STOCK PURCHASE AGREEMENT
among
LAHAINA ACQUISITIONS, INC.
and
THE SHAREHOLDERS OF
UNITED CAPITAL MORTGAGE CORPORATION
October 1, 2000
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ARTICLE I
PURCHASE AND SALE OF STOCK
Section 1.01. Purchase and Sale......................................1
Section 1.02. Purchase Price.........................................1
Section 1.03. Security...............................................2
Section 1.04. Restrictions on Transfer...............................2
Section 1.05. Shareholder Demand Rights..............................2
ARTICLE II
CLOSING
Section 2.01. The Closing............................................3
Section 2.02. Conditions to Close....................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
Section 3.01. Representations and Warranties of the Shareholders.....6
Section 3.02. Representations and Warranties of the Purchaser........7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
Section 4.01. Organization...........................................8
Section 4.02. Authorization..........................................8
Section 4.03. Capital Structure......................................8
Section 4.04. Financial Statements...................................9
Section 4.05. No Conflict or Violation...............................9
Section 4.06. Litigation.............................................9
Section 4.07. Properties and Leases..................................9
Section 4.08. Taxes..................................................10
Section 4.09. Absence of Certain Changes.............................10
Section 4.10. Commitments and Contracts..............................10
Section 4.11. Insurance..............................................10
Section 4.12. Licenses, Authorizations and Approvals.................10
Section 4.13. Labor..................................................11
Section 4.14. Defaults...............................................11
Section 4.15. Environmental Liability................................11
Section 4.16. Compliance With Law ...................................12
Section 4.17. No Other Agreements To Sell the Company................12
Section 4.18. No Agreements With Management..........................12
Section 4.19. Undisclosed Liabilities................................12
Section 4.20. Employee Benefit Plans.................................12
Section 4.21. Disclosure.............................................14
Section 4.22. Name, Trade Name and Service Marks.....................14
Section 4.23. Employment Contracts...................................15
Section 4.24. Loan Matters...........................................15
Section 4.25. Interested Transactions................................16
Section 4.26. Statements True and Correct............................16
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE PURCHASER
Section 5.01. Organization...........................................16
Section 5.02. Authorization..........................................16
Section 5.03. Capital Structure......................................17
Section 5.04. Reports and Financial Statements.......................17
Section 5.05. No Conflict or Violation...............................17
Section 5.06. Litigation.............................................17
Section 5.07. Properties and Leases..................................18
Section 5.08. Taxes..................................................18
Section 5.09. Absence of Certain Changes.............................18
Section 5.10. Commitments and Contracts..............................18
Section 5.11. Insurance..............................................18
Section 5.12. Licenses, Authorizations and Approvals.................18
Section 5.13. Labor..................................................19
Section 5.14. Defaults...............................................19
Section 5.15. Environmental Liability................................19
Section 5.16. Compliance With Law....................................20
Section 5.17. Employment Contracts...................................20
Section 5.18. Undisclosed Liabilities................................20
Section 5.19. Employee Benefit Plans.................................20
Section 5.20. Disclosure.............................................22
Section 5.21. Name, Trade Name and Service Marks.....................22
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Publicity..............................................23
Section 6.02. Conduct of the Company's Business......................23
Section 6.03. Termination............................................24
Section 6.04. Investigations and Confidentiality.....................25
Section 6.05. No Other Proposals.....................................25
Section 6.06. Consents and Approvals.................................26
ARTICLE VII
INDEMNIFICATION
Section 7.01. Indemnification by Shareholders........................26
Section 7.02. Indemnification by Purchaser...........................26
Section 7.03. Indemnification Procedures.............................27
Section 7.04. Indemnification Limitation.............................27
Section 7.05. Right of Setoff........................................27
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Assignment; Binding Effect.............................27
Section 8.02. Governing Law..........................................28
Section 8.03. Arbitration............................................28
Section 8.04. Notices................................................28
Section 8.05. Survival of Representations and Warranties.............29
Section 8.06. Headings...............................................29
Section 8.07. Fees and Expenses......................................29
Section 8.08. Entire Agreement.......................................29
Section 8.09. Waiver and Amendment...................................30
Section 8.10. Counterparts; Facsimile Signatures.....................30
Section 8.11. Third-party Beneficiaries and Acts of Agent............30
Section 8.12. Severability...........................................30
Section 8.13. Construction...........................................30
LIST OF EXHIBITS:
EXHIBIT A SHAREHOLDERS' OBLIGATIONS TO COMPANY
EXHIBIT B LIST OF DISTRIBUTED PROPERTY
EXHIBIT C SHORT-TERM NOTE
EXHIBIT D NOTE
EXHIBIT E ALLOCATION OF PURCHASE PRICE AMONG SHAREHOLDERS
EXHIBIT F STOCK PLEDGE AGREEMENT
EXHIBIT G LIST OF COMPANY SUBSIDIARIES
EXHIBIT H CONSULTING AND NONCOMPETITION AGREEMENT OF XXXXXXX X. XXXXXX
EXHIBIT I EMPLOYMENT AGREEMENT (XXXXX XXXXXXX AND XXX XXXX)
EXHIBIT J OPINION OF COUNSEL TO THE COMPANY
EXHIBIT K INDEMNITY AGREEMENT IN FAVOR OF XXXXXXX X. XXXXXX
EXHIBIT L OPINION OF COUNSEL TO THE PURCHASER
EXHIBIT M GUARANTY AGREEMENT OF L. XXXXX XXXXXXX
EXHIBIT N FINANCIAL STATEMENTS
EXHIBIT O INTERIM FINANCIAL STATEMENTS
EXHIBIT P TAX RETURNS
SCHEDULE INDEX WITH RESPECT TO THE COMPANY:
SCHEDULE 4.03 CAPITAL STRUCTURE
SCHEDULE 4.04 FINANCIAL STATEMENTS
SCHEDULE 4.05 NO CONFLICT OR VIOLATION
SCHEDULE 4.06 LITIGATION
SCHEDULE 4.07 PROPERTIES AND LEASES
SCHEDULE 4.08 TAXES
SCHEDULE 4.09 ABSENCE OF CERTAIN CHANGES
SCHEDULE 4.10 COMMITMENTS AND CONTRACTS
SCHEDULE 4.11 INSURANCE
SCHEDULE 4.12 LICENSES, AUTHORIZATIONS AND APPROVALS
SCHEDULE 4.13 LABOR
SCHEDULE 4.14 DEFAULTS
SCHEDULE 4.15 ENVIRONMENTAL LIABILITY
SCHEDULE 4.16 COMPLIANCE WITH LAWS
SCHEDULE 4.18 AGREEMENTS WITH MANAGEMENT
SCHEDULE 4.19 UNDISCLOSED LIABILITIES
SCHEDULE 4.20 EMPLOYEE BENEFIT PLANS
SCHEDULE 4.23 EMPLOYMENT CONTRACTS
SCHEDULE 4.24 INTERESTED TRANSACTIONS
SCHEDULE INDEX WITH RESPECT TO THE PURCHASER:
SCHEDULE 5.03 CAPITAL STRUCTURE
SCHEDULE 5.04 NO CONFLICT OR VIOLATION
SCHEDULE 5.06 LITIGATION
SCHEDULE 5.07 PROPERTIES AND LEASES
SCHEDULE 5.08 TAXES
SCHEDULE 5.09 ABSENCE OF CERTAIN CHANGES
SCHEDULE 5.10 COMMITMENTS AND CONTRACTS
SCHEDULE 5.13 LABOR
SCHEDULE 5.14 DEFAULTS
SCHEDULE 5.15 ENVIRONMENTAL LIABILITY
SCHEDULE 5.16 COMPLIANCE WITH LAWS
SCHEDULE 5.17 EMPLOYMENT CONTRACTS
SCHEDULE 5.18 UNDISCLOSED LIABILITIES
SCHEDULE 5.19 EMPLOYEE BENEFIT PLANS
SCHEDULE 5.22 EMPLOYMENT CONTRACTS
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
effective as of the 1st day of October, 2000, by and among LAHAINA ACQUISITIONS,
INC., a Colorado corporation ("Purchaser"), UNITED CAPITAL MORTGAGE CORPORATION,
an Arkansas corporation (the "Company"), and the shareholders of the Company
whose names are set forth on the signature page of this Agreement
("Shareholders").
W I T N E S S E T H :
WHEREAS, the Shareholders own all of the issued and outstanding shares of
capital stock of the Company (the "Stock"); and
WHEREAS, the Shareholders desire to sell their Stock to the Purchaser, and
the Purchaser desires to purchase the Stock from the Shareholders, in the
manner, on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
Section 1.01. Purchase and Sale. Subject to the terms and conditions of
this Agreement, Purchaser hereby agrees to purchase the Stock from Shareholders,
and the Shareholders hereby agree to sell the Stock to the Purchaser, for the
Purchase Price (as defined below). The Purchaser shall pay the Purchase Price in
the manner set forth in this Article I.
Section 1.02. Purchase Price. As used in this Agreement, "Purchase Price"
means Two Million, Nine Hundred Forty-Seven Thousand, Six Hundred Seventy-Five
and 40/100 Dollars ($2,947,675.40). The Purchaser shall pay the Purchase Price
as follows:
(a) The Purchaser shall pay Seven Hundred Fifty Thousand Dollars ($750,000)
of the Purchase Price (the "Cash Payment") to the Shareholders in cash at the
Closing (as defined below). Notwithstanding the immediately preceding sentence,
the Cash Payment will be reduced by (i) the amount, as of the Closing Date (as
defined below), of the obligations of the Shareholders to the Company set forth
in attached Exhibit A, and (ii) the net value of any assets distributed to the
Shareholders by the Company at the Closing, or within the thirty-day period
immediately prior to the Closing Date, including without limitation the property
listed in attached Exhibit B.
(b) The Purchaser shall pay Two Hundred Fifty Thousand Dollars ($250,000)
of the Purchase Price by delivery to the Shareholders of a negotiable promissory
note (the "Short-Term Note") payable to the Shareholders in the principal amount
of Two Hundred Fifty Thousand Dollars ($250,000). The Short-Term Note will bear
interest at the rate of seven percent (7%) per annum, and all principal and
interest on the Short-Term Note will be payable in full on the ninety-day
anniversary of the Closing Date. The Short Term Note will (i) contain customary
provisions for promissory notes in transactions similar to the transaction
contemplated by this Agreement (the "Transaction"), (ii) be subject to the
reasonable negotiation of the parties, and (iii) following its negotiation, be
attached to this Agreement as Exhibit C.
(c) The Purchaser shall pay Eight Hundred Ninety-Seven Thousand, Six
Hundred Seventy-Five and 40/100 Dollars ($897,675.40) of the Purchase Price by
delivery to the Shareholders of a negotiable promissory note (the "Note")
payable to the Shareholders in the principal amount of Eight Hundred
Ninety-Seven Thousand, Six Hundred Seventy-Five and 40/100 Dollars
($897,675.40). The Note will bear interest at the rate of seven percent (7%) per
annum and will be payable in twelve (12) consecutive equal monthly installments
beginning on the thirty-day anniversary of the Closing Date. The Note will (i)
contain customary provisions for promissory notes in transactions similar to the
Transaction, (ii) be subject to the reasonable negotiation of the parties, and
(iii) following its negotiation, be attached to this Agreement as Exhibit D.
(d) The Purchaser shall pay the balance of the Purchase Price by
transferring to the Shareholders shares of stock in the Purchaser with a value,
based on the average closing price for publicly-traded shares of Purchaser for
the five-day period immediately preceding the Closing Date, of One Million Fifty
Thousand Dollars ($1,050,000) (the "Purchaser Shares").
The Purchase Price will be specifically allocated and paid in the manner
determined at the sole discretion of the Shareholders as set forth in attached
Exhibit E.
Section 1.03. Security. Following the Closing, the Purchaser shall pledge
the Stock to the Shareholders in order to secure Purchaser's payment of the
Short-Term Note and the Note. The Purchaser shall pledge the Stock to the
Shareholders pursuant to the terms of a Stock Pledge Agreement which will (i)
contain customary provisions for similar agreements in transactions similar to
the Transaction, (ii) be subject to the reasonable negotiation of the parties,
and (iii) following its negotiation, be attached to this Agreement as Exhibit F.
Section 1.04. Restrictions on Transfer. Each Shareholder acknowledges that
the Shareholder has been advised that, because the distribution to the
Shareholder of the Purchaser Shares has not been registered under the Securities
Act of 1933, as emended (the "Act"), the Shareholder may not sell, transfer or
otherwise dispose of the Purchaser Shares in the absence of (a) conformity with
the requirements of Rule 144 promulgated under the Act ("Rule 144"), (b) an
effective registration statement under the Act and applicable state laws, or
(c) exemption from registration from the Act and applicable state laws.
Section 1.05. Shareholder Demand Rights. If, on the one-year anniversary of
the Closing Date (the "Anniversary Date"), the value of the Purchaser Shares
(based on the average closing price for publicly-traded shares of Purchaser for
the five-day period immediately preceding the Anniversary Date) is less than One
Million Fifty Thousand Dollars ($1,050,000), the Shareholders will have the
right, for a period of sixty (60) days, to demand that Purchaser either issue to
the Shareholders, or arrange for the transfer to Shareholders of, enough shares
of Section 1.01. stock in the Purchaser to increase the value (based on the
average closing price for publicly-traded shares of Purchaser for the five-day
period immediately preceding the Anniversary Date) of all shares of stock in
Purchaser owned by the Shareholders (including the Purchaser Shares) to One
Million Fifty Thousand Dollars ($1,050,000). For all shares issued or
transferred to the Shareholders pursuant to this Section, Purchaser will, at
Purchaser's option, either (i) take all reasonable steps to ensure that the
shares satisfy the holding period requirements of Rule 144, or (ii) file an S-3
registration statement with respect to the shares. If the Purchaser fails to
ensure that the shares satisfy the holding period requirements of Rule 144, the
Purchaser shall file an S-3 registration statement with respect to the shares
within thirty (30) days after receiving from the Shareholders written demand to
file the S-3 registration statement. Any demand of the Shareholders pursuant to
this Section must be made in writing.
Section 1.06. Purchaser Shares. Notwithstanding any other provision of this
Agreement which may be construed to the contrary, the Shareholders acknowledge
that the Purchaser Shares are being offered without registration under the Act,
the Georgia Securities Act of 1973, as amended the, or any other applicable
securities laws, and are offered in reliance upon the exemption from
registration provided by Section 4(2) and Paragraph 13 of Code Section 10-5-9 of
the Georgia Securities Act of 1973. The Purchase Shares have not been
recommended or approved by any federal or state securities commission or
regulatory authority, and any representation to the contrary is a criminal
offense. The Purchaser Shares are speculative, and an investment in the
Purchaser Shares involves a high degree of risk. The Purchaser Shares shall, for
a period of one year from the Closing Date, contain a legend similar to the
following:
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN
RELIANCE ON SECTION 4(2) AND/OR 3(B) OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), ON REGULATION D
AND RULE 506 PROMULGATED THEREUNDER, AND ON
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA
SECURITIES ACT OF 1973 ( THE "GEORGIA ACT" ). THE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
A TRANSACTION WHICH IS EXEMPT UNDER THE ACT AND
THE GEORGIA ACT OR PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT AND THE GEORGIA ACT.
ARTICLE II
CLOSING
Section 2.01. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place at a specific time and location
determined by the mutual agreement of the parties on a date (the "Closing Date")
which is not later than November 30, 2000. All transactions that occur at the
Closing shall be deemed to occur simultaneously, and no transaction at the
Closing shall be effective or any document, agreement, or instrument be
considered to be delivered, until all of the transactions have been completed in
full, and all of such items have been executed and delivered.
Section 2.02. Conditions to Close.
(a) The obligation of the Purchaser to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties of the Shareholders and the
Company set forth in this Agreement must be true and correct in all material
respects at and as of the Closing Date;
(ii) the Company and each Shareholder must have performed and
complied with all of their covenants hereunder in all material respects
through the Closing;
(iii) no action, suit or proceeding may be pending before any court or
quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (C) affect adversely the Purchaser's
right to own the Stock and to control the Company, or (D) affect aterially
and adversely the right of the Company to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(iv) the Board of Directors of the Purchaser must have approved
the transaction contemplated by this Agreement;
(v) the Shareholders must have delivered to the Purchaser certified
copies of the resolutions of the Company's board of directors authorizing
the Company's execution and delivery of this Agreement and consummation of
the transactions contemplated by this Agreement;
(vi) the Shareholders must have delivered to the Purchaser certificates
representing their Stock, properly endorsed for transfer or with properly
executed stock powers attached;
(vii) the Company must have delivered to the Purchaser a certificate
of good standing for the Company issued by the Secretary of State of Arkansas
as of a date reasonably close to the Closing Date;
(viii) the Purchaser must have received written confirmation of all
consents, approvals, authorizations and orders of and all registrations,
declarations and filings with third parties, including creditors, contract
parties or public or governmental authorities, necessary for the
authorization, execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated by this
Agreement;
(ix) Xxxxxxx X. XxXxxx must have delivered to the Purchaser a duly
executed Consulting and Noncompetition Agreement, dated as of the Closing
Date, which will (i) contain customary provisions for similar agreements
in transactions similar to the Transaction, (ii) be subject to the
reasonable negotiation of the parties, and (iii)following its negotiation, be
attached to this Agreement as Exhibit H;
(x) Xxxxx Xxxxxxx and Xxx Xxxx must have delivered to the Purchaser a
duly executed Employment Agreement, dated as of the Closing Date, which
will (i) contain customary provisions for similar agreements in transactions
similar to the Transaction, (ii) be subject to the reasonable negotiation
of the parties, and (iii) following its negotiation, be attached to this
Agreement as Exhibit I;
(xi) the Company must have delivered to the Purchaser an opinion of
counsel to the Company, addressed to the Purchaser and dated as of the
Closing Date, which will (i) contain customary provisions for similar
documents in transactions similar to the Transaction, (ii) be subject to the
reasonable negotiation of the parties and approval of their attorneys, and
(iii) following its negotiation, be attached to this Agreement as Exhibit J;
(xii) the Purchaser's Due Diligence (as hereinafter defined) must have
been completed to the satisfaction of the Purchaser, in its sole discretion;
and
(xiii) the Shareholders must have delivered to the Purchaser all other
documents reasonably requested by the Purchaser and contemplated by this
Agreement or required to be delivered by the Company or the Shareholders to
the Purchaser pursuant to this Agreement and not previously delivered;
(b) The obligation of the Shareholders to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(i) the representations and warranties of the Purchaser set forth in
this Agreement must be true and correct in all material respects at and as of
the Closing Date;
(ii) the Purchaser must have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding may be pending before any court
or quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, or
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect);
(iv) the Purchaser must have delivered to the Shareholders a certified
copy of a resolution of the board of directors of the Purchaser authorizing
the execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement;
(v) the Purchaser must have delivered to each Shareholder the
Shareholder's respective share of the Purchase Price as provided in
Article I;
(vi) The Purchaser must have delivered to Xxxxxxx X. XxXxxx a duly
executed Indemnity Agreement, dated as of the Closing Date, which will
(i) contain customary provisions for similar agreements in transactions
similar to the Transaction, (ii) be subject to the reasonable negotiation
of the parties, and (iii) following its negotiation, be attached to this
Agreement as Exhibit K;
(vii) the Purchaser must have delivered to the Shareholders an opinion
of counsel of the Purchaser, addressed to the Shareholders and dated as of
the Closing Date, which will (i) contain customary provisions for similar
documents in transactions similar to the Transaction, (ii) be subject to the
reasonable negotiation of the parties and approval of their attorneys, and
(iii) following its negotiation, be attached to this Agreement as Exhibit L;
(viii) The Purchaser must have delivered to the Shareholders a duly
executed Guaranty Agreement, dated as of the Closing Date pursuant to which
L. Xxxxx Xxxxxxx personally guarantees performance of the Company's
obligations under the Note and the Short-Term Note. The Guaranty Agreement
will (i) contain customary provisions for similar agreements in transactions
similar to the Transaction, (ii) be subject to the reasonable negotiation
of the parties, and (iii) following its negotiation, be attached to this
Agreement as Exhibit M; and
(ix) the Purchaser must have delivered to the Shareholders all other
documents reasonably requested by the Shareholders and contemplated by this
Agreement or required to be delivered by the Purchaser to the Shareholders
pursuant to this Agreement and not previously delivered.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Except as otherwise set forth in the disclosure schedules, if any, attached
to this Agreement (which schedules correspond to the section numbers below),
each Shareholder severally represents and warrants to the Purchaser, as of the
date of this Agreement, as follows:
Section 3.01. Authorization of Transaction. The Shareholder has full power
and authority to execute and deliver this Agreement and any Related Agreements
(as defined below) to which the Shareholder is a party and to perform his or her
obligations under this Agreement and any such Related Agreements. This Agreement
and each Related Agreement to which the Shareholder is a party constitute valid
and legally binding obligations of the Shareholder, enforceable in accordance
with their respective terms and conditions. The Shareholder need not give any
notice to, make any filing with or obtain any authorization, consent or approval
of any government or governmental agency in order to consummate the transactions
contemplated by this Agreement or any Related Agreement to which the Shareholder
is a party. For purposes of this Agreement, "Related Agreements" means the
Consulting and Noncompetition Agreements and the Employment Agreements required
pursuant to Article II above.
Section 3.02. Noncontravention. The execution and the delivery of, and the
consummation of the transactions contemplated by, this Agreement and any Related
Agreement to which the Shareholder is a party will not (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any government, governmental agency or
court to which this Shareholder is subject or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel or require any
notice under any agreement, contract, lease, license, instrument or other
arrangement to which the Shareholder is a party or by which he or she is bound
or to which any of his or her assets are subject.
Section 3.03. Brokers' Fees. The Shareholder has no liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which the Purchaser could
become liable or obligated. Notwithstanding any other provision of this
Agreement which may be construed to the contrary (including without limitation
Section 7.04), the Shareholders will indemnify the Purchaser and hold the
Purchaser harmless from and against any and all liability, loss, damage or
expense (including without limitation reasonable attorney fees and court costs)
incurred by the Purchase as a result of any violation by the Shareholder of this
Section.
Section 3.04. Stock. The Shareholder is the holder of record and
beneficially owns the number of shares of the Stock set forth next to his or her
name on the signature page of this Agreement and at Closing will have good,
valid and marketable title to the Stock and such Stock will be free and clear of
any liens, encumbrances or security interests, restrictions on transfer,
shareholder agreements, voting trusts or other defects in title, and will not
been pledged or assigned to any person. The Purchaser will receive good, valid
and marketable title to the Stock, free and clear of all liens and encumbrances.
Section 3.05. The Shareholder (a) is acquiring the Purchaser Shares for the
Shareholder's own account, for investment and not for resale, distribution or on
behalf of an undisclosed principal; (b) is aware that the transfer of the
Purchaser Shares is restricted by federal and state securities laws and that a
market does not exist for the Purchaser Shares, except as may be permitted under
Rule 144; (c) has such knowledge and experience in financial and business
matters that the Shareholder is capable of evaluating the merits and risks of an
investment in the Purchaser Shares; (d) is financially capable of bearing the
possible loss of the Shareholder's entire investment herein, can afford to bear
the economic risks of the investment for an indefinite period, and does not have
a need for a high degree of liquidity in this investment; (e) recognizes that
the purchase of the Purchaser Shares involves certain risks.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
Except as otherwise set forth in the disclosure schedules, if any, attached
to this Agreement (which schedules correspond to the section numbers below), the
Company represents and warrants to the Purchaser that each of the following
statements is true and correct in all material respects, and the Shareholders
jointly and severally represent to the Purchaser that, to the best of their
actual knowledge (the "Knowledge of the Shareholders"), each of the following
statements is true and correct:
Section 4.01. Organization. The Company is duly incorporated, validly
existing and in good standing under the laws of the state in which it was
organized, and is qualified or otherwise authorized to act as a foreign
corporation and is in good standing under the laws of every other state in which
such qualification or authorization is necessary under applicable law and where
the failure to be so qualified or otherwise authorized would cause or result in
a change in the assets, business, property, results of operations or prospects
of the Company that is materially adverse to the financial condition or future
prospects of the Company (a "Material Adverse Effect"). The Company has all
requisite corporate power and authority necessary to own and operate its
respective properties and to carry on its respective businesses as now
conducted.
Section 4.02. Authorization. The Company's execution, delivery and
performance of this Agreement and any Related Agreements to which the Company is
a party have been duly authorized by all necessary corporate action. This
Agreement and the Related Agreements have been duly executed and delivered by
the Company and, assuming the due execution of this Agreement and each Related
Agreement by the other parties hereto, are valid and binding obligations of the
Company, enforceable against it in accordance with their respective terms,
except to the extent that enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and general
principles of equity (whether considered in a proceeding at law or in equity)
and the discretion of the court before which any proceeding therefor may be
brought.
Section 4.03. Capital Structure. The capital structure of the Company and
each Company Subsidiary is as set forth in attached Schedule 4.03. Except as set
forth in attached Schedule 4.03, with respect to the Company, (a) all of the
outstanding shares of stock or other ownership interests are fully paid and
nonassessable, have been legally and validly authorized and issued and have been
offered and sold in compliance with applicable state and federal securities
laws, (b) there are no outstanding options, warrants or other rights to acquire,
or securities convertible to, stock or other ownership interests, (c) the
Company has no obligation, contingent or otherwise, to reacquire any shares of
the stock or other ownership interests, (d) the Company has no outstanding stock
appreciation, phantom stock or similar rights, and (e) the Company does not
control directly or indirectly or have any direct or indirect equity
participation in any other corporation, partnership, trust or other business
association.
Section 4.04. Financial Statements. The financial statements of the Company
for the years ended June 30, 1998, 1999 and 2000 (the "Financial Statements")
and the financial statements of the Company for the period ended September 30,
2000 (the "Interim Financial Statements") have been provided to the Purchaser
and are attached as Exhibit N and Exhibit O to this Agreement, respectively.
Except as otherwise set forth therein (including the footnotes, supplemental
schedules and the statement of accounting policies) and in attached
Schedule 4.04, the Financial Statements and the Interim Financial Statements and
all updates thereto delivered pursuant to Section 5.05(a), are and will be based
on the books and records of the Company and fairly present, in all material
respects, the financial position and the results of operations and cash flows of
the Company, as of the date, or for the period, indicated therein, in accordance
with generally accepted accounting principles.
Section 4.05. No Conflict or Violation. Except as set forth in attached
Schedule 4.05, neither the Company's execution and delivery of, nor its
consummation of the transactions contemplated by, this Agreement and the Related
Agreements to which the Company is a party, will (a) conflict with or result in
any breach under any term or provision of any contract to which the Company is a
party or is subject or by which any assets of the Company are bound, which
breach or default would have a Material Adverse Effect, (b) result in any
violation of the provisions of the articles of incorporation, bylaws or similar
documentation of the Company, or (c) result in any violation by the Company of
any statute, order, rule, regulation, ordinance, code, judgment, writ,
injunction, decree or award, which conflict or violation would have a Material
Adverse Effect.
Section 4.06. Litigation. Except as set forth in attached Schedule 4.06,
there is no Action (as defined below) pending or, to the Knowledge of the
Shareholders, threatened against the Company, except for Actions which, if
adversely determined, would not have a Material Adverse Effect. Except as set
forth in attached Schedule 4.06, the Company is not in default with respect to
any judgment, order, writ or decree of any court or governmental agency, and
there are no unsatisfied judgments against the Company which would have a
Material Adverse Effect. For purposes of this Agreement, "Action" means any
action order, writ, judgment, decree, suit, litigation or proceeding.
Section 4.07. Properties and Leases. Except as may be reflected in the
Financial Statements, the Interim Financial Statements, or Schedule 4.07, and
except for any lien for current taxes not yet delinquent, the Company has good
and marketable title free and clear of any material liens, claims, charges,
options, encumbrances or similar restrictions to all the real and personal
property reflected in the Financial Statements and the Interim Financial
Statements and all real and personal property acquired since such date, except
such real and personal property as has been disposed of in the ordinary course
of business. Except as set forth in attached Schedule 4.07, all leases of real
property and all other leases material to the Company pursuant to which the
Company, as lessee, leases real or personal property are valid and effective in
accordance with their respective terms, and there is not, under any such lease,
any material existing default by the Company or any event which, with notice or
lapse of time or both, would constitute such a material default. Except as set
forth in attached Schedule 4.07, the Shareholders have provided to the Purchaser
copies of all real property leases and material leases of personal property of
the Company.
Section 4.08. Taxes. Except as set forth in attached Schedule 4.08, the
Company has accurately and timely filed all federal, state, county, local and
foreign tax returns, including information returns, required to be filed by it,
and has timely paid all taxes owed by it, and no taxes shown on such returns to
be owed by it or assessments received by it are delinquent. Except as set forth
in attached Schedule 4.08, the Company is not a party to any pending action or
proceeding, nor to the Knowledge of the Shareholder or the knowledge of the
Company is any such action or proceeding threatened, by any governmental
authority for the assessment or collection of taxes, interest or penalties.
Except as set forth in attached Schedule 4.08, the Company has not executed or
filed with any taxing authority any agreement extending the period for
assessment or collection of any taxes. Except as set forth in attached
Schedule 4.08, the Company has paid all taxes owed or which it is required to
withhold from amounts owing to its employees, creditors or other third parties.
Except as set forth in attached Schedule 4.08, any tax liabilities, as
determined in accordance with generally accepted accounting principles, are
appropriately reflected in the Financial Statements and the Interim Financial
Statements. All tax returns of the Company for fiscal years ended June 30, 1998,
1999 and 2000 have been provided to the Purchaser and are attached as Exhibit P
to this Agreement (the "Tax Returns").
Section 4.09. Absence of Certain Changes. Except as set forth in attached
Schedule 4.09, since the date of the Interim Financial Statements, nothing has
occurred with respect to the operations of the Company which would have a
Material Adverse Effect.
Section 4.10. Commitments and Contracts. Except as set forth in attached
Schedule 4.10, the Company is not a party or subject to any material contract
(whether written or oral, express or implied) containing covenants which
materially limit the ability of the Company to compete in any line of business
or with any person or which involve any material restriction of the geographical
area in which, or method by which, the Company may carry on its business (other
than as may be required by law or applicable regulatory authorities).
Section 4.11. Insurance. The Company is presently insured, and since the
commencement of its business has been insured or self-insured, for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured against, and has maintained all
insurance required by applicable law and regulation or by contract. A list of
all insurance policies of the Company is attached as Schedule 4.11 to this
Agreement.
Section 4.12. Licenses, Authorizations and Approvals. The Company has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state or local
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of the Company; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and, to the Knowledge of the Shareholders, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. A list of such permits, licenses and
authorizations is attached as Schedule 4.12 to this Agreement. The conduct by
the Company of its business and the condition and use of its properties does not
violate or infringe, in any respect material to any such business, any
applicable domestic (federal, state or local) or foreign law, statute,
ordinance, license or regulation. The Company is not in material default under
any order, license, regulation or demand of any federal, state, municipal or
other governmental agency or with respect to any order, writ, injunction or
decree of any court. Except for statutory or regulatory restrictions of general
application, no federal, state, municipal or other governmental authority has
placed any restrictions on the business or properties of the Company which
reasonably could be expected to have a Material Adverse Effect.
Section 4.13. Labor. Except as set forth in attached Schedule 4.13, no work
stoppage involving the Company is pending or, to the Knowledge of the
Shareholders, threatened and there is no pending or, to the Knowledge of the
Shareholders, threatened labor dispute, arbitration, lawsuit or administrative
proceeding which could have a Material Adverse Effect. No employee of any of the
Company is represented by any labor union nor are any collective bargaining
agreements otherwise in effect with respect to any such employee.
Section 4.14. Defaults. Except as set forth in attached Schedule 4.14, the
Company is not in default, nor has any event occurred which, with the passage of
time or the giving of notice, or both, would constitute a default under any
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets are bound or to which any of its assets are
subject, the result of which has had or could reasonably be expected to have a
Material Adverse Effect. Except as set forth in attached Schedule 4.14, to the
Knowledge of the Shareholders, all parties with whom the Company has material
leases, agreements or contracts or who owe to the Company material obligations
are in compliance therewith in all material respects.
Section 4.15. Environmental Liability. Except as set forth in attached
Schedule 4.15:
(a) None of the assets of the Company (defined for purposes of this
subsection (a) as the real property and tangible personal property owned
or leased by the Company) contain any hazardous materials or hazardous
substances, as such terms are defined or used in the Comprehensive
Environmental Response, Compensation and Recovery Act of 1980, as amended,
the Resource Conservation and Recovery Act of 1976, as amended, and all
other federal, state and local laws, ordinances, rules, regulations, orders
or determinations of any governmental authority now or hereafter pertaining
to health or the environment, including, without limitation, petroleum
products, friable asbestos and PCBs ("Hazardous Materials"), other than in
such quantities which are incidental and customary for the maintenance and
operation of such assets (e.g., cleaning fluids);
(b) No notice or other communication has been made or issued by any
governmental agency having jurisdiction over the assets of the Company, or
any other person, with respect to any alleged violation of any federal,
state or local laws, rules, regulations, ordinances and codes governing
Hazardous Materials and which are applicable to the assets of the Company;
and
(c) Any and all Hazardous Materials which have been remediated from any
assets of any of the Company prior to or during the Company's ownership of
such assets have been handled in compliance with all applicable laws.
Section 4.16. Compliance With Law. Except as set forth in attached
Schedule 4.16, the Company is operating in compliance with all applicable
federal, state and local laws, statutes, ordinances and regulations.
Section 4.17. No Other Agreements To Sell the Company. Neither the Company
nor any of the Shareholders has any agreement with any other person or entity to
sell the capital stock, assets (other than sales of assets in the ordinary
course of business) or business of the Company or to effect any merger,
consolidation or other reorganization of the Company.
Section 4.18. No Agreements With Management. Except as set forth in
attached Schedule 4.18, neither the Company nor any other person or entity has
any contracts, agreements, arrangements or understandings, whether in writing,
oral or tacit, with any officer, director, employee or agent of the Company,
relating to this Agreement or the Purchaser's acquisition of control of the
Company.
Section 4.19. Undisclosed Liabilities. The Company has no material
liabilities or obligations whatsoever, either accrued, absolute, contingent or
otherwise, except those (a) set forth in the Financial Statements, the Interim
Financial Statements, or attached Schedule 4.19, and which have not heretofore
been paid or discharged, or (b) incurred in or as a result of the normal and
ordinary course of business, all of which have been consistent with past
practices and none of which is material or unrecorded.
Section 4.20. Employee Benefit Plans.
(a) Schedule 4.20 contains a true and complete list of each "employee
benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), including,
but not limited to, pension, profit sharing, 401(k), severance,
welfare, disability, deferred compensation and all other employee benefit
plans, including, but not limited to, stock purchase, stock option,
employment, change-in-control, fringe benefit, bonus, incentive agreements,
programs, policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally binding
or not, under which any employee or former employee of the Company has any
present or future right to benefits or under which the Company has any
present or future liability. All such plans, agreements, programs, policies
and arrangements shall be collectively referred to as the "Company Plans."
(b) The Shareholders, severally represent and warrant that:
(i) each Company Plan has been established and administered in
accordance with its terms, and each Company Plan and the all of the
Company are in full compliance with the applicable provisions of ERISA,
the Internal Revenue Code (the "Code"), and other federal and state
applicable laws, rules and regulations;
(ii) each "employee pension benefit plan" (within the meaning
of ERISA Section 3 (2)) of the Company has received a favorable
determination letter as to its qualification, and is qualified in form
and operation. Each trust for each such Plan is exempt from federal
income tax under Code Section 501(a). No event has occurred or
circumstance exists that will or could give rise to disqualification or
loss of tax-exempt status of any such Plan or trust;
(iii) all filings required by ERISA and the Code as to each
Company Plan have been timely filed, and all notices and disclosures to
participants required by either ERISA or the Code have been timely
provided;
(iv) no event has occurred and no condition exists that could
subject the Company to any tax, fine, lien, penalty or other liability
imposed by ERISA (including any breach of fiduciary responsibility by any
director, officer or employee) the Code or other applicable laws, rules
and regulations;
(v) for each Company Plan with respect to which a Form 5500 has
been filed, no material change has occurred with respect to the matters
covered by the most recent Form 5500 since the date thereof;
(vi) no "reportable event" (as such term is defined in ERISA
Section 4043), "prohibited transaction" (as such term is defined in ERISA
Section 406 and Code Section 4975) or "accumulated funding deficiency"
(as such term is defined in ERISA Section 302 and Code Section 412
(whether or not waived)) has occurred with respect to any Company Plan
and no Company Plan is a Multiemployer Plan within the meaning of ERISA
Section 4001(a)(3);
(vii) all contributions and payments made or accrued with respect
to all Company Plans and other benefit obligations are deductible under
Code Section 162 or Section 404. No amount, or any asset of any Company
Plan is subject to tax as unrelated business taxable income;
(viii) no event has occurred or circumstance exists that could
result in a material increase in premium costs of Company Plans and other
benefit obligations that are insured, or a material increase in benefit
costs of such plans and obligations that are self-insured;
(ix) except to the extent required under ERISA Section 601 et seq.
and Code Section 4980B, the Company does not provide health or welfare
benefits for any retired or former employee and is not obligated to
provide health or welfare benefits to any active employee following
such employee's retirement or other termination of service;
(x) the Company has the right to modify and terminate benefits to
retirees (other than pensions) with respect to both retired and active
employees;
(xi) the Shareholders and the Company have complied with the
provisions of ERISA Section 601 et seq. and Code Section 4980B;
(xii) the Closing will not result in the payment, vesting, or
acceleration of any benefit;
(xiii) no Company Plan provides retiree welfare benefits and the
Company has no obligations to provide any retiree welfare benefits;
(xiv) except as disclosed in Schedule 4.20, no current employee of
the Company received aggregate remuneration (bonus, salary and
commission) in excess of $200,000 for the calendar year ending on June
30, 2000, or would reasonably be expected to receive aggregate
remuneration in excess of $200,000 for the calendar year ending on June
30, 2001.
(c) With respect to any Company Plan, (i) no actions, suits or claims
are pending or, to the Knowledge of the Shareholders, threatened; (ii) to
the Knowledge of the Shareholders, no facts or circumstances exist that
reasonably could give rise to any such actions, suits or claims; and
(iii) no written or oral communication has been received from the PBGC
in respect of any Company Plan subject to Title IV of ERISA concerning
the funded status of any such plan or any transfer of assets and
liabilities from any such plan in connection with the transactions
contemplated herein.
(d) Full payment has been made of all amounts which are due to any of
the Company Plans. Furthermore, the Company has made adequate provision
for reserves to meet contributions that have not been made because they
are not yet due under the terms of any of the Company Plans.
Section 4.21. Disclosure. No representations, warranties, assurances or
statements by the Shareholders or the Company in this Agreement or in any
related documentation (including the Related Agreements, the Financial
Statements, the Interim Financial Statements, any certificates or other writings
furnished or to be furnished by the Shareholders or the Company, or caused to be
furnished by the Shareholders or the Company, to the Purchaser) contains any
untrue statement of material fact, or omits or will omit to state any fact
necessary, in light of the circumstances under which such statement was made, in
order to make the statements not misleading.
Section 4.22. Name, Trade Name and Service Marks. The Company shall have
the right as of the Closing Date to use, free and clear of any royalty or other
payment obligations, claims of infringement or alleged infringement or other
liens, the Company's corporate name, trade names, including but not limited to
"United Capital Mortgage Corporation" and service marks together with any
stylized logos incorporating those names or marks (collectively, the "Marks")
and the Company is not in conflict with or violation or infringement of, nor is
there any such conflict with or violation or infringement of, any asserted
rights of any other person with respect to any of the Marks in any material
respect.
Section 4.23. Employment Contracts. Except as set forth in attached
Schedule 4.23, the Company is not a party to any employment contract or
arrangement, whether in writing or not, whether legally binding or not, with any
past or present employee of the Company. All employees of the Company are
employees at will and no promises, assurances, agreements, statements or actions
limit the Company's ability to dismiss, impose penalties or modify the terms of
employment of any employee.
Section 4.24. Interested Transactions. Except as set forth in attached
Schedule 4.24, the Company is not a party to any contract, loan or other
transaction with any Shareholder. No Shareholder is an employee, consultant,
partner, principal, director or owner of, or has any other direct or indirect
interest in or affiliation with, any person or business entity that is engaged
in a business that competes with or is similar to the business of the Company.
Section 4.25. Brokers' Fees. The Company has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Purchaser could become
liable or obligated. Notwithstanding any other provision of this Agreement which
may be construed to the contrary (including without limitation Section 7.04),
the Shareholders shall indemnify the Purchaser and hold the Purchaser harmless
from and against any and all liability, loss, damage or expense (including
without limitation reasonable attorney fees and court costs) incurred by the
Purchaser as a result of any violation by the Purchaser of this Section.
Section 4.26. Statements True and Correct. No representation or warranty
made in this Agreement by the Company or the Shareholders, nor in any statement,
certificate or instrument to be furnished to the Purchaser by the Company or the
Shareholders pursuant to this Agreement, contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein not misleading.
There is no fact known to the Company or the Shareholders which materially and
adversely affects the business, prospects, working capital or financial
condition of the Company, or any properties or assets of the Company, which has
not been set forth in this Agreement or in some statement, certificate or
instrument associated with this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING THE PURCHASER
Except as otherwise set forth in the disclosure schedules, if any, attached
to this Agreement (which schedules correspond to the section numbers below), the
Purchaser represents and warrants to the Shareholders that, to the Knowledge of
Purchaser (as defined below), each of the following statements is true and
correct:
Section 5.01. Organization. The Purchaser is duly incorporated, validly
existing and in good standing under the laws of the State of Colorado, and is
qualified or otherwise authorized to act as a foreign corporation and is in good
standing under the laws of every other state in which such qualification or
authorization is necessary under applicable law and where the failure to be so
qualified or otherwise authorized would have or result in a change in the
assets, business, property, results of operations or prospects of the Purchaser
that is materially adverse to the financial condition or future prospects of the
Purchaser (a "Purchaser Material Adverse Effect"). The Purchaser has all
requisite corporate power and authority necessary to own and operate its
respective properties and to carry on its respective businesses as now
conducted.
Section 5.02. Authorization. The Purchaser's execution, delivery and
performance of this Agreement and any Related Agreements to which the Purchaser
is a party have been duly authorized by all necessary corporate action. This
Agreement and the Related Agreements have been duly executed and delivered by
the Purchaser and, assuming the due execution of this Agreement and each Related
Agreement by the other parties hereto, are valid and binding obligations of the
Purchaser, enforceable against it in accordance with their respective terms,
except to the extent that enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and general
principles of equity (whether considered in a proceeding at law or in equity)
and the discretion of the court before which any proceeding therefor may be
brought.
Section 5.03. Capital Structure. Except as set forth in Schedule 5.03, the
capital structure of the Purchaser is as set forth in the most recent Form 10-Q
filed by the Purchaser with the Securities and Exchange Commission.
Section 5.04. Reports and Financial Statements. The Purchaser has
previously made available to the Shareholders (including through the SEC's XXXXX
system) true and complete copies of: (a) the Purchaser's Annual Report on Form
10-K, and all amendments thereto, filed with the SEC for the year ended
September 30, 1999; (b) the Purchaser's Quarterly Report on Form 10-Q filed with
the SEC for the quarter ended June 30, 2000; and (c) all Current Reports on Form
8-K filed by the Purchaser with the SEC since September 30, 1999. As of their
respective dates (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), such reports and information
statements (individually a "SEC Report" and collectively, the "SEC Reports") (i)
complied as to form in all material respects with the applicable requirements of
the Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder, and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited consolidated interim financial statements included in the Purchaser's
SEC Reports (including any related notes and schedules) complied as to form, as
of their respective dates of filing with the SEC, in all material respects with
all applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with GAAP
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto, and except that unaudited statements do not contain
footnotes in substance or form required by GAAP, as is permitted by Form 10-Q of
the Exchange Act) and fairly presented the financial position of the Purchaser
and its consolidated Subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods or as of the dates then ended
(subject, where appropriate, to normal year-end adjustments).
Section 5.05. No Conflict or Violation. Except as set forth in attached
Schedule 5.05, neither the Purchaser's execution and delivery of, nor its
consummation of the transactions contemplated by, this Agreement and the Related
Agreements to which the Purchaser is a party, will (a) conflict with or result
in any breach under any term or provision of any contract to which the Purchaser
is a party or is subject or by which any assets of the Purchaser are bound,
which breach or default would have a Purchaser Material Adverse Effect,
(b) result in any violation of the provisions of the articles of incorporation
or bylaws of the Purchaser, or (c) result in any violation by the Purchaser of
any statute, order, rule, regulation, ordinance, code, judgment, writ,
injunction, decree or award, which conflict or violation would have a Purchaser
Material Adverse Effect.
Section 5.06. Litigation. Except as set forth in attached Schedule 5.06,
there is no Action pending or, to the Knowledge of the Purchaser (as defined
below), threatened against the Purchaser, except for Actions which, if adversely
determined, would not have a Purchaser Material Adverse Effect. Except as set
forth in attached Schedule 5.06, the Purchaser is not in default with respect to
any judgment, order, writ or decree of any court or governmental agency, and
there are no unsatisfied judgments against the Purchaser which would have a
Purchaser Material Adverse Effect. For purposes of this Agreement, "Knowledge of
the Purchaser" means the actual knowledge, after reasonable investigation, of
any officer or director of the Purchaser.
Section 5.07. Properties and Leases. Except as stated in the SEC Reports or
in attached Schedule 5.07, and except for any lien for current taxes not yet
delinquent, the Purchaser has good and marketable title free and clear of any
material liens, claims, charges, options, encumbrances or similar restrictions
to all the real and personal property reflected in the SEC Reports, except such
real and personal property as has been disposed of in the ordinary course of
business. Except as set forth in attached Schedule 5.07, all leases of real
property and all other leases material to the Purchaser pursuant to which the
Purchaser, as lessee, leases real or personal property are valid and effective
in accordance with their respective terms, and there is not, under any such
lease, any material existing default by the Purchaser or any event which, with
notice or lapse of time or both, would constitute such a material default.
Section 5.08. Taxes. The Purchaser has made available to the Shareholders
for inspection copies of all federal, state, county, local and foreign tax
returns filed by the Purchaser. Except as set forth in attached Schedule 5.08,
the Purchaser is not a party to any pending action or proceeding, nor to the
Knowledge of the Purchaser is any such action or proceeding threatened, by any
governmental authority for the assessment or collection of taxes, interest or
penalties. Except as set forth in attached Schedule 5.08, the Purchaser has not
executed or filed with any taxing authority any agreement extending the period
for assessment or collection of any taxes. Except as set forth in attached
Schedule 5.08, the Purchaser has paid all taxes owed or which it is required to
withhold from amounts owing to its employees, creditors or other third parties.
Except as set forth in attached Schedule 5.08, any tax liabilities, as
determined in accordance with generally accepted accounting principles, are
appropriately reflected in the SEC Reports.
Section 5.09. Absence of Certain Changes. Except as set forth in attached
Schedule 5.09, since the date of the most recent SEC Report, nothing has
occurred with respect to the operations of the Purchaser which would have a
Purchaser Material Adverse Effect.
Section 5.10. Commitments and Contracts. Except as set forth in attached
Schedule 5.10, the Purchaser is not a party or subject to any material contract
(whether written or oral, express or implied) containing covenants which
materially limit the ability of the Purchaser to compete in any line of business
or with any person or which involve any material restriction of the geographical
area in which, or method by which, the Purchaser may carry on its business
(other than as may be required by law or applicable regulatory authorities).
Section 5.11. Insurance. The Purchaser is presently insured, and since the
commencement of its business has been insured or self-insured, for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured against, and has maintained all
insurance required by applicable law and regulation or by contract.
Section 5.12. Licenses, Authorizations and Approvals. The Purchaser has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state or local
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of the Purchaser; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and, to the Knowledge of the Purchaser, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. The conduct by the Purchaser of its business and
the condition and use of its properties does not violate or infringe, in any
respect material to any such business, any applicable domestic (federal, state
or local) or foreign law, statute, ordinance, license or regulation. The
Purchaser is not in material default under any order, license, regulation or
demand of any federal, state, municipal or other governmental agency or with
respect to any order, writ, injunction or decree of any court. Except for
statutory or regulatory restrictions of general application, no federal, state,
municipal or other governmental authority has placed any restrictions on the
business or properties of the Purchaser which reasonably could be expected to
have a Purchaser Material Adverse Effect.
Section 5.13. Labor. Except as set forth in attached Schedule 5.13, no work
stoppage involving the Purchaser is pending or, to the Knowledge of the
Purchaser, threatened and there is no pending or, to the Knowledge of the
Purchaser, threatened labor dispute, arbitration, lawsuit or administrative
proceeding which could have a Purchaser Material Adverse Effect. Employees of
the Purchaser are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees.
Section 5.14. Defaults. Except as stated in the SEC Reports or in attached
Schedule 5.14, the Purchaser is not in default, nor has any event occurred
which, with the passage of time or the giving of notice, or both, would
constitute a default under any agreement, indenture, loan agreement or other
instrument to which it is a party or by which it or any of its assets are bound
or to which any of its assets are subject, the result of which has had or could
reasonably be expected to have a Purchaser Material Adverse Effect. Except as
set forth in attached Schedule 5.14, to the Knowledge of the Purchaser, all
parties with whom the Purchaser has material leases, agreements or contracts or
who owe to the Purchaser material obligations are in compliance therewith in all
material respects.
Section 5.15. Environmental Liability. Except as set forth in attached
Schedule 5.15:
(a) None of the assets of the Purchaser (defined for purposes
of this subsection (a) as the real property and tangible personal property
owned or leased by the Purchaser) contain any hazardous materials or
hazardous substances, as such terms are defined or used in the
Comprehensive Environmental Response, Compensation and Recovery Act of
1980, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, and all other federal, state and local laws, ordinances, rules,
regulations, orders or determinations of any governmental authority now
or hereafter pertaining to health or the environment, including, without
limitation, petroleum products, friable asbestos and PCBs ("Hazardous
Materials"), other than in such quantities which are incidental and
customary for the maintenance and operation of such assets (e.g., cleaning
fluids);
(b) No notice or other communication has been made or issued
by any governmental agency having jurisdiction over the Purchaser's assets,
or any other person, with respect to any alleged violation of any federal,
state or local laws, rules, regulations, ordinances and codes governing
Hazardous Materials and which are applicable to the Purchaser's assets; and
(c) Any and all Hazardous Materials which have been remediated
from any assets of the Purchaser prior to or during the Purchaser's
ownership of such assets have been handled in compliance with all
applicable laws.
Section 5.16. Compliance With Law. Except as set forth in attached
Schedule 5.16, the Purchaser is operating in compliance with all applicable
federal, state and local laws, statutes, ordinances and regulations.
Section 5.17. Employment Contracts. Except as set forth in attached
Schedule 5.17, the Purchaser is not a party to any employment contract or
arrangement, whether in writing or not, whether legally binding or not, with any
past or present employee, officer or director of the Purchaser. Except as set
forth in attached Schedule 5.17, all employees of the Purchaser are employees at
will and no promises, assurances, agreements, statements or actions limit the
Purchaser's ability to dismiss, impose penalties or modify the terms of
employment of any employee.
Section 5.18. Undisclosed Liabilities. The Purchaser has no material
liabilities or obligations whatsoever, either accrued, absolute, contingent or
otherwise, except those (a) set forth in the SEC Reports, or attached
Schedule 5.18, and which have not heretofore been paid or discharged, or
(b) incurred in or as a result of the normal and ordinary course of business,
all of which have been consistent with past practices and none of which is
material or unrecorded.
Section 5.19. Employee Benefit Plans.
(a) Schedule 5.19 contains a true and complete list of each
"employee benefit plan" (within the meaning of Section 3(3) of the ERISA),
including, but not limited to, pension, profit sharing, 401(k), severance,
welfare, disability, deferred compensation and all other employee benefit
plans, including, but not limited to, stock purchase, stock option,
employment, change-in-control, fringe benefit, bonus, incentive agreements,
programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or required
in the future as a result of the transaction contemplated by this Agreement
or otherwise), whether formal or informal, oral or written, legally binding
or not, under which any employee or former employee of the Purchaser has
any present or future right to benefits or under which the Purchaser has
any present or future liability. All such plans, agreements, programs,
policies and arrangements shall be collectively referred to as the
"Purchaser Plans."
(b) The Purchaser represents and warrants that:
(i) each Purchaser Plan has been established and
administered in accordance with its terms, and each such Plan and
the Purchaser are in full compliance with the applicable provisions
of ERISA, the Internal Revenue Code (the "Code"), and other federal
and state applicable laws, rules and regulations;
(ii) each "employee pension benefit plan" (within the
meaning of ERISA Section 3(2)) of the Purchaser has received a
favorable determination letter as to its qualification, and is
qualified in form and operation. Each trust for each such Plan is
exempt from federal income tax under Code Section 501(a). No
event has occurred or circumstance exists that will or could give
rise to disqualification or loss of tax-exempt status of any such
Plan or trust;
(iii) all filings required by ERISA and the Code as to
each Purchaser Plan have been timely filed, and all notices and
disclosures to participants required by either ERISA or the Code
have been timely provided;
(iv) no event has occurred and no condition exists that
could subject the Purchaser to any tax, fine, lien, penalty or
other liability imposed by ERISA (including any breach of fiduciary
responsibility by any director, officer or employee) the Code or
other applicable laws, rules and regulations;
(v) for each Purchaser Plan with respect to which
a Form 5500 has been filed, no material change has occurred with
respect to the matters covered by the most recent Form 5500 since
the date thereof;
(vi) no "reportable event" (as such term is defined in
ERISA Section 4043), "prohibited transaction" (as such term is
defined in ERISA Section 406 and Code Section 4975) or "accumulated
funding deficiency" (as such term is defined in ERISA Section 302
and Code Section 412 (whether or not waived)) has occurred with
respect to any Purchaser Plan and no Purchaser Plan is a
Multiemployer Plan within the meaning of ERISA Section 4001(a)(3);
(vii) all contributions and payments made or accrued
with respect to all Purchaser Plans and other benefit bligations
are deductible under Code Section 162 or Section 404. No amount,
or any asset of any Purchaser Plan is subject to tax as unrelated
business taxable income;
(viii) no event has occurred or circumstance exists that
could result in a material increase in premium costs of Purchaser
Plans and other benefit obligations that are insured, or a material
increase in benefit costs of such plans and obligations that are
self-insured;
(ix) except to the extent required under ERISA Section
601 et seq. and Code Section 4980B, the Purchaser does not provide
health or welfare benefits for any retired or former employee and
is not obligated to provide health or welfare benefits to any
active employee following such employee's retirement or other
termination of service;
(x) the Purchaser has the right to modify and
terminate benefits to retirees (other than pensions) with respect
to both retired and active employees;
(xi) the Shareholders and the Purchaser have complied
with the provisions of ERISA Section 601 et seq. and Code
Section 4980B;
(xii) the Closing will not result in the payment,
vesting, or acceleration of any benefit;
(xiii) no Purchaser Plan provides retiree welfare
benefits and the Purchaser has no obligations to provide any
retiree welfare benefits;
(xiv) except as disclosed in Schedule 5.19, no current
employee of the Purchaser received aggregate remuneration (bonus,
salary and commission) in excess of $200,000 for the calendar year
ending on June 30, 2000, or would reasonably be expected to receive
aggregate remuneration in excess of $200,000 for the calendar year
ending on June 30, 2001.
(c) With respect to any Purchaser Plan, (i) no actions, suits
or claims are pending or, to the Knowledge of the Shareholders,
threatened; (ii) to the Knowledge of the Purchaser, no facts or
circumstances exist that reasonably could give rise to any such
actions, suits or claims; and (iii) no written or oral
communication has been received from the PBGC in respect of any
Purchaser Plan subject to Title IV of ERISA concerning the funded
status of any such plan or any transfer of assets and liabilities
from any such plan in connection with the transactions contemplated
herein.
(d) Full payment has been made of all amounts which are due to
any of the Purchaser Plans. Furthermore, the Purchaser has made
adequate provision for reserves to meet contributions that have not
been made because they are not yet due under the terms of any of
the Purchaser Plans.
Section 5.20. Disclosure. No representations, warranties, assurances or
statements by the Purchaser in this Agreement or in any related documentation
(including the Related Agreements, the SEC Reports, any certificates or other
writings furnished or to be furnished by the Purchaser, or caused to be
furnished by the Purchaser, to the Shareholders) contains any untrue statement
of material fact, or omits or will omit to state any fact which, to the
Knowledge of Purchaser, is necessary, in light of the circumstances under which
such statement was made, in order to make the statements not misleading.
Section 5.21. Name, Trade Name and Service Marks. The Purchaser shall have
the right as of the Closing Date to use, free and clear of any royalty or other
payment obligations, claims of infringement or alleged infringement or other
liens, the Purchaser's corporate name, trade names, including but not limited to
"Lahaina Acquisitions, Inc." and service marks together with any stylized logos
incorporating those names or marks (collectively, the "Marks") and the Purchaser
is not in conflict with or violation or infringement of, nor is there any such
conflict with or violation or infringement of, any asserted rights of any other
person with respect to any of the Marks in any material respect.
Section 5.22. Brokers' Fees. The Purchaser has no liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which any Shareholder could
become liable or obligated. Notwithstanding any other provision of this
Agreement which may be construed to the contrary (including without limitation
Section 7.04), the Purchaser will indemnify the Shareholders and hold the
Shareholders harmless from and against any and all liability, loss, damage or
expense (including without limitation reasonable attorney fees and court costs)
incurred by the Shareholders as a result of any violation by the Purchaser of
this Section.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Publicity. The Purchaser, the Company and the Shareholders
agree to communicate with each other and cooperate with each other prior to any
public disclosure of this transaction. The Company, the Purchaser and the
Shareholders agree that (a) no public release or announcement concerning the
terms of the transactions contemplated by this Agreement shall be issued by any
party without the prior consent of the other parties, except as such release or
announcement may be required by law or any agreement to which any party is
subject, in which case the party required to make the release or announcement
shall allow the other parties reasonable time to comment on such release or
announcement in advance of such issuance, and (b) no other disclosure of the
existence or terms of this Agreement shall be made by any party without the
prior consent of the other parties.
Section 6.02. Conduct of the Company's Business.
(a) Each of the Shareholders and the Company agree that from
the date of this Agreement until the Closing Date, the Company shall:
(i) continue to conduct its business and operations in
the ordinary and usual course;
(ii) continue to exercise the same degree of care that
it has previously exercised with respect to its business;
(iii) use its commercially reasonable efforts to
maintain existing relationships with its customers, processors,
employees and other parties with whom it has business
relationships;
(iv) deliver unaudited updates to the Interim Financial
Statements to the Purchaser promptly after the end of each
calendar month and audited statements at fiscal year end;
(v) promptly notify the Purchaser of any development
which could have a Material Adverse Effect; and
(vi) cooperate with Purchaser to facilitate a smooth
transition of ownership of the Company.
(b) Each of the Shareholders and the Company agree that, from
the date of this Agreement until the Closing Date, the Company shall not,
without the prior written consent of the Purchaser:
(i) authorize or effect any change in its charter,
articles of incorporation or bylaws;
(ii) grant any options, warrants, or other rights to
purchase or obtain any of its capital stock or issue, sell or
otherwise dispose of any of its capital stock;
(iii) declare, set aside, or pay any dividend or
distribution with respect to its capital stock, in cash or in
kind, or redeem, repurchase, or otherwise acquire any of its
capital stock;
(iv) issue any note, bond, or other debt security or
create, incur, assume, or guarantee any indebtedness for borrowed
money or capitalized lease obligations;
(v) impose any security interest upon any of its
assets;
(vi) make any capital investment in, make any loan to,
or acquire the securities or assets of any other person outside
the ordinary course of business;
(vii) make any change in employment terms for any of its
directors, officers and employees;
(viii) cancel, compromise or settle any material claim,
or waive or release any rights of the Company;
(ix) contribute any amounts, other than employee
elective contributions, to the Company Plan;
(x) engage in any practice, take any action, or enter
into any transaction outside the ordinary course of business;
(xi) except in the ordinary course of business, make
application for the opening, relocation or closing of any, or
open, relocate or close any, office or loan production or
servicing facility;
(xii) make or acquire any loan or issue a commitment for
any loan except for loans and commitments that are made in the
ordinary course of business consistent with past practice, or
agree to guarantee the obligations of any other persons; or
(xiii) enter into any securitizations of any loans.
Section 6.03. Termination.
(a) Termination of Agreement. Purchaser and Shareholders may
terminate this Agreement as provided below:
(i) Purchaser and Shareholders may terminate this
Agreement by mutual written consent at any time prior to the
Closing Date;
(ii) The Purchaser may terminate this Agreement by
giving written notice to the Shareholders at any time prior to the
Closing Date (A) if the Company or the Shareholders have breached
any material representation, warranty, or covenant contained in
this Agreement in any material respect, (B) the Purchaser, in its
sole discretion, is not satisfied with the results of the Due
Diligence, or (C) if the Closing does not occur on or before
November 30, 2000; and
(iii) The Shareholders may terminate this Agreement
by giving written notice to the Purchaser at any time prior to the
Closing Date (A) if the Purchaser has breached any material
representation, warranty, or covenant contained in this Agreement
in any material respect, or (B) if the Closing does not occur on
or before November 30, 2000.
(b) Effect of Termination. If any party terminates this
Agreement pursuant to Section 5.06(a) above, all rights and obligations
of the parties hereunder will terminate without any liability of any party
to any other party, except for any liability of any party then in breach
and except for Section 5.06, which will survive any such termination.
Section 6.04. Investigations and Confidentiality. Until the Closing Date,
Purchaser, through its employees, representatives and agents, will have access,
at reasonable times during normal business hours and with reasonable prior
notice, to the properties, books, records, and documents of the Company to the
extent reasonably related to Purchaser's interests in the transaction
contemplated by this Agreement (the "Due Diligence"). Purchaser's Due Diligence
will be conducted at its own expense and may further include, but will not be
limited to: (a) inquiries with customers, suppliers, professional advisors,
regulators and former business associates of the Shareholders, and
(b) discussions with employees of the Company. The Shareholders hereby authorize
the third parties contacted by Purchaser in the course of Due Diligence to make
such disclosures as they deem fit in connection therewith. If the Closing does
not occur: (i) Purchaser shall return to the Company all books, records and
other documents and papers obtained from the Shareholders and all copies
thereof, and Purchaser shall not disclose, and shall cause its employees and
agents not to disclose, any confidential data or information obtained from the
Shareholders in the course of such investigation; and (ii) the Shareholders
shall return to Purchaser all books, records and other documents and papers
obtained from Purchaser and all copies thereof, and the Shareholders shall not
disclose, and shall cause its employees and agents not to disclose, any
confidential data or information obtained from Purchaser. The phrase
"confidential data or information" does not include: (A) information which is or
becomes generally available to the public; (B) information which was available
on a nonconfidential basis prior to the commencement of Due Diligence; or
(C) information which becomes available on a nonconfidential basis from a source
other than a party (or its representatives) hereto, so long as such source is
entitled, to the best of one's knowledge, to make such disclosure.
Section 6.05. No Other Proposals. Until the earlier of the Closing or the
termination of this Agreement pursuant to Section 5.06, neither the Shareholders
nor the Company nor any of their respective officers and directors shall, and
the Company will cause its employees, agents and representatives not to,
initiate or solicit, directly or indirectly, any inquiries or the making of any
proposal with respect to any purchase of all or any significant portion of the
assets of, or any equity interest in the Company (a "Proposal"), or engage in
any negotiations concerning, or provide any confidential information or data to
any person relating to, a Proposal, or otherwise facilitate any effort or
attempt to make or implement a Proposal. The Shareholders and the Company will
notify Purchaser immediately if any Proposal is received by, any such
information is requested from, or any such negotiations are sought to be
initiated or continued with, any of them and promptly request each person which
has heretofore executed a confidentiality agreement in connection with its
consideration of any Proposal to return all confidential information heretofore
furnished to such person by or on behalf of it.
Section 6.06. Consents and Approvals. On or after the Closing Date, the
parties will work together and cooperate as necessary to obtain all approvals,
consents, authorizations or orders of and to make all registrations,
declarations or filings with third parties, including governmental authorities,
necessary for the authorization, execution and delivery of this Agreement and
the Related Agreements by the parties or the consummation by the parties of the
transactions contemplated by this Agreement and the Related Agreements.
ARTICLE VII
INDEMNIFICATION
Section 7.01. Indemnification by Shareholders. Subject to the provisions of
this Article VII, the Shareholders jointly and severally shall indemnify and
hold harmless Purchaser and the Company against and in respect of any of the
following:
(a) Any and all losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to reasonable attorneys'
fees and all reasonable expenses incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim)
arising out of or based on any breach of any of the representations,
warranties, covenants or agreements which have been made or undertaken by
the Shareholders or the Company under this Agreement; and
(b) Assessments, judgments, costs and reasonable legal
expenses arising from or in connection with any action, suit or proceeding
incident to any of the foregoing.
Section 7.02. Indemnification by Purchaser. Subject to the provisions of
this Article VII, the Purchaser shall indemnify and hold harmless the
Shareholders against and in respect of any of the following:
(a) Any and all losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to reasonable attorneys'
fees and all reasonable expenses incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim)
arising out of or based on any breach of any of the representations,
warranties, covenants or agreements which have been made or undertaken by
the Purchaser under this Agreement; and
(b) Assessments, judgments, costs and reasonable legal
expenses arising from or in connection with any action, suit or proceeding
incident to any of the foregoing.
Section 7.03. Indemnification Procedures. Should any claim be made by a
person not a party to this Agreement with respect to any matter to which the
foregoing indemnity relates, the party against whom such claim is made (the
"Indemnified Party"), on not less than 60 days' notice to the party to render
indemnification pursuant to this Article VI (the "Indemnifying Party"), may make
settlement of such claim and such settlement shall be binding on the parties
hereto for the purposes of this Article VI; provided, however, that if within
said 60-day period the Indemnifying Party shall have requested the Indemnified
Party to contest any such claim at the expense of the Indemnifying Party, the
Indemnified Party will promptly comply and the Indemnifying Party shall have the
right to direct the defense of such claim or any litigation based thereon at the
expense of the Indemnifying Party through counsel reasonably acceptable to the
Indemnified Party. The Indemnified Party shall also have the right, at its own
expense, to participate in the settlement of any such claim or in any such
litigation. Any payment or settlement made by the Indemnifying Party in such
contest, together with the total expense thereof, shall be binding on the
parties hereto for purposes of this Article VI. Notwithstanding the foregoing,
the Indemnifying Party may not make settlement of any claim without the
Indemnified Party's written consent if such settlement would materially and
adversely affect the Indemnified Party or the Company.
Section 7.04. Indemnification Limitation. Notwithstanding any other
provision of this Agreement which may be construed to the contrary, the
Shareholders will not be obligated to indemnify the Purchaser, under this
Article VII, with respect to any valid claim for indemnification ("Individual
Claim") unless the sum of the Individual Claim and all prior valid claims for
indemnification exceeds Fifty Thousand Dollars ($50,000). Notwithstanding any
other provision of this Agreement which may be construed to the contrary, the
Shareholders will not be obligated to indemnify the Purchaser, pursuant to this
Article VII, for any amount in excess of Two Hundred Thousand Dollars
($200,000).
Section 7.05. Right of Setoff. If Purchaser becomes entitled to
indemnification from Shareholders pursuant to the terms of this Article VII,
then (i) Purchaser will be entitled to reduce any amounts owed to Shareholders
pursuant to the Note or the Short-Term Note by the amount of the indemnification
obligation, and/or (b) Purchaser's obligation to issue to the Shareholders, or
arrange for the transfer to the Shareholders of, additional shares of stock in
Purchaser, under the circumstances described in Section 1.05, may be reduced in
proportion to the indemnification obligation.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Assignment; Binding Effect. This Agreement and the rights
hereunder are not assignable. This Agreement will inure to the benefit of and be
binding upon the heirs, personal representatives and successors of the parties
hereto.
Section 8.02. Governing Law. This Agreement and all rights and obligations
of the parties will be construed and interpreted under and pursuant to the
internal laws, and not the law of conflicts, of the State of Georgia.
Section 8.03. Arbitration. Any controversy or claim arising out of or
relating to the interpretation, enforcement or breach of this Agreement or the
relationship between the parties will be submitted to binding arbitration in
Dallas, Texas, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("AAA"). In any arbitration proceeding, it is
the intention of the parties that arbitration be the exclusive mechanism for
resolving disputes between them and that any decision rendered by the
arbitrators will be final. Any award rendered by the arbitrators may be entered
in any court of competent jurisdiction. This paragraph will be specifically
enforceable under the Federal Arbitration Act. To the extent so determined by
the arbitrator, the prevailing party will be entitled to recover from the losing
party, in addition to any other relief, reasonable expenses, attorney fees and
costs actually incurred.
Section 8.04. Notices. All notices, requests, consents, demands and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when delivered personally, when sent by confirmed cable,
telecopy, telegram or telex, when sent by overnight courier service or when
mailed by certified or registered mail, return receipt requested, with postage
prepaid to the parties at the following addresses (or at any other address for a
party which the party specifies by like notice):
(a) if to the Company and/or the Shareholders, to:
United Capital Mortgage Corporation
00000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx XxXxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxxxxxxxx & Xxxxxx, PA
Suite 501
401 West Capitol
Xxxx Xxxxxx Xxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and a copy to:
Xxxx X. Xxxxxxxx
000 Xxxx Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxx Xxxxx, Xxxxxxxx 00000
(b) if to the Purchaser, to:
Lahaina Acquisitions, Inc.
Suite 220
0000 Xxxxxxxx Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx Xxxx LLP
Suite 2100
000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 8.05. Survival of Representations and Warranties. The
representations and warranties of the Company, the Shareholders and the
Purchaser contained in this Agreement will survive the Closing and extend one
(1) year from the Closing Date.
Section 8.06. Headings. The headings contained in this Agreement are
inserted for convenience only and will not be considered in interpreting or
construing any of the provisions contained in this Agreement.
Section 8.07. Fees and Expenses. The Company and the Shareholders may pay
from the income of the Company up to Thirty-Two Thousand Five Hundred Dollars
($32,500) in legal fees incurred by such parties in connection with this
Agreement and the transactions contemplated by this Agreement. Except as
provided in the immediately preceding sentence, the Shareholders will bear their
own costs and expenses (including investment advisory and legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated by this Agreement.
Section 8.08. Entire Agreement. This Agreement (including the exhibits and
schedules hereto) constitutes the entire agreement between the parties with
respect to the subject matter of this Agreement and supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
Section 8.09. Waiver and Amendment. Any provisions of this Agreement may be
waived in writing at any time prior to Closing by the Purchaser or by the
Company on behalf of itself and the Shareholders, and any of the provisions of
this Agreement may be amended at any time prior to Closing by written agreement
of the Purchaser and the Company on behalf of itself and the Shareholders;
provided, however, no waiver or amendment by the Company on behalf of the
Shareholders will materially decrease the rights or materially increase the
obligations of any Shareholder without his or her consent.
Section 8.10. Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of counterparts, each of which when executed, will be
deemed to be an original and all of which together will be deemed to be one and
the same instrument binding upon all of the parties notwithstanding the fact
that all parties are not signatories to the original or the same counterpart.
For purposes of this Agreement, facsimile signatures will be deemed originals,
and the parties agree to exchange original signatures as promptly as possible.
Section 8.11. Third-party Beneficiaries and Acts of Agent. This Agreement
is for the sole benefit of the parties to this Agreement, and nothing by this
Agreement expressed or implied will give or be construed to give to any person
or entity, other than the parties to this Agreement, any legal or equitable
rights under this Agreement. The agreements and covenants made by the Company in
this Agreement and all actions taken by the Company pursuant to and in
furtherance of this Agreement are made and taken on behalf of, and as agent for,
the Shareholders. The Shareholders hereby appoint the Company their agent for
such purposes.
Section 8.12. Severability. If any provision of this Agreement or the
application of any provision to any person or circumstance is held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
the invalidity, illegality or unenforceability will not affect any other
provision of this Agreement and the remaining provisions will be construed to
give effect, as nearly as possible, to the original intent of the parties.
Section 8.13. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the parties and no presumption or burden of proof will arise favoring
or disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local or foreign statute or
law will be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. As used in this Agreement
"including" means including, without limitation.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
the day and year first above written.
PURCHASER:
LAHAINA ACQUISITIONS, INC.
By /s/ L. Xxxxx Xxxxxxx
_________________________________________________
L. Xxxxx Xxxxxxx
President
COMPANY:
UNITED CAPITAL MORTGAGE CORPORATION
By /s/ Xxxxxxx X. XxXxxx
_________________________________________________
Xxxxxxx X. XxXxxx
President
SHAREHOLDERS:
/s/ Xxxxxxx X. XxXxxx
_____________________________________________________
Xxxxxxx X. XxXxxx
Number of shares: 670
/s/ Xxxxxx X. Xxxxx
_____________________________________________________
Xxxxxx X. Xxxxx
Number of Shares: 165
ESTATE OF XXXXXXXX XXXXX
By: /s/ Xxxxxx X. Xxxxx
__________________________________________________
Xxxxxx X. Xxxxx
Personal Representative
Number of Shares: 165
EXHIBIT A
SHAREHOLDERS' OBLIGATIONS TO COMPANY
Copies available at the principal office of the buyer.
EXHIBIT B
LIST OF DISTRIBUTED PROPERTY
Copies available at the principal office of the buyer.
EXHIBIT C
SHORT-TERM NOTE
Copies available at the principal office of the buyer.
EXHIBIT D
NOTE
Copies available at the principal office of the buyer.
EXHIBIT E
ALLOCATION OF PURCHASE PRICE AMONG SHAREHOLDERS
Copies available at the principal office of the buyer.
EXHIBIT F
STOCK PLEDGE AGREEMENT
Copies available at the principal office of the buyer.
EXHIBIT G
LIST OF COMPANY SUBSIDIARIES
Copies available at the principal office of the buyer.
EXHIBIT H
CONSULTING AND NONCOMPETITION AGREEMENT OF
XXXXXXX X. XxXXXX
Copies available at the principal office of the buyer.
EXHIBIT I
EMPLOYMENT AGREEMENT
(XXXXX XXXXXXX AND XXX XXXX)
Copies available at the principal office of the buyer.
EXHIBIT J
OPINION OF COUNSEL TO THE COMPANY
Copies available at the principal office of the buyer.
EXHIBIT K
INDEMNITY AGREEMENT IN FAVOR OF
XXXXXXX X. XxXXXX
Copies available at the principal office of the buyer.
EXHIBIT L
OPINION OF COUNSEL TO THE PURCHASER
Copies available at the principal office of the buyer.
EXHIBIT M
GUARANTY AGREEMENT OF S. XXXXX XXXXXXX
Copies available at the principal office of the buyer.
EXHIBIT N
FINANCIAL STATEMENTS
Copies available at the principal office of the buyer.
EXHIBIT O
INTERIM FINANCIAL STATEMENTS
Copies available at the principal office of the buyer.
EXHIBIT P
TAX RETURNS
Copies available at the principal office of the buyer.
Schedule 5.03
Capital Structure
Copies available at the principal office of the buyer.
Schedule 5.05
No Conflict or Violation
None.
Schedule 5.06
Litigation
Copies available at the principal office of the buyer.
Schedule 5.07
Properties and Leases
None.
Schedule 5.08
Taxes
None.
Schedule 5.09
Absence of Certain Changes
None.
Schedule 5.10
Commitments and Contracts
None.
Schedule 5.13
Labor
None.
Schedule 5.14
Defaults
None.
Schedule 5.15
Environmental Liability
None.
Schedule 5.16
Compliance with Law
None.
Schedule 5.17
Employment Contracts
The Purchaser is a party to an employment contract with L. Xxxxx Xxxxxxx.
L. Xxxxx Xxxxxxx is the only party with whom the Purchaser has any employment
contract.
Schedule 5.18
Undisclosed Liabilities
None.
Schedule 5.19
Employee Benefit Plans
Corporate Business Solutions 401(k) Plan dated May 1999. Employees are
eligible to participate in this plan on the first day of the quarter (January 1,
April 1, July 1 and October 1) following completion of 90 days of employment.
They must be at least 21 years of age. If they do not enroll on their initial
eligibility date, they must enroll on the first of any subsequent month. They
may contribute up to 15% of their earnings and all contributions are
tax-deferred. The plan is an Allocated Retirement Account plan and offers a
number of investment options. The plan is administered by Manulife Financial.
