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ASSET PURCHASE AGREEMENT
by and among
PCH SECURITIES, INC.,
XXXXXXX XXXXXX,
PPI CAPITAL GROUP, INC.
and
DP SECURITIES, INC.
Dated as of October 2, 2001
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TABLE OF CONTENTS
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ARTICLE I.................................................................... 1
1.1. Certain Definitions:................................................ 1
1.2 Transfer of the Assets:............................................. 4
1.3 Assumption by the Buyer of Certain Liabilities:..................... 4
1.4 Non-Assumed Liabilities:............................................ 5
1.5 Purchase Price for the Assets; Restrictions on Transfer:............ 5
1.6 Closing Adjustments................................................. 5
ARTICLE II................................................................... 5
2.1 The Closing:........................................................ 5
2.2 Additional Actions to be Taken on the Closing Date:................. 6
ARTICLE III.................................................................. 6
3.1 Organization and Qualification:..................................... 6
3.2 Subsidiaries :...................................................... 7
3.3. Validity and Execution of Agreement:................................ 7
3.4. No Conflict:........................................................ 7
3.5 Litigation:......................................................... 7
3.6 The Assets:......................................................... 8
3.7 Intangible Property:................................................ 8
3.8 No Material Adverse Change:......................................... 8
3.9 Contracts and Other Agreements:..................................... 8
3.10 ERISA:.............................................................. 8
3.11 Environmental Matters:.............................................. 8
3.12 Licenses and Permits:............................................... 8
3.14 Investment Representations:......................................... 8
3.14 Tax Matters......................................................... 9
3.15 Undisclosed Liabilities............................................. 9
3.16 Financial Statements................................................ 10
3.17 Compliance with Laws................................................ 10
ARTICLE IV................................................................... 10
4.1 Organization and Qualification:..................................... 11
4.2 Validity and Execution of Agreement:................................ 11
4.3 No Conflict:........................................................ 11
4.4. The Shares:......................................................... 11
ARTICLE V.................................................................... 12
5.1 Survival:........................................................... 12
5.2 Indemnification..................................................... 12
5.3 Method of Asserting Claims:......................................... 12
ARTICLE VI................................................................... 14
6.1 Compliance With Agreement........................................... 14
6.2 Absence of Litigation............................................... 14
6.3 Consents and Approvals.............................................. 15
6.4 Clearing Arrangements............................................... 15
6.5 Registration of Xxxxxx.............................................. 15
ARTICLE VII.................................................................. 15
7.1 Compliance With Agreement........................................... 15
ARTICLE VIII................................................................. 15
8.1 Affirmative Covenants of Seller..................................... 15
8.2 Negative Covenants.................................................. 16
8.3 Termination......................................................... 16
8.4 Effect of Termination............................................... 17
8.5 Waiver of Right to Terminate........................................ 17
ARTICLE IX................................................................... 17
9.1 Sales and Transfer Taxes............................................ 17
9.2 Post-Closing Further Assurances..................................... 17
9.3 Notices............................................................. 17
9.4 Publicity........................................................... 18
9.5 Entire Agreement.................................................... 18
9.6 Waivers and Amendments.............................................. 19
9.7 Governing Law....................................................... 19
9.8 Binding Effect; No Assignment....................................... 19
9.9 Variations in Pronouns.............................................. 19
9.10 Counterparts........................................................ 19
9.11 Exhibits and Schedules.............................................. 19
9.12 Effect of Disclosure on Schedules................................... 19
9.13 Headings............................................................ 19
9.14 Severability of Provisions.......................................... 20
9.15 Brokers............................................................. 20
9.16 Confidential Information............................................ 20
Exhibits
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EXHIBIT A - Assignment & Assumption Agreement
EXHIBIT B - Xxxx of Sale
EXHIBIT C - Employment Agreement
Schedules
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1.1(a) - Excluded Assets
1.2 - Assets
1.3(b) - Assumed Liabilities
3.1 - Jurisdictions of Qualification
3.5 - Litigation
3.9 - Material Agreements
3.10 - Real Estate
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of October 2, 2001 by and between
PCH Securities, Inc., a California corporation ("Seller"), DP Securities, Inc.,
a California corporation (the "Buyer"), PPI Capital Group, Inc., a Utah
corporation ("Buyer Parent"), and F. Xxxxxxx Xxxxxx, and individual residing at
000 Xxxxx Xxxxx, Xxxxxxxxx, XX 00000 ("Xxxxxx").
W I T N E S S E T H :
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WHEREAS, the Seller is engaged in the business of operating a financial
services firm located at 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000,Xxxxxxxxx, XX 00000
(the "Business"); and
WHEREAS, the Seller owns certain assets comprising the Assets (as
hereinafter defined) which are related to the conduct of the Business; and
WHEREAS, the Seller wishes to transfer, and the Buyer wishes to
purchase, the Assets, subject to the assumption by the Buyer of certain
liabilities of the Seller comprising the Assumed Liabilities (as hereinafter
defined) in exchange for the Shares (as hereafter defined); and
WHEREAS, Seller and Buyer have adopted a plan of reorganization and
intend that the sale of the Assets qualify as a reorganization within the
meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended
(the "Code") .
NOW, THEREFORE, in consideration of the mutual terms, conditions and other
agreements set forth herein, the Seller, Xxxxxx, Buyer Parent and the Buyer
hereby agree as follows:
ARTICLE I
DEFINITIONS; PURCHASE OF THE ASSETS;
ASSUMPTION OF ASSUMED LIABILITIES; PURCHASE PRICE;
CLOSING ADJUSTMENTS; CONDITION OF ASSETS
1.1 Certain Definitions. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person.
"Assets" has the meaning specified in Section 1.2.
"Assigned Contracts and Leases" means the executory contracts and
leases set forth on Schedule 3.9 that are specifically identified as assigned
contracts and leases.
"Assignment and Assumption Agreement" means an instrument substantially
in the form of Exhibit A attached hereto.
"Assumed Liabilities" has the meaning specified in Section 1.3.
"Xxxx of Sale" means an instrument substantially in the form of Exhibit
B attached hereto.
"Business" has the meaning specified in the Recitals.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required by law to close in New York
City.
"Buyer" has the meaning specified in the introductory paragraph of this
Agreement.
"Claim Notice" has the meaning specified in Section 5.2(a).
"Closing" has the meaning specified in Section 2.1(a).
"Employment Agreement" means an instrument substantially in the form of
Exhibit [E] attached hereto.
"Environmental Law" means any and all present and future federal,
state, local and statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, grants, franchises, licenses or agreements relating to
(a) the protection of the environment, health or workers safety; (b) pollution
or environmental contamination; or (c) the use, processing, distribution,
generation, treatment, storage, recycling, transportation, disposal, handling,
Release or threatened or potential Release of any Material of Environmental
Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means those assets of the Seller or an Affiliate of
Seller set forth on Schedule 1.1(a).
"Fair Market Value" shall mean, with respect to any issuance date, the
average closing price of the shares of common stock of Buyer Parent as reported
on the principal exchange (or electronic quotation system) on which such shares
are traded (or quoted) for the twenty (20) trading days immediately preceding
such issuance date.
"Governmental or Regulatory Body" means any government or political
subdivision thereof, whether federal, state, county, local or foreign, or any
agency, authority or instrumentality of any such government or political
subdivision.
"Xxxxxx" has the meaning specified in the introductory paragraph of
this Agreement.
"Indemnified Party" has the meaning specified in Section 5.2.
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"Indemnifying Party" has the meaning specified in Section 5.2.
"Leases" has the meaning specified in Section 3.10.
"Lien" means any lien, pledge, hypothecation, mortgage, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any stockholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"Losses" has the meaning specified in Section 5.1.
"Material Adverse Effect" means any change or changes or effect or
effects that individually or in the aggregate are or is reasonably expected to
be materially adverse to (a) the Assets, operations, income or conditions
(financial or otherwise) of the Business or the transactions contemplated by
this Agreement, (b) the ability of the Seller to perform its obligations under
this Agreement or (c) the business of Buyer following the Closing.
"Material Agreements" has the meaning specified in Section 3.9.
"Non-Assumed Liabilities" has the meaning specified in Section 1.4.
"Permitted Liens" means Liens for taxes not yet due.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental or Regulatory Body or other entity.
"Plan" means any plan, fund, program, understanding, policy,
arrangement, contract or commitment, whether qualified or not qualified for
federal income tax purposes, whether formal or informal, whether for the benefit
of a single individual or more than one individual, which is in the nature of
(a) an employee pension benefit plan (as defined in ERISA Section 3(2)) (b) an
employee welfare benefit plan (as defined in ERISA Section 3(1)) or (c) an
incentive, deferred compensation, or other benefit arrangement for employees,
former employees, their dependents or their beneficiaries.
"Purchase Price" has the meaning specified in Section 1.5.
"Records" shall mean files and records, including correspondence, books
of account, employment records, customer files, purchase and sales records and
correspondence, advertising records, files and literature, and other written
materials of Seller to the extent relating to the Assets or the Business;
provided, however, that Records shall not mean or include the corporate minute
books and stock records of Seller and any shares of capital stock of Seller, nor
shall they include any communications that do not relate to the Assets or the
Business that are currently protected from disclosure by Seller by virtue of the
attorney-client privilege.
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"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment.
"Shares" has the meaning specified in Section 1.5.
"Seller" has the meaning specified in the introductory paragraph of
this Agreement.
"Tax" or "Taxes" shall mean any federal, state, local or foreign
income, gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, real property gains, registration, value added,
excise, natural resources, severance, stamp, occupation, premium, windfall
profit, environmental, customs, duties, real property, personal property,
capital stock, social security, unemployment, disability, payroll, license,
employee or other withholding, or other tax, of any kind whatsoever, including
any interest, penalties or additions to tax or additional amounts in respect of
the foregoing; the foregoing shall include any transferee or secondary liability
for a Tax and any liability assumed by agreement or arising as a result of being
(or ceasing to be) a member of any affiliated group or being included (or
required to be included) in any Tax Return relating thereto.
"Tax Return" shall mean any return, declaration, report, claim for
refund, information return or other document (including any related or
supporting schedule, statement or information) filed or required to be filed in
connection with the determination, assessment or collection of any Tax of any
party or the administration of any laws, regulations or administrative
requirements relating to any Tax.
1.2 Transfer of the Assets. Subject to the terms and conditions set
forth in this Agreement, the Seller agrees that, on the date hereof (the
"Closing Date"), the Seller shall sell, transfer, assign, convey and deliver to
the Buyer, and Buyer shall purchase from the Seller, substantially all of the
assets owned, used or held by the Seller to conduct the Business, including
without limitation the assets set forth on Schedule 1.2, other than the Excluded
Assets (the "Assets"), free and clear of all Liens, other than Permitted Liens.
1.3 Assumption by the Buyer of Certain Liabilities. Subject to the
terms and conditions set forth in this Agreement, Buyer agrees that on the
Closing Date, Buyer shall assume and thereafter pay, perform or discharge, as
the case may be, the following obligations and liabilities of the Seller (the
"Assumed Liabilities"):
(a) all obligations and liabilities of the Seller arising out of, or
in connection with, the Assigned Contracts and Leases; and
(b) all liabilities of the Seller outstanding as of the Closing Date
reflected on Schedule 1.3 (b) attached hereto not to exceed $10,000 in the
aggregate.
1.4 Non-Assumed Liabilities. The Buyer shall not assume nor be
responsible for any liabilities or obligations of the Seller or any of its
Affiliates other than the Assumed Liabilities (the "Non-Assumed Liabilities").
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1.5 Purchase Price for the Assets; Restrictions on Transfer. The
consideration for the Assets shall be the (i) assumption by the Buyer of the
Assumed Liabilities; and (ii) the issuance of a number of shares of common stock
of Buyer Parent having a Fair Market Value equal to one million dollars
($1,000,000) (the "Shares") (collectively, the "Purchase Price"). Seller and
Xxxxxx agree not to sell, transfer, pledge, hypothecate or otherwise encumber
the Shares during the first year following the date hereof without the prior
written consent of the Buyer, except for transfer of the Shares to Xxxxxx upon
liquidation of Seller.
1.6 Closing Adjustments. (a) Adjustments shall be made between the
Seller and the Buyer as of 11:59 P.M. of the day before the Effective Date with
respect to Lease payments and other charges payable by or to the Seller pursuant
to any Assigned Contracts and Leases.
(b) The net amount of any closing adjustments shall be paid to on the
Closing Date in immediately available funds.
(c) Any errors or omissions in computing closing adjustments
discovered after Closing Date shall be corrected promptly upon discovery. The
obligation of the parties under this Section shall survive the Closing.
ARTICLE II
CLOSING
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2.1 The Closing. (a) The consummation of the transactions
contemplated by this Agreement (the "Closing") shall be held on October 22,
2001, or on such other date, and at such hour and place, as the parties shall
agree upon. Such date is referred to as the "Closing Date" at the offices of
Buyer Parent.
(b) At the Closing, the Seller shall execute and deliver or cause to
be executed and delivered to the Buyer, all documents and instruments necessary
to transfer to the Buyer, all of the right, title and interest of the Seller in
and to the Assets, including, without limitation:
(i) the Assignment and Assumption Agreement; and
(ii) the Xxxx of Sale.
(c) At the Closing, the Buyer shall:
(i) execute and deliver to the Seller the Assignment and
Assumption Agreement;
(ii) assume the Assumed Liabilities effective as of the
Effective Date; and
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(iii) deliver a number of Shares having a Fair Market Value
equal to $1,000,000 to the Seller.
(e) At the Closing, each of Buyer and Xxxxxx shall execute and
deliver the Employment Agreement.
2.2 Additional Actions to be Taken on the Closing Date.
(a) Liens/Consents. The Seller shall have satisfied and discharged
all Liens on the Assets, except for Permitted Liens and provided the Buyer with
evidence of such satisfaction and discharge as well as all necessary consents to
transfer or assign the Assets to Buyer, in form and substance satisfactory to
the Buyer.
(b) Directors and Shareholders Consent. The Buyer shall have received
consents to the transactions contemplated by this agreement signed by all of the
shareholders and directors of Seller.
(c) Bulk Sales Act. Xxxxxx agrees to indemnify Buyer and Buyer Parent
from any Losses incurred by Buyer and Buyer Parent arising out of or resulting
from the failure of the Seller to comply with Article 6 of the Uniform
Commercial Code of the State of California. Buyer and Buyer Parent hereby waives
compliance with the provisions of any applicable bulk sales law of any
jurisdiction in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND XXXXXX
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The Seller and Xxxxxx jointly and severally represent and warrant to
the Buyer and Buyer Parent as follows:
3.1 Organization and Qualification. Seller is a corporation validly
existing and in good standing under the laws of the State of California, and has
all requisite corporate power and authority to (a) own, lease and operate its
properties and assets as they are now owned, leased and operated and (b) carry
on its business as now presently conducted and as proposed to be conducted.
Seller is duly qualified to do business in each jurisdiction in which the nature
of its business or properties makes such qualification necessary, except where
the failure to do so would not have a Material Adverse Effect.
3.2 Subsidiaries . Seller has no subsidiaries.
3.3 Validity and Execution of Agreement. Seller has the full legal
right, capacity and power and all requisite corporate authority and approval
required to enter into, execute and deliver this Agreement and any other
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agreement or instrument contemplated hereby, and to perform fully its
obligations hereunder and thereunder. The shareholders and the board of
directors of Seller have each approved the transactions contemplated pursuant to
this Agreement and each of the other agreements required to be entered into
pursuant hereto by Seller. This Agreement and such other agreements and
instruments have been duly executed and delivered by Seller and each constitutes
the valid and binding obligation of Seller enforceable against it in accordance
with its terms, except as may be limited by any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws (whether
statutory, regulatory or decisional), now or hereafter in effect, relating to or
affecting the rights of creditors generally or by equitable principles
(regardless of whether considered in a proceeding at law or in equity).
3.4 No Conflict. Neither the execution and delivery of this Agreement
nor the performance by the Seller or Xxxxxx of the transactions contemplated
hereby will violate or conflict with (a) any of the provisions of the
Certificate of Incorporation or By-Laws or other organizational documents of the
Seller; (b) or result in the acceleration of, or entitle any party to accelerate
the maturity or the cancellation of the performance of any obligation under, or
result in the creation or imposition of any Lien in or upon the Assets or
constitute a default (or an event which might, with the passage of time or the
giving of notice, or both, constitute a default) under any material contract to
which Seller is a party other than (1) any contract or instrument evidencing any
of the Non-Assumed Liabilities, (2) such contract violations, accelerations,
cancellations, defaults or Liens as do not individually or in the aggregate have
a Material Adverse Effect, (c) any order, judgment, regulation or ruling of any
Governmental or Regulatory Body to which the Seller and Xxxxxx is a party or by
which any of its property or assets may be bound or affected or with any
provision of any law, rule, regulation, order, judgment, or ruling of any
Governmental or Regulatory Body applicable to the Seller other than such
violations or conflicts as do not or will not individually or in the aggregate
have a Material Adverse Effect.
3.5 Litigation. There are no outstanding orders, judgments,
injunctions, investigations, awards or decrees of any court, Governmental or
Regulatory Body or arbitration tribunal by which the Seller, or any of its
securities, assets, properties or business is bound. There are no actions,
suits, claims, investigations, legal, administrative or arbitral proceedings
pending or, to the best knowledge of the Seller, threatened (whether or not the
defense thereof or liabilities in respect thereof are covered by insurance)
against or affecting the Seller, or any of its assets or properties, that,
individually or in the aggregate, are reasonably expected to have a Material
Adverse Effect.
3.6 The Assets. The Seller owns outright and has good title to all of
the owned Assets free and clear of any Lien, other than Permitted Liens. The
Assignment and Assumption Agreement and such other conveyancing documents as
shall have been executed and delivered to the Buyer will convey good title to
the Assets, free and clear of any Liens, except for Permitted Liens. The Assets
transferred pursuant hereto constitute all of the assets necessary and
appropriate for the conduct of the Business as of the date hereof in
substantially the same manner as the Business has heretofore been conducted.
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3.7 Intangible Property. To the best knowledge of the Seller without
having conducted any investigation, (i) no patent, invention, trademark, service
xxxx or trade name of any other Person infringes upon, or is infringed upon by
any of the trademarks, service marks, logos or tradenames of the Seller and (ii)
the operation of the Business has not infringed on the intellectual property
rights of others.
3.8 No Material Adverse Change. Since January 1, 2001, there has been
no material adverse change in the Business, operations or financial condition of
the Seller, or in the assets, liabilities, net worth or properties of the
Seller, and the Seller knows of no such change that is threatened, nor has there
been any damage, destruction or loss which could have a Material Adverse Effect,
whether or not covered by insurance.
3.9 Contracts and Other Agreements. Schedule 3.9 sets forth all
written agreements (and, to the best knowledge of the Seller, any oral
agreement) and arrangements that materially affect the operations of the
Business or to which Seller is a party (collectively, the "Material
Agreements").
3.10 ERISA. The Seller does not sponsor, maintain, have any obligation
to contribute to, have any liability under, and is not otherwise a party to, any
Plan.
3.11 Environmental Matters. The Seller is not in violation of, or
delinquent in respect to, any Environmental Law.
3.12 Licenses and Permits. Any permits, licenses, registrations and
consents which are necessary in connection with the Seller's operations and
properties, are in full force and effect and in good standing.
3.13 Investment Representations. The issuance of the Shares in this
transaction is intended to be a private transaction exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), and is made
in reliance upon the representations set forth below.
(a) Seller is acquiring the Shares for its own account for investment
only and not with a view to, or for sale in connection with, a distribution of
the Shares in violation of the Securities Act and any applicable state
securities or blue-sky laws;
(b) Seller acknowledges to the Buyer that:
(i) the Buyer has advised Seller that the Shares have not
been registered under the Securities Act or under the laws of any state on the
basis that the issuance thereof contemplated by this Agreement is exempt from
such registration and the certificate representing the Shares shall contain a
restrictive legend reflecting the fact that the Shares have not been registered;
(ii) the Buyer's reliance on the availability of such
exemption is, in part, based upon the accuracy and truthfulness of Seller's
representations contained herein;
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(iii) the Shares cannot be resold without registration or an
exemption under the Securities Act and such state securities laws, and that
certificates representing the Shares will bear a restrictive legend to such
effect as well as a restrictive legend in accordance with the restrictions on
transfer contained in Section 1.5;
(iv) Seller has evaluated the merits and risks of acquiring
the Shares and has such knowledge and experience in financial and business
matters and is capable of evaluating the merits and risks of such acquisition,
is aware of and has considered the financial risks and financial hazards of
acquiring the Shares, and is able to bear the economic risk of acquiring the
Shares, including the possibility of a complete loss with respect thereto.
3.14 Tax Matters
(a) Seller has timely filed all Tax Returns required to be filed by
it, each such Tax Return has been prepared in compliance with all applicable
laws and regulations, and all such Tax Returns are true and accurate in all
respects. All Taxes due and payable by Seller have been paid. Seller has
delivered to Buyer correct and complete copies of all federal income Tax Returns
filed with respect to Seller for taxable periods ended since December 31, 1993,
and all examination reports, and statements of deficiencies assessed against or
agreed to by Seller with respect to such taxable periods.
(b) Except as set forth in Schedule 3.14 (i) no deficiency or
proposed adjustment which has not been settled or otherwise resolved for any
amount of Tax has been proposed, asserted or assessed by any taxing authority
against Seller; (ii) there is no action, suit, taxing authority proceeding or
audit now in progress, pending or, to Seller's knowledge, threatened against or
with respect to Seller with respect to any Tax; (iii) Seller does not reasonably
expect any taxing authority to claim or assess any additional Taxes with respect
to Seller for any period; (iv) no claim has ever been made by a taxing authority
in a jurisdiction where Seller does not pay Tax or file Tax Returns that Seller
is or may be subject to Taxes assessed by such jurisdiction; and (v) Seller has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor, independent
contractor or other third party.
3.15 Undisclosed Liabilities. Except (i) as reflected in the Financial
Statements or in the notes thereto, (ii) for liabilities incurred in connection
with this Agreement or the transactions contemplated hereby, or (iii)
liabilities incurred in the ordinary cause of Seller's business since June 30,
2001 neither Seller nor any of its subsidiaries has any liabilities or
obligations of any nature which, individually or in the aggregate, would have a
Material Adverse Effect.
3.16 Financial Statements.
(a) Schedule 3.16 contains the following financial statements (the
"Financial Statements"):
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(i) the audited balance sheets of Seller as of December 31,
2000 (the "2000 Balance Sheet"), and the related statements of operations,
stockholders' equity and cash flows for the two years ended December 31, 2000;
and
(ii) the unaudited balance sheet of Seller as of June 30,
2001 (the "Latest Balance Sheet") and the related statements of operations,
stockholders' equity and cash flows for the 6-month period then ended; and
Each of the foregoing Financial Statements presents fairly the financial
condition, results of operations and cash flows of Seller in accordance with
GAAP throughout the periods covered thereby.
3.17 Compliance with Laws. Except as set forth in Schedule 3.17:
(a) Seller is in compliance with, and Seller has not violated any
applicable law, rule or regulation of any federal, state, local or foreign
government or agency thereof. No notice, claim, charge, complaint, action, suit,
proceeding, investigation or hearing has been received by Seller or filed,
commenced or threatened against Seller, alleging a violation of or liability or
potential responsibility under any such law, rule or regulation which has not
heretofore been duly cured and for which there is no remaining liability.
(b) Seller is not in receipt of notice of, or subject to, any adverse
inspection, finding of deficiency, finding of non-compliance, investigation,
penalty, fine, sanction, assessment, request for corrective or remedial action
or other compliance or enforcement action.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND BUYER PARENT
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The Buyer and Buyer Parent, jointly and severally, represent and
warrant to the Seller and Xxxxxx as follows:
4.1 Organization and Qualification . The Buyer is a corporation
validly existing and in good standing under the laws of the State of California
and has all requisite corporate power and authority to (a) own, lease and
operate its properties and assets as they are now owned, leased and operated and
(b) carry on its business as now presently conducted and is duly qualified to do
business in each jurisdiction in which the nature of its business or properties
makes such qualification necessary. Buyer Parent is a corporation validly
existing and in good standing under the laws of the State of Utah.
4.2 Validity and Execution of Agreement. The Buyer and Buyer Parent
each has the full legal right, capacity and power and all requisite corporate
authority and approval required to enter into, execute and deliver this
Agreement and any other agreement or instrument contemplated hereby, and to
perform fully its respective obligations hereunder and thereunder. The
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respective board of directors of the Buyer and Buyer Parent each has approved to
the extent required by law the transactions contemplated by this Agreement and
each of the other agreements required to be entered into pursuant hereto by the
Buyer and Buyer Parent and no other corporate or shareholder approvals are
required. This Agreement and such other agreements and instruments have been
duly executed and delivered by the Buyer and Buyer Parent and each constitutes
the valid and binding obligation of the Buyer and Buyer parent enforceable
against them in accordance with its terms, except as may be limited by any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
laws (whether statutory, regulatory or decisional), now or hereafter in effect,
relating to or affecting the rights of creditors generally or by equitable
principles (regardless of whether considered in a proceeding at law or in
equity).
4.3 No Conflict. Neither the execution and delivery of this Agreement
nor the performance by the Buyer of the transactions contemplated herein will
violate or conflict with (a) any of the provisions of their respective
Certificates of Incorporation or By-Laws or other organizational documents of
Buyer and Buyer Parent; or (b) result in the acceleration of, or entitle any
party to accelerate the maturity or the cancellation of the performance of any
obligation under, or result in the creation or imposition of any Lien or
constitute a default (or an event which might, with the passage of time or the
giving of notice, or both, constitute a default) under any material contract to
which Buyer or Buyer Parent is a party, other than (1) such contract violations,
accelerations, cancellations, defaults or Liens as do not individually or in the
aggregate have a material adverse effect on Buyer or Buyer Parent, (2) any
order, judgment, regulation or ruling of any Governmental or Regulatory Body to
which the Buyer or Buyer Parent is a party or by which any of its respective
property or assets may be bound or affected or with any provision of any law,
rule, regulation, order, judgment, or ruling of any Governmental or Regulatory
Body applicable to the Buyer or Buyer Parent, other than such violations or
conflicts as do not individually or in the aggregate have a material adverse
effect on Buyer or Buyer Parent.
4.4 The Shares. The Shares have been duly and validly authorized and
issued by Buyer Parent and are fully paid and non-assessable.
ARTICLE V
INDEMNIFICATION AND OTHER COVENANTS
-----------------------------------
5.1 Survival. Subject to this Section 5.1, all representations,
warranties, covenants and agreements contained in this Agreement or in any
Section, exhibit, certificate, agreement, document or statement delivered
pursuant hereto (an "Ancillary Instrument") shall survive (and not be affected
in any respect by) the Closing and any investigation conducted by any party
hereto.
5.2 Indemnification. (a) The Seller and Xxxxxx jointly and severally
agree to indemnify, defend and hold harmless the Buyer and Buyer Parent and
their respective directors, officers, employees, shareholders and any Affiliates
of the foregoing, and their successors and assigns (collectively, the "Buyer
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Group") from and against any and all losses, liabilities (including punitive or
exemplary damages and fines or penalties and any interest thereon), expenses
(including reasonable fees and disbursements of counsel and expenses of
investigation and defense), claims, Liens or other obligations of any nature
whatsoever (hereinafter individually, a "Loss" and collectively, "Losses")
suffered or incurred by the Buyer Group which, directly or indirectly, arise out
of, result from or relate to, (i) any inaccuracy in or any breach (as of the
Effective Date) of any representation or warranty of the Seller contained in
Article III, (ii) any breach of any covenant or agreement of the Seller, in each
case contained in this Agreement or in any other document contemplated by this
Agreement, (iii) any Taxes of the Seller or Xxxxxx attributable to the period
prior to the Closing Date, or (iv) any liability or obligation arising out of
the operation of the Business before the Effective Date, except for the Assumed
Liabilities.
(b) The Buyer and Buyer Parent jointly and severally agree to
indemnify, defend and hold harmless Xxxxxx, the Seller and its respective
directors, officers, employees, and shareholders, and any Affiliates of the
foregoing, and their successors and assigns from and against any and all Losses
suffered or incurred by them which, directly or indirectly, arise out of, result
from or relate to (i) any inaccuracy in or any breach of any representation or
warranty of the Buyer or Buyer Parent contained in Article IV, (ii) any breach
of any covenant or agreement of the Buyer or Buyer Parent contained in this
Agreement or in any other document contemplated by this Agreement, (iii) the
Assumed Liabilities, or (iv) any liability or obligation arising out of the
operation of the Business after the Closing Date.
5.3 Method of Asserting Claims. The party making a claim under this
Article V is referred to as the "Indemnified Party" and the party against whom
such claims are asserted under this Article V is referred to as the
"Indemnifying Party". All claims by any Indemnified Party under this Article V
shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which an Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against or
sought to be collected from such Indemnified Party by a third party, said
Indemnified Party shall with reasonable promptness notify in writing the
Indemnifying Party of such claim or demand, specifying the nature of the
specific basis for such claim or demand, and the amount or the estimated amount
thereof to the extent then feasible (which estimate shall not be conclusive of
the final amount of such claim and demand; any such notice, together with any
notice given pursuant to Section 5.3(b) hereof, collectively being the "Claim
Notice"); provided, however, that any failure to give such Claim Notice will not
be deemed a waiver of any rights of the Indemnified Party except to the extent
the rights of the Indemnifying Party are actually prejudiced or harmed. The
Indemnifying Party, upon request of the Indemnified Party, shall retain counsel
(who shall be reasonably acceptable to the Indemnified Party) to represent the
Indemnified Party, and shall pay the fees and disbursements of such counsel with
regard thereto, provided, further, that any Indemnified Party is hereby
authorized prior to the date on which it receives written notice from the
Indemnifying Party designating such counsel, to retain counsel, whose reasonable
fees and expenses shall be at the expense of the Indemnifying Party, to file any
motion, answer or other pleading and take such other action which it reasonably
shall deem necessary to protect its interests or those of the Indemnifying Party
until the date on which the Indemnified Party receives such notice from the
Indemnifying Party. After the Indemnifying Party shall retain such counsel, the
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Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties of any such
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The Indemnifying Party shall not, in connection with any proceedings or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one such firm for the Indemnified Party (except to the
extent the Indemnified Party retained counsel to protect its (or the
Indemnifying Party's) rights prior to the selection of counsel by the
Indemnifying Party). The Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any claim or demand which the
Indemnifying Party defends. No claim or demand may be settled by an Indemnifying
Party or, where permitted pursuant to this Agreement, by an Indemnified Party
without the consent of the Indemnified Party in the first case or the consent of
the Indemnifying Party in the second case, which consent shall not be
unreasonably withheld, unless such settlement shall be accompanied by a complete
release of the Indemnified Party in the first case or the Indemnifying Party in
the second case.
(b) In the event any Indemnified Party shall have a claim against any
Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with respect to such claim to the
Indemnifying Party. If the Indemnifying Party does not dispute such claim, the
amount of such claim shall be paid to the Indemnified Party within thirty (30)
days of receipt of the Claim Notice.
(c) So long as any right to indemnification exists pursuant to this
Article V, the affected parties each agree to retain all books, records,
accounts, instruments and documents reasonably related to the Claim Notice. In
each instance, the Indemnified Party shall have the right to be kept informed by
the Indemnifying Party and its legal counsel with respect to all significant
matters relating to any legal proceedings. Any information or documents made
available to any party hereunder, which information is designated as
confidential by the party providing such information and which is not otherwise
generally available to the public, or which information is not otherwise
lawfully obtained from third parties or not already within the knowledge of the
party to whom the information is provided (unless otherwise covered by the
confidentiality provisions of any other agreement among the parties hereto, or
any of them), and except as may be required by applicable law or requested by
third party lenders to such party, shall not be disclosed to any third Person
(except for the representatives of the party being provided with the
information, in which event the party being provided with the information shall
request its representatives not to disclose any such information which it
otherwise required hereunder to be kept confidential).
(d) To the extent a Loss occurs under Section 5.2(a), Buyer shall, at
its option, elect to be indemnified by Seller's surrender for cancellation of
Shares having a Fair Market value equal to such Loss. Any indemnification
pursuant to Section 5.2 shall be treated as an adjustment to the Purchase Price.
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ARTICLE VI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
-------------------------------------------
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
6.1 Compliance With Agreement. Seller and Xxxxxx shall have in all
material respects performed and complied with all of their agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date, including the delivery of the closing
documents specified in Article II. The representations and warranties set forth
in Article III hereof will be true and correct in all respects at and as of the
Closing as though then made and as though the Closing Date were substituted for
the date of this Agreement or, in the case of any representations and warranties
made as of a specified date earlier than the Closing Date, on and as of such
earlier date, except where the failure of such representations and warranties to
be true and correct could not reasonably be expected to have a Material Adverse
Effect.
6.2 Absence of Litigation. No action or proceeding before any court
or government body will be pending or threatened which, in the reasonable
judgment of Buyer, makes it inadvisable or undesirable to consummate the
transactions contemplated by this Agreement by reason of the probability that
the action or proceeding will result in a judgment, decree or order that would
prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated hereby or
cause such transactions to be rescinded.
6.3 Consents and Approvals. All approvals, consents and waivers that
are required to effect the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to Buyer
not less than two (2) business days prior to the Closing.
6.4 Clearing Arrangements. An agreement with a clearing firm, in form
and substance satisfactory to Buyer, shall have been executed by the Buyer and
such firm.
6.5 Registration of Xxxxxx. Registration of Xxxxxx as registered
representative of Buyer shall have been approved by the National Association of
Securities Dealers.
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ARTICLE VII
CONDITIONS PRECEDENT TO SELLER'S AND XXXXXX'X OBLIGATIONS
---------------------------------------------------------
Each and every obligation of Seller and the Xxxxxx to be performed on
the Closing Date shall be subject to the satisfaction prior to or at the Closing
of the following conditions:
7.1 Compliance With Agreement. Buyer shall have in all material
respects performed and complied with all of Buyer's agreements and obligations
under this Agreement which are to be performed or complied with by Buyer prior
to or on the Closing Date, including the delivery of the closing documents
specified in Article II.
ARTICLE VIII
COVENANTS PRIOR TO CLOSING; TERMINATION
---------------------------------------
8.1 Affirmative Covenants of Seller. Between the date hereof and the
Closing Date, except as otherwise expressly provided herein, Seller will:
(a) conduct the Business, including, without limitation, the cash
management customs and practices of the Business (including the collection of
receivables and payment of payables) only in the usual and ordinary course of
business in accordance with past custom and practice;
(b) use best efforts to preserve the present business relationships
with all material customers, suppliers and distributors of the Business, to the
extent such relationships are beneficial to the Business and promote the smooth
transition of such customers, suppliers and distributors from Seller to Buyer;
(c) permit Buyer and its employees, agents, potential lenders,
investors, and accounting and legal representatives to have access, upon
reasonable notice, to its books, records, invoices, contracts, leases, key
personnel, independent accountants, legal counsel, property, facilities,
equipment and other things reasonably related to the Business or the Assets;
(d) use best efforts to cause all conditions to Buyer's obligation to
close to be satisfied; and
(e) promptly inform Buyer in writing of any variances from the
representations and warranties contained in Article III hereof.
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8.2 Negative Covenants
(a) Between the date hereof and the Closing Date, except as otherwise
provided herein, Seller will not:
(i) take any action or omit to take any action (the omission
of which) that has had or will have a Material and Adverse Effect upon the
business, financial condition or operating results of Seller; or
(ii) without the prior written consent of Buyer, enter into any
contract (1) out of the ordinary course of business or (2) restricting in any
way the conduct of the Business.
(b) Neither Seller nor Xxxxxx, nor any officer, director, employee,
stockholder, agent, representative or affiliate thereof shall (i) until the
earlier of the Closing Date or the date this Agreement is terminated pursuant to
Section 8.3 hereof, discuss or pursue a possible sale, recapitalization or other
disposition of Seller, any securities or substantial portion of the assets of
Seller, or the Business or any portion thereof with any other party or provide
any information to any other party in connection therewith or (ii) disclose to
any other party the terms of this Agreement. Neither Seller nor Xxxxxx nor any
of their respective affiliates shall, by pursuing the transactions contemplated
hereby, violate the terms of any other agreement or obligation to which any of
them is subject, and each of Seller and Xxxxxx shall inform Buyer of and provide
Buyer with information regarding any other offers or expressions of interest for
Seller, any securities or substantial portion of the assets of Seller, or the
Business or any portion thereof.
8.3 Termination. This Agreement may be terminated at any time prior
to the Closing only as follows:
(a) by mutual consent of Buyer and Seller;
(b) by either Buyer if there has been a misrepresentation or breach
of warranty or breach of covenant on the part of the other party in the
representations and warranties or covenants set forth in this Agreement which
would have a Material Adverse Effect; or
(c) by either Buyer or Seller if the transactions contemplated hereby
have not been consummated by November 15, 2001; provided that a party will not
be entitled to terminate this Agreement pursuant to this subsection (c) if (i)
that party's breach of this Agreement has prevented the consummation of the
transactions contemplated hereby at or prior to such time or (ii) that party has
failed to satisfy any condition that such party was required to satisfy;
8.4 Effect of Termination
(a) In the event of termination of this Agreement as provided in
Section 8.3 hereof, this Agreement will forthwith become void and there will be
no liability hereunder on the part of Seller, Xxxxxx or Buyer, except as arising
under the provisions of Section 8.2(b) hereof (which shall survive the Closing).
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8.5 Waiver of Right to Terminate. Each of the parties hereto shall be
deemed to have waived their respective rights to terminate this Agreement upon
consummation of the Closing.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Sales and Transfer Taxes. All required filings under any
applicable Federal, state, foreign or local sales tax, stamp tax or similar laws
or regulations shall be made in a timely manner by the party responsible
therefor under such laws and regulations.
9.2 Post-Closing Further Assurances. (a) At any time and from time to
time after the Closing Date at the request of either party, and without further
consideration, the other party will execute and deliver, or cause the execution
and delivery of, such other instruments of sale, transfer, conveyance,
assignment and confirmation and take or cause to be taken such other action as
the party requesting the same may reasonably deem necessary or desirable in
order to transfer, convey and assign more effectively to the requesting party
all of the property and rights intended to be conveyed to such party pursuant to
the provisions of this Agreement.
(b) Seller, Xxxxxx, Buyer and Buyer Parent agree to report the sale
of Assets for income Tax purposes as a tax-free reorganization under Section
368(a)(1)(C) of the Code (and any corresponding provision of state or local
income tax law).
9.3 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
given personally, sent by facsimile transmission or sent by prepaid air courier
or certified, registered or express mail, postage prepaid. Any such notice shall
be deemed to have been given (a) when received, if delivered in person, sent by
facsimile transmission and confirmed in writing within three (3) Business Days
thereafter or sent by prepaid air courier or (b) two (2) Business Days following
the mailing thereof, if mailed by certified first class mail, postage prepaid,
return receipt requested, in any such case as follows (or to such other address
or addresses as a party may have advised the other in the manner provided in
this Section 6.4):
If to Seller and Xxxxxx, to:
Xxxxxxx Xxxxxx
PCH Securities, Inc.
000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
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with a copy to:
Xxx X. Xxxxxx, Esq.
0000 Xxxxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, Xxxxxxxxxx 00000
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
If to Buyer or to Buyer Parent to:
DP Securities, Inc.
0000 Xxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxxx
Telephone Number (000) 000-0000
Telecopier Number (000) 000-0000
with a copy to:
Berlack, Israels & Xxxxxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Telephone Number (000) 000-0000
Telecopier Number (000) 000-0000
9.4 Publicity. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without advance
approval thereof by the Buyer.
9.5 Entire Agreement. This Agreement (including the Exhibits and
Schedules) and the agreements, certificates and other documents delivered
pursuant to this Agreement contain the entire agreement among the parties with
respect to the transactions described herein, and supersede all prior
agreements, written or oral, with respect thereto.
9.6 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the parties hereto or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
9.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without regard to
principles of conflicts of law.
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9.8 Binding Effect; No Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
assigns and legal representatives. This Agreement is not assignable except by
operation of law and any other purported assignment shall be null and void.
9.9 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
9.10 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
9.11 Exhibits and Schedules. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
9.12 Effect of Disclosure on Schedules. Any item disclosed on any
Schedule shall be deemed to be disclosed in connection with (a) the specific
representation and warranty to which such Schedule is expressly referenced, (b)
any specific representation and warranty which expressly cross-references such
Schedule and (c) any specific representation and warranty to which any other
Schedule to this Agreement is expressly referenced if such other Schedule
expressly cross-references such Schedule.
9.13 Headings. The headings in this agreement are for reference only,
and shall not affect the interpretation of this Agreement.
9.14 Severability of Provisions.. If any provision or any portion of
any provision of this Agreement or the application of such provision or any
portion thereof to any Person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement, or the application of such provision or portion of
such provision as is held invalid or unenforceable to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affect thereby.
9.15 Brokers. Each party hereto represents and warrants that no broker
or finder is entitled to any brokerage or finder's fee or other commission from
such party, based on agreements, arrangements or undertakings made by such
party, in connection with the transactions contemplated hereby.
9.16 Confidential Information Neither Seller nor Xxxxxx shall at any
time subsequent to the Closing, except as explicitly requested by Buyer, use for
any purpose, disclose to any person, or keep or make copies of documents, tapes,
discs, programs or other information storage media ("records") containing, any
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confidential information concerning the Business, the Assets, or the Assumed
Liabilities, all such information being deemed to be transferred to Buyer
hereunder, and if at any time after Closing Seller or Xxxxxx should discover
that they are in possession of any records containing the confidential
information of Buyer, then the party making such discovery shall immediately
turn such records over to Buyer, which shall upon request make available to the
surrendering party any information contained therein which is not confidential
information.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PCH SECURITIES, INC.
By: /s/ F. XXXXXXX XXXXXX
-------------------------------------
Name: F. Xxxxxxx Xxxxxx
Title: President
PPI CAPITAL GROUP, INC.
By: /s/ XXXXX X. XXXXXXXXXX
-------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: President and Chief Executive
Officer
DP SECURITIES, INC.
By: /s/ XXXXX X. XXXXXXXXXX
-------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Chairman
/s/ F. XXXXXXX XXXXXX
-----------------------------------------
F. Xxxxxxx Xxxxxx
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