AMENDED AND RESTATED PLAN AND AGREEMENT OF REORGANIZATION
This Plan and Agreement of Reorganization (this "Agreement") is entered
into on this 27th day of May, 1999, by and among XXXXXXX HOLDINGS, INC., a
Delaware corporation ("Xxxxxxx"), FI-TEK V INC., a Delaware corporation subject
to the reporting requirements imposed pursuant to Section 15(d) of the
Securities Exchange Act of 1934, as amended ("Fitek"), WESTMINSTER SECURITIES
CORPORATION, a New York corporation ("Westminster") and certain stockholders of
Xxxxxxx signatory hereto ("Xxxxxxx Shareholders") and certain stockholders of
Westminster ("Westminster Shareholders") signatory hereto.
INTRODUCTION
On April 15, 1999, a certain Plan and Agreement of Reorganization was
entered into among Xxxxxxx, Fitek and the Xxxxxxx Shareholders pursuant to which
the Xxxxxxx Shareholders will contribute to Fitek at least 95% of the issued and
outstanding shares of Xxxxxxx for a stipulated number of shares of Fitek.
On April 30, 1999, a Letter of Intent was entered into among Xxxxxxx,
Westminster and the Westminster Shareholders providing for reorganization of
Xxxxxxx and Westminster pursuant to which the Westminster Shareholders will
contribute to Fitek all their shares of Westminster (other than nominal retained
shares for regulatory capital maintenance purposes) for a stipulated number of
shares of Fitek.
The parties deem it appropriate to combine in this single document the
proposed transactions provided for in the April 15, 1999 Plan and Agreement of
Reorganization and the reorganization contemplated by the Letter of Intent.
PLAN OF REORGANIZATION
The transactions contemplated by this Agreement are intended to be a
reorganization of the corporate parties under either or both of sections 351 and
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. In furtherance
thereof (i) the Xxxxxxx Shareholders shall contribute to Fitek at Closing not
less than 95% of Xxxxxxx'x issued and outstanding common and preferred stock
(the "Xxxxxxx Shares"), which shall constitute not less than 80% of both the
voting and economic interest in Xxxxxxx and (ii) the Westminster Shareholders
shall contribute to Fitek all of the issued and outstanding capital stock of
Westminster (other than nominal retained shares for regulatory capital
maintenance purposes), which, together with the Xxxxxxx Shares, shall be
exchanged solely for shares of Fitek voting common stock, $.00001 par value (the
"Common Stock"). The result of such reorganization shall be that the
participating Xxxxxxx Shareholders and the Westminster Shareholders shall
receive at the Closing more than an 80% ownership interest in Fitek and, on a
fully diluted basis, and after giving effect to shares reserved for issuance
after the Closing hereunder, in the aggregate a 95% ownership interest in Fitek
as part of a single plan of reorganization of Fitek, Xxxxxxx and Westminster.
The exchange of the Westminster Shares and of the Xxxxxxx Shares for Fitek
shares shall occur substantially simultaneously.
AGREEMENT
A. With Respect to the Xxxxxxx Shares:
1. Status of Xxxxxxx Shares; Transfer of Xxxxxxx Shares; Lack of
Encumbrances.
(a) The Xxxxxxx Shareholders represent that, as of the date of this
Agreement, the Xxxxxxx Shareholders own, in the aggregate, not less than
95% of all of Xxxxxxx'x issued and outstanding common and preferred stock,
and their share holdings, both common and preferred stock, are listed on
Exhibit A-1 attached to this Agreement. It is contemplated that the Xxxxxxx
Shareholders may transfer a portion of their respective holdings of Xxxxxxx
Shares to other persons or entities prior to the Closing (as defined in
Section 3), who, as a condition of such transfer, shall execute a
counterpart of this Agreement as a Xxxxxxx Shareholder.
(b) Xxxxxxx represents that, as of the date of this Agreement, all
persons and entities that currently hold convertible debt, options and
warrants to acquire Xxxxxxx Shares are listed on Exhibit A-2 attached to
this Agreement.
(c) The Xxxxxxx Shareholders shall transfer, assign, convey and
deliver to Fitek at the Closing certificates representing, as of the
Closing Date (as defined in Section 3), the Xxxxxxx Shares.
(d) The transfer of the Xxxxxxx Shares shall be made free and clear of
all liens, mortgages, pledges, encumbrances, or charges, whether disclosed
or undisclosed, except as the Xxxxxxx Shareholders, Westminster and Fitek
shall have otherwise agreed in writing.
2. Issuance of Common Stock to Xxxxxxx Shareholders and Others.
(a) As consideration for the transfer, assignment, conveyance and
delivery of the Xxxxxxx Shares, Fitek shall, at the Closing, issue to the
Xxxxxxx Shareholders pro-rata to their existing ownership percentages of
the Common Stock of Xxxxxxx, certificates representing shares of Common
Stock (the "Fitek Exchange Stock" or "Exchange Stock"), and shall reserve
for issuance (i) upon exercise of warrants or options scheduled on Exhibit
A-2; (ii) upon conversion of convertible debt scheduled on Exhibit A-2;
(iii) upon delivery to Fitek of any Xxxxxxx Shares or other shares of
Xxxxxxx common or preferred stock not tendered at Closing; (iv) upon
issuance, pursuant to Section 18, of Exchange Stock to the Westminster
Shareholders at the Closing as to the Westminster Shareholders; or (v) upon
issuance of up to 3,000,000 shares of Exchange Stock by Fitek in an
acquisition of an alternative to Westminster, should the Westminster
Shareholders fail for any reason to tender their Westminster Shares
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for exchange pursuant to Section 17 or otherwise terminate their
participation in this Agreement, an additional number of shares of Exchange
Stock as shall equal, when added to the Exchange Stock issued to the
Xxxxxxx Shareholders at Closing, 19,000,000 shares, or such other number as
shall represent at least 80% of the fully-diluted outstanding Common Stock
of Fitek immediately following the Closing, including for this purpose the
Common Stock reserved for future issuance, but not including any Common
Stock issuable upon exercise of Fitek's outstanding Class A and Class B
Warrants.
(b) The issuance of the Fitek Exchange Stock shall be made free and
clear of all liens, mortgages, pledges, encumbrances, or charges, whether
disclosed or undisclosed, except as the Xxxxxxx Shareholders and Fitek
shall have otherwise agreed in writing.
(c) As provided herein, and immediately prior to the Closing, Fitek
shall have issued and outstanding not more than 1,000,000 shares of Common
Stock, after giving effect to the Reverse Stock Split as contemplated in
Section 11(p) hereof, and such number of Class A Warrants and Class B
Warrants issued and outstanding which would result from the Reverse Stock
Split as contemplated in Section 11(p) hereof, and shall not have any
shares of preferred stock issued and outstanding.
(d) None of the Exchange Stock issued or transferred to the Xxxxxxx
Shareholders and none of the Xxxxxxx Shares transferred to Fitek hereunder
shall, at the time of Closing, be registered under federal securities laws
but, rather, shall be issued pursuant to an exemption therefrom and be
considered "restricted stock" within the meaning of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act"). Each certificate
representing any of such shares shall bear a legend worded substantially as
follows:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" within the meaning of Rule 144 under the Act.
The securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement
under the Act, or pursuant to an exemption from registration under the
Act, the availability of which is to be established to the
satisfaction of the Company.
The respective transfer agents of Fitek and Xxxxxxx shall annotate their
records to reflect the restrictions on transfer embodied in the legend set
forth above. There shall be no requirement that Fitek register the Exchange
Stock under the Act, nor shall Xxxxxxx or the Xxxxxxx Shareholders be
required to register any Xxxxxxx Shares under the Act.
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3. Closing. The consummation of the exchange described in Sections 1 and 2
(the "Closing") shall take place on a date (the "Closing Date") chosen by mutual
agreement of Xxxxxxx and Fitek within forty-five (45) days from the date of this
Agreement, unless a later time shall be mutually agreed upon by the parties.
4. Deliveries at Closing.
(a) Xxxxxxx and the Xxxxxxx Shareholders shall deliver to Fitek, at
Closing:
(1) certificates representing the Xxxxxxx Shares (both common and
preferred) as described in Section 1, each endorsed in blank by the
registered owner;
(2) an agreement from each Xxxxxxx Shareholder, substantially in
the form of Exhibit B, agreeing to a restriction on the transfer of
the Exchange Stock as described in Section 11(c) hereto;
(3) a copy of a consent of Xxxxxxx'x board of directors
authorizing Xxxxxxx to take the necessary steps toward consummation of
the transactions described by this Agreement; and
(4) a copy of a Certificate of Good Standing for Xxxxxxx issued
not more than thirty days prior to Closing by the Delaware Secretary
of State.
(b) Fitek shall deliver to the Xxxxxxx Shareholders, at Closing,
certificates representing the Exchange Stock, in the names of the
appropriate Xxxxxxx Shareholders, each in the appropriate denomination, as
described in Section 2.
(c) Fitek shall deliver to the new Fitek Board, appointed pursuant to
Section 11(k) below, at Closing, all of Fitek's corporate records.
(d) Fitek shall deliver to Xxxxxxx at Closing:
(1) a copy of a consent of Fitek's board of directors authorizing
Fitek to take the necessary steps toward consummation of the
transactions described by this Agreement and electing the new
directors designated by Xxxxxxx effective as of the Closing; and
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(2) a copy of a Certificate of Good Standing for Fitek issued not
more than thirty days prior to Closing by the Secretary of State of
Delaware.
5. Covenants, Representations and Warranties of Xxxxxxx and the
Shareholders. Subject to the schedule of exceptions, attached hereto as Exhibit
C and incorporated herein by this reference, which schedule shall be acceptable
to Fitek, Laidlaw, as an accommodation to the Xxxxxxx Shareholders, and the
Xxxxxxx Shareholders represent and warrant to Fitek and to the Westminster
Shareholders as follows:
(a) Organization and Standing of Xxxxxxx. Xxxxxxx is a corporation
duly organized, validly existing, and in good standing under the laws of
the State of Delaware. Xxxxxxx'x books and records are complete and correct
and have been maintained with good business practice and accurately reflect
in all material respects the transactions to which they relate. Copies of
Xxxxxxx'x Certificate of Incorporation, and all amendments thereof to date,
certified by the proper Delaware officials and of Xxxxxxx'x bylaws as
amended to date, together with all minutes of shareholder and directors'
meetings, certified by Xxxxxxx'x Secretary, will be delivered to Fitek
prior to Closing and will be complete and correct as of the date of
delivery of said documents. The same shall be subject to the review and
approval of counsel for Fitek and Westminster.
(b) Subsidiaries and Ownership of Securities. Xxxxxxx has, as of the
date of this Agreement, the subsidiaries and percentage ownership interest
in the same scheduled on Exhibit H attached hereto. As of the Closing,
Xxxxxxx shall also have 100% ownership of Xxxxxxx Pacific Financial
Services (Holdings) Ltd., a Hong Kong corporation, and 63% ownership of
Global Electronic Exchange, Inc., a Delaware corporation. Each of such
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
authority necessary to conduct its business as presently conducted, and, as
to Xxxxxxx Pacific Financial Services (Holdings) Ltd., substantially as set
forth in that certain Exchange Agreement dated as of May 20, 1999 among
Xxxxxxx, PUSA Investment Company and Xxxxxxx Pacific, including the
schedules annexed thereto. All other subsidiaries of Xxxxxxx listed on
Schedule 3.4 of such Exchange Agreement are inactive. No person has, or at
Closing shall have, any rights to acquire any equity interest in any of the
subsidiaries.
(c) Capitalization. The aggregate number of shares of stock which
Xxxxxxx is authorized to issue is 21,300,000 shares, consisting of three
classes of capital stock:
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(i) 15,000,000 shares of common stock, $.05 par value, of which
9,129,045 shares are currently issued and outstanding. All of such
outstanding shares are validly issued, fully paid and nonassessable;
(ii) 6,100,000 shares of non-voting common stock, par value $.05
per share, of which there are no shares currently issued and
outstanding; and
(iii) 200,000 shares of one or more series of preferred stock,
par value $.01 per share, of which 2,500 shares designated as Series C
Preferred Stock are currently issued and outstanding. All of such
outstanding shares are validly issued, fully paid and nonassessable.
Xxxxxxx has outstanding those warrants and options to purchase common stock
as are scheduled on Exhibit A-2.
According to Xxxxxxx'x books and records, each of the persons or entities
that is to be a Shareholder at Closing is domiciled in one of the following
jurisdictions: New York, New Jersey, Connecticut or non-United States. All
securities issued by Xxxxxxx as of the date of this Agreement have been
issued in compliance with all applicable state and federal laws.
(d) Financial Statements. Xxxxxxx has delivered to Fitek and the
Westminster Shareholders, a copy of Xxxxxxx'x audited financial statement
for the fiscal year ended December 31, 1998 and will deliver to Fitek and
the Westminster Shareholders an unaudited financial statement for the three
month period ended March 31, 1999. All such statements will be true and
complete and will have been prepared in accordance with generally accepted
accounting principles.
(e) Absence of Undisclosed Liabilities. Except to the extent reflected
in this Agreement or in Xxxxxxx'x audited balance sheet at December 31,
1998, Xxxxxxx has no actual knowledge of any liabilities of any nature,
whether accrued, absolute, contingent, or otherwise, including, without
limitation, annual franchise taxes or other corporate charges in the normal
course of business, in existence as of such date.
(f) Absence of Certain Changes. Except as disclosed in Exhibit C,
since December 31, 1998, there has not been, and as of the Closing, there
will not be (i) any change in Xxxxxxx'x financial condition, assets,
liabilities, or business other than changes in the ordinary course of
business, none of which, taken individually or considered together with
other changes, has been materially adverse or (ii) any damage, destruction,
or loss, whether or not covered by insurance, materially and adversely
affecting Xxxxxxx'x properties or business.
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(g) Title to Properties. Xxxxxxx has good and marketable title to all
of its properties and assets, real and personal, tangible and intangible,
none of which is subject to any security interest, mortgage, pledge, lien,
encumbrance, or charge, except for liens, if any, shown on Xxxxxxx'x
financial statements as of December 31, 1998, or on Exhibit D prepared in
compliance with subsection (j) below as securing specified liabilities set
forth therein (with respect to which no default exists) and, except for
minor imperfections of title and encumbrances, if any, which are not
substantial in amount, do not materially detract from the value of the
properties subject thereto, or materially impair Xxxxxxx'x operations and
have arisen in the ordinary course of business.
(h) Accounts Receivable. Xxxxxxx represents that, except to the extent
disclosed in Exhibit C or reserved against on its balance sheet at December
31, 1998, it is not aware of any accounts and contracts receivable existing
that in its judgment would be uncollectible.
(i) Litigation. Except as disclosed in Exhibit C, there is no
litigation or proceeding pending, or to Xxxxxxx'x knowledge threatened,
against or relating to Xxxxxxx, its properties, or business, nor does
Xxxxxxx know or have reasonable grounds to know, of any basis for any such
action, or of any governmental investigation relative to Xxxxxxx, its
properties, or business. Xxxxxxx is not, and on the Closing Date will not
be, in default under or with respect to any judgment, order, writ,
injunction or decree of any court or of any federal, state, municipal or
other governmental authority, department, commission, board, agency or
other instrumentality; and Xxxxxxx has, and on the Closing Date will have,
complied in all material respects with all laws, rules, regulations and
orders applicable to it and to its business, if any.
(j) Exhibits Relating to Certain Matters. Exhibit D contains a
complete and accurate recitation of the following documents: a description
of all liens, mortgages, charges, and encumbrances that are outstanding
with respect to any of the properties and assets of Xxxxxxx; a list of all
leases wherein Xxxxxxx is either lessor or lessee; a list of all other
material written or oral contracts, commitments, agreements, and other
contractual obligations to which Xxxxxxx is a party; a list of all
insurance policies carried by Xxxxxxx, a description of all bonus, pension,
profit sharing, retirement, stock purchase, stock option, hospitalization,
insurance, and other executive or employee compensation or benefit plans to
which Xxxxxxx is a party; a list of all notes payable of Xxxxxxx; and a
list of all notes and contracts receivable of Xxxxxxx.
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(k) Contracts. Xxxxxxx is not a party to any contract, except
contracts described in Exhibits C or D. To the best of its knowledge,
Xxxxxxx has in all material respects performed all obligations required to
be performed by it to date and is not in default in any material respect
under any agreements, leases, or other documents to which it is a party,
except as disclosed in Exhibit D.
(l) Taxes. Xxxxxxx has filed in correct form, or has received proper
extensions to file, all federal and state income tax returns due with
respect to all periods through the end of its last fiscal year, and all
real and personal property tax schedules, franchise, sales or use tax
returns, and all federal and state employment and withholding tax returns
that are required to be filed, and has paid all taxes as shown on the said
returns and all assessments received by it to the extent that such taxes
and assessments have become due.
(m) Authority to Execute Agreement. The Board of Directors of Xxxxxxx,
pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by Xxxxxxx of this Agreement, and has
duly authorized each of the transactions hereby contemplated to be
performed. A copy of the Consent of Board of Directors of Xxxxxxx
authorizing such action is attached hereto as Exhibit E and incorporated
herein by this reference. Xxxxxxx has the power and authority to execute
and deliver this Agreement, to consummate the transactions hereby
contemplated by it and to take all other actions required to be taken by it
pursuant to the provisions hereof. Xxxxxxx has taken all actions required
by law, its Certificate of Incorporation, as amended, its bylaws, as
amended, or otherwise to authorize the execution and delivery of this
Agreement. This Agreement is valid and binding upon the Xxxxxxx
Shareholders in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will constitute a violation or breach of the
Certificate of Incorporation, as amended, or the bylaws, as amended, of
Xxxxxxx, or any agreement, stipulation, order, writ, injunction, decree,
law, rule or regulation applicable to Xxxxxxx.
(n) Finder's Fees. Xxxx X'Xxxx and affiliates have acted as a finder
in this transaction. Any compensation, whether in cash, stock, or
combination of both, will be paid by the combined Fitek/Xxxxxxx (or
Fitek/Xxxxxxx/Westminster) entity immediately following Closing.
(o) Disclosure. No representation or warranty by Xxxxxxx in this
Agreement, nor any statement or certificate hereto, or in connection with
the transactions contemplated hereby, knowingly contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained therein not
misleading.
(p) Compliance. To the best of its knowledge, Xxxxxxx has complied in
all material respects with all applicable laws, orders and regulations of
federal,
8
state, municipal and/or other governments and/or any instrumentality
thereof domestic or foreign, currently applicable to its assets and to the
business conducted by it.
(q) Change of Fitek Name. Xxxxxxx and the Xxxxxxx Shareholders agree
to use their best efforts to amend Fitek's Certificate of Incorporation
immediately following the Closing to change Fitek's name to Xxxxxxx Global
Corp., or to a name that is substantially similar.
(r) Fitek Representative. The Xxxxxxx Shareholders agree that the
current Fitek board shall have the right to designate a non-board advisor
who shall be entitled to notice of and to attend all board meetings for a
period of one year from the Closing. Xxxxxxx and the Shareholders agree
that the Fitek representative shall have the right to be reimbursed for all
travel expenses to attend meetings.
6. Access and Information. Subject to the protections provided by Section
15, Xxxxxxx shall give to Fitek and to Westminster and to Fitek's and
Westminster's counsel, accountants, and other representatives full access,
during normal business hours throughout the period prior to the Closing, to all
of Xxxxxxx'x properties, books, contracts, commitments, and records, including
information concerning products and customer base, and patents held by, or
assigned to, Xxxxxxx, and furnish Fitek and Westminster during such period with
all such information concerning Xxxxxxx'x affairs as Fitek or Westminster
reasonably may request.
7. Covenants, Representation and Warranties of Fitek. Fitek represents and
warrants to Xxxxxxx, the Xxxxxxx Shareholders, Westminster and the Westminster
Shareholders as follows:
(a) Organization and Standing of Fitek. Fitek is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Fitek's books and records are complete and correct and
have been maintained with good business practice and accurately reflect in
all material respects the transactions to which they relate. Copies of
Fitek's Certificate of Incorporation, and all amendments thereof to date,
certified by the proper Delaware officials, and of Fitek's bylaws as
amended to date, together with all minutes of shareholders' and directors'
meetings, certified by Fitek's Secretary, will be delivered to Xxxxxxx
prior to Closing and shall be complete and correct as of the date of
delivery of said documents. The same shall be subject to the review and
approval of counsel for Xxxxxxx.
(b) Subsidiaries. Fitek has no subsidiaries.
(c) Capitalization. As of the date of this Agreement, and prior to the
Reverse Stock Split as contemplated in Section 11(q) hereof, the aggregate
9
number of shares of common stock, par value $.00001 per share, which Fitek
is authorized to issue is 300,000,000 of which 32,477,800 shares are
currently issued and outstanding. In addition, there are 8,632,500 Class A
Common Stock Purchase Warrants and 8,632,500 Class B Common Stock Purchase
Warrants issued and outstanding, each of which warrants is exercisable for
one share of common stock at a price of $.12 per share for Class A Warrants
and $.20 per share for Class B Warrants. Except for the Class A Common
Stock Purchase Warrants and Class B Common Stock Purchase Warrants, no
options or rights to purchase common stock or preferred stock are currently
outstanding, or will be outstanding as of the Closing. The aggregate number
of shares of preferred stock, par value $.00001 per share, which Fitek is
authorized to issue is 20,000,000, of which no shares are issued and
outstanding.
(d) Financial Statements. Fitek will deliver to Xxxxxxx, prior to
Closing, copies of all of Fitek's audited and unaudited financial
statements, including but not limited to Fitek's audited 12 month
statements for the year ended August 31, 1998, and first quarter and second
quarter statements as at November 30, 1998 and February 28, 1999,
respectively. All of Fitek's audited and unaudited financial statements
through February 28, 1999 shall be true and complete and have been prepared
in accordance with generally accepted accounting principles and Regulation
S-X appearing in title 17 of the Code of Federal Regulations ("Regulation
S-X").
(e) Absence of Undisclosed Liabilities. Except to the extent reflected
in this Agreement or in Fitek's balance sheet at February 28, 1999, Fitek
has no actual knowledge of any liabilities, as of such date, of any nature,
whether accrued, absolute, contingent, or otherwise, including, without
limitation, annual franchise taxes or other corporate charges in the normal
course of business.
(f) Absence of Certain Changes. Fitek is engaged in no business and
conducts no operations. Since February 28, 1999, there has not been any
material change in Fitek's financial condition, assets or liabilities,
except the incurring of expenses in connection with the acquisition of
Xxxxxxx and Westminster or as reflected in this Agreement.
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(g) Litigation. There is no litigation or proceeding pending, or to
Fitek's knowledge threatened, against or relating to Fitek, nor does Fitek
know or have reasonable grounds to know, of any basis for any such action,
or of any governmental investigation relative to Fitek. Fitek is not, and
on the Closing Date will not be, in default under or with respect to any
judgment, order, writ, injunction or decree of any court or of any federal,
state, municipal or other governmental authority, department, commission,
board, agency or other instrumentality; and Fitek has, and on the Closing
Date will have, complied in all material respects with all laws, rules,
regulations and orders applicable to it, if any.
(h) Contracts. Fitek is not a party to any contract, nor is Fitek a
party to any written or oral commitment, for capital expenditures. Fitek
has in all material respects performed all obligations required to be
performed by it to date and is not in default in any material respect under
any agreements or other documents to which it was a party.
(i) SEC Filings. As of the date of this Agreement, Fitek has
accurately and timely filed with the Securities and Exchange Commission
("SEC") all registration statements, financial statements, applications,
reports, schedules, forms, proxy statements and all other instruments,
documents and written information (collectively, the "SEC Filings")
required to be filed by Fitek under the Act and the Securities Exchange Act
of 1934, as amended. At the date hereof, none of the SEC Filings contains
or, on the Closing Date, will contain any untrue statement of a material
fact or omits or, on the Closing Date, will omit to state a material fact
necessary in order to make the statements contained therein, in light of
the circumstances in which they were made or shall have been made, not
misleading.
(j) Authority to Execute Agreement. The Board of Directors of Fitek,
pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by Fitek of this Agreement and the
Fitek Exchange Stock, and has duly authorized each of the transactions
hereby contemplated. A copy of the Consent of Board of Directors of Fitek
authorizing such action is attached hereto as Exhibit F and incorporated
herein by this reference. Fitek has the power and authority to execute and
deliver this Agreement, to consummate the transactions hereby contemplated
and to take all other actions required to be taken by it pursuant to the
provisions hereof. Fitek has taken all the actions required by law, its
Certificate of Incorporation, as amended, its bylaws, as amended, or
otherwise to authorize the execution and delivery of the Fitek Exchange
Stock pursuant to the provisions hereof. Not less than a majority of the
holders of the outstanding stock of Fitek entitled to vote has approved
this Agreement. This Agreement is valid and binding upon Fitek in
accordance with its terms. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute a violation or breach of the
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Certificate of Incorporation, as amended, or the bylaws, as amended, of
Fitek, or any agreement, stipulation, order, writ, injunction, decree, law,
rule or regulation applicable to Fitek. Upon issuance, the Fitek Exchange
Stock shall be validly issued, fully paid and non-assessable.
(k) Finder's Fees. Xxxx X'Xxxx and affiliates have acted as a finder
in this transaction. Any compensation, whether in cash, stock, or a
combination of both, will be paid by the combined Fitek/Xxxxxxx (or
Fitek/Xxxxxxx/Westminster) entity immediately following Closing.
(l) Disclosure. No representation or warranty by Fitek in this
Agreement, nor any statement or certificate furnished or to be furnished to
Xxxxxxx or the Shareholders pursuant hereto, or in connection with the
transactions contemplated hereby, knowingly contains or will contain any
untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained therein not
misleading
(m) Taxes. Fitek has filed in correct form all federal and state
income tax returns due with respect to all periods through the end of its
last fiscal year, and all real and personal property tax schedules,
franchise, sales or use tax returns, and all federal and state employment
and withholding tax returns that are required to be filed, and has paid all
taxes as shown on the said returns and all assessments received by it to
the extent that such taxes and assessments have become due. The Internal
Revenue Service has not examined any income tax return of Fitek.
(n) Registration Rights. Except to the extent set forth in Fitek's
Prospectus, dated July 10, 1991, which pertains to Fitek's obligations in
favor of its warrant holders, Fitek has not granted any registration rights
to holders of warrants or to holders of restricted Common Stock.
(o) Exhibits Relating to Certain Matters. Exhibit I contains a
complete and accurate recitation of the following documents: a description
of all liens, mortgages, charges, and encumbrances that are outstanding
with respect to any of the properties and assets of Fitek; a list of all
leases wherein Fitek is either lessor or lessee; a list of all other
written or oral contracts, commitments, agreements, and other contractual
obligations to which Fitek is a party; a list of all insurance policies
carried by Fitek; a description of all bonus, pension, profit sharing,
retirement, stock purchase, stock option, hospitalization, insurance, and
other executive or employee compensation or benefit plans to which Fitek is
a party, a list of all notes payable of Fitek, and a list of all notes and
contracts receivable of Fitek.
(p) Lock-up of Fitek Common Stock. (i) At Closing, Fitek and certain
holders of Fitek common stock, signatory hereto, and any holders of Fitek
common stock owning in excess of 500,000 shares, calculated prior to the
Reverse
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Stock Split contemplated in Section 11(p) herein (collectively, "Principal
Fitek Shareholders" or individually, "Principal Fitek Shareholder"), shall
deliver to Xxxxxxx true copies of duly executed, legally binding and
enforceable "lock-up"agreements pursuant to which such number of shares of
Fitek common stock held by each such Principal Fitek Shareholder, computed
in accordance with Section 7(p)(ii) below, will not be directly or
indirectly offered for sale, assigned, transferred, pledged, hypothecated
or otherwise encumbered or disposed, without the prior written consent of
Xxxxxxx for a period expiring on October 31, 2000, except as set forth in
Section 7(p)(iii) below.
(ii) As set forth in Section 2(a) herein, it is intention of the
transactions contemplated in this Agreement for current Fitek Shareholders
to own 5% of the fully diluted outstanding stock of Fitek immediately
following the Closing, including stock reserved for future issuance as
identified on Exhibit A-2. After giving effect to the Reverse Stock Split
of Fitek Common Stock, as set forth in Section 11(p) hereof, Fitek
Shareholders will own an aggregate of 1,000,000 shares of Fitek. However
most, if not all, of the shares reserved for future issuance will not be
issued at the Closing. Therefore, any shares which the Principal Fitek
Shareholders own immediately after Closing which exceed their respective
portion of 5% outstanding shall be subject to the lock-up agreements set
forth above.
By way of example:
(1) Total shares of Fitek (fully diluted) to be outstanding
immediately following Closing, plus shares to be reserved as described
in Section 2(a): 20,000,000 shares
(2) Total ownership of shares of Fitek by existing Fitek
Shareholders immediately preceding Closing: 1,000,000 shares
(3) Assume that 14,000,000 shares of Fitek are issued at the
Closing to the Xxxxxxx Shareholders,
(A) Outstanding immediately following Closing would be
15,000,000 shares;
(B) 5% of 15,000,000 shares = 750,000 shares;
(C) Excess over 5% of outstanding = 250,000 shares;
(D) Percentage of holdings which exceed 5% held
proportionately by Fitek Shareholders is 25%;
13
(E) Therefore, the percentage of shares of Principal Fitek
Shareholders Stock subject to lock-up pursuant to Section 7(p)(i)
above would be 25%.
(iii) As additional shares which were not issued at Closing become
issued through post-closing tender of outstanding Xxxxxxx Shares, by
exercise of options or warrants or conversion of convertible debt or
otherwise, and thereby increase the total outstanding shares of Fitek, the
shares of the Fitek Principal Stockholders will proportionately be released
from lock-up under Section 7(p)(i) so that each such shareholder will have
his proportion of 5% of the total outstanding of Fitek Common Stock freed
from the lock-up provisions of Section 7(p)(i). Fitek shall provide each of
the Fitek Principal Stockholders with written notice of each such issuance
within three (3) business days of its occurrence, and shall simultaneously
advise its transfer agent of the release of such shares from the provisions
of the lock-up agreement. In addition, Fitek undertakes to bear the
expense, from time to time as necessary, of (i) removal from any
certificates held by or on behalf of the Principal Fitek Stockholders of
any restrictive legends with respect to the lock-up, and (ii) cancellation
and reissuance of new certificates in respect of each such release from the
lock-up.
(q) Reverse Stock Split. The Reverse Stock Split contemplated in
Section 11(q) hereof shall be in accordance with Fitek's Certificate of
Incorporation, Bylaws and the laws of the State of Delaware.
8. Access and Information. Subject to the protections provided by Section
14, Fitek shall give to Xxxxxxx, Westminster and to Xxxxxxx'x and Westminster's
counsel, accountants, and other representatives full access, during normal
business hours throughout the period prior to the Closing, to all of Fitek's
properties, books, contracts, commitments, and records, if any, and shall
furnish Xxxxxxx and Westminster during such period with all such information
concerning Fitek's affairs as Xxxxxxx or Westminster reasonably may request.
9. Conduct of Xxxxxxx Business Pending Closing. Xxxxxxx and each of the
Xxxxxxx Shareholders, to the extent within each Xxxxxxx Shareholder's control,
covenant with Fitek and with Westminster and the Westminster Shareholders that
pending the Closing:
14
(a) Except as described in, or as may be necessary to effect the
transactions contemplated by the next sentence, no change will be made in
Xxxxxxx'x Certificate of Incorporation or bylaws and no change will be made
in Xxxxxxx'x issued shares of stock, other than such changes as may be
first approved in writing by Fitek. Fitek and the Westminster Shareholders
acknowledge that the Xxxxxxx Shareholders intend to transfer outstanding
Xxxxxxx shares, prior to the Closing, to one or more of the persons or
entities listed on Exhibit A-2 and to issue 1,300,000 Xxxxxxx Shares to
PUSA Investment Company in exchange for all of the issued and outstanding
shares of capital stock of Xxxxxxx Pacific Financial Services (Holdings)
Ltd.
(b) No dividends shall be declared and no stock options shall be
granted.
(c) Except as otherwise permitted by Fitek and the Westminster
Shareholders, Xxxxxxx will use its best efforts (without making any
commitment on Fitek's behalf) to preserve Xxxxxxx'x business organization
intact, to keep available to Xxxxxxx the services of its present officers
and employees, and to preserve the goodwill of those having business
relations with Xxxxxxx.
10. Conduct of Fitek Pending Closing. Fitek covenants with Xxxxxxx, the
Xxxxxxx Shareholders, Westminster and the Westminster Shareholders that, pending
the Closing:
(a) No change will be made in Fitek's Certificate of Incorporation or
bylaws or in Fitek's authorized or issued shares of stock, except as may be
first approved in writing by Xxxxxxx and Westminster, or as provided by
Section 11(q).
(b) No dividends shall be declared, no stock options granted and no
employment agreements shall be entered into with officers or directors of
Fitek, except as contemplated by this Agreement or as may be first approved
in writing by Xxxxxxx.
(c) Fitek will not issue any stock or other securities, including any
right or option to purchase or otherwise acquire any of its stock, or issue
any notes or other evidences of indebtedness.
(d) Fitek shall continue to conduct no business except in furtherance
of this Agreement.
11. Conditions Precedent to Closing. All obligations of Fitek, Xxxxxxx and
the Xxxxxxx Shareholders under this Agreement are subject to the fulfillment, or
waiver by the party or parties to be benefited, prior to or at the Closing, of
all conditions elsewhere herein set forth, including, but not limited to,
receipt by the appropriate party of all
15
deliveries required by Section 4 herein, and fulfillment, prior to the Closing,
of each of the following conditions:
(a) The respective representations, warranties and covenants of all of
the parties hereto contained in this Agreement shall be true at the time of
Closing as though such representations, warranties and covenants were made
at such time.
(b) Xxxxxxx, the Xxxxxxx Shareholders and Fitek shall have performed
and complied with all agreements and conditions required by this Agreement
to be performed or complied with by each prior to or at the Closing.
(c) Each Xxxxxxx Shareholder acquiring Exchange Stock will be
required, at Closing, to submit an agreement, substantially in the form of
Exhibit B, confirming that all the Exchange Stock received will be acquired
for investment and not with a view to, or for sale in connection with, any
distribution thereof, and agreeing not to transfer any of the Exchange
Stock for a period of one year from the Closing Date, except to those
persons approved by legal counsel to Fitek as falling within an exemption
from registration under the Act and any applicable state securities laws,
which transfers do not constitute a public distribution of securities, and
in which the transferees execute an investment letter in form and substance
satisfactory to counsel for Fitek. The foregoing provision shall not
prohibit the registration of those shares at any time following the
Closing. Each Xxxxxxx Shareholder acquiring Exchange Stock will be required
to transfer to Fitek at the Closing his or her respective Xxxxxxx Shares,
free and clear of all liens, mortgages, pledges, encumbrances or changes,
whether disclosed or undisclosed.
(d) Fitek and the Westminster Shareholders shall have been presented
with, and shall have approved, an updated version of Exhibits C and D,
prepared by Xxxxxxx, current as of the Closing.
(e) Each party shall have received favorable opinions from the other
party's counsel on such matters in connection with the transactions
contemplated by this Agreement as are reasonable, including an opinion from
counsel for Xxxxxxx that the exchange of shares contemplated, if
consummated, will not in any manner violate corporate or securities laws of
any states where any Xxxxxxx Shareholder resides.
(f) Each party shall have satisfied itself that since the date of this
Agreement the business of the other party has been conducted in the
ordinary course except to the extent otherwise contemplated by this
Agreement. In addition, each party shall have satisfied itself that no
withdrawals of cash or other assets have been made and no indebtedness has
been incurred since the date of this Agreement, except with respect to
services rendered or expenses incurred in connection with the consummation
of the transactions contemplated by this
16
Agreement, unless said withdrawals or indebtedness were either contemplated
by the terms of this Agreement or subsequently consented to in writing by
the parties or were incurred in the ordinary course of business by Xxxxxxx
or Westminster.
(g) Each party shall provide a closing certificate that, to the best
of its knowledge, it has complied in all material respects with all
applicable laws, orders and regulations of federal, state, municipal and/or
other governments and/or any instrumentality thereof, domestic or foreign,
applicable to their assets, to the business conducted by them and to the
transactions contemplated by this Agreement.
(h) Fitek shall have provided to Xxxxxxx and the Westminster
Shareholders all audited and unaudited financial statements, including but
not limited to Fitek's audited 12 month statements for the year ended
August 31, 1998, and first quarter and second quarter statements as at
November 30, 1998 and February 28, 1999, respectively. All audited and
unaudited financial statements shall be prepared in accordance with
generally accepted accounting principles and Regulation S-X, and the
audited statements certified as such by independent accountants of Fitek.
(i) Xxxxxxx shall have provided to Fitek and the Westminster
Shareholders audited consolidated financial statements of Xxxxxxx for the
three most recently completed fiscal years, prepared in accordance with
generally accepted accounting principles, together with consolidated
unaudited financial statements in the same form for the period from the end
of the most recently ended fiscal year to a date within thirty days of the
Closing. Such unaudited financial statements of Xxxxxxx shall have included
the following schedules: Schedule of Assets; Schedule of Notes Payable;
Schedule of Accounts Payable; and Schedule of Notes Receivable or, in their
absence, an affirmation that such items do not exist. Xxxxxxx shall also
provide, as of a date within ten days of Closing, an update of any material
change in the aforementioned schedules. In addition, Xxxxxxx will deliver
to Fitek and the Westminster Shareholders, prior to Closing, in a form
satisfactory to Fitek and the Westminster Shareholders, a letter from
Xxxxxxx'x independent auditors confirming that Xxxxxxx'x financial
statements, covering the period from January 1, 1997 to the Closing Date,
are audited or are auditable and such financial statements, if not already
prepared in accordance in accordance with generally accepted accounting
principles, can be prepared in accordance with generally accepted
accounting principles within seventy-five (75) days of the Closing Date.
(j) Each party shall have granted to the other party (acting through
its management personnel, counsel, accountants or other representatives
designated by it) full opportunity to examine its books and records,
properties, plants and equipment, proprietary rights and other instruments,
rights and papers of all kinds in accordance with Sections 6 and 8 hereof
and each party shall be satisfied to
17
proceed with the transactions contemplated by this Agreement upon
completion of such examination and investigation.
(k) Effective as of the Closing Date, all of the members of Fitek's
current board of directors and each and every person serving as an officer
of Fitek shall resign their respective positions and/or offices by
tendering written resignations. Immediately prior to said resignations,
Fitek's board of directors shall appoint those persons listed on Exhibit G
as members of Fitek's new board and/or as officers of Fitek, with such
appointments to correspond with the position or office designated on
Exhibit G and with such appointments to be effective as of the Closing. The
parties hereto agree that the current board may designate, at any time
within twelve months following the Closing, one person to serve as an
advisor to the Board for a period of one year following Closing.
(l) All press releases, shareholder communications, SEC Filings and
other publicity generated by Fitek, Westminster or Xxxxxxx regarding the
transactions contemplated by this Agreement shall have been reviewed and
approved by each of the other corporate parties before their release to the
public or any governmental agency.
(m) Each party shall have satisfied itself that all transactions
contemplated by this Agreement, including those contemplated by the
exhibits attached hereto, shall be legal and binding under applicable
statutory and case law of the State of Delaware including, but not limited
to Delaware's securities laws and all other applicable state securities
laws.
(n) Each of the Xxxxxxx Shareholders shall have tendered his or her
stock certificate or certificates to Fitek, endorsed in blank, to permit
the transfer of the Xxxxxxx'x Stock at Closing as contemplated by Section
2(b).
(o) All holders of Fitek restricted common stock in excess of 500,000
restricted shares, calculated prior to the Reverse Stock Split contemplated
in Section 11(p) below, shall execute agreements in form and substance
satisfactory to Xxxxxxx and Fitek whereby they agree:
(i) to grant to Xxxxxxx or its designees for a period of six
months following Closing the right and option to purchase one third of
their restricted stock at a price of $3.50 per share (assuming a
reverse stock split post Closing of no more than one for
thirty-eight), and;
(ii) to a lock-up of an additional one third of their restricted
stock for a period of nine months following Closing, except that
private sales may be made to purchasers who agree to be bound by the
provisions of the "lock-up" agreement.
18
(p) Fitek shall effect a combination (reverse split) of shares or
other capital readjustment or other reduction of the number of shares of
common stock outstanding, without receiving compensation therefor in money,
services or property, so that immediately prior to Closing, Fitek shall
have issued and outstanding not more than 1,000,000 shares of Common Stock
(the "Reverse Stock Split").
(q) Xxxxxxx shall have received a valuation opinion satisfactory to it
that the transactions contemplated hereby meet the standards of NASD Rule
2720.
(r) It shall not be a condition to Closing among the Xxxxxxx
Shareholders and Fitek that the Westminster Shareholders participate in
this reorganization.
12. Standstill Agreement. Prior to the Closing or termination of this
Agreement pursuant to Section 13, neither Fitek, Laidlaw, Westminster nor any of
the Xxxxxxx Shareholders or Westminster Shareholders may discuss or negotiate
with any other corporation, firm or person, or entertain or consider any
inquiries, or proposals relating to the possible disposition of their shares of
capital stock of either Xxxxxxx, Westminster or Fitek, and each of them will
cause Xxxxxxx, Westminster or Fitek, respectively, to conduct business only in
the ordinary course except that Xxxxxxx may undertake investigation, discussion
and/or negotiations with potential acquisition candidate companies and/or
strategic investors, provided that such negotiations, discussions and
investigations are in furtherance of Xxxxxxx'x business plan, and further, each
Xxxxxxx Shareholder shall be authorized to sell his stock to employees and/or
others prior to Closing, so long as such transferee becomes a Xxxxxxx
Shareholder by executing a counterpart of this Agreement as a condition thereof.
Notwithstanding the foregoing, each party shall be free to engage in activities
mentioned in the preceding sentence which are designed to further the mutual
interests of the parties for the contemplated consolidation of the companies and
advancement of Xxxxxxx'x business plan.
13. Termination. This Agreement may be terminated prior to Closing, and the
contemplated transactions abandoned, without liability to any party, except with
respect to the obligations of Fitek, Xxxxxxx and the Xxxxxxx Shareholders,
Westminster and the Westminster Shareholders under Section 15 hereof:
(a) by mutual consent of the parties;
(b) by Fitek, if in its reasonable belief there has been a material
misrepresentation or breach of warranty on the part of Xxxxxxx or any
Xxxxxxx Shareholder in the representations and warranties set forth in the
Agreement;
(c) by Xxxxxxx or a majority in interest of the Xxxxxxx Shareholders
if, in the reasonable belief of Xxxxxxx or such Xxxxxxx Shareholders, there
has been a
19
material misrepresentation or breach of warranty on the part of Fitek in
the representations and warranties set forth in the Agreement;
(d) by either Fitek or by a majority in interest of the Xxxxxxx
Shareholders if the Closing shall not have occurred by the Closing Date;
(e) by Fitek if in its opinion or that of its counsel, the
transactions contemplated by this Agreement do not qualify for exemption
from registration under applicable federal and state securities laws, or
qualification, if obtainable, cannot be accomplished, in Fitek's opinion or
that of its counsel, without unreasonable expense or effort;
(f) by Fitek if, in its opinion or that of its counsel, the
transactions contemplated by this Agreement cannot be consummated under
Colorado or other relevant state corporate law or, if consummation is
possible, that it cannot be accomplished, in Fitek's opinion or that of its
counsel, without unreasonable expense or effort;
(g) by Fitek or by a majority in interest of the Xxxxxxx Shareholders
if Fitek in its sole discretion or such Xxxxxxx Shareholders in their
discretion shall determine that any of the transactions contemplated by
this Agreement have become inadvisable or impracticable by reason of the
institution or threat by state, local, or federal governmental authorities
or by any other person of material litigation or proceedings against any
party;
(h) by Fitek if the business or assets or financial condition of
Xxxxxxx, taken as a whole, have been materially and adversely affected,
whether by the institution of litigation or by reason of changes or
developments or in operations in the ordinary course of business or
otherwise, or, by a majority in interest of the Xxxxxxx Shareholders if the
business or assets or financial condition of Fitek, taken as a whole, have
been materially and adversely affected, whether by the institution of
litigation or by reason of changes or developments or in operations in the
ordinary course of business or otherwise;
(i) by Fitek if it shall appear to Fitek that Xxxxxxx shall not be
able to obtain within a reasonable amount of time after Closing all
consents and approvals of all governmental authorities having any
jurisdiction over the business of Xxxxxxx, or if such authorities shall
withdraw any approvals, licenses, or permits given to Xxxxxxx or to any
other entity with which Xxxxxxx is affiliated or in which Xxxxxxx has an
interest;
(j) by Fitek if more than 5% (by percentage ownership) of the total
shareholders of Xxxxxxx do not participate in the exchange described in
Sections 1 and 2, or are unable or for any reason refuse to transfer any or
all of their Xxxxxxx Shares to Fitek in accordance with Section 1, or fail
to tender at the Closing the
20
certificate or certificates, endorsed in blank, representing all of their
Xxxxxxx Shares;
(k) by Xxxxxxx if Fitek fails to perform material conditions set forth
in Section 11;
(l) by Xxxxxxx if examination of Fitek's books and records pursuant to
Section 8 uncovers a material deficiency, and
(m) by Fitek if Xxxxxxx fails to perform material conditions set forth
in Section 11.
In the event of a bad-faith termination of this Agreement, the
non-terminating party or parties shall be limited solely and exclusively to
recovery of its attorney's fees expended in the preparation and reporting
of the transaction. Fitek, Xxxxxxx and the Xxxxxxx Shareholders,
Westminster and the Westminster Shareholders expressly waive all other
damages, fees, costs, and lost opportunity costs (consequential damages)
against each other as a result of termination of this Agreement.
14. Possible Acquisition by Xxxxxxx Prior to Closing. Fitek understands
that Xxxxxxx is currently in discussions with one or more investment banking
firms, including Westminster, to be part of the business combination
contemplated by this Agreement. Fitek agrees that such discussions may continue
and any agreement with such a firm that may be reached will result in common
stock to be issued at Closing in an amount to be determined by Xxxxxxx.
Notwithstanding such acquisition, Fitek's shareholders shall own 5% of the
combined entity to be created by this Agreement as provided in Paragraph 2.
15. Confidentiality. While each of Fitek, Westminster and Xxxxxxx is
obligated to provide access to and furnish information in accordance with
Sections 6, 8 and 22 herein, it is understood and agreed that such disclosures
and information subsequently obtained as a result of such disclosures are
proprietary and confidential in nature. Each of Fitek, Westminster and Xxxxxxx
agrees to hold such information in confidence and not to reveal any such
information to any person who is not a party to this Agreement, or an officer,
director, key employee, or shareholder, counsel or auditors thereof, and not to
use the information obtained for any purpose other than assisting in its due
diligence inquiry precedent to the Closing. Upon request of any party, a
confidentiality agreement, acceptable to the disclosing party, will be executed
by any person selected to receive such proprietary information, prior to receipt
of such information.
16. Nature and Survival of Representations. All statements contained in any
certificate or other instrument delivered by or on behalf of Xxxxxxx,
Westminster, the Xxxxxxx Shareholders, the Westminster Shareholders or Fitek,
pursuant hereto, or in connection with the transactions contemplated hereby,
shall be deemed representations and warranties by Xxxxxxx, Westminster, the
Xxxxxxx Shareholders, the Westminster
21
Shareholders or Fitek, respectively, and shall survive the Closing for a period
of twenty-four (24) months.
B. With Respect to the Westminster Shares:
17. Status of Westminster Shares; Transfer of Westminster Shares; Lack of
Encumbrances.
(a) The Westminster Shareholders represent that, as of the date of
this Agreement, the Westminster Shareholders own all of Westminster's
issued stock, except for one share held by MLIC Holdings, Inc., which share
shall be redeemed by Westminster prior to Closing, and their share holdings
are listed on Exhibit J attached to this Agreement. Pursuant to Section
26(o), Westminster shall redeem a certain number of shares of Westminster's
Class A Voting Common Stock from the Westminster Shareholders or their
affiliates prior to Closing. Further, certain of the Westminster Shares may
be transferred to trusts created by the existing Westminster Shareholders
prior to Closing. As a condition to such transfers, such trusts shall
execute a counterpart of this Agreement as a Westminster Shareholder unless
all of the Westminster Shares owned by such trusts are to be redeemed prior
to Closing. The Westminster Shares delivered at Closing shall constitute
all shares of Westminster Class A Voting Common Stock issued and
outstanding on the Closing Date other than the minimum number of such
shares required to be owned by the Westminster Shareholders as set forth
for the purposes described in Section 26(o); and there shall be no issued
and outstanding shares of Westminster Class B Non-Voting Common Stock.
(b) Westminster represents that, as of the date of this Agreement, and
as of the Closing no persons shall hold any convertible debt, options or
warrants to acquire Westminster Shares.
(c) The Westminster Shareholders shall transfer, assign, convey and
deliver to Fitek at the Closing certificates representing, as of the
Closing Date (as defined in Section 19), the Westminster Shares.
(d) The transfer of the Westminster Shares shall be made free and
clear of all liens, mortgages, pledges, encumbrances, or charges, whether
disclosed or undisclosed, except as the Westminster Shareholders, Xxxxxxx
and Fitek shall have otherwise agreed in writing.
18. Issuance of Common Stock to Westminster Shareholders and Others.
(a) As consideration for the transfer, assignment, conveyance and
delivery of the Westminster Shares, Fitek shall, at the Closing, issue to
the Westminster Shareholders certificates representing a total of 3,000,000
shares of Common Stock (the "Fitek Exchange Stock" or "Exchange Stock"), or
such other
22
number as shall represent 15% of the fully-diluted outstanding Common Stock
of Fitek immediately following the Closing, including for this purpose the
Common Stock reserved for future issuance, but not including any Common
Stock issuable upon exercise of Fitek's outstanding Class A and Class B
Warrants.
(b) The issuance of the Fitek Exchange Stock shall be made free and
clear of all liens, mortgages, pledges, encumbrances, or charges, whether
disclosed or undisclosed, except as the Westminster Shareholders and Fitek
shall have otherwise agreed in writing.
(c) As provided herein, and immediately prior to the Closing, Fitek
shall have issued and outstanding not more than 1,000,000 shares of Common
Stock, after giving effect to the Reverse Stock Split as contemplated in
Section 11(p) hereof, and such number of Class A Warrants and Class B
Warrants issued and outstanding which would result from the Reverse Stock
Split as contemplated in Section 11(p) hereof, and shall not have any
shares of preferred stock issued and outstanding.
(d) None of the Fitek Exchange Stock issued or transferred to the
Westminster Shareholders and none of the Westminster Shares transferred to
Fitek hereunder shall, at the time of Closing, be registered under federal
securities laws but, rather, shall be issued pursuant to an exemption
therefrom and be considered "restricted stock" within the meaning of Rule
144 promulgated under the Securities Act of 1933, as amended (the "Act").
All of such shares shall bear a legend worded substantially as follows:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" within the meaning of Rule 144 under the Act.
The securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement
under the Act, or pursuant to an exemption from registration under the
Act, the availability of which is to be established to the
satisfaction of the Company.
The respective transfer agents of Fitek and Westminster shall annotate
their records to reflect the restrictions on transfer embodied in the
legend set forth above. There shall be no requirement that Fitek register
the Exchange Stock under the Act, nor shall Westminster or the Westminster
Shareholders be required to register any Westminster Shares under the Act.
19. Closing. The consummation of the exchange described in Sections 17 and
18 (the "Closing") shall take place on a date (the "Closing Date") chosen by
mutual agreement of Westminster and Fitek within forty-five (45) days from the
date of this
23
Agreement, unless a later time shall be mutually agreed upon by the parties. In
all events, the Closing shall take place substantially simultaneously with the
Closing referred to in Section 3.
20. Deliveries at Closing.
(a) Westminster and the Westminster Shareholders shall deliver to
Fitek, at Closing:
(1) certificates representing the Westminster Shares as described
in Section 17, each endorsed in blank by the registered owner,
(2) an agreement from each Westminster Shareholder, substantially
in the form of Exhibit B, agreeing to a restriction on the transfer of
the Fitek Exchange Stock as described in Section 26(c) hereto,
(3) a copy of a consent of Westminster's board of directors
authorizing Westminster to take the necessary steps toward
consummation of the transactions described by this Agreement, and
(4) a copy of a Certificate of Good Standing for Westminster
issued not more than thirty days prior to Closing by the New York
Secretary of State.
(b) Fitek shall deliver to the Westminster Shareholders, at Closing,
certificates representing the Fitek Exchange Stock, in the names of the
appropriate Westminster Shareholders, each in the appropriate denomination,
as described in Section 18.
(c) Fitek shall deliver to the new Fitek Board, appointed pursuant to
Section 26(k) below, at Closing, all of Fitek's corporate records.
(d) Fitek shall deliver to the Westminster Shareholders at Closing:
(1) a copy of a consent of Fitek's board of directors authorizing
Fitek to take the necessary steps toward consummation of the
transactions described by this Agreement and electing the new
directors designated by Xxxxxxx effective as of the Closing; and
24
(2) a copy of a Certificate of Good Standing for Fitek issued not
more than thirty days prior to Closing by the Secretary of State of
Delaware.
21. Covenants, Representations and Warranties of Westminster and the
Westminster Shareholders. Subject to the schedule of exceptions, attached hereto
as Exhibit L and incorporated herein by this reference, which schedule shall be
acceptable to Fitek, Xxxxxxx and Westminster, as an accommodation to the
Westminster Shareholders, and the Westminster Shareholders represent and warrant
to Fitek and to Xxxxxxx as follows:
(a) Organization and Standing of Westminster. Westminster is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of New York. Westminster's books and records are
complete and correct and have been maintained with good business practice
and accurately reflect in all material respects the transactions to which
they relate. Copies of Westminster's Articles of Incorporation, and all
amendments thereof to date, certified by the proper New York officials and
of Westminster's bylaws as amended to date, together with all minutes of
shareholder and directors' meetings, certified by Westminster's Secretary,
will be delivered to Fitek prior to Closing and will be complete and
correct as of the date of delivery of said documents. The same shall be
subject to the review and approval of counsel for Fitek and Xxxxxxx.
(b) Subsidiaries and Ownership of Securities. Westminster has no
subsidiaries.
(c) Capitalization. The aggregate number of shares of stock which
Westminster is authorized to issue is 1,000 shares of Class A Voting Common
Stock, $1.00 par value, and 1,000 shares of Class B Non-Voting Common
Stock, $2.00 par value. All of the Westminster Shares are Class A Voting
Common Stock.
Westminster has outstanding no warrants or options to purchase common
stock.
According to Westminster's books and records, each of the persons or
entities that is to be a Westminster Shareholder at Closing is domiciled in
one of the following jurisdictions: New York, Connecticut or New Jersey.
All securities issued by Westminster as of the date of this Agreement have
been issued in compliance with all applicable state and federal laws.
(d) Financial Statements. Westminster has delivered to Fitek and to
Xxxxxxx, a copy of Westminster's audited financial statement for the period
ended January 31, 1999 and will deliver prior to Closing an unaudited
financial statement for the three-month period ended April 30, 1999. All
such statements
25
will be true and complete and will have been prepared in accordance with
generally accepted accounting principles.
(e) Absence of Undisclosed Liabilities. Except to the extent reflected
in this Agreement or in Westminter's audited balance sheet at January 31,
1999, Westminster has no actual knowledge of any liabilities of any nature,
whether accrued, absolute, contingent, or otherwise, including, without
limitation, annual franchise taxes or other corporate charges in the normal
course of business, in existence as of such date.
(f) Absence of Certain Changes. Except as disclosed in Exhibit L,
since January 31, 1999, there has not been, and as of the Closing, there
will not be, except as contemplated by Section 26(o), (i) any change in
Westminster's financial condition, assets, liabilities, or business other
than changes in the ordinary course of business, none of which, taken
individually or considered together with other changes, has been materially
adverse, or (ii) any damage, destruction, or loss, whether or not covered
by insurance, materially and adversely affecting Westminster's properties
or business.
(g) Title to Properties. Westminster has good and marketable title to
all of its properties and assets, real and personal, tangible and
intangible, none of which is subject to any security interest, mortgage,
pledge, lien, encumbrance, or charge, except for liens, if any, shown on
Wesminster's financial statement as of January 31, 1999, or on Exhibit M
prepared in compliance with subsection (j) below as securing specified
liabilities set forth therein (with respect to which no default exists)
and, except for minor imperfections of title and encumbrances, if any,
which are not substantial in amount, do not materially detract from the
value of the properties subject thereto, or materially impair Westminster's
operations and have arisen in the ordinary course of business.
(h) Accounts Receivable. Westminster represents that, except to the
extent disclosed in Exhibit L or reserved against on its balance sheet at
January 31, 1999, it is not aware of any accounts and contracts receivable
existing that in its judgment would be uncollectible.
(i) Litigation. Except as disclosed in Exhibit M, there is no
litigation or proceeding pending, or to Westminster's knowledge threatened,
against or relating to Westminster, its properties, or business, nor does
Westminster know or have reasonable grounds to know, of any basis for any
such action, or of any governmental investigation relative to Westminster,
its properties, or business. Westminster is not, and on the Closing Date
will not be, in default under or with respect to any judgment, order, writ,
injunction or decree of any court or of any federal, state, municipal or
other governmental authority, department, commission, board, agency or
other instrumentality; and Westminster has, and on
26
the Closing Date will have, complied in all material respects with all
laws, rules, regulations and orders applicable to it and to its business,
if any.
(j) Exhibits Relating to Certain Matters. Exhibit M contains a
complete and accurate recitation of the following documents: a description
of all liens, mortgages, charges, and encumbrances that are outstanding
with respect to any of the properties and assets of Westminster; a list of
all leases wherein Westminster is either lessor or lessee; a list of all
other material written or oral contracts, commitments, agreements, and
other contractual obligations to which Westminster is a party; a list of
all insurance policies carried by Westminster; a description of all bonus,
pension, profit sharing, retirement, stock purchase, stock option,
hospitalization, insurance, and other executive or employee compensation or
benefit plans to which Westminster is a party; a list of all notes payable
of Westminster; and a list of all notes and contracts receivable of
Westminster.
(k) Contracts. Westminster is not a party to any contract, except
contracts described in Exhibits L or M. To the best of its knowledge,
Westminster has in all material respects performed all obligations required
to be performed by it to date and is not in default in any material respect
under any agreements, leases, or other documents to which it is a party,
except as disclosed in Exhibit M to this Agreement.
(l) Taxes. Westminster has filed in correct form, or has received
proper extensions to file, all federal and state income tax returns due
with respect to all periods through the end of its last fiscal year, and
all real and personal property tax schedules, franchise, sales or use tax
returns, and all federal and state employment and withholding tax returns
that are required to be filed, and has paid all taxes as shown on the said
returns and all assessments received by it to the extent that such taxes
and assessments have become due.
(m) Authority to Execute Agreement. The Board of Directors of
Westminster, pursuant to the power and authority legally vested in it, has
duly authorized the execution and delivery by Westminster of this
Agreement, and has duly authorized each of the transactions hereby
contemplated to be performed. A copy of the Consent of Board of Directors
of Westminster authorizing such action is attached hereto as Exhibit N and
incorporated herein by this reference. Westminster has the power and
authority to execute and deliver this Agreement, to consummate the
transactions hereby contemplated by it and to take all other actions
required to be taken by it pursuant to the provisions hereof. Westminster
has taken all actions required by law, its Articles of Incorporation, as
amended, its bylaws, as amended, or otherwise to authorize the execution
and delivery of this Agreement. This Agreement is valid and binding upon
the Westminster Shareholders in accordance with its terms. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will constitute a violation or breach of
the Articles of Incorporation, as amended,
27
or the bylaws, as amended, of Westminster, or any agreement, stipulation,
order, writ, injunction, decree, law rule or regulation applicable to
Westminster.
(n) Finder's Fees. Xxxx X'Xxxx and affiliates have acted as a finder
in this transaction. Any compensation, whether in cash, stock, or
combination of both, will be paid by the combined Fitek/Xxxxxxx/Westminster
entity immediately following Closing.
(o) Disclosure. No representation or warranty by Westminster in this
Agreement, nor any statement or certificate hereto, or in connection with
the transactions contemplated hereby, knowingly contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained therein not
misleading.
(p) Compliance. To the best of its knowledge, Westminster has complied
in all material respects with all applicable laws, orders and regulations
of federal, state, municipal and/or other governments and/or any
instrumentality thereof domestic or foreign, currently applicable to its
assets and to the business conducted by it.
(q) Fitek Representative. The Westminster Shareholders agree that the
current Fitek board shall have the right to designate a non-board advisor
who shall be entitled to notice of and to attend all board meetings of
Fitek for a period of one year from the Closing.
22. Access and Information. Subject to the protections provided by Section
15, Westminster shall give to Fitek, Xxxxxxx and to Fitek's and Xxxxxxx'x
counsel, accountants, and other representatives full access, during normal
business hours throughout the period prior to the Closing, to all of
Westminster's properties, books, contracts, commitments, and records, including
information concerning products and customer base, and patents held by, or
assigned to, Westminster, and furnish Fitek and Xxxxxxx during such period with
all such information concerning Westminster's affairs as Fitek or Xxxxxxx
reasonably may request.
23. Intentionally omitted.
24. Intentionally omitted.
25. Conduct of Westminster Business Pending Closing. Westminster and each
of the Westminster Shareholders, to the extent within each Westminster
Shareholder's control, covenant with Fitek and with Xxxxxxx that pending the
Closing:
(a) Except as described in, or as may be necessary to effect the
transactions contemplated by, the next sentence, no change will be made in
Westminster's Certificate of Incorporation or bylaws and no change will be
made
28
in Westminster's issued shares of stock, other than such changes as may be
first approved in writing by Fitek and Xxxxxxx. Fitek and Xxxxxxx
acknowledge that Westminster intends to redeem a majority of the currently
outstanding Westminster shares and to redeem the share of Westminster
Common Stock owned by MLIC Holdings, Inc. prior to the Closing in
accordance with Section 26(o).
(b) Subject to the provisions of Section 26(o), no dividends shall be
declared and no stock options shall be granted.
(c) Except as otherwise permitted by Fitek or Xxxxxxx, Westminster
will use its best efforts (without making any commitment on Fitek's or
Xxxxxxx'x behalf) to preserve Westminster's business organization intact,
to keep available to Westminster the services of its present officers and
employees, and to preserve the goodwill of those having business relations
with Westminster.
26. Conditions Precedent to Closing. All obligations of Fitek, Westminster,
and the Westminster Shareholders under this Agreement are subject to the
fulfillment, or waiver by the party or parties to be benefited, prior to or at
the Closing, of all conditions elsewhere herein set forth, including, but not
limited to, receipt by the appropriate party of all deliveries required by
Section 20 herein, and fulfillment, prior to the Closing, of each of the
following conditions:
(a) The respective representations, warranties and covenants of
Xxxxxxx, the Xxxxxxx Shareholders, and of Fitek contained in this Agreement
shall be true at the time of Closing as though such representations,
warranties and covenants were made at such time.
(b) The other parties shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or
complied with by each prior to or at the Closing.
(c) Each Westminster Shareholder acquiring Exchange Stock will be
required, at Closing, to submit an agreement, substantially in the form of
Exhibit B, confirming that all the Exchange Stock received will be acquired
for investment and not with a view to, or for sale in connection with, any
distribution thereof, and agreeing not to transfer any of the Exchange
Stock for a period of one year from the Closing Date, except to those
persons approved by legal counsel to Fitek as falling within an exemption
from registration under the Act and any applicable state securities laws,
which transfers do not constitute a public distribution of securities, and
in which the transferees execute an investment letter in form and substance
satisfactory to counsel for Fitek. The foregoing provision shall not
prohibit the registration of those shares at any time following the
Closing. Each Westminster Shareholder acquiring Exchange Stock will be
required to transfer to Fitek at the Closing his or her respective
Westminster
29
Shares, free and clear of all liens, mortgages, pledges, encumbrances or
changes, whether disclosed or undisclosed.
(d) Subject to the terms of this Agreement, Fitek, Xxxxxxx and the
Xxxxxxx Shareholders shall substantially simultaneously herewith have
already closed the transactions among them contemplated by this Agreement.
(e) Each party shall have received favorable opinions from each
party's counsel on such matters in connection with the transactions
contemplated by this Agreement as are reasonable, including an opinion from
counsel for Westminster that the exchange of shares contemplated, if
consummated, will not in any manner violate corporate or securities laws of
any states where any Westminster Shareholder resides.
(f) Each party shall have satisfied itself that since the date of this
Agreement the business of the other parties has been conducted in the
ordinary course except to the extent otherwise contemplated by this
Agreement. In addition, each party shall have satisfied itself that no
withdrawals of cash or other assets have been made and no indebtedness has
been incurred since the date of this Agreement, except with respect to
services rendered or expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement, unless said withdrawals
or indebtedness were either contemplated by the terms of this Agreement or
subsequently consented to in writing by the parties or were incurred in the
ordinary course of business by Westminster, Xxxxxxx or Fitek.
(g) Each party covenants that, to the best of its knowledge, it has
complied in all material respects with all applicable laws, orders and
regulations of federal, state, municipal and/or other governments and/or
any instrumentality thereof, domestic or foreign, applicable to their
assets, to the business conducted by them and to the transactions
contemplated by this Agreement.
(h) Fitek shall have provided to Westminster all audited and unaudited
financial statements, including but not limited to Fitek's audited 12 month
statements for the year ended August 31, 1998, and first quarter and second
quarter statements as at November 30, 1998 and February 28, 1999,
respectively. All audited and unaudited financial statements shall be
prepared in accordance with generally accepted accounting principles and
Regulation S-X, and the audited statements certified as such by independent
accountants of Fitek.
(i) Westminster shall have provided to Fitek and Xxxxxxx audited
consolidated financial statements of Westminster for the three most
recently completed fiscal years, prepared in accordance with generally
accepted accounting principles, together with consolidated unaudited
financial statements in the same form for the period from the end of the
most recently ended fiscal year to a date
30
within thirty days of the Closing. Such unaudited financial statements of
Westminster shall have included the following schedules: Schedule of
Assets; Schedule of Notes Payable; Schedule of Accounts Payable; and
Schedule of Notes Receivable or, in their absence, an affirmation that such
items do not exist. Westminster shall also provide, as of a date within ten
days of Closing, an update of any material change in the aforementioned
schedules.
(j) Each of Fitek, Xxxxxxx and Westminster shall have granted to one
another (acting through its management personnel, counsel, accountants or
other representatives designated by it) full opportunity to examine its
books and records, properties, plants and equipment, proprietary rights and
other instruments, rights and papers of all kinds in accordance with
Sections 6, 8 and 22 hereof and each party shall be satisfied to proceed
with the transactions contemplated by this Agreement upon completion of
such examination and investigation.
(k) Effective as of the Closing Date, all of the members of Fitek's
current board of directors and each and every person serving as an officer
of Fitek shall resign their respective positions and/or offices by
tendering written resignations. Immediately prior to said resignations,
Fitek's board of directors shall appoint those persons listed on Exhibit G
as members of Fitek's new board and/or as officers of Fitek, with such
appointments to correspond with the position or office designated on
Exhibit G and with such appointments to be effective as of the Closing. The
parties hereto agree that the current board may designate, at any time
within twelve months following the Closing, one person to serve as an
advisor to the Board of Fitek for a period of one year following Closing.
(l) Each party shall have satisfied itself that all transactions
contemplated by this Agreement, including those contemplated by the
exhibits attached hereto, shall be legal and binding under applicable
statutory and case law of the State of Delaware or New York, as the case
may be, including, but not limited to subject state's securities laws and
all other applicable state securities laws, and the transactions
contemplated by this Agreement shall have been approved by the New York
Stock Exchange.
(m) Each of the Westminster Shareholders shall have tendered his or
her stock certificate or certificates to Fitek, endorsed in blank, to
permit the transfer of the Westminster's Stock at Closing as contemplated
by Section 18(b).
(n) Fitek shall have allocated to Westminster at least 60,000 stock
options under the Fitek employee stock option plan to be adopted by Fitek
prior to Closing, which options shall be allocated by the Board of
Directors of Westminster in its sole discretion and shall be subject to
terms and conditions established by the Board of Directors of Westminster
consistent with the requirements of the plan, and shall have an exercise
price of $1.25 per share. Such
31
plan shall have a total plan allocation of no more than 2,900,000 shares,
of which approximately 2,400,000 shares have already been granted to or
reserved for employees of Xxxxxxx.
(o) Westminster shall have capital (as defined in Rule 15c3-1 of the
0000 Xxx) of at least $600,000 at Closing, and shall not voluntarily take
any action to reduce Westminster's capital following Closing. Such capital
may be in the form of subordinated debt having a maturity of at least three
years, so long as such subordinated debt meets all of the criteria for
counting such debt as capital under Rule 15c3-1. The holders of such debt
may, but need not be, the three current Westminster Shareholders, who shall
retain nominal shareholdings in Westminster for purposes of making such
loans good capital for SEC and NYSE regulatory purposes. Xxxxxxx and Fitek
acknowledge and agree that as of the date of this Agreement, Westminster's
capital is substantially in excess of such amount, and all capital in
excess of $600,000 at Closing may be withdrawn from Westminster prior to
Closing, on such terms as may be arranged by the Westminster Shareholders.
Westminster shall use best efforts to assist Xxxxxxx in the placement of at
least $600,000 principal amount of the 8% convertible subordinated notes in
Xxxxxxx currently being privately placed by Xxxxxxx, but the completion of
such sale shall not be a condition precedent hereto.
(p) The corporate parties hereto shall have entered into the following
agreements effective the date of the Closing:
(i) the Common Sourcing Agreement in the form annexed hereto as
Exhibit O.
(ii) the Occupancy Agreement in the form annexed hereto as
Exhibit P, and
(iii) the Federal Income Tax Allocation Agreement in the form
annexed hereto as Exhibit Q.
27. Termination. This Agreement with respect to the exchange of Westminster
Shares for Fitek Exchange Stock may be terminated prior to Closing, and the
contemplated transactions abandoned, without liability to any party, except with
respect to the obligations of Fitek, Laidlaw, the Xxxxxxx Shareholders,
Westminster and the Westminster Shareholders under Section 15 hereof and without
causing a termination of this Agreement for the exchange of the Laidlow Shares
for Fitek Exchange Stock:
(a) by mutual consent of the parties;
32
(b) by Fitek or Xxxxxxx, if in its reasonable belief there has been a
material misrepresentation or breach of warranty on the part of Westminster
or any Westminster Shareholder in the representations and warranties set
forth in the Agreement;
(c) by Westminster or a majority in interest of Westminster
Shareholders if, in the reasonable belief of Westminster or the Westminster
Shareholders, there has been a material misrepresentation or breach of
warranty on the part of Fitek or Xxxxxxx in the representations and
warranties set forth in the Agreement;
(d) by either Fitek or by a majority in interest of the Westminster
Shareholders or of the Xxxxxxx Shareholders if the Closing shall not have
occurred by the Closing Date;
(e) by Fitek if in its opinion or that of its counsel, the
transactions contemplated by this Agreement do not qualify for exemption
from registration under applicable federal and state securities laws, or
qualification, if obtainable, cannot be accomplished, in Fitek's opinion or
that of its counsel, without unreasonable expense or effort;
(f) by Fitek if, in its opinion or that of its counsel, the
transactions contemplated by this Agreement cannot be consummated under
Colorado or other relevant state corporate law or, if consummation is
possible, that it cannot be accomplished, in Fitek's opinion or that of its
counsel, without unreasonable expense or effort;
(g) by Fitek or by a majority in interest of the Westminster
Shareholders or of the Xxxxxxx Shareholders if Fitek in its sole discretion
or such Shareholders in their discretion shall determine that any of the
transactions contemplated by this Agreement have become inadvisable or
impracticable by reason of the institution or threat by state, local, or
federal governmental authorities or by any other person of material
litigation or proceedings against any party;
(h) by Fitek or by a majority in interest of the Xxxxxxx Shareholders
if the business or assets or financial condition of Westminster, taken as a
whole, have been materially and adversely affected, whether by the
institution of litigation or by reason of changes or developments or in
operations in the ordinary course of business or otherwise, or, by a
majority in interest of the Westminster Shareholders if the business or
assets or financial condition of Fitek or of Xxxxxxx, taken as a whole,
have been materially and adversely affected, whether by the institution of
litigation or by reason of changes or developments or in operations in the
ordinary course of business or otherwise;
33
(i) by Fitek or by a majority in interest of the Xxxxxxx Shareholders
if it shall appear to Fitek or such majority that Westminster shall not be
able to obtain within a reasonable amount of time after Closing all
consents and approvals of all governmental authorities having any
jurisdiction over the business of Westminster, or if such authorities shall
withdraw any approvals, licenses, or permits given to Westminster or to any
other entity with which Westminster is affiliated or in which Westminster
has an interest;
(j) by Fitek or by a majority in interest of the Xxxxxxx Shareholders
if any Westminster Shareholder does not participate in the exchange
described in Section 18, or are unable or for any reason refuse to transfer
any or all of their Westminster Shares to Fitek in accordance with Section
18, or fail to tender at the Closing the certificate or certificates,
endorsed in blank, representing all of their Westminster Shares;
(k) by Westminster if Fitek or Xxxxxxx fails to perform material
conditions set forth in Sections 11 or 26;
(l) by Westminster if examination of Fitek's or Xxxxxxx'x books and
records pursuant to Sections 6 and 8 uncovers a material deficiency, and
(m) by Fitek or Xxxxxxx if Westminster or the Westminster Shareholders
fails to perform material conditions set forth in Section 26.
In the event of a bad-faith termination of this Agreement, the
non-terminating party or parties shall be limited solely and exclusively to
recovery of its attorney's fees expended in the preparation and reporting
of the transaction. Fitek, Laidlaw, Westminster and the Xxxxxxx
Shareholders and the Westminster Shareholders expressly waive all other
damages, fees, costs, and lost opportunity costs (consequential damages)
against each other as a result of termination of this Agreement.
28. Post Closing Management of Westminster.
(a) The parties hereto covenant that on and after the Closing,
Westminster will be maintained as a separate operating subsidiary of Fitek
and will be managed as follows, until otherwise agreed to in writing by all
of the Westminster Shareholders:
(i) The current management of Westminster (Xxxx X'Xxxx, Xxxxxx
Xxxxxxx and Xxxxx Xxxxxx) shall remain as the Board of Directors and
executive officers of Westminster, with full authority from the Fitek
Board to: operate the daily business of Westminster, hire and fire
employees, compensate employees (including the executive officers),
set operating policies with respect to employees ventures in non-SEC,
NYSE or NASD regulated businesses, proprietary stock trading, market
making,
34
underwriting and placement agent activities, establish joint ventures
with third parties, finance its operations (but not to cause or permit
Fitek to be contractually obligated for any liabilities arising out of
any of such activities without the prior express consent of Fitek),
and otherwise continue the business of Westminster substantially as it
is conducted as of the Closing. All activities of Westminster shall be
conducted in accordance with all applicable laws, SEC rules and
policies for registered broker dealers and NYSE and NASD rules and
policies for member firms. Without limiting the foregoing, Westminster
shall not allow any employee to own equity in another broker dealer
(other than a publicly-traded broker dealer) unless such other broker
dealer is majority owned by Westminster, without prior approval of
Fitek.
(ii) Westminster shall be entitled to have its post-closing
payroll (including bonuses) at least equal its pre-closing payroll as
shown on Westminster's audited financial statements for the fiscal
year ended January 31, 1999, so long as such level of payroll can be
met from Westminster's own revenues. Westminster shall not allocate
more than 20% of its pre-tax net income to bonuses for present
officers without the prior consent of the Board of Fitek.
(iii) Subject to the Federal Income Tax Allocation Agreement
attached hereto as Exhibit Q, all profits of Westminster shall be
retained by Westminster for the growth of its business. Should
Westminster require additional capital from Fitek, the terms of such
financing will be negotiated between the Boards of Directors of
Westminster and Fitek.
(iv) The Board of Directors of Westminster shall have the right
to designate one person (who shall initially be Xxxx X'Xxxx) to the
Board of Directors of Fitek. This right shall continue until expressly
waived in writing by Westminster. Fitek shall not, in its capacity as
sole shareholder of Westminster, replace any directors of Westminster
or, except as set forth in the next sentence, elect additional
directors of Westminster, without the consent of the majority of the
Board of Directors of Westminster, except in the case of criminal
conduct by a director or the final conclusion of a civil enforcement
proceeding by the SEC, NYSE or NASD suspending or barring such
individual from participation in the management of a broker dealer.
The Board of Directors of Fitek shall have the right to elect one
additional director to the Board of Directors of Westminster, which
director shall be subject to the approval of the NYSE in accordance
with its rules and standards. Westminster shall establish an executive
committee composed of its key operating employees, which shall meet at
least monthly, with the objective of coordinating the business of
Westminster with the business of Fitek and its other operating
subsidiaries, including, without limitation, Xxxxxxx and its various
35
operating subsidiaries, so as to improve the operations and financial
results of Fitek. The Chairman of such executive committee shall be a
member of the Fitek executive committee, which Fitek executive
committee shall be composed of members of the executive committees of
each Fitek operating subsidiary and shall have as its objective
suggesting methods of enhancing shareholder value to the Fitek Board
of Directors.
(v) Fitek shall obtain and maintain in full force and effect,
errors and omissions insurance for all directors and officers of Fitek
and each of its subsidiaries, with such coverage limits and retentions
as the Board of Directors of Fitek shall reasonably deem prudent.
C. With Respect to All Signatories:
29. Binding Agreement.
(a) This Agreement shall become binding upon the parties when, but
only when, it shall have been signed by or on behalf of all parties.
(b) Subject to the condition stated in subsection (a) above, this
Agreement shall be binding upon, and inure to the benefit of, the
respective parties and their legal representatives, successors and assigns.
Subject to the last paragraph of Section 27, this Agreement, in all of its
particulars, shall be enforceable by legal action for the recovery of
damages or by way of specific performance and the terms and conditions of
this Agreement shall remain in full force and effect subsequent to Closing
and shall not be deemed to be merged into any documents conveyed and
delivered at the time of Closing.
30. Construction. This Agreement is intended to be performed in the State
of Delaware, and shall be construed and enforced in accordance with the laws of
that State.
31. Notices. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered or mailed, first class postage, prepaid, to Xxxxxxx, at 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxxx Xxxxxxxxxx, President, if
to Fitek, at 000 Xxxx Xxxxxx, Xxxxxx, XX 00000, Attention Xxxxxx X. Xxxxxx, if
to the Xxxxxxx Shareholders, to the respective addresses indicated beneath each
Shareholder's name on the signature page of this Agreement. If to Westminster,
at 00 Xxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, Attention: Xxxx X. X'Xxxx,
or if to the Westminster Shareholders, to the respective addresses indicated
beneath each Shareholder's name on the signature page of this Agreement.
32. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
36
33. Arbitration. Any dispute arising pursuant to or in any way related to
this Agreement or the transactions contemplated hereby shall be settled by
arbitration, provided, however, that nothing in this Section shall restrict the
right of either party to apply to a court of competent jurisdiction for
emergency relief pending final determination of a claim by arbitration in
accordance with this Section. All arbitration shall be conducted in New York,
New York, in accordance with the rules and regulations of the American
Arbitration Association then obtaining. The decision of the arbitrator shall be
binding upon the parties and judgment in accordance with that decision may be
entered in any court of competent jurisdiction.
34. Enforceability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereto hereby waive any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
35. Amendment. This Agreement may be amended only by a writing signed by
all of the parties.
37
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
XXXXXXX HOLDINGS, INC. FI-TEK V, INC.
By: /s/ Xxxxxxxxx Xxxxxxxxxx By: /s/ Xxxxx X. Xxxxxx
------------------------------- -----------------------------
Xxxxxxxxx Xxxxxxxxxx, President Xxxxx X. Xxxxxx, President
By: /s/ Xxxxx X. Xxxxxx WESTMINSTER SECURITIES
------------------------------- CORPORATION
Xxxxx X. Xxxxxx, Chairman
By: /s/ Xxxx X'Xxxx
-----------------------------
Xxxx X' Xxxx, President
SHAREHOLDERS OF XXXXXXX HOLDINGS, INC.
Pacific USA Holdings Corp.* Europ Continent Holding
By: /s/ Xxxxx X. Xxxxxx By: /s/
-------------------------- ------------------------
Its: Chairman
Xxxxxxxxx Xxxxxxxxxx Aleutian Capital Corp.
By: /s/ Xxxxxxxxx Xxxxxxxxxx By: /s/
-------------------------- ------------------------
Acquasco Navigations SA Societe d'Equipment Generale Int'l
By: /s/ By: /s/
-------------------------- ------------------------
Xxxx Investment Corp. Xxxxxx Xxxxxxxx
By: /s/ By: /s/ Xxxxxx Xxxxxxxx
-------------------------- ------------------------
SHAREHOLDERS OF WESTMINSTER SECURITIES CORPORATION
/s/ Xxxx X. X'Xxxx /s/ Xxxxxx Xxxxxxx
------------------------------- -----------------------------
Xxxx X. X'Xxxx Xxxxxx Xxxxxxx
/s/ Xxxxx Xxxxxx
-------------------------------
Xxxxx Xxxxxx *PUSA Investment Company
By: /s/ Xxxxx X. Xxxxxx
--------------------------
Its: President
39
THE UNDERSIGNED SHAREHOLDERS OF FITEK, COLLECTIVELY OWNING MORE THAN 50% OF THE
CURRENTLY OUTSTANDING SHARES OF FITEK, APPROVE OF THE FOREGOING AGREEMENT AND
THE TRANSACTION THEREIN DESCRIBED, AND FOR THE LIMITED PURPOSE OF THEIR
AGREEMENT TO SECTIONS 7(p) AND 11(p):
/s/ Xxxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxx
----------------------------- -----------------------------
Xxxxx X. Xxxxxx Xxxxxx X. Xxxxxx
/s/ Xxxxxxx Xxxxxxxx
-----------------------------
Xxxxxxx Xxxxxxxx
40
EXHIBIT LIST
Exhibit A-1 -- Names and Respective Share holdings in Xxxxxxx of the
Individuals and Entities that are Xxxxxxx Shareholders as of
February 28, 1999.
Exhibit A-2 -- Names and Anticipated Respective Share Holdings in Xxxxxxx
of the Individuals and Entities That Currently Hold Convertible
Debt, Options and Warrants to Acquire Shares of Xxxxxxx.
Exhibit B -- Form of Investment Letter of Xxxxxxx Shareholders.
Exhibit C -- Schedule of Exceptions to Covenants, Representations and
Warranties of Xxxxxxx Holdings, Inc.
Exhibit D -- Description of Liens, Mortgages, Charges and Encumbrances of
Xxxxxxx Holdings, Inc.
Exhibit E -- Consent of Board of Directors of Xxxxxxx Holdings, Inc.
Exhibit F -- Consent of Directors of Fi-Tek V, Inc.
Exhibit G -- Persons to be Appointed Directors and Officers of Fitek
Exhibit H -- Xxxxxxx'x Subsidiaries and Percentage Ownership Interests
Exhibit I -- Description of Liens, Mortgages, Charges and Encumbrances of
Fi-Tek V, Inc.
Exhibit J -- Names and Respective Share holdings in Westminster of the
Individuals and Entities that are Westminster Shareholders as of
May 15, 1999.
Exhibit K -- Not Used.
Exhibit L -- Schedule of Exceptions to Covenants, Representations and
Warranties of Westminster Securities Corporation
Exhibit M -- Description of Liens, Mortgages, Charges and Encumbrances of
Westminster Securities Corporation
Exhibit N -- Consent of Board of Directors of Westminster Securities
Corporation
Exhibit O -- Common Sourcing Agreement
Exhibit P -- Space Sharing Agreement
Exhibit Q -- Federal Income Tax Allocation Agreement
41
EXHIBIT A-1
NAMES AND RESPECTIVE SHAREHOLDINGS IN XXXXXXX OF THE
INDIVIDUALS AND ENTITIES THAT ARE XXXXXXX SHAREHOLDERS AS OF
JUNE 5, 1999
COMMON STOCK, $.05 PAR VALUE
Name # Shares %Ownership
---- ---------------- --------------
PUSA Investment Company 6,827,989 68.03%
Europ Continents (formally Societe d'Equipement General S.A.) 1,384,344 13.79%
Xxxxxxxxx Xxxxxxxxxx 807,000 8.04%
Aleutian Capital Corp. 220,000 2.19%
Acquasco Navigation S.A 183,000 1.82%
Societe d'Equipment General International 157,000 1.56%
Xxxx Investment Corp. 136,000 1.36%
Xxxxx Xxxxxxxx 100,000 1.00%
Leta Trading 90,000 0.90%
Calmuny Ltd. 72,000 0.72%
Xxxxxx X. Xxxxxx 22,000 0.22%
Xxxxxxxx Trust 14,670 0.15%
ONA International SA 12,185 0.12%
Estate of Xxxxxxxx von Xxxxxx Xxxxxxxxx 5,189 0.05%
Xxxxx Xxxxxx 1,179 0.01%
Xxxxx X. Xxxxxxx, Xx 805 0.01%
Xxxxxx X. Xxxx 799 0.01%
Xxxxxx Xxxxx 786 0.01%
Xxxxxxxx London 472 0.00%
Xxxxx Xxxxxxxxxxx 315 0.00%
Xxxxxx X. Xxxxxx 192 0.00%
Xxxxx Xxxxxxxxxxxx 48 0.00%
Xxxxx Xxxxxxxxx 36 0.00%
Xxxxxxx X. Xxxxx, Xx 24 0.00%
King Harris 12 0.00%
---------- ---------
Total 10,036,045 100.00%
========== =========
PREFERRED STOCK C
Name # Shares
---- ----------
Xxxxxx Xxxxxx 2,500
==========
EXHIBIT A-2
NAMES AND ANTICIPATED RESPECTIVE SHARE HOLDINGS
IN XXXXXXX OF THE INDIVIDUALS AND ENTITIES THAT CURRENTLY
HOLD CONVERTIBLE DEBT, OPTIONS AND WARRANTS
TO ACQUIRE SHARES OF XXXXXXX
See Attached Lists
43
Xxxxxxx Holdings, Inc.
Total Options Granted as amended
Employee # Shares
-------- --------
Xxxxxxxx, Xxxxx 250,000
Xxxxxx, Xxxxxxx 250,000
Xxxxxxxx, Xxxxxx 190,000
Xxxxxx Xxxxxxxx 150,000
Xxxxxx, Xxxxxxx 75,000
(Potential) Dept. Head (i.e.) Asset Management 75,000
Xxxxxxx Pacific employees 75,000
Westminster 60,000
Renov, Kal 50,000
H&R employees 50,000
Other Inv. Banking 43,000
Xxxxxx, Xxxxx 35,000
Xxxxxxx, Xxxxxxx 30,000
Other Global Inst. Sales 26,000
Xxxxxxxxx Ranios 25,000
Xxxxxxx, Xxxx 25,000
Support Personnel 25,000
Finders 25,000
Xxxxxxxx, Xxxx 20,000
Xxxxxxxxxx, Xxxx 20,000
Xxxxxxxxx, Sr., Xxxxxx 15,000
Xxxxxxx, Kama 15,000
Xxxxxx, Xxxxxx 15,000
Xxxxxxxxx, Xxxx 12,000
Xxxxxxx, Xxxxxxx 12,000
Jaecklin, Alexandrine 10,000
Xxxxxxx, Xxxxx 10,000
Xxxx, Xxxxxx 10,000
Xxxxxx, Xxxx 10,000
Xxxxxxxxxx, Xxxxxx 5,000
Xxxxxx, Ardadiy 5,000
Xx Xxxxx, Xxx 4,000
Gecevice, Xxxxx 4,000
Xxxxxxx, Xxxxx 4,000
---------
1,630,000
Undesignated balance: 363,000
=========
Total: 1,993,000
Xxxxxxx Holdings, Inc.
5-year 8% Convertible Subordinated Notes
Cusip # 507 997AD6
4.00
No. Name Date Principal
--- ---- ---- ---------
1 Xxxx Tsourtis 07/31/98 500,000
2 Xxxxxxxxx Xxxxxxxxxx Xxxxx 07/31/98 250,000
3 Gestilac SA as Fiduciary do Pictet & Cie 07/31/98 250,000
4 Contalexis Financial Services 07/31/98 100,000
S Xxxxxxx Xxxxxxxxxxx 07/31/98 35,000
6 Gestilac SA as Fiduciary do Pictet & Cie 08/31/98 100,000
7 RBCW, LIC 09/29/98 35,000
8 Walco & Cie 09/29/98 15,000
9 Xxxxxx Xxxxxxxx 09/29/98 50,000
10 Xxxxx Xxxxxxx 10/06/98 50,000
11 Xxxxxxx X. Xxxxxxx 10/06/98 125,000
12 Lloyds Bank PLC Geneva as fiduciary
x/x Xxxxx Xxxxxxxx Xxxxxxxx & Xx. XX 09/29/98 100,000
00 Xxxxx Xxxxxxxx Xxxxxx Geneva 09/30/98 100,000
14 UBS SA Zurich 09/29/98 100,000
15 King Eagle Investment Ltd. 11/16/98 250,000
16 M. Xxxxx Xxxxxx 12/29/98 35,000
17 RBCW, LLC 12/29/98 65,000
18 Walco&Cie 12/30/98 100,000
19 CIBC (Suisse) SA 12/30/98 100,000
20 UBS SA Zurich 12/30/98 100,000
21 WPC Capital Ltd. 01/29/99 6,000
22 Walco & Cie 01/29/99 8,000
23 Xxxxxx Xxxxxxx 01/29/99 50,000
24 Alain &Janine Perget 01/29/99 21,000
25 RBCW, LLC 01/29/99 15,000
26 Xxxx X. Xxxxx 03/15/99 100,000
27 Xxxxx Xxxxxxx 03/25/99 100,000
28 Xxxxx Xxxxxx 04/15/99 100,000
29 Charterwell Maritime 04/22/99 563,700
30 Cheltenham Pension Fund 04/22/99 276,750
31 Xxxx Tsurtis 04/22/99 50,000
32 Astiram Trading Ltd 04/22/99 50,000
33 Pictet Bank & Trust 04/27/99 510,000
34 Xxxxxxxxxx Xxxxxx 04/27/99 49,970
35 Xxxxxxxx International Ltd 04/27/99 100,000
36 Xxxxx Ntoutsia 04/27/99 49,970
37 Sogen N.V. (Xxxxxxx Gestion SA) 04/27/99 160,000
00 Xxx Xxxx Xxxxxxxx & Xx. XX 05/10/99 500,000
39 Eurasian Invest Ltd. 05/11/99 50,000
00 Xxxxxxxx Xxxxxxxxxx 05/11/99 15,000
41 Luther Investments SA 05/12/99 100,000
42 Xxxxxxxx Xxxxxxxx 05/12/99 10.000
43 Xxxxxxxx Euaggelou 05/13/99 62,900
44 Xxxxxxx Xxxxxxx 05/13/99 20,475
45 xxxxxxx Xxxxxxxxxxx 05/13/99 15,000
46 Stylianos Mixailidis 05/13/99 26,800
47 05/18/99 100,000
00 Xxx Xxxx Xxxxxxxx & Xx. XX 05/18/99 500,000
---------
6,070,565
=========
EXHIBIT B
FORM OF INVESTMENT LETTER OF XXXXXXX SHAREHOLDERS
AND OF WESTMINSTER SHAREHOLDERS
(TO BE PROVIDED AT CLOSING)
Exhibit C
Schedule of Exceptions To Covenants, Representations and Warranties of
Xxxxxxx Holdings, Inc.
1. Xxxxxxx Brewery Case
Xxxxxxx names as a third party defendant.
Case Value - $0
Xxxxxxx incurred $100,000 in legal fees.
2. Xxxxx Xxxxxx
Action by a former broker for termination. The broker seeks re-instatement
and unspecified damages. Xxxxxxx incurred $25,000 in litigation costs.
3. Galacticomm Technologies, Inc. x. Xxxxxxx Global Securities, Inc., et al.
Action by an issuer for breach of an underwriting agreement to purchase
200,000 shares and 200,000 warrants of the issuer. In the event of a breach of
the underwriting agreement, Xxxxxxx'x liability is limited to these shares and
warrants plus an additional 10% of the shares and warrants. All defendants are
relying upon a "market out" theory which allegedly justified the lead
underwriters' decision to abort the IPO. While it is premature to determine
whether this defense will prevail, Xxxxxxx should be successful in obtaining
indemnification from the lead underwriting group. Xxxxxxx'x liability is limited
to the offering price value of 220,000 shares and warrants of the issuer.
4. The Estate of Xxxxxx Xxxxx x. Xxxxxxx Securities, Inc., et. al.
Action by an individual investor against Xxxxxxx alleging that a registered
representative employed by Xxxxxxx made unsuitable trades in his account. The
claim also alleges failure to properly supervise, fraud, breach of fiduciary
duty, and violations of NASD rules. Claimant seeks $92,000 in compensatory
damages, as well as lost opportunity to properly invest $571,000 and attorneys'
fees. This matter will not likely proceed to trial before the end of 1999.
Xxxxxxx believes that it has a meritorious defense against these claims.
EXHIBIT D
DESCRIPTION OF LIENS, MORTGAGES, CHARGES AND ENCUMBRANCES OF
XXXXXXX HOLDINGS, INC.
XXXXXXX HOLDINGS INC.
INSURANCE POLICIES
AGENT - PACIFIC AGENCY, INC.
1) SECURITIES DEALER BLANKET BOND
RELIANCE INSURANCE COMPANY
POLICY AMOUNT -- $2 MILLION
PREMIUM ANNUAL 21,420
2) WORKERS' COMPENSATION & EMPLOYERS LIABILITY
THE FIDELITY AND DEPOSIT COMPANIES
PREMIUM ANNUAL 37,611
3) COMMERCIAL PACKAGE AND UMBRELLA COVERAGE
THE FIDELITY AND DEPOSIT COMPANIES
PREMIUM ANNUAL 9,533
4) DIRECTORS AND OFFICERS
RELIANCE INSURANCE COMPANY -- THROUGH PUSA
PREMIUM ANNUAL 57,000
5) DISCRIMINATION
XXXXXXX INSURANCE BROKERS -- THROUGH PUSA
PREMIUM ANNUAL 5,716
6) KEY MAN LIFE INSURANCE-- XXXXX XXXXXX
AIG LIFE INSURANCE COMPANY-- THROUGH PUSA
PREMIUM ANNUAL 26,556
XXXXXXX HOLDINGS INC.
COMPUTER EQUIPMENTS LEASES
AS OF 03/31/99
LEASEVEST CAPITAL CORP.
FROM TO MONTHLY TOTAL
---- -- ------- -----
COMPUTERS #11 10/01/98 08/31/01 975.00 35,100.00
COMPUTERS #12 01/01/99 12/31/01 2,712.00 97,632.00
COMPUTERS #13 03/01/99 02/28/02 2,033.11 73,191.96
------------------------
5,720.11 205,923.96
========================
XXXXXXX HOLDINGS INC.
OFFICE LEASES COMMITMENTS
AS OF DECEMBER 31, 1998
PRUDENTIAL INSURANCE COMPANY OF AMERICA - 000 XXXX XXXXXX, XX, XX 00000
1) 28TH & 29TH FLOORS
01/01/99 - 06/30/99 6 MOS. @ 46,056 (552,672/12) 276,336.00
07/01/99 - 12/31/99 6 MOS. @ 50,904 305,424.00
2000 - 2003 4 YRS @ 610,848 2,443,392.00
01/01/04 - 06/30/04 6 MOS. @ 50,904 305,424.00
07/01/04 - 12131/04 6 MOS. @ 55,752 334,512.00
2005 - 2009 5 YRS @ 669,024 3,345,120.00
01/01/10 - 06/30/10 6 MOS. @ 55,752 334,512.00
7,344,720.00
------------
2) 27TH FLOOR
1999 1 YR @ 147,098.00 147,098.00
01/01/00 - 06/30/00 6 MOS. @ 12,258.17 73,549.02
07/01/00 - 12/31/00 6 MOS. @ 12,903.33 77,419.98
2001 - 2004 4 YRS @ 154,840. 619,360.00
01/01/05 - 06/30/05 6 MOS. @ 12,903.33 77,419.98
994,846.98
------------
3) 25TH FLOOR
1999 1 YR @ 273,752 273,752.00
01/01/00 - 06/30/00 6 MOS. @ 22,812.67 136,876.02
07/01/00 - 12/31/00 6 MOS. @ 24,013.33 144,079.98
2001 - 2004 4 YRS @ 288,160 1,152,640.00
01/01/05 - 06/30/05 6 MOS. @ 24,013.33 144,079.98
1,851,427.98
------------
SUBLEASE 00XX XXXXX 000 XXXX XXXXXX XX
ERICSSON, INC.-- 2 YEARS UNTIL 12/31/00 @ $14,193.67 MONTHLY (340,648.08)
INTEROFFICE -- 0000 XXXXXXXX-. XXXXXX XXXXX XX 00000
SUITE 906/907 1 YEAR ENDING 12/31/99 @ $2,870 A MONTH 34,440.00
PARIS OFFICE -- 00 XXX XX XX XXXXXXXXXXXX
FF23,719.60/QUARTER 15,180.54
-------------
TOTAL 9,899,967.42
=============
XXXXXXX HOLDINGS INC. & SUBSIDIARIES
NOTES PAYABLE SCHEDULE
AS OF APRIL 10, 1999
PRINCIPAL
---------
PACIFIC USA HOLDING @ 8% DUE 01/20/00 500,000.00
XXXXX XXXXXX @ 10% ON DEMAND 250,000.00
SEG INTERNATIONAL S A. 10% 250,000.00
XXXXXX XXXXX @ (PRIME) DUE MONTHLY @ $50,000
BEGINNING 04/01/99 250,000.00
XXXXXXX MUDHERN SETTLEMENT DUE MONTHLY FOR
18 MONTHS BEGINNING 03/01/99 @ $4,166.67 66,666.66
SENIOR SECURED EURO-NOTE @ 12% DUE 2002 2,305,000.00**
CONVERTIBLE SUBORDINATED NOTES @ 8% DUE 2003 2,760,000.00*
------------
TOTAL 6,381,666.66
H & R NOTEHOLDERS @ 15% DUE 12/99 500,000.00
H & R NOTEHOLDERS @ 15% DUE 12/00 500,000.00
TOTAL 7,381,666.66
============
* It is anticipated that this may be $7 million or more and although there can
be no assurance, it is expected that most will convert into common stock.
** We anticipate offering shares in exchange for this debt sometime after
closing.
XXXXXXX HOLDINGS INC.
CONTRACTUAL COMMITMENTS
1) INSTINET - 3 USERS
2) BLOOMBERG LP. - 6 TERMINALS
3) TORONTO STOCK EXCHANGE - REAL TIME MARKET DATA
4) BRIDGE INFO SYSTEM (ADP POWER PARTNER)
5) NASDAQ
6) AMERICAN STOCK EXCHANGE
7) DOW XXXXX & CO.
8) MMS INTERNATIONAL $1,607.53 QTRLY
9) NEW YORK STOCK EXCHANGE
10) REUTERS AMERICA INC. $2,002.63 A MONTH
11) COMMSCAN $1,077.09 A MONTH
12) BELLATLANTIC
13) XXXX SOUTH
14) FAXSAVE
15) MCI WORLDCOM
16) SPRINT
17) TAPNET - T1 LINE @ $1,254 A MONTH
18) PITNEY XXXXX - COPYING MACHINE LEASE & POSTAGE METER
19) OPTION PRICE REPC)RTING
20) UNILINK NETWORK INC.
21) PERSHING, A DIVISION OF DLJ - CLEARING BROKER
22) XXXXX XXXXXXXX ..LP - INDEPENDENT ACCOUNTANT
23) ADP PAYROLL SERVICE
24) BUSINESS MICRO SOLUTIONS - PLATINUM GENERAL LEDGER MAINTENANCE
Xxxxxxx Global Securities, Inc.
(A Wholly-owned Subsidiary of
Xxxxxxx Holdings, Inc.)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998
NOTE G - NET CAPITAL REQUIREMENTS
The Company is subject to the Securities and Exchange Commission Uniform
Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of
minimum net capital and requires that the ratio of aggregate indebtedness
to net capital, both as defined, shall not exceed 15 to 1. At December 31,
1998, the Company had net capital of $505,364, which exceeded its required
net capital of $100,000 by $405,364. The Company's net capital ratio was
2.75 to 1, which is in compliance with SEC Rule 15c3-l.
NOTE H - TRANSACTIONS WITH RELATED PARTIES
The Company pays certain operating expenses on behalf of the Parent in its
ordinary course of business, for which the Parent reimburses the Company.
At December 31, 1998, the Company had an amount due to the Parent of
$34,976, which resulted from a net overpayment by the Parent of the
advances made by the Company.
The Company has an agreement with Xxxx & Rusling Inc. ("H&R"), a
majority-owned subsidiary of the Parent, whereby it provides H&R with
management services. For these services, the Company receives from H&R a
fee equal to 50% of H&R's adjusted annual net income with actual payments
not to exceed $200,000 per year. Any amounts earned in excess of $200,000
are accrued by the Company and paid by H&R in future years when the
required payments are less than $200,000. For the period ended December 31,
1998, the Company has recorded $200,000 for fees earned.
NOTE I- TAX DEFERRED SAVINGS PLAN - 401 (K)
The Company maintains a deferred compensation plait which covers
substantially all employees who are employed by the Company and its
affiliates who have attained the age of 21. The Company has appointed
individual trustees under the Plan and the assets are held with an outside
agent. All investments are stated at fair value. Additionally, the employer
reserves the right to terminate the Plan, in whole or in part, at any time.
(A Wholly-owned Subsidiary of
Xxxxxxx Holdings, inc.)
NOTES TO FINANCIAL STATEMENTS (continued)
December 3l, 1998
NOTE I (continued)
The Plan allows each participant to contribute 15% of the participant's
annual compensation to the Plan. Employee contributions are vested
immediately. Furthermore, discretionary employer matching contributions are
made to the Plan. The Company has declared an employer matching
contribution for the 1998 Plan year in an amount equal to 25% of each
participant's salary deferrals to the extent such participant's
contribution does not exceed 4% of compensation. Vesting in the Company
match occurs ratably over a period of four years. During 1998, the Company
contributed approximately $34,000 to the Plan.
NOTE J - COMMITMENTS AND CONTINGENCIES
The Company has bet n named as defendant in several lawsuits and
arbitration proceedings that allege violations of Federal and state
securities laws and claim substantial damages. Management of the Company,
after consultation with outside legal counsel, believes that the resolution
of these various proceedings will not result in any material adverse
effects on the Company's financial position.
-16-
$2,305 worth of Euro-Notes are securitized prorate as per the following:
Security underlying
the Notes; Ranking: The Notes will be secured by the outstanding
shares of the capital stock of the Company's
subsidiary, HRAC, which owns 100% of the
outstanding common stock of Xxxx & Rusling, with
20% subject to H&R employee options. The Notes
will rank senior to all present and future
indebtedness of the Company and its subsidiaries,
except that the Notes will be pari passu to rights
of payment under and to the security interest in
the HRAC stock underlying that certain loan
payable by the Company to PUSA (the "PUSA Loan")
to the extent any balance remains outstanding
after the Offering
EXHIBIT E
XXXXXXX HOLDINGS, INC.
RESOLUTION
We, as Directors of Xxxxxxx Holdings, Inc. (the "Company"), pursuant to
Sections 141 of the Delaware General Corporation Law, hereby unanimously consent
in writing to the following resolutions:
WHEREAS, the Company entered into a letter of intent dated March 10, 1999,
and fully executed on March 11, 1999, with Fi-Tek V, Inc., a Delaware
corporation ("Fitek"), whereby the Company intends to issue ___________________
shares of its capital stock in exchange for a specified number of shares of
Fitek's common stock to be issued to certain shareholders of the Company; and
WHEREAS, the Company has prepared a formal agreement consistent with the
terms of the letter of intent, which agreement is entitled "Plan and Agreement
of Reorganization," a copy of which is attached hereto as Exhibit A; and
WHEREAS, it is in the Company's best interests to approve the terms and the
execution of the Plan and Agreement of Reorganization on behalf of the Company;
and be it then
RESOLVED, that the terms and conditions of the exchange as set forth in the
Plan and Agreement of Reorganization be, and the same hereby are, ratified and
confirmed; and be it
FURTHER RESOLVED, that any officer of this Company is authorized to take
whatever steps and execute whatever documents are necessary to carry out the
aforementioned resolutions; and be it
FURTHER RESOLVED, that this resolution may be signed in as many counter
parts as necessary and each counter part will be accepted as if all parties had
signed.
IN WITNESS WHEREOF, the undersigned have executed this written consent,
which shall be effective as of April ___, 1999.
-------------------------- --------------------------
Xxxxx X. Xxxxxx Xxxxxxxxx Xxxxxxxxxx
-------------------------- --------------------------
Xxxx-Xxxx Beaujolin Xxxx X. Xxxxxxx
--------------------------
Xxxxxx X. X. Ma
47
EXHIBIT F
CONSENT OF DIRECTORS OF FI-TEK V, INC.
A special meeting of the Board of Directors of FI-TEK V, INC. (the
"Corporation"), a Delaware corporation, was held by consent and without an
actual meeting. The undersigned, being all of the Directors, do hereby waive
notice of the time, place and purpose of this meeting of the Board of Directors
of the Corporation and, in lieu thereof, hereby agree and consent to the
adoption of the following corporate actions
WHEREAS, the Corporation entered into a letter of intent dated March 10,
1999, and fully executed on March 11, 1999, with Xxxxxxx Holdings, Inc., a
Delaware corporation ("Xxxxxxx"), whereby the Corporation intends to purchase
all of the issued and outstanding capital stock of Xxxxxxx in exchange for a
specified number of shares of the Corporation's common stock,
WHEREAS, the Corporation has prepared a formal agreement consistent with
the terms of the letter of intent, which agreement is entitled "Plan and
Agreement of Reorganization," a copy of which is attached hereto as Exhibit A,
WHEREAS, it is in the Corporation's best interests to approve the terms and
the execution of the Plan and Agreement of Reorganization on behalf of the
Corporation,
NOW, THEREFORE, BE IT RESOLVED that the terms and conditions of the
exchange as set forth in the Plan and Agreement of Reorganization be, and the
same hereby are, ratified and confirmed, and the President of the Corporation is
authorized to execute the same on behalf of the Corporation
GENERAL AUTHORIZATION
BE IT RESOLVED that the President and the Secretary of the Corporation be,
and they hereby are, authorized, directed and empowered to prepare or cause to
be prepared, execute and deliver all such documents and instruments and to
undertake all such actions as they deem necessary or advisable in order to carry
out and perform any or all of the matters contemplated by the Plan and Agreement
of Reorganization and as authorized in the foregoing resolution
IN WITNESS WHEREOF, the undersigned have executed this written consent,
which shall be effective as of April ___, 1999.
------------------------------
Xxxxx X. Xxxxxx
------------------------------
Xxxxxx X. Xxxxxx
48
EXHIBIT G
PERSONS TO BE APPOINTED DIRECTORS AND OFFICERS OF FITEK
DIRECTORS:
Xxxxx X. Xxxxxx
Xxxx Xxxxxxx
Xxxxxx Ma
Xxxx-Xxxx Beaujolin
Xxxxxxxxx Xxxxxxxxxx
Xxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
Xxxx X'Xxxx
OFFICERS:
Xxxxx X. Xxxxxx,
Chairman and Chief Executive Officer
Xxxxxxxxx Xxxxxxxxxx,
President and Chief Operating Officer
49
EXHIBIT H
XXXXXXX'X SUBSIDIARIES AND PERCENTAGE OWNERSHIP INTERESTS
INTERESTS
Xxxxxxx Global Securities, Inc. 100%
H&R Acquisition Corp. 81%
50
EXHIBIT I
DESCRIPTION OF LIENS, MORTGAGES,
CHARGES AND ENCUMBRANCES OF FITEK
51
EXHIBIT J
NAMES AND RESPECTIVE SHARE HOLDINGS IN WESTMINSTER OF
THE INDIVIDUALS THAT ARE WESTMINSTER SHAREHOLDERS AS
OF MAY 15, 1999
CLASS A COMMON STOCK, $1.00 PAR VALUE # OF
------------------------------------- ----
NAME SHARES
---- ------
Xxxx X. X'Xxxx 120
Xxxxx Xxxxxx 120
Xxxxxx Xxxxxxx 000
XXXX Holdings, Inc. 1
52
EXHIBIT K
Intentionally Omitted
53
EXHIBIT L
SCHEDULE OF EXCEPTIONS TO COVENANTS,
REPRESENTATIONS AND WARRANTIES OF WESTMINSTER
SECURITIES CORPORATION
54
EXHIBIT M
DESCRIPTION OF LIENS, MORTGAGES, CHARGES AND
ENCUMBRANCES OF WESTMINSTER SECURITIES
CORPORATION
55
EXHIBIT N
CONSENT OF DIRECTORS OF WESTMINSTER SECURITIES
CORPORATION
A special meeting of the Board of Directors of WESTMINSTER SECURITIES
CORPORATION (the "Corporation"), a New York corporation, was held by consent and
without an actual meeting. The undersigned, being all of the Directors, do
hereby waive notice of the time, place and purpose of this meeting of the Board
of Directors of the Corporation and, in lieu thereof, hereby agree and consent
to the adoption of the following corporate actions
WHEREAS, the Corporation has prepared a formal reorganization agreement
consistent with the terms of the letter of intent, which agreement is entitled
"Amended and Restated Plan and Agreement of Reorganization," a copy of which is
attached hereto as Exhibit A,
WHEREAS, it is in the Corporation's best interests to approve the terms and
the execution of the Plan and Agreement of Reorganization on behalf of the
Corporation,
NOW, THEREFORE, BE IT RESOLVED that the terms and conditions of the
exchange as set forth in the Amended and Restated Plan and Agreement of
Reorganization be, and the same hereby are, ratified and confirmed, and the
President of the Corporation is authorized to execute the same on behalf of the
Corporation
GENERAL AUTHORIZATION
BE IT RESOLVED that the President and the Secretary of the Corporation be,
and they hereby are, authorized, directed and empowered to prepare or cause to
be prepared, execute and deliver all such documents and instruments and to
undertake all such actions as they deem necessary or advisable in order to carry
out and perform any or all of the matters contemplated by the Amended and
Restated Plan and Agreement of Reorganization and as authorized in the foregoing
resolution
IN WITNESS WHEREOF, the undersigned have executed this written consent,
which shall be effective as of May ___, 1999.
-------------------------
Xxxx X'Xxxx
-------------------------
Xxx Xxxxxxx
-------------------------
Xxxxx Xxxxxx
56
EXHIBIT O
FORM OF COMMON SOURCING AGREEMENT
57
COMMON SOURCING AGREEMENT
This Agreement (the "Agreement") is entered into on this __________ day of
May, 1999 by and among XXXXXXX HOLDINGS, INC., a Delaware corporation
("Xxxxxxx"), FI-TEK V INC., a Delaware corporation ("Fitek") and WESTMINSTER
SECURITIES CORPORATION, a New York corporation ("Westminster").
INTRODUCTION
Substantially simultaneously herewith, the parties hereto have consummated
an Amended and Restated Plan and Agreement of Reorganization pursuant to which
each of Xxxxxxx and Westminster has become a subsidiary of Fitek. For the
foreseeable future, Xxxxxxx and Westminster will be conducting their businesses
out of common premises. The parties hereto recognize that economies are
obtainable through cooperation in selecting vendors of goods and services. To
that end, the parties are entering into this Agreement.
AGREEMENT
1. Joint Third-Parting Sourcing. On and after the date hereof, the parties
hereto agree that, to the extent practical, each party will utilize the same
third party vendor for goods and services, including but not limited to, office
supplies, clearing and settlement, custody, information technology and the like.
2. Common Group Sourcing. Parties shall further endeavor, to the extent
practical, to utilize each other's expertise and to cooperate in business with
one another to maximize their combined profits. However, no party shall be
required to purchase goods and services from any other party at rates or prices
in excess of those available from independent third party providers.
3. Sourcing Manager. In order to expedite the foregoing objectives and
agreements, the parties hereto will annually appoint a sourcing manager (who
need not be an officer or director of any of the parties) who shall coordinate
the purchasing activities of all of the parties and shall allocate the costs of
any jointly sourced goods and services among the parties hereto according to
actual usage. The sourcing manager will be selected by the unanimous vote of the
parties hereto.
4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5. Amendment. This Agreement may not be amended, except by an Agreement
signed by all of the parties hereto.
-18-
IN WITNESS WHEREOF, the parties hereto have executed this Common Sourcing
Agreement by authorized officers thereof as of the date first above written.
FI-TEK V INC.
By:
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XXXXXXX HOLDINGS, INC.
By:
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WESTMINSTER SECURITIES CORPORATION
By:
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EXHIBIT P
FORM OF OCCUPANCY AGREEMENT
58
OCCUPANCY AGREEMENT FOR A PORTION OF THE 28 FLOOR
AT
000 XXXX XXXXXX, XXX XXXX, XXX XXXX
This Agreement ("Agreement") entered into on this __________ day of June,
1999 between XXXXXXX HOLDINGS, INC., a Delaware corporation ("Xxxxxxx") and
WESTMINSTER SECURITIES CORPORATION ("Westminster"), a New York corporation.
INTRODUCTION
Xxxxxxx and Westminster are parties, together with a third party, to a
certain Amended and Restated Plan and Agreement of Reorganization (the
"Reorganization Agreement") dated May __, 1999. The Reorganization Agreement
contemplates Xxxxxxx and Westminster being sister corporations with a common
parent corporation. To reduce their respective space occupancy costs, Xxxxxxx
and Westminster have decided to enter into this Space Sharing Agreement on the
terms and conditions listed below.
AGREEMENT
1. Licensed Area. The Licensed Area (the "Licensed Area") consists of
approximately 2,500 square feet at Xxxxxxx'x current offices at 000 Xxxx Xxxxxx
on the 28th Floor and actually shown on the attached Exhibit A by hatchmarks
(the "Premises"). The parties acknowledge that upon the date hereof, the
Premises contain several offices not currently needed by Westminster. Such
offices may be used for Xxxxxxx purposes, consistent with the rules of the New
York Stock Exchange, and Westminster shall only pay for the square footage
actually occupied by it. Westminster will have access and the right to utilize
all common facilities at the Premises, including conference rooms, library,
kitchen, reception and office equipment, PBX, fax, mail room, etc. If
Westminster utilizes Xxxxxxx'x telephone service, it shall, on a monthly basis,
reimburse Xxxxxxx for telephone expenses on a pro rata basis.
2. Term. The Term ("Term") of this License will commence on the date of
occupancy, which shall be as soon as practical following the closing of the
Reorganization Agreement, but no later than July 1, 1999, and may be terminated
by Xxxxxxx upon 9 months prior written notice to Westminster or by Westminster
upon 4 months prior written notice to Xxxxxxx if it determines that suitable
space is available at a cost lower per square foot than that provided for in
this Agreement.
3. License Fee. Westminster will pay to Xxxxxxx, on a monthly basis, for
its use and occupancy of the Licensed Area and the use by Westminster, during
the Term, of Xxxxxxx'x above mentioned accoutrements at the Premises, a sum per
square foot of the Premises equal to Xxxxxxx'x fully allocated average cost for
the 25th and 28th floors at the premises, which is currently approximately
$36.00 per square foot. The License Fee, for any month which is less than a full
calendar month, shall be pro rated on a per diem basis.
4. Furniture. Westminster will be permitted, at no additional charge, to
use such furniture and furnishings as may be located in the Licensed Area upon
the date it takes occupancy.
5. Repairs and Maintenance. Xxxxxxx will arrange to maintain in good order
and clean and repair the Licensed Area, including the furniture and furnishings
located therein to the extent such services are otherwise provided or made
available by the landlord under Xxxxxxx'x lease for the Premises (the
"Landlord") and cause all necessary repairs to be made as and when needed to
preserve Licensed Area in good condition. Notwithstanding the foregoing, all
damage or injury to the Licensed Area or any part of the premises or to any
furniture or fixtures, whether requiring structural or nonstructural repairs,
which are caused by or result from the misuse or negligent conduct or omission
by Westminster, will be repaired at Westminster's sole cost and expense to
Xxxxxxx'x reasonable satisfaction. Xxxxxxx shall arrange to have the Premises
partitioned from the offices of Xxxxxxx in accordance with the applicable rules
of the New York Stock Exchange. Such partitioning, and any internal demolition
and partitioning requested by Westminster shall be an operating expense of
Westminster.
6. Use. Westminster shall occupy the Licensed Area solely for the conduct
of its various securities businesses.
7. Utilities. Heat, ventilating and air conditioning (HVAC), hot water and
electricity shall be supplied to the Licensed Area without charge after the date
of first occupancy, to the extent that such utilities are provided by the
Landlord in consideration of the payment by Xxxxxxx of rent, additional rent or
fixed (not variable) charges for such services. Westminster shall be separately
responsible for any variable charges set by the Landlord with respect to the
Premises only, such as for discrete chillers serving only the Premises.
Westminster shall at all times comply with the rules and regulations applicable
to the service, equipment, wiring and requirements promulgated by the landlord
of the premises (the "Landlord") and by the utility company supplying
electricity to their premises or the Building.
8. Reimbursement for Services. Xxxxxxx will xxxx Westminster, at cost,
monthly, and Westminster will remit payment therefore `within ten days following
such invoice date, for all the services furnished to Westminster by Xxxxxxx in
connection with xeroxing charges, word processing, postage, messengers and
computerized research conducted on Westminster's computers. Xxxxxxx will, if
feasible, cause Westminster to be added as an additional named insured on its
policy of comprehensive general public liability and property damage insurance.
Westminster will indemnify and hold Xxxxxxx harmless against
(i) all claims of whatever nature against or arising from any act or
omission or negligence by Westminster, its employees, contractors,
subcontractors, licensees, agents, invitees and visitors; and
(ii) all claims against Xxxxxxx arising from any accident, injury or damage
to property or persons occurring in or about the Licensed Area, unless caused by
Xxxxxxx'x active or passive negligence or its intentional wrongdoing.
9. Assignments/Occupancy. Westminster will not assign its right or delegate
its duties under this License or permit the Licensed Area or a part thereof to
be occupied or used by any other person or entity.
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10. License and not Lease. This Agreement is not to be construed as in any
way granting Westminster or any leasehold other real property interest in the
Licensed Area, it being intended that this Agreement merely grants to
Westminster a license to enter part of the Licensed Area during the Term in
accordance with the terms and conditions hereof
11. End of Term. Upon the termination of the Term, Westminster will quit
and surrender to Xxxxxxx the Licensed Area, vacant, broom-clean and in good
order and condition, ordinary wear and tear excepted, and remove all of its
property therefrom.
12. Bills and Notices. Any xxxx, statement or notice of communication which
either party may desire or be required to give to the other hereunder shall be
deemed officially given or rendered if, in writing, delivered personally or sent
by registered or certified mail addressed to the other at the address 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx or such other address as either may designate by
written notice. Each such notice or communication shall be deemed to be of the
limit of time as the same received here rejected.
13. Rules and Regulations. Westminster will comply with the rules and
regulations of the Building existing from time to time.
14. Directory Listing. Xxxxxxx
will endeavor to obtain the Landlord's approval to
the listing of Wesminster in the Building
directory.
IN WITNESS WHEREOF, the parties have duly executed this Occupancy Agreement
as of the date first above written.
XXXXXXX HOLDINGS, INC.
By:
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WESTMINSTER SECURITIES CORPORATION
By:
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EXHIBIT 0
FORM OF FEDERAL INCOME TAX ALLOCATION AGREEMENT
59
FEDERAL INCOME TAX ALLOCATION AGREEMENT
Federal Income Tax Allocation Agreement ("Agreement") made as of this
_______ day of_____________, 1999, among FI-TEK V INC. ("Parent") and its
subsidiaries, XXXXXXX HOLDINGS, INC. ("Xxxxxxx") and WESTMINSTER SECURITIES
CORPORATION ("Westminster") (individually the "Subsidiary; together the
"Subsidiaries"). Parent and Subsidiaries are sometimes hereinafter referred to
severally as the "Member Company" and collectively as the "Affiliated Group".
WITNESSETH:
WHEREAS, Parent owns more than 80% of the issued and outstanding stock of
each of the Subsidiaries; and
WHEREAS, the Member Companies are an affiliated group within the meaning of
Section 1504(a) of the Internal Revenue Code of 1986 (the "Code") and,
therefore, are eligible to file a consolidated income tax return for Federal
income tax purposes; and
WHEREAS, the Affiliated Group intends to file consolidated federal income
tax returns until they unanimously determine otherwise; and
WHEREAS, Xxxxxxx has an existing net operating loss carried forward of
approximately $16 million, which is to be made to be available to the Affiliated
Group, all without cost to any Member Company, and all in accordance with
Treasury Regulation 1.1552-1(a)(1).
WHEREAS, the Affiliated Group desires to establish a method for allocating
the consolidated tax liability, if any, of the Group among the Member Companies
in an agreed fashion and consistent with the regulations (the "Regulations")
promulgated under the Code.
NOW THEREFORE, in consideration of their mutual covenants herein, the
parties hereby agree as follows:
1. Consolidated Return Election. At all times hereafter, unless they
unanimously agree otherwise, all Member Companies will join in the filing of a
consolidated Federal Income Tax Return for the Affiliated Group for each taxable
period for which the Affiliated Group is required or permitted to file such a
return, and to the extent permitted by any relevant state or municipal income
tax law, such state and local income tax returns as well. Each Member Company
agrees to file such consents, elections and other documents and take such other
action as may be necessary or appropriate to carry out the purpose of this
Section 1. Any period for which a Subsidiary is included in a consolidated
Federal Income Tax Return filed by the Affiliated Group is referred to in the
agreement as a "Consolidated Return Year".
2. Allocation of Tax Liability and Member Company Liability to Parent for
Consolidated Return Year. Pursuant to Treasury Regulation l.1552-1(a)(1), and in
the manner set forth therein, the federal income tax liability, if any, of the
Affiliated Group shall be apportioned among the Member Companies in accordance
with the ratio which that portion of consolidated taxable income attributable to
each Member Company having taxable income bears
to the consolidated taxable income. In making such calculations and causing such
allocation, the following principles shall be observed:
(i) All payroll withholding, corporate franchise and other non-income
related taxes of each Member Company shall be considered operating expenses of
such entity;
(ii) The operating loss carried forward of Xxxxxxx in the amount of
approximately $16 million will, until exhausted, and without cost or charge, be
available to the Member Companies to the extent permitted by law; and
(iii) Within a reasonable period after the end of each tax period of the
Parent in respect of which there shall a federal income tax payable, there shall
be calculated and paid by each Subsidiary to the Parent that portion of the
federal taxes due from the Affiliated Group which is attributable to the taxable
income of the Subsidiary. Prior to the end of any Affiliated Group consolidated
return year, each Subsidiary shall advance to Parent (within a reasonable period
after request by Parent) amounts necessary to reimburse Parent for that portion
of any estimated federal income tax payments attributable to the inclusion of
such Subsidiary in the Group. Any amounts so paid in any year shall operate to
reduce the amount payable to Parent following the end of such year pursuant to
this Section 2, and any balance resulting from such reduction shall promptly be
refunded by Parent to such Subsidiary. For the purposes hereof, all payments of
estimated tax which would be due from any Subsidiary on a separate return basis
shall be based on annualized taxable income of such Subsidiary from the
beginning of the year to the end of the period covered by such estimated tax
payment.
(iv) State and local income tax liability will be similarly apportioned and
paid in accordance with the regulations of such jurisdiction to the extent
permitted, and to the extent not permitted, each Member Company shall pay its
own state and local income taxes as an individual expense as set forth in
Section 2(i) above.
3. Payments Due. All payments between and among Member Companies of the
Affiliated Group under this Agreement shall be made on or before the due date
for filing of the estimated or annual consolidated federal corporate income tax
return.
4. Tax Adjustments. In the event of any adjustments to the tax returns of
the Affiliated Group as filed (by reason of an amended return, claim for refund,
or an audit by the Internal Revenue Service or any applicable state or local tax
authority), the liabilities of the Member Companies, including Parent, under
Sections 2 and 3 shall be redetermined to give effect to any such adjustment as
if it has been made as part of the original computation of tax liability, and
adjusting payments among the Affiliated Group will be made within 120 days after
any such payments are made or refunds are received, or, in the case of contested
proceedings, within 120 days after a final determination of the contest. To the
extent that interest and/or penalties are imposed by the Internal Revenue
Service or any applicable state or local tax authority or interest is included
in any refund, any adjusting payment among the Affiliated Group shall reflect
the same in an equitable manner.
5. Intent or Interpretation. The intent of this Agreement is that each
Subsidiary shall make Parent whole, but not more than whole, by reimbursing
Parent only to the
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extent of Parent's actual Federal tax expenditure incurred by reason of
inclusion of the Subsidiary in the Affiliated Group. The determination of the
regularly employed independent certified accountants for the Affiliated Group as
to this calculation and all others required by this Agreement will be binding
and conclusive on all parties to this Agreement.
6. Termination. This Agreement shall terminate if:
(i) The parties agree in writing to such termination or
(ii) A Member Company's membership in the Affiliated Group ceases or is
terminated for any reason whatsoever, in which case the Agreement shall
terminate as to such Member Company only.
Notwithstanding the termination of this Agreement, its provisions will
remain in effect with respect to any period of time during the tax year in which
termination occurs, for which the income of the terminating party must be
included in the consolidated return.
7. Successors. This Agreement shall be binding on and inure to the benefit
successors to all the parties hereto (including without limit any successor of
any Member Company succeeding to the tax attributes of such Member Companies
under Section 381 of the Code), the same extent as if such successor had been an
original party to the Agreement.
8. Applicable Law. Tax calculations shall be made pursuant to the Internal
Revenue Code and the Regulations. In all other respects this Agreement shall be
construed in accordance with the internal laws, without regard to conflict of
laws provisions, of the State of Delaware.
9. Modification. This Agreement may be modified or amended only by a
written document signed by all parties hereto.
10. No Representation. It is expressly understood and agreed by the parties
hereto that Xxxxxxx makes no representation or warranty as to the position of
the Internal Revenue Service or any state or local taxation agency regarding the
availability of all or any part of Xxxxxxx'x net operating loss carryforward or
whether the same may be used in whole or in part by Member Companies.
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IN WITNESS WHEREOF, the parties hereto have executed this Federal Income
Tax Allocation Agreement by authorized officers thereof as of the date first
above written.
FI-TEK V INC.
By:
-------------------------------
XXXXXXX HOLDINGS, INC.
By:
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WESTMINSTER SECURITIES CORPORATION
By:
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