EXECUTION COPY
AGREEMENT AND PLAN OF MERGER,
DATED AS OF JANUARY 4, 2006,
BY AND AMONG
XXXX X. XXXXXXX,
XXXXXX X. XXXX,
VALLEY FORGE ENTERPRISES, LTD.
VFE MERGER CORP.
AND
NATIONAL INVESTMENT MANAGERS INC.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 4, 2006, and
effective as of January 1, 2006 (this "Agreement"), by and among VALLEY FORGE
ENTERPRISES, LTD., a Pennsylvania corporation (the "Company"), XXXX X. XXXXXXX,
an individual ("Holland"), XXXXXX X. XXXX, an individual ("Xxxx" and, together
with Holland, sometimes individually referred to as a "Shareholder" and
collectively as the "Shareholders"), and VFE MERGER CORP., a Pennsylvania
corporation ("MergerCo") (the Company and MergerCo are sometimes hereinafter
collectively called the "Constituent Corporations"), and NATIONAL INVESTMENT
MANAGERS INC., a Florida corporation ( "NIM").
RECITALS:
A. The Company has the authority to issue one thousand 1,000 shares of
common stock, no par value per share ("Company Common Stock"). Four hundred
fifty (450) shares of Company Common Stock are issued and outstanding. Holland
is the owner of two hundred twenty-five (225) shares of Company Common Stock
(the "Holland Shares"), and Xxxx is the owner of two hundred twenty-five (225)
shares of Company Common Stock (the "Xxxx Shares" and, together with the Holland
Shares, the "Shares"). The Xxxx Shares and the Holland Shares represent, in the
aggregate, one hundred percent (100%) of the issued and outstanding capital
stock of the Company.
B. NIM is authorized to issue one hundred million (100,000,000) shares of
common stock, par value $0.001 per share (the "NIM Common Stock"), of which
15,433,322 shares were issued and outstanding as of December 31, 2005.
C. MergerCo is a wholly owned subsidiary of NIM.
D. The respective Boards of Directors of NIM, MergerCo and the Company
deem it advisable and generally to the advantage and welfare of NIM, MergerCo
and the Company, and their respective shareholders, that the Company be merged
with and into MergerCo under the terms and conditions hereinafter set forth (the
"Merger"), the Merger to be effective pursuant to the Pennsylvania Business
Corporation Law and the Merger to be a tax free reorganization under Section
368(a)(2)(D) of the Code, as hereinafter defined.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and legal adequacy of which is acknowledged, the parties agree as
follows:
Article I
DEFINITIONS
The terms defined in this Article I, whenever used in this Agreement
(including, without limitation, the exhibits and schedules attached hereto),
shall have the following meanings:
1.1 "Accounts Receivable" means all bona fide trade accounts receivable
and all notes, bonds and other evidences of indebtedness of and rights to
receive payment, including, without limitation, rebates, refunds and similar
payments and any rights of the Company with respect to any third party
collection procedures, or any other actions or proceedings relating to the
Business (as defined below) which have been commenced in connection therewith
and any other item that would be characterized as an account receivable in
accordance with GAAP (as such term is hereinafter defined).
1.2 "Affiliate" of any Person (as such term is hereinafter defined) means
any stockholder, member, Person or entity controlling, controlled by or under
common control with such Person, or any director, officer or Key Employee (as
defined below) of such Person, or, with respect to a Shareholder, any of the
immediate family members of the Shareholder who were at any time employed by the
Company. For purposes of this definition, the term "control", when used with
respect to any Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings that correspond to the foregoing.
1.3 "Agreement" has the meaning given such term in the first paragraph of
this Agreement.
1.4 "Articles of Merger" has the meaning given such term in Section 2.1 of
this Agreement.
1.5 "Authorizations" means all licenses, permits, franchises, approvals,
authorizations, qualifications, concessions or the like, issued or granted by
any federal, state, local or foreign Governmental Entity or Regulatory Authority
(as such terms are hereinafter defined) to any Company Subsidiary or any
employee, agent or representative thereof, including, without limitation, SEC
(including, without limitation, RIA registrations) and NASD licenses and
registrations, or by any nongovernmental entity to any Person or which in any
way relate to the business, operations, activities, properties and assets of
such Person.
1.6 "Audit" shall mean the audit of the Company and the Company
Subsidiaries for their two (2) most recent fiscal years on a consolidated basis
in accordance with GAAP, as performed by Xxxxxxxx Xxxxxx Xxxxx LLP.
1.7 "Benefit Plans" has the meaning given such term in Section 4.22(a) of
this Agreement.
1.8 "Broker" has the meaning given such term in Section 4.28 of this
Agreement.
1.9 "Broker Fee" has the meaning given such term in Section 4.28 of this
Agreement.
1.10 "Business Day" means a day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
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1.11 "Business" means the business, activities and operations of the
Company and its wholly-owned Subsidiaries, as presently conducted.
1.12 "Cash Advance" has the meaning given such term in Section 2.7(c) of
this Agreement.
1.13 "Cash Advance Payment Date" has the meaning given such term in
Section 2.7(c) of this Agreement.
1.14 "Cash Requirement" has the meaning given such term in Section 2.7(a)
of this Agreement.
1.15 "Closing" has the meaning given such term in Section 3.1 of this
Agreement.
1.16 "Closing Date" has the meaning given such term in Section 3.1 of this
Agreement.
1.17 "Closing Date Payables" has the meaning given such term in Section
2.7(b) of this Agreement.
1.18 "Closing Date Receivables" has the meaning given such term in Section
2.7(d) of this Agreement.
1.19 "Code" means the Internal Revenue Code of 1986, as amended.
1.20 "Company" has the meaning given such term in the first paragraph of
this Agreement.
1.21 "Company Common Stock" has the meaning given such term in the
Recitals to this Agreement.
1.22 "Company Subsidiary" means each of VFCC, VFA and VFIS, and "Company
Subsidiaries" means VFCC, VFA and VFIS, collectively.
1.23 "Company Subsidiary Shares" has the meaning given such term in
Section 4.1(b) of this Agreement.
1.24 "Contract" has the meaning given such term in Section 4.17(a) of this
Agreement.
1.25 "Constituent Corporations" has the meaning given such term in the
first paragraph of this Agreement.
1.26 "Conversion Ratio" has the meaning given such term in Section 2.2 of
this Agreement.
1.27 "Disclosure Statement" shall mean the Disclosure Statement delivered
by the Shareholders to NIM contemporaneously with this Agreement.
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1.28 "Environment" means all air, surface water, groundwater or land,
including, without limitation, land surface or subsurface, including, without
limitation, all fish, wildlife, biota and all other natural resources.
1.29 "Environmental Law" means any and all current federal, state, local,
provincial and foreign, civil and criminal laws, statutes, ordinances, orders,
codes, rules, regulations, Environmental Permits, policies, guidance documents,
judgments, decrees, injunctions, or agreements with any Governmental Entity or
Regulatory Authority, relating to the protection of health and the Environment,
worker health and safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution,
formulation, packaging, labeling, or Release of Hazardous Substance, including,
but not limited to: the Clean Air Act, 42 U.S.C. ss.7401 et seq.; the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. ss.9601 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
ss.1251 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. ss.1801 et
seq.; the Federal Insecticide Fungicide and Rodenticide Act, 7 U.S.C. ss.136 et
seq.; the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
ss.6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq.;
the Occupational Safety and Health Act of 1970, 29 U.S.C. ss.651 et seq.; the
Oil Pollution Act of 1990, 33 U.S.C. ss.2701 et seq.; and the state analogies
thereto; and any common law doctrine, including, but not limited to, negligence,
nuisance, trespass, personal injury, or property damage related to or arising
out of the presence, Release, or exposure to a Hazardous Substance.
1.30 "Environmental Permit" means any federal, state, local, provincial,
or foreign permits, licenses, consents or Authorizations required by any
Governmental Entity or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental Entity or Regulatory
Authority under any applicable Environmental Law.
1.31 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the regulations thereunder.
1.32 "Xxxx Employment Agreement" means the Employment Agreement, to be
entered into and dated as of the Closing Date, between MergerCo and Xxxx, in the
form attached hereto as Exhibit "A".
1.33 "Xxxx Merger Cash" has the meaning given such term in Section 2.2 of
this Agreement.
1.34 "Xxxx Merger Shares" has the meaning given such term in Section 2.2.
1.35 "Xxxx Non-Competition Agreement" means the Non-Competition Agreement,
to be entered into and dated as of the Closing Date, between NIM and Xxxx, in
the form attached hereto as Exhibit "B".
1.36 "Xxxx Shares" has the meaning given such term in the Recitals to this
Agreement.
1.37 "Financial Statements" has the meaning given such term in Section 4.8
of this Agreement.
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1.38 "Fixed Assets" has the meaning given such term in Section 4.14(a) of
this Agreement.
1.39 "GAAP" means generally accepted accounting principles in effect in
the United States of America at the time of any determination in accordance with
standards for publicly-held companies, and which are applied on a consistent
basis. All accounting terms used in this Agreement which are not expressly
defined in this Agreement shall have the meanings given to those terms by GAAP,
unless the context of this Agreement otherwise requires.
1.40 "Governmental Entity or Regulatory Authority" means any court,
tribunal, arbitrator, executive or regulatory authority, tax authority, agency,
commission, official or other instrumentality of the United States of America,
any foreign country or any domestic or foreign state, county, city, municipality
or other political subdivision.
1.41 "Hazardous Substance" means petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls, and
any other chemicals, materials, substances or wastes, in any amount or
concentration, which are now or hereafter become defined or regulated as
"hazardous substances", "hazardous materials", "hazardous wastes", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic
pollutants", "pollutants", "regulated substances", "solid wastes" or
"contaminants" or words of similar import under any Environmental Law.
1.42 "Holland" has the meaning given such term in the first paragraph of
this Agreement.
1.43 "Holland Closing Date Payment" has the meaning given such term in
Section 2.3 of this Agreement.
1.44 "Holland Employment Agreement" means the Employment Agreement, to be
entered into and dated as of the Closing Date, between MergerCo and Holland, in
the form attached hereto as Exhibit "C".
1.45 "Holland Merger Cash" has the meaning given such term in Section 2.2
of this Agreement.
1.46 "Holland Merger Shares" has the meaning given such term in Section
2.2.
1.47 "Holland Non-Competition Agreement" means the Non-Competition
Agreement, to be entered into and dated as of the Closing Date, between NIM and
Holland, in the form attached hereto as Exhibit "D".
1.48 "Holland Shares" has the meaning given such term in the Recitals to
this Agreement.
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1.49 "Income Tax" means any federal, state, local or foreign Tax (as such
term is hereinafter defined) that is (a) based upon, measured by or calculated
with respect to income, profits, capital stock, net worth or receipts, in each
case whether gross, net or adjusted (including, without limitation, capital
gains Taxes and minimum Taxes), or (b) based upon, measured by or calculated
with respect to multiple bases (including, without limitation, corporate
franchise Taxes) if one or more of the bases on which such Tax may be based,
measured or calculated with respect to, is described in clause (a), in each case
together with any interest, penalties or additions to any Tax in respect of any
of the foregoing, whether disputed or not, and any obligation to indemnify,
assume or succeed to the liability of any other Person in respect of the
foregoing (including, without limitation, as a transferee pursuant to Section
6901 of the Code or otherwise) as a result of Treasury Regulation ss.1.1502-6 or
any similar provision of applicable law, or as a result of a tax sharing or
similar agreement, arrangement or understanding.
1.50 "Indemnification Acknowledgment" has the meaning given such term in
Section 10.4(a)(ii) of this Agreement.
1.51 "Indemnitee" has the meaning given such term in Section 10.4(a) of
this Agreement.
1.52 "Indemnitor" has the meaning given such term in Section 10.4(a) of
this Agreement.
1.53 "Insurance Policies" has the meaning given such term in Section 4.23
of this Agreement.
1.54 "Intellectual Property Rights" means the United States of America and
foreign patents, copyrights, trademarks, trade names, service marks, brand
names, business and product names, uniform resource locators ("URLs") or
internet domain names, internet websites and the electronic files, content and
layout related thereto, email addresses, listings in telephone books and
directories and internet directories, browser and search engines, logos,
symbols, trade dress, design or representation or expressions of any of the
foregoing, all registrations or applications for registration of any of the
foregoing, and all databases, source codes, object codes, computer programs and
computer software in any form or medium (including, without limitation, the
Systems (as such term is hereinafter defined)), in each case that are owned by
the Company or any Company Subsidiary and/or were, are or may be used in
connection with the Business or held for use or being developed by the Company
or any Company Subsidiary or by others for use in connection with the Business,
and all trade secrets, industrial or manufacturing models, processes, designs
and methodologies, research and development, inventions, know-how, customer
lists, manufacturing, engineering and other drawings and blueprints, technology,
technical information, engineering data, design and engineering specifications,
inventions and other proprietary processes and information of any kind owned by
the Company or any Company Subsidiary or the Shareholders and were, are or may
be used in connection with the Business.
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1.55 "Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee for the benefit of another Person) or capital contribution to (by
means of any transfer of cash or other property to any other Person or any
payment for property or services for the account or use of any others) any other
Person, or any purchase or acquisition by such Person of any capital stock,
bonds, securities, debentures or other securities or evidences of indebtedness
issued by, any other Person.
1.56 "Investment Advisers Act" shall mean the Investment Advisers Act of
1940, as amended.
1.57 "Key Employee" means those employees of the Company and the Company
Subsidiaries whose names and positions are listed on Schedule 1.57 of the
Disclosure Statement and any person who may succeed any such employee in that
position.
1.58 "knowledge", "known", "best of knowledge" with respect to a Person
shall mean those matters actually known or which should be known by such Person
based on facts actually known by such Person, and which, in the case of the
Company, shall include the Shareholders.
1.59 "Legal Requirement" of a Person means any statute, rule, regulation
or other provision of law, or any order, judgment or other direction of a court,
arbitration panel or other tribunal resolution or any Governmental Entity or
Regulatory Authority, or any other requirement, permit, registration, license or
Authorization applicable to such Person, or to any of its properties, assets or
business.
1.60 "Liens" means any liens, charges, encumbrances, options, rights of
first refusal, security interests, claims, mortgages, pledges, charges,
easements, covenants, restrictions, obligations or any other encumbrances
(including, without limitation, any conditional sale or other title retention
agreement or any lease in the nature thereof and any agreement to grant or to
permit or suffer to exist any of the foregoing) or third party rights or
equitable interests of any nature whatsoever.
1.61 "Losses" has the meaning given such term in Section 10.2 of this
Agreement.
1.62 "Material Adverse Effect" shall mean a material adverse effect on the
assets, properties, operations, workforce, prospects or condition (financial or
otherwise) of the Company.
1.63 "Merger Cash" has the meaning given such term in Section 2.2 of this
Agreement.
1.64 "Merger Consideration" means the Merger Shares plus the Merger Cash.
1.65 "Merger Shares" has the meaning given such term in Section 2.2 of
this Agreement.
1.66 "MergerCo" has the meaning given such term in the first paragraph of
this Agreement.
1.67 "MergerCo Indemnified Person" has the meaning given such term in
Section 10.2 of this Agreement.
1.68 "Minimum EBITDA" has the meaning given such term in the Holland
Employment Agreement.
1.69 "NASD" means National Association of Securities Dealers, Inc.
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1.70 "NIM" has the meaning given such term in the first paragraph of this
Agreement.
1.71 "NIM Common Stock" has the meaning given such term in the Recitals to
this Agreement.
1.72 "NIM Shares" means shares of NIM Common Stock.
1.73 "Notice of Claim" has the meaning given such term in Section
10.4(a)(i) of this Agreement.
1.74 "Office Lease" means that certain lease, as amended through the date
hereof, between the Company and The Xxxxx with respect to the premises located
at Suite 1206, 000 Xxx Xxxxx Xxxxxx Xxxx, Xxxxx, Xxxxxxxxxxxx 00000.
1.75 "Person" means any natural individual, corporation, partnership,
joint venture, trust, limited liability company, association, organization, firm
or other entity.
1.76 "Personal Property Leases" has the meaning given such term in Section
4.14(b) of this Agreement.
1.77 "RCRA" shall mean the Resource Conservation and Recovery Act of 1976.
1.78 "RIA" shall mean an investment adviser, as defined in the Investment
Advisers Act, who is registered with the SEC under Section 203 of the Investment
Advisers Act.
1.79 "Registrable Securities" has the meaning given to such term in
Section 2.8 of this Agreement.
1.80 "Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Substance into the Environment.
1.81 "Remaining Payables" has the meaning given to such term in Section
2.7(b) of this Agreement.
1.82 "Required Consents" has the meaning given to that term in Section 4.6
of this Agreement.
1.83 "SEC" means the United States Securities and Exchange Commission.
1.84 "Securities Act" has the meaning given to such term in Section 2.9(a)
of this Agreement.
1.85 "Shareholder Indemnified Person" has the meaning given such term in
Section 10.3 of this Agreement.
1.86 "Shareholder" and "Shareholders" have the meanings given such terms
in the first paragraph of this Agreement.
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1.87 "Shares" has the meaning given such term in the Recitals to this
Agreement.
1.88 "Site" means any real property (including, without limitation, the
Real Property) currently or previously leased, used or operated by the Company,
any predecessors of the Company or any entities previously owned by the Company,
including, without limitation, all soil, subsoil, surface waters and groundwater
thereat.
1.89 "Subsidiary" of a Person means any entity, the securities of which or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions (including,
without limitation, managers) are at the time directly or indirectly owned by
such Person or such Person otherwise has the right to vote or to direct the vote
of such securities or other ownership interests.
1.90 "Systems" means all computer hardware and software, including,
without limitation, application software data and databases, applications and
all related documentation utilized in the Business.
1.91 "Tax Return" means any federal, state, local or foreign return,
declaration, report, claim for refund or credit, document, or other information
or filing (including any schedule or exhibit thereto) that is filed or required
to be supplied to any Governmental Entity or Regulatory Authority in respect of
or relating to any Tax, and any amendment thereof, whether on a consolidated,
combined, unitary or separate basis.
1.92 "Tax" or "Taxes" means any and all taxes, charges, fees, levies,
deficiencies or other assessments of any nature whatsoever, including, without
limitation, any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (pursuant to Section 59A of the Code or
otherwise), custom duties, capital stock, net worth, franchise, recording,
employee's income withholding, foreign withholding, social security (or its
equivalent), unemployment, disability, real property, personal property,
intangible property, sales, use, transfer, value added, occupancy, registration,
customs, recording, gains, alternative or add-on minimum, estimated or other
tax, charge, fee, levy, deficiency or other assessment of whatever kind or
nature, including any interest, penalties or additions to tax in respect of the
foregoing, whether disputed or not, and any obligation to indemnify, assume or
succeed to the liability of any other Person in respect of the foregoing
(including, without limitation, as a transferee (pursuant to Section 6901 of the
Code or otherwise), as a result of Treasury Regulation ss.1.1502-6 or similar
provision of applicable law, or as a result of a tax sharing or similar
agreement, arrangement or understanding).
1.93 "Third Party Claim" means a claim or demand made by any Person who is
not a party to this Agreement against an Indemnitee.
1.94 "URLs" means uniform resource locators.
1.95 "VFA" means V.F. Associates, Inc., a Pennsylvania corporation and a
wholly-owned Subsidiary of the Company.
1.96 "VFCC" means Valley Forge Consulting Corporation, a Pennsylvania
corporation and a wholly-owned Subsidiary of the Company.
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1.97 "VFIS" means VF Investment Services Corp., a Pennsylvania corporation
and a wholly-owned Subsidiary of the Company.
1.98 "Working Capital Statement" has the meaning given such term in
Section 2.7(a) of this Agreement.
Article II
MERGER AND RELATED MATTERS
2.1 Merger. The Constituent Corporations each have (i) caused a special
meeting of its shareholders to be called to consider and vote upon the Merger on
the terms and conditions hereinafter set forth, or (ii) obtained the written
consent of such shareholders, as applicable, as is necessary to approve the
Merger. Subject to the further conditions and provisions of this Agreement, the
Closing shall be held and Articles of Merger ("Articles of Merger") and all
other documents or instruments deemed necessary or appropriate by the parties
hereto to effect the Merger shall be executed and filed with the Secretary of
State of the Commonwealth of Pennsylvania promptly following the execution of
this Agreement. The terms and conditions of the Merger, the mode of carrying the
same into effect, and the manner and basis of converting the securities of each
of the Constituent Corporations are set forth below in this Article II.
2.2 Treatment of Shares. At the Closing Date, each share of Company Common
Stock issued and outstanding shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and become (a) nine
thousand two hundred twenty-two and two hundred twenty two thousandths
(9,222.222) shares ("Conversion Ratio") of NIM Common Stock, which the parties
have valued at eighty-three cents ($0.83) per share, for a total of four million
one hundred fifty thousand (4,150,000) shares of NIM Common Stock ("Merger
Shares") plus (b) seven thousand twelve dollars and twenty two and two-tenths
cents ($7,012.222) for a total of three million one hundred fifty-five thousand
five hundred dollars ($3,155,500.00) ("Merger Cash"), payable at Closing via
wire transfer to accounts designated by Holland and Xxxx. By way of
clarification, MergerCo will deliver to Holland two million seventy-five
thousand (2,075,000) shares of NIM Common Stock ("Holland Merger Shares") plus
one million five hundred seventy-seven thousand seven hundred fifty dollars
($1,577,750.00) ("Holland Merger Cash"), and MergerCo will deliver to Xxxx two
million seventy-five thousand (2,075,000) shares of NIM Common Stock ("Xxxx
Merger Shares") plus one million five hundred seventy seven thousand seven
hundred fifty dollars ($1,577,750.00) ("Xxxx Merger Cash") at Closing. The
MergerCo Common Shares shall remain outstanding and unchanged. Each Shareholder
hereby waives any dissenters' rights to which such Shareholder may be entitled
under applicable law.
2.3 [RESERVED]
2.4 Share Certificates. At the Closing or as promptly thereafter as
possible, Holland and Xxxx shall surrender all of the Holland Shares and all of
the Xxxx Shares to MergerCo for cancellation and upon such surrender shall
receive in exchange therefore certificates representing the number of shares of
NIM Common Stock into which the same shall have been converted as set forth
above. All shares of NIM Common Stock so issued shall be deemed to be duly and
validly issued, fully paid and non-assessable. At the Closing Date, the stock
transfer books of the Company shall be and shall be deemed to be closed and no
transfer of shares of the Company Common Stock shall thereafter be made,
effectuated or consummated.
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2.5 Effect of the Merger. At the Closing Date,
(a) The separate existence of the Company shall cease;
(b) MergerCo shall possess all the rights, privileges, powers and
franchises of the Company;
(c) All the property, real, personal and mixed, and franchises (if
any) of the Company and all debts due on whatever account to it, and all other
choses in action belonging to it, shall be taken and deemed to be transferred to
and vested in MergerCo by operation of law and without acts or deeds;
(d) All such rights, privileges, powers and franchises (if any), and
all and every other interest of the Company shall be thereafter as effectually
the property of MergerCo as they were of the Company;
(e) The title to an interest in any real estate vested by deed,
lease or otherwise in the Company shall not revert or be impaired;
(f) MergerCo shall be responsible for all the liabilities and
obligations of the Company, but the liabilities of the Company, or its
shareholders, directors or officers shall not be affected by the merger, nor
shall the rights of the Company, the officers and directors of the Company;
(g) At the expense of MergerCo, the officers and directors of the
Company shall execute and deliver all such instruments and take all such actions
as MergerCo may determine to be necessary or appropriate in order to vest in and
confirm to MergerCo title to and possession of all such properties, assets,
rights, privileges and franchises, and otherwise to carryout the purposes of
this Agreement. MergerCo, as the surviving corporation, shall continue its
corporate existence under the laws of the Commonwealth of Pennsylvania;
(h) The name of MergerCo will change to Valley Forge Enterprises,
Ltd.;
(i) The Company's office policy manual as amended through the
Closing Date shall become MergerCo's office policy manual, subject to amendment
or modification by NIM at any time following the first anniversary of the
Closing in NIM's sole discretion, but following consultation with the
Shareholders and with a reasonable transition period to effect such amendment or
modification; and
(j) The Company's Profit Sharing Plan and Trust Agreement as amended
through the Closing Date shall become MergerCo's Profit Sharing Plan and Trust
Agreement.
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2.6 Articles of Incorporation, Bylaws, Directors and Officers of the
Surviving Corporation. The Articles of Incorporation of MergerCo on the date
hereof shall continue as its Articles of Incorporation, until amended or
appealed in accordance with their provisions and of applicable law. The Bylaws
of MergerCo on the date hereof shall continue as its Bylaws until amended or
appealed in accordance with their provisions, and the provisions of the Articles
of Incorporation and of applicable law. The directors and officers of MergerCo
on Closing Date will be the directors and officers, respectively, of MergerCo on
and after the Closing Date until expiration of their current terms and until
their successors are elected and qualify or their prior resignation, removal or
death, subject to the Articles of Incorporation and Bylaws of MergerCo.
2.7 Post-Closing Adjustments.
(a) The Company has provided to MergerCo a written statement (the
"Working Capital Statement") set forth in Schedule 2.7(a) of the Disclosure
Statement. The Working Capital Statement sets forth the projected cash
requirements of MergerCo and the Company Subsidiaries, exclusive of the
obligations set forth in Sections 2.7(b), (d), (f) and (g) hereof, for the 120
days following the Closing. The Shareholders represent that the Working Capital
Advance (as defined below) is sufficient, when combined with post-Closing cash
collections of post-Closing revenue, to enable MergerCo and the Company
Subsidiaries to carry on business operations independently of NIM and pay all
overhead costs previously paid by the Company and the Company Subsidiaries in
the ordinary course of business and in a manner consistent with the Company's
past practice, exclusive of the obligations set forth in Sections 2.7(b), (d),
(f) and (g) hereof, from January 1, 2006 until April 1, 2006.
(b) Immediately prior to the Closing, the Shareholders shall have
caused the Company to pay the accounts payable and accrued liabilities, if any,
of the Company and the Company Subsidiaries ("Closing Date Payables"), except
for (i) such Closing Date Payables as are listed on Schedule 2.7(b) of the
Disclosure Statement (the " Employee Payables"), which consist solely of accrued
regular payroll for the period ended December 31, 2005 (payable January 5,
2006), (ii) such Closing Date Payables as are listed on Schedule 2.7(b) of the
Disclosure Statement, which consist solely of bonuses payable in January 2006 to
the Shareholders (the "January Shareholder Payables"), (iii) such Closing Date
Payables as are listed on Schedule 2.7(b) of the Disclosure Statement, which
consist solely of bonuses payable on or before the 75th day following the
Closing to the Shareholders and such other employees as the Shareholders shall
determine in their sole and absolute discretion (the "March Payables") and (iv)
such Closing Date Payables consisting of payroll taxes and deductions and other
liabilities ("Other Liabilities") listed on Schedule 2.7(b) (collectively, the
"Remaining Payables"). From and after the Closing Date, MergerCo shall not take
any action to rescind, reverse or eliminate any of the Employee Payables,
January Shareholder Payables, March Payables, or the Other Liabilities other
than by payment, except to the extent that funds are not available from Closing
Date Cash, from collections of Closing Date Receivables, Stale Receivables, and
Fees Receivable and from the Receivables Deposit (all as defined below) to
discharge the Employee Payables, the January Shareholder Payables, the March
Payables and the Other Liabilities.
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(c) At Closing, the Shareholders will loan one hundred thousand
dollars ($100,000) to the Company (the "Working Capital Advance"). The Working
Capital Advance, reduced by any Closing Date Payables that are either unpaid as
of the Cash Advance Repayment Date (as defined below) or not disclosed on
Schedule 2.7(b), and increased by any Closing Date assets not listed on Schedule
2.7(d) to the Disclosure Statement, shall be returned by MergerCo to the
Shareholders on April 1, 2006 (the "Cash Advance Repayment Date") except to the
extent necessary for MergerCo to have not less than $50,000 of cash on that date
(excluding the Receivables Deposit) after giving effect to repayment of the
Working Capital Advance and after having paid its accounts payable and accrued
liabilities as and when due. If MergerCo does not have at least $50,000 of cash
(excluding the Receivables Deposit) on the Cash Advance Repayment Date, or if
payment of its accounts payable and accrued liabilities have not been made on a
current basis as of that date, then the unpaid portion of the Working Capital
Advance shall be repaid on the first Business Day thereafter that MergerCo has
not less than $50,000 of cash (excluding the Receivables Deposit) after giving
effect to repayment of the Working Capital Advance and MergerCo has paid its
accounts payable and accrued liabilities as and when due. Unless and until the
Working Capital Advance is repaid, MergerCo and the Company Subsidiaries shall
make no payment of any nature whatsoever to NIM or any of its Affiliates except
with respect to payments made by NIM or its Affiliates to third parties on
behalf of MergerCo and the Company Subsidiaries in the ordinary course of
business.
(d) In addition, immediately prior to Closing, the Company shall
have retained an amount of cash ("Closing Date Cash"), Accounts Receivable
("Closing Date Receivables"), amounts billed and owed but written off for
accounting purposes ("Stale Receivables"), commissions and fees earned but not
yet billed or collected ("Fees Receivable") and amounts listed as "Prepaid
Assets" on Schedule 2.7(d) and the "Security Deposit" on Schedule 2.7(d) (the
Prepaid Assets and the Security Deposit referred to collectively as "Other
Assets") (which Closing Date Cash, Closing Date Receivables, Stale Receivables,
Fee Receivables and Other Assets are collectively referred to as the "Retained
Assets") which, together with the Receivables Deposit, are sufficient to
discharge or offset the Employee Payables, the January Shareholder Payables, the
March Payables, and the Other Liabilities. Such Retained Assets are listed on
the Schedule 2.7(d) to the Disclosure Statement.
(e) In addition, at Closing, the Shareholders shall deposit with the
Company the sum of $100,000 (the "Receivables Deposit").
(f) After the Closing Date, MergerCo shall exercise its commercially
reasonable efforts to collect the Closing Date Receivables, Stale Receivables
and Fees Receivable. MergerCo shall apply the receipts from such collections,
the Closing Date Cash and, to the extent necessary, the Receivables Deposit to
only the Employee Payables, the January Shareholder Payables and the March
Payables and, to the extent not offset by Other Assets, to Other Liabilities.
The balance, if any, of the Receivables Deposit shall be released to the
Shareholders when the following conditions are satisfied: (1) all of the
Remaining Payables are paid or are offset by the Other Assets, and (2) the
conditions for repayment of the Working Capital Advance have been met. Promptly
following the satisfaction or offsetting of the Remaining Payables and
fulfillment of the conditions for repayment of the Working Capital Advance as
set forth above, MergerCo will pay any surplus Closing Date Cash and receipts
from collection of the Closing Date Receivables, Stale Receivables and Fees
Receivable, first, in repayment of the unreturned portion of the Receivables
Deposit, second, to repayment of any unpaid portion of the Working Capital
Advance, with any balance in equal shares to Holland and Xxxx. If, at any time
after the Closing Date, the Remaining Payables are satisfied, then upon request
of the Shareholders, MergerCo will assign any of the remaining Closing Date
Receivables to the Shareholders, in equal shares. MergerCo shall not be required
in connection with its efforts to collect the Closing Date Receivables, Stale
Receivables and Fees Receivable to institute any action, suit or proceeding, or
incur any cost or expense, or to take any action other than normal and customary
collection procedures but the Shareholders may, if they wish and at their
expense, take any such action on behalf of and in the name of MergerCo. Except
to the extent that any surplus Receivables Deposit is not returned to the
Shareholders in accordance with this Section or that any uncollected Closing
Date Receivables are not assigned to the Shareholders in accordance with this
Section, MergerCo shall bear no liability to the Shareholders for any
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uncollected Closing Date Receivables, Stale Receivables, or Fee Receivables.
Notwithstanding anything herein to the contrary, any portion of the Receivables
Deposit (as the same may be increased at the option of the Shareholders as set
forth in Section 2.7(h) below) used to satisfy any unpaid Employee Payables,
January Shareholder Payables and March Payables shall not be refunded to the
Shareholders until the first to occur of (i) collection of sufficient Closing
Date Receivables, Stale Receivables and Fees Receivable to replenish the
Receivables Deposit and (ii) payment of all of the Employee Payables, January
Shareholder Payables, and March Payables. Notwithstanding anything contained
herein to the contrary, MergerCo will use and apply the Closing Date Cash, the
Closing Date Receivables, the Stale Receivables, and the Fees Receivable and any
proceeds of such Remaining Assets only as set forth in Section 2.7(b) - (g),
inclusive. The parties acknowledge that the assets and liabilities listed on
Schedules 2.7(b) and 2.7(d) may be subject to adjustment to reflect
circumstances as of the close of business on the Closing Date, provided that
MergerCo is satisfied that the Retained Assets are sufficient to discharge and
offset the Closing Date Payables.
(g) MergerCo will pay the Employee Payables consisting of regular
payroll on January 5, 2006. To the extent that the Closing Date Cash and
proceeds from the Closing Date Receivables, Stale Receivables and Fees
Receivable and, if required, the Receivables Deposit in accordance with Section
2.7(f) above are available, MergerCo will pay the January Shareholder Payables
on or before January 15, 2006 and will pay the March Payables on or before the
75th day following the Closing.
(h) The Shareholders shall have the right, upon prior written notice
to NIM, to increase the Receivables Deposit for the purpose of satisfying the
Remaining Payables if sufficient funds from collection of Closing Date
Receivables, Stale Receivables and Fees Receivable and from the Receivables
Deposit are not available on the due dates for payment of such Remaining
Payables.
(i) The parties acknowledge and agree that the signature of the
Chief Operating Officer of NIM shall be required for all expenditures and
payments of MergerCo in excess of five thousand dollars ($5,000). Subject to the
foregoing signature requirement, at the request of the Shareholders, MergerCo
shall open or retain separate bank accounts for the administration of funds
under this Section 2.7.
2.8 Piggyback Registration of Registrable Securities. NIM shall effect the
registration of the Holland Merger Shares and the Xxxx Merger Shares to the
extent then held by them ("Registrable Securities"), as follows:
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(a) If at any time NIM proposes to register any NIM Common Stock
under the Securities Act of 1933, as amended (the "Securities Act"), either for
its own account or for the account of others, on a registration form that would
also permit the registration of the Registrable Securities (or any NIM Shares
received by the Shareholder arising from a stock dividend, stock split,
reorganization, reclassification, merger, exchange or similar occurrence) (other
than a registration covering NIM Shares issued pursuant to an employee benefit
plan, or a registration on Form S-4 for the purpose of offering such securities
to another business entity or the shareholders of such entity in connection with
the acquisition of assets or shares of capital stock, respectively, of such
entity), NIM shall, each such time, promptly give each Shareholder written
notice of such proposal. Within 30 days after such written notice is given, each
Shareholder shall give notice to NIM as to the number of shares of the
Registrable Securities, if any, which such Shareholder requests to be registered
simultaneously with such registration by NIM. Subject to (i) any restrictions as
may be imposed by Laurus Master Fund, Ltd. or its affiliates or assignees
(collectively, "Laurus") pursuant to that certain Amended and Restated
Registration Rights Agreement, dated as of November 30, 2005 (the "November 30
Agreement"), as thereafter amended or supplemented (provided that such amendment
or supplement is not more restrictive than the November Agreement in permitting
other parties to participate in Laurus' registration statement as selling
stockholders), NIM shall include in such registration statement the Registrable
Securities that each Shareholder requests to be registered under the Securities
Act and shall take such actions as shall be necessary to maintain the
effectiveness of such registration for a period of two hundred seventy (270)
days. In the event that the Shareholders are restricted from participating in
Laurus' registration statement (the "Laurus Registration Statement") as selling
stockholders, then NIM shall file with the SEC a separate registration statement
for the Registrable Securities within sixty (60) days of the effective date of
the Laurus Registration Statement.
(b) Notwithstanding the foregoing, if such registration statement
was initiated by NIM to effect a public offering of its securities and, if at
any time after giving written notice of its intention to so register securities
and before the effectiveness of the registration statement filed in connection
with such registration, NIM determines for any reason either not to effect such
registration, to reduce the number of shares subject to such registration, or to
delay such registration, NIM may, at its election, by prior written notice to
each Shareholder: (i) in the case of a determination not to effect registration,
relieve itself of its obligation to register the Registrable Securities in
connection with such registration; or (ii) in the case of a determination to
reduce the number of shares subject to such registration, effect a reduction in
the number of Registrable Securities to such quantity as NIM determines in its
sole discretion will not jeopardize the success of the offering; or (iii) in the
case of a determination to delay registration, delay the registration of the
Registrable Securities for the same period as the delay registration of such
other securities. Each Shareholder may, at any time before the effective date of
the registration statement relating to such registration, revoke such request by
written notice of such revocation to NIM, in which case NIM shall cause the
Registrable Securities to be withdrawn from such registration statement.
(c) In connection with any registration of Registrable Securities,
each Shareholder and the Company shall enter into indemnification arrangements
customary for a registration of this nature.
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Article III
CLOSING
3.1 The Closing. The closing of the Merger and the other transactions
contemplated hereby (the "Closing") shall take place at 10:00 a.m. local time on
January 4, 2006 or on such other date and time as may be agreed to in writing by
MergerCo and the Shareholders (the "Closing Date"), at the offices of MergerCo's
counsel, Xxxxx Xxxxxx Xxxxxxxx & Xxxxxx, LLP or such other location as may be
agreed to in writing by MergerCo and the Shareholders. All transactions
contemplated hereunder to occur on the Closing Date shall be deemed to have
occurred simultaneously at 12:01 a.m. as of January 1, 2006.
3.2 Deliveries by the Shareholders. At the Closing and subject to the
terms, provisions and conditions contained herein, the Shareholders shall and
shall cause the Company to take all actions and do all things necessary to
deliver the Shares to MergerCo, free and clear of any and all Liens, and to
consummate the transactions contemplated hereby, including, without limitation,
delivery or causing to be delivered to MergerCo the following:
(a) the Holland Shares, as evidenced by certificates nos. 1 and 5;
(b) the Xxxx Shares, as evidenced by certificates nos. 2 and 6;
(c) the Holland Non-Competition Agreement, executed by Holland;
(d) the Xxxx Non-Competition Agreement, executed by Xxxx;
(e) the Holland Employment Agreement, executed by Holland;
(f) the Xxxx Employment Agreement, executed by Xxxx;
(g) a certificate dated as of the Closing Date, executed by the
Secretary of the Company, certifying that attached thereto are true, correct and
complete copies of the Certificate of Incorporation and By-Laws of the Company;
(h) a certificate dated as of the Closing Date, executed by the
Secretary of each Company Subsidiary, certifying that attached thereto are true,
correct and complete copies of the Certificate of Incorporation and By-Laws of
such Company Subsidiary;
(i) executed originals of all Required Consents and all consents and
Authorizations necessary or required to be obtained in order to consummate the
transactions contemplated hereby;
(j) evidence satisfactory to NIM of the payment by the Company of
all Taxes due and payable as of the Closing Date;
(k) all of the Company's and the Company Subsidiaries' books,
records and other data and materials (by giving NIM access to the Company
office);
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(l) the Working Capital Statement, certified by the President of the
Company;
(m) such other certificates, documents, receipts and instruments as
NIM, MergerCo or its legal counsel may reasonably request that entails no
material expense or obligation to the MergerCo, the Subsidiaries or the
Shareholders.
3.3 Deliveries by MergerCo. At the Closing and subject to the terms,
provisions and conditions contained herein, MergerCo shall deliver to the
Shareholders the following:
(a) the Holland Merger Cash and the Xxxx Merger Cash;
(b) the Holland Merger Shares and the Xxxx Merger Shares;
(c) a certificate dated as of the Closing Date, executed by an
officer of MergerCo certifying that attached thereto is a true, correct and
complete copy of the resolutions adopted by the board of directors of MergerCo
relating to authorizing the execution, delivery and performance of this
Agreement and the other documents referenced in this Section 3.3 (including
subsections) and the consummation of the transactions contemplated hereby and
thereby and the incumbency of the officers of MergerCo executing this Agreement
and the other documents referenced in this Section 3.3 (including subsections);
and
(d) the Non-Competition Agreement, executed by MergerCo;
(e) the Holland Employment Agreement, executed by MergerCo;
(f) the Xxxx Employment Agreement, executed by MergerCo; and
(g) such other certificates, documents, receipts and instruments as
the Company, the Shareholders or their legal counsel may reasonably request that
entails no material expense or obligation to NIM or MergerCo.
Article IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, jointly and severally, hereby represent and
warrant to NIM as follows:
4.1 Capitalization; Ownership of Shares; No Liens on Shares.
(a) The authorized capital stock of the Company consists of 1,000
shares of common stock, no par value, of which four hundred fifty (450) shares
are issued and outstanding, two hundred twenty-five (225) of which are held
beneficially and of record by Holland, free and clear of all Liens, two hundred
twenty-five (225) of which are held beneficially and of record by Xxxx, free and
clear of all Liens. The Holland Shares and the Xxxx Shares represent one hundred
percent (100%) of the issued and outstanding capital stock of the Company. All
such issued and outstanding Shares are duly authorized, validly issued, fully
paid and nonassessable. None of the Shares were issued or will be transferred
under this Agreement in violation of any preemptive or preferential rights of
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any Person. There are no options, warrants, calls, subscriptions, conversions or
other similar rights, agreements or commitments to acquire from the Company or
the Shareholders any shares of capital stock or any other securities convertible
into, exchangeable for or evidencing the right to subscribe for any shares of
capital stock of the Company; none of the Shares are subject to any restrictions
on transfer thereof; and each Shareholder has the full power and authority to
convey, and will convey to Purchaser at Closing, good and marketable title to
such Shareholder's Shares, free and clear of all Liens.
(b) The authorized capital stock of each Company Subsidiary, and the
number of issued and outstanding shares of capital stock of each Company
Subsidiary, is set forth on Schedule 4.1(b) of the Disclosure Statement. All of
the issued and outstanding shares of each Company Subsidiary ("Company
Subsidiary Shares") are owned beneficially and of record by the Company, free
and clear of all Liens. All such issued and outstanding Company Subsidiary
Shares are duly authorized, validly issued, fully paid and nonassessable. None
of the Company Subsidiary Shares were issued or will be transferred under this
Agreement in violation of any preemptive or preferential rights of any Person.
There are no options, warrants, calls, subscriptions, conversions or other
similar rights, agreements or commitments to acquire from the Company or the
Shareholders any shares of capital stock or any other securities convertible
into, exchangeable for or evidencing the right to subscribe for any shares of
capital stock of any Company Subsidiary; and none of the Company Subsidiary
Shares are subject to any restrictions on transfer thereof; the Company has the
full power and authority to convey, and will convey to Purchaser at Closing,
good and marketable title to such the Company Subsidiary Shares, free and clear
of all Liens.
t 6 0 4.2 Organization; Good Standing. The Company and each Company
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania, and has the power
and authority to own and lease its assets and properties and to conduct the
Business as it is now being conducted. The Company and each Company Subsidiary
is duly qualified or licensed to do business and is in good standing as a
foreign corporation under the laws of those jurisdictions listed on Schedule 4.2
of the Disclosure Statement, constituting each jurisdiction in which the conduct
of the Business or the ownership or leasing of its assets and properties
requires such qualification. Attached to Schedule 4.2 of the Disclosure
Statement are true, correct and complete copies of the Certificate of
Incorporation, as amended, certified by the Secretary of State of the
Commonwealth of Pennsylvania, and the By-Laws of the Company and each Company
Subsidiary.
4.3 Authority; Enforceability. Each Shareholder and the Company have the
requisite legal capacity to execute, deliver and perform, as applicable, this
Agreement, the Holland Employment Agreement, the Xxxx Employment Agreement and
the Non-Competition Agreements to which such Person is, or will be, a party.
This Agreement has been duly executed and delivered by each Shareholder and the
Company and this Agreement constitutes the legal, valid and binding obligations
of the Shareholders and the Company, enforceable against the Shareholders and
the Company in accordance with its terms.
4.4 No Conflict.
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(a) Except as set forth on Schedule 4.4(a) of the Disclosure
Statement, the execution, delivery and performance of this Agreement by the
Company and the Shareholders and the consummation of the transactions
contemplated hereby do not and will not (i) violate or conflict with any
provision of the Certificate of Incorporation and the By-Laws of the Company or
of any Company Subsidiary; (ii) violate, conflict with, result in a breach of or
constitute (with or without notice or lapse of time or both) a default under,
give rise to a right of termination, amendment or cancellation of, accelerate
the performance required by, or result in any payment under, any Contract,
instrument or other writing of any nature whatsoever to or by which the Company,
any Company Subsidiary or either Shareholder is a party or is bound, or to which
the Business is subject; (iii) violate, conflict with or result in a breach of
any Legal Requirement; or (iv) result in the creation of any Lien on any of the
Company's or any Company Subsidiary's assets.
(b) Except as set forth in Schedule 4.4(a) the execution, delivery
and performance by the Shareholders of this Agreement, their respective
Employment Agreements and Non-Competition Agreements, and the consummation of
the transactions contemplated hereby and thereby, and the execution, delivery
and performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby, do not and will not (i) violate, conflict
with, result in a breach of or constitute (with or without notice or lapse of
time or both) a default under, give rise to a right of termination, amendment or
cancellation of, accelerate the performance required by, or result in any
payment under, any Contract, instrument or other writing of any nature
whatsoever to or by which either Shareholder, the Company or any Subsidiary
Company is a party or bound, or by which any of the Company's assets, any of the
Company Subsidiaries' assets or the Business is subject; (ii) violate, conflict
with or result in a breach of any Legal Requirement applicable to either
Shareholder or to the Company or any Company Subsidiary; or (iii) result in the
creation of any Lien on any of the Company's assets or any Company Subsidiary's
assets.
4.5 Litigation; Compliance with Law.
(a) Schedule 4.5(a) of the Disclosure Statement contains a true,
complete and correct list of all actions, suits, proceedings (including, without
limitation, all arbitrations and alternative dispute resolution proceedings), or
governmental investigations pending or, to the best knowledge of the
Shareholders, threatened against the Company or any of its properties or assets
or any of the Company's officers, directors or employees or the Shareholders
which in any way arises out of or relates to the Business or any of the
Company's assets, in each case, at any time during the last three (3) years.
Except as set forth in Schedule 4.5(a) of the Disclosure Statement, there is no
claim, action, suit, proceeding (including, without limitation, all arbitrations
and alternative dispute resolution proceedings) or governmental investigation
before any court, arbitrator or Governmental Entity or Regulatory Authority
pending or, to the best knowledge of the Shareholders, threatened against the
Company or the Shareholders or which relates to or arises out of the Business or
any Legal Requirement relating to the Business, the Company's relationships with
any of its customers or the transactions contemplated by this Agreement, nor
does the Company or the Shareholders have any knowledge of any reasonably likely
basis or set of circumstances for any such action, suit, proceeding, claim or
investigation: (i) the result of which could materially and adversely affect the
Business, the Company's relationships with any of its customers or the
transactions contemplated hereby; (ii) questions the validity of this Agreement;
(iii) could impair the ability of the Shareholders to consummate the
transactions contemplated hereby; (iv) could adversely affect and impact
MergerCo's rights to, or enjoyment of, the Company's assets and the Business
following the Closing; or (v) seeks to delay, prohibit, or restrict in any
manner any action contemplated hereby. Neither Shareholder has any claims of any
nature against the Company or any Company Subsidiary, other than as disclosed in
this Agreement or the Disclosure Statement and except for the obligations of
MergerCo set forth in the Holland Employment Agreement and the Xxxx Employment
Agreement.
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(b) Except as set forth on Schedule 4.5(b) of the Disclosure
Statement, none of the Company's assets or the Company or any of the Company's
officers, directors or employees or the Shareholders, in each case with respect
to the Business or the Company's assets, is subject or a party to, or bound by
or otherwise affected by, any judgment, order, decree, restraint or other
directive of or stipulation with any court or other Governmental or Regulatory
Authority or tribunal, or in violation of any other Legal Requirement, and the
Shareholders have no knowledge of any reasonable basis for a claim that such a
violation exists. The Shareholders are not aware of any proposed Legal
Requirement that might affect any of the operations or prospects of the Business
or any of the Company's assets.
(c) The Shareholders have furnished, or have caused the Company to
furnish, to MergerCo true, correct and complete copies of (i) all pleadings in,
and material correspondence with respect to, the actions, suits, proceedings,
claims or governmental investigations set forth on Schedule 4.5(a) of the
Disclosure Statement, (ii) responses to accountant audit inquiry letters from
attorneys with respect to the Company since 2002; and (iii) insurance company
loss run reports indicating the claim experience of the Company in respect of
personal injury, worker's compensation, general liability, errors and omissions
and automobile liability claims for the period during the three (3) years
preceding the Closing Date.
(d) Neither the Company nor the Shareholders are in violation of any
federal, state or local statute, law, regulation, ordinance or administrative
order affecting the operation of the Business. No complaints have been filed
with any Governmental Agency or Regulatory Authority, or threatened in writing,
against the Company or its Affiliates of either Shareholder within the past
thirty-six (36) months. Neither the Company nor the Shareholders have received
any written or oral notice or demand relating to a violation or claimed
violation under any applicable federal, state or local laws, rules, ordinances,
policies or regulations.
(e) For purposes of this Section 4.5, references to the "Company"
shall be deemed to include each Company Subsidiary.
4.6 Consents; Third Party Options.
(a) Except as set forth in Schedule 4.6 of the Disclosure Statement
(the "Required Consents"), no filing or registration with, notice to or
authorization, consent or approval or other action (including, without
limitation, the grant of any waiver) of any Governmental Entity or Regulatory
Authority or any other Person is required to be obtained by the Company, any
Company Subsidiary or the Shareholders in connection with (i) the Merger; (ii)
the execution, delivery and performance of this Agreement and the consummation
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of the transactions contemplated hereby and thereby; and (iii) following the
Closing, the enjoyment and possession by MergerCo of all of the rights and
privileges with respect to the Company's assets (including, without limitation,
the Company Subsidiary Shares) and the Business which the Company has enjoyed or
possessed prior to the Closing, including, without limitation, all rights and
privileges under existing Contracts with clients and customers.
(b) There are no existing Contracts, options, commitments with or
rights granted to any Person to acquire (whether directly by merger, or
otherwise) the Business or any of the Company's or any Company Subsidiary's
assets or any interest therein.
4.7 No Subsidiaries. Except as set forth in Schedule 4.7 to the Disclosure
Statement, neither the Company nor any Company Subsidiary owns, directly or
indirectly, any shares of capital stock of any corporation or any equity
investment in any Person, limited liability company, partnership, association or
other business organization.
4.8 Financial Statements. Attached as Schedule 4.8 to the Disclosure
Statement are true and complete copies of (i) the audited combined balance
sheets of the Company as of February 28, 2005 and 2004, and the related combined
statements of operations, stockholders' equity and cash flows (together with the
related notes) for the years ended February 28, 2005 and 2004, as audited by
Xxxxxxxx Xxxxxx Xxxxx LLP, and (ii) the unaudited combined balance sheet and the
related statement of income as of and for the period beginning March 1, 2005 and
ended December 31, 2005 (all of the foregoing, collectively, the "Financial
Statements"). The Financial Statements (x) fairly present the financial position
of the Company as of the dates thereof and the results of its operations, cash
flows and stockholders' equity for each of the periods then ended in all
material aspects; (y) except for the fact that the unaudited financial
statements omit notes to such statements, have been prepared in accordance with
GAAP. Except as set forth on Schedule 4.8 of the Disclosure Statement, all
accounts receivable are bona fide.
4.9 Absence of Undisclosed Liabilities.
(a) The Company and the Company Subsidiaries have no liabilities or
obligations, except those set forth or adequately reserved against on the
balance sheets contained in the Financial Statements (or disclosed in the notes
thereto), other than those incurred in the ordinary course of business and in a
manner consistent with past practices.
(b) All capital expenditures of the Company and the Company
Subsidiaries from and after March 1, 2005 are set forth on Schedule 4.9(b) of
the Disclosure Statement. All liabilities and obligations of the Company and the
Company Subsidiaries incurred since March 1, 2005 have been incurred in the
ordinary course of business, in a manner consistent with past practice and are
not materially adverse to the assets, operations or prospects of the Company or
any Company Subsidiary. The Shareholders have no knowledge of any basis for the
assertion against the Company or any Company Subsidiary of any other liability
or loss contingency. For purposes of this Section 4.9(b), all references to
liabilities shall include, without limitation, all liabilities, whether direct
or indirect, absolute, contingent or matured, known or unknown, asserted or
unasserted, and liquidated or unliquidated.
-21-
4.10 No Material Adverse Change. Except as set forth on Schedule
4.10,since March 1, 2005, the Company and each Company Subsidiary has operated
in the ordinary course of business, and there has been no material adverse
change in the business, operations, properties, assets, liabilities,
commitments, earnings, financial condition or prospects of such entity, except
as specifically disclosed in the footnotes, if any, to the Financial Statements.
Without limiting the foregoing, since March 1, 2005, the Company has not, and
each Company Subsidiary has not:
(i) suffered any damage, destruction or loss of physical
property (whether or not covered by insurance) in excess of $25,000;
(ii) incurred or agreed to incur any indebtedness for borrowed
money;
(iii) suffered any substantial loss or waived any substantial
right;
(iv) sold, transferred or otherwise disposed of, or agreed to
sell, transfer or otherwise dispose of, any assets other than in the ordinary
course of business;
(v) mortgaged, pledged or subjected to any charge, lien, claim
or encumbrance, any of its properties or assets;
(vi) increased, or agreed to increase, the compensation or
bonuses or special compensation of any kind of any of its officers, employees or
agents, other than normal merit and/or cost-of-living increases pursuant to
customary arrangements consistently followed, or adopted or increased any
benefit under any insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any such officer, employee or agent;
(vii) lost any material customer or client or knows of any
threatened cancellation of a customer or client relationship; or
(viii) entered into any transaction not in the ordinary course
of its business.
4.11 Taxes.
(a) For purposes of this Section 4.11(a), references to the
"Company" shall be deemed to include the Company and each Company Subsidiary.
(i) The Company has duly and timely (A) filed with the
appropriate Governmental Entity and Regulatory Authority all Tax Returns
required to be filed by, including or relating to the Company, its income,
operations, payroll and business, with respect to all periods ending on or prior
to the date hereof, which Tax Returns are materially true, correct and complete;
and (B) paid the amount of Tax showing as payable on such Tax Returns for all
periods ending on or prior to the Closing Date.
(ii) The Company has duly and timely paid all Taxes due and
payable on or before the date hereof and properly accrued on the Financial
Statements and books and records in accordance with GAAP all Taxes in respect of
all periods up to and including the date hereof that are not yet payable and has
not incurred any liability for Taxes that was not fully reflected or properly
accounted for on the Financial Statements.
-22-
(iii) Each Shareholder represents and warrants that no Tax
Liens filings have been made against such Shareholder and that no Tax
proceedings by any Governmental Entity or Regulatory Authority are pending with
respect to, or threatened in writing against, such Shareholder which involve
amounts of Tax in excess of $10,000.
(iv) The Company has complied in all material respects with
all applicable Legal Requirements, rules, and regulations relating to the
collection, withholding and payment of Taxes. No Governmental Entity or
Regulatory Authority has proposed, asserted or assessed (tentatively or
otherwise) any adjustment that could result in an additional Tax for which the
Company is or may be liable or which could result in a Lien on any of the
Company's assets that has not been finally settled and fully paid. There is no
pending, proposed or, to the knowledge of the Company and the Shareholders,
threatened audit, examination, investigation, dispute, deficiency assessment,
refund litigation, claim, or other administrative or judicial proceeding
relating to any Tax for which the Company is or may be liable and which could
result in a Lien on any of the Company's assets.
(v) None of the Company's assets is "tax-exempt use property"
or "tax-exempt bond-financed property" within the meaning of Section 168(g) and
(h), respectively, of the Code.
(vi) There are no closing agreements within the meaning of
Section 7121 of the Code or any similar provision of applicable law, ruling
requests, requests to consent to change a method of accounting, Code Section 481
adjustments, subpoenas or requests for information with or by any Governmental
Entity or Regulatory Authority that could reasonably be expected to affect any
Tax for which the Company or either Shareholder is or may be liable and which
could result in a Lien on any of the Company's assets.
(vii) Schedule 4.11(a)(vii) of the Disclosure Statement sets
forth a list of each jurisdiction in which the Company files or is presently
required to file a Tax Return and the type of Tax Return filed, and except as
set forth thereon, no Governmental Entity or Regulatory Authority where such
entity does not file a Tax Return with respect to a particular Tax has made a
claim or assertion that such entity is subject to such Tax in such jurisdiction
or is required to file a Tax Return with respect to such Tax in such
jurisdiction. Federal Income Tax Returns of the Company have been audited and
the audits thereof completed or the statute of limitations has run for all
fiscal years ending on or prior to February 28, 1997.
(viii) All applicable sales taxes and use taxes due in
connection with the Company's assets and leased properties (including those set
forth on the balance sheets contained in the Financial Statements and those
fixed assets or leases acquired from that date through the Closing Date) have
been paid in full.
(b) Schedule 4.11(b) of the Disclosure Statement sets forth a list
of each state in which the Company conducts business or operations or has
employees or assets.
-23-
(c) Neither the Company nor any Company Subsidiary has engaged in
any transaction that is a "tax shelter" as defined in Section 6111 of the Code.
4.12 Personal Property. Except as set forth on Schedule 4.12 of the
Disclosure Statement, the Company and each Company Subsidiary has good, valid
and marketable title to or, in the case of leases and licenses, valid and
subsisting leasehold interests or licenses in, all of its properties and assets
of whatever kind (whether real, personal, mixed, tangible or intangible), in
each case free and clear of any and all Liens. All assets, properties and rights
relating to the Business of the Company and the Company Subsidiaries are owned
by the Company and the Company Subsidiaries, as the case may be, and neither the
Shareholders nor any of the Shareholders' respective Affiliates or family
members has any ownership interest therein. The Company's and each Company
Subsidiary's assets (including, without limitation, the facilities, furniture
and office equipment of such entities) that are owned, together with those used
or occupied under lease or used under license, are free from material defects,
are in good operating condition and a good state of maintenance and repair,
subject only to normal wear and tear in the ordinary course of business, and are
suitable for the continued conduct of the Business in a manner consistent with
past practices. The Company's and the Company Subsidiaries' assets include all
rights and property necessary for the conduct of the Business by MergerCo in the
manner it is presently conducted by the Company and the Company Subsidiaries.
4.13 Real Property.
(a) Neither the Company nor any Company Subsidiary owns any real
property.
t 12 (b) The Company has a valid leasehold interest in the real property
described in the Office Lease, free and clear of all Liens, and the Office Lease
is in full force and effect and enforceable in accordance its terms. The rent
and other charges payable under the Office Lease are consistent with market
rates at the time when the Office Lease was executed. A true, correct and
complete copy of the Office Lease (including, without limitation, all amendments
and subleases, if applicable) is attached to the Disclosure Statement as
Schedule 4.13. The Company has not assigned, pledged or otherwise transferred,
and has not sublet the premises demised by such Office Lease or granted to any
Person the right to possession, use or occupancy of the premises leased
thereunder. No event has occurred or failed to occur which (with the giving of
notice or the passage of time, or both) would constitute a default under the
Office Lease. No brokerage commissions are payable by the Company and/or the
Shareholders with respect to the Office Lease.
4.14 Fixed Assets; Personal Property Leases.
(a) Schedule 4.14(a) of the Disclosure Statement contains a true,
complete and correct list and brief description of the fixed assets of the
Company and each Company Subsidiary including equipment, computers, furniture,
leasehold improvements, vehicles and other items of personal property owned,
used or leased by the Company and each Company Subsidiary and all interests
therein which are part of the Company's assets ("Fixed Assets"). The Company and
each Company Subsidiary has good, valid and marketable title to its Fixed
Assets, free and clear of any and all Liens, except for those Liens set forth on
Schedule 4.14(a) of the Disclosure Statement. All of the Fixed Assets are in
good operating condition, state of maintenance and repair and working order,
subject to normal wear and tear.
-24-
(b) Schedule 4.14(b) of the Disclosure Statement sets forth a list
(including, without limitation, all amendments) of all leases of personal
property to which the Company or any Company Subsidiary is a party (the
"Personal Property Leases"), including, without limitation, the dates of the
Personal Property Leases, the personal property leased thereunder, the name of
the lessees and lessors, the commencement date and expiration date of such
Personal Property Leases, the annual rent payable by the lessee under such
Personal Property Leases, the security deposited with the lessor or sublessor
under any such Personal Property Lease and the amount of the purchase option
under any such Personal Property Lease. Attached to Schedule 4.14(b) of the
Disclosure Statement are true, correct and complete copies of the Personal
Property Leases. The Personal Property Leases are in full force and effect and,
to the best knowledge of the Shareholders, are enforceable in accordance with
their respective terms with respect to the counterparties thereto. Except as set
forth in Schedule 4.14(b) of the Disclosure Statement, the Personal Property
Leases have not been amended or modified. Neither the Company nor any Company
Subsidiary has assigned, pledged or otherwise transferred, or subjected, by
consent or sufferance, to any Lien, any of its rights under any Personal
Property Lease and the Company, nor has it granted any rights to sublet any
Personal Property Lease. The Company and each Company Subsidiary, as he case may
be, is in possession of all the personal property that is subject to the
Personal Property Leases. No event has occurred or failed to occur which (with
the giving of notice or the passage of time or both) would constitute a default
under any Personal Property Lease, and to the knowledge of the Shareholders no
such default is threatened. No lessor or lessee under any Personal Property
Lease has notified the Company, any Company Subsidiary or the Shareholders of
the exercise of any option or right to: (i) cancel or terminate such Personal
Property Lease or shorten the term thereof; (ii) lease additional personal
property; or reduce or relocate the personal property leased under such Personal
Property Lease; (iii) purchase any personal property subject to a Personal
Property Lease; or (iv) renew or extend such Personal Property Lease. The
Company's and each Company Subsidiary's equipment and other personal property
(whether leased or owned) are in good operating condition and repair, subject to
ordinary wear and tear.
4.15 Intellectual Property Matters. Set forth on Schedule 4.15 of the
Disclosure Statement is a list of the Intellectual Property Rights, specifying
as to each, as applicable: (i) the nature of the Intellectual Property Right;
(ii) the user of the Intellectual Property Right; (iii) all licenses,
sublicenses and other agreements (true, correct and complete copies of any such
licenses, sublicenses or other agreements are attached to Schedule 4.15)
relating in any manner to any Intellectual Property Right; and (iv) the filing
and registration information with respect to each Intellectual Property Right
that is registered with the United States Patent and Trademark Office, the
United States Copyright Office, or any other Governmental Authority or
Regulatory Authority. There are no trade secrets, inventions, technology,
proprietary processes, formulae or information that are owned by the Company or
the Shareholders or any of their respective Affiliates or family members, or any
Key Employees, which are used in or in connection with the Business that are not
set forth on Schedule 4.15 of the Disclosure Statement. There are no royalties,
fees or other amounts payable by or to the Company with respect to any of the
Intellectual Property Rights. The Company's prior use of the Intellectual
-25-
Property Rights has not, and the Company's present use of the Intellectual
Property Rights does not, infringe or otherwise violate any rights (including,
without limitation, rights of privacy) of any Person, and neither Shareholder
has received any notice of a claim of infringement or knows of any reasonable
basis for a claim that such an infringement or violation exists. The Company has
ownership of (free and clear of any and all Liens) or rights by license, lease
or other agreement to use (free and clear of any and all Liens) without the
payment of any fees or the incurrence of any costs) the Intellectual Property
Rights that are necessary to permit the use of the Company's assets and to
conduct its Business. Neither the Shareholders nor any of the Shareholders'
Affiliates or family members or any present or former employee of the Company
owns or has a propriety or financial interest, directly or indirectly, in any of
the Intellectual Property Rights. Neither the Company nor the Shareholders are
parties in any pending action, suit or proceeding that involves a claim of
infringement or any other claim related to any Intellectual Property Right and,
to the best of the knowledge of the Shareholders, there is no threatened action,
suit or proceeding that involves a claim of infringement or any other claim
relating to any Intellectual Property Right. None of the Intellectual Property
Rights is subject to any outstanding Legal Requirement. No Intellectual Property
Right is subject to any outstanding order, judgment, decree, stipulation or
agreement restricting its use by the Company or restricting the licensing
thereof to any Person by the Company or which could affect the transfer of the
Intellectual Property Rights to MergerCo free and clear of any and all Liens.
For purposes of this Section 4.15, references to the "Company" shall be deemed
to include each Company Subsidiary. Each and every one of the representations
and warranties stated above in this Section 4.15 is subject to the disclosures
contained in the Disclosure Statement Schedule 4.15.
4.16 Computer Software. Schedule 4.16 of the Disclosure Statement contains
a list of all Systems, specifying hardware and software used in the operation of
the Business. The Company has the right to use, by license, lease or other
agreement, its Systems free and clear of any and all Liens and has obtained
licenses for all users or appropriate site licenses, as set forth on Schedule
4.16 of the Disclosure Statement. True, correct and complete copies of such
licenses, leases or other agreements are attached to Schedule 4.16 of the
Disclosure Statement. The Systems perform in accordance with the documentation
and written material used in connection therewith, free from any material
defects, and the source codes and object codes of the underlying computer
software and programs are in machine-readable form and contains all current
revisions and modifications. The Shareholders have heretofore delivered to
MergerCo full, correct and complete copies of all user and technical
documentation relevant to the Systems. The Company has taken all appropriate
measures to protect the confidential nature of the Systems in accordance with
the applicable license, lease or other agreement governing the use of such
Systems. The documentation for the Systems is publicly available or, to the
extent proprietary, the Company has appropriate documentation for such software
and programming. For purposes of this Section 4.16, references to the "Company"
shall be deemed to include each Company Subsidiary.
4.17 Contracts; Customers and Suppliers.
(a) Attached to Schedule 4.17(a) of the Disclosure Statement is a
complete list of all contracts, leases, licenses or other instruments,
agreements or binding commitments, whether or not in written form, to which the
Company (or any of its properties or assets), any Company Subsidiary (or any of
its properties or assets) or either Shareholder (in connection with the
Business) is a party, is bound, or otherwise subject or otherwise is related to
its Business and which provides for or falls within any of the following
categories (collectively, the "Contracts"):
-26-
(i) Contracts with any service provider or client, including,
without limitation, agent and broker contracts;
(ii) Contracts with any broker-dealer, investment advisor,
insurance/annuity company or agency or clearing agency;
(iii) Contracts with any mutual fund, hedge fund or 401(K)
service providers;
(iv) Contracts granting, or consenting to the existence of,
any Lien on or in any of the Company's or any Company Subsidiary's assets in
favor of any Person;
(v) Collective bargaining arrangements or other Contracts with
any labor union;
(vi) Contracts for capital expenditures or the acquisition or
construction of any Fixed Assets in excess of $25,000;
(vii) Contracts relating to the borrowing of money or the
incurrence of any indebtedness for borrowed money, or the issuance of any letter
of credit, or the guaranty of another Person's indebtedness or Contracts of
suretyship;
(viii) Contracts granting to any Person a right of first
refusal, first offer, option or similar preferential right to purchase or
acquire any of the Company's or any Company Subsidiary's properties, assets or
securities;
(ix) Contracts limiting, restricting or prohibiting the
Company or any Company Subsidiary from conducting any business anywhere in the
world;
(x) Joint venture or partnership agreements or other similar
Contracts;
(xi) Contracts of employment or for the retention of
consultants or advisors or the furnishing of services by any third party;
(xii) Contracts which indemnify any other Person or which
provide for charitable contributions or which are in the nature of a severance
agreement or which would otherwise entitle any Person not a party to this
Agreement to receive a payment based upon the consummation of the transactions
contemplated hereby; or
(xiii) any other Contract which is material to the operations
of the Business or any of the Company's or any Company Subsidiary's assets.
-27-
Each Contract (assuming due authorization and execution by the
counterparty to the Contract): (i) is in full force and effect; (ii) is a valid
and binding obligation of the Company or Company Subsidiary, as the case may be,
enforceable in accordance with its terms; (iii) does not give rise to a Lien on
any of the Company's or any Company Subsidiary's assets; and (iv) has been
entered into on an arm's-length basis in the ordinary course of business and
consistent with past practices. There is no default under or breach by the
Company or any Company Subsidiary (which, with or without the giving of notice
or lapse of time or both) would constitute a default under any Contract and, to
the knowledge of the Shareholders there is no default under or breach by any
counterparty to a Contract (which with or without the giving of notice or lapse
of time or both) would constitute a default under any Contract. No Contract will
be adversely affected or terminated by consummation of the transactions
contemplated hereby. Attached to Schedule 4.17(a) of the Disclosure Statement
are true, correct and complete copies of all Contracts and summaries of oral
Contracts, if any.
(b) Schedule 4.17(b) of the Disclosure Statement contains a list of
clients of the Company and each Company Subsidiary with related dollar volume of
revenues for fiscal year 2005. Neither the Company, any Company Subsidiary or
either Shareholder is engaged in any dispute with any client or service
provider, nor does either the Company or either Shareholder have knowledge of
any matter or fact which could reasonably be expected to result in a dispute
with any client or service provider. To the knowledge of the Shareholders, no
customer or service provider is considering termination, non-renewal or any
modification of its arrangements with the Company or any Company Subsidiary
prior to or following the Closing.
4.18 Assets Under Management. Schedule 4.18 of the Disclosure Statement
sets forth a list, by dollar amount, of assets under management by the Company
and each Company Subsidiary as of November 30, 2005 respectively, segregated by
asset management program.
4.19 Accounts Receivable. Schedule 4.19 of the Disclosure Statement is a
list of the Accounts Receivable of the Company and each Company Subsidiary as at
December 19, 2005 (excluding, for the avoidance of doubt, the Stale Receivables
and Fees Receivables). All Accounts Receivable are bona fide.
4.20 Authorizations. Schedule 4.20 of the Disclosure Statement sets forth
true, correct and complete copies of all Authorizations, including all
Authorizations held in the name of either Shareholder or any other Person other
than the Company, that relate to the operations of the Business, including,
without limitation, all securities licenses, insurance licenses and
registrations held by the Shareholders and employees of the Business. All
Authorizations are current, in full force and effect, and have not been
terminated, revoked or withdrawn. Each Shareholder, the Company, each Company
Subsidiary and each officer and employee of the Company and any Company
Subsidiary, owns, holds, possesses or lawfully uses all Authorizations which are
in any manner necessary for the conduct of the Business as now or previously
conducted and for the ownership and use of the Company's and the Company
Subsidiaries' assets, free and clear of any and all Liens or other restrictions.
Neither the Company nor any Company Subsidiary nor either Shareholder is in
default, nor has the Company, any Company Subsidiary or either Shareholder
received any notice of any claim of default or non-compliance, with respect to
any Authorization and, to the knowledge of the Shareholders, no event has
occurred, which with the giving of notice or passage of time or both, would
cause or give rise to any default, revocation or other termination event with
respect to any Authorization. All such Authorizations are renewable by their
terms or in the ordinary course of business without the need to comply with any
special qualification procedures (other than continuing education requirements)
or to pay any amounts other than routine filing fees, and will not be adversely
affected or terminated by consummation of the transactions contemplated hereby.
None of the Authorizations have been amended, assigned, pledged or otherwise
transferred.
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4.21 Employees; Labor Matters. Schedule 4.21 of the Disclosure Statement
contains a list of the Company's employees employed in the Business, including a
description of each employee's position, compensation and benefits. The Company
has not hired or terminated any employees since March 1, 2005. Except as set
forth on Schedule 4.21 attached hereto, neither the Company nor the Shareholders
know of any efforts within the last three (3) years to attempt to organize the
Company's employees or any other union activities including organizational,
protected and concerted activities. Except for grievances which are described on
Schedule 4.21 of the Disclosure Statement, no strike, slowdown, picketing, work
stoppage or other labor dispute involving the Company has occurred during the
last three (3) years and, to the best knowledge of the Shareholders, none is
threatened or presently contemplated. No Key Employee of the Company or any
Company Subsidiary has indicated that he or she is considering terminating his
or her employment. Insofar as the Shareholders know, after consultation with
corporate legal counsel, but without retaining or consulting with specialized
legal counsel or a specialized consulting firm, and without contacting any
Governmental Entity or Regulatory Authority, the Company has complied with Legal
Requirements relating to its employees, including, without limitation, the
Occupational Safety and Health Act of 1970 within the United States of America
and comparable workplace-safety laws of all other jurisdictions and all rules,
regulations and orders thereunder, all applicable laws and related rules and
regulations of the United States of America and foreign jurisdictions affecting
labor union activities, civil rights or employment, including without
limitation, the Civil Rights Act of 1964, the Age Discrimination in Employment
Act of 1967, the Equal Employment Opportunity Act of 1972, ERISA, the Equal Pay
Act, the National Labor Relations Act, the Family Medical Leave Act, the
Americans with Disabilities Act of 1990 and the Civil Rights Act of 1964 and any
other federal, state, local or foreign laws concerning employment and comparable
workplace-safety laws, labor union activities, civil rights or employment. All
of the facilities of the Company are in compliance with the Americans with
Disabilities Act of 1990.
The Company is not a party to any collective bargaining agreement,
no collective bargaining agent has been certified as a representative of any
such employees and no representation campaign or election is now in progress
with respect to any such employees and to the knowledge of the Shareholders no
such campaign is threatened. There are no pending, or to the knowledge of the
Shareholders, threatened, charges or complaints of unfair labor practice,
employment discrimination or any similar matters against or relating to the
Company. To the knowledge of the Shareholders, the transactions contemplated
hereunder will not have an adverse effect on the Company's relationship with its
employees.
For purposes of this Section 4.21, references to the "Company" shall
be deemed to include each Company Subsidiary.
4.22 Employee Benefits.
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(a) Except as set forth in Schedule 4.22 of the Disclosure
Statement, the Company does not maintain, contribute to, or have any obligation
to contribute to, any employee benefit plans ("Benefit Plans"), as defined in
Section 3(3) of ERISA. Except as set forth on Schedule 4.22 of the Disclosure
Statement, the Company does not sponsor, maintain or support, is not otherwise a
party to, and has no liability or contingent liability under any of the
following:
(i) cash bonus or incentive pay arrangements (current or
deferred, earned or contingent);
(ii) debt forgiveness or low-interest (or interest-free)
loans;
(iii) stock bonus plan arrangements (including, but not
limited to, arrangements known as ESOPs and/or TRASOPs);
(iv) employee stock purchase plans;
(v) shadow or phantom stock arrangements;
(vi) stock appreciation rights, whether separate from or
associated with stock options;
(vii) performance share plans;
(viii) individual life insurance policies (including but not
limited to, "key man" and "split dollar" arrangements);
(ix) group life insurance programs;
(x) retired life reserve programs;
(xi) surviving spouse's or survivor's benefits;
(xii) wage or salary continuation programs;
(xiii) severance benefit plans;
(xiv) short- or long-term disability income programs;
(xv) travel insurance coverage;
(xvi) accidental death and/or dismemberment benefits;
(xvii) medical expense reimbursement plans (insured or
self-insured);
(xviii) medical/surgical insurance;
(xix) major medical expense programs;
(xx) health maintenance organization benefits;
-30-
(xxi) optical and/or dental care benefits;
(xxii) prepaid legal services;
(xxiii) section 501(c) (9) "voluntary employee beneficial
associations";
(xxiv) day care centers;
(xxv) educational expense benefit plans or tuition subsidies;
(xxvi) layoff and/or vacation pay plans, or time banks;
(xxvii) furnishing goods or services on a discount or
subsidized basis;
(xxviii) non-cash incentive programs (such as trading stamp,
travel or merchandise award programs;
(xxix) "cafeteria plans";
(xxx) recreation programs at total or partial employer
expenses;
(xxxi) early retirement incentive of Social Security
supplement payments;
(xxxii) retiree payments and bonuses (gratuitous, traditional
or contractual); or
(xxxiii) other benefits or policies in the nature of
compensation or otherwise of economic value to employees, their dependents or
survivors.
For purposes of this Section 4.22, references to the "Company" shall
be deemed to include each Company Subsidiary.
4.23 Insurance. Schedule 4.23 of the Disclosure Statement sets forth a
true, complete and correct list of all policies of insurance of any kind or
nature covering any of the Company's assets or which in any way relate to the
Business (collectively, the "Insurance Policies") including, without limitation,
policies of life, fire, theft, casualty, errors and omissions, workmen's
compensation, business interruption, employee fidelity and other casualty and
liability insurance, indicating the type of coverage, the name of insured, the
insurer, the premium, the expiration date of each policy and the amount of
coverage. All such Insurance Policies: (a) are with insurance companies
reasonably believed by the Shareholders to be financially sound and reputable;
(b) are sufficient for compliance with all Legal Requirements and all applicable
Contracts; (c) are in full force and effect, valid and enforceable in accordance
with their respective terms, and no notice of cancellation has been received and
there is no existing default or event which, with the giving of notice or lapse
of time or both, would constitute a default under any such Insurance Policies
has occurred, and to the knowledge of the Shareholder, no such default or event
is threatened; and (d) provide full insurance coverage for the Company's assets,
operations of the Company and the conduct of the Business for all risks normally
insured against by Persons carrying on businesses similar to the business of the
Company. The Shareholders have heretofore furnished NIM with true, correct and
complete copies of such Insurance Policies.
-31-
For purposes of this Section 4.23, references to the "Company" shall
be deemed to include each Company Subsidiary.
4.24 Transactions with Affiliates; No Conflicting Shareholder Interests.
Except as set forth in Schedule 4.24 of the Disclosure Statement, since January
1, 2004, the Company has not had any direct or indirect dealings or engaged in
any business transactions with the Shareholders or any Affiliates or family
members of either the Company or the Shareholders. The Company has no
obligations to or claims against any of its Affiliates or against the
Shareholders or their respective Affiliates. In furtherance and not in
limitation of the foregoing, except as set forth on Schedule 4.24 of the
Disclosure Statement, the Company does not (i) owe any indebtedness to any of
its officers, directors, or employees, or to the Shareholders (other than
accrued salaries or benefits payable in the ordinary course of business) or (ii)
have indebtedness owed to it from any of its officers, directors, or employees,
or to the Shareholders, excluding indebtedness for reasonable travel advances or
similar advances for expenses incurred on behalf of and in the ordinary course
of business of the Company and consistent with the Company's past practices. For
purposes of this Section 4.24, references to the "Company" shall be deemed to
include each Company Subsidiary.
4.25 Books and Records. The books and records of the Company and each
Company Subsidiary to be transferred to MergerCo pursuant to Section 3.2 hereof
are complete and correct in all material respects and properly and accurately
reflect all transactions engaged in by the Company and each Company Subsidiary
with respect to the Business.
4.26 Improper Payments. Neither the Company nor any of its officers and
agents, Affiliates or any Person associated with or acting on behalf of the
Company, the Shareholders or any of their respective Affiliates, has made any
illegal or improper payment to, or provided any illegal or improper benefit or
inducement for, any governmental official, customer or other Person, in an
attempt to influence any such Person to take or to refrain from taking any
action relating to the Business, the operations of the Company or any of the
Company's assets or to engage in any action by or on behalf of the Company or
the Shareholders or any of their respective Affiliates in any way or paid any
bribe, payoff, influence payment, kickback or other unlawful payment. For
purposes of this Section 4.26, references to the "Company" shall be deemed to
include each Company Subsidiary.
4.27 Additional Information Regarding Banking and Customer Matters.
Schedule 4.27 of the Disclosure Statement lists (i) all lockboxes maintained by
the Company, each Company Subsidiary and all authorized signatories therefor,
specifying their respective authority, and contains the terms of such lockboxes
including, but not limited to, notice provisions; (ii) any open letters of
credit and/or pre-arranged wire transfers between the Company and/or any Company
Subsidiary and their respective customers; and (iii) personal or other
guaranties given to the Company or any Company Subsidiary by or on behalf of its
customers.
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4.28 No Brokers. Other than in connection with any arrangements involving
Xxxxxxx Xxxxxxxxx (the "Broker"), whose fees (the "Broker Fee") shall be the
sole obligation of NIM, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Company and the
Shareholders directly with NIM and without the intervention of any other Person
acting on behalf of the Company or the Shareholders and in such manner as not to
give rise to any claim against NIM or any of its Affiliates for any finder's
fee, brokerage commission or like payment, and if any such fee, commission or
payment is payable, it shall be the sole responsibility of the Shareholders. NIM
and MergerCo, on the one hand, and the Shareholders, on the other hand, shall
indemnify and hold harmless the other from and against any claims of Persons
claiming to have dealt with such indemnifying party for any finder's fee,
brokerage commission or like payment relative to this Agreement and the
transactions contemplated hereby.
4.29 Powers of Attorney. Neither the Company nor any Company Subsidiary
has granted any powers of attorney to any third party that in any way relates to
the Company's assets, the Company's liabilities or its Business.
4.30 Accredited Investor. Each Shareholder is an "accredited investor"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), and is acquiring the NIM Shares for his own account and not with a view
to their distribution within the meaning of Section 2(11) of the Securities Act.
Article V
REPRESENTATIONS AND WARRANTIES OF NIM AND MERGERCO
NIM and MergerCo hereby represent and warrant to the Shareholders as
follows:
5.1 Organization; Good Standing. NIM is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida and
has all material licenses, permits, authorizations and the power and authority
to own and lease its assets and properties and to conduct its business as it is
now being conducted. NIM is duly qualified or licensed to do business and is in
good standing as a foreign corporation under the laws of the jurisdictions in
which the conduct of its business or the ownership or leasing of its assets and
properties requires such qualification.
5.2 Authority; Enforceability. MergerCo and NIM have the corporate power
and authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance of
this Agreement by NIM and MergerCo have been duly authorized by all necessary
corporate action on the part of NIM and MergerCo. This Agreement and each of the
other associated documents has been duly executed and delivered by NIM and
MergerCo and this Agreement and each of the other Purchaser Documents
constitutes (or when executed and delivered will constitute) legal, valid and
binding obligations of NIM and MergerCo, enforceable against NIM and MergerCo in
accordance with their respective terms.
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5.3 No Conflict. The authorization, execution, delivery and performance by
NIM of this Agreement and the consummation of the transactions contemplated
hereby and thereby do not and will not (a) violate or conflict with any
provision of NIM's charter or bylaws; (b) violate, conflict with, result in a
breach of or constitute (with or without notice or lapse of time or both) a
default under, give rise to a right of termination, amendment or cancellation
of, accelerate the performance required by, or result in any payment under, any
Contract, instrument or other writing of any nature whatsoever to or by which
NIM is a party or is bound, or by which any of its properties or assets is
subject; or (c) violate, conflict with or result in a breach of any Legal
Requirement applicable to NIM.
5.4 Litigation. There is no action, suit, proceeding (including, without
limitation, all arbitrations and alternative dispute resolution proceedings) or
governmental investigation of or pending or, to the knowledge of NIM, threatened
against NIM which relates to the transactions contemplated by this Agreement,
nor does NIM have any knowledge of any reasonably likely basis or set of
circumstances for any such action, suit, proceeding, claim or investigation, the
result of which could materially and adversely affect NIM or the transactions
contemplated hereby or could impair the ability of NIM to consummate the
transactions contemplated hereby.
5.5 Consents. No filing or registration with, notice to, or authorization,
consent or approval of, or other action (including, without limitation, the
grant of any waiver) of any Governmental Entity or Regulatory Authority or any
other Person is required to be obtained by NIM (i) in connection with the
purchase from the Shareholders of the Shares; and (ii) the execution, delivery
and performance of this Agreement and the other Purchaser Documents and the
consummation of the transactions contemplated hereby and thereby.
5.6 No Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by NIM directly with the
Company and the Shareholders and without the intervention of any other Person on
behalf of NIM, and in such a manner as not to give rise to any claim against the
Company or the Shareholders or any of their respective Affiliates for any
finder's fee, brokerage commission or like payment, and if any such fee,
commission or payment is payable, it shall be the sole responsibility of NIM.
5.7 SEC Filings. NIM's current filings with the Securities and Exchange
Commission do not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained therein not
misleading as of the Closing Date.
5.8 Accredited Investor. Each of NIM and MergerCo is an "accredited
investor" within the meaning of the Securities Act and is acquiring the Holland
Shares and the Xxxx Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act.
Article VI
COVENANTS
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6.1 Obtaining Consents. Prior to or at the Closing, the Shareholders
shall, or shall cause the Company to, make all filings with, and obtain all
consents (including the Required Consents), Authorizations, qualifications and
orders from, all Governmental Entities and Regulatory Authorities and other
Persons necessary or required to be obtained by any of them in order to
consummate the transactions contemplated by this Agreement, the Employment
Agreements, the Non-Competition Agreements and the other agreements contemplated
thereby. The Shareholders shall promptly furnish MergerCo with all necessary
information in connection with this Section 6.1. Following the Closing, the
Shareholders shall, or shall cause VFIS to, comply with statutory notification
requirements to its registered investment adviser clients as required by the
transactions contemplated hereby.
6.2 Publicity. Following the Closing, only NIM may issue a press release
or otherwise make a public statement or announcement with respect to this
Agreement or the transactions contemplated hereby or the existence of this
Agreement.
6.3 Further Assurances. Following the Closing, each of the parties hereto
shall execute such documents and other instruments and perform such further acts
as may be required or reasonably requested by any other party hereto to carry
out the provisions hereof and the transactions contemplated hereby. Each party
shall, on or prior to the Closing Date, use its reasonable best efforts to
fulfill or obtain the fulfillment of the conditions precedent to the
consummation of the transactions contemplated hereby.
6.4 Transfer and Retention of Records. Except as permitted in connection
with the performance of the Shareholders' duties to the Company, as the case may
be, pursuant to their respective employment arrangements, after the Closing, the
Shareholders will not, nor permit any of their agents or representatives (other
than their counsel or auditors) to, retain any document, databases or other
media embodying any confidential or proprietary information relating to the
Company's assets or the Business or use, publish or disclose to any third person
any such confidential or proprietary information.
6.5 Employee Matters; Bonus Plan.
(a) MergerCo shall not be obligated to continue to employ any
specified number of the Company's or any Company Subsidiary's current employees.
(b) Following the Closing, MergerCo shall cause the Company to
implement the bonus plan annexed s Exhibit "E" to the Holland Employment
Agreement and the Xxxx Employment Agreement.
(c) MergerCo will continue the productivity and compensation systems
identified as 4C-VFE Account Executive Policies, 4C-VFCC Productivity
Compensation System for Pension Admin, 4C-Chart of 5 insurance, 4C-chart of 5
investments, and 4C-chart of 5 pension on Schedule 4.22 for a period of at least
twelve (12) months from and after Closing, which period shall be increased to
twenty-four (24) months from and after Closing if Minimum EBITDA is achieved for
the first twelve (12) month period from and after Closing.
(d) The Company has retained sufficient funds to discharge the
employer's Social Security and Medicare tax obligations with respect to the
January Shareholder Payables and the March Payables, which payment will
completely satisfy MergerCo's obligation for Social Security tax during the 2006
calendar year and thereby relieve MergerCo from the financial burden of paying
the tax on the Shareholders' salaries and bonuses. On or before January 31,
2007, MergerCo will pay in equal shares to the Shareholders an amount equal to
the Social Security tax that MergerCo would have incurred on 2006 Shareholder
salaries and bonuses excluding the January Shareholder Payables and the March
Payables.
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6.6 Tax Matters.
(a) The Shareholders shall and shall cause the Company and each
Company Subsidiary to:
(i) duly and timely file or cause to be filed all Tax Returns
required to be filed by, including or relating to the Company, each Company
Subsidiary or the Shareholders for all periods through and including the Closing
Date which Tax Returns shall be true, correct and complete;
(ii) duly and timely pay or cause to be paid all Taxes that
are required to be paid on or before the Closing Date or which relate to periods
ending on or before the Closing Date, and shall properly accrue on its Financial
Statements and books and records in accordance with GAAP for the payment of any
Taxes that are not yet payable; and
(iii) comply in all material respects with all Legal
Requirements and all other rules and regulations relating to the collection,
withholding and payment of Taxes.
(b) The Shareholders (i) shall cause to be prepared and duly and
timely filed all Tax Returns relating to any excise, sales, use, real or
personal property or other transfer, recording fees and charges and similar
Taxes required to be filed as a result of any of the transactions contemplated
by this Agreement; and (ii) shall be solely responsible for the payment of such
Taxes. The Shareholders shall provide to NIM a copy of each Tax Return referred
to in Section 6.6(a) hereof, together with all related work papers, for its
review at least fifteen (15) Business Days in the case of an Income Tax Return
and at least five (5) Business Days in the case of any other Tax Return prior to
filing such Tax Return. NIM's receipt of any Tax Return, review and comments
thereon shall not waive any right NIM or its Affiliates may have under this
Agreement.
6.7 Insurance.
(a) During such time as Holland or Xxxx are employees of MergerCo,
following the Closing, MergerCo shall maintain errors and omissions insurance
coverage for directors, officers and employees of the Company that is no less
favorable to officers, employees and directors than is in effect on the date
hereof, with no prior acts exclusions. Following the termination of the
employment of Holland and Xxxx with MergerCo, MergerCo shall maintain such
coverage, or equivalent coverage, for them as former officers, employees and
directors of MergerCo.
(b) In the event that MergerCo is unable to procure the errors and
omissions coverage referred to under Section 6.7(a) containing a "no prior acts
exclusions" provision, MergerCo shall purchase extended tail coverage providing
comparable errors and omissions insurance coverage.
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6.8 Fee Assignment. If requested by NIM, on the Closing Date, each
Shareholder shall assign to MergerCo or the appropriate Company Subsidiary, as
the case may be, the right to receive commissions, investment fees and other
payments and fees from third parties with respect to services provided by such
third parties to clients of the Company and the Company Subsidiaries or with
respect to funds maintained by clients of the Company and the Company
Subsidiaries with such Persons. The Shareholders shall retain the right to
receive and retain all such payments to the extent that they relate to events
occurring prior to the Closing Date, and NIM shall retain the right to receive
and retain all such payments to the extent that they relate to events occurring
on or after the Closing Date. If one party receives any such payments that
another party is entitled to under this Section, then the party receiving such
payment shall hold it in trust for, and promptly deliver it to, the party
entitled to receive such payment.
6.9 No Reversals of Accruals. Provided that, and to the extent that,
sufficient cash is available for the payment of the January Shareholder Payables
and the March Payables under Section 2.7, MergerCo will not reverse the January
Shareholder Payables or the March Payables.
6.10 Post-Closing Tax Elections and Returns. The Shareholders shall cause
the Company to file Income Tax returns for the period ended at Closing as
contemplated by Section 6.6 and such Tax returns will not be consolidated with
NIM's consolidated Income Tax return. MergerCo shall be included in NIM's
consolidated group for Federal income tax purposes for the year ending December
31, 2006. Neither MergerCo nor NIM will file a tax election under Section 338 of
the Code.
Article VII
CONDITIONS PRECEDENT TO CLOSING
OBLIGATIONS OF NIM
All obligations of NIM pursuant to this Agreement to consummate the
transactions contemplated hereby at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived in writing by NIM (in its sole
discretion):
7.1 Representations and Warranties Accurate. All representations and
warranties of the Shareholders contained in this Agreement shall be true and
accurate in all respects on and as of the Closing Date as if made again at and
as of such date.
7.2 Performance by the Company and the Shareholders. The Company and each
Shareholder shall have performed and complied with all terms, provisions,
agreements, covenants and conditions required by this Agreement to be performed
and complied with by them at or prior to the Closing.
7.3 [RESERVED]
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7.4 Legal Prohibition. No action, suit, investigation, inquiry or other
proceeding by any Governmental Entity or Regulatory Authority or other Person
shall have been instituted or threatened in writing which (i) has a material
adverse effect on the Business, the Company's assets or liabilities or NIM; (ii)
arises out of or relates to this Agreement or the transactions contemplated
hereby; or (iii) questions the validity hereof or any of the transactions
contemplated hereby, or seeks to enjoin the consummation of the transactions
contemplated hereby or seeks to obtain substantial damages in respect thereof.
On the Closing Date, there shall be no effective permanent or preliminary
injunction, writ, temporary restraining order or any order of any nature issued
by a court of competent jurisdiction directing that the transactions provided
for herein not be consummated as so provided.
7.5 Closing Deliveries. NIM shall have received all deliveries to be made
to it pursuant to this Agreement, including, without limitation, those specified
in Section 3.2 hereof.
7.6 Consents. The Company and the Shareholders shall have obtained all
consents, approvals or waivers set forth on Schedule 4.6 of the Disclosure
Statement (including, without limitation, the Required Consents), all without
cost or other adverse consequences to NIM, the Company and the Business.
7.7 Due Diligence. NIM shall have completed its due diligence review of
the Company, the Business and the Company's assets and determined that the
results of such review are satisfactory to NIM in its sole discretion.
7.8 Opinion of Counsel. NIM shall have received an opinion of counsel to
the Company and the Shareholders in form and substance reasonably satisfactory
to NIM.
Article VIII
CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS OF THE SHAREHOLDERS
All obligations of the Shareholders pursuant to this Agreement to
consummate the transactions contemplated hereby at the Closing, shall be subject
to the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived in writing by the
Shareholder.
8.1 Representations and Warranties Accurate. All representations and
warranties of NIM and MergerCo contained in this Agreement shall be true and
accurate in all respects on and as of the Closing Date as if made again at and
as of such date.
8.2 Performance by NIM. NIM and MergerCo shall have performed and complied
with all terms, provisions, agreements, covenants and conditions required by
this Agreement to be performed and complied with by it prior to the Closing.
8.3 [RESERVED]
8.4 Legal Prohibition. On the Closing Date, there shall be no effective
permanent or preliminary injunction, writ, temporary restraining order or any
order of any nature issued by a court of competent jurisdiction directing that
the transactions provided for herein not be consummated as so provided.
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8.5 Closing Deliveries. The Shareholders shall have received all
deliveries to be made to them pursuant to this Agreement, including, without
limitation, those specified in Section 3.3 hereof.
Article IX
[RESERVED]
Article X
INDEMNIFICATION
10.1 Survival of Representations and Warranties. All representations,
warranties, covenants and agreements of the Shareholders, NIM and MergerCo
contained in this Agreement shall survive the Closing, (notwithstanding any
examination or investigation made by or on behalf of any party hereto) for a
period of twenty-four (24) months following the Closing Date; provided, however,
that the representations and warranties of the Shareholders regarding Taxes in
Section 4.11 and the covenants of MergerCo contained in Section 6.9 and Section
6.10 shall survive until ninety (90) days after the expiration of the applicable
statute of limitations. Notwithstanding the foregoing, effective as of the
Closing, any and all representations, warranties, covenants or obligations of
the Company shall expire and the Company shall be released from any obligation
or liability hereunder.
10.2 Indemnification by the Shareholders. On the condition that the
Closing is effected, the Shareholders, jointly and severally (subject to the
limitations contained in Section 10.7), shall indemnify and hold harmless NIM,
MergerCo and their respective Affiliates, and each of their respective
directors, officers, employees, agents, representatives, stockholders and
controlling parties and all of their successors and assigns (each a "MergerCo
Indemnified Person") from and defend each of them from and against and will pay
each MergerCo Indemnified Person for any and all demands, claims, actions,
liabilities, losses, damages (including, without limitation, special,
consequential and punitive damages), costs, penalties and expenses (including,
without limitation, interest, costs of investigation and defense and the
reasonable fees and expenses of attorneys and other professionals and experts),
whether or not involving a Third Party Claim (without regard to any Tax benefit
that may be obtained as a result thereof but net of any insurance proceeds
actually collected by a MergerCo Indemnified Party with respect thereto)
(collectively, "Losses") validly asserted against, imposed upon or incurred by
any such MergerCo Indemnified Person, directly or indirectly, resulting from or
arising out of or in connection with or relating to any of the following:
(a) any inaccuracy or breach of any representation or warranty of
the Company or the Shareholders contained herein;
(b) any breach of any agreement, covenant or obligation of the
Company or the Shareholders contained herein;
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(c) any liability, obligation or responsibility of the Company or
the Shareholders or which in any way relates to the Business or the Company's
assets (including, without limitation, any liability for Taxes or withholdings)
arising out of the operation of the Company prior to the Closing Date which
liability, obligation or responsibility is not expressly disclosed in this
Agreement or in the schedules hereto, including any claims on account of Closing
Date Payables not disclosed on the Working Capital Statement;
(d) any and all claims, actions, suits or any administrative,
arbitration, governmental or other proceedings or investigations against any
MergerCo Indemnified Person or in which any MergerCo Indemnified Person becomes
involved that relate to the Company, the Shareholders or the Business in which
the principal event giving rise thereto occurred prior to the Closing Date or
which result from or arise out of any action or inaction prior to the Closing
Date of the Company or any director, officer, employee, agent, representative or
subcontractor of the Company or either Shareholder or a state of facts prior to
Closing Date, and which is not expressly disclosed in this Agreement or in the
Disclosure Statement schedules;
(e) any claim, action, suit or other proceeding asserting that any
sales tax is payable in connection with the transactions contemplated hereby;
(f) any matters relating to VF Business Advisory Group or Valley
Forge Business Development Fund, whether or not disclosed in this Agreement or
in the Disclosure Statement schedules;
(g) any matters relating to any real estate development activities
engaged in by the Company and/or either Shareholder, whether or not disclosed in
this Agreement or in the Disclosure Statement schedules;
(h) any claims of former shareholders of the Company or any Company
Subsidiary arising out of their ownership interests in the Company or an Company
Subsidiary; and
(i) any obligations of the Company or any Company Subsidiary to
either Shareholder under their respective Salary Continuation Plan Agreements
with the Company (previously terminated), whether or not disclosed in this
Agreement or in the Disclosure Statement schedules.
If an indemnity payment is made resulting from a breach of a representation or
warranty contained in Section 4.11 and MergerCo or NIM realizes a corresponding
"Tax Benefit" (for example, an indemnity payment is made because a deduction is
disallowed in one period but the deduction will be allowed in a later period),
MergerCo or NIM will refund an amount up to the lesser of (i) the indemnity
payment or (ii) the related Tax Benefit upon filing its tax returns for the
period in which such Tax Benefit is realized. The Tax Benefit shall be deemed to
be realized in the period when NIM or MergerCo realizes an actual reduction in
Income Tax payable or receives a refund of Tax. The refund for the Tax Benefit
will be calculated based on NIM's highest marginal tax rates in the period in
which the Tax Benefit is realized, at MergerCo's highest marginal Tax rates if
the Tax Benefit is realized in a period when MergerCo files an income tax return
that is not consolidated with NIM, or at the Company's highest marginal tax
rates if the Tax Benefit is realized by carrying a net operating loss back to a
period before Closing.
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10.3 Indemnification by NIM. On the condition that the Closing is
effected, NIM shall indemnify and hold harmless the Shareholders and the
Shareholders' respective successors and permitted assigns (each a "Shareholder
Indemnified Person"), from and defend each of them from and against and will pay
each Shareholder Indemnified Person for any and all Losses asserted against,
imposed upon or incurred by any such Shareholder Indemnified Person, directly or
indirectly, resulting from or arising out of or in connection with or relating
to any of the following:
(a) any inaccuracy or breach of any representation or warranty of
NIM or MergerCo contained herein;
(b) any breach of any agreement, covenant or obligation of NIM or
MergerCo contained herein; and
(c) any liability, obligation or responsibility of MergerCo or NIM
or which in any way relates to the Business or the Company's assets (including,
without limitation, any liability for Taxes or withholdings) arising solely out
of the operation of the Company after the Closing Date.
10.4 Indemnification Procedures - Third-Party Claims.
(a) The rights and obligations of a party claiming a right to
indemnification under this Article X (each an "Indemnitee") from another party
hereto (each an "Indemnitor") in any way relating to a Third Party Claim shall
be governed by the following procedures of this Section10.4:
(i) The Indemnitee shall give prompt written notice to the
Indemnitor of the commencement of any action, suit or proceeding, or any written
threat thereof, or any state of facts which the Indemnitee reasonably determines
will give rise to a claim by the Indemnitee against the Indemnitor based on the
indemnity agreements contained in this Article X, which notice shall set forth
the nature and basis of the claim and the amount thereof (or a reasonable
estimate of such amount), to the extent known and any other reasonably relevant
information in the possession of the Indemnitee (a "Notice of Claim"). No
failure to give a Notice of Claim shall affect the indemnification obligations
of an Indemnitor hereunder, except to the extent such failure materially
prejudices such Indemnitor's ability to successfully defend the matter giving
rise to the indemnification claim.
(ii) In the event that an Indemnitee furnishes an Indemnitor
with a Notice of Claim, then upon the written acknowledgment by the Indemnitor
given to the Indemnitee within thirty (30) days after the Indemnitor's receipt
of the Notice of Claim, that the Indemnitor is undertaking and will prosecute
the defense of the claim under the indemnity agreements contained in this
Article X and confirming that as between the Indemnitor and the Indemnitee, the
claim covered by the Notice of Claim is the obligation of the Indemnitor, with
respect to which the Indemnitor is obligated to indemnify and hold harmless the
Indemnitee hereunder and that the Indemnitor will be able to pay the full amount
of potential liability in connection with such claim (including, without
limitation, any action, suit or proceeding and all proceedings on appeal which
legal counsel for the Indemnitee shall deem appropriate) (an "Indemnification
Acknowledgment"), then the claim covered by the Notice of Claim may be defended
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by the Indemnitor; provided, however, that the Indemnitee is authorized to file
any motion, answer or other pleading that may be reasonably necessary or
appropriate to protect its interests during such thirty (30) day period. In the
event the Indemnitor does not furnish an Indemnification Acknowledgment to the
Indemnitee within such time period, or does not offer reasonable assurances to
the Indemnitee as to Indemnitor's financial capacity to satisfy any final
judgment or settlement, the Indemnitee may, upon written notice to the
Indemnitor, assume control of the defense (with legal counsel chosen by the
Indemnitee) and defend, settle or dispose of the claim, at the sole cost and
expense of the Indemnitor. Notwithstanding receipt of an Indemnification
Acknowledgment, the Indemnitee shall have the right to employ its own legal
counsel in respect of any such claim, action, suit or proceeding, but the fees
and expenses of such legal counsel shall be at the Indemnitee's own cost and
expense, unless (A) the employment of such legal counsel and the payment of such
fees and expenses both shall have been specifically authorized by the Indemnitor
or (B) the Indemnitee shall have reasonably concluded, based upon a written
opinion of legal counsel to the Indemnitee, a copy of which shall be furnished
to the Indemnitor, that there may be conflicts in the defenses available to the
Indemnitee which are different from or additional to those available to the
Indemnitor (if the Indemnitor is also a party or potential party to the claim)
or the claim is one which could have a material adverse effect on the business,
operations, assets, properties or prospects of the Indemnitee in which case the
costs and expenses incurred by the Indemnitee shall be borne by the Indemnitor.
(iii) The Indemnitee or the Indemnitor, as the case may be,
depending upon who is controlling the defense of the action, suit or proceeding,
shall keep the other fully informed of such claim, action, suit or proceeding at
all stages thereof, whether or not the other is represented by legal counsel.
Subject to the Indemnitor furnishing the Indemnitee with an Indemnification
Acknowledgment in accordance with Section 10.4(a)(ii) hereof, the Indemnitee
shall cooperate with the Indemnitor and provide such assistance, at the sole
cost and expense of the Indemnitor, as the Indemnitor may reasonably request in
connection with the defense of any such claim, action, suit or proceeding,
including, but not limited to, providing the Indemnitor with access to and use
of all relevant corporate records and making available its officers and
employees for depositions, pre-trial discovery and as witnesses at trial, if
required. In requesting any such cooperation, the Indemnitor shall have due
regard for, and attempt to not be disruptive of, the business and day-to-day
operations of the Indemnitee and shall follow the requests of the Indemnitee
regarding any documents or instruments which the Indemnitee reasonably believes
should be given confidential treatment or is subject to a privilege.
(b) The Indemnitor shall not settle any claim, action, suit or
proceeding which Indemnitor has undertaken to defend, in accordance with the
procedures set forth in this Article X, without the Indemnitee's prior written
consent (which consent shall not be unreasonably withheld or delayed), unless
there is no obligation on the part of the Indemnitee to contribute to any
payment made to settlement of the claim, action, suit or proceeding, the
Indemnitee receives a general and unconditional release with respect to the
claim (which shall be in form, substance and scope reasonably acceptable to the
Indemnitee), there is no finding or admission of violation of any Legal
Requirement by, or effect on any other claims that may be made against the
Indemnitee and the relief granted in connection therewith requires no action on
the part of and has no effect on the Indemnitee or its business or reputation.
If the Indemnitee is controlling the defense of the claim, action, suit or
proceeding, the Indemnitee shall not settle the claim, action, suit, or
proceeding without the Indemnitor's prior written consent (which consent shall
not be unreasonably withheld or delayed).
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(c) Any claim made by a Purchaser Indemnified Person or a
Shareholder Indemnified Person that may be made under more than one subsection
under Section 10.2 or Section 10.3, as applicable, may be made under the
subsection that the claiming party may elect in its sole discretion,
notwithstanding that such claim may be made under more than one subsection.
10.5 Procedure for Indemnification -- Direct Indemnification Claims. A
claim for indemnification for any matter not relating to a Third Party Claim may
be asserted by notice directly by the Indemnitee to the Indemnitor.
10.6 Right to Indemnification Not Affected by Knowledge or Waiver.
(a) The right to indemnification hereunder, payment of Losses or
other remedy based upon breach of any representation, warranty, covenant,
agreement or obligation of a party hereunder shall not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date (including, without limitation,
the due diligence investigation engaged in by NIM and its representatives), with
respect to the accuracy or inaccuracy of or compliance or noncompliance with,
any such representation, warranty, covenant, agreement or obligation. The right
to indemnification will be affected by matters disclosed in the Disclosure
Statement.
(b) The waiver of any condition to a party's obligation to
effectuate the Closing and consummate the transactions contemplated hereby,
where such condition is based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant, agreement or
obligation, will not affect the right to indemnification, payment of Losses or
other remedy based on such representation, warranty, covenant, agreement or
obligation.
10.7 Limitations. Except as set forth in this Section 10.7, (a) neither
party shall have any obligation to indemnify the other party with respect to any
claimed Loss for which a claim has not been made within two (2) years after the
Closing, and (b) neither party shall have any right to indemnification payment
to Section 10.2(a) or Section 10.3(a) until aggregate Losses thereunder for such
a party exceeds $50,000, in which event such party shall be entitled to such
indemnification from the first dollar of Losses. Notwithstanding the foregoing,
the limitations on survival or dollar amounts set forth in the first sentence of
this Section 10.7 shall not apply to any claimed Loss on account of breaches of
representations and warranties under Section 4.11 hereof (Taxes) or on account
of a breach of Section 6.9 or Section 6.10, with respect to which claims may be
made during the time period set forth in Section 10.1. The amount of any payment
or reimbursement for a Loss shall be net of any insurance proceeds or
indemnification amounts actually received or to be received by the Indemnitee in
respect of such Loss.
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Article XI
MISCELLANEOUS
11.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party hereto shall pay its own costs and expenses unpaid as of Closing and
incurred in connection with or incidental to the preparation and negotiations of
this Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby (including, without
limitation, attorneys' fees and expenses). If the Closing is consummated, the
Shareholders will pay out of the proceeds received by the Shareholders all of
the Company's and Shareholders' unpaid legal and accounting fees and other
unpaid expenses incurred in connection with the preparation of this Agreement
and the performance of the terms and provisions of this Agreement and the
consummation of the transactions contemplated hereby and thereby including,
without limitation, all sales, real estate transfer, capital gains and income
Taxes incurred by the Shareholders as a result of the Merger. Notwithstanding
the foregoing, the costs of the Audit shall be borne by NIM.
11.2 Amendment. This Agreement may not be modified, amended, altered or
supplemented, except by a written agreement executed by each of the parties
hereto.
11.3 Entire Agreement. This Agreement, including the Disclosure Statement
schedules and exhibits hereto, and the instruments and other documents delivered
pursuant to this Agreement, contain the entire understanding and agreement of
the parties relating to the subject matter hereof and supersedes all prior
and/or contemporaneous understandings and agreements of any kind and nature
(whether written or oral) among the parties with respect to such subject matter,
all of which are merged herein.
11.4 Waiver. Any waiver by NIM, on the one hand, and the Shareholders, on
the other hand, of any breach of or failure to comply with any provision or
condition of this Agreement by the other party shall not be construed as, or
constitute, a continuing waiver of such provision or condition, or a waiver of
any other breach of, or failure to comply with, any other provision or condition
of this Agreement, any such waiver to be limited to the specific matter and
instance for which it is given. No waiver of any such breach or failure or of
any provision or condition of this Agreement shall be effective unless in a
written instrument signed by the party granting the waiver and delivered to the
other party hereto in the manner provided for hereunder in Section 11.5. No
failure or delay by either party to enforce or exercise its rights hereunder
shall be deemed a waiver hereof, nor shall any single or partial exercise of any
such right or any abandonment or discontinuance of steps to enforce such rights,
preclude any other or further exercise thereof or the exercise of any other
right.
11.5 Notices. All notices, demands, consents, requests, instructions and
other communications to be given or delivered or permitted under or by reason of
the provisions of this Agreement or in connection with the transactions
contemplated hereby shall be in writing and shall be deemed to be delivered and
received by the intended recipient as follows: (a) if personally delivered, on
the Business Day of such delivery (as evidenced by the receipt of the personal
delivery service), (b) if mailed certified or registered mail return receipt
requested, five (5) Business Days after being mailed, (c) if delivered by
overnight courier (with all charges having been prepaid), on the Business Day of
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such delivery (as evidenced by the receipt of the overnight courier service of
recognized standing), or (d) if delivered by facsimile transmission, on the
Business Day of such delivery if sent by 6:00 p.m. in the time zone of the
recipient, or if sent after that time, on the next succeeding Business Day (as
evidenced by the printed confirmation of delivery generated by the sending
party's fax machine). If any notice, demand, consent, request, instruction or
other communication cannot be delivered because of a changed address of which no
notice was given (in accordance with this Section 11.5), or the refusal to
accept same, the notice, demand, consent, request, instruction or other
communication shall be deemed received on the second Business Day the notice is
sent (as evidenced by a sworn affidavit of the sender). All such notices,
demands, consents, requests, instructions and other communications will be sent
to the following addresses or facsimile numbers as applicable:
If to Holland:
Xxxx X. Xxxxxxx
000 Xxxxxx Xxxxx
Xxxxx, Xxxxxxxxxxxx 00000
With a copy to:
Xxxxx Xxxx Herald, A Professional Corporation
000 Xxxx Xxxxxx Xxxxxx Xxxxx
Xxxxx, XX 00000-0000
Fax No. 000 000 0000
If to Xxxx:
Xxxxxx X. Xxxx
0000 Xxxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
With a copy to:
Xxxxx Xxxx Herald, A Professional Corporation
000 Xxxx Xxxxxx Xxxxxx Xxxxx
Xxxxx, XX 00000-0000
Fax No. 000 000 0000
If to the Company (after Closing) or NIM:
National Investment Managers Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax No.: 000 000 0000
Attention: Xxxxxxx X. Xxxxxxxxx
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With copies to:
Xxxxx Xxxxxx Xxxxxxxx & Xxxxxx, LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax No.: 000 000 0000
Attention: Xxxx Xxxxx, Esq.
or to such other address as any party may specify by notice given to the other
party in accordance with this Section 11.5.
11.6 Governing Law; Jurisdiction.
EXCEPT TO THE EXTENT THAT PENNSYLVANIA APPLIES WITH RESPECT TO THE MERGER,
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THAT
STATE, WITHOUT REGARD TO ANY OF ITS PRINCIPLES OF CONFLICTS OF LAWS OR OTHER
LAWS WHICH WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED WITHOUT REGARD TO ANY
PRESUMPTION AGAINST THE PARTY CAUSING THIS AGREEMENT TO BE DRAFTED. EACH OF THE
PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES
UNCONDITIONALLY AND IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK LOCATED IN THE COUNTY OF NEW YORK AND THE
FEDERAL DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN THE
COUNTY OF NEW YORK WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND EACH
OF THE PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY OBJECTION TO
VENUE IN ANY SUCH COURT, AND AGREES THAT SERVICE OF ANY SUMMONS, COMPLAINT,
NOTICE OR OTHER PROCESS RELATING TO SUCH SUIT, ACTION OR OTHER PROCEEDING MAY BE
EFFECTED IN THE MANNER PROVIDED IN SECTION 11.5.
11.7 Information and Confidentiality. Each party hereto agrees that such
party shall hold in strict confidence all information and documents received
from any other party hereto, and if the Closing does not occur, each such party
agrees to promptly return to the other parties hereto all such documents then in
such receiving party's possession without retaining copies; provided, however,
that each party's obligations under this Section 11.7 shall not apply to (a) any
information or document in the public domain other than because of the wrongful
actions of the disclosing party; (b) information known by or documents in the
possession of the receiving party prior to the date of disclosure by the
disclosing party; (c) information independently developed by the receiving party
without the use or assistance of the disclosing party's information.
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11.8 Severability. The parties agree that should any provision of this
Agreement be held to be invalid, illegal or unenforceable in any jurisdiction,
that holding shall be effective only to the extent of such invalidity, illegally
or unenforceability without invalidating or rendering illegal or unenforceable
the remaining provisions hereof, and any such invalidity, illegally or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. It is the intent of the
parties that this Agreement be fully enforced to the fullest extent permitted by
applicable law.
11.9 Binding Effect; Assignment. This Agreement and the rights and
obligations hereunder may not be assigned by any party hereto without the prior
written consent of the other parties hereby; provided that NIM, in its sole
discretion, may assign this Agreement and any of its rights or obligations
hereunder to: (i) its ultimate parent, a subsidiary or any of its Affiliates,
without in any way releasing NIM from its obligations hereunder; or (ii) any
lender or other person providing financing for the transactions contemplated
hereby. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns and the
heirs, estate and legal representatives of the Shareholder.
11.10 Headings. The section headings contained in this Agreement
(including, without limitation, section headings and headings in the exhibits
and Disclosure Statement schedules) are inserted for reference purposes only and
shall not affect in any way the meaning, construction or interpretation of this
Agreement. Any reference to the masculine, feminine, or neuter gender shall be a
reference to such other gender as is appropriate. References to the singular
shall include the plural and vice versa.
11.11 Third Parties. Except as expressly permitted by Section 11.9 hereof,
nothing herein is intended or shall be construed to confer upon or give to any
Person, other than the parties hereto and the Indemnified Persons, any rights,
privileges or remedies under or by reason of this Agreement.
11.12 Counterparts. This Agreement may be executed in counterparts, and by
the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, and all of which, when taken
together, shall constitute one and the same document. This Agreement shall
become effective when one or more counterparts, taken together, shall have been
executed and delivered by all of the parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
SHAREHOLDERS:
-----------------------------------
XXXX X. XXXXXXX
-----------------------------------
XXXXXX X. XXXX
COMPANY:
VALLEY FORGE ENTERPRISES, LTD.
By: ________________________
Name:
Title:
VFE MERGER CORP.
By: __________________________
Name:
Title:
NATIONAL INVESTMENT MANAGERS INC.
By: ________________________
Name:
Title:
[SIGNATURE PAGE - VFE AGREEMENT AND PLAN OF MERGER]
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EXHIBITS
Exhibit A - Form of Xxxx Employment Agreement
Exhibit B - Form of Xxxx Noncompetition Agreement
Exhibit C - Form of Holland Employment Agreement
Exhibit D - Form of Holland Noncompetition Agreement
