STOCK PURCHASE AND OPTION AGREEMENT (the "Agreement"), dated as of May 10,
2002, between XXXXXXX XXXXXX (the "Seller"), and PRIME MANAGEMENT CORPORATION, a
New York corporation (the "Purchaser").
W I T N E S S E T H:
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WHEREAS, the Seller owns 190,000 shares (the "Purchased Shares") of common
stock, par value $.01 per share (the "Common Stock"), of Xxxxxx & Ciocia, Inc.
("Issuer");
WHEREAS, the Seller owns an additional 193,071 shares of the Common Stock
(the "Option Shares");
WHEREAS, the Seller desires to sell the Purchased Shares and to grant the
Option (as defined below) to purchase the Option Shares to the Purchaser, and
the Purchaser desires to purchase the Purchased Shares and the Option to
purchase the Option Shares from the Seller, at the purchase price of $569,000
for the Purchased Shares and $1,000 for the Option (collectively, the "Purchase
Price"), all on the terms set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Sale and Purchase of the Purchased Shares and Grant of Option.
(a) The Seller hereby agrees to transfer, assign and sell the Purchased
Shares to the Purchaser, and the Purchaser hereby agrees to purchase the
Purchased Shares from the Seller, at the Closing (as defined in subsection (c)
below).
(b) Subject to Sections 3 and 4 below, the Seller hereby grants to the
Purchaser the right (the "Option") for a period of five years from the date of
this Agreement (the "Option Period") to purchase any or all of the Option Shares
from the Seller at an exercise price per share (the "Option Price") equal to
160% of the average closing price of the Common Stock as quoted on the Nasdaq
National Market (or such other market or exchange on which the Common Stock
shall be listed or quoted) on the 20 trading days prior to any exercise of the
Option, except that the Option Price shall not in any event be less than $75 per
share.
(c) At a closing (the "Closing") to be held at the offices of Xxxxxx
Xxxxxx Xxxxx Xxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 at 10:00 AM on May
16, 2002 (or such other place, time or date as the Seller and the Purchaser
shall agree) (the "Closing Date") the Seller shall deliver to the Purchaser a
certificate or certificates evidencing the Purchased Shares, duly endorsed or
accompanied by a stock power duly executed in blank, and the Purchaser shall pay
the Purchase Price to the Seller by wire transfer of immediately available
funds. Immediately after delivery of the Purchased Shares to the Purchaser and
payment of the Purchase Price to the Seller at the Closing, the Purchaser shall
deliver the Purchased Shares to the Trustee (as defined below) to be placed in a
voting trust pursuant to Section 2 below. Immediately after payment of the
Purchase Price to the Seller at the Closing, the Seller shall deliver a
certificate or certificates evidencing the Option Shares, duly endorsed or
accompanied by a stock power duly executed in blank, to the Trustee, to be
placed in a voting trust pursuant to Section 2 below.
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2. Voting Trust Agreement. The Option Shares and the Purchased Shares shall
be placed into a voting trust (the "Trust") for the duration of the Option
Period pursuant to a voting trust agreement (the "Trust Agreement") dated as of
the Closing Date, in substantially the form attached hereto as Exhibit A by and
between the Seller, the Purchaser and Xxxxxxx Xxxx (the "Trustee").
3. Rights of First Refusal.
(a) Restricted Period. During the Option Period, the Seller may not, except
in accordance with this Section 3, sell, pledge, hypothecate, or otherwise
encumber any Option Shares, or any interest therein.
(b) Transfer Notice. Commencing with the second anniversary of the date of
this Agreement, if the Seller proposes to pledge, transfer, hypothecate or
otherwise encumber any Option Shares to one or more third parties in one or more
related transactions pursuant to a bona fide agreement with such third parties,
or to sell such Option Shares over the Nasdaq National Market (or such other
market or exchange as the Common Stock shall be listed or quoted on) (a
"Transfer"), then the Seller shall give the Purchaser written notice of the
Seller' intention to make the Transfer (the "Transfer Notice"), which Transfer
Notice shall include a reasonable description of the Option Shares to be
transferred ("Offered Shares"), the identity of the prospective transferee(s),
the consideration to be paid and the material terms and conditions upon which
the proposed Transfer is to be made; provided, however, that the total number of
Offered Shares shall not exceed 50,000 in any one-year period.
(c) Purchaser's Option. The Purchaser shall have an option for a period of
30 days from receipt of the Transfer Notice to elect to purchase some or all of
the Offered Shares from the Seller at the Purchaser's option, at (i) the same
price, terms and conditions as described in the Transfer Notice or (ii) a price
equal to the average closing price of the Issuer's Common Stock as quoted on the
Nasdaq National Market (or such other market or exchange as the Common Stock
shall be listed or quoted on) over the 20 trading days prior to the date of
receipt of the Transfer Notice. The Purchaser may exercise such purchase option
and, thereby, purchase all or a portion of the Offered Shares by notifying the
Seller in writing before expiration of the 30 day period as to the number of
such shares which it wishes to purchase. If the Purchaser gives the Seller
notice that it desires to purchase any of the Offered Shares, then payment for
such Offered Shares shall be by check or wire transfer, against delivery of such
Offered Shares at a place agreed upon between the parties and at the time of the
scheduled closing therefor, which shall be no later than 30 days after the
Purchaser's election to purchase the Offered Shares.
(d) Non-Exercise of Rights. To the extent that the Purchaser has not
exercised its right of first refusal to purchase the Offered Shares within the
time periods specified in this Agreement, the Seller shall have a period of 30
days from the expiration of such rights in which to sell the Offered Shares, as
the case may be, upon terms and conditions (including the purchase price) no
less favorable to the Seller than those specified in the Transfer Notice. In the
event the Seller does not consummate the sale or disposition of the Offered
Shares within the 30 day period from the expiration of these rights, the
Purchaser's right of first refusal shall continue to be applicable to any
subsequent proposed disposition of Option Shares by the Seller during the
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Option Period. Any Offered Shares sold pursuant to this subsection (d) shall be
removed from the Trust pursuant to the terms of the Trust Agreement.
4. Change in Control. In the event of a "Change of Control" (as defined
below) of the Issuer during the six months following this Agreement, the
Purchaser shall have the right to resell the Purchased Shares and any Option
Shares therertofor purchased by it back to the Seller, and the Seller shall have
the obligation to purchase such Purchased Shares and Option Shares theretofor
purchased, at the purchase prices paid for such Purchased Shares and Option
Shares by the Purchaser. A "Change in Control" shall be deemed to occur upon (a)
the sale or transfer by any party, or the issuance by the Issuer, of an amount
of Common Stock or other equity securities of the Issuer (or warrants, options
or other rights to purchase Common Stock or other equity securities of the
Issuer), in one or more transactions, related or unrelated, with voting power
equal to 20% (10% if such transactions involve current officers or directors of
the Issuer) or more of the votes represented by the outstanding Common Stock as
of the date of this Agreement (except to Xxxxxxx Xxxx, or individuals or
entities controlled by Xxxxxxx Xxxx); or (b) the merger of the Issuer with any
person (as such term is defined in the Securities Exchange Act of 1934 (the
"Exchange Act")) as a result of which the Issuer is not the surviving entity as
a publicly held corporation, the consolidation of the Issuer with any person, or
the sale of all or the sale of all or substantially all of the assets of the
Issuer (other than in a transaction with an entity controlled by Xxxxxxx Xxxx).
5. Representations and Warranties of the Seller. The Seller represents and
warrants to the Purchaser that:
(a) Title to Shares and Warrants. The Seller is the record and
beneficial owner of the Purchased Shares hereby purchased and the Option Shares
to be purchased upon the exercise of the Option, free and clear of all liens,
pledges, encumbrances, restrictions, and claims.
(b) Valid and Binding. This Agreement constitutes the legal, valid and
binding obligation of the Seller, enforceable against the Seller in accordance
with its terms.
(c) Non-contravention. The execution and delivery of this Agreement and
the Trust Agreement, and the consummation by the Seller of the transactions
contemplated by this Agreement and the Trust Agreement, does not constitute a
default under (or an event which with notice or lapse of time or both could
become a default) or give to others any rights of termination, amendment or
cancellation or, any material agreement or instrument to which the Seller is a
party, or results in a violation of any law, rule, regulation, order, judgment,
or decree (foreign or domestic and including federal and state securities laws
and regulations) applicable to the Seller.
(d) Offering Valid. Assuming the accuracy of the Purchaser's
representations and warranties below, the sale of the Purchased Shares and the
Option Shares purchased under any exercise of the Option is registered or
qualified (or will be exempt from registration and qualification) under the
registration requirements of the Securities Act of 1933 (the "Securities Act")
and all applicable state securities laws.
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(e) Full Disclosure. To the Sellers' knowledge, none of the reports,
schedules, forms and statements filed by the Issuer with the Securities and
Exchange Commission pursuant to the reporting requirements of the Exchange Act
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Seller has no knowledge of any material events that would be
required to be disclosed in a Current Report on Form 8-K under the Exchange Act.
(f) Ownership of Additional Common Stock The Purchased Shares and the
Option Shares together represent the total number of shares of Common Stock
owned by the Seller.
6. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller that:
(a) Valid and Binding. This Agreement constitutes the legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms.
(b) Investment Representations. It (i) is purchasing the Purchased
Shares (and the Option Shares to be purchased upon the exercise of the Option)
for its own account without a view to any distribution thereof in violation of
the Securities Act; (ii) is an "accredited investor" as defined under Rule 501
under the Securities Act; (iii) has no contract, undertaking, agreement or
arrangement with any person to sell, transfer or pledge to such person or anyone
else the Purchased Shares (and the Option Shares to be purchased upon the
exercise of the Option) or any part thereof; (iv) has sufficient knowledge and
experience in business matters to evaluate the merits and risks of the
investment; and (v) has adequate means of providing for its current needs and
possible contingencies; has no need for liquidity of its investment in the
Purchased Shares (and the Option Shares to be purchased upon the exercise of the
Option) and would be able to bear the economic risk of a complete loss of its
proposed investment in the Purchased Shares (and the Option Shares to be
purchased upon the exercise of the Option) hereunder.
(c) Information about Issuer. It acknowledges that it has received and
reviewed carefully the Issuer's most recent Quarterly Report on Form 10-Q and
Annual Report on Form 10-K.
(d) Offers and Sales. All subsequent offers and sales of the Purchased
Shares and any Option Shares purchased upon exercise of the Option shall be made
pursuant to an effective registration statement under the Securities Act or
pursuant to an applicable exemption from such registration.
(e) Authorization. It has the requisite corporate power and authority
to enter into this Agreement and the Trust Agreement.
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7. Indemnification.
(a) By the Seller. The Seller agrees to indemnify and hold harmless the
Purchaser and its directors, officers, members, shareholders, employees, agents,
successors and assigns (the "Purchaser Parties") against, and to reimburse the
Purchaser Parties on demand with respect to, any and all losses, liabilities,
obligations, suits, proceedings, demands, judgments, damages, claims, expenses
and costs (including, without limitation, reasonable fees, expenses and
disbursements of counsel) (collectively, "Damages") which each may suffer, incur
or pay by reason of (i) the breach by the Seller of any representation or
warranty contained in this Agreement, or in any agreement, certificate or
instrument executed by it and contemplated hereby or (ii) the failure of the
Seller to perform any agreement required by this Agreement or any agreement,
certificate or instrument contemplated hereby.
(b) By the Purchaser. The Purchaser agrees to indemnify and hold
harmless the Seller and their agents, successors and assigns (the "Seller's
Parties") against, and to reimburse the Seller's Parties on demand with respect
to, any and all Damages which each may suffer, incur or pay by reason of (i) the
breach by the Purchaser of any representation or warranty contained in this
Agreement or in any agreement, certificate or instrument executed by it and
contemplated hereby or (ii) the failure of the Purchaser to perform any
agreement required by this Agreement or any agreement, certificate or instrument
contemplated hereby.
8. Miscellaneous
(a) Expenses. The parties hereto will bear their own costs, fees and
expenses in connection with the negotiation, documentation and/or enforcement of
this Agreement.
(b) No Modification Except in Writing. This Agreement shall not be
changed, modified or amended except by a written agreement executed by the
parties hereto.
(c) Entire Agreement. This Agreement sets forth the entire agreement
and understanding among the parties hereto as to the subject matter hereof.
(d) Notices. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing and shall be delivered (i) in
person, (ii) by certified or registered mail, return receipt requested, (iii) by
Federal Express or other nationally recognized overnight courier service which
issues confirmation of delivery or (iv) by confirmed facsimile transmission at
the addresses or facsimile numbers set forth below or to such other addresses or
facsimile number, as applicable, as any party hereto may designate to the other
in writing.
If to the Purchaser:
c/o Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
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Attn: Xxxxxx Xxxxxxx, Esq.
If to the Seller, to it at the address set forth below the Seller's
signature below.
Any such notice shall be deemed to be given (i) when delivered, if delivered
personally or by Federal Express or other nationally recognized overnight
courier service, (ii) on the third business day after the date of mailing, if
sent by certified or registered mail or (iii) upon confirmation of receipt, if
delivered by facsimile transmission.
(e) Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement may not be
assigned by either party hereto without the written consent of the other party.
(f) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.
(g) Captions; Construction. The captions appearing in this Agreement
are inserted only as a matter of convenience and for reference and in no way
define, limit or describe the scope and intent of this Agreement or any of the
provisions hereof.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
SELLER:
/s/ Xxxxxxx Xxxxxx
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Address:
PURCHASER:
PRIME MANAGEMENT CORPORATION
By: /s/ Xxxxxxx Xxxx
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Title: President
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EXHIBIT A
Form of Voting Trust Agreement
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