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EXHIBIT 10.10
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into this ________________ ___, 199_, by and between XXXXXXX X. XXXXX, XXXX X.
XXXXX and XXXXXX XXXXXXX, each an individual (hereinafter individually a
"SELLER" and collectively the "SELLERS"), WALNUT FINANCIAL SERVICES, INC., a
Utah corporation ("BUYER"), and PACIFIC FINANCIAL SERVICES CORP., a Washington
corporation ("PACIFIC FINANCIAL");
R E C I T A L S:
A. Each Seller is the legal holder and owner of one hundred (100)
shares (hereinafter the full three hundred (300) shares are collectively
referred to as the "SHARES") of the issued and outstanding common stock of
Pacific Financial, which Shares constitute one hundred percent (100%) of the
issued and outstanding capital stock of Pacific Financial;
B. Buyer desires to purchase from the Sellers and the Sellers desire to
sell to Buyer the Shares on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements hereinafter set forth, and other good and valuable
considerations, the receipt and sufficiency of which are mutually acknowledged,
the parties agree as follows:
1. PURCHASE AND SALE. On the Closing Date (as hereinafter defined), the Sellers
shall sell, transfer, convey and assign to Buyer, and Buyer shall purchase from
the Sellers, all of the Shares, together with any and all other shares,
investment securities, units, equity interests, subscription rights, options and
warrants of Pacific Financial, and any other legal or beneficial interest (or
related right) in Pacific Financial now or hereafter owned by Sellers, whether
issued or acquired in substitution for or in addition to any of the Shares, and
whether issued or acquired by dividend, distribution, exchange, stock split,
purchase and sale or otherwise (collectively, together with the Shares, the
"SECURITIES"), free and clear of all liens, claims, charges, restrictions,
voting trusts or comparable arrangements, options, constructive trusts, pledges,
security interests and other encumbrances (collectively, "LIENS"), at the price
and upon the terms and subject to the conditions hereinafter set forth.
2. PURCHASE PRICE.
2.1 Payment and Purchase Price. The aggregate price to be paid by Buyer to
Sellers for the purchase of the Securities shall be Three Million and No/100
Dollars ($3,000,000.00) payable at Closing (as hereinafter defined) as follows:
(a) A total of Nine Hundred Thousand and No/100 Dollars ($900,000.00)
shall be paid in cash (the "CASH PAYMENT") to Sellers by wire transfer of
federal funds in the amount of Three Hundred Thousand and No/100 Dollars
($300,000.00) to or as directed by each Seller;
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(b) Buyer shall cause to be issued to Sellers, that number of shares
of Buyer's common stock, par value $0.01 per share ("BUYER'S COMMON"), as
is derived by dividing Nine Hundred Thousand and No/100 Dollars
($900,000.00) by Buyer's Closing Bid Price (as hereinafter defined) (the
"COMMON STOCK PAYMENT") such that each Seller receives that number of
shares of Buyer's Common equal to one third (1/3) of the total Common Stock
Payment; and
(c) Buyer shall cause to be issued to each Seller by Pacific Financial
an unsecured promissory note in the principal amount of One Hundred
Thousand and No/100 Dollars ($100,000.00) such that promissory notes are
issued to Sellers in an aggregate principal amount of Three Hundred
Thousand and No/100 Dollars ($300,000.00) (the "SHORT TERM NOTES"). The
Short Term Notes shall be in substantially the form attached hereto as
EXHIBIT A, shall mature at the earlier to occur of (i) twelve (12) months
from the Closing Date and (ii) the completion of a private placement of
Buyer's securities by Xxxxx Xxxxxxx Securities, LLC with net proceeds to
Buyer of at least Two Million One Hundred Seventy-Five Thousand and No/100
Dollars ($2,175,000.00), and shall bear interest at eight percent (8%) per
annum. The Short Term Notes shall be guaranteed by Buyer pursuant to the
form of guaranty that appears at the end of the Short Term Notes (the
"SHORT TERM GUARANTY"); and
(d) Buyer shall cause to be issued to each Seller by Pacific Financial
an unsecured promissory note in the principal amount of Three Hundred
Thousand and No/100 Dollars ($300,000.00) such that promissory notes are
issued to Sellers in an aggregate principal amount of Nine Hundred Thousand
and No/100 Dollars ($900,000.00) (the "LONG TERM NOTES"). The Long Term
Notes shall be in substantially the form attached hereto as EXHIBIT B,
shall mature four (4) years from the Closing Date, which maturity date
shall be subject to extension as set forth in Section 3.2 hereto, and shall
bear interest at eight percent (8%) per annum. The Long Term Notes shall be
guaranteed by Buyer pursuant to the form of guaranty that appears at the
end of the Long Term Notes (the "LONG TERM GUARANTY").
2.2 Common Stock Payment. As used herein, "BUYER'S CLOSING BID PRICE" shall
mean the average closing bid price reported on the Nasdaq National Market System
for Buyer's Common for the five (5) trading days immediately preceding the
Closing Date, provided that Buyer's Closing Bid Price shall be deemed to be not
more than Two and 75/100 Dollars ($2.75) per share. The number of shares of
Buyer's Common delivered hereunder shall be rounded to the nearest whole share
and Buyer shall not issue any fractional shares in connection with the Common
Stock Payment. Buyer shall deliver valid title to Buyer's Common, free and clear
of all Liens; provided, however, that Buyer's Common shall be restricted stock
within the meaning of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), and shall bear the restrictive legends set forth on EXHIBIT C.
Each Seller agrees to deliver to Buyer at the Closing a subscription
agreement and confidential purchaser questionnaire (a "SUBSCRIPTION AGREEMENT")
in substantially the form attached hereto as EXHIBIT X. Xxxxxxx shall be granted
those registration rights with respect to the shares of Buyer's Common received
as the Common Stock Payment as set forth in the form of registration agreement
attached hereto as EXHIBIT E (the "REGISTRATION AGREEMENT").
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2.3 Repayment of Certain Pacific Financial Debt. In addition to the
consideration set forth in Sections 2.1 and 2.2 above, Pacific Financial shall
repay, or cause to be repaid, at Closing the unpaid outstanding principal
balance of certain notes owed by Pacific Financial to Messrs. Xxxxx and Xxxxxxx
and the Xxxxxxx Trust #1 and identified on Schedule 1 attached hereto but
excluding any interest, default interest or accrued fees with respect thereto
(the "NOTE REPAYMENT"), the aggregate amount of which Note Repayment shall in no
event exceed Six Hundred Thousand and No/100 Dollars ($600,000.00). The Note
Repayment may be made by provision to Pacific Financial of financing from, or
arranged by, Buyer, which financing shall be made on such terms as Buyer
dictates or negotiates in its sole and absolute discretion.
2.4 Allocation of Purchase Price. The parties hereto hereby stipulate that
Thirty Thousand and No/100 Dollars ($30,000.00) of the Purchase Price shall be
allocated as follows: (i) Ten Thousand and No/100 Dollars ($10,000.00) to the
confidentiality and non-compete provisions of the Employment Agreement (as
defined in Section 12.1(e)) and (ii) Ten Thousand and No/100 Dollars
($10,000.00) to each of the Non-Competition Agreements (as defined in Section
12.1(f)). The parties hereto agree to file all applicable tax returns and other
required tax-related schedules and documents in accordance with the allocations
set out above and will not adopt or otherwise assert tax positions inconsistent
therewith.
3. CLOSING BALANCE SHEET; COLLECTION OF RECEIVABLES.
3.1 Closing Balance Sheet. The parties agree that immediately after the
Closing Date, the firm of Xxxxxxx X. Xxxxxx & Co., L.L.P. or such other
independent public accountants as selected by Buyer (the "ACCOUNTANTS") will
compile and provide to the parties a balance sheet with respect to Pacific
Financial as of the Closing Date (the "CLOSING BALANCE SHEET"), at the sole cost
and expense of Buyer or Pacific Financial, payable after the Closing Date, which
Closing Balance Sheet shall be prepared in accordance with the standard
accounting practices of Pacific Financial as in existence prior to Closing.
Sellers shall afford the Accountants full access to the books and records of
Pacific Financial and full access to all other relevant information, documents
and files required by the Accountants in connection with its preparation of the
Closing Balance Sheet. Sellers represent and warrant that all of such books and
records and other information, documents and files are and will be as of the
Closing Date true, correct and complete and fairly and accurately represent the
financial condition of Pacific Financial and its business and properties and
liabilities and will have been prepared in accordance with generally accepted
accounting principles consistently applied with prior periods.
3.2 Collection of Receivables.
(a) In the event any Pacific Financial Receivable (as defined in
Section 6.13) outstanding as of the Closing Date (whether or not identified
on the Closing Balance Sheet) is deemed to be an Uncollectible Receivable
(as hereinafter defined) at any time on or following the Closing Date,
Sellers may cause such Uncollectible Receivable to be replaced by the
appropriate Pacific Financial client (the "DEFAULTING CLIENT") with
another, nonfactored receivable of the Defaulting Client in an amount equal
to or greater than the value of the Uncollectible Receivable plus any
accrued fees owed to Pacific Financial with respect to such Uncollectible
Receivable (a "REPLACEMENT RECEIVABLE"); provided,
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however, that (i) no additional advance shall be made by Pacific Financial
to the Defaulting Client until an acceptable Replacement Receivable has
been given to Pacific Financial by the Defaulting Client to replace the
Uncollectible Receivable, (ii) the replacement shall not cause the total
obligation of the Defaulting Client to Pacific Financial to exceed eighty
percent (80%) of the value of all collateral pledged by the Defaulting
Client to Pacific Financial, (iii) Pacific Financial has not reasonably
determined that it has ceased doing business with the Defaulting Client,
and (iv) Sellers have no actual information that leads them to reasonably
believe that the Replacement Receivable is or will become an Uncollectible
Receivable. In the event that a Replacement Receivable is deemed to be an
Uncollectible Receivable, Sellers may cause such Replacement Receivable to
be replaced by the Defaulting Client with another Replacement Receivable (a
"FINAL RECEIVABLE"); provided, however, that (w) no additional advance
shall be made by Pacific Financial to the Defaulting Client until an
acceptable Final Receivable has been given to Pacific Financial by the
Defaulting Client to replace the Replacement Receivable that has become an
Uncollectible Receivable, (x) the replacement shall not cause the total
obligation of the Defaulting Client to Pacific Financial to exceed eighty
percent (80%) of the value of all collateral pledged by the Defaulting
Client to Pacific Financial, (y) Pacific Financial has not reasonably
determined that it has ceased doing business with the Defaulting Client,
and (z) Sellers have no actual information that leads them to reasonably
believe that the Final Receivable is or will become an Uncollectible
Receivable. A Receivable, a Replacement Receivable or a Final Receivable
shall be deemed to be an "UNCOLLECTIBLE RECEIVABLE" if Pacific Financial is
not paid in full (and if paid by check, such check has cleared consistent
with the Collected Funds Act) with respect to such Receivable, Replacement
Receivable or Final Receivable, as the case may be, including payment of
all accrued fees owed to Pacific Financial in connection therewith, within
ninety (90) days of Pacific Financial's acquisition of such Receivable,
Replacement Receivable or Final Receivable, as the case may be. Unless
Pacific Financial has reasonably determined that it has ceased doing
business with the Defaulting Client, Pacific Financial shall have no
obligation to charge reserves, if any, of a Defaulting Client with respect
to an Uncollectible Receivable. If Pacific Financial has reasonably
determined that it has ceased doing business with the Defaulting Client,
Pacific Financial shall charge reserves of such Defaulting Client against
such Uncollectible Receivable pro rata among reserves contributed to
Pacific Financial by the Defaulting Client with respect to all of such
Defaulting Client's receivables.
(b) Upon the first occurrence and upon each occurrence thereafter of
any Final Receivable being deemed an Uncollectible Receivable (or any
Uncollectible Receivable being deemed ineligible to be replaced by a
Replacement Receivable or a Final Receivable, as the case may be, for any
reason), payment of an amount of principal of the Long Term Notes (pro rata
among them) equal to the amount of such Final Receivable or Final
Receivables (or such Uncollectible Receivable or Uncollectible Receivables)
plus any accrued fees owed to Pacific Financial in connection therewith,
shall be extended for one year from the Original Maturity Date (as defined
in the Long Term Notes). For example, in the event that a Final Receivable
totaling One Hundred Thousand and No/100 Dollars ($100,000.00) (including
accrued fees owed to Pacific Financial) is deemed an Uncollectible
Receivable, One Hundred Thousand and No/100 ($100,000.00) of the principal
amount due under the Long Term Notes (pro rata among them) shall become due
one year after the
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Original Maturity Date and Eight Hundred Thousand and No/100
($800,000.00) shall be payable on or before the Original Maturity Date of
the Long Term Notes. If subsequently an additional Final Receivable
totaling One Hundred Thousand and No/100 Dollars ($100,000.00) (including
accrued fees owed to Pacific Financial) is deemed an Uncollectible
Receivable, an additional One Hundred Thousand and No/100 Dollars
($100,000.00) of the principal amount due under the Long Term Notes (pro
rata among them) shall become due one year after the Original Maturity Date
such that Two Hundred Thousand and No/100 Dollars ($200,000.00) shall be
due one year after the Original Maturity Date and Seven Hundred Thousand
and No/100 Dollars ($700,000.00) shall be payable on or before the Original
Maturity Date of the Long Term Notes. If the Original Maturity Date of the
Long Term Notes is so extended, Buyer and Sellers agree to execute such
amendments or modifications to the Long Term Notes and take such other
actions reasonably necessary to effectuate such extension. For a period of
nine months following the Closing Date, Pacific Financial shall provide
monthly a written statement to Sellers stating in reasonable detail the
status of collections of any outstanding Uncollectible Receivables,
Replacement Receivables or Final Receivables.
(c) In the event that on or following the Closing Date (i) any
Uncollectible Receivable is not replaced or is not eligible to be replaced
with a Replacement Receivable or a Final Receivable, as the case may be,
for any reason, or (ii) any Final Receivable is not paid in full, including
payment of all accrued fees owed to Pacific Financial in connection
therewith, within ninety (90) days of the acquisition of the Final
Receivable by Pacific Financial, Pacific Financial shall be entitled to
demand payment from Sellers, on a pro rata basis among Sellers, in an
amount equal to the Uncollectible Receivable or Final Receivable, as the
case may be, plus any accrued fees owed to Pacific Financial in connection
therewith and all reasonable out-of-pocket costs incurred by Pacific
Financial, Buyer or any of Buyer's subsidiaries in attempting to collect
such Uncollectible Receivable or Final Receivable, as the case may be (the
"DEMAND AMOUNT"). If Sellers shall not have paid such Demand Amount in full
within ten (10) days following any such demand for payment by Pacific
Financial, Pacific Financial shall offset such Demand Amount or unpaid
portion thereof against the next payment or payments due under either the
Short Term Notes or the Long Term Notes, or both, as Pacific Financial
shall determine in its sole discretion, on a pro rata basis among the
Sellers, until the Demand Amount is satisfied in full. Messrs. Xxxxx and
Xxxxxxx shall be jointly and severally liable with respect to two thirds
(2/3) of any Demand Amount.
(d) In the event any Uncollectible Receivable, any accrued fees owed
to Pacific Financial in connection therewith, and/or any collection costs
of Pacific Financial, Buyer or any of Buyer's subsidiaries incurred in
connection therewith that have been included in a Demand Amount are
actually collected in full or in part by Pacific Financial (a "COLLECTION")
and Pacific Financial has received payment of the Demand Amount associated
with such Uncollectible Receivable or Pacific Financial has offset such
Demand Amount against the Short Term Notes or the Long Term Notes, Pacific
Financial shall credit the amount of such Collection to Sellers by either
(i) making payment of the amount of such Collection to Sellers, or (ii)
reinstating the payment or payments due under the Short Term Notes or Long
Term Notes with respect to which the Demand Amount was offset or scheduled
to be offset.
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(e) Pacific Financial shall use its best efforts and due diligence to
collect any Uncollectible Receivable from a Defaulting Client in accordance
with the standard operating procedures of Pacific Financial in effect as of
the date hereof, including the pursuit of available legal remedies, if
appropriate, in accordance with such procedures; provided, however, that
neither Pacific Financial nor Buyer shall have any obligation to pursue any
remedy available against a Defaulting Client that has an ongoing factoring
relationship with Pacific Financial for payment of any Uncollectible
Receivable, Replacement Receivable or Final Receivable (unless Pacific
Financial institutes litigation against the Defaulting Client involving
other Receivables in which event Pacific Financial shall include the
Uncollectible Receivable as a claim in such litigation). No such pursuit by
Pacific Financial or Buyer, however, shall release Sellers from their
reimbursement obligations or Buyer's right of offset hereunder. Sellers
hereby waive (i) all rights of subrogation, all rights of indemnity and any
other rights to collect reimbursement from a Defaulting Client for any sums
paid to Pacific Financial or Buyer by Sellers hereunder, and (ii) all
rights to enforce any remedy that Pacific Financial or Buyer may have
against a Defaulting Client.
(f) For purposes of this Agreement, the payable from Ultrapak
Packaging, Inc. to Pacific Financial reflected by Letter Agreement dated
April 7, 1997 shall be deemed an Uncollectible Receivable only if there has
been a default on the terms of such payable as set forth in such Letter
Agreement, which such default has existed for at least ninety (90) days. In
addition, that certain note dated June 6, 1996 made by Xxxxx (Xxx) and
Xxxxxxx Xxxxxxxx payable to Pacific Financial in connection with Pacific
Financial's factor of receivables of Allstate Fabricators, Inc. shall be
excluded from the Closing Balance Sheet and shall not be deemed a
Receivable for purposes of this Agreement.
4. CLOSING ESCROW. The parties hereto agree to execute and deliver the documents
necessary for the closing of the transactions provided for herein ("CLOSING"),
including but not limited to the documents set forth in paragraph 12 hereof, to
Xxxxxx & Xxxxxx (the "ESCROWEE"). The Closing shall take place on such date
agreed upon by the parties in writing, which date shall in any case be no later
than ten business days after the receipt by the Escrowee of the last of the
documents necessary to be executed and/or delivered in order for the Closing to
occur (the "CLOSING DATE"). Until the Closing Date, the parties hereto agree
that the Escrowee shall hold any and all executed documents received by it in
escrow until the Escrowee receives the written instruction of each of the
parties hereto to release such documents in order that the Closing may occur.
5. NO-SHOP. From the date hereof through Closing or the earlier termination of
this Agreement as provided herein, Sellers shall not, and shall cause Pacific
Financial not to, (a) solicit, initiate, consider, encourage or accept any other
proposals or offers from any person, association or entity ("PERSON") relating
to (i) any acquisition or purchase of all or any portion of the assets, capital
stock or other securities of Pacific Financial (other than inventory to be sold
or disposed of in the ordinary course of business consistent with past
practice), (ii) any business combination involving Pacific Financial, or (iii)
any other extraordinary business transaction involving or otherwise relating to
Pacific Financial, or (b) participate in any discussions, negotiations or other
communications regarding, or furnish to any other Person any information with
respect to, or otherwise cooperate in any way, assist or participate in,
facilitate or encourage any effort or attempt by any Person relating to any of
the foregoing. Sellers shall notify the Buyer promptly of any such proposal or
offer, or any
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inquiry or other contact with any Person with respect thereto, and
shall, in any such notice to the Buyer, indicate in reasonable detail the
identity of the Person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or other contact.
6. REPRESENTATIONS OF SELLERS. Sellers hereby represent, warrant and covenant to
Buyer as of the date hereof and as of the Closing Date, which representations,
warranties and covenants shall be joint and several with respect to Messrs.
Xxxxx and Xxxxxxx as to two-thirds (2/3) of any obligation or loss and shall be
several with respect to Xx. Xxxxx as to one-third (1/3) of any obligation or
loss, are material, are being relied upon by Buyer (notwithstanding any
independent investigations) and shall survive the Closing as provided herein, as
follows, subject only to such exceptions as are explicitly set forth on Schedule
6 attached hereto ("SELLERS' DISCLOSURE SCHEDULE") on a section-by-section
basis:
6.1 Organization and Authority. Pacific Financial is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington and has no subsidiaries; has full power and authority to carry on its
business as it is now being conducted and to own, lease and operate its
properties and assets as now owned, leased and operated; and has full power and
authority to take all actions on its part contemplated to be taken under this
Agreement and all other agreements, instruments and documents referred to herein
or contemplated hereby. Pacific Financial is duly qualified and in good standing
as a foreign corporation under the laws of any state or jurisdiction in which
the character of the properties owned or leased by it therein or in which the
transactions of its business makes such qualification necessary and Sellers'
Disclosure Schedule sets forth a list of all such properties.
6.2 Capitalization. The entire authorized capital stock of Pacific
Financial consists of one thousand (1,000) shares of common stock, without par
value, of which three hundred (300) shares are validly issued and outstanding,
fully paid and non-assessable and all three hundred (300) of which are owned by
Sellers. As of the date of this Agreement, the Securities consist only of the
Shares. None of the Shares are subject to any restrictions with respect to
transferability. There are no outstanding options, warrants, voting trusts,
shareholder agreements or other rights of any kind relating to the sale,
encumbrance or other disposition, or the authorization, issuance or voting of,
any shares of capital stock of any class of, or other equity interest in,
Pacific Financial, nor any securities convertible into or evidencing the right
to purchase any share of capital stock of any class of, or other equity interest
in, Pacific Financial.
6.3 Authorization and Enforceability. Each Seller is a natural person who
has reached the age of majority and has full legal capacity, power and authority
to enter into, execute and deliver, and to perform his obligations under, this
Agreement and all other agreements, instruments and documents referred to herein
or contemplated hereby to be executed, delivered and performed by him. This
Agreement, and all other agreements, instruments and documents referred to
herein or contemplated hereby and executed by Sellers, constitute, and will
constitute, valid, binding and enforceable obligations of Sellers in accordance
with its and their terms, subject to the enforcement of involuntary bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
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6.4 No Conflicts. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby by Sellers do not
and will not: (a) conflict with the Articles of Incorporation and By-laws of
Pacific Financial, in each case as amended as of the date hereof; (b) conflict
with, or result in a breach or termination of, or constitute a default (or an
event which, with the giving or due notice or lapse of time, or both, would
constitute a default) or cause or permit the acceleration of the maturity of or
give rise to any right to impose any fees or penalties under, any agreement,
commitment, or other instrument, or any order, judgment or decree, to which any
of the Sellers or Pacific Financial is a party or by which any of them or any of
their respective assets is bound; (c) result in the creation or imposition of
any Lien upon any of their respective assets; or (d) constitute a violation by
any of the Sellers or Pacific Financial of any law, statute, judgment,
injunction, decree, order or other authoritative matter of any governmental
authority applicable to Sellers or to any of their respective assets.
6.5 Consents. No consents approvals, waivers, variances or authorizations
of, notices to or filings with (collectively, "CONSENTS") any Person (including,
without limitation, any governmental authority) are necessary in connection with
the execution and delivery by Sellers of this Agreement or the consummation by
Sellers of the transactions contemplated herein other than compliance with
applicable federal and state securities laws.
6.6 Litigation. Except as disclosed on behalf of Sellers in that certain
letter dated January 6, 1997 from Xxxxxxx X. Xxxxxx addressed to Buyer or as set
forth on Section 6.6 of Sellers' Disclosure Schedule: (a) there is no
investigation, audit or review by any governmental authority pending with
respect to the Shares, any of the Sellers, Pacific Financial or any of their
respective business or assets; (b) there are no claims, actions, suits or
proceedings pending, or to the best knowledge of Sellers after due inquiry,
threatened, in connection with the Shares, any of the Sellers, Pacific Financial
or any of their respective business or assets, at law or in equity, before or by
any governmental authority or any third party, and, to the best knowledge of
Sellers after due inquiry, there exists no state of facts that could reasonably
be expected to result in any such claims, actions, suits or proceedings; and (c)
there is no outstanding judgment, order, injunction or decree of any
governmental authority or any third party against or affecting the Shares, any
of the Sellers, Pacific Financial or any of their respective business or assets,
and neither Sellers, nor Pacific Financial has been a party to, or bound by, any
such judgment, order, injunction or decree.
6.7 The Shares. Sellers are and until the Closing shall remain the sole
owners of and have and until the Closing shall continue to have good and
marketable legal and beneficial title of record to all of the Shares, free and
clear of all Liens, and Sellers have and until the Closing shall continue to
have physical possession of the original stock certificate(s) representing the
Shares. Sellers have and shall continue to have the full and unrestricted right
to vote the Shares and to transfer absolute ownership thereof to Buyer. At
Closing the Sellers will transfer the Securities and valid title thereto, free
and clear of all Liens, to Buyer. Except as disclosed on Schedule 1, no Seller
is a creditor or the holder of any debt of Pacific Financial.
6.8 Patents, Trademarks, Etc.. There are no patents, trademarks, copyrights
and service marks, registrations thereof and applications therefor, and trade or
business names owned or used by, registered in the name of, or licensed to or by
Pacific Financial or necessary in connection with the operation of Pacific
Financial's business.
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6.9 Financial Statements. All the existing financial statements of or
pertaining to Pacific Financial (the "FINANCIAL STATEMENTS") have been provided
to Buyer. All the Financial Statements are true, complete and correct, and have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated and from period to period,
and fairly and accurately present the financial condition of Pacific Financial,
its assets and liabilities and the results of its operations as at the
respective dates and for the respective periods indicated. The Financial
Statements reflect all known material claims against, and debts and liabilities
of, Pacific Financial in accordance with generally accepted accounting
principles consistently applied, as of the dates thereof. Except for such
claims, debts and liabilities reflected in the unaudited balance sheet and
related income statements of Pacific Financial for the period ended December 31,
1996 prepared in accordance with generally accepted accounting principles
consistently applied (the "DECEMBER STATEMENT"), Pacific Financial does not have
any claims, debts or liabilities, accrued, absolute, direct, indirect,
perfected, contingent or otherwise, nor is it subject to any claims, debts,
liabilities, fixed or contingent, other than those expressly disclosed in this
Agreement or Sellers' Disclosure Schedule or incurred in the ordinary course of
business since the date hereof and in accordance with this Agreement, including,
without limitation, any liabilities arising from the operation of Pacific
Financial's business in violation of any law, ordinance, rule or regulations of
any federal, state or municipal government or any department, board or agency
thereof, and further including, without limitation, all federal, state or other
tax liabilities due or to become due, including, but not limited to, income,
sales, personal property, use or franchise taxes, whether or not incurred in
respect of or measured by Pacific Financial's income for any period or arising
out of transactions entered into, or any state of facts existing, as of the date
hereof.
6.10 Compliance with Laws. Each of Sellers and Pacific Financial has
complied with and shall continue to comply with through the Closing all
applicable statutes, ordinances, rules and regulations, orders and other laws
relating to any of their respective businesses and assets (including, without
limitation, the Shares) and Pacific Financial has all licenses, permits and
other authorizations required in connection with the conduct of its business
(which licenses, permits and authorizations are valid, fully paid and in full
force and effect). None of such licenses, permits or other authorizations expire
(without being able to be renewed upon payment of a nominal renewal fee) during
the 24 month period following the date hereof.
6.11 Taxes. (a) Pacific Financial has timely filed all returns, reports and
declarations respecting Taxes (as hereinafter defined) which are required to be
filed; (b) to the best of Sellers' knowledge, such returns, reports and
declarations are complete, correct and in accordance with applicable law; (c)
Pacific Financial has paid all Taxes which have become due and are imposed by
law upon it or any of its property, assets, income, receipts, imports, payrolls,
transactions, capital, net worth or franchises, other than those not delinquent
or being contested in good faith by appropriate proceedings or for which all
applicable statutes of limitation, if any (including extensions thereof), have
expired; (d) no issues, deficiencies or claims have been asserted in writing or,
proposed, to Pacific Financial by the Internal Revenue Service or any other
governmental authority in connection with the examination of any of their
respective returns respecting Taxes which would, if determined adversely, have
an adverse affect on the business or any of the assets of Pacific Financial; (e)
no investigation or audit of any governmental authority with respect to Taxes
that might give rise to a lien or other encumbrance against any of such assets
is in effect or, to the best of Sellers' knowledge, has been threatened; and (f)
except as otherwise accrued and adequately
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reserved for in the books of account and other financial records and statements
of Pacific Financial made available to Buyer or its representatives, no
unsatisfied deficiency, delinquency or default for any Taxes that might give
rise to a lien against any of their respective assets has been claimed, proposed
or assessed by the Internal Revenue Service or any other governmental authority.
"TAXES" means all federal, state, county, local and foreign income, use,
exercise, property, sales, unemployment, franchise, business activity and other
taxes, levies and assessments and associated interest and penalties.
6.12 Conduct of Business. Since December 10, 1996, (a) the business of
Pacific Financial has been conducted in the ordinary course and consistent with
past practice, and there have been no material adverse changes in connection
therewith; and (b) there has been no action or omission of any of the Sellers or
Pacific Financial which could interfere with the transactions contemplated
hereby or have an adverse affect on the business of Pacific Financial.
6.13 Accounts Receivable. The unpaid accounts receivable, loans, advances
and contracts receivable (individually, a "RECEIVABLE," collectively, the
"RECEIVABLES") reflected in the December Statement and the Receivables generated
or created between the date reflected on the December Statement and the Closing
are and will be existing debts owed to Pacific Financial, are and will be
genuine, arose or will arise in the ordinary course of business and are and will
be fully collectible according to their terms. To the best of Sellers'
knowledge, none of the Receivables are or will become Uncollectible Receivables.
The amount ultimately collected from such Receivables shall at least be equal to
the amount of Receivables shown on the Closing Balance Sheet.
6.14 Contracts. Sellers have delivered to Buyer true, correct and complete
copies of all of the Material Contracts (as hereinafter defined) that are in
writing, together with reasonably detailed written summaries of the terms of all
Material Contracts that are not in writing. To the best of Sellers' knowledge,
the Material Contracts are legal, valid and binding, enforceable in accordance
with their respective terms, and are in full force and effect. Neither any of
the Sellers nor Pacific Financial is in breach, violation or default, however
defined, in the performance of any of its obligations under any Material
Contract, and no facts and circumstances exist which, whether with the giving of
due notice, lapse of time, or both, would constitute such a breach, violation or
default thereunder or thereof; and, to Seller's best knowledge after due
inquiry, no other parties thereto are in breach, violation or default, however
defined, under any Material Contract, and, no facts or circumstances exist
which, whether with the giving of due notice, lapse of time or both, would
constitute such a breach, violation or default thereunder or thereof. "MATERIAL
CONTRACTS" means all agreements, contracts, leases, licenses and other
commitments, whether written or oral, in effect as of the date hereof, (a) to
which any of the Sellers or Pacific Financial is a party that affect or relate
to the Securities, and/or (b) to which Pacific Financial is a party that (i)
cannot be terminated by Pacific Financial on thirty (30) days or less notice, or
(ii) could require expenditures by Pacific Financial over the anticipated course
of the commitment in excess of Five Thousand Dollars ($5,000.00).
6.15 Disclosure. No representation, warranty or schedule contained in this
Agreement or attached hereto, and no schedule, certificate or other written
document or instrument, including, without limitation, any Material Contract,
delivered, made available or to be delivered or made available to Buyer pursuant
to this Agreement, in connection with the transactions contemplated hereby, or
in connection with Buyer's investigation concerning its purchase of the
Securities,
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contains or will contain any untrue statement of material fact or omits or will
omit to state any material fact necessary to make the statements contained
therein not misleading. There is no fact known to Sellers which has, or which
could reasonably be foreseen by Sellers as likely to have, a material adverse
effect on the assets, liabilities, financial condition, results of operations,
business, prospects or operations of Pacific Financial which has not been
disclosed herein, in any schedule attached hereto or in any schedule,
certificate or other written document or instrument furnished or to be furnished
to Buyer under this Agreement or in connection with the transactions
contemplated hereby.
6.16 Compensation and Employment Agreements. Sellers' Disclosure Schedule
contains a true, correct and complete list of all employees, consultants (other
than accountants and attorneys) and sales or marketing representatives of
Pacific Financial, together with the compensation, bonuses and commissions and
expense reimbursements and allowances for such employees, consultants and
representatives and sets forth the annual rate of such compensation (including
bonuses, commissions and expense allowances, if any) and the positions held by
all such employees, consultants and representatives, together with a list and
brief description of all current and future pension, retirement, profit sharing,
vacation, sick pay, severance and similar arrangements and benefits of the
Company with its employees of a legally binding nature or of the nature of any
informal understanding, all of which are in full force and effect and fully
funded and adequate reserves for which have been established in the December
Statement and the Financial Statements as of the Closing Date. There are no
written or oral employment agreements and arrangements for employees,
consultants or sales and marketing representatives of the Company not disclosed
on Sellers' Disclosure Schedule. Pacific Financial does not maintain and has not
maintained in the past any "employee pension plan," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended.
6.17 Environment. There exists no violation of any applicable federal,
state or local environmental laws in connection with the business or assets of
Pacific Financial, or in connection with any of the premises owned, used or
occupied by Pacific Financial (and none of the Sellers or Pacific Financial has
received notice of any alleged such violation), and no hazardous materials or
hazardous substances (each as defined in such laws) are now or have in the past
been used, generated, stored, handled, released or disposed of in or about such
premises.
6.18 Collective Bargaining Agreements. Pacific Financial is not currently
nor has it ever been party to or subject to any collective bargaining agreement
or other arrangement with any union. Pacific Financial does not employ any known
union employees.
6.19 Customers and Suppliers. None of Sellers nor Pacific Financial has
received any notice or has any reason to believe that as a result of Sellers'
anticipated sale of the Securities to Buyer hereunder or the negotiation of the
terms this Agreement or of such sale generally any customer of Pacific Financial
has ceased, or will at any time before or after the Closing Date cease, to use
the products, goods or services of the business of Pacific Financial or has
substantially reduced, or will at any time before or after the Closing Date
substantially reduce, the use of such products, goods or services at any time.
None of Sellers nor Pacific Financial has received any notice or has any reason
to believe that any supplier of Pacific Financial has ceased or will cease to
sell supplies, inventory and other goods to the business of Pacific Financial at
any time before or after the Closing Date on terms and conditions substantially
similar to those used in its current sales to
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Seller, subject only to general and customary price increases. None of the
Sellers nor Pacific Financial will take any action as of and after the Closing
Date which could impair any relationships, agreements and understandings between
Pacific Financial and its customers or suppliers notwithstanding the sale of the
Securities to Buyer (except any such action taken by any Seller specifically in
connection with a credit facility provided by such Seller to any such customer
or supplier), and the Sellers and Pacific Financial shall fully cooperate with
Buyer in arranging meetings with such customers and suppliers as Buyer may
reasonably request.
6.20 Insurance. Sellers' Disclosure Schedule contains a true, correct and
complete list and description of all insurance policies and premiums thereon
pertaining to which Pacific Financial is the insured, including, but not limited
to, product and other liability insurance and fire and extended coverage
insurance, true, correct and complete copies of which policies have been
provided to Buyer. Such policies are in full force and effect at the date hereof
and shall remain so in effect through the Closing. Pacific Financial is not in
default under any such policy and has paid all premiums due and payable with
respect to each.
6.21 Investment Company. Pacific Financial is not deemed to be an
investment company under the Investment Company Act of 1940, as amended,
pursuant to the exemption provided by Section 3(c)(5)(A) of such Act.
7. REPRESENTATIONS OF BUYER. Buyer hereby represents, warrants and covenants to
the Sellers as of the date hereof and as of the Closing Date, which
representations, warranties and covenants are material, are being relied upon by
the Sellers (notwithstanding any independent investigations) and shall survive
the Closing as provided herein, as follows, subject only to such exceptions as
are explicitly set forth on Schedule 7 attached hereto ("BUYER'S DISCLOSURE
SCHEDULE") on a section-by-section basis:
7.1 Buyer's Authority. Subject to receiving the approval of the Walnut
Board, Buyer has full power and authority to enter into, execute and deliver,
and to perform its obligations under, this Agreement and all other agreements,
instruments and documents referred to herein or contemplated hereby.
7.2 Authorization and Enforceability. The execution, delivery and
performance of this Agreement by Buyer have been duly authorized by all
requisite action on the part of Buyer, and this Agreement and all other
agreements, instruments and documents referred to herein or contemplated hereby
and executed by Buyer constitute valid, binding and enforceable obligations of
Buyer in accordance with their terms, subject to the enforcement of involuntary
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors rights' and to general equitable principles.
7.3 No Conflicts. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby by Buyer do not and
will not: (i) conflict with, or result in a breach or termination of, constitute
a default (or an event which, with the giving of due notice or lapse of time, or
both, would constitute a default) or cause or permit the acceleration of the
maturity of or give rise to any right to impose any fees or penalties under, any
agreement, commitment, or other instrument, or any order, judgment or decree, to
which Buyer is a party or by
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which Buyer is bound; or (ii) constitute a violation by Buyer of any law,
statute, judgment, injunction, decree, order or other authoritative matter of
any governmental authority applicable to Buyer, the enforcement of which would
have an adverse effect on Buyer's ability to consummate the transactions
contemplated by this Agreement.
7.4 Consents. No Consents are necessary in connection with the execution
and delivery by Buyer of this Agreement or the consummation by Buyer of the
transactions contemplated herein (other than the approval of the Walnut Board)
other than compliance with applicable federal and state securities laws.
7.5 Statements. Neither this Agreement nor any schedule, exhibit,
certificate, list or other document furnished or to be furnished by or on behalf
of Buyer to Sellers pursuant hereto or thereto contains or will contain any
untrue statement of fact or omits or will omit to state a fact necessary to make
the statements contained herein and therein, in light of the circumstances under
which they are made, not misleading.
7.6 Investment Intent.
(a) Buyer is acquiring the Shares with its own funds, for its own
account, for investment purposes only, and not with the intent to resell
such Shares. Buyer further understands and acknowledges as follows:
(i) The Securities have never been and are not now being
registered under the Securities Act or under any state securities act
or under any other applicable securities act (the "ACTS");
(ii) Sellers have advised Buyer that (however, Buyer makes no
representations, warranties or guarantees whatsoever with respect to
the accuracy of such advice), (w) to be legally transferred from
Sellers to Buyer, the Securities must be exempt from the registration
requirements of the Acts, and that Sellers are relying upon, inter
alia, the exemptions set forth in Sections 4(1) and 4(2) of the
Securities Act, and a combination thereof, and corresponding
exemptions under state law (collectively the "EXEMPTIONS"); (x) the
Securities were originally acquired by Sellers for investment purposes
only, and without the intent of later resale, and Seller are not now
offering the Securities on behalf of an issuer, and thus Sellers have
taken the position they are not underwriters as that term is defined
in the Acts, (y) Sellers are specifically relying on the
representations and warranties contained in this Section 7.6, and
otherwise would not engage in this transaction unless Buyer makes
these representations and warranties; and (z) the transaction
consummated hereunder did not originate from a public offering or
public solicitation of Buyer to acquire the Securities, but instead is
a private and single isolated transaction not involving a public
offering as that term is defined in the Acts;
(iii) Buyer (through its officers and agents) is a highly
sophisticated investor and qualifies as an accredited investor as that
term is defined in the Acts and Regulation D as promulgated by the
Securities and Exchange Commission (17 CFR
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230.501 et seq.) under the Securities Act, regardless of the
availability of Regulation D as an exemption hereunder;
(iv) Because of the sophistication, accreditation and general
knowledge and expertise of Buyer, Buyer does not require the
protection of the registration provisions of the Acts;
(v) Buyer agrees that, to the maximum extent allowed by law, it
is forever estopped from, and waives and forever releases any claim
that it may have against Sellers, their successors, assigns or
affiliates, for failure to register the Securities transferred
hereunder;
(vi) Buyer may have to hold the Securities indefinitely unless
the Securities are registered under the Acts or an additional
exemption from such registration is available; Pacific Financial is
under no obligation to register the Securities or to take any other
action which would make any exemption available; Pacific Financial is
under no obligation to cause or permit the shares purchased hereunder
to be transferred in the absence of registration or availability of an
exemption;
(vii) Buyer and its agents, attorneys and accountants have had
full opportunity, and have exercised such opportunity, in reviewing
the books and records of Pacific Financial, inspecting the assets and
premises of Pacific Financial, and discussing the purchase hereunder
with employees of Pacific Financial, its principals, agents, advisors,
accountants and attorneys;
(viii) the following legend will be placed on the certificates
evidencing the Securities:
These shares have not been registered under the Securities Act of
1933, as amended, any applicable state securities act or any
other applicable securities act (the "ACTS"), and neither the
offering of the shares nor any offering materials have been
reviewed by any administrator under the Acts. The shares were
acquired by the registered shareholder pursuant to the
representation and warranty that the holder was acquiring the
shares with the holder's own funds, for the holder's own account,
for investment. These shares may not be pledged, hypothecated,
sold, transferred, or offered for sale in the absence of an
effective registration statement as to the shares under the Acts
or an opinion of counsel satisfactory to the corporation that
such registration is not required.
7.7 Authorization for Issuance of Common Stock. The shares of Buyer's
Common to be issued to Sellers pursuant to Section 2(b) hereof will be duly
authorized for issuance and will, when issued in accordance with the terms of
this Agreement and upon performance by Sellers of their obligations hereunder,
be validly issued and outstanding, fully paid and non-assessable.
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7.8 Financial Statements. All financial statements of Buyer on file with
the United States Securities and Exchange Commission are true, complete and
correct and have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods indicated and from period
to period, and fairly and accurately present the financial condition of Buyer,
its assets and liabilities and its results of operations as of the respective
dates and for the respective periods indicated.
8. CONDUCT OF BUSINESS. The Sellers hereby covenant to Buyer, which covenants
are joint and several with respect to Messrs. Xxxxx and Xxxxxxx as to two thirds
(2/3) of any obligation or loss, that during the period from the date hereof
through the Closing Date:
8.1 Ordinary Course. The business of Pacific Financial shall be conducted
only in the usual and ordinary course of business in accordance with customary
practices in its industry, and, without Buyer's prior written consent, Pacific
Financial shall not enter into any transactions or agreements, including,
without limitation, any that would result in the sale, lease, transfer, disposal
of or encumbrance of any asset, except in the ordinary course of business.
8.2 Preservation of Pacific Financial's Business and Goodwill. Sellers will
use their reasonable, good faith efforts to preserve intact the relationships of
Pacific Financial with customers, financial institutions, distributors, agents,
employees (subject to Section 8.3 below), suppliers, consultants, salespersons,
and others having relationships with Pacific Financial in connection with such
business (without making any commitment violative of this Agreement on behalf of
Pacific Financial).
8.3 Employees. The Sellers agree that Pacific Financial shall not employ
any new personnel, grant an increase in the salaries of any employees, pay any
bonuses to its personnel (except for regularly accrued bonuses to Xx. Xxxxx in
the ordinary course not to exceed Fifteen Thousand and No/100 Dollars
($15,000.00)) prior to the Closing) or make any increase in any other benefit to
which employees may be entitled; provided, however, that Pacific Financial shall
not enter into any employment agreement or any other commitment to employ or
continue the employment of any officer or employee of Pacific Financial without
Buyer's prior written consent.
8.4 No Dividends or Other Distributions. Prior to the Closing, Pacific
Financial may distribute, in accordance with Washington State corporate law, its
after-tax earnings to its stockholders for the period beginning January 1, 1997
and continuing through the date of the execution of this Agreement, which such
earnings total approximately $220,000. In addition, prior to Closing, Pacific
Financial may repay a certain unsecured loan made to Pacific Financial by Mr.
Maurice, the amount of which repayment shall not exceed $44,000. Other than the
foregoing, Sellers agree that Pacific Financial shall not accrue, make or pay
any dividend or other distribution, whether in cash or kind, to any stockholder
or other person or purchase or redeem any shares of its capital stock; provided,
however, the foregoing shall not limit the rights of, or otherwise prohibit,
Pacific Financial from paying salaries, wages, expense reimbursements and other
similar payments in the ordinary course of business to any employee or from
distributing to the Sellers those amounts necessary to pay the Sellers' federal
income tax attributable to the earnings of Pacific Financial for the time period
prior to the Closing.
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8.5 Purchase of Capital Assets. Sellers agree that Pacific Financial shall
not make any capital expenditures or commitments to make capital expenditures in
excess of an aggregate of Thirty Thousand and No/100 Dollars ($30,000.00).
9. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE. The obligations of Buyer to
purchase the Securities and to consummate the other transactions contemplated
herein pursuant to the terms of this Agreement are subject to the satisfaction,
at or prior to the Closing, of each of the conditions of this Section 9. Buyer
may waive any or all of these conditions in whole or in part, but no such waiver
shall constitute a waiver by Buyer of any of its other rights or remedies at law
or in equity under this Agreement. No condition shall be deemed to have been
waived by Buyer unless such waiver is contained in a writing specifically
referring to this provision and signed by Buyer.
9.1 Approval. Buyer shall have received on or before the Closing Date the
approval of the Walnut Board to consummate the purchase of the Securities on the
terms hereof.
9.2 Financial Information. Buyer shall have prepared and received financial
statements and other information satisfactory to Buyer, in its reasonable
discretion, evidencing Pacific Financial's financial condition.
9.3 Representations and Warranties of Sellers. The representations and
warranties of Sellers contained in this Agreement shall be true and correct in
all material respects at the Closing with the same force and effect as if made
at the Closing.
9.4 Compliance. Sellers shall have performed, complied with and fulfilled
in all material respects all of their respective covenants, agreements,
obligations and conditions required by this Agreement to be performed, complied
with or fulfilled at or prior to the Closing.
9.5 Consents. All Consents necessary to the consummation of the sale of the
Securities or consummation of the other transactions contemplated by this
Agreement shall have been obtained.
9.6 Litigation. No order, decree or ruling of any governmental authority or
court shall have been entered, and no governmental action, suit, claim,
investigation or proceeding seeking to restrain or invalidate the transactions
contemplated by this Agreement or seeking damages from Buyer by reason of the
transactions contemplated by this Agreement shall be pending or threatened.
9.7 No Adverse Change. In the reasonable judgment of Buyer, there shall
have been no material adverse change in Pacific Financial or its assets,
operations, business or prospects.
9.8 Credit Facility. Pacific Financial shall have received at least a one
(1) year extension of the maturity date of the credit facility made available to
Pacific Financial from Xxxxx Fargo Bank (the "CREDIT FACILITY") or Pacific
Financial shall have been provided with a credit facility in substitution of the
Credit Facility with a maturity date and other terms satisfactory to Buyer in
its sole discretion.
9.9 Escrow Instructions. Buyer shall have received the Escrow Instructions
executed by each Seller and the Escrow Agent.
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9.10 Closing Deliveries. Buyer shall have received from Sellers all of the
instruments, documents and considerations described in Section 12.1, and the
form and substance of all such deliveries shall be reasonably satisfactory in
all respects to Buyer and its counsel.
10. CONDITIONS PRECEDENT TO PERFORMANCE BY SELLERS. The obligations of Sellers
to sell the Securities and consummate the other transactions contemplated herein
pursuant to the terms of this Agreement are subject to the satisfaction, at or
prior to the Closing, of each of the conditions of this Section 10. Sellers may
waive any or all of these conditions in whole or in part, but no such waiver
shall constitute a waiver by Sellers of any of their other rights or remedies at
law or in equity under this Agreement. No condition shall be deemed to have been
waived by Sellers unless such waiver is contained in a writing specifically
referring to this provision and signed by Sellers.
10.1 Release of Guarantees. Those certain guarantees issued by the Sellers
to Xxxxx Fargo Bank in connection with the Credit Facility and any personal
liability of the Sellers arising therefrom shall have been released by Xxxxx
Fargo Bank.
10.2 Representations and Warranties of Buyer. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at the Closing with the same force and effect as if made at
the Closing.
10.3 Compliance. Buyer shall have performed, complied with and fulfilled in
all material respects all the covenants, agreements, obligations and conditions
required by this Agreement to be performed, complied with or fulfilled by it at
or prior to the Closing.
10.4 Litigation. No order, decree or ruling of any governmental authority
or court shall have been entered, and no governmental action, suit, claim,
investigation or proceeding seeking to restrain or invalidate the transactions
contemplated by this Agreement or seeking damages from Sellers by reason of the
transactions contemplated by this Agreement shall be pending or threatened.
10.5 Escrow Instructions. Sellers shall have received the Escrow
Instructions executed by Buyer and the Escrow Agent.
10.6 Closing Deliveries. Sellers shall have received from Buyer all of the
instruments, documents and considerations described in Section 12.2, and the
form and substance of all such deliveries shall be reasonably satisfactory in
all respects to Sellers and its counsel.
11. TERMINATION. In addition to the termination rights set forth elsewhere in
this Agreement or otherwise available, this Agreement shall be subject to
termination as set forth below. In the event of any such termination, the
parties shall have no further obligations to each other, except as otherwise
provided herein.
11.1 Termination by Mutual Agreement. This Agreement may be terminated by
the mutual agreement in writing of all of the parties at any time prior to the
Closing.
11.2 Termination by Buyer. This Agreement and any obligations of Buyer
hereunder (other than its obligations under Section 14 hereof, which obligations
shall survive any termination
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of this Agreement) may be terminated by Buyer by
written notice at any time prior to or at the Closing, if any condition to
Buyer's performance contained herein is not capable of being satisfied or has
not been satisfied by the Closing Date. If this Agreement is terminated by Buyer
due to a breach by Sellers, Buyer may pursue whatever rights or remedies it may
have against Sellers arising out of any such breach of this Agreement.
11.3 Termination by Seller. This Agreement and any obligations of the
Sellers hereunder (other than their obligations under Section 14 hereof, which
obligations shall survive any termination of this Agreement) may be terminated
by the Sellers (in whole, but not in part) by written notice at any time prior
to or at the Closing, if any condition to performance by the Sellers contained
herein is not capable of being met or has not been satisfied by the Closing
Date. If this Agreement is terminated by the Sellers due to a Default by Buyer,
then the sole remedy of Sellers shall be the receipt of the Escrow Deposit
pursuant to Section 4 herein.
12. CLOSING DELIVERIES.
12.1 Delivery of Documents by Sellers. Sellers shall deliver (or cause to
be delivered) the following agreements, documents and instruments to Buyer on
the Closing Date, in form and substance as required by the terms of this
Agreement and otherwise in form and substance reasonably acceptable to Buyer's
counsel:
(a) Original certificates representing the Securities, registered in
the name of Sellers, and duly endorsed in blank by Sellers for transfer or,
at Buyer's option, accompanied by assignment(s) separate from certificate
duly endorsed in blank by Sellers.
(b) A certificate executed by each Seller certifying that each of the
representations and warranties of the Sellers set forth herein is true and
complete in all material respects as of the Closing Date, and that each of
the covenants, agreements, terms and conditions on the part of the Sellers
to be observed, performed and complied with hereunder has been fully
observed, performed and complied with in all material respects.
(c) The Subscription Agreements executed by each Seller.
(d) Certified copies of the Articles of Incorporation and Bylaws of
Pacific Financial, along with a Certificate of Good Standing for Pacific
Financial issued by the Secretary of State of Washington within five (5)
days of the Closing and Certificates of Good Standing from all states in
which Pacific Financial is or is required to be qualified to conduct
business.
(e) An employment agreement in substantially the form attached hereto
as EXHIBIT F (the "EMPLOYMENT AGREEMENT") executed by Xx. Xxxxx and Pacific
Financial.
(f) Non-competition agreements in substantially the form attached
hereto as EXHIBIT G (the "NON-COMPETITION AGREEMENTS") executed by each of
Messrs. Xxxxx and Xxxxxxx and Pacific Financial.
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(g) Evidence of payment by Sellers of all stamp, transfer and
transaction taxes payable with respect to the transactions provided for
herein, if any.
(h) A receipt for the Cash Payment, executed by Sellers.
(i) Termination Agreement with respect to the Shareholder Agreement of
ZMP, Inc, executed by each Seller and Pacific Financial, in form and
substance reasonably acceptable to Buyer.
(j) The Registration Agreement executed by each Seller.
(k) Such other documents and instruments as may be required by any
other provision of this Agreement or as may be required or desirable to
carry out the terms and intent of this Agreement, as reasonably determined
by Buyer or its counsel.
12.2 Delivery of Documents and Payment by Buyer. Buyer shall execute and
deliver or cause to be delivered the following agreements, documents,
instruments and payments on the Closing Date, in form and substance as required
by the terms of this Agreement and otherwise in form and substance reasonably
acceptable to Sellers' counsel:
(a) The Cash Payment.
(b) The Note Repayment.
(c) Evidence of Buyer's instructions to its transfer agent to issue
the shares of Buyer's Common representing the Common Stock Payment to
Sellers.
(d) The Short Term Notes executed by Pacific Financial and the Short
Term Guaranties executed by Buyer.
(e) The Long Term Notes executed by Pacific Financial and the Long
Term Guaranties executed by Buyer.
(f) A certificate executed by Buyer certifying that each of Buyer's
representations and warranties set forth herein is true and complete in all
material respects as of the Closing Date, and that each of the covenants,
agreements, terms and conditions on Buyer's part to be observed, performed
and complied with hereunder has been fully observed, performed and complied
with in all material respects.
(g) The Registration Agreement executed by Buyer.
(h) Such other documents and instruments as may be required by any
other provision of this Agreement or as may be required or desirable to
carry out the terms and intent of this Agreement, as reasonably determined
by Sellers or their counsel.
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13. POST-CLOSING COVENANTS.
13.1 Transfer Taxes. Sellers shall be responsible for and shall timely pay
all Taxes imposed by any governmental authority with respect to this Agreement,
the sale, assignment or delivery of the Shares or the consummation of the
transactions contemplated by this Agreement. Sellers shall timely pay, before
the same shall become delinquent and before penalties accrue thereon, all Taxes
that could result in any lien on any of the Securities.
13.2 Further Assurances. At the request of any party from time to time on
and after the Closing Date, the other party shall, without further
consideration, execute and/or deliver to or as directed by the requesting party
such document, and take such actions, as the requesting party may reasonably
request in order to consummate and evidence more effectively the transactions
provided for herein. Furthermore, Sellers agree to, and shall cause Pacific
Financial to, fully cooperate with Buyer in securing equity capital and/or debt
financing in connection with the Note Repayment.
13.3 Warrant Title. Sellers shall warrant and defend Buyer's title to the
Securities against all persons and entities whatsoever, lawfully claiming same
or any part thereof or interest therein.
13.4 Section 338 Elections. Buyer and Sellers shall join in an election to
have the provisions of Section 338(h)(10) of the Internal Revenue Code of 1986,
as amended (the "CODE"), and similar provisions of state law ("SECTION
338(H)(10) ELECTION") apply to the acquisition by Buyer of Pacific Financial.
Buyer shall be responsible for, and control, the preparation and filing of such
election. The allocation of purchase price among the assets of Pacific Financial
shall be made in accordance with Code Sections 338 and 1060 and any comparable
provisions of state, local or foreign law, as appropriate. Sellers shall, unless
it would be unreasonable to do so, accept Buyer's determination of such purchase
price allocations and shall report, act, file in all respects and for all
purposes consistent with such determination of Buyer. Sellers shall execute and
deliver to Buyer such documents or forms (including Section 338 Forms, as
defined below) as Buyer shall request or as are required by applicable law for
an effective Section 338(h)(10) Election. "Section 338 Forms" shall mean all
returns, documents, statements and other forms that are required to be submitted
to any federal, state, county or other local taxing authority in connection with
a Section 338(h)(10) Election, including, without limitation, any "statement of
Section 338 election" and Internal Revenue Service Form 8023 (together with any
schedules or attachments thereto) that are required pursuant to Treasury
Regulations.
14. INDEMNIFICATION.
14.1 Indemnification by the Sellers. Sellers shall indemnify, defend and
hold harmless Buyer and Pacific Financial, and each of their respective members,
shareholders, affiliates, officers, directors, agents, attorneys, accountants
and employees, and each of their respective successors and assigns (all
collectively, the "BUYER INDEMNIFIED PARTIES"), of, from and against, any and
all loss, claim, damage, suit, action, cause of action, liability, penalty,
judgment, decree, cost and expense (including, without limitation, reasonable
attorneys' fees and costs), which may at any time be asserted or recovered
against or incurred or suffered by the Buyer Indemnified Parties, or any of
them, arising from, in connection with, on account of, or relating to: (a) any
and all liabilities of Pacific Financial of any nature, whether accrued,
absolute, contingent or otherwise, existing at the
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date of the Closing Balance Sheet, or based on any act or omission or state of
fact which occurred prior to or as of the Closing Date, to the extent not
reflected or reserved against in the Closing Balance Sheet or set forth in the
Exhibits hereto, (b) any and all claims arising out of the conduct of the
business of Pacific Financial between January 1, 1997 and the Closing Date,
other than in the ordinary course of business thereof and as expressly permitted
herein or as otherwise consented to by Buyer in writing, (c) any untruth,
incompleteness or misleading character of any representation or warranty of the
Sellers set forth herein, (d) any breach or default by any of the Sellers of or
under any covenant, agreement, term or condition contained herein, (e) any and
all liability, in excess of the reserves therefor reflected on the December
Statement, arising out of or resulting from any litigation, legal action,
arbitration, proceeding, demand, claim or investigation, pending, or to the best
knowledge of Sellers after due inquiry threatened, contemplated or planned, in
existence as of the Closing Date (whether or not disclosed in this Agreement or
in any Exhibit hereto or on the Closing Balance Sheet), excluding any liability
arising in connection with the Xxxxxxxx Note or that certain matter brought by
Xxxx X. Xxxxx under Xxxx County Superior Court Case No. 96-2-29694-5SEA, and/or
(f) any and all liabilities arising out of or resulting from Pacific Financial's
or Sellers' failure to pay when due (or accrue in the December Statement) all
taxes, assessments and impositions in connection with Pacific Financial's
business or properties. Buyer shall have the right to offset against amounts due
to the Sellers hereunder, including amounts due pursuant to Sections 2.1(c) and
2.1(d) above, in the event Sellers do not fully indemnify the appropriate Buyer
Indemnified Parties, or any of them, in a prompt and timely fashion. The
indemnification by Sellers in this Section 14.1 shall be joint and several with
respect to Messrs. Xxxxx and Xxxxxxx as to two thirds (2/3) of any obligation or
loss and shall be several with respect to Xx. Xxxxx as to one-third (1/3) of any
obligation or loss.
14.2 Buyer's Indemnification. Buyer shall indemnify, defend and hold
harmless each Seller and each of his heirs, successors, assigns, agents,
attorneys and accountants, and each of their respective successors and assigns
(all collectively, the "SELLER INDEMNIFIED PARTIES"), of, from and against, any
and all loss, claim, damage, suit, action, cause of action, liability, penalty,
judgment, decree, cost and expense (including, without limitation, reasonable
attorneys' fees and costs), which may at any time be asserted or recovered
against or incurred by said Seller Indemnified Parties, or any of them, arising
from, in connection with, on account of, or relating to: (a) any untruth,
incompleteness or misleading character of any representation or warranty of
Buyer set forth herein; and (b) any breach or default by Buyer of or under any
covenant, agreement, term or condition contained herein.
14.3 Notice. If any party entitled to indemnification hereunder (the
"INDEMNIFIED PARTY OR PARTIES") receives notice of any claim or the commencement
of any action or proceeding with respect to which the other party is obligated
to provide indemnification pursuant to this Section 14 (the "INDEMNIFYING PARTY
OR PARTIES"), the indemnified party or parties shall give the indemnifying party
or parties written notice thereof, which notice states specifically and in
reasonable detail the nature of the claim. Such notice shall be a condition
precedent to any liability of an indemnifying party or parties under the
provisions or indemnification contained in this Agreement. The indemnifying
party or parties may compromise, settle or defend at their own expense, using
counsel reasonably satisfactory to the indemnified party or parties, any such
matter involving the asserted liability of the indemnified party or parties. In
any event, the indemnified party or parties shall cooperate in the compromise
of, settlement or defense against, any such asserted liability.
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15. GENERAL PROVISIONS.
15.1 Expenses. Each party hereto shall bear its own respective costs and
expenses accruing after the execution of this Agreement relating to the
transactions contemplated hereby, including, without limitation, fees and
expenses of legal counsel, accountants, consultants or other representatives for
the services used, hired or connected with the proposed transactions mentioned
above. It is expressly understood that Sellers costs and expenses shall not be
paid by Pacific Financial.
15.2 Headings. The subject headings of the sections of this Agreement are
included for purposes of convenience only, and shall not affect the construction
or interpretation of any of its provisions.
15.3 Entire Agreement; Severability. This Agreement, together with any
exhibits and schedules referred to herein and attached hereto, constitute the
entire agreement and understanding between the parties with regard to the
subject matter hereof, and there are no other prior or contemporaneous written
or oral agreements, undertakings, promises, warranties, or covenants respecting
such subject matter not expressly set forth or described herein. The invalidity,
illegality or unenforceability for any reason of any one or more provisions of
this Agreement shall not affect the validity, legality or enforceability of the
remainder of this Agreement.
15.4 Notices. Any notices, requests, demands, and other communications
required to be given under this Agreement shall be in writing and shall be
either (a) personally delivered, (b) sent by U.S. certified or registered mail,
return receipt requested, postage prepaid, or (c) sent by Federal Express or
other reputable common carrier guaranteeing next business day delivery, to the
respective addresses of the parties set forth below, or to such other place as
any party hereto may by notice given as provided herein designate for receipt of
notices hereunder. Any such notice shall be deemed given and effective upon
receipt or refusal of receipt thereof by the primary party to whom it is to be
sent.
If to Buyer: Walnut Financial Services, Inc.
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxxxx
With a copy to: Barack Xxxxxxxxxx Xxxxxxxxxx
Xxxxxxx & Xxxxxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
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If to Sellers: Pacific Financial Services Corp.
00000 Xxx-Xxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Xxxx X. Xxxxx
X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxx 00000
With a copy to: Xxxxxx & Xxxxxx
000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
and: Sorrel & Tall, Inc., P.S.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Orly J. Sorrel
15.5 Modification and Waiver. Except as provided in that certain Agreement
of even date herewith by and between Buyer and Mr. Maurice and that certain
Agreement of even date herewith by and between Buyer and Xx. Xxxxx, no
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by all the parties. No waiver of any breach or waiver of any
of the provisions of this Agreement shall constitute or shall be deemed to
constitute a waiver of any other breach or violation of any provision of this
Agreement, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the party
making the waiver.
15.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and may contain the signatures of less than
all parties, but all of which together shall constitute one and the same
instrument.
15.7 Exhibits and Schedules. All exhibits and schedules referred to in and
attached to this Agreement are incorporated herein and made a part hereof by
this reference in the same manner as if such exhibits and schedules were set
forth at length in the text hereof.
15.8 Successors and Third Party Beneficiaries. This Agreement shall be
binding on, and shall inure to the benefit of, the parties and their respective
heirs, successors and assigns; provided, however, no party may assign or
transfer any of its rights or obligations hereunder except with the prior
written consent of all of the other parties. The foregoing is not meant to
restrict the ability of Sellers, subject to compliance with applicable federal
and state securities laws, to transfer or otherwise assign their respective
interests in the Buyer's Common issued under Section 2.1(b). There are no third
party beneficiaries of this Agreement except for the indemnified parties
referred to in Section 14 hereof; provided, however, that following the closing,
Pacific Financial shall be a third party beneficiary of the provisions of
Section 3.2 hereof and the representations and warranties of Sellers made in
Section 6.13 hereof. The liabilities of Messrs. Xxxxx and Xxxxxxx hereunder are
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joint and several with respect to two-third (2/3) of such liabilities and shall
be several with respect to Xx. Xxxxx as to one-third (1/3) of such liabilities.
15.9 Representations and Warranties; Survival. No party shall be deemed to
have made any representations or warranties with respect to the transactions
contemplated by this Agreement, unless the representation or warranty is set
forth herein, or in any other agreement or instrument executed and delivered
pursuant to this Agreement. All representations, warranties, covenants and
agreements contained in this Agreement shall not be affected by any
investigation made by or on behalf of any party to this Agreement. Except as
otherwise expressly provided herein, any provision of this Agreement that
imposes an obligation or restriction, or confers a right or benefit, the
observance, performance or exercise of which may or must occur after Closing,
shall survive Closing.
15.10 Time of Essence. The parties hereto acknowledge and agree that time
is strictly of the essence with respect to each and every term, condition,
obligation and provision hereof.
15.11 Remedies Cumulative. Subject to Sections 4 and 11.3 herein, all
remedies of any party hereunder are cumulative and not alternative, and are in
addition to any other remedies available at law, in equity or otherwise, and may
be exercised concurrently or successively. Buyer shall not be denied any remedy
for any breach or default by any Seller, and the amount recoverable from any or
all Sellers on account thereof shall not be diminished, by reason of the fact
that some or all of the damage therefrom is suffered by Pacific Financial. In
any such case, Buyer shall have all rights and remedies available hereunder, at
law and in equity and, if required by law, any recovery of money from any or all
Sellers shall be deemed made by Buyer for the benefit of Pacific Financial.
15.12 Specific Performance. The parties hereto agree that irreparable
damage would occur to Buyer in the event any provision of this Agreement was not
performed by Seller in accordance with the terms hereof and, as a result, Buyer
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or equity.
15.13 Construction. Any reference to the masculine gender shall be deemed
to include the feminine and neuter genders unless the context otherwise
requires. The singular shall include the plural, and the plural the singular, as
the context may require. The words "hereof," "herein," "hereto," "hereby,"
"hereunder" and other words of similar import refer to this Agreement as a
whole, including, without limitation, all schedules and exhibits. 15.14
Governing Law. This Agreement and all transactions contemplated hereby shall be
governed, construed and enforced in accordance with the laws of the State of
Delaware without reference to (i) its judicially or statutorily pronounced rules
regarding conflict of laws or choice of law; (ii) where any instrument is
executed or delivered; (iii) where any payment or other performance required by
any such instrument is made or required to be made; (iv) where any breach of any
provision of any such instrument occurs, or any cause of action otherwise
accrues; (v) where any action or other proceeding is instituted or pending; (vi)
the nationality, citizenship, domicile, principal place of business, or
jurisdiction or organization or domestication of any party; (vii) whether the
laws of the form jurisdiction otherwise would apply the laws of a jurisdiction
other than the State of Delaware; or (viii) any combination of the foregoing.
Each party hereto (a) agrees that
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any suit, action or other legal proceeding relating hereto may be brought in
state or federal court, as applicable, in the State of Illinois, the State of
Washington or the Commonwealth of Virginia; and (b) consents to the jurisdiction
of each such court in any such suit, action or proceeding; and (c) waives any
objection said party may have to the laying of venue in any such suit, action or
proceeding in either such court; and (d) consents to service of process by U.S.
mail.
15.15 Brokers. Each party hereto represents, warrants and covenants to the
other that it has not dealt and shall not deal with any broker or finder in
connection with this Agreement or any transaction provided for herein, and that
no person or entity is entitled or shall become entitled to any brokerage or
finder's fee, commission or other compensation on account of any such dealings
with the warranting party. Notwithstanding the foregoing, the parties hereto
acknowledge that they were introduced to each other by Mr. Schocken and that the
compensation paid to Mr. Schocken, if any, shall be paid by Buyer.
15.16 Defense of Title. From and after the Closing Date, Sellers shall
warrant and defend the title of Buyer to the Securities sold, transferred,
conveyed and assigned pursuant hereto against all persons, associations and
entities whatsoever.
15.17 Confidentiality. Buyer acknowledges that it has had access to Pacific
Financial, its assets and business operations (including, without limitation,
Pacific Financial's plants and properties), and its books and records
(including, without limitation, Pacific Financial's financial statements,
supplier and customer lists and the like), all such information actually
obtained by Buyer, to the extent not otherwise publicly available, being
referred to herein as "CONFIDENTIAL INFORMATION"). In the event that this
Agreement is terminated in accordance with Section 11 above, all Confidential
Information shall remain the property of and be returned to Pacific Financial
(along with all copies thereof) or destroyed within 30 days of receipt by Buyer
of a written request from Pacific Financial setting forth the Confidential
Information to be returned or destroyed. The foregoing obligations regarding the
disposition of Confidential Information shall not apply, however, to any
information which (a) is already in the public domain or becomes available to
the public through no breach of this Agreement by Buyer, (b) was in Buyer's
possession prior to receipt from Pacific Financial or any Seller, (c) is
received independently from a third party, or (d) is subsequently independently
developed by Buyer. In addition, in the event that this Agreement is terminated
in accordance with Section 11 above, Buyer hereby agrees not to solicit any
employee or client of Pacific Financial (except to the extent that any such
client or employee is not then an active employee or client of Pacific Financial
during such period) for a period of two (2) years after the termination hereof.
15.18 Publication/Disclosure. Except as may otherwise be required by law,
each party hereto agrees that it will not make any public disclosure about the
existence or contents hereof or negotiation relating to this Agreement, or cause
to be publicized in any manner whatsoever, by way of interview, responses to
questions or inquiries, press releases or otherwise, any aspect or proposed
aspect of this Agreement without the prior approval of the other party which
approval shall not be unreasonably withheld or denied. If any party deems that
it is required by law to make any announcement or release concerning this
Agreement, said party agrees to provide a written copy thereof to the other
parties in advance of any such release.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SELLERS:
/s/ XXXXXXX X. XXXXX
-------------------------------------
Xxxxxxx X. Xxxxx, Individually
/s/ XXXX X. XXXXX
-------------------------------------
Xxxx X. Xxxxx, Individually
/s/XXXXXX XXXXXXX
-------------------------------------
Xxxxxx Xxxxxxx, Individually
BUYER:
Walnut Financial Services, Inc.
By: /s/ XXXX X. XXXXXX
-------------------------------------
Its: President
PACIFIC FINANCIAL:
Pacific Financial Services, Corp.
By: /s/ XXXXXXX X. XXXXX
-------------------------------------
Its: President
27
CONSENT
Each of the undersigned hereby acknowledges and agrees to the
following:
1. I have read the foregoing Agreement and understand that
pursuant to such Agreement my spouse has agreed to sell his
Securities (as defined in such Agreement) in Pacific Financial
including my community interest in them.
2. As of July 1, 1994 and pursuant to RCW 26.16.060 and RCW
26.26.090, I have irrevocably granted to my spouse a power of
attorney to dispose of our interest in the Securities, which
power of attorney is still in full force and effect.
3. I hereby consent to the terms and provisions of the Agreement
and the sale of the Securities pursuant thereto.
Dated this 2nd day of January, 1998
/s/ XXXXXXX X. XXXXXXX
-----------------------------------
-----------------------------------
-----------------------------------
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CONSENT
Each of the undersigned hereby acknowledges and agrees to the
following:
1. I have read the foregoing Agreement and understand that
pursuant to such Agreement my spouse has agreed to sell his
Securities (as defined in such Agreement) in Pacific Financial
including my community interest in them.
2. As of July 1, 1994 and pursuant to RCW 26.16.060 and RCW
26.26.090, I have irrevocably granted to my spouse a power of
attorney to dispose of our interest in the Securities, which
power of attorney is still in full force and effect.
3. I hereby consent to the terms and provisions of the Agreement
and the sale of the Securities pursuant thereto.
Dated this 22nd day of December, 1997
/s/ XXXXX XXXXX
-----------------------------------
-----------------------------------
-----------------------------------
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CONSENT
Each of the undersigned hereby acknowledges and agrees to the
following:
1. I have read the foregoing Agreement and understand that
pursuant to such Agreement my spouse has agreed to sell his
Securities (as defined in such Agreement) in Pacific Financial
including my community interest in them.
2. As of July 1, 1994 and pursuant to RCW 26.16.060 and RCW
26.26.090, I have irrevocably granted to my spouse a power of
attorney to dispose of our interest in the Securities, which
power of attorney is still in full force and effect.
3. I hereby consent to the terms and provisions of the Agreement
and the sale of the Securities pursuant thereto.
Dated this 2nd day of January, 1998
/s/ XXXX XXXXX
-----------------------------------
-----------------------------------
-----------------------------------
30
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Short Term Note and Short Term Guaranty
Exhibit B Form of Long Term Note and Long Term Guaranty
Exhibit C Restrictive Legends
Exhibit D Form of Subscription Agreement
Exhibit E Form of Registration Agreement
Exhibit F Form of Employment Agreement
Exhibit G Form of Non-Competition Agreement
Schedule 1 Promissory Notes
Schedule 6 Sellers' Disclosure Schedule
Schedule 7 Buyer's Disclosure Schedule
31
EXHIBIT A
Form of Short Term Note and Short Term Guaranty
A-1
32
EXHIBIT B
Form of Long Term Note and Long Term Guaranty
B-1
33
EXHIBIT C
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE
STATE LAW, AND SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS: (A)
THEY ARE REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE LAW; OR (B) SUCH SALE
OR TRANSFER IS EXEMPT FROM SUCH REGISTRATION AND THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL ACCEPTABLE TO IT TO THE EFFECT THAT SUCH SALE OR TRANSFER IS
SO EXEMPT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS OF TRANSFER RELATING TO SECTION 382 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, AS SET FORTH IN THE ISSUER'S ARTICLES OF INCORPORATION, AS
AMENDED. SUCH RESTRICTIONS ON TRANSFER MAY PREVENT TRANSFERS OR AGREEMENTS TO
TRANSFER, INCLUDING, WITHOUT LIMITATION, OPTIONS, OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE WHICH, IF EFFECTIVE, (i) WOULD CAUSE OR RESULT IN THE
OWNERSHIP INTEREST PERCENTAGE OF THE TRANSFEREE OR ANY OTHER PERSON TO INCREASE
ABOVE FOUR AND ONE-HALF (4.5) PERCENT, WHETHER OR NOT SAID TRANSFEREE OR OTHER
PERSON HELD STOCK IN EXCESS OF SUCH PERCENTAGE BEFORE SUCH TRANSFER, (ii) WOULD
CAUSE OR RESULT IN AN INCREASE IN THE OWNERSHIP INTEREST PERCENTAGE OF ANY FIVE
PERCENT SHAREHOLDER OR (iii) IS A TRANSFER BY A FIVE PERCENT SHAREHOLDER. ALL
ITALICIZED TERMS IN THIS LEGEND HAVE THE MEANINGS SET FORTH IN THE ARTICLES OF
INCORPORATION OF THE ISSUER, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON
TRANSFER, WILL BE SENT WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS. IF
THE RESTRICTIONS ON TRANSFER ARE VIOLATED, THE SECURITIES REPRESENTED HEREBY
WILL BE DESIGNATED AND TREATED AS PROHIBITED SHARES WHICH WILL BE SOLD OR
RE-SOLD BY AN AGENT DESIGNATED BY THE ISSUER.
C-1
34
EXHIBIT D
Form of Subscription Agreement
See Attached
D-1
35
EXHIBIT E
Form of Registration Agreement
See Attached
X-0
00
XXXXXXX X
Form of Employment Agreement
See Attached
F-1
37
EXHIBIT G
Form of Non-Competition Agreement
See Attached
G-1
38
SCHEDULE 1
Promissory Notes
DATE OF NOTE PRINCIPAL PAYEE
------------ --------- -----
March 27, 1996 $ 35,000 Xxxxxx Xxxxxxx
June 1, 1996 $ 12,100 Xxxxxxx Trust #1
June 1, 1996 $ 8,400 Xxxxxxx Trust #1
June 1, 1996 $ 33,900 Xxxxxxx Trust #1
June 1, 1996 $ 10,600 Xxxxxxx Trust #1
June 1, 1996 $100,000 Xxxxxxx Trust #1
June 1, 1996 $100,000 Xxxxxxx Trust #1
January 1, 1996 $100,000 Xxxx X. Xxxxx
March 1, 1995 $ 65,000 Xxxx X. Xxxxx
March 27, 1996 $ 35,000 Xxxx X. Xxxxx
April 11, 1996 $100,000 Xxxx X. Xxxxx
