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Exhibit 1
STOCK PURCHASE AGREEMENT
AGREEMENT dated November 19, 1998, by and among Xxxxxx & Xxxxxx, Inc.,
a Delaware corporation with a principal office at 000 Xxxxxxxx Xxxxxxxxx, Xxxxx
Xxxx, XX 00000 ("Purchaser"), Xxxxxx X. Xxxx, an individual with an address at
00 Xxxxxxxxxx Xxxxx, Xxx Xxxxx, Xxx Xxxx 00000 ("Levy"), and Xxxxxx Xxxxxxx, an
individual with an address at 0 Xxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000
("Xxxxxxx") (Xxxx and Xxxxxxx will be referred to herein as "Sellers" and
individually as a "Seller").
W I T N E S S E T H :
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from Seller, all of the capital stock of North Shore Capital Management
Corp., a New York corporation ("North Shore"), and North Ridge Securities Corp.,
a New York corporation ("North Ridge") (collectively, North Shore and North
Ridge will be referred to herein as the "Company"), upon the terms hereinafter
set forth;
NOW, THEREFORE, in consideration of the covenants set forth herein and
in reliance on the representations and warranties contained herein, the parties
hereto hereby agree as follows:
Section 1. Purchase and Sale of Stock.
On the Closing Date (hereinafter defined), Seller shall sell, assign,
transfer and deliver, unto Purchaser, and its successors and assigns forever,
free and clear of all Liens (as defined in Section 5.5 hereof) all right, title,
interest and claims in or to all of the issued and outstanding capital stock
(the "Shares") of the Company.
Section 2. Status of Assets and Liabilities.
2.1. Acquired Assets. Sellers jointly and severally represent and
warrant to Purchaser and acknowledge and confirm that each such representation
and warranty shall be deemed to be material and that Purchaser is relying upon
such representations and warranties in connection with the execution, delivery
and performance of this Agreement, any investigation made by Purchaser or on its
behalf notwithstanding, except as otherwise specifically set forth herein and in
the Schedules hereto: the Company owns free and clear of Liens (as defined in
Section 5.5 hereof) or is using, pursuant to a valid and effective license or
lease described in the Schedules hereto, all of the business, properties,
contracts and assets of the Company or used by the Company in its business as
conducted since January 1, 1998, real, personal or mixed, tangible or
intangible, together with the goodwill of the Company, all as the same existed
on June 30, 1998, except for those assets disposed of in the ordinary course of
business consistent with past practice in arms-length
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transactions with unaffiliated parties, together with any additions thereto
after such date, (hereinafter, other than the Excluded Assets (as defined in
Section 2.2 below) sometimes together referred to as the "Acquired Assets").
2.2. Excluded Assets. The Acquired Assets do not include
the assets (herein collectively referred to as the "Excluded
Assets") of the Company as follows:
(a) counterclaims and cross claims to the extent relating to
any liability against which the Sellers indemnify Purchaser hereunder;
(b) insurance claims and rights under insurance policies to
the extent relating to any liability against which the Sellers indemnify
Purchaser hereunder;
(c) the personal property listed on Schedule 2.2 hereto; and
(d) the remaining installments totaling $185,000 due to the
Company from Met Life in connection with the settlement of the litigation
entitled North Shore Management Corp., et al. v. Metropolitan Life Insurance
Company, et al., New York State Supreme Court, Suffolk County (Index No.
94-17852).
in each case, to the extent not reflected as an asset on any
balance sheet of the Company.
Section 3. Consideration. The purchase price (the "Purchase Price") for
the Shares shall be total consideration of $5,000,000 plus the difference (such
difference being referred to herein as the "Excluded Cash Amount") of the
Company's tangible assets, other than property, plant and equipment, minus all
of its liabilities as of October 31, 1998 determined in accordance with
generally accepted accounting principles applied on a consistent basis with the
Company's June 30, 1998 financials, which shall be delivered in good funds to
Sellers at the Closing (as that term is defined in Section 4 below), to be
allocated as follows: $4,500,000 to the Shares of North Ridge and $500,000 to
the Shares of North Shore, and the Excluded Cash Amount in accordance with the
balance sheets of the Company as of October 31, 1998, provided that for every
$1.00 less than $5.5 million that North Ridge and North Shore generate in
combined net revenues (meaning gross revenues earned by such companies less bad
debt and consumer refunds) from all sources from January 1, 1999 to December 31,
1999, the Purchase Price shall be reduced $.91. Upon determination of such
combined net revenues, Sellers shall pay to the Purchaser the amount of any such
reduction in Purchase Price. Any provision herein to the contrary
notwithstanding, no price adjustment shall be made if the Purchaser shall be or
have been a debtor in bankruptcy, whether by voluntary or involuntary action, at
any time prior to December 31, 1999, and no Purchase Price reduction shall be
made on
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account of lost revenues resulting from the suspension or permanent cessation of
the Company's operations pursuant to an injunction obtained by the Securities
and Exchange Commission. The Purchaser shall pay $250,000 in respect of the
Excluded Cash Amount in accordance with Section 8.5 below. Purchase price shall
be paid 60% to Levy and 40% to Xxxxxxx.
Section 4. Closing. The consummation of the purchase and sale of the
Shares contemplated by this Agreement (the "Closing") shall take place on or
about the date hereof (the "Closing Date").
Section 5. Representations and Warranties of Sellers. Sellers, jointly
and severally, represent and warrant to Purchaser as follows, and acknowledge
and confirm that each such representation and warranty shall be deemed to be
material and that Purchaser is relying upon such representations and warranties
in connection with the execution, delivery and performance of this Agreement,
notwithstanding any investigation made by Purchaser or on its behalf.
5.1. Proper Authority and Structure. The Company has the power and
authority to own, lease and operate its properties and to carry on its business
as now conducted. The Company has no subsidiaries or equity investments in any
entities.
5.2. Consents, Authorizations and Binding Effect.
(a) Sellers may execute, deliver and perform this Agreement
without the necessity of obtaining any consent, approval, authorization or
waiver or giving any notice or otherwise.
(b) This Agreement has been duly authorized, executed and
delivered by Sellers and constitutes the legal, valid and binding obligation of
Sellers, enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement will not:
(i) conflict with, result in the breach of, constitute a
default, with or without notice and/or lapse of time, under, result in
being declared void or voidable any provision of, or result in any
right to terminate or cancel any contract, lease, agreement, license,
commitment or purchase order to which Company or Sellers or any of
their properties is bound;
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(ii) conflict with either Company's Certificates of
Incorporation or By-Laws, which are annexed hereto, together with all
amendments thereto, as Schedule 5.2(b);
(iii) constitute a violation of any statute, judgment, order,
decree or regulation or rule of any court, governmental authority or
arbitrator applicable or relating to any of Sellers, the Company's
assets or the business and operations of either of North Ridge or North
Shore (collectively, the "Business"), excluding, however, the
following: any consent, approval, authorization or similar action that
my be required by any federal, state, and/or municipal agency, the
National Association of Securities Dealers, Inc., or any other
regulatory body with regard to securities or anti-trust laws governing
Purchaser, Purchaser's business, or Purchaser's involvement in the
transaction contemplated hereby; or
(iv) result in the acceleration of any debt or other
obligation of Sellers or the Company or the creation of any Lien (as
defined in Section 5.5) upon any of the Company's assets.
5.3. Owners of Company. Sellers are the only beneficial or registered
owners of the Company, and the true and correct addresses of all of their
residences are set forth on the first page hereof.
5.4. Financial Representations.
(a) The Sellers have caused to be maintained the Company's
books of account in accordance with applicable laws, rules and regulations, and
such books and records are and, during the periods covered by the Financial
Statements (hereinafter defined), were correct and complete in all respects, and
completely and accurately reflect the transactions of the Business and the
income, expenses, assets and liabilities of the Business, including the nature
thereof and the transactions giving rise thereto.
(b) Included in Schedule 5.4 are the audited balance sheets of
the Business as of June 30, 1998 and June 30, 1997, and the related audited
statements of income and of cash flows for the fiscal years ended each such June
30th, reported on by Xxxxxxxx X. Xxxxxxx & Company, P.A. and the unaudited
balance sheet of the Business as of September 30, 1998 and the related
statements of income for the 3 months ended September 30, 1997 and September 30,
1998, (the balance sheet of the Business as of September 30, 1998 being referred
to as the "Balance Sheet")
(c) The Financial Statements have been prepared from the books
of account of the Seller, in conformity with generally accepted accounting
principles consistently applied ("GAAP"), and present fairly the financial
position of the Business as of the
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date of such statements and the results of operations of the Business for the
periods covered thereby. The Financial Statements reflect all necessary
adjustments and reserves for losses and contingencies.
(d) Except as indicated on Schedule 5.9(a) hereto, the
Business and the Company have no liabilities (including, without limitation,
unasserted claims, whether known or unknown, matured or unmatured, absolute,
contingent or otherwise) that, in accordance with GAAP, are required to be
reflected, and are not reflected or are in excess of the amount reflected, in
the Balance Sheet or notes thereto except those incurred since the date of the
Balance Sheet in the ordinary course of business, consistent with past practice,
in arms' length transactions with unrelated parties, and which do not have and
cannot reasonably be expected to have, in the aggregate, a material adverse
effect on the business, financial condition or prospects of the Business (a
"Material Adverse Effect").
5.5. Title and Condition of Assets.
(a) The Sellers have good and marketable title to the Shares,
free and clear of liens, encumbrances, claims of third parties, security
interests, mortgages, pledges, agreements, options and rights of others of any
kind whatsoever, whether or not filed, recorded or perfected, and including,
without limitation, any conditional sale or title retention agreement or lease
in the nature thereof or any financing statements filed in any jurisdiction or
any agreement to give any such financing statements (hereinafter collectively
referred to as "Liens").
(b) North Ridge and North Shore have good and marketable title
to the Acquired Assets free and clear of Liens or are using them pursuant to a
valid and effective license or lease described in the Schedules hereto.
(c) The equipment and the other tangible assets included in
the Acquired Assets and listed on Schedule 5.5 hereto are in good operating
condition, order and repair, are suitable for the purposes for which they are
being used and constitute all of the assets used in the operations of, and
necessary to operate, the Business as conducted during the two years prior to
the date hereof. None of the Acquired Assets has been affected by any fire,
accident, act of God or any other casualty that materially and adversely impairs
its function in the Business. The Business is not conducted under any
restriction imposed upon the Company (but not imposed upon other similar
businesses in the locality where its business is located).
(d) Schedule 5.5 hereto includes a complete and correct list
and a summary description of all material tangible personal property in the
nature of equipment owned or leased by the Company and used in connection with
the Business. None of such property is leased.
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5.6. [Omitted]
5.7. [Omitted]
5.8. Insurance.
(a) Schedule 5.8 hereto contains a copy of all of the policies
of insurance maintained by the Company. Such policies are underwritten by
financially sound and reputable insurers.
(b) No claims are pending or, to the knowledge of the Company,
threatened under any of the Company's casualty or liability insurance policies,
and no claim has been made thereunder during the three (3) years preceding the
date hereof. All premiums due and payable thereon have been paid, and all such
policies are in full force and effect in accordance with their respective terms.
No outstanding claims or liabilities, exist, whether fixed or contingent, under
any medical reimbursement plan or any other plan or policy under which the
Company acts as a self-insured.
5.9. Litigation and Compliance.
(a) Except as disclosed on Schedule 5.9(a) annexed hereto,
there are no actions, suits, claims or proceedings or governmental or
administrative investigations pending or, to the knowledge of Sellers or the
Company, threatened, nor, to the knowledge of Company, is there any reasonable
basis for any such action, suit, claim or proceeding (i) by, against or
otherwise involving any of Sellers, the Company, or any of Company's officers,
directors, employees or agents, any of the Acquired Assets or any asset or
property of others leased or used by the Company pursuant to an agreement or
(ii) which questions or challenges the validity of this Agreement or any action
taken or to be taken pursuant to this Agreement.
(b) The Company is in substantial compliance with, is not in
default or violation in any material respect under, and has not been charged
with or received any notice at any time of any violation by it of, any statute,
law, ordinance, regulation, rule, decree or order applicable to the business or
operations of the Company. North Ridge is registered with the National
Association of Securities Dealers (the "NASD") as a registered Broker/Dealer and
such registration is current in all respects. Neither the Company nor to the
best knowledge of the Company any of its employees is the subject of any
disciplinary proceedings before, or under investigation by, the NASD, the United
States Securities and Exchange Commission (the "SEC"), any securities exchanges
or markets, any state securities division or other regulatory bodies except as
provided for in Schedule 5.9(b). Neither the Company nor the Sellers have
received during the two years prior to the date hereof any written complaints or
requests for refunds of commissions paid. Annexed hereto as Schedule 5.9(b) are
the Forms U-4 for all registered representatives and
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principals of the Company and all Forms BD and amendments thereto filed with the
SEC during the three years prior to the date hereof. All such filings were to
the best knowledge of the Company true and accurate in all material respects
when filed and no further amendment thereof is currently (until the execution
hereof) required.
(c) None of the Company, nor any of the Acquired Assets or
transactions contemplated under this Agreement, is subject to any judgment,
order or decree entered in any lawsuit or proceeding applicable to the Business
and operations of the Company.
(d) The Company has duly filed all reports and returns
required to be filed by it with governmental authorities and has obtained all
governmental permits and licenses and other governmental consents, except as may
be required after the execution of and closing under this Agreement. All of such
material permits, licenses and consents are in full force and effect, and no
proceedings for the suspension or cancellation of any of them, and no
investigation relating to any of them, is pending or, to the best knowledge of
Sellers, threatened, and none of them will be affected by the consummation of
the transactions contemplated hereby.
(e) The Company has operated, and will through the Closing
Date operate, in material compliance with all laws, rules, statutes, ordinances,
orders and regulations, including, without limitation, those applicable to the
Company under the Occupational Safety and Health Act of 1970, as amended, or any
equivalent state law. The Company has received no notice of any violation
thereof, nor are Sellers or the Company aware of any basis therefor.
5.10. Taxes.
(a) The Company has, or on or before the Closing Date will
have, duly filed all tax reports and returns required to be filed in respect of
its business and operations and the Acquired Assets as of June 30, 1998. All
such tax reports and returns are or will be complete, accurate and in compliance
with all relevant laws and regulations in all material respects, and, none has
been audited by any governmental authority. The Company has, or on or before the
Closing Date will have, paid and discharged all federal, state, local and
foreign taxes, interest, penalties or other payments required, as the case may
be, to be paid and then currently due as shown on such tax reports and returns
or otherwise in respect of the Acquired Assets and the business, operations and
employees of the Company as of October 31, 1998. To the knowledge of Company, no
audit of Sellers or the Company is planned or threatened. The Company has
withheld proper and accurate amounts from its employees' compensation in
substantial compliance with all withholding and similar provisions of the IRS
Code of 1986, as amended, and any other applicable law.
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(b) The Company has received no notice of any tax deficiency
outstanding, proposed or assessed against it, nor does the Company have any
knowledge of any basis for any tax deficiency or assessment, nor has the Company
executed any waiver of any statute of limitations on the assessment or
collection of any tax. No tax liens are upon, pending against or, to the
knowledge of the Sellers or the Company, threatened against any Acquired Assets.
5.11. Intangible Assets.
(a) "Intellectual Property" means and includes
(i) trademarks, trademark registrations, service
marks, service xxxx registrations, applications for trademark and
service xxxx registrations, trade names, copyrights and copyright
registration;
(ii) license agreements with respect to any of the
foregoing intellectual property;
(iii) all printed or other written material and all
other copyrightable property;
(iv) all material trade secrets; and
(v) all computer software, programs, and
applications.
(b) No material Intellectual Property other than that included
in the Acquired Assets ("Company Intellectual Property") is used or necessary in
connection with the conduct of the Business. No claim is pending or to the best
knowledge of the Company threatened against Sellers or the Company by any person
or entity relating to (i) any of the Company Intellectual Property, or its use
included in the Acquired Assets; (ii) infringement by the Company on the
Intellectual Property rights of any person or entity; or (iii) infringement by
any person or entity on the Company Intellectual Property rights included in the
Acquired Assets. To the knowledge of the Company and Sellers, no valid basis
exists for any claims referred to in this Section 5.11(b).
(c) The current computer software, programming and
applications used by the Company, or held by it for use in the operation of the
Business (the "Software"), to the extent they have been designed or developed by
Sellers or by consultants on Sellers' behalf or on behalf of the Company, are
original and are protected by the copyright laws of the United States, and
Sellers or the Company have complete rights to and ownership of such Software.
All work performed in connection therewith was "work- for-hire" under the United
States Copyright Act, or the product thereof has been assigned in full to
Sellers or the Company. To the best knowledge of the Company, no part of such
Software or
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the use thereof infringes upon the rights of any other person or entity, or
violates or infringes upon any common law or statutory rights of any other
person or entity, including, without limitation, rights relating to defamation,
contractual rights, copyrights, patents, trade secrets and rights of privacy or
publicity. Neither of the Sellers nor the Company has sold, assigned, licensed,
distributed or in any other way disposed of or encumbered the Software.
(d) The Software, to the extent it is licensed from any third
party licensor or constitutes "off-the-shelf" software, is held by the Company
legitimately and is fully and freely transferable without any third party
consent and is not limited to use on any hardware and/or any site or sites. All
of the Company's computer hardware, and all computer hardware of the Seller used
or dedicated to use in the Business, has, and has had, only
legitimately-licensed software installed therein.
(e) To the best knowledge of the Company, the Software is free
from any significant software defect or programming or documentation error,
operates and runs in a reasonable and efficient business manner, conforms to the
specifications thereof, and, with respect to owned Software, the applications
can be recreated from their associated source code, which is in the Company's
sole custody and control.
(f) Neither of the Sellers nor the Company nor any employee or
agent of either of the Sellers or the Company has knowingly altered the data, or
any Software or supporting software that may in turn damage the integrity of the
data, stored in electronic, optical or magnetic form. Seller has no knowledge of
the existence of any bugs or viruses with respect to the Software.
(g) Seller and the Company shall, to the maximum possible
extent, pass through to Purchaser all manufacturer's and supplier's warranties
and support contracts for the Software that is not owned by Seller or the
Company, and Seller shall upon Purchaser's reasonable request, execute each and
every document that is necessary or appropriate to effectuate Purchaser's
obtaining and enjoying the benefits of any such pass-through warranty.
(h) Seller has furnished all documentation relating to the
use, maintenance and operation of the Software, all of which, to the knowledge
of Seller, is true and accurate.
(i) Schedule 5.11(i) includes a list of all trademarks,
service marks and copyrights included in the Acquired Assets and indicating
those which are subject to the filing of an affidavit of use or renewal.
5.12. Employees. The Company has good relations with its
current and former employees and current and former independent
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contractors and has not received any material complaint from, and has not
engaged in any material dispute with, any of such employees and independent
contractors and affiliated brokers during the twelve (12) months prior to the
date hereof except for terminations set forth on Schedule 5.17. Annexed hereto
as Schedule 5.12 is the Company's registered representative agreement with
Xxxxxxx. Any provision in this Section 5.12 to the contrary notwithstanding,
Sellers give no assurance or guarantee that any one or more employees and/or
independent contractors will not terminate his or her relationship with the
Company upon or at any time after the execution hereof, although neither the
Company nor either of the Sellers has received any notice that any such
termination is planned.
5.13. ERISA. Apart from a health plan that is not unusual in the
Company's industry, the Company has no employee benefit plan (within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), written or oral employment or consulting agreement,
severance pay plan, employee relations policy, practice or arrangement,
agreements with respect to leased or temporary employees, vacation plan or
arrangement, sick plan, stock purchase plan, stock option plan, fringe benefit
plan, bonus plan and any deferred compensation agreement, plan or program
covering any present or former employee of the Company including any plan which
is, or at any time was, sponsored or maintained by (or to which contributions
are, were, or at any time were required to have been, made by) the Company or
any other organization which is a member of a controlled group of organizations
(within the meaning of Sections 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended) of which the Company is a member (the "Controlled
Group").
5.14. Labor Relations.
(a) No employee of any the Company is covered by any
collective bargaining agreement.
(b) The Company has complied, and is currently in compliance,
in all material respects with applicable laws (including, without limitation,
ERISA), rules and regulations relating to the employment of labor, including
without limitation those relating to wages, hours, unfair labor practices,
discrimination and payment of social security and similar taxes.
5.15. Contracts. Etc.
(a) All contracts, leases, agreements, licenses, commitments
and orders to which either or both of Sellers in connection with the Business or
the Company is a party or by which Company or any of its assets is bound
("Contracts") are attached as Schedule 5.15.
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(b) All such Contracts, are valid and in full force and effect
and constitute the legal, valid and binding obligations of the Company and the
other parties thereto, and there are no existing defaults by either of the
Company, or, to the knowledge of the Company, by any other party thereto, and,
to the knowledge of the Company, no event, act or omission has occurred that
(with or without notice, lapse of time and/or the happening or occurrence of any
other event) would result in a material default thereunder. No option exists or
will arise as a result of the Closing to amend or terminate any Contract. No
party to any Contract is paying liquidated damages in lieu of performance.
(c) None of such Contracts is to be performed by the Company
at a price that would result in a loss to the Company.
(d) Neither of the Sellers nor the Company has entered into
any agreement or arrangement with Xxxxx X. Xxxxx to pay or cause to be paid any
compensation to him or any person or entity affiliated with him on account of
the transaction contemplated herein.
5.16. Customers and Suppliers.
(a) The Company is unaware of any loss or threatened loss of
any business from any customer. The Company has not received any material
complaint from, and is not engaged in any material dispute with, any customer or
supplier.
(b) Nothing has come to the attention of either of the Sellers
or the Company that should reasonably lead him or it to believe that any
customers or suppliers of the Company will terminate or curtail its business
relationship with the Company as a result of the Closing hereunder.
5.17. Absence of Certain Changes, Etc. Since January 1, 1998, except as
disclosed in Schedule 5.17 annexed hereto: no event or other development has
occurred that would indicate that a material loss or decline in business will
occur in the future; no compensation increase for any employee in excess of 10%
on an annual basis has been granted or promised; the Company has not established
or made any bonus, profit sharing, retirement or other similar payment, plan or
arrangement, nor has the Company entered into any union contract or any
employment agreement, or agreement with any preparer or sales agent or any
franchise agreement, independent dealer/distributor agreement or other contract
or arrangement with respect to the performance of services for the Company; no
new employee has been retained; nothing has come to the attention of the Company
that would lead it to believe that any material adverse change in the business,
operations, or prospects of the Business or in the condition of any of the
Acquired Assets, or the assets or properties of others leased or used by
Company, has occurred or is likely to occur; the Company has not suffered any
material damage, destruction or loss to any of its material assets; the Company
has not entered
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into any transaction or contract, or amended any contract, which might have a
Material Adverse Effect on the business, financial condition or prospects of the
Company; the Company has not canceled or waived any claim or right of material
value; neither the Company nor the Sellers have leased or allowed any Lien to
arise upon any of the Acquired Assets, or acquired or committed to acquire any
material capital assets except for fair market price, in the ordinary course of
business, consistent with prior practice, in arms-length transaction with
unaffiliated parties; the Company has not delayed or accelerated collection of
any note or receivable beyond the usual and customary period therefor or the
legal maturity thereof; the Company has not entered into any contract for the
purchase of real property or exercised any option to extend or terminate any
lease of real property; the Company has not declared or paid any dividend or
distributed any asset in respect of any security, whether as a distribution,
repurchase, redemption or otherwise; Sellers have operated the Business
diligently and only in the usual, ordinary manner and, to the extent consistent
with such operation, (i) preserved its current business organization intact,
(ii) preserved its current relationships with employees, customers, suppliers
and all other persons having business dealings with them and (iii) maintained in
force the insurance policies referred to in Section 5.8 hereof; Sellers have
caused the Company to maintain its books, accounts and records in the usual and
ordinary manner, and in a manner that fairly and correctly reflects its income,
expenses, assets and liabilities in accordance with GAAP; Sellers have not
modified or changed any existing right, concession, license, lease, contract,
commitment or agreement, and no sale or other disposition of any right or
privilege accruing to the Sellers relating to the Business has occurred, except
as otherwise provided herein; the Company has not delayed in the payment of any
account payable or indebtedness beyond the usual and customary period therefor
or the legal maturity thereof; neither the Company nor the Sellers has incurred
any indebtedness other than that (i) incurred in the usual and ordinary course
of business, or (ii) incurred pursuant to existing contracts disclosed in the
Schedules hereto, in all cases not exceeding $5,000 in the aggregate; and the
Company has not made any agreement, commitment or arrangement to take any action
inconsistent with the obligations under, or prohibited by, this Section 5.17.
5.18. Fraudulent Conveyances; Bankruptcy. Sellers are not entering into
this Agreement with the intent to hinder, delay or defraud present or future
creditors of Sellers or of the Company. Sellers are now solvent and are not
involved as debtor in any bankruptcy or similar proceeding.
5.19. Related Party Transactions. The Company has not, except as
disclosed in Schedule 5.19 annexed hereto, engaged in any transactions, or
entered into any contracts with, in the last year, any other person, corporation
or entity, directly or
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indirectly, affiliated with any of Sellers or the Company or any
members of Sellers' families.
Section 6. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Sellers as follows, and acknowledges that Sellers are
relying upon such representations and warranties in connection with the
execution, delivery and performance of this Agreement, notwithstanding any
investigation made by Sellers or on their behalf.
6.1. Authorizations and Binding Effect. Purchaser is duly licensed to
carry on its business as currently conducted in the State of New York. This
Agreement has been duly executed and delivered by Purchaser and constitutes the
legal, valid and binding obligation of Purchaser, enforceable in accordance with
its terms. The execution, delivery and performance of this Agreement does not
and will not:
(i) conflict with, result in the breach of, constitute a
default, with or without notice and/or lapse of time, under, result in
being declared void or voidable any provision of, or result in any
right to terminate or cancel any contract, lease or agreement to which
Purchaser or any of its properties is bound;
(ii) constitute a violation of any statute, judgment, order,
decree or regulation or rule of any court, governmental authority or
arbitrator applicable or relating to Purchaser;
(iii) result in the acceleration of any debt or other
obligation of Purchaser;
(iv) conflict with Purchaser's Certificate of Incorporation or
By-Laws; or
(v) render Purchaser insolvent as that term is defined under
11 U.S.C. Section 101(32).
6.2. Judgments. No judgments exist against Purchaser or
any of Purchaser's assets.
6.3. Litigation. No actions, suits, claims, proceedings or
investigations (whether or not purportedly on behalf of or against Purchaser),
are pending or threatened against Purchaser at law or in equity that relate to
the transactions contemplated by this Agreement or that will prohibit Purchaser
from performing the obligations to be performed by it hereunder.
6.4. Nonreliance. Purchaser has not relied in entering into this
Agreement on any representation or warranty of Sellers regarding the revenues of
the Company from and after July 1, 1998, except indirectly as specifically set
forth herein.
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6.5. Financing. Purchaser has sufficient liquid assets or available
credit to complete the terms of the transaction contemplated by this Agreement.
6.6. Execution. Purchaser may execute, deliver and perform this
Agreement without the necessity of obtaining any consent, approval,
authorization or waiver or giving any notice or otherwise.
Section 7. Covenants.
7.1. Employment and Noncompete Agreements. Levy shall enter into an
Employment Agreement with the Company at the Closing. Sellers shall enter into a
Noncompetition Agreement with Purchaser at the Closing. Xxxxxxx shall be
retained by the Company as a financial consultant and shall enter into a
Consulting Agreement with North Ridge at the Closing.
7.2. Taxes. Sellers shall pay all of the sales taxes or transfer taxes
or fees payable as a direct result of the consummation of the transactions
contemplated hereby, including the New York State stock transfer tax.
7.3. Confidentiality. All parties hereto shall keep in strict
confidence all information pertaining to the business of the Company and
Purchaser and relating to this Agreement, including, without limitation, the
terms of such transaction, except as may be required by securities law or other
laws.
7.4. Performance of Contracts. Purchaser shall cause the Company to
perform its obligations under each of the contracts listed on Schedule 5.15 to
the extent arising from and after the Closing, except to the extent that the
Company asserts defenses in good faith to such performance.
7.5. E&O Insurance. Purchaser shall cause the Company to maintain in
force errors and omissions insurance covering the Sellers as employees and/or
consultants of the Company comparable to such insurance maintained by the
Company prior to June 30, 1998.
Section 8. Survival of Representations and Warranties;
Indemnifications; Escrow.
8.1. Survival. The representations, warranties and agreements made in
Sections 5 and 6 hereof and in the Schedules hereto by Sellers, Purchaser and
the Company shall remain operative and in full force for a period of eighteen
months after the Closing Date, except with respect to Sections 5.3, 5.5 and with
respect to tax matters, as to which such representations and warranties shall
continue to survive for a period of any applicable statutes of limitation,
regardless of any investigation made by or on behalf of any party.
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8.2. Indemnification by Seller. To the extent Purchaser or the Company
does not receive reimbursement from the insurance policy referred to in Section
7.5 above, Sellers shall defend and indemnify Purchaser from any and all losses,
liabilities, proceedings, claims, settlements, judgments, fines, assessments,
damages and expenses (including reasonable attorneys' fees and litigation
expenses, whether arising out of a third party claim or relating to recovering
indemnifiable damages from Company) (collectively, the "indemnifiable damages")
that Purchaser may suffer or incur in whole or in part by reason of, or which
may arise out of: (i) the inaccuracy of any of the representations of Company or
each of the Sellers in this Agreement subject to the time periods as set forth
in 8.1; (ii) the breach by Company or any of the Sellers of any of the covenants
or warranties herein subject to the time periods as set forth in 8.1; (iii) any
and all liabilities (including, without limitation, unasserted claims, whether
known or unknown, matured or unmatured, absolute, contingent or otherwise) that
are not reflected or are in excess of the amount reflected, in the Balance Sheet
or notes thereto except those incurred since the date of the Balance Sheet in
the ordinary course of business, consistent with past practice, in arms' length
transactions with unrelated parties so long as Purchaser's claim under this
clause is made in writing to Seller prior to 18 months after Closing; and (iv)
the litigation entitled Essex National Securities, Inc., Annuity Agency of New
York, Inc., and The Bank of New York, v. Xxxxxx Xxxxxxx d/b/a Village
Investments, North Shore Capital Management Corp., and North Ridge Securities
Corp. to the extent of damages accrued through date of Closing.
8.3. Indemnification by Purchaser. Purchaser shall defend, hold
harmless and indemnify Seller from any and all "indemnifiable damages" that
Seller may suffer or incur by reason of: (i) the inaccuracy or breach of any of
the representations and warranties of Purchaser herein; (ii) the breach by
Purchaser of any of the covenants or warranties herein;(iii) any claim for
breach of Purchaser's obligation to perform contracts under Section 7.4 above;
(iv) failure of Purchaser to comply with any rule or regulation of the
Securities and Exchange Commission or the National Association of Securities
Dealers, Inc. or involving anti-trust matters to the extent governing
Purchaser's business as same relates to this transactions; or (v) any claim by
Xxxxx X. Xxxxx for a commission or fee in connection with the introduction of
the parties hereto.
8.4. Notice and Right to Defend Third Party Claims and
Perform Remediation.
(a) Promptly upon receipt of notice of any third party claim,
demand or assessment or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought on account of an indemnity agreement
contained in this Section 8, the party seeking indemnification (the
"Indemnitee") shall notify in writing, within sufficient time to respond to such
claim or
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answer or otherwise plead in such action, the party from whom indemnification is
sought (the "Indemnitor") thereof; provided, however, that failure or delay to
supply such notice shall not relieve Indemnitor of their indemnification
obligation hereunder except to the extent that Indemnitor is actually prejudiced
by such failure or delay.
(b) In case any claim, demand or assessment is asserted or
suit, action or proceeding commenced against an Indemnitee (collectively a
"Claim") and it notifies the Indemnitor of the commencement thereof, if the
Indemnitor acknowledges its indemnification obligations therefor hereunder,
then, the Indemnitor shall be entitled to participate therein, and, to the
extent that it may wish, to assume the defense, conduct or settlement thereof,
with counsel satisfactory to the Indemnitee, whose consent to the selection of
counsel shall not unreasonably be withheld. After notice from the Indemnitor to
the Indemnitee of its election so to assume the defense, conduct or settlement
thereof, the Indemnitor shall not be liable to the Indemnitee for any legal or
other expenses subsequently incurred by the Indemnitee in connection with the
defense, conduct or settlement thereof; provided, however, that if the
Indemnitee has any separate defense from those of the Indemnitor, the Indemnitee
shall have the right to be represented by its own counsel at the Indemnitor's
expense. The Indemnitee shall have the right in any event to participate in any
such defense with its own counsel at its own expense. The Indemnitee will
cooperate with the Indemnitor in connection with any such Claim and make
personnel, books and records relevant to the Claim available to the Indemnitor
at Indemnitor's expense. In the event that the Indemnitor fails timely to
defend, contest or otherwise protect against any such Claim, the Indemnitee
shall have the right to defend, contest or otherwise protect against the same
and may make any compromise or settlement thereof and recover the entire cost
thereof from the Indemnitor, including, without limitation, reasonable
attorneys' fees, disbursements and all amounts paid as a result of such Claim or
compromise or settlement thereof.
(c) Anything to the contrary herein notwithstanding, prior to
finally settling any such Claim, the Indemnitor shall give to the Indemnitee
prompt notice of its intention to settle same and the terms of such proposed
settlement and acknowledging its indemnification responsibility therefor
hereunder. If the Indemnitee shall object to such proposed settlement within 10
days, then the Indemnitee shall thereafter, at its sole expense, assume the
control and defense of such claim, suit, action, investigation or proceeding and
in such event the liability of the Indemnitor shall be limited to the amount for
which the same could have been settled as proposed by the Indemnitor. If the
Indemnitee does not object to the terms of the proposed settlement within the
aforesaid 10-day period, then the Indemnitor shall have the right to consummate
such proposed settlement upon the terms set forth in the aforesaid notice.
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8.5. Escrow. The amount of the Excluded Cash Amount shall be held in
escrow by Steinberg, Fineo, Xxxxxx & Burlant, P.C., as escrow agent, to satisfy
obligations of the Sellers under the indemnification provisions of this Section
8 and price adjustments under Section 3 until 18 months after the Closing, at
which time such escrow shall be immediately released except to the extent of the
amount equal to any bona fide claim under this Section 8 or Section 3 of which
Purchaser shall have delivered to the escrow agent notice in reasonable detail
during such 18-month period after Closing and not resolved during such 18-month
period.
Section 9. Further Actions. From time to time, as and when requested by
Purchaser, Sellers shall execute and deliver such documents and instruments and
shall take such further or other actions as Purchaser may deem necessary or
desirable to carry out the intent and purposes of this Agreement, to convey,
transfer, assign and deliver to Purchaser, and its successors and assigns, the
Shares, to vest in the Company the Acquired Assets (or to evidence any of the
foregoing) and to consummate and give effect to the other transactions
contemplated hereby.
Section 10. Broker's Fees. Each of the Company, Sellers and Purchaser
represents that it has not used or retained any broker or finder in connection
with the transactions contemplated hereby, other than Xxxxx Xxxxx, Esq., the
fees of which shall be paid by Purchaser.
Section 11. Expenses. Except as otherwise specifically provided herein,
Levy and Xxxxxxx, collectively, and Purchaser shall bear their own, legal fees
and other costs and expenses with respect to the negotiation, execution and the
delivery of this Agreement and the consummation of the transactions hereunder,
and the Acquired Assets shall not be reduced or impaired by the payment or
accrual of any such costs and expenses by Company.
Section 12. Entire Agreement. This Agreement, which includes the
Schedules and Exhibits hereto and the other documents, agreements and
instruments executed and delivered pursuant to or in connection with this
Agreement, contains the entire agreement between Sellers and Purchaser with
respect to the transactions contemplated by this Agreement and supersedes all
prior arrangements or understandings with respect thereto.
Section 13. Construction.
(a) The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
(b) Any pronoun herein shall include all genders and/or the
plural or singular as appropriate from the context.
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Section 14. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient when
delivered personally or telecopied by confirmed facsimile, or three (3) business
days after mailing by registered or certified mail, return receipt requested, or
the next business day if sent by nationally recognized overnight courier
providing for a return receipt, in each case postage prepaid, addressed as
follows:
If to Purchaser:
Xxxxxx & Ciocia, Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxx Xxxx, XX 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
with a copy to:
Akabas & Xxxxx
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to Sellers:
Xxxxxx X. Xxxx
00 Xxxxxxxxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxx
0 Xxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
With a copy to:
Steinberg, Fineo, Xxxxxx & Xxxxxxx, P.C.
0000 Xxxxxxxx Xxxxxx, Xxxxx #000
Xxxxxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed, effective ten (10) days
after such notice.
Section 15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts entered into, executed and to be performed wholly in such state.
Section 16. Assignability. This Agreement shall not be assignable
otherwise than by operation of law by any party hereto without the prior written
consent of the other parties, and any purported assignment without such prior
written consent shall be
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void, except that Purchaser may assign this agreement to a corporation
controlling, controlled by or under common control with the Purchaser, provided
that in such case Purchaser shall retain responsibility for the assignees
performance hereunder.
Section 17. Waivers and Amendments. Any waiver of any term or condition
of this Agreement, or any amendment or supplementation of this Agreement, shall
be effective only if in writing executed by the party against whom such waiver,
amendment or supplementation is sought to be charged. A waiver of any breach or
failure to enforce any of the terms or conditions of this Agreement shall not in
any way affect, limit or waive a party's rights hereunder at any time to enforce
strict compliance thereafter with every term or condition of this Agreement.
Section 18. Third Party Rights. Any other provision of
this Agreement to the contrary notwithstanding, this Agreement
shall not create benefits for any third party.
Section 19. Illegalities. In the event that any provision contained in
this Agreement shall be determined to be invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and the remaining provisions of this
Agreement shall not, at the election of the party for whose benefit the
provision exists, be in any way impaired.
Section 20. Counterparts. This Agreement may be executed n
multiple counterparts all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Sellers have signed and Purchaser has caused this
Agreement to be executed by its duly authorized officer, as of the date first
above written.
XXXXXX & CIOCIA, INC.
By: \s\ Xxxxx Xxxxxx \s\ Xxxxxx Xxxx
--------------------- ------------------------
Name: Xxxxx Xxxxxx XXXXXX X. XXXX
Title: President
\s\ Xxxxxx Xxxxxxx
------------------
XXXXXX XXXXXXX
Escrow Accepted
Steinberg, Fineo, Xxxxxx
& Burlant, P.C.
By:\s\ Xxxxxx Xxxxxxxxx
---------------------
Xxxxxx Xxxxxxxxx
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LIST OF SCHEDULES AND OTHER DOCUMENTS
Basic Agreements
Stock Purchase Agreement
Non-competition Agreement
Xxxxxxx Client List
Levy Client List
Employment Agreement Xxxx
Xxxxxxx Client List
Levy Client List
Stock Option Agreement
Consulting Agreement Xxxxxxx
Xxxxxxx Client List
Levy Client List
Employment Agreement Xxxxxxxx
Schedules (responsibility)
2.2 excluded personal property
5.2(b): Certificates of Incorporation; By-Laws
5.4: Financial Statements (Xxxxxx)
5.5: tangible property
5.8: insurance policies
5.9(a): litigation (SFB&B)
5.9(b): Forms U-4 and Form BD and all amendments (Levy)
5.11(i): trademarks, service marks and copyrights
5.12: Registered Representative Contract of Xxxxxxx
5.15: contracts and leases
5.17: certain changes (SFB&B and Levy)
5.19: related party transactions (SFB&B and Levy)
Other Documents (Xxxxxx & Xxxxxx, Inc.)
Opinion of Akabas & Xxxxx
Good Standing Certificate of Purchaser
Board Consent of Purchaser
Prospectus
21
Other Documents (Sellers)
Good Standing Certificates for each Company (SFB&B)
North Shore
North Ridge
Lien Searches on Company and Sellers (A&C)
North Shore
North Ridge
Xxxxxx Xxxx
Xxxxxx Xxxxxxx
Opinion of Sellers' counsel (SFB&B)
Minute Books (SFB&B)
Closing Deliveries
Checks
Levy $3,000,000
Xxxxxxx $2,000,000
SFB&B, as escrowee $250,000
Stock Certificates with tax stamps (SFB&B)
Stock Powers(SFB&B)
Post Closing Shareholder Consent of each Company (A&C)
Post Closing Board Consent of each Company (A&C)
