STOCK PURCHASE AGREEMENT
AMONG
NATIONAL INVESTMENT MANAGERS INC.
THE PENSION ALLIANCE, INC.
XXXXX X. XXXXXX
AND XXXXXXX X. XXXXXXXXX
Dated as of February 28, 2007
TABLE OF CONTENTS
Section Page
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ARTICLE I SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares .................................... 1
ARTICLE II PURCHASE PRICE AND PAYMENT
2.1 Amount of Purchase Price ....................................... 1
2.2 Payment of Purchase Price ...................................... 1
2.3 Net Working Capital Adjustment ................................. 1
2.4 Additional Consideration ....................................... 2
ARTICLE III CLOSING AND TERMINATION
3.1 Closing Date ................................................... 3
3.2 Termination of Agreement ....................................... 3
3.3 Procedure Upon Termination ..................................... 4
3.4 Effect of Termination .......................................... 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS
4.1 Organization and Good Standing ................................. 4
4.2 Authority ...................................................... 4
4.3 Shares ......................................................... 5
4.4 Basic Corporate Records ........................................ 5
4.5 Minute Books ................................................... 5
4.6 Subsidiaries and Affiliates .................................... 6
4.7 Consents ....................................................... 6
4.8 Financial Statements ........................................... 6
4.9 Records and Books Account ...................................... 7
4.10 Absence of Undisclosed Liabilities ............................. 7
4.11 Taxes .......................................................... 7
4.12 Account Receivable ............................................. 9
4.13 Inventory ...................................................... 9
4.14 Machinery and Equipment ........................................ 10
4.15 Title to Properties; Certain Real Property Matters ............. 10
4.16 Leases ......................................................... 11
4.17 Patents, Software, Trademarks, Etc. ............................ 12
4.18 Insurance Policies ............................................. 12
4.19 Banking and Personnel Lists .................................... 13
4.20 Lists of Contracts, Etc. ....................................... 13
4.21 Compliance With the Law ........................................ 15
4.22 Litigation, Pending Labor Disputes ............................. 15
4.23 Absence of Certain Changes or Events ........................... 16
4.24 Employee Benefit Plans ......................................... 17
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4.25 Product Warranties and Product Liabilities ..................... 18
4.26 Assets ......................................................... 18
4.27 Absence of Certain Commercial Practices ........................ 19
4.28 Licenses, Permits, Consents and Approvals ...................... 19
4.29 Environmental Matters .......................................... 19
4.30 Broker ......................................................... 21
4.31 Related Party Transactions ..................................... 21
4.32 Patriot Act .................................................... 21
4.33 Disclosure ..................................................... 22
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 Organization and Good Standing ................................. 22
5.2 Authority ...................................................... 22
5.3 Conflicts; Consents of Third Parties ........................... 22
5.4 Litigation ..................................................... 23
5.5 Investment Intention ........................................... 23
5.6 Broker ......................................................... 23
ARTICLE VI COVENANTS
6.1 Access to Information .......................................... 23
6.2 Conduct of the Business Pending the Closing .................... 24
6.3 Consents ....................................................... 26
6.4 Other Actions .................................................. 26
6.5 No Solicitation ................................................ 26
6.6 Preservation of Records ........................................ 27
6.7 Publicity ...................................................... 27
6.8 Use of Name .................................................... 27
6.9 Employment Agreements .......................................... 27
6.10 Board of Directors ............................................. 27
6.11 Financial Statements ........................................... 28
6.12 Tax Election ................................................... 28
6.13 Tax Matters .................................................... 28
ARTICLE VII CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of Purchaser ............... 30
7.2 Conditions Precedent to Obligations of the Sellers ............. 32
ARTICLE VIII DOCUMENTS TO BE DELIVERED
8.1 Documents to be Delivered by the Sellers ....................... 33
8.2 Documents to be Delivered by the Purchaser ..................... 33
ARTICLE IX INDEMNIFICATION
9.1 Indemnification ................................................ 33
9.2 Limitations on Indemnification for Breaches of
Representations and Warranties ................................. 34
9.3 Indemnification Procedures ..................................... 35
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9.4 Tax Treatment of Indemnity Payments ............................ 36
ARTICLE X MISCELLANEOUS
10.1 Payment of Sales, Use or Similar Taxes ......................... 36
10.2 Survival of Representations and Warranties ..................... 36
10.3 Expenses ....................................................... 36
10.4 Specific Performance ........................................... 36
10.5 Further Assurances ............................................. 37
10.6 Submission to Jurisdiction; Consent to Service of Process ...... 37
10.7 Table of Contents and Headings ................................. 37
10.8 Governing Law .................................................. 38
10.9 Table of Contents and Headings ................................. 38
10.10 Notices ........................................................ 38
10.11 Severability ................................................... 39
10.12 Binding Effect; Assignment ..................................... 39
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 28, 2007 (the
"Agreement"), among National Investment Managers Inc., a corporation organized
under the laws of Florida (the "Purchaser"), The Pension Alliance, Inc., a
corporation organized under the laws of the Commonwealth of Pennsylvania (the
"Company"), and Xxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxxxx ("Sellers").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Sellers own an aggregate of one thousand one hundred
(1,100) shares of common stock, One ($1.00) Dollar par value, of the Company
(the "Shares"), which Shares constitute all of the issued and outstanding shares
of capital stock of the Company; and
WHEREAS, the Sellers desires to sell to Purchaser, and the Purchaser
desires to purchase from the Sellers, the Shares for the purchase price and upon
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares.
Upon the terms and subject to the conditions contained herein, on
the Closing Date the Sellers shall sell, assign, transfer, convey and deliver to
the Purchaser, and the Purchaser shall purchase from the Sellers, all of the
Shares.
ARTICLE II
PURCHASE PRICE AND PAYMENT
2.1 Amount of Purchase Price.
(a) The purchase price for the Shares shall be an amount equal to
$4,600,000 (four million six hundred thousand US dollars) (the "Purchase Price")
consisting of (i) $3,250,000 (three million two hundred fifty thousand US
dollars) payable to the Sellers (the "Cash Purchase Price"), (ii) $337,500
(three hundred thirty seven thousand US dollars) evidenced by promissory notes
in the form of exhibit 2.1(ii) attached hereto, payable to the Sellers pro rata
based upon proportionate ownership of the Company (the "Initial Notes") and
(iii) $337,500 (three hundred thirty seven thousand US dollars) evidenced by
promissory notes in the form of exhibit 2.1(iii) attached hereto, payable to the
Sellers pro rata based upon proportionate ownership of the Company (the
"Additional Notes").
(b) The Sellers shall receive 1,088,710 shares (the "Purchase Price
Shares", and collectively with the Cash Purchase Price (the "Purchase Price") of
the Purchaser's common stock (the "Common Stock").
2.2 Payment of Purchase Price. On the Closing Date, the Purchaser
shall pay the Cash Purchase Price to the Sellers, which shall be paid by the
delivery to Sellers by wire transfer of immediately available funds into
accounts designated by the Sellers. On the Closing Date, the Purchaser shall
deliver the Initial Notes, the Additional Notes and the Purchase Price Shares to
the Sellers.
2.3 Adjustment to the Initial Notes, the Additional Notes and the
Purchase Price Shares.
(a) Within 30 days after the end of each of the first two twelve
month periods following the Closing Date, the Purchaser shall cause to be
prepared and delivered to Sellers a statement of operations of the Company for
such twelve month period, determined in accordance with generally accepted
accounting principles ("GAAP"). Such statement of operations shall include (i) a
separate calculation of the Company's annual earnings before interest, taxes,
depreciation and amortization ("Adjusted EBITDA"). Unless within 15 days of
delivery of such statement of operations by Purchaser to Seller, Purchaser shall
have received a written objection from Seller to such statement of operations,
then such draft shall be considered the final statement of operations of the
Company for such period (the "Final Statement of Operations"). If within 15 days
of delivery of the statement of operations by Purchaser to Seller, Purchaser
shall have received a written objection from Seller to such statement of
operations, then the Seller and Purchaser shall attempt to reconcile their
differences diligently and in good faith and any resolution by them shall be
final, binding and conclusive. If the Seller and the Purchaser are unable to
reach a resolution with such effect within 5 business days of the Purchaser's
receipt of the Seller's written notice of objection, the Seller and the
Purchaser shall submit such dispute for resolution to an independent accounting
firm mutually appointed by the Seller and the Purchaser (the "Independent
Accounting Firm"), which shall determine and report to the parties and such
report shall be final, binding and conclusive on the parties hereto. The fees
and disbursements of the Independent Accounting Firm shall initially be paid by
the Seller; provided, however, in the event that the Independent Accounting Firm
determines that the Seller's objection to the statement of operations are valid,
then the Purchaser shall pay the fee payable to the Independent Accounting Firm.
(b) If the Adjusted EBITDA of the Company for the first 12-month
period (the "Initial Period") following the Closing Date is less than $1,000,000
(the "Initial Period Target"), then the principal amount payable pursuant to the
Initial Notes shall be subject to reduction by the amount that the actual
Adjusted EBITDA for the Initial Period is less than the Initial Period Target
(the "Initial Shortfall"); provided, however, in the event that the Initial
Shortfall exceeds the amount payable pursuant to the Initial Notes, then the
Additional Notes and the Purchase Price Shares shall be subject to reduction
respectively. The amount of Purchase Price Shares to be cancelled shall be equal
to the amount of the Initial Shortfall less the amount applied towards the
Initial Notes and the Additional Notes divided by the price per share of the
Purchase Price Shares acquired by the Sellers (the "Initial Price Per Share").
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(c) If the Adjusted EBITDA of the Company for the second 12-month
period following the Closing Date (the "Secondary Period") is less than the
greater of $900,000 or the actual Adjusted EBITDA for the Initial Period (the
"Secondary Period Target"), then the principal amount payable pursuant to the
Additional Notes shall be subject to reduction by the amount that the actual
Adjusted EBITDA for the Secondary Period is less than the Secondary Period
Target (the "Secondary Shortfall"). In no event shall the Secondary Period
Target be greater than $1,050,000. Notwithstanding the foregoing, (i) there
shall be no reduction for the Secondary Shortfall if and to the extent that the
combined Adjusted EBITDA for the Initial Period and the Secondary Period equals
or exceeds $1,900,000, and (ii) if a payment under the Initial Notes is reduced
due to an Initial Shortfall, such reduced amount shall be added to the
Additional Notes if the combined Adjusted EBITDA for the Initial Period and the
Secondary Period equals or exceeds $1,900,000. In the event that the Secondary
Shortfall exceeds the amount payable pursuant to the Additional Notes, then the
Purchase Price Shares shall be subject to reduction. The amount of Purchase
Price Shares to be cancelled shall be equal to the amount of the Secondary
Shortfall less the amount applied towards the Additional Notes divided by the
Initial Price Per Share.
(d) There shall be no adjustment to the principal amounts payable
pursuant to the Initial Notes or the Additional Notes nor shall there be any
adjustment to the Purchase Price Shares in the event that Xxxxx X. Xxxxxx is
terminated without Cause as defined in section 5(A)(ii) of that certain
Employment Agreement by and between the Company and Xxxxx X. Xxxxxx dated
January 2, 2007.
(e) In the event that the Company's Adjusted EBITDA is greater than
$1,000,000 for the first 12-month period following the Closing Date (the "Excess
EBITDA"), then the Purchaser shall pay to the Sellers, within thirty (30) days
of such determination that there is an Excess EBITDA, an amount in cash, shares
of common stock of the Purchaser at the price of $0.62 per share and promissory
notes substantially in the form of the Additional Notes due April 28, 2009 in
the ratio that the Purchase Price is paid on the Closing Date equal to the
Excess EBITDA multiplied by five (5); provided, however, the aggregate amount of
all notes delivered pursuant to this Section 2.3(e) shall not exceed $750,000.
(f) In order to facilitate the cancellation of Purchase Price Shares
which may be effected as a result of an Initial Shortfall or a Secondary
Shortfall, the Purchase Price Shares shall be affixed with a stop transfer
legend until the Adjusted EBITDA for the Initial Period and the Secondary Period
is determined and accepted by all parties and the cancellation of Purchase Price
Shares in accordance with the terms of Section 2.3 hereof as a result of any
shortfall. If at the end of the Initial Period or the Secondary Period, there is
a Initial Shortfall or Secondary Shortfall (as applicable), the Sellers shall
return a portion of the Purchase Price Shares to the Purchaser as set forth in
this Section 2.3 to Purchaser for cancellation.
2.5 Stock Options. On the Closing Date, Xxxxx X. Xxxxxx shall be
granted an option to purchase 100,000 shares of the Purchaser's common stock
evidenced by stock option in the form of exhibit 2.4 attached hereto.
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ARTICLE III
CLOSING AND TERMINATION
3.1 Closing Date.
Subject to the satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereof (or the waiver thereof by the party entitled to waive that
condition), the closing of the sale and purchase of the Shares provided for in
Section 1.1 hereof (the "Closing") shall take place at the offices of Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP located at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 (or at such other place as the parties may designate in writing) on
such date as the Sellers and the Purchaser may designate. The date on which the
Closing shall be held is referred to in this Agreement as the "Closing Date".
3.2 Termination of Agreement.
This Agreement may be terminated prior to the Closing as
follows:
(a) At the election of the Sellers or the Purchaser on or after
March 31, 2007, if the Closing shall not have occurred by the close of business
on such date, provided that the terminating party is not in default of any of
its obligations hereunder;
(b) by mutual written consent of the Sellers and the Purchaser; or
(c) by the Sellers or the Purchaser if there shall be in effect a
final nonappealable order of a governmental body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; it being agreed that the parties hereto shall
promptly appeal any adverse determination which is not nonappealable (and pursue
such appeal with reasonable diligence).
3.3 Procedure Upon Termination.
In the event of termination and abandonment by the Purchaser
or the Sellers, or both, pursuant to Section 3.2 hereof, written notice thereof
shall forthwith be given to the other party or parties, and this Agreement shall
terminate, and the purchase of the Shares hereunder shall be abandoned, without
further action by the Purchaser or the Sellers. If this Agreement is terminated
as provided herein, each party shall redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same. The parties specifically ratify the covenants regarding
confidentiality and non-use of information set forth in the Letter of Intent of
the parties dated September 19, 2006, and agree that the obligations set forth
therein will survive any termination and abandonment of the transactions
contemplated by this Agreement.
3.4 Effect of Termination.
In the event that this Agreement is validly terminated as
provided herein, then each of the parties shall be relieved of their duties and
obligations arising under this Agreement after the date of such termination and
such termination shall be without liability to the Purchaser, the Company, the
Sellers or the Company; provided, however, that the obligations of the parties
set forth in Section 10.4 hereof shall survive any such termination and shall be
enforceable hereunder; provided, further, however, that nothing in this Section
3.4 shall relieve the Purchaser or the Sellers of any liability for a breach of
this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers and the Company hereby jointly and severally
represent and warrant to the Purchaser that:
4.1. Organization and Good Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation as set forth above. The Company is not
required to be qualified to transact business in any other jurisdiction where
the failure to so qualify would have an adverse effect on the business of the
Company.
4.2. Authority.
(a) The Company has full power and authority (corporate and
otherwise) to carry on its business and has all permits and licenses that are
necessary to the conduct of its business or to the ownership, lease or operation
of its properties and assets.
(b) The execution of this Agreement and the delivery hereof to
the Purchaser and the sale contemplated herein have been, or will be prior to
Closing, duly authorized by the Board of Directors of the Company, having full
power and authority to authorize such actions.
(c) Subject to any consents required under Section 4.7 below,
the Sellers and the Company have the full legal right, power and authority to
execute, deliver and carry out the terms and provisions of this Agreement; and
this Agreement has been duly and validly executed and delivered on behalf of
Sellers and the Company and constitutes a valid and binding obligation of the
Sellers and the Company, enforceable in accordance with its terms.
(d) Except as set forth in Section 4.2, neither the execution
and delivery of this Agreement, the consummation of the transactions herein
contemplated, nor compliance with the terms of this Agreement will violate,
conflict with, result in a breach of, or constitute a default under any statute,
regulation, indenture, mortgage, loan agreement, or other agreement or
instrument to which the Sellers or the Company is a party or by which it or any
of them is bound, any charter, regulation, or bylaw provision of the Company, or
any decree, order, or rule of any court or governmental authority or arbitrator
that is binding on the Sellers or the Company in any way.
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4.3. Shares.
(a) The authorized capital stock of the Company consist of
10,000 shares of common stock, par value $1.00 per share, of which 1,100 shares
have been issued to Sellers and constitute the only shares of capital stock
outstanding. All of the Shares are duly authorized, validly issued, fully paid
and non-assessable.
(b) The Sellers are the lawful record and beneficial owner of
all the Shares, free and clear of any liens, pledges, encumbrances, charges,
claims or restrictions of any kind, except as set forth in Section 4.3 or
Schedule 4.3, and have, or will have on the Closing Date, the absolute,
unilateral right, power, authority and capacity to enter into and perform this
Agreement without any other or further authorization, action or proceeding,
except as specified herein.
(c) There are no authorized or outstanding subscriptions,
options, warrants, calls, contracts, demands, commitments, convertible
securities or other agreements or arrangements of any character or nature
whatever under which the Company is or may become obligated to issue, assign or
transfer any shares of capital stock of the Company, except as set forth in
Section 4.3. Upon the delivery to Purchaser on the Closing Date of the
certificates representing the Shares, Purchaser will have good, legal, valid,
marketable and indefeasible title to all the then issued and outstanding shares
of capital stock of the Company, free and clear of any liens, pledges,
encumbrances, charges, agreements, options, claims or other arrangements or
restrictions of any kind.
4.4. Basic Corporate Records. The copies of the Articles of
Incorporation of the Company (certified by the Secretary of State or other
authorized official of the jurisdiction of incorporation), and the Bylaws of the
Company, as the case may be (certified as of the date of this Agreement as true,
correct and complete by the Company's secretary or assistant secretary), all of
which have been delivered to the Purchaser, are true, correct and complete as of
the date of this Agreement.
4.5. Minute Books. The minute books of the Company, which shall be
exhibited to the Purchaser between the date hereof and the Closing Date, contain
true, correct and complete minutes and records of all meetings, proceedings and
other actions of the shareholders, Board of Directors and committees of such
Board of Directors of the Company, if any, and, on the Closing Date, will
contain true, correct and complete minutes and records of any meetings,
proceedings and other actions of the shareholders, Board of Directors and
committees of such Board of Directors of the Company.
4.6. Subsidiaries and Affiliates. Any and all businesses, entities,
enterprises and organizations in which the Company has any ownership, voting or
profit and loss sharing percentage interest (the "Subsidiaries") are identified
in Schedule 4.6 hereto, together with the Company's interest therein. Unless the
context requires otherwise or specifically designated to the contrary on Section
4.6 hereto, "Company" as used in this Agreement shall include all such
Subsidiaries. Except as set forth in Section 4.6 or 4.31 or on Schedule 4.6, (i)
the Company has made no advances to, or investments in, nor owns beneficially or
of record, any securities of or other interest in, any business, entity,
enterprise or organization, (ii) there are no arrangements through which the
Company has acquired from, or provided to, the Sellers or their affiliates any
goods, properties or services, (iii) there are no rights, privileges or
advantages now enjoyed by the Company as a result of the ownership of the
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Company by the Sellers which, to the knowledge of the Sellers or the Company,
might be lost as a result of the consummation of the transactions contemplated
by this Agreement. Each entity shown on Schedule 4.6 is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has full power to own all of its property and to carry on its
business as it is now being conducted. Also set forth on Schedule 4.6 is a list
of jurisdictions in which each Subsidiary is qualified to do business. Such
jurisdictions are the only jurisdictions in which the ownership or leasing of
property by each Subsidiary or the conduct of its business requires it to be so
qualified. The ownership interest in each Subsidiary has been duly authorized
and validly issued, is fully paid and nonassessable, and, except as set forth on
Schedule 4.6, is owned, of record and beneficially, by the Company, and on the
Closing Date will be owned by the Company, free and clear of all liens,
encumbrances, equities, options or claims whatsoever. No Subsidiary has
outstanding any other equity securities or securities options, warrants or
rights of any kind that are convertible into equity securities of such
Subsidiary, except as set forth on Schedule 4.6.
4.7. Consents. Except as set forth in Schedule 4.7, no consents or
approvals of any public body or authority and no consents or waivers from other
parties to leases, licenses, franchises, permits, indentures, agreements or
other instruments are (i) required for the lawful consummation of the
transactions contemplated hereby, or (ii) necessary in order that the Business
can be conducted by the Purchaser in the same manner after the Closing as
heretofore conducted by the Company, nor will the consummation of the
transactions contemplated hereby result in creating, accelerating or increasing
any liability of the Company.
4.8. Financial Statements. The Sellers have delivered, or will
deliver prior to Closing, to the Purchaser copies of the following financial
statements (which include all notes and schedules attached thereto), all of
which are true, complete and correct, have been prepared from the books and
records of the Company in accordance with GAAP consistently applied and fairly
present the financial condition, assets, liabilities and results of operations
of the Company as of the dates thereof and for the periods covered thereby:
the unaudited balance sheet of the Company as at December 31, 2004
and 2005, and the related audited statements of operations,
stockholder's equity and of cash flows of the Company for the years
then ended and (ii) the unaudited balance sheet of the Company as of
September 30, 2006 and the related compiled statement of operations
of the Company for the nine (9) month period then ended (such
statements, including the related notes and schedules thereto, are
referred to herein as the "Financial Statements").
In such Financial Statements, the statements of operations do not
contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business except as set forth in Schedule 4.8,
and the financial statements for the interim periods indicated include all
adjustments, which consist of only normal recurring accruals, necessary for such
fair presentation. There are no facts known to any of the Sellers or the Company
that, under generally accepted accounting principles consistently applied, would
alter the information contained in the foregoing Financial Statements in any
material way.
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For the purposes hereof, the balance sheet of the Company as of
December 31, 2005 is referred to as the "Balance Sheet" and December 31, 2005 is
referred to as the "Balance Sheet Date".
4.9. Records and Books of Account. The records and books of account
of the Company and of each Subsidiary reflect all material items of income and
expense and all material assets, liabilities and accruals, and have been, and to
the Closing Date will be, regularly kept and maintained in conformity with GAAP
applied on a consistent basis.
4.10. Absence of Undisclosed Liabilities. Except as and to the
extent reflected or reserved against in the Company's Financial Statements or
disclosed in Schedule 4.10, there are no liabilities or obligations of the
Company of any kind whatsoever, whether accrued, fixed, absolute, contingent,
determined or determinable, and including without limitation (i) liabilities to
former, retired or active employees of the Company under any pension, health and
welfare benefit plan, vacation plan or other plan of the Company, (ii) tax
liabilities incurred in respect of or measured by income for any period prior to
the close of business on the Balance Sheet Date, or arising out of transactions
entered into, or any state of facts existing, on or prior to said date, and
(iii) contingent liabilities in the nature of an endorsement, guarantee,
indemnity or warranty, and there is no condition, situation or circumstance
existing or which has existed that could reasonably be expected to result in any
liability of the Company, other than liabilities and contingent liabilities
incurred in the ordinary course of business since the Balance Sheet Date
consistent with the Company's recent customary business practice, none of which
is materially adverse to the Company. As of the Closing date, the value of the
liabilities as disclosed in the Company's Financial Statements and Schedule
4.10, shall not exceed $567,130 which shall solely consist of trade payables and
normal accruals.
4.11 Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" refers
to: (i) any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities relating to
taxes, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes and escheatment payments, together with all interest, penalties and
additions imposed with respect to such amounts and any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity; (ii) any
liability for the payment of any amounts of the type described in clause (i) as
a result of being or ceasing to be a member of an affiliated, consolidated,
combined or unitary group for any period (including, without limitation, any
liability under Treas. Reg. Section 1.1502-6 or any comparable provision of
foreign, state or local law); and (iii) any liability for the payment of any
amounts of the type described in clause (i) or (ii) as a result of any express
or implied obligation to indemnify any other person or as a result of any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
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(b) (i) The Company has timely filed all federal, state, local
and foreign returns, estimates, information statements and reports ("Returns")
relating to Taxes required to be filed by the Company with any Tax authority.
All such Returns are true, correct and complete in all respects. The Company has
paid all Taxes shown to be due on such Returns. Except as listed on Schedule
4.11 hereto, the Company is not currently the beneficiary of any extensions of
time within which to file any Returns. The Sellers and the Company have
furnished and made available to the Purchaser complete and accurate copies of
all income and other Tax Returns and any amendments thereto filed by the Company
in the last three (3) years.
(ii) The Company, as of the Closing Date, will have
withheld and accrued or paid to the proper authority all Taxes required to have
been withheld and accrued or paid.
(iii) The Company has not been delinquent in the payment
of any Tax nor is there any Tax deficiency outstanding or assessed against such
Company. The Company has not executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) There is no dispute, claim, or proposed adjustment
concerning any Tax liability of the Company either (A) claimed or raised by any
Tax authority in writing or (B) based upon personal contact with any agent of
such Tax authority, and there is no claim for assessment, deficiency, or
collection of Taxes, or proposed assessment, deficiency or collection from the
Internal Revenue Service or any other governmental authority against the Company
which has not been satisfied. The Company is not a party to nor has the Company
been notified in writing that it is the subject of any pending, proposed, or
threatened action, investigation, proceeding, audit, claim or assessment by or
before the Internal Revenue Service or any other governmental authority, nor
does the Company have any reason to believe that any such notice will be
received in the future. Neither the Internal Revenue Service nor any state or
local taxation authority has ever audited any income tax return of the Company.
The Company has not filed any requests for rulings with the Internal Revenue
Service. No power of attorney has been granted by the Company or its Affiliates
with respect to any matter relating to Taxes of the Company. There are no Tax
liens of any kind upon any property or assets of the Company, except for
inchoate liens for Taxes not yet due and payable.
(v) The Company has no liability for any unpaid Taxes
which has not been paid or accrued for or reserved on the Financial Statements
in accordance with GAAP, whether asserted or unasserted, contingent or
otherwise.
(vi) There is no contract, agreement, plan or
arrangement to which the Company is a party as of the date of this Agreement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
would reasonably be expected to give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G, 404 or 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). There is no contract, agreement,
plan or arrangement to which the Company is a party or by which it is bound to
compensate any individual for excise taxes paid pursuant to Section 4999 of the
Code.
9
(vii) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(viii) The Company is not a party to, nor has any
obligation under any tax-sharing, tax indemnity or tax allocation agreement or
arrangement.
(ix) None of the Company's assets are tax exempt use
property within the meaning of Section 168(h) of the Code.
(x) The Company has made a valid election under Section
1362 of the Code to be treated as an S corporation as defined in Code Section
1361, which election was acknowledged by the IRS and became effective on March
1, 1995. The election has remained in effect since that date without revocation,
cessation or termination, and the Company has qualified to be taxed under the
provisions of Subchapter S of the Code and under applicable similar provisions
of state income tax law for all periods beginning on or after March 1, 1995.
4.12. Accounts Receivable. The accounts receivable of the Company
shown on the Balance Sheet Date, and those to be shown in the Financial
Statements, are, and will be, actual bona fide receivables from transactions in
the ordinary course of business representing valid and binding obligations of
others for the total dollar amount shown thereon, and as of the Balance Sheet
Date were not (and presently are not) subject to any recoupments, set-offs, or
counterclaims. All such accounts receivable are and will be collectible in
amounts not less than the amounts (net of reserves) carried on the books of the
Company, including the Financial Statements, and will be paid in accordance with
their terms. Except as listed on Schedule 4.12 hereto, all such accounts
receivable are and will be actual bona fide receivables from transactions in the
ordinary course of business. The Sellers expressly acknowledge that all account
receivables, as of the Closing Date, whether incurred prior or subsequent to the
Closing Date, will be property of the Company, which is in turn property of the
Purchaser and the Sellers further acknowledge that they will have no claim to
the account receivables existing as of or after the Closing Date. The Company
will continue to invoice and collect on the account receivables in accordance
with its standard collection procedures subject to the direction of the
Purchaser.
4.13. Intentionally Left Blank.
4.14. Machinery and Equipment. Except for items disposed of in the
ordinary course of business, all computers and related software, machinery,
tools, furniture, fixtures, equipment, vehicles, leasehold improvements and all
other tangible personal property (hereinafter "Fixed Assets") of the Company
currently being used in the conduct of its business, or included in determining
the net book value of the Company on the Balance Sheet Date, together with any
machinery or equipment that is leased or operated by the Company, are in fully
serviceable working condition and repair. Said Fixed Assets shall be maintained
in such condition from the date hereof through the Closing Date. Except as
described on Schedule 4.14 hereto, all Fixed Assets owned, used or held by the
Company are situated at its business premises and are currently used in its
business. Schedule 4.14 describes all Fixed Assets owned by or an interest in
which is claimed by any other person (whether a customer, supplier or other
person) for which the Company is responsible (copies of all agreements relating
thereto being attached to said Schedule 4.14), and all such property is in the
Company's actual possession and is in such condition that upon the return of
such property in its present condition to its owner, the Company will not be
liable in any amount to such owner. There are no outstanding requirements or
recommendations by any insurance company that has issued a policy covering
either (i) such Fixed Assets or (ii) any liabilities of the Company relating to
operation of the Business, or by any board of fire underwriters or other body
exercising similar functions, requiring or recommending any repairs or work to
be done on any Fixed Assets or any changes in the operations of the Business,
any equipment or machinery used therein, or any procedures relating to such
operations, equipment or machinery. All Fixed Assets of the Company are set
forth on Schedule 4.14 hereto.
10
4.15. Real Property Matters. The Company does not own any real
property as of the date hereof and has not owned any real property during the
three years preceding the date hereof.
4.16. Leases. All leases of real and personal property of the
Company are described in Schedule 4.16, are in full force and effect and
constitute legal, valid and binding obligations of the respective parties
thereto enforceable in accordance with their terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting generally the enforcement of creditor's rights, and have not been
assigned or encumbered. The Company has performed in all material respects the
obligations required to be performed by it under all such leases to date and it
is not in default in any material respect under any of said leases, except as
set forth in Schedule 4.16, nor has it made any leasehold improvements required
to be removed at the termination of any lease, except signs. No other party to
any such lease is in material default thereunder. Except as noted on Schedule
4.16, none of the leases listed thereon require the consent of a third party in
connection with the transfer of the Shares.
4.17. Patents, Software, Trademarks, Etc. The Company owns, or
possess adequate licenses or other rights to use, all patents, software,
trademarks, service marks, trade names and copyrights and trade secrets, if any,
necessary to conduct its business as now operated by it. The patents, software,
trademarks, service marks, copyrights, trade names and trade secrets, if any,
registered in the name of or owned or used by or licensed to the Company and
applications for any thereof (hereinafter the "Intangibles") are described or
referenced in Schedule 4.17. Sellers hereby specifically acknowledge that all
right, title and interest in and to all patents and software listed on Schedule
4.17 as patents owned by the Company are owned by the Company and that the
ownership of such patents and software will be transferred as part of the
Company to Purchaser as part of the transaction contemplated hereby. No officer,
director, shareholder or employee of the Company or any relative or spouse of
any such person owns any patents or patent applications or any inventions,
software, secret formulae or processes, trade secrets or other similar rights,
nor is any of them a party to any license agreement, used by or useful to the
Company or related to the Business except as listed in Schedule 4.17. Except as
set forth on Schedule 4.17, all of said Intangibles are valid and in good
standing, are free and clear of all liens, security interests, charges,
restrictions and encumbrances of any kind whatsoever. Seller and/or the Company
have not licensed any Intangibles to any third party except as described in
Schedule 4.17. The Company has not been charged with, nor to the Seller's
knowledge has it infringed, nor is it threatened to be charged with infringement
of, any patent, proprietary rights or trade secrets of others in the conduct of
its business, and, to the date hereof, neither the Sellers nor the Company have
received any notice of conflict with or violation of the asserted rights in
intangibles or trade secrets of others. The Company is not now manufacturing any
goods. The consummation of the transactions contemplated hereby will not alter
or impair any rights of the Company in any such Intangibles or in any such
permit, franchise or license, except as described in Schedule 4.17. The
Intangibles are in such form and of such quality and will be maintained in such
a manner that the Company can provide the services heretofore provided by it so
that such services meet applicable specifications and conform with the standards
of quality heretofore met by it. The Company has the sole and exclusive right to
use its corporate and trade names in the jurisdictions where it transacts
business.
11
4.18. Insurance Policies. There is set forth in Schedule 4.18 a list
and brief description of all insurance policies on the date hereof held by the
Company or on which it pays premiums, including, without limitation, life
insurance and title insurance policies, which description includes the premiums
payable by it thereunder. Schedule 4.18 also sets forth, in the case of any life
insurance policy held by the Company, the name of the insured under such policy,
the cash surrender value thereof and any loans thereunder. All such insurance
premiums in respect of such coverage have been, and to the Closing Date will be,
paid in full, or if not due, properly accrued on the Balance Sheet. All claims,
if any, made against the Company which are covered by such policies have been,
or are being, settled or defended by the insurance companies that have issued
such policies. Up to the Closing Date, such insurance coverage will be
maintained in full force and effect and will not be cancelled, modified or
changed without the express written consent of the Purchaser, except to the
extent the maturity dates of any such insurance policies expiring prior to the
Closing Date. No such policy has been, or to the Closing Date will be, cancelled
by the issuer thereof, and, to the knowledge of the Sellers and the Company,
between the date hereof and the Closing Date, there shall be no increase in the
premiums with respect to any such insurance policy caused by any action or
omission of the Sellers or of the Company.
4.19. Banking and Personnel Lists. The Sellers and the Company will
deliver to the Purchaser prior to the Closing Date the following accurate lists
and summary descriptions relating to the Company:
(i) The name of each bank in which the Company has an
account or safe deposit box and the names of all persons authorized to draw
thereon or have access thereto.
(ii) The names, current annual salary rates and total
compensation for the preceding fiscal year of all of the present directors and
officers of the Company, and any other employees whose current base accrual
salary or annualized hourly rate equivalent is $20,000 or more, together with a
summary of the bonuses, percentage compensation and other like benefits, if any,
paid or payable to such persons for the last full fiscal year completed,
together with a schedule of changes since that date, if any.
12
(iii) A schedule of workers' compensation payments of
the Company over the past five full fiscal years and the fiscal year to date, a
schedule of claims by employees of the Company against the workers' compensation
fund for any reason over such period, identification of all compensation and
medical benefits paid to date on each such claim and the estimated amount of
compensation and medical benefits to be paid in the future on each such claim.
(iv) The name of all pensioned employees of the Company
whose pensions are unfunded and are not paid or payable pursuant to any
formalized pension arrangements, their agent and annual unfunded pension rates.
(v) The name, address, telephone number, facsimile
number, email address, the name of the principal contact and all other relevant
contact information of all clients and business relationships of the Sellers.
4.20. Lists of Contracts, Etc. There is included in Schedule 4.20 a
list of the following items (whether written or oral) relating to the Company,
which list identifies and fairly summarizes each item:
(i) All collective bargaining and other labor union
agreements (if any); all employment agreements with any officer, director,
employee or consultant; and all employee pension, health and welfare benefit
plans, group insurance, bonus, profit sharing, severance, vacation,
hospitalization, and retirement plans, post-retirement medical benefit plans,
and any other plans, arrangements or custom requiring payments or benefits to
current or retiring employees.
(ii) All joint venture contracts of the Company or
affiliates relating to the Business;
(iii) All contracts of the Company relating to (a)
obligations for borrowed money, (b) obligations evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations to pay the deferred purchase
price of property or services, except trade accounts payable arising in the
ordinary course of business, (d) obligations under capital leases, (e) debt of
others secured by a lien on any asset of the Company, and (f) debts of others
guaranteed by the Company.
(iv) All agreements of the Company relating to the
supply of raw materials for and the distribution of the products of the
Business, including without limitation all sales agreements, manufacturer's
representative agreements and distribution agreements of whatever magnitude and
nature, and any commitments therefor;
(v) All contracts that individually provide for
aggregate future payments to or from any of the Company of $5,000 or more, to
the extent not included in (i) through (iv) above;
13
(vi) All contracts of the Company that have a term
exceeding one year and that may not be cancelled without any liability, penalty
or premium, to the extent not included in (i) through (v) above;
(vii) A complete list of all outstanding powers of
attorney granted by any of the Company; and
(viii) All other contracts of the Company material to
the business, assets, liabilities, financial condition, results of operations or
prospects of the Business taken as a whole to the extent not included above.
Except as set forth in Schedule 4.20, (i) all contracts, agreements
and commitments of the Company set forth in Schedule 4.20 are valid, binding and
in full force and effect, and (ii) neither the Company nor any other party to
any such contract, agreement, or commitment has materially breached any
provision thereof or is in default thereunder. Except as set forth in Schedule
4.20, the sale of the Shares by the Sellers in accordance with this Agreement
will not result in the termination of any contract, agreement or commitment of
the Company set forth in Schedule 4.20, and immediately after the Closing, each
such contract, agreement or commitment will continue in full force and effect
without the imposition or acceleration of any burdensome condition or other
obligation on the Company resulting from the sale of the Shares by the Sellers.
True and complete copies of the contracts, leases, licenses and other documents
referred to in this Schedule 4.20 will be delivered to the Purchaser, certified
by the Secretary or Assistant Secretary of the Company as true, correct and
complete copies, not later than four weeks from the date hereof or ten business
days before the Closing Date, whichever is sooner.
There are no pending disputes with customers or vendors of the
Company regarding quality or return of goods involving amounts in dispute with
any one customer or vendor, whether for related or unrelated claims, in excess
of $5,000 except as described on Schedule 4.20 hereto, all of which will be
resolved to the reasonable satisfaction of Purchaser prior to the Closing Date.
To the knowledge of Sellers and the Company, there has not been any event,
happening, threat or fact that would lead them to believe that any of said
customers or vendors will terminate or materially alter their business
relationship with the Company after completion of the transactions contemplated
by this Agreement.
4.21. Compliance With the Law. The Company is not in violation of
any applicable federal, state, local or foreign law, regulation or order or any
other, decree or requirement of any governmental, regulatory or administrative
agency or authority or court or other tribunal (including, but not limited to,
any law, regulation order or requirement relating to securities, properties,
business, products, manufacturing processes, advertising, sales or employment
practices, terms and conditions of employment, occupational safety, health and
welfare, conditions of occupied premises, product safety and liability, civil
rights, or environmental protection, including, but not limited to, those
related to waste management, air pollution control, waste water treatment or
noise abatement). Except as set forth in Schedule 4.21, the Company has not been
and are not now charged with, or to the knowledge of the Sellers or the Company
under investigation with respect to, any violation of any applicable law,
regulation, order or requirement relating to any of the foregoing, nor, to the
knowledge of Sellers or the Company after due inquiry, are there any
circumstances that would or might give rise to any such violation. The Company
has filed all reports required to be filed with any governmental, regulatory or
administrative agency or authority.
14
4.22. Litigation; Pending Labor Disputes. Except as specifically
identified on Schedule 4.22:
(i) There are no legal, administrative, arbitration or
other proceedings or governmental investigations pending or, to the knowledge of
Sellers or the Company, threatened, against the Sellers or the Company, relating
to the Business or the Company or its properties (including leased property), or
the transactions contemplated by this Agreement, nor is there any basis known to
the Sellers or the Company for any such action.
(ii) There are no judgments, decrees or orders of any
court, or any governmental department, commission, board, agency or
instrumentality binding upon Sellers or the Company relating to the Business or
the Company the effect of which is to prohibit any business practice or the
acquisition of any property or the conduct of any business by the Company or
which limit or control or otherwise adversely affect its method or manner of
doing business.
(iii) No work stoppage has occurred and is continuing
or, to the knowledge of Sellers or the Company, is threatened affecting the
Business, and no representation question involving recognition of a collective
bargaining agent exists in respect of any employees of the Company.
(iv) There are no pending labor negotiations or union
organization efforts relating to employees of the Company.
(v) There are no charges of discrimination (relating to
sex, age, race, national origin, handicap or veteran status) or unfair labor
practices pending or, to the knowledge of the Sellers or the Company, threatened
before any governmental or regulatory agency or authority or any court relating
to employees of the Company.
4.23. Absence of Certain Changes or Events. The Company has not,
since the Balance Sheet Date, except as described on Schedule 4.23:
(i) Incurred any material obligation or liability
(absolute, accrued, contingent or otherwise) or in connection with the
performance of this Agreement, and any such obligation or liability incurred in
the ordinary course is not materially adverse, except for claims, if any, that
are adequately covered by insurance;
(ii) Discharged or satisfied any lien or encumbrance, or
paid or satisfied any obligations or liability (absolute, accrued, contingent or
otherwise) other than (a) liabilities shown or reflected on the Balance Sheet,
and (b) liabilities incurred since the Balance Sheet Date in the ordinary course
of business that were not materially adverse;
15
(iii) Increased or established any reserve or accrual
for taxes or other liability on its books or otherwise provided therefor, except
(a) as disclosed on the Balance Sheet, or (b) as may have been required under
generally accepted accounting principles due to income earned or expense accrued
since the Balance Sheet Date and as disclosed to the Purchaser in writing;
(iv) Mortgaged, pledged or subjected to any lien, charge
or other encumbrance any of its assets, tangible or intangible;
(v) Sold or transferred any of its assets or cancelled
any debts or claims or waived any rights, except in the ordinary course of
business and which has not been materially adverse;
(vi) Disposed of or permitted to lapse any patents or
trademarks or any patent or trademark applications material to the operation of
its business;
(vii) Incurred any significant labor trouble or granted
any general or uniform increase in salary or wages payable or to become payable
by it to any director, officer, employee or agent, or by means of any bonus or
pension plan, contract or other commitment increased the compensation of any
director, officer, employee or agent;
(viii) Authorized any capital expenditure for real
estate or leasehold improvements, machinery, equipment or molds in excess of
$5,000.00 in the aggregate;
(ix) Except for this Agreement, entered into any
material transaction;
(x) Issued any stocks, bonds, or other corporate
securities, or made any declaration or payment of any dividend or any
distribution in respect of its capital stock; or
(xi) Experienced damage, destruction or loss (whether or
not covered by insurance) individually or in the aggregate materially and
adversely affecting any of its properties, assets or business, or experienced
any other material adverse change or changes individually or in the aggregate
affecting its financial condition, assets, liabilities or business.
4.24. Employee Benefit Plans.
(a) Schedule 4.24 lists a description of the only Employee Programs
(as defined below) that have been maintained (as such term is further defined
below) by the Company at any time during the five (5) years prior to the date
hereof.
16
(b) There has not been any failure of any party to comply with
any laws applicable with respect to any Employee Program that has been
maintained by the Company. With respect to any Employee Programs now or
heretofore maintained by the Company, there has occurred no breach of any duty
under the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
or other applicable law which could result, directly or indirectly in any taxes,
penalties or other liability to the Purchaser, the Company or any affiliate (as
defined below). No litigation, arbitration, or governmental administrative
proceeding (or investigation) or other proceeding (other than those relating to
routine claims for benefits) is pending or, to the knowledge of the Company or
Sellers, threatened with respect to any such Employee Program.
(c) Except as set forth in Schedule 4.24 attached hereto,
neither the Company nor any affiliate has ever (i) provided health care or any
other non-pension benefits to any employees after their employment was
terminated (other than as required by Part 6 of Subtitle B of Title I of ERISA)
or has ever promised to provide such post-termination benefits or (ii)
maintained an Employee Program provided to such employees subject to Title IV of
ERISA, Section 401(a) or Section 412 of Code, including, without limitation, any
Multiemployer Plan.
(d) For purposes of this Section 4.24:
(i) "Employee Program" means (A) all employee benefit
plans within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are not
subject to ERISA; and (B) all stock option plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (A) above. In the case of
an Employee Program funded through an organization described in Code Section
501(c)(9), each reference to such Employee Program shall include a reference to
such organization;
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides (or has promised to provide)
benefits under such Employee Program, or has any obligation (by agreement or
under applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents, or beneficiaries);
(iii) An entity is an "affiliate" of the Company for
purposes of this Section 3.24 if it would have ever been considered a single
employer with the Company under ERISA Section 4001(b) or part of the same
"controlled group" as the Company for purposes of ERISA Section 302(d)(8)(C);
and
17
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer contributes
and which is maintained pursuant to one or more collective bargaining
agreements.
4.25. Product Warranties and Product Liabilities. The product
warranties and return policies of the Company in effect on the date hereof and
the types of products to which they apply are described on Schedule 4.25 hereto.
Schedule 4.25 also sets forth all product liability claims involving amounts in
controversy in excess of $5,000 that are currently either pending or, to the
best of the Sellers' and the Company's knowledge, threatened against the
Company. The Company has not paid in the aggregate, or allowed as credits
against purchases, or received claims for more than one percent (1%) per year of
gross sales, as determined in accordance with GAAP consistently applied, during
the past three years pursuant to obligations under any warranty or any product
liability claim with respect to goods manufactured, assembled or furnished by
the Company. The future cost of performing all such obligations and paying all
such product liability claims with respect to goods manufactured, assembled or
furnished prior to the Closing Date will not exceed the average annual cost
thereof for said past three year period.
4.26. Assets. The assets of the Company are located at the locations
listed on Schedule 4.26 attached hereto. Except as described in Schedule 4.26,
the assets of the Company are, and together with the additional assets to be
acquired or otherwise received by the Company prior to the Closing, will at the
Closing Date be, sufficient in all material respects to carry on the operations
of the Business as now conducted by the Company and in no event shall the assets
of the Company at closing have a value of less than $567,130. The Company
(including for such purpose any Subsidiaries thereof listed on Schedule 4.6) are
the only business organizations through which the Business is conducted. Except
as set forth in Schedule 4.16 or Schedule 4.26, all assets used by the Sellers
and the Company to conduct the Business are, and will on the Closing Date be,
owned by the Company.
4.27. Absence of Certain Commercial Practices. Except as described
on Schedule 4.27, neither the Company nor the Sellers has made any payment
(directly or by secret commissions, discounts, compensation or other payments)
or given any gifts to another business concern, to an agent or employee of
another business concern or of any governmental entity (domestic or foreign) or
to a political party or candidate for political office (domestic or foreign), to
obtain or retain business for the Company or to receive favorable or
preferential treatment, except for gifts and entertainment given to
representatives of customers or potential customers of sufficiently limited
value and in a form (other than cash) that would not be construed as a bribe or
payoff.
4.28. Licenses, Permits, Consents and Approvals. The Company has,
and at the Closing Date will have, all licenses, permits or other authorizations
of governmental, regulatory or administrative agencies or authorities
(collectively, "Licenses") required to conduct the Business. All Licenses of the
Company are listed on Schedule 4.28 hereto. At the Closing, the Company will
have all such Licenses which are material to the conduct of the Business and
will have renewed all Licenses which would have expired in the interim. Except
as listed in Schedule 4.28, no registration, filing, application, notice,
transfer, consent, approval, order, qualification, waiver or other action of any
kind (collectively, a "Filing") will be required as a result of the sale of the
Shares by Sellers in accordance with this Agreement (a) to avoid the loss of any
License or the violation, breach or termination of, or any default under, or the
creation of any lien on any asset of the Company pursuant to the terms of, any
law, regulation, order or other requirement or any contract binding upon the
Company or to which any such asset may be subject, or (b) to enable Purchaser
(directly or through any designee) to continue the operation of the Company and
the Business substantially as conducted prior to the Closing Date. All such
Filings will be duly filed, given, obtained or taken on or prior to the Closing
Date and will be in full force and effect on the Closing Date.
18
4.29. Environmental Matters. Except as set forth on Schedule 4.29
hereto:
(a) The operations of the Company are in compliance with all
applicable Laws promulgated by any governmental entity which prohibit, regulate
or control any hazardous material or any hazardous material activity
("Environmental Laws") and all permits issued pursuant to Environmental Laws or
otherwise except for where noncompliance or the absence of such permits would
not, individually or in the aggregate, have a Material Adverse Effect;
(b) The Company has obtained all permits required under all
applicable Environmental Laws necessary to operate the Business;
(c) The Company is not the subject of any outstanding written order
or Contract with any governmental authority or person respecting Environmental
Laws or any violation or potential violations thereof; and,
(d) The Company has not received any written communication alleging
either or both that the Company may be in violation of any Environmental Law, or
any permit issued pursuant to Environmental Law, or may have any liability under
any Environmental Law.
4.30 Broker. Except as specified in Schedule 4.30, neither the
Company nor the Sellers has retained any broker in connection with any
transaction contemplated by this Agreement. Purchaser and the Company shall not
be obligated to pay any fee or commission associated with the retention or
engagement by the Company or Sellers of any broker in connection with any
transaction contemplated by this Agreement.
4.31. Related Party Transactions. Except as described in Schedule
4.31, all transactions during the past five years between the Company and any
current or former shareholder or any entity in which the Company or any current
or former shareholder had or has a direct or indirect interest have been fair to
the Company as determined by the Board of Directors. No portion of the sales or
other on-going business relationships of the Company is dependent upon the
friendship or the personal relationships (other than those customary within
business generally) of any Sellers, except as described in Schedule 4.31. During
the past five years, the Company has not forgiven or cancelled, without
receiving full consideration, any indebtedness owing to it by the Sellers.
19
4.32 Patriot Act. The Company and the Sellers certify that neither
the Company nor any of its Subsidiaries has been designated, and is not owned or
controlled, by a "suspected terrorist" as defined in Executive Order 13224. The
Company and the Sellers hereby acknowledge that the Purchaser seeks to comply
with all applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Company and the Sellers hereby represent,
warrant and agree that: (i) none of the cash or property that the Sellers has
contributed or paid or will contribute and pay to the Company has been or shall
be derived from, or related to, any activity that is deemed criminal under
United States law; and (ii) no contribution or payment by the Company or any of
their Subsidiaries to the Purchaser, to the extent that they are within the
Companies' and/or their Subsidiaries' control shall cause the Purchaser to be in
violation of the United States Bank Secrecy Act, the United States International
Money Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Sellers shall
promptly notify the Purchaser if any of these representations ceases to be true
and accurate regarding the Sellers, the Company or any of its Subsidiaries. The
Sellers agrees to provide the Purchaser any additional information regarding the
Company or any of its Subsidiaries that the Purchaser reasonably requests to
ensure compliance with all applicable laws concerning money laundering and
similar activities.
4.33. Disclosure. All statements contained in any schedule,
certificate, opinion, instrument, or other document delivered by or on behalf of
the Sellers or the Company pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed representations and warranties
by the Sellers and the Company herein. No statement, representation or warranty
by the Sellers or the Company in this Agreement or in any schedule, certificate,
opinion, instrument, or other document furnished or to be furnished to the
Purchaser pursuant hereto or in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact required to be stated therein or necessary
to make the statements contained therein not misleading or necessary in order to
provide a prospective purchaser of the business of the Company with full and
fair disclosure concerning the Company, the Business, and the Company's affairs.
4.34 Investment Intent. The Purchase Price Shares are being acquired
hereunder by the Sellers for investment purposes only, for its own account, not
as a nominee or agent and not with a view to the distribution thereof. The
Sellers have no present intention to sell or otherwise dispose of the Purchase
Price Shares and it will not do so except in compliance with the provisions of
the Securities Act of 1933, as amended, and applicable law. The Sellers
understand that the Purchase Price Shares acquired hereunder must be held by
them indefinitely unless a subsequent disposition or transfer of any of said
shares is registered under the Securities Act of 1933, as amended, or is exempt
from registration therefrom. The Sellers further understand that the exemption
from registration afforded by Rule 144 (the provisions of which are known to
such Sellers) promulgated under the Securities Act of 1933, as amended, depends
on the satisfaction of various conditions, and that, if and when applicable,
Rule 144 may afford the basis for sales only in limited amounts.
20
4.35 Exemption. The Sellers are either an "accredited investor"
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act of 1933, as amended, or acknowledge that the sale of the Purchase
Price Shares shall be made under Section 4(2) the Securities Act of 1933, as
amended. The Sellers understand that the Purchase Price Shares are being offered
in reliance upon specific exemptions from the registration requirements of
United States federal and state securities laws and that the Purchaser is
relying upon the truth and accuracy of, and the Sellers' compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Sellers set forth herein in order to determine the availability of such
exemptions and the eligibility of the Sellers to acquire the Purchase Price
Shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 Organization and Good Standing.
The Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida.
5.2 Authority.
(a) The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein have been, or will prior to
Closing be, duly and validly approved and acknowledged by all necessary
corporate action on the part of the Purchaser.
(b) The execution of this Agreement and the delivery hereof to the
Sellers and the purchase contemplated herein have been, or will be prior to
Closing, duly authorized by the Purchaser's Board of Directors having full power
and authority to authorize such actions.
5.3 Conflicts; Consents of Third Parties.
(a) The execution and delivery of this Agreement, the acquisition of
the Shares by Purchaser and the consummation of the transactions herein
contemplated, and the compliance with the provisions and terms of this
Agreement, are not prohibited by the Articles of Incorporation or Bylaws of the
Purchaser and will not violate, conflict with or result in a breach of any of
the terms or provisions of, or constitute a default under, any court order,
indenture, mortgage, loan agreement, or other agreement or instrument to which
the Purchaser is a party or by which it is bound.
(b) No consent, waiver, approval, order, permit or authorization of,
or declaration or filing with, or notification to, any person or governmental
body is required on the part of the Purchaser in connection with the execution
and delivery of this Agreement or the Purchaser Documents or the compliance by
Purchaser with any of the provisions hereof or thereof.
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5.4 Litigation.
There are no Legal Proceedings pending or, to the best knowledge of
the Purchaser, threatened that are reasonably likely to prohibit or restrain the
ability of the Purchaser to enter into this Agreement or consummate the
transactions contemplated hereby.
5.5 Investment Intention.
The Purchaser is acquiring the Shares for its own account, for
investment purposes only and not with a view to the distribution (as such term
is used in Section 2(11) of the Securities Act of 1933, as amended (the
"Securities Act") thereof. Purchaser understands that the Shares have not been
registered under the Securities Act and cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration is
available.
5.6 Broker.
The Purchaser has not retained any broker in connection with any
transaction contemplated by this Agreement. Sellers shall not be obligated to
pay any fee or commission associated with the retention or engagement by the
Purchaser of any broker in connection with any transaction contemplated by this
Agreement.
ARTICLE VI
COVENANTS
6.1 Access to Information.
The Sellers and the Company agree that, prior to the Closing Date,
the Purchaser shall be entitled, through its officers, employees and
representatives (including, without limitation, its legal advisors and
accountants), to make such investigation of the properties, businesses and
operations of the Company and its Subsidiaries and such examination of the
books, records and financial condition of the Company and its Subsidiaries as it
reasonably requests and to make extracts and copies of such books and records.
Any such investigation and examination shall be conducted during regular
business hours and under reasonable circumstances, and the Sellers shall
cooperate, and shall cause the Company and its Subsidiaries to cooperate, fully
therein. No investigation by the Purchaser prior to or after the date of this
Agreement shall diminish or obviate any of the representations, warranties,
covenants or agreements of the Sellers contained in this Agreement or the Seller
Documents. In order that the Purchaser may have full opportunity to make such
physical, business, accounting and legal review, examination or investigation as
it may reasonably request of the affairs of the Company and its Subsidiaries,
the Sellers shall cause the officers, employees, consultants, agents,
accountants, attorneys and other representatives of the Company and its
Subsidiaries to cooperate fully with such representatives in connection with
such review and examination.
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6.2 Conduct of the Business Pending the Closing.
(a) Except as otherwise expressly contemplated by this Agreement or
with the prior written consent of the Purchaser, the Sellers shall use their
best efforts, and shall cause the Company to:
(i) Conduct the businesses of the Company only in the ordinary
course consistent with past practice;
(ii) Use its best efforts to (A) preserve its present business
operations, organization (including, without limitation, management and the
sales force) and goodwill of the Company and (B) preserve its present
relationship with Persons having business dealings with the Company;
(iii) Maintain (A) all of the assets and properties of the
Company in their current condition, ordinary wear and tear excepted and (B)
insurance upon all of the properties and assets of the Company in such amounts
and of such kinds com-parable to that in effect on the date of this Agreement;
(iv) (A) maintain the books, accounts and records of the
Company in the ordinary course of business consistent with past practices, (B)
continue to collect accounts receivable and pay accounts payable utilizing
normal procedures and without discounting or accelerating payment of such
accounts, and (C) comply with all contractual and other obligations applicable
to the operation of the Company; and
(v) Comply in all material respects with applicable Laws.
(b) Except as otherwise expressly contemplated by this Agreement or
with the prior written consent of the Purchaser, the Sellers shall not, and
shall cause the Company not to:
(i) Declare, set aside, make or pay any dividend or other
distribution in respect of the capital stock of the Company or repurchase,
redeem or otherwise acquire any outstanding shares of the capital stock or other
securities of, or other ownership interests in, the Company;
(ii) Transfer, issue, sell or dispose of any shares of capital
stock or other securities of the Company or grant options, warrants, calls or
other rights to purchase or otherwise acquire shares of the capital stock or
other securities of the Company;
(iii) Effect any recapitalization, reclassification, stock
split or like change in the capitalization of the Company;
(iv) Amend the certificate of incorporation or by-laws of the
Company;
(v) (A) materially increase the annual level of compensation
of any employee of the Company, (B) increase the annual level of compensation
payable or to become payable by the Company to any of its executive officers,
(C) grant any unusual or extraordinary bonus, benefit or other direct or
indirect compensation to any employee, director or consultant, (D) increase the
coverage or benefits available under any (or create any new) severance pay,
termination pay, vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus or other incentive
compensation, insurance, pension or other employee benefit plan or arrangement
made to, for, or with any of the directors, officers, employees, agents or
representatives of the Company or otherwise modify or amend or terminate any
such plan or arrangement or (E) enter into any employment, deferred
compensation, severance, consulting, non-competition or similar agreement (or
amend any such agreement) to which the Company is a party or involving a
director, officer or employee of the Company in his or her capacity as a
director, officer or employee of the Company;
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(vi) Except for trade payables and for indebtedness for
borrowed money incurred in the ordinary course of business and consistent with
past practice, borrow monies for any reason or draw down on any line of credit
or debt obligation, or become the guarantor, surety, endorser or otherwise
liable for any debt, obligation or liability (contingent or otherwise) of any
other Person, or change the terms of payables or receivables;
(vii) Subject to any Lien (except for leases that do not
materially impair the use of the property subject thereto in their respective
businesses as presently conducted), any of the properties or assets (whether
tangible or intangible) of the Company;
(viii) Acquire any material properties or assets or sell,
assign, transfer, convey, lease or otherwise dispose of any of the material
properties or assets (except for fair consideration in the ordinary course of
business consistent with past practice) of the Company except, with respect to
the items listed on Schedule 6.2(b)(viii) hereto, as previously consented to by
the Purchaser;
(ix) Cancel or compromise any debt or claim or waive or
release any material right of the Company except in the ordinary course of
business consistent with past practice;
(x) Enter into any commitment for capital expenditures or the
purchase of assets out of the ordinary course in excess of $5,000;
(xi) Permit the Company to enter into any transaction or to
make or enter into any Contract which by reason of its size or otherwise is not
in the ordinary course of business consistent with past practice;
(xii) Permit the Company to enter into or agree to enter into
any merger or consolidation with, any corporation or other entity, and not
engage in any new business or invest in, make a loan, advance or capital
contribution to, or otherwise acquire the securities of any other Person;
(xiii) Except for transfers of cash pursuant to normal cash
management practices, permit the Company to make any investments in or loans to,
or pay any fees or expenses to, or enter into or modify any Contract with, the
Sellers or any Affiliate of the Sellers; or
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(xiv) Agree to do anything prohibited by this Section 6.2 or
anything which would make any of the representations and warranties of the
Sellers in this Agreement or the Seller Documents untrue or incorrect in any
material respect as of any time through and including the Effective Time.
6.3 Consents.
The Sellers and the Company shall use their best efforts, and the
Purchaser shall cooperate with the Sellers and the Company, to obtain at the
earliest practicable date all consents and approvals required to consummate the
transactions contemplated by this Agreement, including, without limitation, the
consents and approvals referred to in Section 4.7 hereof; provided, however,
that neither the Sellers, the Company nor the Purchaser shall be obligated to
pay any consideration therefor to any third party from whom consent or approval
is requested.
6.4 Other Actions.
Each of the Sellers, the Company and the Purchaser shall use its
best efforts to (i) take all actions necessary or appropriate to consummate the
transactions contemplated by this Agreement and (ii) cause the fulfillment at
the earliest practicable date of all of the conditions to their respective
obligations to consummate the transactions contemplated by this Agreement.
6.5 No Solicitation.
The Sellers will not, and will not cause or permit the Company or
any of the Company's directors, officers, employees, representatives or agents
(collectively, the "Representatives") to, directly or indirectly, (i) discuss,
negotiate, undertake, authorize, recommend, propose or enter into, either as the
proposed surviving, merged, acquiring or acquired corporation, any transaction
involving a merger, consolidation, business combination, purchase or disposition
of any amount of the assets or capital stock or other equity interest in the
Company other than the transactions contemplated by this Agreement (an
"Acquisition Transaction"), (ii) facilitate, encourage, solicit or initiate
discussions, negotiations or submissions of proposals or offers in respect of an
Acquisition Transaction, (iii) furnish or cause to be furnished, to any Person,
any information concerning the business, operations, properties or assets of the
Company in connection with an Acquisition Transaction, or (iv) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the foregoing.
The Sellers will inform the Purchaser in writing immediately following the
receipt by Sellers, the Company or any Representative of any proposal or inquiry
in respect of any Acquisition Transaction.
6.6 Preservation of Records.
The Sellers and the Purchaser agree that each of them shall preserve
and keep the records held by it relating to the business of the Company for a
period of three years from the Closing Date and shall make such records and
personnel available to the other as may be reasonably required by such party in
connection with, among other things, any insurance claims by, legal proceedings
against or governmental investigations of the Sellers or the Purchaser or any of
their Affiliates or in order to enable the Sellers or the Purchaser to comply
with their respective obligations under this Agreement and each other agreement,
document or instrument contemplated hereby or thereby.
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6.7 Publicity.
None of the Sellers, the Company nor the Purchaser shall issue any
press release or public announcement concerning this Agreement or the
transactions contemplated hereby without obtaining the prior written approval of
the other party hereto, which approval will not be unreasonably withheld or
delayed, unless, in the sole judgment of the Purchaser, the Company or the
Sellers, disclosure is otherwise required by applicable Law or by the applicable
rules of any stock exchange on which the Purchaser lists securities, provided
that, to the extent required by applicable law, the party intending to make such
release shall use its best efforts consistent with such applicable law to
consult with the other party with respect to the text thereof.
6.8 Use of Name.
The Sellers hereby agrees that upon the consummation of the
transactions contemplated hereby, the Purchaser and the Company shall have the
sole right to the use of the name "The Pension Alliance, Inc.", and any
derivation of the aforementioned names and the Sellers shall not, and shall not
cause or permit any Affiliate to, use such name or any variation or simulation
thereof.
6.9 Employment, Non-Competition and Non-Solicitation Agreements.
On or prior to the Closing Date, Xxxxx X. Xxxxxx shall enter into
non-competition and non-solicitation agreements with the Purchaser and the
Company, substantially in the form of agreements attached hereto as Exhibit 6.9
(the "Non-Competition Agreements").
6.10 Financial Statements.
The Sellers shall deliver the Financial Statements to the Purchaser
on or prior to the Closing Date.
6.11 Intentionally left blank.
6.12 Tax Matters.
(a) Tax Periods Ending on or Before the Closing Date. The
Sellers shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Company for all periods through and including the Closing
Date which are filed after the Closing Date as soon as practicable and prior to
the date due (including any proper extensions thereof). The Sellers shall permit
the Company and the Purchaser to review and provide comments, if any, on each
such Return described in the preceding sentence prior to filing. Unless the
Purchaser or the Company provides comments to the Sellers, the Company shall
deliver to the Sellers each such Return signed by the appropriate officer(s) of
the Company for filing within ten (10) days following the Sellers' delivery to
the Company and the Purchaser of any such Return. The Sellers shall deliver to
the Company promptly after filing each such Return a copy of the filed Return
and evidence of its filing. The Sellers shall pay the costs and expenses
incurred in the preparation and filing of the Tax Returns on or before the date
such costs and expenses are due.
26
If the Company provide comments to the Sellers and at the end
of such ten (10) day period the Company and the Sellers have failed to reach
written agreement with respect to all of such disputed items, the parties shall
submit the unresolved items to arbitration for final determination. Promptly,
but no later than thirty (30) days after its acceptance of its appointment as
arbitrator, the arbitrator shall render an opinion as to the disputed items. The
determination of the arbitrator shall be conclusive and binding upon the
parties. The Company and the Sellers (as a group) shall each pay one half of the
fees, costs and expenses of the arbitrator. The prevailing party may be entitled
to an award of pre- and post-award interest as well as reasonable attorneys'
fees incurred in connection with the arbitration and any judicial proceedings
related thereto as determined by the arbitrator.
(b) Tax Periods Beginning Ending After the Closing Date. The
Company or the Purchaser shall prepare or cause to be prepared and file or cause
to be filed any Returns of the Company for Tax periods that begin and end after
the Closing Date.
(c) Refunds and Tax Benefits. Any Tax refunds that are
received after the Closing Date by the Sellers (other than tax refunds received
in connection with such Sellers' individual tax Returns) and any amounts
credited against Tax to which the Sellers become entitled, shall be for the
account of the Sellers.
(d) Cooperation on Tax Matters.
(i) The Purchaser, the Company and the Sellers shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of any Returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes. Purchaser agrees
that Sellers shall, at Sellers' expense, control any audit of the tax returns of
the Company for any year up to and including 2006. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company and the Sellers agree (A) to retain all
books and records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by the Purchaser or the
Sellers, any extensions thereof) of the respective tax periods, and to abide by
all record retention agreements entered into with any taxing authority, and (B)
to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so
requests, the Company or the Sellers, as the case may be, shall allow the other
party to take possession of such books and records.
(ii) The Purchaser and the Sellers further agree, upon
request, to use their commercially reasonable best efforts to obtain any
certificate or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
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(iii) The Purchaser and the Sellers further agree, upon
request, to provide the other party with all information that either party may
be required to report pursuant to ss.6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
6.13 Bonus Pool.
For the first twelve month period following the Closing Date (the
"Initial Bonus Period"), each of the employees of the Company shall be eligible
to participate in a bonus pool equal to 10% of the Company's earnings before
interest, taxes, depreciation and amortiziation ("EBITDA") in excess of
$1,050,000 (one million fifty thousand US dollars), which such bonus shall be
paid within the joint discretion of Xxxxxxx Xxxxxxx, the Chief Operating Officer
of the Purchaser, and Xxxxx X. Xxxxxx within 30 days of the determination of
such bonus. For each subsequent twelve month period following the Initial Bonus
Period, each of the employees of the Company shall be eligible to participate in
a bonus pool equal to 10% of the Company's EBITDA in excess of the greater of
$1,050,000 (one million fifty thousand US dollars) or the Company's EBITDA used
for the prior twelve month period, which such bonus shall be paid within the
joint discretion of the Purchaser and Xxxxx X. X'Xxxxxx within 30 days of the
determination of such bonus.
6.14 Piggyback Registration Rights
If at any time the Purchaser shall determine to file with the
Securities and Exchange Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of 1933, as amended, of any of its equity securities (other than (i) the
amendment of a registration statement previously filed or the filing of a
registration statement that was previously filed and withdrawn or (ii) on Form
X-0, Xxxx X-0 or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other bona fide,
employee benefit plans), the Purchaser shall use its best efforts to include in
such Registration Statement all or any part of the shares of common stock
underlying the Nanstatutory Stock Option and Convertible Promissory Note issued
to the Sellers provided, however, it shall be within Purchaser's sole discretion
to reduce or eliminate such shares of common stock included on any registration
statement.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of Purchaser.
The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement is subject to the fulfillment, on or prior to the
Closing Date, of each of the following conditions (any or all of which may be
waived by the Purchaser in whole or in part to the extent permitted by
applicable law):
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(a) all representations and warranties of the Sellers and the
Company contained herein shall be true and correct as of the date hereof;
(b) all representations and warranties of the Sellers and the
Company contained herein qualified as to materiality shall be true and correct,
and the representations and warranties of the Sellers and the Company contained
herein not qualified as to materiality shall be true and correct in all material
respects, at and as of the Closing Date with the same effect as though those
representations and warranties had been made again at and as of that time;
(c) the Sellers and the Company shall have performed and complied in
all material respects with all obligations and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date;
(d) the Purchaser shall have been furnished with certificates (dated
the Closing Date and in form and substance reasonably satisfactory to the
Purchaser) executed by each Sellers certifying as to the fulfillment of the
conditions specified in Sections 7.1(a), 7.1(b) and 7.1(c) hereof;
(e) Certificates representing 100% of the Shares shall have been, or
shall at the Closing be, validly delivered and transferred to the Purchaser,
free and clear of any and all Liens;
(f) there shall not have been or occurred any Material Adverse
Change;
(g) the Sellers and the Company shall have obtained all consents and
waivers referred to in Section 4.7 hereof, in a form reasonably satisfactory to
the Purchaser, with respect to the transactions contemplated by this Agreement
and the Seller Documents;
(h) no Legal Proceedings shall have been instituted or threatened or
claim or demand made against the Sellers, the Company, or the Purchaser seeking
to restrain or prohibit or to obtain substantial damages with respect to the
consummation of the transactions contemplated hereby, and there shall not be in
effect any order by a governmental body of competent jurisdiction restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby;
(i) the Purchaser shall have received the written resignations of
each director and officer of the Company;
(j) the Employment Agreements and Non-Competition Agreements shall
have been executed; and
(k) the Purchaser shall have received information satisfactory in
its sole discretion to verify the accuracy of all financial information
delivered by the Sellers to the Purchaser.
7.2 Conditions Precedent to Obligations of the Sellers and the
Company.
29
The obligations of the Sellers and the Company to consummate the
transactions contemplated by this Agreement are subject to the fulfillment,
prior to or on the Closing Date, of each of the following conditions (any or all
of which may be waived by the Sellers and the Company in whole or in part to the
extent permitted by applicable law):
(a) all representations and warranties of the Purchaser contained
herein shall be true and correct as of the date hereof;
(b) all representations and warranties of the Purchaser contained
herein qualified as to materiality shall be true and correct, and all
representations and warranties of the Purchaser contained herein not qualified
as to materiality shall be true and correct in all material respects, at and as
of the Closing Date with the same effect as though those representations and
warranties had been made again at and as of that date;
(c) the Purchaser shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by Purchaser on or prior to the Closing Date;
(d) the Sellers shall have been furnished with certificates (dated
the Closing Date and in form and substance reasonably satisfactory to the
Sellers) executed by the Chief Executive Officer and Chief Financial Officer of
the Purchaser certifying as to the fulfillment of the conditions specified in
Sections 7.2(a), 7.2(b) and 7.2(c); and
(e) no Legal Proceedings shall have been instituted or threatened or
claim or demand made against the Sellers, the Company, or the Purchaser seeking
to restrain or prohibit or to obtain substantial damages with respect to the
consummation of the transactions contemplated hereby, and there shall not be in
effect any Order by a Governmental Body of competent jurisdiction restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby.
ARTICLE VIII
DOCUMENTS TO BE DELIVERED
8.1 Documents to be Delivered by the Sellers.
At the Closing, the Sellers shall deliver, or cause to be delivered,
to the Purchaser the following:
(a) stock certificates representing the Shares, duly endorsed in
blank or accompanied by stock transfer powers and with all requisite stock
transfer tax stamps attached;
(b) the certificates referred to in Section 7.1(d) and 7.1(e)
hereof;
(c) copies of all consents and waivers referred to in Section 7.1(g)
hereof;
30
(d) the Employment Agreement and Non-Competition Agreement duly
executed by all parties other than the Purchaser;
(e) written resignations of each of the officers and directors of
the Company;
(f) certificate of good standing with respect to the Company issued
by the Secretary of State of the State of incorporation, and for each state in
which the Company is qualified to do business as a foreign corporation; and
(g) such other documents as the Purchaser shall reasonably request.
8.2 Documents to be Delivered by the Purchaser.
At the Closing, the Purchaser shall deliver to the Sellers the
following:
(a) The Purchase Price;
(b) The Initial Notes and the Additional Notes;
(c) the certificates referred to in Section 7.2(d) hereof;
(d) the Non-Competition Agreements duly executed by the Company or
the Purchaser;
(e) the Purchase Price Shares; and
(f) such other documents as the Sellers shall reasonably request.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification.
(a) Subject to Section 9.2 hereof, the Sellers hereby agree to
jointly and severally indemnify and hold the Purchaser, the Company, and their
respective directors, officers, employees, Affiliates, agents, successors and
assigns (collectively, the "Purchaser Indemnified Parties") harmless from and
against:
(i) any and all liabilities of the Company of every kind,
nature and description, absolute or contingent, existing as against the Company
prior to and including the Closing Date or thereafter coming into being or
arising by reason of any state of facts existing, or any transaction entered
into, on or prior to the Closing Date, except to the extent that the same have
been fully provided for in the Balance Sheet or disclosed in the notes thereto
or were incurred in the ordinary course of business between the Balance Sheet
date and the Closing Date;
(ii) subject to Section 10.3, any and all losses, liabilities,
obligations, damages, costs and expenses based upon, attributable to or
resulting from the failure of any representation or warranty of the Sellers set
forth in Section 4 hereof, or any representation or warranty contained in any
certificate delivered by or on behalf of the Sellers pursuant to this Agreement,
to be true and correct in all respects as of the date made;
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(iii) any and all losses, liabilities, obligations, damages,
costs and expenses based upon, attributable to or resulting from the breach of
any covenant or other agreement on the part of the Sellers under this Agreement;
(iv) any and all notices, actions, suits, proceedings, claims,
demands, assessments, judgments, costs, penalties and expenses, including
attorneys' and other professionals' fees and disbursements (collectively,
"Expenses") incident to any and all losses, liabilities, obligations, damages,
costs and expenses with respect to which indemnification is provided hereunder
(collectively, "Losses").
(b) Subject to Section 9.2, Purchaser hereby agrees to indemnify and
hold the Sellers and their respective Affiliates, agents, successors and assigns
(collectively, the "Sellers Indemnified Parties") harmless from and against:
(i) any and all Losses based upon, attributable to or
resulting from the failure of any representation or warranty of the Purchaser
set forth in Section 5 hereof, or any representation or warranty contained in
any certificate delivered by or on behalf of the Purchaser pursuant to this
Agreement, to be true and correct as of the date made;
(ii) any and all Losses based upon, attributable to or
resulting from the breach of any covenant or other agreement on the part of the
Purchaser under this Agreement or arising from the ownership or operation of the
Company from and after the Closing Date; and
(iii) any and all Expenses incident to the foregoing.
9.2 Limitations on Indemnification for Breaches of Representations
and Warranties.
An indemnifying party shall not have any liability under Section
9.1(a)(ii) or Section 9.1(b)(i) hereof unless the aggregate amount of Losses and
Expenses to the indemnified parties finally determined to arise thereunder based
upon, attributable to or resulting from the failure of any representation or
warranty to be true and correct, other than the representations and warranties
set forth in Sections 4.3, 4.11, 4.24 and 4.29 hereof, exceeds $25,000 (the
"Basket") and, in such event, the indemnifying party shall be required to pay
the entire amount of such Losses and Expenses in excess of $25,000 (the
"Deductible").
9.3 Indemnification Procedures.
(a) In the event that any Legal Proceedings shall be instituted or
that any claim or demand ("Claim") shall be asserted by any Person in respect of
which payment may be sought under Section 9.1 hereof (regardless of the Basket
or the Deductible referred to above), the indemnified party shall reasonably and
promptly cause written notice of the assertion of any Claim of which it has
knowledge which is covered by this indemnity to be forwarded to the indemnifying
32
party. The indemnifying party shall have the right, at its sole option and
expense, to be represented by counsel of its choice, which must be reasonably
satisfactory to the indemnified party, and to defend against, negotiate, settle
or otherwise deal with any Claim which relates to any Losses indemnified against
hereunder. If the indemnifying party elects to defend against, negotiate, settle
or otherwise deal with any Claim which relates to any Losses indemnified against
hereunder, it shall within five (5) days (or sooner, if the nature of the Claim
so requires) notify the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Claim which relates to any Losses indemnified against hereunder,
fails to notify the indemnified party of its election as herein provided or
contests its obligation to indemnify the indemnified party for such Losses under
this Agreement, the indemnified party may defend against, negotiate, settle or
otherwise deal with such Claim. If the indemnified party defends any Claim, then
the indemnifying party shall reimburse the indemnified party for the Expenses of
defending such Claim upon submission of periodic bills. If the indemnifying
party shall assume the defense of any Claim, the indemnified party may
participate, at his or its own expense, in the defense of such Claim; provided,
however, that such indemnified party shall be entitled to participate in any
such defense with separate counsel at the expense of the indemnifying party if,
(i) so requested by the indemnifying party to participate or (ii) in the
reasonable opinion of counsel to the indemnified party, a conflict or potential
conflict exists between the indemnified party and the indemnifying party that
would make such separate representation advisable; and provided, further, that
the indemnifying party shall not be required to pay for more than one such
counsel for all indemnified parties in connection with any Claim. The parties
hereto agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such Claim.
(b) After any final judgment or award shall have been rendered by a
court, arbitration board or administrative agency of competent jurisdiction and
the expiration of the time in which to appeal therefrom, or a settlement shall
have been consummated, or the indemnified party and the indemnifying party shall
have arrived at a mutually binding agreement with respect to a Claim hereunder,
the indemnified party shall forward to the indemnifying party notice of any sums
due and owing by the indemnifying party pursuant to this Agreement with respect
to such matter and the indemnifying party shall be required to pay all of the
sums so due and owing to the indemnified party by wire transfer of immediately
available funds within 10 business days after the date of such notice.
(c) The failure of the indemnified party to give reasonably prompt
notice of any Claim shall not release, waive or otherwise affect the
indemnifying party's obligations with respect thereto except to the extent that
the indemnifying party can demonstrate actual loss and prejudice as a result of
such failure.
9.4 Tax Treatment of Indemnity Payments.
The Sellers and the Purchaser agree to treat any indemnity payment
made pursuant to this Article 9 as an adjustment to the Purchase Price for
federal, state, local and foreign income tax purposes.
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ARTICLE X
MISCELLANEOUS
10.1 Payment of Sales, Use or Similar Taxes.
All sales, use, transfer, intangible, recordation, documentary stamp
or similar Taxes or charges, of any nature whatsoever, applicable to, or
resulting from, the transactions contemplated by this Agreement shall be borne
by the Sellers.
10.2 Survival of Representations and Warranties.
The parties hereto hereby agree that the representations and
warranties contained in this Agreement or in any certificate, document or
instrument delivered in connection herewith, shall survive the execution and
delivery of this Agreement, and the Closing hereunder, regardless of any
investigation made by the parties hereto; provided, however, that any claims or
actions with respect thereto (other than claims for indemnifications with
respect to the representation and warranties contained in Sections 4.3, 4.11,
4.24 and 4.35 which shall survive for periods coterminous with any applicable
statutes of limitation) shall terminate unless within twenty-four (24) months
after the Closing Date written notice of such claims is given to the Sellers or
such actions are commenced.
10.3 Expenses.
Except as otherwise provided in this Agreement, the Sellers and the
Purchaser shall each bear its own expenses incurred in connection with the
negotiation and execution of this Agreement and each other agreement, document
and instrument contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby, it being understood that in no
event shall the Company bear any of such costs and expenses.
10.4 Specific Performance.
The Sellers and the Company acknowledge and agree that the breach of
this Agreement would cause irreparable damage to the Purchaser and that the
Purchaser will not have an adequate remedy at law. Therefore, the obligations of
the Sellers and the Company under this Agreement, including, without limitation,
the Sellers' obligation to sell the Shares to the Purchaser, shall be
enforceable by a decree of specific performance issued by any court of competent
jurisdiction, and appropriate injunctive relief may be applied for and granted
in connection therewith. Such remedies shall, however, be cumulative and not
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
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10.5 Further Assurances.
The Sellers and the Purchaser each agrees to execute and deliver
such other documents or agreements and to take such other action as may be
reasonably necessary or desirable for the implementation of this Agreement and
the consummation of the transactions contemplated hereby.
10.6 Submission to Jurisdiction; Consent to Service of Process.
The parties hereto hereby irrevocably submit to the exclusive jurisdiction of
any federal or state court located within the state of New York over any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby and each party hereby irrevocably agrees that all claims in
respect of such dispute or any suit, action proceeding related thereto may be
heard and determined in such courts. The parties hereby irrevocably waive, to
the fullest extent permitted by applicable law, any objection which they may now
or hereafter have to the laying of venue of any such dispute brought in such
court or any defense of inconvenient forum for the maintenance of such dispute.
Each of the parties hereto agrees that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
10.7 Entire Agreement; Amendments and Waivers.
This Agreement (including the schedules and exhibits hereto)
represents the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof and can be amended, supplemented or
changed, and any provision hereof can be waived, only by written instrument
making specific reference to this Agreement signed by the party against whom
enforcement of any such amendment, supplement, modification or waiver is sought.
No action taken pursuant to this Agreement, including without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be construed
as a further or continuing waiver of such breach or as a waiver of any other or
subsequent breach. No failure on the part of any party to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.
10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of New York.
35
10.9 Table of Contents and Headings.
The table of contents and section headings of this Agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
10.10 Notices.
All notices and other communications under this Agreement shall be
in writing and shall be deemed given when delivered personally or mailed by
certified mail, return receipt requested, to the parties (and shall also be
transmitted by facsimile to the Persons receiving copies thereof) at the
following addresses (or to such other address as a party may have specified by
notice given to the other party pursuant to this provision):
(a) Purchaser:
National Investment Managers Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxx, COO
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Copy to:
Xxxxxxx Xxxxxxxxx, Esq.
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
(b) Sellers:
Xxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Facsimile: 000-000-0000
Copy to:
Xxxxx X. Xxxxxx
Xxxxxx Xxxx Xxxxx & Xxxxx, LLP
Suite 400
000 Xxxxx 00xx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: 000-000-0000
36
10.11 Severability.
If any provision of this Agreement is invalid or unenforceable, the
balance of this Agreement shall remain in effect.
10.12 Binding Effect; Assignment.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns. Nothing in this
Agreement shall create or be deemed to create any third party beneficiary rights
in any person or entity not a party to this Agreement except as provided below.
No assignment of this Agreement or of any rights or obligations hereunder may be
made by either the Sellers or the Purchaser (by operation of law or otherwise)
without the prior written consent of the other parties hereto and any attempted
assignment without the required consents shall be void; provided, however, that
the Purchaser may assign this Agreement and any or all rights hereunder
(including, without limitation, the Purchaser's rights to purchase the Shares
and the Purchaser's rights to seek indemnification hereunder) to any Affiliate
of the Purchaser. Upon any such permitted assignment, the references in this
Agreement to the Purchaser shall also apply to any such assignee unless the
context otherwise requires and notwithstanding any such assignment, Purchaser
shall remain fully liable for all obligations hereunder.
[intentionally blank]
37
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
NATIONAL INVESTMENT MANAGERS INC.
By: Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: COO
THE PENSION ALLIANCE, INC.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
/s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx
38
