
or
(o) committed (orally or in writing) to any of the foregoing.
Section 3.09. Tax Matters.
(a) The Company has filed all Tax Returns that it was required to file
on or prior to the Closing Date. All such Tax Returns were correct and
complete in all material respects and accurately reflected all Liability
for Taxes for the periods covered thereby. The Company's Liability for
unpaid Taxes, whether to any governmental authority or to another Person
such as under a tax sharing agreement, for all periods ending on or before
the Effective Date do not exceed the amount of the Liability accruals for
Taxes (excluding reserves for deferred Tax assets or deferred Tax
Liabilities) on the Most Recent Fiscal Year End Balance Sheet. Neither the
Company nor any Principal Shareholder has received notice of any claim made
by an authority in a jurisdiction where the Company does not file Tax
Returns that the Company is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to
pay any Tax when due.
(b) The Company has withheld and paid when due all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party.
(c) Neither the Company nor any Principal Shareholder has any
Knowledge of any Basis on which any taxing authority could assess any
additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax Liability of the Company
either (i) claimed or raised by any taxing authority in writing or (ii) as
to which any Shareholder or the Company has Knowledge. The Company has
previously provided to Buyer correct copies of all Federal, state, local,
and foreign Tax Returns filed with respect to the Company for all taxable
periods for which the applicable statue of limitations has not closed. None
of such Tax Returns have been audited, and none currently is the subject of
audit, and there are no examination reports or statements of deficiencies
assessed against or agreed to by the Company for such taxable periods.
(d) The Company has disclosed on its Federal income tax returns all
positions taken therein that could give rise to a substantial
understatement of Federal income tax within the meaning of Section 6662 of
the Code. The Company has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations. The Company has not made any
material payments, is not obligated to make any material payments, and is
not a party to any agreement that would obligate it to make any material
payments that will not be deductible under Section 280G of the Code. The
Company has not been a United States Real Property Holding Corporation
within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(A)(ii) of the Code. The Company is not a
party to any tax allocation or sharing agreement. The Company never has
been a member of an Affiliated Group
which filed federal income tax returns, other than a group of which the
Company was the common parent. The Company has no Liability for Taxes owed
by any Person (other than the Company), including without limitation, (A)
as a transferee, assignee or other successor or (B) pursuant to a Tax
sharing agreement or other contract.
(e) The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
Section 3.10. Title and Condition of Properties.
(a) Tangible Personal Property. The Company owns good and marketable
title, free and clear of all Security Interests, liens, claims, charges,
options or other title defects or encumbrances, to the Tangible Personal
Property, and the Tangible Personal Property is in good workmanlike
condition and repair, except for ordinary wear and tear not caused by
neglect, and is useable in the Ordinary Course of Business.
(b) Intellectual Property. The Company owns all right, title and
interest in and to the Intellectual Property, free and clear of all
Security Interests, liens, claims, charges, options or other encumbrances.
To the knowledge of Seller, none of the rights of the Company in and to the
Intellectual Property are being challenged or infringed, no current
licenses for the use of any such rights have been granted to any third
parties, and none of such rights is being used by any person other than the
Company.
Section 3.11. Environmental Liability.
(a) None of the assets of the Company (defined for purposes of this
subsection (a) as the Tangible Personal Property owned or leased by the
Company) contain any hazardous materials or hazardous substances, as such
terms are defined or used in the Comprehensive Environmental Response,
Compensation and Recovery Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, and all other federal,
state and local laws, ordinances, rules, regulations, orders or
determinations of any governmental authority now or hereafter pertaining to
health or the environment, including, without limitation, petroleum
products, friable asbestos and PCBs ("Hazardous Materials"), other than in
such quantities which are incidental and customary for the maintenance and
operation of such assets (e.g., cleaning fluids);
(b) No notice or other communication has been made or issued by any
governmental agency having jurisdiction over the Company's assets, or any
other person, with respect to any alleged violation of any federal, state
or local laws, rules, regulations, ordinances and codes governing Hazardous
Materials and which are applicable to the Company's assets; and
(c) All Hazardous Materials which have been remediated from any assets
of the Company prior to or during the Company's ownership of such assets
have been handled in compliance with all applicable laws.
Section 3.12. Contracts. The Company is not a party to any of the following
contracts, agreements, or other written arrangements:
(a) any written arrangement (or group of related written arrangements)
for the lease of personal property from or to third parties with annual
payments exceeding $10,000 or with a term exceeding one year;
(b) any written arrangement concerning a partnership or joint venture;
(c) any written arrangement (or group of related written arrangements)
under which the Company has (i) created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) Indebtedness in excess of
$10,000 or (ii) imposed (or may impose) a Security Interest on any of its
assets, tangible or intangible;
(d) any written arrangement concerning confidentiality or any written
arrangement concerning non-competition;
(e) any written arrangement not disclosed in the Disclosure Schedule
pursuant to any other provision in this Section 3.12 under which the
consequences of a default or termination could have a Material Adverse
Effect on the Company;
(f) any contract with any labor union or contract for the employment
of any officer, individual employee or other Person on a full-time,
part-time or consulting basis, and any contract for the engagement of any
consultants or independent contractors;
(g) any guaranty of any obligation for borrowed money or otherwise,
other than endorsements made for collection in the Ordinary Course of
Business, or any agreement or commitment with respect to the lending or
investing of funds to or in other Persons;
(h) any contract or group of related contracts with the same party (or
group of related parties) for or relating to the purchase or sale of
products or services, either (i) which is not terminable by the Company on
sixty (60) days or less notice or (ii) under which the undelivered balance
of products and services has a selling price in excess of $10,000;
(i) any other contract or group of related contracts with the same
party either (i) requiring payments after the date hereof to or by the
Company of more than $10,000 or (ii) not terminable by the Company on sixty
(60) days or less notice;
(j) any agreement with any employee, the benefits of which are
contingent or the terms of which are materially altered upon the occurrence
of a transaction of the nature contemplated by this Agreement involving the
Company;
(k) any agreement or plan the benefits of which will be increased or
accelerated by the occurrence of the transactions contemplated by this
Agreement; and
(l) any other written arrangement or group of related written
arrangements not entered into in the Ordinary Course of Business or the
breach, default or termination of which would have a Material Adverse
Effect.
The Company has delivered or otherwise made available to Buyer a correct
and complete copy of each written arrangement (including all amendments thereto)
listed in Section 3.12 of the Disclosure Schedule. With respect to each written
arrangement so listed: (i) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect; (ii) the written arrangement will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms immediately after the Effective Time, (iii) neither
the Company (nor, to the Knowledge of the Company and the Principal
Shareholders, any other party) is in material breach or default (including, with
respect to any express or implied warranty), and no event has occurred which
with notice or lapse of time or both would constitute a material breach or
default or permit termination, modification, or acceleration, under the written
arrangement, except for any breaches, defaults, terminations, modifications or
accelerations which have been cured or waived; and (iv) no party has repudiated
any provision of any such written arrangement. The Company is not a party to any
verbal contract, agreement, or other arrangement which, if reduced to written
form, would be required to be listed in the Disclosure Schedule under the terms
of this Section 3.12. Correct and complete copies of the general forms of client
engagement and services used by the Company have been delivered to Buyer. Except
for those Contracts set forth on Section 3.12 of the Disclosure Schedule (the
"Fixed Rate Engagements"), the Company is not a party to any fixed fee or capped
price contracts or engagement arrangements, nor does the Company have any
outstanding offers, bids or proposals to perform any services on a fixed fee or
capped basis. Section 3.12 of the Disclosure Schedule identifies each Fixed Rate
Engagement and sets forth the number of hours remaining to complete the work
required thereunder and the amount of fees uncollected with respect thereto.
Section 3.12 of the Disclosure Schedule also sets forth the full amount, to the
Knowledge of the Company and the Shareholders, of client payments to the Company
through the date hereof with respect to services not yet performed by the
Company.
Section 3.13. Employees, Employment Matters.
(a) The Company is not a party to or bound by any collective
bargaining agreement, and the Company has not experienced any strikes,
grievances, other collective bargaining disputes or, to the Knowledge of
the Principal Shareholders or the Company, claims of unfair labor
practices. Neither the Company nor the Principal Shareholders have any
Knowledge of any organizational effort presently being made or threatened
by or on behalf of any labor union with respect to employees of the
Company.
(b) Section 3.13 of the Disclosure Schedule contains a true, correct
and complete list setting forth the names and current salaries or rates of
compensation of all employees of the Company and independent contractors
who render services to the Company on more than a single occasion. Except
as disclosed on Section 3.13 of the Disclosure Schedule, the Company has no
unsatisfied Liability to any previously terminated employee or independent
contractor. The Company has disclosed all written (and summarized all oral)
employee handbooks, policies, programs and arrangements to Buyer.
(c) All Persons employed by the Company are employees at will or
otherwise employed such that the Company may lawfully terminate their
employment at any time, with or without cause, without creating any
material cause of action against the Company
or otherwise giving rise to any material Liability of the Company for
wrongful discharge, breach of contract or tort. None of the employees of
the Company are subject to noncompete/nonsolicitation covenants in favor of
the Company. The Company has not breached, and is not in default under any
agreements with any current employee, including without limitation, any
employee engaged in Branch Operations.
(d) The Company has materially complied with all applicable laws
relating to labor, including, without limitation, any provisions thereof
relating to wages, termination pay, vacation pay, fringe benefits,
collective bargaining and the payment and/or accrual of the same and all
Taxes, insurance and all other costs and expenses applicable thereto, and
the Company is not liable for any arrearage, or any Taxes, costs or
penalties for failure to comply with any of the foregoing. Without limiting
the generality of the foregoing, the Company has not incurred a violation
of Part 6 of Subtitle B of Title I of ERISA ("COBRA") or other applicable
state insurance continuation law. No material COBRA or other state
insurance continuation law violation exists or will exist with respect to
any employees of the Company prior to and including the Effective Time, nor
will any such violation occur as a result of the transactions contemplated
hereby. As of the Effective Time, the Company will not be, nor has the
Company ever been, an enterprise subject to the Workers Adjustment
Retraining and Notification Act ("WARN") and the Company will not incur,
nor will the company ever have incurred, material Liabilities, penalties or
other charges under WARN.
(e) Each Person whom the Company currently retains as a consultant or
previously retained as a consultant qualifies, or at all times while
performing services for the Company qualified, as an independent contractor
and not as an employee of the Company, under the Code and all applicable
state laws. Neither the execution of this Agreement nor the consummation of
the transactions contemplated hereby shall cause the Company to be in
breach of any agreement with any employee, contractor or consultant or
cause the Company to be liable to pay any severance or other amount to any
employee, contractor or consultant of the Company.
Section 3.14. Employee Benefit Plans.
(a) All employee benefit plans ("Plans") are listed and briefly
described in Section 3.14 of the Disclosure Schedule. Each Plan is in
compliance with its terms and with ERISA and other applicable laws
(including, without limitation, compliance with the health care
continuation requirements of COBRA and any proposed regulations promulgated
thereunder), and all agreements and instruments applicable to any Plan.
Section 3.14(a) of the Disclosure Schedule sets forth each former employee
of the Company entitled to COBRA benefits and the remaining period of such
benefit. The Company and each applicable ERISA Affiliate of the Company
have received favorable determination letters as to the qualification under
the code of each pension plan, as defined in Section 3(2) of ERISA
("Pension Plan"), and there have been no amendments of other developments
since the date of such determination letters which would cause the loss of
such qualified status. No material violation of ERISA has at any time
occurred in connection with the administration of any of the Plans, and
there are no actions, suits, or claims (other than routine, non-contested
claims for benefits) pending or threatened
against the Plans, or any administrator of fiduciary thereof, which
would result in any Liability.
(b) With respect to all present Plans, the Company and all ERISA
Affiliates of the Company have heretofore delivered to Buyer true and
complete copies of each of the following (including descriptions of
vacation, severance pay, sickness, and separation policies):
(i) the most recent Internal Revenue Service determination letter
request relating to each of the Pension Plans, if any;
(ii) the summary plan description (as currently in effect) and
any summary of material modification for each of the Plans, if any;
(iii) the most recent Annual Report (Form 5500 Series), and
accompanying schedules, filed for each of the Plans, if any, and the
most recent summary annual report furnished for each of the Plans;
(iv) the most recent actuarial valuations, if applicable, and
latest financial statements for each of the Plans; and
(v) all documents filed with the Internal Revenue Service,
Department of Labor or Pension Benefit Guaranty Corporation since
January 1, 1997, if any.
(vi) Each Plan is maintained by the Company or any ERISA
Affiliate of the Company under a plan document which does not provide
for other participating employers except for the Company or any ERISA
Affiliate of the Company and no Plan provides or has provided credit
with respect to service other than with the Company or any ERISA
Affiliate of the Company.
(vii) Neither the Company nor any ERISA Affiliate of the Company
nor any of their employees, shareholders, or directors have engaged in
any transaction in connection with which any of them would be subject
either to a civil penalty assessed pursuant to Section 502 of ERISA or
a tax imposed by Section 4975 of the Code. The execution and
performance of this Agreement will not involve any prohibited
transaction within the meaning of Section 406 of ERISA.
(viii) None of the assets of any of the Plans is or has been
invested in any property constituting employer real property or any
employer security within the meaning of Section 407(d) of ERISA.
(ix) No Pension Plan or trust created under any such Pension Plan
has, since September 2, 1974, been terminated in whole or in part.
Additionally, there is no reasonable Basis for the Company or any
ERISA Affiliate of the Company to anticipate material Liability to the
Pension Benefit Guaranty Corporation with respect to a Pension Plan
and there has been no reportable event (within the meaning of Section
4043(c) of ERISA), or any event requiring disclosure under Section
4063(a) or 4041(c) of ERISA with respect to such a Pension Plan since
September 2, 1974. There has been no event or condition which presents
a material risk of termination of any Pension Plan by the Pension
Benefit Guaranty Corporation, and no circumstances exist that
constitute grounds under Section 4042 of ERISA entitling the Pension
Benefit Guaranty Corporation to institute any such proceeding.
(x) Full payment as of the Effective Time will have been made of
all amounts which the Company and any ERISA Affiliate of the Company
are required, under the terms of all Plans, to have paid as
contributions to such Plans as of the last day of the most recent
fiscal year prior to the Effective Time. Further, no accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412
of the Code), whether or not waived, exists with respect to any Plan,
nor has there been any lien imposed under Section 412(n) of the Code.
(xi) The execution and performance of this Agreement will not
constitute a stated triggering event under any Plan or employment
agreement that will result in any payment (whether of severance pay or
otherwise) becoming due to any employee of the Company or ERISA
Affiliate of the Company.
(xii) Neither the Company nor any ERISA Affiliate of the Company
provides, nor have they at any time provided, coverage under any
welfare plan (a "Welfare Plan"(as defined in Section 3(l) of ERISA)
(including, but not limited to, life insurance, disability, medical,
dental, prescription drugs, or accidental death or dismemberment) to
any of their retirees, other than any continuation or conversion
coverage which any such retiree may have purchased at his own expense,
or a defined benefit plan (as defined in Section 3(35) of ERISA).
(xiii) The financial statements of each Pension Plan as of the
end of the most recent plan year, and the list of the investments of
such Pension Plan as of the most recent plan year end, accurately
reflect the financial conditions of the Pension Plans, and there have
been no material changes in such investments between such date and the
Effective Time.
(xiv) There have been no statements, either written or oral, or
communications made or materials provided to any employee or former
employee of the Company or any ERISA Affiliate of the Company by any
person that provide for or could be construed as a contract or promise
by the Company or any ERISA Affiliate of the Company to provide for
any pension, welfare, or other insurance-type benefits to such
employee or former employee, whether before or after retirement, other
than benefits under the Plans.
(xv) Neither the Company nor any ERISA Affiliate of the Company
currently contributes, or at any time in the past has contributed to a
defined benefit plan (as defined in Section 3(35) of ERISA). With
respect to each multiemployer plan, as defined in Section 3(37) of
ERISA, to which the Company or any ERISA Affiliate of the Company
contributes, neither the Company nor any ERISA Affiliate of the
Company is delinquent in making any contribution
required to be paid to any multiemployer plan or would be liable to
any multiemployer plan for any withdrawal liability imposed by Title
IV of ERISA or the Plan itself.
Section 3.15. Licenses, Permits and Approvals. Section 3.15 of the
Disclosure Schedule lists all governmental and regulatory licenses, permits and
approvals necessary to the conduct of the Company's business. All such licenses,
permits and approvals are in full force and effect and all such filings,
applications and registrations are current. There are no violations by the
Company of, or any claims or proceedings, pending or, to the Knowledge of the
Principal Shareholders or the Company, threatened, challenging the validity of,
or seeking to discontinue, any such licenses, permits or approvals. The Company
holds a currently valid lender license in the State of Florida and has currently
valid agency approvals from the Federal Housing Authority, the Department of
Housing and Urban Development and the Veterans' Administration.
Section 3.16. Unlawful Payments. No payments of either cash or other
consideration have been made to any Person by the Company or the Principal
Shareholders or, to the Knowledge of the Principal Shareholders or the Company,
on behalf of the Company by any agent, employee, officer, director, shareholders
or other Person, that were unlawful under the laws of the United States or any
state or any other foreign or municipal government authority having appropriate
jurisdiction over the Company.
Section 3.17. Insurance.
(a) Section 3.17 of the Disclosure Schedule lists and describes each
insurance policy (including policies providing property, casualty,
Liability, and workers' compensation coverage and bond and surety
arrangements) relating, directly or indirectly, to the Branch Operations to
which the Company is or within the past three (3) years has been a party, a
named insured, or otherwise the beneficiary of coverage at any time: (i)
the name, address, and telephone number of the agent; (ii) the name of the
insurer, the name of the policyholder, and the name of each covered
insured; (iii) the policy number and the period of coverage; and (iv) the
scope (including an indication of whether the coverage was on a claims
made, occurrence, or other basis) and amount of coverage (including a
description of how deductibles and ceilings are calculated and operate).
(b) With respect to each such insurance policy: (i) the policy is
legal, valid, binding, enforceable, and in full force and effect; (ii) the
policy will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms immediately following the consummation
of the transactions contemplated hereby; (iii) neither the Company nor, to
the Knowledge of the Company or the Shareholders, any other party to the
policy, is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with
notice or the lapse of time, or both, would constitute such a breach or
default, or permit termination, modification, or acceleration, under the
policy; and (iv) no party to the policy has repudiated any provision
thereof.
Section 3.18. Brokers' Fees. Neither the Company nor any Principal
Shareholder has any Liability or obligation to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement for which Buyer or Buyer Subsidiary could become liable or
otherwise obligated.
Section 3.19. Enforceability. This Agreement and all other agreements to be
executed in connection with this Agreement are valid and binding and enforceable
upon and against Seller in accordance with their respective terms.
Section 3.20. Claims and Proceedings. There are no claims, complaints,
proceedings, demands, liabilities, suits or actions against Seller or the
Property, domestic or foreign (including, without limitation, proceedings by any
public or quasi-public authority, employees of the Company or insurance carriers
and pending or to Seller's Knowledge threatened foreclosure procedures or other
actions by any mortgage or lienholder), before any court or by any governmental,
administrative or regulatory agency or authority, or otherwise, and Seller has
received no notice, inquiry or demand which could lead to such a claim, demand,
liability on litigation.
Section 3.21. Bankruptcy or Insolvency Proceedings. There are no
attachments, executions, assignments for the benefit of creditors or voluntary
or involuntary proceedings in bankruptcy pending or to Seller's Knowledge
threatened against the Company or the Property.
Section 3.22. No Knowledge or Notice. There is no fact or condition
presently existing with respect to the Property which violates any applicable
law, rule, regulation, ordinance, judgment, order or decree of any governmental
instrumentality or court, domestic or foreign, and neither the Company nor and
Principal Shareholders have received any notice, written or otherwise, from any
governmental instrumentality or court requiring the correction of any condition
with respect to the Property which might be in violation of any applicable law,
rule, regulation, ordinance, judgment, order or decree of any governmental
instrumentality or court, domestic or foreign.
Section 3.23. Debts, Liabilities and Obligations. All debts, Liabilities
and obligations of the Company arising from the Property, including, but not
limited to, Taxes, accounts payable, bills or claims in connection with the
Property, have been paid as they became due and will continue to be so paid, and
all such debts, Liabilities and obligations accrued as of the date of the
Closing have been or will be satisfied by the Company.
Section 3.24. No Other Agreements. Seller has no existing contract or
agreement, written or oral, with any party other than Buyer for the sale,
transfer or other conveyance of the Property or portion thereof or of any
interest in or right to acquire the Property or a portion thereof, and Seller
shall not negotiate with, grant rights to or enter into any contract or
agreement, written or oral, with anyone other than Buyer for the sale, transfer
or conveyance of the Property or any portion thereof, unless this Agreement is
terminated.
Section 3.25. Compliance With Laws. All licenses, permits and approvals
necessary to own and operate the Property are in full force and effect and there
are no violations thereof or of
any federal, state or local laws or regulations which have or may have a
material adverse effect upon the ownership or operation of the Property.
Section 3.26. No Agreements with Management. Neither the Company nor any
other person or entity has contracts, agreements, arrangements or
understandings, whether in writing or tacit, with any officer, director,
employee or agent of the Company relating to this Agreement or Buyer's purchase
of certain assets of the Company pursuant to this Agreement.
Section 3.27. Name, Trade Name and Service Marks. The Company shall have
the right as of the Closing Date to use, free and clear of any royalty or other
payment obligations, claims of infringement or alleged infringement or other
liens, the Company's corporate name, trade names, including but not limited to
"Paradigm Mortgage Company" and the domain name, "xxx.xxXxxxxxxx.xxx," and
service marks together with any stylized logos incorporating those names or
marks (collectively, the "Marks") and the Company is not in conflict with or
violation or infringement of, nor is there any such conflict with or violation
or infringement of, any asserted rights of any other person with respect to any
of the Marks in any material respect.
Section 3.28. Claims by Branch Operations. Except as set forth in Section
3.28 of the Disclosure Schedule, to the knowledge of the Company and the
Principal Shareholders, there are no claims or causes of action or any basis for
a threatened cause of action by any of the Branch Agreements against the Company
in connection with the Branch Agreements or otherwise.
Section 3.29. Loan Matters.
(a) All loans originated by the Company since January 1, 1996
("Loans") and each commitment to extend credit has been solicited and
originated and is administered and serviced in all material respects in
accordance with the relevant loan documents, the Company's underwriting
standards and in material compliance with all applicable requirements of
federal, state and local laws, regulations and rules.
(b) None of the agreements pursuant to which the Company has sold
Loans or pools of Loans or participation interests in Loans or pools of
Loans contain any obligation to repurchase such Loans or interests therein
solely on account of a payment default by the obligor on any such Loans
(other than an early payment default). Except as disclosed in Section 3.29
of the Disclosure Schedule, the Company is not in default under any such
agreement or has received any notice alleging default.
(c) All brokers and other third parties who originate or have
originated Loans since January 1, 1996 have all required licenses and
approvals from all jurisdictions requiring licenses and approvals and to
the best knowledge of the Company, have complied and are not in violation
of any applicable law, regulation, order, rule, policy or guideline of any
governmental entity.
(d) The Company has no outstanding agreements, arrangements or
commitments to securitize Loans.
(e) Since January 1, 1996, the practices of the Company with respect
to compensation paid to mortgage brokers comply with the policy statement
issued by Department of Housing and Urban Development ("HUD") in March
1999.
Section 3.30. Disclosure. Neither this Agreement nor the Disclosure
Schedule contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading. There is no material
fact which has not been disclosed to Buyer which results in, or could reasonably
be anticipated to result in, a Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY BUYER
Section 4.01. Organization. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Georgia.
Section 4.02. Power and Authority. Buyer has the corporate power and
authority to enter into and perform this Agreement and all other documents
contemplated by this Agreement and has taken all corporate action required to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated on its part hereby. No consent or approval of any
person, entity or governmental authority or agency is required to, of or for the
execution and entering into of this Agreement or for the purchase of the
Property except as have been obtained.
Section 4.03. Noncontravention. The execution and delivery of this
Agreement by Buyer and the consummation by Buyer of the transactions as
contemplated on its part hereby do not or will not violate or result, with the
giving of notice or the lapse of time or both, in a material violation of any
provision of (a) any existing law or regulation or any order, award or decree of
any court, arbitrator or governmental authority by which Buyer is bound, (b) any
mortgage, indenture, security agreement, contract, agreement or other
undertaking to which Buyer is a party or by which it is bound or (c) Buyer's
Articles of Incorporated or Bylaws.
Section 4.04. No Broker. All negotiations relative to this Agreement and
the transactions contemplated herein have been carried on by Buyer directly with
Seller and without the intervention of any person or entity in such manner as to
give rise to any valid claim against any of the parties hereto for a brokerage
commission, finder's fee or other like payments.
Section 4.05. Bankruptcy or Insolvency Proceedings. There are no
attachments, executions, assignments for the benefit of creditors or voluntary
or involuntary proceedings pending or threatened against Buyer.
Section 4.06. Enforceability. This Agreement and all other agreements to be
executed in connection with this Agreement are valid and binding and enforceable
upon and against Buyer in accordance with their respective terms.
Section 4.07. Payment Shares. All actions necessary to authorize and
approve the issuance of the Payment Shares, and as of the Closing, the Payment
Shares will, when issued, be
duly authorized, validly issued, fully paid and nonassessable. There are no
statutory or contractual shareholders' preemptive rights or rights of refusal
with respect to the issuance of the Payment Shares upon Closing.
Section 4.08. Disclosure. None of the representations or warranties
contained herein omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, as of the Effective Date.
ARTICLE V
CONDITIONS PRECEDENT
The Closing shall not occur unless the following conditions precedent have
been satisfied or waived in writing by Buyer:
(a) All covenants, warranties and representations of Seller set forth
herein shall be true, complete and correct.
(b) Seller shall not be in default under this Agreement.
(c) Subsequent to the Effective Date through the Closing Date there
shall be no material adverse change in the Property.
(d) Seller, as a result of the pending sale of the Property to Buyer,
shall have complied with all applicable provisions of the Uniform
Commercial Code, and Seller's creditors shall not have a claim as of or
subsequent to Closing against the Property. Seller shall have provided to
Buyer evidence reasonably satisfactory to Buyer that any and all
obligations against the Property have been satisfied including such lien
waivers as may be reasonably required by Buyer.
(e) Seller shall have provided Buyer with evidence satisfactory to
Buyer of Seller's discharge of any federal, state and local taxes accruing
prior to Closing with respect to the Property and The Company's business,
including, without limitation, all sales, use and employment withholding
taxes, and all notices required to be delivered to the taxing authorities
of the State of Florida as a result of the transaction contemplated by this
Agreement shall have been timely delivered.
(f) Seller shall have satisfied the requirements of Article VI herein;
(g) All required governmental approvals of the sale of the Property
shall have been received;
(h) Buyer receives all necessary regulatory approvals to conduct the
Branch Operations;
(i) All covenants, warranties and representations of Buyer set forth
herein shall be true, complete and correct;
(j) Buyer shall not be in default under this Agreement;
(k) No action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any Federal,
state, local or foreign jurisdiction, to which any of the Parties is a
party which would prevent or inhibit the consummation of the transaction
contemplated hereby or seek to impose any liability on any Party as a
result of the consummation of the Acquisition, and all necessary regulatory
approvals shall have been obtained;
(l) Buyer, the Escrow Agent and the Company shall have entered into
the Escrow Agreement, and, as of the Closing Date, all deposits required
under the Escrow Agreement shall have been made, and the Escrow Agreement
shall be in full force and effect;
(m) The Company shall have procured all of the consents, if any,
identified in the Disclosure Schedule; and
(n) Those certain individuals and entities specified on Exhibit D
hereto shall be granted options to purchase, in the aggregate, 350,000
shares of Buyer Common Stock, such options to provide an exercise price of
$3.00 per share, to vest ratably over thirty-six (36) months of employment
by Buyer following the Closing Date and to be exercisable for a period of
five (5) years following the Closing Date.
ARTICLE VI
CONDUCT OF SELLER PRIOR TO CLOSING
Section 6.01. Full Access.
(a) Prior to Closing, Buyer and its authorized representatives shall
have full access to all properties, books, records, contracts and documents
of the Company, and the Company shall furnish to Buyer and its authorized
representatives all information with respect to the affairs of the Company
as Buyer and its authorized representatives may request.
(b) Simultaneously with or prior to the execution of this Agreement,
The Company shall deliver to Buyer true, correct and complete copies of the
following documents and records:
(i) Copies of all contracts and agreements affecting the
Property; and
(ii) All other books, records, statements, agreements, documents
and information pertaining to the operation of the Company and the
ownership and use of the Property which Buyer may reasonably request.
Section 6.02. Carry on in Regular Course. Seller covenants and agrees that,
prior to the Closing, unless the consent of Buyer or its authorized
representative to a specific deviation shall be first obtained, Seller will:
(a) Not do any act or omit to do any act which will cause or permit a
breach of any material contract, commitment or obligation to which it is a
Party;
(b) Not enter into any contract or commitment involving an obligation
or commitment not in the usual and ordinary course of business and
consistent with past practices of The Company;
(c) Not sell or dispose of any of its assets;
(d) Not amend its Articles of Incorporation or Bylaws except to permit
the closing of the transaction contemplated by this Agreement;
(e) Keep in force all insurance policies presently in effect;
(f) Disclose to Buyer all material accounts and Branch Operations of
the Company which Seller knows have been lost or discontinued subsequent to
the Effective Date;.
(g) Use its best efforts (without making any commitments on behalf of
Buyer) to preserve its business organization intact, and to preserve its
present relationships with its customers and others having business
relations with them; and
(h) Duly comply in all material respects with all applicable laws,
local, state or federal, domestic or foreign, pertaining to the operation
of its businesses.
ARTICLE VII
EMPLOYMENT AGREEMENT
AND NONCOMPETITION AGREEMENTS
Section 7.01. Employment Agreements. At Closing, Buyer and C.W. Xxxxxx
Xxxxxxx and Xxxx X. Xxxxxx, Xx. shall execute and deliver the employment
agreements.
Section 7.02. Noncompetition Agreements. The Company and the Principal
Shareholders shall, in accordance with Article IX hereof, agree not to compete
with Buyer.
ARTICLE VIII
HOLDBACK ESCROW
Section 8.01. Establishment of Holdback Escrow. The Parties hereby agree
that 400,000 of the Payment Shares (the "Escrowed Shares") shall be delivered to
Xxxxx Xxxx LLP (the "Escrow Agent") and held and released by the Escrow Agent in
accordance with the Escrow Agreement. Two Hundred and Fifty Thousand (250,000)
of the Escrowed Shares (the "Indemnity/Performance Escrowed Shares") shall be
segregated for use to pay indemnity claims and performance guarantees, as
described in paragraphs (a) and (b) of this Section 8.01. One Hundred and Fifty
Thousand (150,000) of the Escrowed Shares (the "Transition Costs Escrowed
Shares") shall be segregated for use to pay Transition Costs (defined in Section
9.07 hereof), as
set forth in paragraph (c) of this Section 8.01. It is agreed that all of the
Indemnity/Performance Escrowed Shares shall be held in escrow for a period of
one (1) year from the Closing Date, and 150,000 of such Indemnity Performance
Escrowed Shares shall be held in escrow for a period of two (2) years following
the Closing Date. The Transition Costs Escrowed Shares shall be held in escrow
in accordance with paragraph (c) of this Section 8.01.
(a) Indemnification Claims. In the event the Company and/or the
Principal Shareholders are required to indemnify Buyer for any indemnity
obligation arising under Section 9.04 hereof, such indemnity obligation
may, in the discretion of Buyer and/or Buyer Subsidiary, as the case may
be, be satisfied, from the Escrowed Shares. For purposes of this Section
8.01(a), the value of Escrowed Shares used to satisfy an indemnity
obligation shall be equal to the Current Market Price, such Current Market
Price to be determined as of the date Buyer gives written notice to the
Escrow Agent pursuant to the Escrow Agreement of an indemnity claim.
(b) Performance Guarantee. The Company covenants that the Branch
Operations purchased by Buyer pursuant to this Agreement will maintain a
combined minimum monthly volume of mortgage loan originations in the amount
of $19,000,000 (the "Minimum Volume") for a period of eighteen (18)
consecutive calendar months following the Closing Date. For each month the
Minimum Volume is not reached, the Escrow Agent shall deliver to Buyer or
Buyer's designee, in Buyer's discretion, 25,000 of the
Indemnity/Performance Escrowed Shares. Buyer shall have the right, in its
sole discretion, to waive or reduce the terms of the preceding sentence.
(c) Transition Costs. To the extent the Company fails to make a
payment of Transition Costs, when due pursuant to Section 9.07 hereof, the
Escrow Agent shall release to Buyer or liquidate, upon Buyer's request,
that number of the Transition Costs Escrowed Shares with an aggregate value
sufficient to cover the claim for non-payment in accordance with the Escrow
Agreement. For purposes of this Section 8.01(c), the value of Escrowed
Shares used to pay Transition Costs to or for Buyer, as the case may be,
shall be equal to the Current Market Price, such Current Market Price to be
determined as of the date of Buyer's written notice pursuant to the Escrow
Agreement of a claim for Transition Costs.
ARTICLE IX
ADDITIONAL AGREEMENTS
Section 9.01. Post-Acquisition Covenants. The Parties agree as follows with
respect to the period following the Effective Time.
(a) General. In case at any time after the Effective Date any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any
other party reasonably may request, at the sole cost and expense of the
requesting party (unless the requesting party is entitled to
indemnification with respect to such matter under Section 9.04).
(b) Transfer of Payment Shares.
(i) The Company hereby acknowledges and agrees that the Payment
Shares may not be transferred except pursuant to (a) a registered
offering under the Securities Act, (b) Rule 144 of the Securities and
Exchange Commission (or any similar rule or rules then in force) if
available, or (c) subject to the conditions specified in subparagraph
(ii) below, any other legally available means of transfer.
(ii) In connection with the transfer of any Payment Shares (other
than a transfer pursuant to a registered public offering), the holder
thereof shall deliver written notice to Buyer describing in reasonable
detail the transfer or proposed transfer, together with an opinion of
securities counsel (with such opinion and such counsel being
satisfactory to Buyer ) to the effect that such transfer of Payment
Shares may be effected without registration of such Payment Shares
under the Securities Act or any applicable state securities law. In
addition, if the holder of Payment Shares delivers to Buyer such an
opinion that concludes that no subsequent transfer of such Payment
Shares will require registration under the Securities Act or any
applicable state securities law, Buyer shall promptly upon such
contemplated transfer cause its transfer agent to deliver new
certificates for such Payment Shares which do not bear the restrictive
legend set forth in this Section 9.01(b). If Buyer is not required to
deliver new certificates for such Payment Shares not bearing such
legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to Buyer in writing its agreement
to be bound by the conditions contained in this Section.
(c) Cooperation with Buyer. Prior to, at and subsequent to the
Closing, the Company shall cooperate with Buyer in connection with the
administrative, legal and management functions previously provided by the
Company with respect the assets purchased by Buyer hereunder.
Section 9.02. Non-Competition.
(a) In consideration of the benefits to be received by Seller in
connection with this transaction agrees that for a period ending on the
second anniversary of the Closing Date, the Company and the Principal
Shareholders will not, directly or indirectly, alone or in association with
others, either as a principal agent, director, indirect owner, shareholder,
partner, joint venturer or member, officer, director, employee, lender,
investor, consultant, manager or in any other capacity:
(i) contact or solicit, or direct any person, firm, corporation,
association or other entity to contact or solicit, any Clients (as
defined below) for the purpose of providing or attempting to provide,
any services and/or products that are the same as or similar to the
services or products and provided by Buyer to its Clients during the
Restricted Period;
(ii) solicit or accept if offered, with or without solicitation,
on Seller's own behalf or on behalf of any other Person, the services
of any Person who is an
employee of Buyer or its Affiliates, nor solicit any of Buyer or its
Affiliate's employees to terminate employment with Buyer or its
Affiliates, nor agree to hire any employee of Buyer or its Affiliates
into employment with Seller or any company, individual or other
entity;
(iii) take an action that is designed or intended or has the
effect of discouraging any Client of Buyer or its Affiliates from
initiating a relationship or maintaining its business relationship
with the Buyer or its Affiliates; or
(iv) allow Seller's name to be used by or participate (as defined
below) in any Restricted Activity (as defined below).
(b) For purposes of this Agreement, (A) the term "participate" means
to have any direct or indirect interest, participation, association or
involvement, whether as an officer, director, employee, partner, sole
proprietor, agent, representative, independent contractor, consultant,
franchiser, franchisee, owner, shareholder, member or otherwise; provided
that Participate does not include ownership of less than 2% of the
outstanding stock of any publicly traded entity so long as such Principal
Shareholder does not have any active participation in the business or
management of such entity; (B) the term "Restricted Activity" means any (i)
engagement or association with or for mortgage brokerage practice, (ii)
engagement or association with a Client, or (iii) engagement or association
with an enterprise, venture or proprietorship engaged in the provision of
mortgage brokerage services and (C) "Clients" means (i) any Person for whom
the Buyer or its Affiliates has provided or currently provides mortgage
brokerage services and (ii) any Person to whom the Buyer or its Affiliates
has offered in writing to provide services, mortgage brokerage or with whom
the Buyer or its Affiliates has had discussions followed or accompanied by
written materials or other correspondence regarding the provision of
mortgage brokerage services, at any time during the Restricted Period.
(c) The Parties hereto agree that the Buyer would suffer irreparable
harm from a breach of any of the covenants or agreements contained in this
Section 9.02. In the event of an alleged or threatened breach by the
Company and/or Principal Shareholders of any of the provisions of this
Section 9.02, the Buyer or its successors or assigns may, in addition to
all other rights and remedies existing in its favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions
hereof (including the extension of the Restricted Period with respect to
the Company and/or the Principal Shareholders in breach by a period equal
to the length of the violation of this Section 9.02) and the Restricted
Period described above will be tolled with respect to the Seller until such
alleged breach or violation is resolved. The Company and the Principal
Shareholders agree that the restrictions in this Section 9.02 are
reasonable protections under the circumstances of the Acquisition.
(d) If, at the time of enforcement of any of the provisions of this
Section 9.02, a court holds that the restrictions stated herein are
unreasonable under the circumstances then existing, the Company and the
Principal Shareholders agree that the maximum
period, scope or geographical area reasonable under such circumstances will
be substituted for the stated period, scope or area.
(e) The Company and the Principal Shareholders agree that the
covenants made in this Section 9.02 shall be construed as an agreement
independent of any provision of this Agreement and shall survive any order
of a court of competent jurisdiction terminating any other provision of
this Agreement.
Section 9.03. Waiver and Release. Seller, on behalf of Seller and Seller's
heirs, executors, administrators, successors and assigns (the "Releasing
Parties"), irrevocably and unconditionally waives and releases any and all
rights with respect to, and releases, forever acquits and discharges each and
all of Buyer, Buyer's, directors, officers, employees, agents and other
representatives, and their respective heirs, executors, administrators,
successors and assigns ("Released Parties") from, each and all claims, demands,
charges, complaints, obligations, causes of action, suits, liabilities,
indebtedness, sums of money, covenants, agreements, instruments, contracts
(written or oral, express or implied), controversies, promises, fees, expenses
(including attorneys' fees, costs and expenses), damages and judgments, at law
or in equity, in contract or tort, in federal, state or other judicial,
administrative, arbitration or other proceedings, of any nature whatsoever,
known or unknown, suspected or unsuspected, previously, now or hereafter
arising, in each case which arise out of, are based upon or are connected with
facts or events occurring or in existence on or prior to the date of the Closing
("Released Claims"). Each Principal Shareholder further represents and warrants
that he has not assigned or otherwise transferred any right or interest in or to
any of the Released Claims. This Section 9.03 shall not apply to claims against
Buyer for indemnification pursuant to Section 9.04(b)(ii) herein, to the extent
applicable.
Section 9.04. Indemnification.
(a) Survival. All of the representations and warranties of Seller
contained in Article III hereof (the "Seller Representations"), shall
survive the consummation of this transaction (regardless of any Knowledge
or investigation of Buyer and shall continue in full force and effect for a
period of two years (the "Survival Period"). All of the representations and
warranties of Buyer contained in Article IV (the "Buyer Representations")
shall survive the consummation of this transaction (regardless of any
Knowledge or investigation of the Shareholder or the Company) and shall
continue in full force and effect until the expiration of the Survival
Period.
(b) Indemnification by the Parties.
(i) Subject to Section 9.04(c), Seller shall indemnify, defend
and hold Buyer, its directors, officers, employees and agents
(collectively, the "Acquiring Parties") harmless, from and against the
entirety of any Adverse Consequences any of the Acquiring Parties may
suffer, sustain or become subject to, through and after the date of
the claim for indemnification, including any Adverse Consequences any
of the Acquiring Parties may suffer after the end of any applicable
Survival Period, resulting from, arising out of, relating to, in the
nature of, or caused by: (A) any breach or inaccuracy of any
representation or warranty
of the Seller in this Agreement or in the schedules or certificates
delivered by them in connection herewith, (B) any nonfulfillment or
breach of any covenant or agreement on the part of the Seller set
forth in this Agreement, or (C) the costs and expense of defending any
action, demand or claim by any third-party against or affecting any of
the Acquiring Parties which, if true or successful, would give rise to
a breach of any of the representations, warranties or covenants of the
Seller. All Adverse Consequences for which the Acquiring Parties are
entitled to seek indemnification under this Agreement are referred to
herein as "Buyer Indemnifiable Losses."
(ii) Buyer shall indemnify, defend and hold Seller harmless, from
and against the entirety of any Adverse Consequences Seller may
suffer, sustain or become subject to, through and after the date of
the claim for indemnification, including any Adverse Consequences
Seller may suffer after the end of any applicable Survival Period,
resulting from, arising out of, relating to, in the nature of, or
caused by: (i) any breach or inaccuracy of any representation or
warranty of Buyer in this Agreement or in the schedules or
certificates delivered by them in connection herewith, and (ii) any
nonfulfillment or breach of any covenant or agreement on the part of
Buyer set forth in this Agreement. All Adverse Consequences for which
Seller is entitled to seek indemnification under this Agreement are
referred to herein as "Seller Indemnifiable Losses."
(c) Certain Limits On and Provisions Relating to Seller's
Indemnification. The obligation of the Sellers to indemnify the Acquiring
Parties under Section 9.04(b)(i) of this Agreement shall be subject to the
following:
(i) the aggregate liability of Seller hereunder with respect to
all Buyer Indemnifiable Losses shall not exceed the aggregate
consideration received by Seller hereunder;
(ii) the Seller will not have any obligation to indemnify the
Acquiring Parties from and against any Buyer Indemnifiable Losses
Indemnifiable under Section 9.04(b)(i) until the Acquiring Parties
have suffered such aggregate Buyer Indemnifiable Losses in excess of
$5,000 (at which point the Seller will be obligated to indemnify the
Acquiring Parties from and against all such Buyer Indemnifiable Losses
relating back to the first dollar); and
(iii) the Seller will not have any obligation to indemnify the
Acquiring Parties from and against any Buyer Indemnifiable Losses
arising out of the breach of any of the Seller Representations, unless
the Acquiring Parties make a written claim within the Survival Period
with respect to the breach which gives rise to such Buyer
Indemnifiable Losses.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim
by such Indemnified Party for indemnification against any other Party
(the "Indemnifying Party") under this Agreement, then the Indemnified
Party shall notify each Indemnifying Party thereof promptly; provided,
however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party
from any liability or obligation hereunder unless (and then solely to
the extent that) the Indemnifying Party is damaged thereby.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of the
Indemnifying Party's choice, reasonably satisfactory to the
Indemnified Party, so long as (A) the Indemnifying Party notifies the
Indemnified Party, within fifteen (15) business days after the
Indemnified Party has given notice of the Third Party Claim to the
Indemnifying Party (or by such earlier date as may be necessary under
applicable procedural rules in order to file a timely appearance and
response) that the Indemnifying Party is assuming the defense of such
Third Party Claim and will indemnify the Indemnified Party against
such Third Party Claim in accordance with the terms and limitations of
this Section 9.04, (B) the Indemnifying Party provides the Indemnified
Party with reasonable evidence that the Indemnifying Party will have
the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder with respect
thereto, and (C) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
(iii) So long as the conditions set forth in Section 9.04(d)(ii)
are and remain satisfied, then (A) the Indemnifying Party may conduct
the defense of the Third-Party Claim in accordance with Section
9.04(d)(ii), (B) the Indemnified Party may retain separate co-counsel
at its sole cost and expense (except that the Indemnifying Party will
be responsible for the fees and expenses of the separate co-counsel to
the extent the Indemnified Party reasonably concludes that the counsel
the Indemnifying Party has selected has an actual or potential
conflict of interest), (C) the Indemnified Party will not consent to
the entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be unreasonably withheld, conditioned or
delayed), (D) the Indemnifying Party will not consent to the entry of
any judgment with respect to the matter, or enter into any settlement
which either imposes an injunction or other equitable relief upon the
Indemnified Party or does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, and (E) the Indemnified Party
shall, at the Indemnifying Party's reasonable request and at the
Indemnifying Party's expense, cooperate in the defense of the matter.
In the event that the conditions in Section 9.04(d)(ii) are not or
become unsatisfied in the case of any Third Party Claim, then the
Indemnified Party may assume control of the defense of such claim.
Section 9.05. Dispute Resolution Regarding Indemnification. In the event
that any dispute should arise among the Parties with respect to any claims under
Section 9.04, the Parties
shall first use their best efforts to resolve such dispute among themselves. If
the Parties are unable to resolve the dispute within thirty (30) calendar days
after the commencement of efforts to resolve the dispute, the dispute will be
submitted to arbitration in accordance with Subsection 9.06 hereof.
Section 9.06. Arbitration.
(a) Either Buyer or Seller may submit any dispute hereunder to binding
arbitration by notifying the other Party hereto, in writing, of such
dispute and submission.
(b) Either Party requesting arbitration shall serve a written demand
for arbitration on the other Party in the manner specified in Section
9.06(f). The demand shall set forth a statement of the nature of the
dispute, the amount involved and the remedies sought. Each party shall have
the right to be represented by counsel and shall have the right to full
documentary discovery.
(c) Except as specifically provided herein, the arbitration shall be
conducted by and in accordance with the commercial rules of American
Arbitration Association, and the arbitrator's ruling shall be in accordance
with law and the terms of this Agreement. The arbitrator shall not have the
power to amend this Agreement in any respect.
(d) No later than twenty (20) calendar days after a demand for
arbitration is served, the Parties shall jointly select and appoint a
single, disinterested individual to act as the arbitrator. In the event
that the Parties do not agree on the selection of an arbitrator, the
American Arbitration Association shall within thirty (30) more days select
an arbitrator from its panel, from a short list of 5 to 10 names, as to
which each party shall have two preemptory challenges. The panel proposed
and the arbitrator chosen shall in any case possess experience relevant to
disputes relating to consulting and other personal services businesses and
the acquisitions of private businesses. Any arbitrator designated hereunder
shall not now or in the three years preceding such arbitration be an
employee, consultant, officer, director or shareholder of any Party hereto
or any Affiliate of any Party to this Agreement or have now or in the three
years preceding such arbitration any business relationship with any Party
hereto or any Affiliate of any Party hereto.
(e) No later than ten (10) calendar days after the arbitrator is
appointed, the arbitrator shall schedule the arbitration for a hearing to
commence on a mutually convenient date. The hearing shall commence no later
than thirty (30) calendar days after the arbitrator is appointed and shall
continue from day to day until completed.
(f) The arbitrator shall use his or her best efforts to rule on each
disputed issue within 30 days after the completion of the hearings
described in paragraph (d) above. The determination of the arbitrator as to
the resolution of any dispute shall be binding and conclusive upon all
Parties; provided, that the arbitrator may not award any punitive damages.
All rulings of the arbitrator shall be in writing, shall set forth the
basis for the decision and shall be delivered to the Parties.
(g) The prevailing Party in any arbitration shall be entitled to an
award of reasonable attorneys' fees incurred in connection with the
arbitration and the disputed issues with respect thereto. The
non-prevailing Party shall pay such fees, together with the fees of the
arbitrator and the costs and expenses of the arbitration. For purposes
hereof, a Party seeking payment of any amount in arbitration shall be
deemed to be the prevailing Party if it is determined that such party is
entitled to receive at least 51% of the payment initially claimed by it to
be due to such Party in such arbitration, and the other Party from which
such payment is sought shall be deemed to be the "prevailing party" if the
other Party is not so deemed to be the prevailing Party.
(h) Any arbitration pursuant to this Subsection 9.06 shall be
conducted in the Forsyth County, Georgia. Any arbitration award may be
entered in and enforced by any court having jurisdiction thereof and the
Parties hereby consent and commit themselves to the jurisdiction of the
courts of the State of Georgia and the United States District Court for the
Northern District of Georgia, Atlanta Division, for purposes of the
enforcement of any arbitration award.
Section 9.07. Transition Costs. Seller hereby covenants and agrees to
reimburse or pay to Buyer an amount not to exceed $900,000, in the aggregate,
over a period of twelve (12) months following the Closing Date, for transition
costs associated with integrating, assimilating and consolidating the Property
and the related operations, all as determined in the sole discretion of Buyer
(collectively, the "Transition Costs"). Buyer shall submit Transition Costs to
Seller for payment, if not previously paid by Buyer, or for reimbursement, if
previously paid by Buyer. All such Transition Costs shall be paid by Seller
within thirty (30) days from receipt of written notice from Buyer.
Section 9.08. Most Recent Fiscal Year End Financial Statements. Within
thirty (30) days after the Closing Date, Seller shall deliver to Buyer an
unaudited balance sheet and related statements of income, changes in
shareholders' equity and cash flow for the Company as of and for the fiscal year
ending December 31, 1999, which statements shall fairly present the financial
condition and results of operations of the Company as of the time and for the
period referred to therein.
ARTICLE X
DEFAULT
If the transaction contemplated by this Agreement is not consummated by
reason of Buyer's breach or other failure to perform all obligations and
conditions to be performed by Buyer, Buyer shall reimburse Seller for Seller's
out-of-pocket expenses incurred in furtherance of this Agreement and Seller may,
as Seller's sole remedy, terminate this Agreement or enforce specific
performance of this Agreement. If the transaction contemplated by this Agreement
is not consummated by reason of Seller's breach or other failure to perform all
obligations and conditions to be performed by Seller, Seller shall reimburse
Buyer for Buyer's out-of-pocket expenses incurred in furtherance of this
Agreement and Buyer may, as Buyer's sole remedy, terminate this Agreement or
enforce specific performance of this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Possession. Buyer shall be entitled to full possession of
the Property at Closing.
Section 11.02. Prorations and Adjustments; Costs. Personal property taxes
on the Property for the year in which Closing occurs shall be pro rated as of
the date of Closing. Each party shall pay its own travel, legal, accounting and
other fees and expenses incurred in connection with the transactions
contemplated by this Agreement.
Section 11.03. Headings. All headings of sections of this Agreement are
inserted for convenience only and do not form part of this Agreement or limit,
expand or otherwise alter the meaning of any provisions hereof.
Section 11.04. Duplicate Executions. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which shall constitute one in the same agreement.
Section 11.05. Time of the Essence. Time shall be of the essence in
connection with the satisfaction of agreements and performance of obligations
under this Agreement.
Section 11.06. Construction. This Agreement shall be construed without
regard to any presumption or rule requiring construction against the party
causing such instrument to be drafted.
Section 11.07. Assignment or Delegation. No rights, obligations or duties
of Seller or Buyer hereunder may be assigned or delegated.
Section 11.08. Severability. Should any provision of this Agreement be
deemed unenforceable by a court of competent jurisdiction, the unenforceable
provision shall be considered severed from this Agreement and the remainder
shall remain in force.
Section 11.09. Entire Agreement. This instrument contains and constitutes
the entire agreement of the parties regarding the subject matter hereof, and
there are no other agreements, written or oral, between the parties affecting
the subject matter hereof.
Section 11.10. Notices. All notices or other communications to be given
hereunder shall be given in writing and delivered by (i) certified mail, return
receipt requested, (ii) personal delivery, (iii) facsimile or (iv) overnight
express carrier addressed as follows:
If to the Company Paradigm Mortgage Associates, Inc.
Principal Shareholders: 0000 Xxx Xxxxxxx Xxx
Xxxxxxxxxxxx, XX 00000
Attn: Mr. C. W. Xxxxxx Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to Buyer: The Accent Group, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 770-772-0562
With a copy to: Xxxxxx X. Xxxxxxxxx, Esq.
Xxxxx Xxxx LLP
Suite 2100
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 404-222-4654
or to such other address furnished by any party to the other in writing at any
time and from time to time for such notice purposes. Any notice served by either
party on the other shall be deemed effective the fifth business day following
deposit in the mail if sent by certified mail, return receipt requested, when
received, if delivered personally, upon machine confirmation if sent by
facsimile, or the next business day following deposit with an overnight express
carrier.
Section 11.11. Nonwaiver. No delay, forbearance or neglect by Buyer or
Seller in the enforcement of any of the conditions of this Agreement or any of
Seller's or Buyer's rights or remedies hereunder shall constitute or be
construed as a waiver thereof. No waiver of any of the conditions of this
Agreement by Seller or Buyer shall be effective unless expressly and
affirmatively made and given by Seller or Buyer, as the case may be, in writing.
Section 11.12. Schedules. Exhibits A through E attached hereto shall be
deemed a part hereof to the same extent as if fully set forth herein.
Section 11.13. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Georgia without giving
effect to its conflict of laws principles.
Section 11.14. Amendments. This Agreement may not be modified or amended,
except by an agreement in writing signed by the parties hereto. The parties may
waive any of the conditions contained herein or any of the obligations of the
other parties hereunder, but any such waiver shall be effective only if it is in
writing and signed by the party waiving such condition or obligation.
Section 11.15. Further Assurances. Each of the parties hereto agrees to
take such further action and to execute such further instruments as may be
reasonably required by any of the other parties in order to consummate the
transaction contemplated by this Agreement and to carry out the intentions
expressed in this Agreement.
Section 11.16. Confidentiality. As a material inducement to Seller and
Buyer entering into this Agreement, Seller and Buyer shall keep the Confidential
Information (as defined below) in strict confidence and shall not disclose such
Confidential Information other than (i) to (A) such of their respective
officers, directors, employees, attorneys, advisors, accountants and agents and
(B) government authorities to the extent necessary to comply with applicable
laws and regulations; (ii) in response to a subpoena or court order to disclose
such Confidential Information; or (iii) as agreed to in writing by Seller and
Buyer, provided that, before such Confidential Information is so disclosed, the
party subpoenaed or ordered to disclose such Confidential Information shall
first give the other parties to this Agreement notice of such subpoena or order
and such other parties shall have had an opportunity to intervene in the matter.
"Confidential Information" shall mean this Agreement, the terms and conditions
of this Agreement, the documents delivered in connection with this Agreement and
the transactions contemplated herein.
Section 11.17. Risk of Loss. Risk of loss until the Closing shall be borne
by Seller. In the event of material damage, loss or destruction to the Property
or any part thereof by fire or other casualty prior to Closing, Buyer shall, at
its option, elect one of the following:
(a) To terminate this Agreement; or
(b) To close the transactions contemplated hereby and take an
assignment of and receive in cash all insurance proceeds payable as a
result of such casualty or loss, and receive a credit against the Purchase
Price in the amount of any deductible applicable to such insurance
coverage, or to receive a credit against the Purchase Price in the amount
of such casualty proceeds, together with any deductible amount applicable
thereto. If Buyer elects to proceed under this Section 11.17, then Buyer
shall have the right to settle any claim with the applicable insurance
company.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date and year first above written.
PARADIGM MORTGAGE ASSOCIATES, INC.
By: /s/ C.W. Xxxxxx Xxxxxxx
----------------------------------
Name: C. W. Xxxxxx Xxxxxxx
Title: Chairman - CEO
PRINCIPAL SHAREHOLDERS
By: /s/ C.W. Xxxxxx Xxxxxxx
----------------------------------
C. W. Xxxxxx Xxxxxxx
By: /s/ Xxxx X. Xxxxxx, Xx.
----------------------------------
Xxxx X. Xxxxxx, Xx.
ACCENT ACQUISITIONS I, CO.
By: /s/ L. Xxxxx Xxxxxxx
----------------------------------
Name: L. Xxxxx Xxxxxxx
Title: President
EXHIBIT A
DISCLOSURE SCHEDULE
Copies available at the principal office of the Buyer.
EXHIBIT B
OPINION OF SELLER'S COUNSEL
Copies available at the principal office of the Buyer.
EXHIBIT C
ESCROW AGREEMENT
EXHIBIT D
STOCK OPTION AGREEMENTS
Name No. Options Proposed
Xxxx Xxxxxx 10,000
Xxxxx Xxxx 10,000
Xxxxxx Xxxxxxx 10,000
Xxxx Xxxxxxxxxxx 10,000
Xxxxx Xxxxxxx 10,000
Xxxxx Xxxxxx 7,500
Xxxxxx Xxxxxx 7,500
Xxxxxxxx Xxx 7,500
Xxxxxx Xxxxx 7,500
Xxxxxxx Xxxxxxxxx 4,000
Xxxxx Xxxxxxxx 4,000
Xxx Xxxxxx 4,000
Xxxx Xxxxxxxx 4,000
Xxxx Xxxxxx 4,000
Xxxx Xxxxxxxx 2,000
Xxxxxxx Xxxxxxxxxxx 2,000
Xxxxxx Xxxxxx 2,000
Ed Hru 2,000
Xxxx Xxxxx 2,000
Xxxxxxx Xxxxxx 2,000
Xxxxx Xxxxxxxxxx 2,000
Xxxx Xxxxxx 2,000
Xxxxxx Xxxxxxx 2,000
Xxxxxxx Blackenbecker 2,000
Corporate
Xxx Xxxxxxx 120,000
Xxxx Xxxxxx 30,000
Xxxxx Xxxxxx 15,000
Xxxx Xxxxxx 10,000
Xxx Xxxxxx 10,000
Xxxxxxx Xxxxxx 11,000
Xxxx Xxxxxxxx 8,500
Xxxx Xxxxxx 8,500
Xxxx Huep 8,500
Xxx Xxxxxx 8,500
