EXHIBIT 2.3
SHARE PURCHASE AGREEMENT
BETWEEN
CFDC HOLDINGS CORP.
AND
XXXXXXXX X. XXXXXX
XXXXX X. XXXXXX
XXXX X. XXXX
MADE AS OF
JANUARY 4, 2000
TABLE OF CONTENTS
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SHARE PURCHASE AGREEMENT
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ARTICLE 1 - INTERPRETATION
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1.1 Definitions....................................................... 2
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1.2 Headings.......................................................... 4
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1.3 Extended Meanings................................................. 4
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1.4 Accounting Principles............................................. 4
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1.5 Currency.......................................................... 4
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1.6 Schedules......................................................... 4
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ARTICLE 2 - PURCHASE AND SALE
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2.1 Purchase and Sale and Purchase Price............................... 5
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ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
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3.1 Vendors' Representations and Warranties............................ 5
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3.2 Survival of Vendors' Representations, Warranties and Covenants..... 18
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3.3 Purchaser's Representations and Warranties......................... 18
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3.4 Survival of Purchaser's Representations, Warranties and Covenants.. 18
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ARTICLE 4 - CLOSING
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4.1 Closing............................................................ 19
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4.2 Deliveries by the Vendors to the Purchaser......................... 19
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4.3 Deliveries by the Purchaser to the Vendors......................... 20
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ARTICLE 5 - COVENANTS
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5.1 Taxes.............................................................. 20
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5.2 Employees.......................................................... 21
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ARTICLE 6 - INDEMNIFICATION
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6.1 By the Vendors..................................................... 22
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6.2 By Purchaser....................................................... 22
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6.3 Indemnification Procedure.......................................... 22
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ARTICLE 7 - CONDITIONS
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7.1 Conditions for the Benefit of the Purchaser........................ 23
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7.2 Conditions for the Benefit of the Vendors.......................... 24
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ARTICLE 8 - GENERAL
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8.1 Further Assurances................................................. 25
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8.2 Time of the Essence................................................ 25
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8.3 Commissions........................................................ 25
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8.4 Legal Fees......................................................... 26
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8.5 Public Announcements............................................... 26
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8.6 Benefit of the Agreement........................................... 26
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8.7 Entire Agreement................................................... 26
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8.8 Amendments and Waiver.............................................. 26
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8.9 Assignment......................................................... 26
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8.10 Notices............................................................ 27
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8.11 Governing Law...................................................... 28
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8.12 Forum Selection.................................................... 28
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8.13 Severability....................................................... 28
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8.14 Counterparts and Facsimile Signatures.............................. 28
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8.15 Construction....................................................... 28
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SHARE PURCHASE AGREEMENT
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THIS AGREEMENT made as of January 3/rd/, 2000 with effect as of January 1/st/,
2000
BETWEEN:
CFDC HOLDINGS CORP., a corporation incorporated under the laws of
the State of Texas
(the "Purchaser"),
AND:
XXXXXXXX X. XXXXXX, of the City of Wichita in the State of Kansas
("Xx. Xxxxxx")
XXXXX X. XXXXXX, of the City of Wichita in the State of Kansas
("Xx. Xxxxxx")
XXXX X. XXXX, of the City of Wichita in the State of Kansas
("Xx. Xxxx")
(Xx. Xxxxxx, Xx. Xxxxxx, and Xx. Xxxx are hereinafter referred to
collectively as the "Vendors"),
WHEREAS:
A. The Vendors are the beneficial and registered owners of the Shares,
being all the issued and outstanding common shares of the capital stock of the
Corporation; and
B. The Vendors desire to sell and the Purchaser desires to purchase the
Shares upon and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the
premises and the covenants and agreements herein contained (and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged) the parties hereto agree as follows:
ARTICLE 1 - INTERPRETATION
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1.1 Definitions
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In this Agreement, unless something in the subject matter or context
is inconsistent therewith:
(a) "Agreement" means this agreement and all amendments made hereto by
written agreement between the Vendors and the Purchaser;
(b) "Balance Sheet" means the consolidated balance sheet of the
Corporation and the Subsidiary as of the Balance Sheet Date;
(c) "Balance Sheet Date" means December 31, 1998;
(d) "Business Day" means a day other than a Saturday, Sunday or bank
holiday in Kansas;
(e) "Closing" means the closing of all the transactions contemplated in
this Agreement at the Time of Closing on the Closing Date which shall
be effected by the deposit by the parties hereto of all documents
required to be delivered in order to effect such Closing pursuant to
the provisions hereof, whereupon the Closing shall have occurred and
the respective documents thus tabled will be delivered to the
respective parties and third parties, if any, in accordance with a
closing agenda to be agreed upon between the Purchaser Counsel and the
Vendor Counsel before the Time of Closing;
(f) "Closing Date" means January 3, 2000 or such other date as may be
agreed to in writing between the Vendors and the Purchaser;
(g) "Corporation" means National Recovery Systems, Ltd. of America;
(h) "Financial Statements" has the meaning set out in Section 3.1(o);
(i) "Interim Financial Statements" has the meaning set out in Section
3.1(p);
(j) "Interim Balance Sheet Date" means November 30, 1999;
(k) "Interim Balance Sheets" means the balance sheets of the Corporation
and the Subsidiary as at the Interim Balance Sheet Date;
(l) "Knowledge of the Vendors" means with respect to the existence or
absence of facts, that none of the Vendors have had come to their
attention any information which would give them actual knowledge of
the existence or absence of such facts
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and that they have not undertaken any independent investigation to
determine the existence or absence of such facts;
(m) "Losses" has the meaning set out in Section 6.1;
(n) "NASDAQ" means the National Association of Security Dealer Automated
Quotation System;
(o) "Material Contracts" has the meaning set out in Section 3.1(z);
(p) "Purchase Price" has the meaning set out in Section 2.1(a);
(q) "Purchaser Counsel" means, collectively, in Canada, XxXxxxxx Xxxxxxxx
of Vancouver, British Columbia, and in the United States of America,
Martin, Pringle, Oliver, Owen, Xxxxxxx & Xxxxxx, L.L.P. of Wichita,
Kansas;
(r) "Real Property" has the meaning set out in Section 3.1(gg);
(s) "Shares" means the 400,000 issued and outstanding common shares of the
capital stock of the Corporation;
(t) "Sharing Percentages" means for Xx. Xxxxxx 23.75%, for Xx. Xxxxxx
47.5%, and for Xx. Xxxx 28.75%;
(u) "Software" means, collectively, all computer software used by the
Corporation and the Subsidiary;
(v) "Subsidiary" means National Process Servers Inc., a corporation
incorporated pursuant to the laws of the State of Kansas;
(w) "Subsidiary Share" means one common share of the capital stock of the
Subsidiary;
(x) "Time of Closing" means 9 o'clock in the morning (Wichita Time) on the
Closing Date; and
(y) "Vendor Counsel" means Foulston & Siefkin L.L.P of Wichita, Kansas;
(z) "Vendors' Certificates" means collectively, the certificates delivered
on Closing, in substantially the form of the draft affidavit attached
hereto as Schedule 4.2(a)(xiv) by each of the Vendors stating under
penalty of perjury each Vendor's United States taxpayer identification
number and that such Vendor is not a foreign person within the meaning
of Section 1445(b)(2) of the Internal Revenue Code of the United
States of America;
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1.2 Headings
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The division of this Agreement into Articles and Sections and the
insertion of headings are for convenience of reference only and shall not affect
the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement supplemental hereto. Unless something in the subject
matter or context is inconsistent therewith, references herein to Articles and
Sections are to Articles and Sections of this Agreement.
1.3 Extended Meanings
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In this Agreement words importing the singular number only shall
include the plural and vice versa, words importing the masculine gender shall
include the feminine and neuter genders and vice versa and words importing
persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
1.4 Accounting Principles
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Except as previously disclosed to the Purchaser, wherever in this
Agreement reference is made to a calculation to be made in accordance with
generally accepted accounting principles, such reference shall be deemed to be
to the generally accepted accounting principles from time to time approved by
the American Institute of Certified Public Accountants, or any successor
institute, applicable as at the date on which such calculation is made or
required to be made in accordance with generally accepted accounting principles.
1.5 Currency
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All references to currency herein are to lawful money of the United
States of America.
1.6 Schedules
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The following are the Schedules annexed hereto and incorporated by
reference and deemed to be part hereof:
Schedule 3.1(a) Pending Filings
Schedule 3.1(c) Pending Applications
Schedule 3.1(d)(iii) Corporate Record Material
Schedule 3.1(f) Rights Attached to the Shares
Schedule 3.1(h) Rights attached to the Subsidiary Shares
Schedule 3.1(o) Financial Statements
Schedule 3.1(p) Interim Financial Statements
Schedule 3.1(p)(iv) Unreported Matters
Schedule 3.1(s) Liens and Encumbrances
Schedule 3.1(u) Capital Expenditures
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Schedule 3.1(w) Tax Liability
Schedule 3.1(x) Tax Returns
Schedule 3.1(z) Material Contracts
Schedule 3.1(cc) Leases of Real Property
Schedule 3.1(ff) Leases of Personal Property
Schedule 3.1(jj) Royalty, License Fee, Management Fee
Schedule 3.1(kk) Employees
Schedule 3.1(ll) Employee Benefit Plans
Schedule 3.1(oo) Employee Payments Out of the Ordinary
Course
Schedule 3.1(uu) Legal Actions
Schedule 3.1(xx) Jurisdictions of Business, Permits, and
Licenses
Schedule 3.1(bbb) Intellectual Property
Schedule 3.1(eee) Insurance Policies
Schedule 3.1(fff) Software Compliance
Schedule 4.2(a)(x) Opinion of Vendor's Counsel
Schedule 4.2(a)(xi) Xx. Xxxxxx'x Employment Agreement
Schedule 4.2(a)(xii) Non-Competition Agreements
Schedule 4.2(a)(xiv) Vendor's Certificates
ARTICLE 2 - PURCHASE AND SALE
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2.1 Purchase and Sale and Purchase Price
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(a) The Vendors shall sell the Shares to the Purchaser and the Purchaser
shall purchase the Shares from the Vendors for a total purchase price of Three
Million, Two Hundred and Fifty Thousand ($3,250,000) Dollars (the "Purchase
Price") upon and subject to the terms and conditions hereof.
(b) The Purchase Price shall be paid and satisfied by delivery of
immediately available funds to each of the Vendors on Closing in the amount of
their respective Sharing Percentages of the Purchase Price.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
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3.1 Vendors' Representations and Warranties
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Each of the Vendors represents and warrants to the Purchaser that the
following representations and warranties are true as of the date hereof or will
be true as of the Time of Closing;
(a) except as disclosed in Schedule 3.1(a), the Corporation is a
corporation duly organized and validly existing and in good standing
under the laws of Kansas with the corporate power to own its assets
and to carry on its business and has made all
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necessary filings under all applicable corporate, securities and
taxation laws or any other laws to which the Corporation is subject;
(b) the Corporation is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which the nature of its business
or the location of its assets requires such qualification.
(c) except as disclosed in Schedule 3.1(c), the Corporation is duly
authorized and licensed and has all licenses, franchises, permits and
other governmental authorizations required under all applicable laws,
regulations, ordinances and orders of public authorities to own, lease
and operate its assets and to carry on its business in the places and
in the manner as now conducted.
(d) the Vendors have delivered to the Purchaser or its representatives
complete and correct copies of the following documents relating to the
corporate existence of the Corporation and the Subsidiary.
(i) the Articles of Incorporation and Bylaws of the Corporation and
the Subsidiary, including all amendments and restatements
thereof, as in effect on the date hereof;
(ii) the stock records of the Corporation and the Subsidiary;
(iii) except as set forth on Schedule 3.1(d)(iii), the minutes and
other records of the meetings and other proceedings of the
shareholders and directors of the Corporation and the Subsidiary
since the date of their incorporation which accurately disclose
all material corporate actions relating to the allotment,
issuance, repurchase, redemption, surrender and cancellation or
other actions pertaining to the shares of the capital stock of
the Corporation and the Subsidiary; and
(iv) copies of certificates of good standing for the Corporation and
Subsidiary for each jurisdiction in which the nature of their
business or the location of their assets requires qualification;
(e) the entire authorized capital stock of the Corporation consists of
500,000 common shares without par value, of which 400,000 have been
validly issued and are outstanding as fully paid and non-assessable;
(f) the rights, privileges, restrictions and conditions attached to the
Shares are as set out in Schedule 3.1(f) attached hereto;
(g) the authorized capital of the Subsidiary consists of 10,000 common
shares without par value, of which 5,000 have been validly issued and
are outstanding as fully paid and non-assessable;
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(h) the rights, privileges, restrictions and conditions attached to the
Subsidiary Shares are as set out in Schedule 3.1(h);
(i) each of the Vendors is the beneficial and registered owner of the
number of Shares shown adjacent to his name in the following table
free and clear of all liens, charges, encumbrances and any other
rights of others:
Name of Vendor Number of Shares
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Xx. Xxxxxx 95,000
Xx. Xxxxxx 190,000
Xx. Xxxx 115,000
(j) each of the Vendors has good and sufficient power, authority and right
to enter into and deliver this Agreement and to transfer the legal and
beneficial title and ownership of the Shares registered in their
respective names to the Purchaser free and clear of all liens,
charges, encumbrances and any other rights of others;
(k) there is no contract, option or any other right of another binding
upon or which at any time in the future may become binding upon:
(i) the Vendors to sell, transfer, assign, pledge, charge, mortgage
or in any other way dispose of or encumber any of the Shares
other than pursuant to the provisions of this Agreement; or
(ii) the Corporation to allot or issue any of the authorized but
unissued shares of the Corporation or to create any additional
class of shares;
(l) the Corporation is the beneficial and registered owner of all the
issued and outstanding Subsidiary Shares free and clear of all liens,
charges, encumbrances and any other rights of others;
(m) there is no contract, option or any other right of another binding
upon or which at any time in the future may become binding upon:
(i) the Corporation to sell, transfer, assign, pledge, charge,
mortgage or in any other way dispose of or encumber any of the
issued and outstanding Subsidiary Shares; or
(ii) the Subsidiary to allot or issue any of the unissued Subsidiary
Shares or to create any additional class of shares;
(n) neither the entering into nor the delivery of this Agreement nor the
completion of the transactions contemplated hereby by the Vendors or
by the Corporation will result in the violation of:
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(i) any of the provisions of the articles of incorporation or bylaws
of the Corporation or the Subsidiary;
(ii) any agreement or other instrument to which the Corporation or
the Subsidiary is a party or by which the Corporation or the
Subsidiary is bound which will not be terminated as of the
Closing Date, or
(iii) any applicable law, rule or regulation;
(o) the audited consolidated financial statements of the Corporation and
the Subsidiary, consisting of the Balance Sheets and statements of
operations, and statements of cash flow for the fiscal periods ended
on December 31, 1997 and on the Balance Sheet Date, together with the
report of Xxxxxxxxxxx Xxxxxxxx & Co. L.L.P., certified public
accountants, thereon (hereinafter collectively referred to as the
"Financial Statements"), copies of which are attached hereto as
Schedule 3.1(o):
(i) are in accordance with the books and accounts of the Corporation
and the Subsidiary as at the Balance Sheet Date,
(ii) are true and correct and present fairly the financial position
of the Corporation and the Subsidiary as at the Balance Sheet
Date,
(iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, and
(iv) present fairly all of the assets and liabilities of the
Corporation and the Subsidiary as at the Balance Sheet Date
including, without limiting the generality of the foregoing, all
contingent liabilities of the Corporation and the Subsidiary as
at the Balance Sheet Date;
(p) the unaudited financial statements of the Corporation and the
Subsidiary, consisting of the Interim Balance Sheets and statement of
operations, statement of change in stockholder's equity (deficit) and
statement of cash flow for the period ended on the Interim Balance
Sheet Date (hereinafter collectively referred to as the "Interim
Financial Statements"), a copy of which is attached hereto as Schedule
3.1(p):
(i) are in accordance with the books and accounts of the Corporation
and the Subsidiary as at the Interim Balance Sheet Date,
(ii) are true and correct and present fairly the financial position
of the Corporation and the Subsidiary as at the Interim Balance
Sheet Date,
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(iii) except as previously disclosed to the Purchaser have been
prepared in accordance with generally accepted accounting
principles consistently applied, and
(iv) present fairly all of the assets and liabilities of the
Corporation and the Subsidiary as at the Interim Balance Sheet
Date including, without limiting the generality of the
foregoing, all contingent liabilities of the Corporation and the
Subsidiary as at the Interim Balance Sheet Date except as set
forth in Schedule 3.1(p)(iv);
(q) since the Interim Balance Sheet Date there has been no material
adverse change in the assets, liabilities or financial position of the
Corporation or the Subsidiary including, without limitation the
business, prospects, operations or condition of the Corporation or the
Subsidiary, financial or otherwise, whether arising as a result of any
legislative or regulatory change, revocation of any license or right
to do business, fire, explosion, accident, casualty, labor dispute,
flood, drought, riot, storm, condemnation, act of God, public force or
otherwise, except changes occurring in the usual and ordinary course
of business which have not materially and adversely affected the
affairs, business, prospects, operations or condition of the
Corporation or the Subsidiary, financial or otherwise;
(r) since the Interim Balance Sheet Date, the businesses of the
Corporation and the Subsidiary have been carried on in their usual and
ordinary course and neither the Corporation nor the Subsidiary has
entered into any transaction out of the usual and ordinary course of
their respective businesses;
(s) the Corporation and the Subsidiary are the respective owners with a
good and marketable title, free and clear of all liens, charges,
encumbrances and any other rights of others, of all assets of the
Corporation and the Subsidiary shown or reflected on the Interim
Balance Sheet and listed in Schedule 3.1(s), except (as noted in such
Schedule 3.1(s)) for (A) such of the assets of the Corporation and the
Subsidiary as have been disposed of in the usual and ordinary course
of business since the Interim Balance Sheet Date, (B) assets being
leased, (C) liens which are to be released by the Closing Date or
which are not listed in such Schedule 3.1(s) because they (i) are not
substantial in character amount or extent, and do not materially
detract from the value of the assets subject thereto, (ii) do not
materially interfere with either the present or intended use of such
assets, and (iii) do not, individually or in the aggregate, materially
interfere with the conduct of the Corporation's or the Subsidiary's
business;
(t) no outstanding orders, notices or similar requirements relating to the
Corporation and the Subsidiary issued by any building, environmental,
fire, health, labor or police authorities or from any other similar
federal, state or municipal authority and there are no matters under
discussion with any such authorities relating to orders, notices or
similar requirements;
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(u) except as set out in Schedule 3.1(u), no single capital expenditure in
excess of $10,000 or capital expenditures in the aggregate in excess
of $50,000 have been made or authorized by either the Corporation or
the Subsidiary since the Interim Balance Sheet Date;
(v) no dividends have been declared or paid on or in respect of the Shares
and no other distribution on any of its securities or shares has been
made by the Corporation since the Interim Balance Sheet Date and all
dividends which to the date hereof have been declared or paid by the
Corporation have been duly and validly declared or paid;
(w) neither the Corporation nor the Subsidiary has any liability,
obligation or commitment for the payment of income taxes, corporation
taxes or any other taxes or duties of whatever nature or kind, or
interest or penalties with respect thereto, except such as are
disclosed in the Interim Financial Statements or such taxes or duties
not yet due and payable as have arisen since the Interim Balance Sheet
Date in the usual and ordinary course of business and for which
adequate provision in the accounts of the Corporation or the
Subsidiary, as the case may be, has been made, and neither the
Corporation nor the Subsidiary are in arrears with respect to any
required withholdings or installment payments of any tax or duty of
any kind and has not filed any waiver for a taxation year of the
Corporation under the Internal Revenue Code of the United States of
America or any other legislation imposing tax on the Corporation
except as disclosed in Schedule 3.1(w);
(x) the tax returns of the Corporation and the Subsidiary as disclosed in
Schedule 3.1(x) attached hereto are true and complete in all material
respects;
(y) except as disclosed in Schedule 3.1(w), there are no outstanding
liabilities against the Corporation or the Subsidiary except trade
debts incurred in the usual and ordinary course of business which
could be reasonably expected to have a material adverse effect on the
Corporation or the Subsidiary;
(z) neither the Corporation nor the Subsidiary is a party to any contract
or commitment (i) outside the usual and ordinary course of business
(ii) not cancellable without penalty extending for a period of time
longer than three (3) months or (iii) involving expenditures by the
Corporation in the aggregate in excess of $5,000 or (iv) not listed in
Schedules 3.1(cc) and 3.1(ff), except such contracts or commitments as
are listed in Schedule 3.1(z) attached hereto (collectively, the
"Material Contracts");
(aa) all such Material Contracts are in good standing and in full force and
effect and neither the Corporation nor the Subsidiary is in default
or breach of any Material Contract to which each is a party and there
exists no condition, event or act which, with the giving of notice or
lapse of time or both would constitute such a default or breach so
that the Corporation or the Subsidiary, as the case may be, are each
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entitled to all material benefits under the Material Contract to which
they are respectively parties;
(bb) neither the Corporation nor the Subsidiary is a party to or bound by
any guarantee, indemnification, surety or similar obligation;
(cc) neither the Corporation nor the Subsidiary owns any real property nor
are they a party to any lease or agreement in the nature of a lease
for real property, whether as lessor or lessee except as set out in
Schedule 3.1(cc);
(dd) the leases of real property listed on Schedule 3.1(cc) constitute all
the real property leases to which either the Corporation or the
Subsidiary is a party (either as lessor or lessee). True and complete
copies of such leases and all amendments and modifications thereof
have been provided to the Purchaser. Except as set forth [in the
leases described] on Schedule 3.1(cc), neither the Corporation nor the
Subsidiary has any obligation under any such leases for the repair or
reconstruction of any of the leasehold premises, including any
buildings, structures, leasehold improvements, fixtures, or
appurtenances. To the knowledge and belief of the Vendors, all such
leasehold premises are adequate and suitable for the purposes for
which they are presently being used, and conform in all material
respects to all applicable laws, ordinances, and regulations;
(ee) with respect to the leases of real property listed on Schedule 3.1(cc)
hereto, the Corporation or the Subsidiary has a valid leasehold
interest in such real property, free and clear of all liens, claims,
and encumbrances, except as described on Schedule 3.1(cc). With
respect to each such lease, except as otherwise disclosed on Schedule
3.1(cc), (i) the leases are in full force and effect, and are valid,
binding and enforceable in accordance with their respective terms,
(ii) all accrued and currently payable rents and other payments
required by such leases have been paid, (iii) such leases were entered
into in the ordinary course of business and the Corporation or the
Subsidiary has been in peaceable possession since the beginning of
their respective possession (either as lessor or lessee) under any
such lease, (iv) for a period of two (2) years prior to the date
hereof or, if shorter, during the period of the Corporation or the
Subsidiary's possession (either as lessor or lessee), the Corporation
or the Subsidiary and each other party thereto have complied with all
respective covenants and provisions of any such leases in all material
respects, (v) neither the Corporation, the Subsidiary nor any other
party is in material default in any respect under any such leases,
(vi) for a period of two (2) years prior to the date hereof or, if
shorter, during the period of the Corporation or the Subsidiary's
possession (either as lessor or lessee), no party has asserted any
defense, set-off or counterclaim thereunder, (vii) for a period of two
(2) years prior to the date hereof or, if shorter, during the period
of the Corporation or the Subsidiary's possession (either as lessor or
lessee), no waiver, indulgence, or postponement of any obligations
thereunder has been granted by any party, (viii) for a period of two
(2) years prior to the date hereof or, if shorter, during the period
of the Corporation or the Subsidiary's possession (either as
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lessor or lessee), no notice of default or termination has been given
or received, no event of default has occurred, and no condition exists
and no event has occurred that, with the giving of notice, the lapse
of time, or the happening of any further event would become a default
or permit early termination under any such lease, and (ix) neither the
Corporation, the Subsidiary nor, to the Knowledge of the Vendors, any
other party has violated any term or condition under any such lease in
any material respect;
(ff) the leases of personal property listed in Schedule 3.1(ff) constitute
all the personal property leases to which the Corporation or the
Subsidiary is a party (either as lessor or lessee) true and complete
copies of such leases and all amendments and modifications thereof or
proper and complete descriptions of which have been provided to the
Purchaser;
(gg) Environmental Representations and Warranties of the Vendors:
(i) as used herein:
A. the term "Environmental Laws" shall mean any and all state,
federal, and local statutes, regulations and ordinances
relating to the protection of human health and the
environment, including without limitation the Federal
Comprehensive Environmental Response, Compensation, and
Liability Act and the Toxic Substances Control Act; and
B. the term "Hazardous Material" shall mean any hazardous or
toxic substance, material, or waste, including, but not
limited to those substances, materials, pollutants,
contaminants and wastes listed in the United States
Department of Transportation Hazardous Materials Table (49
C.F.R. (S)172.101) or by the United States Environmental
Protection Agency as hazardous substances (40 C.F.R. Part
302 and amendments thereto), petroleum products (as defined
in Title I to the Resource Conservation and Recovery Act, 42
U.S.C. (S)6991-6991(i)) and their derivatives;
(ii) to the Knowledge of the Vendors:
A. all activities of the Corporation and the Subsidiary with
respect to real property now or formerly owned or leased by
the Corporation or the Subsidiary ("Real Property") have
been and are being conducted in material compliance with all
federal, state and local statutes, ordinances, rules,
regulations and orders, as well as all requirements of
common law concerning those activities, repairs or
construction of any improvements, manufacturing processing
and/or handling of any materials, and discharges to the air,
soil, surface water or groundwater;
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B. there has been no release or presence of any Hazardous
Materials on, in, from or onto the Real Property;
C. neither the Corporation or the Subsidiary has generated,
manufactured, refined, transported, stored, handled,
disposed of or released any Hazardous Material on the Real
Property;
D. the Corporation and the Subsidiary have obtained all
approvals and caused all notifications to be made with
respect to the Real Property as required by Environmental
Laws, if any;
E. the Corporation has delivered to the Purchaser a true and
complete list of all registrations with, licenses from, or
permits issued by governmental agencies or authorities
material to the operations of the business of the
Corporation and the Subsidiary pursuant to environmental,
health and safety laws, and all such registrations, licenses
or permits are in full force and effect;
F. neither the Corporation nor the Subsidiary has received any
written notice of any violation of any Environmental Laws
with respect to the Real Property;
G. no action has been commenced or threatened regarding the
Corporation's or the Subsidiary's compliance with any
Environmental Laws with respect to the Real Property;
H. no tanks used for the storage of any Hazardous Material
above or below ground are present or to the Knowledge of the
Vendors were at any time present on or about the Real
Property;
I. no action has been commenced or threatened regarding the
presence of any Hazardous Material on or about the Real
Property;
J. no Hazardous Materials are present in any medium in the
operations of the business of the Corporation and the
Subsidiary and/or at the Real Property in such a manner as
requires investigation or remediation under any applicable
law;
K. no polychlorinated biphenyls or substances containing
polychlorinated biphenyls are present on the Real Property;
and
L. no friable asbestos is present in the operations of the
business of the Corporation and the Subsidiary and/or the
Real Property;
(iii) neither the Corporation nor the Subsidiary has released or waived
the liability of any previous owner, lessee, or operator of the
Real Property or
-13-
any party who may be potentially responsible for the presence or
removal of Hazardous Material on or about the Real Property and
has any indemnification obligation regarding Hazardous Material
with respect to the Real Property to any party;
(hh) other than the Subsidiary which is a subsidiary of the Corporation,
neither the Corporation nor the Subsidiary has any subsidiaries or
agreements, options or commitments to acquire any shares or securities
of any corporation or other entity or partnership or to acquire or
lease any business operations, real property or assets;
(ii) there is no unexpired agreement, option, understanding or commitment,
or any right or privilege capable of becoming an agreement, for the
purchase from the Corporation or the Subsidiary of its business or any
of its assets other than in the usual and ordinary course of business;
(jj) except as set out in Schedule 3.1(jj), neither the Corporation nor the
Subsidiary is a party to or bound by any contract or commitment to pay
any royalty, license fee or management fee;
(kk) neither the Corporation nor the Subsidiary has any written or
unwritten employment contract with any person whomsoever except such
contracts for all the employees of the Corporation and the Subsidiary
as are listed in Schedule 3.1(kk) attached hereto and such Schedule
truly and correctly sets out whether such contracts are or are not in
writing and the date at birth, annual salary, car allowance, holiday
entitlement, position and hire date of each of the employees of the
Corporation or the Subsidiary, as the case may be;
(ll) neither the Corporation nor the Subsidiary is bound by or a party to:
(i) any collective bargaining agreement, or
(ii) any health, dental, life and disability insurance, retirement,
pension, bonus, profit-sharing or similar plan or incentive
management or deferred compensation plan of any kind whatsoever
or any benefit plan including, without limitation maintained by
or on behalf of the Corporation or the Subsidiary for any of its
employees;
except such agreements and plans as are listed in Schedule 3.1(ll)
attached hereto and copies of which are attached to such Schedule
3.1(ll) as exhibits;
(mm) all benefit plans listed in Schedule 3.1(ll) have been duly registered
where required by, and are in good standing under, all applicable
legislation and all required employer contributions under any such
plans have been made and the applicable funds have been funded in
accordance with the terms thereof of the plans and no past service
funding liabilities exist thereunder;
-14-
(nn) no trade union, council of trade unions, employee bargaining agency or
affiliated bargaining agent:
(i) holds bargaining rights with respect to any of the Corporation's
or the Subsidiary's employees by way of certification, interim
certification, voluntary recognition, designation, successor
rights or other means,
(ii) has applied to be certified as the bargaining agent of any of
the Corporation's or the Subsidiary's employees, or
(iii) has applied to have the Corporation or the Subsidiary declared a
related employer pursuant to any law which would allow it to
hold bargaining rights with respect to any of the Corporation's
or the subsidiary's employees;
(oo) except as disclosed in Schedule 3.1(oo), except for remuneration paid
to employees in the usual and ordinary course of business including,
without limitation, holiday or other bonus remuneration or severance
payments and made at current rates of remuneration no payments have
been made or authorized since the Interim Balance Sheet Date by the
Corporation or the Subsidiary, respectively, to officers, directors or
employees of the Corporation or the Subsidiary;
(pp) except as disclosed in Schedule 3.1(uu), there are no outstanding or
threatened or pending actions, claims, grievances or proceedings
pertaining to the businesses of the Corporation or the Subsidiary
pursuant to any taxation, health, employment or other law relating to
employees or independent contractors;
(qq) the Corporation and the Subsidiary have made or paid all payments,
premiums, assessments, penalties and/or remittances in a timely
fashion in respect of their respective employees;
(rr) to the Knowledge of the Vendors, there are no actual or threatened or
pending organizing activities of any trade union, council of trade
unions, employee bargaining agency or affiliated bargaining agent or
any actual, or, threatened or pending unfair labor practice complaints
pertaining to the businesses of the Corporation or the Subsidiary, nor
have there been any such activities or complaints within the last five
years;
(ss) except as described in Schedule 3.1(oo), all vacation pay for
employees of the Corporation and the Subsidiary is properly reflected
in the books and accounts of the Corporation and the Subsidiary;
(tt) no current or former director, officer, shareholder, employee or
consultant of the Corporation or the Subsidiary or any other person
who may be deemed to be not dealing at arm's length with the
Corporation with any such person is indebted to the Corporation or the
Subsidiary, as the case may be;
-15-
(uu) None of the Vendors has received notice of any actions, suits or
proceedings (whether or not purportedly on behalf of the Corporation
or the Subsidiary) pending or threatened against or adversely
affecting, or which could adversely affect, the Corporation or the
Subsidiary or any of their assets before or by any federal, state,
municipal or other governmental court, department, commission, board,
bureau, agency or instrumentality, domestic or foreign, whether or not
insured, including without limitation, any claim, litigation or
liabilities in any way relating to the Fair Credit Reporting Act, any
federal or state equal employment opportunity law or any other law,
and which might involve the possibility of any judgment or liability
against the Corporation or the Subsidiary, except such actions, suits
or proceedings as are disclosed in Schedule 3.1(uu) attached hereto
and to the Knowledge of the Vendors, neither the Corporation nor the
Subsidiary has been operating under or subject to, or in default with
respect to, any order, writ, injunction or decree of any court or
federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, foreign or domestic;
(vv) there are no outstanding or unsatisfied judgements against the
Vendors, the Corporation or the Subsidiary;
(ww) None of the Vendors has filed for bankruptcy protection under United
States bankruptcy laws nor, to the Knowledge of the Vendors, do they
know of any circumstances which might reasonably lead any of them to
seek such protection during the period of ninety (90) days after the
Closing;
(xx) neither the Corporation nor the Subsidiary is seeking business in any
jurisdiction other than those set out in Schedule 3.1(xx);
(yy) the Corporation and the Subsidiary have complied with all applicable
laws, rules, regulations, notices, approvals and orders of the United
States of America and of the jurisdictions stated in Schedule 3.1(xx)
and all municipalities thereof in which its business is carried on,
the non-compliance with which could be reasonably expected to have a
material adverse effect on the Corporation or the Subsidiary and
neither the Corporation nor the Subsidiary has received notice of the
breach of any such laws, rules, regulations, notices, approvals or
orders and is not in breach of any such laws, rules, regulations,
notices, approvals or orders;
(zz) to the Knowledge of the Vendors, (A) the Corporation and the
Subsidiary are duly licensed, registered or qualified, and duly
possess all permits, in the jurisdictions stated in Schedule 3.1(xx)
and all municipalities thereof in which the Corporation or the
Subsidiary carry on their respective businesses to enable their
businesses to be carried on as now conducted and their assets to be
owned, leased and operated, and (B) all such licenses, registrations,
qualifications and permits are listed in Schedule 3.1(xx) and are
valid and subsisting and in good standing and none of the same
contains or is subject to any term, provision, condition or limitation
which has or may have a material adverse effect on the operation of
its business;
-16-
(aaa) to the Knowledge of the Vendors, the operation of the Corporation
and the Subsidiary on any lands from which it conducts the
operations of its business is not in contravention of any
restriction or limitation applicable to such lands and is not in
contravention of any law or regulation or of any decree or order of
any court or other body having jurisdiction;
(bbb) attached hereto as Schedule 3.1(bbb) is a list of all registered
trade marks, trade names, patents and copyrights, of all
unregistered trade marks, trade names and copyrights and of all
patent applications, trade xxxx registration applications and
copyright registration applications, both domestic and foreign,
owned or made by the Corporation or the Subsidiary;
(ccc) all trade marks, trade names, patents, copyrights and Software used
in or required for the proper carrying on of the Corporation's
business and the Subsidiary's business are listed in Schedule
3.1(bbb) and to the Knowledge of the Vendors are either validly
licensed for all uses to which they are put by the Corporation and
the Subsidiary or are validly and beneficially owned, either by the
Corporation or the Subsidiary and are, to the extent indicated in
such Schedule 3.1(bbb) duly registered in the United States Patent
and Trademark Office except as reflected in Schedule 3.1(bbb);
(ddd) to the Knowledge of the Vendors, neither the conduct of the
Corporation nor the Subsidiary infringes upon the trade marks, trade
names, patents or copyrights, domestic or foreign, of any other
person;
(eee) attached hereto as Schedule 3.1(eee) is a true and complete list of
all insurance policies maintained by the Corporation and the
Subsidiary that also specifies the insurer, the amount of the
coverage, the type of insurance, the policy number and any pending
claims thereunder;
(fff) the Corporation has received letters from its software vendors
copies of which are attached as Schedule 3.1(fff) assuring the
Corporation that the Software is fully year 2000 compliant and is
entirely fault free performance in the manipulation of data with
dates prior to, through and beyond January 1, 2000 so that such
performance is transparent to the user;
3.2 Survival of Vendors' Representations, Warranties and Covenants
--------------------------------------------------------------
The covenants of the Vendors set forth in this Agreement shall
survive the completion of the sale and purchase of the Shares herein provided
for and, notwithstanding such completion, shall continue in full force and
effect for the benefit of the Purchaser in accordance with the terms thereof for
a period of two (2) years from the Closing Date.
-17-
3.3 Purchaser's Representations and Warranties
------------------------------------------
The Purchaser represents and warrants to the Vendors that the
following representations and warranties are true as of the date hereof and will
be true as of the Time of Closing:
(a) the Purchaser is a corporation duly incorporated, organized and
subsisting under the laws of the State of Texas;
(b) the Purchaser has good and sufficient power, authority and right to
enter into and deliver this Agreement and to complete the transactions
to be completed by the Purchaser contemplated hereby;
(c) the Purchaser is acquiring the Shares for its own account and not with
a view to their distribution within the meaning of Section 2(11) of
the Securities Act of 1933; and
(d) the Purchaser and its officers and agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with
this Agreement other than a finder's fee in the amount of $113,750
payable to Xxxxxxx Xxxxxxx of Omaha, Nebraska payable in common shares
in the capital stock of LML Payment Systems Inc. to be issued at an
issue price per common share equal to the closing offering price for
the purchase of such common share as reported by NASDAQ on the day
previous to the Closing Date and will indemnify and hold Vendors
harmless from any such payment alleged to be due by or through
Purchaser as a result of the action of Purchaser or its officers or
agents.
3.4 Survival of Purchaser's Representations, Warranties and Covenants
-----------------------------------------------------------------
The covenants of the Purchaser set forth in this Agreement shall
survive the completion of the sale and purchase of the Shares herein provided
for and, notwithstanding such completion, shall continue in full force and
effect for the benefit of the Vendors in accordance with the terms thereof for a
period of two (2) years from the Closing Date.
ARTICLE 4 - CLOSING
-------------------
4.1 Closing
-------
The sale and purchase of the Shares shall be completed at the Time of
Closing at the offices of Vendors' Counsel, Bank of America Center, 000 Xxxx
Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxx.
-18-
4.2 Deliveries by the Vendors to the Purchaser
------------------------------------------
(a) At the Closing, the Vendors shall deliver or cause to be delivered to
the Purchaser the following:
(i) certificates of each of the Vendors as to the accuracy of their
respective representations and warranties hereunder at Closing;
(ii) certificate of the secretary of the Corporation certifying a
copy of the resolution of the directors of the Corporation
authorizing transfer of the Shares to the Purchaser and
issuance of a share certificate to the Purchaser;
(iii) the Certificate of Good Standing or evidence of such good
standing of the Corporation from each state in which the nature
of the Corporation's business or the location of its assets
requires qualification;
(iv) the Certificate of Good Standing or evidence of such good
standing of the Subsidiary from each state in which the nature
of the Subsidiary's business or the location of its assets
requires qualification;
(v) the certified copy of the Articles of Incorporation and Bylaws
of the Corporation;
(vi) the certified copy of the Articles of Incorporation and Bylaws
of the Subsidiary;
(vii) incumbency certificate certifying as to the authority of the
signatory of the Corporation to execute certificates on behalf
of the Corporation;
(viii) incumbency certificate certifying as to the authority of the
signatory of the Subsidiary to execute certificates on behalf
of the Subsidiary;
(ix) certificates evidencing the Shares being purchased by the
Purchaser, which shall be delivered free and clear of all
liens, registered in the name of the Purchaser;
(x) opinion of Vendor Counsel, substantially in the form attached
hereto as Schedule 4.2(a)(x);
(xi) Employment Agreement executed by Xx. Xxxxxx and the Corporation
substantially in the form attached hereto as Schedule
4.2(a)(xi);
(xii) non-competition agreements executed by Xx. Xxxxxx and Xx. Xxxx,
the Purchaser, the Corporation and the Subsidiary in the forms
attached hereto as Schedule 4.2(a)(xii) (the "Non-Competition
Agreement");
-19-
(xiii) resignations of certain of the officers and directors of the
Corporation and the Subsidiary requested by the Purchaser;
(xiv) the Vendors' Certificates in the form attached hereto as
Schedule 4.2(a)(xiv); and
(xv) the consent of the Auditor of the Corporation and the
Subsidiary as to use of its name in public filings.
4.3 Deliveries by the Purchaser to the Vendors
------------------------------------------
(a) At the Closing, the Purchaser shall deliver or cause to be delivered
to the Vendors the following:
(i) certified copy of the constating documents of the Purchaser;
(ii) certificate of status of the Purchaser;
(iii) certificate of the President of the Purchaser as to the
accuracy of the representations and warranties of the
Purchaser at Closing;
(iv) certificate of the President and the Secretary of the
Purchaser certifying copies of the Board of Directors'
resolutions and/or meeting minutes, evidencing authorization
of the transaction contemplated herein;
(v) incumbency certificate certifying as to the authority of the
signatory of the Purchaser to execute this Agreement; and
(vi) the portion of the Purchase Price payable by the Purchaser to
each of the Vendors in accordance with Section 2.1(b).
ARTICLE 5 - COVENANTS
---------------------
5.1 Taxes
-----
The Purchaser does not assume and shall not be liable for any taxes
under the Internal Revenue Code of the United States of America or any other
taxes whatsoever which may be or become payable by the Vendors including,
without limitation, any taxes resulting from or arising as a consequence of the
sale by the Vendors to the Purchaser of the Shares herein contemplated, and the
Vendors shall severally indemnify and save harmless the Purchaser from and
against all such taxes except as described and reflected in Schedule 5.1.
-20-
5.2 Employees
---------
(a) the Purchaser intends for the immediately foreseeable future to cause
the Corporation to maintain the employment of all employees of the
Corporation upon the Closing Date (collectively, the "Employees") at
the wage and benefit levels in existence on the Closing Date or as
otherwise set forth on Schedule 3.1(kk), including, without
limitation, existing health insurance coverage. The Purchaser shall
cause the Corporation to honor all Employees vacation, sick leave,
cash bonus and similar bonuses, incentives and benefits properly
accrued as of the Closing Date and to continue to offer existing
benefits for the immediately foreseeable future;
(b) the Purchaser shall indemnify, defend and hold the Vendors harmless
from liability, if any, resulting from the Purchaser's failure after
the Time of Closing to honor, continue and pay the accrued benefits
and obligations described in this Section 5.2 or any failure to
continue to offer any benefits as required by applicable federal,
state and local law. In the event the termination of any Employee
occurs after the Time of Closing or a dispute arises over the
Corporation's failure to honor properly accrued vacation, sick leave,
cash bonus, or any other bonuses or benefits after the Time of
Closing, the Purchaser shall indemnify, defend and hold harmless the
Vendors from all such liability;
(c) attached to this Agreement as Schedule 3.1(kk) is a list of all
salaried employees of the Corporation and, inter alia, the current
annual compensation of each such employee;
(d) notwithstanding anything contained in this Section 5.2, the
Corporation shall not be required to continue the employment after
Closing of any Employee who:
(i) is not performing his or her job functions to the Corporation's
reasonable satisfaction, or
(ii) due to circumstances not foreseen at Closing, should not, in the
sole discretion of management of the Corporation continue in the
employment of the Corporation;
(e) notwithstanding anything contained in this Section 5.2, the continuing
employment of Xx. Xxxxxx shall be governed by Xx. Xxxxxx'x Employment
Agreement in the form attached hereto as Schedule 4.2(a)(xi).
This Section 5.2 shall not be construed to create a contract of employment for
any Employee or to otherwise create any third party beneficiary rights for any
Employee.
-21-
ARTICLE 6 - INDEMNIFICATION
---------------------------
6.1 By the Vendors
--------------
Subject to Section 6.4, each of the Vendors shall severally indemnify
and hold harmless the Purchaser, the Corporation and the Subsidiary from and
against any and all loss, damage, expense (including, without limitation, court
costs, interest, penalties, reasonable legal fees and expenses), suit, action,
claim, liability or obligation (collectively, "Losses") related to, caused by or
arising from any misrepresentation, breach of warranty or failure to fulfill any
covenant or agreement of the Vendors contained in this Agreement or any
agreement ancillary hereto (an "Indemnification Claim"); provided, however, that
the Vendors shall not have any obligation to indemnify the Purchaser from and
against any Losses until the Purchaser, the Corporation and the Subsidiary have
collectively suffered Losses by reason of all such breaches (or alleged
breaches) in excess of a fifty thousand dollars ($50,000) aggregate threshold
(in which case the Vendors will be severally obligated to indemnify the
Purchaser from and against only such Losses from the first dollar of such Losses
resulting from, arising out of, or relating to an Indemnification Claim against
the Vendors. In computing the extent of any Loss under this Agreement, the
liability of the Vendors for the Indemnification Claim shall be taken into
account, if appropriate.
6.2 By Purchaser
------------
Subject to Section 6.4, the Purchaser shall indemnify and hold
harmless the Vendors from and against any and all Losses related to, caused by
or arising from any misrepresentation, breach of warranty or failure to fulfill
any covenant or agreement of the Purchaser contained in this Agreement;
provided, however, that the Purchaser shall not have any obligation to indemnify
the Vendors from and against any Losses until the Vendors have collectively
suffered Losses by reason of all such breaches (or alleged breaches) in excess
of a ($50,000) Fifty Thousand Dollars aggregate threshold (in which case the
Purchaser will be obligated to indemnify the Vendors from the first dollar of
such Losses resulting from, arising out of, or relating to an Indemnification
Claim against the Vendors. In computing the extent of any Loss under this
Agreement, the liability of the Purchaser for the Indemnification Claim shall be
taken into account, if appropriate.
6.3 Indemnification Procedure
-------------------------
(a) Any party seeking indemnification must have a good faith belief that it
is entitled to such indemnification and shall give prompt (and, in any event,
within thirty (30) days after receipt of actual notice of the claim) written
notice (in accordance with the provisions of Section 8.10 hereof) to the
indemnifying party of the facts and circumstances giving rise to the claim, and
the amount of the claim for which it is seeking indemnification. The
indemnifying party shall be relieved of the duty to indemnify for any damages
which are incurred as a result of the failure to give such notice within the
time required by the preceding sentence, however, except for such reductions,
the failure to provide such notice within the time required by the preceding
sentence, without the incurrence of damages as a result, will not reduce such
indemnification obligation. Such notice shall contain a description in
reasonable detail of the basis for such claim for
-22-
indemnification. With respect to any claim for which indemnification is sought,
the party seeking indemnification has an obligation to exercise its best efforts
to mitigate the amount of any such indemnification claim.
(b) Any indemnifying party will have the right to defend the indemnified
party against any third party claim with counsel of the indemnifying party's
choice reasonably satisfactory to the indemnified party so long as (i) the
indemnifying party notifies the indemnified party in writing within fifteen (15)
days after the indemnified party has given notice of the third party claim that
the indemnifying party will, subject to the limitation of this Agreement,
indemnify the indemnified party from and against such claims, and (ii) the
indemnifying party conducts the defense of such third party claim actively and
diligently. The indemnified party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the third party claim. In
addition, if a legitimate conflict of interests exists such that one firm of
attorneys cannot ethically represent both the indemnified party and the
indemnifying party or the counsel retained by the indemnifying party otherwise
advises the indemnifying party that separate counsel should be obtained, then
the indemnified party may select its own counsel with the reasonable fees and
expenses thereof to be paid by the indemnifying party.
(c) The indemnified party will not consent to the entry of any judgment or
enter into any settlement with respect to the third party claim without the
prior written consent of the indemnifying party (not to be delayed, conditioned
or withheld unreasonably), and the indemnifying party will not consent to the
entry of any judgment or enter into any settlement with respect to the third
party claim without the prior written consent of the indemnified party (not to
be delayed, conditioned or withheld unreasonably).
6.4 Maximum Amount of Indemnification Obligations
---------------------------------------------
Notwithstanding anything in this Agreement to the contrary, the
aggregate potential liability for a breach of this Agreement, or otherwise
arising from the transaction contemplated hereby, including, but not limited to,
any liability arising under Article 6 of this Agreement or any liability arising
for breach of contract, indemnity claims, tort claims or otherwise, is hereby
expressly limited in respect of each of the Vendors to his Sharing Percentage of
the Purchase Price and in respect of the Purchaser to three million, two hundred
and fifty thousand dollars ($3,250,000).
ARTICLE 7 - CONDITIONS
----------------------
7.1 Conditions for the Benefit of the Purchaser
-------------------------------------------
(a) The sale by the Vendors and the purchase by the Purchaser of the Shares
is subject to the following conditions which are for the exclusive benefit of
the Purchaser to be performed or complied with at or prior to the Time of
Closing:
-23-
(i) the representations and warranties of the Vendors set forth in
Section 3.1 shall be correct at the Time of Closing with the same
force and effect as if made at and as of such time;
(ii) the Vendors shall have performed or complied with all the terms,
covenants and conditions of this Agreement to be performed or
complied with by the Vendors at or prior to the Time of Closing; and
(iii) the Purchaser shall be furnished with such certificates, affidavits
or statutory declarations of the Corporation and the Subsidiary and
of the Vendors or of officers of the Corporation and the Subsidiary
and of the Vendors as the Purchaser or the Purchaser's Counsel may
deem reasonably necessary in order to establish that the terms,
covenants and conditions contained in this Agreement have been
performed or complied with by the Vendors, the Corporation or the
Subsidiary, as the case may be, at or prior to the Time of Closing
and that the representations and warranties of the Vendors herein are
true and correct at the Time of Closing.
(b) In case any term or covenant of the Vendors or condition to be
performed or complied with for the benefit of the Purchaser at or prior to the
Time of Closing shall not have been performed or complied with at or prior to
the Time of Closing, the Purchaser may, without limiting any other right that
the Purchaser may have, at its sole option, either:
(i) rescind this Agreement by notice to the Vendors, and in such event
the Purchaser shall be released from all obligations hereunder; or
(ii) waive compliance with any such term, covenant or condition in whole
or in part on such terms as may be agreed upon without prejudice to
any of its rights of rescission in the event of non-performance of
any other term, covenant or condition in whole or in part.
7.2 Conditions for the Benefit of the Vendors
-----------------------------------------
(a) The sale by the Vendors and the purchase by the Purchaser of the
Shares is subject to the following conditions which are for the exclusive
benefit of the Vendors to be performed or complied with at or prior to the Time
of Closing:
(i) the representations and warranties of the Purchaser set forth in
Section 3.3 shall be true and correct at the Time of Closing with the
same force and effect as if made at and as of such time;
(ii) the Purchaser shall have performed or complied with all of the terms,
covenants and conditions of this Agreement to be performed or
complied with by the Purchaser at or prior to the Time of Closing;
and
(iii) the Vendors shall be furnished with such certificates, affidavits or
statutory declarations of the Purchaser or of officers of the
Purchaser as the Vendors or the
-24-
Vendors' counsel may reasonably think necessary in order to establish
that the terms, covenants and conditions contained in this Agreement
to have been performed or complied with by the Purchaser at or prior
to the Time of Closing have been performed and complied with and that
the representations and warranties of the Purchaser herein given are
true and correct at the Time of Closing;
(iv) that the employment agreement between the Corporation and Xx. Xxxxxx
and the noncompetition agreements with Xx. Xxxx and Xx. Xxxxxx are
signed and executed.
(b) In case any term or covenant of the Purchaser or condition to be
performed or complied with for the benefit of the Vendors at or prior to the
Time of Closing shall not have been performed or complied with at or prior to
the Time of Closing, the Vendors may, without limiting any other right that the
Vendors may have, at its sole option, either:
(i) rescind this Agreement by notice to the Purchaser, and in such event
the Vendors shall be released from all obligations hereunder; or
(ii) waive compliance with any such term, covenant or condition in whole or
in part on such terms as may be agreed upon without prejudice to any
of its rights of rescission in the event of non-performance of any
other term, covenant or condition in whole or in part.
ARTICLE 8 - GENERAL
-------------------
8.1 Further Assurances
------------------
Each of the Vendors and the Purchaser shall from time to time execute
and deliver all such further documents and instruments and do all acts and
things as the other party may, either before or after the Closing Date,
reasonably require to effectively carry out or better evidence or perfect the
full intent and meaning of this Agreement.
8.2 Time of the Essence
-------------------
Time shall be of the essence of this Agreement.
8.3 Commissions
-----------
The Vendors shall indemnify and save harmless the Purchaser from and
against any claims whatsoever for any commission or other remuneration payable
or alleged to be payable to any person in respect of the sale and purchase of
the Shares, whether such person purports to act or have acted for the Vendors in
connection with the sale of the Shares.
-25-
8.4 Legal Fees
----------
Each of the parties hereto shall pay their respective legal and
accounting costs and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and all documents and instruments
executed pursuant hereto and any other costs and expenses whatsoever and
howsoever incurred. However, it is understood that the audit fees incurred in
connection with the preparation of the Financial Statements are an expense of
the Corporation.
8.5 Public Announcements
--------------------
No public announcement or press release concerning the sale and
purchase of the Shares shall be made by the Vendors without the prior consent
and joint approval of the Vendors and the Purchaser. The Purchaser will publish
a press release concerning the sale and purchase of the Shares as required by
law. The Purchaser will allow the Vendors to review such press release and will
consider corrections thereto suggested by the Vendors but will not be bound to
publish in such press release anything except as is finally determined in the
sole discretion of the Purchaser.
8.6 Benefit of the Agreement
------------------------
This Agreement shall enure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and permitted assigns of
the parties hereto.
8.7 Entire Agreement
----------------
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and cancels and supersedes any
prior understandings and agreements between the parties hereto with respect
thereto. There are no representations, warranties, terms, conditions,
undertakings or collateral agreements, express, implied or statutory, between
the parties other than as expressly set forth in this Agreement.
8.8 Amendments and Waiver
---------------------
No modification of or amendment to this Agreement shall be valid or
binding unless set forth in writing and duly executed by both of the parties
hereto and no waiver of any breach of any term or provision of this Agreement
shall be effective or binding unless made in writing and signed by the party
purporting to give the same and, unless otherwise provided, shall be limited to
the specific breach waived.
8.9 Assignment
----------
This Agreement may not be assigned by the Vendors without the written
consent of the Purchaser or by the Purchaser without the written consent of the
Vendors.
-26-
8.10 Notices
-------
Any demand, notice or other communication to be given in connection
with this Agreement shall be given in writing and shall be given by personal
delivery, by registered mail or by electronic means of communication addressed
to the recipient as follows:
To the Vendors:
XXXXXXXX X. XXXXXX
0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxx
00000
Fax No.: (000) 000-0000
XXXXX X. XXXXXX
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxx
00000
Fax No.:
XXXX X. XXXX
000 X. Xxxxxxx
Xxxxxxx, Xxxxxx
00000
Fax No.: (000) 000-0000
To the Purchaser:
CFDC Holdings Corp.
Suite 200
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxx
X.X.X. 00000
Fax No.: (000) 000-0000
Attention: President
---------
or to such other address, individual or electronic communication number as may
be designated by notice given by either party to the other. Any demand, notice
or other communication given by personal delivery shall be conclusively deemed
to have been given on the day of actual delivery thereof and, if given by
registered mail, on the seventh Business Day following the
-27-
deposit thereof in the mail and, if given by electronic communication, on the
day of transmittal thereof if given during the normal business hours of the
recipient and on the Business Day during which such normal business hours next
occur if not given during such hours on any day. If the party giving any demand,
notice or other communication knows or ought reasonably to know of any
difficulties with the postal system which might affect the delivery of mail, any
such demand, notice or other communication shall not be mailed but shall be
given by personal delivery or by electronic communication.
8.11 Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Kansas and the laws of the United States of America
applicable therein.
8.12 Forum Selection
---------------
For the purpose of all legal proceedings this Agreement shall be
deemed to have been performed in the State of Kansas and the courts of the State
of Kansas shall have jurisdiction to entertain any action arising under this
Agreement. The Vendors and the Purchaser each hereby attorns to the
jurisdiction of the courts of the State of Kansas.
8.13 Severability
------------
The parties agree that if one or more provisions contained in this
Agreement shall be deemed or held to be invalid, illegal or unenforceable in any
respect under any applicable law, this Agreement shall be construed with the
invalid, illegal and unenforceable provision deleted, and the validity, legality
and unenforceability of the remaining provisions contained herein shall not be
affected or impaired thereby.
8.14 Counterparts and Facsimile Signatures
-------------------------------------
This Agreement may be executed in any number of counterparts with the
same effect as if the parties had all signed the same document. All
counterparts shall be construed together and shall constitute one instrument.
In making proof of this Agreement, it shall not be necessary to account for more
than one counterpart executed by the party against whom enforcement is sought.
Facsimile signatures are binding on the party providing the facsimile signature.
8.15 Construction
------------
The parties acknowledge that each party and their counsel have had the
opportunity to review and negotiate the terms and conditions of this Agreement,
and that the normal rule of construction to the effect that any ambiguities are
to be construed against the drafting party shall not be employed in the
interpretation of this Agreement or any exhibits or amendments hereto.
IN WITNESS WHEREOF the parties have executed this Agreement.
-00-
XXXX XXXXXXXX XXXX.
Per: _________________________________
c/s
_________________________________
SIGNED, SEALED AND DELIVERED in the )
presence of: )
)
___________________________________ ) _________________________________
Witness ) XXXXXXXX X. XXXXXX
)
___________________________________ ) _________________________________
Witness ) XXXXX X. XXXXXX
)
___________________________________ ) _________________________________
Witness ) XXXX X. XXXX
-29-
Schedule 3.1(a)
---------------
Pending Filings
Schedule 3.1(c)
---------------
Pending Applications
Schedule 3.1(d)(iii)
--------------------
Corporation Record Material
Schedule 3.1(f)
---------------
Rights Attached to the Shares
Schedule 3.1(h)
---------------
Rights Attached to the Subsidiary Shares
Schedule 3.1(o)
---------------
Financial Statements
Schedule 3.1(p)
---------------
Interim Financial Statements
Schedule 3.1(p)(iv)
-------------------
Unreported Matters
1. $5,000.00 of account receivable written off in December as uncollectible.
2. $1,100.00 of former employees' receivables written off as uncollectible.
3. Sold Telrad phone system for $200.00, creating a $8,750.00 loss.
4. $1,405.00 of A/C receivable - NSF checks written off as past the statute of
limitations.
5. The net book value of NCN area code fee of $6,000.00 is questionable.
6. The A/C receivable from blockbuster corporate is in dispute.
7. Inventory accounts are adjusted annually in December based on year end
inventories.
8. Monthly accruals are based on estimates. At year end prepaids and accruals
are based on actual numbers.
9. Depreciation expense was adjusted $18,325.00 in December for December
purchases and year-end adjustments to accumulated depreciation.
Schedule 3.1(s)
---------------
Liens and Encumbrances
Schedule 3.1(u)
---------------
Capital Expenditures
Schedule 3.1(w)
---------------
Tax Liability
Schedule 3.1(x)
---------------
Tax Returns
Schedule 3.1(z)
---------------
Material Contracts
Schedule 3.1(cc)
----------------
Leases of Real Property
Schedule 3.1(ff)
----------------
Leases of Personal Property
Pitney Xxxxx postage meter of May 29, 1999
Schedule 3.1(jj)
----------------
Royalty, License Fee, Management Fee
Schedule 3.1(kk)
----------------
Employees
Schedule 3.1(ll)
----------------
Employee Benefit Plans
PLAN CARRIER
Group Health Blue Cross/Blue Shield
Group Life Advance Insurance Company
Group Disability AFLAC
Section 125 AFLAC
Cafeteria Plan
401K Xxxxxxx Xxxxx
Schedule 3.1(oo)
----------------
Employee Payments out of the Ordinary Course
New Hires:
12/1 - Xxx Xxxxxx - $8.00 = Legal
12/4 - Xxxxxxx Xxxx - $7.00 = Processing
Raises in December:
12/16 - Xxxxxx Xxxxx - $.25 per hour
11/27 - Xxxxx Xxxxxxx - $30.00 per week
11/27 - Xxxxxxx Xxxxx - $25.00 per week
10/23 - Xxxx Xxxxx - $.75 per hour
11/27 - Xxxxx Xxxxxxxxx - $20.00 per week
12/14 - Xxxxxxx Xxxxxxx - $.50 per hour
10/23 - Xxxxx Xxxxxx - $125.00 per week
11/27 - Xxxxx Xxxxxxxx - $.50 per hour
Vacation Pay in Lieu of Vacation Days Off:
Xxxxx Xxxxxx - 56 hours
Schedule 3.1(uu)
----------------
Legal Actions
Debtor ID Threats from Check Writers Estimated Liability
647372 Xxxxx Xxxxxxxx .
000000 Xxxxx Xxxxxx .
000000 Xxxxxxx Xxxxxxxxxx .
507263 Damian Love .
457438 Xxxxxxxx Xxxxx .
479205 Xxxxxxx Xxxxxx .
533507 Xxxx Xxxxxxxx .
287037 Xxxxx Xxxx .
205873 Xxxxxxx Xxxxx .
Schedule 3.1(xx)
----------------
Jurisdictions of Business, Permits and Licenses
Kansas
Missouri
Nebraska
Colorado
Oklahoma
Iowa
Illinois
Texas
Schedule 3.1(bbb)
-----------------
Intellectual Property
Check Centre Trademark (Federal and Kansas)
Schedule 3.1(eee)
-----------------
Insurance Policies
Schedule 3.1(fff)
-----------------
Software Compliance
Schedule 4.2(a)(x)
------------------
Opinion to Vendor Counsel
Schedule 4.2(a)(xi)
-------------------
Employment Agreement between the Purchaser, the Corporation and Xx. Xxxxxx
Schedule 4.2(a)(xii)
--------------------
Non Competition Agreements Executed by Xx. Xxxxxx and Xx. Xxxx
Schedule 4.2(a)(xiv)
--------------------
Vendors' Certificates
Schedule 4.2(a)(xiv)
--------------------
Vendors' Certificates