Exhibit 2
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of the day of
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July, 2003, by and between All American Companies, Inc., a Delaware corporation
(the "Purchaser") and the individuals set forth on Schedule 1.4 hereto (the
"Selling Stockholders").
RECITALS
Whereas. Xxxx Xxxxxxxxx ("Xxxxxxxxx") owns 3,551,877 shares of common stock
("Common Stock") of First Chesapeake Financial Corp., a Virginia corporation
(the "Company"); and
Whereas, Xxxx Xxxxx ("Xxxxx") owns 897,832 shares of Common Stock; and
Whereas, Xxxxxxxxx and Xxxxx constitute all of the Selling Stockholders;
and
Whereas, the Selling Stockholders desire to sell and Purchaser desires to
purchase an aggregate of 3,674,709 shares of the Company's Common Stock for the
purchase price set forth below; and
Whereas, immediately after the Closing, Xxxxxxxxx shall retain 700,000
shares of Common Stock and options to purchase an additional 1,400,000 shares of
Common Stock and Xxxxx shall retain 75,000 shares of Common Stock and options to
purchase an additional 600,000 shares of Common Stock.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and mutual promises,
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound, Company and Purchaser agree as follows:
The above Recitals are true and accurate and are to be made a part of this
Agreement.
ARTICLE 1. PURCHASE AND SALE
Section 1.1 Purchase and Sale.
At the Closing (as defined below), in consideration of the Purchase
Price, as defined below, being paid by Purchaser to the Selling Stockholders, as
well as the other undertakings of the Purchaser hereunder, the Selling
Stockholders shall sell to the Purchaser, and the Purchaser shall purchase from
the Selling Stockholders an aggregate of 3,674,709 shares (the "Existing
Shares") of Common Stock currently held by the Selling Stockholders in the
amounts set forth in Schedule 1.1 attached hereto.
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Section 1.2 Purchase Price.
The Purchaser, in consideration of the undertakings of the Selling
Stockholders herein, shall pay to the Selling Stockholders the sum of $740,000
(the" Purchase Price") payable as follows:
(a) $239,000.00 payable at Closing in immediately available funds, of
which $200,000.00 shall be paid to Xxxxxxxxx and $39,000.00 shall be paid to
Xxxxx; and
(b) $501,000.00 shall be paid to Xxxxxxxxx and Xxxxx, in accordance
with the terms and provisions of the Promissory Note ("Note"), of which a copy
is attached hereto as Exhibit "A".
Section 1.3 Release of Guaranty and Collateral.
In consideration of the undertakings of the Selling Stockholders hereunder,
the Purchaser agrees to obtain the release of the liens and security interests
evidenced by the Personal Guaranty Documents as defined in and provided for in
the Escrow Agreement of even date.
Section 1.4 Lockup Agreements and Proxies
In consideration of the undertakings of the Purchaser herein, at the Closing
each of the Selling Stockholders shall execute and deliver a lock-up agreement
in substantially the form of Exhibit "C" hereto (collectively, the "Lock-up
Agreements") covering the securities of the Company and the time periods set
forth on Schedule 1.4 with respect to each such Selling Stockholder. In
addition, the Selling Stockholders agree to obtain from Xxxx Xxxxxxxxx, Xxxxxxxx
Xxxxxxx, Xxxx Xxxxxxxxx and Xxxx Xxxxxxxx ("Other Stockholders") lock-up
agreements in substantially the form of the Lockup Agreement covering the
securities of the Company and the time periods set forth on Schedule 1.4 with
respect to each of the Other Stockholders.
Section 1.5 Proxies.
The Selling Stockholders shall execute and deliver a proxy in substantially
the form of Exhibit "D" hereto with respect to an aggregate of 775,000 shares of
Common Stock and, the shares of Common Stock issuable upon the exercise of any
of the 2,000,000 options being retained by the Selling Stockholders as shown on
Schedule 1.4 (the "Proxy").
Section 1.6 Cancellation of Selling Stockholders' Options
In consideration of the undertakings of the Purchaser herein, the Selling
Stockholders agree to terminate and cancel, in accordance with the terms of the
Options Cancellation Agreement in substantially the form of Exhibit "B" hereto
(the "Options Cancellation Agreement") , those options to purchase Common Stock
set forth on Schedule 1.1 hereto. In addition, the Selling Stockholders agree to
obtain from each of the Other Stockholders, with the exception of Xxxx
Xxxxxxxxx, an executed counterpart signature page to the Options Cancellation
Agreement evidencing such Other Stockholders agreement to cancel those options
held by them as set forth Schedule 1.1 hereto.
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Section 1.7. Closing.
The closing (the "Closing") of the transactions contemplated
herein shall be held via facsimile no later than July , 2003 (with hard copies
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to follow via courier or overnight delivery service) or such other date and
place as the parties hereto may agree. The date on which the Closing actually
takes place is hereinafter referred to as the "Closing Date".
Section 1.8 Closing Deliveries.
(a) At the Closing:
(i) each of the Selling Stockholders shall deliver certificates
representing the Existing Shares held by such Selling Stockholder, duly endorsed
for transfer to the Purchaser;
(ii) Each party listed on Schedule 1.4, including the Selling
Stockholders and Other stockholders shall execute and deliver a Lock-up
Agreement in the form attached hereto as Exhibit "C";
(iii) each of the Selling Stockholders shall execute and deliver the
Proxies, in the form of Exhibit "D", duly executed;
(iv) each of the parties listed on Schedule 1.4, including the Selling
Stockholders and, Other Stockholders, with the exception of Xxxx Xxxxxxxxx,
shall execute and deliver an Options Cancellation Agreement, in the form
attached hereto as Exhibit "B";
(v) each Selling Stockholder shall deliver to the Purchaser all other
previously undelivered documents, instruments and writings required to be
delivered by such Selling Stockholder to the Purchaser at or prior to the
Closing pursuant to this Agreement or otherwise in connection herewith.
(vi) the Selling Stockholders shall deliver the executed Forbearance
and Consent Agreement in substantially the form of Exhibit "E" attached hereto
(the "Forbearance and Consent Agreement).
(b) At the Closing, the Purchaser shall deliver:
(i) to each Selling Stockholder, the amounts provided on Schedule 1.1
with respect to such Selling Stockholder by wire transfer of immediately
available funds and by delivery of the Note; and
(ii) to the Selling Stockholders, all other previously undelivered
documents, instruments and writings required to be delivered by the Purchaser at
or prior to the Closing pursuant to this Agreement or otherwise in connection
herewith.
(c) Pursuant to the terms of the Escrow Agreement attached hereto as
Exhibit "F" ("Escrow Agreement"), the Existing Shares, the Note, the Options
Cancellation Agreement, The Lock Up Agreement, and the Proxies shall be
delivered to Xxxxx, Xxxxxxxx Xxxxxx,
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Branzburg & Xxxxxx, LLP ("Escrow Agent") to be held in escrow pursuant to the
terms of the Escrow Agreement .
ARTICLE II. REPRESENTATIONS AND WARRANTIES
OF THE SELLING STOCKHOLDERS
Each Selling Stockholder, severally, but not jointly, represents and
warrants to the Purchaser, but only to the extend such statements are applicable
to such Selling Stockholder, as of the date hereof as follows:
Section 2.1 Authority.
Each Selling Stockholder has all necessary capacity, power and
authority to enter into this Agreement and the other agreements contemplated
herein to which he is a party, to carry out his obligations under this Agreement
and the other agreements contemplated herein to which he is a party and to
consummate the transactions contemplated by this Agreement and the other
agreements contemplated herein to which he is a party. This Agreement has been
and, upon execution, the other agreements contemplated herein to which such
Selling Stockholder is a party shall have been, duly executed and delivered by
such Selling Stockholder, and (assuming due authorization, execution and
delivery by the other parties thereto) this Agreement constitutes and, upon
execution, the other agreements contemplated herein to which such Selling
Stockholder is a party will constitute, legal, valid and binding obligations of
such Selling Stockholder, enforceable against him in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to the enforcement of creditors' rights and remedies or by other
equitable principles of general application.
Section 2.2. Ownership.
As of Closing, such Selling Stockholder owns of record and
beneficially, the Existing Shares set forth opposite his name on Schedule 1.1,
free and clear of all liens, security interests, encumbrances, pledges, charges,
claims, voting trusts, and restrictions of any nature whatsoever, except
restrictions on transfer imposed by or pursuant to federal or state securities
laws or state corporation laws and the security interest in favor of Royal Bank
in certain of the Existing Shares. There are no agreements or commitments with
respect to the disposition of any of the equity interest in the ownership of the
Existing Shares of the Selling Shareholders or any proxy, voting trust or other
agreement relating to the voting of the Existing Shares of the Selling
Shareholders. Subject to the rights of Royal Bank, such Selling Stockholder has
the full and unrestricted right, power and capacity to execute this Agreement
and to consummate the transactions contemplated by this Agreement without the
consent or approval of any other person. This Agreement has been duly executed
and delivered by such Selling Stockholder and constitutes the legal, valid and
binding obligation of each Selling Stockholder, enforceable against such Selling
Stockholder in accordance with its terms.
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Section 2.3. No Violation.
Except as expressly contemplated by this Agreement and the other
agreements entered into in connection herewith, neither the execution and
delivery of this Agreement by such Selling Stockholder nor the performance by
such Selling Stockholder of his obligations hereunder will (i) give rise to any
lien or encumbrance on the Existing Shares or the Company's properties or assets
or (ii) violate any statute, law, rule, regulation, writ, injunction, judgment,
order or decree of any court, administrative agency or governmental authority
binding on such Selling Stockholder or any of his properties or assets.
Section 2.4. Consents.
No consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority or other party is
required to be made or obtained by such Selling Stockholder in connection with
the execution and delivery of this Agreement by such Selling Stockholder or the
performance by such Selling Stockholder of his obligations hereunder, except the
consent of Royal Bank which acquired Crusader Bank, permitting the issuance of
New Shares to Purchaser, as more fully described below in Section 2.10.
Section 2.5. Brokerage.
There are no claims for investment banking fees, brokerage
commissions, finder's fees or similar compensation (other than professional fees
to lawyers, accountants or other consultants) in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of such Selling Stockholder.
Section 2.6. Existing Shares Validly Issued, etc.
The Existing Shares, all of which are owned beneficially and of
record by the Selling Stockholders, have been duly authorized and validly
issued, and no Existing Shares have been issued in violation of preemptive or
similar rights. Other than specifically indicated otherwise in this Agreement,
there are no outstanding subscriptions, options, puts, calls, agreements,
understandings, claims, or other commitments or rights of any type relating to
the issuance, sale or transfer by such Selling Stockholder of any Existing
Shares or other ownership interests of such Selling Stockholder; and the Company
has no obligation of any kind to issue any additional shares of Common Stock.
Section 2.7 Stock Ownership through Affiliate
Except as set forth on Schedule 1.4, such Selling Stockholder warrants
and represents that he does not own any other shares of Company, other than the
amount being sold to Purchaser and the amount being retained by such Selling
Stockholder pursuant to the terms of the Lock-Up Agreement, which is
specifically set forth on Schedules 1.1 and 1.4, either directly or indirectly
through a family member, agent, representative, or an entity controlled and
owned in any fashion by such Selling Stockholder (hereinafter referred to as
"Affiliate Ownership of Shares"). If such Selling Stockholder has any shares of
Common Stock, or options to purchase
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Common Stock, by means of Affiliate Ownership of Shares, the owner of those
Shares shall execute the Lock-Up Agreement. This Section 2.9 applies to Hampton
Financial Services, Inc.
Section 2.8 Shares Held by Royal Bank
Selling Stockholders represent that certain of the Existing Shares are
pledged and held as collateral by Royal Bank in accordance with the terms and
provisions of the Lender's Consent, Pledge Agreement and Forbearance Agreement
executed on February 5, 2001 and Business Loan Agreement executed on February 9,
1999 (collectively referred to as "Loan Documents"), for the purposes of
repayment of a debt in the approximate amount of $1,200,000 (the "Loan") by the
Company and Selling Stockholders represent that if the Loan is repaid in full
within 90 days after Closing Date, Royal Bank shall release the Existing Shares
to Purchaser.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Selling Stockholders, as
follows:
Section 3.1. Corporate Organization.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida. The Purchaser has
delivered to the Company complete and correct copies of its charter and bylaws,
as in effect on the date hereof.
Section 3.2. Authorization.
The Purchaser has all requisite corporate power and authority to
execute and deliver this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the performance by the
Purchaser of its obligations hereunder have been duly authorized by the
Purchaser and no other corporate proceeding therefore on the part of the
Purchaser or its stockholders is required. This Agreement has been duly executed
and delivered by the Purchaser and is a valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to
the enforcement of creditors' rights and remedies or by other equitable
principles of general application.
Section 3.3. No Violation.
Neither the execution and delivery of this Agreement by the Purchaser
nor the performance by the Purchaser of its obligations hereunder will (i)
conflict with or result in any breach of any provision of the Purchaser's
charter or bylaws, (ii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default or give rise to any
lien or encumbrance on the Purchaser's properties or assets or any right of
termination, cancellation or acceleration under any of the terms or conditions
of any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which the Purchaser is a party or by which its properties or
assets may be bound, or (iii) violate any statute, law, rule,
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regulation, writ, injunction, judgment, order or decree of any court,
administrative agency or governmental authority binding on the Purchaser or any
of its properties or assets.
Section 3.4. Consents.
No consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority or other party is
required to be made or obtained by the Purchaser in connection with the
execution and delivery of this Agreement by the Purchaser or the performance by
the Purchaser of its obligations hereunder.
Section 3.5. Litigation, Orders.
There are no claims, actions, suits, proceedings, investigations or
inquiries pending before any court, arbitrator or governmental or regulatory
official or office, or, to the knowledge of the Purchaser, threatened, against
or affecting the Purchaser or questioning the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken by the
Purchaser pursuant to this Agreement.
Section 3.6. Brokerage.
There are no claims for investment banking fees, brokerage
commissions, finder's fees or similar compensation (other than professional fees
to lawyers, accountants and other consultants) in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Purchaser.
Section 3.7. Securities.
(a) Own Account. The Purchaser is purchasing the Existing Shares for
its own account for investment only and not with a view to or for sale in
connection with the distribution thereof.
(b) Knowledge and Experience. The Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment contemplated by this Agreement and making
an informed investment decision with respect thereto.
(c) Accredited Investor. The Purchaser and each holder of an equity
interest in the Purchaser is an "accredited investor" as such term is defined in
Rule 501 promulgated under Regulation D of the Securities Act of 1933.
(d) Due Diligence, The Purchaser has received and reviewed the risk
factors provided by the Company, has reviewed the Company's filings with the
Securities and Exchange Commission and has had the opportunity to ask questions
and receive answers concerning the Company as well as the opportunity to obtain
additional information necessary to verify the accuracy of information furnished
in connection with the transactions contemplated by this Agreement that the
Company possesses or can acquire without unreasonable effort or expense.
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(e) Shares Not Registered. The Purchaser understands that the Existing
Shares have not been registered under the Securities Act of 1933 or any state
securities laws, and may not be transferred unless subsequently registered or
pursuant to an exemption from registration, and that a legend indicating such
restrictions will be placed on the certificates representing the Securities.
ARTICLE IV. CONDITIONS TO CLOSING
Section 4.1. Conditions to Purchaser's Obligations.
The obligations of the Purchaser under this Agreement are subject to
the satisfaction (or waiver), at or before the Closing, of each of the following
conditions:
(a) Representations and Warranties of the Selling Stockholders. The
representations and warranties of the Selling Stockholders shall be true and
correct in all material respects as of the date when made and as of the date of
the Closing as though made at that time and the Selling Stockholders shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Selling Stockholders at or prior to the Closing.
(b) No Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that restrains or prohibits the consummation of any of the
transactions contemplated hereby.
(c) Agreements. The Lock-up Agreement, Options Cancellation Agreement,
Escrow Agreement and the Proxies shall have been executed and delivered by each
Selling Stockholder that is a party thereto and by all other parties other than
the Purchaser.
(d) Consents. The Selling Stockholders shall have obtained the written
consents of all parties necessary for the execution and delivery by the Selling
Stockholders of this Agreement and the performance by the Selling Stockholders
of their obligations hereunder, including the Lender's Consent.
(e) Share Certificates. Delivery to the Escrow Agent to hold pursuant
to the terms of the Escrow Agreement the share certificates, duly endorsed for
transfer, set forth in Schedule 1.1.
(f) Options Cancellation Agreement. The execution and delivery to the
Purchaser by the Other Stockholders, , with the exception of Xxxx Xxxxxxxxx, of
the abandonment and cancellation of all outstanding and unexercised options
previously granted to the Other Stockholders as shown on Schedule 1.1 in
substantially the form of Exhibit "B" attached hereto.
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(g) Lockup Agreements. The delivery to the Purchaser of the lockup
Agreements executed by the Other Stockholders as shown on Schedule 14 in
substantially the form of Exhibit "C" attached hereto.
Section 4.2. Conditions to the Selling Stockholders' Obligations.
The obligations of the Selling Stockholders under this Agreement are
subject to the satisfaction (or waiver), at or before the Closing, of each of
the following conditions:
(a) Representations and Warranties of the Purchaser. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the date of the Closing as
though made at that time (except for representations and warranties that
expressly relate to a different date) and the Purchaser shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Closing.
(b) No Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that restrains or prohibits the consummation of any of the
transactions contemplated hereby.
(c) Consents. The Purchaser shall have obtained the written consents
of all parties necessary for the execution and delivery by the Purchaser of this
Agreement and the performance by the Purchaser of its obligations hereunder,
including the Lender's Consent.
(d) Escrow Agreement. The Escrow Agreement shall have been executed
and the Existing Shares, the Note, the Options Cancellation Agreement, The Lock
Up Agreements, and the Proxy shall be delivered to Escrow Agent to be held in
escrow pursuant to the terms of the Escrow Agreement.
(e) Purchase Price. The remaining balance of the cash portion of the
Purchase Price shall have been wired transferred to the Company.
(f) Forbearance and Consent Agreement. The Selling Stockholders shall
have received a fully executed counterpart Forbearance and Consent Agreement.
ARTICLE V. TERMINATION
Section 5.1. Termination of Agreement.
This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written consent of the Purchaser and the Selling
Stockholders;
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(b) by the Purchaser or the Selling Stockholders if the Closing shall
not have been consummated on or before the date set forth herein, (or such later
date as the Purchaser and the Selling Stockholders shall agree), provided that
the right to terminate this Agreement under this Section 5.1(b) shall not be
available to any party whose failure to fulfill any covenant or agreement under
this Agreement or breach of a representation or warranty set forth herein has,
in full or in material part, been the cause of or resulted in the failure of the
Closing to occur on or before such date;
(c) by the Purchaser or the Selling Stockholders, upon a material
breach of any representation, warranty, covenant or agreement set forth in this
Agreement on the part of the other party, which breach has not been cured on or
before two business days before the date referred to in Section 5.1(b).
Section 5.2. Procedure Upon Termination.
In the event of termination pursuant to Section 5.1, written notice
thereof shall immediately be given by the terminating party to the other party
and the transactions contemplated by this Agreement shall be terminated, without
further action by the parties; provided, however, that such termination shall
not in any way limit or restrict the rights and remedies of the Selling
Stockholders or the Purchaser against the other party that has materially
breached this Agreement prior to the termination hereof.
ARTICLE VI. MUTUAL INDEMNIFICATION
Section 6.1 Survival of representations, Warranties and Agreements.
The representations and warranties of the Company contained in
sections 4.1, 4,3, 4.5 and 4.9 and the representations and warranties of the
Purchaser contained in Sections 5.1, 5.2, 5.5 and 5.6 shall survive the Closing
Date. All other representations and warranties of the Company and the Purchaser
contained herein shall survive the Closing and shall terminate two years after
the Closing Date. Upon the termination of a representation or warranty in
accordance with the foregoing, such representation or warranty shall have no
further force or effect for any purpose under this Agreement, including Section
6.2 hereof; provided, however, that any representation or warranty in respect of
which indemnity may be sought under Section 6.2, and the indemnity with respect
thereto, shall survive the time at which it would otherwise terminate pursuant
to this Section 6.1 if notice of the inaccuracy or breach thereof giving rise to
such right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time. Except as may otherwise be agreed by
the parties in writing, the election by any party to consummate the transactions
contemplated by this Agreement, notwithstanding such party's actual knowledge of
the inaccuracy of any representation or warranty contained herein, shall
constitute a waiver by such party of any claim for indemnification arising out
of the breach of such representation or warranty. As used in this Article any
reference to a representation, warranty or covenant contained in any section of
this Agreement shall include the schedule relating to such section.
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Section 6.2 Indemnifications
(a) By Selling Stockholders. Selling Stockholders shall indemnify
Purchaser and its officers, directors, employees and agents and hold each of
them harmless from and against any and all damages incurred by any of them in
connection with, arising out of, or resulting from (i) any breach of any
representation or warranty made by Company in this Agreement or (ii) any failure
by Selling Stockholders to perform in a timely manner any agreement, covenant or
obligation pursuant to this Agreement.
(b) By Purchaser. Purchaser shall indemnify Selling Stockholders and
hold each of them harmless from and against any and all damages incurred by any
of them in connection with, arising out of, or resulting from (i) any breach of
any representation or warranty made by Purchaser in this Agreement or (ii) any
failure by Purchaser to perform in a timely manner any agreement, covenant or
obligation of Purchaser pursuant to this Agreement.
(c) Defense of Claims. If a claim for damages (a "Claim") is to be
made by a party entitled to indemnification hereunder (the "Indemnified Party")
against the party from whom indemnification is claimed (the "Indemnifying
Party"), the Indemnified Party shall give written notice (a "Claim Notice") to
the Indemnifying Party as soon as practicable after the Indemnified Party
becomes aware of any fact, condition or event which may give rise to damages for
which indemnification may be sought under this Section 6.2. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the Indemnifying
Party as promptly as practicable and in any event within ten business days after
the service of the citation or summons. The failure of any Indemnified Party to
give timely notice hereunder shall not affect rights to indemnification
hereunder, except to the extent that the Indemnifying Party demonstrates actual
damage caused by such failure. Notwithstanding the foregoing, a Claim Notice
that relates to a representation or warranty that is subject to a survival
period set forth in Section 6.1 must be made within such survival period,
whether or not the Indemnifying Party is prejudiced by any failure to give the
Claim Notice. To the extent then known by the Indemnifying Party, the Claim
Notice shall describe in reasonable detail the nature of the Claim, including an
estimate of the amount of damages that have been or may be suffered or incurred
by the Indemnified Party attributable to such Claim, the basis of the
Indemnified Party's request for indemnification under this Agreement and all
information in the Indemnified Party's possession relating to such Claim. After
receipt of such Claim Notice, the Indemnifying Party shall be entitled, if it so
elects, at its own cost, risk and expense, (i) to take control of the defense
and investigation of such lawsuit or action and (ii) to employ and engage
attorneys of its own choice to handle and defend the same. If the Indemnifying
Party fails to assume the defense of such Claim within ten business days after
receipt of the Claim Notice, the Indemnified Party against which such Claim has
been asserted will, upon delivering notice to such effect to the Indemnifying
Party, have the right to undertake, at the Indemnifying Party's cost and
expense, the defense, compromise or settlement of such Claim on behalf of and
for the account and risk of the Indemnifying Party. In the event the Indemnified
Party assumes the defense of the Claim, the Indemnified Party will keep the
Indemnifying Party reasonably informed of the progress of any such defense,
compromise or settlement. Notwithstanding the foregoing, the Indemnified Party
shall be entitled to conduct its own defense at the cost and expense of the
Indemnifying Party if the Indemnified Party
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establishes that the conduct of its defense by the Indemnifying Party would be
reasonably likely to prejudice materially the Indemnified Party due to a
conflict of interest between the Indemnified Party and the Indemnifying Party;
and provided further that in any event the Indemnified Party may participate in
such defense at its own expense.
(d) Settlement. In the event that the Indemnified Party settles any
Claim without the prior written consent of the Indemnifying Party, the
Indemnifying Party shall have no further indemnification obligations under this
Section 6.2 with respect to such Claim; provided, however, that if the
Indemnifying Party fails to defend or otherwise handle such Claim and it is
subsequently determined that the Indemnifying Party is or was obligated to
defend or indemnify the Indemnified Party with respect to such Claim, then the
Indemnifying Party shall remain obligated with respect to such settlement
amount. If the Indemnifying Party shall control the defense of any such Claim,
the Indemnifying Party shall obtain the prior written consent of the Indemnified
Party, which shall not be unreasonably withheld, before entering into any
settlement of a Claim or ceasing to defend such Claim if, pursuant to or as a
result of such settlement or cessation, injunctive or other equitable relief
shall be imposed against the Indemnified Party or if such settlement or
cessation does not expressly and unconditionally release the Indemnified Party
from all liabilities and obligations with respect to such Claim with prejudice.
In the event that the Indemnifying Party proposes a settlement to any Claim
satisfactory to the party instituting such Claim, and the Indemnified Party
withholds its consent to such settlement, and thereafter a final judgment is
entered against the Indemnifying Party or the Indemnified Party pursuant to
which Damages exceed the amount of the proposed settlement, then in such case
the Indemnifying Party shall have no obligation to indemnify the Indemnified
Party under this Section 6.2 against and in respect of the amount by which the
Damages resulting from such final judgment exceed the amount of the proposed
settlement.
(e) Mitigation. Each Indemnified Party shall have an obligation to
mitigate damages under this Agreement, and to that end each party shall use its
reasonable efforts and shall consult and cooperate with each other with a view
towards mitigating Damages that may give rise for indemnification under this
Section 6.2.
(f) Cooperation. In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated by this
Agreement is commenced, whether before or after the Closing, the parties hereto
agree to cooperate and use reasonable efforts to defend vigorously against and
respond thereto and make available to each other such personnel, witnesses,
books, record, documents or other information within its control that are
necessary or appropriate for such defense except for trade secrets and such
items which may not be made available pursuant to a Court Order; provided,
however, that subject to Section 6.2(c), the Indemnifying Party shall reimburse
the Indemnified Party, for its out-of-pocket expenses incurred in connection
therewith.
(g) Limitation. The rights of an Indemnified Party to indemnification
under this Section are subject to the following limitations:
Page 12
(i) The maximum amount any party can recover as damages as a result of
being indemnified under Section 6.2(a) or 6.2(b) herein, shall be limited, in
the aggregate, to $740,000.00.
(ii) Neither party hereto shall have any liability to the other party
under Section 6.2(a) or 6.2(b) herein, unless and until the aggregate amount of
damages incurred by the indemnified party exceeds $7,400.00 and thereafter only
to the extent that such damages exceed $7,400.00.
Section 6.3 Insurance Proceeds.
With respect to any Claim required to be indemnified pursuant to this
Agreement, so long as the Indemnifying Party has complied with its
indemnification obligations on such Claim, (i) to the extent available, the
Indemnified Party shall assign to the Indemnifying Party any applicable proceeds
under any insurance policy which covers the matter which is the subject of the
indemnification (but only to the extent of indemnification actually paid by the
Indemnifying Party) and shall take reasonable steps to insure that the
Indemnifying Party obtains the benefits of such policy, including providing any
notices as required under such policy and (ii) if the Indemnified Party receives
insurance proceeds with respect to any damages paid by the Indemnifying Party,
then the Indemnified Party shall reimburse the Indemnifying Party in an amount
equivalent to such proceeds up to the amount actually paid by the Indemnifying
Party.
Section 6.4 Exclusive Remedy.
The rights of Purchaser under Section 6.2 shall be the exclusive
remedy of Purchaser with respect to claims based upon a breach or alleged breach
of the representations, warranties and covenants of the Selling Stockholders
contained herein. The rights of the Selling Stockholders under Section 6.2 shall
be the exclusive remedy of the Selling Stockholders with respect to claims based
upon a breach or alleged breach of the representations, warranties and covenants
of Purchaser contained herein. Except as expressly set forth in this Agreement,
the Selling Stockholders have not made any representations or warranties,
express or implied, in connection with the transactions contemplated by this
Agreement.
Section 6.5 No Right to Set-Off.
Notwithstanding any other provision of this Agreement, neither party
shall have a right to off set payments, services or benefits due to the other
party against damages actually or allegedly incurred by the first party.
ARTICLE VII. MISCELLANEOUS
Section 7.1. Consents; Approvals; Efforts to Close.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, the parties
hereto shall cooperate in good faith and shall use commercially reasonable
efforts to obtain all consents necessary and to take,
Page 13
or cause to be taken, all actions necessary, proper or advisable to consummate
the transactions contemplated by this Agreement.
Section 7.2. Amendments, Waivers and Consents.
No provision hereof may be waived except by a written instrument
signed by the party so waiving such provision; provided however that (i) if the
Closing occurs, each of the conditions set forth in Article IV shall be deemed
to have been complied with or waived and (ii) any provision hereof may be waived
on behalf of all of the Selling Stockholders by a written instrument signed by
the Selling Stockholders as of the date of this Agreement. This Agreement may
not be amended except by a written instrument duly executed by the Purchaser and
the Selling Stockholders as of the date of this Agreement; provided however that
any amendment that adversely and disproportionately affects any Selling
Stockholder shall require the written consent of the Selling Stockholder so
affected.
Section 7.3. Survival of Warranties.
The representations and warranties of the Selling Stockholders and the
Purchaser contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing for a period of two
years from the Closing Date.
Section 7.4. Governing Law; Jurisdiction; Venue.
This Agreement shall be governed by the laws of the State of Delaware
without regard to its conflicts of laws principles, and any and all actions
shall be brought in the State of Delaware. To the extent permitted by law, each
party hereby expressly submits and consents in advance to such exclusive
jurisdiction in any such action or proceeding and agrees that service of such
summons and complaint or other process or papers may be made by registered or
certified mail addressed to such party at the address to which notices are to be
sent pursuant to this Agreement. The exclusive choice of forum set forth in this
Section shall not be deemed to preclude the enforcement of any judgment obtained
in such forum or the taking of any action to enforce the same in any other
appropriate jurisdiction.
Section 7.5. Section Headings.
The descriptive headings in this Agreement have been inserted for
convenience only and shall not be deemed to limit or otherwise affect the
construction or interpretation of any provision hereof.
Section 7.6. Counterparts.
This Agreement may be executed by facsimile and in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute but one and the
same document.
Page 14
Section 7.7. Notices and Demands.
Any notice or demand which is required or provided to be given under
this Agreement shall be deemed to have been sufficiently given and received for
all purposes when delivered by hand, telecopy, or nationally recognized
overnight courier, or five days after being sent by certified or registered
mail, postage and charges prepaid, return receipt requested, to the following
addresses:
If to Selling Stockholders: With copy to:
Xxxx Xxxxx
-----------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Attn:
--------------------------------------------------------------------------------
Facsimile: Facsimile:
--------------------------------------------------------------------------------
Xxxx Xxxxxxxxx
------------------------------------
--------------------------------------------------------------------------------
Attn:
--------------------------------------------------------------------------------
Facsimile: Facsimile:
--------------------------------------------------------------------------------
If to Purchaser: With copy to:
All American Companies, Inc. Hatch & Xxxx, P.A.
000 Xxxxxx Xxxx, Xxxxx 000 0000 Xxxxxxx X0X, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000 Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx Attn: Xxx X. Xxxxx, Esq.
Facsimile: 000-000-0000 Facsimile: 772-234-8299
or at any other address designated in writing by such party in accordance with
the provisions of this Section 7.7.
Section 7.8. Severability.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
Page 15
Section 7.9. Integration.
This Agreement, including the exhibits, documents and instruments
referred to herein or therein, constitutes the entire agreement, and supersedes
any other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
Section 7.10. Binding Effect; Assignment.
This Agreement shall be binding upon, inure to the benefit of and be
enforceable by and against the Parties and their respective heirs, personal
representatives, successors, and assigns. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be transferred or
assigned by any of the Parties without the prior written consent of the other
Parties.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Stock Purchase Agreement as of the day and year first above written.
Purchaser: All American Companies, Inc.
By:
-------------------------------------
Name: Xxxx Xxxxxx
Title: President
Selling Shareholder: Selling Shareholder:
By: By:
-------------------------------------- ---------------------------------
Xxxx Xxxxxxxxx Xxxx Xxxxx
Page 16
Schedule 1.1 -Table of Stockholder Transactions
Number of
Existing Amount
Selling Stockholder Shares to be Number of Total Amount Due Under
or Other Sold to Options to be Amount Due at Promissory
Stockholder Purchaser Abandoned Due Closing Notes
-------------------- ------------ ------------- -------- -------- ----------
Xxxx Xxxxx 822,832 270,000 $360,000 $ 39,000 $321,000
Xxxx Xxxxxxxxx 2,851,877 -0- $380,000 $200,000 $180,000
Xxxx Xxxxxxxxx -0- 55,000 $ -0- $ -0- $ -0-
Xxxxxxxx Xxxxxxx -0- 40,000 $ -0- $ -0- $ -0-
Xxxx Xxxxxxxx -0- 88,000 $ -0- $ -0- $ -0-
--------- ------- -------- -------- --------
Totals: 3,674,709 453,000 $740,000 $239,000 $501,000
Shares Option
Page 17
Schedule 1.4 - Lock-Up Agreements
Portion of Stock Released from Lock-Up
--------------------------------------
Amount of Share Following Following
Equivalents Immediately First Second
Initially Subject to at Anniversary of Anniversary of
Stockholder Lock up* Closing Closing** Closing**
-------------------- -------------------- ------------ --------------- ----------------
Xxxx Xxxxxxxxx 700,000 Shares and 33% of Total 33% of Total 34% of Total
1,400,000 Options,
collectively
Xxxx Xxxxx 75,000 Shares and 33% of Total 33% of Total 34% of Total
600,000 Options,
collectively
Xxxx Xxxxxxxxx 239,993 Shares 33% of Total 33% of Total 34% of Total
and Equivalents
Xxxx Xxxxxxxx 80,000 Shares 33% of Total 33% of Total 34% of Total
and Equivalents
Xxxxxxxx Xxxxxxx 83,334 Shares 33% of Total 33% of Total 34% of Total
and Equivalents
Xxxx Xxxxxxxxx 30,000 Shares 33% of Total 33% of Total 34% of Total
and Equivalents
*Includes shares of common stock issuable upon exercise of option.
**Plus any prior year's share equivalents not previously sold or transferred.
Page 18
Exhibit A to Stock Purchase Agreement
PROMISSORY NOTE
To be attached
Exhibit B to Stock Purchase Agreement
OPTIONS CANCELLATION AGREEMENT
To be attached
Exhibit C to Stock and Options Purchase Agreement
LOCK-UP AGREEMENT
To be attached
Exhibit D to Stock Purchase Agreement
IRREVOCABLE PROXY
To be attached
Exhibit E to Stock Purchase Agreement
FOREBEARANCE AND CONSENT AGREEMENT
To be attached
Exhibit F to Stock Purchase Agreement
ESCROW AGREEMENT
To be attached
Page 19
