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ASSET PURCHASE AGREEMENT
among
XxXXX.XXX, INC.,
XXXXXXXXXX.XXX, INC., and
XXXXXX X. XXXX
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August 20, 1999
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated as of August 20,
1999 among XxXXX.XXX, INC., a Delaware corporation ("Purchaser"),
XXXXXXXXXX.XXX, INC., a Pennsylvania corporation ("Seller"), and XXXXXX X. XXXX,
an individual ("Shareholder") (Seller and Shareholder are sometimes hereinafter
referred to as "Selling Parties").
WITNESSETH
WHEREAS, Seller is engaged in the business of originating, and processing
for sale to wholesale lenders, mortgage loans for single-family residences,
condominiums and townhouses; and
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to
sell to Purchaser, certain of Seller's assets upon the terms and conditions
hereinafter set forth;
WHEREAS, Shareholder owns all of the issued and outstanding shares of the
Seller's capital stock and is a party to this Agreement for purposes of certain
of the covenants, representations and warranties contained herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1. Purchase by Purchaser. Subject to the terms and conditions set forth
in this Agreement, at the Closing (as defined in Section 1.4 below), Purchaser
agrees to purchase from Seller, and Seller agrees to sell to Purchaser all of
Seller's right, title and interest in and to the following assets (collectively,
the "Purchased Assets"):
(a) All machinery, equipment (including, without limitation, computer
equipment and software, telephonic systems and other communication and
information systems), fixtures and office fumiture, vehicles and other tangible
personal property owned by Seller set forth in Schedule 1.1(a);
(b) The registration for the Internet domain name "xxxxxxxxxx.xxx;"
(c) The business name "Lowestrate. com" and the trademark application for
such name and the goodwill related thereto.
(d) All contracts, leases and agreements listed on Schedule 1.1(d)
(collectively, the "Assumed Contracts").
1.2. Reserved Rights. Seller reserves for itself a non-exclusive,
fully-paid, non-assignable license to use the Purchased Assets in connection
with its business as described in the recitals hereto until November 30, 1999.
1.3. Excluded Assets. Anything herein to the contrary notwithstanding,
Seller is not selling to Purchaser, and Purchaser is not purchasing any of the
assets listed on Schedule 1.3.
1.4. Assumed Obligations. Purchaser shall assume, as of the Closing, all of
the liabilities and obligations of Seller under the Assumed Contracts (the
"Assumed Liabilities"). Except for the Assumed Liabilities, Purchaser shall not
assume, become responsible for, or incur, any debt, liability, obligation, or
commitment of Seller of any nature whatsoever, whether known or unknown,
contingent or otherwise.
1.5. Closing. The sale and purchase of the Purchased Assets (the "Closing")
shall occur simultaneously with the execution and delivery of this Agreement at
the offices of Xxxxxxxx & Werson, One Embarcadero Center, San Francisco,
California or at such other place as shall be mutually agreeable to the parties.
At the Closing, the following actions shall be taken:
(a) Purchaser shall deliver:
(i) to Seller the portion of the Purchase Price due at Closing
as required pursuant to Section 2. 1 below;
(ii) to the Escrow Agent the portion of the Purchase Price to be
held pursuant to the terms of the Escrow Agreement (as
defined below); and
(iii)to Seller an assumption of liabilities instrument executed
by Purchaser to evidence the assumption by Purchaser of the
Assumed Liabilities, in a form reasonably satisfactory to
Seller,
(b) Seller shall deliver assignments and bills of sale and such other
documents of transfer executed by Seller necessary to convey the Purchased
Assets to Purchaser, each in a form reasonably satisfactory to Purchaser;
(c) Shareholder and Purchaser shall enter into an employment agreement
(the "Employment Agreement"), in the form of Exhibit A attached hereto;
(d) Seller and Purchaser shall enter into a registration rights
agreement (the "Registration Rights Agreement"), in the form of Exhibit B
attached hereto;
(e) Seller and Purchaser shall enter into a services agreement (the
"Services Agreement"), in the form of Exhibit C attached hereto;
(f) Seller and Purchaser shall enter into an escrow agreement (the
"Escrow Agreement") with Bank of San Francisco ("Escrow Agent"), in
substantially the form of Exhibit D attached hereto;
(g) Purchaser and Shareholder shall enter into a Covenant Not to
Compete, in substantially the form of Exhibit E attached hereto;
(h) Purchaser and Seller shall enter into a Covenant Not To Compete,
in substantially the form of Exhibit F attached hereto;
(i) Shareholder and Purchaser shall enter into a Consulting Agreement
(the "Consulting Agreement"), in substantially the form of Exhibit G attached
hereto,
(j) Seller and Purchaser shall have entered into a Loan and Security
Agreement ("Loan Agreement") substantially in the form of Exhibit H hereto.
(k) Purchaser shall receive the opinion of Duane, Morris & Heckscher
LLP, counsel for Seller, in substantially the form of Exhibit I attached hereto;
(1) Seller shall receive the opinion of Xxxxxxxx & Xxxxxx, a
Professional Corporation, counsel for Purchaser, in substantially the form of
Exhibit J attached hereto;
(m) Each party shall execute and deliver such other documents or
certificates required under this Agreement or reasonably requested by the other
parties; and
(n) Change of Name. Upon request of Purchaser, Selling Parties will
take such action and sign, seal, acknowledge, deliver, file and record such
instruments as shall be necessary to change Seller's name to a name not
including the words "Lowestrate", "Xxxxxxxxxx.xxx", "Security National",
"Security" or any variation or derivative thereof or any name confusingly
similar thereto.
ARTICLE II
PURCHASE PRICE
2.1. Purchase Price. The purchase price ("Purchase Price") to be paid by
Purchaser to Seller in exchange for the Purchased Assets shall be 1,400,000
shares of Purchaser's common stock, $.01 par value per share (the "FiNet
Stock"). The FiNet Stock shall be issued to Seller and delivered as follows:
560,000 shares to Seller at Closing and 840,000 shares to Escrow Agent upon
Closing (the "Escrowed Shares") to be held pursuant to the Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING SELLER
Seller and Shareholder, jointly and severally, represent and warrant to
Purchaser as follows:
3.1. Organization, Books and Records. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, with full corporate power and authority to carry
on its business as presently conducted by it and to own, lease and operate its
properties in the places where it maintains offices and where its properties are
owned, leased or operated. Copies of the Articles of Incorporation, as amended,
and Bylaws of Seller have been delivered to Purchaser and are true, correct and
complete as of the date hereof
3.2. Authority, Enforceability. The execution, delivery and performance by
Selling Parties of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action (corporate
or otherwise) on the part of Selling Parties. This Agreement has been duly
executed and delivered by or on behalf of Selling Parties. This Agreement
constitutes the valid and binding obligation of Selling Parties enforceable
against each of them in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting the enforcement of creditors rights and
general principles of equity.
3.3 Qualifications, etc. Seller has obtained, and is in compliance with,
all necessary licenses, permits, consents, approvals, orders, certificates,
authorizations, declarations, registrations and filings required by all federal,
state, local and other governmental or regulatory authorities (including,
without limitation, any federal, state or local authorities or agencies
regulating mortgage brokers, processors, underwriters or originators and their
operations) and all courts and other tribunals appropriate for the conduct of
the business and operations of Seller as presently conducted by it, and there
are no proceedings pending or, to Seller's knowledge, threatened which may
result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses, permits, etc., nor, to Seller's knowledge,
are there any facts which may give rise to such proceedings. Schedule 3.3 sets
forth (a) each jurisdiction in which Seller is duly qualified to do business and
in good standing, and (b) each jurisdiction in which Seller is duly licensed,
authorized or registered to conduct such business or businesses as are presently
conducted by it and the type of business or businesses for which it is so
licensed, authorized or registered. Each such qualification, license,
authorization and registration (collectively, "Qualification") is validly issued
and is in full force and effect and neither the character of the properties
owned or held under lease or license by Seller nor the nature of the business
presently conducted by Seller requires any additional Qualification in any such
jurisdiction or any Qualification in any other jurisdiction, except any such
jurisdiction wherein the failure to be so qualified, licensed, authorized or
registered would not result in a Material Adverse Change. "Material Adverse
Change" or "Material Adverse Effect" or other similar phrase including the word
"material" shall mean any adverse change or effect or potential adverse change
or effect involving an effect of more than $20,000 upon the assets or
liabilities of Seller taken as a whole in any 12-month period.
3.4. Non-Contravention. Except as set forth in Schedule 3.4, the execution,
delivery and performance of this Agreement by Selling Parties and the
consummation of the transactions contemplated hereby do not and will not, with
or without the giving of notice or the lapse of time, or both, require a consent
under, violate, conflict with, result in the breach of or accelerate the
performance required by any of the terms, conditions or provisions of the
charter documents or by-laws or other governing documents of Seller or any
material covenant, agreement or understanding to which the either of Selling
Parties is a party or any order, ruling, decree, judgment, arbitration award,
law, rule, regulation or stipulation to which either of Selling Parties is
subject or constitute a default thereunder or result in the creation of any
lien, charge or encumbrance upon any of the Purchased Assets.
3.5. Regulatory Approvals. Except as set forth in Schedule 3.5, neither of
the Selling Parties is required to file, seek or obtain any governmental notice,
filing, authorization, approval, order or consent, or any bond in satisfaction
of any governmental regulation, in connection with the execution, delivery and
performance of this Agreement by Selling Parties.
3.6. Capitalization of Seller. Seller's authorized capital stock consists
of 1,000 shares of common stock, without par value, of which 100 shares are
issued and outstanding and owned by Shareholder (the "Common Stock"). All the
issued and outstanding shares of Common Stock are duly authorized, validly
issued, fully paid and nonassessable. There are no outstanding options, warrants
or other rights to purchase, obtain or acquire, or any outstanding securities or
obligations convertible into or exchangeable for, or any voting agreements with
respect to, any shares of capital stock of Seller or any other securities of
Seller, and Seller is not obligated, now or in the future, contingently or
otherwise, to issue, purchase or redeem capital stock of Seller or any other
securities of Seller to or from any person.
3.7. Subsidiaries and Equity Interests. Transactions with Affiliates.
Seller owns no capital stock of or other equity interest in, and has no
obligation to form or participate in, any corporation, partnership or other
person, and is not a member of or participant in any partnership, joint venture
or similar person. Except as set forth in Schedule 3.7, there is no lease,
sublease, indebtedness, contract, agreement, commitment, understanding, or other
arrangement of any kind entered into by Seller with respect to Seller with any
officer, director, or shareholder of Seller or any "affiliate" or "associate" of
any of them (as those terms are defined in the Securities Exchange Act of 1934,
as amended) (the "Exchange Act"), except, in each case, for management fees and
other compensation paid to officers consistent with previously established
policies (including normal merit increases in such compensation in the ordinary
course of business), reimbursements of ordinary and necessary expenses incurred
in connection with their employment, and amounts paid pursuant to existing
employee benefit plans listed on Schedule 3.22.
3.8. Financial Statements. Seller has furnished to Purchaser (a) audited
financial statements for Seller consisting of (i) balance sheets at December 31,
1998, 1997 and 1996 and (ii) statements of income, retained earnings and cash
flows for the fiscal years ended December 31, 1998, 1997 and 1996, together with
the opinion of Xxxxxxxxx, Xxxxxxxx & Xxxxxxx, Certified Public Accountants
thereon and the notes thereto, and (b) unaudited financial statements for Seller
consisting of (i) a balance sheet at May 31, 1999 (the "Interim Balance Sheet"),
and (ii) statements of income, retained earnings and cash flows for the five
months ended May 31, 1999 (the foregoing audited and unaudited consolidated
financial statements, reports and notes thereto are hereinafter collectively
referred to as the "Financial Statements"). The Financial Statements (A) have
been prepared in accordance with generally accepted accounting principles
("GAAP") (except for the unaudited financial statements at and for the period
ending May 31, 1999 which are management prepared and do not contain footnotes
required by GAAP), and (B) present fairly the financial position of Seller at
the dates thereof and the results of operations and cash flows of Seller for the
periods then ended. Except as and to the extent reflected or reserved against in
the unaudited consolidated balance sheet of Seller at May 31, 1999 or otherwise
set forth on Schedule 3.8, at May 31, 1999 Seller had no material liability or
obligation (whether absolute or contingent, or accrued or unaccrued) required to
be disclosed in financial statements, or in the notes thereto, prepared in
accordance with GAAP.
3.9. Absence of Certain Chanizes or Events. Except as set forth in Schedule
3.9, since May 31, 1999, there has not been:
(a) any material adverse change in Seller's financial condition or the
Purchased Assets taken as a whole;
(b) any material obligations or liabilities incurred by Seller in the
operation of the business presently conducted by it, except trade and other
obligations or liabilities in usual amounts and on terms consistent with past
practices incurred by Seller in the ordinary course of business;
(c) any indebtedness for borrowed money incurred by Seller, except
indebtedness under existing facilities or incurred in the ordinary course of
business; or
(d) any destruction, damage by fire, accident or other casualty or act
of God of or to any of the material properties or assets included in the
Purchased Assets, whether or not covered by insurance.
3.10. Assets Other than Real Property Interests. Seller has good and valid
title to all of the Purchased Assets. In each case, the Purchased Assets are
free and clear of all mortgages, liens, security interests, pledges,
encumbrances, charges, agreements, claims, restrictions and defects of title of
any kind except (i) as are set forth in Schedule 3.10, (ii) mechanics',
carriers', workmen's, repairmen's or other like liens arising or incurred in the
ordinary course of business and liens for Taxes (as defined in Section 3.19)
which are not due and payable or being contested in good faith by appropriate
proceedings, and (iii) other imperfections of title or encumbrances, if any,
which mortgages, liens, security interests and encumbrances do not, individually
or in the aggregate, materially impair the continued use and operation of the
assets to which they relate in the business of Seller as is presently conducted
by it.
3.11. Real Property Owned and Leased. Schedule 3.11 contains a complete and
accurate list and description of all real property leased now or in the past by
Seller (the "Leased Property"). Seller has good and valid title to the leasehold
estates in all real property and interests in real property leased by it. In
each case, these property interests are free and clear of all mortgages, liens,
security interests, pledges, leases, subleases, encumbrances, charges,
assignments, easements, claims or other restrictions and defects of title,
except (i) as are set forth in Schedule 3.11, (ii) liens for Taxes not yet due
and payable or being contested in good faith by appropriate proceedings, and
(iii) which do not impair the current or intended use or diminish the value of
the property affected to any material extent.
3.12. Intellectual Property. Seller owns no patents or patent applications.
Schedule 3.12 sets forth a complete and accurate listing of all trademarks,
trade names, service marks and copyrights (collectively, the "Intellectual
Property") owned, licensed, used or held for use in the conduct of Seller's
businesses as presently conducted by it, whether registered or unregistered
(including the date and serial number), and any applications or registrations
therefor. Except as set forth in Schedule 3.12, Seller solely owns free and
clear of any payments or encumbrances other than royalties which in the
aggregate are not material to the conduct of the Seller's business as presently
conducted by it, all such Intellectual Property. Except as set forth in Schedule
3.12, there is no claim or demand of any person pertaining to, or any
proceedings which are pending or, to the knowledge of Seller, threatened, which
challenge the exclusive rights of Seller in respect of any Intellectual Property
whether registered or unregistered. No Intellectual Property is subject to any
agreement restricting the use thereof or any outstanding order, ruling, decree,
judgment or stipulation by or with any court, arbitrator or administrative
agency. There are no agreements or licenses between Seller and any other person
or entity which may have been terminated or expired prior to the date of this
Agreement and under which Seller has granted rights or licenses in the
Intellectual Property to such other persons or entities or granted an option to
acquire such rights or licenses, which rights or licenses or the option to
acquire the same survived such termination or expiration. Except as set forth in
Schedule 3.12, no person or entity has any licenses under any of the
Intellectual Property. Notwithstanding the foregoing, Seller makes no
representation or warranty as to the registrability or enforceability of any
Intellectual Property for which registration has not been sought or for which
registration has not been granted, or which is not presently being used by
Seller in its business as presently conducted by it. Moreover, Seller makes no
representation or warranty with regard to the use of the Intellectual Property
with services not presently provided by or not presently proposed to be provided
by Seller in its business as presently conducted by it.
Seller has registered with Internic the domain name "xxxxxxxxxx.xxx".
3.13. Insurance. Schedule 3.13 sets forth a complete and accurate list of
all casualty, directors and officers liability, general liability (including
product liability) and all other types of insurance maintained by Seller,
together with the carriers and liability limits for each such policy. Each
policy is duly in force, and no notice has been received by Seller from any
insurance carrier purporting to cancel or reduce coverage under any such policy.
Seller is current in all premiums or other payments due thereunder. Schedule
3.12 identifies which insurance policies are "occurrence" or "claims made".
3.14. Commitments. Schedule 3.14(a) lists all contracts, leases, agreements
and arrangements, whether written or oral, to which Seller is a party. Except as
set forth in Schedule 3.14(b), all material agreements, contracts, leases,
licenses, commitments or instruments of Seller listed in Schedule 3.14(a)
(collectively, the "Contracts") are valid and binding, in full force and effect
and are enforceable by Seller in accordance with their respective terms, other
than such failures to be so valid and binding, in full force and effect or
enforceable which would not, either individually or in the aggregate, result in
a material adverse change to the financial condition of Seller or the Purchased
Assets taken as a whole. Except as set forth in Schedule 3.14(b), Seller has
performed all material obligations required to be performed by it to date under
the Contracts, and it is not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect and, to Seller's
knowledge, no other party to any of the Contracts is (with or without the lapse
of time or the giving of notice, or both) in breach or default in any material
respect thereunder. Seller has provided to Purchaser a true and correct copy of
each of the Contracts.
3.15. Qualification as Mortgage Broker. Seller is in good standing and
eligible as a mortgage broker under applicable laws, rules, regulations and
procedures promulgated by each of the states in which Seller acts as a broker
with respect to mortgage loans. Schedule 3.15 sets forth a list of all mortgage
broker transactions processed by Seller during 1998 and during the seven months
ended July 31, 1999.
3.16. Origination Representations and Warranties, No Recourse. The
representations and warranties made by Seller to investors, applicants, and
lenders and prospective lenders with respect to each mortgage loan brokered by
Seller were true and correct. Except as set forth on Schedule 3.16, no mortgage
loan previously brokered by Seller has been brokered or sold with recourse.
3.17. Purchase of Mortgage Loans, Payments to Brokers.
(a) All payments made by any person to Seller or Shareholder or by
Seller or Shareholder to any person, or between Seller and Shareholder in
connection with any mortgage loan (i) comply with all federal and state laws and
regulations, including the Real Estate Settlement Procedures Act of 1974 and the
Truth-in-Lending Act, and (ii) have been disclosed to each applicable mortgagor
to the extent required by federal or state law or regulation. All fees and other
compensation paid or received by any of the Selling Parties comply with all
applicable state and federal limitations on such fees or compensation.
(b) All state and federal disclosure requirements applicable to
mortgage brokers have been complied with in connection with mortgage loans for
which broker services, including table funding services, were performed by
Seller.
(c) The attached Schedule 3.17(c) constitutes a full and complete list
of all mortgage loan brokers who have referred, arranged, brokered or sold to
Seller mortgage loan applications, mortgage loan applicants, or mortgage loans
during 1998 and during the six months ended July 31, 1999. Except as set forth
on Schedule 3.17, each such broker is a party to a loan broker agreement with
Seller.
(d) The attached Schedule 3.17(d) constitutes a full and complete list
of all lenders to which Seller has brokered mortgage loan applications, mortgage
loan applicants, or mortgage loans during 1998 and during the seven months ended
July 31, 1999. Except as set forth on Schedule 3.17(d), each such lender is a
party to a written agreement with Seller.
3.18. Legal Proceedings. Seller is not engaged in or a party to, or, to the
knowledge of Seller, threatened with, any suit, investigation, legal action or
other proceeding before any court, administrative agency, arbitration panel or
other similar authority which (i) involves the possibility of liability of
Seller (whether or not covered by insurance), (ii) seeks injunctive relief, or
(iii) relates to the transactions contemplated by this Agreement, and Seller
knows of no basis for any such suit, investigation, legal action or proceeding.
There are no outstanding orders, rulings, decrees, judgments or stipulations by
or with any court, administrative agency, arbitration panel or other similar
authority which are applicable to Seller or the Purchased Assets or which
challenge or otherwise relate to the transactions contemplated by this
Agreement. There is no lawsuit or claim by Seller pending, or which Seller
intends to initiate, against any other person.
3.19. Taxes. Except as set forth in Schedule 3.19, all federal, state,
local and foreign tax Returns (as defined below) required to be filed by or with
respect to Seller and any predecessor corporations in respect of Taxes (as
defined below) have been filed with the appropriate tax authorities, and each
such Return is true, accurate and complete in all material respects. All amounts
shown by such Returns to be due and payable and all Taxes for which no Returns
are required to be filed have been timely paid. Seller has delivered to
Purchaser correct and complete copies of all material Returns of Seller that
have been filed for taxable periods ending within the past five years. Except as
and to the extent reflected or reserved against in the Interim Balance Sheet or
as described in the notes thereto, at May 31, 1999 Seller had no liability for
Taxes. All Taxes for periods after May 31, 1999 that should be reserved on the
books of Seller in accordance with GAAP and Seller's past practice have been so
reserved, and all estimated tax payments required to be made have been made.
Except as set forth in Schedule 3.19, there have been no audits or examinations
by any taxing authority relating to Taxes of Seller during the past six years.
No taxing authority has given notice that it will commence any such audit or
examination, and no taxing authority is asserting (either orally or in writing)
or, to the knowledge of Seller, threatening to assert any deficiency or claim
relating to Taxes of Seller, and no liens for Taxes have been filed and are
currently outstanding with respect to any of the Purchased Assets. There is no
agreement or waiver currently in effect extending the period for assessment or
collection of any Taxes. None of the assets of Seller are treated as "tax exempt
use property" within the meaning of Section 168(h) of the United States Internal
Revenue Code of 1986, as amended (the "Code"), and Seller has not filed a
consent under Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Seller, and Seller is not, nor has it
been at any time, a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code. Seller is not, nor has it ever been, a
party to a tax sharing, tax indemnity or tax allocation agreement, and Seller
has not assumed the tax liability of any other person under contract. Seller is
not, nor has it ever been, a member of an affiliated group filing a consolidated
federal income tax Return, and Seller has no liability for the Taxes of any
individual or entity under Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise. Schedule 3.19 contains accurate and
complete descriptions of all material tax elections affecting Seller that remain
in effect. Except as set forth in Schedule 3.19, Seller is not required to
include in income any adjustment pursuant to Section 481 of the Code (or similar
provisions of other laws or regulations) in its current or in any future taxable
period by reason of a change in accounting method nor does Seller have any
knowledge that the Internal Revenue Service (or other taxing authority) has
proposed or is considering proposing any such change in accounting method. As
used herein, (A) "Taxes" shall mean all federal, state, county, local,
municipal, foreign and other taxes, assessments, duties or similar charges of
any kind whatsoever, including all corporate franchise, income, sales, use, ad
valorem, receipts, value added, profits, license, withholding, payroll,
employment, excise, premium, property, customs, net worth, capital gains,
transfer, stamp, documentary, social security, environmental, alternative
minimum, occupation, recapture and other taxes, and including any interest,
penalties and additions imposed with respect to such amounts, and (B) "Return"
or "Returns" shall mean all returns, declarations of estimated tax payments,
reports, estimates, information returns and statements, including any related or
supporting information with respect to any of the foregoing, filed or to be
filed with the United States or any state, county, local, foreign or other
governmental authority or subdivision or agency thereof in connection with the
determination, assessment, collection or administration of any Taxes.
3.20. Compliance with Laws, Government Permits.
(a) Except as set forth in Schedule 3.20, Seller has complied, and is
now in compliance with, with all federal, state, local and foreign laws,
ordinances and regulations (including, without limitation, those relating to
employment and employment practices, and occupational safety and health)
applicable to Seller, except where noncompliance would not have a Material
Adverse Effect.
(b) No claims or complaints from any governmental authorities or other
parties have been asserted or received by Seller which are still pending or
outstanding and, to the knowledge of Seller, none is threatened, that Seller is
in material violation of any applicable building, zoning, occupational safety
and health, or similar law, ordinance or regulation in relation to its offices
or equipment, or the operation thereof, or of any applicable fair employment,
equal opportunity or similar law, ordinance or regulation.
(c) Seller has not received notice from any governmental authorities
of any pending proceedings to take all or any part of the properties leased by
Seller by condemnation or right of eminent domain and, to the knowledge of
Seller, no such proceedings are threatened.
(d) Neither Seller, nor, to Seller's knowledge, any director, officer,
agent, employee, or other person associated with or acting on behalf of Seller,
has, directly or indirectly: used any funds by or on behalf of Seller for
unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity; made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; established or maintained any unlawful or
unrecorded fund of corporate moneys or other assets; made any false or
fictitious entry on the books or records of Seller; made any bribe, rebate,
payoff, influence payment, kickback, or other unlawful payment; or made any
bribe, kickback or other payment of a similar or comparable nature, whether
lawful or not, to any person or entity, private or public, regardless of form,
whether in money, property, or services, to obtain favorable treatment in
securing business or to obtain special concessions, or to pay for favorable
treatment for business secured or for special concessions already obtained.
(e) Seller has no knowledge of any noncompliance by Seller with
applicable laws and regulations which would cause the cancellation of any
insurance coverage provided by any private mortgage insurance companies.
(f) Seller is in compliance with all state and federal consumer credit
laws and regulations, including without limitation, the Real Estate Settlement
Procedures Act of 1974, the Trust-in-Lending Act, the Equal Credit Opportunity
Act, the Fair Housing Act, the Civil Rights Act of 1866, the Home Mortgage
Disclosure Act, and the Fair Credit Reporting Act. Seller is also in compliance
with all audit requirements, orders or decrees resulting from any audit by any
federal or state regulatory authority.
(g) Seller has not sold, transferred or assigned any applicant lists,
applicant loan files, or any other consumer financial information to any other
person, except as authorized or permitted by applicable state or federal law.
Seller has complied with all state or federal advertising and solicitation
requirements applicable to the its business as presently conducted by it.
3.21. Environment. Except as set forth in Schedule 3.21, (a) no Hazardous
Material (as defined below) is located on, at, in, under or about any real
property, including any buildings, structures, fixtures, improvements,
interests, privileges, easements and appurtenances related thereto which are
leased or operated by Seller ("Premises") in a manner which violates any
Environmental Requirement (as defined below), or for which clean-up or
corrective action of any kind could be required or is otherwise authorized under
any Environmental Requirement; (b) no risk to human health or the environment
exists as a result of any Hazardous Material previously or currently located on,
at, in, under or about the Premises; (c) no releasing, emitting, discharging,
leaching, dumping, disposing of any Hazardous Material from the Premises onto or
into any other property or from any other property onto or into the Premises has
occurred or is occurring in violation of any Environmental Requirement, or for
which clean-up or corrective action of any kind could be required or is
otherwise authorized under any Environmental Requirement, or which could pose a
risk to human health or the environment; (d) Seller has not received any notice
of violation, lien, complaint, suit, order or other notice with respect to the
environmental condition of the Premises or regarding the disposal or release of
Hazardous Materials from the Premises onto any other property; (e) Seller does
not currently operate, nor in the past has owned or operated, any property that
is on the "National Priorities List" or the CERCLA list of the U.S.
Environmental Protection Agency ("EPN'), or any similar state list, or is the
subject of any federal, state or local investigation evaluating whether any
remedial action is needed to respond to a release of any Hazardous Material into
the environment; (f) Seller or any of its predecessors has not filed or
otherwise provided any notice under any federal, state or local law indicating
past or present treatment, storage or disposal of a Hazardous Material into the
environment; (g) Seller has no contingent liability in connection with the
generation, treatment, storage, disposal or any release of any Hazardous
Material into the environment; (h) none of the operations of Seller involves or
has ever involved the treatment, storage or disposal of a Hazardous Material;
(i) Seller, nor, to Seller's knowledge, any lessee, prior owner or other person,
has not disposed of or arranged for the disposal of any Hazardous Material on
any premises which are currently or have in the past been leased or operated by
Seller; 0) Seller has not disposed of, or arranged for the disposal of, any
Hazardous Material on any premises not owned by Seller that is on EPA's National
Priorities List or the CERCLA list or any similar state list, or which is or
reasonably could be the subject of any clean-up action by a federal or state
agency, or by a third party who could seek reimbursement of clean-up expenses
from Seller under federal or state law; (k) to Seller's knowledge, no
underground storage tanks or surface impoundments are on any Premises; (1) to
Seller's knowledge, no information exists indicating that any person (including
past or present employees) may have his health impaired as a result of exposure
to any Hazardous Materials located on, at, in, under or about the Premises; and
(m) to Seller's knowledge, Seller and all third parties, with respect to any
conduct of such parties that might result in liability to Seller, are currently
and have at all times in the past been in full compliance with all applicable
Environmental Requirements. For the purpose of this Agreement, the following
terms shall have the following meanings:
The term "Hazardous Materials" means any material, substance or
constituent, including any PCBs, pollutants, solid wastes, explosive or
regulated radioactive materials or substances, hazardous or toxic materials,
substances, wastes or chemicals, petroleum (including crude oil or any fraction
thereof) or petroleum distillates, asbestos or asbestos containing materials,
materials listed in 49 C.F.R. Section 172.101 and materials defined as hazardous
substances pursuant to Section 101(14) of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. sections 9601 et
seq.), as amended ("CERCLA"), that, whether by its nature or its use, is subject
to regulation under, or forms the basis for liability under, any Environmental
Requirement.
The term "Environmental Requirement" means current or future obligations,
duties or requirements arising out of or related to any laws, ordinances,
statutes, codes, rules, regulations, orders, judicial decisions, judgments,
decrees, governmental restrictions, directives, policies, guidelines, permits or
licenses addressing environmental, health or safety issues or requirements of or
by any federal, state or local government agency, including but not limited to,
CERCLA, the Hazardous Materials Transportation Act (49 U. S. C.sections 1801 et
seq.), the Resource Conservation and Recovery Act (42 U. S. C. sections 6901 et
seq.), the Toxic Substances Control Act (15 U.S.C. sections 2601 et seq.) the
Clean Air Act (42 U. S. C. sections 7401 et seq.), the Federal Water Pollution
Control Act (3 2 U. S. C. sections 1251 et seq.) and the Safe Drinking Water Act
(32 U.S.C. sections 300f et seq.), in each case as may be amended from time to
time, any regulation pursuant to any of the above laws, and including, but not
limited to, any obligations, duties or requirements arising out of or related to
Hazardous Materials under common law or foreign law.
3.22. Benefit Plans, Termination and Severance Agreements.
(a) Seller's only current and past employee benefit plan is a fully insured
health benefit plan listed on Schedule 3.22 (the "Employee Benefit Plan"). With
respect to the Employee Benefit Plan: (i) the Company is, and always has been,
in compliance with the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Code and the regulations
promulgated thereunder; (ii) there has been no violation of ERISA's fiduciary
obligations nor have there been any prohibited transactions; (iii) there does
not exist any liability for any federal, state or local taxes; and (iv) all
reports required to be filed with all governmental entities with respect to the
Employee Benefit Plan have been so filed.
(b) Except as set forth on Schedule 3.22, Seller is not a party to any
employment, consulting, termination or severance agreement, contract,
arrangement or understanding (whether oral or written) with any employee or
consultant or former employee or consultant of Seller that is not terminable by
its terms at will by Seller without cost or penalty.
3.23. Employee and Labor Matters. Except as set forth in Schedule 3.23,
Seller is not a party to any collective bargaining agreement or other contract
with or commitment to any labor union or association representing any employee
of Seller nor does any labor union or collective bargaining agent represent any
employees of Seller. No such agreement, contract or other commitment has been
requested by, or is under discussion by management of Seller (or any management
group or association of which Seller is a member or otherwise a participant)
with any group of employees or others nor are there any other current activities
known to Seller to organize any employees of Seller into a collective bargaining
unit. There are no pending or, to the knowledge of Seller, threatened union
grievances against Seller as to which there is a reasonable possibility of a
material adverse determination. Seller is not engaged in any unfair labor
practice. There is no unfair labor practice complaint pending or, to the
knowledge of Seller, threatened against Seller. Except as disclosed in Schedule
3.23, there is, and during the past two years there has been, no labor strike,
dispute, slow-down, union organizing activity or work stoppage pending or, to
the knowledge of Seller, threatened against Seller. Except as set forth in
Schedule 3.23, there are no pending or, to the knowledge of Seller, threatened
charges against Seller or any current or former employee, officer or director of
Seller before the Equal Employment Opportunity Commission, or any state or local
agency responsible for the prevention of unlawful or discriminatory employment
practices. Seller is in compliance with all applicable laws and regulations
respecting employment discrimination in employment, occupational safety and
health, the Immigration Reform and Control Act of 1986 and wages and hours and
Seller has received no notice from any governmental entity, any claim, action or
proceeding involving Seller nor is any investigation or hearing by any such
entity threatened in connection with such laws and regulations.
All employees of Seller are authorized for employment by Seller in the
United States in accordance with the Immigration and Naturalization Act, as
amended, and regulations promulgated under that statute. No allegations of
immigration-related unfair employment practices have been made with the Equal
Employment Opportunity Commission or the Special Counsel for Immigration-Related
Unfair Employment Practices. Seller has completed and retained in accordance
with the Immigration and Naturalization Service regulations a Form I-9 for all
employees of Seller. None of the employees currently employed by Seller is
authorized for employment in the United States pursuant to a nonimmigrant visa
which authorizes the employee to be employed by Seller.
3.24. Powers of Attorney. There are no outstanding powers of attorney or
similar authorizations given by Seller.
3.25. Warehouse Lending. Seller has no existing funding or warehouse
lending agreement with a warehouse lender.
3.26. No Brokers. Neither Seller nor any of Seller's directors, officers or
employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated hereby, other than Xxxx Xxxxx Xxxx Xxxxxx, Incorporated, which
Seller has retained as financial advisor the fees and expenses of which Seller
shall be responsible.
3.27. No Undisclosed Material Liabilities. There are no liabilities of
Seller of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation, set or set of circumstances which could reasonably be expected to
result in such liability, other than liabilities provided for in the Balance
Sheet or disclosed in the notes thereto; liabilities disclosed on the schedules
hereto and other undisclosed liabilities which, individually or in the
aggregate, are not material to Seller's financial condition or results of
operations.
3.28. Disclosure of Material Facts. The representations and warranties
contained in Article III of this Agreement and in the Schedules hereto do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
4.1. Organization. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, with
full corporate power and authority to carry on its business as presently
conducted by it and to own, lease and operate its properties in the places where
it maintains offices and where its properties are owned, leased or operated.
4.2. Authority. Enforceability. The execution, delivery and performance by
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Purchaser. This Agreement has been duly executed and delivered by
Purchaser and constitutes the valid and binding obligation of Purchaser
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the enforcement of
creditors rights and general principles of equity.
4.3. Non-Contravention. The execution, delivery and performance of this
Agreement by Purchaser and the consummation of the transactions contemplated
hereby do not and will not, with or without the giving of notice or the lapse of
time, or both, violate, conflict with, result in the breach of or accelerate the
performance required by any of the terms, conditions or provisions of the
charter documents or by-laws or other governing documents of Purchaser or any
material covenant, agreement or understanding to which Purchaser is a party or
any order, ruling, decree, judgment, arbitration award, law, rule, regulation or
stipulation to which Purchaser is subject or constitute a default thereunder or
result in the creation of any lien, charge or encumbrance upon any of the
properties or assets of Purchaser.
4.4. Regulatory Approvals. Purchaser is not required to file, seek or
obtain any governmental notice, filing, authorization, approval, order or
consent, or any bond in satisfaction of any governmental regulation, in
connection with the execution, delivery and performance of this Agreement by
Purchaser.
4.5. No Brokers. Neither Purchaser nor any of Purchaser's directors,
officers or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
4.6. Absence of Certain Changes. Except as disclosed in Purchaser's filings
with the Securities and Exchange Commission, since April 30, 1999, there has not
been any material adverse change in the business, properties or assets of
Purchaser.
4.7. Litigation, Compliance with Laws. There is no litigation pending or,
to Purchaser's knowledge, threatened against or related to Purchaser, nor any
failure to comply with violation of or any default under, any law, permit or
court order applicable to Purchaser in each case which might have a material
adverse effect on the ability of Purchaser to execute, deliver and perform this
Agreement or on the ability of Purchaser to consummate the transactions
contemplated hereby.
4.8. Capitalization. Purchaser's total authorized capital stock consists of
150,000,000 shares of common stock, $.01 par value per share, of which
91,414,329 shares were issued and outstanding on August 18, 1999, all of which
have been validly issued, and are fully paid and non-assessable, and 100,000
shares of Preferred Stock, none of which shares are presently issued.
4.9. Issuance of the Shares. The shares of FiNet Stock, when issued and
delivered at Closing pursuant to and in accordance with the terms of this
Agreement, (i) will have been validly issued, fully paid and non-assessable,
(ii) will be free and clear of any liens, encumbrances, security interests,
pledges, restrictions and defects in title of any kind (other than restrictions
imposed by the Securities Act of 1933, as amended (the "Securities Act")), and
(iii) will have been issued without violation of any preemptive or other right
to purchase Purchaser's common stock. Neither Purchaser nor any person acting on
behalf of Purchaser has offered or will offer the FiNet Stock, or any part
thereof, or any similar securities of issue and sale to, or has solicited or
will solicit any offer to acquire any of the same from, any person so as to
bring the issuance and sale of the FiNet Stock within the provisions of the
registration and prospectus delivery requirements of the Securities Act.
4.10. Other Securities and Financial Statement Matters. Except for the
amendment to the Form 8-K dated May 15, 1998 and the Quarterly Reports on Form
10-QSB for the periods ending July 31, 1998 and October 31, 1998), Purchaser has
duly filed in a timely manner (without any permitted extension) all reports and
any other applications and reports required to be filed by Purchaser with the
SEC under the Exchange Act (the "SEC Reports"). The SEC Reports (including, in
each case, without limiting the generality thereof, the audited and unaudited
financial statements of Purchaser included therein) when filed contained all
statements required to be stated therein in accordance with the Exchange Act and
did not contain any untrue statement of material fact or omit to state a
material fact necessary to make any of the statements contained therein not
misleading in light of the circumstances under which they were made and
otherwise complied in all material respects with the applicable requirements of
the Exchange Act. All of the shares of FiNet Stock will be issued in accordance
with, or were exempt from, the registration and prospectus delivery requirements
of the Securities Act. The consolidated financial statements included in the SEC
Reports comply as to form with the requirements of Regulation S-X or Regulation
S-B, as the case may be, and are derived from the applicable books and records
of Purchaser, have been prepared to conformity with GAAP (as required by
Regulation S-X or Regulation S-B, as the case may be) and present fairly the
financial condition, results of operations, changes in security holders' equity
and cash flows of Purchaser on a consolidated basis, as at the close of
business, or for the period ended, on the date of each of such financial
statements.
ARTICLE V
FURTHER AGREEMENTS AND ASSURANCES
5.1. Employee Matters. Schedules 5.1(a) and 5.1(b) set forth lists of all
persons employed by Seller in its business as presently conducted by it (the
"Employees"). As of the Closing, Seller shall terminate and Purchaser shall
offer employment to all persons presently employed by Seller listed on Schedule
5.1 (a) As of November 3 0, 1999 Seller shall terminate and Purchaser shall
offer employment to all persons presently employed by Seller listed on Schedule
5.l(b). Effective upon termination by Seller, Purchaser expressly assumes any
and all liability with respect to the Employees that arises under the Federal
Workers Adjustment and Retraining Act or any equivalent state statute. Effective
upon employment by Purchaser, Purchaser expressly assumes all employment related
responsibilities, liabilities, obligations and benefits associated with the
Employees arising out of or related to service after the date of such
employment. Purchaser shall include each Employee's term of employment with
Seller in determining such Employee's rights under any employee benefit plan
which give credit for or takes into account past service for purposes of
determining the benefit, such as, earned vacation days per year, incentive
programs for years of service for hourly employees, etc. Purchaser does not
assume any of Seller's liabilities to its employees including, but not limited
to, any liabilities under any severance, bonus, employment agreement, or other
arrangement arising out of or related to service prior to Closing.
5.2. Further Action. Subject to the terms and conditions provided in this
Agreement, each of the parties agrees to use its reasonable best efforts to take
promptly all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including using its reasonable best efforts to
obtain all necessary waivers, consents and approvals, effecting all necessary
registrations and filings, and defending any lawsuits or other proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of any of the transactions contemplated hereby, including seeking
to have any stay or temporary restraining order entered by any court or other
governmental entity vacated or reversed.
5.3. Vesting of Escrowed Shares. The Escrowed Shares, as defined in Section
2. 1, shall vest and shall be delivered to Seller, subject to the terms and
conditions of the Escrow Agreement, as follows:
(a) 320,000 shares on August 21, 2000 provided that Shareholder shall,
at such vesting date, be in the employment of Purchaser or any affiliate of
Purchaser and shall not have resigned or been terminated for Cause (as defined
in the Employment Agreement), by such employer; provided however, that if
Shareholder's employment terminates for any reason other than (A) for Cause (as
defined in the Employment Agreement) or (B) Shareholder's voluntary resignation
other than for Good Reason (as defined in the Employment Agreement), this
installment of the FiNet Stock shall no longer be subject to the conditions
provided in this Section 5.3(a). In addition, notwithstanding the foregoing, if
there is a Change in Control (as defined in the Consulting Agreement), this
installment of the FiNet Stock shall vest immediately on the date of such Change
in Control.
(b) 100,000 shares on August 21, 2000 provided that the conditions set
forth in Section 5.3 (a) shall have been satisfied and that the further
conditions set forth in Schedule 5.3(b) shall have been satisfied;
(c) 320,000 shares on August 18, 2001 provided that Shareholder shall,
at such vesting date, be in the employment of Purchaser or any affiliate of
Purchaser and shall not have resigned or been terminated for Cause (as defined
in the Employment Agreement), by such employer; provided however, that if
Shareholder's employment terminates for any reason other than (A) for Cause (as
defined in the Employment Agreement) or (B) Shareholder's voluntary resignation
other than for Good Reason (as defined in the Employment Agreement), this
installment of the FiNet Stock shall no longer be subject to the conditions
provided in this Section 5.3(c). In addition, notwithstanding the foregoing, if
there is a Change in Control (as defined in the Consulting Agreement), this
installment of the FiNet Stock shall vest immediately on the date of such Change
in Control.
(d) 100,000 shares on August 18, 2001 provided that the conditions set
forth in Section 5.3(c) shall have been satisfied and that the further
conditions set forth in Schedule 5.3(d) shall have been satisfied.
ARTICLE VI
SURVIVAL
6.1. Survival. The representations, warranties and covenants set forth in
this Agreement shall survive the Closing Date. All representations and
warranties contained in this Agreement (including the attached exhibits and
schedules, or in any certificate delivered with respect thereto) will remain in
full force and effect for two years following the Closing. All such
representations and warranties described above shall survive after the two-year
period with respect to any claim made by Purchaser, Purchaser's Affiliates (as
defined in Section 7.1 below), Seller, Shareholder or Selling Parties'
Affiliates (as defined in Section 7.2 below), as the case may be, prior to the
expiration thereof until, and shall expire when, such claim is finally resolved.
ARTICLE VII
INDEMNIFICATION
7.1. Indemnification by Selling Parties. Selling Parties, jointly and
severally, shall indemnify, defend, save and hold harmless Purchaser and any of
its affiliates and any of its and their respective directors, officers,
employees or agents ("Purchaser's Affiliates") from and against any and all
damage, liability, loss, penalty, expense, assessment, judgment or deficiency of
any nature whatsoever (including, without limitation, reasonable attorneys' fees
and expenses, consultants' and investigators' fees and expenses, and other costs
and expenses incident to any suit, action or proceeding or any investigation of
any environmental condition by Purchaser) (together, "Losses") incurred or
sustained by Purchaser or any of Purchaser's Affiliates which shall arise out of
or result from (i) any breach of any representation and warranty given or made
by Shareholder or by Seller herein; (ii) Seller's use or occupancy of the Leased
Property, including but not limited to any liability related to the release
discharge, disposal, handling, use, distribution, storage, transportation,
remediation or removal of any Hazardous Materials by, or resulting from the act
or omission of, Seller, any entity in which Seller owns an interest, or any of
their respective officers, directors, shareholders, employees, agents,
contractors, lessees or sublessees, occurring any time prior to or after the
Closing; (iii) the noncompliance with or nonperformance of any agreement,
obligation or covenant of Seller under this Agreement; or (iv) the operation of
its business by Seller prior to the Closing.
Any claims for indemnification under this Section 7.1 must be made by
written notice to Selling Parties and, with respect to claims for
indemnification arising in connection with any breach of any representation or
warranty given or made by Seller, within the applicable time period specified in
Section 6.1.
7.2. Indemnification by Purchaser. Purchaser shall indemnify, defend, save
and hold harmless Seller, Shareholder and any of their respective directors,
officers, employees, agents, representatives or beneficiaries ("Selling Parties'
Affiliates") from and against any and all Losses incurred or sustained by Seller
or any of Selling Parties' Affiliates which shall arise out of or result from
(i) any breach of any representation and warranty given or made by Purchaser
herein; (ii) the noncompliance with or nonperformance of any agreement, ,
obligation or covenant of Purchaser under this Agreement; or (iii) the operation
of the Purchaser's business after the Closing.
Any claims for indemnification under this Section 7.2 must be made by
written notice to Purchaser and, with respect to claims for indemnification
arising in connection with any breach of any representation or warranty given or
made by Purchaser, within the applicable time period specified in Section 6.1.
7.3. Escrow, Right of Set Off. Upon notice to Seller specifying in
reasonable detail the basis for such set-off, Purchaser may set off any amount
to which it may be entitled under this Article VII against the number of shares
of FiNet Stock held by the Escrow Agent pursuant to and in accordance with the
terms of the Escrow Agreement and subject to Seller's right to dispute such
claim in accordance with the terms of the Escrow Agreement. Such right of
set-off will constitute Purchaser's sole remedy for any amount to which it may
be entitled under this Article VII.
7.4. Third-Party Claims.
(a) Reasonably promptly after service of notice of any claim or of
process by any third person in any matter in respect of which indemnity may be
sought pursuant to this Agreement, the party asserting such claim (the
"Indemnified Party") shall notify the other party (the "Indemnifying Party") of
the receipt thereof Failure to give such notice reasonably promptly shall not
relieve the Indemnifying Party of its obligation hereunder, except to the extent
such delay in providing the notice adversely affects the Indemnifying Party's
ability to defend any claims set forth in such notice. Thereupon, the
Indemnifying Party will assume solely the defense thereof by representatives
chosen by itl provided, that the Indemnified Party shall be entitled to
participate in such action and to employ counsel at its own expense to assist in
the handling of such claim.
(b) If the Indemnifying Party, within a reasonable time after notice
of such claim, fails to assume the defense thereof, the Indemnified Party shall
(upon 10 days' prior notice to the Indemnifying Party) have the right to
undertake the defense or, to undertake a compromise or settlement of such claim
on behalf of and for the account and risk of the Indemnifying Party. During any
period when the Indemnifying Party is contesting any such claim in good faith,
the Indemnified Party shall not pay, compromise or settle such claim without the
Indemnifying Party's consent; provided, that the Indemnified Party may
nonetheless pay, compromise or settle such claim without such consent during
such period, in which event it shall, automatically and without any further
action on its part, waive any right (whether or not pursuant to this Agreement)
to indemnity in respect of all losses, liabilities, damages or expenses relating
to such claim.
(c) Anything in this Section 7.4 to the contrary notwithstanding, the
Indemnifying Party shall not, without the written consent of the Indemnified
Party (which consent shall not be withheld unreasonably or delayed), settle or
compromise any claim or consent to the entry of any judgment which imposes any
future obligation on the Indemnified Party or which does not include an
unconditional release by the claimant or plaintiff to the Indemnified Party from
all liability in respect of such claim.
7.5. Assistance. The Indemnified Party shall, and shall cause its
affiliates to, provide the Indemnifying Party with such assistance (without
charge) as may reasonably be requested by the Indemnifying Party in connection
with any indemnification or defense provided for herein, including, without
limitation, providing the Indemnifying Party with such information, documents
and records and reasonable access to the services of and consultations with such
personnel of the Indemnified Party or its affiliates as the Indemnifying Party
shall be reasonably necessary (provided that such access shall not unreasonably
interfere with the performance of the duties performed by or responsibilities of
such personnel) and any reasonable out of pocket costs incurred in connection
therewith shall be borne by the Indemnifying Party.
7.6. Effect on Taxes and Insurance. The determination of the amount of any
Losses for which indemnification may be claimed under this Article VII shall be
net of any tax benefits realized and insurance proceeds received (less any Taxes
due on account of such insurance benefits) by the party incurring such Losses.
7.7. Limits on Indemnified Claims. Seller shall not be required to provide
indemnification under Section 7.1 above, unless Purchaser's Losses for all
claims for indemnification shall exceed in the aggregate $150,000 (the "Basket
Amount"), and Seller's obligations of indemnification shall be only for amounts
in excess of the Basket Amount.
ARTICLE VIII
MISCELLANEOUS
8.1. Integration, Amendment.
This Agreement and the Schedules and Exhibits attached hereto constitute
the entire agreement and understanding of the parties relating to the subject
matter hereof and supersede all prior agreements and understandings, whether
oral or written, relating to the subject matter hereof The terms of this
Agreement cannot be changed, modified, released or discharged orally.
8.2. Parties in Interest, Assignment. This Agreement shall be binding upon,
and inure to the benefit of, the parties and their respective heirs, personal
representatives, successors and permitted assigns. This Agreement is not made
for the benefit of any person, firm, corporation or association not a party to
this Agreement (or their respective successors or assigns), and no person, firm,
corporation or association other than the parties or their successors or
permitted assigns shall acquire or have any right under or by virtue of this
Agreement. This Agreement may not be assigned by Purchaser without the prior
written consent of Seller or by Seller without the prior written consent of
Purchaser; provided, however, that this Agreement may be assigned by Purchaser
or any permitted assignee of Purchaser to any corporation directly or indirectly
wholly owned by Purchaser's ultimate parent or to any transferee or successor of
substantially all of the business of Purchaser; provided further, however, that
no such assignment shall limit or affect Purchaser's obligations under this
Agreement. Any assignment (other than the assignments permitted hereunder)
without the prior written consent of the other party shall be void.
8.3. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
8.4. Headings. The headings in this Agreement are included for convenience
of reference only and shall not in any way affect the meaning or interpretation
of this Agreement.
8.5. Waiver, Requirement of Writing. This Agreement cannot be changed or
any performance, term or condition waived in whole or in part except by a
writing signed by the party against whom enforcement of the change or waiver is
sought. Any term or condition of this Agreement may be waived at any time by the
party entitled to the benefit thereof No delay or failure on the part of any
party in exercising any rights under this Agreement, and no partial or single
exercise thereof, will constitute a waiver of such rights or of any other rights
hereunder.
8.6. Expenses. Each of the parties shall pay, without right of
reimbursement from the other party, all the costs incurred by it incident to the
preparation, execution and delivery of this Agreement, and the performance of
its obligations hereunder.
8.7. Notices. Any notice, request, consent, waiver or other communication
required or permitted hereunder shall be effective only if it is in writing and
personally delivered or sent by telecopy or sent, postage prepaid, by
registered, certified or express mail or reputable overnight courier service and
shall be deemed given when so delivered by hand or telecopied, or if mailed,
five days after mailing (two business days in the case of express mail or
overnight courier service), as follows:
If to Seller:
Xx. Xxxxxx X. Xxxx
c/o Xxxxxxxxxx.xxx, Inc.
000 Xxxx Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000
with a copy to:
Duane, Morris & Heckscher LLP
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxx X. Toner, Esq.
If to Purchaser:
XxXxx.xxx, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxxxx, Chairman and Chief Executive
Officer
with copies to:
D. Xxxxx Xxxxxxx, Esq.
XxXxx.xxx, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
and
Xxxxxxxx & Xxxxxx
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
or such other person or address as the addressee may have specified in a notice
duly given to the sender as provided herein.
8.8. Dispute Resolution. Any controversy, dispute or claim (whether lying
in contract or tort) between or among the parties arising out of or related to
this Agreement shall be submitted to arbitration in accordance with this Section
8.8.
Each such controversy, dispute or claim submitted by a party to arbitration
shall be heard by an arbitration panel composed of three arbitrators, in
accordance with the following provisions. Purchaser and Seller shall each
appoint one arbitrator within fifteen days after the matter has been submitted
to arbitration. If any party fails to appoint its arbitrator within such fifteen
day period, any party may apply to the American Arbitration Association (the
"AAA") to appoint an arbitrator on behalf of the party that has failed to
appoint its arbitrator. The two arbitrators appointed by, or on behalf of, the
parties shall jointly appoint a third arbitrator, who shall chair the
arbitration panel (the "Chairman"). If the arbitrators appointed by, or on
behalf of, the parties do not succeed in appointing a Chairman within fifteen
days after the latter of the two arbitrators appointed by, or on behalf of, the
parties has been appointed, the Chairman shall, at the request of either party,
be appointed by the AAA. If for any reason an arbitrator is unable to perform
his or her function, he or she shall be replaced, and a substitute shall be
appointed in the same manner as the arbitrator replaced.
Except as otherwise stated in this Agreement, arbitration proceedings shall
be conducted in accordance with the Commercial Arbitration Rules of the AAA. In
any arbitration proceeding hereunder (i) proceedings shall, unless otherwise
agreed by the parties, be held in Philadelphia, Pennsylvania, if initiated by
Purchaser, and San Francisco, California, if initiated by Seller; (ii) the
arbitration panel shall have no power to award punitive damages; and (iii) the
decision of a majority of the arbitrators (or the Chairman if there is no such
majority) shall be final and binding on the parties to this Agreement and shall
be enforceable in any court specified in Section 8.9 below. The parties hereby
waive any rights to appeal or to review of such decision by any court or
tribunal and also waive any objections to such enforcement. THE PARTIES HEREBY
AGREE TO WAIVE ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY CONTROVERSY,
DISPUTE OR CLAIM SUBMITTED TO ARBITRATION UNDER THIS AGREEMENT.
Notice preliminary to, in conjunction with, or incident to any arbitration
proceeding may be sent to the parties by registered or certified mail (return
receipt requested) at the address set forth in Section 8.7, and personal service
is hereby waived.
8.9. Applicable Law, Consent to Jurisdiction. Without limiting the
provisions of Section 8.8, this Agreement will be construed and interpreted in
accordance with and governed by the internal laws of the State of Delaware
without regard to conflicts of laws principles. Each of the parties irrevocably
and unconditionally consents to submit to the non-exclusive jurisdiction of the
courts of the State of California or the Commonwealth of Pennsylvania and of the
United States of America located in the City and County of San Francisco the
City and County of Philadelphia, as the case may be, for the entry and
enforcement of any award resulting from any arbitration proceeding pursuant to
Section 8.8.
8. 10. Public Announcements. The Parties to this Agreement shall not make
any press release or public announcement with respect to the transactions
contemplated in this Agreement without obtaining the prior approval of the other
parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed by their respective officers there
unto duly authorized, as of the date first above written.
Seller:
XXXXXXXXXX.XXX, INC.
By /s/ Xxxxxx X. Xxxx
-------------------------------
Its President
Purchaser:
XxXXX.XXX, INC.
By /s/ Xxxx X. Xxxxxx
-------------------------------
Its Chairman and CEO
By /s/ Xxxx Xxxxxx
-------------------------------
Its Executive Vice President
Shareholder:
/s/ Xxxxxx X. Xxxx
-------------------------------
Xxxxxx X. Xxxx
SCHEDULE OF EXHIBITS AND SCHEDULES
Exhibit Title
Exhibit A Employment Agreement
Exhibit B Registration Rights Agreement
Exhibit C Services Agreement
Exhibit D Escrow Agreement
Exhibit E Covenant Not To Compete
Exhibit F Covenant Not To Compete
Exhibit G Consulting Agreement
Exhibit H Loan Agreement
Exhibit I Form of Opinion of Selling Parties' Counsel
Exhibit J Form of Opinion of Purchaser's Counsel
Schedule No. Title
Schedule 1.1(a) Equipment
Schedule 1.1(d) Assumed Contracts
Schedule 1.3 Excluded Assets
Schedule 3.3 Qualifications of Seller
Schedule 3.4 Non-Contravention; Consents
Schedule 3.5 Regulatory Approvals
Schedule 3.7 Subsidiaries and Equity Interests; Transactions with Affiliates
Schedule 3.8 Financial Statements
Schedule 3.9 Absence of Certain Changes or Events
Schedule 3.10 Assets Other Than Real Property Interests
Schedule 3.11 Real Property Leased
Schedule 3.12 Intellectual Property
Schedule 3.13 Insurance
Schedule 3.14(a) Commitments and Material Agreements
Schedule 3.14(b) Exceptions to Enforceability of Contracts, etc.
Schedule 3.15 Qualifications as Mortgage Broker; Transactions
Schedule 3.16 Origination Representations and Warranties; No Recourse
Schedule 3.17(c) Purchase of Mortgage Loans; Payments to Brokers
Schedule 3.17(d) Brokering of Mortgage Loans
Schedule 3.18 Legal Proceedings
Schedule 3.19 Taxes
Schedule 3.20 Compliance with Laws; Government Permits
Schedule 3.21 Environment
Schedule 3.22 Benefit Plans; Termination and Severance Agreements
Schedule 3.23 Employee and Labor Matters
Schedule 5.1 Employees
Schedule 5.3(b) First Anniversary Vesting Conditions
Schedule 5.3(d) Second Anniversary Vesting Conditions
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF ASSETS .........................................1
1.1. Purchase by Purchaser ................................................1
1.2. Reserved Rights.......................................................2
1.3. Excluded Assets.......................................................2
1.4. Assumed Obligations...................................................2
1.5. Closing...............................................................2
ARTICLE II PURCHASE PRICE .....................................................3
2. 1. Purchase Price.......................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING
SELLER.....................................................................4
3. 1. Organization, Books and Records......................................4
3.2. Authority, Enforceability.............................................4
3.3. Qualifications, etc...................................................4
3.4. Non-Contravention ....................................................5
3.5. Regulatory Approvals..................................................5
3.6. Capitalization of Seller..............................................5
3.7. Subsidiaries and Equfty Interests. Transactions with Affiliates.......5
3.8. Financial Statements..................................................6
3.9. Absence of Certain Changes or Events .................................6
3.10. Assets Other than Real Property Interests............................6
3.11. Real PropeLty Owned and Leased.......................................7
3.12. Intellectual Property................................................7
3.13. Insurance ...........................................................8
3.14. Commitments..........................................................8
3.15. Qualification as Mortgage Broker.....................................8
3.16. Origination Representations and Warranties, No Recourse .............8
3.17. Purchase of Mortgage Loans, Payments to Brokers .....................8
3.18. Legal Proceedings....................................................9
3.19. Taxes................................................................9
3.20. Compliance with Laws, Government Permits ...........................10
3.21. Environment.........................................................11
3.22. Benefit Plans, Termination and Severance Agreements.................13
3.23. Employee and Labor Matters .........................................13
3.24. Powers of Attorney..................................................14
3.25. Warehouse Lending...................................................14
3.26. No Brokers .........................................................14
3.27. No Undisclosed Material Liabilities ................................14
3.28. Disclosure of Material Facts .......................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER........................15
4. 1. Orpanization...................................................15
4.2. Authodty, Enforceability........................................15
4.3. Non-Contravention...............................................15
4.4. Regulatory Approvals ...........................................15
4.5. No Brokers .....................................................16
4.6. Absence of Certain Changes......................................16
4.7. Litigation, Compliance with Laws................................16
4.8. Capitalization .................................................16
4.9. Issuance of the Shares..........................................16
4. 10. Other Securities and Financial Statement Matters .............16
ARTICLE V FURTHER AGREEMENTS AND ASSURANCES...................................17
5. 1. Employee Matters ..............................................17
5.2. Further Action..................................................17
5.3. Vesting of Escrowed.............................................18
ARTICLE VI SURVIVAL...........................................................18
6. 1. Survival.......................................................19
ARTICLE VII INDEMNIFICATION...................................................19
7. 1. Indemnification by Selling Parties.............................19
7.2. Indemnification by Purchaser....................................20
7.3. Escrow, Right of Set Off........................................20
7.4. Third-Party Claims..............................................20
7.5. Assistance......................................................21
7.6. Effect on Taxes and Insurance...................................21
7.7. Limits on Indemnified Claims....................................21
ARTICLE VIII MISCELLANEOUS ...................................................21
8. 1. Integration, Amendment.........................................21
8.2. Parties in Interest, Assignment.................................21
8.3. Counterparts....................................................22
8.4. Headings........................................................22
8.5. Waiver, Requirement of Writing..................................22
8.6. Expenses........................................................22
8.7. Notices.........................................................22
8.8. Dispute Resolution..............................................23
8.9. Applicable Law, Consent to Jurisdiction.........................24
8.10. Public Announcements...........................................24