STOCK PURCHACE AGREEMENT
BY AND AMONG
RATEXCHANGE CORPORATION
AND
INSTREAM SECURITIES, INC
f.n.a. SPIDER SECURITIES, INC. AND
INDEPENDENT ADVANTAGE FINANCIAL & INSURANCE
SERVICES, INC.
December 7, 2001
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of December 7, 2001, is by and
among RateXchange Corporation., a Delaware corporation (the "PURCHASER"),
Independent Advantage Financial & Insurance Securities, Inc., a California
corporation, sole shareholder (the "SELLER"), and Instream Securities, Inc.,
formerly know as Spider Securities, Inc., a California corporation (the
"COMPANY").
A. The Seller is the Company's sole shareholder.
B. The Purchaser desires to acquire from the Seller all of the Stock
Interests in the Company such that the Company will be wholly owned by the
Purchaser upon the completion of this transaction.
C. The parties hereto wish to make certain representations, warranties,
Covenants and agreements in connection with the purchase of all of the
outstanding Stock Interests in the Company and also to prescribe various
conditions to such transaction.
NOW THEREFORE, for good and valuable consideration, and in consideration of
the representations, warranties, convenants, agreements and conditions herein
contained, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF STOCK; PURCHASE PRICE
1.1 Purchase and Sale of Stock. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as defined below) the Seller will
sell and deliver to the Purchaser, and the Purchaser will purchase from the
Seller, all the Stock of the Company which Stock will constitute all of the
outstanding Stock of the Company as of the Closing Date.
1.2 Purchase Price. At the Closing the purchaser will pay the Seller an
aggregate amount of $50,000.00 in cash (the "Purchase Price") for the Stock of
the Company. Further, at the Closing the Purchaser will purchase from the
Company certain cash assets including a clearing deposit, and bank deposit (the
"Deposit Accounts"). At the date of this Agreement, this deposit total
approximately $7,500.
1.3 Closing. Subject to the satisfaction or waiver of all of the conditions
provided for herein, and unless this Agreement has been terminated and the
transactions contemplated herein have been abandoned pursuant to Article 7
hereof, the consummation of the transactions contemplated by this Agreement (the
"Closing"), will take place at a time and on a date the (the "Closing Date") to
be specified by the parties.
Page 2 of 26 Pages
4. Deliveries at the Closing.
a) Deliveries by the Seller. At the Closing, the Seller will deliver
or cause to be delivered to the Purchaser the following:
(i) A certificate representing the Stock free and clear of all
Encumbrances (as defined below):
(ii) The minute books and capital contribution records of the
Company;
(iii) Certificates of good standing of the Company from its state
of incorporation (California);
(iv) A certificate (the "Closing Certificate") executed by the
Company's financial operations principal setting forth the Company's
Net Capital and Net Worth as of the close of business on the day
before the Closing Date and specifying in reasonable detail the
calculations from which such amounts have been derived.
b) Deliveries by the Purchaser. At the Closing the Purchaser will
deliver to the Seller the cash consideration of $50,000.00, and the further
cash consideration equal to the amounts in the Deposit Account on the
Closing Date.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND COMPANY
The Seller and Company, jointly and severally, hereby represent and warrant
to the Purchaser that, as of the date of this Agreement and as of the Closing
Date, the following statements will be true and correct.
2.1 Organization, etc. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California with the
requisite power and authority to carry on its business as it is now being
conducted and to own, operate and lease its properties and assets. The Company
is qualified to do business in most of the other states. The Seller shall
provide Purchaser with complete and correct copies of the Company's Articles of
Incorporation. The Company does not own or control any capital stock of any
corporation or any interest in any partnership, joint venture or other entity.
Page 3 of 26 Pages
2.2 Stock. The Shares outstanding of the Company are set forth in Exhibit A
attached hereto. The Ownership of the Company outstanding, as of the Closing
Date of this Agreement and set forth in Exhibit A, represent all of the
outstanding shares of the Company. The shares of the Company are duly
authorized, validly issued, fully paid and non-assessable. The Seller represents
and warrants that the shares listed on Exhibit A as being owned by the Seller
are free and clear of any pledge, lien, security interest, restriction, option,
claim or charge of any kind whatsoever ("Encumbrances"), and there are no
agreements relating to the Seller's ownership of such shares. There are no other
shares of the Company outstanding. There is no subscription, option, warrant,
call, right, contract, agreement, commitment, understanding or arrangement to
which the Company or the Seller is a party, or by which any of them are bound,
with respect to the issuance, sale, delivery or transfer of the shares of the
Company, including any right of conversion or exchange under any security or
other instrument.
2.3 Authorization, etc. The Seller and Company have all requisite power and
authority to enter into, execute, deliver, and perform their respective
obligations under this Agreement. This Agreement has been duly and validly
executed and delivered by the Seller and Company and is the valid and binding
legal obligation of the Seller and Company enforceable against them in
accordance with its terms, subject to bankruptcy, moratorium, principles of
equity and other limitations limiting the rights of creditors generally.
2.4 Non-Contravention. Neither the execution, delivery and performance of
this Agreement, and each other agreement to be entered into in connection with
this Agreement, nor the consummation of the transactions contemplated herein
will:
a) Violate, contravene or in conflict with any provision of the
Articles of Incorporation of the Company;
b) Be in conflict with, or constitute a default, however defined (or
an event which, with the giving of due notice or lapse of time, or both,
would constitute such a default), under, or cause or permit the
acceleration of the maturity of, or give rise to any right of termination,
cancellation, imposition of fees or penalties under any debt, note, bond,
lease, mortgage, indenture, license, obligation, contract, commitment,
franchise, permit, instrument or other agreement or obligation to which the
Company or the Seller is a party or by which the Company or the Seller or
any of the Company's or the Seller's properties or assets is or may be
bound;
c) Result in the creation or imposition of any Encumbrances upon any
property or assets of the Company or the Seller under any debt, obligation,
contract, agreement or commitment to which the Company or the Seller is a
party or by which the Company or the Seller or any of the Company's or the
Seller's assets or properties are bound; or
Page 4 of 26 Pages
d) Materially violate any statute, treaty, law, judgment, writ,
injunction, decision, decree, order, regulation, ordinance or other similar
authoritative matters (referred to herein individually as a "Law" and
collectively as "Laws") of any foreign, federal, state or local
governmental or quasi-governmental, administrative, regulatory or judicial
court, department, commission, agency, board, bureau, instrumentality or
other authority having jurisdiction thereof (referred to herein
individually as an "Authority" and collectively as "Authorities").
2.5 Consents and Approvals. With respect to the Company and Seller, no
consent, approval, order or authorization of or from, or registration,
notification, declaration or filing with ("Consent") any individual or entity,
including without limitation any Authority, is required in connection with the
execution, deliver any individual or entity, including without limitation any
Authority, is required in connection with the execution, delivery or performance
of this Agreement the Seller or the consummation by the Company or the Seller of
the transactions contemplated herein.
2.6 Financial Statements. The Seller shall provide Purchaser with a copy of
the audited financial statements of the Company as of December 31, 2000,
together with a copy of the unaudited financial statement of the Company (the
"Most Recent Financial Statement") as of September 30, 2001 and the Company's
audited financial statement as of December 31, 1998 and December 31, 1999.
Except as disclosed therein, the aforesaid financial statements: (i) are in
accordance with the books and records of the Company and have been prepared in
conformity with GAAP consistently applied for all periods (except as stated
therein or in the notes thereto); and (ii) are true, complete and accurate in
all material respects and fairly present the financial position of the Company
as of the respective dates thereof, and the income or loss, changes in
memberships' interests and changes in cash flows (or financial position) for the
periods then ended. The Net Capital and Net Worth of the Company as set forth on
the most recent Financial Statement are in accordance with the books and records
of the Company, are true, complete and accurate in all materials respects and
fairly present the Net Capital and Net Worth of the Company as of the Closing
Date.
2.7 Absence of Undisclosed Liabilities. Except as disclosed the Company
does not have any liabilities, obligations of claims of any kind whatsoever,
whether secured or unsecured, accrued or unaccrued, fixed or contingent, matured
or unmatured, direct or indirect, contingent or otherwise and whether due or to
become due other than liabilities that are fully reflected or reserved for in
the financial statement.
Page 5 of 26 Pages
2.8 Absence of Certain Changes. Since the date of the Most Recent Financial
Statement, the Company has owned and operated its assets, properties and
business in the ordinary course of business and consistent with past practice.
Without limiting the generality of the foregoing, subject to the aforesaid
exceptions:
a) The Company has not experienced any change that has had a Material
Adverse Effect on the Company or experienced any event or failed to take
any action that reasonably could be expected to result in a Material
Adverse Effect on the Company;
b) The Company has not suffered (i) any loss, damage, destruction or
other property or casualty (whether or not covered by insurance) or (ii)
any loss of officers, employees, dealers, distributors, independent
contractors, customers or suppliers, which had or may reasonably be
expected to result in a Material Adverse Effect on the Company; and
c) No event has taken place, which if consummated following the
Effective Date hereof would constitute a violation of Section 4.1 hereof.
2.9 Assets. The Company has good and indefeasible title to all of its
assets and properties, whether or not reflected in the Most Recent Financial
Statement or acquired after the date thereof, that relate to or are necessary
for the Company to conduct its business and operations are currently conducted
(collectively, the "Assets"), free and clear of any mortgage, pledge, lien,
security interest, conditional or installment sales agreement, encumbrance,
claim, easement, right of way, tenancy, covenant, other than (i) liens securing
specific Liabilities shown on the Most Recent Financial Statement with respect
to which no breach, violation or default exists; (ii) mechanics', carriers',
workers' or other like liens arising in the ordinary course of business; (iii)
minor imperfections of title that do not individually or in the aggregate,
impair the continued use and operation of the Assets to which they relate in the
operation of the Company as currently conducted; and (iv) liens for current
taxes not yet due and payable or being contested in good faith by appropriate
proceedings ("Permitted Liens").
2.10 Litigation. Except as disclosed, there is no legal, administrative,
arbitration, or other proceeding, suit, claim or action of any nature or order
(a "Legal Proceeding") pending, noticed, scheduled, or, to the knowledge of the
Seller and Company, threatened by or against or involving the Company, its
assets, properties or business or its directors, officers, agents or employees
(but only in their capacity as such), whether at law or in equity, before or by
any person or entity or authority, or which questions or challenges the validity
of this Agreement or in connection with the transactions contemplated herein.
Page 6 of 26 Pages
2.11 Tax Matters.
a) For purposes of this Agreement, the term "Taxes" means all federal,
state, local, foreign and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, real or personal property, windfall profits,
customs, duties or other taxes, fees, assessments, charges or levies of any
kind whatever, together with any interest and any penalties, additions to
tax or additional amounts with respect thereto, and the term "Tax" means
any one of the foregoing Taxes. In addition, the term "Tax Returns" means
all returns, declarations, reports, statements and other documents required
to be filed with any Authority in respect of California, and the term "Tax
Return" means any one of the foregoing Tax Returns. The Seller and Company
hereby represents and warrants the following with respect to the Company:
b) There are no facts or circumstances which could, directly or
indirectly, subject the Purchaser or any of its affiliates to any Liability
of any nature with respect to Taxes of the Company or subject the Assets to
any Lien resulting from the failure to pay, withhold or otherwise satisfy
outstanding Taxes of the Company. Company will pay all Taxes imposed upon
the Company on or before the Closing Date. Any Tax Returns covering a
period during which the Company was owned by the Seller will be submitted
to the Seller for review prior to filing.
2.12 Insurance. The only policy of insurance held by the Company is a
Fidelity Bond, a copy of which will be provided to Purchaser.
2.13 Employee Benefit Plans. The Company does not have any employees. The
Company does not have, nor has it ever had any employee pension, welfare,
incentive, perquisite, paid time off, severance or other employee benefit plan,
policy, practice or agreement sponsored, maintained or contributed to by the
Company or any affiliate, whether or not administered by the Company
(collectively, "Benefit Plans"), to which the Company or any affiliate is a
party or with respect to which the Company or any affiliate could have any
Liability.
2.14 Bank Accounts. The Company presently maintains one (1) bank account.
The balance in such account will be transferred to Seller at the Closing, by
appropriate signatures on bank documents.
Page 7 of 26 Pages
2.15 Contracts and Commitments; No Default.
a) Neither the Company nor the Seller is a party to, nor are any of
the Assets bound by, any written or oral:
(i) Employment, non-competition, consulting or severance
agreement, collective bargaining agreement, or pension,
profit-sharing, incentive compensation, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance,
severance pay or retirement plan or agreement;
(ii) Indenture, mortgage, note, installment obligation, agreement
or other instrument relating to the borrowing of money by the Company;
(iii) Contract, agreement, lease (real or personal property) or
arrangement that (A) is not terminable on less than 30 days' notice
without penalty, (B) is not over one year in length of obligation of
the Company, or (C) involves an obligation of more than $500 over its
term;
(iv) Obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise)
in any person or entity;
(v) Outstanding sales or purchase contracts, commitments or
proposals that will result in any material loss upon completion or
performance thereof after allowance for direct distribution expenses,
or bound by any outstanding contracts, bids, sales or service
proposals quoting prices that are not reasonably expected to result in
a normal profit.
2.17 Customers. There has not been in the twelve-month period prior to the
Closing Date any dispute with or complaints made by any customer or user of the
Company's products or services that could reasonably be anticipated to have a
Material Adverse Effect, not any set of circumstances that is reasonably
anticipated to have a Material Adverse Effect, on any relationship between the
Company and any such customer or user of the Company's products or services. All
of the Company's relationships with its customers are good, and neither the
Seller nor the Company is aware of any circumstances that could materially
affect the ability of any customer of the Company to continue doing business
with the Purchaser in the manner in which such business has been conducted in
the past. The Company is not aware of any facts or circumstances that would
cause the Company as a result of the transactions contemplated
Page 8 of 26 Pages
by this Agreement. The Seller and Company have made available to Purchaser a
current list of all of the Company's customers.
2.18 Registration Matters.
a) The Company is duly registered as a broker-dealer with the United
States Securities and Exchange Commission ("SEC"), the securities and
insurance commission or similar authority of most of the 50 states that
require such registrations are in full force and effect. A list of the
states where such registrations are not in full force and effect will be
provided Purchaser on the Closing Date. The Company is, and at the
effective time of the Closing will be, a member in good standing with all
required Self-Regulatory Organizations and in compliance with all
applicable rules and regulations of the Self-Regulatory Organizations. For
the purposes of this Agreement, the term "Self-Regulation Organization"
means the National Association of Securities Dealers ("NASD") or other
commission, board, agency, or body that is charged with the supervision or
regulation of brokers, dealers, securities underwriting or trading, stock
exchange, commodities exchanges, insurance companies or agents, investment
companies or investment advisors, or to the jurisdiction of which the
Seller or the Company is otherwise subject.
b) The Company will make available to the Purchaser, true, correct and
complete copies of each Uniform Application for Broker-Dealer Registration
amendments thereto filed by the Company (each, "Company Form BD")
reflecting all amendments thereto filed with the NASD or the SEC, as the
case may be, on or prior to the date hereof. Each Company Form BD is in
compliance with the applicable requirements of the Securities Exchange Act
of 1934, as amended, and the rules and relations thereunder (the "Exchange
Act") and does not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Seller and Company will make available true and
complete copies of all audit reports since December 31, 1998 by the SEC or
the NASD regarding the Company. Each member, director, officer, agent and
employee of the Company who is required to be registered as a
representative, principal or agent with the securities commission of any
state or with any Self Regulating Organization is duly registered as such
and such registration is in full force and effect. Each registered
representative and principal of the Company has at least the minimum series
license for the activities, which such registered representative or
principal, performs for the Company.
c) The net capital, as such term is defined in Rule 15c3-1 under the
Exchange Act, of the Company satisfies the minimum net capital requirements
of the Exchange Act and of the laws of any jurisdiction in which the
Company conducts business, and has been sufficient to permit the Company to
operate
Page 9 of 26 Pages
without restriction on its ability to expand its business under NASD
Conduct Rule 3130.
d) To the best knowledge of the Seller and Company, the Company is not
(a) subject to a "statutory disqualification" as such term is defined in
the Exchange Act, (b) ineligible to serve as a broker-dealer (c) subject to
a disqualification that would be a basis for censure, limitations on the
activities, functions or operations of, or suspension or revocation of the
registration of the Company as a broker dealer, under Section 15 of the
Exchange Act and there is no reasonable basis for, or proceeding or
investigation, whether formal or informal, or whether preliminary or
otherwise, that is reasonably likely to result in, any such censure,
limitations, suspension or revocation.
2.19 Compliance with Laws. Each of the Company, and, to the best knowledge
of the Seller and Company, each of the Company's Directors and officers:
a) Is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders
or decrees applicable to the conduct of its businesses or to the employees
conducting such businesses, and the rules of all Self-Regulatory
Organization applicable thereto;
b) Has all permits, licenses, authorizations, orders and approvals of,
and has made all fillings, applications and registrations with, all
Authorities and Self-Regulatory Organizations that are required in order to
permit them to own or lease their properties and to conduct their
businesses as presently conducted; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect and are
current and, to the best knowledge of the Seller and Company, no suspension
or cancellation of any of them is threatened or is reasonably likely and
all such filings, applications and registrations are current;
c) Has received, since January 1, 2000, no written notification or
communication (or, to the best knowledge of the Seller and Company, any
other communication) from any Authority of Self-Regulatory Organization (A)
asserting non-compliance with any of the statues, regulations, rules or
ordinances that such Authority or Self Regulatory Organization enforces,
(B) threatening any material penalty or to revoke any license, franchise,
seat on any exchange, permit, or governmental authorization, (C) requiring
any of them (including any of the Company's directors or controlling
persons) to enter into a cease and desist order, agreement, or memorandum
of understanding (or requiring or disqualifying their activities (except
for restrictions imposed by rule, regulation or policy), or (D) restricting
or disqualifying their activities (except for restrictions imposed by rule,
regulation or administrative policy on brokers or dealers generally);
d) In not aware of any pending or threatened investigation, review or
disciplinary proceedings by any Authority or Self-Regulatory Organization
against the Company, or any officer, director or employee thereof;
Page 10 of 26 Pages
e) Is not subject to any cease-and-desist or other order issued by, or
a party to any written agreement, consent agreement or memorandum of
understanding with, or a party to any commitment letter or similar
undertaking to, or subject to any order or directive by, a recipient of any
supervisory letter from or has adopted any member resolutions at the
request of, any Authority or Self-Regulatory Organization, or been advised
since January 1, 2000, by any Authority of Self-Regulatory Organization
that it is considering issuing or requesting any such agreement or other
action or has knowledge of any pending or threatened regulatory
investigation; and
f) Since January 1, 2000, has timely filed all reports, registrations
and statements, together with any amendments required to be made with
respect thereto, that were required to be filed under any applicable law,
regulation or rule, with (A) any applicable Authority and (B) any
Self-Regulatory Organization (collectively, the "Company Reports"). As of
their respective dates, the Company Reports compiled with the applicable
statutes, rules, regulations and orders enforced or promulgated by the
regulatory authority with which they were filed.
2.20 Brokers. Neither the Company, the Seller nor any of the Company's
Directors or officers has employed any broker, finder, investment banker or
financial advisor or incurred any liability for any brokerage fee or commission,
finder's fee or financial advisory fee, in connection with the transactions
contemplated hereby, nor is there any basis known to the Company for any such
fee or commission to be claimed by any person or entity. Fees due to individual
third parties, if any for any of the above will be the sole responsibility of
the Seller and the Seller will indemnify the purchaser against any and all
claims.
2.21 Books and Records. To the best of Seller's knowledge, the books of
account, minute books, and other records of the Company, all of which have been
made available to the Purchaser, are complete and correct in all material
respects and have been maintained in accordance with reasonable business
practices. The minute books of the Company contain accurate and complete records
of all formal meetings held, and action taken by, the Seller, the Directors of
the Company and all committees thereof. At the Closing, all of those books and
records will be delivered to Purchaser.
2.22 Business, Generally; Accuracy of Information. There has been no event,
transaction or information that has come to the attention of the Seller that, as
it relates directly to the Company, would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company. No
representation or warranty made by the Seller or in this Agreement, or in any
document, agreement or certificate furnished or to be furnished to the Purchaser
at the Closing by or on behalf of the Company or the Seller in connection with
any of the transactions contemplated by this Agreement contains or will contain
any untrue statement of material fact or omit or
Page 11 of 26 Pages
will omit to state any material fact necessary in order to make the statements
herein or therein not misleading in light of the circumstances in which they are
made, and all of the foregoing completely and correctly present the information
required or purported to be set forth herein or therein. The representations and
warranties contained in this Article 2 or elsewhere in this Agreement or any
document delivered pursuant hereto will not be affected or deemed waived by
reason of the fact that the Purchaser or its representatives knew or should have
known that any such representation or warranty is or might be inaccurate in any
respect.
2.23 Audit for Year-End 2001: The Seller will incur and pay for the
required year-end audit by a CPA of the Purchaser's choice. Any expenses related
to the firm being eligible for the change of ownership process will be at the
Seller's expense by a firm approved by the Purchaser.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
3.1 Corporate Organization. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2 Authorization. The Purchaser has all the requisite corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated herein. The Board of Directors of the Purchaser has taken all
action required by law, its articles of incorporation and bylaws or otherwise to
authorize the execution, delivery and performance of this Agreement is the valid
and binding legal obligation of the Purchaser enforceable against it in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization of similar laws that affect
creditors' rights generally.
3.3 Non-Contravention. Neither the execution, delivery nor performance of
this Agreement nor the consummation of the transactions contemplated herein
will: (a) violate any provision of the articles of incorporation or bylaws of
the Purchaser; or (b) violate any Law of any Authority.
3.4 Consents and Approvals. No Consent is required by any person or entity,
including without limitation any Authority, in connection with the execution,
delivery and performance by the Purchaser of this Agreement, or the consummation
of the transactions contemplated herein, other than any Consent which, if not
made or obtained, will not, individually or in the aggregate, have a Material
Adverse Effect on the business of the Purchaser.
Page 12 of 26 Pages
3.5 Business Generally; Accuracy of Information. There has been no event,
transaction or information that has come to the attention of the Purchaser that,
as it relates directly to the Purchaser would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Purchaser. No
representation or warranty made by the Purchaser in this Agreement or in any
document, agreement, or certificate furnished or to be furnished to the Seller
at the Closing by or on behalf of the Purchaser in connection with any of the
transactions contemplated by this Agreement contains or will contain any untrue
statement of material fact or omit or will omit to state any material fact
necessary in order to make the statements herein or therein not misleading in
light of the circumstances in which them are made, and all of the foregoing
completely and correctly present the information required or purported to be set
forth herein or therein.
ARTICLE 4
COVENANTS OF THE PARTIES
4.1 Conduct of Business of the Company.Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Closing
Date, the Seller will cause the Company to conduct its business and operations
according to its ordinary and usual course of business consistent with past
practices, to preserve substantially intact its business organizations and to
preserve its current relationships with customers, suppliers and other persons
with which it has significant business relations. Without limiting the
generality of the foregoing, and, except as otherwise expressly provided in this
Agreement prior to the Closing Date, without the prior written consent of the
Purchaser, which consent will not be unreasonably withheld, the Seller agrees
that the Company will not:
a) Amend its Articles of Incorporation;
b) Increase in any manner the compensation of any of its Directors or
officers.
c) Hire any personnel;
d) Incur, assume, suffer or become subject to, whether directly or by
way of guarantee or otherwise, any Liabilities which, individually or in
the aggregate, would have a Material Adverse Effect on the Company.
e) Cancel any debts accruing to the Company or waive any claims or
rights, in each case, of substantial value;
f) Make or enter into any commitment for capital expenditures;
Page 13 of 26 Pages
g) Pay, lend or advance any amount to, or sell, transfer any lease any
properties or assets (real, personal or mixed, tangible or intangible) to,
or enter into any agreement or arrangement with, any of its officers or
directors or any affiliate or associate of any of its officers or
directors;
h) Terminate, enter into or amend in any material respect any
contract, agreement, lease, license or commitment, or take any action or
omit to take any action which will cause a breach, violation or default
(however defined) under any such items, except in the ordinary course of
business and consistent with past practice;
i) Acquire any of the business or assets of any other person or
entity;
j) Permit any of its current insurance policies to be cancelled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than coverage remaining
under those cancelled, terminated or lapsed are in full force and effect;
k) Suffer any adverse change in its relationship with a material
customer, including the loss of any such customer or a contract with such
customer;
l) Enter into other material agreements, commitments or contracts not
in the ordinary course of business or in excess of current requirements;
m) Settle or compromise any suite, claim or dispute or threatened
suite, claim or dispute;
n) Make any change in its accounting methods, principles or practices
except as required by GAAP; or
o) Agree in writing or otherwise to take any of the foregoing actions
or any action, which would make any representation or warranty in this
Agreement untrue or incorrect in any material respect.
4.2 No Company Solicitation of Alternate Transaction. The Seller will not,
and will ensure that the Company, the Company's Directors, officers and agents
will not, directly or indirectly, solicit, or initiate offers from, or
participate in any way in negotiations with, provide any nonpublic information
to, enter into any agreement with, or in any manner encourage, discuss, accept
or consider any proposal of, any third party relating to the acquisition of the
Company, its assets or business, in whole or in part.
Page 14 of 26 Pages
4.3 Full Access to the Purchaser. Throughout the period prior to Closing,
the Seller will cause the Company to afford to the Purchaser and its directors,
officers, employees and other authorized representatives and agents, reasonable
access to the facilities, books and records of the Company in order that the
Purchaser may have full opportunity to make such investigations as it will
desire to make of the affairs of the Company; provided that such investigations
do not interfere with the Company's current future ability to conduct its
business. The Company will furnish such additional financial and operating data
and other information as the Purchaser will, from time to time, reasonably
request; provided, however, that any such investigation will not affect or
otherwise diminish or obviate in any respect any of the representations and
warranties of the Seller herein.
4.4 Confidentiality. Each of the parties hereto agrees that it will not
use, or permit the use of, any of the information relating to any other party
hereto furnished to it in connection with the transactions contemplated herein
in a manner or for a purpose detrimental to such other party or otherwise than
in connection with the transaction, and that they will not disclose, divulge,
provide or make accessible or permit the disclosure of, any of the information
to any person or entity, other than their respective directors, officers,
employees, and other authorized representatives and agents, except as may be
required by judicial or administrative process or, in the opinion of such
party's counsel, by other requirements of Law.
4.5 Filings; Consents; Removal to Objections. Subject to the terms and
conditions herein provided, the parties hereto will use their best efforts to
take or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated
hereby, including without limitation obtaining all Consents of any person or
entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and not in
limitation of the foregoing, it is the intent of the parties to consummate the
transactions herein at the earliest practicable time, and they respectively
agree to exert commercially reasonable efforts to that end, including without
limitation: (i) the removal or satisfaction, if possible, of any objections to
the validity or legality of the transaction contemplated herein; and (ii) the
satisfaction of the conditions to consummation of the transactions contemplated
hereby.
Page 15 of 26 Pages
4.6 Further Assurances; Cooperation; Notification.
a) Each party hereto will, before, at and after Closing, execute and
deliver such instruments and take such other actions as the other party or
parties, as the case may be, may reasonably require in order to carry out
the intent of this Agreement. Without limiting the generality of the
foregoing, at any time after the Closing, at the reasonable request of the
Purchaser and without further consideration, the Seller and Company will
execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as the Purchaser may
reasonably deem necessary or desirable in order to more effectively
consummate the transaction contemplated hereby. The Purchaser, on or before
the Closing shall enter into an agreement for services with RND Resources,
Inc. to, among other things, use the service of Xxxx Xxxxxxxx as a
principal of the Company.
b) The Seller and Company will cause the Company to cooperate with the
Purchaser to promptly develop plans for the management of the business
after the Closing, including without limitation plans relating to
productivity, marketing, operations and improvements.
c) At all times from the date of this Agreement until the Closing,
each party will promptly notify the other in writing of the occurrence of
any event which it reasonably believes will or may result in a failure by
such party to satisfy the conditions specified in this Article 4.
4.7 Public Announcements. None of the parties hereto will make any public
announcement with respect to the transactions contemplated herein without the
prior written consent of the other parties. Any of the parties hereto may at any
time make any announcements that are required by applicable Law so long as the
party so required to make an announcement promptly upon learning of such
requirement notifies the other parties of such requirement and discusses with
the other parties in good faith the exact proposed wording of any such
announcement.
4.8 Tax Matters.
a) No new elections by or on behalf of the Company with respect to
Taxes, or any changes in current elections with respect to Taxes, will be
made after the date of this Agreement without the prior written consent of
the Purchaser.
Page 16 of 26 Pages
b) The Seller will on the Closing Date provide the Purchaser with any
clearance certificates or similar documents that may be required by any
state taxing Authority in order to relieve the Purchaser of any obligation
to withhold any portion of the purchase price or to assume any Liability
with respect to sales taxes attributable to operations of the Company prior
to the Closing Date.
c) The Seller will pay any sales, use, transfer or documentary taxes
and recording and filing fees applicable to the transactions contemplated
by this Agreement.
d) The Purchaser and the Company will file and control any Tax Returns
required to be filed by the Company for periods beginning on or after the
Closing Date. The Seller agrees that it will provide, and will cause its
accountants and other representatives to provide, to the Purchaser on a
timely basis the information, including but not limited to all work papers
and records relating to the Company, that it or the accountants or other
representatives have within their control and that may be reasonably
necessary ore related to: (i) the preparation of any and all tax Returns,
information returns and reports required to be filed by the Purchaser or
the Company with governmental agencies; and (ii) audits or other tax
determinations or proceeding by or before such agencies, such information
to be provided in the form in which it has in the past been maintained by
the Company, its accountants or other representatives.
4.10 Satisfaction of Conditions Precedent. Each party will use commercially
reasonable efforts to satisfy or cause to be satisfied all of the conditions
precedent that are applicable to them, and to cause the transactions
contemplated by this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all material consents and authorizations
of third parties and to make filings with, and give all notices to, third
parties that may be necessary or reasonably required on its part in order to
effect the transactions contemplated hereby.
ARTICLE 5
CONDITIONS TO THE PURCHASER'S OBLIGATIONS.
Notwithstanding any other provision of this Agreement to the contrary, the
obligation of the Purchaser to effect the transactions contemplated herein will
be subject to the satisfaction at or prior to the Closing, or waiver by the
Purchaser, of each of the following conditions:
Page 17 of 26 Pages
5.1 Representations and Warranties True. The representations and warranties
of the Seller and Company contained in this Agreement, will be true, complete
and accurate as of the date when made and at and as of such time, except for
changes specifically permitted or contemplated by this Agreement, and except
insofar as the representations and warranties relate expressly and solely to a
particular date or period, in which case they will be true and correct at the
Closing with respect to such date or period.
5.2 Performance. The Seller and Company will have performed and complied in
all material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by the Seller or
Company on or prior to the Closing.
5.3 Required Approvals and Consents.
a) All action required by law and otherwise to be taken by the Seller
to authorize the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will have been
duly and validly taken.
b) All Consents of or from all Authorities and Self-Regulatory
Organizations required hereunder to consummate the transactions
contemplated herein, will have been delivered, made or obtained, and the
Purchaser will have received copies thereof.
5.4 Agreements and Documents. The Purchaser will have received the
following agreements and documents, each of which will be in full force and
effect:
(i) Resignations, effective as of the Closing Date, of all
Directors or officers of the Company as may be requested by the
Purchaser in writing prior to the Closing.
5.5 Adverse Changes. No material adverse change will have occurred in the
business financial condition, prospects, assets or operations of the Company
since the date of this Agreement.
5.6 No Proceeding or Litigation. No suit, action, investigation, inquiry or
other proceeding by any Authority or other person or entity will have instituted
or threatened which delays or questions the validity or legality of the
transaction contemplated hereby or which, if successfully asserted, would, in a
reasonable judgment of the Purchaser, individually or in the aggregate,
otherwise have a Material Adverse Effect on the Company's business, financial
condition, prospects, assets or operations or prevent or delay the consummation
of the transactions contemplated by this Agreement.
5.7 Legislation. No Law will have been enacted which prohibits, restricts
or delays the consummation of the transactions contemplated hereby or any of the
conditions to the consummation of such transaction.
Page 18 of 26 Pages
5.8 Due Diligence. The Purchaser will have completed its due diligence
investigation of the Company to its complete satisfaction, including but no
limited to (i) a satisfactory verification by the Purchaser of the financial
statements of the Company, (ii) a satisfactory review of the Company's existing
customers, contracts and obligations.
5.9 Appropriate Documentation.The Purchaser will have received, in a form
and substance reasonably satisfactory to the Purchaser, dated the Closing Date,
all certificates and other documents, instruments and writings to evidence the
fulfillment of the conditions set forth in this Article 5 as the Purchaser may
reasonably request.
5.10 No Third-Party Interest. Immediately prior to the Closing, all the
outstanding Stock in the Company will be owned beneficially and of record by the
Seller, and no third party will have any options, warrants or other rights to
acquire any membership or other interest in the Company.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF THE SELLER.
Notwithstanding anything in this Agreement to the contrary, the obligation
of the Company and the Seller to effect the transactions contemplated herein
will be subject to the satisfaction at or prior to the Closing of each of the
following conditions:
6.1 Representations and Warranties True. The representations and warranties
of the Purchaser contained in this Agreement will be true, complete and accurate
as of the date when made and at and as of the Closing, as though such
representations and warranties were made at and as of such time, except for
changes permitted or contemplated in this Agreement, and except insofar as the
representations and warranties relate expressly and solely to a particular date
or period, in which case they will be true and correct at the Closing with
respect to such date or period.
6.2 Performance. The Purchaser will have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by the Purchaser at
or prior to the Closing.
6.3 Corporate Approvals. All action required to be taken by the Board of
Directors of the Purchaser to authorize the execution, delivery and performance
of this Agreement by the Purchaser and the consummation of the transactions
contemplated hereby will have been duly and validly taken.
6.4 Adverse Changes. No material adverse change will have occurred in the
business, financial condition, prospects, assets or operations of the Purchaser
since the date of this Agreement.
Page 19 of 26 Pages
6.5 No Proceeding or Litigation. No suit, action, investigation, inquiry or
other proceeding by any Authority or other person or entity will have been
instituted or threatened which delays or questions the validity or legality of
the transactions contemplated hereby or which, if successfully asserted, would
individually or in the aggregate, otherwise have a Material Adverse Effect on
the Purchaser's business, financial condition, prospects, assets or operations.
ARTICLE 7
TERMINATION AND ABANDONMENT.
7.1 Termination by Mutual Consent. This Agreement may be terminated at any
time prior to the Closing by written consent of the Seller and the Purchaser.
7.2 Termination by the Purchaser. This Agreement may also be terminated at
any time prior to the Closing Date by the Purchaser without penalty if: (i) the
Seller or Company have failed to comply in any respect with any of the
convenants, conditions or agreements contained in this Agreement required to be
performed or complied with by the Seller prior to the Closing Date; or (ii) any
representation or warranty of the Seller contained in this Agreement is or
becomes untrue or incorrect (except for changes permitted by this Agreement and
those representations which address matters only as of a particular date that
remain true and correct as of such date); or (iii) the transactions contemplated
by this Agreement have not been approved by the NASD despite a good faith effort
on the part of the Purchaser to obtain such approval.
7.3 Termination by the Seller. This Agreement may be terminated prior to
the Closing Date by the Seller if: (i) the Purchaser has failed to comply in any
respect with any of the convenants, conditions or agreements contained in this
Agreement required to be performed on or complied with the Purchaser prior to
the Closing Date; (ii) any representation or warranty of the Purchaser contained
in this Agreement is or becomes untrue or incorrect (except for changes
permitted by this Agreement and those representations which address matters as
of a particular date that remain true and correct as of such date); (iii) the
transactions contemplated hereby are not approved by the NASD on or before
November 9, 2001 unless the Purchaser elects to extend the Closing Date to a
date not later than the 60th day after the date of this Agreement.
7.4 Procedures and Effect of Termination. In the event of termination of
this Agreement and abandonment of the transactions contemplated hereby by the
Seller or the Purchaser pursuant to this Article 7, this Agreement will
terminate (except to the extent provided in Section 8,1 hereof) and the
transactions contemplated hereby will be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated as provided herein:
Page 20 of 26 Pages
a) Each of the parties will, upon request, return all documents,
workpapers and other material of the other parties relating to the
transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same;
b) No party will have any liability for a breach of any
representation, warranty, agreement, covenant or the provision of this
Agreement, unless such breach was due to a willful or bad faith action or
omission of such party or any representative, agent, employee or
independent contractor thereof, and except for such representations,
warranties and covenants that will survive termination of this Agreement
pursuant to Section 8.1; and
c) All filings, applications and other submissions made pursuant to
the terms of this agreement will, to the extent practicable, be withdrawn
from the agency or other person to which made.
ARTICLE 8
SURVIVAL
8.1 Survivals of Representations, Warranties and Covenants; Investigation.
The representations, warranties and covenants of each of the parties hereto will
survive the Closing for a period of one (1) year thereafter except that: (i) the
representations and warranties of the Seller contained in Sections 2.3 and 2.10
will survive forever; and (ii) the representations and warranties of the Seller
contained in Sections 2.4 and 2.12 will survive until the expiration of all
applicable statutory limitation periods, plus sixty (60) days. The covenants and
agreements contained herein will survive the Closing forever, unless the
convenant or agreement specifies a term, in which case such convenant or
agreement will survive for such specified term and will thereon expire.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Expenses. The Purchaser and the Seller (including the Company) will
each bear their own costs and expenses relating to the transactions contemplated
hereby, including without limitation, fees ad expenses of legal counsel,
accountants, investment bankers, brokers or finders, printers, copiers,
consultants or other representatives for the services used, hired or connected
with the transactions contemplated hereby. Except for those expenses to be paid
by the Seller, as specifically described in Sections 2.23 and 4.8 (c) of this
Agreement.
9.2 Amendments and Modification. Subject to applicable Law, this Agreement
may be amended or modified by the parties hereto at any time with respect to any
of the
Page 21 of 26 Pages
terms contained herein; provided, however, that all such amendments and
modifications must be in writing duly executed by all of the parties hereto.
9.3 Waiver of Compliance; Consents. Any failure to a party to comply with
any obligation, covenant, agreement or condition herein may be expressly waived
in writing by the party entitled hereby to such compliance, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition will not operate as a waiver of, or estoppel with respect
to, any subsequent or other failure. No single or partial exercise of a right or
remedy will preclude any other or further exercise thereof or of any other right
or of any other right or remedy hereunder. Whenever this Agreement requires or
permits the consent by or on behalf of a party, such consent will be given in
writing in the same manner as for waivers of compliance.
9.4 No Third Party Beneficiaries. Nothing in this Agreement will entitle
any person or entity (other than a party hereto and his, her or its respective
successors and assigns permitted hereby) to any claim, cause of action, remedy
or right of any kind.
9.5 Notices. All notices, requests, demands and other communications
required or permitted hereunder will be made in writing and will be deemed to
have been duly given and effective: (i) on the date of delivery, if delivered
personally; (ii) on the earlier of the fourth (4th) day after mailing or the
date of the return receipt acknowledgement, if mailed, postage prepaid, by
certified or registered mail, return receipt requested; or (iii) on the date of
transmission, if sent by facsimile, telecopy, telegraph, telex or other similar
telegraphic communications equipment.
If to the Seller or Company:
Spider Securities, Inc.
Independent Advantage Financial & Insurance Services
000 Xxxxxxxxxx Xxxx
Xxxxxx Xxx Xxx, XX 00000
Attn: Xxxxxx Xxxx Esq/ Xxxxxx Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
If to the Purchaser:
RateXchange Corporation
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxx Xxxxxxxx/ Xxxxxxxxxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Or to such other person or address as either the Company or the Seller will
furnish to the other parties hereto in writing in accordance with this
subsection.
Page 22 of 26 Pages
9.6 Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interest or obligations hereunder will be assigned (whether voluntarily,
involuntarily, by operation of law or otherwise) by any of the parties hereto
without the prior written consent of the other parties.
9.7 Governing Law. This Agreement and the legal relations among the parties
hereto will be governed by and construed in accordance with the internal
substantive laws of the State of California (without regard to the laws of
conflict that might otherwise apply) as to all maters, including without
limitation matters of validity, construction, effect, performance and remedies.
9.8 Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.9 Headings. The table of contents and the headings of the sections and
subsections of this Agreement are inserted for convenience only and will not
constitute a part hereof.
9.10 Entire Agreement. This Agreement, and the exhibits and other writings
referred to in this Agreement or any such exhibit or other writing are part of
this Agreement, together they embody the entire agreement and understanding of
the parties hereto in respect of the transactions contemplated by this Agreement
and together they are referred to as this "Agreement" or the "Agreement." There
are no restrictions, promises, warranties, agreements, covenants or
undertakings, other than those expressly set forth or referred to in this
Agreement. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the transaction or transactions contemplated
by this Agreement. Provisions of this Agreement will be interpreted to be valid
and enforceable under applicable Law to the extent that such interpretation does
not materially alter this Agreement; provided, however, that if such provision
becomes invalid or unenforceable under applicable Law such provision will be
stricken to the extent necessary and the remainder of such provisions and the
remainder of this Agreement will continue in full force and effect.
9.11 Remedies and Injunctive Relief. It is expressly agreed among the
parties hereto that monetary damages would be inadequate to compensate a party
hereto for any breach by any other party of its covenants in Article 4 hereof.
Accordingly, the parties agree and acknowledge that any such violation or
threatened violation will cause irreparable injury to the other and that, in
injunctive relief against the threatened breach of Article 4 hereof or the
continuation of any such breach without the necessity of proving actual damages
and may seek to specifically enforce the terms thereof.
Page 23 of 26 Pages
Notwithstanding anything contained in this Agreement to the contrary, the
Company and the Seller, on the one hand, and the Purchaser, on the other hand,
will only have the right to make a claim against the other for damages if the
non-claiming party has willfully and materially breached any of its
representations, convenants or agreements set forth in this Agreement. For
purposes of this provision, a party will be deemed to have willfully breached
any of its representations, covenants or agreements set forth in this Agreement
if such party has intentionally and knowingly taken, or intentionally and
knowingly failed to take, any action that causes a breach of any of its
covenants or agreements set forth in this Agreement. No party hereto will be
entitled to rescind this Agreement after the Closing.
9.12 Definition of Material Adverse Effect. "Material Adverse Effect" with
respect to the Company means an individual or cumulative adverse change in or
effect on the business, customers, customer relations, operations, properties,
working capital condition (financial or otherwise), assets, properties or
liabilities of the Company taken as a whole that is reasonably expected to be
materially adverse to the business, properties, working capital condition
(financial or otherwise), assets, or liabilities of the Company taken as a whole
or would prevent the Company or the Seller from consummating the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
INDEPENDENT ADVANTAGE RATEXCHANGE CORPORATION
FINANCIAL & INSURANCE
SERVICES, INC.
By:___________________________ By:____________________________
Its:__________________________ Its:___________________________
INSTREAM SECURITIES, INC.
f.n.a. SPIDER SECURITIES, INC.
By:___________________________
Its:__________________________
Page 24 of 26 Pages
EXHIBIT A
Authorized Shares of Spider Securities, Inc. 100,000
Issued and Outstanding Shares of Spider Securities, Inc. 45,919
Page 25 of 25 Pages
