Exhibit 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 15 day of January, 2002 by and among ND Holdings, Inc., a North Dakota
corporation (the "Buyer"), Capital Financial Services, Inc., a Wisconsin
corporation (the "Company"), and Xxxxxxxx Xxxxxx ("Xxxxxx") and Xxxxxxx X.
Xxxxxxx ("Xxxxxxx"), individuals residing in the state of Wisconsin (jointly
and severally referred to as the "Shareholder"), who are, respectively, the
sole shareholder and sole option holder of the Company.
W I T N E S S E T H:
WHEREAS, Shareholder owns all of the issued and outstanding shares of common
stock of the Company as well as all options to purchase shares of common stock
of the Company and Shareholder desires to sell and convey to Buyer, and Buyer
desires to purchase from Shareholder, all of the outstanding common stock of
the Company and all options to purchase shares of common stock of the Company;
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and upon the terms and subject to the
conditions hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE
1.1 Purchase of Stock
(a) On the Closing Date (as defined in Article VII), Buyer agrees to
purchase from Shareholder, and Shareholder agrees to sell to Buyer, all of the
issued and outstanding shares of common stock of the Company and all options to
purchase shares of common stock of the Company (collectively, the "Company
Shares") for a total consideration as follows:
(1) payment of $1,140,000 in cash or other immediately available
funds at Closing;
(2) a convertible debenture, that is senior to all Buyer
debentures and notes with the exception of bank loans and bank
lines of credit, with a term of three years in the form of
EXHIBIT A hereto (the "Debenture") issued to the Shareholder
on the one year anniversary of the Closing Date in the
principal amount of $250,000, which principal amount shall be
subject to adjustment as provided herein and in paragraph 1.3.
The Debenture shall carry an interest rate of 4% per annum,
payable semiannually. Following issuance, the Debenture shall
be convertible, in whole or in part, at Shareholder's option
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to no par common stock of Buyer (the "Debenture Shares") at
the rate of one share of no par common stock for each one
dollar ($1.00) of principal amount converted;
(3) the issuance of 750,000 shares of no par value common stock of
Buyer (the "Installment Shares") in three installments; the
first installment of 250,000 shares at Closing, the second
installment of 250,000 shares on the one year anniversary of
the Closing Date, and the third installment of 250,000 shares
on the two year anniversary of the Closing Date. Shareholder
will have a put right in the form of EXHIBIT B hereto (the
"Put"), whereby the Shareholder may put the Installment Shares
back to Buyer at the rate of up to 250,000 shares per year for
three consecutive years at a price of $1.00 per share.
Shareholder also may sell, transfer, or assign the Put.
Shareholder may exercise the Put at any time within the ninety
(90) day period following the first, second, and third annual
anniversaries of the Closing Date (the "Redemption Periods")
by giving Buyer notice of Shareholder's intent to exercise the
put at least thirty days prior to the beginning of a
Redemption Period and a notice of exercise prior to the end of
the Redemption Period. The put rights granted hereby are
nonaccumlutive, and each installment will expire if not
exercised during the scheduled Redemption Period; and
(4) the issuance of 250,000 options to purchase no par common
stock of Buyer in the form of EXHIBIT C hereto, at an option
strike price of $1.00 per share, each option allowing each
holder of such option to purchase one share of no par common
stock (the "Option Shares"). Said options shall be issued in
the amounts and to those persons identified in EXHIBIT C
hereto and shall expire on the tenth anniversary of the
Closing Date.
(b) The cash consideration described in Section 1.1(a)(1) shall be paid
one-half to each of Xxxxxxx and Xxxxxx by separate cash, wire
transfer, or other immediately available funds. The Debenture shall
be issued as two separate, equal debentures, each having the same
rights as the other. The Installment Shares shall be issued one-
half to each Xxxxxxx and Xxxxxx by individually titled certificates,
and the Put shall apply to them severally. The stock options
described in Section 1.1(a)(4) shall be issued individually to the
persons described in EXHIBIT C hereto. Any other amounts due to
Shareholder hereunder shall be issued separately, one-half to each
of Xxxxxxx and Xxxxxx.
(c) All of the Debenture Shares, Installment Shares, and Option Shares
(collectively, the "Buyer Shares"), options to purchase any Buyer
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Shares, and the Debenture shall be unregistered shares issued to
Shareholder by Buyer in a private transaction, exempt from federal
Securities and Exchange Commission ("SEC") or any state securities
commission registration. Any certificates for the Buyer Shares
shall contain standard language describing restrictions on transfer.
Buyer Shares issued to Shareholder shall have the same rights and
privileges of all other common shares issued by Buyer. Shareholder
shall have "piggyback" registration rights for the Buyer Shares in
the event that Buyer registers its common stock for sale to the
public. In the event of such piggyback registration, Shareholder
shall pay the additional cost, if any, of preparation and filing
of the registration statement created by such piggyback registration
of Shareholder's Buyer Shares and shall provide such information,
disclosures and warranties as may be reasonably required by
registration counsel to Buyer.
1.2 Assets and Liabilities at Closing.
(a) All of the inventory and other assets of the Company listed on
SCHEDULE 2.11 and all of the material contracts, including mutual
funds and variable annuity distribution contracts, listed on
SCHEDULE 2.9 shall remain assets of the Company as of the
Closing Date.
(b) Upon Closing, the Company shall immediately notify all mutual fund
and variable annuity vendors to change the address of the Company
to "care of" Buyer.
(c) Except as noted in the next sentence, no assets, tangible or
intangible of the Company shall be distributed, withdrawn,
transferred or assigned prior to Closing. It is agreed that all
of the following cash assets that will remain in the Company as of
the Closing Date: $40,000 deposit or account for the benefit of
NSCC; $35,000 clearing deposit with RBC Xxxx Xxxxxxxx; and a $25,000
receivable from CNA due in February 2002. None of the cash assets
described in this Section 1.2(c) which shall remain assets of the
Company as of the Closing Date shall be subject to offset, creditor
claim or registered representative commissions.
1.3 Adjustment of Debenture Principal. The principal amount of the Debenture
may be reduced or increased, in accordance with this paragraph 1.3, to reflect
undisclosed or unknown liabilities, loss of producing broker revenue base,
recovery from third parties, and the costs of such recovery.
(a) The principal amount of the Debenture will be reduced to the extent
of any liabilities, arbitration claims or civil litigation,
including reasonable legal fees, penalties, fees, other payments
or costs, required to be paid by Buyer or the Company as a result of
liabilities of the Company occurring or arising prior to the
Closing Date and are not disclosed herein on SCHEDULE 1.2(d), but
which are discovered within twelve months following the Closing Date
and the amount of which is determined within twelve months following
the discovery of such liability (the "Undisclosed Liabilities").
The principal amount of the Debenture will also be reduced in an
amount equal to 12% of all gross commissions and fees that are
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payable to the Company for the prior twelve month period and which
were generated by each registered representative or agent listed on
SCHEDULE 4.1(b)(1) who is employed by or associated with the Company
on January 1, 2002, and voluntarily terminates or is terminated for
violating NASD Regulation, Inc. or state securities commission
regulation during the twelve month period following the Closing Date
(the "Lost Production"). Lost Production shall not include lost
revenue resulting from any registered representative or agent who
terminates due to death, disability, retirement pursuant to a
retirement agreement, Buyer's violation of any state or federal law
or regulation, or Buyer's breach of this Agreement or any agreement
with such registered representative or agent. The principal amount
of the Debenture shall not be adjusted for any Lost Production until
twelve months after the termination of the registered representative
or agent for whom such an adjustment is required. The Undisclosed
Liabilities and Lost Production, together with all other losses and
damages, shall be collectively referred to herein as the "Losses."
(b) Buyer will, for a period of one year after the discovery of any
Loss, seek recovery from all reasonable sources for the Losses,
including but not limited to any applicable insurance policies
(the "Third Party Recovery"). The principal amount of the Debenture
will be increased by any Third Party Recovery, less the reasonable
costs, including legal fees, incurred by Buyer in seeking such Third
Party Recovery (the "Recovery Costs"). Any Recovery Costs incurred
by Buyer shall not exceed the Third Party Recovery. In addition,
subject to the reasonable approval of Buyer, Shareholder may recruit
qualified registered representatives or agents to replace any Lost
Production. Upon the second annual anniversary of the Closing Date,
the principal amount of the Debenture shall be increased by an
amount equal to 12% of trailing twelve month gross production of
the registered representatives and agents recruited by Shareholder
or, if a representative or agent has not been associated with the
Company for a twelve month period, 12% of the annualized, actual
gross production of such representative or agent. But the principal
amount of the Debenture shall not exceed $250,000 as a result of the
adjustments required pursuant to this paragraph 1.3(b).
(c) At least 30 days prior to making any adjustment required under this
paragraph 1.3, Buyer will give Shareholder written notice of
adjustment (the "Notice of Adjustment") which describes in detail
the reason for and the amount of the adjustment. Shareholder may
dispute any such adjustment as provided for in sub. (f).
Shareholder will be entitled to participate in the compromise,
settlement, or defense of any Undisclosed Liability and, to the
extent that it wishes, to assume the defense of such Undisclosed
Liability with counsel reasonably satisfactory to the Buyer. After
notice to the Buyer of its election to assume the defense of such
Undisclosed Liability, the Debenture will not, as long as
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Shareholder diligently conducts such defense, be subject to
reduction under Section 1.3(a) or (b) with respect to the defense
of such Undisclosed Liability. If the Shareholder assumes the
defense of an Undisclosed Liability, Shareholder may compromise or
settle such claim and Buyer will have no liability with respect to
any compromise or settlement of such claim effected without its
consent. If notice is given to Shareholder of any Undisclosed
Liability and Shareholder does not, within thirty days after
Buyer's notice is given, notify Buyer of its election to assume
the defense of such Undisclosed Liability, Shareholder will be
bound by any compromise or settlement effected by Buyer.
Notwithstanding the foregoing, if Buyer determines in good faith
that an Undisclosed Liability will result in less than $5,000 of
monetary damages for which the Debenture is subject to reduction,
Buyer may, by written notice to Shareholder, assume the exclusive
right to defend, compromise, or settle such Undisclosed Liability.
(d) The principal amount of the Debenture will not be reduced for any
Losses until the aggregate amount of Losses exceeds $17,500, and
Shareholder shall not be liable, by principal adjustment or
otherwise, for Losses in excess of $250,000 collectively. Upon
the anniversary of the Closing Date, Buyer shall issue to
Shareholder the Debenture in the form described in paragraph
1.1(a)(2) in the principal amount of $250,000 less all Losses and
Recovery Costs, plus all Third Party Recovery.
(e) In the event that an adjustment of the principal amount of the
Debenture is required under this paragraph 1.3 after the Debenture
has been issued to Shareholder (whether or not the issued Debenture
has been converted, in whole or in part, to Debenture Shares), the
party requesting adjustment shall provide the other party with a
Notice of Adjustment. Unless an Adjustment Resolution Procedure is
commenced under sub. (f), Shareholder shall surrender the Debenture
and certificates for any Debentures Shares to the Buyer within 10
days after receipt of the Notice of Adjustment. Thereupon, the
Buyer shall promptly issue a replacement Debenture and/or new
certificates for Debenture Shares reflecting the principal balance
adjustment provided for in the Notice of Adjustment. Any adjustment
under this paragraph 1.3 will be made, first by increasing or
decreasing the principal amount of the Debenture (but to not less
than $0), and then by issuing or canceling an appropriate number of
Debenture Shares.
(f) If either party hereto disputes an adjustment to be made pursuant to
this paragraph 1.3, such dispute shall be submitted to an accounting
firm which is mutually agreeable when and if needed for final
resolution within 10 days of the issuance of the Debenture or a
Notice of Adjustment giving rise to the dispute, (the "Adjustment
Resolution Procedure"). Thereafter, both parties shall promptly
submit to said accounting firm all materials relevant to the
dispute. Said accounting firm shall render its decision within 20
days of the receipt thereof. Buyer and Shareholder shall share
equally the fees of said accounting firm for the purpose of
resolving the dispute.
(g) The Company will list on SCHEDULE 1.2(d) all liabilities and claims
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against the Company, including intercompany accounts, of any amount
or nature that will remain liabilities of the Company at the time of
Closing.
1.4 Sublease. Shareholder or their affiliate will provide Buyer and/or the
Company a sublease for space at One Landmark Place - 0000 Xxxx Xxxxxxxx
Xxxxxxx, Xxxxxxx, Xxxxxxxxx 00000.
1.5 Noncompete Agreement. Shareholder shall provide Buyer a noncompete
agreement in the form attached hereto as EXHIBIT G (the "Noncompete
Agreement").
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that all of the following
representations and warranties with respect to the Company and its business
and operations set forth in this Article II (A) are true and correct in all
material respects on the date hereof and will be true and correct in all
material respects at the time of the Closing.
2.1 Authorization. This Agreement has been duly executed and delivered by
the Company, and it constitutes the valid and binding obligation of the
Company, enforceable against it in accordance with the terms hereof.
2.2 Organization, Existence and Good Standing of the Company. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Wisconsin. Set forth on SCHEDULE 2.2 is a list of
the states in which the Company is qualified or licensed to do business.
True, complete and correct copies of (i) the Articles of Incorporation of
the Company and (ii) the By-laws of the Company are attached hereto on
SCHEDULE 2.2 (collectively, the "Charter Documents").
2.3 Common Stock of the Company. The Company's authorized common stock
consists of two thousand eight hundred (2800) shares of no par value common
stock, of which two hundred fifty (250) shares are issued and outstanding, all
of which are owned of record by Xxxxxx, and the only issued and outstanding
option to purchase the Company Shares. All of the Company Shares have been
validly issued and are fully paid and nonassessable and no holder thereof is
entitled to any preemptive rights (except any statutory preemptive rights,
which the Shareholder hereby waives). Other than the option held by Xxxxxxx,
there are no outstanding conversion or exchange rights, subscriptions, options,
warrants or other arrangements or commitments obligating the Company to issue
any shares of common stock or other securities or to purchase, redeem or
otherwise acquire any shares of common stock or other securities, or to pay any
dividend or make any distribution in respect thereof. A copy of Shareholder's
common stock certificate and a copy of Shareholder's option agreement and
documentation are attached as Appendices hereto.
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2.4 Subsidiaries. The Company does not presently own, of record or
beneficially, or control directly or indirectly, 80% or more of the (i) common
stock, securities convertible into common stock or (ii) other equity or
membership interest in any corporation, association or business entity nor
is the Company, directly or indirectly, a participant in any joint venture or
partnership.
2.5 Financial Statements.
(a) The Company has previously furnished to Buyer the balance sheet of
the Company as of September 30, 2001 and 2000 and the related
statements of operations, shareholder equity and cash flows for the
fiscal years 1999, 2000, and 2001, as audited by the Company's
certified public accountants (collectively, the "Financial
Statements"). The Financial Statements present fairly the financial
position and results of operations of the Company as of the
indicated dates and for the indicated periods and have been prepared
in accordance with GAAP.
(b) Except to the extent reflected in the September 30, 2001 balance
sheet included in the Financial Statements or as disclosed on
SCHEDULE 1.2(d), the Company has no liabilities or obligations
required to be reflected in the Financial Statements (or the notes
thereto) in accordance with GAAP other than liabilities incurred in
the ordinary course of business, consistent with past practice,
subsequent to September 30, 2001.
2.6 Permits and Intangibles. The Company holds all material licenses,
franchises, permits and other governmental authorizations necessary to conduct
its business as it is currently conducted (the "Material Permits").
2.7 Tax Matters. The Company has filed all income tax returns required to be
filed by the Company and all returns, reports and forms of other Taxes (as
defined below) required to be filed by the Company and has paid or provided for
all Taxes shown to be due on such returns and all such returns are correct and
complete in all material respects. No action or proceeding for the assessment
or collection of any Taxes is pending against the Company and no notice of any
claim for Taxes, whether pending or threatened, has been received. No
deficiency, assessment or other formal claim for any Taxes has been asserted or
made against the Company that has not been fully paid or finally settled. No
issue has been formally raised by any taxing authority in connection with an
audit or examination of any return of Taxes. No federal, state or foreign
income tax returns of the Company have been examined, and there are no
outstanding agreements or waivers extending the applicable statutory periods of
limitation for such Taxes for any period. All Taxes that the Company has been
required to collect or withhold have been duly withheld or collected and, to
the extent required, have been paid to the proper taxing authority. For
purposes of this Agreement, "Taxes" shall mean all taxes, charges, fees, levies
or other assessments including, without limitation, income, excise, property,
withholding, sales and franchise taxes, imposed by the United States, or any
state, county, local or foreign government or subdivision or agency thereof,
and including any interest, penalties or additions attributable thereto.
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2.8 Assets and Properties.
(a) Real Property. The Company does not own or hold any interest in
real property.
(b) Real Property Leases. The Company is not a party to any lease or
sublease of real property. None of such leases is subject to any
lien, pledge, security interest, claim, easement, limitation,
restriction or encumbrance or any kind or nature whatsoever, or any
agreement to give any of the foregoing. Except as would not,
individually or in the aggregate, reasonably be expected to have a
material adverse effect on the Company, the Company has the right to
quiet enjoyment of all property leased by it for the full term of
each such lease or sublease or similar agreement (or any renewal
option) relating thereto and such leased property is not subject
to any failure to have the right to quiet enjoyment.
2.9 Contracts. Set forth on SCHEDULE 2.9 is a listing of all material
contracts, agreements, arrangements and commitments (whether oral or written)
to which the Company is a party or by which its assets or business are bound.
2.10 Trademarks. The Company does not own any registered trademarks,
copyrights, or other intellectual property.
2.11 Inventory and Description of Assets. SCHEDULE 2.11 is a complete
inventory and description of the assets of the Company, and the location
thereof.
2.12 Consents. Except as set forth in SCHEDULE 2.12, no consent,
approval, notice to, registration or filing with, authorization or order of,
any court or governmental authority, under any contract or other agreement or
commitment to which the Company or Shareholder is a party or by which its
respective assets are bound, is required as a result of or in connection with
the execution or delivery of this Agreement, and the other agreements and
documents to be executed by the Company and Shareholder or the consummation
by the Company and Shareholder of the transactions contemplated hereby.
2.13 Litigation and Related Matters. Set forth on SCHEDULE 2.13 is a list of
all actions, suits, proceedings, investigations or grievances pending against
the Company or, to the best knowledge of the Company and the Shareholder,
threatened against the Company, the business or any property or rights of the
Company, at law or in equity, before or by any arbitration board or panel,
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign
("Agencies"). None of the actions, suits, proceedings or investigations
listed on SCHEDULE 2.13 either would, if adversely determined, (i) have a
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material adverse effect on the Company or (ii) affect the right or ability of
the Company to carry on its business substantially as now conducted. The
Company is not subject to any continuing court or Agency order, writ,
injunction or decree applicable specifically to its business, operations or
assets or its employees, nor is the Company in default with respect to any
order, writ, injunction or decree of any court or Agency with respect to its
assets, business, operations or employees. SCHEDULE 2.13 lists all actions,
suits or proceedings filed by or against the Company since December 31, 1997.
The Company has not during the last two (2) years been required to make any
indemnification payment as a result of any actual or alleged act or omission
of the Company or any person under its control.
2.14 Compliance with Laws.
(a) The Company is in compliance with all applicable laws, regulations
(including federal, state and local procurement regulations), orders,
judgments and decrees except where the failure to so comply would
not have a material adverse effect on the Company or its business.
(b) Neither the execution, delivery nor performance of this Agreement by
the Company nor the consummation of the transactions contemplated
hereby will (i) violate any provision of the Charter Documents, or
(ii) violate, in any material respect, any statute, rule, regulation,
order or decree of any public body or authority by which the Company
or its respective properties or assets are bound
2.15 Employees and Employee Benefit Plans. The names of all of the Company'
employees and a list of all employment contracts are set forth in SCHEDULE
2.15. The Company has no employee benefit plans.
(a) The Company (i) is in compliance in all material respects with all
applicable federal and state laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees;
(iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv)
(other than routine payments to be made in the normal course of
business and consistent with past practice) is not liable for any
payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation
benefits, social security or other benefits for Employees.
(b) The Company is not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any
arrangement with any labor union. No employee of the Company is
represented by any labor union or covered by any collective
bargaining agreement and no campaign to establish such
representation is in progress. There is no pending or threatened
labor dispute involving the Company and any group of its employees
nor has the Company experienced any labor interruptions over the
past three years and the Company considers its relationship with
its employees to be good.
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(c) Except as provided in this Agreement, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby or thereby will (i) result in any payment
(including severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director, officer, employee
or consultant of the Company under any employment agreement or
otherwise or (ii) result in the acceleration of the time of payment
or vesting of any such benefits.
2.16 Officers and Directors. Set forth on SCHEDULE 2.16 is a list of the
current officers and directors of the Company.
2.17 Bank Accounts and Powers of Attorney. SCHEDULE 2.17 sets forth each
bank, savings institution and other financial institution with which the
Company has an account or safe deposit box, letter of credit, line of credit
or other financial agreement, arrangement or obligation and the names of all
persons authorized to draw thereon or to have access thereto. Each person
holding a power of attorney or similar grant of authority on behalf of the
Company is identified on SCHEDULE 2.17. Except as disclosed on SCHEDULE 2.17,
(i) the Company has not given any revocable or irrevocable powers of attorney
to any person, firm, corporation or organization relating to its business for
any purpose whatsoever, and (ii) the Company has canceled any and all credit,
debit, gas and other cards issued to or otherwise payable by the Company
effective prior to the Closing and all amounts due thereunder have been fully
paid and discharged. Additionally, SCHEDULE 2.17 identifies all agreements
regarding custodial accounts or other custodial arrangements.
2.18 Insurance. SCHEDULE 2.18 lists all insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and the Shareholder of the Company, including without
limitation product liability insurance. There is no claim by the Company
pending under any of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and the Company is otherwise
in material compliance with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage). The
Shareholder has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.19 Interested Party Transactions. Except as set forth on SCHEDULE 2.19
and except for any insurance wholesaling activities, no officer, director or
owner of the Company (nor any ancestor, sibling, descendant or spouse of any
of such persons, or any trust, partnership or corporation in which any of
such persons has an interest), has, directly or indirectly, (i) an interest
in any entity that furnished or sold, or furnishes or sells, services or
products that the Company furnishes or sells, or proposes to furnish or sell,
or (ii) an interest in any entity that purchases from or sells or furnishes
to, the Company, any goods or services or (iii) a beneficial interest in any
contract with the Company; provided, that ownership of no more than one percent
(1%) of the outstanding voting stock of a publicly traded corporation shall not
be deemed an "interest in any entity" for purposes of this Section.
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2.20 Regulatory Good Standings. The Company is a member in good standing
with NASD Regulation, Inc. ("NASD"); Registered and in good standing with the
United States Securities and Exchange Commission; and a member in good
standing of SIPC. A complete copy of the Company's NASD membership agreement
and restriction letter, current Form BD and all NASD Examinations and related
documentation is attached hereto as SCHEDULE 2.20. A complete copy of the
Company's registration with the SEC, and all SEC Examinations and related
documentation is attached as an Appendix hereto. Proof of the Company's
current SIPC membership is attached hereto as an Appendix hereto.
(B) REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder represents and warrants that to the best of Shareholder's
actual knowledge all of the following representations and warranties with
respect to the Shareholder set forth in this Article II (B) are true and
correct in all material respects on the date hereof and will be true and
correct in all material respects at the time of the Closing.
2.21 Authorization. This Agreement has been duly executed and delivered
by the Shareholder and constitutes the valid and binding obligation of each
such party, enforceable against each such party in accordance with its terms.
2.22 The Shareholder owns of record and beneficially and has good and
marketable title to the Company Shares, free and clear of any and all liens,
mortgages, security interests, encumbrances, pledges, charges, adverse claims,
options, buy-sell agreements, right of first refusal agreements, property
settlement agreements, rights or restrictions of any character whatsoever
other than standard state and federal securities law private offering legends
and restrictions (collectively, "Liens"). Xxxxxx has the right to vote the
issued and outstanding shares common stock of the Company on any matters as
to which any shares of the Company common stock are entitled to be voted under
the laws of the state of incorporation of the Company and the Company's Charter
Documents, free of any right of any other person.
2.23 Neither the execution, delivery and performance of this Agreement by the
Shareholder nor the consummation of the transactions contemplated hereby will
violate, in any material respect, any statute, rule, regulation, order or
decree of any public body or authority by which the Shareholder or its
properties or assets are bound.
2.24 Absence of Claims Against the Company. The Shareholder does not have
any claims against the Company other than as disclosed herein, including
without limitation, final settlement of intercompany accounts and
transactions consistent with past practices.
2.25 Disclosure. All schedules and exhibits furnished to Buyer pursuant
hereto or in connection with this Agreement or the transactions contemplated
hereby are and will be complete and accurate in all material respects. No
representation or warranty by the Company contained in this Agreement, in
the schedules attached hereto or in any certificate furnished or to be
furnished by the Company to Buyer in connection herewith or pursuant hereto
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contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make any statement
contained herein or therein not misleading. There is no fact known to the
Company that has specific application to the Company (other than general
economic or industry conditions) and that materially adversely affects or, as
far as the Company can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of the
Company that has not been set forth in this Agreement or any schedule hereto.
2.26 Shareholder's Representation with respect to the Buyer Shares.
(a) The Buyer Shares are being acquired by the Shareholder for the
Shareholder's own account and not on behalf of any other person.
(b) The Buyer Shares are being acquired for investment purposes and
not for resale or distribution.
(c) The Shareholder has received a copy of the Corporation's Form
10KSB for the year ended December 31, 2000 with exhibits and
subsequent quarterly filings on form 10QSB (jointly and severally
the "10KSB"). The Shareholder has read the 10KSB and has been
afforded the opportunity to discuss the business of the
Corporation with its management. As a result, the Shareholder
is cognizant of the market aspects of the common shares, financial
condition, capitalization, and proposed operations and financing of
the Buyer and has been able to evaluate the merits and risks of the
investment in the Buyer Shares. The Shareholder understands that
an investment in the Buyer Shares is inherently one of high risk.
(d) The management of the Buyer has furnished to the Shareholder's
satisfaction any information requested in writing by the
Shareholder and the Shareholder has made such independent
investigation, research and analysis of the Company, its proposed
business and prospects, as the Shareholder deems necessary.
(e) The Shareholder represents that an investment in the Buyer Shares
is a suitable investment for the Shareholder.
(f) The Shareholder understands that the Buyer Shares have not been
registered under the Securities Act of 1933 (the "Act") and are
restricted securities within the meaning of Rule 144 of the General
Rules and Regulations under the Act. The Shareholder consents to
the placement of an appropriate restrictive legend or legends on
any certificates evidencing shares of common stock. Each Buyer
Share certificate shall contain a legend denoting restrictions on
transfer.
(g) The Shareholder understands and agrees that, by the Shareholder's
execution of this Agreement, it is acknowledged and understood that
the Buyer is relying upon the accuracy and completeness hereof
complying with certain obligations under applicable securities laws.
12
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and Shareholder that all of the
following representations and warranties with respect to Buyer are true and
correct as of the date hereof, and will be true and correct in all material
respects at the time of the Closing.
3.1 Organization and Authorization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of North
Dakota with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Buyer has all requisite corporate power, capacity and authority to execute and
deliver this Agreement and all other agreements and documents contemplated
hereby. The execution and delivery of this Agreement and such other agreements
and documents by Buyer and the consummation by Buyer of the transactions
contemplated hereby, including issuance of the Buyers Shares, have been duly
authorized by Buyer and no other corporate action on the part of Buyer is
necessary to authorize the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Buyer and is the legal valid and
binding obligation of Buyer, enforceable in accordance with its terms.
3.2 No Violations. The execution and delivery of this Agreement and the
other agreements and documents contemplated hereby by Buyer and the
consummation of the transactions contemplated hereby will not (a) violate any
provision of the articles of incorporation or bylaws of Buyer (b) violate any
statute, rule, regulation, order or decree of any public body or authority by
which Buyer or its properties or assets are bound, or (c) result in a violation
or breach of, or constitute a default under or result in the creation of any
encumbrance upon, or create any rights of termination, cancellation or
acceleration in any person with respect to any agreement, contract, indenture,
mortgage or instrument to which Buyer is a party or any of its properties or
assets is bound.
3.3 Consents. No consent, approval or other authorization of any
governmental authority or third party is required as a result of or in
connection with the execution and delivery of this Agreement and the other
agreements and documents to be executed by Buyer or the consummation by Buyer
of the transactions contemplated hereby except for required approval of the
transfer of control of the Company as required by NASD Regulation, Inc.
("NASD") rules and transfer of location to Minot, North Dakota.
3.4 Financial Statements. Buyer has previously furnished to Shareholder the
balance sheet of Buyer as of December 31, 2000 and the related statements of
operations, shareholder's equity and cash flows for the three (3) fiscal years
then ended, as audited by Buyer's certified public accountants (collectively,
the "Buyer Financial Statements"). The Buyer Financial Statements present
fairly the financial position and results of operations of Buyer as of the
indicated dates and for the indicated periods and have been prepared in
accordance with GAAP except as disclosed on SCHEDULE 3.4.
13
3.5 Financing. Buyer has, and as of the Closing will have, sufficient
funds to consummate the transactions contemplated hereby, including, without
limitation, payment of the cash Consideration.
ARTICLE IV.
COVENANTS OF THE PARTIES
4.1 Course of Conduct by the Company. From the date hereof through and
until the Closing Date, except as approved in writing by Buyer or as otherwise
permitted or contemplated by this Agreement, the Company's business shall be
conducted only in the ordinary course of business consistent with past
practice, and the Shareholder shall cause the Company to comply with the
following covenants:
(a) Articles of Incorporation; Bylaws. The Company shall not make any
material change to its Charter Documents.
(b) Relations with Registered Representatives The Company will use
commercially reasonable efforts to preserve its relationships with
the registered representatives set forth in SCHEDULE 4.1(b)(1) (the
"Representatives") and shall not materially change or modify or
commit to materially change or modify any terms offered to the
Representatives. Set forth in SCHEDULE 4.1(b)(2) is a list of all
contracts with registered representatives.
(c) Incurrence of Debt. The Company will not voluntarily incur or
assume, whether directly or by way of guaranty or otherwise, any
material obligation or liability, except obligations and liabilities
incurred in the ordinary course of business, consistent with past
practice.
(d) Liens. The Company will not mortgage, pledge, encumber, create or
allow any Liens not existing on the date hereof upon any of its
properties or assets, tangible or intangible, except Liens created
in the ordinary course of business, consistent with past practice.
(e) Disposition of Assets. The Company will treat its assets consistent
with Section 1.2(a), (c), and (e) hereof. The Company will not
cancel or forgive any debts or claims except or in the ordinary
course of business, consistent with past practice.
(f) Material Transactions. The Company will not enter into any other
agreement, course of action or transaction material to it, except in
the ordinary course of business, consistent with past practice.
(g) Stock Issuance; Redemptions; Reorganizations. The Company shall not
(i) issue, grant or dispose of, or make any agreement, arrangement
or commitment obligating the Company to issue, grant or dispose of
any common shares or other securities of the Company, (ii) redeem
14
or acquire, or make any agreement, arrangement or commitment
obligating the Company to redeem or acquire, any shares of common
stock or other securities of the Company, or (iii) authorize or
effect or make any agreement, arrangement or commitment obligating
the Company to effect, any reorganization, recapitalization or
split-up of such common stock of the Company.
(h) NASD Matters. The Company and Shareholder shall take all
reasonably necessary actions to comply with the rules and
regulations adopted and enforced by the NASD, including without
limitation, (i) obtaining the consent of the NASD to the
transactions contemplated hereby, and (ii) filing a notice to
Company's district field Supervisor at NASD of the request and
notice, pursuant to Rule 1018 of the NASD Membership and
Registration Rules for membership continuance and change of
control.
4.2 Investigations. The Company shall provide Buyer and its representatives
and agents such access to the books and records of the Company and furnish to
Buyer such financial and operating data and other information with respect to
the businesses and properties of the Company as it may reasonably request from
time to time, and permit Buyer and its representatives and agents to make such
inspections of the Company's real and personal properties as they may
reasonably request. The Shareholder shall promptly arrange for Buyer and its
representatives and agents to meet with such directors, officers, employees and
agents of the Company as reasonably requested. From the date of this agreement
through the Closing, Buyer will be permitted full access to all regulatory
reports and data bases, financial reports, books and records of the Company,
and full access to all employees, associated persons, registered
representatives, customers, landlords and suppliers of the Company, in order
to make a reasonable investigation of the Company's business affairs as such
books and records relate to the Closing. Officers and agents of Buyer shall be
permitted confidential access to the Company's registered representatives for
discussions of each individual's securities business and anticipated loyalty
to the Company after the Closing. Buyer will honor its nonsolicitation,
confidentiality, and others promises set forth in the Confidentiality
Agreement by and between the parties hereto dated October 18, 2001 (the
"Confidentiality Agreement").
4.3 Records Pertaining to the Company.
(a) Turnover of Records. At the Closing, the Shareholder will deliver
or cause to be delivered to the Company any and all records
applicable to the Company (i) in the possession of the Shareholder,
and (ii) of which the Company does not already have copies. All
original agreements, documents, records, reports and files,
including but not limited to customer files, related to the broker
dealer business of the Company, shall be delivered to the Company
by Shareholder.
(b) Access to Records. Prior to closing the Shareholder shall allow
Buyer and its representatives access to all business records and
files of the Shareholder that pertain in part to the Company,
during normal working hours at the principal place(s) of business
15
of the Shareholder, or at any location where such records are
stored, and the Buyer shall have the right, at its own expense,
to make copies of any such records and files.
(c) Assistance with Records. From and after the Closing Date,
Shareholder shall make Shareholder be available to Buyer, upon
written request, to the extent reasonable to assist Buyer in
locating and obtaining records and files maintained by Shareholder
and for assistance or participation as is reasonably required by
Buyer in anticipation of, or preparation for, any existing or
future third party actions, tax or other matters in which the
Company or any of its past, present or future Affiliates is
involved and which relate to the business of the Company,
including without limitation, assisting Buyer in the conversion
of Company data from the Company's or Shareholder's computer
systems to Buyer's computer systems.
(d) Records Prior to Closing. Commencing on the effective date of this
Agreement, Shareholder shall provide Buyer with all current records
in electronic or other form appropriate for loading into Buyer's
system and Buyer's personnel shall, at Buyer's cost and expense, be
permitted to assist the Company in the servicing of its assets and
accounts for purposes of familiarization and transition. Such
records shall be held in strict confidence in accordance with the
Confidentiality Agreement and shall be promptly returned to
Shareholder or the Company in the event this Agreement is terminated
prior to Closing for any reason.
(e) Third Party Payments. Any payments or checks for the benefit of
Company received by Shareholder after the Closing shall be
immediately forwarded to the Company care of Buyer.
(f) Audited Financial Statements. Shareholder shall provide to Buyer,
at Shareholder's sole cost and expense, audited financial statements
for the Company for the fiscal years ended September 30, 1999, 2000,
and 2001, and other financial data and schedules, along with the
related opinions prepared by the Company's independent auditors.
Shareholder shall use reasonable efforts to assist Buyer in
obtaining the consent of the Company's independent auditors for
Buyer to include such financial statements in Buyer's regulatory
filings.
4.4 Preparation and Filing of Tax Returns.
(a) Shareholder shall prepare or cause to be prepared and file or cause
to be filed all federal and state income and employer Tax returns
for all taxable periods of the Company ending on or prior to the
Closing Date. Such Tax returns shall be prepared on a basis
consistent with past practice. Notwithstanding the provisions of
paragraph 1.3, Shareholder shall be responsible for the payment of
all taxes attributable to such periods and Tax returns. Buyer shall
prepare or cause to be prepared and file or cause to be filed all
Tax returns of the Company for taxable periods which begin before
the Closing Date and end after the Closing Date. The Buyer shall be
responsible for the payment of all amounts due on such Tax returns.
Notwithstanding the provisions of paragraph 1.3, Shareholder shall
pay Buyer within thirty (30) days after the date on which Taxes are
paid, with respect to such periods, an amount equal to the portion
of such Taxes which relates to the portion of such taxable period
16
ending on the Closing Date to the extent such Taxes are not
reflected in the reserve for tax liability set forth on the
Financial Statements and covered by cash left in the Company at
closing for payment of such taxes. For purposes of this Section,
in the case of any Taxes that are imposed on a periodic basis and
are payable for a taxable period that includes (but does not end on)
the Closing Date, the portion of such Tax which relates to the
portion of such taxable period ending on the Closing Date shall (x)
in the case of any Taxes other than Taxes based upon or related to
income or receipts, be deemed to be the amount of such Tax for the
entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the
Closing Date and the denominator of which is the number of days in
the entire taxable period, and (y) in the case of any Tax based upon
or related to income or receipts be deemed equal to the amount which
would be payable if the relevant taxable period ended on the Closing
Date. Any credits relating to a taxable period that begins before
and ends after the Closing Date shall be taken into account as
though the relevant taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations
shall be made in a manner consistent with the prior practice of the
Company. Shareholder and Buyer shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with
the filing of Tax returns pursuant to this Section.
(b) The Shareholder shall have responsibility for the conduct of any
audit of the Company for any taxable period ending on or prior to
the Closing Date; provided, however, that in the event that the
Shareholder receives notice of a claim from the IRS or any other
taxing authority the Shareholder shall promptly, but in any event
within five (5) business days, notify Buyer of such claim and of any
action taken or proposed to be taken. In the event Buyer wishes to
participate in such audit it may do so at its own cost and expense.
Notwithstanding any indication in this Agreement to the contrary,
the Shareholder shall not agree to an adjustment in a federal or
state income tax audit, appeals procedure or judicial proceeding
that will adversely impact the Company in tax periods after the
Closing Date without the prior written consent of Buyer, which
consent shall not be unreasonably withheld.
(c) All tax attributes of the Company as of the Closing Date computed
on a separate company basis shall remain with the Company after the
Closing.
(d) Any Tax refunds, that are received by Buyer or Company, and any
amounts credited against Tax to which Buyer or Company become
entitled, that relate to tax periods or portions thereof ending
on or before the Closing Date shall remain an assets of the
Company after closing.
17
(e) Shareholder shall be responsible for payment of any and all personal
income, sales, use or transaction taxes arising as a result of the
transactions contemplated by this Agreement.
4.5 Existing Personal Service Contracts. No consulting contracts, employment
contracts or other future or contingent liabilities or obligations of the
Company not specifically approved by Buyer shall remain in force at closing.
For a period of three years from Closing, Buyer will neither change any
existing commission payout schedules with respect to associated registered
representatives, assess any additional fee to such registered representatives
for the conduct of their business, nor assess any fee to such registered
representatives for the conduct of their business with the exception of any
increases in fees which are typically passed through to the registered
representatives. Additionally, at Closing Shareholder will sign a new
commission agreement in the form of EXHIBIT D and a new consulting and
recruiting agreement in the form of EXHIBIT E.
4.6 NASD Regulation, Inc. Issues. With respect to violations by the
Company or Company associated persons of rules or regulations that may
have occurred prior to closing, all fines, penalties, costs and sanctions
will remain the sole responsibility of the Company up to closing, If the
Company as a broker dealer shall be subject to sanction by NASD Regulation,
Inc. during the one year period following closing for activities occurring
prior to closing, but which are not disclosed as a liability herein, such
sanctions will be considered indemnifiable losses subject to the terms of
paragraph 1.3 hereof.
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to purchase the Company Shares, and to cause the
other transactions contemplated hereby to occur at the Closing, shall be
subject to the satisfaction of each of the following conditions at or prior
to the Closing:
5.1 Representations and Warranties. Each representation and warranty of
the Company and the Shareholder contained in this Agreement and in any schedule
or other disclosure in writing from the Company or the Shareholder shall be
true and correct in all material respects (i) when made, and (ii) on and as
of the Closing Date with the same effect as though such representation and
warranty had been made on and as of the Closing Date.
5.2 Covenants of the Shareholder and the Company. All of the material
terms, covenants, conditions and agreements herein on the part of the
Shareholder and the Company to be complied with or performed on or before the
Closing Date shall have been fully complied with and performed.
5.3 Certificate of The Company and The Shareholder. There shall be
delivered to Buyer a certificate dated the Closing Date and signed by an
officer of the Company and by the Shareholder as individuals to the effect
set forth in Sections 5.1 and 5.2, which certificate shall have the effect
18
of a representation and warranty made by the Company and the Shareholder on
and as of the Closing Date.
5.4 Absence of Litigation. No inquiry, action, suit or proceeding shall
have been asserted, threatened or instituted (i) in which it is sought to
restrain or prohibit the carrying out of the transactions contemplated by
this Agreement or to challenge the validity of such transactions or any part
thereof, (ii) which could, if adversely determined, have a material adverse
effect on the Company or (iii) as a result of which, in the reasonable
judgment of Buyer, Buyer would be deprived of the material benefits of the
ownership of the Company Shares.
5.5 Consents and Approvals. All material authorizations, consents,
approvals, waivers and releases, if any, necessary for the Shareholder and
the Company to consummate the transactions contemplated hereby shall have
been obtained and copies thereof shall be delivered to Buyer. NASD shall
have been notified and consented to the transfer of control to Buyer and
the relocation of Buyer's principal office to Minot, North Dakota under
the jurisdiction of District 4 of NASD. The Continuing Membership Agreement
for the Company shall be reasonably satisfactory to Buyer.
5.6 Certificates. The Company and the Shareholder shall have delivered to
Buyer (i) certificates of the appropriate governmental authorities, dated as
of a date not more than forty five (45) days prior to the date hereof,
attesting to the existence and good standing of the Company in the State of
Wisconsin; (ii) a copy, certified by the Department of Financial Institutions
of the State of Wisconsin as of a date not more than forty five (45) days
prior to the date hereof, of the Articles of Incorporation and all amendments
thereto of the Company; (iii) a copy certified by the Secretary of the
Company, dated the Closing Date, of the Bylaws of the Company; and (iv)
certificates, dated the Closing Date, of the Secretary of the Company,
relating to the incumbency and corporate proceedings in connection with the
consummation of the transactions contemplated hereby.
5.7 Opinion of Counsel. Buyer shall have received an opinion of counsel to
the Shareholder and the Company, dated the Closing Date substantially in the
form of EXHIBIT F hereto (" Shareholder and Company Legal Opinion").
5.8 No Transfers to Affiliates. Except as otherwise expressly contemplated
by this Agreement, the Company shall not have distributed or transferred any
of its assets or properties, or made any payments, to or for the benefit of
any of its affiliates.
5.9 Termination of Related Party Agreements. All existing agreements between
the Company and the Shareholder and all existing bonus and incentive plans and
arrangements of the Company shall have been canceled or terminated.
5.10 Stock Certificates. The Shareholder shall have tendered certificates
representing the Company Shares, duly endorsed in blank or accompanied by
appropriate stock powers, in proper form for transfer, with all transfer taxes
paid.
19
5.11 Resignations of Directors and Officers. Buyer shall have received the
resignations of each of the directors and officers of the Company, effective
as of the Closing.
5.12 Commission Agreement. Shareholder shall have executed and delivered a
commission agreement with Buyer (the "Commission Agreement"), the form of
which is attached hereto as EXHIBIT E.
5.13 Noncompete Agreement. Shareholder shall have executed and delivered to
Buyer a noncompete agreement in the form attached hereto as EXHIBIT G (the
"Noncompete Agreement").
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER
The obligations of the Shareholder to sell the Company Shares and to cause
the other transactions contemplated hereby to occur at the Closing shall be
subject, except as the Shareholder may waive in writing, to the satisfaction
of each of the following conditions at or prior to the Closing:
6.1 Representations and Warranties. Each representation and warranty of
Buyer contained in this Agreement and in any schedule or other disclosure in
writing from Buyer shall be true and correct in all material respects (i) when
made, and (ii) on and as of the Closing Date with the same effect as though
such representation and warranty had been made on and as of the Closing Date.
6.2 Covenants of Buyer. All of the material terms, covenants, conditions
and agreements herein on the part of Buyer to be complied with or performed
on or before the Closing Date shall have been fully complied with and
performed.
6.3 Absence of Litigation. No inquiry, action, suit or proceeding shall have
been asserted, threatened or instituted in which it is sought to restrain or
prohibit the carrying out of the transactions contemplated by this Agreement
or to challenge the validity of such transactions or any part thereof.
6.4 Certificates. Buyer shall have delivered to the Shareholder (i) a
certificate of the appropriate governmental authority, dated as of a date not
more than forty five (45) days prior to the Closing Date, attesting to the
existence and good standing of Buyer in the State of its incorporation; (ii)
copies, certified by the Secretary of the State of its incorporation as of a
date not more than forty five (45) days prior to the Closing Date, of the
articles of incorporation and all amendments thereto of Buyer; (iii) copies,
certified by the Secretary of Buyer, dated the Closing Date, of the bylaws of
Buyer; and (iv) certificates, dated the Closing Date, of the Secretary of
Buyer relating to the incumbency and corporate proceedings in connection with
the consummation of the transactions contemplated hereby.
20
6.5 Payment of Consideration. Buyer shall have delivered to Shareholder
the consideration set forth in Section 7.3 to be delivered at Closing.
6.6 Certificate of Buyer. There shall be delivered to Shareholder a
certificate dated as of the Closing Date and signed by an officer of Buyer to
the effect set forth in Sections 6.1 and 6.2 which certificate shall have the
effect of a representation and warranty made by Buyer on and as of the Closing
Date.
6.7 NASD shall have granted consent to the transfer of control of the
Company to Buyer and provided the Company with a Continuing Membership
Agreement satisfactory to Buyer.
ARTICLE VII.
CLOSING
7.1 Closing. Unless this Agreement is first terminated as provided in
Section 8.1, and subject to the satisfaction or waiver of all the conditions
set forth in Articles V and VI, the closing of the transactions contemplated
hereby (the "Closing") shall take place at the principal offices of the Buyer
at 1 North Main Street, Minot, North Dakota, or by telecopy with originals of
all materials to follow upon the agreement of the parties, or such other place
as is agreed to by Buyer and Shareholder, on the earlier January 18, 2002 or
such other date as the parties may agree upon in writing (the "Closing Date").
Copies of Exhibits and Schedules as well as information requested by Schedules
required by this Agreement must be provided at least seven days prior to the
anticipated closing date.
7.2 Delivery of the Company Shares. At the Closing, Shareholder shall
deliver or cause to be delivered to Buyer the stock certificate(s) and option
documents evidencing all of the Company Shares owned by Shareholder, duly
endorsed or accompanied by duly executed stock powers assigning the Company
Shares (and options) to Buyer and otherwise in good form for transfer.
7.3 Payment of Consideration to Shareholder. At the Closing, Buyer shall
deliver: 1) by wire transfer or other immediately available funds, to
Shareholder, an amount equal to $1,140,000; 2) a certificate for 250,000 shares
of no par value common stock of Buyer; and 3) an option agreement for 250,000
options to purchase no par common stock of Buyer at an option strike price of
$1.00 per share, each option allowing Shareholder to purchase one share of no
par common stock. The additional items of consideration will be issued in
good faith post-Closing in accordance with the provisions of paragraph 1.1
hereof.
ARTICLE VIII.
TERMINATION PRIOR TO CLOSING
8.1 Termination.
(a) This Agreement may be terminated and abandoned at any time prior to
the Closing:
21
(1) By the written mutual consent of Buyer and Shareholder;
(2) By Buyer on the Closing Date if any of the conditions set
forth in Article V shall not have been fulfilled on or prior
to the Closing Date;
(3) By Shareholder on the Closing Date if any of the conditions
set forth in Article VI shall not have been fulfilled on or
prior to the Closing Date;
In the event of a termination pursuant to this Article VIII, each party
shall bear its own costs and expenses incurred with respect to the transactions
contemplated hereby. Neither party hereto shall be entitled to monetary damages
pursuant to a termination in accordance with this Article VIII.
ARTICLE IX.
MISCELLANEOUS
9.1 Entire Agreement. This Agreement (including the exhibits and schedules
hereto) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties hereto with
respect to the subject matter hereof, and no party shall be liable or bound
to the other in any manner by any representations or warranties not set forth
herein.
9.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. This Agreement may not be
assigned by any party hereto without the prior written consent of all other
parties hereto.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument. Facsimile
signatures may be substituted for originals.
9.4 Headings. The headings of the articles and sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute part
of this Agreement or to affect the construction hereof.
9.5 Construction. As used in this Agreement, the words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement as
a whole and not to any particular article, section, paragraph or other
subdivision.
9.6 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled
to the benefits thereof, and this Agreement may be modified or amended by a
written instrument executed by Buyer, the Company and the Shareholder. No
supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by all of the parties hereto. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
22
9.7 Schedules, etc. All exhibits and schedules annexed hereto are expressly
made a part of this Agreement as though fully set forth herein.
9.8 Notices. All notices of communication required or permitted hereunder
shall be in writing and may be given by (a) depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt request, (b) delivering the same
in person to an officer or attorney of such party, or (c) telecopying the same
with electronic confirmation of receipt to the addresses set forth below or to
such other address or counsel as any party hereto shall specify pursuant to
this Section from time to time.
(1) If to Buyer, addressed to it at:
0 Xxxxx Xxxx Xxxxxx
Xxxxx, Xxxxx Xxxxxx 00000
ATTENTION: Xxxxxx X. Xxxxxxx
(2) If to the Shareholder, addressed to:
Xxxxxxx X. Xxxxxxx
One Landmark Place - Suite 307
0000 Xxxx Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Xxxxxxxx Xxxxxx
Xxx Xxxxxxxx Xxxxx - Xxxxx 000
0000 Xxxx Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
9.9 GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH LAWS OF THE STATE OF NORTH DAKOTA. THE PARTIES
HERETO EXPRESSLY CONSENT AND AGREE THAT ANY DISPUTE, CONTROVERSY, LEGAL
ACTION OR OTHER PROCEEDING THAT ARISES UNDER, RESULTS FROM, CONCERNS OR RELATES
TO THIS AGREEMENT SHALL BE BROUGHT IN THE UNITED STATES DISTRICT COURTS FOR THE
DISTRICT OF NORTH DAKOTA WITH VENUE IN FARGO, NORTH DAKOTA AND ACKNOWLEDGE
THAT THEY WILL ACCEPT SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL OR
THE EQUIVALENT DIRECTED TO THEIR LAST KNOWN ADDRESS AS DETERMINED BY THE OTHER
PARTY IN ACCORDANCE WITH THIS AGREEMENT OR BY WHATEVER OTHER MEANS ARE
PERMITTED BY SUCH COURTS.
9.10 Termination of Representations and Warranties. All representations
and warranties contained herein shall terminate at and as of the Closing.
23
9.11 Expenses. Company and the Shareholder, on the one hand, and Buyer,
on the other hand, shall be solely responsible for their respective costs and
expenses incurred in connection with the transactions contemplated hereby.
9.12 Number and Gender of Words. Whenever the singular number is used, the
same shall include the plural where appropriate, and words of any gender shall
include each other gender where appropriate.
9.13 Further Assurances. From time to time after the Closing, at the request
of any other party but at the expense of the requesting party, Buyer, Company
or the Shareholder, as the case may be, will execute and deliver any such other
instruments of conveyance, assignment and transfer, and take such other action
as the other party may reasonably request in order to consummate or evidence
the transactions contemplated hereby.
9.14 Brokers and Agents. Each party represents and warrants that it has
employed no broker or agent in connection with this transaction and agrees to
indemnify and hold harmless the other parties against all loss, cost, damages
or expense arising out of claims for fees or commissions of brokers employed
or alleged to have been employed by such indemnifying party.
9.15 Public Announcements. Buyer, the Company and Shareholder shall not issue
or cause the publication of any press release or any other announcement
(including without limitation announcements to the Company's employees,
representatives, or agents) with respect to this Agreement or the transactions
contemplated hereby without the consent of the others, except where such
release or announcement is required by applicable law or pursuant to any
listing agreement with, or the rules or regulations of, any securities exchange
or any other regulatory requirements.
9.16 Damages. Except as otherwise expressly set forth herein, the parties
acknowledge that their sole remedy under this Agreement is to terminate this
Agreement pursuant to Article VIII.
24
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of the date first above written.
BUYER: COMPANY:
ND HOLDINGS, INC. CAPITAL FINANCIAL SERVICES, INC.
By: /s/Xxxxxxx Xxxxx By: /s/Xxxxxxxx Xxxxxx
-------------------- --------------------------------
Title: President Title: President
-------------------- --------------------------------
SHAREHOLDER:
/s/Xxxxxxx X. Xxxxxxx
----------------------
Xxxxxxx X. Xxxxxxx, an Individual
/s/Xxxxxxxx Xxxxxx
------------------
Xxxxxxxx Xxxxxx, an Individual
25
LIST OF SCHEDULES AND EXHIBITS
EXHIBITS:
EXHIBIT A Form of Debenture Agreement
EXHIBIT B Form of Put Agreement
EXHIBIT C Form of Option Agreement
EXHIBIT D Form of Commission Agreement - Shareholder
EXHIBIT E Form of Consulting and Recruiting Agreement - Shareholder
EXHIBIT F Form of Opinion of Shareholder's and Company's Counsel
EXHIBIT G Form of Noncompete Agreement
EXHIBIT H Form of Xxxx of Sale
SCHEDULES:
1.2(d) Liabilities to Remain in Company
2.2 List of Jurisdictions Company qualified or licensed to do business
2.8(b) Existing Leases
2.9 List of all Material Contracts
2.11 Inventory and Description of Assets
2.13 List of all Litigation
2.15 List of Employees
2.16 List of Directors and Officers
2.17 Bank Accounts, Credit Accounts, Powers of Attorney, Custodial
Accounts
2.18 Insurance Policies and Bonds
2.19 Interested Party Transactions
4.1(b)(1) List of Registered Representatives
4.1(b)(2) List of Contracts with Registered Representatives
Appendix Certificates at Closing:
ARTICLE V
Seller's Corporate Articles Certificate of Good Standing
Seller's Certified Articles of Incorporation
Seller's Secretary Certified Bylaws
Seller's Closing Certificate
Company's Closing Certificate
Seller's Officer and Director Resignations
26
ARTICLE VI
Buyer's Corporate Articles Certificate of Good Standing
Buyer's Certified Articles of Incorporation
Buyer's Secretary Certified Bylaws
Buyer's Minutes Authorizing Transaction
Buyer's Closing Certificate
NASD Membership, Form BD and Examinations
SEC Registration and Documents
SIPC Documentation
27
Exhibit A to Stock Purchase Agreement - Form of Convertible Debenture
Instrument
Date of Instrument January 15, 2003, Convertible Debenture No.
ND HOLDINGS, INC.
Senior Convertible Debenture
ND Holdings, Inc., a North Dakota corporation organized and existing under
the laws of the State of North Dakota (the "Corporation"), for value received,
hereby promises to pay to Xxxxxxx X Xxxxxxx
.0 ("Investor") the principal sum of One Hundred Twenty-Five Thousand and no/
100 ($125,000.00), [initial principal amount to be determined in accordance
with the Stock Purchase Agreement dated 1/15/02] subject to reduction due to
conversion as provided herein, plus all accrued and unpaid interest three
years from the date hereof on January 15, 2006. Interest on the principal
amount hereof shall accrue at the rate of four percent (4%) per annum (based
on a three hundred sixty five (365) day year). In the event of any Default
(as defined herein) interest shall accrue at the rate of twelve percent (12%)
until such default is cured, at which time interest shall accrue at four
percent (4%). All accrued and unpaid interest shall be payable on a
semiannual basis beginning on July 15th, 2003 and thereafter on January
15th and July 15th of each year in which any portion of the principle of this
Convertible Debenture remains outstanding. All payments hereunder will be
applied first to interest and any remainder to reduction of principal. The
principal amount of this Convertible Debenture shall be increased or
decreased as provided in paragraph 1.3 of that certain Stock Purchase
Agreement between the Corporation and the Investor, among others, dated
January 15, 2002.
CONVERSION
From the date of this instrument set forth above until all amounts owing
hereunder are paid in full, the Investor may, from time to time, convert all
or any portion of this Convertible Debenture to no par common stock of the
Corporation at the rate of one share for each one dollar of Convertible
Debenture (1 share per $1.00 converted). The Investor may effectuate the
conversion by delivering to the President of the Corporation (i) written notice
of conversion (by certified mail return receipt requested), specifying the
amount of this Convertible Debenture to be converted and the number of shares
to be issued, and (ii) this Convertible Indenture. The Corporation shall
immediately issue to the Investor the common shares specified in said notice.
If less than the entire principal amount of this Convertible Debenture is
converted, the Corporation shall also immediately issue to the Investor a
replacement convertible debenture equal in principal amount to the unconverted
portion of the Convertible Debenture surrendered and, otherwise, identical to
this Convertible Indenture. Upon partial conversion, payment of accrued
interest shall continue as provided herein, and if a full conversion occurs
the entire accrued interest shall be paid through the conversion date.
The Corporation shall reserve out if its authorized but unissued common stock
or its common stock held in treasury enough shares of common stock to permit
the conversion of this Convertible Debenture. All shares of common stock which
may be issued upon conversion of this Convertible Debenture shall be fully paid
and non-assessable and shall have the same rights and privileges as all other
common stock issued by the Corporation.
If the Corporation:
(i) pays a dividend or other distribution with respect to its common
stock in shares of any of its capital stock;
(ii) subdivides its outstanding shares of common stock into a greater
number of shares;
(iii) combines its outstanding shares of common stock into a smaller
number of shares, or
(iv) issues any shares of its capital stock pursuant to a reorganization
or recapitalization,
such that the number of its outstanding shares is increased by more than five
percent (5%), then the conversion privilege and the conversion price in effect
immediately prior to such action shall be adjusted so that the Investor may
receive upon subsequent conversion the number of shares of common stock of the
Company corresponding to the percentage of shares of common stock which would
have been owned immediately following such action if the Investor had converted
this Convertible Debenture immediately prior to such action. The adjustment
shall become effective immediately after the record date in the case of a
dividend or distribution and immediately after the effective date in the case
of a subdivision, combination or issuance. In addition, appropriate and
equitable adjustments to the conversion price and privilege shall be made for
any stock or cash dividend, stock split, recapitalization, reorganization,
issuance or other change in the capital structure of the Corporation not
covered by this paragraph. If the Corporation takes any action which would
require an adjustment in the conversion price or privilege pursuant to this
paragraph, or the Corporation adopts a plan of liquidation or dissolution, the
Investor shall be given written notice thereof at least sixty (60) days prior
to the record date for or the effective date of the transaction so that it may
exercise its conversion right and may receive the rights, warrants, securities
or assets which a holder of common stock on that date may receive.
UNREGISTERED SECURITY
This Convertible Debenture is being issued by the Corporation pursuant to
exemptions from federal registration. No application to register this
Convertible Debenture and no registration statement covering this Convertible
Debenture or any underlying security of the Corporation with respect to this
Convertible Debenture has been filed with the United States Securities and
Exchange Commission (SEC). There is no market for this Convertible Debenture
and there is no assurance a market will develop. The Corporation has no
obligation to register this Convertible Debenture, the underlying common stock
or any other security of the Corporation. Securities sold under exemption from
registration cannot be resold without registration under the Securities Act of
1933 or an exemption thereof. However, the Investor shall be entitled to
register some or all of the shares it receives hereunder in the event that the
Corporation registers its common stock for sale to the public (the "Piggyback
Registration"). In the event the Corporation anticipates filing a registration
statement with the SEC relating to a public sale of its common stock, it shall
give notice thereof to the Investor who shall, within 20 days, inform the
Corporation in writing of its exercise of its Piggyback Registration Rights.
Upon such exercise, Investor shall pay the additional cost, if any, of
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preparation and filing of the registration statement created by such Piggyback
Registration of Investor's shares of common stock and shall provide such
information, disclosures and warranties as may be reasonably required by
registration counsel to Corporation.
GENERAL OBLIGATION
This Convertible Debenture is a general obligation of the Corporation which is
not secured by any bond, mortgage, sinking fund, or any other security.
Creditors of the Corporation holding mortgages or other security interests in
specific Corporation properties will have priority over the holder of this
Convertible Debenture in the event of the insolvency or liquidation of the
Corporation. The holder of this Convertible Debenture is a general creditor of
the Corporation, but will have priority over the Corporation's owners and all
other holders debentures and notes of the Corporation. Notwithstanding the
preceding sentence, this Convertible Debenture will be subordinated to current
and future bank loans and lines of credit.
This Convertible Debenture is not guaranteed or insured by any agency of any
state or the United States of America.
DEFAULT
The Corporation hereby waives demand, presentment, dishonor and protest and
any notices thereof as well as all other notices of any kind, except as
explicitly set forth herein. Without notice, except as expressly provided
herein, the following will be deemed to be events of Default, upon which
Investor is entitled to acceleration of all principal and interest due in
accordance with this Convertible Debenture:
a. Default in the payment of principal or interest under this
Convertible Debenture as and when the same becomes due and payable and the
continuance of such default for a period of more than ten (10) days after
notice as described in paragraph b below.
b. Failure on the part of the Corporation to duly observe or perform any
other of the covenants or agreements on the part of the Corporation contained
in this Convertible Debenture and written notice of such failure, requiring the
Corporation to remedy the same, has been delivered by certified mail return
receipt requested to the Corporation, attention President, and the Corporation
has refused or failed to remedy the same within thirty days of the receipt of
such notice.
c. The Corporation (i) becomes insolvent or takes or fails to take any
action which constitutes an admission of its inability to pay its debts as they
mature; or (ii) makes an assignment for the benefit of creditors, files a
petition in bankruptcy, petitions or applies to a tribunal for the appointment
of a custodian, receiver or a trustee for it or a substantial part of its
assets; or (iii) commences any proceeding under bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation law or statute
of any jurisdiction, whether now or hereafter in effect; or (iv) has filed
against it such petition or applications in which an order for relief is
entered or which remains undismissed for a period of thirty (30) days or more;
or (v) indicates its consent to, approval of, or acquiescence in any such
petition, application, proceeding, order or appointment; or (vi) suffers any
such custodianship, receivership or trusteeship to continue undischarged for
thirty (30) days or more.
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FAILURE TO PAY
If the Corporation Defaults as provided in the preceding section, Investor
will be entitled and empowered to take such measures as may be available by law
to enforce Investor's expectations under this Convertible Debenture, by
judicial proceedings or otherwise. The Corporation acknowledges that damages
would be an inadequate remedy for any breach of the provisions of this
Convertible Indenture and agrees that the obligations of it hereunder shall be
specifically enforceable.
No delay or omission by the Investor to exercise any right or remedy
hereunder, whether on, before or after the happening of any breach or default,
shall impair any such right or remedy or shall operate as a waiver thereof or
as a waiver of any such breach or default. No single or partial exercise by
the Investor of any right or remedy shall preclude any other or further
exercise thereof, or preclude any other right or remedy. The rights and
remedies herein provided are cumulative and are not exclusive of any other
rights or remedies provided by law or in equity.
GOVERNING LAW
This instrument is to be construed under the laws of the State of North
Dakota. Any legal proceeding with respect to this Convertible Debenture shall
be brought in the U.S. District Court, District of North Dakota and venued in
Fargo, North Dakota.
EXECUTION
Executed on January 15, 2002 at Minot, North Dakota.
ND HOLDINGS, INC.
By: /s/Xxxxxxx Xxxxx
Its President
THIS CONVERTIBLE DEBENTURE IS ISSUED IN RELIANCE OF EXEMPTIONS FROM
REGISTRATION PROVIDED BY PROVISIONS OF THE SECURITIES ACT OF 1933 PROVIDING
EXEMPTIONS FOR NONPUBLIC SALES OF SECURITIES. SECURITIES SOLD UNDER
EXEMPTION FROM REGISTRATION CANNOT BE RESOLD WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF 1933 OR AN EXEMPTION THEREOF. THIS DEBENTURE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND THEREFORE CANNOT
BE RESOLD UNLESS IT IS REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNLESS
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
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Exhibit B to Stock Purchase Agreement - Form of Put Option Agreement
PUT OPTION AGREEMENT
PUT OPTION AGREEMENT dated as of January 15, 2002, among ND Holdings, Inc.,
a North Dakota corporation ("NDHI") and ______________________ ("Put Holder").
A. NDHI, Capital Financial Services, Inc., a Wisconsin corporation, and
Xxxxxxxx Xxxxxx and Xxxxxxx X. Xxxxxxx are parties to that certain stock
purchase agreement dated January 15, 2002 (the "Stock Purchase Agreement").
All terms used herein and not otherwise defined shall have the meaning assigned
such terms in the Stock Purchase Agreement.
B. Pursuant to the Stock Purchase Agreement NDHI shall issue to Put Holder
a total of 375,000 shares of no par value common stock of NDHI (the
"Installment Shares") in three installments; the first installment of 125,000
shares at Closing, the second installment of 125,000 shares on the one year
anniversary of the Closing Date, and the third installment of 125,000 shares on
the two year anniversary of the Closing Date.
For the consideration set forth in the Stock Purchase Agreement, Put Holder
and NDHI agree as follows:
1. Grant of Put Option. Subject to the terms hereof, NDHI hereby grants to
Put Holder an irrevocable option to put to NDHI, and NDHI hereby irrevocably
commits itself to buy from Put Holder, up to 375,000 shares of NDHI no par
common stock at the purchase price of U.S. $1.00 per share (the "Option").
Registration. The Option is being issued by NDHI pursuant to
exemptions from registration provided by provisions of the Securities Act of
1933 providing exemptions for nonpublic sales of securities. Securities sold
under exemption from registration cannot be resold without registration under
the Securities Act of 1933 or an exemption thereof. The Issuer has no
intention or obligation to register the Option.
2. Exercise of Option. Put Holder may exercise the Option in whole or in
part in accordance with the provisions of Section 1 above and this Section 2.
Put Holder may exercise the Option at the rate of up to 125,000 shares per year
for each of the three consecutive years following the Closing Date. Put Holder
may exercise the Option at any time within the ninety (90) day period following
the first, second, and third annual anniversaries of the Closing Date (the
"Redemption Periods"). Put Holder may effectuate his right to exercise the
Option by delivering to NDHI, at least thirty days prior to the beginning of
a Redemption Period, written notice identifying (i) the Option, (ii) his intent
to exercise the Option during a Redemption Period, and (iii) the number of
Installment Shares Put Holder will put to NDHI (the "Notice of Intent").
Put Holder may then exercise the option by delivering to NDHI, by overnight
mail prior to the end of the Redemption Period, (x) written notice of exercise
and (y) certificates representing the number of Installment Shares identified
in the Notice of Intent, duly assigned to the name of NDHI or its nominee, or
evidence of Put Holder's direction to the holder of record of the Installment
Shares identified in the Notice of Intent to cause a book entry to occur to
transfer ownership of the Installment Shares so tendered to NDHI (the "Notice
of Exercise"). Upon NDHI's receipt of a Notice of Exercise, NDHI shall pay to
Put Holder no later than 2:00 p.m. on the 3rd business day following the Notice
of Exercise (the "Payment Date") the purchase price for the Installment Shares
identified in the Notice of Intent at the price per share specified in
Section 1, by wire transfer of immediately available funds in U.S. dollars to
an account or accounts designated in writing by Put Holder. If Put Holder
tenders to NDHI a certificate representing a greater number of Installment
Shares than identified in the Notice of Intent, on the Payment Date NDHI shall
issue to Put Holder a new certificate for that number of shares equal to the
difference between the number of Installment Shares so tendered and the number
of Installment Shares identified in the Notice of Intent. Put Holder, in his
sole discretion, shall determine whether to exercise the Option. The put
rights granted hereby are non-accumulative, and each installment will expire
if not exercised during the scheduled Redemption Period.
3. Representations and Warranties of Put Holder. Put Holder hereby
represents and warrants to NDHI as follows:
a. Put Holder has the power and authority to enter into this Agreement.
This Agreement, when executed and delivered by Put Holder, constitutes the
legal, valid and binding obligation of Put Holder, enforceable against Put
Holder in accordance with its terms, except as the enforceability thereof may
be Limited by creditors' rights generally or by general principles of equity.
No, consent, approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, is required by,
or with respect to, Put Holder in connection with the execution and delivery of
this Agreement by Put Holder or the consummation by Put Holder of the
transactions contemplated hereby. The execution and delivery of this Agreement
by Put Holder, and the consummation of the transactions contemplated hereby
by Put Holder, does not conflict with, or result in the breach of, any law or
regulation of any governmental authority applicable to Put Holder or any
material agreement to which Put Holder is a party.
b. Any Installment Shares delivered to NDHI pursuant to exercise of the
Option shall be free and clear of all liens, encumbrances and charges, other
than those arising from acts of NDHI and its subsidiaries or affiliates. Put
Holder shall convey to NDHI good and valid title to such Installment Shares
tendered to NDHI pursuant hereto.
4. Representations and Warranties of NDHI. NDHI hereby represents and
warrants to Put Holder as follows:
a. Authority. NDHI has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by NDHI of this Agreement, and the
consummation by NDHI of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of NDHI. This
Agreement has been duly executed and delivered by NDHI and constitutes a
valid and binding obligation of NDHI enforceable against NDHI in accordance
with its terms except as the enforceability thereof may be limited by
creditors' rights generally or by general principles of equity. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, is required by, or with
respect to, NDHI or Put Holder in connection with the execution and delivery of
this Agreement by NDHI or the consummation by NDHI of the transactions
-2-
contemplated hereby. The execution and delivery of this Agreement by NDHI,
and the consummation of the transactions contemplated hereby by NDHI, does
not conflict with, or result in a breach of, any law or regulation of any
governmental authority applicable to NDHI or any material agreement to which
NDHI is a party.
b. Securities Act. Any Installment Shares purchased by NDHI hereunder,
will be acquired for investment only and not with a view to any public
distribution thereof, and NDHI will not offer to sell or otherwise dispose of
any Installment Shares so acquired by it in violation of the registration
requirements of the United States Securities Act of 1933, as amended.
5. Assignment. Subject to the limitations of the Securities Act, Put Holder
shall have the right to assign all or any portion of his rights, interests and/
or obligations under this Agreement, including the Option to any person,
including to a lender as collateral security or to a lender or any other person
or entity as an outright assignment, in his sole discretion, without the prior
consent of NDHI. The Put Holder will give NDHI notice of any such assignment,
but the failure to give such notice shall not affect the validity of any such
assignment. Upon the request of the Put Holder, NDHI will acknowledge the
validity of any such assignment for the benefit of any such assignee, however,
failure by NDHI to provide such acknowledgment or the lack of any such
acknowledgment by NDHI shall not affect the validity of any such assignment.
Subject to the provisions of this Section 5, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective successors and assigns.
6. GENERAL PROVISIONS.
a. Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable.
b. Expenses. Whether or not the Option is exercised, all costs and
expenses incurred in connection with the Option, this Put Option Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expense.
c. Amendment. This Agreement may not be amended except by an instrument
in writing signed by each of the parties hereto.
d. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested), to the parties at
the addresses set forth below or at such other address as any party may from
time to time furnish to the other party hereto in writing:
(1) if to NDHI, to:
ND Holdings, Inc.
0 Xxxxx Xxxx Xxxxxx
Xxxxx, XX 00000
Attention: President
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(2) if to Put Holder, to
-----------------------
-----------------------
Service of any such notice shall be deemed to be effected when received.
e. Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include", "includes" or "including' are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
f. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
g. Entire Agreement. This Agreement (i) constitutes the entire
agreement of the parties hereto with respect to the subject matter specified
herein and supersedes all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof and (ii) is
not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
h. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of North Dakota (without
regard to conflict of law principles).
i. Partial Invalidity. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
j. Indemnification. NDHI and Put Holder each hereby indemnify and hold
harmless the other from and against, and agrees to defend the other from and
reimburse such other party for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
reasonable attorneys' fees and other reasonable legal costs and expenses) which
such other party may at any time suffer or incur, or become subject to, as a
result of or in connection with its failure to perform any of its covenants
or agreements under this Put Option Agreement or any suit, action, or other
proceeding brought by any person arising out of or in any way related to
thereto.
-4-
IN WITNESS WHEREOF, NDHI and Put Holder have signed, or caused this Put
Option Agreement to be signed, by officers thereunto duly authorized, all as
of the date first written above.
ND Holdings, Inc.
By:
---------------------
Its President
Put Holder
------------------
------------------
THIS PUT OPTION AGREEMENT IS ISSUED IN RELIANCE OF EXEMPTIONS FROM
REGISTRATION PROVIDED BY PROVISIONS OF THE SECURITIES ACT OF 1933 PROVIDING
EXEMPTIONS FOR NONPUBLIC SALES OF SECURITIES. SECURITIES SOLD UNDER EXEMPTION
FROM REGISTRATION CANNOT BE RESOLD WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933 OR AN EXEMPTION THEREOF. THIS AGREEMENT HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND THEREFORE CANNOT BE RESOLD UNLESS IT IS
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
-5-
Exhibit C Attachment
Pursuant to section 1.1(a)(4), options in the amount of 250,000 will be
distributed as follows:
Xxxxxxx Xxxxxx 20,000 options
Xxxx Xxxxxxx 46,000 options
Xxxxxxx Xxxxxxx 92,000 options
Xxxxxxxx Xxxxxx 92,000 options
Exhibit D to Stock Purchase Agreement - Form of Stock Option Agreement
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of January 15 2002, among ND Holdings, Inc.,
a North Dakota corporation ("NDHI") and ______________________ ("Option
Holder").
A. NDHI, Capital Financial Services, Inc., a Wisconsin corporation, and
Xxxxxxxx Xxxxxx and Xxxxxxx X. Xxxxxxx have entered into that certain stock
purchase agreement dated January 15, 2002, (the "Stock Purchase Agreement").
All terms used herein and not otherwise defined shall have the meaning assigned
such terms in the Stock Purchase Agreement; and
B. Pursuant to Section 1.1(a)(4) of the Stock Purchase Agreement, NDHI is
obligated to grant to the Shareholder or other designated persons 250,000
options to purchase common stock of NDHI in accordance with terms set forth
therein;
NOW, THEREFORE, for the consideration set forth in the Stock Purchase Agreement
and for other good and valuable consideration, the receipt and the sufficiency
of which is hereby acknowledged, Option Holder and NDHI agree as follows:
1. Grant of Option. Subject to the terms hereof, NDHI hereby grants to
Option Holder an option (the "Option") to purchase from NDHI, and NDHI hereby
irrevocably commits itself to sell to Option Holder, up to _______ shares of
NDHI no par common stock at the purchase price of U.S. $1.00 per each share
(the "Option Shares"). The Option shall be fully vested as of the date hereof,
and it shall expire on the tenth anniversary of the date hereof (the
"Expiration Date").
2. Exercise of Option. Option Holder may exercise the Option, in whole or in
part, by delivering, or his or her designee delivering, to NDHI written notice
identifying (i) this Option, (ii) the number of Option Shares with respect to
which it is being exercised, and (iii) the date on which Option Holder will
purchase said number of Option Shares, which shall be at least thirty days
after the delivery of said notice (the "Payment Date"). On the Payment Date,
(a) Option Holder shall pay to NDHI, no later than 2:00 p.m., the purchase
price for the Option Shares as specified in Section 1, by wire transfer of
immediately available funds in U.S. dollars to an account or accounts
designated in writing by NDHI, and (b) NDHI shall deliver to Option Holder
certificates representing the number of Option Shares purchased, in the name
of Option Holder or his or her nominee.
3. Adjustment for Change in Capital Stock. If, prior to the Expiration Date,
NDHI:
a. pays a dividend or other distribution with respect to its common
stock in shares of any of its common stock;
b. subdivides its outstanding shares of common stock into a greater
number of shares;
c. combines its outstanding shares of common stock into a smaller
number of shares; or
d. issues any shares of its capital stock pursuant to a reorganization
or recapitalization,
such that the number of its outstanding shares is increased by more than five
percent (5%), then the number of Option Shares which Option Holder is entitled
to acquire pursuant to the Option immediately prior to such action shall be
adjusted so that Option Holder may receive upon subsequent exercise of the
Option the number of shares of common stock of NDHI corresponding to the
percentage of shares of common stock which would have been owned immediately
following such action if Option Holder had exercised the Option immediately
prior to such action. The adjustment shall become effective immediately after
the record date in the case of a dividend or distribution and immediately after
the effective date in the case of a subdivision, combination or issuance.
In addition, appropriate and equitable adjustments to the number of shares
Option Holder is entitled to acquire pursuant to the Option shall be made for
any stock or cash dividend, stock split, recapitalization, reorganization,
issuance, or other change in the capital structure of NDHI not otherwise
covered by this Section 3.
If NDHI takes any action described in this Section 3 which would require an
adjustment in the number of shares Option Holder is entitled to acquire, or
NDHI adopts a plan of liquidation or dissolution, NDHI shall give Option Holder
written notice thereof at least sixty (60) days prior to the record date for or
the effective date of the transaction so that Option Holder may exercise the
Option and may receive the rights, warrants, securities or assets which a
holder of common stock on that date may receive.
4. Nature of Option Shares and Registration. The Option Shares will be
issued by NDHI pursuant to exemptions from registration set forth in the
Securities Act of 1933 for nonpublic sales of securities. Securities sold
under exemption from registration cannot be resold without registration under
the Securities Act of 1933 or an exemption thereof. Restrictions on
transferability will be stated on any common stock certificates issued to the
Option Holder on exercise of the Option.
All Option Shares shall have the same rights and privileges as all other
common shares issued by NDHI. In addition, the Option Holder shall be entitled
to register the Option Shares in the event that NDHI registers its common stock
for sale to the public (the "Piggyback Registration"). In the event the
Corporation anticipates filing a registration statement with the SEC relating
to a public sale of its common stock, it shall give notice thereof to the
Option Holder who shall, within 20 days, inform the Corporation in writing of
its exercise of its Piggyback Registration Rights. Upon such exercise,
Piggyback Registration, Option Holder shall pay the additional cost, if any,
of preparation and filing of the registration statement created by such
Piggyback Registration of the Option Shares and shall provide such information,
disclosures and warranties as may be reasonably required by registration
-2-
counsel to NDHI.
5. Representations and Warranties of Option Holder. Option Holder hereby
represents and warrants to NDHI as follows:
a. Authority. Option Holder has the power and authority to enter into
this Agreement. This Agreement, when executed and delivered by Option Holder,
constitutes the legal, valid and binding obligation of Option Holder,
enforceable against Option Holder in accordance with its terms, except as the
enforceability thereof may be limited by creditors' rights generally or by
general principles of equity. No, consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign, is required by, or with respect to, Option Holder in connection with
the execution and delivery of this Agreement by Option Holder or the
consummation by Option Holder of the transactions contemplated hereby. The
execution and delivery of this Agreement by Option Holder, and Option Holder's
consummation of the transactions contemplated hereby, does not conflict with,
or result in the breach of, any law or regulation of any governmental authority
applicable to Option Holder or any material agreement to which Option Holder
is a party.
b. Securities Act. Any Option Shares purchased by Option Holder
pursuant to his or her exercise of the Option, will be acquired for investment
only and not with a view to any public distribution thereof, and Option Holder
will not offer to sell or otherwise dispose of any Option Shares so acquired
by it in violation of the registration requirements of the United States
Securities Act of 1933, as amended.
6. Representations and Warranties of NDHI. NDHI hereby represents and
warrants to Option Holder as follows:
a. Authority. NDHI has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by NDHI of this Agreement, and the
consummation by NDHI of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of NDHI. This
Agreement has been duly executed and delivered by NDHI and constitutes a valid
and binding obligation of NDHI enforceable against NDHI in accordance with its
terms, except as the enforceability thereof may be limited by creditors' rights
generally or by general principles of equity. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required by, or with respect to, NDHI
in connection with the execution and delivery of this Agreement by NDHI or the
consummation by NDHI of the transactions contemplated hereby. The execution and
delivery of this Agreement by NDHI, and NDHI's consummation of the transactions
contemplated hereby, does not conflict with, or result in a breach of, any law
or regulation of any governmental authority applicable to NDHI or any material
agreement to which NDHI is a party.
b. Upon delivery by NDHI to Option Holder of any Option Shares pursuant
to the terms of this Agreement, and upon the receipt by Option Holder of such
Option Shares, good and valid title to such Option Shares will pass to Option
Holder, free and clear of all liens, encumbrances and charges, other than those
arising from acts of Option Holder.
-3-
7. Assignment. Subject to limitations of the Securities Act, Option Holder
shall have the right to assign all or any portion of his or her rights,
interests and/or obligations under this Agreement, to any person, including to
a lender as collateral security or to a lender or any other person or entity as
an outright assignment, in his or her sole discretion, without the prior
consent of NDHI. The Option Holder will give NDHI notice of any such
assignment, but the failure to give such notice shall not affect the validity
of any such assignment. Upon the request of the Option Holder, NDHI will
acknowledge the validity of any such assignment for the benefit of any such
assignee, however, failure by NDHI to provide such acknowledgment or the lack
of any such acknowledgment by NDHI shall not affect the validity of any such
assignment. Subject to the provisions of this Section 7, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by the parties
hereto and their respective successors and assigns.
8. General Provisions.
a. Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable.
b. Expenses. Whether or not the Option is exercised, all costs and
expenses incurred in connection with the Stock Option, this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
c. Amendment. This Agreement may not be amended except by an instrument
in writing signed by each of the parties hereto.
d. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested), to the parties at the
addresses set forth below or at such other address as any party may from time
to time furnish to the other party hereto in writing:
(1) if to NDHI, to:
ND Holdings, Inc.
0 Xxxxx Xxxx Xxxxxx
Xxxxx, XX 00000
Attention: President
(2) if to Option Holder, to
-----------------------
-----------------------
Service of any such notice shall be deemed to be effected when received.
-4-
e. Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include", "includes" or "including' are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation".
f. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
g. Entire Agreement. This Agreement (i) constitutes the entire agreement
of the parties hereto with respect to the subject matter specified herein and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and (ii) is not
intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
h. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of North Dakota (without
regard to conflict of law principles).
i. Partial Invalidity. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
j. Indemnification. NDHI and Option holder each hereby indemnify and
hold harmless the other from and against, and agrees to defend the other from
and reimburse such other party for, any and all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind (including, without
limitation, reasonable attorneys' fees and other reasonable legal costs and
expenses) which such other party may at any time suffer or incur, or become
subject to, as a result of or in connection with its failure to perform any
of its covenants or agreements under this Stock Option Agreement or any suit,
action, or other proceeding brought by any person arising out of or in any
way related thereto.
-5-
IN WITNESS WHEREOF, NDHI and Option Holder have signed, or caused this
Agreement to be signed, by officers thereunto duly authorized, all as of the
date first written above.
ND Holdings, Inc.
By:-----------------------
Its President
Option Holder
--------------------------
--------------------------
THIS STOCK OPTION AGREEMENT IS ISSUED IN RELIANCE OF EXEMPTIONS FROM
REGISTRATION PROVIDED BY PROVISIONS OF THE SECURITIES ACT OF 1933 PROVIDING
EXEMPTIONS FOR NONPUBLIC SALES OF SECURITIES. SECURITIES SOLD UNDER EXEMPTION
FROM REGISTRATION CANNOT BE RESOLD WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933 OR AN EXEMPTION THEREOF. THIS AGREEMENT HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND THEREFORE CANNOT BE RESOLD UNLESS IT
IS REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
-6-
Exhibit F
ND Holdings, Inc.
0 Xxxxx Xxxx Xxxxxx
Xxxxx, XX 00000
Re: Stock Purchase Agreement
Ladies and Gentlemen:
We have acted as counsel for the Company and the Shareholder in connection
with the Stock Purchase Agreement dated January 15, 2002 (the "Purchase
Agreement"), between and among ND Holdings, Inc., a North Dakota corporation
(the "Buyer"), Capital Financial Services, Inc., a Wisconsin Corporation,
(the "Company") and Xxxxxxxx Xxxxxx and Xxxxxxx X. Xxxxxxx, individuals and
respectively, the sole shareholder and option holder of the Company (jointly
and severally the "Shareholder") and the transactions contemplated thereby.
This opinion is rendered to you pursuant to terms of the Purchase Agreement.
Terms not otherwise defined in this opinion shall have the meanings assigned to
such terms in the Purchase Agreement.
In rendering this opinion, we have reviewed such documents and made such
other investigation as we have deemed appropriate. As to matters of fact
material to the opinions expressed herein, we have relied on the
representations contained in the Purchase Agreement and certificates of public
officials and officers of the Company. We have not independently established
the facts so relied on. In rendering this opinion we have also reviewed the
following documents and made such other investigation as noted below:
1. Articles of Incorporation of the Company, as amended.
2. The Purchase Agreement and the executed counterparts thereto;
3. The disclosure schedules delivered by the Company and the Shareholder
pursuant to the Purchase Agreement dated January 15, 2002 (the "Disclosure
Schedule").
4. Certificates of the Company and the Shareholder, dated as of January
15, 2002, executed by the Company and the Shareholder.
In addition, in rendering this opinion, we have assumed the following: (a)
the representations and warranties in the Purchase Agreement and the factual
matters set forth in any other certificates, instruments or agreements executed
in connection with the Purchase Agreement or delivered to us are true, correct
and not misleading; (b) the genuineness of all signatures on original
documents, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all copies submitted to us as copies
thereof, the legal capacity of all natural persons, and the due execution and
delivery of all documents (except as to due execution and delivery by the
Company and the Shareholder) where due execution and delivery are a
prerequisite to the effectiveness thereof; (c) each party to the Purchase
Agreement, other than the Company and the Shareholder, is duly organized,
validly existing and in good standing under its jurisdiction of organization
and is in good standing in each such jurisdiction in which the conduct of its
business or its ownership or leasing of property currently requires that it
qualify as a foreign entity, with the organizational power to perform its
obligations under the Agreement to which it is a party, each such party has
complied with any applicable requirement to file tax returns and pay taxes in
each jurisdiction in which it is required to do so, each such party has validly
authorized, executed and delivered the Purchase Agreement and the Purchase
Agreement constitutes a valid and binding obligation of each such party,
enforceable against each such party in accordance with its terms; and (d) there
are no agreements, written or oral, among any of the parties to the Purchase
Agreement that modify, waive, amend or affect the terms of the Purchase
Agreement, and neither the execution of the Purchase Agreement nor the
consummation of the transactions provided for therein contravenes any
applicable law of any jurisdiction.
Based upon and subject to the foregoing, and subject in all respects to the
assumptions, qualifications and limitations set forth herein as well as the
express disclosures made by the Company and the Shareholder in the Disclosure
Schedule, we are of the opinion that:
1. The Company is a Corporation validly existing under the laws of the
State of Wisconsin which has properly filed an annual report for its most
recently completed year and has not filed articles of dissolution.
2. The Company has the requisite corporate power and authority to own,
lease, and operate its assets and property and to conduct its business as now
being conducted.
3. The Company has the corporate power to make, execute and deliver the
Purchase Agreement and each other agreement, document and instrument to be
executed and delivered by the Company pursuant to the Purchase Agreement
(collectively, the "Documents") and to perform the obligations thereunder.
The execution and delivery of the Purchase Agreement and the consummation of
the transactions contemplated thereby have been duly authorized by all
necessary corporate action.
4. The Shareholder has the authority to make, execute and deliver the
Purchase Agreement and each other agreement, document and instrument to be
executed and delivered by the Shareholder pursuant to the Documents and to
perform its obligations thereunder.
5. The Purchase Agreement has been duly executed and delivered by the
Company and the Shareholder and constitutes the valid and binding obligation
of the Company and the Shareholder, enforceable against the Company and the
Shareholder in accordance with its terms.
6. Except as set forth in the Purchase Agreement and the Disclosure
Schedule, the execution and delivery of the Purchase Agreement by the Company
and the Shareholder does not, and, as of the effective date, the consummation
of the transactions contemplated hereby will not, (a) result in any violation
of, or default under (with or without notice or lapse of time, or both) (i)
any provision of the Articles of Incorporation of the Company, (ii) to our
knowledge, any material contract or agreement except as and to the extent
listed on the Disclosure Schedule, or (iii) to our knowledge, any judgment or
order of any court or governmental department, commission, board, agency or
instrumentality, domestic or foreign, or any applicable law, rule or
regulation, or (b) to our knowledge and except as set forth on the Disclosure
Schedule, require the consent of any party to any contract.
2
7. All Documents required to be delivered by the Company and the
Shareholder have been duly executed and delivered and constitute the legal,
valid and binding obligations of the Company and the Shareholder, and each
is enforceable in accordance with its respective terms.
The opinions expressed above are subject to the following additional
qualifications, limitations and assumptions:
A. The opinions expressed herein are limited in all respects to matters
governed by the laws of the United States of America and the laws of the State
of Wisconsin, and we express no opinion concerning the laws, rules or
regulations of any other jurisdiction or jurisdictions.
B. To the extent any opinion is rendered herein with respect to the
enforceability of any agreement, we express no opinion as to (1) the effect
on such enforceability of applicable federal or state bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting relief of
debtors or the enforcement of the rights of creditors; (2) the effect on such
enforceability of laws governing specific performance, injunctive relief,
fraudulent sales and/or conveyances, preferences or other equitable remedies;
(3) the extent to which the enforceability of obligations in the Purchase
Agreement may be subject to general principles of equity regardless of whether
such enforceability is considered in a proceeding in equity or law, and a court
applying such principles may refuse to enforce, or may limit the application
of, a contract or any clause thereof; (4) the extent to which enforcement of
indemnification and arbitration provisions contained in the Purchase Agreement
may be limited by applicable law; and (5) the enforceability of any of the
agreements attached as exhibits to the Purchase Agreement.
C. We have not served as counsel to the Company and the Shareholder since
its inception and have acted as counsel to the Company and the Shareholder only
with respect to certain corporate matters and the rendering of these opinions.
Accordingly, we may not have knowledge of all matters of fact or law relating
to the Company and the Shareholder that may be relevant in connection with the
opinions herein. Whenever a statement herein is qualified by "to our
knowledge," or "known to us," or the like, our opinion is, with your
permission, based solely on the certificates of the Shareholder and the Company
and the current conscious awareness of facts or other information of the
attorneys currently with our firm who have represented the Company and the
Shareholder in connection with the transactions contemplated by the Purchase
Agreement and of any other attorneys currently with our firm whom we have
determined are likely, in the course of representing any of said parties, to
have knowledge of the matters covered by this opinion. Any alteration of those
facts may adversely affect our opinions. Except as otherwise expressly
indicated, we have not undertaken any independent investigation to determine
the accuracy of any such statement (including, without limitation, any search
of litigation filings in any court), and any limited inquiry undertaken by us
during the preparation of this letter should not be regarded as such an
investigation. No inference as to our actual knowledge of any matters bearing
on the accuracy of any such statement should be drawn from the fact of our
representation of the Company and the Shareholder.
3
D. We express no opinion herein as to compliance or non-compliance with
federal or state securities laws, including but not limited to, the antifraud
or antitrust provisions of any state or federal securities statute, law, rule
or regulation.
E. Our opinion set forth in paragraphs 1 and 2 above is based solely on
the certificates referenced above as to the legal existence and incorporation
of the Company in the State of Wisconsin.
F. We have not reviewed, and express no opinion as to, provisions in the
Documents, other agreements or instruments relating to (i) financial covenants
or similar provisions requiring financial calculations or determinations to
ascertain whether there is any such conflict, (ii) provisions relating to the
occurrence of a "material adverse event" or words of similar import or (iii)
parol evidence bearing on interpretation or construction of the provisions of
such agreements and instruments. Moreover, to the extent that any of the
Company and the Shareholder's agreements and instruments are governed by the
laws of any jurisdiction other than the State of Wisconsin, our opinion
relating to those agreements and instruments is based solely upon the plain
meaning of their language without regard to interpretation or construction
that might be indicated by the laws governing those agreements.
This opinion is furnished to you solely for your benefit in connection with
the Purchase Agreement and the transactions contemplated thereby and is not
to be made available to or relied upon by any other person, firm or entity
for any purpose without our express prior written consent.
Very truly yours,
/s/Xxxxxxx & Xxxxx LLP
Xxxxxxx & Xxxxx LLP
Exhibit G - Form of Noncompete Agreement
NONCOMPETE AGREEMENT
THIS NONCOMPETE AGREEMENT ("Agreement") dated as of January 15, 2002 by and
between ND Holdings, Inc. ("Parent"), together with its subsidiary, Capital
Financial Services, Inc., a Wisconsin Corporation and NASD Regulation, Inc.
member Broker Dealer, with a principal place of business at 0 Xxxxx Xxxx,
Xxxxx, Xxxxx Xxxxxx 00000 ("Broker Dealer"), as one party and Xxxxxxxx
Xxxxxx and Xxxxxxx X. Xxxxxxx, individuals residing in the state of Wisconsin
(jointly and severally "Seller") as the other party.
W I T N E S S E T H :
WHEREAS, the parties hereto are also parties to that certain Stock Purchase
Agreement dated the date hereof in which Seller as the former sole shareholder
of Broker Dealer sold its entire interest in Broker Dealer to Parent;
WHEREAS, Seller has access to certain proprietary and/or confidential
information of Broker Dealer or clients of Broker Dealer; and
WHEREAS, Seller and Broker Dealer desire to prevent the dissemination,
unauthorized disclosure or misuse of such information or competition from
Seller in the business of Broker Dealer,
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. Covenant Not to Solicit:
During a period of five years commencing on the date hereof Seller
shall not directly or indirectly induce or attempt to induce any employees or
registered representatives associated with Broker Dealer to leave the employ
of Broker Dealer, or, except as provided in Section 2 below, solicit the
business of any client or customer of Broker Dealer or any consultant to Broker
Dealer.
2. Covenant Not to Compete:
During a period of five years commencing on the date hereof within
those states listed in Schedule 2.2 of the Stock Purchase Agreement, Seller
shall not, except as a passive investor in less than 5% percent of the equity
securities of a publicly held company, own or control an interest in, or act
as principal to any firm or corporation (i) engaged in a venture or business
operation substantially similar to that of the Broker Dealer or (ii) which
1
is in direct or indirect competition with the Broker Dealer within the United
States of America, its territories and possessions. Nothing in this Agreement
shall prohibit or limit Seller from engaging in: (a) any insurance
wholesaling business (including business with the Broker Dealer or its
representatives or agents), (b) any business with any of Seller's existing
clients, as described in EXHIBIT A to this Agreement (which shall be provided
to Broker Dealer within 60 days of the date hereof) or (c) any business with
a client that is not an existing client of Seller but which was not otherwise
obtained in violation of paragraph 1 of this Agreement.
3. Proprietary Information:
(a) For purposes of this Agreement, "Proprietary Information" shall
mean any information relating to the business of Broker Dealer
that has not been publicly released by duly authorized
representatives of Broker Dealer and shall include (but shall
not be limited to) information encompassed in all proposals,
marketing and sales plans, financial information, costs, pricing
information, computer programs (including source code, object
code, algorithms and models), customer information, customer
lists, and all methods, concepts, know-how or ideas in or
reasonably related to the business of Broker Dealer, confidential
information belonging to Broker Dealer's customers or clients,
all trademarks, computer programs, customer information, employee
lists, products, procedure, copyrights, and developments created
or developed by Broker Dealer prior to the term of this Agreement
as a result of, or in connection with, Seller's previous
ownership of Broker Dealer. Seller agrees to regard and
preserve as confidential all Proprietary Information which it
may possess in any form.
(b) Seller will not, without written authority from Broker Dealer to
do so, which authority shall not be unreasonably withheld,
directly or indirectly, use any Proprietary Information for
Seller's benefit or purposes, nor disclose any Proprietary
Information to others. Seller recognizes that all such
Proprietary Information, whether developed by Seller or by
someone else during the time of Seller's previous ownership or
Broker Dealer, is the sole and exclusive property of Broker
Dealer.
2
4. Saving Provision:
Seller expressly agrees that the covenants set forth in this Agreement
are being given to Broker Dealer in connection with the sale by Seller of its
equity interest in Broker Dealer to Parent, and that such covenants are
intended to protect Broker Dealer against competition by Seller, within the
terms stated, to the fullest extent deemed reasonable and permitted in law
and equity. In the event that the foregoing limitations upon the conduct
of Seller are beyond those permitted by law, such limitations, both as to
time and geographical area, shall be, and be deemed to be, reduced in scope
and effect to the maximum extent permitted by law. Non-compliance with any
one paragraph of this Agreement shall not have an effect on the validity of
any other part of this Agreement.
5. Injunctive Relief:
Seller acknowledges that disclosure of any Confidential Information or
breach of any of the non-competitive covenants or agreements contained herein
will give rise to irreparable injury to Broker Dealer or clients of Broker
Dealer, inadequately compensable in damages. Accordingly, Broker Dealer or,
where appropriate a client of Broker Dealer, may seek and obtain injunctive
relief against the breach or threatened breach of the foregoing undertakings,
in addition to any other legal remedies which may be available. Seller
further acknowledges and agrees that the covenants contained herein are
necessary for the protection of the Broker Dealer's legitimate business
interests and are reasonable in scope and content.
6. Term:
This Agreement shall commence on the date hereof and shall terminate
five years thereafter.
7. Governing Law:
The Agreement shall be construed in accordance with the laws of the
State of North Dakota.
8. General:
This Agreement contains the entire agreement of the parties relating
to the subject matter hereof. This Agreement may be modified only by an
instrument in writing signed by both parties hereto. Any notice to be given
under this Agreement shall be sufficient if it is in writing and is sent by
certified or registered mail to Seller, at their principal place of business
address or otherwise as directed by Seller, from time to time or to Broker
Dealer at its principal office, attention of the President, or otherwise as
directed by Broker Dealer, from time to time.
4
IN WITNESS WHEREOF, the undersigned have set their hands.
Seller ND Holdings, Inc. Capital Financial Services, Inc.
/s/Xxxxxxxx Xxxxxx By:/s/Xxxxxxx Xxxxx By:/s/Xxxxxxxxx Xxxxxx
----------------- ------------------- ----------------------
Xxxxxxxx Xxxxxx Title: President Title: President
/s/Xxxxxxx X. Xxxxxxx
---------------------
Xxxxxxx X. Xxxxxxx
