STOCK PURCHASE AND OPTION AGREEMENT (the "Agreement"), dated as of May
1, 2002, between XXXXX and XXXXX XXXXXX (collectively, the "Seller"), and PRIME
MANAGEMENT CORPORATION, a New York corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller owns 400,000 shares (the "Purchased Shares") of
common stock, par value $.01 per share (the "Common Stock"), of Xxxxxx & Ciocia,
Inc. ("Issuer");
WHEREAS, the Seller owns an additional 474,686 shares of the Common
Stock (the "Option Shares");
WHEREAS, the Seller desires to sell the Purchased Shares and to grant
an option to purchase the Option Shares to the Purchaser, and the Purchaser
desires to purchase the Purchased Shares and such option to purchase the Option
Shares from the Seller, at the purchase price of $1,199,000 for the Purchased
Shares and $1,000 for the Option (as defined below) (collectively, the "Purchase
Price"), all on the terms set forth herein; and
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Sale and Purchase of the Purchased Shares.
(a) The Seller hereby transfers, assigns and sells the Purchased
Shares to the Purchaser, and the Purchaser hereby purchases the Purchased Shares
from the Seller.
(b) Subject to Sections 3 and 4 below, the Seller hereby grants to
the Purchaser the right (the "Option") for a period of five years from the date
of this Agreement (the "Option Period") to purchase any or all of the Option
Shares from the Seller at an exercise price per share (the "Option Price") equal
to 160% of the average closing price of the Common Stock as quoted on the Nasdaq
National Market (or such other market or exchange on which the Common Stock
shall be listed or quoted on) over the 20 trading days prior to any exercise of
the Option, except that the Option Price shall not in any event be less than $75
per share. The Seller shall deliver to the Escrow Agent (as defined below)
identified on Exhibit A hereto a certificate or certificates evidencing the
Option Shares, duly endorsed or accompanied by a stock power duly executed in
blank, and such certificates shall be held in escrow pursuant to the Escrow
Agreement (as defined below). Immediately after delivery of the Option Shares to
the Escrow Agent and disbursement of the escrowed Purchase Price to the Seller
pursuant to the Escrow Agreement, the Option Shares will be placed in a voting
trust pursuant to Section 2 below.
(c) Contemporaneously with the delivery of the Purchase Price to
the escrow agent (the "Escrow Agent") pursuant to an Escrow Agreement dated as
of the date hereof (the "Escrow Agreement"), the Seller shall deliver to the
Escrow Agent identified on Exhibit A hereto a certificate or certificates
evidencing the Purchased Shares, duly endorsed or accompanied by a stock power
duly executed in blank, and such certificates shall be held in escrow pursuant
to the Escrow Agreement. Upon disbursement of the escrowed Purchase Price to the
Seller pursuant to the Escrow Agreement, the Purchased Shares will be placed in
a voting trust pursuant to Section 2 below.
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(d) Contemporaneously with the delivery of the Purchased Shares
pursuant to subsection (c), the Purchase Price for the Purchased Shares shall be
delivered to the Escrow Agent to be held in escrow pursuant to the Escrow
Agreement, in accordance with the instructions set forth in Exhibit B annexed
hereto. Upon the delivery of the Purchased Shares and the Option Shares to the
Agent, the Purchaser shall pay the Purchase Price to the Seller by instructing
the Escrow Agent to disburse the Purchase Price to the Seller pursuant to the
Escrow Agreement.
2. Voting Trust Agreement. The Option Shares and the Purchased Shares
shall be placed into a voting trust (the "Trust") for the duration of the Option
Period pursuant to a voting trust agreement (the "Trust Agreement") in
substantially the form attached hereto as Exhibit C by and between the Seller,
the Purchaser and Xxxxxxx Xxxx (the "Trustee").
3. Rights of First Refusal.
(a) Restricted Period. During the Option Period, the Sellers may not,
except in accordance with this Section 3, sell, pledge, hypothecate, or
otherwise encumber any Option Shares, or any interest therein.
(b) Transfer Notice. Commencing with the second anniversary of the date
of this Agreement, if Seller proposes to pledge, transfer, hypothecate or
otherwise encumber any Option Shares to one or more third parties in one or more
related transactions pursuant to a bona fide agreement with such third parties,
or to sell such Option Shares over the Nasdaq National Market (or such other
market or exchange as the Common Stock shall be listed or quoted on) (a
"Transfer"), then the Seller shall give the Purchaser written notice of the
Seller's intention to make the Transfer (the "Transfer Notice"), which Transfer
Notice shall include a reasonable description of the Option Shares to be
transferred ("Offered Shares"), the identity of the prospective transferee(s),
the consideration to be paid and the material terms and conditions upon which
the proposed Transfer is to be made; provided, however, that the total number of
Offered Shares shall not exceed 50,000 in any one-year period.
(c) Purchaser's Option. The Purchaser shall have an option for a period
of 30 days from receipt of the Transfer Notice to elect to purchase some or all
of the Offered Shares from the Seller at the Purchaser's option, at (i) the same
price, terms and conditions as described in the Transfer Notice or (ii) a price
equal to the average closing price of the Issuer's Common Stock as quoted on the
Nasdaq National Market (or such other market or exchange as the Common Stock
shall be listed or quoted on) over the 20 trading days prior to the date of
receipt of the Transfer Notice. The Purchaser may exercise such purchase option
and, thereby, purchase all or a portion of the Offered Shares by notifying the
Seller in writing before expiration of the 30 day period as to the number of
such shares which it wishes to purchase. If the Purchaser gives the Seller
notice that it desires to purchase any of the Offered Shares, then payment for
such Offered Shares shall be by check or wire transfer, against delivery of such
Offered Shares at a place agreed upon between the parties and at the time of the
scheduled closing therefor, which shall be no later than 30 days after the
Purchaser's election to purchase the Offered Shares.
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(d) Non-Exercise of Rights. To the extent that the Purchaser has not
exercised its right of first refusal to purchase the Offered Shares within the
time periods specified in this Agreement, the Seller shall have a period of 30
days from the expiration of such rights in which to sell the Offered Shares, as
the case may be, upon terms and conditions (including the purchase price) no
less favorable to the Seller than those specified in the Transfer Notice. In the
event the Seller does not consummate the sale or disposition of the Offered
Shares within the 30 day period from the expiration of these rights, the
Purchaser's right of first refusal shall continue to be applicable to any
subsequent proposed disposition of Option Shares by the Seller during the Option
Period. Any Offered Shares sold pursuant to this subsection (d) shall be removed
from the Trust pursuant to the terms of the Trust Agreement.
4. Change in Control. In the event of a "Change of Control"(as defined
below) of the Issuer during the six months following this Agreement, the
Purchaser shall have the right to resell the Purchased Shares and any Option
Shares therertofor purchased by it back to the Seller, and the Seller shall have
the obligation to purchase such Purchased Shares and Option Shares theretofor
purchased, at the purchase prices paid for such Purchased Shares and Option
Shares by the Purchaser. A "Change in Control" shall be deemed to occur upon (a)
the sale or transfer by any party, or the issuance by the Issuer, of an amount
of Common Stock or other equity securities of the Issuer (or warrants, options
or other rights to purchase Common Stock or other equity securities of the
Issuer), in one or more transactions, related or unrelated, with voting power
equal to 20% or more of the votes represented by the outstanding Common Stock as
of the date of this Agreement (except to Xxxxxxx Xxxx, or individuals or
entities controlled by Xxxxxxx Xxxx); or (b) the merger of the Issuer with any
person (as such term is defined in the Securities Exchange Act of 1934 (the
"Exchange Act")) as a result of which the Issuer is not the surviving entity as
a publicly held corporation, the consolidation of the Issuer with any person, or
the sale of all or the sale of all or substantially all of the assets of the
Issuer (other than in a transaction with an entity controlled by Xxxxxxx Xxxx).
5. Representations and Warranties of the Seller. The Seller represents
and warrants to the Purchaser that:
(a) Title to Shares and Warrants. The Seller is the record and
beneficial owner of the Purchased Shares hereby purchased and the Option Shares
to be purchased upon the exercise of the Option, free and clear of all liens,
pledges, encumbrances, restrictions, and claims.
(b) Valid and Binding. This Agreement constitutes the legal, valid
and binding obligation of the Seller, enforceable against the Seller in
accordance with its terms.
(c) Non-contravention. The execution and delivery of this Agreement
and the Trust Agreement, and the consummation by the Seller of the transactions
contemplated by this Agreement and the Trust Agreement, does not constitute a
default under (or an event which with notice or lapse of time or both could
become a default) or give to others any rights of termination, amendment or
cancellation or, any material agreement or instrument to which the Seller is a
party, or result in a violation of any law, rule, regulation, order, judgment,
or decree
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(foreign or domestic and including federal and state securities laws and
regulations) applicable to the Seller.
(d) Offering Valid. Assuming the accuracy of the Purchaser's
representations and warranties below, the sale of the Purchased Shares and the
Option Shares purchased under any exercise of the Option is registered or
qualified (or will be exempt from registration and qualification) under the
registration requirements of the Securities Act of 1933 (the "Securities Act")
and all applicable state securities laws.
(e) Full Disclosure. To the Seller's knowledge, none of the
reports, schedules, forms and statements filed by the Issuer with the Securities
and Exchange Commission pursuant to the reporting requirements of the Exchange
Act contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Seller has no knowledge of any material events that would be
required to be disclosed in a Current Report on Form 8-K under the Exchange Act.
(f) Ownership of Additional Common Stock The Purchased Shares and
the Option Shares together represent the total number of shares of Common Stock
owned by the Seller.
6. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller that:
(a) Valid and Binding. This Agreement constitutes the legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms.
(b) Investment Representations. It (i) is purchasing the Purchased
Shares (and the Option Shares to be purchased upon the exercise of the Option)
for its own account without a view to any distribution thereof in violation of
the Securities Act; (ii) is an "accredited investor" as defined under Rule 501
under the Securities Act; (iii) has no contract, undertaking, agreement or
arrangement with any person to sell, transfer or pledge to such person or anyone
else the Purchased Shares (and the Option Shares to be purchased upon the
exercise of the Option) or any part thereof; (iv) has sufficient knowledge and
experience in business matters to evaluate the merits and risks of the
investment; and (v) has adequate means of providing for its current needs and
possible contingencies; has no need for liquidity of its investment in the
Purchased Shares (and the Option Shares to be purchased upon the exercise of the
Option) and would be able to bear the economic risk of a complete loss of its
proposed investment in the Purchased Shares (and the Option Shares to be
purchased upon the exercise of the Option) hereunder.
(c) Information about Issuer. It acknowledges that it has received
and reviewed carefully the Issuer's most recent Quarterly Report on Form 10-Q
and Annual Report on Form 10-K.
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(d) Offers and Sales. All subsequent offers and sales of the
Purchased Shares and any Option Shares purchased upon exercise of the Option
shall be made pursuant to an effective registration statement under the
Securities Act or pursuant to an applicable exemption from such registration.
(e) Authorization. It has the requisite corporate power and
authority to enter into this Agreement and the Trust Agreement.
7. Indemnification.
(a) By the Seller. The Seller agrees to indemnify and hold harmless
the Purchaser and its directors, officers, members, shareholders, employees,
agents, successors and assigns (the "Purchaser Parties") against, and to
reimburse the Purchaser Parties on demand with respect to, any and all losses,
liabilities, obligations, suits, proceedings, demands, judgments, damages,
claims, expenses and costs (including, without limitation, reasonable fees,
expenses and disbursements of counsel) (collectively, "Damages") which each may
suffer, incur or pay by reason of (i) the breach by the Seller of any
representation or warranty contained in this Agreement, or in any agreement,
certificate or instrument executed by it and contemplated hereby or (ii) the
failure of the Seller to perform any agreement required by this Agreement or any
agreement, certificate or instrument contemplated hereby.
(b) By the Purchaser. The Purchaser agrees to indemnify and hold
harmless the Seller and its agents, successors and assigns (the "Seller's
Parties") against, and to reimburse the Seller's Parties on demand with respect
to, any and all Damages which each may suffer, incur or pay by reason of (i) the
breach by the Purchaser of any representation or warranty contained in this
Agreement or in any agreement, certificate or instrument executed by it and
contemplated hereby or (ii) the failure of the Purchaser to perform any
agreement required by this Agreement or any agreement, certificate or instrument
contemplated hereby.
8. Miscellaneous
(a) Expenses. The parties hereto will bear their own costs, fees
and expenses in connection with the negotiation, documentation and/or
enforcement of this Agreement.
(b) No Modification Except in Writing. This Agreement shall not be
changed, modified or amended except by a written agreement executed by the
parties hereto.
(c) Entire Agreement. This Agreement sets forth the entire
agreement and understanding among the parties hereto as to the subject matter
hereof.
(d) Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be delivered (i)
in person, (ii) by certified or registered mail, return receipt requested, (iii)
by Federal Express or other nationally recognized overnight courier service
which issues confirmation of delivery or (iv) by confirmed facsimile
transmission at the addresses or facsimile numbers set forth below or to such
other
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addresses or facsimile number, as applicable, as any party hereto may designate
to the other in writing.
If to the Purchaser:
c/o Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxxx Xxxxxxx, Esq.
If to the Seller, to it at the address set forth below the Seller's
signature below, with a copy to:
Xxxxxxx X. X'Xxxxxx, Esq.
0 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Any such notice shall be deemed to be given (i) when delivered, if delivered
personally or by Federal Express or other nationally recognized overnight
courier service, (ii) on the third business day after the date of mailing, if
sent by certified or registered mail or (iii) upon confirmation of receipt, if
delivered by facsimile transmission.
(e) Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement may not be
assigned by either party hereto without the written consent of the other party.
(f) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York.
(g) Captions; Construction. The captions appearing in this
Agreement are inserted only as a matter of convenience and for reference and in
no way define, limit or describe the scope and intent of this Agreement or any
of the provisions hereof.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
SELLER:
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
Address:
PURCHASER:
PRIME MANAGEMENT CORPORATION
By: /s/ Xxxx Xxxx
---------------------------------
Title: President
------------------------------
Address:
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