Exhibit 1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of the day
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of July, 2003, by and between First Chesapeake Financial Corporation, a Virginia
corporation (the "Company") and All American Companies, Inc., a Delaware
corporation (the "Purchaser").
RECITALS
WHEREAS, the Company desires to sell and the Purchaser desires to purchase
Ten Million (10,000,000) shares of the Company's common stock under the terms
and conditions of this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and mutual promises,
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound, the Company and the Purchaser agree as follows:
ARTICLE I. PURCHASE OF SHARES
1.1 Shares to be Acquired.
Subject to the terms and conditions contained herein, the Company
shall take all necessary steps to authorize, issue and sell to Purchaser, Ten
Million (10,000,000) shares of the Company's Common Stock ("Common Stock"),
fully paid and non assessable and free and clear of liens and encumbrances,
except as set forth herein.
1.2 Conveyance.
On the Closing Date the Company shall issue 5,400,000 shares of Common
Stock to the Purchaser (the New Shares"). The New Shares shall be issued by
delivery of a certificate registered in the name of the Purchaser or, if a
certificate is not available on the Closing Date, a copy of the Company's
instructions to its transfer agent to issue such certificate.
1.3 Authorization to Issue Additional Shares of Common Stock.
The Company shall issue 4,600,000 shares of Common Stock, representing
the balance of the shares being purchased by Purchaser (the "Additional Shares")
as soon as practical upon action taken by the shareholders of the Company that
results in the number of authorized shares of Common Stock being sufficient for
the Company to issue all of the Additional Shares to Purchaser.
1.4 Resignations.
On the Closing Date, the Company shall deliver to the Purchaser
written resignations of certain directors and officers of the Company and its
subsidiaries as set forth on Schedule 1.4 hereto (the "Company Resignations").
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1.5 Escrow.
The New Shares and the written resignations of certain directors and
officers of the Company and its subsidiaries as set forth on schedule 1.5
attached hereto ("Purchaser's Resignations"), shall, at time of closing, be
delivered to Xxxxx, Xxxxxxxx Xxxxxx, Xxxxxxxxx & Xxxxxx, LLP ("Escrow Agent") to
be held in escrow pursuant to the terms of the Escrow Agreement attached hereto
as Exhibit "A" (the "Escrow Agreement"). The Company's obligation to issue and
the Purchaser's right to receive the Additional Shares are subject to the terms
of the Escrow Agreement. If the Escrow Agreement is still in effect at the time
of the issuance of the Additional Shares, then the Additional Shares shall also
be delivered to the Escrow Agent to be held in escrow pursuant to the terms of
the Escrow Agreement.
ARTICLE II. PURCHASE PRICE
2.1 Purchase Price.
The total purchase price to be paid by Purchaser for the New Shares
(the "Purchase Price") shall be Three Hundred Thousand Dollars ($300,000.00).
2.2 Payment of Purchase Price.
On the Closing Date, the Purchase Price shall be paid to Company by
Purchaser as follows: (a) by a credit of $200,000 which has already been paid by
Purchaser to Company as a deposit ("Deposit"), (b) $100,000.00 by wire transfer
of immediately available funds for credit to the account of Company at Royal
Bank of Pennsylvania ("Royal Bank") in accordance with the wire instructions
previously identified by the Company to the Purchaser.
ARTICLE III. CLOSING
3.1 Time and Place.
Subject to the satisfaction or waiver of the conditions to closing set
forth in Article VII, the closing of the transactions contemplated herein (the
"Closing") shall be held via facsimile (with hard copies to follow via courier
or overnight delivery service ) no later than July 18, 2003, or at such time and
place as the parties hereto may mutually agree in writing (the "Closing Date").
3.2 Conduct of Closing.
(a) Subject to the fulfillment of all of the conditions set forth in
Article VII and the delivery of all certificates and opinions required thereby,
except such conditions as may be waived by the Purchaser, on the Closing date
Purchaser shall deliver the remaining balance of the Purchase Price to the
Company.
(b) Subject to the fulfillment of all of the conditions set forth in
Article VII and the delivery of all certificates and opinions required thereby,
except such conditions as may be waived by Company, on the Closing Date the
Purchaser shall (i) disburse the proceeds of the Working Capital Note (as
defined in Section 7.1(j) below), by paying (A) $10,000.00 to
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Xxxxx, Xxxxxxxx Xxxxxx, Xxxxxxxxx & Xxxxxx, LLP as partial payment of attorneys'
fees and costs owed the by the Company; (B) $50,000.00 to be wired transfer to
Royal Bank, which together with an additional $100,000.00 to be paid from the
remaining proceeds due the Company, will be held by Royal Bank in the form of a
certificate of deposit as additional collateral for the Company's debt to Royal
Bank as set forth in the Forbearance and Consent Agreement; (C) $10,000.00 to
Royal Bank as the agreed upon fee for the granting of the Forbearance and
Consent Agreement (as defined in Section 3.2(c)(v) below); (iii) pay the
reasonable attorneys' fees and costs incurred by the attorneys representing
Royal Bank in the negotiation, preparation, and execution of the Forbearance and
Consent Agreement and other documents entered into in connection therewith; and
(ii) deliver to the Company the AMI Note as defined in Section 8.1(d) below.
(c) Subject to the fulfillment of all of the conditions set forth in
Article VII and the delivery of all certificates and opinions required thereby,
except such conditions as may be waived by Company, on the Closing Date Company
shall deliver:
(i) to Purchaser in a form satisfactory to Purchaser's counsel, a
certificate representing the New Shares, or a copy of the instructions to the
Company's transfer agent authorizing the issuance of the New Shares. Upon
issuance of such certificate for the New Shares, the certificate shall be
deposited with the Escrow agent to be held pursuant to the terms of the Escrow
Agreement.
(ii) a certificate, in form and substance satisfactory to
Purchaser and its counsel, of the Chief Executive Officer and Chief Financial
Officer of Company stating that Company performed all covenants and agreements
required to be performed by it under this Agreement on or prior to the Closing
Date;
(iii) a unanimous written consent (the "Board Appointment
Consent") of the remaining members of the Company's board of directors,
appointing the individuals set forth on Schedule 1.5 hereto as directors of the
Company effective immediately following the Closing.
(iv) certified copies of duly executed written actions of the
Board of Directors of Company authorizing and approving the execution and
delivery of this Agreement by the Chief Executive Officer and Chief Financial
Officer and all other documents and instruments required hereunder to be
executed and delivered by Company and the consummation by Company of all
transactions and agreements contemplated herein;
(v) a Forbearance and Consent Agreement in the form attached
hereto as Exhibit "B" (the "Forbearance and Consent Agreement") .
(vi) Proof that the Company has applied for reinstatement in good
sanding with the State of Virginia and has paid all fees and penalties in
connection therewith
(vii) such other documents and instruments as shall reasonably be
required by Purchaser to be executed and delivered by Company in order to fully
and effectively consummate all of the transactions contemplated herein to be
performed by Company.
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3.3 Other Obligations of Company Prior to Closing.
(a) Purchaser agrees that, prior to Closing the Company may reprice
and grant "cashless exercise" rights to 2,030,000 outstanding stock options held
by Xxxx Xxxxxxxxx, Xxxx Xxxxx, Xxxx Xxxxxxxxx, Xxxxxxxx Xxxxxxx and Xxxx
Xxxxxxxx and listed on Schedule 3.3(a) hereto at an exercise price of $0.10 per
share, representing out-of-the-money option pricing at May 15, 2003, the date of
the term sheet agreement between the parties. The terms of the 1999 Stock Option
Plan shall prevail and be applicable, or those options shall be returned and
cancelled and new options will be issued prior to Closing. Such Options shall be
subject to the Lockup Agreements executed pursuant to the Stock Purchase
Agreement of even date.
(b) The Company shall issue an additional 20,000 shares of Common
Stock to Director Xxxx Xxxxxxxxx for consulting services previously provided.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser, as of the date hereof
(except for representations and warranties that expressly relate to a different
date) as follows:
4.1 Corporate Organization.
Once the Company is reinstated in Virginia the Company; (i) will be a
corporation duly organized, validly existing and in good standing under the laws
of the State of Virginia; (ii) will have all requisite power and authority to
own, operate and lease its properties and to conduct its business as currently
conducted; and (iii) will be duly qualified or licensed to do business and is in
good standing in each jurisdiction in which its ownership or leasing of property
or the conduct of its business requires such licensing or qualification, except
to the extent that the failure to be so qualified or licensed would not have a
material adverse effect on the operations or financial condition of the Company
or on the transactions contemplated by this Agreement (a "Material Adverse
Effect").
4.2 Subsidiaries.
Except as set forth in the SEC Documents, as defined below, the
Company does not, directly or indirectly, own any equity or similar interest, or
any interest convertible into or exchangeable or exercisable for any equity or
similar interest, in any corporation, partnership, limited liability company,
joint venture or other business association, entity or person.
4.3 Authorization.
The Company has all requisite corporate power and authority to execute
and deliver this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the performance by the Company of
its obligations hereunder have been duly authorized by the Company, and no other
corporate proceeding therefore on the part of the Company or its stockholders is
required. This Agreement has been duly executed and delivered by the Company and
is a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws
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relating to the enforcement of creditors' rights and remedies or by other
equitable principles of general application..
4.4 Capitalization.
At March 31, 2003, the authorized capital stock of the Company
consists of (i) 20,000,000 shares of Common Stock, no par value, of which
9,999,758 shares are issued and outstanding, and (ii) 5,000,000 shares of
Preferred Stock, no par value, consisting of (a) 1,000,000 shares of Series A
Preferred Stock of which none are outstanding and (b) 1,620,856 shares of Series
B Preferred Stock, all of which are outstanding. The shares of Series B
Preferred Stock were not duly authorized and validly issued by the Company.
Prior to issuances specified hereunder, the Company has also issued 3,344,800
options to purchase or acquire shares of its Common Stock. When issued, both the
New Shares and Additional Shares will be duly authorized, validly issued, fully
paid and non-assessable.
4.5 SEC Documents.
The Company has filed each annual and quarterly report and definitive
proxy statement with the U.S. Securities and Exchange Commission ("SEC") that
the Company has been required to file since January 1, 1999 ("SEC Documents").
As of their respective filing dates, none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances in which they were made, not misleading. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations of the SEC promulgated thereunder.
4.6 No Violation.
Subject to obtaining the consent of Royal Bank, neither the execution
and delivery of this Agreement by the Company nor the performance by the Company
of its obligations hereunder will (i) conflict with or result in any breach of
any provision of the Company's charter or bylaws, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default or give rise to any lien or encumbrance on the Company's properties or
assets or any right of termination, cancellation or acceleration under any of
the terms or conditions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company is a party or
by which its properties or assets may be bound, or (iii) violate any statute,
law, rule, regulation, writ, injunction, judgment, order or decree of any court,
administrative agency or governmental authority binding on the Company or any of
its properties or assets.
4.7 Consents.
No consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority or other party is
required to be made or obtained by the Company in connection with the execution
and delivery of this Agreement by the Company or the performance by the Company
of its obligations hereunder, except for the
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Forbearance and Consent Agreement, state and local licensing and registration
requirements and filings required by applicable federal and state securities
laws.
4.8 Litigation, Orders.
Except as disclosed in the SEC Documents or set forth in Schedule 4.8
hereto, there are no claims, proceedings, suits, or investigations
(collectively, "actions"), to the best knowledge of Company, threatened against
or relating to Company (or any of its officers, directors or employees in
connection with the business or affairs of Company), before any federal, state,
local or foreign court or governmental body in which the amount in dispute
exceeds Ten Thousand Dollars ($10,000.00) or could reasonably be expected to
result in liability or loss for Company of more than Ten Thousand Dollars
($10,000.00); and (b) to the best knowledge of Company, there exist no disputes
or conflicts, or circumstances providing a basis for a dispute or conflict with
activity in the twenty-four (24) months preceding Closing, which could
reasonably be expected to result in any such action. There are no actions
pending or, to the best knowledge of Company, threatened for the purpose of
enjoining or preventing this Agreement of any other transaction contemplated by
this Agreement or otherwise challenging the validity or propriety of the
transactions contemplated by this Agreement. Company is not subject to any
judgment, order or decree, or any governmental restriction, which could have a
Material Adverse Effect on the ability of Purchaser in acquiring either the New
Shares or Additional Shares or prohibit Company from conducting its business. .
4.9 Brokerage.
There are no claims for investment banking fees, brokerage
commissions, finder's fees or similar compensation, other than professional fees
payable to lawyers, accountants, other consultants and fees payable in the form
of stock grants to the Xxxxxxxx Family Trust, in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Company.
4.10 Accounts.
Company represents that all bank accounts in the name of the Company
or any of its subsidiaries are specifically listed on Schedule 4.10 annexed
hereto as made a part of this Agreement.
4.11 Issuance of Additional Shares/Options.
Except as set forth on Schedule 4.11, the Company represents that it
has not issued any additional shares of stock or Options to purchase stock of
the Company other than the amount already issued as of the date of the Company's
last filing of its 10-KSB with the SEC or as specifically authorized herein.
4.12 New Shares Issued.
When issued in accordance with the terms of this Agreement, the New
Shares and Additional Shares shall have been duly authorized and validly issued.
No existing shares of stock in the Company have been issued in violation of
preemptive or similar rights. The issuance of the New Shares and the Additional
Shares, will not violate any preemptive or similar rights.
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Other than specifically indicated otherwise in this Agreement or previously
disclosed to Purchaser, there are no outstanding subscriptions, options, puts,
calls, agreements, understandings, claims, or other commitments or rights of any
type relating to the issuance, sale or transfer of the New Shares. The New
Shares and Additional Shares, if and when issued, shall be sold by the Company
in full compliance with all applicable federal and state securities laws.
4.13 Full Disclosure.
The representations and warranties contained in this Article do not
contain any untrue statement of a material fact or omit to state any known
material fact necessary in order to make the factual statements contained
herein, in light of the circumstances under which they were made, not
misleading.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company, as of the date hereof
(except for representations and warranties that expressly relate to a different
date) as follows:
5.1 Corporate Organization.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Purchaser has
delivered, or will deliver within ten days following the Closing to the Company
a certificate of good standing dated within ten days of the Closing Date.
5.2 Authorization.
The Purchaser has all requisite corporate power and authority to
execute and deliver this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement, and the performance by the
Purchaser of its obligations hereunder, have been duly authorized by the
Purchaser, and no other corporate proceeding therefore on the part of the
Purchaser or its stockholders is required. This Agreement has been duly executed
and delivered by the Purchaser and is a valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to
the enforcement of creditors' rights and remedies or by other equitable
principles of general application.
5.3 No Violation.
Neither the execution and delivery of this Agreement by the Purchaser
nor the performance by the Purchaser of its obligations hereunder will (i)
conflict with or result in any breach of any provision of the Purchaser's
charter or bylaws, (ii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default or give rise to any
lien or encumbrance on the Purchaser's properties or assets or any right of
termination, cancellation or acceleration under any of the terms or conditions
of any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which the Purchaser is a party or by which its properties or
assets may be bound, or (iii) violate any statute, law, rule,
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regulation, writ, injunction, judgment, order or decree of any court,
administrative agency or governmental authority binding on the Purchaser or any
of its properties or assets.
5.4 Consents.
No consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority or other party is
required to be made or obtained by the Purchaser in connection with the
execution and delivery of this Agreement by the Purchaser or the performance by
the Purchaser of its obligations hereunder.
5.5 Litigation, Orders.
There are no claims, actions, suits, proceedings, investigations or
inquiries pending before any court, arbitrator or governmental or regulatory
official or office, or, to the knowledge of the Purchaser, threatened, against
or affecting the Purchaser or questioning the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken by the
Purchaser pursuant to this Agreement.
5.6 Brokerage.
There are no claims for investment banking fees, brokerage
commissions, finder's fees or similar compensation (other than professional fees
to lawyers, accountants and other consultants) in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Purchaser.
5.7 Securities.
(a) The Purchaser is purchasing the New Shares and Additional Shares,
when and if issued, for its own account for investment only and not with a view
to or for sale in connection with the distribution thereof.
(b) The Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investment contemplated by this Agreement and making an informed investment
decision with respect thereto.
(c) The Purchaser is an "accredited investor" as such term is defined
in Rule 501 promulgated under Regulation D of the Securities Act.
(d) The Purchaser has reviewed the SEC Documents filed by the Company
and has had the opportunity to ask questions and receive answers concerning the
Company as well as the opportunity to obtain additional information necessary to
verify the accuracy of information furnished in connection with the transactions
contemplated by this Agreement that the Company possesses or can acquire without
unreasonable effort or expense.
(e) The Purchaser understands that the New Shares and the Additional
Shares, when and if issued, have not been registered under the Securities Act or
any state securities laws, and may not be transferred unless subsequently
registered thereunder or pursuant to an
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exemption from registration, and that a legend indicating such restrictions will
be placed on the certificates representing the Securities.
ARTICLE VI. COVENANTS
6.1 Access to Information and Records.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, the Company
shall permit the Purchaser to continue to make reasonable investigation of the
operations and properties of the Company and the Company's financial condition,
including providing access to the Company's officers and its books and records
and other documents.
6.2 Conduct of Business.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, the Company
shall conduct its business only in the ordinary course consistent with past
practice. However, Company shall not be permitted to enter into any contracts or
incur any further financial obligation on behalf of the Company that exceeds the
amount of $5,000.00 aggregate per year other than those previously disclosed to
Purchaser except in its normal course of the business.
6.3 Consents; Approvals; Efforts to Close.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, the parties
hereto shall cooperate in good faith and shall use commercially reasonable
efforts to obtain all consents necessary, including the Forbearance and Consent
Agreement pursuant to Section 3.2(b)(vi) hereof, and to take, or cause to be
taken, all actions necessary, proper or advisable to consummate the transactions
contemplated by this Agreement.
6.4 Use of Proceeds.
From the proceeds, the Company shall first immediately remit the
amount of One Hundred Thousand Dollars ($100,000.00) to Royal Bank to be held as
additional security for the loan owed by the Company to Royal Bank in order to
induce Royal Bank to grant the Company a ninety (90) day extension on the
maturity date of the Loan.. This amount, together with the $50,000.00 advanced
to the Company by Purchaser under the terms of the Working Capital Note as
defined in Section 7.1(j) below, shall be held as additional security by Royal
Bank for the debt owed by the Company. The additional security of $150,000.00
shall be in form of a security interest in a Certificate of Deposit to be held
by Royal Bank in accordance with the terms and provisions of the Forbearance and
Consent Agreement and related documents dated July 17, 2003.
6.5 Increase in Authorized Capital Stock.
As promptly as practicable following the Closing, the Company shall
take commercially reasonable and timely efforts, including without limitation
seeking all necessary shareholder approvals at a special meeting of Shareholders
or in connection with the Company's
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next annual meeting, to increase the authorized capital stock of the Company in
an amount that will permit the issuance of all of the Additional Shares to
Purchaser pursuant to the terms of this Agreement.
6.6 Registration of Common Stock.
As soon as is reasonably practicable after the Closing and in any case
within 90 days thereof, the Purchaser shall cause the Company to prepare and
file with the Securities and Exchange Commission certain registration
statement(s) to register the resale of (a) the New Shares and Additional Shares
issued to the Purchaser, (b) the shares of Common Stock set forth on Schedule
6.6 hereto, including those shares of Common Stock issuable upon the exercise of
the stock options listed on Schedule 6.6 and (c) shares of Common Stock issuable
upon conversion of all outstanding shares of Preferred Stock, set forth on
Schedule 6.6; provided however, that as a condition precedent to the inclusion
of shares of Common Stock held by any holder or shares of Common Stock to be
issued upon the exercise of any option or conversion of any Preferred Stock, the
holder of such Common Stock, option or Preferred Stock shall cooperate with the
Company in good faith and timely provide the Company with any information
requested in connection with such registration.
6.7 Acknowledgement of Debt.
The Purchaser in its post-Closing role as controlling shareholder of
the Company hereby acknowledges the existence of the Company's liabilities and
obligations as reported on the Company's financial statements included in the
Company's latest Form 10-KSB and Form 10-QSB and in supplemental information
provided to Purchaser by Company. Purchaser agrees to the repayment amounts and
timings as agreed upon pursuant to Schedule 6.7 hereto.
6.8 Certificate of Good Standing.
The Company shall deliver to Purchaser within thirty (30) days
following Closing, a certificate stating that the Company has been reinstated in
good standing in the Commonwealth of Virginia.
6.9 Mutual Covenants.
(a) General. Each Party shall use all commercially reasonable efforts
to take all actions and do all things necessary, proper or advisable to
consummate this Agreement and the other transactions contemplated by this
Agreement.
(b) Other Governmental Matters. Each Party shall use all reasonable
efforts to take any additional action that may be necessary, proper or advisable
in connection with any other notices to, filings with, and authorizations,
consents and approvals of any court, administrative agency or commission, or
other governmental authority or instrumentality that it may be required to give,
make or obtain.
(c) Cooperation. On and after the Closing, each Party hereto agrees to
execute any and all further documents and writings and to perform such other
reasonable actions which may be or become necessary or appropriate to effectuate
and carry out this Agreement.
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(d) Representations and Warranties. Each Party shall not do, or cause
to be done, any act, or suffer, or cause to be suffered, any omission, which
would cause it or him to be in breach of, or might result in a breach of, any of
the representations, warranties, covenants, allocations and agreements of any
Party contained herein.
ARTICLE VII. CONDITIONS TO CLOSING
7.1 Conditions to Purchaser's Obligations.
The obligations of the Purchaser under this Agreement are subject to
the satisfaction (or waiver), at or before the Closing, of each of the following
conditions:
(a) Representations and Warranties of the Company. The representations
and warranties of the Company shall be true and correct in all material respects
as of the date when made and as of the date of the Closing as though made at
that time and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing.
(b) No Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that restrains or prohibits the consummation of any of the
transactions contemplated hereby.
(c) Securities. The Company shall have delivered to the Purchaser a
certificate representing the New Shares, or a copy of the Company's instructions
to its transfer agent to promptly issue such shares.
(d) Agreements, Consents, Assignments. All remaining documentation
defined herein shall have been executed and delivered.
(e) Consents. The Company shall have obtained the written consents of
all parties necessary for the execution and delivery by the Company of this
Agreement and the performance by the Company of its obligations hereunder.
(f) Resignation of Directors. Certain Directors of the Board of the
Company listed on Schedule 1.4 shall resign and provide Purchaser at Closing
with original executed resignation of all such Directors.
(g) New Directors. Following the resignations pursuant to (f) above,
the remaining Directors shall appoint as replacement Directors those persons
listed on Schedule 1.5.
(h) Forbearance and Consent Agreement. All parties shall have executed
and delivered counterparts of the Forbearance and Consent Agreement.
(i) Receivables Forgiveness Agreement. The Company shall deliver to
the Purchaser an executed Receivables Forgiveness Agreement in the form attached
hereto as Exhibit "D", to be held in escrow pursuant to the terms of the Escrow
Agreement.
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(j) Working Capital Note. At or before Closing, the Purchaser shall
lend to the Company the monies to be advanced under Section 3.2(b) above. Such
loan to be evidenced by a promissory note executed by the Company in
substantially the form attached hereto as Exhibit "E' ("Working Capital Note").
7.2 Conditions to the Company's Obligations.
The obligations of the Company under this Agreement are subject to the
satisfaction (or waiver), at or before the Closing, of each of the following
conditions:
(a) Representations and Warranties of the Purchaser. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the date of the Closing as
though made at that time (except for representations and warranties that
expressly relate to a different date) and the Purchaser shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Closing.
(b) No Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that restrains or prohibits the consummation of any of the
transactions contemplated hereby.
(c) Final Approval. Prior to Closing, Company's Board of Directors
shall review this agreement and related documentation and at its sole discretion
provide its final approval of this agreement in the form of corporate resolution
to be delivered prior to Closing.
(d) Consents. The Purchaser shall have obtained the written consents
of all parties necessary for the execution and delivery by the Purchaser of this
Agreement and the performance by the Purchaser of its obligations hereunder.
(e) Purchase Price. The Purchaser shall have delivered the purchase
price.
(f) Forbearance and Consent Agreement. All parties shall have executed
and delivered counterparts of the Forbearance and Consent Agreement.
(g) Working Capital Note. At or before Closing, the Purchaser shall
lend to the Company the monies evidenced by the Working Capital Note.
ARTICLE VIII. TERMINATION
8.1 Termination of Agreement.
This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written consent of the Company and the Purchaser;
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(b) by the Company or the Purchaser if the Closing shall not have been
consummated on or before July 21, 2003 (or such later date as the Company and
the Purchaser shall agree), provided that the right to terminate this Agreement
under this Section 8.1(b) shall not be available to any party whose failure to
fulfill any covenant or agreement under this Agreement or breach of a
representation or warranty set forth herein has, in full or in material part,
been the cause of or resulted in the failure of the Closing to occur on or
before such date;
(c) by the Company or the Purchaser, upon a material breach of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of the other party, which breach has not been cured on or before two
business days before the date referred to in Section 8.1(b).
(d) Should the Agreement be terminated pursuant to Section 8.1(a) or
8.1(b) above at no fault of the Purchaser, the Company shall return the Deposit
to Purchaser by paying to Purchaser Seventy Five Thousand Dollars ($75,000.00)
and endorsing over to Purchaser, without recourse, the promissory note from Argo
Mortgage and Investment, Inc. D/B/A AMI Funding Corp., a New York corporation
("AMI") to the Company in the amount of One Hundred and Twenty Five Thousand
Dollars ($125,000.00). A copy of the Note from AMI is attached hereto as Exhibit
"C" (the "AMI Note"). After return of the AMI Note to Purchaser, Company shall
have no obligation to the Purchaser or any other party with regard to monies
advanced to AMI
8.2 Procedure Upon Termination.
In the event of termination pursuant to Section 8.1, written notice
thereof shall immediately be given by the terminating party to the other party
and the transactions contemplated by this Agreement shall be terminated, without
further action by the parties; provided, however, that such termination shall
not in any way limit or restrict the rights and remedies of the Company or the
Purchaser against the other party that has materially breached this Agreement
prior to the termination hereof.
ARTICLE IX. MUTUAL INDEMNIFICATIONS
9.1 Survival of Representations, Warranties and Agreements.
The representations and warranties of Company contained in Sections
4.1, 4.3, and 4.9, and the representations and warranties of Purchaser contained
in Sections 5.1, 5.2, 5.5 and 5.6 shall survive the Closing Date. All other
representations and warranties of Company and Purchaser contained herein shall
survive the Closing and shall terminate two years after the Closing Date. Upon
the termination of a representation or warranty in accordance with the
foregoing, such representation or warranty shall have no further force or effect
for any purpose under this Agreement, including Section 9.2 hereof; provided,
however, that, any representation or warranty in respect of which indemnity may
be sought under Section 9.2, and the indemnity with respect thereto, shall
survive the time at which it would otherwise terminate pursuant to this Section
9.1 if notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time. Except as may otherwise be agreed by the parties in
writing, the election by any party to consummate the transactions contemplated
by this Agreement, notwithstanding such party's
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actual knowledge of the inaccuracy of any representation or warranty contained
herein, shall constitute a waiver by such party of any claim for indemnification
arising out of the breach of such representation or warranty.
(b) As used in this Article any reference to a representation,
warranty or covenant contained in any Section of this Agreement shall include
the schedule relating to such Section.
9.2 Indemnification.
(a) By Company. The Company shall indemnify the Purchaser and its
officers, directors, employees and agents and hold each of them harmless from
and against any and all damages incurred by any of them in connection with,
arising out of, or resulting from (i) any breach of any representation or
warranty made by the Company in this Agreement, or (ii) any failure by the
Company to perform in a timely manner any agreement, covenant or obligation of
the Company pursuant to this Agreement .
(b) By Purchaser. The Purchaser shall indemnify the Company and its
officers, directors, employees and agents and hold each of them harmless from
and against any and all damages incurred by any of them in connection with,
arising out of, or resulting from (i) any breach of any representation or
warranty made by Purchaser in this Agreement, or (ii) any failure by the
Purchaser to perform in a timely manner any agreement, covenant or obligation of
the Purchaser pursuant to this Agreement .
(c) Defense of Claims. If a claim for damages (a "Claim") is to be
made by a party entitled to indemnification hereunder (the "Indemnified Party")
against the party from whom indemnification is claimed (the "Indemnifying
Party"), the Indemnified Party shall give written notice (a "Claim Notice") to
the Indemnifying Party as soon as practicable after the Indemnified Party
becomes aware of any fact, condition or event which may give rise to Damages for
which indemnification may be sought under this Section 9.2. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the Indemnifying
Party as promptly as practicable and in any event within ten business days after
the service of the citation or summons. The failure of any Indemnified Party to
give timely notice hereunder shall not affect rights to indemnification
hereunder, except to the extent that the Indemnifying Party demonstrates actual
damage caused by such failure. Notwithstanding the foregoing, a Claim Notice
that relates to a representation or warranty that is subject to a survival
period set forth in Section 9.1 must be made within such survival period,
whether or not the Indemnifying Party is prejudiced by any failure to give the
Claim Notice. To the extent then known by the Indemnifying Party, the Claim
Notice shall describe in reasonable detail the nature of the Claim, including an
estimate of the amount of Damages that have been or may be suffered or incurred
by the Indemnified Party attributable to such Claim, the basis of the
Indemnified Party's request for indemnification under this Agreement and all
information in the Indemnified Party's possession relating to such Claim. After
receipt of such Claim Notice, the Indemnifying Party shall be entitled, if it so
elects, at its own cost, risk and expense, (i) to take control of the defense
and investigation of such lawsuit or action and (ii) to employ and engage
attorneys of its own choice to handle and defend the same. If the Indemnifying
Party fails to assume the defense of such Claim within ten business days
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after receipt of the Claim Notice, the Indemnified Party against which such
Claim has been asserted will, upon delivering notice to such effect to the
Indemnifying Party, have the right to undertake, at the Indemnifying Party's
cost and expense, the defense, compromise or settlement of such Claim on behalf
of and for the account and risk of the Indemnifying Party. In the event the
Indemnified Party assumes the defense of the Claim, the Indemnified Party will
keep the Indemnifying Party reasonably informed of the progress of any such
defense, compromise or settlement. Notwithstanding the foregoing, the
Indemnified Party shall be entitled to conduct its own defense at the cost and
expense of the Indemnifying Party if the Indemnified Party establishes that the
conduct of its defense by the Indemnifying Party would be reasonably likely to
prejudice materially the Indemnified Party due to a conflict of interest between
the Indemnified Party and the Indemnifying Party; and provided further that in
any event the Indemnified Party may participate in such defense at its own
expense.
(d) Settlement. In the event that the Indemnified Party settles any
Claim without the prior written consent of the Indemnifying Party, the
Indemnifying Party shall have no further indemnification obligations under this
Section 9.2 with respect to such Claim; provided, however, that if the
Indemnifying Party fails to defend or otherwise handle such Claim and it is
subsequently determined that the Indemnifying Party is or was obligated to
defend or indemnify the Indemnified Party with respect to such Claim, then the
Indemnifying Party shall remain obligated with respect to such settlement
amount. If the Indemnifying Party shall control the defense of any such Claim,
the Indemnifying Party shall obtain the prior written consent of the Indemnified
Party, which shall not be unreasonably withheld, before entering into any
settlement of a Claim or ceasing to defend such Claim if, pursuant to or as a
result of such settlement or cessation, injunctive or other equitable relief
shall be imposed against the Indemnified Party or if such settlement or
cessation does not expressly and unconditionally release the Indemnified Party
from all liabilities and obligations with respect to such Claim with prejudice.
In the event that the Indemnifying Party proposes a settlement to any Claim
satisfactory to the party instituting such Claim, and the Indemnified Party
withholds its consent to such settlement, and thereafter a final judgment is
entered against the Indemnifying Party or the Indemnified Party pursuant to
which Damages exceed the amount of the proposed settlement, then in such case
the Indemnifying Party shall have no obligation to indemnify the Indemnified
Party under this Section 9.2 against and in respect of the amount by which the
Damages resulting from such final judgment exceed the amount of the proposed
settlement.
(e) Mitigation. Each Indemnified Party shall have an obligation to
mitigate damages under this Agreement, and to that end each party shall use its
reasonable efforts and shall consult and cooperate with each other with a view
towards mitigating Damages that may give rise for indemnification under this
Section 9.2.
(f) Cooperation. In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated by this
Agreement is commenced, whether before or after the Closing, the parties hereto
agree to cooperate and use reasonable efforts to defend vigorously against and
respond thereto and make available to each other such personnel, witnesses,
books, record, documents or other information within its control that are
necessary or appropriate for such defense except for trade secrets and such
items which may not be made available pursuant to a Court Order; provided,
however, that subject to Section
Page 15
9.2(c), the Indemnifying Party shall reimburse the Indemnified Party, for its
out-of-pocket expenses incurred in connection therewith.
(g) Limitations on Indemnification.
The rights of an Indemnified Party to indemnification under this
Section 9 are subject to the following limitations:
(i) The maximum amount any party can recover as damages as a
result of being indemnified under Section 9.2(a) or 9.2(b) herein, shall be
limited, in the aggregate, to $350,000.00.
(ii) Neither party hereto shall have any liability to the other
party under Section 9.2(a) or 9.2(b) herein, unless and until the aggregate
amount of damages incurred by the indemnified party exceeds $5,000.00 and
thereafter only to the extent that such damages exceed $5,000.00.
9.3 Insurance Proceeds.
With respect to any Claim required to be indemnified pursuant to this
Agreement, so long as the Indemnifying Party has complied with its
indemnification obligations on such Claim, (i) to the extent available, the
Indemnified Party shall assign to the Indemnifying Party any applicable proceeds
under any insurance policy which covers the matter which is the subject of the
indemnification (but only to the extent of indemnification actually paid by the
Indemnifying Party) and shall take reasonable steps to insure that the
Indemnifying Party obtains the benefits of such policy, including providing any
notices as required under such policy and (ii) if the Indemnified Party receives
insurance proceeds with respect to any Damages paid by the Indemnifying Party,
then the Indemnified Party shall reimburse the Indemnifying Party in an amount
equivalent to such proceeds up to the amount actually paid by the Indemnifying
Party.
9.4 Exclusive Remedy.
The rights of Purchaser under Section 9.2 shall be the exclusive
remedy of Purchaser with respect to claims based upon a breach or alleged breach
of the representations, warranties and covenants of Company contained herein.
The rights Company under Section 9.2 shall be the exclusive remedy of Company
with respect to claims based upon a breach or alleged breach of the
representations, warranties and covenants of Purchaser contained herein. Except
as expressly set forth in this Agreement, neither Company nor any of its
respective Representatives or Affiliates makes or has made any representations
or warranties, express or implied, in connection with the transactions
contemplated by this Agreement.
9.5 No Right to Set-Off.
Notwithstanding any other provision of this Agreement, neither party
shall have a right to off set payments, services or benefits due to the other
party against damages actually or allegedly incurred by the first party.
Page 16
ARTICLE X. MISCELLANEOUS
10.1 Intentionally Omitted.
10.2 Intentionally Omitted.
10.3 Amendments, Waivers and Consents.
No provision hereof may be waived except by a written instrument
signed by the party so waiving such provision; provided however that if the
Closing occurs each of the conditions set forth in Article V shall be deemed to
have been complied with or waived. This Agreement may not be amended except by a
written instrument duly executed by the Company and the Purchaser.
10.4 Survival of Warranties.
The representations and warranties of the Company and the Purchaser
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing as set forth in Article 9.1 above..
10.5 Governing Law; Jurisdiction; Venue.
This Agreement shall be governed by the laws of the State of Delaware
without regard to its conflicts of laws principles, and any and all actions
shall be brought in the State of Delaware. To the extent permitted by law, each
party hereby expressly submits and consents in advance to such exclusive
jurisdiction in any such action or proceeding and agrees that service of such
summons and complaint or other process or papers may be made by registered or
certified mail addressed to such party at the address to which notices are to be
sent pursuant to this Agreement. The exclusive choice of forum set forth in this
Section shall not be deemed to preclude the enforcement of any judgment obtained
in such forum or the taking of any action to enforce the same in any other
appropriate jurisdiction.
10.6 Section Headings.
The descriptive headings in this Agreement have been inserted for
convenience only and shall not be deemed to limit or otherwise affect the
construction or interpretation of any provision hereof.
10.7 Counterparts.
This Agreement may be executed by facsimile and in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute but one and the
same document.
10.8 Consents; Approvals; Efforts to Close.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, the parties
hereto shall cooperate in good
Page 17
faith and shall use commercially reasonable efforts to obtain all consents
necessary and to take, or cause to be taken, all actions necessary, proper or
advisable to consummate the transactions contemplated by this Agreement.
10.9 Notices and Demands.
Any notice or demand which is required or provided to be given under
this Agreement shall be deemed to have been sufficiently given and received for
all purposes when delivered by hand, telecopy, or nationally recognized
overnight courier, or five days after being sent by certified or registered
mail, postage and charges prepaid, return receipt requested, to the following
addresses:
If to the Company: With a copy to:
First Chesapeake Financial Corporation Klehr, Harrison, Xxxxxx, Xxxxxxxxx &
Xxxxxx, LLP
000 Xxxxxxxx Xxxxxx 000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000 Xxxxxxxxxxxx XX 00000
Attn; Corner Executive Office._ Attn: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: Facsimile 000-000-0000
-----------------
If to Purchaser: With copy to:
All American Companies, Inc. Hatch & Xxxx, P.A..
000 Xxxxxx Xxxx, Xxxxx 000 0000 X-0-X Xxxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000 Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx Attn: Xxx Xxxxx, Esq.
Facsimile: 000-000-0000 Facsimile: 772-234-8299
or, with respect to any party hereto, at any other address designated in writing
by such party in accordance with the provisions of this Section 10.9.
10.10 Severability.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
10.11 Integration.
This Agreement, including the exhibits, documents and instruments
referred to herein or therein, constitutes the entire agreement, and supersedes
any other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
10.12 Additional Purchases.
Page 18
Nothing in this Agreement or the Warrants shall be construed to
prohibit the Purchaser from purchasing additional shares of capital stock of the
Company upon terms mutually agreeable to the Purchaser and the Company.
10.13 Binding Effect; Assignment.
This Agreement shall be binding upon, inure to the benefit of and be
enforceable by and against the Parties and their respective heirs, personal
representatives, successors, and assigns. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be transferred or
assigned by any of the Parties without the prior written consent of the other
Parties.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Securities Purchase Agreement as of the day and year first above written.
Company: Purchaser:
By: By:
-------------------------------- --------------------------------
Name: Name:
Title: Title:
Page 19
Schedule 1.4 to Securities Purchase Agreement
Resignations of Members of the Company's Board of Directors
The following individuals shall resign from the Company's Board of Directors
effective immediately prior to Closing:
1. Xxxx Xxxxx
0. Xxxxxxxx Xxxxxxx
3. Xxxx Xxxxxxxx
Schedule 1.5 to Securities Purchase Agreement
Appointments to Company's Board of Directors
The following individuals shall be appointed to the Company's Board of Directors
effective immediately after the Closing:
1. Xxxx Xxxxxx
2. Xxxxxx Xxxxx
3. Xxxxx Xxxxx
Schedule 3.3(a) to Securities Purchase Agreement
Options Repricing Schedule
To be attached
Schedule 4.8 to Securities Purchase Agreement
List of SEC Documents
To be attached
Schedule 4.10 to Securities Purchase Agreement
Bank Accounts
To be attached
Page 20
Schedule 4.11 to Securities Purchase Agreement
Additional Options Stock
To be attached
Schedule 6.6 to Securities Purchase Agreement
Schedule of Shares to be Registered
To be attached
Schedule 6.7 to Securities Purchase Agreement
Liabilities and Payment Schedule
To be attached
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