STOCK PURCHASE AGREEMENT
THIS AGREEMENT made this 5th day of May, 1995 by and among Xxxxxxxx
Xxxxxxxxxx, an individual residing at 000 00xx Xxxxxx, Xxxxx, Xxxxxxx 00000
individually and collectively hereinafter referred to as "Sellers") of
National-Wide Premium Finance Co., a Florida corporation (the "Company"); and
LMI Acquisition Corporation, a Delaware corporation ("LMI").
WHEREAS, the Sellers own in the aggregate one hundred percent (100%) of
the issued and outstanding common stock of the Company (the "Shares");
WHEREAS, the Company has since 1985 been engaged in the business of
originating and servicing insurance premium finance contracts;
WHEREAS, Sellers desire to sell the Shares and LMI desires to purchase
the Shares upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Sale of Shares; Purchase Price.
1.1 Sale of Shares. For and in consideration of the payment of the
purchase price set forth below, at the Closing, Sellers shall sell, convey,
transfer and assign to LMI, and LMI shall purchase, acquire and accept from
Sellers, 500 shares of common stock of the Company which constitutes one hundred
percent (100%) of the outstanding shares of common stock (the "Shares"). The
Shares shall be free and clear of all claims, liens, charges and encumbrances.
At the Closing, Sellers shall deliver the Shares as represented by the Company's
stock certificates, properly endorsed for transfer by Sellers, along with an
assignment separate from certificate executed by Sellers.
1.2 Purchase Price. Subject to the terms and conditions of this
Agreement, the purchase price paid by LMI for the Shares (the "Purchase Price")
shall be as follows:
(i) cash accounts, plus contract (premium finance accounts)
receivables, plus down payment receivables, plus agents receivables, plus
prepaid drafts, plus prepaid insurance, plus
prepaid taxes, plus security deposits, plus miscellaneous receivables, minus
notes payable to banks, minus unearned finance income, minus documentary stamp
amounts, minus drafts in transit, minus amounts due to insureds, minus unearned
origination fee income, minus accounts payable and accrued expenses, minus
drafts payable, minus refunds payable, minus amounts payable to insurance
agencies, minus withholding tax payable, minus accrued interest, minus all
supplemental payables ("Net Value") as of the Closing Date; plus
(ii) Two Hundred Thousand Dollars ($200,000); plus
(iii) An amount equal to the outstanding balance on the credit
facility provided by Capital Bank to the Company as of the Closing Date, which,
by way of illustration and not limitation, was $513,398 as of March 31, 1995.
For the purposes of determining "Net Value," the terms set forth in
Section 1.2 (i) shall have the meaning set forth on the balance sheet contained
within the financial statements (or if no such financial statements have been
prepared, on the Company's financial books and records of original entry) of the
Company, as of the Closing Date. The determination of Net Value as set forth on
Schedule 1.2.1 hereto shall express the intent of the parties as to the
calculation of the Purchase Price utilizing the Closing Date Balance Sheet (as
hereinafter defined). For the purposes of determining "Net Value", the premium
finance accounts receive shall be calculated without deduction for "allowance
for credit losses."
For the purposes of determining the Purchase Price, the amount which
insurance agencies owe to the Company and "miscellaneous receivables" will be
credited toward the Purchase Price; provided, however, that any such amount
which are not collected and received by LMI within 60 days of the Closing Date,
at LMI's election, shall be immediately remitted by Sellers to LMI in
consideration for assignment of such receivables to Sellers. All bad debts in
collection or bad debts as to which Sellers shall be otherwise responsible as of
the Closing Date shall be assigned to Sellers; provided, however, that such bad
debts to be assigned shall not have been included in the calculation of the
Purchase Price. Seller shall reimburse LMI for those amounts owed by insurance
companies to the Company which on the Closing Date are in excess of 120 days
old; provided that Seller shall not be otherwise responsible for any amounts
owed by insurance companies to the Company.
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The Purchase Price shall be paid to each Seller in accordance with
Schedule 1.2(a) to be attached hereto as of the Closing Date.
1.2.1 Purchase Price Adjustment.For the purposes of payments of the
Purchase Price to be made on the Closing Date, the parties will calculate Net
Value utilizing the Company's balance sheet as of March 31, 1995 as set forth on
Schedule 1.2.1. The parties hereby agree that the Net Value is $1,159,228 and
the aggregate Purchase Price for the purposes of Closing payments is $1,872,626.
The Purchase Price will be finally determined based upon a Closing Date Balance
Sheet (as hereinafter defined) and adjusted accordingly (the "Purchase Price
Adjustment") in the same manner as set forth on Schedule 1.2.1.
Within thirty (30) days after Closing, Sellers shall deliver a
Closing Date Balance Sheet to LMI as of the close of business on the Closing
Date prepared in accordance with generally accepted accounting principles (the
"Closing Date Balance Sheet") and a Net Value based thereon. LMI shall have the
right to audit the Closing Date Balance Sheet and shall have thirty (30) days
from the date of receipt of the Closing Date Balance Sheet within which to
notify Sellers of any objections to the Closing Date Balance Sheet or the Net
Value. If LMI fails to notify Sellers of any such objections, the Net Value
shall be deemed to have been finally determined. If LMI timely notifies Sellers
of objections to the Closing Date Balance Sheet or the Net Value, LMI and the
Sellers will endeavor to resolve such objections. If LMI and Sellers are unable
to resolve such objections within fifteen (15) days, either party may submit the
issue to arbitration under the rules of the American Arbitration Association,
and any award thereunder shall be final and binding upon the parties in
accordance with Section 9.2 hereof. The Parties will share the expense of such
arbitration equally. Once the Net Value is finally determined, Sellers will
promptly remit to LMI any overpayment if the parties determine that the Sellers
were overpaid at Closing and LMI shall promptly pay to Sellers any increase if
the parties determine that the Sellers were underpaid at Closing. Any downward
adjustment in the Purchase Price shall be paid by Sellers in the first instance
with the surrender of Preferred Stock at a rate of $3.00 per share. The portion
of the Purchase Price escrowed at Closing in accordance with Section 1.3.1 shall
be released pursuant to such Purchase Price Adjustment.
1.3 Manner of Payment. The Purchase Price shall be paid as follows:
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1.3.1 Series A Preferred Stock. $200,000 of the Purchase Price
shall be paid to the Sellers and $100,000 to Xxxxx Xxxxxxx by delivery at
Closing of 83,333 shares of LMI's newly designated Series A $3.00 Preferred
Stock ("Preferred Stock") to Seller and delivery into escrow of 16,667 shares of
Preferred Stock to be released in accordance with the Purchase Price Adjustment.
A summary of the terms of the Preferred Stock is attached hereto as Schedule
1.3.1(a). Such Preferred Stock shall be more fully described in the "Certificate
of Designation" which shall be attached hereto and made a part hereof as
Schedule 1.3(b) as of the Closing.
1.3.2 Immediately Available Funds. The balance of the Purchase
Price shall be paid to the Sellers by delivery at Closing of cash, check, wire
transfer or other immediately available funds to the following persons in the
following order of priority:
(i) Pursuant to Section 1.2(iii) hereof, to Capital Bank
an amount equal to the outstanding balance on the credit facility provided by
Capital Bank to the Company as of the Closing Date as set forth on Schedule
1.3.2 to be attached hereto and made a part hereof as of the Closing Date.
(ii) To certain third party creditors identified on
Schedule 1.3.2(ii).
(iii) The balance of the Purchase Price to the Sellers in
accordance with Schedule 1.2.
At Closing, the deposit(s) paid by LMI to Sellers shall be
credited against the Purchase Price. At Closing, LMI shall place the sum $40,000
into escrow pursuant to the terms of this Agreement with an escrow agent agreed
upon by the parties ("Escrow Agent") to be disbursed in accordance with an
upward adjustment to the Purchase Price, if any, pursuant to the Purchase Price
Adjustment.
1.3.3 Deposit(s). Within 5 business days after LMI obtains a
written commitment to secure the financing referenced at Section 5.7 hereafter
(the "Commitment"), LMI shall deposit into escrow pursuant to the terms of this
Agreement with the Escrow Agent the sum of $25,000. These funds are to be
retained in escrow in accordance with the terms of the Escrow Agreement attached
hereto and made a part hereof as Exhibit 1.3.3. If the Closing shall not have
occurred by June 15, 1995 for any reason other than as permitted in this
Agreement, such deposit, with accrued interest, shall be retained by Sellers. If
the Closing shall not have occurred by June 15, 1995 for reasons that are
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permitted in this Agreement then the deposit with accrued interest shall be
returned to LMI. LMI may elect to extend the Closing Date until July 15, 1995 in
consideration for the deposit into escrow of an additional sum of $25,000 on
July 15, 1995. If the Closing Date is so extended, all deposits shall remain in
escrow pursuant to this Section 1.3.3 and the Escrow Agreement. In the event
that the Closing shall not have occurred by July 15, 1995, for any reason other
than as permitted in this Agreement, the deposit with accrued interest shall be
retained by Sellers. In the event that the Closing shall not have occurred by
July 15, 1995 for any reason as permitted in this Agreement, the deposit with
accrued interest shall be returned with interest to LMI.
2. Closing. At 10:00 a.m. on June 15, 1995, unless extended by LMI as
provided at Paragraph 1.3.3 above, the Closing of the sale and purchase of the
Shares shall take place in the offices of Xxxxxxx Xxxxxxxxxx at 000 Xxxxxxxx
Xxxxx, Xxxxx Xxxxx, Xxxxxxx or at such other place and time as the parties
mutually agree (the "Closing" or "Closing Date").
3. Representations and Warranties of Sellers. Sellers, intending to be
obligated hereunder jointly and severally, hereby represent and warrant to LMI,
intending for it to rely thereon, as follows:
3.1 Title to Shares. Except as set forth on Schedule 3.1, each of
Sellers own that number of the Shares shown on Schedule 3.1 beneficially and of
record, free and clear of any lien, pledge, charge, encumbrance, covenant,
restriction, option agreement or claim.
3.2 Execution and Enforceability. This Agreement and the other
agreements to which Sellers are a party pursuant hereto have been duly executed
and delivered by, and constitute valid and binding obligations of Sellers
enforceable against them in accordance with their respective terms.
3.3 Due Authorization. The execution, delivery and performance by
Sellers of this Agreement are within their full legal right, power and authority
and do not contravene, permit the termination of or constitute a default (or an
event which, with or without the giving of notice or the passage of time, or
both, will constitute a default) under any agreement or other instrument binding
upon them, excluding any contravention, termination or default which does not
affect Sellers' ability to consummate the transactions contemplated by this
Agreement and does not result in the creation or imposition of any lien, charge
or encumbrance upon any of the Shares.
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3.4 Organization and Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Florida and has the corporate power to own its property and
assets and to carry on its business as now being conducted. Copies of the
Articles of Incorporation and By-laws of the Company as amended and currently in
effect are attached as Schedule 3.4. The Company is qualified to do business in
all jurisdictions in which the conduct of its business requires such
qualification. There presently are no proceedings pending or threatened wherein
any state has asserted that the Company's activities require it to qualify as a
foreign corporation in such state.
3.5 Capitalization. The capital stock of the Company consists solely
of 500 shares of common stock, $100 par value, of which 500 shares are issued
and outstanding. The Shares are validly issued, fully paid and nonassessable.
3.6 No Options, Warrants, Rights, Etc. Except as set forth on
Schedule 3.6, there are no authorized or outstanding any options, warrants,
agreements, calls, rights, plans or other commitments of any character providing
for the issuance, delivery, purchase or sale of any shares of capital stock of
the Company.
3.7 Subsidiaries. The Company has no subsidiaries.
3.8 Sufficiency of Assets. The Company owns or leases all of the
properties and assets necessary for the conduct of its business.
3.9 Financial Statements. Attached as Schedule 3.9 are copies of the
audited financial statements of the Company for the past three years and
unaudited financial statements for the interim period ending, March 31, 1995, in
the aggregate (the "Financial Statements") including statements of income and
retained earnings, statements of cash flow, balance sheets, supplemental
schedules and footnotes, all of which, are true and correct, have been prepared
in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and fairly present the results
of its operations and condition of the Company for the periods indicated.
3.10 No Undisclosed Liabilities. Except as set forth in Schedule
3.10, the Company has no liabilities or obligations accrued, absolute or
contingent, except as disclosed in the Financial Statements of the Company as
set forth in Schedule 3.9.
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3.11 Absence of Certain Changes. Except as disclosed in Schedule
3.11, since December 31, 1994, the Company has conducted and until the Closing
Date will conduct, its business only in the ordinary course and has not and will
not have:
3.11.1 incurred any material adverse change in its financial
condition, results of operations, business or property;
3.11.2 incurred any obligation or liability affecting its
operations or business except normal trade obligations and taxes incurred in the
ordinary course of business and consistent with its prior practices;
3.11.3 purchased, sold, assigned, transferred, mortgaged,
pledged or subjected to any lien, charge, security interest or any other
encumbrance or restriction any of its assets except in the ordinary course of
its business (and except for any lien for unpaid property taxes not yet due);
3.11.4 suffered any labor trouble, or any damage, destruction or
loss which has materially adversely affected any of its assets or business;
3.11.5 made, or obligated itself in any way to make, any
increase in the compensation payable to any officer, director or employee, or
incurred any further employment obligations or commitments;
3.11.6 terminated, transferred or granted any rights under any
leases, licenses, trademarks or trade names except in the ordinary course of
business;
3.11.7 made any changes in its capital stock or declared or paid
any dividend or declared or made any distribution on, or authorized the creation
or issuance of, or issued or otherwise effected any split-up or other
reclassification or reorganization of any of its securities of any class, or
directly or indirectly redeemed, purchased or otherwise acquired any of its
outstanding securities, or agreed to take any such action;
3.11.8 issued or sold any Shares or any options, warrants, or
other rights to purchase any Shares or any securities convertible into or
exchangeable for Shares;
3.11.9 incurred any indebtedness for borrowed money or issued or
sold any debt securities; or
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3.11.10 forgiven or cancelled any debts or claims, or waived any
rights.
3.12 Material Changes. Except as disclosed in Schedule 3.12, no
hidden fact or hidden condition exists or is contemplated or threatened other
than existing market conditions, which might cause a material change in the
assets, liabilities, financial condition or results of operations of the Company
in the future. No representation or warranty is made with respect to the future
impact of pending or future federal, state or local laws.
3.13 Taxes. The Company has filed all income, sales, excise,
corporate, franchise, property, payroll and other tax returns and reports which,
as of the date hereof, it is required to file by the United States of America
and any state or other political subdivision and has paid all taxes or
assessments relating to the periods covered by such returns or reports, or
resulting from any assessment, proposed deficiency, settlement or resettlement
of such taxes, returns or reports. All such income, excise, corporate,
franchise, property, payroll and other taxes properly chargeable with respect to
the Company or its earnings as of the Closing will be properly accrued and
provided for on the Company's internal financial statements as of the Closing
Date. On the Closing Date, the Company will not have any liability for any such
income, sales, excise, corporation, franchise, property, payroll or other taxes
except as set forth upon Schedule 3.13. There are no present disputes or
outstanding audits as to taxes of any nature payable by the Company.
3.14 Leases. The Company is not a party, either as lessor or lessee,
to any lease of any property except for the leases listed in Schedule 3.14
attached hereto. A copy of each such written lease or a description of any such
oral lease has been delivered to LMI, and each is complete and correct. All such
leases are in full force and effect and all rents or other amounts required to
be paid by the Company under such leases, which have become due, have been paid.
There exists no default under any such lease, and no event, occurrence,
condition or act which, with the giving of notice, the lapse of time or the
happening of any further condition would become a default under any such lease,
and no waiver or indulgence has been granted by the lessor under any such lease.
3.15 Personal Property. The Company has good and marketable title to
all the inventory, fixtures, office equipment, raw material, machinery,
equipment, leasehold improvements and all other personal property and assets
reflected in the balance sheet
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included within the financial statements as of December 31, 1994, or thereafter
acquired by it, free and clear of all claims, liens, charges and encumbrances
except as set forth in Schedule 3.15. All such property and assets are in good
working condition and have been operated and maintained in accordance with
applicable manufacturer's manuals or guidelines.
3.16 Intellectual Property rights and other Intangibles. Schedule
3.16 is a complete list of the "Intellectual Property Rights" and other
intangibles of the Company owned, licensed or used by or registered in the name
of the Company or other persons which are used in connection with the Company's
business. For the purposes of this Agreement "Intellectual Property Rights"
shall mean all patents, patents pending, trademarks, tradenames, service marks,
logos, computer programs, software, practices, copyright registrations or
applications, trade secrets, customer lists, know-how, data bases and any other
proprietary rights and applications thereof. Except as listed in Schedule 3.16,
there are no Intellectual Property rights owned, licensed or used by or
registered in the name of the Company or other persons, which the Company owns
or is licensed under such Intellectual Property Rights that Sellers or the
Company believes are necessary to operate the business as now being operated and
is not currently in receipt of any notice nor has it any knowledge of conflict
with the asserted rights of others in such Intellectual Property Rights or
similar property rights and no proceedings have been instituted which challenge
any of the rights of the Company in respect thereto.
3.17 Accounts and Notes Receivable. The accounts receivable and
notes receivable of the Company reflected on the Financial Statements as of the
Closing Date ("Accounts Receivable"), have been collected or are collectible at
the aggregate recorded amounts thereof, including a bad debt reserve not to
exceed in the aggregate thirty-five thousand dollars ($35,000), except to the
extent that the collection thereof is affected by the insolvency or bankruptcy
of the insurance companies underwriting such Finance Contracts. Sellers shall
reimburse LMI for any Accounts Receivable which are not collected or collectible
in the ordinary course without the institution of collection proceedings;
provided that LMI shall be paid by Sellers in the first instance with the
surrender of Preferred Stock at a rate of $3.00 per share.
3.18 Insurance. The Company has currently in force policies of
insurance of the types and in the amounts shown on Schedule 3.18.
9
3.19 Contracts, Commitments, Etc. Schedule 3.19 is a list of all
contracts relating to the Company's business. These contracts include, but are
not limited to:
3.19.1 all finance contracts and endorsements thereto ("Finance
Contracts"). Sellers hereby represent as follows:
(i) The Company has good and marketable title to all
Finance Contracts. There are no liens or encumbrances against any Finance
Contract, except in favor of Capital Bank, which shall be removed on or before
the Closing Date;
(ii) As to the Finance Contracts, all applicable federal
and state laws, rules and regulations, as may exist from time to time, have been
complied with in all respects, including as to the origination, financing,
servicing, or sale or purchase of such Finance Contracts; and
(iii) The information reflected in the records of the
Company is true, accurate, complete and current, including, without limitation,
with respect to the customers and any endorsers, and the origination servicing
and collection of each Finance Contract.
3.19.2 all contracts, agreements, purchase commitments,
licenses, undertakings or other arrangements affecting the Company's business,
to which the Company is a party or by which it is bound.
Except as disclosed in Schedule 3.19, the Company has no obligation,
contingent or otherwise, under any contract, license, undertaking or other
arrangement affecting its business. Except as disclosed on Schedule 3.19, the
Company has no all collective bargaining agreements, employment agreements,
consulting agreements, executive compensation plans or employee benefit plans
relating to employee benefits with respect to which the Company has or may incur
any future or contingent obligations, including, without limitation, all plans,
agreements, arrangements, or policies relating to deferred compensation,
pensions, profit sharing, retirement income or other benefits, stock purchase
and stock option plans, bonuses, severance arrangements, health benefits,
insurance benefits and all other employee benefits or fringe benefits, including
any employee welfare benefit plans and employee pension benefit plans within the
meaning of Sections 3(1) and 3(2) of the Employee Retirement Income Security Act
of 1974, as amended, ("ERISA").
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Sellers have delivered to LMI a copy of all written agreements or a
description of all oral agreements which are listed in Schedule 3.19, except
Finance Contracts. Each of the agreements listed on Schedule 3.19 is in full
force and effect and is valid and binding in accordance with its terms upon the
Company and, to the best of Sellers' knowledge, upon the other parties to said
agreements.
3.20 Absence of Defaults. The Company is not in payment or technical
default under or in breach or violation, in any material respect, of the terms
of its Articles of Incorporation, By-laws or any judgment, order, decree,
mortgage, contract, license, agreement, deed of trust, indenture or other
instrument to which it is a party or by which it is bound or to which its
property is subject or any federal, state or local statute or regulation
applicable to it. The execution and delivery of this Agreement do not, and the
transactions contemplated hereby will not, violate any provisions of, or in a
any manner adversely effect the rights of the Company or LMI, or result in the
acceleration of any obligation, under the Company's Articles of Incorporation or
By-laws or any mortgage, contract, license, agreement, or other instrument or
order, arbitration award, judgment or decree to which the Company is a party or
by which it is bound.
3.21 Litigation. Except as disclosed in Schedule 3.21 attached
hereto: (i) there is no material claim, legal action, administrative,
arbitration or other proceeding, suit or governmental investigation pending, or,
threatened, against the Company, (ii) the Company has not been charged with and,
it is not in violation of, or in default with respect to, any order, law, rule
or regulation of, or any report required to be filed with any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, (iii) the Sellers are not aware of any condition, occurrence,
event or circumstance upon which any claim, legal action, administrative,
arbitration or other proceeding, suit or governmental investigation adversely
affecting the Company, might reasonably be predicated and (iv) there have never
been any material product liability claims against the Company, there are none
now and Sellers are aware of no circumstances that may give rise to such a
claim.
3.22 Compliance with Laws. Except as disclosed in Schedule 3.22, the
Company has complied with all laws, regulations and orders and has obtained all
governmental permits or licenses required by its business. No notice or warning
from any governmental authority in respect of any failure or alleged
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failure by the Company to comply with any law, regulation or order has been
received by the Company.
3.23 Employees. Attached hereto as Schedule 3.23 is a list of all of
the key employees of the Company which reflects his or her current salary and
eligibility for bonus entitlements. Sellers have no information or facts
indicating that any of the persons so listed intends to terminate his employment
relationship with the Company. The Company is not liable for damages to any
employee or former employee as a result of any violation of any state or federal
laws directly or indirectly relating to such employee or former employee.
3.24 Minute Books. The minute books of the Company contain complete
and accurate records of any and all meetings of the directors and shareholders
of the Company.
3.25 Labor Relations. Attached hereto as Schedule 3.25 is a list of
all unions which has any bargaining rights applicable to the Company's
employees. There is no labor strike, dispute, slowdown or stoppage pending or
threatened by any group of the Company's employees.
3.26 Customers. Schedule 3.26 reflects a list of all customers who
for periods reflected within the financial statements accounted for 10% or more
of the Company's gross revenues. Since the dates of the financial statements,
there has not been any material adverse change in the business relationship of
the Company with any significant customer.
3.27 Licenses and Permits. Schedule 3.27 lists all permits, licenses
and other approvals and authorizations which are necessary to conduct the
business of the Company. All such permits, licenses and other approvals are
possessed or held by the Company and the Company is in compliance therewith.
3.28 Real Estate. The Company does not own or lease any real
property other than as set forth on Schedule 3.14.
3.29 OSHA Violations; Workers' Compensation. The Company is not
operating its business in violation of the Occupational Safety and Health Act of
1970, or the regulations promulgated thereunder. The Company is not, and will
not become, liable for any retroactive workers' compensation insurance premiums
relating to the period of time prior to the date of this Agreement in excess of
the estimated premium plus One Thousand Dollars ($1,000). The Company is not
operating its business in
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violation of any applicable state, federal or municipal laws, regulations or
ordinances.
3.30 Banking. Schedule 3.30 to this Agreement is a complete and
accurate listing of each bank or other financial institution in which the
Company has an account, deposit or safe deposit box, with the names of all
persons authorized to draw upon these accounts or to have access to these boxes.
3.31 Infringement of Intellectual Property Rights. Except as
disclosed in Schedule 3.31, the operation of the Company's business does not
violate any patent rights, copyrights, or other intellectual property rights of
any third party.
3.32 Environmental Matters. Except as set forth in Schedule 3.32,
the Company is in compliance with all laws, rules and regulations relating to
environmental protection and conservation (including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act and the
Superfund Amendments and Reauthorization Act of 1986, as amended and all
applicable state laws pertaining to the environment), and neither the Company
nor Sellers have received any notification of any asserted present or past
failure to so comply with such laws, rules or regulations.
3.33 Powers of Attorney and Suretyships. Except as set forth on
Schedule 3.33, neither the Sellers nor the Company have any general or special
powers of attorney outstanding (whether as grantor or grantee thereof) or have
any obligation or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, co-xxxxxx, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as endorser or
maker of checks or letters of credit, respectively, endorsed or made in the
ordinary course of business.
3.34 Accuracy and Completeness of Representations and Warranties.
Neither this Agreement nor any exhibit or other instrument, document or material
furnished to LMI pursuant to this Agreement (whether furnished before or after
the execution of this Agreement up to and including the Closing Date) 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. The Sellers know of no fact which materially
adversely affects the present or future condition (material or otherwise) of the
Company or any of its assets which has not been set forth in this
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Agreement or in any schedule attached to this Agreement. The representations and
warranties contained in Sections 3.1 through 3.34 of this Agreement shall be
true on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date. Such
representations and warranties have been made by Sellers with the knowledge and
expectation that LMI is relying thereon. Each of the representations and
warranties shall survive the Closing and the Closing Date and shall remain
operative and in full force and effect for the time periods specified in Section
7 hereof regardless of any investigation at any time made by or on behalf of LMI
and shall not be deemed merged in any document or instrument so executed and
delivered by Sellers.
4. Representations and Warranties of LMI. LMI hereby represents and
warrants to Sellers as follows:
4.1 Organization, Existence and Authorization. LMI is duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The execution, delivery and performance by LMI of this Agreement are
within its corporate power and authority, have been duly authorized by all
necessary corporate action and do not contravene, permit the termination of or
constitute a default under its Articles of Incorporation or Bylaws, or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
LMI or to which any of its assets are bound.
4.2 Execution and Enforceability. This Agreement and the other
agreements to which LMI is a party pursuant to this Agreement have been duly
executed and delivered by, and constitute the valid and binding obligation of,
LMI enforceable against it in accordance with their respective terms, except to
the extent such enforcement may be limited by bankruptcy, insolvency,
reorganization or similar laws or equitable principles relating to or limiting
creditors' rights generally.
5. Conditions to Closing for the Benefit of LMI. The obligation of LMI
pursuant to this Agreement shall be subject to the satisfaction, at or before
the Closing Date, of the following conditions (any of which may be waived, in
whole or in part, by LMI):
5.1 Representations and Warranties. The representations and
warranties of the Sellers contained in Article 3 hereof shall be true and
correct as of the Closing Date, and Sellers have complied with all other
covenants required under this Agreement to be undertaken by them prior to the
Closing Date.
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Sellers shall deliver to LMI a certificate to such effect on the Closing Date.
5.2 Material Adverse Change. Sellers shall deliver to LMI a
certificate to the effect that, except as disclosed in any schedule delivered
pursuant to Article 3 hereof, during the period from December 31, 1994 to the
Closing Date, there shall not have been any material adverse change in the
financial condition or results of operations or prospects of the Company; the
Company shall not have sustained any material loss or damage to its property;
there shall not have come to the attention of the Sellers or any officer of the
Company any event which may materially adversely affect the business of the
Company; the Company shall have carried on its business in the ordinary course;
the Company shall not have entered into any contract, commitment or transaction
other than in the ordinary course of business consistent with past practice; the
Company shall not have sold or disposed of any capital assets; the Company has
not created any indebtedness or other liability except as incurred in the
ordinary course of business consistent with past practice or pursuant to
existing contracts; the Company has not amended its Articles of Incorporation or
Bylaws; the Company has maintained all present life insurance policies with
respect to its key employees and all property insurance policies with respect to
its assets and has not borrowed against any of such life insurance policies; the
Company has used its best efforts to preserve its business and employment
relationships, including with its insurers, customers, suppliers, employees and
others having business relations with it; and the Company has not changed its
present compensation or bonuses paid to its employees.
5.3. Release. Sellers shall deliver to LMI a release satisfactory to
LMI executed by Xxxxxx X. Xxxxx-Xxxxxx favor of LMI and the Company, which shall
be attached hereto at Closing as Schedule 5.3.
5.4 No Restraints. No action or proceeding shall have been
instituted or threatened prior to or at the Closing Date before any court or
governmental body or authority pertaining to the acquisition by LMI of the
Shares.
5.5 Consents. All necessary agreements and consents of any third
parties, including, but not limited to, governmental or other regulatory
agreements, federal, state or municipal required in connection with the transfer
of Shares to LMI shall have been obtained, including any approvals or consents
of the Florida Department of Insurance and/or Special Finance Division of the
State of Florida.
15
5.6 Documentation. The form and substance of all opinions,
certificates, instruments of transfer and all other documents shall be
satisfactory in all reasonable respects to LMI's counsel.
5.7 Financing. Concurrent with the Closing Date, LMI shall have
secured and closed upon a debt facility of no less than $5,000,000 secured in
whole or in part by the assets of the Company, on terms and conditions
reasonably satisfactory to LMI.
5.8 No Liabilities. Taking into account any payments pursuant to
Section 1.3.2(i) and (ii), all outstanding liabilities of the Company shall have
been satisfied, paid and discharged on or before the Closing Date, including,
but not limited to, all accounts payable, accrued business expenses, accrued
interest and other liabilities or obligations reflected or not reflected on the
Company's balance sheet contained within the financial statements as of the
Closing Date.
5.9 Employment Agreement. On or before the closing, LMI shall enter
into a written employment agreement with Xxxxxxxx Xxxxxxxxxx acceptable to the
parties.
6. Conditions to Closing for the Benefit of Sellers. The obligations of
Sellers pursuant to this Agreement shall be subject to the satisfaction, at or
before the Closing Date, of the following conditions (any of which may be
waived, in whole or in part, by Sellers):
6.1 Representations and Warranties. The representations and
warranties of the Sellers contained in Article 4 hereof shall be true and
correct as of the Closing Date and Sellers have complied with all other
covenants required under this Agreement to be undertaken by them prior to the
Closing Date. Sellers shall deliver to LMI a certificate to such effect on the
Closing Date.
6.2 Documentation. The form and substance of all opinions,
certificates, instruments of transfer, and other documentation required to be
delivered to Sellers shall be satisfactory in all reasonable respects to Sellers
and their counsel.
6.3 No Restraints. No action or proceeding shall have been
instituted prior to or at the Closing Date before any court or other
governmental body, or instituted or threatened by any
16
public authority pertaining to the acquisition by LMI of the Shares to be
transferred pursuant to this Agreement to LMI.
6.4 Consents. All necessary agreements and consents of any third
parties, including, but not limited to, governmental or other regulatory
agreements, federal, state or municipal required in connection with the transfer
of Shares to LMI shall have been obtained, including any approvals or consents
of the Florida Department of Insurance and/or Special Finance Division of the
State of Florida.
6.5 Financing. Concurrent with the Closing Date, LMI shall have
secured and closed upon a debt facility of no less than $5,000,000 secured in
whole or in part by the assets of the Company, on terms and conditions
reasonably satisfactory to LMI.
6.6 Employment Agreement. On or before the closing, LMI shall enter
into a written employment agreement with Xxxxxxxx Xxxxxxxxxx acceptable to the
parties.
7. Indemnification of LMI.
7.1 Sellers shall, jointly and severally, defend, indemnify and hold
harmless LMI from and against any and all claims, causes of action, losses,
costs, damages, deficiencies or expenses (including reasonable attorneys' fees)
(collectively "Damages") to LMI or the Company arising from or related to: (a)
any and all misrepresentations or breaches of representations, warranties or
covenants of Sellers set forth in this Agreement or in any exhibit or other
instrument, document or material furnished to LMI pursuant to this Agreement
(whether furnished before or after execution of this Agreement up to and
including the Closing Date); (b) the litigation disclosed on Schedule 3.21; (c)
any suit, claim, action, or breach of warranty, negligence, or strict tort
asserted against the Company relating to or in connection with or arising out of
an occurrence or condition existing or arising on or before the Closing Date;
(d) any amounts of tax, interest or penalties relating to the non-reporting or
non-payment of any federal, state or local taxes; and (e) any suit, claim or
action by any former stockholder of the Company as to the sale of his shares of
the Company's stock to the Sellers.
7.2 Sellers shall be liable for all Damages arising from or related
to any claim of which LMI or the Company notifies Sellers during the following
time periods:
7.2.1 The applicable statute of limitations with respect to
Damages arising from or related to (a) any
17
misrepresentations or breach of warranties or representations set forth in
Section 3.13 relating to "Taxes", (with the exception of any Damages relating to
any such breach arising from or related to any fraudulent act on the part of
Sellers occurring on or before the Closing Date, it being understood that
Sellers' liability hereunder for such Damages shall continue indefinitely);
Section 3.31 relating to "Infringement of Intellectual Property Rights,"; or
clause (iv) of Section 3.21 relating to "Litigation," or (b) any product
liability claim of breach of warranty, negligence or strict tort asserted
against the Company relating to an occurrence arising on or before the Closing
Date and
7.2.2 Three (3) years from the Closing Date, with respect to
Damages arising from or related to any misrepresentation or breach of any
warranty, representation, or covenant set forth in this Agreement, except as
otherwise provided in Section 7.2.1; and
7.2.3 Without any limitation with respect to damages arising
from or related to any defect in the title to the Shares conveyed hereunder by
Sellers to LMI.
7.3 The Company or LMI, as the case may be ("Indemnitee"), shall
give written notice to the Sellers ("Indemnitors") promptly upon receipt by
Indemnitee of any claim for which Indemnitees have a duty of indemnification
under this Section 7. Indemnitee shall control the defense or settlement of such
claim or any litigation arising therefrom, and the Indemnitors may elect, at
their expense, to participate therein. In any event, upon the reasonable request
of the party controlling such defense, the other party shall cooperate with said
controlling party in the preparation of such defense.
7.4 LMI or the Company, as the case may be, at its option, may
utilize the right of set-off against any amounts due to the Sellers, under this
Agreement, with respect to any claim for indemnification it has under this
Article 7 against the Sellers.
8. Additional Agreements.
The parties agree to the following matters:
8.1 Registration of Shares. LMI shall file a registration statement
(the "Registration Statement") with the Securities and Exchange Commission the
purpose of which is to register certain of the outstanding shares of LMI under
the Securities Act of 1933, as amended (the "Act") at such time as the
18
Company's Board of Directors, upon the advice of its investment bankers,
auditors or other consultants, deems such filing to be in the best interests of
the Company. LMI shall pay the expenses of preparing and filing such
Registration Statement.
8.2 Restrictive Covenant. Notwithstanding Section 8.1 above,
Xxxxxxxx Xxxxxxxxxx hereby agrees that she will not sell, convey, furnish,
assign or dispose of securities of LMI prior to the earlier of (i) the two year
anniversary of the effective date of such Registration Statement, if any, or
(ii) the 42 month anniversary of the date of issuance of such securities. Xx.
Xxxxxxxxxx hereby agrees to have a restrictive legend placed on such securities
to such effect.
8.3 Liquidated Damages. The retention of the deposit(s) by Sellers
pursuant to Section 1.3.3 hereof shall be Sellers' only remedy against LMI or
its agents, officers, directors or affiliates as liquidated damages and LMI
shall have no other obligations with respect to Sellers. Notwithstanding the
foregoing, the parties shall have the right to seek injunctive relief in
connection with a breach of Section 8.5 hereof.
8.4 Exclusivity. Sellers individually and collectively, agree that
they will not negotiate with or enter into any agreement with, any other party
for the combination, reorganization, merger, acquisition or sale of the Shares,
the Company or the assets of the Company. During the term of this Agreement,
Sellers further represent and warrant that neither they nor the Company is party
to such an agreement.
8.5 Confidentiality. LMI and the Company and the Sellers have
furnished to each other data, financial statements, records, reports and other
information, regarding their respective businesses which is either non-public,
confidential or propriety in nature (collectively, "Information"). LMI and
Sellers each agree that all Information furnished is provided in reliance upon
each party's express representation that such Information will be used only for
the purpose of evaluating a possible merger or other combination of their
businesses and for no other purpose. Each party agrees to maintain and hold all
Information received by it in trust and as strictly confidential. Each party
agrees that it will not, under any circumstances, allow or permit any such
Information to be disclosed to or to come into the possession of any third party
other than their respective attorneys or accountants, except as may be required
by federal or state securities laws.
19
8.6 Access. Prior to the Closing Date, the Sellers agree to provide
LMI and its representatives with reasonable access to the records and facilities
of the Company for the purpose of conducting further due diligence and to
further provide such additional assistance to LMI in connection with its due
diligence as it shall reasonably require.
8.7 Securities to be issued to the Sellers. The shares of common
stock issuable upon conversion of the Preferred Stock, will, when issued and
delivered in accordance with the terms and conditions of this Agreement and the
Preferred Stock be validly issued, fully paid and non-assessable. The Sellers
have acknowledged and agreed (a) that they have such knowledge and experience in
financial and business matters that they are capable of obtaining and utilizing
the information necessary to evaluate the risk of investing in the Preferred
Stock and the common stock issuable upon conversion of such Preferred Stock; (b)
that they have been advised that such shares of common stock to be issued to
them upon conversion of the Preferred Stock will not be registered under the
Act, and accordingly, subject to the registration of such shares pursuant to
Section 8.1 hereof, they may not be able to sell or otherwise dispose of such
shares when they wish to do so; (c) that the shares of common stock so issued
are being acquired by or for their own benefit and account for investment and
not with a view to or for resale with a public offering or distribution thereof;
(d) that the shares of common stock so issued will not be resold (i) without
registration thereof under the Act (unless in the opinion of counsel to the
holder thereof, an exemption from such registration is available), or (ii) in
violation of any law; (e) that the certificate or certificates representing the
shares to be so issued will be imprinted with a restrictive legend; and (f) that
LMI is hereby authorized to notify its transfer agent of the status of such
shares and to take such other action including, but not limited to, placing of a
"stop transfer" order on the transfer agent's books and records to insure
compliance with the Act.
8.8 No Guaranty of Obligations. It is hereby agreed by the parties
that Xxxxxxxx Xxxxxxxxxx shall not be required by the Company or LMI to become
personally obligated as guarantor or otherwise in connection with any promissory
notes, guarantees or other third party financing obligations incurred by LMI or
the Company after the Closing Date.
8.9 Delivery of Exhibits and Schedules. The parties hereto
acknowledge that certain exhibits and schedules to this Agreement must be
prepared and delivered. Such exhibits and schedules shall be delivered within
five (5) business days after
20
the date of this Agreement. This Agreement may be terminated by either party in
the event that either party does not receive the exhibits and schedules to be
delivered to such party which are satisfactory to such party within such five
(5) business days after the date of this Agreement.
9. Miscellaneous.
9.1 Further Assurances. Each of the parties will, at the request of
any other party from time to time, execute and deliver such further instruments
and will take such other action reasonably required to consummate the
transactions contemplated by this Agreement.
9.2 Arbitration. If a dispute arises as to interpretation of this
Agreement, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Sellers, one by the LMI and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Philadelphia, Pennsylvania. The decision of a majority of the Arbitrators
shall be conclusively binding upon the parties and final, and such decision
shall be enforceable as a judgment in any court of competent jurisdiction. Each
party shall pay the fees and expenses of the arbitrator appointed by it, its
counsel and its witnesses. The parties shall share equally the fees and expenses
of the impartial arbitrator.
9.3 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the state of Delaware.
9.4 Assignment. This Agreement shall not be assignable by any party
without the prior written approval of the other parties, provided that LMI may
assign this Agreement to an affiliate. To the extent assignable, this Agreement
shall be binding upon, and inure to the benefit of, the LMI and Sellers and
their respective successors, heirs, executors, administrators and assigns.
9.5 Headings for Reference Only. The section and paragraph headings
in this Agreement are for convenience of reference only and shall not be deemed
to modify or limit the provisions of this Agreement.
21
9.6 Notices. Any notice, communication, demand or other writing (a
"notice") required or permitted to be given, made or accepted by any party to
this Agreement shall be given by personal delivery (including overnight delivery
by a nationally recognized overnight carrier) or by depositing the same in the
United States mail, properly addressed, postage prepaid and registered or
certified with return receipt requested. A notice given by personal delivery
shall be effective upon delivery and a notice given by registered or certified
mail shall be deemed effective on the second day after such deposit. For
purposes of notice, the addresses of the parties shall be, until changed by a
notice given in accordance herewith, as follows:
If to Sellers:
If to LMI:
LMI Acquisition Corp.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000-0000
Attention: Xx. Xxxxxxx Xxxxxxx
With copies to:
Xxxxxxx X. Xxxxx, Esquire
Clark, Ladner, Xxxxxxxxxxx & Xxxxx
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
9.7 Entire Agreement and Amendment. This Agreement states the entire
agreement reached between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior or contemporaneous agreements,
understandings, representations and warranties between the parties, and may not
be amended except by written instrument executed by the parties hereto.
9.8 Survival of Representations and Warranties. The parties hereto
acknowledge and agree that as of the Closing Date they shall not be deemed to
have made any representations and warranties other than as set forth in this
Agreement and the documents delivered in connection herewith or pursuant hereto.
The representations and warranties made in this Agreement and in any
certificate, exhibit or document delivered in connection
22
therewith shall survive the Closing Date, but each of the representations and
warranties of each party shall expire simultaneously with the expiration of the
duty of indemnification relating to each such warranty and representation, as
set forth in Section 7. Notwithstanding the foregoing, the covenant set forth in
Section 8.2 shall survive the Closing and thereafter.
9.9 Expenses. LMI and Sellers will each pay all of its or their own
legal and other expenses incurred in the preparation of this Agreement and the
performance of the terms and conditions hereof.
9.10 Brokerage Fees. Sellers represent and warrant that neither of
them has engaged any broker or finder in connection with the transactions
contemplated in this Agreement. LMI agrees to be responsible for all investment
banking, brokerage or finders' fees arranged for and incurred by it in
connection with the transactions contemplated in this Agreement.
9.11 Severability of Invalid Provision. If any one or more covenants
or agreements provided in this Agreement should be contrary to law, then such
covenant or covenants, agreement or agreements shall be null and void and shall
in no way affect the validity of the other provisions of this Agreement.
9.12 Waiver. Waiver by Sellers or LMI of any breach of or failure to
comply with any provision of this Agreement by the other party shall not be
construed as, or constitute a continuing waiver of, or a waiver of any other
breach of, or failure to comply with, any other provision of this Agreement.
9.13 Non-Exclusivity. The rights, remedies, powers and privileges
provided in this Agreement are cumulative and not exclusive and shall be in
addition to any and all other rights, remedies, powers and privileges granted by
law, rule, regulation or instrument, provided that any action for damages for
breach of contract, warranty, representations or covenants shall be subject to
the time limitations and the limitations on amount of Damages set forth in
Sections 7 with respect to the duties of indemnification.
9.14 Counterparts. This Agreement may be executed in one or more
counterparts, and shall become effective when one or more counterparts have been
signed by each of the parties.
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized representatives of the parties hereto on the day and year first above
written.
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SELLERS
By: /s/ Xxxxxxxx Xxxxxxxxxx
---------------------------
Xxxxxxxx Xxxxxxxxxx
By: _____________________
Xxxxx Xxxxxxx
LMI ACQUISITION CORPORATION
By: /s/ Xxxxxxx Xxxxxxx
---------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
24
SCHEDULE 1.2.1
CALCULATION OF NET VALUE
Assets
Cash $21,811
Contract Receivables $1,796,888
Down Payment Receivables $15,789
Agents Receivable $9,646
Prepaid Drafts $76,929
Prepaid Insurance $2,549
Prepaid Taxes $4,047
Security Deposits $1,540
Miscellaneous Receivables $983
----------
Total Assets $1,930,182
Liabilities
Accounts payable $1,500
Documentary Stamps $1,748
Drafts Payable $69,603
Drafts in Transit $0
Due to Insured $0
Supplemental Payable $12,127
Payable to Banks $513,398
Withholding Taxes Payable $0
Accrued Interest $3,928
Unearned Finance Income $110,184
Unearned Origination Fee $58,466
--------
Total Liabilities $770,954
"Net Value" = Total Assets - Total Liabilities $1,159,228
25
SCHEDULE 1.3.1(a)
PRINCIPAL TERMS OF SERIES A PREFERRED STOCK
o Dividends - 10% payable in cash on an annual basis, based upon a
liquidation value of $3.00 per share.
o Voting Rights - The holders of the Series A Preferred Stock shall
have no voting rights.
o Liquidation - The holders of the Series A Preferred Stock are
entitled to a liquidation preference of $3.00 per share upon liquidation of LMI.
o Rights of Conversion - Following issuance of the Series A Preferred
Stock, the holders thereof may convert such shares into shares of the Company's
common stock at a conversion rate of one share of common stock converted for
each share of preferred stock converted. The outstanding shares of Series A
Preferred Stock shall automatically convert into shares of the Company's common
stock at the above conversion rate concurrently with the effective date of the
Company's Registration Statement (as defined in Section 8.1 hereof), if any,
filed with the Securities and Exchange Commission for the purposes of
registering the outstanding shares of the Company's common stock.
26
