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EXHIBIT 10.17
MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND AMONG
SELLERS
XXXXXX XXXXXXXX,
an individual
and
XXXXXXXX X. XXXXXX,
an individual
AND
PURCHASER
AMERICAN NATIONAL FINANCIAL, INC.,
a California corporation
MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Membership Interest Purchase Agreement (this "Agreement") is entered into
as of February 29, 2000, by and among Xxxxxx Xxxxxxxx, an individual
("Xxxxxxxx"), Xxxxxxxx X. Xxxxxx, an individual ("Castle" - Xxxxxxxx and Castle
are sometimes referred to herein collectively as the "Sellers") and American
National Financial, Inc., a California corporation (the "Purchaser"). Certain
capitalized terms used without definition in this Agreement are defined in
Exhibit A.
RECITALS
A. Sellers are the record and beneficial owners of all of the outstanding
membership interests (the "Membership Interests") of Emerald Mortgagee
Assistance Company, LLC, a Colorado limited liability company ("EMAC") and
American Research Services, LLC, a Colorado limited liability company ("ARS" --
EMAC and ARS are referred to herein, individually, as a "Company," and
collectively, as the "Companies").
B. The Companies are full service providers of release and assignment document
preparation, document retrieval services and title research services, including,
but not limited to: on-site source retrieval and file review; off site paid loan
file review; nationwide document retrieval; preparation of assignment and
release forms for all fifty states; administering nationwide recording and
tracking of documents; working with title research providers to correct
intervening chain of assignment problems; and managing database tracking systems
to prepare weekly status reports for clients (the "Businesses").
C. The Purchaser desires to purchase from the Sellers, and the Sellers desire to
sell to the Purchaser, the Membership Interests in the Companies, on the terms
and conditions hereinafter set forth in this Agreement.
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties, intending to be legally bound, agree as follows:
ARTICLE 1
PURCHASE AND SALE OF MEMBERSHIP INTERESTS
SECTION 1.1 PURCHASE AND SALE OF MEMBERSHIP INTERESTS. Subject to the
terms and conditions of this Agreement, on the Closing Date (as hereinafter
defined), each Seller agrees, severally and not jointly, to sell, convey,
assign, transfer, set over and deliver one hundred percent (100%) of the
Membership Interest in the Companies owned by them to Purchaser, free and clear
of pledges, options and any other adverse interests whatsoever, and Purchaser
shall purchase and accept such Membership Interest from each of the Sellers.
ARTICLE 2
PAYMENT OF PURCHASE PRICE; CLOSING.
SECTION 2.1 PURCHASE PRICE. Subject to Section 2.2, as the purchase
price for the Membership Interest being acquired hereunder, Purchaser shall pay
to Sellers (as hereinafter defined) an aggregate consideration equal to One
Million Eight Hundred Forty Thousand Dollars ($1,840,000) (the "Purchase
Price"), which shall be paid in cash and stock of Purchaser as follows:
(a) Xxxxxxxx shall receive (a) Eight Hundred Twenty Thousand and
9/100ths Dollars ($820,000.09) in cash (the "Xxxxxxxx Holdback Cash"); and (b)
Twenty Nine Thousand Two Hundred Forty Eight (29,248)1 shares of Common Stock of
Purchaser (the "Xxxxxxxx Shares"); and
(b) Castle shall receive (a) Eight Hundred Twenty Thousand and
9/100ths Dollars ($820,000.09) in cash (the "Castle Holdback Cash" -- and
collectively with the Xxxxxxxx Holdback Cash, the "Holdback Cash"); and (b)
twenty Nine Thousand Two Hundred Forty Eight (29,248) shares of Common Stock of
Purchaser (the "Castle Shares," and collectively with the Xxxxxxxx Shares, the
"Holdback Shares").
(c) Notwithstanding the provisions of Sections 2.1(a) and (b)
above, Sellers reserve the right to reallocate a portion of the Purchase Price
between them in an amount not to exceed $100,000 to take into account a
disparity in their respective capital accounts in EMAC. The flow of funds
statement to be provided to Purchaser pursuant to Section 6.3(c) shall indicate
any reallocation of the Purchase Price between Sellers.
Notwithstanding the foregoing, the Holdback Cash and the Holdback Shares shall
be adjusted pursuant to Section 2.2 and delivered pursuant to Section 2.3.
SECTION 2.2 ADJUSTMENT TO PURCHASE PRICE.
(a) No later than March 15, 2000, Sellers will deliver to Purchaser
an internally prepared adjusted combined balance sheet for the Companies, dated
the Closing Date (the "Closing Date Balance Sheet"), prepared consistently with
the internally prepared adjusted combined balance sheet for the Companies, dated
November 30, 1999, previously delivered to Purchaser and included in Schedule
2.2(a) (the "November Balance Sheet").
(b) In the event that the Tangible Net Worth of the Companies,
determined based on the Closing Date Balance Sheet, is more than Three Hundred
Forty Two Thousand Dollars ($342,000), then Purchaser will owe and pay to
Xxxxxxxx and Castle the total amount of such difference in cash, fifty percent
(50%) to
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(1) The value of the shares of Common Stock of Purchaser received by any
of the Sellers pursuant to this Agreement was determined by calculating the
average closing price of the Common Stock of Purchaser, as quoted on the NASDAQ
National Market System, over the (10) day period ending on the third (3rd) prior
to the Closing Date, or $3.419.
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Xxxxxxxx and fifty percent (50%) to Castle in addition to the amounts set forth
in Section 1(a) and (b) above. In the event that the Tangible Net Worth of the
Company, determined based on the Closing Date Balance Sheet, is less than Three
Hundred Forty Two Thousand Dollars ($342,000.00), then Xxxxxxxx and Castle will
owe to Purchaser the amount of such difference, fifty percent (50%) from
Xxxxxxxx and fifty percent (50%) from Castle to be paid through a reduction of
the cash portion of the purchase price to be paid to each of Castle and
Xxxxxxxx, respectively pursuant to Section 2.1(a) and 2.1(b) above. As used
herein, the term "Tangible Net Worth" shall mean the sum of cash, accounts
receivable, inventory and other tangible assets less accounts payable and other
liabilities; provided, however, that (i) accrued benefits to employees shall not
be included in the calculation of Tangible Net Worth, and (ii) depreciation and
amortization on assets shall be calculated on a straight line basis from the
date of the acquisition of such asset. Any payment made pursuant to Section
2.2(b) will be treated by the parties as an adjustment to the Purchase Price and
the Purchase Price as so adjusted will be referred to in this Agreement as the
"Purchase Price."
(c) The number of Holdback Shares deliverable to Sellers shall be
reduced by such number of Holdback Shares, valued at $3.419 per share, as is
necessary to indemnify Purchaser for the dollar amount of Purchaser's losses, as
reasonably determined by Purchaser, arising from (i) accounts receivable shown
on the Closing Date Balance Sheet and included in the computation of Tangible
Net Worth but not collected by Purchaser by March 15, 2001, due to the
bankruptcy of FirstPlus Financial, and (ii) any other liabilities in existence
as of the date of the Closing Date Balance Sheet and not shown thereon, as
determined on March 15, 2001, except such liabilities as are disclosed in the
Schedules, the accrued benefits to employees referenced in Section 2.2(b) above
and the leases described on Schedule 3.6. In the event Purchaser writes off any
account receivable hereunder as uncollectible, such account receivable shall be
assigned to each of the Sellers in equal percentages.
(d) In the event of a dispute among Purchaser and the Sellers with
respect to the Closing Date Balance Sheet, Purchaser, and the Sellers shall
attempt in good faith to reach an agreement as to the matters in dispute. If
Purchaser and Sellers, notwithstanding such good faith effort, fail to resolve
the matters in dispute within ten (10) days after written notice of a dispute (a
"Dispute Notice") is given, then any remaining disputed matters will be finally
and conclusively determined by an independent auditing firm of recognized
national standing (the "Arbiter"), selected by Purchaser and the Sellers no
later than thirty (30) days from the date of the Dispute Notice. The Arbiter
will not be the regular auditing firm of Purchaser or either Company. Promptly,
but not later than forty-five (45) days after its acceptance of its appointment,
the Arbiter will determine (based solely on presentations by Sellers and
Purchaser and not by independent review) only those matters in dispute and will
render a written report as to the disputed matters, which report will be
conclusive and binding upon the parties. The fees and expenses of the Arbiter,
and any reasonable attorneys fees or costs will be paid by the non-prevailing
party with respect to the determination of the Arbiter as set forth in the
Arbiter's report.
(e) For purposes of complying with the terms set forth herein, each
party will cooperate with and make available to the other party and its auditors
and representatives all information, records, data and auditors' working papers,
and will permit access to its facilities and personnel, as may be reasonably
required in connection with the analysis of the Closing Date Balance Sheets and
the resolution of any disputes pertaining thereto.
SECTION 2.3 PAYMENT OF PURCHASE PRICE.
(a) Purchaser shall hold the Holdback Cash and the Holdback Shares
from and after the Closing Date until the Holdback Cash is delivered to the
Sellers pursuant to Section 2.3(a) and the Holdback Shares are delivered to the
Sellers pursuant to Section 2.3(c); provided, that dividends or other
distributions made on the Holdback Shares, if any, while the Holdback Shares are
held by Purchaser shall be the property of the Sellers and shall be delivered to
the Sellers simultaneously with the delivery of the Holdback Shares pursuant to
Section 2.3(c).
(b) On the later to occur of (i) the satisfaction of the conditions
set forth in Section 6.3, and (ii) March 15, 2000, Purchaser shall deliver to
Xxxxxxxx the Xxxxxxxx Holdback Cash, plus or minus any amounts added or deducted
therefrom pursuant to Section 2.2(b), and to Castle the Castle Holdback Cash,
plus or minus any amounts added or deducted therefrom pursuant to Section
2.2(b). Purchaser shall simultaneously pay such cash to Xxxxxxxx and Castle by
wire transfer to a bank account designated in writing by each.
(c) On March 15, 2001, Purchaser shall deliver: (i) to Xxxxxxxx,
the Xxxxxxxx Shares less fifty
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percent (50%) of the Holdback Shares retained by Purchaser to cover the
indemnity provision of Section 2.2(c) above; and (ii) to Castle, the Castle
Shares less fifty percent (50%) of the Holdback Shares retained by Purchaser to
cover the indemnity provision of Section 2.2(c) above. Fractional shares
resulting from the division of the Holdback Shares among Purchaser, Xxxxxxxx and
Castle shall be paid in cash, using a value of $3.419 per share.
SECTION 2.4 CLOSING. The closing of the purchase of the Membership
Interests (the "Closing") shall take place at the offices of Xxxxxxxxx Xxxxx
Xxxxxxx & Xxxxx, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx
00000, and shall occur as of February 29, 2000, or at such other place, time
and/or date as may be jointly designated by the Sellers and the Purchaser (the
"Closing Date").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as set forth on the Disclosure Schedule, Xxxxxxxx and Castle hereby
represent and warrant, severally and not jointly, to the Purchaser as follows:
SECTION 3.1 FORMATION AND EXISTENCE; OWNERSHIP OF MEMBERSHIP INTERESTS.
(a) Form and Existence. Each Company is a limited liability company
duly formed, validly existing and in good standing under the laws of the State
of Colorado. Each Company has full power, under its organization documents and
the Colorado Limited Liability Company Act, to carry on its business as now
being conducted and to own and operate the property and assets now owned and
operated by it, and is duly qualified to transact business and is in good
standing in each jurisdiction where the ownership of its properties or the
conduct of its business requires such qualification and the failure to be so
qualified will have a Material Adverse Effect. Purchaser has been furnished with
true and correct copies of the Articles of Organization and Operating Agreement
of each Company.
(b) Ownership of Membership Interests. Each Seller is the sole
beneficial and record owner of, and at the Closing such Seller will sell and
convey to Purchaser, the Membership Interests in the Companies set forth
opposite such Seller's name on Schedule 3.1(b), free and clear of any pledges,
options and any adverse interests of any nature whatsoever, other than
transferability restrictions imposed by any applicable federal or state
securities laws. Such Seller has not, and as of the Closing such Seller shall
not have, sold or granted any options or rights to purchase, and such Seller is
not, and as of the Closing such Seller shall not be, a party to any agreement
obligating him or it to sell or grant options or rights to purchase, any of such
Membership Interest, except to the Purchaser.
(c) Outstanding Membership Interests. The Membership Interests set
forth opposite the respective names of the Sellers on Schedule 3.1(b) are the
only Membership Interests that have been authorized for issuance and have been
issued by the Companies and neither Company has (i) granted any options or
rights to purchase, or issued any securities that are exchangeable for or
exercisable into, any Membership Interests ("Derivative Interests") and (ii)
neither Company has entered into and is a party to any agreement, contract or
commitment obligating it to sell or issue any Membership Interests or any
Derivative Interests in such Company.
SECTION 3.2 POWER AND AUTHORITY. Xxxxxxxx and Castle, each for
themselves, have the legal right and capacity to execute and deliver this
Agreement and each of the other Acquisition Documents and to consummate the
transactions contemplated hereby and thereby to be consummated by them, and this
Agreement and each of the other Acquisition Documents will, at or prior to the
Closing, be duly and validly executed and delivered by each of them. Assuming
due authorization, execution and delivery by the Purchaser, this Agreement
constitutes, and each of the other Acquisition Documents when so executed and
delivered will constitute, legal, valid and binding obligations of each of them,
enforceable against each of them in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
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SECTION 3.3 CONFLICTS; CONSENTS OF THIRD PARTIES. Subject to receipt of
the consents and approvals referred to on Schedule 3.3, the execution and
delivery by each Seller of this Agreement and the other Acquisition Documents to
which such Seller is or will be a party, the consummation of the transactions
contemplated hereby or thereby or compliance by such Seller with any of the
provisions hereof or thereof (a) will not violate any provision of the Operating
Agreements or other charter documents of the Companies; (b) will not conflict
with, violate, result in the breach or termination of, or constitute a default
under (whether with notice or lapse of time or both), or accelerate or permit
the acceleration of the performance required by, any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which such
Seller or a Company is a party or by which the respective properties or assets
of such Seller or such Company is bound; (c) will not violate any statute, rule,
regulation, order or decree of any Governmental Entity by which a Company or
such Seller is bound; or (d) will not result in the creation of any lien,
charge, or encumbrance upon such Seller's Membership Interest or on any of the
assets or properties of the Companies, except, in case of clauses (b) and (c),
for such conflicts, violations, breaches or defaults as will not have a Material
Adverse Effect. No consent, approval or authorization of any governmental
authority is required on the part of the Sellers in connection with the
execution, delivery and performance of this Agreement and/or the other
Acquisition Documents.
SECTION 3.4 FINANCIAL STATEMENTS. Sellers have delivered to Purchaser
the November Balance Sheet. Except as set forth in Schedule 3.4, neither Company
has any liabilities or obligations which are, individually or in the aggregate,
material, which are not reflected on the November Balance Sheet, other than
liabilities or obligations incurred after November 30, 1999 in the ordinary
course of business consistent with past practices and which do not exceed
$125,000 in the aggregate.
SECTION 3.5 RECEIVABLES. Except as set forth on Schedule 3.5, all
accounts or notes receivable of the Companies which will be reflected on the
Closing Date Balance Sheet and included in the computation of Tangible Net Worth
are bona fide, have arisen in the ordinary course of business, and are owned
free and clear of any lien or encumbrance except for the liens in favor of the
bank lenders as disclosed on Schedule 3.5. No such receivables, to the knowledge
of the Sellers, have any right of recourse, defense, deduction, return of goods,
counterclaim, offset or setoff on the part of the obligor.
SECTION 3.6 REAL PROPERTY. Schedule 3.6(a) sets forth a list of all of
the real property leases in effect as of the date hereof under which either
Company is a lessee (collectively, the "Leased Property"). The Sellers have made
available to Purchaser true, correct and complete copies of all such leases,
including all amendments, modifications and renewals thereof. All such leases
are valid, binding and enforceable in accordance with their terms, and are in
full force and effect as of the date hereof. There are no existing defaults by
either Company beyond any applicable grace periods under such leases, and
neither Company has received any notice of default. The Companies have no real
property interests other than those set forth on Schedule 3.6(a).
SECTION 3.7 PERSONAL PROPERTY; SUFFICIENCY OF ASSETS. Schedule 3.7
contains a list of each Company's fixtures, machinery, equipment and other
tangible personal property assets (the "Tangible Personal Property"), other than
any such assets that have a book value of less than $1,000. Except as set forth
on Schedule 3.7, each Company has good title to, or holds by valid and existing
lease, all of its Tangible Personal Property, free and clear of all liens or
encumbrances, other than Permitted Encumbrances or encumbrances listed on
Schedule 3.7. All the Tangible Personal Property is in good operating condition
and repair, subject only to ordinary wear and tear. The Tangible Personal
Property, inventory, Owned Property, Leased Property and Proprietary Rights (as
defined below) are sufficient to conduct the Businesses on the Closing Date in
the same manner as conducted on the date hereof.
SECTION 3.8 SUBSIDIARIES AND PARTNERSHIPS. Except as set forth on
Schedule 3.8, the Companies have no subsidiaries or investments in other
corporations, limited liability companies, partnerships or joint ventures.
SECTION 3.9 MATERIAL CONTRACTS. Schedule 3.9 includes lists of: (a) all
commitments and agreements for the purchase of any materials, supplies or
services that involve an expenditure by a Company of more than $15,000 for any
one contract or series of related contracts; (b) all personal property leases
under which a Company is either lessor or lessee that involve annual payments or
receipts of $15,000 or more; (c) all agreements, guarantees, mortgages,
indentures and other instruments relating to indebtedness for borrowed money to
which a Company is a party or by which it or its properties are bound; (d) all
licenses and agreements relating to a Proprietary Right; (e) all policy manuals
of a Company; (f) all agreements that involve an annual payment to a
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Company of more than $15,000 for any one contract or set of related contracts;
and (g) all agreements whereby a Company is entitled to receive or is required
to make any royalty payments. The Sellers have made available to Purchaser
complete and correct copies of all items listed on Schedule 3.9 that are in
writing, and the descriptions contained on Schedule 3.9 of all items listed
therein that are not in writing are complete and correct. Except as disclosed on
Schedule 3.9, neither Company is in default under the terms of any item listed
on Schedule 3.9 and to the knowledge of the Sellers no other party is in default
under the terms of any item listed on Schedule 3.9. To the knowledge of Sellers,
each of the contracts, arrangements, instruments or other agreements listed on
Schedule 3.9 is valid and in full force and effect and no party has notified
Sellers or a Company in writing of its intention to cease to deliver or perform
any material goods or services required to be delivered or performed by it or
withhold any material payment required to be made by it thereunder.
SECTION 3.10 PROPRIETARY RIGHTS.
(a) Schedule 3.10(a) sets forth a list of (i) all United States and
foreign patents and patent applications, all United States, state and foreign
trademarks, service marks and trade names for which registrations have been
issued or applied for, and all other United States, state and foreign
trademarks, service marks and trade names, owned or used by a Company or in
which a Company holds any right, license or interest; (ii) all material
agreements, commitments, contracts, understandings, licenses, assignments and
indemnities relating or pertaining to any asset, property or right of the
character described in the preceding clause to which a Company is a party or
which is related to its Business; (iii) all licenses or agreements pertaining to
know-how, trade secrets, inventions, disclosures or uses of ideas to which a
Company is a party; (iv) all copyrights material to the Businesses; and (v) all
registered assumed or fictitious names under which a Company is conducting
business (each of (i) through (v) describes a "Proprietary Right") specifying as
to each, as applicable: (i) the nature of such Proprietary Right; (ii) the owner
of such Proprietary Right; and (iii) the jurisdictions by or in which such
Proprietary Right has been issued or registered or in which an application for
such issuance or registration has been filed, including the respective
registration or application numbers, if available.
(b) Except as set forth on Schedule 3.10(b), neither Company (i) is
a defendant in any claim, suit, action or proceeding which involves a claim of
infringement of any Proprietary Rights or acting in a fashion which could be the
basis for such an action or the cancellation or termination of any Proprietary
Right, and (ii) has any knowledge of any existing infringement by any other
person of any Proprietary Right. Except as disclosed on Schedule 3.10(b), no
Proprietary Right is subject to any outstanding order, judgment, decree,
stipulation issued as to a Company or agreement to which a Company is a party
restricting the use thereof by such Company or restricting the licensing thereof
by such Company to any person. Except as may be provided in items disclosed on
Schedule 3.10(b), neither Company has entered into any special agreement to
indemnify any other person against any charge of infringement of any patent,
trademark, service xxxx or copyright of the Businesses. To the knowledge of the
Sellers, as of the date hereof, there will not be any adverse effect on any
Proprietary Right due to Sellers ceasing to beneficially own the Membership
Interests. The operations, activities, products, equipment, machines,
advertisements or processes of the Companies do not infringe the patent, patent
applications, trademarks, service marks, trade names, secrets, inventions,
copyrights or other proprietary rights of any other person.
SECTION 3.11 COMPLIANCE WITH LAWS.
(a) Compliance. To the knowledge of Xxxxxxxx and Castle, each
Company is in compliance with all laws, rules, regulations, orders, judgments,
ordinances or decrees of any Governmental Entity applicable to its Business
(collectively, "Laws") the non-compliance with which would have a Material
Adverse Effect. Except as set forth in Schedule 3.11(a), no Company or Seller
has received any notice of any violation or alleged violation of, nor is either
Company or any Seller subject to any liability (whether accrued, absolute,
contingent, direct or indirect) for past or continuing violation of, any Laws in
connection with the Company's Business or operation of its assets which would
have a Material Adverse Effect.
(b) Licenses and Permits.
(i) To the knowledge of Xxxxxxxx and Castle, each Company
has all licenses, permits, approvals, authorizations and consents of all
governmental and regulatory authorities and all certification organizations
required for the operation of the Business of such Company as currently
conducted. All such licenses, permits, approvals, authorizations and consents
are described in Schedule 3.11(b)(i), are in full force and effect and,
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except as specifically indicated in Schedule 3.11(b)(i), the continued
effectiveness thereof will not be adversely affected by the consummation of the
transactions contemplated by this Agreement.
(ii) Except as set forth in Schedule 3.11(b)(ii), each
Company has been in compliance with all such permits and licenses, approvals,
authorizations and consents other than any non-compliance that is not reasonably
expected to have a Material Adverse Effect.
SECTION 3.12 LITIGATION.
(a) There are no judicial or administrative actions, proceedings or
investigations pending or, to the knowledge of any Seller or Company,
threatened, that question the validity of this Agreement or any of the other
Acquisition Documents or any action taken or to be taken by the Sellers in
connection herewith or therewith. Except as set forth on Schedule 3.12, there is
no litigation, proceeding or governmental investigation pending or, to the
knowledge of any Seller or Company, threatened, or any order, injunction or
decree outstanding, against a Company or the Sellers that, if adversely
determined, would individually or in the aggregate, adversely effect the
Sellers' ability to perform its obligations under this Agreement or any of the
other Acquisition Documents.
(b) Except as disclosed in Schedule 3.12, these are no judicial or
administrative actions or proceedings pending against either Company or, to the
knowledge of Sellers, threatened in writing against either Company with respect
to the Businesses.
(c) To Sellers' knowledge no claims or actions have been taken by
any person or entity which could reasonably lead to adverse publicity or
otherwise have a Material Adverse Effect on either Company.
SECTION 3.13 LABOR MATTERS.
(a) Schedule 3.13(a) lists the collective bargaining agreements or
other labor union contracts and employee benefit plans applicable to employees
which are employed by the Companies, and each Company is as of the date of this
Agreement in full compliance with the terms and conditions of such agreements
and contracts, except where the failure to be in compliance would not have a
Material Adverse Effect. Except as set forth on Schedule 3.13(a), (i) there are
no charges or allegations of unfair labor practices pending or threatened under
Federal or state labor laws; (ii) there are no pending arbitration matters or
grievance procedures under any of the agreements listed in Schedule 3.13(a);
(iii) there are no facts or conditions existing which upon the giving of notice,
or lapse of time, will result in a breach under any collective bargaining
agreement or under any of the other foregoing agreements, which will have a
Material Adverse Effect; and (iv) there is no pending or threatened, labor
dispute, strike or work stoppage which will have a Material Adverse Effect.
(b) Schedule 3.13(b) contains a complete and accurate list of the
following information for each employee of each Company, including each employee
on leave of absence or layoff status: employee name; job title; current
compensation paid or payable and any change in compensation since January 1,
1999; vacation accrued; and service credited for purposes of vesting and
eligibility to participate under any of the Company's pension, retirement,
profit-sharing, deferred compensation, stock bonus, stock option, cash bonus,
severance pay, insurance, medical, welfare, or vacation plan, other employee
pension benefit plan or employee welfare benefit plan, or any other employee
benefit plan.
SECTION 3.14 EMPLOYEE BENEFIT PLANS AND BENEFIT ARRANGEMENTS.
(a) Definitions.
(i) The term "Employees" shall mean all current employees of
the Companies, including employees on approved leaves of absence (whether family
leave, workers compensation, medical leave or otherwise) and the term "Employee"
shall mean any of the Employees.
(ii) The term "Employee Benefit Plans" shall mean each and
all "employee benefit plans" as defined in Section 3(3) of ERISA, maintained or
contributed to by the Companies or any predecessor or in which a Company or any
predecessor participates or participated and which provides benefits to
Employees
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including (a) any such plans that are "employee welfare benefit plans," as
defined in Section 3(1) of ERISA, including retiree medical and life insurance
plans ("Welfare Plans") and (b) any such plans that are "employee pension
benefit plans" as defined in Section 3(2) of ERISA ("Pension Plans").
(iii) The term "Benefit Arrangements" shall mean any life
and health insurance, hospitalization, savings, bonus, deferred compensation,
incentive compensation, holiday, vacation, termination, severance pay, sick pay,
sick leave, disability, tuition refund, service award, company car, scholarship,
relocation, patent award, fringe benefit, contracts, collective bargaining
agreements, individual employment, consultancy, termination contracts or
severance contracts and other policies or practices of a Company providing
employee or executive compensation or benefits to Employees, other than Employee
Benefit Plans.
(b) Schedule 3.14(b) lists all Employee Benefit Plans and all
material Benefit Arrangements. With respect to each of the Employee Benefit
Plans and Benefit Arrangements, the Sellers have delivered or made available to
Purchaser, as applicable, copies of any: (i) plans and related trust documents
and amendments thereto; (ii) the most recent summary plan descriptions and the
most recent annual report; (iii) the most recent actuarial valuation; and (iv)
the most recent determination letter received from the Internal Revenue Service.
(c) Except as shown on Schedule 3.14(c), (i) each Company is in
compliance in all material respects with the terms of each Employee Benefit Plan
or Benefit Arrangement and with the requirements prescribed by all applicable
statutes, orders or governmental rules or regulations including, without
limitation, ERISA and the Code; (ii) each Pension Plan intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service with respect to such qualification, or has been
submitted to the Internal Revenue Service requesting such a favorable
determination; its related trust has been determined to be exempt from taxation
under Section 501(a) of the Code; and, to each Seller's knowledge, nothing has
occurred since the date of such letter that would adversely effect such
qualification or exemption; and (iii) there are no material actions or
proceedings (other than routine claims for benefits) pending or, to such
Seller's knowledge, threatened, with respect to any such Employee Benefit Plan
or Benefit Arrangement or against the assets of any such Employee Benefit Plan.
(d) With respect to each Employee Benefit Plan and Benefit
Arrangement (i) full payment has been made of all amounts required under
applicable law or plan terms, due or accrued, to be made as a contribution to or
benefit from such Employee Benefit Plan or Benefit Arrangement; (ii) the
liability of each Company has been fully funded based on reasonable actuarial
assumptions, has been fully insured or has been fully reserved for on its
financial statements; (iii) to each Seller's knowledge, nothing has occurred or
is expected to occur which would cause a material increase in the cost of
providing benefits thereunder.
(e) The consummation of the transactions contemplated under this
Agreement and under any of the other Acquisition Documents will not: (i) entitle
any current or former employee, officer, member or manager of the Companies to
severance pay, unemployment compensation or any similar payment; (ii) accelerate
the time of payment or vesting under any Employee Benefit Plan or Benefit
Arrangement except as provided on Schedule 3.14(e); or (iii) directly or
indirectly cause a Company to transfer or set aside any assets to fund or
provide compensation or benefits out of the ordinary course.
SECTION 3.15 ABSENCE OF CERTAIN LIABILITIES AND CHANGES. Except to the
extent reflected or adjusted for in the Closing Date Balance Sheet, or otherwise
disclosed on Schedules hereto, there are no liabilities or obligations material
to the Businesses, or the Companies as a whole, as of the Closing Date, except
those liabilities and obligations disclosed on Schedule 3.15 hereto.
SECTION 3.16 ENVIRONMENTAL. Except as set forth in Schedule 3.16, to the
knowledge of Xxxxxxxx and Castle, the Companies are in compliance with all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws,
except for any non-compliance which is not reasonably expected to have a
Material Adverse Effect. There is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, official proceeding, notice
or demand letter pending or, to the knowledge of Xxxxxxxx and Castle, threatened
against a Company relating in any way to the Environmental Laws.
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SECTION 3.17 BROKERS' FEES. Neither the Sellers nor the Companies have
incurred any liability for brokerage fees, finders' fees, agents' commissions or
other similar forms of compensation in connection with this Agreement and the
transactions contemplated hereby.
SECTION 3.18 BANK ACCOUNTS, POWERS OF ATTORNEY. Schedule 3.18 sets forth
a true and complete list of (a) the name of each bank in which each Company has
an account or safe deposit box and a brief description thereof and (b) the names
of all persons, if any, having powers of attorney from each Company and a
summary statement of the terms of the power of attorney.
SECTION 3.19 TAX MATTERS.
(a) Definitions.
(i) The term "Tax Returns" shall mean all federal, state,
local or foreign tax returns, tax reports, declarations, claims for refund,
information returns or statements relating to Taxes, and declarations of
estimated tax, including any schedules or attachments thereto and any amendments
thereon.
(ii) The term "Tax" or "Taxes" shall mean all federal,
state, local or foreign income, gross receipts, windfall or excess profits,
severance, property, production, sales, use, license, excise, franchise,
employment, withholding or similar taxes, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
or penalties.
(b) Representations and Warranties.
(i) All Tax Returns required to be filed by the Companies
have been duly filed on a timely basis (including extensions) and such Tax
Returns are true, complete and correct in all respects. All Taxes shown to be
payable on the Tax Returns or on subsequent assessments with respect thereto
have been paid in full on a timely basis, and no other Taxes are payable by the
Companies with respect to items or periods covered by such Tax Returns (whether
or not shown on or reportable on such Tax Returns) or with respect to any period
prior to the date of this Agreement. The Companies have withheld and paid over
all Taxes required to have been withheld and paid over, and complied with all
information reporting and backup withholding requirements, including maintenance
of required records with respect thereto, in connection with amounts paid or
owing to any employee, creditor, independent contractor, shareholder or other
third party. There are no liens on any of the assets of the Companies with
respect to Taxes, other than liens for Taxes not yet due and payable and Taxes
that the Companies are contesting in good faith through appropriate proceedings
and for which appropriate reserves have been established. As of the time of
filing, the foregoing Tax Returns correctly reflected the facts regarding the
income, business, assets, operations, activities, status or other matters of the
Companies or any other information required to be shown thereon. Any extension
of time within which to file any Tax Return has been requested and is pending or
has been granted.
(ii) With respect to all amounts in respect of Taxes imposed
upon the Companies, or for which the Companies are or could be liable, whether
to taxing authorities (as, for example under law) or to other persons with
respect to all taxable periods or portions of periods ending on or before the
Closing Date, to the knowledge of Xxxxxxxx and Castle, all applicable Tax laws
and agreements have been fully complied with, and all such amounts required to
be paid by the Companies to taxing authorities or others on or before the date
hereof have been paid.
(iii) No Seller or member, manager or officer (or employee
responsible for Tax matters) of the Companies expects any authority to assess
any additional Taxes for any period for which Tax Returns have been filed. There
is no dispute or claim concerning any Tax Liability of the Companies either (A)
claimed or raised by any authority in writing or (B) as to which any of the
Sellers, members, managers or officers (or employees responsible for Tax
matters) of the Companies have knowledge based upon contact with any agent of
such authority. Except as set forth on Schedule 3.19, the Tax Returns of the
Companies have never been audited by a government or taxing authority, nor is
any such audit in process, pending or threatened (either in writing or verbally,
formally or informally). No Tax deficiencies exist or have been asserted (either
in writing or verbally, formally or informally) or are expected to be asserted
with respect to Taxes of the Companies, and the Companies have not received
notice (either in writing or verbally, orally or informally) and do not expect
to receive notice that they have not filed a Tax Return or
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paid Taxes required to be filed or paid by either of them. Neither Company is a
party to any proceeding for assessment or collection of Taxes, nor has such
event been asserted or threatened (either in writing or verbally, formally or
informally) against either Company or any of its assets.
(iv) The Sellers have furnished Purchaser true and complete
copies of all federal and state income tax or franchise Tax Returns for the
Companies for all periods ending in 1996, 1997 and 1998. Neither Company has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency, nor has such waiver or
extension been requested from either Company.
SECTION 3.20 INSURANCE. Schedule 3.20 lists all insurance policies
pursuant to which the Companies are insured as of the date of this Agreement.
Each policy listed on Schedule 3.20 is in full force and effect as of the date
hereof. Each Company has maintained adequate insurance for its Business and its
assets with respect to risks normally insured against by similar businesses.
SECTION 3.21 RELATED PARTY TRANSACTIONS. Except as described on Schedule
3.21 or on the Closing Date Balance Sheet, neither Xxxxxxxx nor Castle, for
themselves, nor, to the knowledge of Xxxxxxxx or Castle, respectively, any
officer, member, manager or employee of the Companies, and none of their
relatives or Affiliates, owns any interest in any direct competitor, lessor,
lessee or customer or supplier of the Companies; and neither Company is a party
to any transaction or arrangement with any of the Seller or with any of its
respective officers, members, managers or employees, or any relative or
affiliate of any of them, which relates to or affects the ownership, lease or
use or disposition of any assets, properties or the operations of the Companies
or the sale, lease or use of goods or services, or the loan of money or any
extension of credit or guaranty, by or to either of the Companies, other than
the payment of wages, salaries and bonuses to employees of the Companies for
services performed in the ordinary course of business. Except as disclosed on
Section 3.21 or on the Closing Date Balance Sheet, none of the assets or
properties of the Companies include any receivables or contract rights from, or
notes payable or evidences of indebtedness of, any of the Sellers or any of the
officers, members, managers or employees of the Companies or any relative or
Affiliate of any of them.
SECTION 3.22 INVENTORY. The Companies have no inventory.
SECTION 3.23 YEAR 2000 COMPLIANCE. Except as set forth on Schedule 3.23,
all software, hardware, databases and devices that run under the control of a
microprocessor used by the Companies, and each of the hardware products of the
Companies are Year 2000 Compliant, except for failures to be Year 2000 Compliant
that would not have a Material Adverse Effect.
SECTION 3.24 INVESTMENT REPRESENTATIONS. Xxxxxxxx and Castle represent
that with respect to the shares of Common Stock of Purchaser (the "Shares") it
shall receive hereunder:
(a) They are acquiring the Shares for their own account, not as
nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the 1933 Act.
(b) They understand that (i) the Shares have not been registered
under the 1933 Act and, in the absence of an exemption therefrom, they must be
held by them indefinitely, and that they must therefore bear the economic risk
of such investment indefinitely, unless a subsequent disposition thereof is
registered under the 1933 Act or is exempt from such registration; (ii) each
certificate representing the Shares will be endorsed with the following legend:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS PURSUANT TO SEC RULE
144 OR RULE 144A OR THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR
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HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE 1933 ACT."
and (iii) the Purchaser will instruct any transfer agent not to register the
transfer of any of the Shares unless the conditions specified in the foregoing
legend are satisfied; provided, however, that no such opinion of counsel shall
be necessary if the sale, transfer or assignment is made pursuant to SEC Rule
144 or Rule 144A and Xxxxxxxx or Castle provides the Purchaser with evidence
reasonably satisfactory to the Purchaser and its counsel that the proposed
transaction satisfies the requirements of Rule 144 or Rule 144A. The Purchaser
agrees to remove the foregoing legend from any securities if the requirements of
SEC Rule 144(k) (or any successor rule or regulation) apply with respect to such
securities and the Purchaser and its counsel are provided with reasonably
satisfactory evidence that the requirements of Rule 144(k) apply.
(c) They acknowledge that they are each able to fend for
themselves, can bear the economic risk of their investment and has such
knowledge and experience in financial or business matters that they are capable
of evaluating the merits and risks of the investment in the Shares.
(d) They understand that the Shares they are purchasing are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Purchaser in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act, only in
certain limited circumstances, and they represent that they are familiar with
SEC Rule 144 and Rule 144A, as presently in effect, and understand the resale
limitations imposed thereby and by the 1933 Act.
SECTION 3.25 DISCLOSURE. Neither this Agreement (including the Exhibits
hereto, including without limitation the other Acquisition Documents) nor the
Closing Date Balance Sheet nor any certificate or information furnished by
Sellers under this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements contained herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Sellers as follows:
SECTION 4.1 CORPORATE EXISTENCE. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power to carry on its
business as now being conducted and to own and operate the property and assets
now owned and operated by it, and is duly qualified to transact business and is
in good standing in each jurisdiction where the ownership of its properties or
the conduct of its business requires such qualification and the failure to be so
qualified would have a Material Adverse Effect on the Purchaser.
SECTION 4.2 CORPORATE POWER AND AUTHORITY. The Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and the other Acquisition Documents and to consummate the transactions
contemplated hereby and thereby. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and each of the other
Acquisition Documents has been duly taken by the Purchaser. This Agreement has
been, and each of the Acquisition Documents will be at or prior to the Closing,
duly and validly executed and delivered by the Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each of the Acquisition Documents when so
executed and delivered will constitute, legal, valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
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SECTION 4.3 BROKERS' FEES. The Purchaser has not incurred any liability
for brokerage fees, finders' fees, agents' commissions or other similar forms of
compensation in connection with this Agreement and the transactions
contemplated.
ARTICLE 5
TAX MATTERS
SECTION 5.1 LIABILITY FOR TAXES AND RELATED MATTERS.
(a) Sellers' Indemnification of Buyer. Sellers shall be liable for
and indemnify Purchaser for all Taxes imposed on the Companies or for which the
Companies may otherwise be liable for any taxable year or period that ends on or
before the Closing Date and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of such taxable
year ending on and including the Closing Date; provided, however, that Sellers'
liability under this Section 5.1(a) shall be reduced as to any item to the
extent that such item was reserved for in the Closing Date Balance Sheet.
Sellers shall also indemnify, defend and hold harmless Purchaser from all costs
and expenses incurred by Purchaser (including reasonable attorneys' fees and
expenses) in connection with any liability to, or claim by, any taxing
authority, for Taxes for which Sellers are required to indemnify Purchaser under
this Section 5.
(b) Purchaser's Indemnification of Sellers. Purchaser shall be
liable for and indemnify Sellers for (i) the Taxes of the Companies for any
taxable year or period that begins after the Closing Date and, with respect to
any taxable year or period beginning before and ending after the Closing Date,
the portion of such taxable year beginning after the Closing Date. Purchaser
shall also indemnify, defend and hold harmless Sellers from all costs and
expenses incurred by Sellers (including reasonable attorneys' fees and expenses)
in connection with any liability to, or claim by, any taxing authority, for
Taxes for which Purchaser is required to indemnify Sellers under this Section
5.1(b).
(c) Taxes for Short Taxable Years. For purposes of paragraphs (a)
and (b), whenever it is necessary to determine the liability for Taxes of a
Company for a portion of a taxable year or period that begins before and ends
after the Closing Date, the determination of the Taxes of such Company for the
portion of the year or period ending on, and the portion of the year or period
beginning after, the Closing Date shall be determined by assuming that such
Company had a taxable year or period which ended at the close of the Closing
Date, except that exemptions, allowances or deductions that are calculated on an
annual basis, such as the deduction for depreciation, shall be apportioned on a
time basis. The taxable years of the Companies shall terminate on the Closing
Date. Sellers shall take the responsibility for preparing the final tax returns
of the Companies, which shall be reported on a cash basis of accounting.
SECTION 5.2 ASSISTANCE AND COOPERATION. After the Closing Date, each of
the Sellers and Purchaser shall:
(a) assist (and cause their respective Affiliates to assist) the
other party in preparing any Tax Returns or reports which such other party is
responsible for preparing and filing in accordance with this Section 5;
(b) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns of the Companies;
(c) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to Taxes
of the Companies;
(d) provide timely notice to the other in writing of any pending or
threatened tax audits or assessments of the Companies for taxable periods for
which the other may have a liability under this Section 5; and
(e) furnish the other with copies of all correspondence received
from any taxing authority in connection with any tax audit or information
request with respect to any such taxable period.
SECTION 5.3 SURVIVAL OF OBLIGATIONS. The obligations of the parties set
forth in this Article 5 shall be unconditional and absolute and shall remain in
effect for three (3) years from the Closing Date (in the absence of a finding of
fraud with respect to Taxes by a Governmental Entity).
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ARTICLE 6
CLOSING
SECTION 6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER TO CLOSE.
The obligation of the Purchaser to purchase the Membership Interests and
otherwise consummate the transactions that are to be consummated at the Closing
is subject to the satisfaction, as of the Closing Date, of the following
conditions (any of which may be waived by the Purchaser in whole or in part):
(a) the representations and warranties of the Sellers set forth in
Article 3 shall be accurate in all material respects at and as of the Closing
Date;
(b) the Sellers shall have performed and complied, in all material
respects, with all of their obligations required to be performed by them on or
before the Closing Date;
(c) the Purchaser shall have received the following documents:
(i) such assignments necessary or appropriate to transfer to
and vest in the Purchaser 100% of the Membership Interest of the Companies owned
by the Sellers;
(ii) the Employment Agreements, duly executed by Xxxxxxxx
and Xxxxxxx Xxxxxx ("Xxxxxx") (each, an "Employment Agreement," together, the
"Employment Agreements"); and
(iii) written consent to the transaction contemplated by
this Agreement, including, but not limited to, the consent from the lessor of
the premises occupied by EMAC, who shall have consented in writing to an
assumption of the lease by Purchaser pursuant to which Xxxxxxxx and Castle shall
be released from all future liability;
(d) there shall be (i) no pending or overtly threatened litigation
(other than litigation which is determined by the parties in good faith, after
consulting their respective attorneys, to be without legal or factual substance
or merit), whether brought against a Seller, a Company or the Purchaser, that
seeks to enjoin the consummation of any of the transactions contemplated by this
Agreement, (ii) no order that has been issued by any court or governmental
agency having jurisdiction that restrains or prohibits the consummation of the
purchase and sale of the Membership Interests hereunder and no proceedings
pending which are reasonably likely to result in the issuance of such an order,
and (iii) no pending or overtly threatened litigation, which has had or is
expected to have a Material Adverse Effect; and
(e) all material consents set forth on Schedule 3.3 shall have been
received in form and substance reasonably acceptable to Purchaser.
SECTION 6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS TO CLOSE. The
Sellers obligation to sell their Membership Interests to the Purchaser and
otherwise consummate the transactions that are to be consummated at the Closing
is subject to the satisfaction, as of the Closing Date, of the following
conditions (any of which may be waived by the Sellers in whole or in part):
(a) the representations and warranties of the Purchaser set forth
in Article 4 shall be accurate in all material respects at and as of the Closing
Date;
(b) the Purchaser shall have performed and complied, in all
material respects, with all of its obligations required to be performed by it on
or before the Closing Date;
(c) the Sellers shall have received the following documents:
(i) a copy of the resolutions of the board of directors of
Purchaser authorizing the execution, delivery and performance of this Agreement
by Purchaser, and a certificate of its secretary or assistant secretary, dated
the Closing Date, that such resolutions were duly adopted and are in full force
and effect;
(ii) the Employment Agreements, duly executed by Purchaser;
and
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(iii) written evidence that as of the Closing Date, with
respect to the lessor of the premises occupied by EMAC, Purchaser shall have
assumed such lease and Xxxxxxxx and Castle shall be released from all future
liability under such lease.
(d) there shall be (i) no pending or overtly threatened litigation
(other than litigation which is determined by the parties in good faith, after
consulting their respective attorneys, to be without legal or factual substance
or merit), whether brought against a Seller, a Company or the Purchaser, that
seeks to enjoin the consummation of any of the transactions contemplated by this
Agreement, (ii) no order that has been issued by any court or governmental
agency having jurisdiction that restrains or prohibits the consummation of the
purchase and sale of the Membership Interests hereunder and no proceedings
pending which are reasonably likely to result in the issuance of such an order,
and (iii) no pending or overtly threatened litigation, which has had or is
expected to have a Material Adverse Effect;
SECTION 6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER TO PAY THE
Holdback CASH. Payment to the Sellers of the Holdback Cash shall be conditioned
upon the following.
(a) The Sellers shall have provided the Purchaser with evidence
reasonably acceptable to Purchaser that Xxxxxxxx has acquired all of the
Membership Interest of ARS owned by Xxxx Xxxxxx and Castle has acquired all of
the Membership Interest of ARS owned by Xxxxxx Xxxxxx, such that as of March 15,
2000, the Sellers shall own 100% of the Membership Interest of ARS.
(b) The Sellers shall have provided the Purchaser with evidence
reasonably acceptable to Purchaser that Castle has acquired all of the
Membership Interest of EMAC owned by Castle Holdings, Ltd., a Colorado limited
partnership, and Xxxxxxxx and Castle have acquired all of the Membership
Interest of EMAC owned by Xxxxxx, such that as of March 15, 2000, the Sellers
shall own 100% of the Membership Interest of EMAC.
(c) Sellers' legal counsel shall have delivered a legal opinion to
the Purchaser as to the due authorization, execution and delivery of this
Agreement, in form and substance reasonably acceptable to the Purchaser.
(d) Sellers shall have delivered to Purchaser stock assignments
separate from certificates, executed in blank, with respect to the Holdback
Shares.
(e) Sellers shall have delivered to Purchaser a funds flow
statement, directing Purchaser, by amount, account and means of delivery, as to
payment of the Holdback Cash to be paid out pursuant to Section 2.3(b).
SECTION 6.4 FAILURE OF CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
TO PAY THE HOLDBACK CASH. In the event the deliveries set forth in Section 6.3
above are not made by March 31, 2000:
(a) this Agreement shall terminate;
(b) the Holdback Cash and the Holdback Shares shall be retained by
the Purchaser;
(c) Purchaser shall execute such instruments as are reasonably
requested by the Sellers to evidence the return of the Membership Interests to
the Sellers in the manner of ownership existing before the Closing Date; and
(d) the Purchaser shall promptly cause to be returned to the
Sellers or the Companies all documents and information obtained in connection
with this Agreement and the transactions contemplated by this Agreement and all
documents and information obtained in connection with the Purchaser's
investigation of the Companies' business, operations and legal affairs,
including any copies of any such documents or information made by the Purchaser
or any of the Purchaser's Associates.
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ARTICLE 7
INDEMNIFICATION AND RELATED MATTERS
SECTION 7.1 INDEMNIFICATION BY THE SELLERS. Subject to the limitations
set forth in this Article 7 and elsewhere in this Agreement, Xxxxxxxx and
Castle, severally and not jointly, shall indemnify the Purchaser, each for
themselves, against any and all Damages that the Purchaser actually incurs which
arise from, occur as a result of or in connection with any breach of any of the
representations, warranties or covenants of the Sellers contained in this
Agreement or any of the Acquisition Documents and any failure by the Sellers to
consummate the sale and transfer of the Membership Interests to Purchaser on the
Closing Date in accordance with the terms of this Agreement.
SECTION 7.2 INDEMNIFICATION BY THE PURCHASER. Subject to the limitations
set forth in this Article 7 and elsewhere in this Agreement, the Purchaser shall
indemnify the Sellers against any Damages that the Sellers, or either of them,
actually incurs which arise from, occur as a result of or in connection with any
breach by the Purchaser of any representation, warranty or covenant of the
Purchaser set forth in this Agreement or any of the Acquisition Documents.
SECTION 7.3 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation by Purchaser or Sellers
and shall survive the Closing and continue in full force and effect for three
years thereafter; provided, however, that the representations and warranties of
the Sellers set forth in Section 3.1 shall continue and full force and effect
forever.
SECTION 7.4 ACCOUNTS RECEIVABLE. In the event the Company or the
Purchaser receives any payment that relates to accounts receivable generated
from services rendered by the Businesses prior to the Closing Date, the Company
or Purchaser (as the case may be) shall promptly transmit these funds to the
Sellers. In the event either Seller receives any payment that relates to
accounts receivable generated from services rendered by the Businesses after the
Closing Date, such Seller shall promptly transmit these funds to the Purchaser.
ARTICLE 8
POST-CLOSING COVENANTS
SECTION 8.1 GENERAL; FURTHER DOCUMENTS. In case at any time after the
Closing Date any further action is necessary or desirable to carry out the
purposes of this Agreement, each of the parties will take such further action
(including the execution and delivery of such further instruments and documents)
as the other party reasonably may request, at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Article 7).
SECTION 8.2 AMERICAN DOCUMENT SERVICES. Purchaser and EMAC agree to
negotiate in good faith an agreement whereby Purchaser will cause, after the
Closing Date, EMAC to receive from American Document Services a ten percent
(10%) fee on premium dollars referred, provided that American Document Services
does not pay a sales representative's commission.
SECTION 8.3 OPINION OF PURCHASER'S COUNSEL. Concurrently with the
delivery of the legal opinion of Sellers' legal counsel pursuant to Section
6.3(c), Purchaser's legal counsel shall deliver a legal opinion to the Sellers
as to the due authorization, execution and delivery of this Agreement, in form
and substance reasonably acceptable to the Sellers.
SECTION 8.4 By no later than March 25, 2000, Purchaser shall have
satisfied in full the obligations of EMAC and the Sellers to Guaranty Bank &
Trust and of ARS to Megabank of Denver/Arapahoe under the three promissory notes
identified in item 5 of Schedule 3.4, Liabilities and Obligations.
SECTION 8.5 Purchaser shall pay and satisfy in the ordinary course of
business all trade payables and accrued liabilities assumed at the Closing Date
when such trade payables or accrued liabilities become due.
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ARTICLE 9
MISCELLANEOUS PROVISIONS
SECTION 9.1 COMPLIANCE WITH LAWS. Each party shall execute such
agreements and other documents, and shall take such other actions, as the other
may reasonably request (prior to, at or after the Closing) for the purpose of
ensuring that the transactions contemplated by this Agreement are carried out in
full compliance with the provisions of all applicable laws and regulations.
SECTION 9.2 TRANSFER TAXES. Any Colorado sales taxes, real property
transfer or gains taxes or any other taxes payable as a result of the sale of
the Membership Interests or any other action contemplated by this Agreement
shall be paid by the Sellers. Any California sales taxes, real property transfer
or gains taxes or any other taxes payable as a result of the sale of the
Membership Interests or any other action contemplated by this Agreement shall be
paid by the Purchaser.
SECTION 9.3 GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of law).
SECTION 9.4 ATTORNEYS FEES. In the event of any controversy, claim or
dispute arising out of or relating to this Agreement, or breach hereof, the
prevailing party shall be entitled to recover from the losing party reasonable
attorneys' fees, expenses and costs.
SECTION 9.5 ARBITRATION; VENUE AND JURISDICTION. Any dispute arising out
of or relating to this Agreement or the breach, termination or the validity
hereof, shall be settled by arbitration in accordance with the End
Dispute-Judicial Arbitration and Mediation Services (JAMS) rules for arbitration
of business disputes by a neutral arbitrator who shall be a former superior
court or appellate court judge or justice with experience in resolving business
disputes. The arbitration shall be governed by the California Code of Civil
Procedure Section 1280 et seq. and the parties intend this procedure to be
specifically enforceable in accordance with such provisions. Judgment upon the
award rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The parties agree that the judgment or decision of the arbitrator shall
be final and binding. The place of arbitration shall be Orange County,
California. The arbitrator shall be required to follow the applicable law as set
forth in the governing law section of this Agreement. The arbitrator shall award
reasonable attorneys fees and costs of arbitration to the prevailing party in
such arbitration.
SECTION 9.6 CONFIDENTIALITY. Each party acknowledges that it may have
access to various items of proprietary and confidential information of the other
in the course of investigations and negotiations prior to Closing. Each party
agrees that any such information received from the other party shall be kept
confidential and shall not be used for any purpose other than to facilitate the
consummation of the transactions contemplated herein. Confidential and
proprietary information shall include any business or other information which is
delivered by one party to the other, unless such information (i) is already
public knowledge or (ii) becomes public knowledge through no fault, action or
inaction of the receiving party or (iii) was known by the receiving party, or
any of its directors, officers, employees, representatives, agents or advisors,
as applicable, prior to the disclosure of such information by the disclosing
party to the receiving party. No party hereto, nor its respective officers,
directors, employees, accountants, attorneys, or agents, as applicable, shall
intentionally disclose the existence or nature of, or any of the terms and
conditions relating to, the transaction referred to herein, to any third person
without the written consent of all other parties.
SECTION 9.7 NOTICES. All notices, requests, demands or other
communications hereunder shall be in writing and shall be deemed to have been
duly given, if delivered in person or mailed, certified, return-receipt
requested, postage prepaid or on confirmation of receipt if delivered by
facsimile transmission (provided that the original thereof is sent by mail in
the manner set forth above within one business day after the original
transmission) to:
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If to Purchaser, addressed to:
American National Financial, Inc.
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000-0000
Attn: M'Liss Xxxx
With a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000-0000
Attn: C. Xxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Sellers, addressed to:
Xxxxxxxx X. Xxxxxx
C/O Castle, Xxxxxxx, Xxxxxx & Xxxxxxxx
0000 00xx Xxxxxx, Xxxxx #0000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Xxxxxx X. Xxxxxxxx
C/O Emerald Mortgagee Assistance Company
0000 00xx Xxxxxx, Xxxxx #0000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx & Xxxxxxx, L.L.P.
000 Xxxx 00xx Xxx., Xxxxx #000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Xx.
Facsimile: (000) 000-0000
Any party hereto may from time to time, by written notice to the other party,
designate a different address, which shall be substituted for the one specified
above for such party. If any notice or other document is sent by certified or
registered mail, return receipt requested, postage prepaid, properly addressed
as aforementioned, the same shall be deemed served or delivered on the third
business day following mailing thereof. If any notice is transmitted by
facsimile machine ("fax") to a party, it will be deemed to have been delivered
on the date the fax thereof is actually received, as indicated by an electronic
confirmation of successful transmission, provided that an original or photocopy
of the document sent is also mailed, postage prepaid, to the address then
applicable to such party within twenty-four (24) hours after such transmission.
SECTION 9.8 TABLE OF CONTENTS AND HEADINGS. The table of contents of
this Agreement and the underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
SECTION 9.9 ASSIGNMENT. No party hereto may assign any of its rights or
delegate any of its obligations under this Agreement to any other Person without
the prior written consent of the other party hereto.
SECTION 9.10 PARTIES IN INTEREST. Nothing in this Agreement is intended
to provide any rights or remedies to any Person (including any employee, member,
manager, Affiliate, Associate or creditor of a Seller, the Purchaser or a
Company) other than the parties hereto.
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SECTION 9.11 SEVERABILITY. In the event that any provision of this
Agreement, or the application of such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
SECTION 9.12 ENTIRE AGREEMENT. This Agreement, the other Acquisition
Documents and the Nondisclosure Agreement set forth the entire understanding of
the Parties and supersede all other agreements and understandings among the
Parties relating to the subject matter hereof and thereof.
SECTION 9.13 EXPENSES. Each of the parties shall be responsible for and
pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement.
SECTION 9.14 WAIVER. No failure on the part of any party hereto to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of either party hereto in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver thereof; and
no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
SECTION 9.15 AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented except by means of a written instrument executed on
behalf of both the Purchaser and each of the Sellers.
SECTION 9.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be as original and all of which,
when taken together, will be deemed to constitute one and the same.
SECTION 9.17 INTERPRETATION OF AGREEMENT.
(a) Each party hereto acknowledges that it has participated in the
drafting of this Agreement, and any applicable rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in connection with the construction or interpretation of this
Agreement.
(b) Whenever required by the context hereof, the singular number
shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, and shall
be deemed to be followed by the words "without limitation."
(d) References herein to "Articles," "Sections" and "Exhibits" are
intended to refer to Sections of and Exhibits to this Agreement.
[signature page to follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
PURCHASER:
AMERICAN NATIONAL FINANCIAL, INC.
a California corporation
By:
------------------------------------
Its:
-----------------------------------
SELLERS:
---------------------------------------
Xxxxxx Xxxxxxxx
---------------------------------------
Xxxxxxxx X. Xxxxxx
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EXHIBIT A
DEFINED TERMS
For purposes of this Agreement (including the Disclosure Schedule):
"ACQUISITION" means the acquisition by the Purchaser of the Membership
Interests owned by Sellers.
"ACQUISITION TRANSACTION" shall mean any transaction involving:
(a) the sale or other disposition of all or any portion of a
Company's business or assets (other than in the ordinary course of business);
(b) the issuance, sale or other disposition of any Membership
Interests or other Equity Securities of a Company; or
(c) any merger, consolidation, business combination, membership
interest exchange, reorganization or similar transaction involving a Company.
"AFFILIATE" means a Person that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
specified Person. "ASSOCIATES" of a Person shall include:
(a) such Person's Affiliates, stockholders, members, managers,
directors, officers, employees, agents, attorneys, accountants and
representatives; and
(b) all stockholders, members, managers, directors, officers,
employees, agents, attorneys, accountants and representatives of each of such
Person's Affiliates.
"DAMAGES" shall mean out-of-pocket losses and actual damages; provided,
that for purposes of computing the amount of Damages incurred by any Person,
there shall be deducted an amount equal to the amount of any insurance proceeds,
indemnification payments, contribution payments or reimbursements directly or
indirectly received by such Person or any of such Person's Affiliates in
connection with such Damages or the circumstances giving rise thereto; and
provided, further, that in no event shall the Sellers or the Purchasers be
liable to the other for any special, consequential or economic damages.
"DISCLOSURE SCHEDULE" shall mean that certain Disclosure Schedule
delivered together with the Agreement, which shall be arranged in parts to
correspond with the sections and subsections of the Agreement and each
disclosure set forth therein shall be deemed to modify each and every
representation, warranty and covenant of the Sellers set forth in the Agreement
as it pertains to such representation, warranty or covenant. The contents of
each of the contracts and other documents referred to in the Disclosure Schedule
shall be deemed to be incorporated and referred to in the Disclosure Schedule as
though set forth in full therein.
"ENVIRONMENTAL LAWS" means all applicable federal, state and local laws
relating to pollution, storage, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic, hazardous or petroleum-based
substances or wastes ("Waste") into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Waste including, without
limitation, the Clean Water Act, the Clean Air Act, the Resource Conservation
and Recovery Act, the Toxic Substances Control Act and the Comprehensive
Environmental Response Compensation Liability Act ("CERCLA"), as amended, and
their state and local counterparts.
"EQUITY SECURITIES" means any capital stock or other equity interest, or
securities convertible into or exchangeable for capital stock or other equity
interest, or any other rights, warrants or options to acquire any of the
foregoing securities.
"GOVERNMENTAL ENTITY" means any government or any agency, bureau, board,
commission, court,
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department, official, political subdivision, tribunal or other instrumentality
of any government or any quasi-governmental authority or self-regulatory
organization (such as the New York Stock Exchange, Inc.), whether federal, state
or local.
"KNOWLEDGE," or the term "to the best knowledge of," "to which a Person
is aware," "known to a Person," or any variation of such terms, shall mean the
actual knowledge of such Person without having made independent investigation in
connection with this Agreement.
"MATERIAL ADVERSE EFFECT" shall mean any occurrence, event or condition,
either individually or in the aggregate, having a material adverse effect on the
business operations or financial condition of a Seller, a Company, the Companies
or the Purchaser, as applicable, and the assets and properties of such
entity(ies), taken together as a whole.
"MATTER" shall mean any claim, demand, dispute, action, suit,
examination, audit, proceeding, investigation, inquiry or other similar matter.
"PERMITTED ENCUMBRANCES" shall mean (i) those encumbrances resulting
from taxes that have not yet become due and delinquent, (ii) minor encumbrances
that do not materially detract from the value of the real property interests
subject thereto or materially impair their operations, (iii) zoning laws and
other use restrictions of public record, (iv) encumbrances that arise or have
otherwise arisen in the ordinary course of business, and (v) restrictions
arising under all Laws.
"PERSON" shall mean any individual, corporation, limited liability
company, association, general partnership, limited partnership, joint venture,
trust, association, firm, organization, company, business, entity, union,
society, government (or political subdivision thereof) or governmental agency,
authority or instrumentality.
"YEAR 2000 COMPLIANT" means that systems and products accurately process
date and time data (including, without limitation, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries, the
years 1999 and 2000, and leap year
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