STOCK PURCHASE AND OPTION AGREEMENT (the "Agreement"), dated as of May
10, 2002, between XXXXXXX XXXXXX (the "Seller"), and PRIME MANAGEMENT
CORPORATION, a New York corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller owns 165,000 shares (the "Purchased Shares") of
common stock, par value $.01 per share (the "Common Stock"), of Xxxxxx & Ciocia,
Inc. ("Issuer");
WHEREAS, the Seller owns an additional 168,981 shares of the Common
Stock (the "Option Shares");
WHEREAS, the Seller desires to sell the Purchased Shares and to grant
the Option (as defined below) to purchase the Option Shares to the Purchaser,
and the Purchaser desires to purchase the Purchased Shares and the Option to
purchase the Option Shares from the Seller, at the purchase price of $494,000
for the Purchased Shares and $1,000 for the Option (collectively, the "Purchase
Price"), all on the terms set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Sale and Purchase of the Purchased Shares and Grant of Option.
(a) The Seller hereby agrees to transfer, assign and sell the
Purchased Shares to the Purchaser, and the Purchaser hereby agrees to purchase
the Purchased Shares from the Seller, at the Closing (as defined in subsection
(c) below).
(b) Subject to Sections 3 and 4 below, the Seller hereby
grants to the Purchaser the right (the "Option") for a period of five years from
the date of this Agreement (the "Option Period") to purchase any or all of the
Option Shares from the Seller at an exercise price per share (the "Option
Price") equal to 160% of the average closing price of the Common Stock as quoted
on the Nasdaq National Market (or such other market or exchange on which the
Common Stock shall be listed or quoted) on the 20 trading days prior to any
exercise of the Option, except that the Option Price shall not in any event be
less than $75 per share.
(c) At a closing (the "Closing") to be held at the offices of
Xxxxxx Xxxxxx Xxxxx Xxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 at 10:00 AM
on May 16, 2002 (or such other place, time or date as the Seller and the
Purchaser shall agree) (the "Closing Date") the Seller shall deliver to the
Purchaser a certificate or certificates evidencing the Purchased Shares, duly
endorsed or accompanied by a stock power duly executed in blank, and the
Purchaser shall pay the Purchase Price to the Seller by wire transfer of
immediately available funds. Immediately after delivery of the Purchased Shares
to the Purchaser and payment of the Purchase Price to the Seller at the Closing,
the Purchaser shall deliver the Purchased Shares to the Trustee (as defined
below) to be placed in a voting trust pursuant to Section 2 below. Immediately
after payment of the Purchase Price to the Seller at the Closing, the Seller
shall deliver a certificate or certificates evidencing the Option Shares, duly
endorsed or accompanied by a stock power duly executed in blank, to the Trustee,
to be placed in a voting trust pursuant to Section 2 below.
1
2. Voting Trust Agreement. The Option Shares and the Purchased
Shares shall be placed into a voting trust (the "Trust") for the duration of the
Option Period pursuant to a voting trust agreement (the "Trust Agreement") dated
as of the Closing Date, in substantially the form attached hereto as Exhibit A
by and between the Seller, the Purchaser and Xxxxxxx Xxxx (the "Trustee").
3. Rights of First Refusal.
(a) Restricted Period. During the Option Period, the Seller
may not, except in accordance with this Section 3, sell, pledge, hypothecate, or
otherwise encumber any Option Shares, or any interest therein.
(b) Transfer Notice. Commencing with the second anniversary of
the date of this Agreement, if the Seller proposes to pledge, transfer,
hypothecate or otherwise encumber any Option Shares to one or more third parties
in one or more related transactions pursuant to a bona fide agreement with such
third parties, or to sell such Option Shares over the Nasdaq National Market (or
such other market or exchange as the Common Stock shall be listed or quoted on)
(a "Transfer"), then the Seller shall give the Purchaser written notice of the
Seller' intention to make the Transfer (the "Transfer Notice"), which Transfer
Notice shall include a reasonable description of the Option Shares to be
transferred ("Offered Shares"), the identity of the prospective transferee(s),
the consideration to be paid and the material terms and conditions upon which
the proposed Transfer is to be made; provided, however, that the total number of
Offered Shares shall not exceed 50,000 in any one-year period.
(c) Purchaser's Option. The Purchaser shall have an option for
a period of 30 days from receipt of the Transfer Notice to elect to purchase
some or all of the Offered Shares from the Seller at the Purchaser's option, at
(i) the same price, terms and conditions as described in the Transfer Notice or
(ii) a price equal to the average closing price of the Issuer's Common Stock as
quoted on the Nasdaq National Market (or such other market or exchange as the
Common Stock shall be listed or quoted on) over the 20 trading days prior to the
date of receipt of the Transfer Notice. The Purchaser may exercise such purchase
option and, thereby, purchase all or a portion of the Offered Shares by
notifying the Seller in writing before expiration of the 30 day period as to the
number of such shares which it wishes to purchase. If the Purchaser gives the
Seller notice that it desires to purchase any of the Offered Shares, then
payment for such Offered Shares shall be by check or wire transfer, against
delivery of such Offered Shares at a place agreed upon between the parties and
at the time of the scheduled closing therefor, which shall be no later than 30
days after the Purchaser's election to purchase the Offered Shares.
(d) Non-Exercise of Rights. To the extent that the Purchaser
has not exercised its right of first refusal to purchase the Offered Shares
within the time periods specified in this Agreement, the Seller shall have a
period of 30 days from the expiration of such rights in which to sell the
Offered Shares, as the case may be, upon terms and conditions (including the
purchase price) no less favorable to the Seller than those specified in the
Transfer Notice. In the event the Seller does not consummate the sale or
disposition of the Offered Shares within the 30 day period from the expiration
of these rights, the Purchaser's right of first refusal shall continue to be
applicable to any subsequent proposed disposition of Option Shares by the Seller
during the
2
Option Period. Any Offered Shares sold pursuant to this subsection (d) shall be
removed from the Trust pursuant to the terms of the Trust Agreement.
4. Change in Control. In the event of a "Change of Control" (as
defined below) of the Issuer during the six months following this Agreement, the
Purchaser shall have the right to resell the Purchased Shares and any Option
Shares therertofor purchased by it back to the Seller, and the Seller shall have
the obligation to purchase such Purchased Shares and Option Shares theretofor
purchased, at the purchase prices paid for such Purchased Shares and Option
Shares by the Purchaser. A "Change in Control" shall be deemed to occur upon (a)
the sale or transfer by any party, or the issuance by the Issuer, of an amount
of Common Stock or other equity securities of the Issuer (or warrants, options
or other rights to purchase Common Stock or other equity securities of the
Issuer), in one or more transactions, related or unrelated, with voting power
equal to 20% (10% if such transactions involve current officers or directors of
the Issuer) or more of the votes represented by the outstanding Common Stock as
of the date of this Agreement (except to Xxxxxxx Xxxx, or individuals or
entities controlled by Xxxxxxx Xxxx); or (b) the merger of the Issuer with any
person (as such term is defined in the Securities Exchange Act of 1934 (the
"Exchange Act")) as a result of which the Issuer is not the surviving entity as
a publicly held corporation, the consolidation of the Issuer with any person, or
the sale of all or the sale of all or substantially all of the assets of the
Issuer (other than in a transaction with an entity controlled by Xxxxxxx Xxxx).
5. Representations and Warranties of the Seller. The Seller
represents and warrants to the Purchaser that:
(a) Title to Shares and Warrants. The Seller is the record and
beneficial owner of the Purchased Shares hereby purchased and the Option Shares
to be purchased upon the exercise of the Option, free and clear of all liens,
pledges, encumbrances, restrictions, and claims.
(b) Valid and Binding. This Agreement constitutes the legal,
valid and binding obligation of the Seller, enforceable against the Seller in
accordance with its terms.
(c) Non-contravention. The execution and delivery of this
Agreement and the Trust Agreement, and the consummation by the Seller of the
transactions contemplated by this Agreement and the Trust Agreement, does not
constitute a default under (or an event which with notice or lapse of time or
both could become a default) or give to others any rights of termination,
amendment or cancellation or, any material agreement or instrument to which the
Seller is a party, or results in a violation of any law, rule, regulation,
order, judgment, or decree (foreign or domestic and including federal and state
securities laws and regulations) applicable to the Seller.
(d) Offering Valid. Assuming the accuracy of the Purchaser's
representations and warranties below, the sale of the Purchased Shares and the
Option Shares purchased under any exercise of the Option is registered or
qualified (or will be exempt from registration and qualification) under the
registration requirements of the Securities Act of 1933 (the "Securities Act")
and all applicable state securities laws.
3
(e) Full Disclosure. To the Sellers' knowledge, none of the
reports, schedules, forms and statements filed by the Issuer with the Securities
and Exchange Commission pursuant to the reporting requirements of the Exchange
Act contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Seller has no knowledge of any material events that would be
required to be disclosed in a Current Report on Form 8-K under the Exchange Act.
(f) Ownership of Additional Common Stock The Purchased Shares
and the Option Shares together represent the total number of shares of Common
Stock owned by the Seller.
6. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller that:
(a) Valid and Binding. This Agreement constitutes the legal,
valid and binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms.
(b) Investment Representations. It (i) is purchasing the
Purchased Shares (and the Option Shares to be purchased upon the exercise of the
Option) for its own account without a view to any distribution thereof in
violation of the Securities Act; (ii) is an "accredited investor" as defined
under Rule 501 under the Securities Act; (iii) has no contract, undertaking,
agreement or arrangement with any person to sell, transfer or pledge to such
person or anyone else the Purchased Shares (and the Option Shares to be
purchased upon the exercise of the Option) or any part thereof; (iv) has
sufficient knowledge and experience in business matters to evaluate the merits
and risks of the investment; and (v) has adequate means of providing for its
current needs and possible contingencies; has no need for liquidity of its
investment in the Purchased Shares (and the Option Shares to be purchased upon
the exercise of the Option) and would be able to bear the economic risk of a
complete loss of its proposed investment in the Purchased Shares (and the Option
Shares to be purchased upon the exercise of the Option) hereunder.
(c) Information about Issuer. It acknowledges that it has
received and reviewed carefully the Issuer's most recent Quarterly Report on
Form 10-Q and Annual Report on Form 10-K.
(d) Offers and Sales. All subsequent offers and sales of the
Purchased Shares and any Option Shares purchased upon exercise of the Option
shall be made pursuant to an effective registration statement under the
Securities Act or pursuant to an applicable exemption from such registration.
(e) Authorization. It has the requisite corporate power and
authority to enter into this Agreement and the Trust Agreement.
4
7. Indemnification.
(a) By the Seller. The Seller agrees to indemnify and hold
harmless the Purchaser and its directors, officers, members, shareholders,
employees, agents, successors and assigns (the "Purchaser Parties") against, and
to reimburse the Purchaser Parties on demand with respect to, any and all
losses, liabilities, obligations, suits, proceedings, demands, judgments,
damages, claims, expenses and costs (including, without limitation, reasonable
fees, expenses and disbursements of counsel) (collectively, "Damages") which
each may suffer, incur or pay by reason of (i) the breach by the Seller of any
representation or warranty contained in this Agreement, or in any agreement,
certificate or instrument executed by it and contemplated hereby or (ii) the
failure of the Seller to perform any agreement required by this Agreement or any
agreement, certificate or instrument contemplated hereby.
(b) By the Purchaser. The Purchaser agrees to indemnify and
hold harmless the Seller and their agents, successors and assigns (the "Seller's
Parties") against, and to reimburse the Seller's Parties on demand with respect
to, any and all Damages which each may suffer, incur or pay by reason of (i) the
breach by the Purchaser of any representation or warranty contained in this
Agreement or in any agreement, certificate or instrument executed by it and
contemplated hereby or (ii) the failure of the Purchaser to perform any
agreement required by this Agreement or any agreement, certificate or instrument
contemplated hereby.
8. Miscellaneous
(a) Expenses. The parties hereto will bear their own costs,
fees and expenses in connection with the negotiation, documentation and/or
enforcement of this Agreement.
(b) No Modification Except in Writing. This Agreement shall
not be changed, modified or amended except by a written agreement executed by
the parties hereto.
(c) Entire Agreement. This Agreement sets forth the entire
agreement and understanding among the parties hereto as to the subject matter
hereof.
(d) Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be
delivered (i) in person, (ii) by certified or registered mail, return receipt
requested, (iii) by Federal Express or other nationally recognized overnight
courier service which issues confirmation of delivery or (iv) by confirmed
facsimile transmission at the addresses or facsimile numbers set forth below or
to such other addresses or facsimile number, as applicable, as any party hereto
may designate to the other in writing.
If to the Purchaser:
c/o Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxxx Xxxxxxx, Esq.
5
If to the Seller, to it at the address set forth below the Seller's
signature below.
Any such notice shall be deemed to be given (i) when delivered, if delivered
personally or by Federal Express or other nationally recognized overnight
courier service, (ii) on the third business day after the date of mailing, if
sent by certified or registered mail or (iii) upon confirmation of receipt, if
delivered by facsimile transmission.
(e) Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement may not be
assigned by either party hereto without the written consent of the other party.
(f) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York.
(g) Captions; Construction. The captions appearing in this
Agreement are inserted only as a matter of convenience and for reference and in
no way define, limit or describe the scope and intent of this Agreement or any
of the provisions hereof.
(h) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original.
6
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
SELLER:
/s/ Xxxxxxx Xxxxxx
-------------------------------------------
Address:
PURCHASER:
PRIME MANAGEMENT CORPORATION
By: /s/ Xxxxxxx Xxxx
----------------------------------------
Title: President
-------------------------------------
7
EXHIBIT A
Form of Voting Trust Agreement
VOTING TRUST AGREEMENT, dated as of May __, 2002 between
XXXXXXX XXXX, (the "Trustee"), PRIME MANAGEMENT CORPORATION, a New York
corporation (the "First Beneficiary"), and XXXXXXX XXXXXX (the "Second
Beneficiary", and together with the First Beneficiary, the "Beneficiaries").
W I T N E S S E T H :
WHEREAS, the First Beneficiary is the owner of 165,000 shares
(the "Purchased Shares") of the common stock, par value $0.01 per share (the
"Common Stock"), of Xxxxxx & Xxxxxx, Inc., a Delaware corporation (the
"Company");
WHEREAS, the Second Beneficiary is the owner of 168,981 shares
(the "Option Shares") of Common Stock; and
WHEREAS, in order to vest in the Trustee the sole right to
vote the Purchased Shares and the Option Shares, the Beneficiaries are willing
to deposit the Option Shares and Purchased Shares with the Trustee under this
Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DELIVERY TO TRUSTEE OF CERTIFICATES FOR SHARES. Simultaneously
with the execution and delivery of this Agreement: (a) the First Beneficiary
shall deliver to the Trustee certificates representing an aggregate of 165,000
shares of Common Stock representing the Purchased Shares held by the First
Beneficiary, and (b) the Second Beneficiary shall deliver to the Trustee
certificates representing an aggregate of 168,981 shares of Common Stock
representing the Option Shares held by the Second Beneficiary. Such certificates
shall be endorsed in blank or accompanied by duly completed stock powers
executed by the Beneficiaries. Immediately subsequent to the execution and
delivery of this Agreement, the Trustee shall deliver a copy of this Agreement
to the Company for filing in the Company's registered office in the State of
Delaware, shall surrender to the Company said certificates and stock powers, and
the Trustee and Beneficiaries shall take all further necessary or appropriate
actions to enter the name of the Trustee in the register of stockholders in
respect thereof and to cancel said certificates and to issue to the Trustee a
new certificate, representing 333,981 shares of Common Stock (the "Trust
Shares"), in the name of the Trustee, which certificate shall bear a legend
indicating that it has been issued pursuant to this Agreement. Said new
certificate shall be held by the Trustee, in trust, for the benefit of the
Beneficiaries, subject to the terms hereinafter set forth.
2. DELIVERY OF TRUSTEE'S CERTIFICATES. Upon the delivery to the
Trustee of the certificates and stock powers referred to in paragraph 1 hereof,
the Trustee shall deliver to the First Beneficiary a certificate substantially
in the form hereinafter set forth (a "Trustee's Certificate") for the number of
Shares delivered to the Trustee by the First Beneficiary, and the
8
Trustee shall deliver to the Second Beneficiary a Trustee's certificate for the
number of Shares delivered to the Trustee by the Second Beneficiary.
The Trustee's Certificate (the provisions of which are a part
of this Agreement) shall be substantially in the following form:
TRUSTEE'S CERTIFICATE
This is to certify that the undersigned Trustee has received a
certificate or certificates issued in the name of [First
Beneficiary][Second Beneficiary], evidencing the ownership of _______
shares of common stock, par value $0.01, of Xxxxxx & Xxxxxx, Inc., a
Delaware corporation (the "Shares"), and that the Shares are held
subject to all the terms of that certain Agreement (the "Voting Trust
Agreement"), dated as of _________, 2002, between Prime Management
Corporation, Xxxx and Xxxxxxx Xxxxxx, and Xxxxxxx Xxxx, as Trustee.
During the term of the Voting Trust Agreement, the Trustee shall, as
provided in the Voting Trust Agreement, possess and be entitled to
exercise the right to vote and otherwise represent all of the Shares
for all purposes, it being agreed that no voting authority or power
shall pass to the holder hereof by virtue of the ownership of this
Certificate.
This Certificate is assignable with the right to issuance of a new
certificate of like tenor only upon the surrender to the Trustee of
this certificate properly endorsed. Upon the termination of the Voting
Trust Agreement, this certificate shall be surrendered to the Trustee
by the holder hereof upon delivery to the holder hereof of a
certificate representing the Shares.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
____ day of ___________, 2002.
-----------------------------
Xxxxxxx Xxxx, Trustee
Each Trustee's Certificate may be transferred by endorsement
by the person to whom issued, or by his, her or its attorney-in-fact, or by the
administrator or executor of his, her or its estate, by delivery of such
Trustee's Certificate so endorsed to the Trustee; but such transfer shall not be
evidence to or be binding upon the Trustee until such Trustee's Certificate is
surrendered to the Trustee and the transfer is entered upon the "Trustee's
Certificate Book," which shall be kept by the Trustee to show the names of the
parties by whom and to whom transferred, the numbers of the certificates, the
number of shares and the date of transfer. No new Trustee's Certificate shall be
issued until the Trustee's Certificate for the shares represented thereby shall
have been surrendered to and cancelled by the Trustee, and the Trustee shall
preserve the certificates so cancelled as vouchers. In case any Trustee's
Certificate shall be claimed to be lost or destroyed, a new Trustee's
Certificate may be issued in lieu thereof, upon such proof of loss as may be
required by the Trustee.
9
3. VOTING AUTHORITY AND POWER OF TRUSTEE.
(a) Subject to Section 4 below, during the term of this
Agreement, the Trustee shall have the sole and exclusive voting authority and
power with respect to the Trust Shares at all regular and special meetings of
the stockholders of the Company and may vote for, do or assent or consent to and
shall have all the powers, rights and privileges of a stockholder of the
Company.
(b) The Trustee may vote in person or by proxy, and a proxy
in writing signed by the Trustee shall be sufficient authority to the person
named therein to vote all the Trust Shares at any meeting, regular or special,
of the stockholders of the Company.
4. SALE OF OPTION SHARES. If, subsequent to the second
anniversary of the date of this Agreement, the Second Beneficiary sells or
otherwise transfers any of the Option Shares (the "Transferred Shares"), the
Trustee's voting power and authority shall cease with respect to such
Transferred Shares, the Transferred Shares shall no longer be subject to the
terms of this Agreement. The Trustee's Certificate representing the Option
Shares shall be surrendered to the Trustee and a new Trustee's Certificate
issued to the First Beneficiary pursuant to Section 2 above representing the
Option Shares less any Transferred Shares, and the certificate representing the
Trust Shares shall be cancelled and a new certificate issued in the name of the
Trustee representing the Trust Shares less any Transferred Shares.
5. DISTRIBUTION OF CASH DIVIDENDS.
(a) The Trustee shall distribute directly any cash
dividends or distributions declared and paid on the Trust Shares (other than
dividends or distributions made in the form of voting securities of the Company)
to the holders of Trustee's Certificates in proportion to their respective
interests therein as shown on the books of the Trustee, such distribution to be
equivalent to the dividends or distribution which each respective holder would
have been entitled to receive had the Shares not been deposited hereunder.
(b) The Trustee shall receive and hold, subject to the
terms of this Agreement, any voting securities of the Company issued in respect
of the Trust Shares by reason of any dividend, distribution, capital
reorganization, stock split, combination or the like and shall issue and deliver
Trustee's Certificates therefor to the holders of the Trustee's Certificates in
proportion to their respective interests therein as shown on the books of the
Trustee.
6. TERM OF AGREEMENT. The trust hereby created shall terminate
on May _, 2007. Until termination in accordance with the terms of this
Agreement, neither this Agreement nor the trust hereby created shall be
revocable or amendable, in whole or in part.
7. LIABILITY FOR WILLFUL MISCONDUCT. The Trustee shall not be
liable for any error of judgment or mistake of fact or law, or for any act or
omission undertaken in good faith in connection with his powers and duties under
this Agreement, except for his own willful misconduct or gross negligence. The
Trustee shall not be liable for acts or omissions of any employee or
10
agent of the Company. The Trustee shall not be liable for acting in reliance on
any notice, request, consent, certificate, instruction, or other paper or
document or signature believed to be genuine and to have been signed by the
proper party or parties. The Trustee may consult with legal and other counsel of
his choosing, and any act or omission undertaken by the Trustee in good faith in
accordance with the opinion of legal or other counsel shall be binding and
conclusive on the parties to this Agreement.
8. BINDING AGREEMENT. Every registered holder of a Trustee's
Certificate, and every bearer of a Trustee's Certificate properly endorsed in
blank or properly assigned, by the acceptance or holding thereof, shall be
deemed conclusively for all purposes to have assented to this Agreement and to
all of its terms, conditions and provisions and shall be bound thereby with the
same force and effect as if such holder or bearer had executed this Agreement.
Without limiting the foregoing, this Agreement shall be binding upon and inure
to the benefit of each of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
9. SEVERABILITY. The invalidity of any term or provision of
this Agreement shall not affect the validity of the remainder of this Agreement.
10. GOVERNING LAW. Regardless of the place of execution, delivery,
performance or any other aspect of this Agreement, this Agreement and all of the
rights of the parties under this Agreement shall be governed by, construed under
and enforced in accordance with the substantive law of the State of Delaware
without regard to conflicts of law principles.
11. NO WAIVER. No waiver of any covenant or condition or the
breach of any covenant or condition of this Agreement shall be deemed to
constitute a waiver of any subsequent breach of such covenant or condition nor
justify or authorize a nonobservance upon any occasion of such covenant or
condition or any other covenant or condition of this Agreement.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with regard to the subject matter thereof,
and shall not be modified or amended except in a writing executed by both of the
parties hereto.
11
IN WITNESS WHEREOF, the Trustee and the Beneficiaries have
executed this Agreement as of the date set forth above.
------------------------------------
Xxxxxxx Xxxx, as Trustee
PRIME MANAGEMENT CORPORATION
By: ________________________________
------------------------------------
Xxxxxxx Xxxxxx
12
