EXHIBIT 2(b)
COMMON STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of March 12, 2002,
between Xxxxxx Opportunity Fund 2, LLC (the "Buyer") and Firebrand Financial
Group, Inc. (the "Seller"). The Buyer and Seller are referred to collectively
herein as the "Parties".
The Seller owns shares of common stock, par value $0.0001 per
share (the "Common Stock"), of Shochet Holding Corp., a Delaware corporation
(the "Company"), and the Seller desires to sell certain of such shares to the
Buyer, and the Buyer desires to purchase such shares from the Seller pursuant to
the terms and conditions of this Agreement.
NOW, THEREFORE, the Parties hereto agree as follows:
1. Purchase and Sale of Company Shares.
(a) Basic Transaction. At the Closing and upon the terms and conditions set
forth in this Agreement, the Seller shall sell, transfer and assign to the
Buyer, and the Buyer shall purchase from the Seller, all of the Seller's right,
title and interest in and to the number of shares of Common Stock set forth
opposite the Seller's name on Schedule I hereto (the "Shares") free and clear of
all security interests, claims, liens, pledges, options, encumbrances, charges,
agreements, voting trusts, proxies and other arrangements or restrictions
whatsoever other than restrictions under Federal and state securities laws
("Encumbrances").
(b) Preliminary Purchase Price and Payment. Subject to the terms and
conditions of this Agreement, at the Closing, the Seller shall sell to the Buyer
the Shares in exchange for an aggregate amount equal to $727,400 (the
"Preliminary Purchase Price").
(c) Closing. The closing of the purchase and sale of the Shares hereunder
(the "Closing") shall take place at the offices of Xxxxxxxx & Xxxxx at 10:00
a.m. on March 28, 2002, or at such other place or on such other date as is
mutually agreeable to the Buyer and the Seller (the "Closing Date"). At the
Closing, subject to the satisfaction or waiver of each of the conditions
specified in Section 2 below:
(i) The Seller shall deliver to the Buyer certificate(s) representing
the Shares free and clear of all Encumbrances, duly endorsed in blank
for transfer or accompanied by stock powers duly executed in blank.
(ii) The Buyer shall pay to the Seller an aggregate amount equal to
(A) the Preliminary Purchase Price, less (B) the Escrow Amount, by
wire transfer of immediately available funds to one or more accounts
as designated by the Seller.
(iii) The Buyer shall pay an amount equal to $145,480 (the "Escrow
Amount") to an escrow agent mutually acceptable to the Buyer and
Seller (the "Escrow Agent") pursuant to the Escrow Agreement, by wire
transfer of immediately available funds.
(iv) The closing certificates and other documents and agreements
required to be delivered pursuant to this Agreement with respect to
the Closing will be exchanged.
(d) Adjustment to Preliminary Purchase Price. The Preliminary Purchase
Price will be adjusted as follows:
(i) If the Actual Cash Amount exceeds the Estimated Cash Amount, the
Buyer shall pay to the Seller an amount equal to such excess
multiplied by the Adjustment Factor by wire transfer or delivery of
other immediately available funds within five Business Days after the
Audit Date;
(ii) If the Actual Cash Amount is less than the Estimated Cash Amount,
the Seller shall pay or cause the Escrow Agent to pay to the Buyer an
amount equal to such deficiency multiplied by the Adjustment Factor by
wire transfer or delivery of other immediately available funds within
five Business Days after the Audit Date;
(iii) The Seller shall pay to the Buyer 56.45% of all costs, fees and
expenses of any kind (including any penalties) arising from or related
to the Accountant's preparation and filing of all the Company's and
its Subsidiaries' unfiled state and federal tax returns for all
periods prior to January 1, 2002; and
(iv) The Seller shall pay, on a dollar for dollar basis, all costs,
fees, expenses or payments incurred or paid by the Company or any of
its Subsidiaries to any director or executive officer (other than
Xxxxxx Xxxxxxx) of the Company or its Subsidiaries, to the extent such
costs, fees, expenses or payments were made or incurred from January
31, 2002 through the Closing Date.
The Preliminary Purchase Price as so adjusted is referred to herein as the
"Purchase Price".
2. Closing Conditions.
(a) Mutual Conditions. The obligation of the Seller to sell, transfer and
assign the Shares to be sold to the Buyer hereunder is subject to the Seller,
Buyer and Escrow Agent having executed and delivered an escrow agreement (the
"Escrow Agreement") in substantially the form attached hereto as Exhibit A, and
such Escrow Agreement shall be in full force and effect as of the Closing and
shall be used to make payments to the Buyer in connection with (i) adjustments
made to the Purchase Price pursuant to Section 1(d) and (ii) Seller's
indemnification obligations as set forth in Section 7(b).
(b) Conditions to Seller's Obligations. The obligation of the Seller to
sell, transfer and assign the Shares to be sold to the Buyer hereunder is
subject to the satisfaction of the following conditions as of the Closing:
(i) the representations and warranties contained in Section 5 hereof
shall be, with respect to those representations and warranties
qualified by any materiality standard, true and correct in all
respects as of the Closing Date, and with respect to all other
representations and warranties, true and correct in all material
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respects at and as of the Closing Date as though then made, except to
the extent of changes caused by the transactions expressly
contemplated herein;
(ii) the Buyer shall have delivered to Seller a certificate of an
officer of the Buyer, dated as of the Closing Date, stating that the
conditions specified in Section 2(b)(i) have been satisfied;
(iii) Schedule 14(f) shall have been filed by the Company with the SEC
and mailed to its stockholders at least 10 days prior to the Closing
Date; and
(iv) the Seller shall have received a copy of the Escrow Agreement
executed by Buyer and the Escrow Agent.
(c) Conditions to Buyer's Obligations. The obligation of the Buyer to
purchase the Shares from the Seller is subject to the satisfaction of the
following conditions as of the Closing:
(i) the representations and warranties contained in Section 4 shall
be, with respect to those representations and warranties qualified by
any materiality standard, true and correct in all respects as of the
Closing Date, and with respect to all other representations and
warranties, true and correct in all material respects at and as of the
Closing Date as though then made, except to the extent of changes
caused by the transactions expressly contemplated herein;
(ii) the Seller shall have caused the Company to have made all filings
and obtained all permits, authorizations, consents and approvals
required to be obtained by the Company to consummate the transactions
contemplated by this Agreement as set forth on Schedule 4(b);
(iii) the Buyer shall have obtained an opinion of Seller's counsel
regarding the exemption from registration under the Securities Act of
1933 with respect to the transfer of the Shares from the Seller to the
Buyer or a written waiver by the Company of all opinion delivery
requirements imposed by any legend on the certificates representing
the Shares;
(iv) the Buyer shall have received the resignations, effective as of
the Closing, of each director and officer (other than Xxxxxx Xxxxxxx)
of the Company and each Subsidiary of the Company;
(v) the Seller shall have caused Xxxxxxx X. Xxxxx, III and Xxxxxx X.
Xxxxx to have been nominated as directors of the Company;
(vi) the Buyer shall have received evidence reasonably satisfactory to
Buyer that the Company has caused each of its Subsidiaries that is a
broker-dealer and/or investment advisor to terminate such
Subsidiaries' status as a broker-dealer and/or independent advisor in
each state or jurisdiction in which such Subsidiary is registered as
such;
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(vii) the Buyer shall have received from the Seller, at least 15 days
prior to the Closing, copies of any correspondence or comments from
the NASD or any state, federal and local governments (and all agencies
thereof) with respect to any complaint or investigation of Shochet
Securities, Shochet Investment Advisors Corp. or any other Subsidiary
of the Company referred to in the Schedules and all other
correspondence or comments received after the date of this Agreement;
(viii) the Buyer shall have received evidence reasonably satisfactory
to Buyer that (A) Shochet Securities, Inc. has paid to Seller an
aggregate amount equal to $44,109.00, such amount representing all
amounts due under the Intercompany Services Agreement and (B) the
Intercompany Services Agreement has been terminated and neither the
Company nor any of its Subsidiaries owes any Person any amount
thereunder;
(ix) the Buyer shall have received the Engagement Letter;
(x) each employment agreement (other than the employment agreement of
Xxxxxx Xxxxxxx) between the (i) Company and a Company employee and
(ii) a Subsidiary of the Company and an employee of such Subsidiary,
including without limitation, the employment agreements of Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxxx and Xxxxxx Xxxxxxxx shall have been
terminated on terms satisfactory to Buyer;
(xi) the Seller shall have caused the Company to deliver to Buyer
documents, reasonably satisfactory to Buyer (i) evidencing the
Estimated Cash Amount and (ii) that will serve to remove as of the
Closing, all signatories to the Company Cash Accounts immediately
prior to the Closing as of the date hereof and replace such
signatories with Xxxxxx X. Xxxxx and Xxxxxxx X. Xxxxx, III;
(xii) the Seller shall have caused the Company to transfer to the
Company's new directors all documents, books, records (including tax
records), agreements, and financial data of the Company; provided that
Seller shall not have to deliver such documents, books, records
agreements and financial data to a place other than the property
described in the Boca Lease;
(xiii) the Buyer shall have received evidence reasonably satisfactory
to the Buyer that any account (other than the accounts set forth on
Schedule 4(j)) of a broker-dealer and/or investment advisor customer
of the Company or its Subsidiaries has been terminated;
(xiv) since the date hereof, there shall have been no fact, event or
circumstance which would reasonably be expected to have a Material
Adverse Effect;
(xv) the Seller shall have delivered to the Buyer a certificate of an
officer of the Seller, dated as of the Closing Date, stating that the
conditions specified in Section 2(c)(i) and (xiv) have been satisfied;
(xvi) the Buyer shall have received a copy of Schedule 14(f) and
evidence that such Schedule 14(f) was filed with the SEC and mailed to
the Company's shareholders at least 10 days prior to the Closing Date;
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(xvii)the Buyer shall have a received copy of the Escrow Agreement
executed by Seller and the Escrow Agent.
3. Pre-Closing Covenants. Each of the Buyer and the Seller hereto agrees
as follows with respect to the period between the date of this Agreement and the
Closing:
(a) General. Each of the parties hereto shall use its commercially
reasonable best efforts, in good faith, to take all action and to do all things
necessary, proper or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the conditions set forth in Section 2 above and execution and
delivery of the agreements and instruments contemplated hereby to be executed
and delivered at the Closing).
(b) Notices of Certain Events. The Seller shall promptly notify the Buyer
of:
(i) any written notice or other written communication received by the
Seller from any Person alleging that the consent of such Person is or
may be required in connection with the transactions contemplated by
this Agreement;
(ii) any written notice or other written communication received by the
Seller from any governmental entity either in connection with the
transactions contemplated by this Agreement or related to the
Company's or its Subsidiaries' status as a broker-dealer or investment
advisor; and
(iii) any change or event (i) having or which would reasonably be
expected to have a Material Adverse Effect on the Company, or
(ii) impairing the ability of the Seller to consummate the
transactions contemplated hereby.
(c) Operation of Business. The Seller shall use its best efforts to cause
the Company to (i) take all actions required to assure that the Company and its
Subsidiaries remain duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or formation, (ii) take all
actions required to assure that the Company and its Subsidiaries maintain and
comply with all requisite governmental authority (and agencies thereof),
licenses, permits and reporting requirements necessary to conduct its business,
(iii) take all actions required to assure that the Company and its Subsidiaries
comply with their organizational documents, (iv) take all actions required to
assure that the Company and its Subsidiaries comply with their material
obligations, other than those material obligations that arise out of the matters
listed on Schedule 4(f), (v) conduct the business of the Company and its
Subsidiaries in compliance with all applicable laws, and (vi) conduct the
business of the Company and its Subsidiaries substantially in the manner
conducted on the date hereof.
(d) Exclusivity. Neither the Seller nor any of its respective
representatives, officers, directors, agents, stockholders or Affiliates (all
such Persons, the "Seller Group") shall directly or indirectly initiate,
solicit, entertain, negotiate, accept or discuss any proposal or offer (an
"Acquisition Proposal") to acquire all or any of the Shares (a "Third Party
Acquisition"), or provide any nonpublic information to any third party in
connection with an Acquisition Proposal or a Third Party Acquisition, or enter
into any agreement, arrangement or understanding requiring the Seller to
abandon, terminate or fail to consummate the transactions contemplated hereby.
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The Seller represents that no member of the Seller Group is party to or bound by
any agreement with respect to an Acquisition Proposal or a Third Party
Acquisition other than under this Agreement and the Seller has terminated all
discussions with third parties (other than the Buyer) regarding Acquisition
Proposals or Third Party Acquisitions.
(e) Schedule 14(f). The Seller shall use its best efforts to cause the
Company to prepare, file and mail Schedule 14(f) no later than 10 days prior to
the Closing and the Buyer shall provided Seller with such information reasonably
requested by Seller for the preparation of such schedule.
(f) Employment Agreements. The Seller shall have caused the Company and its
Subsidiaries to terminate, on terms satisfactory to Buyer, each employment
agreement (other than the oral employment agreement between the Company and
Xxxxxx Xxxxxxx, the terms of which shall be documented in a letter agreement
dated as of the Closing Date), whether written or oral, between the Company
and/or its Subsidiaries and any Person.
(g) Intercompany Services Agreement. The Seller shall have (i) terminated
the Intercompany Services Agreement and (ii) caused the Company to have caused
Shochet Securities, Inc., and not the Company, to pay to Seller an aggregate
amount equal to $44,109.00, such amount representing all amounts due Seller
under the Intercompany Services Agreement.
4. Representations and Warranties of Seller. The Seller hereby represents
and warrants to the Buyer that the statements contained in this Section 4
are correct and complete as of the date hereof and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4) with
respect to himself, herself or itself.
(a) Ownership. All of the Shares set forth opposite Seller's name on
Schedule I attached hereto are owned of record and beneficially by the Seller,
and the Seller has good and marketable title to such Shares, free and clear of
all Encumbrances. All of the Shares are validly issued, fully paid and
nonassessable. Other than the Shares and an additional 52,785 shares of Common
Stock held by the Seller, the Seller owns no other shares of the capital stock
of the Company or rights to acquire any such shares. At the Closing, the Seller
shall transfer to the Buyer good and marketable title to the Shares, free and
clear of all Encumbrances.
(b) Authorization; No Breach. The execution, delivery and performance of
this Agreement and all other agreements and instruments contemplated hereby to
which the Seller is a party have been duly authorized by all necessary action on
the part of the Seller. This Agreement constitutes a valid and binding
obligation of the Seller, enforceable in accordance with its terms. Except as
set forth on Schedule 4(b) attached hereto, the execution and delivery by the
Seller of this Agreement and all other agreements and instruments contemplated
hereby to which the Seller is a party, and the fulfillment of and compliance
with the respective terms hereof and thereof by the Seller does not and shall
not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under (whether with or without the
passage of time, the giving of notice or both), (iii) result in the creation of
any Encumbrance upon the Shares pursuant to, (iv) give any third party the right
to modify, terminate or accelerate any obligation under, (v) result in a
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violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any third party or
any government entity pursuant to, (A) the articles of incorporation or bylaws
of the Company, or, to Seller's Knowledge, (B) any law or regulation to which
the Company or any of its subsidiaries is subject, or any order, judgment or
decree or (C) any material agreement or instrument to which the Company is
subject.
(c) Not Party in Interest. The Seller is not a "party in interest" (as that
term is defined in section 3(14) of the Employee Retirement Income Security Act
of 1974) with respect to Buyer.
(d) Disclosures. The Buyer has received from the Seller a copy of the
Company's Financial Statements, and except as set forth on Schedule 4(f) and
Schedule 4(g) attached hereto or incurred as a continuing expense associated
with its operations as a holding company, Seller is not aware of any material
adverse change in the financial condition, operating results, assets,
liabilities, operations or businesses of the Company since the date of the
Financial Statements.
(e) Capitalization. As of the date hereof, the entire authorized stock of
the Company consists of (i) 15,000,000 shares of Common Stock, of which
2,150,000 is issued and outstanding and (ii) 1,000,000 shares of preferred
stock, par value $0.0001 per share (the "Preferred Stock"), of which none is
issued and outstanding. Other than the Common Stock and Preferred Stock, there
are no other classes or series of stock of the Company, and other than as set
forth on Schedule 4(e) attached hereto, there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Company to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized appreciation, phantom
stock, profit participation, or similar rights with respect to the Company.
(f) Undisclosed Liabilities. Except as set forth on Schedule 4(f) attached
hereto, neither the Company nor any of its Subsidiaries have any material
Liability (and to Seller's Knowledge, there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability) except for
Liabilities set forth on the face of the Recent Balance Sheets (rather than in
any notes thereto), other than Liabilities incurred after the date of the Recent
Balance Sheets in the Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law and is
material).
(g) Legal Compliance. To Seller's Knowledge and except as set forth on
Schedule 4(g) attached hereto, the Company and its Subsidiaries have complied in
all material respects with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, foreign governments (and all agencies
thereof) and self regulatory agencies, the non-compliance of which would
reasonably be expected to have a Material Adverse Effect, and as of the date
hereof, there is no decree, judgment, order, investigation, regulatory
examination, claim or litigation at law or in equity, no arbitration proceeding,
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and no proceeding before or by any judicial authority, commission, agency or
other administrative or regulatory body or authority, pending or, to the
Seller's knowledge, threatened, to which the Company is a party or otherwise
relating to the business of the Company or its Subsidiaries.
(h) Reporting Requirements. To Seller's Knowledge, the Company and each of
its Subsidiaries have filed all reports, filings, statements or other documents
required under the Securities Act of 1933, Securities Exchange Act of 1934,
rules of the NASD and Investment Advisers Act of 1940, the failure to file of
which would reasonably be expected to have a Material Adverse Effect, and no
such reports, filings, statements or other documents contained any material
misstatement or omissions.
(i) Broker's Fee. Neither the Seller nor the Company has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(j) Customers. Other than the 10 customers set forth on Schedule 4(j)
attached hereto, neither the Company nor any of its Subsidiaries has any
broker-dealer and/or investment advisor customers.
(k) No Material Misstatements. No representation or warranty by the Seller
in this Agreement (including the Schedules hereto) or in any written statement
or certificate which furnished by the Seller to the Buyer pursuant to this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements made not misleading. The Seller
is not aware of any material fact relating to the Shares, the transaction
contemplated by this Agreement or the Company that has not been disclosed by the
Seller to the Buyer.
(l) Affiliate Transactions. Except as set forth on Schedule 4(l) attached
hereto, and described in the Company's periodic reports filed with the SEC under
the Securities Exchange Act of 1934, neither the Seller nor any of its
Affiliates has been involved in any business arrangement or relationship with
the Company or its Subsidiaries within the past 12 months, and neither the
Seller nor any of its Affiliates owns any asset, tangible or intangible, which
is used in the business of the Company.
(m) Shochet Leases. The Boca Lease and the Shochet Leases constitute all
the leases, subleases and other occupancy agreements, including all amendments,
extensions and other modifications ("Leases") for real property to which either
the Company and its Subsidiaries is a party, and other than the Boca Lease and
the Shochet Leases identified as Tamarack, Delray, South Miami and Weston, the
obligations of the Company or its Subsidiary under each of its Leases has been
breached (see Schedule 4(f) attached hereto) and an event of default has
occurred. The Company and/or its Subsidiaries has reached agreements with the
landlords of Tamarack, Delray, South Miami and Westin to terminate these leases
and the Company and its Subsidiaries has no further liability thereunder.
5. Representations and Warranties of Buyer. The Buyer hereby represents
and warrants to the Seller that the statements contained in this Section 5
are correct and complete as of the date hereof and will be correct and complete
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as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 5) with
respect to himself, herself or itself:
(a) Authorization. The execution and performance of this Agreement have
been duly authorized by all necessary action on the part of the Buyer, and this
Agreement when executed and delivered shall constitute a valid and legally
binding obligation of the Buyer, enforceable in accordance with its terms.
(b) Investment Representations. The Buyer is purchasing the Shares for
investment purposes and is not purchasing the Shares with a view to the public
sale or distribution of any part thereof, and Buyer has no present intention of
selling, granting participation in, or otherwise distributing the Shares in
violation of any federal or state securities laws. The Buyer has been given
access to all information regarding the Company that it has requested from the
Seller. The Buyer is capable of evaluating and has evaluated the merits and
risks of its purchase of the Shares and is able to bear the economic risk of its
investment in the Shares. The Buyer recognizes that it must bear the economic
risk of the investment represented by its purchase of the Shares for an
indefinite period. The Buyer understands that the Shares have not been
registered under the Securities Act of 1933, as amended from time to time (the
"Act") on the basis that the sale provided for in this Agreement is exempt
pursuant to Sections 4(1) and 4(2) (and the so-called Section "4(1 1/2)"
exemption) of the Act and that the reliance of the Seller on such exemptions is
predicated upon Buyer's representations set forth herein.
(c) Schedule 14(f). With respect to Schedule 14(f), all the information
provided to Seller pursuant to Section 3(e) is true and correct in all material
respects.
6. Post-closing Covenants. The Parties agree as follows with respect to
the period following the closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7). The
Seller and Buyer acknowledge and agree that from and after the Closing the
Company's new officers and directors will be entitled to possession of all
documents, books, leases, records (including tax records), agreements, and
financial data relating to the Company. The Buyer shall cause the Company to
maintain all material documents, books, records (including tax records)
agreements and financial data relating to the Company for such periods of time
as may be appropriate for the Seller to have access thereto relating to any
indemnification claims.
(b) Litigation and Arbitration Support. In the event and for so long as any
Party or the Company or its Subsidiaries is actively contesting or defending
against any action, suit, proceeding, hearing, arbitration, investigation,
charge, complaint, claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction prior to the Closing Date involving the
Company or its Subsidiaries, each of the other Parties will cooperate with him
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or it and his, her or its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 7).
(c) Certain Indemnification Rights. The Seller and the Buyer acknowledge
that the Company and/or its Subsidiaries have certain rights of indemnification
and other claims against Bluestone Capital Corp., HealthStarCorp. and Sands
Brothers & Company, Inc. arising under the Purchase Agreement, specifically, but
without limitation, the Company and/or its Subsidiaries have indemnification
rights and other claims against these entities as they relate to the Shochet
Leases, the Shochet Equipment Leases and the Xxxxxxxx Letter. Buyer agrees that
insofar as Seller is indemnifying the Buyer for a proportionate share of the
liabilities of the Company arising under these matters pursuant to Section
7(b)(ii), if reasonably requested by Seller, Buyer shall cause the Company
and/or its Subsidiaries to assert their rights of indemnification or other
claims against these entities; provided that notwithstanding the above, the
Buyer shall have no obligation to cause the Company and/or its Subsidiaries to
assert their rights to indemnification for such claims if the Buyer and its
legal counsel reasonably and in good faith determine that asserting such
indemnification rights is not practicable or in the best interest of either the
Buyer or the Company or its Subsidiaries. The assertion of these rights shall be
treated as if they were a matter of defending a third party claim under Section
7(d) and the cost of asserting these rights shall be treated as if they were a
cost of defending a third party claim under Section 7(d) for which the Seller is
indemnifying Buyer under Section 7(b)(ii). Any recovery received by the Company
or its Subsidiary in asserting its rights against these entities shall be an
offset against the liabilities for which Seller is indemnifying the Buyer under
Section 7(b)(ii) and Seller shall be entitled to receive fifty-six and
forty-five one hundredths of a percent (56.45%) of any such recovery if Seller
has previously paid (whether by direct payment or through the Escrow Agent) the
Buyer with respect to such indemnification claim.
7. Remedies for Breaches of this Agreement.
(a) Survival of representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
Closing hereunder and continue in full force and effect until May 16, 2003 for
purposes of being true and correct as of the Closing; provided that the
representations and warranties set forth in Section 4(a), Section 4(b) and
Section 5(a) and the covenants and agreements of the Parties shall continue in
full force and effect until the expiration of all relevant statutes of
limitations.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event the Seller breaches (or in the event any third
party alleges facts that, if true, would mean any of the Seller
has breached) any of its representations, warranties, and covenants
contained herein, and provided that the Buyer makes a written claim
for indemnification against the Seller pursuant to Section 16 within
any applicable survival period described in Section 7(a), then the
Seller agrees to indemnify the Buyer from and against the entirety of
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any Adverse Consequences the Buyer may suffer (and not merely as a
result of being a stockholder of the Company in a situation where
the Company suffers an Adverse Consequence, which is intended to be
covered by Section 7(b)(ii)) through and after the date of the claim
for indemnification (including any Adverse Consequences the Buyer may
suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach).
(ii) Provided Buyer makes a written claim for indemnification against
the Seller pursuant to Section 16 within any applicable survival
period described in Section 7(a), Seller agrees to indemnify Buyer
from and against (A) fifty-six and forty-five one hundredths percent
(56.45%) of any Adverse Consequences the Company may suffer resulting
from, arising out of, relating to, or caused by (1) a breach by Seller
of any of its representations, warranties and covenants contained
herein, (2) the customer accounts set forth on Schedule 4(j) attached
hereto, (3) the Shochet Leases and any matter (other than the Boca
Lease) set forth on Schedule 4(f) attached hereto or (4) existing
and/or future litigation or arbitration arising from those items
listed in clause (3) above and (B) any Adverse Consequences the
Company may suffer resulting from, arising out of, relating to, or
caused by the termination of the employment agreements between the
Company and Xxxxx X. Xxxxxxxxx and Xxxxx X. Xxxxxxxxx; provided that
to the extent an adjustment to the Purchase Price has been made
pursuant to Section 1(d)(iv) in respect to the termination of such
employment agreement, the amount of such adjustment shall not be
deemed an Adverse Consequence under this Section 7(b)(ii)(B).
Notwithstanding (i) and (ii) above, the Seller shall not have any obligation to
indemnify the Buyer from and against any Adverse Consequences to the Buyer or
the Company in an aggregate amount that exceeds the Purchase Price.
(c) Indemnification Provisions for Benefit of the Seller. In the event the
Buyer breaches (or in the event any third party alleges facts that, if true,
would mean the Buyer has breached) any of its representations, warranties, and
covenants contained herein, and provided that the Seller makes a written claim
for indemnification against the Buyer pursuant to Section 16 within any
applicable survival period described in Section 7(a), then the Buyer agrees to
indemnify the Seller from and against the entirety of any Adverse Consequences
the Seller may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Seller may suffer after
the end of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 7, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing;
provided however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
11
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the
Third Party Claim, (B) the Indemnifying Party provides the Indemnified
Party with evidence reasonably acceptable to the Indemnified Party
that the Indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (C) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential custom or
practice materially adverse to the continuing business interests
of the Indemnified Party, and (E) the Indemnifying Party diligently
conducts the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 7(d)(ii), (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B)
the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be
withheld unreasonably), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 7(d)(ii) is or
becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need
not consult with, or obtain any consent from, any Indemnifying Party
in connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the
costs of defending against the Third Party Claim (including reasonable
attorneys' fees and expenses), and (C) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim to the fullest extent provided
in this Section 7.
(v) The Seller represents to the Buyer that the Company has retained
outside counsel with respect to third party claims arising from the
Shochet Leases, Shochet Equipment Leases and the arbitrations,
litigation and customer complaints set forth on Schedule 4(f). Seller
acknowledges that claims against the Company and/or its Subsidiaries
under the Shochet Leases, Shochet Equipment Leases and the
arbitrations, litigation and customer complaints (other than the
complaints of Soll and Xxxxxxxx) set forth on Schedule 4(f) are
matters for which Seller will have indemnification responsibility
12
pursuant to Section 7(b)(ii). Accordingly, Seller and Buyer
acknowledge that it is not necessary for Buyer to provide any notice
to Seller under Section 7(d)(ii) to assert an indemnification claim
against Seller for those claims that have arisen to date under the
Shochet Lease or the Shochet Equipment Leases and Seller shall conduct
the defense of the Company and/or its Subsidiaries with respect to
such claims, the cost of which shall be apportioned as provided in
Section 7(d)(ii).
(e) Determination of Adverse Consequences. In determining Adverse
Consequences for purposes of this Section 7, the Parties shall (i) take into
account the time cost of money (using the Applicable Rate as the discount rate),
(ii) disregard any materiality qualification set forth herein, and (iii) make
appropriate adjustments for tax consequences and insurance coverage. All
indemnification payments under this Section 7 shall be deemed adjustments to the
Purchase Price.
8. Definitions. For the purpose hereof, the following terms have the
meanings set forth below:
"Accountant" means Xxxxxxx Xxxxx & Co., P.C.
"Accountant Certificate" means a certificate signed by Accountant
setting forth the Actual Cash Amount, as reflected in the audited consolidated
financial statements of the Company and its Subsidiaries upon which the
Accountant has issued its report.
"Actual Cash Amount" means the amount of cash or cash equivalents held
by the Company and its Subsidiaries as of January 31, 2002, as set forth on the
Accountant Certificate.
"Adjustment Factor" means 0.5645.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Applicable Rate" means the corporate base rate of interest publicly
announced from time to time by XX Xxxxxx Chase & Co.
"Audit Date" means the date on which the Accountant delivers the
Accountant Certificate to the Company.
"Boca Lease" means that certain Lease dated December 17, 2001 by and
between the Company and Mizner Business Certer Corp. for real property located
at 000 Xxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx, 00000.
"Business Day" means any day other than Saturday, Sunday or any federal
legal holiday.
13
"Company Cash Accounts" means any and all accounts, of any type or
nature, used by the Company to hold cash or cash equivalents.
"Engagement Letter" means an engagement letter, reasonably satisfactory
to Buyer, executed by and among the Company and the Accountant pursuant to which
the Accountant has agreed to (i) prepare the Accountant Certificate and the
Company's 10-K due to be filed with the SEC on or about May 1, 2002 and (ii)
prepare and file the state and federal tax returns (to the extent such returns
have not been filed as of the date hereof) of the Company and each of its
Subsidiaries for all periods prior to January 1, 2002
"Estimated Cash Amount" means as of January 31, 2002, cash or cash
equivalents held by the Company in an amount equal to $1,200,000.00.
"Filing Date" means the date on which the Company files its 10-K with
the SEC, due to be filed on or about May 1, 2002.
"Financial Statements" means the Recent Balance Sheets.
"Intercompany Services Agreement" means that certain intercompany
services agreement dated August 1, 2001, by and among Firebrand Financial Group,
Inc., the Company and Shochet Securities, Inc.
"Knowledge" means that none of Seller's officers or directors, in each
case after reasonable investigation, which shall include for purposes of Section
4, the questioning of officers and directors of the Company and each Subsidiary
of the Company has actual (and not constructive) knowledge that any statement in
a representation or warranty is not true.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for taxes.
"Material Adverse Effect" means a material and adverse effect upon (i)
the business, operations, assets, liabilities, condition (financial or
otherwise), operating results or employee, customer or supplier relations or
prospects of the Company or (ii) the ability of the Seller to consummate the
transactions contemplated hereby or perform its respective obligations
hereunder.
"NASD" means National Association of Securities Dealers, Inc.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Purchase Agreement" means that certain agreement dated August 1, 2001,
by and among Bluestone Capital Corp., Healthstar Corp., Shochet Securities Inc.
14
and Shochet Holding Corp., as amended and supplemented on August 31, 2001 and as
modified by the Agreement dated as of November 7, 2001 among such parties and
Sand Brothers & Company, Inc.
"Recent Balance Sheets" means together, the Company's audited
consolidated balance sheet as of January 31, 2001 and the unaudited consolidated
balance sheets as of January 31, 2002, attached hereto as Exhibit B.
"Schedule 14(f)" means a schedule prepared by the Company and complying
with Rule 14f-1 of the Securities and Exchange Act of 1934.
"Xxxxxxxx Letter" has the meaning ascribed such term in the Purchase
Agreement.
"Shochet Equipment Leases" has the meaning ascribed such term in the
Purchase Agreement.
"Shochet Leases" has the meaning ascribed such term in the Purchase
Agreement.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means any corporation, partnership, limited liability
company, joint venture or other legal entity with respect to which a specified
Person directly or indirectly (or a Subsidiary thereof) owns a majority of the
ownership interests or has the power to vote or direct the voting of sufficient
ownership interests to elect a majority of the directors or equivalent governing
Persons.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to the Seller at any time prior to the Closing (A) in the event the
Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Buyer has
notified the Seller of the breach, and the breach has continued
without cure for a period of 10 days after the notice of breach or
(B) if the Closing shall not have occurred by April 5, 2002, by reason
of the failure of any condition precedent under Section 2(c) (unless
the failure results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement);
and
(iii) the Seller may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing (A) in the event the
Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Seller has
notified the Buyer of the breach, and the breach has continued without
15
cure for a period of 10 days after the notice of breach or (B) if the
Closing shall not have occurred by April 5, 2002, by reason of the
failure of any condition precedent under Section 2(b) (unless the
failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a), all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party who has committed a willful and material breach).
10. Complete Agreement. This Agreement constitutes the entire agreement
between the parties hereto regarding the subject matter of this Agreement
and supersedes and preempts any prior understandings, agreements or
representations, written or oral, which may have related to the subject matter
hereof.
11. Expenses. Each of the Parties will bear his, her or its own costs and
expenses (including investment banking, accounting and legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby. The Seller agrees that neither the Company nor its
Subsidiaries will bear any of the Seller's costs and expenses (including any of
their legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby; provided that the Company shall bear its own
expenses relative to its obligation to file Schedule 14(f).
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
13. Further Assurances. After the Closing, as and when requested by the
Buyer, the Seller shall, without further consideration, execute and deliver
all such instruments of conveyance and transfer and shall take such further
actions as the Buyer may deem necessary or desirable in order to transfer the
Shares to the Buyer and to carry out fully the provisions and purposes of this
Agreement.
14. Successors and Assigns. This Agreement is intended to bind and inure to
the benefit of and be enforceable by the Buyer and the Seller and their
respective successors and assigns.
15. Choice of Law. The construction, validity, interpretation and
enforcement of this Agreement shall be governed by the internal law, and not the
law of conflicts, of the State of New York.
16. Notice. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
16
If to Seller:
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Mr. Xxxxx Xxxxxxxx, Chief Executive Officer
with a copy to:
Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
If to Buyer:
c/x Xxxxxx Capital Management, LLC
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xx. Xxxxxx X. Xxxxx or Xx. Xxxxxxx X. Xxxxx, III
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxx Xxxx, Esq.
If to Escrow Agent:
Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
Any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
17
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
party recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other parties notice in the manner herein set forth.
17. Waiver of Jury Trial. Each of the Parties waives any right it may have to
trial by jury in respect of any litigation based on, arising out of, under or in
connection with this Agreement or any course of conduct, course of dealing,
verbal or written statement or action of any party hereto.
* * * *
18
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
XXXXXX OPPORTUNITY FUND 2, LLC
By: Xxxxxx Capital Management, LLC
Its: Managing Member
By: __________________________
Name: Xxxxxx X. Xxxxx
Its: Managing Member
FIREBRAND FINANCIAL GROUP, INC.
By: ______________________________
Name: Xxxxx X. Xxxx
Its: Chief Financial Officer
SCHEDULE I
Firebrand Financial Group, Inc. 1,213,675
EXHIBIT A
EXHIBIT B
