Exhibit 2
AGREEMENT AND PLAN OF MERGER
AMONG
XXXXXXXX.XXX, INC.,
PARAGON HOMEFUNDING, INC.
MORTGAGE EXPRESS, INC.
XXXXXX XXXXXX
XXXX XXXXXXXX
AND
XXXXXX XXXXXXXX
Dated as of October 14, 2002
TABLE OF CONTENTS
1. AGREEMENT
2. SCHEDULES
Schedule 2.8 Note Recipients
Schedule 3.1 States Seller is Qualified as a Foreign Corporation
Schedule 3.2 Consents Schedule 3.4(i) Audited Financial Statements
Schedule 3.4(ii) Interim Financial Statements Schedule 3.5 Liabilities
Schedule 3.7.2(a) Proprietary Rights Schedule 3.8 Litigation
Schedule 3.9 Listed Agreements
Schedule 3.12(e) Exceptions to No Breach
Schedule 3.14 Prior Names and Addresses of Seller
Schedule 3.15 List of Seller's Permits From All Bodies
Schedule 3.16 Principal Shareholder's Stock Ownership in Seller
Schedule 3.19 Material Leases or Leased Real Property
Schedule 3.21 Employees and Independent Contractors
Schedule 3.22(a) Employee Benefit Plans
Schedule 3.22.7 Qualifications to Employee Benefit Plan Representations
Schedule 4.2 Consents
Schedule 4.5 Brokers
Schedule 5.1(f) Additional Consents
3. EXHIBITS
2.8(a) Form of Promissory Note
2.8(b) Form of Promissory Note
6.4 Form of Target Counsel Opinion
6.7(a) Form of Lagori Employment Agreement
6.7(b) Form of XxXxxxxx Employment Agreement
6.7(c) Form of XxXxxxxx Employment Agreement
AGREEMENT AND PLAN OF MERGER dated as of October 14, 2002 (the "Agreement")
by and among XXXXXXXX.XXX, INC., a Delaware corporation ("Purchaser"), PARAGON
HOMEFUNDING, INC., a Delaware corporation and a wholly-owned subsidiary of
Purchaser ("Paragon"), MORTGAGE EXPRESS, INC., an Illinois corporation
("Target") (Purchaser, Paragon and Target are sometimes collectively referred to
as the "Parties" and individually as a "Party"), Xxxxxx Xxxxxx ("Lagori"), Xxxx
XxXxxxxx ("XxXxxxxx") and Xxxxxx XxXxxxxx ("XxXxxxxx") (Lagori, XxXxxxxx and
XxXxxxxx are sometimes collectively referred to as the "Principals").
RECITALS:
Target is engaged primarily in the business of home mortgage banking and
home mortgage origination through third party lenders (the "Business").
Paragon is a wholly owned subsidiary of Purchaser based in Ponte Vedra
Beach, Florida.
Subject to the terms and conditions hereof, Purchaser, Paragon and Target
deem it desirable and in the best interests of their respective corporations and
stockholders that Paragon merge with and into Target (the "Merger") in a
statutory merger in accordance with the laws of the State of Delaware (the
"Delaware Statute") and the laws of the State of Illinois (the "Illinois
Statute").
NOW, THEREFORE, in consideration of the mutual benefits to be derived
hereby and the representations, warranties, covenants and agreements herein
contained, the Parties agree as follows:
ARTICLE I
DEFINED TERMS; SCHEDULES
1.1 Defined Terms. Capitalized terms used in this Agreement will have the
meanings given such terms in Article XIV hereof or elsewhere in the text of this
Agreement, and variants and derivatives of such terms shall have correlative
meanings.
1.2 Schedules. References to a Schedule will include any applicable disclosure
expressly set forth on the face of any other Schedule if specifically
cross-referenced to such other Schedule. Each Schedule and the information,
agreements and documents expressly listed in each Schedule will be considered a
part of this Agreement as if set forth herein in full and will be deemed to
constitute representations and warranties under this Agreement, limited as set
forth in the applicable provision of this Agreement under which such Schedule is
delivered or on the face of such Schedule; provided, however, that the
representations and warranties set forth in this Agreement shall not be affected
or deemed qualified, modified or limited in any respect by the information
provided in the Schedules, except to the extent that any qualification,
modification
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or limitation to any representation and warranty is expressly and conspicuously
set forth on the face of such particular Schedule.
ARTICLE II
MERGER
2.1 Merger and Surviving Corporation.
(a) Pursuant to the Illinois Statute and the Delaware Statute, Paragon
shall merge with and into Target, and Target shall be the surviving corporation
after the Merger (the "Surviving Corporation") and shall continue to exist as a
corporation created and governed by the laws of the State of Illinois.
(b) The Certificate of Incorporation of the Surviving Corporation, from and
after the Effective Time, shall be the Certificate of Incorporation of Target.
(c) The By-Laws of the Surviving Corporation, from and after the Effective
Time, shall be the By-Laws of Target.
2.2 Effectiveness of Merger. If all of the conditions precedent to the
obligation of each of the Parties hereto as hereinafter set forth shall have
been satisfied or shall have been waived, a certificate of merger or articles of
merger, as applicable, relating to the Merger (each a "Certificate of Merger")
shall be delivered as soon as practicable after the Closing to the Secretary of
State of Delaware and the Secretary of State of Illinois, for filing in
accordance with the Delaware Statute and the Illinois Statute respectively. The
Merger shall become effective upon the acceptance of such filing by the
Secretary of State of Illinois or at such later time as is specified in the
Certificate of Merger, which effective time shall be the "Effective Time" of the
Merger.
2.3 Shares of the Constituent and Surviving Corporations. The manner and basis
of converting and exchanging the securities of Target and the status of
Paragon's securities shall be as follows:
(a) Subject to the provisions of this Agreement, each share of Common
Stock, no par value, of Target (the "Target Common Stock") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be canceled and
extinguished and converted into the right to receive, in accordance with Section
2.3(b) hereof, shares of Common Stock, par value $.0001 per share, of Purchaser
(the "Purchaser Common Stock").
(b) The number of shares of Purchaser Common Stock to be issued pursuant to
Section 2.3(a) hereof for each share of Target Common Stock issued and
outstanding
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immediately prior to the Effective Time (the "Merger Consideration") shall be
Five Hundred Twenty Three Thousand Two Hundred Ninety Seven and Thirty Five
Hundredths (523,297.35) shares of Purchaser Common Stock (or an aggregate of
Fifty Two Million Three Hundred Twenty Nine Thousand Seven Hundred Thirty Five
(52,329,735) shares of Purchaser Common Stock).
(c) If any holder of Target Common Stock is entitled to receive fractional
shares of Purchaser Common Stock pursuant to the Merger, such holder instead
will be entitled to receive (i) one whole share of Purchaser Common Stock in
lieu of such fractional share if such holder would have otherwise been entitled
to receive or purchase one-half or more of a share of Purchaser Common Stock and
(ii) otherwise such holder shall not be entitled to receive or purchase any
additional shares or fractional shares.
(d) Any share of Target Common Stock held in the treasury of Target at the
Effective Time shall be canceled and retired, and no shares or other securities
of Purchaser or Paragon shall be issuable with respect thereto.
(e) Each share of Common Stock, par value $.001 per share, of Paragon (the
"Paragon Common Stock") shall be converted into and become one (1) validly
issued, fully paid and non-assessable share of Target Common Stock.
(f) Subject to the provisions hereof, each holder of an outstanding
certificate or certificates theretofore representing shares of Target Common
Stock, and theretofore surrendered by such holder to Purchaser or its transfer
agent for cancellation, shall be entitled to receive in exchange therefore (i)
as promptly as practicable after the Effective Time, certificates representing
that holder's proportionate number of shares of Purchaser Common Stock for each
share of Target Common Stock surrendered, as is specified in Section 2.3(b)
hereof. If the shares of Purchaser Common Stock (or any portion thereof) are to
be delivered to any person other than the person in whose name the certificate
or certificates representing the Target Common Stock surrendered in exchange
therefore are registered, in addition to any other requirements of applicable
law, it shall be a condition to such exchange that the certificate or
certificates so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person requesting such exchange shall pay to
Purchaser or its transfer agent any transfer or other taxes required by reason
of the delivery of the Purchaser Common Stock to a person other than the
registered holder of the certificate or certificates surrendered, or shall
establish to the satisfaction of Purchaser or its transfer agent that such tax
has been paid or is not applicable.
(g) The Purchaser Common Stock is being issued hereunder in a private
transaction exempt from registration under Section 5 of the Securities Act,
pursuant to Section 4(2) of the Securities Act, and accordingly such shares of
Purchaser Common Stock may not be sold or otherwise transferred or disposed of
by the holders thereof unless they are registered under the Securities Act or
unless an exemption from such registration is available. Accordingly, a
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restrictive legend will be placed on any instruments, certificates or other
documents evidencing such shares of Purchaser Common Stock in, or substantially
in, the following form:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933. These
securities have been acquired for investment and not for
distribution or resale. They may not be sold, assigned,
mortgaged, pledged, hypothecated or otherwise transferred or
disposed of without an effective registration statement for
such securities under the Securities Act of 1933 or an
opinion of counsel to the company that registration is not
required under such Act."
(h) Unless and until outstanding certificates representing shares of Target
Common Stock prior to the Effective Time shall be surrendered as provided in
Section 2.3(f) hereof, dividends and other distributions, if any (including,
without limitation, any shares issuable in connection with stock split-ups or
other recapitalizations), payable as of any date subsequent to the Effective
Time to the holders of record of shares of Purchaser Common Stock shall not be
paid to the holders of such certificates, but in the case of each such
certificate which shall be so surrendered: (i) there shall be paid, upon such
surrender, to the record holder of the certificate for shares of Purchaser
Common Stock issued in exchange therefore, the full amount, without any interest
thereon, of the dividends and any other distributions (including, without
limitation, any shares issued in connection with stock split-ups or other
recapitalizations) referred to above which theretofore became payable with
respect to the number of shares of Purchaser Common Stock represented by such
certificate; and (ii) there shall be paid to such record holder, on the payment
date therefor, the amount of any such dividend or other distribution with
respect to such number of shares, if the record date for the determination of
the stockholders entitled to such dividend or other distribution shall be prior
to the surrender of such certificate but the payment date of such dividend shall
be subsequent to such surrender.
(i) Promptly after the Effective Time, Purchaser's transfer agent shall
mail to each holder of certificates that immediately prior to the Effective Time
represented Target Common Stock a form of letter of transmittal and instructions
for use in surrendering such certificates and receiving the Purchaser Common
Stock in exchange therefore.
(j) No holder of the Target Common Stock shall have any of the rights of a
stockholder of Purchaser with respect to the Purchaser Common Stock to be issued
in the Merger until the Effective Time.
2.4 Effect of Merger.
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(a) Except as herein otherwise specifically set forth, the identity,
existence, purposes, powers, franchises, rights and immunities of Target shall
continue unaffected and unimpaired by the Merger, and the corporate identity,
existence, purposes, powers, franchises and immunities of
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Paragon shall be merged into Target, and Target, as the Surviving Corporation
and a wholly-owned subsidiary of Purchaser, shall be fully vested therewith. The
separate existence and corporate organization of Paragon (except insofar as they
may be continued by statute) shall cease as of the Effective Time.
(b) At the Effective Time:
(i) All rights, privileges, goodwill, franchises and property, real,
personal and mixed, and all debts due on whatever account and all other
things in action, belonging to Paragon shall be, and they hereby are,
bargained, conveyed, granted, confirmed, transferred, assigned and set over
to and vested in Target as the Surviving Corporation by operation of law
and without further act or deed, and all property and rights, and all and
every other interest of Paragon shall be the property, rights and interests
of Target as the Surviving Corporation as they were of Paragon;
(ii) No Action, whether civil or criminal, pending at the Effective
Time by or against either Paragon or Target, or any shareholder, officer or
director thereof, shall xxxxx or be discontinued by the Merger, but may be
enforced, prosecuted, settled or compromised as if the Merger had not
occurred, or the Surviving Corporation may be substituted in such action or
proceeding in place of Paragon; and
(iii) All rights of employees and creditors and all Liens upon the
property of Paragon shall be preserved unimpaired, limited to the property
affected by such Liens at the Effective Time, and all the debts,
liabilities and duties of Paragon shall attach to Target as the Surviving
Corporation and shall be enforceable against the Surviving Corporation to
the same extent as if all such debts, liabilities and duties had been
incurred or contracted by it.
2.5 Further Assurances. Paragon and Purchaser agree that, from time to time,
after the Closing, as and when requested by the Surviving Corporation or by its
successors and assigns, officers of the Surviving Corporation shall, in the name
of Paragon, execute and deliver, or cause to be executed and delivered, at the
sole expense of Purchaser, all deeds, assignments and other instruments and
shall take or cause to be taken all such other and further actions as Purchaser
or the Surviving Corporation may deem necessary or appropriate in order more
fully to vest in and confirm to the Surviving Corporation title to and
possession of all the property, rights, privileges, immunities, powers,
purposes, franchises and all and every other interest of Paragon referred to in
Section 2.4 hereof and otherwise to carry out the intent and purposes of this
Agreement.
2.6 Directors of Surviving Corporation. The persons comprising the Board of
Directors of the Surviving Corporation, who shall hold office from the Effective
Time in accordance with its By-Laws until the next annual meeting of
shareholders and until their respective successors shall have been elected and
shall have qualified, shall be the directors of Target immediately prior to the
Effective Time, subject to the terms hereof.
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2.7 Officers of Surviving Corporation. The officers of the Surviving
Corporation, who shall hold office from the Effective Time in accordance with
its By-Laws until the next annual meeting of directors and until their
respective successors shall have been elected or appointed and shall have
qualified, shall be the officers of Target immediately prior to the Effective
Time, subject to the terms hereof.
2.8 Issuance of Promissory Notes. Subject to the effectiveness of the Merger, at
the Closing, Purchaser shall issue:
(a) a $1,800,000 promissory note in, or substantially in, the form annexed
hereto as Exhibit 2.8(a), to the recipient set forth on Schedule 2.8.
(b) a $1,200,000 promissory note in, or substantially in, the form annexed
hereto as Exhibit 2.8(b), to the recipient set forth on Schedule 2.8.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
AND THE PRINCIPALS
Target and the Principals, jointly and severally, hereby make the following
representations and warranties to Purchaser, each of which shall be deemed
material, and Purchaser, in executing, delivering and consummating this
Agreement, has relied upon the correctness and completeness of each of such
representations and warranties. For purposes of the following representations
and warranties, the Target shall be deemed to possess all information actually
known to the Principals of the Target, or which should reasonably have been
known to such Principals.
3.1 Valid Existence; Qualification. Target is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois.
Target has the power to carry on its Business as now conducted and to own its
Assets. Target is qualified to do business in the states set forth on Schedule
3.1 attached hereto, is not required to qualify in any other jurisdiction in
order to own its Assets or carry on its business as now conducted, and there has
not been any claim by any other jurisdiction to the effect that Target is
required to qualify or otherwise be authorized to do business as a foreign
corporation therein. The copies of the Target's Certificate of Incorporation, as
amended to date (certified by the Secretary of the State of Illinois), and the
Target's By-Laws, as amended to date (certified by the Secretary of the Target),
which have been delivered to Purchaser, or are delivered at the Closing, are
true and complete copies of those documents as in effect on the date hereof and
the Closing Date.
3.2 Consents. Except as set forth on Schedule 3.2 attached hereto and made a
part hereof, no consents of federal, state and local Bodies, foreign or
domestic, or of any other parties are
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required to be received by or on the part of Target to enable it to enter into
and carry out this Agreement and the Transaction contemplated hereby.
3.3 Authority; Binding Nature of Agreement. Target and the Principals each have
the power to enter into this Agreement and to carry out their respective
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Target and except for the consent of the
stockholders of Target, no other proceedings, corporate or otherwise, on the
part of Target are necessary to authorize the delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement constitutes
the valid and binding obligation of Target and the Principals and is enforceable
in accordance with its terms.
3.4 Financial Statements. The books of account and related records of the Target
have been maintained in accordance with applicable laws, rules and regulations,
are complete and correct in all material respects, fairly reflect in reasonable
detail all income, expenses, assets and liabilities of, and transactions
relating to, the Business in accordance with generally accepted accounting
principles ("GAAP") and provided a fair and accurate basis for the preparation
of the Financial Statements (defined below). Attached hereto as Schedule 3.4(i)
are copies of the audited consolidated financial statements of the Target for
the years ended, and as of, December 31, 1999, 2000 and 2001, together, in each
case, with the audit reports thereon of Xxxxxxx & Associates (the "Audited
Financial Statements"). The Audited Financial Statements are correct and
complete and in accordance with the Books and Records of the have been prepared
in accordance with GAAP consistently applied, and fairly present, the
consolidated assets, liabilities and financial position of the Target, as at the
respective dates thereof, and the results of its consolidated operations and
cash flows for the years then ended. Attached hereto as Schedule 3.4(ii) is a
copy of the unaudited balance sheet of the Target for the Interim period ending
August 31, 2002 (the "Interim Financial Statements" and, together with the
Audited Financial Statements, the "Financial Statements"). The Interim Financial
Statements are correct and complete and in accordance with the Books and Records
of the Target, have been prepared in accordance with GAAP consistently applied
(subject to the absence of footnotes and to normal and recurring year end
adjustments, none of which is material in amount), and fairly present, the
consolidated assets, liabilities and financial position of the Target, as at the
date thereof. All adjustments (consisting of normal recurring adjustments),
considered necessary for a fair presentation have been included in the Interim
Financial Statements. The contingency, tax and other reserves reflected on the
Financial Statements are adequate, appropriate and reasonable in accordance with
GAAP. During the Target's five previous fiscal years, the Target has not changed
any accounting methods or principles used in recording transactions on its books
or in preparing its financial statements, except to comply with new Statements
on Financial Accounting Standards issued by the Financial Accounting Standards
Board.
3.5 Liabilities. Except as set forth in the Audited Financial Statements or
Schedule 3.5, as of the date hereof, Target has no direct or indirect Liability
contingent or absolute, inchoate or
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otherwise, and there is no basis for the assertion against Target of any such
Liability, which would have a material adverse effect on the Purchaser or the
future operation of the Business.
3.6 Taxes. All taxes, including, without limitation, income, property, sales,
use, utility, excise, value added, employees' withholding, social security and
unemployment taxes imposed by the United States, any state, locality or any
foreign country, or by any other taxing authority, which have or may become due
or payable by Target, and all interest and penalties thereon, whether disputed
or not, have been paid in full; all deposits required by law to be made by
Target or with respect to estimated income, franchise and employees' withholding
taxes have been duly made; and all tax returns, including estimated tax returns,
required to be filed have been duly and timely filed. No extension of time for
the assessment of deficiencies for any year is in effect. No deficiency notice
is proposed, or to the knowledge of Target threatened against Target. The tax
returns of Target have not been audited within the past six years.
3.7 Ownership of Assets; Trademarks, Patents, Etc.
3.7.1 Assets Generally.
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(a) Target owns outright, and has good and marketable title to,
all of its assets (the "Assets"), free and clear of all Liens. The
Assets are sufficient to permit Target to conduct its Business as now
conducted. None of the Assets are subject to any restriction with
regard to transferability.
(b) There are no agreements, options, commitments or
understandings with, of or to any person to acquire any of the Assets
or any rights or interest therein, except for this Transaction.
3.7.2 Trademarks, Patents, Etc. Schedule 3.7.2(a) sets forth a true
and complete list of (including, without limitation, each application
number, serial number or registration number, the class of goods or
services covered and the expiration date for each country in which a
Proprietary Right has been registered) and a brief description of all any
and all registered trademarks, registered service marks, trademark and
service xxxx applications and unregistered trademarks and service marks
included in, or related to, the Assets (collectively, the "Trademarks"),
patents and copyrights (including, without limitation, all registrations,
licenses and applications pertaining thereto), patent license rights, trade
secrets, franchises, inventions, processes, designs, specifications, plans,
drawings, system documentation, programming, databases, know-how,
confidential information, shop rights, licenses, internet domain names,
world wide web addresses and all other proprietary information, processes
and formulae owned by the Target (the "Other Intellectual Property") and
all other intellectual property rights related thereto (collectively, with
the Trademarks and the Other Intellectual Property, the "Proprietary
Rights"). No other person, firm or corporation has any proprietary or other
interest in any such Proprietary Rights and Target is not a party to or
bound by any contract requiring the payment to any person, firm or
corporation of any royalty. The Target is not infringing upon any
Proprietary Rights
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or otherwise violating the rights of any third party with respect thereto,
and no proceedings have been instituted, and no claim has been received by
Target, and the Target is not aware of any claim, alleging any such
violation. There are no pending applications with regard to any Proprietary
Right. Target has taken all reasonable and prudent steps to protect the
Proprietary Rights from infringement by any other person. No other person,
(i) has the right to use any of Target's Trademarks on the goods on, or in
connection with the services for, which they are now being used, either in
identical form or, to the best of Target's knowledge, in such near
resemblance thereto as to be likely, when applied to the goods or services
of any such person, to cause confusion with such Trademarks or to cause a
mistake or to deceive, (ii) has a license or the right to use any
Proprietary Right of Target, whether by license, sublicense or other rights
(iii) has notified Target that it is claiming any ownership of or right to
use such Proprietary Rights, or (iv) to the best of Target's knowledge, is
infringing upon any such Proprietary Rights in any way.
3.8 Litigation; Compliance with Law. Except as set forth on Schedule 3.8
attached hereto, there are no Actions relating to Target or the Business pending
or, to the knowledge of Target, threatened, or any order, injunction, award or
decree outstanding, against Target or relating to the Business and there exists
no basis for any such Action. Target is not in violation of any statute, law,
regulation, ordinance, rule, order, judgment, injunction, decree, award, or
other requirement of any Body.
3.9 Agreements and Obligations; Performance. Except as listed and briefly
described in Schedule 3.9 attached hereto and made a part hereof (the "Listed
Agreements") Target is not party to, or bound by, any: (i) Contract which
involves aggregate payments or receipts in excess of $1,000 that cannot be
terminated at will without penalty or premium or any continuing obligation or
Liability; (ii) Contract of any kind with any officer, director or shareholder,
of Target; (iii) Contract which is in violation of applicable law; (iv) Contract
for the purchase, sale or lease of any equipment, materials, products, supplies
or services which contains, or which commits or will commit it for, a fixed
term; (v) license or royalty Contract; (vi) Contract which, by its terms,
requires the consent of any party thereto to the consummation of the
transactions contemplated hereby; (vii) Contract containing covenants limiting
the freedom of Target or any officer, employee or shareholder to engage or
compete in any line or business or with any person in any geographical area;
(viii) Contract or option relating to the acquisition or sale of any business;
(ix) voting agreement or similar agreement or Contract; (x) option for the
purchase of any Asset, tangible or intangible; or (xi) distributor, franchise,
license, technical assistance agency or advertising Contracts; (xii) Contract
with the United States, or any state or local government or any agency or
department thereof, and/or (xiii) any other Contract which affects any of the
Assets, whether directly or indirectly, or which was entered into other than in
the ordinary and usual course of business consistent with past practice. A true
and correct copy of each of the written Listed Agreements has been delivered, or
made available, to Purchaser. Except as set forth on Schedule 3.9, Target has in
all material respects performed all obligations required to be performed by it
to date under all of the Listed Agreements, is not in Default under any of the
Listed Agreements and has received no notice of any dispute, Default or alleged
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Default thereunder which has not heretofore been cured or which notice has not
heretofore been withdrawn. The Target does not know of any Default under any of
the Listed Agreements by any other party thereto or by any other person, firm or
corporation bound thereunder. In addition, the Merger and the consummation of
the Transaction contemplated by this Agreement does not constitute a prohibited
assignment under the terms of any of the Listed Agreements.
3.10 Condition of Assets. All of the tangible personal properties owned by
Target operate according to their respective current specifications and
purposes.
3.11 Reserved.
3.12 No Breach. Neither the execution and delivery of this Agreement nor
compliance by the Target or the Principals with any of the provisions hereof nor
the consummation of the transactions contemplated hereby, will:
(a) violate or conflict with any provision of the Certificate of
Incorporation or By-Laws of Target;
(b) violate or, alone or with notice or the passage of time,
result in the material breach or termination of, or otherwise give any
contracting party the right to terminate, or declare a Default under,
the terms of any Contract to which Target or any Principal is a party
or by which any of them or Target's Assets may be bound (except as
disclosed in Schedule 3.2 regarding required consents);
(c) result in the creation of any Lien upon any of Target's
Assets;
(d) violate any judgment, order, injunction, decree or award
against, or binding upon, Target, which would have a material adverse
effect on Target's Assets, or the Transaction contemplated hereby or
the future operation of the Business by Purchaser or Target; and/or
(e) violate any statute, law, regulation, ordinance or rule
(collectively "Law") of any jurisdiction or Body relating to Target or
the Business, except as set forth on schedule 3.12(e).
3.13 Brokers. The Target has not engaged, consented to, or authorized any
broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker or finder in connection with the
transactions contemplated by this Agreement.
3.14 Prior Names and Addresses. Since its inception, Target has not used any
business name or had any business address other than its current name and the
names and the business addresses set forth in Schedule 3.14.
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3.15 Permits and Licenses. Target has all Permits from all Bodies required to
carry on the Business as presently conducted; all such Permits are in full force
and effect, and, to the knowledge of Target, no suspension or cancellation of
any of such Permits is threatened and Target is in compliance in all material
respects with all requirements, standards and procedures of the Bodies which
have issued such Permits. Schedule 3.15 attached hereto and made a part hereof
sets forth a true and complete list of all Permits from all Bodies held by
Target.
3.16 Capitalization. The authorized capital stock of the Target consists of Ten
Thousand (10,000) shares of common stock, no par value per share. As of the date
hereof, there is one hundred (100) shares of the Target's common stock
outstanding. Further, each of the Principals of the Target own that number of
common shares of the Target as are listed next to his name as provided on
Schedule 3.16 attached hereto and made a part hereof, and except as set forth on
Schedule 3.16 attached hereto, there are no owners of capital stock or equity of
Target other than the Principals.
3.17 Investment Intent; Qualifications as Purchaser.
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(a) The Principals represent and warrant that the shares of Purchaser
Common Stock to be acquired pursuant to the terms hereof are being acquired for
their own account, for investment and not for distribution or resale to others.
The Principals will not sell, assign, transfer, encumber or otherwise dispose of
any of such shares of Purchaser Common Stock unless (i) a registration statement
under the Securities Act with respect thereto is in effect and the prospectus
included therein meets the requirements of Section 10 of the Securities Act, or
(ii) Purchaser has received a written opinion of its counsel that, after an
investigation of the relevant facts, such counsel is of the opinion that such
proposed sale, assignment, transfer, encumbrance or disposition does not require
registration under the Securities Act.
(b) The Principals understand that, the shares of Purchaser Common Stock
are not being registered under the Securities Act and must be held indefinitely
unless they are subsequently registered thereunder or an exemption from such
registration is available.
(c) The Principals each represent and warrant that he is an "accredited
investor," as such term is defined in Rule 501(a) promulgated by the Securities
and Exchange Commission (the "SEC") under the Securities Act, and that he,
alone, or with his purchaser representative, if any, has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the acquisition of the shares of Purchaser Common Stock
contemplated hereby. Each Principal will execute and deliver to Purchaser such
documents as Purchaser may reasonably request in order to confirm the accuracy
of the foregoing.
(d) The Principals understand that the shares of Purchaser Common Stock are
not being registered under the Securities Act in part on the ground that the
issuance thereof is exempt under Section 4(2) of the Securities Act as a
transaction by an issuer not involving any public
11
offering and that Purchaser's reliance on such exemption is predicated in part
on the foregoing representations and warranties of the Principals.
3.18 Restrictive Legend. The shares of Purchaser Common Stock to be issued to in
the Transaction contemplated hereby may not be sold, assigned, transferred,
encumbered or disposed of unless they are registered under the Securities Act or
unless an exemption from such registration is available. Accordingly, a
restrictive legend, in or substantially in the form set forth in Section 2.3(g)
hereof placed on any instrument, certificate or other document evidencing the
shares of Purchaser Common Stock.
3.19 Real Property. Except as set forth on Schedule 3.19 attached hereto, Target
does not own or lease, or use under license or the like, any real property. The
leases for each of the Target's offices are listed on Schedule 3.19.
3.20 Occupational Heath and Safety and Environmental Matters. The operations of
the Business do not, and will not, require, and Target does not have any,
Permits from any Bodies relating to occupational health and safety or
environmental matters to lawfully conduct the Business. There is no litigation,
investigation or other proceeding pending or, to the knowledge of Target,
threatened or known to be contemplated by any Bodies in respect of or relating
to the Business of Target with respect to occupational health and safety or
environmental matters. All operations of the Business have been conducted in
compliance with all, and Target is not liable in any respect for any violation
of any, applicable United States federal, state, local or foreign laws or
regulations, pertaining to occupational health and safety and environmental
matters, including, without limitation, those relating to the emission,
discharge, storage, release or disposal of any materials of environmental
concern into ambient air, surface water, ground water or land surface or
sub-surface strata or otherwise relating to the manufacture, processing,
distribution, use, handling, disposal or transport of Materials of Environmental
Concern. Target has not received any notice of a possible claim or citation
against or in respect of any real property leased by Target, or with regard to
its Assets or the Business, relating to occupational health and safety or
environmental matters and Target is not aware of any basis for any such Action.
3.21 Employment Relations. Schedule 3.21 contains a true and complete list of
all current employees and independent contractors of the Target, the address of
their place of work, and their respective salaries and or compensation packages
for the past 12 months. No employees who are Material to the future operation of
the Business have expressed intention to leave the Target. Target has not made
any promises of increases in wages, salary, compensation, payments, benefits or
otherwise. In the past, to the knowledge of Target, Target has complied with all
United States federal, state, local, foreign, and other applicable laws, rules
and regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not engaged in any unfair
labor practice which, in any of the foregoing cases, could have a Material
Adverse Effect. There is not pending, or, to the knowledge of Target threatened,
any unfair labor practice charge or complaint against Target by or before the
12
United States Federal National Labor Relations Board or any comparable state,
local or foreign agency or authority. No litigation, arbitration, administrative
proceeding or governmental investigation is now pending, and, to the knowledge
of Target, no current, former or prospective employee has made any claim or has
threatened litigation, arbitration, administrative proceeding or governmental
investigation, against Target arising out of any law relating to discrimination
against employees or employment practices.
3.22 Employee Benefit Plans.
----------------------
3.22.1 Schedule 3.22(a) attached hereto, contains a true and complete list
of each plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits of any kind, whether formal or informal, proposed or final, funded or
unfunded and whether or not legally binding, including, without limitation, each
employee benefit plan within the meaning of Section 3(3) of the Employment
Retirement Income Security Act of 1974, as amended, and regulations promulgated
thereunder ("ERISA") (such employee benefit plan, an "Employee Plan"), which is
now maintained, contributed to, or required to be contributed to, for the
benefit of any current or former employee, officer, independent contractor,
agent or consultant working for the Target ("Employee") and any Employee Plan
(whether or not currently in effect) as to which Target has or may have any
continuing obligations or liabilities, and each management, employment,
severance or consulting agreement or contract between the Target and any
Employee which is currently in effect or pursuant to which Target has or may
have any continuing obligations or liabilities (the "Target Employee
Agreements"). Target has provided to Purchaser true and complete copies of all
documents, if any, embodying each Employee Plan and the Target Employee
Agreements, including all amendments thereto and written interpretations
thereof; the three most recent annual reports filed (Form 5500 Series with
applicable schedules) with respect to each Employee Plan required under ERISA;
the most recent summary plan description, if any, with respect to each Employee
Plan required under ERISA; the most recent favorable determination letter from
the IRS, if applicable, with respect to each Employee Plan; and all material
communications, if any, to any Employee relating to each Employee Plan.
3.22.2 Each Employee Plan that is intended to be qualified under the
Internal Revenue Code of 1986, as amended (the "Code"), has received a
determination letter from the IRS to the effect that such Employee Plan and
related trust are qualified and exempt from Federal income taxes under Sections
401(a) and 501(a) of the Code, respectively, or is within a "remedial amendment
period"; such determination letter includes any requirements under the Code; and
no such determination letter has been revoked, nor, to the knowledge of Target,
has revocation been threatened. To the knowledge of Target, nothing has occurred
or is expected to occur that would adversely affect the qualified status of such
Employee Plan or any related trust subsequent to the issuance of such
determination letter.
3.22.3 Seller has performed in all material respects all obligations
required to
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be performed under each Employee Plan, and each Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in compliance with all applicable Laws including but not limited to ERISA or
the Code. No Employee Plan is a defined benefit plan within the meaning of
Section 3(35) of ERISA, nor a Multiemployer Plan (as defined in Section 3(37) of
ERISA), and Target does not have any liability with respect to any defined
benefit plan or Multiemployer Plan as a result of having been treated as part of
a "single employer" within the meaning of Section 414(b), (c), (m), (n) and (o)
of the Code, nor is there any basis for such liability being imposed. There are
no Actions pending, or, to Target's knowledge, threatened or anticipated (other
than routine claims for benefits) against any Employee Plan or the assets of any
Employee Plan, and to Target's knowledge, there are no facts that could give
rise to any material liability in the event of any such Action. Each Employee
Plan can be amended, terminated, or otherwise discontinued after the Closing in
accordance with its terms, without liability to the Target or the Purchaser. All
premiums required by any Employee Plan have been paid thereunder; all
outstanding indebtedness for services performed or accrued vacation, holiday
pay, earned commissions, accrued bonuses or other benefits owed to any Employee
have been paid when due or accrued in accordance with generally accepted
accounting principles and consistent with past practice on the books of the
Target; all contributions due to and payments from, the Employee Plans that may
have been required to be made have been made. No "prohibited transaction" within
the meaning of Section 4975 of the Code or Section 406 of ERISA has occurred
with respect to any Employee Plan; no action or failure to act with respect to
any Employee Plan could subject the Target or the Purchaser or any Employee Plan
to any material tax, penalty or other liability, for breach of fiduciary duty or
otherwise, under ERISA or any other applicable Law, whether by way of indemnity
or otherwise.
3.22.4 Target does not maintain or contribute to any Employee Plan which
provides, or has any liability to provide, life insurance, medical or other
employee welfare benefits (other than severance and accrued vacation and holiday
pay) to any Employee upon his or her retirement or termination of employment,
except as may be required by applicable Law, and the Target has never promised,
represented to, or contracted with (orally or in writing) any Employee
(individually or as a group) that life insurance, medical or other employee
welfare benefits (other than severance and accrued vacation and holiday pay)
would be provided upon their retirement or termination of employment, except to
the extent required by applicable Law.
3.22.5 Each "group health plan" within the meaning of Section 4980B(g)(2)
of the Code maintained by the Target or any entity with which it is considered a
"single employer" within the meaning of Section 414(b), (c), (m), (n) and (o) of
the Code, has been administered in good faith in compliance with the
continuation coverage requirements contained in the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (COBRA), as set forth at Section 4980B of
the Code and any regulations promulgated or proposed thereunder.
3.22.6 The execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not (either alone or when taken
together with any additional or subsequent events) constitute an event under any
Employee Plan or Target
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Employee Agreements that will or may result in any payment, upon a change in
control or otherwise, whether of severance, accrued vacation, or otherwise,
acceleration, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee. No payment or benefit which will or may
be made by the Target or the Purchaser or contemplated by this Agreement with
respect to any Employee as a result of the transactions contemplated by this
Agreement will be characterized as an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code.
3.22.7 The Representations and Warranties set forth in Sections 3.22.1 to
3.22.6 above are qualified in their entirety by Schedule 3.22.7 attached hereto.
3.23 Untrue or Omitted Facts. No representation, warranty or statement by Target
in this Agreement or contained in any Contract, agreement, document or item
furnished by Target or the Principals to Purchaser relating to this Agreement
and the transactions contemplated hereby, contains any untrue statement of a
material fact, or omits to state a fact necessary in order to make such
representations, warranties or statements not materially misleading. Without
limiting the generality of the foregoing, there is no fact known to Target or
Principals that has had, or which may be reasonably expected to have, a material
adverse effect on the Transaction contemplated by this Agreement, or the future
operation of the Business by Purchaser that has not been disclosed in this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and Paragon jointly and severally, makes the following
representations and warranties to Target each of which shall be deemed material,
and Target in executing, delivering and consummating this Agreement, has relied
upon the correctness and completeness, in all material respects, of each of such
representations and warranties:
4.1 Valid Existence; Qualification. Each of Purchaser and Paragon is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Purchaser and Paragon has the power to carry
on its business as now conducted and to own its assets. Purchaser is qualified
to do business as a foreign corporation in the States of Tennessee and Florida,
and Paragon is qualified to do business as a foreign corporation in the State of
Florida, and neither is required to be so qualified in any other jurisdiction in
order to own its respective assets or carry on its respective business as now
conducted, and there has not been any claim by any other jurisdiction to the
effect that Purchaser is required to qualify or otherwise be authorized to do
business as a foreign corporation therein.
4.2 Consents. Except as set forth on Schedule 4.2 attached hereto, consents of
any Bodies are required to be received by or on the part of Purchaser or Paragon
to enable them to enter into and carry out this Agreement and the Transactions
contemplated hereby.
15
4.3 Authority; Binding Nature of Agreement. Each of Purchaser and Paragon has
the power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the respective
Boards of Directors of the Purchaser and Paragon, and Purchaser as the sole
stockholder of Paragon, and no other proceedings, corporate or otherwise, on the
part of Purchaser or Paragon are necessary to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement constitutes the valid and binding obligation of Purchaser
and Paragon and is enforceable in accordance with its terms.
4.4 No Breach. Neither the execution and delivery of this Agreement nor
compliance by Purchaser or Paragon with any of the provisions hereof nor the
consummation of the transactions contemplated hereby, will:
(a) violate or conflict with any provision of the Certificate of
Incorporation or By-Laws of Purchaser or Paragon;
(b) violate or, alone or with notice or the passage of time, result in the
material breach or termination of, or otherwise give any contracting party the
right to terminate, or declare a Default under, the terms of any Contract to
which Purchaser or Paragon is a party or by which they may be bound;
(c) violate any judgment, order, injunction, decree or award against, or
binding upon, Purchaser or Paragon or their respective properties or assets, the
violation of which would have a Material Adverse Effect on Purchaser or Paragon;
or
(d) violate any Law of any jurisdiction or Body relating to Purchaser or
Paragon or their respective businesses, the violation of which would have a
Material Adverse Effect on Purchaser or Paragon.
4.5 Brokers. Except as set forth on Schedule 4.5 attached hereto, neither
Purchaser nor Paragon has engaged, consented to, or authorized any broker,
finder, investment banker or other third party to act on its behalf, directly or
indirectly, as a broker or finder in connection with the transactions
contemplated by this Agreement.
4.6 Paragon Shares of Purchaser Common Stock. The shares of Purchaser Common
Stock shall, upon issuance, constitute duly authorized, validly issued, fully
paid non-assessable shares of Common Stock of the Purchaser.
4.7 Untrue or Omitted Facts. No representation, warranty or statement by
Purchaser or Paragon in this Agreement, or contained in any contract, agreement,
document or item furnished by Purchaser or Paragon to Target relating to this
Agreement and the transactions contemplated
16
hereby, contains any untrue statement of a material fact, or omits to state a
fact necessary in order to make such representations, warranties or statements
not materially misleading.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Target Covenants. Target hereby covenants that from and after the date
hereof and until the Closing or earlier termination of this Agreement:
(a) Access. Target shall afford to the officers, attorneys, accountants and
other authorized representatives of Purchaser free and full reasonable access,
during regular business hours and upon reasonable notice, to all of its books,
records, information systems, technology (owned or licensed by Target) personnel
and properties so that Purchaser, at its own expense, may have full opportunity
to make such review, examination and investigation as Purchaser may desire.
Target will cause the employees, accountants, attorneys and other agents and
representatives of Target to cooperate fully with said review, examination and
investigation and to make full disclosure to Purchaser and its representatives
of all material facts affecting the Assets. Target acknowledges and agrees that
no review, examination or investigation heretofore or hereafter undertaken by
Purchaser or its representatives shall limit or affect any representation or
warranty made by Target in, or otherwise relieve Target from any liability
under, this Agreement. Purchaser shall not disrupt Target's business in
connection with any such investigation.
(b) Actions Prior to Closing. Prior to the Closing, Target will not,
without the prior written consent of Purchaser:
(i) amend its Certificate of Incorporation or By-Laws.
(ii) sell, lease or dispose of any of its Assets;
(iii) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership, limited liability company or
other business organization or division thereof or any material
interest therein;
(iv) issue, sell or redeem any capital stock or otherwise change
the capitalization of Target;
(v) acquire, sell, lease or dispose of any of the Assets or
subject the Assets to any Lien;
(vi) enter into any material transaction not in the ordinary and
usual course of business consistent with past practice;
17
(vii) take any other action outside the ordinary course of
business consistent with past practice;
(viii) adopt any resolution, or enter into or amend any Contract,
with respect to any of the foregoing.
(c) Liabilities. (i) Target shall not incur any liability except for those
incurred in the ordinary and usual course of its business consistent with past
practice which are not singly or in the aggregate with other liabilities, more
than $5,000, unless it does not have an Material Adverse Effect on the Business
(the "Excepted Liabilities"), without the prior written consent of the
Purchaser; (ii) Target shall cause any loan, extension of credit, credit
arranged for by Target, personal loan or any equivalent to any Person, which at
the time of closing would [violate section 402 of the Xxxxxxxx-Xxxxx Act of
2002] to be fully satisfied or extinguished in all respects, in accordance with
GAP and applicable law.
(d) Preservation of Business. Target shall use its best efforts to keep
available the services of its present officers, managers, employees and
consultants, and to maintain and preserve intact good relationships with
customers and lenders, preserve its good will.
(e) No Breach.
(i) Target will (A) use its best efforts to assure that all of its
representations and warranties contained herein are true in all material
respects as of the Closing as if repeated at and as of such time, that no
breach or Default shall occur with respect to any of its covenants,
representations or warranties contained herein that has not been cured by
the Closing and that all conditions to Purchaser's obligation to enter into
and complete the Closing are satisfied in a timely manner; (B) not
voluntarily take any action or do anything which will cause a breach of, or
default respecting, such covenants, representations or warranties or would
impede the satisfaction of such conditions; and (C) promptly notify
Purchaser of any event or fact which represents or is likely to cause such
a breach or default or result in such an impediment.
(ii) Without limiting the generality of the foregoing, Target agrees
to use its best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
taking such actions as may reasonably be required to be taken under
applicable state securities or Blue Sky laws in connection with the
issuance of the shares of Purchaser Common Stock and applicable federal and
state banking and lending laws.
(f) Consents. Promptly following the execution of this Agreement, the
Target shall use its best efforts to obtain consents of all third parties and
Bodies (i) necessary to the consummation of the transactions contemplated by
this Agreement, and as set forth on Schedule 5.1(f) attached hereto.
18
(g) Stockholder Approval. Target shall, in accordance with applicable legal
requirements and the Certificate of Incorporation and By-laws of Target, cause
the transaction contemplated hereby approved by the holders of its capital stock
to the extent required by Law.
5.2 Principal Covenants. The Principals each hereby covenant that they shall
vote their respective voting capital stock of the Target to approve this
Agreement and the transactions contemplated hereby.
5.3 Purchaser Covenants. It is hereby agreed that, from and after the date
hereof and until the Closing or earlier termination of this Agreement:
(a) Access. Upon request, Purchaser and Paragon will cause its officers,
attorneys, accountants and other agents and representatives to meet with the
officers, attorneys and accountants and other agents and representatives of
Target during regular business hours and upon reasonable notice, to discuss the
financial condition and business operations of Purchaser and Paragon. Purchaser
acknowledges and agrees that no review, examination or investigation heretofore
or hereafter undertaken by Target or its representatives shall limit or affect
any representation or warranty made by Purchaser or Paragon, otherwise relieve
Purchaser from any liability under, this Agreement. Target shall not disrupt
Purchaser's or Paragon's business in connection with any such investigation.
(b) No Breach.
(i) Purchaser and Paragon will each (A) use its best efforts to assure
that all of its representations and warranties contained herein are true in
all material respects as of the Closing as if repeated at and as of such
time, that no material breach or Default shall occur with respect to any of
its covenants, representations or warranties contained herein that has not
been cured by the Closing and that all conditions to Target's obligation to
enter into and complete the Closing are satisfied in a timely manner; (B)
not voluntarily take any action or do anything which will cause a breach of
or default respecting such covenants, representations or warranties or
would impede the satisfaction of such conditions; and (C) promptly notify
Target of any event or fact which represents or is likely to cause such a
breach or default or result in such an impediment.
(ii) Without limiting the generality of the foregoing, Purchaser
agrees to use its best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
taking such actions as may reasonably be required to be taken under
applicable state securities or Blue Sky laws in connection with the
issuance of the shares of Purchaser Common Stock and applicable federal and
state banking and lending laws.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION
OF PURCHASER AND PARAGON TO CLOSE
The obligation of Purchaser and Paragon to consummate the Transaction is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions, any one or more of which may be waived in writing by Purchaser and
Paragon (except when the fulfillment of such condition is a requirement of Law):
6.1 Representations and Warranties. All representations and warranties of Target
and Principals contained in this Agreement and in any written statement
(including financial statements), exhibit, certificate, schedule or other
document delivered pursuant hereto shall be true and correct in all material
respects (except to the extent that any such representation and warranty is
already qualified as to materiality, in which case such representation and
warranty shall be true and correct without further qualification, and further
except to the extent that Target has acted in compliance with Section 5.1
hereof) as at the Closing Date, as if made at the Closing and as of the Closing
Date.
6.2 Covenants. Target shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be performed or
complied with by it prior to or at the Closing.
6.3 Certificate. Purchaser shall have received a certificate, dated the Closing
Date, signed by the Secretary of Target, as to the satisfaction of the
conditions contained in Sections 6.1 and 6.2 hereof.
6.4 Opinion. Purchaser shall have received an opinion from counsel satisfactory
to it, dated the Closing Date, to the effect set forth in Exhibit 6.4 attached
hereto.
6.5 No Actions. No Action shall have been instituted by a Person other than a
Party, directly or indirectly, and be continuing before a court or before or by
any Body, or shall have been threatened and be unresolved, to restrain or
prevent, or obtain any material amount of damages in respect of, the carrying
out of the Transaction, or which might have a Material Adverse Effect thereon.
6.6 Consents; Permits. Target and Purchaser shall have obtained all consents,
approvals, licenses and other Permits of Bodies and other Persons necessary for
the performance by each of them of all of their respective obligations under
this Agreement, and Target shall have obtained such other consents, if any, to
prevent the occurrence of a Default under any Contract to which Target is a
party or is otherwise bound, as set forth in Section 5.1(f) and on Schedule
5.1(f).
20
6.7 Employment Agreements. Purchaser shall have tendered to each of Lagori,
XxXxxxxx and XxXxxxxx respectively, an employment agreement (the "Employment
Agreements") in, or substantially in, the forms attached hereto as Exhibits
6.7(a), 6.7(b) and 6.7(c) respectively.
6.8 Corporate Actions. All actions necessary to authorize the execution,
delivery and performance of this Agreement by Target and the consummation of the
Transaction shall have been duly and validly taken (including, without
limitation, approval of the Transaction by Target's shareholders) and Target
shall have full power and right to consummate the Transaction.
6.9 No Insider Loans. At the time of the Closing, there shall be no loan,
extension of credit, financing arrangements and the like from Target to any
Person, the existence of which would, as a result of the Merger, be in violation
of Section 402 of the Xxxxxxxx-Xxxxx Act of 2002.
6.10 Approval of Counsel. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental thereto, and all other
related legal matters, shall have been approved by counsel to Purchaser, which
approval shall not be unreasonably withheld or delayed.
6.11 Additional Documents. Target shall have delivered all such certified
resolutions, certificates and documents with respect to Target and the
Transaction as Purchaser or its counsel may have reasonably requested.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION
OF TARGET TO CLOSE
The obligation of Target to consummate the Transaction is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions,
any one or more of which may be waived in writing by Target (except when the
fulfillment of such condition is a requirement of law):
7.1 Representations and Warranties. All representations and warranties of
Purchaser and Paragon contained in this Agreement and in any written statement
(including financial statements), exhibit, certificate, schedule or other
document delivered pursuant hereto shall be true and correct in all material
respects (except to the extent that any such representation and warranty is
already qualified as to materiality, in which case such representation and
warranty shall be true and correct without further qualification, and further
except to the extent that Purchaser and Paragon have acted in compliance with
Section 5.3 hereof) as at the Closing Date, as if made at the Closing and as of
the Closing Date.
7.2 Covenants. Purchaser and Paragon shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it prior to or at the Closing.
21
7.3 Certificate. Target shall have received a certificate, dated the Closing
Date, signed by the Chief Executive Officer of Purchaser, as to the satisfaction
of the conditions contained in Sections 7.1 and 7.2 hereof.
7.4 No Actions. No Action shall have been instituted by a Person other than a
Party, directly or indirectly, and be continuing before a court or before or by
a Body, or shall have been threatened and be unresolved, to restrain or prevent,
or obtain any material amount of damages in respect of, the carrying out of the
Transaction.
7.5 Consents; Permits. Purchaser and Paragon shall have obtained all consents,
licenses and other Permits of Bodies and other Persons necessary for the
performance by Purchaser and Paragon of all of its obligations under this
Agreement, and such other consents, if any, to prevent the occurrence of a
Default under any Contract to which Purchaser is a party or otherwise bound, as
set forth on Schedule 4.2.
7.6 Corporate Actions. All actions necessary to authorize the execution,
delivery and performance of this Agreement by Purchaser and Paragon and the
consummation of the Transaction shall have been duly and validly taken
(including, without limitation, shareholders' approval, if necessary), and
Purchaser and Paragon shall have full power and right to consummate the
Transaction.
7.7 Employment Agreements. Each of Lagori, XxXxxxxx and XxXxxxxx shall have
executed and delivered their respective Employment Agreement.
7.8 Approval of Counsel. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental thereto, and all other
related legal matters, shall have been approved as to form and substance by
counsel to Target, which approval shall not be unreasonably withheld or delayed.
7.9 Additional Documents. Purchaser shall have delivered all such certified
resolutions, certificates and documents with respect to Purchaser and the
Transaction as Target or its counsel may have reasonably requested.
ARTICLE VIII
TERMINATION AND WAIVER; LIQUIDATED DAMAGES
8.1 Termination . Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated and the transactions provided for herein
abandoned at any time prior to the Closing:
(a) By mutual consent of the respective Boards of Directors of Purchaser
and Target;
22
(b) By Purchaser if any of the conditions set forth in Article VI hereof
shall not have been fulfilled on or prior to December 31, 2002 or shall become
incapable of fulfillment, in each case except as such shall have been the
result, directly or indirectly, of any action or inaction by Purchaser or its
officers and directors, and shall not have been waived.
(c) By Target, if any of the conditions set forth in Article VII hereof
shall not have been fulfilled on or prior to December 31, 2002 or shall have
become incapable of fulfillment, in each case except as such shall have been the
result, directly or indirectly, of any action or inaction by Target or its
officers and directors, and shall not have been waived.
If this Agreement is terminated as described above, this Agreement shall be
of no further force and effect, without any liability or obligation on the part
of any of the parties except for any liability which may arise pursuant to
Section 8.3 hereof or as a result of a party's willful failure to consummate the
transactions contemplated hereby.
8.2 Waiver. Any condition to the performance of the parties which legally may be
waived on or prior to the Closing Date may be waived at any time by the party
entitled to the benefit thereof by action taken or authorized by an instrument
in writing executed by the relevant party or parties. The failure of any party
at any time or times to require performance of any provision hereof shall in no
manner affect the right of such party at a later time to enforce the same. No
waiver by any party of the breach of any term, covenant, representation or
warranty contained in this Agreement as a condition to such party's obligations
hereunder shall release or affect any liability resulting from such breach, and
no waiver of any nature, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such condition or of any breach of any other term, covenant,
representation or warranty of this Agreement.
8.3 Liquidated Damages.
8.3.1 Breach by Target. Target acknowledges that Purchaser is investing a
significant amount of resources, time, expense and reputation in pursuing the
potential acquisition contemplated hereby. Target further acknowledges that
Purchaser would be irreparably harmed if the Target terminated or abandoned this
Agreement at a time when the conditions set forth in Article VII have been met
(provided that any reference in Article VII to the conditions shall be construed
to mean only those conditions that were required to be met prior to the date of
termination, expiration or abandonment of the Agreement) and that monetary
damages to Purchaser in such event would be immeasurable. Accordingly, in such
event, Target shall pay Purchaser's accounted for costs and expenses relating to
the review, negotiation and preparation of this Agreement and the transactions
contemplated hereby and related hereto (including, without limitation, any legal
fees and disbursements and travel costs) as liquidated damages for the breach of
this Agreement immediately. Target acknowledges that Target has received good,
valuable and sufficient consideration for the foregoing agreement, and that
Purchaser is relying
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on this Section 8.3.1 entering into this Agreement and pursuing the transaction
contemplated hereby.
8.3.2 Breach by Purchaser. Purchaser acknowledges that Target is investing
a significant amount of resources, time, expense and reputation in pursuing the
potential acquisition contemplated hereby. Purchaser further acknowledges that
Target would be irreparably harmed if the Purchaser terminated or abandoned this
Agreement at a time when the conditions set forth in Article VI have been met
(provided that any reference in Article VI to the conditions shall be construed
to mean only those conditions that were required to be met prior to the date of
termination, expiration or abandonment of the Agreement), and that monetary
damages to Target in such event would be immeasurable. Accordingly, in such
event, Purchaser shall pay Target's accounted for costs and expenses relating to
the review, negotiation and preparation of this Agreement and the transactions
contemplated hereby and related hereto (including, without limitation, legal
fees and disbursements) as liquidated damages for the breach of this Agreement
immediately. Purchaser acknowledges that Purchaser has received good, valuable
and sufficient consideration for the foregoing agreement, and that Target is
relying on this Section 8.3.2 entering into this Agreement and pursuing the
transaction contemplated hereby.
8.3.3 Legal Action. Any party may commence a lawsuit for specific
performance of the provisions of this Section 8.3 applicable to it and, if such
party prevails in such lawsuit, the other party shall reimburse such party for
the reasonable legal fees and costs of such party incurred in prosecuting such
lawsuit.
ARTICLE IX
CLOSING
9.1 Location; Date. The closing of the Transaction (the "Closing") shall take
place at the offices of Mortgage Express, at 10:00 a.m. (central time) on or
before December 31, 2002, or, at such time and place as may be mutually agreed
to by the Parties (the "Closing Date").
9.2 Items to be Delivered to Purchaser. At the Closing, Target will deliver or
cause to be delivered to Purchaser:
(a) the Certificates of Merger required by Section 2.2 hereof;
(b) the certificate required by Section 6.3 hereof;
(c) the opinion of counsel required by Section 6.4 hereof;
(d) the Employment Agreements executed by each of Lagori, XxXxxxxx and
XxXxxxxx, as the case may be;
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(e) certified copies of all corporate actions required by Section 6.8
hereof;
(e) such other certified resolutions, documents and certificates as are
required to be delivered to Purchaser pursuant to the provisions of this
Agreement or which otherwise confirm that all of the conditions precedent to the
obligation of Purchaser to close have been satisfied.
9.3 Items to be Delivered to Target and Other Parties. At the Closing, Purchaser
will deliver or cause to be delivered to Target, and other parties as described
below:
(a) the Certificates of Merger required by Section 2.2 hereof;
(b) the certificate required by Section 7.3 hereof;
(c) certified copies of all corporate action required by Section 7.6
hereof;
(d) the Employment Agreements to each of Lagori, XxXxxxxx and XxXxxxxx
respectively;
(e) the promissory note described in Section 2.8(a) to the recipient listed
on Schedule 2.8;
(f) the promissory notes described in Section 2.8(b) to the recipients
listed on Schedule 2.8; and
(g) such other certified resolutions, documents and certificates as are
required to be delivered to Target pursuant to the provisions of this Agreement
or which otherwise confirm that all of the conditions precedent to the
obligation of Target to close have been satisfied.
ARTICLE X
POST-CLOSING MATTERS
10.1 Further Assurances. On and after the date hereof, Target agrees to take the
following actions at Purchaser's sole expense:
(a) execute and deliver, from time to time after the date hereof upon the
request of the Purchaser, all such further instruments and documents as may be
necessary or appropriate to carry out this Transaction;
(b) perform any other acts deemed necessary to carry out the intent of this
Agreement.
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10.2 Compliance with Rule 145 of the Securities Act; Exemption from
Registration. With respect to the shares of Purchaser Common Stock on and after
the date hereof, Target shall, at all times, comply with the provisions of Rule
145 of the Securities Act and shall not take, or omit to take, any action which
would cause the issuance of the Paragon shares of Purchaser Common Stock not to
be exempt from (a) Section 5 of the Securities Act pursuant to Section 4(2) or
otherwise, or (b) any registration provisions under any state securities laws.
10.3 Election as Director. Immediately upon the Closing of this Agreement, the
Board of Directors of Purchaser shall cause Lagori to be elected as a director
and Vice Chairman of the Board of Purchaser, to serve until his successor is
duly elected, and shall qualify.
10.4 Competition/Non-Solicitation by the Target and the Principals.
10.4.1 Subject to the provisions of Section 10.4.4, other than for or on
behalf of Purchaser, Target or Purchaser's affiliates, for a period of three (3)
years following the Closing Date, the Principals shall not, without the prior
written consent of the Purchaser, engage, directly or indirectly, in the
mortgage loan brokerage or banking business, insurance business, or in any other
business which is similar in nature to that of the Target anywhere in the United
States, or any other jurisdiction in which the Target conducts business or is
licensed to conduct business, or directly or indirectly own an interest in,
manage, operate, join, control, lend money or render financial or other
assistance to or participate in or be connected with (as a partner, member,
stockholder, consultant or otherwise) any person or entity that competes with
the Purchaser or the Business in the mortgage loan business; provided, however,
that, for the purposes of this Section 10.4 ownership of securities having less
than five percent (5%) of the outstanding voting power of any competitor which
are listed on any national securities exchange or traded actively in the
national over-the-counter market shall not be deemed to be in violation of this
Section 10.4 so long as the Person owning such securities has no other
connection or relationship with such competitor.
10.4.2 In addition, subject to the provisions of Section 10.4.4, the
Principals agree that, for a period of three (3) years following the Closing
Date, none of the Principals will, in any manner and through any medium,
directly or indirectly, (i) call upon, solicit, advise or otherwise do, or
attempt to do, business with any borrower or any prospective borrower which does
business with the Purchaser, Target or Purchaser's affiliates or with whom the
Target or Principals had any dealings prior to the Closing Date, or take away or
interfere or attempt to interfere with any custom, trade, business or patronage
of the Purchaser, Target or Purchaser's affiliates, for the purpose of
conducting or engaging in the residential mortgage loan or any other business
that is similar in nature to that of the Business, or (ii) employ, compete for,
solicit, divert, take away, interfere, or attempt to do any of the foregoing
with respect to, any officers, employees, representatives, independent
contractors, agents or other individuals who rendered services to either (A) the
Purchaser, Target and/or Purchaser's affiliates during the period between the
Closing and the third (3rd) anniversary thereof and (B) Target as of the date
hereof, or to solicit any of the foregoing referenced people to leave the employ
of the Purchaser, Target
26
or Purchaser's affiliates or violate the terms of their contracts, or any
employment arrangements, with the Purchaser or Target.
10.4.3 The three year period referred to in 10.4.1 and 10.4.2 above shall
be extended by the length of any period during which any of the Principals are
in breach of the terms of this Section 10.4 and shall be shortened by the length
of any period during which Purchaser is in default of any of its obligations
under this Agreement.
10.4.4 Notwithstanding anything to the contrary in Sections 10.4.1, 10.4.2
and 10.4.3, the provisions set forth therein shall expire on the first
anniversary of the Closing hereof, if on that date the shares of Purchaser's
Common Stock are not listed or included on a national stock exchange, the Nasdaq
National Market or the Nasdaq SmallCap Market. The provisions of this Section
10.4.4 shall not effect any restrictive covenant in any of the Employment
Agreements.
10.4.5 The covenants of the Principals set forth in this Section 10.4 are
an essential element of this Agreement and that, but for the agreement of the
Principals to comply with these covenants, the Purchaser and Paragon would not
have entered into this Agreement. This Section 10.4 constitutes an independent
covenant and shall not be affected by performance or nonperformance of any other
provision of this Agreement by the Purchaser or Paragon. The Principals have
independently consulted with their respective counsel and after such
consultation agree that the covenants set forth in this Section 10.4 are
reasonable and proper.
10.4.6 It is the intent and understanding of each party hereto that if in
any action before any Body legally empowered to enforce the terms and covenants
contained in this Section 10.4 any term, restriction, covenant or promise
contained herein is found to be unreasonable and accordingly unenforceable, then
such term, restriction, covenant or promise shall be deemed modified to the
extent necessary to make it enforceable by such Body.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
11.1 Survival. The parties agree that their respective representations and
warranties contained in this Agreement shall survive the Closing of this
Agreement.
11.2 Indemnification.
---------------
11.2.1 General Indemnification Obligation of Target. From and after the
Closing, Target and the Principals, jointly and severally, (collectively the
"Target Indemnifying Parties") will reimburse, indemnify and hold harmless
Purchaser, Paragon and their respective directors, officers, employees and/or
agents, successors and assignees (collectively the "Purchaser Indemnified
Parties) against and in respect of:
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(a) any and all damages, losses, deficiencies, liabilities, costs and
expenses incurred or suffered by any Purchaser Indemnified Party that result
from, relate to or arise out of any misrepresentation, breach of warranty or
non-fulfillment of any agreement or covenant on the part of Target or the
Principals under this Agreement, or from any misrepresentation in or omission
from any certificate, schedule, statement, document or instrument furnished to
Purchaser pursuant hereto; and
(b) any and all Actions, assessments, audits, fines, judgments, costs and
other expenses (including, without limitation, reasonable legal fees and
expenses) incident to any of the foregoing or to the enforcement of this Section
11.2.1.
11.2.2 General Indemnification Obligation of Purchaser. From and after the
Closing, Purchaser will reimburse, indemnify and hold harmless Target, its
directors, officers, employees and/or agents, successors and assignees, and the
Principals (collectively the "Target Indemnified Parties") against and in
respect of:
(a) any and all damages, losses, deficiencies, liabilities, costs and
expenses incurred or suffered by any Target Indemnified Party that result from,
relate to or arise out of any misrepresentation, breach of warranty or
non-fulfillment of any agreement or covenant on the part of Purchaser or Paragon
under this Agreement, or from any misrepresentation in or omission from any
certificate, schedule, statement, document or instrument furnished to Target
pursuant hereto; and
(b) any and all Actions, assessments, audits, fines, judgments, costs and
other expenses (including, without limitation, reasonable legal fees and
expenses) incident to any of the foregoing or to the enforcement of this Section
11.2.2.
11.2.3 Method of Asserting Claims, Etc.
-------------------------------
(a) In the event that any claim or demand for which Target Indemnifying
Parties would be liable to any Purchaser Indemnified Party(ies) hereunder is
asserted against or sought to be collected from any such Purchaser Indemnified
Parties by a third party, the Purchaser Indemnified Party(ies) shall notify
Target Indemnifying Parties of such claim or demand, specifying the nature of
such claim or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the final amount
of such claim and demand) (the "Claim Notice"). Target Indemnifying Parties
shall thereupon, at their sole cost and expense, defend the Purchaser
Indemnified Party(ies) against such claim or demand with counsel reasonably
satisfactory to the Purchaser Indemnified Party(ies).
(b) Target Indemnifying Parties shall not, without the prior written
consent of the Purchaser Indemnified Party(ies), consent to the entry of any
judgment against the Purchaser Indemnified Party(ies) or enter into any
settlement or compromise which does not include, as an unconditional term
thereof (i.e., there being no requirement that the Purchaser Indemnified
Party(ies) pay any amount of money or give any other consideration), the giving
by the claimant
28
or plaintiff to the Purchaser Indemnified Party(ies) of a release, in form and
substance satisfactory to the Purchaser Indemnified Party(ies) from all
liability in respect of such claim or litigation. If the Purchaser Indemnified
Party(ies) desire to participate in, but not control, any such defense or
settlement, it may do so at its or their sole cost and expense. If, in the
reasonable opinion of the Purchaser Indemnified Party(ies), any such claim or
demand or the litigation or resolution of any such claim or demand involves an
issue or matter which could have a Material Adverse Effect on the business,
operations, assets, properties or prospects of the Purchaser Indemnified
Party(ies) or Purchaser's affiliates, then the Purchaser Indemnified Party(ies)
shall have the right to control the defense or settlement of any such claim or
demand and its costs and expenses shall be included as part of the
indemnification obligation of Target hereunder; provided, however, that the
Purchaser Indemnified Party(ies) shall not settle any such claim or demand
without the prior written consent of Target Indemnifying Parties, which consent
shall not be unreasonably withheld or delayed. If the Purchaser Indemnified
Party(ies) should elect to exercise such right, the Target Indemnifying Parties
shall have the right to participate in, but not control, the defense or
settlement of such claim or demand at their sole cost and expense.
(c) Notwithstanding anything hereinabove to the contrary, the Purchaser
Indemnified Party(ies) shall have the right to employ separate counsel
(including local counsel), and Target shall bear the reasonable fees, costs and
expenses of one (1) such separate counsel (and local counsel) if (i) the use of
counsel chosen by Target Indemnifying Parties to represent the Purchaser
Indemnified Party(ies) would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action
include both the Purchaser Indemnified Party(ies) and Target Indemnifying
Parties, and Target on the one hand, and the Purchaser Indemnified Party(ies) on
the other hand, shall have reasonably concluded that there may be legal defenses
available to the Purchaser Indemnified Party(ies) which are different from or
additional to those available to Target Indemnifying Parties, (iii) Target
Indemnifying Parties shall not have employed counsel reasonably satisfactory to
the Purchaser Indemnified Party(ies) to represent the Purchaser Indemnified
Party(ies) within a reasonable time after notice of the institution of such
Action or (iv) Target Indemnifying Parties shall authorize the Purchaser
Indemnified Party(ies) to employ one (1) separate counsel at the expense of
Target Indemnifying Parties.
(d) In the event the Purchaser Indemnified Party(ies) should have a claim
against Target Indemnifying Parties hereunder that does not involve a claim or
demand being asserted against or sought to be collected from it by a third
party, the Purchaser Indemnified Party(ies) shall send a Claim Notice with
respect to such claim to Target Indemnifying Parties. If Target Indemnifying
Parties dispute their liability with respect to such claim or demand, such
dispute shall be resolved in accordance with Section 11.3 hereof; if Target
Indemnifying Parties do not notify the Purchaser Indemnified Party(ies), within
twenty (20) days from receipt of notice of such a claim, that they dispute such
claim or demand, the amount of such claim or demand shall be conclusively deemed
a liability of Target Indemnifying Parties hereunder.
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(e) All claims for indemnification by any Target Indemnified Party(ies)
under this Agreement shall be asserted and resolved under the procedures set
forth hereinabove by substituting in the appropriate place "Purchaser" or
"Indemnifying Target Parties" and "Target Indemnified Party(ies)" for "Purchaser
Indemnified Party(ies)."
11.3 Payment; Right of Setoff . Upon the determination of liability under
Section 11.2 hereof, the amount of any claim for indemnification made hereunder.
Notwithstanding the foregoing and any other rights that Purchaser may have
against any other person, firm or corporation, Purchaser shall have the right to
setoff the unpaid amount of any such claim against any amounts owed by it under
any agreements or instruments entered into pursuant to this Agreement. Further,
pending final determination of any claims, demands or disputes in accordance
with the provisions of this Article XI, Purchaser shall have the right to
withhold from any amounts due pursuant to this Agreement or any other agreement,
if any, the amount of such claims, demands and/or disputes. Upon the final
payment in full of any claim, either by setoff or otherwise, the entity making
payment shall be subrogated to the rights of the indemnified party against any
person, firm or corporation with respect to the subject matter of such claim.
11.4 Other Rights and Remedies Not Affected. The indemnification rights of the
parties under this Article XI are independent of, and in addition to, such
rights and remedies as the parties may have at law or in equity or otherwise for
any misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party hereto, including, without
limitation, the right to seek specific performance, rescission or restitution,
none of which rights or remedies shall be affected or diminished hereby.
ARTICLE XII
REGISTRATION RIGHTS
12.1 Purchaser's Obligations
(a) Registration
(i) If at any time after the date hereof Purchaser shall file with the
SEC a registration statement (a "Registration Statement") under the
Securities Act relating to an offering for its own account or the account
of others under the Securities Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock
option or other employee benefit plans), Purchaser shall send to Principals
written notice of such determination and, if within fifteen (15) days after
the date of such notice, Principals shall so request in writing, that
Purchaser shall include in such Registration Statement all or any part of
the Purchaser Shares (for the purpose of this Article XII, the "Registrable
Securities") that Principals request to be registered, except that if, in
connection with any underwritten public offering, the managing
underwriter(s) thereof shall impose a limitation on the number of
Registrable Securities or other securities of Purchaser
30
which may be included in the Registration Statement because, in such
underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then Purchaser
shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities as the underwriter shall
permit (limited to zero if necessary).
(ii) If an offering in connection with which Principals are entitled
to registration under this Section 12.1(a) is an underwritten offering,
then Principals shall, unless otherwise agreed by Purchaser, offer and sell
such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and on the same terms and conditions as other
like securities included in such underwritten offering.
(b) Copies of Filings and Correspondence. Purchaser shall furnish to
Principals (i) promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by Purchaser, one copy of the Registration
Statement and any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto, and each item of correspondence from
the SEC or the staff of the SEC which comments upon or requests information
relating to Principals and/or the Registrable Securities (including, without
limitation, the resale and plan of distribution thereof), in each case relating
to such Registration Statement (other than any portion, if any, thereof which
contains information for which Purchaser has sought confidential treatment),
(ii) on the date of effectiveness of the Registration Statement or any amendment
thereto, a notice stating that the Registration Statement or amendment has
become effective, and (iii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as Principals may reasonably request in order to facilitate the
disposition of the Registrable Securities by Principals.
(c) Blue Sky. Purchaser shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "Blue Sky" laws of such jurisdictions in the United
States as Principals request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, and (iii) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that Purchaser shall not be
required in connection therewith or as a condition thereto to (i) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 12.1(c), (ii) subject itself to general taxation in any
such jurisdiction, (iii) provide any undertakings that cause Purchaser undue
expense or burden, or (iv) make any change in its charter or bylaws, which in
each case the Board of Directors of Purchaser determines to be contrary to the
best interests of Purchaser and its shareholders.
(d) Events Affecting Prospectus. Purchaser shall notify Principals of the
happening of any event, of which Purchaser has knowledge, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or
31
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, as promptly as practicable after
becoming aware of such event, and if such Registration Statement is supplemented
or amended to correct such untrue statement or omission, Purchaser shall deliver
such number of amended or supplement Prospectuses as Principals may reasonably
request.
(e) Notification of Amendment or Supplement. Purchaser shall, as promptly
as practicable after becoming aware of such event described in Section 12.1(d),
notify Principals of the issuance of any order related thereto and the
resolution thereof (and if such Registration Statement is supplemented or
amended, deliver such number of copies of such supplement or amendment to
Principals as he may reasonably request).
(f) Review by Principals' Counsel. Purchaser shall permit one firm of
counsel designated by Principals to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the SEC.
(g) Principals' Due Diligence; Confidentiality of the Purchaser's
Information. Purchaser shall make available for inspection by (i) Principals,
and (ii) a firm of attorneys and a firm of accountants or other agents retained
by Principals (collectively, the "Inspectors") all pertinent financial and other
records, and pertinent corporate documents and properties of Purchaser
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause Purchaser's officers, directors and employees to supply all
information which Principals may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to Principals) of any record or other
information which Purchaser determines in good faith to be confidential, and of
which determination the Inspector so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court or other Body of competent jurisdiction,
or (iii) the information in such Records has been made generally available to
the public other than by disclosure in violation of this or any other agreement.
Purchaser shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
a confidentiality agreements with Purchaser with respect thereto, substantially
in the form of this Section 5.1(g). Principals agrees that he shall, upon
learning that disclosure of such Records is sought, in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to Purchaser and allow Purchaser, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the records deemed confidential. Nothing herein shall be deemed to limit
Principals's ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
(h) Confidentiality of Principals' Information. Purchaser shall hold in
confidence and not make any disclosure of information concerning Principals
provided to Purchaser unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii)
32
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement, or (v) Principals consents to the form and content
of any such disclosure regarding it. Purchaser agrees that it shall, upon
learning that disclosure of such information concerning any of Principals is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to Principals prior to making such
disclosure, and allow Principals, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, such
information.
(i) Compliance with Laws. Purchaser shall comply with all applicable Laws
related to a Registration Statement and offering and sale of securities and all
applicable rules and regulations of Bodies in connection therewith (including,
without limitation, the Securities Act and the Exchange Act, and the rules and
regulations promulgated by the SEC).
12.2 Obligations of Principals. In connection with a registration of the
Registrable Securities, Principals shall have the following obligations:
(a) Principals' Information. It shall be a condition precedent to the
obligations of Purchaser to complete the registration of Registrable Securities
for each Principal respectively pursuant to this Article XII that each
respective Principal shall furnish to Purchaser such information regarding
himself, the Registrable Securities and the intended method of disposition as
shall be required to effect the registration of such Registrable Securities and
shall execute such documents in connection with such registration as Purchaser
may reasonably request. At least five (5) business days prior to the first
anticipated filing date of the Registration Statement, Purchaser shall notify
Principals of the information Purchaser requires from Principals.
(b) Cooperation. Principals shall agree to cooperate with Purchaser as
requested by Purchaser in connection with the preparation and filing of the
Registration Statement hereunder.
(c) Underwritten Offering. In the event Principals determines to engage the
services of an underwriter, Principals agrees to enter into and perform his
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities.
(d) No Disposition of Registrable Securities. Principals agrees that, upon
receipt of any notice from Purchaser of the happening of any event of the kind
described in Sections 12.1(d) or 12.1(e), Principals will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering the resale of such Registrable Securities until Principals's
receipt of the copies of the supplemented or amended prospectus contemplated by
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Sections 12.1(d) or 12.1(e) and, if so directed by Purchaser, Principals shall
deliver to Purchaser or destroy (and deliver to Purchaser a certificate of
destruction) all copies in Principals's possession, of the prospectus covering
such Common Shares current at the time of receipt of such notice.
(e) Method of Underwritten Distribution. Principals may not participate in
any underwritten distribution of the Registrable Securities unless Principals
(i) agrees to sell the Registrable Securities on the basis provided in any
underwriting arrangements in usual and customary form entered into by Purchaser,
and (ii) completes, in a manner reasonably acceptable to Purchaser, and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
12.3 Expenses of Registration. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications, relating to one (1) Registration Statement pursuant to Article
XII, except that if a portion of Principals' Registrable Securities are not
permitted to be included in one (1) Registration Statement by an underwriter as
provided in Section 12.1(a), then relating to the least number of Registration
Statements which will cover the resale of all of Principals's Registrable
Securities, including all registration, listing and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for
Purchaser hereof, shall be borne by Purchaser.
12.4 Exemption from Registration. The provisions of Sections 12.1 through 12.3
notwithstanding, Purchaser shall have no obligation to register the resale of
the Registrable Securities to the extent the Registrable Securities may be
resold without registration without violating Section 5 of the Securities Act
pursuant to Rule 144 promulgated thereunder or any other exemption or exception
from registration under the Securities Act.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Expenses. Except as otherwise specifically provided in this Agreement, each
of the parties shall bear its own expenses in connection herewith and with
respect to any transactions and negotiations contemplated hereby, whether or not
consummated for any reason.
13.2 Publicity. No Party may make any press releases, announcements and other
public disclosures regarding the transactions contemplated hereby without the
written consent of the other Parties, except to the extent such disclosure is
required by Law or trading market regulations, in which case the disclosing
party shall provide the other with prior notice of such disclosures.
13.3 Confidential Information. All information that a disclosing Party furnishes
in connection with the Transaction described herein and all information which a
disclosing Party
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previously furnished, and the existence of, and the terms of, the transaction
described herein (the "Information"), will be kept confidential, and will not,
without prior written consent of the disclosing Party, be used or disclosed,
directly or indirectly, in any manner whatsoever, in whole or in part.
Notwithstanding anything hereinabove to the contrary, the obligations
imposed upon the Parties herein shall not apply to Information:
(a) which is publicly available prior to the date hereof; or
(b) which hereafter becomes available to the public through no wrongful act
of the receiving Party; or
(c) which was in the possession of the receiving Party prior to the
commencement of negotiations between the parties with regard to the transactions
contemplated hereby and not subject to an existing agreement of confidence
between the Parties; or
(d) which was or is received from a third party without restriction, not in
violation of an agreement of confidence and without breach of this Agreement;
(e) which was or is independently developed by the receiving Party; or
(f) which is disclosed pursuant to a requirement or request of a Body,
arbitrator or court.
13.4 Equitable Relief. The parties agree that the remedy at law in any breach or
threatened breach of the provisions of Sections 10.4 and 13.3 will be inadequate
and the aggrieved party shall be entitled to injunctive relief to compel the
breaching party to perform or refrain from action required or prohibited
thereunder.
13.5 Entire Agreement. This Agreement, including the schedules and exhibits
attached hereto, which are a part hereof, constitutes the entire agreement of
the parties with respect to the subject matter hereof. The representations,
warranties, covenants and agreements set forth in this Agreement constitute all
the representations, warranties, covenants and agreements of the parties and
upon which the parties have relied, shall not be deemed waived or otherwise
affected by any investigation made by any party hereto and, except as may be
specifically provided herein, no change, modification, amendment, addition or
termination of this Agreement or any part thereof shall be valid unless in
writing and signed by or on behalf of the party to be charged therewith.
13.6 Notices. Any and all notices or other communications or deliveries required
or permitted to be given or made pursuant to any of the provisions of this
Agreement shall be deemed to have been duly given or made for all purposes when
in writing and hand delivered or sent by certified
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or registered mail, return receipt requested and postage prepaid, overnight
mail, nationally recognized overnight courier or telecopier as follows:
If to Purchaser at:
0000 Xxxxxxxx Xxxxxxx Xxxxx
Xxxxx Xxxxx Xxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telecopier: (000) 000-0000
With a copy to:
Certilman Balin Xxxxx & Xxxxx, LLP
00 Xxxxxxx Xxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
If to Target and/or Principals:
000 Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attention: President
Telecopier: (000) 000-0000
With a copy to:
Xxxxxxxx XxXxxx, Esq.
Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Telecopier: (000) 000-0000
or at such other address as any party may specify by notice given to the
other party in accordance with this Section 13.6.
13.7 Choice of Law; Severability. This Agreement shall be governed by, and
interpreted and construed in accordance with, the Laws of the State of Delaware,
excluding choice of law principles thereof, and with respect to the filing of
the Merger Certificate with the Secretary of State of Illinois, the Illinois
Statute. In the event any clause, section or part of this Agreement shall be
held or declared to be void, illegal or invalid for any reason, all other
clauses, sections or parts of this Agreement which can be effected without such
void, illegal or invalid clause, section or part shall nevertheless continue in
full force and effect.
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13.8 Successors and Assigns; No Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns; provided, however, that neither party may assign any of its rights or
delegate any of its duties under this Agreement without the prior written
consent of the other party.
13.9 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
13.10 Facsimile Signatures. Signatures hereon which are transmitted via
facsimile shall be deemed original signatures.
13.11 Representation by Counsel; Interpretation. Seller acknowledges that it has
been represented by counsel or has had the opportunity to be represented by
counsel in connection with this Agreement and the transactions contemplated by
this Agreement. Accordingly, any rule or law or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived by such
parties. The provisions of this Agreement shall be interpreted in a reasonable
manner to effect the intent of the parties hereto.
13.12 Headings; Gender. The headings, captions and/or use of a particular gender
under sections of this Agreement are for convenience and reference only and do
not in any way modify, interpret or construe the intent of the parties or affect
any of the provisions of this Agreement.
ARTICLE XIV
DEFINITIONS
14.1 Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"Action" shall mean any action, claim, suit, demand, litigation,
governmental or other proceeding, labor dispute, arbitral action, governmental
audit, inquiry, investigation, criminal prosecution, investigation or unfair
labor practice charge or complaint.
"Agreement" shall mean this Agreement and Plan of Merger dated as of April
22, 2002, among Purchaser, Paragon, and Target.
"Assets" shall have the meaning ascribed to it in Section 3.7.1 hereof.
"Audited Financial Statements" shall have the meaning ascribed to it in
Section 3.4 hereof.
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"Body" shall mean a federal, state, local, and foreign governmental,
political subdivision of such foreign governmental body, or other regulatory
body.
"Books and Records" shall mean all books, ledgers, files, reports, plans,
drawings, records and lists, including, without limitation, all computer
programs and other software, of every kind relating to an entity's business,
operations, assets, liabilities, personnel, customers and suppliers.
"Business" shall have the meaning ascribed to it in the Recitals of this
Agreement.
"Certificate of Merger" shall have the meaning ascribed to it in Section
2.2 hereof.
"Claim Notice" shall have the meaning ascribed to it in Section 11.2.3(a)
hereof.
"Closing" shall have the meaning ascribed to it in Section 9.1 hereof.
"Closing Date" shall have the meaning ascribed to it in Section 9.1 hereof.
"COBRA" shall have the meaning ascribed to it in Section 3.22.5 hereof.
"Code" shall have the meaning ascribed to it in Section 3.22.2 hereof.
"Contract" shall mean any agreement, contract, note, lease, evidence of
indebtedness, purchase order, letter of credit, indenture, security or pledge
agreement, franchise agreement, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation, commitment, course of dealing or
practice, understanding or arrangement, whether written or oral, to which a
particular Person is a party or is otherwise bound.
"Copyrights" shall mean registered copyrights, copyright applications and
unregistered copyrights.
"Default" shall mean any breach, default and/or other violation, and/or the
occurrence of any event that with or without the passage of time or the giving
of notice or both would constitute a breach, default or other violation, under,
or give any Person the right to accelerate, terminate or renegotiate, any
Contract.
"Delaware Statute" shall have the meaning ascribed to it in the Recitals of
this Agreement.
"Effective Time" shall have the meaning ascribed to it in Section 2.2
hereof.
"Employee" shall have the meaning ascribed to it in Section 3.22.1 hereof.
38
"Employee Plan" shall have the meaning ascribed to it in Section 3.22.1
hereof.
"Employment Agreement" shall have the meaning ascribed to it in Section 6.7
hereof.
"ERISA" shall have the meaning ascribed to it in Section 3.22.1 hereof.
"Excepted Liabilities" shall have the meaning ascribed to it in Section
5.1(c) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Financial Statements" shall have the meaning ascribed to it in Section 3.4
hereof.
"Illinois Statute" shall have the meaning ascribed to it in the Recitals
hereof.
"Information" shall have the meaning ascribed to it in Section 13.3 hereof.
"Inspectors" shall have the meaning ascribed to it in Section 12.1(g)
hereof.
"Interim Financial Statements" shall have the meaning ascribed to it in
Section 3.4 hereof.
"Law" shall have the meaning ascribed to it in Section 3.12(e) hereof.
"Liability" shall mean any direct or indirect liability, obligation,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any Person of any type, whether accrued, absolute,
contingent, matured, unmatured or otherwise.
"Lien" shall mean any claim, lien, pledge, option, charge, restriction,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Listed Agreements" shall have the meaning ascribed to it in Section 3.9
hereof.
"Material Adverse Effect" shall mean any material adverse effect on the
business, properties, operations, assets, liabilities, condition (financial or
otherwise), or prospects of Purchaser, on the one hand, or Target, on the other
hand, as applicable.
"Materials of Environmental Concern" shall mean pollutants, contaminants,
hazardous or noxious or toxic materials or wastes.
39
"Merger" shall have the meaning ascribed to it in the Recitals of this
Agreement.
"Merger Consideration" shall have the meaning ascribed to it in Section
2.3(b) hereof.
"Other Intellectual Property" shall have the meaning ascribed to it in
Section 3.7.2 hereof.
"Paragon" shall have the meaning ascribed to it in the heading of this
Agreement.
"Paragon Common Stock" shall have the meaning ascribed to it in Section
2.3(e) hereof.
"Party" and "Parties" shall have the meanings ascribed to them in the
heading of this Agreement.
"Patents" shall mean all patents, patent applications, registered designs
and registered design applications.
"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents, decrees or orders of, or filings with, any and all
Bodies.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a limited liability
partnership, a trust, an unincorporated organization, any other business
organization and a government or other department or agency thereof.
"Proprietary Rights" shall have the meaning ascribed to it in Section 3.7.2
hereof.
"Purchaser" shall have the meaning ascribed to in the heading of this
Agreement.
"Purchaser Common Stock" shall have the meaning ascribed to it in Section
2.3(a) hereof.
"Purchaser Indemnified Parties" shall have the meaning ascribed to it in
Section 11.2.1. hereof.
"Records" shall have the meaning ascribed to it in Section 12.1(g) hereof.
"Registrable Securities" shall have the meaning ascribed to it in Section
12.1(a)(i) hereof.
"Registration Period" shall have the meaning ascribed to it in Section
12.1(c) hereof.
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"Registration Statement" shall have the meaning ascribed to it in Section
12.1(a)(i) hereof.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Surviving Corporation" shall have the meaning ascribed to it in Section
2.1(a) hereof.
"Target" shall have the meaning ascribed to it in the heading of this
Agreement.
"Target Common Stock" shall have the meaning ascribed to it in Section
2.3(a) hereof.
"Target Employee Agreements" shall have the meaning ascribed to it in
Section 3.22.1 hereof.
"Target Indemnified Parties" shall have the meaning ascribed to it in
Section 11.2.2 hereof.
"Target Indemnifying Parties" shall have the meaning ascribed to it in
Section 11.2.1 hereof.
"Trademarks" shall have the meaning ascribed to it in Section 3.7.2 hereof.
"Transaction" shall mean the Merger, the manner of the conversion and
exchange of the Target Common Stock and Paragon Common Stock pursuant to the
Merger, and all other transactions contemplated by the Agreement.
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WITNESS the execution of this Agreement as of the date first above written.
XXXXXXXX.XXX, INC.
By:
-------------------------------
Xxxxxx X. Xxxxxxxx, Chief Executive
Officer
PARAGON HOMEFUNDING, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
MORTGAGE EXPRESS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
WITH RESPECT TO ARTICLES III,
XII, XIII, XIV, AND SECTIONS 5.2,
10.4, 11.2.2, 11.2.3, AND 11.3,ONLY:
----------------------------------
XXXXXX XXXXXX
----------------------------------
XXXX XXXXXXXX
----------------------------------
XXXXXX XXXXXXXX
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