SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 and 15(d) of the
Securities and Exchange Act of 1934
Date of Report (date of earliest event reported): February 18, 1999
USASURANCE GROUP, INC.
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(Exact name of Registrant as specified in Charter)
Colorado 0-26920 84-1298212
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
7345 E. Peakview Ave.
Englewood, Colorado 80111
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (303) 689-0123.
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Item 2. Acquisition and Disposition of Assets.
Effective February 16, 1999 (the "Closing Date"),
USAsurance Group, Inc. (the "Company"), through a recently formed
wholly owned subsidiary, Akahi Corp. ("Akahi"), did enter into an
Ownership Purchase Agreement (the "Agreement"), wherein Akahi did
agree to acquire all of the member interests in and to 2Xtreme
Performance International L.L.C., a Delaware limited liability
company ("2X"). The relevant terms of the transaction provide for
the Company to tender a total purchase price of $4.1 million. Of
this purchase price, $1 million has been already tendered. The
balance of $3.1 million is due pursuant to the terms of a
promissory note (the "Note") and secured by a Security Agreement,
Financing Statements, a Pledge Agreement, and Guaranties. Terms of
the Note provide for repayment at an interest rate of the Prime
Rate as announced daily in The Wall Street Journal with a balloon
payment to be paid 120 days after the Closing Date. Failure to pay
off the Loan in full within such 120-day period shall cause the
Loan interest rate to be increased to the Prime Rate plus 1% as
announced daily by The Wall Street Journal. In the event the
Company fails to pay off the Loan in full within 210 days after the
Closing Date, it has the option to buy a month-to-month extension
at the cost of Fifty Thousand Dollars ($50,000.00) per month to be
paid monthly, on the first of each month, to the Sellers in
addition to the balloon principal amounts owed and accruing
interest as described above. Failure to make the full balloon
payment of principal and interest within one (1) year after the
Closing Date or to timely make any of the extension payments shall
permit Sellers, at their option, to exercise any and all remedies
set forth in the applicable Loan documents. The Note is also
guaranteed by the Company.
2X is a multifaceted network marketing company based in
Dallas, Texas, which offers five categories of health, wellness and
beauty products, including products related to general health,
fitness, personal care, body cleansing and weight management. All
of its products are organically grown, wild harvested and cold
processed. It markets its products through television
"infomercial" advertising and print media, as well as through its
100,000 member associates/distributors.
It commenced its business in March 1996 and during its
most recent fiscal year, generated approximately 40,000,000 in
revenues and earned a profit from such operations.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
The Registrant hereby undertakes to file with the
Commission an amendment to this Form 8-K wherein the Registrant
shall provide the audited financial statements of the Assets
acquired by the Company from 2X and the Company's pro forma
financial statements within sixty (60) days after the filing of
this Form 8-K.
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(c) Exhibits.
2.3 Ownership Purchase Agreement Between the Company and 2X.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934 the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
USASURANCE GROUP, INC.
By:s/ Peter L. Hirsch
---------------------------
Peter L. Hirsch,
President
Dated: February 18, 1999
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USASSURANCE GROUP, INC.
_______________________
EXHIBIT 2.3
_______________________
OWNERSHIP PURCHASE AGREEMENT
_______________________
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H & K
2/16/99
O W N E R S H I P P U R C H A S E A G R E E M E N T
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This Ownership Purchase Agreement ("Agreement") is made
effective as of this 16th day of February, 1999, by and between
AKAHI CORP., a wholly owned subsidiary of USAsurance Group, Inc.,
a Colorado corporation ("Purchaser") and JOHN POLK ("Polk") and
AFEW, L.L.P., a Texas limited liability partnership ("AFEW")
(hereinafter collectively referred to as "Sellers") to purchase all
of the ownership interests of the members of 2XTREME PERFORMANCE
INTERNATIONAL L.L.C. ("2X"), a Delaware limited liability company.
R E C I T A L S
WHEREAS, 2X is a valid legal entity existing under the laws of
the state of Delaware and is authorized to do business in the state
of Texas and such other jurisdictions as are necessary and
appropriate to the conduct of its normal and custom business,
WHEREAS, Purchaser has agreed to purchase all of the ownership
interest of the members of 2X (the "Sale") for the total sum of
FOUR MILLION ONE HUNDRED THOUSAND DOLLARS ($4,100,000.00) (the
"Purchase Price"),
WHEREAS, the Purchase Price shall be paid in two installments
with One Million Dollars ($1,000,000.00) of the Purchase Price
being paid in cash to be wired on February 16, 1999 and to be
deposited in Sellers' bank account no later than February 18, 1999,
and the remaining portion being transformed and repaid as a Three
Million One Hundred Thousand Dollar ($3,100,0000.00) loan (the
"Loan"), all as further described in detail below in this
Agreement,
WHEREAS, the Loan shall be evidenced by a Promissory Note and
secured by a Security Agreement, Financing Statements, a Pledge
Agreement, and Guaranties, as deemed appropriate by Sellers, to be
prepared by Sellers and executed by the required parties as
separate, independent documents (the foregoing hereinafter
collectively referred to as the "Loan Documents"),
WHEREAS, 2X is comprised of two (2) members to-wit: Polk and
AFEW, and said Polk and AFEW are the sole owners of all of the
interests of 2X,
WHEREAS, Polk owns and possesses a forty-nine percent (49%)
membership interest in 2X,
WHEREAS, AFEW owns and possesses a fifty-one percent (51%)
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membership interest in 2X,
WHEREAS, Polk is the sole shareholder, officer, director, and
owner of AFEW, and said Polk and AFEW are the sole owners of all of
the issued and outstanding stock and/or membership interests of 2X,
WHEREAS, Purchaser will by virtue of the purchase of all of
the issued and outstanding stock and/or membership interests in and
to 2X will own all of the assets and assume all of the liabilities
of 2X.
W I T N E S S E T H
NOW, THEREFORE, in consideration of the representations
contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 Pursuant to the terms and provisions contained herein
Sellers hereby agree to sell and convey to Purchaser, and Purchaser
hereby agrees to purchase from the Sellers, all of the issued and
outstanding stock, membership and all other indicia of ownership of
2X (hereinafter referred to as "membership interests"). For
purposes of this Agreement, the purchase of the membership
interests will also include, subject to the exclusions of
Section 1.02:
a. All right, title and interest in and to the assets,
equipment and inventory of 2X, including but not
limited to the items set forth in Schedule 1
attached hereto and incorporated herein as if set
forth verbatim,
b. All right title and interest in and to the leasehold
interests of 2X, including but not limited to the
items set forth in Schedule 2 attached hereto and
incorporated herein as if set forth verbatim.
c. All right, title and interest in and to the
equipment leases of 2X, including but not limited to
the items set forth in Schedule 3 attached hereto
and incorporated herein as if set forth verbatim,
d. All right, title and interest in and to the
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liability, automobile and workers' compensation
insurance policies of 2X, including but not limited
to the items set forth in Schedule 4 attached hereto
and incorporated herein as if set forth verbatim,
e. All right, title and interest in and to the keys,
access cards, entry cards, locks and combination for
entry in and to the premises used by 2X to conduct
its business,
f. All right, title and interest in and to the
copyright applications, if any, and all copyrights,
statutory or common law of or relating to the normal
and customary business of 2X, if any,
g. All right, title and interest in and to the
trademark applications, if any, and all trademarks
of or relating to the normal and customary business
of 2X, if any,
h. All right, title and interest in and to the
intellectual property interests or rights of or
relating to the normal and customary business of 2X,
if any,
i. All right, title and interest in and to the
marketing tools, pictures, logos, customer lists,
vendor lists, customer lists, video presentations,
audio presentations, infomercials, scripts, video
tapes, and audio tapes of 2X, except as set forth in
Section 1.04,
j. All right, title and interest in and to proprietary
software, downlines, websites, URLs, seminar
equipment, databases, telephone numbers and
telephone vanity numbers of 2X,
k. All right, title and interest in and to the
proprietary and product formulations of or relating
to the normal and customary business of 2X,
l. All right, title and interest in and to the
licensing agreements of or relating to the normal
and customary business of 2X,
m. All right, title and interest in and to the bank
accounts, including checking, operating, savings,
money market, reserve, escrow and the like of 2X and
the funds held therein,
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n. All right, title and interest in and to written and
oral contracts or agreements or lines of credit
between 2X and its various distributors, suppliers,
providers, and contractors,
o. All right, title and interest in and to any
subsidiaries of 2X, and
p. The assumption of the liabilities of 2X as set forth
in Schedule 11 attached hereto and incorporated
herein as if set forth verbatim.
1.02 Exclusions:
a. Polk's Property. Polk shall have and retain
possession or ownership of, and shall have the right
to remove and dispose of all of the property
including, without limitation, Polk's office
furniture, computers and related equipment,
television(s), VCR(s), books, all rugs paid for by
Polk, and copies of all corporate records, requested
by Polk, and any other furniture, artwork, fixtures,
furnishings and equipment in Polk's office. Any
such items shall be listed on a Schedule to be
attached hereto and incorporated herein as Schedule
5.
b. American Express Corporate Account. Immediately
upon closing, the existing American Express
Corporate Card Account shall be transferred to
Purchaser personally, or Purchaser (and any other
persons or entities that agree to be included). The
result of the transfer shall be the removal of Polk
and other individuals no longer remaining with 2X on
and after the Closing Date. Purchaser shall on and
after the closing designate all individuals who will
be permitted and entitled to use such account for
the business of 2X. All business related (expressly
excluding any personal charges by authorized
individuals) amounts owed to American Express
Corporate Card Division are to be paid by the
Purchaser, and the Purchaser (and any other persons
or entities that agree to be included) shall
indemnify, defend and hold harmless, from payment of
any such amounts, any parties who may currently be
designated on the American Express Corporate
Accounts for any business related charges, as such
indemnification is further set forth in the
Assumption Agreement.
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c. Merchant Accounts. All merchant accounts used for
the benefit of either (i) Polk for the business, of
2X, only, or (ii) 2X shall remain with Purchaser
(and any other persons or entities that agree to be
included) and all guarantying or indemnifying
parties designated on such Merchant Accounts shall
be removed on or prior to closing and to the extent
permitted by the Merchant Account Banks and/or
entities. If any such merchant accounts cannot be
assigned to Purchaser or if the merchant accounts
cannot have all other parties removed from the
merchant accounts, Purchaser (and any other persons
or entities that agree to be included) shall
indemnify, any not released and/or guarantying
parties. The Purchaser (and any other such persons
or entities) shall jointly and severally be liable
to the Obligated Parties for any charges, deposits
or other claims made, and the Purchaser (and any
other such persons or entities) shall indemnify,
defend and hold harmless the Obligated Parties
against any such claims. The Purchaser assumes all
responsibility of any amounts charged on the
merchant accounts and for repayment of any deposits.
The Purchaser shall indemnify, defend and hold
harmless any parties in connection with the amounts,
as further described in the Assumption Agreement.
The agreement between 2X and DSI shall be set forth
in a side letter to be executed between the parties
on or before February 16, 1999. After closing no
further deposits will be made into the DSI Merchant
Account from sales, and it will remain open for the
minimum required timed.
d. Other Personal Obligations. Other personal
obligations of Polk or of other persons or entities
made for the business of 2X, whether direct
obligations or third party, indirect obligations,
such as guarantors or obligors, specifically Polk
and James Knox Polk, shall be transferred or
assigned to Purchaser (and any other persons or
entities that agree to be included), and the
Obligated Parties shall be removed on or prior to
closing to the extent permitted or allowed by the
respective creditor(s). Each party shall use their
best efforts to accomplish such transfer. If any
personal obligations cannot be assigned to
Purchaser or if the personal obligations cannot
have all other parties removed from the personal
obligations, such personal obligations shall be
assumed and paid by the Purchaser. The Purchaser
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(and any other persons that agree to be included)
shall jointly and severally be liable to the
Obligated Parties for any charges, deposits or other
claims for the benefit and business of 2X made, and
the Purchaser (and any other persons or entities
that agree to be included) shall indemnify, defend
and hold harmless the Obligated Parties against any
such claims, as further described in the Assumption
Agreement.
e. Computer or Equipment Leases(s). All computer
leases, equipment leases, vehicle leases, or other
business related leases on which Polk is signed
personally or has personally guaranteed, shall be
assigned and assumed (pursuant to the Assumption
Agreement) by the Purchaser. Effective as of the
date of the Sale, Polk shall be removed from all
such leases, to the extent permitted or allowed by
the lessor(s). The Purchaser (and any other persons
or entities that agree to be included) shall jointly
and severally be liable to the Obligated Parties for
any charges, deposits or other claims made, and the
Purchaser (and any other persons or entities that
agree to be included) shall indemnify, defend and
hold harmless the Obligated Parties on account of
such leases. The Purchaser assumes all
responsibility for any amounts incurred and for
repayment of any deposits. The Purchaser shall
indemnify, defend and hold harmless any parties in
connection with the amounts owed on any leases or
for repayment of any such deposits, as further
described in the Assumption Agreement.
f. Best Efforts to Remove Obligations. Notwithstanding
all provisions contained herein, Purchaser shall use
best efforts and in good faith to obtain the written
agreement of all relevant third parties needed to
fully release Polk and replace Purchaser (or other
appropriate person or entity) for any third party
obligations, including without limitation, those
described in clauses (b)-(e) above (collectively,
the "Obligations"). Failure to obtain such releases
shall result in the assumptions of the Obligations
described in this Section 1.02 or elsewhere in the
Sale agreements. Purchaser hereby indemnifies,
defends and holds Sellers harmless for all
Obligations including payment of attorneys' fees,
court costs and disbursements.
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1.03 Revised Schedules to be provided by Sellers and 2X.
Notwithstanding any provisions contained herein, no representation
or warranty shall be deemed breached, provided that Sellers shall
have operated 2X in the ordinary course of business, with no
substantial operational changes since the date of the Schedules
provided as of December 11, 1998; and provided further that, since
such date, no disposition or acquisition of assets has occurred,
other than in the ordinary course of business.
1.04 John Polk Identification. Purchaser shall be permitted
to use the name of "John Polk" in the following instances only.
For no more than ninety (90) days from the date of closing, the
Purchaser may use the currently existing infomercials in any way,
including Polk, and for thirty (30) days form the date of closing,
the Purchaser may use currently existing direct mailings involving
Polk. The Purchaser may use the existing brochures and audio tapes
and video tapes and taped phone conversations of Polk for a period
not to exceed thirty (30) days from the date of closing. At the
expiration of these time periods, Purchaser shall (1) within no
more than ninety (90) days from the date of closing, return all
infomercial tapes in any way involving Polk, to Sellers, and insure
termination of any television contracts involving such
infomercials, and (2) return or destroy, at Sellers' option, all
direct mailings involving Polk, including all audiotapes
videotapes, brochures and any and all written, printed, taped or
materials otherwise prepared, including Polk's image or recorded
voice. The Purchaser represents and warrants that the Purchaser
shall satisfy all of the foregoing in the time frames specified and
each of the Purchaser (and any other persons or entities that agree
to be included) shall indemnify, defend and hold harmless the
Sellers for any claims (as defined in the Assumption Agreement)
made against Sellers for Purchaser's failure to satisfy this
paragraph's obligations in the specified time frames.
ARTICLE II
PURCHASE PRICE
2.01 Purchase Price.
a. The total aggregate purchase price ("Purchase
Price") to be paid by the Purchaser to the Sellers for the
membership interests acquired pursuant to this Agreement shall be
FOUR MILLION ONE HUNDRED THOUSAND AND NO/100S DOLLARS
($4,100,000.00), and shall be due and payable by cash, wire
transfer or other immediately available funds as described below.
b. The total aggregate Purchase Price shall be paid as
follows:
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On or before February 16, 1999, Purchaser shall
show proof of the availability of funds of One Million
Dollars ($1,000,000.00) to be able to be wired on
February 16, 1999 by Purchaser and such One Million
Dollars ($1,000,000.00) shall be deposited in Sellers'
bank account no later than February 18, 1999. Three
Million One Hundred Thousand Dollars ($3,100,000.00) of
the remaining Four Million One Hundred Thousand Dollars
($4,100,000.00) of the Purchase Price shall be treated as
a purchase money loan made as of February 16, 1999. The
terms of the Loan are more fully described in Section 6.0
below.
2.02 [Intentionally Deleted.]
2.03 [Intentionally Deleted.]
2.04 [Intentionally Deleted.]
2.05 Pending and Ongoing Expenses/Taxes. It is expressly
agreed and understood by the parties to this Agreement that certain
amounts are, or may be, due and owing on account of 2X's
operations, including without limitation, employee salaries and any
employee benefits, sales taxes, franchises taxes, payroll taxes
(any of which taxes are, or may be, owed to various local, state or
federal governmental authorities), commissions, independent
contractor commissions on sales and overrides and any legal,
accounting or similar third party professional service fees or
vendor charges which are hereby deemed approved by the Purchaser
prior to or at the closing for which sufficient current value and
assets exist in 2X to account for said obligations and which can be
documented by a computer generated report.
2.06 Approval of Obligations and Liabilities. Purchaser
approves the disclosed liabilities and obligations of 2X as set
forth in Schedules 2, 3 and 11, as well as those set forth in
Paragraph 2.05 above.
2.07 Legal and Accounting Fees and Services. The reasonable,
necessary and appropriate legal and accounting fees incurred solely
and directly by 2X in connection with the Sale, and approved by the
Purchaser, shall be paid by 2X at closing.
ARTICLE III
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF JOHN POLK AND AFEW
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3.0 Representations and Warranties of the Sellers. Sellers
represent and warrant to Purchaser that, as of the date of this
Agreement and to Sellers' current and actual knowledge:
a. Representations as to 2X.
1. That 2X is a valid legal entity existing under
the laws of the state of Delaware and is
authorized to do business in the State of Texas
and such other jurisdictions as are necessary
and appropriate to the conduct of its normal
and customary business;
2. That all employment taxes have been or will be
fully paid through the last pay period prior to
the Closing Date;
3. That there are no employment agreements in
place with any employees of 2X;
4. That there are no consulting agreements in
place with any third parties who have or may
provide services to 2X;
5. Subject to Section 1.02(c), that there are no
agreements of any kind or character with an
entity known as DSI;
6. That 2X is comprised of two (2) members, John
Polk and AFEW;
7. That all pending litigation, either civil,
criminal or administrative, as known to 2X, to
which 2X is a party or which the assets,
managers and/or membership interests of 2X are
involved have been disclosed;
8. That there are no pension, profit sharing, 401K
or other ERISA plans in place or in force and
effect;
9. That ownership interests of Polk and AFEW are
not currently held by any other person or
entity, collateralized, pledged, restricted or
otherwise encumbered;
10. That Polk is fully authorized to execute this
Agreement on behalf of 2X;
11. That 2X represents and warrants that it is
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legally free to make and perform this
Agreement, that it has no obligation to any
other person or entity that would affect or
conflict with any of its obligations hereunder
and that the complete performance of its
obligations hereunder will not violate any law,
regulation, order or decree of any governmental
or judicial body or contract by which such
party is bound.
b. Representations as to AFEW.
1. That AFEW is a valid legal entity existing
under the laws of the State of Texas and is
authorized to do business in the State of Texas
and such other jurisdictions as are necessary
and appropriate to the conduct of its normal
and customary business;
2. That all employment taxes have been or will be
fully paid through the last pay period prior to
the Closing Date;
3. That the stock of AFEW is solely and wholly
owned by Polk;
4. That all pending litigation, either civil,
criminal or administrative, as known to 2X, to
which 2X is a party or which the assets,
managers and/or membership interests of 2X are
involved have been disclosed;
5. That there are no pension, profit sharing, 401K
or other ERISA plans in place or in force and
effect;
6. That ownership interests of Polk are not
currently held by any other person or entity,
collateralized, pledged, restricted or
otherwise encumbered;
7. That Polk is fully authorized to execute this
Agreement on behalf of AFEW;
8. That a duly and properly executed statement
authorizing the sale of the membership interest
of AFEW in 2X to the Purchaser has been
presented to the Purchasers;
9. That AFEW represents and warrants that it is
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legally free to make and perform this
Agreement, that it has no obligation to any
other person or entity that would affect or
conflict with any of its obligations hereunder
and that the complete performance of its
obligations hereunder will not violate any law,
regulation, order or decree of any governmental
or judicial body or contract by which such
party is bound.
c. As of December 11, 1998, the date set forth on
Schedule 1, that the assets, equipment and inventory
of 2X are correctly, accurately, fully and
completely set forth in Schedule 1 attached hereto
and incorporated herein as if set forth verbatim;
d. As of December 11, 1998, the date set forth on
Schedule 2, that the leasehold interests of 2X are
correctly, accurately, fully and completely set
forth in Schedule 2 attached hereto and incorporated
herein as if set forth verbatim;
e. As of December 11, 1998, the date set forth on
Schedule 3, that the leased items of equipment of 2X
are correctly, accurately, fully and completely set
forth in Schedule 3 attached hereto and incorporated
herein as if set forth verbatim;
f. That all leases are current and not in default;
g. As of December 11, 1998, the date set forth on
Schedule 4, that the insurance policies of 2X are
correctly, accurately, fully and completely set
forth in Schedule 4 attached hereto and incorporated
herein as if set forth verbatim;
h. That all liability, automobile and workers'
compensation insurance policies are current and not
default;
i. That, to Polk's knowledge and information, all
pending litigation, either civil, criminal or
administrative, as to 2X, its assets, managers or
stock and/or membership interests has been disclosed
and has been correctly, accurately, fully and
completely set forth in Schedule 7 attached hereto
and incorporated herein as if set forth verbatim;
j. From December 8, 1998 the Sellers have operated the
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business of 2X in the usual and ordinary course in
accordance with past practice and current business
plans of 2X; and
k. From the date of the execution of this Agreement
until the Closing Date the Sellers will operate the
business of 2X in the usual and ordinary course in
accordance with past practice and current business
plan of 2X.
The representations and warranties set forth above in Section 3.0
are made as of the date of this Agreement [except as set forth on
the Schedules herein referenced] will be deemed, subject to Section
1.03, to be made again as of the Closing Date, and shall survive
the closing subject to Paragraph 11.19 below.
ARTICLE IV
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF 2XTREME PERFORMANCE INTERNATIONAL, L.L.C.
4.0 Representations and Warranties of 2X. 2X represents and
warrants to Purchaser that, as of the date of this Agreement and to
2X's current and actual knowledge:
a. That 2X is a valid legal entity existing under the
laws of the state of Delaware and is authorized to
do business in the state of Texas and such other
jurisdictions as are necessary and appropriate to
the conduct of its normal and customary business;
b. That all employment taxes have been or will be fully
paid through the last pay period prior to the
Closing Date;
c. That there are no employment agreements in place
with any employees of 2X;
d. That there are no consulting agreements in place
with any third parties who have or may provide
services to 2X;
e. Subject to Section 1.02(c), that there are no
agreements of an kind or character with any entity
known as DSI;
f. That 2X is comprised of two (2) members, John Polk
and AFEW;
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g. That all pending litigation, either civil, criminal
or administrative, as known to 2X, to which 2X is a
party or which the assets, managers and/or
membership interests of 2X are involved have been
disclosed;
h. That there are no pension, profit sharing, 401K or
other ERISA plans in place or in force and effect;
i. That ownership interests of Polk and AFEW are not
currently held by any other person or entity,
collateralized, pledged, restricted or otherwise
encumbered;
j. That Polk is fully authorized to execute this
Agreement on behalf of 2X;
k. As of December 11, 1998, the date set forth on
Schedule 1, that the assets, equipment and inventory
of 2X are correctly, accurately, fully and
completely set forth in Schedule 1 attached hereto
and incorporated herein as if set forth verbatim;
l. As of December 11, 1998, the date set forth on
Schedule 2, that the leasehold interests of 2X are
correctly, accurately, fully and completely set
forth in Schedule 2 attached hereto and incorporated
herein as if set forth verbatim;
m. As of December 11, 1998, the date set forth on
Schedule 3, that the leased items of equipment of 2X
are correctly, accurately, fully and completely set
forth in Schedule 3 attached hereto and incorporated
herein as if set forth verbatim;
n. That all leases are current and not in default;
o. As of December 11, 1998, the date set forth on
Schedule 4, that the insurance policies of 2X are
correctly, accurately, fully and completely set
forth in Schedule 4 attached hereto and incorporated
herein as if set forth verbatim;
p. That all liability, automobile and workers'
compensation insurance policies are current and not
in default;
q. That 2X represents and warrants that it is legally
free to make and perform this Agreement, that it
has no obligation to any other person or entity
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that would affect or conflict with any of its
obligations hereunder and that the complete
performance of its obligations hereunder will not
violate any law, regulation, order or decree of any
governmental or judicial body or contract by which
such party is bound.
r. From December 8, 1998 the Sellers have operated the
business of 2X in the usual and ordinary course in
accordance with past practice and current business
plan of 2X; and
s. From the date of the execution of this Agreement
until the Closing Date the Sellers will operate the
business of 2X in the usual and ordinary course in
accordance with past practice and current business
plan of 2X.
The representations and warranties set forth above in Section 4.0
are made as of the date of this Agreement [except as set forth on
the Schedules herein] will be deemed, subject to Section 1.03, to
be made again as of the Closing Date, and shall survive the
closing, subject to Paragraph 11.19 below.
ARTICLE V
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF PURCHASER
5.0 Representations and Warranties of the Purchaser.
Purchaser represents and warrants to Sellers that, as of the date
of this Agreement and to Purchaser's current and actual knowledge:
a. That the Purchaser is a valid legal entity existing
under the laws of the state of Colorado;
b. That the Purchaser is fully authorized to execute
this Agreement and enter into the Loan and Loan
Documents;
c. That Purchaser represents and warrants that it is
legally free to make and perform this Agreement,
the Loan and Loan Documents that it has no
obligation to any other person or entity that would
affect or conflict with any of its obligations
under the Agreement, the Loan and Loan Documents
and that the complete performance of its
obligations under this Agreement, the Loan and Loan
Documents will not violate any law, regulation,
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order or decree of any governmental or judicial body
or contract by which such party is bound;
d. That a duly and properly executed resolution of the
Board of Directors authorizing the purchase of all
of the membership interests of 2X from the Sellers
and entering into the Loan and Loan Documents has
been presented to the Sellers as set forth in
Schedule 8 which is attached hereto and incorporated
herein for all purposes as if set forth verbatim;
e. That Peter L. Hirsch is the President of the
Purchaser and as such he is fully authorized to
execute this Agreement on behalf of the Purchaser;
f. That as of the Closing Date, the Purchaser will
assume all of the obligations of 2X which have been
disclosed; and
g. That as of the Closing Date Purchaser will honor and
abide by all of the terms and conditions of the
leases set forth in Schedules 2 and 3 in the name of
2X.
The representations and warranties set forth above in Section 5.0
are made as of the date of this Agreement, and will be deemed to be
made again as of the Closing Date, and shall survive the closing,
subject to Section 11.20 below.
ARTICLE VI
CLOSING
6.0 Pursuant to Section 2.01, on February 16, 1999, Purchaser
shall wire, pay cash, or otherwise pay in immediately available
funds to Polk and AFEW One Million Dollars ($1,000,000.00) in cash,
and such One Million Dollar ($1,000,000.00) payment shall be
deposited in Sellers' Bank account, which Sellers shall confirm the
receipt thereof, on or before February 18, 1999 (the "Closing
Date"). On the Closing Date, the "closing" shall be deemed to have
occurred. The remainder of the original Four Million One Hundred
Thousand Dollars ($4,100,000.00) Purchase Price shall be paid
and/or subject to the following terms:
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a. Failure to receive confirmation of payment of the
One Million Dollars ($1,000,000.00) Purchase Price
on the Closing Date shall result in a termination of
this Agreement and render it null and void and of no
further force and effect.
b. If, pursuant to Section 2.01 and 6.0 above, the
Purchaser timely pays the One Million Dollars
($1,000,000.00) of the total Purchase Price on or
before February 18, 1999, then:
(1) Three Million One Hundred Thousand Dollars
($3,100,000.00) of the Four Million One
Hundred Thousand Dollars ($4,100,000.00)
of the Purchase Price shall be treated as
a purchase money loan (the "Loan") made as
of February 16, 1999. The Loan will be
repaid at an interest rate of the Prime
Rate as announced daily in The Wall Street
Journal with a balloon payment to be paid
120 days after the Closing Date. Failure
to pay off the Loan in full within such
120-day period shall cause the Loan
interest rate to be increased to the Prime
Rate plus 1% as announced daily by The
Wall Street Journal. Failure to pay off
the Loan in full within 210 days after the
Closing Date shall force Purchaser to buy
a month-to-month extension at the cost of
Fifty Thousand Dollars ($50,000.00) per
month to be paid monthly, on the first of
each month, to Sellers in addition to the
balloon principal amounts owed and
accruing interest as described above.
Failure to make the full balloon payment
of principal and interest within One (1)
year after the Closing Date or to timely
make any of the extension payments shall
permit Sellers, at their option, to
exercise any and all remedies set forth in
the following Loan Documents or pursuant
to 6.0(c) below:
(2) Promissory Notes will be signed by
Purchaser which shall be legally effective
and binding and fit for Sellers' purposes
in the form and on the date required by
Sellers (in its sole discretion),
effective the Closing Date;
(3) The Guaranties of the Promissory Notes and
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other Loan instruments executed by
USAsurance Group, Inc. ("USAG") or 2X, in
the form and on the date required by
Sellers (in its sole discretion),
effective the Closing Date;
(4) Pledge Agreement(s), Security
Agreement(s), and Financing Statements
will be entered into, providing the
ownership interest in 2X, in Purchaser, in
"USAG" and in other security to secure
repayment of the Loan, in the form and on
the date required by Sellers (in its sole
discretion), effective the Closing Date.
c. Any default under the revised terms of Sale or under
the terms of the Loan, including without limitation,
failure to pay off the Loan on or before one-year
from the Closing Date, will cause ownership of 2X to
revert to Polk and AFEW at Sellers' option, as
further described in the Loan Documents and will
entitle Sellers to any remedies available at law or
equity, including, without limitation, compensatory
damages, punitive damages and injunctive relief.
ARTICLE VII
TERMINATION, DEFAULT AND REMEDIES
7.01 Termination/Default. Upon termination or default
hereunder or under the Loan Documents, Sellers may exercise any
rights and remedies available to Sellers at law or equity,
including without limitation, remedies described in Section 6.0(2)
and (3).
ARTICLE VIII
EXPENSES, BROKERAGE FEES, FINDER'S FEES AND COMMISSIONS
8.01 Expenses.
a. Except as otherwise set forth herein, if this
Agreement is consummated pursuant to the terms
hereof, then the Sellers shall pay all fees and
expenses incurred by the Sellers with this sale, and
the Purchaser shall pay all fees and expenses
incurred by Purchaser in connection with this
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purchase; and
b. Except as otherwise set forth herein, if the
Agreement contemplated hereby is terminated or
abandoned by any party hereto, then each party shall
bear its own costs associated with the attempted
acquisition or any matter related thereto in
connection with this Agreement.
8.02 Brokerage Fees. Each party shall indemnify and hold the
other parties harmless from any claim for brokerage fees, finder's
fees or commission arising out of this Agreement by any person
claiming to have been engaged by the indemnifying party.
ARTICLE IX
CONFIDENTIALITY AND NON-COMPETITION AGREEMENTS
9.0 Confidentiality and Non-Competition Agreements. As part
of this consideration for this Agreement, Polk and AFEW agree to
enter into separate confidentiality and non-competition agreements
for the use and the benefit of 2X and the Purchaser. The
confidentiality and non-competition agreements shall be in the form
agreed to by the parties.
ARTICLE X
SOFTWARE TRADING SYSTEM FOR STOCK
Purchaser hereby acknowledges that among the assets of 2X is
the "Wave on Wall Street" computer software, which is designed to
facilitate real time online stock trading. 2X hereby discloses to
Purchaser that 2X has been advised by counsel that, given counsel's
understanding of the design, function and manner of
commercialization of such software, (i) 2X may have an obligation
to register with the U.S. Securities and Exchange Commission as an
investment adviser pursuant to the Investment Advisers Act of 1940,
as amended (the Investment Advisers Act"), and (ii) in the event
that 2X were to be deemed to be an investment adviser (as defined
by the Investment Advisers Act), the failure to so register could
result in the imposition of various sanctions against 2X, its
members and management.
ARTICLE XI
MISCELLANEOUS
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11.01 Assumption Agreement. As part of the consideration for
this Agreement, Purchaser and Sellers shall enter into an
Assumption Agreement of even date herewith (the "Assumption
Agreement") in the form attached hereto as Schedule 10, and the
Assumption Agreement is hereby incorporated herein as if set forth
verbatim.
11.02 Cooperation of the Parties. Sellers and Purchaser agree
to fully cooperate in the execution, delivery or provision of any
and all necessary documents prior to, at the time of, and
subsequent to the closing, and thereafter, as may be required to
fully complete this Agreement or the transaction contemplated.
11.03 [Intentionally Deleted.]
11.04 No Shop; Operation in the Ordinary Course. In
consideration of Purchaser's commitment to acquire 2X, the Sellers
hereby covenant and agree that they shall not, directly or
indirectly:
a. Solicit or accept any other proposal or bid for,
negotiate or make any agreement for, or effect any
sale or other disposition of any membership
interests in, assets or businesses of 2X, except
sales of products and services by the Sellers in the
ordinary course of its business, consistent with
past practices;
b. Dissolve or liquidate any of 2X;
c. Take or omit to take any action, or cause or permit
any action to be taken or omitted, that is otherwise
inconsistent with this Agreement or the Letter
Intent;
d. Operate 2X other than in the ordinary course of
business consistent with past practices;
e. Permit 2X or Sellers to make any distributions or
payments to any member of 2X, other than salary
payments, if any, at this current rate of pay,
provided, however, any salary payment (including
bonus) made to Polk for the end of calendar year
1998 through the Closing Date shall be permitted
under this Agreement;
f. Permit 2X or the Sellers to issue membership
interests, whether authorized or not by 2X; or
g. Permit 2X or the Sellers to create any new
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membership interests.
Notwithstanding the foregoing, this Section 11.04 shall be deemed
deleted, null and void on the Closing Date, except for the proviso
in Section 11.04(e).
11.05 Facsimile of Execution Signatures Binding. In order to
expedite the transmission, consideration and acceptance of this
Agreement, the parties hereto agree that facsimiles of each party's
signature shall be valid and as binding as an original signature.
The parties hereto further agree that an original of this Agreement
shall be delivered to the Sellers by international courier for
execution and thereafter shall be returned to Purchaser by
international courier.
11.06 Binding Effect. This Agreement is intended to
constitute a binding contract between us, and the parties will be
jointly bound only in accordance with the terms and conditions
contained in this Agreement.
11.07 Multiple Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed to be an original
but all of which shall constitute one and the same document.
11.08 Governing Law and Venue. This Agreement shall be
governed by the laws of the State of Texas, with each party hereto
submitting to the non-exclusive jurisdiction of the District Courts
of the State of Texas, Dallas County, and the United States
District Court for the Northern District of Texas for the purpose
of any suit or action arising out of this Agreement. The parties
further agree that venue for any dispute between the parties shall
be Dallas County, Texas.
11.09 Amendments. This Agreement may be amended only with the
written agreement of each party hereto.
11.10 Notices. Any notice relevant herein shall be deemed to
have been sufficiently served for all purposes if delivered
personally to the party to whom the name is directed, or, if sent,
by overnight mail, delivery confirmed by written receipt or
confirmation, at such party's address as shall be furnished in
writing by any party to the other. Delivery shall be assumed to
have occurred upon receipt or refusal to accept delivery.
11.11 Confidentiality. If the proposed acquisition is not
consummated, all parties shall keep confidential any information
(unless ascertainable from public filings or published information)
obtained concerning the other's operations, assets and business.
Notwithstanding any provision of this Agreement, failure to comply
with the confidentiality requirement shall entitle the aggrieved
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<PAGE>
party to obtain injunctive relief and damages, including
consequential damages, for failure to maintain confidentiality
hereunder.
11.12 Forms. In case of a dispute as to this form or any
document required hereunder, this form shall be conclusively deemed
reasonable and shall not be presumptively interpreted against
either party.
11.13 Captions. The captions used in connection with the
sections of this Agreement are for convenience only and shall not
be deemed to construe or limit the meaning of the language of this
Agreement.
11.14 Attorneys Fees. If any party shall be required to
employ an attorney to enforce or to defend the rights of such party
hereunder, the prevailing party shall be entitled to recover
reasonable attorneys' fees incurred in connection therewith.
11.15 Entire Agreement; Merger and Integration. This
Agreement contains the complete agreement between the parties
hereto and cannot be varied, modified or altered except by written
agreement of the parties hereto. The parties further agree that
there are no oral agreements, understandings, representations or
warranties which are not expressly set forth herein.
11.16 Relationship of the Parties. Nothing contained herein
is intended to create, nor shall it ever be construed to make the
Sellers and the Purchaser partners or joint venturers.
11.17 Consultation with Counsel. Each party hereto
acknowledges that prior to the execution of this Agreement,
adequate opportunity existed for a complete and thorough review of
the terms and conditions of this Agreement, and that counsel was
consulted to review this Agreement.
11.18 Voluntary Execution. Each party hereto acknowledges
that this Agreement is entered into and executed voluntarily with
full knowledge of its terms and conditions.
11.19 Survival of Representations and Warranties of Sellers
and 2X. Subject to Section 1.03, the representations and
warranties set forth above in 3.0 and 4.0 will be deemed to be made
again as of the Closing Date, and shall survive until January 1,
2000.
11.20 Survival of Representations and Warranties of Purchaser.
The representations and warranties set forth above in 5.0 will be
deemed to be made again as of the Closing Date and shall survive
until January 1, 2001.
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11.21 ASSUMPTION OF OBLIGATIONS BY USAG. USAG HEREBY
REPRESENTS AND WARRANTS, AND AGREES AND CONSENTS, TO ASSUME, TO PAY
AND OTHERWISE UNDERTAKE AND GUARANTY ALL OF PURCHASER'S
OBLIGATIONS, LIABILITIES, RESPONSIBILITIES OF ANY KIND OR NATURE
(THE "PURCHASER OBLIGATIONS") UNDER THIS AGREEMENT, ANY SALE
DOCUMENTS, THE LOAN, LOAN DOCUMENTS, OR ANY OTHER OBLIGATIONS
RELATED TO OR CONTEMPLATED BY ANY OF THE PURCHASER OBLIGATIONS, AND
THE PURCHASER OBLIGATIONS SHALL BE TREATED FOR ALL RESPECTS AND AT
ALL TIMES AS IF ANY SUCH PURCHASER OBLIGATIONS IS THE DIRECT
OBLIGATION OF USAG. TIME IS OF THE ESSENCE.
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<PAGE>
IN WITNESS WHEREOF, Purchaser and Sellers have executed and
delivered this Amendment as of the date first above written.
WITNESS/ATTEST: PURCHASER:
AKAHI Corp., a wholly-owned
George Thompson subsidiary of USAsurance Group,
My Commission Expires Inc.
March 17, 1999
s/George Thompson By: s/Peter L. Hirsch
- ------------------------------ ---------------------------
Name: George Thompson Peter L. Hirsch
-------------------------
Title: Notary Title: President
------------------------ ------------------------
WITNESS/ATTEST: SELLERS:
AFEW, L.L.P., Member 2Xtreme
George Thompson Performance International,
My Commission Expires L.L.C.
March 17, 1999
s/George Thompson By: s/John T. Polk
- ------------------------------ ---------------------------
Name: George Thompson Name: John T. Polk
-------------------------
Title: Notary Title: Partner
------------------------
George Thompson
My Commission Expires
March 17, 1999
s/George Thompson By: s/John T. Polk
- ------------------------------ ---------------------------
Name: George Thompson Name: John T. Polk, Member
------------------------- 2Xtreme Performance
Title: Notary International, L.L.C.
------------------------
AGREED AND CONSENTED TO AS
AN UNDERTAKING BY USAG:
USAsurance Group, Inc.
s/George Thompson 2/16/99
-----------------------------
By: s/Peter L. Hirsch George Thompson
----------------------------- My Commission Expires
Peter L. Hirsch March 17, 1999
President
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STATE OF Texas
-------------------------
COUNTY OF Dallas
-------------------------
Execution of the foregoing instrument was acknowledged before
me this 16th Feb , 1999, by Peter L. Hirsch, as
------------------------ -
President of USAsurance Group, Inc., a Colorado corporation, on
behalf of the corporation. He is either personally known to me or
has produced Drivers License as identification.
----------------------------
s/George Thompson
George Thompson ------------------------------
My Commission Expires
March 17, 1999 Notary Public
(AFFIX NOTARIAL SEAL)
Commission No. N/A My Commission Expires: 3/17/99
-------------
STATE OF Texas
--------------------------
COUNTY OF Dallas
-------------------------
Execution of the foregoing instrument was acknowledged before
me this ________________________, 199_, by Peter L. Hirsch, as
____________________________ of Akahi Corp., a wholly-owned
subsidiary of USAsurance Group, Inc., a Colorado corporation, on
behalf of the corporation. He is either personally known to me or
has produced Drivers License as identification.
-----------------------------
George Thompson s/George Thompson
My Commission Expires ------------------------------
March 17, 1999
Notary Public
(AFFIX NOTARIAL SEAL)
Commission No. N/A My Commission Expires: 3/17/99
--------------
24
