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STOCK AND ASSET PURCHASE AGREEMENT
AGREEMENT dated April 5, 1999, by and among Xxxxxx & Xxxxxx, Inc., a
Delaware corporation with a principal office at 000 Xxxxxxxx Xxxxxxxxx, Xxxxx
Xxxx, XX 00000 ("G&C"), Prime Financial Services, Inc, a Delaware corporation
with a principal office at 000 Xxxxxxxx Xxxxxxxxx, Xxxxx Xxxx, XX 00000
("Newco"), Prime Financial Services, Inc., a New York corporation with a
principal office at 00 Xxxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000 ("PFSI"), Xxxxxxx
Xxxx, an individual with an address at 00 Xxxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000
("Xxxx"), and Xxxxx Xxxxxxx, an individual with an address at 00 Xxxxxxx Xxxxxx,
Xxxxxxxxxxxx, XX 00000 ("Xxxxxxx"). (PFSI, Xxxx, and Xxxxxxx will be referred to
herein as "Sellers" and individually as a "Seller." G&C and Newco will be
referred to herein as "Purchaser.")
W I T N E S S E T H :
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from Sellers, all of the capital stock of Prime Capital Services, Inc.,
a New York corporation ("PCSI"), and all of the capital stock of Asset and
Financial Planning, Ltd., a New York corporation ("AFPL") (collectively, PCSI
and AFPL will be referred to herein as the "Company");
WHEREAS, the capital stock of the Company owned by the Sellers (the
"Company Shares") shall be exchanged for a number of shares of the common stock
of the G&C (the "Purchaser's Stock"), upon the terms hereinafter set forth;
WHEREAS, the exchange of the Company Shares for shares of the
Purchaser's Stock is intended to qualify as a Type B tax-free reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended;
WHEREAS, Sellers desire to grant to Purchaser the right to purchase
from Sellers, PFSI's ownership interest in Healthvest LLC, a Delaware limited
liability company ("Healthvest");
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from Sellers, certain assets of PFSI related to the insurance and
broker/dealer management business of PFSI, upon the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants set forth herein and
in reliance on the representations and warranties contained herein, the parties
hereto hereby agree as follows:
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Section 1. Purchase and Sale of Stock.
1.1 Transfer of Stock. On the Closing Date (hereinafter defined),
Sellers shall sell, assign, transfer and deliver, unto G&C, and its successors
and assigns forever, free and clear of all Liens (as defined in Section 5.5
hereof) all right, title, interest and claims in or to all of the issued and
outstanding capital stock (the "Shares") of the Company owned by Sellers.
1.2. Company Acquired Assets. Sellers jointly and severally represent
and warrant to Purchaser and acknowledge and confirm that each such
representation and warranty shall be deemed to be material and that Purchaser is
relying upon such representations and warranties in connection with the
execution, delivery and performance of this Agreement, any investigation made by
Purchaser or on its behalf notwithstanding, except as otherwise specifically set
forth herein and in the Schedules hereto: the Company owns free and clear of
Liens (as defined in Section 5.5 hereof) or is using, pursuant to a valid and
effective license or lease described in the Schedules hereto, all of the
business, properties, contracts and assets of the Company or used by the Company
in its business as conducted since January 1, 1998, real, personal or mixed,
tangible or intangible, together with the goodwill of the Company, all as the
same existed on April 30, 1998, except for those assets disposed of in the
ordinary course of business consistent with past practice in arms-length
transactions with unaffiliated parties, together with any additions thereto
after such date, (hereinafter, other than the Excluded Assets (as defined in
Section 1.3 below) sometimes together referred to as the "Company Acquired
Assets").
1.3. Excluded Assets. The Company Acquired Assets do not include the
assets (herein collectively referred to as the "Excluded Assets") of the Company
as follows:
(a) counterclaims and cross claims to the extent relating to
any liability against which the Sellers indemnify Purchaser hereunder;
(b) insurance claims and rights under insurance policies to
the extent relating to any liability against which the Sellers indemnify
Purchaser hereunder;
(c) rights under this Agreement,
in each case, to the extent not reflected as an asset on any balance sheet of
the Company.
Section 2. Purchase and Sale of Insurance Assets.
2.1 Transfer of Insurance Assets. On the Closing Date (as hereinafter
defined), Sellers shall sell, assign, transfer and deliver, unto Newco, and its
successors and assigns forever, free and clear of all Liens (as defined in
Section 5.5 hereof), all right, title, interest and claims in or to the
following properties and assets of or used in PFSI's insurance brokerage
business and/or in PFSI's business of managing the operations of PCSI and AFPL
(the "Insurance and Management Business"), all as the same shall exist on the
date hereof, together with any
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additions thereto after the date of this Agreement, (hereinafter sometimes
together referred to as the "Insurance Acquired Assets"):
(i) all machines, equipment, furniture, fixtures, office
supplies, and all other tangible personal property, including without
limitation that property (A) described on Schedule 2.1(i) hereto, (B)
used or dedicated to use in the operations of the Insurance and
Management Business, (C) located at Suites 2C, 22, 23, 32 and 34-36 in
the building known as 00 Xxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxx Xxxx
(except, with respect to clauses (A) through (C) above, property leased
by the Sellers, which shall be delivered at the Closing subject to such
leases);
(ii) all contracts, promissory notes, leases of personal
property and agreements listed on Schedule 2.1(ii) hereto;
(iii) all rights, interests and claims of Sellers in, to or
under all intangible assets used in the Insurance and Management
Business (including without limitation the name "Prime Financial
Services, Inc." and any trademarks, trade names or service marks under
which Sellers have operated the Insurance and Management Business, any
copyrighted or copyrightable material, customers' records, customer
lists, together with any goodwill associated with any of the
foregoing);
(iv) all leasehold improvements to the real property to be
leased to Purchaser under the Lease Agreements (hereinafter defined);
(v) all insurance commissions receivable;
(vii) the security deposit provided for under the Lease
Agreements;
(vii) all licenses, franchises, permits, privileges,
immunities, approvals and authorizations from a governmental or
regulatory body ("Governmental Permits") that are necessary to entitle
the Seller to own or lease, operate and use its assets to conduct the
Business substantially as historically conducted by Seller; and
(viii) loans receivable as of the Closing Date (hereinafter
defined) from registered representatives of PCSI set forth on Schedule
2.1(viii) hereto.
2.2. Assumed Insurance Liabilities.
(a) Purchaser shall assume on the Closing Date and, effective
as of the Closing and contingent upon the occurrence of the Closing, shall
discharge in accordance with its terms (subject to any defenses or claimed
offsets asserted in good faith against the obligee to whom such liabilities,
payments and obligations are owed), subject to any contrary provision herein:
(i) insurance commission sharing payables, but only to the
extent such payables relate to insurance commissions receivable
assigned to Purchaser pursuant to
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Section 2.1(v) above and only to the extent such insurance commissions
receivables are collected by Purchaser; and
(ii) the continuing obligations arising subsequent to
the Effective Time of the Closing based on operations subsequent
thereto under the contracts, agreements, licenses and purchase orders
listed on Schedule 2.1(ii) hereto.
(b) No other liabilities, payments or obligations of Sellers
(absolute, contingent or otherwise) arising out of the Insurance and Management
Business, the ownership or operation of any of the Insurance Acquired Assets,
the consummation of the transactions under this Agreement or otherwise shall be
assumed by Purchaser, and Sellers jointly and severally shall and do hereby,
effective as of the Effective Time of the Closing and without the necessity of
any further action on the part of Sellers, assume and/or retain responsibility
for, and shall pay for, perform, satisfy or obtain a discharge or release from,
promptly as they shall become due, all of such other liabilities, payments or
obligations.
2.3. Retained Insurance Liabilities. Without limiting the generality of
Section 2.2(b) hereof, and regardless of whether any of the following may be
disclosed to Purchaser pursuant to Section 5 hereof or otherwise, or whether
Purchaser may have knowledge of the same, Purchaser shall not assume, and shall
not be deemed to have assumed, any obligation, payment or liability of Sellers,
and Sellers jointly and severally shall and do hereby assume and retain
responsibility for and shall pay, perform, satisfy or obtain a discharge or
release from, promptly as they shall become due, any obligation, payment,
liability or expense imposed on Purchaser (the "Retained Liabilities"):
(a) for federal, state, local or foreign income, excise,
sales, unemployment, employer and employee withholding, social security,
occupation, franchise or customs taxes, duties or charges (hereinafter referred
to collectively as "Taxes" or separately as a "Tax") levied, assessed or imposed
in any manner upon Sellers that accrue or are attributable to any event or
occurrence transpiring, or any tax periods or portions thereof ending, on or
before the Closing Date, or any interest, penalties or additions to any such Tax
with respect thereto; or
(b) for any civil or criminal penalties or liabilities
(including interest), or any payments in the nature thereof, imposed upon, or
sought to be imposed upon Sellers or Purchaser (or any of the officers,
directors or shareholders of Purchaser, if assigned to a corporate entity), on
account of any fraudulent, criminal, intentional, willful or negligent act or
omission, or any act or omission of Sellers or any of the directors, officers,
employees or agents of Sellers for which strict liability is imposed or any
violation of the law by Sellers or any of the directors, officers, employees or
agents of Sellers.
(c) liabilities with respect to the Employee Benefit Plans
(including, without limitation, all fringe benefits, bonus and profit sharing
plans, pension, health, retirement, survivor and disability benefits, severance,
vacation, sick day and personal day) owing to any employee of the Insurance and
Management Business at the Closing Date, including, without limitation, all
liability to any such employee who (A) shall not have been offered employment
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by Purchaser, (B) shall not have accepted such offer, or (C) shall have resigned
voluntarily prior to the first day of the first month commencing a least 90 days
after the Closing Date, and all liabilities for Employee Benefit Plans to the
extent accrued for service prior to the Closing Date or to the extent not
included in Purchaser's Comparable Wage Package as offered to such employee;
(d) all liabilities arising out of worker's compensation
claims resulting from any injury that occurred or occurs before the Closing
Date;
(e) all liabilities owed to any employee, consultant or
independent contractor who is not retained by Purchaser after Closing or who is
retained but shall have resigned voluntarily prior to the first day of the first
month commencing a least 90 days after the Closing Date, accruing prior to the
Closing Date as if such employee resigned on the Closing Date;
(f) any present or potential obligation to remediate or take
other action or any present or potential liability relating to any other
environmental degradation, damage, pollution or contamination of any property
leased, owned or used by Seller in connection with the Business (including any
predecessors) on or prior to the Closing Date; and
(g) any liability under any Contract (hereinafter defined) not
assigned to Purchaser or under which a default shall have occurred or an
indemnification obligation shall have arisen prior to or upon the transfer of
the Acquired Assets and as to which, after the Closing, Purchaser shall not have
received the benefit under Section 7.8 hereof.
Section 3. Consideration.
3.1. Purchase Price.
(a) The purchase price (the "Purchase Price") for the Company
Shares and the Insurance Acquired Assets shall be 751,004 shares of the
Purchaser's Stock (the "Purchase Price Shares") based on the sum of (i)
$6,600,000, divided by $8.971875; plus (ii) $216,367, deemed to be the value of
advances to registered representatives acquired by Purchaser under Section
2.1(viii) hereof (the "Representative Loans"), divided by the average of the
closing prices of the Purchaser's Stock for the 20 trading days prior to the
Closing Date (hereinafter defined) which price is $14.075 (the "Average Price"),
in each case subject to any adjustment as described in Section 3.2 below.
(b) At Closing Purchaser shall deliver to Seller, as partial
payment of the Purchase Price, 735,632 shares of the Purchaser's Stock, except
as subject to the escrow set forth in Section 10.5 hereof.
(c) Within 30 days of Closing, Purchaser shall deliver to
Seller, as payment of the remainder of the Purchase Price, 15,372 shares of the
Purchaser's Stock.
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3.2. Adjustments to the Purchase Price.
(a) If the 1999 Adjusted Pre-tax Profits (as defined below)
are less than $900,000, then the Purchase Price shall be reduced by an amount
equal to the product of (i) the difference between $1,100,000 minus the 1999
Adjusted Pre-tax Profits, multiplied by (ii) 6. The term "1999 Adjusted Pre-tax
Profits" shall mean: (i) the sum of the pre-tax income, before depreciation
expense, of Newco, PCSI, and AFPL ("the Subs") for the period January 1, 1999 to
December 31, 1999 determined in accordance with GAAP; less (ii) the Net
Commissions (hereinafter defined) received by the Subs for business generated by
representatives who were prior to January 1, 1999 employees or planners of G&C
or an affiliate or who shall have been recruited by G&C or an affiliate other
than the Subs after January 1, 1999 (the "G&C Planners") ("Net Commissions"
means 1.25% for mutual funds, variable annuities and packaged products and 3.75%
for stocks and bonds); less (iii)soft dollars and other similar revenues, net of
ticket charge payments, clearing costs and meeting expenses, received by the
Subs and allocable to G&C Planners. In addition, in the event that a
representative who was an employee of any of the Subs prior to January 1, 1999
or is recruited by any of the Subs subsequent to January 1, 1999 becomes a
representative or planner of G&C or an affiliate of G&C other than the Subs, the
1999 Adjusted Pre-tax Profits shall be further adjusted such that the Subs are
credited with receiving the same net commissions that would have been received
by the Subs for business generated in 1999 by such representative if such
representative had remained a representative of the Subs. For purposes of
calculating the 1999 Adjusted Pre-tax Profits, commissions paid to G&C Planners
shall be deemed to be 95% for mutual funds, variable annuities and packaged
products and 85% for stocks and bonds. The purpose of the adjustments to 1999
Adjusted Pre-tax Profits set forth in clauses (ii) of this Section 3.2(a) is to
remove from the 1999 Adjusted Pre-tax Profits a reasonable estimate of the
profit received by the Subs for business generated by G&C Planners, but to
reimburse the Subs for a reasonable estimate of the cost of supervising such G&C
Planners. Within 30 days of the end of each calender quarter, Purchaser shall
calculate the 1999 Adjusted Pre-tax Profits for such quarter and provide Sellers
with a copy of such calculation; provided, however, that such quarterly
calculations and the final calculation of the 1999 Adjusted Pre-tax Profits
shall be subject to reasonable year-end adjustments.
(b) The Purchaser shall have the option to assign to the
Sellers any of the Representative Loans which are Uncollectible Loans
(hereinafter defined) The Purchase Price shall be further reduced by the amount
of the unamortized balance of such Uncollectible Loans pursuant to Section 10.5
herein. The calculation of the amortization of such Representative Loans shall
be in accordance with the schedule agreed to upon the making of such
Representative Loans. An "Uncollectible Loan" means any Representative Loan
under which any payment of principal, interest, or other sums due is not paid in
full when due or on proper demand pursuant to the terms of the promissory note
or other document evidencing such Representative Loan.
(c) [omitted]
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(d) G&C shall make the initial determination of any adjustment
in Purchase Price to be made pursuant to this Section 3.2. In the event of a
dispute between the parties over the amount of any adjustment to be made
pursuant to this Section 3.2, such dispute shall be referred to a firm of
independent certified public accounts (that shall not have performed any
accounting or other professional services for either party hereto or any of
their affiliates) selected by Sellers from a list of five such firms supplied by
Purchaser for determination in accordance with the terms of this Agreement, and
the determination of said firm shall be final and binding upon the parties.
Purchaser and Seller shall share equally the cost of referring such dispute to
such firm.
3.3. Allocation. Sellers and Purchaser agree that the consideration
paid for (i) the Insurance Acquired Assets shall equal 3.27% of the Purchase
Price; (ii) the shares of PCSI shall equal 90.79% of the Purchase Price; and
(iii) the shares of AFPL shall equal 5.94% of the Purchase Price. For purposes
of the allocation under this Section 3.3, the Purchase Price shall be deemed not
to include the value of the Representative Loans, and the consideration paid for
the Representative Loans shall be added to the consideration for the Insurance
Acquired Assets set forth in clause (i) above. Such allocations shall be binding
on Purchaser and Sellers for all federal, state and local tax purposes; and
Purchaser and Sellers shall file with their respective federal income tax
returns forms that shall reflect such allocation.
Section 4. Closing. Provided that the conditions in Sections 8 and 9
hereof shall have been satisfied or waived, the consummation of the purchase and
sale of the Company Shares and the Insurance Acquired Assets contemplated by
this Agreement (the "Closing") shall, unless another date or place is agreed to
in writing by Sellers and Purchaser, take place at the offices of Akabas & Xxxxx
on April 5, 1999 (the "Closing Date"), provided, however, that such date may be
adjourned by a party hereto, if the other party hereto shall not have satisfied
all of the conditions to be satisfied by such other party on or before the
Closing. All references contained herein to "the Effective Time of the Closing"
shall be deemed to refer to the time that the consummation of the transaction
contemplated hereby is completed. Without limiting the remedies of any party for
any condition not actually satisfied at the Effective Time of Closing, the
parties hereto acknowledge that, as of the date hereof, the conditions of
obligations of Purchaser set forth in Section 8 hereof and the conditions of
obligations of Sellers set forth in Section 9 hereof have been met or waived by
the respective parties.
Section 5. Representations and Warranties of Sellers. Sellers, jointly
and severally, represent and warrant to Purchaser as follows, and acknowledge
and confirm that each such representation and warranty shall be deemed to be
material and that Purchaser is relying upon such representations and warranties
in connection with the execution, delivery and performance of this Agreement,
notwithstanding any investigation made by Purchaser or on its behalf.
5.1. Proper Authority and Structure. Healthvest, PFSI, PCSI, and AFPL
(the "Prime Group") have the power and authority to own, lease and operate their
properties and to carry
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on their businesses as now conducted. The Company has no subsidiaries or equity
investments in any entities.
5.2. Consents, Authorizations and Binding Effect.
(a) Sellers may execute, deliver and perform this Agreement
without the necessity of obtaining any consent, approval, authorization or
waiver or giving any notice or otherwise.
(b) This Agreement has been duly authorized, executed and
delivered by Sellers and constitutes the legal, valid and binding obligation of
Sellers, enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement will not:
(i) conflict with, result in the breach of,
constitute a default, with or without notice and/or lapse of time,
under, result in being declared void or voidable any provision of, or
result in any right to terminate or cancel any contract, lease,
agreement, license, commitment or purchase order to which the Prime
Group or Sellers or any of their properties is bound;
(ii) conflict with any of the Prime Group's
Certificates of Incorporation, Certificate of Formation, Operating
Agreement or By-Laws, which are annexed hereto, together with all
amendments thereto, as Schedule 5.2(b);
(iii) constitute a violation of any statute,
judgment, order, decree or regulation or rule of any court,
governmental authority or arbitrator applicable or relating to any of
Sellers, the Company's assets or the business and operations of the
Company and the Insurance and Management Business (the "Businesses");
or
(iv) result in the acceleration of any debt or other
obligation of Sellers or the Prime Group or the creation of any Lien
(as defined in Section 5.5) upon any of the Prime Group's assets.
5.3. Title to Shares and Interests.
(a) The Company Shares of AFPL are the only securities of AFPL
issued or outstanding, front and back copies of which have previously been
submitted to Purchaser. PFSI has good and marketable title to the Company Shares
of AFPL free and clear of all Liens.
(b) The Company Shares of PCSI are the only securities of PCSI
issued or outstanding, front and back copies of which have previously been
submitted to Purchaser. PFSI has good and marketable title to the Company Shares
of PCSI free and clear of all Liens.
(c) Xxxx and Xxxxxxx are the only beneficial or registered
owners of the capital stock of PFSI.
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(d) PFSI is the beneficial or registered owner of 50% of the
ownership interests of Healthvest. Xxxxx Xxxxxx and PFSI are the only beneficial
or registered owners of the ownership interests of Healthvest.
(e) No subscription, option, warrant, right, call, contract,
commitment, understanding, right of first refusal, right of first offer, or
agreement (other than this Agreement) relates to the Company Shares or any
capital stock of Company, or the issuance, sale or transfer of such Company
Shares or capital stock, except as set forth in certificates issued to employees
of Company or set forth in agreements with said employees, which are listed in
the Schedules hereto. The Company Shares were acquired by the Company
stockholders in compliance with all applicable laws, including federal and state
securities laws. The Company is not required by any agreement, arrangement or
understanding to issue any additional securities.
(f) No subscription, option, warrant, right, call, contract,
commitment, understanding, right of first refusal, right of first offer, or
agreement (other than this Agreement and the Limited Liability Company Agreement
dated October 31, 1996 among Healthvest, PFSI and Schein (the "LLC Agreement")
and the Joint Development and Marketing Agreement dated October 31, 1996)
relates to the ownership interests of Healthvest, or the issuance, sale or
transfer of such Healthvest ownership interests. The Healthvest ownership
interests were acquired by PFSI in compliance with all applicable laws,
including federal and state securities laws. Healthvest is not required by any
agreement, arrangement or understanding to issue any additional securities.
5.4. Financial Representations.
(a) The Sellers have caused to be maintained the Prime Group's
books of account in accordance with applicable laws, rules and regulations, and
such books and records are and, during the periods covered by the Financial
Statements (hereinafter defined), were correct and complete in all respects, and
completely and accurately reflect the transactions of the Businesses and the
income, expenses, assets and liabilities of the Businesses, including the nature
thereof and the transactions giving rise thereto.
(b) Included in Schedule 5.4 are (i) the audited balance
sheets of PCSI as of April 30, 1998 and April 30, 1997, and the related audited
statements of income and of cash flows for the fiscal years ended each such
April 30th, reported on by Passikoff, Xxxxxx & Xxxxx, Certified Public
Accountants, (ii) the unaudited balance sheets of AFPL as of April 30, 1998 and
April 30, 1997, and the related unaudited statements of income and of cash flows
for the fiscal years ended each such April 30th, (iii) the unaudited balance
sheet of the Company as of November 30, 1998 prepared in accordance with
generally accepted accounting principles consistently applied (the "Balance
Sheet") and the unaudited balance sheets of the Company as of November 30, 1997
prepared in accordance with generally accepted accounting principles
consistently applied, and the related statements of income and of cash flows for
the seven months ended each such November 30th, (iv) the unaudited recast
statement of income of the Company for the year ended April 30, 1998 including
the related payroll and expense
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allocation, (v) the unaudited balance sheet of the Insurance and Management
Business, as of November 30, 1998 prepared in accordance with generally accepted
accounting principles consistently applied reflecting only the assets purchased
by the Purchaser and the liabilities assumed by the Purchaser (the "Insurance
Balance Sheet") and (vi) the statements of income of PCSI, AFPL and the
Insurance and Management Business for the year ended April 30, 1998
(collectively the "Financial Statements").
(c) The Financial Statements have been prepared from the books
of account of the Sellers, in conformity with generally accepted accounting
principles consistently applied ("GAAP"), and present fairly the financial
position of the Businesses as of the date of such statements and the results of
operations of the Businesses for the periods covered thereby. The Financial
Statements reflect all necessary adjustments and reserves for losses and
contingencies as of the date of such statements.
(d) The Company has no liabilities (including, without
limitation, unasserted claims, whether known or unknown, matured or unmatured,
absolute, contingent or otherwise) that, in accordance with GAAP, are required
to be reflected, and are not reflected or are in excess of the amount reflected,
in the Balance Sheet or notes thereto except those incurred since the date of
the Balance Sheet in the ordinary course of business, consistent with past
practice, in arms' length transactions with unrelated parties, and which do not
have and cannot reasonably be expected to have, in the aggregate, a material
adverse effect on the business, financial condition or prospects of the Company
(a "Material Adverse Effect").The Insurance and Management Business has no
liabilities (including, without limitation, unasserted claims, whether known or
unknown, matured or unmatured, absolute, contingent or otherwise) that, in
accordance with GAAP, are required to be reflected, and are not reflected or are
in excess of the amount reflected, in the Insurance Balance Sheet or notes
thereto except those incurred since the date of the Insurance Balance Sheet in
the ordinary course of business, consistent with past practice, in arms' length
transactions with unrelated parties, and which do not have and cannot reasonably
be expected to have, in the aggregate, a material adverse effect on the
business, financial condition or prospects of the Insurance and Management
Business (a "Material Adverse Effect").
(e) Attached hereto as Schedule 5.4(e) are statements of
account for all depository accounts maintained by PCSI and AFPL, showing the
balances of each such account as of March 26, 1999 for bank depository accounts
and March 24, 1999 for broker accounts. No withdrawals have been made from any
such account since such statements outside of the ordinary course of business.
(f) Schedule 5.4(f) hereto is attached hereto as clarification
and/or correction to other schedules provided by Sellers pursuant to this
Section 5.4. Sellers represent and acknowledge that the attachment hereto of
Schedule 5.4(f) shall not result in Purchaser assuming any liability to Sellers
or result in any adjustment of the Purchase Price in favor of the Sellers.
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5.5. Title and Condition of Assets.
(a) The Sellers have good and marketable title to the Company
Shares, free and clear of liens, encumbrances, claims of third parties, security
interests, mortgages, pledges, agreements, options and rights of others of any
kind whatsoever, whether or not filed, recorded or perfected, and including,
without limitation, any conditional sale or title retention agreement or lease
in the nature thereof or any financing statements filed in any jurisdiction or
any agreement to give any such financing statements (hereinafter collectively
referred to as "Liens").
(b) The Prime Group has good and marketable title to the
Insurance Acquired Assets and the Company Acquired Assets (the "Acquired
Assets") free and clear of Liens or is using them pursuant to a valid and
effective license or lease described in the Schedules hereto.
(c) The equipment and the other tangible assets included in
the Acquired Assets and listed on Schedule 5.5 hereto are in operating
condition, order and repair, are suitable for the purposes for which they are
being used and constitute all of the personal property assets used in the
operations of, and necessary to operate, the Businesses as conducted during the
two years prior to the date hereof. None of the Acquired Assets has been
affected by any fire, accident, act of God or any other casualty that materially
and adversely impairs its function in the Businesses. The Businesses are not
conducted under any restriction imposed upon the Prime Group (but not imposed
upon other similar businesses in the locality or localities where the Businesses
are located).
(d) Schedule 5.5 hereto includes a complete and correct list
and a summary description of all material tangible personal property in the
nature of equipment owned or leased by the Company
(e) PFSI has good and marketable title to PFSI's ownership
interests in Healthvest, free and clear of Liens.
5.6. [Omitted]
5.7. Insurance Receivables and Payables.
(a) The insurance commissions receivable of the Insurance and
Management Business are bona fide receivables and arose out of arms' length
transactions, are recorded correctly on the books and records of the Seller, are
not subject to any offsetting claims or adjustments and are collectible within
sixty (60) days after the date hereof in the amount equal to the aggregate face
amount of such receivables, less any reserves therefor reflected on the
Insurance Balance Sheet or added by the Sellers in the ordinary course of
business since the date of the Insurance Balance Sheet, consistent with prior
practice.
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(b) The obligations of the Insurance and Management Business
reflected on the Insurance Balance Sheet and to be assumed by the Purchaser
pursuant to Section 2.2(a)(i) arise only in connection with the insurance
commissions receivable assigned to Purchaser pursuant to Section 2.1(v) and are
payable only to the extent such insurance commissions receivable are collected.
5.8. Insurance.
(a) Schedule 5.8 hereto contains a copy of all of the policies
of insurance maintained by the Prime Group. Such policies are underwritten by
financially sound and reputable insurers and are adequate to cover potential
liabilities relating to the business of the Businesses, the Acquired Assets and
all of the premises in which the Businesses operate.
(b) No claims are pending or, to the knowledge of the Prime
Group, threatened under any of the Prime Group's casualty or liability insurance
policies, and no claim has been made thereunder during the three (3) years
preceding the date hereof. All premiums due and payable thereon have been paid,
and all such policies are in full force and effect in accordance with their
respective terms. No outstanding claims or liabilities, exist, whether fixed or
contingent, under any medical reimbursement plan or any other plan or policy
under which the Prime Group acts as a self-insured.
5.9. Litigation and Compliance.
(a) Except as disclosed on Schedule 5.9(a) annexed hereto,
there are no actions, suits, claims or proceedings or governmental or
administrative investigations pending or, to the knowledge of Sellers or the
Prime Group, threatened, nor, to the knowledge of Sellers or Prime Group, is
there any reasonable basis for any such action, suit, claim or proceeding (i)
by, against or otherwise involving any of Sellers, the Prime Group, or any of
Prime Group's officers, directors, employees or agents, any of the Acquired
Assets or any asset or property of others leased or used by the Prime Group
pursuant to an agreement or (ii) which questions or challenges the validity of
this Agreement or any action taken or to be taken pursuant to this Agreement.
Purchaser acknowledges that, except in regard to Seller's guarantee under
Section 7.16 hereof, Purchaser shall assume any liability of Sellers arising out
of any of the matters set forth on Schedule 5.9(a) hereto. Purchaser further
acknowledges that any payment or payments made by Purchaser arising out of any
of the matters set forth on Schedule 5.9(a) hereto shall not affect the
calculation of any adjustment to the Purchase Price set forth in Section 3.2
hereof.
(b) The Prime Group is in substantial compliance with, is not
in default or violation in any material respect under, and has not been charged
with or received any notice at any time of any violation by it of, any statute,
law, ordinance, regulation, rule, decree or order applicable to the business or
operations of the Prime Group. PCSI is registered with the National Association
of Securities Dealers, Inc. (the "NASD") as a registered Broker/Dealer and such
registration is current in all respects. Neither the Prime Group nor to the best
knowledge of the Prime Group any person who is currently or was during the 12
months prior
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to the date hereof one of its employees, registered representatives or
independent contractors is the subject of any disciplinary proceedings before,
or under investigation by, the NASD, the United States Securities and Exchange
Commission (the "SEC"), any securities exchanges or markets, any state
securities division or other regulatory bodies. Neither the Prime Group nor the
Sellers have received during the two years prior to the date hereof any written
complaints or requests for refunds of commissions paid. Annexed hereto as
Schedule 5.9(b) are the Forms U-4 for all registered representatives and
principals of the Company who answered "Yes" to any part or question of Section
22 of such Form U-4 and all Forms BD and amendments thereto filed with the SEC
during the three years prior to the date hereof. All such filings were to the
best knowledge of the Prime Group true and accurate in all material respects
when filed and no further amendment thereof is currently (until the execution
hereof) required.
(c) None of the Prime Group, nor any of the Acquired Assets or
transactions contemplated under this Agreement, is subject to any judgment,
order or decree entered in any lawsuit or proceeding applicable to the
Businesses and/or operations of the Company.
(d) The Prime Group has duly filed all reports and returns
required to be filed by it with governmental authorities. None of the Prime
Group is required to obtain any governmental permits and licenses and other
governmental consents, except as may be required after the execution of and
closing under this Agreement.
(e) The Prime Group has operated, and will through the Closing
Date operate, in material compliance with all laws, rules, statutes, ordinances,
orders and regulations, including, without limitation, those applicable to the
Prime Group under the Occupational Safety and Health Act of 1970, as amended, or
any equivalent state law. The Prime Group has received no notice of any
violation thereof, nor are Sellers or the Prime Group aware of any basis
therefor.
(f) PCSI has entered into an agreement with Xxxxxx Xxxxxxx
("Xxxxxxx") pursuant to which Ryerson shall indemnify PCSI for 80% of PCSI's
liability arising out of any action, suit, claim or proceeding relating to any
of the claims set forth on Schedule 5.9(a) in which Ryerson is named as a
Defendant and/or a Respondent, including, without limitation, any unfiled claims
of Xxxxxxx Xxxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx Xxxxx and Xxxxxxxxxx Xxxxx, Xxxx
Xxxxxxxx and Xxxxxxxx Xxxxx or other persons if arising out of similar
investments, and 50% of any attorneys' fees and litigation expenses relating to
such claims.
5.10. Taxes.
(a) The Prime Group has, or on or before the Closing Date will
have, duly filed all tax reports and returns required to be filed in respect of
its business and operations and the Acquired Assets as of such date. All such
tax reports and returns are or will be complete, accurate and in compliance with
all relevant laws and regulations in all material respects, and, none has been
audited by any governmental authority. The Prime Group has, or on or before the
Closing Date will have, paid and discharged all federal, state, local and
foreign taxes,
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interest, penalties or other payments required, as the case may be, to be paid
and then currently due as shown on such tax reports and returns or otherwise in
respect of the Acquired Assets and the business, operations and employees of the
Prime Group as of such date. The Financial Statements reflect all adjustments
and reserves for all federal, state, local and foreign taxes, interest,
penalties or other payments necessary to conform the Financial Statements with
generally accepted accounting principles consistently applied. To the knowledge
of Prime Group, no audit of Sellers or the Prime Group is planned or threatened.
The Prime Group has withheld proper and accurate amounts from its employees'
compensation in substantial compliance with all withholding and similar
provisions of the IRS Code of 1986, as amended, and any other applicable law.
Purchaser acknowledges that the Purchaser shall duly file all tax reports and
returns required to be filed after the Closing in respect of the Businesses and
the Acquired Assets for the period from and after January 1, 1999 and Purchaser
shall pay and discharge all federal, state, local and foreign taxes, interest,
penalties or other payments required, as the case may be, to be paid and as
shown on such tax reports and returns or otherwise in respect of the Acquired
Assets and the Businesses for such period.
(b) The Prime Group has received no notice of any tax
deficiency outstanding, proposed or assessed against it, nor does the Prime
Group have any knowledge of any basis for any tax deficiency or assessment, nor
has the Prime Group executed any waiver of any statute of limitations on the
assessment or collection of any tax. No tax liens are upon, pending against or,
to the knowledge of the Sellers or the Prime Group, threatened against any
Acquired Assets.
(c) Attached hereto as Schedule 5.10(c) are all tax reports
and returns required to be filed in respect of the business and operations of
the Prime Group and of the Acquired Assets as of the Closing Date.
5.11. Intangible Assets.
(a) "Intellectual Property" means and includes
(i) trademarks, trademark registrations, service
marks, service xxxx registrations, applications for trademark and
service xxxx registrations, trade names, copyrights and copyright
registration;
(ii) license agreements with respect to any of the
foregoing intellectual property;
(iii) all printed or other written material and all
other copyrightable property;
(iv) all material trade secrets; and
(v) all computer software, programs, and
applications.
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(b) No material Intellectual Property other than that included
in the Acquired Assets ("Company Intellectual Property") is used or necessary in
connection with the conduct of the Businesses. No claim is pending or to the
best knowledge of the Sellers threatened against Sellers or the Prime Group by
any person or entity relating to (i) any of the Company Intellectual Property,
or its use included in the Acquired Assets; (ii) infringement by the Prime Group
on the intellectual property rights of any person or entity; or (iii)
infringement by any person or entity on the Company Intellectual Property rights
included in the Acquired Assets. To the knowledge of the Prime Group and
Sellers, no valid basis exists for any claims referred to in this Section
5.11(b).
(c) The current computer software, programming and
applications used by the Company, or the current computer software, programming
and applications of the Sellers used or dedicated to use in the operation of the
Businesses (the "Software"), to the extent they have been designed or developed
by Sellers or by consultants on Sellers' behalf or on behalf of the Prime Group,
are original and are protected by the copyright laws of the United States, and
Sellers or the Prime Group have complete rights to and ownership of such
Software. All work performed in connection therewith was "work-for-hire" under
the United States Copyright Act, or the product thereof has been assigned in
full to Sellers or the Prime Group. No part of such Software or the use thereof
infringes upon the rights of any other person or entity, or violates or
infringes upon any common law or statutory rights of any other person or entity,
including, without limitation, rights relating to defamation, contractual
rights, copyrights, patents, trade secrets and rights of privacy or publicity.
Neither of the Sellers nor the Prime Group has sold, assigned, licensed,
distributed or in any other way disposed of or encumbered the Software.
(d) To the best knowledge of the Sellers, the Software, to the
extent it is licensed from any third party licensor or constitutes
"off-the-shelf" software, is held by the Prime Group legitimately and is fully
and freely transferable without any third party consent and is not limited to
use on any hardware and/or any site or sites. To the best knowledge of the
Sellers, all of the Company's computer hardware, and all computer hardware of
the Sellers used or dedicated to use in the Businesses, has, and has had, only
legitimately-licensed software installed therein.
(e) To the best knowledge of the Prime Group, the Software is
free from any significant software defect or programming or documentation error,
operates and runs in a reasonable and efficient business manner, conforms to the
specifications thereof, and, with respect to owned Software, the applications
can be recreated from their associated source code, which is in the Company's
sole custody and control.
(f) Neither of the Sellers nor the Prime Group nor any
employee or agent of either of the Sellers or the Prime Group has knowingly
altered the data, or any Software or supporting software that may in turn damage
the integrity of the data, stored in electronic, optical or magnetic form.
Sellers have no knowledge of the existence of any bugs or viruses with respect
to the Software.
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(g) Sellers and the Prime Group shall, to the maximum possible
extent, pass through to Purchaser all manufacturer's and supplier's warranties
and support contracts for the Software that is not owned by Sellers or the Prime
Group , and Sellers shall upon Purchaser's reasonable request, execute each and
every document that is necessary or appropriate to effectuate Purchaser's
obtaining and enjoying the benefits of any such pass-through warranty.
(h) Sellers have furnished all documentation relating to the
use, maintenance and operation of the Software, all of which, to the knowledge
of Sellers, is true and accurate.
(i) To the best knowledge of the Sellers, the Information
Technology (as defined hereinafter) is suitable for use prior to, during and
after the calendar Year 2000 A.D., and the Information Technology used or to be
used during each such period will accurately receive, provide and process
date/time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the 20th and 21st centuries, including the
years 1999 and 2000 and leap-year calculations and will not malfunction, cease
to function, or provide invalid or incorrect results as a result of date/time
data, to the extent that other information technology, used in combination with
the Information Technology, properly exchanges date/time data with it.
"Information Technology" means computer software, computer firmware, computer
hardware (whether general or specific purpose), and other similar or related
items of automation, computerized, or software system(s) that are used or relied
on by the Sellers in the conduct of the Businesses. As of the Closing Date, the
Prime Group is in substantial compliance with all rules, requirements and
regulations of, and has duly filed all reports required to be filed with, the
National Association of Securities Dealers, Inc., the United States Securities
and Exchange Commission, any securities exchanges or markets, any state
securities division or other regulatory bodies, in respect of any of the
Information Technology. All such reports are complete, accurate and in
compliance with all relevant laws and regulations in all material respects.
(j) Purchaser acknowledges that Prime Financial Services and
Prime Capital Services are not registered trademarks of any of the Prime Group
and that no trademark registrations for Prime Financial Services and Prime
Capital Services are pending.
5.12. Employees. The Prime Group has good relations with its current
and former employees and current and former independent contractors and has not
received any material complaint from, and has not engaged in any material
dispute with, any of such employees and independent contractors and affiliated
brokers during the twelve (12) months prior to the date hereof. Schedule 5.12
hereto includes a list of all registered representatives and employees of the
Company as of the date of such Schedule, including a specification of all such
registered representatives or employees who are on leave of absence, disability,
or any other status other than full-time.
5.13. ERISA. Included on Schedule 5.13 is a list of each employee
benefit plan (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), written or oral employment
or consulting agreement, severance pay plan, employee relations policy, practice
or arrangement, agreements with respect to leased or
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temporary employees, vacation plan or arrangement, sick plan, stock purchase
plan, stock option plan, fringe benefit plan, bonus plan and any deferred
compensation agreement, plan or program covering any present or former employee
of Sellers working in the Businesses and which is, or at any time was, sponsored
or maintained by (or to which contributions are, were, or at any time were
required to have been, made by) Sellers or any other organization which is a
member of a controlled group of organizations (within the meaning of Sections
414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended) of
which Sellers is a member (the "Controlled Group") in connection with the
Businesses.
5.14. Labor Relations.
(a) No employee of any the Prime Group is covered by any
collective bargaining agreement.
(b) The Prime Group has complied, and is currently in
compliance, in all material respects with applicable laws (including, without
limitation, ERISA), rules and regulations relating to the employment of labor,
including without limitation those relating to wages, hours, unfair labor
practices, discrimination and payment of social security and similar taxes.
5.15. Contracts. Etc.
(a) All contracts, leases, agreements, licenses, commitments
and orders which are listed on Schedule 2.1(ii) or which either or any of
Sellers in connection with the business of the Prime Group or the Prime Group,
or any of them, is a party or by which Prime Group or any of its assets is bound
("Contracts") are attached as Schedule 5.15.
(b) All such Contracts, are valid and in full force and effect
and constitute the legal, valid and binding obligations of the Prime Group and
the other parties thereto, and there are no existing defaults by either of the
Prime Group, or, to the knowledge of the Prime Group or Sellers, by any other
party thereto, and, to the knowledge of the Prime Group or Sellers, no event,
act or omission has occurred that (with or without notice, lapse of time and/or
the happening or occurrence of any other event) would result in a material
default thereunder. No option exists or will arise as a result of the Closing to
amend or terminate any Contract. No party to any Contract is paying liquidated
damages in lieu of performance.
5.16. Customers and Suppliers.
(a) The Company has no customer who accounts for more than 5%
of the annual revenues of the Company. The Insurance and Management Business has
no customer who accounts for more than 5% of the annual revenues of the
Insurance and Management Business.
(b) Neither the Prime Group nor Sellers is aware of any loss
or threatened loss of any business from any customer of the Businesses. Neither
the Prime Group nor Sellers has
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received any material complaint from, and is engaged in any material dispute
with, any customer or supplier.
(c) Nothing has come to the attention of either of the Sellers
or the Prime Group that should reasonably lead him or it to believe that any
customers or suppliers of the Company or the Insurance and Management Business
will terminate or curtail its business relationship with the Company or the
Insurance and Management Business as a result of the Closing hereunder.
5.17. Absence of Certain Changes, Etc. Since April 30, 1998: Except as
set forth on Schedule 5.17 hereto and except for the hiring of new employees,
the granting of increases in compensation, and purchases or leases of new
equipment in the ordinary course of business, since the date of Schedule 5.17,
no event or other development has occurred that would indicate that a material
loss or decline in business will occur in the future; no compensation increase
for any employee in excess of 10% on an annual basis has been granted or
promised; the Company has not established or made any bonus, profit sharing,
retirement or other similar payment, plan or arrangement, nor has the Company
entered into any union contract or any employment agreement, or agreement with
any preparer or sales agent or any franchise agreement, independent
dealer/distributor agreement or other contract or arrangement with respect to
the performance of services for the Company; no new employee has been retained;
nothing has come to the attention of the Prime Group or the Sellers that would
lead it or them to believe that any material adverse change in the business,
operations, or prospects of the Businesses or in the condition of any of the
Acquired Assets, or the assets or properties of others leased or used by
Company, has occurred or is likely to occur; the Company has not suffered any
material damage, destruction or loss to any of its material assets; the Prime
Group has not entered into any transaction or contract, or amended any contract,
which might have a Material Adverse Effect on the business, financial condition
or prospects of the Company or the Insurance and Management Business; the
Company has not canceled or waived any claim or right of material value; neither
the Prime Group nor the Sellers have leased or allowed any Lien to arise upon
any of the Acquired Assets, or acquired or committed to acquire any material
capital assets except for fair market price, in the ordinary course of business,
consistent with prior practice, in arms-length transaction with unaffiliated
parties; the Company has not delayed or accelerated collection of any note or
receivable beyond the usual and customary period therefor or the legal maturity
thereof; the Company has not entered into any contract for the purchase of real
property or exercised any option to extend or terminate any lease of real
property; the Company has not declared or paid any dividend or distributed any
asset in respect of any security, whether as a distribution, repurchase,
redemption or otherwise; Sellers have operated the Insurance and Management
Business and the Company diligently and only in the usual, ordinary manner and,
to the extent consistent with such operation, (i) preserved its current business
organization intact, (ii) preserved its current relationships with employees,
registered representatives, customers, suppliers and all other persons having
business dealings with them and (iii) maintained in force the insurance policies
referred to in Section 5.8 hereof; Sellers have caused the Company to maintain
its books, accounts and records in the usual and ordinary manner, and in a
manner that fairly and correctly reflects its income, expenses, assets and
liabilities in accordance with GAAP; Sellers
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have not modified or changed any existing right, concession, license, lease,
contract, commitment or agreement, and no sale or other disposition of any right
or privilege accruing to the Sellers relating to the Businesses has occurred,
except as otherwise provided herein; the Company has not delayed in the payment
of any account payable or indebtedness beyond the usual and customary period
therefor or the legal maturity thereof; the Company has not incurred any
indebtedness other than that (i) incurred in the usual and ordinary course of
business, or (ii) incurred pursuant to existing contracts disclosed in the
Schedules hereto, in all cases not exceeding $5,000 in the aggregate; and the
Company has not made any agreement, commitment or arrangement to take any action
inconsistent with the obligations under, or prohibited by, this Section 5.17.
5.18. Fraudulent Conveyances; Bankruptcy. Sellers are not entering into
this Agreement with the intent to hinder, delay or defraud present or future
creditors of Sellers or of the Prime Group. Sellers are now solvent and are not,
and have not been, involved as debtor in any bankruptcy or similar proceeding.
5.19. Related Party Transactions.
(a) The Company has not engaged in any transactions, or
entered into any contracts with, in the last year, any other person, corporation
or entity, directly or indirectly, affiliated with any of Sellers or the Prime
Group or any members of Sellers' families, except (i) through December 31, 1998,
PCSI has paid 99% of PCSI's profits to PFSI in consideration of which PFSI
incurred expenses on behalf of PCSI and paid such expenses as they came due, and
(ii) from January 1, 1999 through the Closing Date, PCSI has paid, or has agreed
to pay, for expenses incurred by PFSI on behalf of PCSI during such period.
(b) Since June 30, 1998, the total salary and other
compensation paid by PCSI and AFPL to or for the benefit of Xxxx and Xxxxxxx has
not exceeded $27,083 per month in the aggregate.
(c) Since June 30, 1998, the Company has not paid any
non-business or personal related expenditures.
5.20. Representations, Warranties and Covenants regarding Purchaser
Stock.
(a) Sellers are acquiring the Purchase Price Shares for
investment only, and not with any view to the sale or distribution thereof.
Sellers are not acquiring the Securities as a result of any advertisement,
public meeting or other public offering.
(b) The addresses set forth below are each of Sellers' true
and correct residences, and each of Sellers has no present intention of becoming
a resident of any other state or jurisdiction.
(c) Each of Sellers understands that the Securities are not
registered under the Securities Act of 1933, as amended (the "Act"), and must be
held by him or it indefinitely
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unless they are subsequently registered under the Act or an exemption from such
registration is available. Each of Sellers understand that the resale of such
Securities will be restricted so that such resale may be made only in accordance
with the appropriate exemptions (including holding such Securities for periods
of time specified in Rule 144 promulgated under the Act and compliance with the
other provisions thereof, if such exemption is available), or registration under
the Act.
(d) Each of Sellers is aware of the risks of an investment in
restricted securities, and Seller has no need for any income from its investment
in the Securities and can afford to lose his or its entire investment. Each of
Sellers is aware that Purchaser has made no representation as to the value of
the Securities now or in the future. Each of Sellers or legal and financial
advisors available to each of them, has such knowledge and experience in
financial and business matters so that Sellers are capable of assessing the
merits and risks of acquiring the Securities.
(e) Sellers have reviewed the Prospectus of Purchaser dated as
of September 28,1998 ("Prospectus"), Purchaser's Quarterly Report on Form 10-Q
for the quarter ended 9/30/98 and Purchaser's Current Report on Form 8-K dated
November 19, 1998, as amended, and Sellers have had an opportunity to ask
questions of and receive answers from management of Purchaser and to obtain any
additional information that Purchaser possesses or can acquire without
unreasonable effort or expense relating to Purchaser's business, financial
condition and results of operations, although neither Purchaser nor any person
or entity on its behalf has made any representation or warranty except as
expressly contained herein. Sellers have reviewed each of the RISK FACTORS set
forth in the Prospectus and understands each of them.
(f) Each of Sellers understands that all certificates
evidencing the Securities will bear a legend substantially in the following
form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under any state
securities laws. These securities may not be sold, transferred, pledged
or hypothecated in the absence of an effective registration statement
for the securities under said Act or an opinion of counsel and other
assurances satisfactory to the Company prior to the transaction that
registration under said Act is not required.
(g) Each of Sellers has consulted with tax and legal counsel
selected by him or it in connection with this Agreement, and with financial
advisors, who have reviewed the merits of an investment in the Securities
hereunder. Each of Sellers, together with such persons, has sufficient knowledge
and experience in business and financial matters to evaluate the merits and the
risks of an investment in the Securities, and each of Sellers is fully aware of
the risks involved and has determined that an investment in the Securities is
consistent with his or its investment objectives. Each of Sellers is relying
solely on his or its own tax advisors with respect to the tax factors relating
to an investment in the Securities.
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(h) Prior to the registration of the Securities, if a Seller
or any subsequent holder, desires to transfer any of the Securities, such holder
must give to Purchaser prior written notice of such proposed transfer including
the name and address of the proposed transferee. Such transfer may be made only
either (i) upon publication by the Securities and Exchange Commission (the
"Commission") of a ruling, interpretation, opinion or "no action letter" based
upon facts presented to the Commission, or (ii) upon receipt by Purchaser of an
opinion of counsel to Purchaser, in either case to the effect that the proposed
transfer will not violate the provisions of the Act, the Securities Exchange Act
of 1934, as amended, or the rules and regulations promulgated under either such
act.
(i) Prior to any such proposed transfer, and as a condition
thereto, such holder, or any subsequent holder, will, if requested by Purchaser,
deliver to Purchaser (i) an investment letter setting forth investment
representations of the proposed transferee and such proposed transferee's
covenant to comply with the transfer provisions set forth in this Section 5.21,
signed by the proposed transferee, and (ii) an agreement by the transferee to
indemnify Purchaser to the same extent as set forth in Section 5.21(j) hereof.
(j) Each of Sellers acknowledges that he understands the
meaning and legal consequences of the representations and warranties contained
herein and hereby agrees to indemnify and hold harmless Purchaser and its
officers, directors agents and representatives and each of their heirs, legal
representatives, successors and assigns from and against any and all loss,
damage or liability (including reasonable attorneys' fees and costs incurred in
enforcing this indemnity provision) due to or arising out of (i) any transfer of
any of the Securities in violation of the Act, the Securities Exchange Act of
1934, as amended, or the rules and regulations promulgated under either of such
acts, (ii) any transfer of any of the Securities not in accordance herewith or
(iii) any untrue statement or omission to state any material fact in connection
with the investment representations or with respect to the facts and
representations supplied by such holder to counsel to Purchaser upon which its
opinion as to a proposed transfer shall have been based.
(k) Purchaser may place a stop order with its transfer agent
and registrar, if any, with respect to any of the Securities or any certificates
into which such Securities are exchanged, except to the extent such security is
covered by an effective registration statement under the Act.
Section 6. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Sellers as follows, and acknowledges that Sellers are
relying upon such representations and warranties in connection with the
execution, delivery and performance of this Agreement, notwithstanding any
investigation made by Sellers or on their behalf.
6.1. Authorizations and Binding Effect. Purchaser is duly licensed to
carry on its business as currently conducted in the State of New York. This
Agreement has been duly executed and delivered by Purchaser and constitutes the
legal, valid and binding obligation of Purchaser, enforceable in accordance with
its terms. The execution, delivery and performance of this Agreement does not
and will not:
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(i) conflict with, result in the breach of, constitute a
default, with or without notice and/or lapse of time, under, result in
being declared void or voidable any provision of, or result in any
right to terminate or cancel any contract, lease or agreement to which
Purchaser or any of its properties is bound;
(ii) constitute a violation of any statute, judgment, order,
decree or regulation or rule of any court, governmental authority or
arbitrator applicable or relating to Purchaser; or
(iii) result in the acceleration of any debt or other
obligation of Purchaser.
6.2. Judgments. No judgments exist against Purchaser or any of
Purchaser's assets.
6.3. Litigation. No actions, suits, claims, proceedings or
investigations (whether or not purportedly on behalf of or against Purchaser),
are pending or threatened against Purchaser at law or in equity that relate to
the transactions contemplated by this Agreement or that will prohibit Purchaser
from performing the obligations to be performed by it hereunder.
6.4. Purchaser Stock. The common stock of G&C included in the purchase
price, when issued upon the Closing pursuant to the terms hereof, will
constitute the duly authorized, validly issued, fully paid and nonassessable
shares of G&C.
6.5. Company Stock. Purchaser is acquiring the Company Shares for
investment only, and not with any view to the sale or distribution thereof.
6.6. Access to Books. Purchaser has not been denied access to any
books, records or information of the Sellers requested by Purchaser.
6.7. Other Information. G&C's annual financial statements for the years
1997 and 1998, recorded on G&C's Form 10-K for the year ended June 30, 1998,
G&C's Form 10-Q dated September 30, 1998, and Purchaser's Current Report on Form
8-K dated November 19, 1998, as amended, as filed with the Securities and
Exchange Commission, and G&C's reports to stockholders do not contain any
statement that is false or misleading with respect to a material fact, and do
not omit to state a material fact necessary in order to make the statements
therein under the circumstance in which they are made not false or misleading in
any material respect.
Section 7. Covenants.
7.1. Access to Records and Properties of the Sellers.
(a) Between the date of this Agreement and the Closing Date,
Sellers shall give to Purchaser such access to the premises, books and records
of Sellers and the Prime Group relating to the Businesses, and such copies
thereof, as Purchaser may from time to time
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reasonably request. Any investigation pursuant to this Section 7.1 shall be
conducted in such manner as not to interfere unreasonably with the operation of
the Businesses.
(b) [omitted]
(c) Purchaser shall not dispose of or destroy any business
records and files of Sellers related to the Businesses for periods prior to the
Closing Date, without first offering to turn over possession thereof to Sellers
by written notice to Sellers at least ninety (90) days prior to the proposed
dates of such disposition or destruction. Purchaser shall not dispose of or
destroy any personnel records of anyone who worked for Sellers (including
medical records), but shall turn over possession without notice to Sellers.
(d) To the extent reasonably required by Sellers, Purchaser
shall allow Sellers and their agents access to all business records and files
(including personnel records and medical records) of Sellers related to the
Businesses that relate to periods prior to the Closing Date, upon reasonable
advance notice during normal working hours at any location where such records
are stored, and Sellers shall have the right, at Seller's own expense, to make
copies of any such records and files, provided, however, that any such access or
copying shall be had or done in such a manner so as not to unreasonably
interfere with the normal conduct of the Businesses by Purchaser.
(e) After the Closing, Purchaser shall make available to
Sellers upon written request: (i) personnel of Purchaser to assist Sellers in
locating and obtaining records and files maintained by Sellers for periods prior
to the Closing Date, and Sellers shall reimburse Purchaser for the actual cost
thereof; and (ii) any personnel of Purchaser whose assistance or participation
is reasonably required by Sellers in anticipation of, preparation for, or the
prosecution or defense of existing or future litigation, tax returns or other
matters, in which Sellers is involved, or in order to address any Retained
Liability, and Sellers shall reimburse Purchaser for the actual cost thereof.
7.2. Operation of the Businesses. From and after the date hereof until
the Closing Date, Sellers shall with regard to the Businesses and its
operations:
(a) Operate the Businesses diligently and only in the usual,
ordinary manner and, to the extent consistent with such operation, (i) preserve
its current business organization intact, (ii) use their best efforts to
preserve its current relationships with employees, customers, suppliers and all
other persons having business dealings with them; (iii) maintain in force the
insurance policies referred to in Section 5.8 hereof; and (iv) maintain in good
working order and repair all tangible personal property and all improvements on
real property (and all fixtures and systems therein) included in the Acquired
Assets, ordinary wear and tear excepted.
(b) Maintain the Seller's and the Company's books, accounts
and records in the usual and ordinary manner, and in a manner that fairly and
correctly reflects the income, expenses, assets and liabilities of the
Businesses on a basis consistent with prior years.
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(c) Comply with all Federal, state, local and other
governmental (domestic or foreign) laws, statutes, ordinances, rules,
regulations, orders, writs, injunctions, decrees, awards or other requirements
of any court or other governmental or other authority applicable to Sellers, the
Prime Group or their assets or to the conduct of the Businesses, and use best
efforts to perform all obligations under all contracts, agreements, licenses,
permits and undertakings without default.
(d) Make no modification or change in any existing right,
concession, license, lease, contract, commitment or agreement, and no sale or
other disposition of any right or privilege accruing to them, except in the
ordinary course of business consistent with past practice, and except as
otherwise provided herein.
(e) Not enter into, modify or extend any contract relating to
the Businesses, or engage in any activity or transaction, in either case not in
the ordinary course of business and in accordance with past practice; and not
enter into, terminate, modify or extend any contract material to the Businesses.
(f) Make no change in the compensation payable or to become
payable to any present or former director, employee, salesman, consultant or
other agent, except as required by existing contracts to which any of Sellers or
the Prime Group is bound; make no change in any existing, and enter into no new,
arrangement or contract relating to management, executive or clerical services
or relating to the sharing of administrative or other overhead or any management
or supervisory fee; establish or make no bonus, stock option, profit sharing,
retirement or other similar payment, plan or arrangement or institute any
increase therein, except as otherwise provided herein or one-time bonuses
payable prior to the Closing Date; and enter into no union contract and no
employment agreement, or agreement with any salesperson or sales agent or any
franchise agreement, independent dealer/distributor agreement or other contract
or arrangement with respect to the performance of services for the Businesses.
Notwithstanding any provision to the contrary herein, the total salary and other
compensation paid by PCSI and AFPL to or for the benefit of Xxxx and Xxxxxxx
shall not exceed $27,083 per month in the aggregate.
(g) Not sell, lease or dispose of, or allow any Lien to arise
upon, any of the Acquired Assets and not acquire or commit to acquire any
material capital assets except for fair market price, in the ordinary course of
business, consistent with prior practice, in arms-length transactions.
(h) Not pay, satisfy or discharge in any other way any account
payable, indebtedness, claim or liability of any kind, except for the payment of
liabilities reflected on the Balance Sheet at no more than the book amount
thereof and except for payments for supplies at fair market value ordered in the
ordinary course of business consistent with prior practice; and not delay or
accelerate the payment of any account payable or indebtedness beyond the usual
and customary period therefor or the legal maturity thereof.
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(i) Not delay or accelerate collection of any note or
receivable beyond the usual and customary period therefor or the legal maturity
thereof.
(j) Not pay any non-business or personal related expenditures.
(k) Not create, incur or assume, or agree to create, incur or
assume, any indebtedness, or enter into any capitalized lease obligation, other
than that (i) incurred in the usual and ordinary course of business, or (ii)
incurred pursuant to existing contracts disclosed in the Schedules hereto.
(l) Not enter into any contract for the purchase of real
property or exercise any option to extend or terminate any lease of real
property without notifying Purchaser in advance of a deadline therefor and
obtaining Purchaser's consent thereto.
(m) Not make any agreement, commitment or arrangement to take
any action inconsistent with the obligations under, or prohibited by, the
foregoing Subsection 7.2.
This Section 7.2 shall not be applicable if the execution and delivery of this
Agreement occurs simultaneously with the Closing.
7.3. Competing Transactions. Sellers shall not take any action,
directly or indirectly, to negotiate, cause, promote, authorize or agree to any
transaction competing or interfering with any of the transactions contemplated
by this Agreement.
7.4. Best Efforts to Satisfy Conditions. Sellers and Purchaser shall
each use its best efforts to cause the conditions to the obligations of the
other parties to be satisfied to the extent that the satisfaction of such
conditions is in its or his control, including obtaining any necessary consents,
authorizations, and approvals. Each of the parties hereto shall refrain from
taking any action, and shall notify the other parties promptly of any event,
occurrence or circumstances, that might render any of its representations and
warranties inaccurate as of the Closing Date.
7.5. Employment and Noncompete Agreements. PFSI, Xxxx, and Xxxxxxx
shall enter into a Noncompetition Agreement with Purchaser in the form of
Exhibit A hereto. Xxxx and Xxxxxxx shall enter into mutually satisfactory
Employment Agreements with Purchaser in the form of, respectively, Exhibit B and
Exhibit C hereto.
7.6. Taxes. Sellers shall pay all of the sales taxes or transfer taxes
or fees payable as a direct result of the consummation of the transactions
contemplated hereby, including the New York State stock transfer tax. Purchaser
shall pay any sales taxes imposed on leases of equipment after the Closing Date.
7.7. Confidentiality. All parties hereto shall keep in strict
confidence all information pertaining to the Businesses and Purchaser and
relating to this Agreement, including, without limitation, the terms of such
transaction, except as may be required by securities law or other laws.
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7.8. Benefit of Contracts. Sellers shall use their best efforts to
secure all consents, approvals, novations and authorizations from third parties
(including a government or governmental unit) as shall be required in order to
enable Sellers to effect the transactions contemplated by this Agreement, and
shall otherwise use all reasonable efforts to cause the consummation of the
transactions contemplated hereby in accordance with the terms and conditions
hereof.
7.9. Public Announcements. The parties hereto will consult with each
other before issuing any press release or otherwise making any public statements
with respect to the transactions contemplated hereunder and shall not issue any
such press release or make any such public statement unless the parties shall
have mutually agreed on the language of such release or statement, except
disclosures required by law.
7.10. Registration Rights. The Purchaser and the Sellers shall enter
into a mutually satisfactory Registration Rights Agreement in the form of
Exhibit D hereto.
7.11. Services.
(a) From January 1, 1999 through December 31, 1999, Newco
shall provide (or through closing shall be deemed to have provided) office
services to PFSI as PFSI shall request subject to this Section 7.11.
(b) PFSI shall pay Newco for the services of Xxxxxxx Xxxx,
Xxxxx Xxxxxxx or Xxxxxx Xxxxxxx or any employee of Newco or PCSI who performs
services for PFSI at an hourly rate equal to (i) 2, multiplied by (ii) the sum
of such employee's monthly compensation, benefits, including, without
limitation, employer's contribution for health insurance, unemployment insurance
and Social Security, multiplied by (iii) a fraction whose numerator is the total
hours worked by such employee during such month while providing services to PFSI
and whose denominator is the number of hours normally worked by such employee in
any such month. In regard to Xxxxxxx Xxxx, Xxxxx Xxxxxxx or Xxxxxx Xxxxxxx, PFSI
shall not pay Newco for such services, if such services are performed outside of
normal business hours and do not materially interfere with any such person's
ability to perform his or her normal duties for Newco or PCSI.
(c) In addition to the payment in Section 7.11(b) above, PFSI
shall pay Newco as reimbursement for Newco's monthly overhead expense
attributable to employees of Newco or PCSI who perform services for PFSI in such
month an amount equal to (i) 2, multiplied by (ii) Newco's (or, before Closing,
PCSI's) total monthly overhead expense, multiplied by (iii) a fraction whose
numerator is the total compensation paid to such employees for performing
services for PFSI in such month and whose denominator is the total of all
compensation of employees of Newco (or, before Closing, PCSI's) and Xxxxxxx
Xxxx, Xxxxx Xxxxxxx and Xxxxxx Xxxxxxx during a normal month.
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(d) In any one month period, Newco's obligation to provide
such services shall be limited to providing services equal in cost to 20% of
Newco's costs for labor and overhead during the immediately prior month.
7.12 Healthvest Option. PFSI and G&C shall enter into a Limited
Liability Company Interest Option Agreement in the form of Exhibit G hereto.
7.13 Home Office. For five years after the Closing Date, the home
offices of Newco, PCSI and AFPL shall be in Poughkeepsie, New York, except that
this Section 7.13 shall be of no further force or effect after the occurrence of
any of the following: (a) a sale of all or substantially all of the assets of
G&C, resulting in a per share value for Purchaser's Stock of $30 or more, or (b)
a merger or consolidation of G&C with, or an acquisition of 50% or more of
Purchaser's Stock by, an unaffiliated entity at a price of $30 or more per share
of Purchaser's Stock.
7.14. Change of Name by PFSI. Within six (6) months after the Closing
Date, PFSI shall, at PFSI's own expense, execute and file an amendment to PFSI's
articles of organization changing the name of PFSI to a name that does not
contain the words "Prime" and "Financial" and does not contain the words "Prime"
and "Capital" . From the Closing Date until the filing of such amendment, the
Seller shall not use the name Prime Financial Services, Inc. publicly for any
purpose, except as required by law and as necessary under existing insurance
licenses in the name of PFSI. After the filing of such amendment, PFSI shall not
use the name Prime Financial Services, Inc. or any name that contains the words
"Prime" and "Financial" or any name that contains the words "Prime" and
"Capital" for any purpose. At all times, where necessary, PFSI shall take all
actions necessary to ensure that no confusion shall exist concerning the
separate identities and existence of PFSI and Newco.
7.15. Settlement of Accounts.
(a) Within 60 days after the Closing Date, the Sellers and the
Purchaser shall mutually agree upon any deficiency or excess in payments made by
PCSI to PFSI under its agreement with PFSI to pay 99% of all PCSI profits for
such period as the parties shall agree in consideration of which PFSI incurred
expenses on behalf of PCSI and paid such expenses as they came due. Any excess
in such payments by PCSI to PFSI shall be repaid by PFSI, and any deficiency in
such payments by PCSI to PFSI shall by paid by PCSI. Any payment to be made by
PCSI to PFSI under this Section 7.15(a) may be funded by 1998 soft dollars
actually paid to PCSI after January 1, 1999.
(b) Within 60 days after the Closing Date, PCSI shall pay to
PFSI any deficiency, as of the Closing Date, in payments by PCSI for expenses
incurred by PFSI on behalf of PCSI from January 1, 1999 through the Closing Date
net of any amounts owed to PCSI under Section 7.11 above.
7.16. Guarantee of Ryerson's Obligation. Sellers shall guarantee up to
50% of any and all obligations of Ryerson to indemnify PCSI as described in
Section 5.9(f) above, to the extent
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that the full amount of such obligations are not paid by Ryerson. This guarantee
is a guarantee of payment and not of collection.
Section 8. Conditions of Obligations of Purchaser. The obligations of
Purchaser to consummate the purchase and sale under this Agreement are subject
to the satisfaction of the following conditions, each of which may be waived by
Purchaser. Any such waiver by Purchaser shall not reduce or impair Purchaser's
right to seek indemnification hereunder in respect of the failure to meet the
condition that shall have been waived.
8.1. Representations and Warranties; Performance of Obligations.
(a) The representations and warranties of Sellers set forth in
Section 5 hereof and in all agreements, documents and instruments executed and
delivered pursuant hereto or in connection with the Closing shall have been on
the date hereof and shall be on the Closing Date true and correct in all
material respects as though made on and as of the Closing Date.
(b) Sellers shall have performed the agreements and
obligations necessary to be performed by them under this Agreement prior to the
Closing Date. Without limiting the generality of the foregoing, Sellers shall
have obtained all consents, waivers, approvals and authorizations or have made
reasonable arrangements in accordance with Section 7.8 hereof, and shall have
given all notices to third parties, and discharged in full any Liens, necessary
so that upon acquisition of the Acquired Assets, Purchaser shall have good and
marketable title to all of the Acquired Assets and all right, title, interest
and claims of Sellers in, to, relating to or arising under the Acquired Assets
free and clear of any Liens except as set forth on Schedule 5.5.
8.2. Transfer of Shares. Sellers shall have delivered to Purchaser
certificates of the Company Shares duly endorsed for transfer, together with any
stock transfer stamps necessary in connection therewith.
8.3. Seller's Good-standing. Sellers shall have provided the Purchaser
with copies of short-form good-standing certificates for PCSI, PFSI and AFPL
from the respective states of their organization, together with a copy of PFSI's
charter and by-laws, as amended, and the minutes of PFSI's board meeting (or, if
applicable, executed consent of its directors) approving this Agreement, each of
the documents referred to herein and the consummation of the transactions
contemplated hereby.
8.4. Noncompete Agreement. PFSI, Xxxx, and Xxxxxxx shall have executed
and delivered to Purchaser a Noncompete Agreement in the form of Exhibit A.
8.5. [Omitted]
8.6. Company's Sales. Company's sales for the six-month period ending
November 30, 1998 shall not have been less than such sales for the comparable
period in the prior year.
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8.7. Employment Agreements. Ryan, Porpora, and Xxxxxx Xxxxxxx shall
have executed and delivered to Purchaser Employment Agreements in the form of,
respectively, Exhibit B, Exhibit C, and Exhibit E hereto.
8.8. Building Premises Lease Agreements. Prime Income Partners, L.P.
shall have executed and delivered to Newco an assignment and extension of the
lease agreements by and between Prime Consulting Services, Inc. and Prime Income
Partners, L.P. (the "Lease Agreements") in the form of Exhibit F, providing for
Purchaser to lease Suites 2C, 22, 23, 32 and 34-36 in the building known as 00
Xxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxx Xxxx.
Section 9. Conditions of Obligations of Sellers. The obligations of
Sellers to consummate the sale and purchase under this Agreement are subject to
the satisfaction of the following conditions, each of which may be waived by
Sellers.
9.1. Representations and Warranties; Performance of Obligations.
(a) The representations and warranties of Purchaser set forth
in Section 6 hereof and in all agreements, documents and instruments executed
and delivered pursuant hereto or in connection with the Closing shall have been
and be true and correct in all respects at all times commencing with the date of
this Agreement and ending with and on the Closing Date as though made on and as
of the Closing Date.
(b) Purchaser shall have performed the agreements and
obligations necessary to be performed by it under this Agreement prior to the
Closing Date.
9.2. Purchase Price. Purchaser shall have delivered to Sellers the
Purchase Price Shares to be delivered on the Closing Date pursuant to Section 3
hereof.
9.3. Purchaser's Good-standing. Purchaser shall have provided Sellers
with a copy of a short-form good-standing certificate of the state of its
incorporation, together with a copy of its charter and by-laws, as amended, and
the minutes of its board meeting (or, if applicable, executed consent of its
directors) approving this Agreement, each of the documents referred to herein
and the consummation of the transactions contemplated hereby.
Section 10. Survival of Representations and Warranties;
Indemnifications; Escrow.
10.1. Survival. The representations, warranties and agreements made in
Sections 5 and 6 hereof and in the Schedules hereto by Sellers, Purchaser and
the Prime Group shall remain operative and in full force for the Escrow Period
defined in Section 10.5 below, except with respect to Sections 5.2, 5.3, 5.5,
5.10, and with respect to tax matters, as to which such representations and
warranties shall continue to survive for a period of any applicable statutes of
limitation, regardless of any investigation made by or on behalf of any party.
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10.2. Indemnification by Sellers. Sellers shall defend and indemnify
Purchaser from any and all losses, liabilities, proceedings, claims,
settlements, judgments, fines, assessments, damages and expenses (including
reasonable attorneys' fees and litigation expenses, whether arising out of a
third party claim or relating to recovering indemnifiable damages from Company
or any of the Sellers) (collectively, the "indemnifiable damages") that
Purchaser may suffer or incur in whole or in part by reason of, or which may
arise out of: (i) the inaccuracy of any of the representations of Company or
each of the Sellers in this Agreement; (ii) the breach by Company or any of the
Sellers of any of the covenants or warranties herein; (iii) any and all
liabilities (including, without limitation, unasserted claims, whether known or
unknown, matured or unmatured, absolute, contingent or otherwise) that are not
reflected, or are in excess of the amount reflected, in the Balance Sheet or
notes thereto except those incurred since the date of the Balance Sheet in the
ordinary course of business, consistent with past practice, in arms' length
transactions with unrelated parties so long as Purchaser's claim under this
clause 10.2(iii) is made in writing to Sellers within the Escrow Period defined
in Section 10.5 below; and (iv) failure of Sellers to comply with any rule or
regulation of the Securities and Exchange Commission or the National Association
of Securities Dealers, Inc. or involving anti-trust matters to the extent
governing the Businesses.
10.3. Indemnification by Purchaser. Purchaser shall defend, hold
harmless and indemnify Sellers from any and all losses, liabilities,
proceedings, claims, settlements, judgments, fines, assessments, damages and
expenses (including reasonable attorneys' fees and litigation expenses, whether
arising out of a third party claim or relating to recovering indemnifiable
damages from Purchaser) (collectively, the "indemnifiable damages") that Sellers
may suffer or incur by reason of: (i) the inaccuracy or breach of any of the
representations and warranties of Purchaser herein;(ii) the breach by Purchaser
of any of the covenants or warranties herein, and (iii) any transaction,
dealing, or business operations of Purchaser occurring after Closing and related
to Newco, PCSI, AFPL or the Insurance Acquired Assets, except as Sellers
indemnify Purchaser pursuant to Section 10.2.
10.4. Notice and Right to Defend Third Party Claims and Perform
Remediation.
(a) Promptly upon receipt of notice of any third party claim,
demand or assessment or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought on account of an indemnity agreement
contained in this Section 8, the party seeking indemnification (the
"Indemnitee") shall notify in writing, within sufficient time to respond to such
claim or answer or otherwise plead in such action, the party from whom
indemnification is sought (the "Indemnitor") thereof; provided, however, that
failure or delay to supply such notice shall not relieve Indemnitor of their
indemnification obligation hereunder except to the extent that Indemnitor is
actually prejudiced by such failure or delay.
(b) In case any claim, demand or assessment is asserted or
suit, action or proceeding commenced against an Indemnitee (collectively a
"Claim") and it notifies the Indemnitor of the commencement thereof, if the
Indemnitor acknowledges its indemnification obligations therefor hereunder,
then, the Indemnitor shall be entitled to participate therein, and, to the
extent that it may wish, to assume the defense, conduct or settlement thereof,
with counsel
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satisfactory to the Indemnitee, whose consent to the selection of counsel shall
not unreasonably be withheld. After notice from the Indemnitor to the Indemnitee
of its election so to assume the defense, conduct or settlement thereof, the
Indemnitor shall not be liable to the Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the defense, conduct
or settlement thereof; provided, however, that if the Indemnitee has any
separate defense from those of the Indemnitor, the Indemnitee shall have the
right to be represented by its own counsel at the Indemnitor's expense. The
Indemnitee shall have the right in any event to participate in any such defense
with its own counsel at its own expense. The Indemnitee will cooperate with the
Indemnitor in connection with any such Claim and make personnel, books and
records relevant to the Claim available to the Indemnitor at Indemnitor's
expense. In the event that the Indemnitor fails timely to defend, contest or
otherwise protect against any such Claim, the Indemnitee shall have the right to
defend, contest or otherwise protect against the same and may make any
compromise or settlement thereof and recover the entire cost thereof from the
Indemnitor, including, without limitation, reasonable attorneys' fees,
disbursements and all amounts paid as a result of such Claim or compromise or
settlement thereof.
(c) Anything to the contrary herein notwithstanding, prior to
finally settling any such Claim, the Indemnitor shall give to the Indemnitee
prompt notice of its intention to settle same and the terms of such proposed
settlement and acknowledging its indemnification responsibility therefor
hereunder. If the Indemnitee shall object to such proposed settlement within 10
days, then the Indemnitee shall thereafter, at its sole expense, assume the
control and defense of such claim, suit, action, investigation or proceeding and
in such event the liability of the Indemnitor shall be limited to the amount for
which the same could have been settled as proposed by the Indemnitor. If the
Indemnitee does not object to the terms of the proposed settlement within the
aforesaid 10-day period, then the Indemnitor shall have the right to consummate
such proposed settlement upon the terms set forth in the aforesaid notice.
10.5. Escrow. Of the Purchase Price Shares, 147,126 shall be placed in
escrow (the "Escrow") by Purchaser to secure any claim by Purchaser under this
Agreement, including, without limitation, any adjustment in the Purchase Price
as provided for in Section 3.2 hereof, provided, however, that such Purchase
Price Shares shall be released from such escrow if no claim has been made
against Sellers by Purchaser hereunder during a period extending from the
Closing Date until and including the date that is 30 days after the final
adjustment of the Purchase Price as provided for in Section 3.2 hereof (the
"Escrow Period"). If the amount of any indemnifiable damages conceded or
determined to be due from Sellers to Purchaser, pursuant to any of the
provisions of this Section 10, shall not be paid to Purchaser within five (5)
business days from the date so conceded or determined, the Purchaser may setoff
such amount out of the Escrow in an amount of Purchase Price Shares equal to the
amount of such indemnifiable damages divided the average of the closing prices
of the Purchaser's Stock for the 20 trading days prior to the date of such
determination. The amount of any reduction in the Purchase Price pursuant to
Section 3.2(a) herein shall be paid to Purchaser out of the Escrow in an amount
of Purchase Price Shares equal to the amount of such reduction divided by
$8.971875. The amount of any reduction in the Purchase Price pursuant to Section
3.2(b) herein shall be paid to Purchaser in cash by Sellers or, at Purchaser's
option, out of the Escrow in an
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amount of Purchase Price Shares equal to the amount of such reduction divided by
the Average Price.
10.6. Limitation of Indemnification. The remedy of the Purchaser for
any indemnification of the Purchaser by the Sellers provided for in this Section
10 or any reduction in the Purchase Price pursuant to Section 3.2(a) herein
shall be limited to the number of Purchase Price Shares in the Escrow on the
date of the determination of such indemnifiable damages or Purchase Price
reduction. The remedies of the Purchaser shall not be limited in any way for any
reduction in the Purchase Price pursuant to Section 3.2(b) herein.
Section 11. Further Actions. From time to time, as and when requested
by a party, the other parties shall execute and deliver such documents and
instruments and shall take such further or other actions as such party may deem
necessary or desirable to carry out the intent and purposes of this Agreement,
to convey, transfer, assign and deliver to Purchaser, and its successors and
assigns, the Company Shares, to vest in Purchaser the Acquired Assets (or to
evidence any of the foregoing) and to consummate and give effect to the other
transactions contemplated hereby.
Section 12. Broker's Fees. Each of the Company, Sellers and Purchaser
represents that it has not used or retained any broker or finder in connection
with the transactions contemplated hereby.
Section 13. Expenses. Except as otherwise specifically provided herein,
PFSI, Xxxx and Xxxxxxx, collectively, and Purchaser shall bear their own, legal
fees and other costs and expenses with respect to the negotiation, execution and
the delivery of this Agreement and the consummation of the transactions
hereunder, and the Acquired Assets shall not be reduced or impaired by the
payment or accrual of any such costs and expenses by Company.
Section 14. Entire Agreement. This Agreement, which includes the
Schedules and Exhibits hereto and the other documents, agreements and
instruments executed and delivered pursuant to or in connection with this
Agreement, contains the entire agreement between Sellers and Purchaser with
respect to the transactions contemplated by this Agreement and supersedes all
prior arrangements or understandings with respect thereto.
Section 15. Construction.
(a) The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
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(b) Any pronoun herein shall include all genders and/or the
plural or singular as appropriate from the context.
Section 16. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient when
delivered personally or telecopied by confirmed facsimile, or the day signed for
or rejected by addressee after mailing by registered or certified mail, return
receipt requested, or the next business day if sent by nationally recognized
overnight courier providing for a return receipt, in each case postage prepaid,
addressed as follows:
If to Purchaser:
Xxxxxx & Ciocia, Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxx Xxxx, XX 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
with a copy to:
Akabas & Xxxxx
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to Sellers:
Prime Financial Services, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
With a copy to:
Xxx X. Xxxxxxxxxxx, Esq.
Xxx Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed, effective ten (10) days
after such notice.
Section 15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts entered into, executed and to be performed wholly in such state.
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Section 16. Assignability. This Agreement shall not be assignable
otherwise than by operation of law by any party hereto without the prior written
consent of the other parties, and any purported assignment without such prior
written consent shall be void, except that Purchaser may assign this agreement
to a corporation controlling, controlled by or under common control with the
Purchaser.
Section 17. Waivers and Amendments. Any waiver of any term or condition
of this Agreement, or any amendment or supplementation of this Agreement, shall
be effective only if in writing executed by the party against whom such waiver,
amendment or supplementation is sought to be charged. A waiver of any breach or
failure to enforce any of the terms or conditions of this Agreement shall not in
any way affect, limit or waive a party's rights hereunder at any time to enforce
strict compliance thereafter with every term or condition of this Agreement.
Section 18. Third Party Rights. Any other provision of this Agreement
to the contrary notwithstanding, this Agreement shall not create benefits for
any third party.
Section 19. Illegalities. In the event that any provision contained in
this Agreement shall be determined to be invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and the remaining provisions of this
Agreement shall not, at the election of the party for whose benefit the
provision exists, be in any way impaired.
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Section 20. Counterparts. This Agreement may be executed in multiple
counterparts all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned individuals have signed and the
undersigned corporations have caused this Agreement to be executed by their duly
authorized officers, as of the date first above written.
XXXXXX & XXXXXX, INC. PRIME FINANCIAL SERVICES, INC.,
a Delaware corporation
By:/s/ Xxxxxx Xxxxxxxxx By:/s/ Xxxxxx Xxxxxxxxx
------------------------------- --------------------------------
Name: Xxxxxx Xxxxxxxxx Name: Xxxxxx Xxxxxxxxx
Title: Chief Operating Officer Title: Chief Operating
Officer
PRIME FINANCIAL SERVICES, INC.,
a New York corporation
By:/s/ Xxxxxxx Xxxx
-------------------------------
Name: Xxxxxxx Xxxx
Title: President
/s/ Xxxxxxx Xxxx /s/ Xxxxx Xxxxxxx
---------------------------------- --------------------------------------
XXXXXXX XXXX XXXXX XXXXXXX
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