UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 6, 1999
onlinetradinginc.com corp.
(Exact name of registrant as specified in its charter)
Florida 333-75119 65-0607814
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) file number) Identification No.)
2700 North Military Trail, Suite 200
Boca Raton, Florida 33431
(Address of principal executive offices)
(561) 995-1010
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective December 6, 1999, onlinetradinginc.com corp. (the "Company"), acquired
certain assets of Newport Discount Brokerage, Inc. ("Newport") pursuant to an
Asset Purchase Agreement dated September 21, 1999 (the "Asset Purchase
Agreement"). Pursuant to the Asset Purchase Agreement, the Company purchased all
of Newport's right, title and interest in and to its clients. A copy of the
Asset Purchase Agreement, and all amendments, are filed herewith as Exhibit 2.1
and are incorporated herein by reference.
The total consideration paid by the Company in connection with this acquisition
included cash of $2,682,000 and up to 125,000 shares of the Company's common
stock. The cash consideration is payable as follows: (i) $2,182,000 to Newport;
(ii) $250,000 to Robert Scarpetti, Newport's President and sole shareholder, in
exchange for a 15 year non-compete agreement (attached hereto as Exhibit 10.2
and incorporated herein by reference); and (iii) $250,000 to Raymond Chodkowski,
a key Newport employee, in exchange for a 15 year non-compete agreement
(attached hereto as Exhibit 10.4 and incorporated herein by reference). Cash
used to complete the acquisition was from the Company's June 1999 public
offering and/or operations. Issuance and delivery of the common stock
consideration is contingent upon the acquired assets achieving certain revenue
goals and maintaining customer accounts within one year from closing. More
specifically, the total shares deliverable under the agreement shall be reduced
by the greater of (i) the percentage that the gross revenue from all Newport
accounts acquired at closing is less than $3,000,000; or (ii) .0009 for each
dollar of account value lost due to the closing of Newport's Pennsylvania
office.
In connection with the acquisition, the Company has entered into employment
agreements with Mr. Scarpetti and Mr. Chodkowski and agreed to employ Newport's
remaining staff on an at-will basis. Mr. Scarpetti's employment agreement has a
three year term and Mr. Chodkowski's employment agreement is for a two year
term. Said employment agreements are attached hereto as Exhibits 10.1 and 10.2,
respectively, and incorporated herein by reference. In addition, the Company has
agreed to appoint Mr. Scarpetti as a director until the election of directors at
the Company's next annual Stockholder meeting.
The Company has also granted options to purchase 85,000 shares of the Company's
common stock, pursuant to its 1999 Stock Option Plan. The options have an
exercise price of 120% of the closing price on the date of the Asset Purchase
Agreement or $11.93. The options are to be distributed, at Newport's discretion,
to the former Newport employees that accept employment with the Company.
Newport is a securities broker dealer registered with the Securities and
Exchange Commission and the National Association of Securities Dealers (NASD).
Prior to the acquisition, there were no material relationships between the
Newport or any of its shareholders and the Company or any of its directors,
officers or associates of such directors or officers.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
The financial statements of Newport Discount Brokerage, Inc.
for the years ended December 31, 1998 and 1997, and the
Independent Accountants' Report thereon. F-1 - F-16
The unaudited financial statements of Newport Discount Brokerage,
Inc. for the nine months ended September 30, 1999. F-17 - F-20
(b) Pro Forma Financial Information
The pro forma financial information required by this section,
including an explanation of significant pro forma adjustments P-1 - P-6
(c) Exhibits
2.1 Asset Purchase Agreement, dated September 21, 1999, between
onlinetradinginc.com corp. and Newport Discount Brokerage, Inc.
10.1 Employment Agreement, dated September 21, 1999 between
onlinetradinginc.com corp. and Robert Scarpetti
10.2 Non-Compete Agreement, dated September 21, 1999 between
onlinetradinginc.com corp. and Robert Scarpetti
10.3 Employment Agreement, dated September 21, 1999 between
onlinetradinginc.com corp. and Raymond Chodkowski
10.4 Non-Compete Agreement, dated September 21, 1999 between
onlinetradinginc.com corp. and Raymond Chodkowski
<PAGE>
CHARLES HECHT & COMPANY LLP
801 Second Avenue
New York, NY 10017
(212) 986-8200
INDEPENDENT ACCOUNTANT'S REPORT
To the Officer and Stockholder of Newport Discount Brokerage Inc.:
We have audited the accompanying statement of financial condition of Newport
Discount Brokerage Inc. as of December 31, 1998, and the related statements of
income and expenses, retained earnings, and cash flows for the year then ended.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Newport Discount Brokerage Inc.
as of December 31, 1998 and the results of its operations and cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ CHARLES HECHT & COMPANY LLP
NEW YORK, NEW YORK
February 5, 1999
F-1
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents ..................................... $ 49,466
Receivable from clearing organization ......................... 306,771
Other receivables ............................................. 10,884
Securities owned, at market value ............................. 65,940
--------
TOTAL CURRENT ASSETS .......................................... 433,061
--------
Fixed Assets, net ............................................. 13,163
--------
Other Assets
Security Deposits ............................................. 5,205
Clearing Deposit .............................................. 51,955
--------
TOTAL OTHER ASSETS ............................................ 57,160
--------
TOTAL ASSETS .................................................. $503,384
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable and accrued liabilities ...................... $ 74,027
Profit sharing plan contribution payable ...................... 20,000
Income taxes payable .......................................... 11,856
--------
TOTAL CURRENT LIABILITIES ..................................... 105,883
--------
Stockholder's Equity
Common stock, authorized 200 shares, no par,
issued and outstanding, 22 shares ............................ 13,200
Retained earnings ............................................. 384,301
--------
TOTAL STOCKHOLDER'S EQUITY .................................... 397,501
--------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY .................... $503,384
========
</TABLE>
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Revenues
Commissions ................................................ $ 2,876,761
Net dealer inventory and investment losses ................. (316,621)
Interest and dividends ..................................... 151,034
-----------
Total Revenues ............................................. 2,711,174
-----------
Expenses
Clearing and other transaction costs ....................... 1,174,445
Employee compensation and benefits ......................... 1,007,193
Occupancy and administration ............................... 448,790
Interest expense ........................................... 16,194
Depreciation ............................................... 10,086
-----------
Total Expenses ............................................. 2,656,708
-----------
Income before provision for income taxes ................... 54,466
Provision for income taxes ................................. 11,821
-----------
Net Income ................................................. $ 42,645
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
-------------------
Shares Retained
Issued Value Earnings Totals
-------- -------- --------- --------
<S> <C> <C> <C> <C>
BALANCES, January 1, 1998 .......... 22 $ 13,200 $341,656 $354,856
Net income for the year ended
December 31, 1998 ................. -- -- 42,645 42,645
-------- -------- -------- --------
BALANCES, December 31, 1998 ........ 22 $ 13,200 $384,301 $397,501
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Cash Flows from Operating Activities
Net income ..................................................... $ 42,645
---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ............................................ 10,086
Receivable from clearing organization ................... (177,095)
Other receivables ....................................... (10,321)
Securities owned at market value ........................ (65,940)
Other current assets .................................... 11,053
Accounts payable and accrued expenses ................... 53,120
Profit sharing plan contribution payable ................ (30,000)
Income taxes payable .................................... 2,000
---------
Total Adjustments .............................................. (207,097)
---------
NET CASH USED IN OPERATING ACTIVITIES .......................... (164,452)
---------
Cash Flows from Investing Activities
Cash payment for the purchase of property ...................... (20,369)
---------
Cash Flows from Financing Activities
Increase in clearing deposit ................................ (21,477)
---------
Net decrease in cash and equivalents ........................... (206,298)
Cash and cash equivalents, beginning of year ................... 255,764
---------
Cash and cash equivalents, end of year ......................... $ 49,466
=========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest expense ............................................... $ 16,194
=========
Income taxes ................................................... $ 9,872
=========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
NEWPORT DISCOUNT BROKERAGE INC.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31,1998
- --------------------------------------------------------------------------------
Note 1 - Organization:
a. The Company was incorporated in New York State and began
business in July 1981. The Company engages in the securities
business as a broker/dealer. The Company is non-clearing and
has entered into a clearing agreement on a fully disclosed
basis which provides that losses due to reneged securities
trades by customers, if any, will be borne by Newport Discount
Brokerage Inc. Consequently, the corporation operates under
the exemptive provisions of SEC Rule 15c3-3.
b. In 1990 the Company received approval of an application to operate
a branch office in North Wales, Pennsylvania.
c. In January 1991 the Company received approval of an
application to operate a branch office in Boca Raton, Florida.
Subsequent to this approval, the Company moved its main office
to this location.
d. During 1991 the Company filed an amendment to its Certificate
of Incorporation in New York State for a change in corporate
name to Newport Discount Brokerage Inc.
e. At December 31, 1998 Robert Scarpetti, President of the Company,
owned 100% of the Company's outstanding common shares.
Note 2 - Significant Accounting Policies:
a. Revenue Recognition
1. Securities transactions (and the related revenue and
expense) are recorded on a settlement date basis,
generally the third business day after trade date for
securities and one business day for options.
2. Other items such as open trades not yet recorded
because of terms of delivery and contingencies of a
reasonably definite nature would make no material
change in the foregoing statement.
b. Fixed Assets:
Fixed assets are recorded at cost and are depreciated over
estimated useful lives on the straight line method for assets
placed in service prior to January 1, 1992 for financial
reporting purposes. Accelerated depreciation methods are used
for tax purposes. Assets placed into service after December
31, 1991 are being depreciated under MACRS for both financial
and income tax purposes.
Depreciation computed under the MACRS system does not
materially differ from depreciation that would have been
computed based on the estimated useful lives of the related
assets.
F- 6
<PAGE>
NEWPORT DISCOUNT BROKERAGE INC.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
- --------------------------------------------------------------------------------
c. Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of financial statements,
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
d. Cash and Cash Equivalents:
Cash and cash equivalents include highly liquid debt
instruments purchased with a maturity of three months or less.
e. Credit Risk:
The Company maintains cash balances at two banks. Accounts at
each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000.
The Company maintains accounts with a stock brokerage firm.
The accounts contain cash and securities. Balances are insured
up to $500,000 (with a limit of $100,000 for cash) by the
Securities Investor Protection Corporation.
f. Income Taxes:
The elements of income tax expense for the year ended December
31, 1998 are as follows:
Federal income tax $ 6,178
Florida corporate tax 2,940
Pennsylvania corporate tax 2,378
New York State franchise tax 325
--------
$ 11,821
========
Note 3 - Net Capital Requirements:
The Capital Ratio of the Company as independently computed by our
auditors was 30%, versus an allowable maximum of 1,500% under the
rules of the Securities and Exchange Commission. The Firm's net
capital requirement under SEC Rule 15c3-1 was $100,000. The Net
Capital as computed was $353,565, leaving capital in excess of
requirements in the amount of $253,565.
Note 4 - Commitments and Contingencies:
On March 20, 1996 the Company entered into a triple net operating
lease for office space in Boca Raton, Florida. The lease agreement
provides for rent, taxes and operating expenses. The Company
occupies space at 5499 North Federal Highway, Suite N, Boca Raton,
Florida. The lease commenced on August 1, 1996 and terminates on
August 31, 1999.
F- 7
<PAGE>
NEWPORT DISCOUNT BROKERAGE INC.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
- --------------------------------------------------------------------------------
On September 1, 1996 the Company leased office space in North
Wales, Pennsylvania for a three year period at a base rental
payment of $24,000 per annum; however, this lease was terminated in
February 1998 with no cost to the Company. On March 13, 1998 the
Company leased office space in Colmar, Pennsylvania on a month to
month tenancy at $2,500 per month.
The minimum lease payments required under the above leases for next
year is as follows:
1999 $ 24,704
========
Note 5 - Financial Instruments with Off-Balance Sheet Credit Risk:
As a securities broker, the Company is engaged in buying and
selling securities for a diverse group of institutional and
individual investors. The Company introduces those transactions for
clearance to another broker/dealer on a fully disclosed basis.
The Company's exposure to credit risk associated with
non-performance of customers in fulfilling their contractual
obligations pursuant to securities transactions can be directly
impacted by volatile trading markets which may impair the
customer's ability to satisfy their obligations to the Company and
the Company's ability to liquidate the collateral at an amount
equal to the original contracted amount. The agreement between the
Company and its clearing broker provides that the Company is
obligated to assume any exposure related to such non-performance by
its customers. The Company seeks to control the aforementioned
risks by requiring customers to maintain margin collateral in
compliance with various regulatory requirements and the clearing
brokers internal guidelines. The Company monitors its customer
activity by reviewing information it receives from its clearing
broker on a daily basis, and requiring customers to deposit
additional collateral, or to reduce position when necessary.
F- 8
<PAGE>
CHARLES HECHT & COMPANY LLP
801 Second Avenue
New York, NY 10017
(212) 986-8200
INDEPENDENT ACCOUNTANT'S REPORT
To the Officer and Stockholder of Newport Discount Brokerage Inc.:
We have audited the accompanying statement of financial condition of Newport
Discount Brokerage Inc. as of December 31, 1997, and the related statements of
income and expenses, retained earnings, and cash flows for the year then ended.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Newport Discount Brokerage Inc.
as of December 31, 1997 and the results of its operations and cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ CHARLES HECHT & COMPANY LLP
NEW YORK, NEW YORK
February 6, 1998
F-9
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents ...................................... $255,764
Receivable from clearing organization .......................... 129,675
Other receivables .............................................. 563
Other current assets ........................................... 11,053
--------
TOTAL CURRENT ASSETS ........................................... 397,055
Fixed Assets, net .............................................. 2,880
Security Deposits .............................................. 35,683
--------
TOTAL ASSETS ................................................... $435,618
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable and accrued liabilities ....................... $ 20,907
Profit sharing plan contribution payable ....................... 50,000
Income taxes payable ........................................... 9,855
--------
TOTAL CURRENT LIABILITIES ...................................... 80,762
--------
Stockholder's Equity
Common stock, authorized 200 shares, no par,
issued and outstanding, 22 shares .......................... 13,200
Retained earnings ........................................... 341,656
--------
TOTAL STOCKHOLDER'S EQUITY ..................................... 354,856
--------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ..................... $435,618
========
</TABLE>
The accompanying notes are an integral part of this statement.
F-10
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Revenues
Commissions ................................................ $ 2,360,153
Net dealer inventory and investment losses ................. (60,225)
Interest and dividends ..................................... 101,737
-----------
Total Revenues ............................................. 2,401,665
-----------
Expenses
Clearing and other transaction costs ....................... 978,964
Employee compensation and benefits ......................... 881,563
Occupancy and administration ............................... 459,572
Interest expense ........................................... 13,236
Depreciation ............................................... 5,051
-----------
Total Expenses ............................................. 2,338,386
-----------
Income before provision for income taxes ................... 63,279
Provision for income taxes ................................. 31,137
-----------
Net Income ................................................. $ 32,142
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-11
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
---------------------------
Shares Retained
Issued Value Earnings Totals
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BALANCES, January 1, 1997 .............................. 22 $ 13,200 $309,514 $322,714
Net income for the year ended
December 31, 1997 ..................................... -- -- 32,142 32,142
-------- -------- -------- --------
BALANCES, December 31, 1997 ............................ 22 $ 13,200 $341,656 $354,856
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-12
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Cash Flows from Operating Activities
Net income ................................................. $ 32,142
---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ........................................... 5,051
Receivable from clearing organization .................. 60,848
Other receivables ...................................... 20,189
Other current assets ................................... (4,324)
Accounts payable and accrued expenses .................. (26,308)
Profit sharing plan contribution payable ............... 6,139
Income taxes payable ................................... 2,255
---------
Total Adjustments ............................................. 63,850
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ..................... 95,992
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash payment for the purchase of property ..................... (3,131)
Net change in security deposits ............................... (30,478)
---------
NET CASH USED IN INVESTING ACTIVITIES ......................... (33,609)
---------
Net increase in cash and equivalents .......................... 62,383
Cash and cash equivalents, beginning of year .................. 193,381
---------
Cash and cash equivalents, end of year ........................ $ 255,764
=========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest expense .............................................. $ 13,236
=========
Income taxes .................................................. $ 26,760
=========
</TABLE>
The accompanying notes are an integral part of this statement.
F-13
<PAGE>
NEWPORT DISCOUNT BROKERAGE INC.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Note 1 - Organization:
a. The Company was incorporated in New York State and began
business in July 1981. The Company engages in the securities
business as a broker/dealer. The Company is non-clearing and
has entered into a clearing agreement on a fully disclosed
basis which provides that losses due to reneged securities
trades by customers, if any, will be borne by Newport Discount
Brokerage Inc. Consequently, the corporation operates under
the exemptive provisions of SEC Rule 15c3-3.
b. In 1990 the Company received approval of an application to
operate a branch office in North Wales, Pennsylvania.
c. In January 1991 the Company received approval of an
application to operate a branch office in Boca Raton, Florida.
Subsequent to this approval, the Company moved its main office
to this location.
d. During 1991 the Company filed an amendment to its Certificate
of Incorporation in New York State for a change in corporate
name to Newport Discount Brokerage Inc.
e. At December 31, 1997 Robert Scarpetti, President of the
Company, owned 100% of the Company's outstanding common
shares.
Note 2 - Significant Accounting Policies:
a. Revenue Recognition
1. Securities transactions (and the related revenue and
expense) are recorded on a settlement date basis,
generally the third business day after trade date for
securities and one business day for options.
2. Other items such as open trades not yet recorded
because of terms of delivery and contingencies of a
reasonably definite nature would make no material
change in the foregoing statement.
b. Fixed Assets:
Fixed assets are recorded at cost and are depreciated over
estimated useful lives on the straight line method for assets
placed in service prior to January 1, 1992 for financial
reporting purposes. Accelerated depreciation methods are used
for tax purposes. Assets placed into service after December
31, 1991 are being depreciated under MACRS for both financial
and income tax purposes.
Depreciation computed under the MACRS system does not
materially differ from depreciation that would have been
computed based on the estimated useful lives of the related
assets.
F- 14
<PAGE>
NEWPORT DISCOUNT BROKERAGE INC.
NOTES TO THE STATEMENT OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
c. Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of financial statements,
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
d. Cash and Cash Equivalents:
Cash and cash equivalents include highly liquid debt
instruments purchased with a maturity of three months or less.
e. Credit Risk:
The Company maintains cash balances at two banks. Accounts at
each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000.
The Company maintains accounts with a stock brokerage firm.
The accounts contain cash and securities. Balances are insured
up to $500,000 (with a limit of $100,000 for cash) by the
Securities Investor Protection Corporation.
f. Income Taxes:
The elements of income tax expense for the year ended December
31, 1997 are as follows:
Federal income tax $ 22,416
Florida corporate tax 5,307
Pennsylvania corporate tax 3,081
New York State franchise tax 333
--------
$ 31,137
=========
Note 3 - Net Capital Requirements:
The Capital Ratio of the Company as independently computed by our
auditors was 24%, versus an allowable maximum of 1,500% under the
rules of the Securities and Exchange Commission. The Firm's net
capital requirement under SEC Rule 15c3-1 was $100,000. The Net
Capital as computed was $330,968, leaving capital in excess of
requirements in the amount of $230,968.
Note 4 - Commitments and Contingencies:
On March 20, 1996 the Company entered into a triple net operating
lease for office space in Boca Raton, Florida. The lease agreement
provides for rent, taxes and operating expenses. The Company
occupies space at 5499 North Federal Highway, Suite N, Boca Raton,
Florida. The lease commenced on August 1, 1996 and terminates on
July 31, 1999.
F- 15
<PAGE>
NEWPORT DISCOUNT BROKERAGE INC.
NOTES TO THE STATEMENT OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
On September 1, 1996 the Company leased office space in North
Wales, Pennsylvania for a three year period at a base rental
payment of $24,000 per annum.
The minimum lease payments required under the above leases for each
of the succeeding years and in the aggregate, are as follows:
1998 $ 64,263
1999 40,016
----------
$ 104,279
==========
Note 5 - Financial Instruments with Off-Balance Sheet Credit Risk:
As a securities broker, the Company is engaged in buying and
selling securities for a diverse group of institutional and
individual investors. The Company introduces those transactions for
clearance to another broker/dealer on a fully disclosed basis.
The Company's exposure to credit risk associated with
non-performance of customers in fulfilling their contractual
obligations pursuant to securities transactions can be directly
impacted by volatile trading markets which may impair the
customer's ability to satisfy their obligations to the Company and
the Company's ability to liquidate the collateral at an amount
equal to the original contracted amount. The agreement between the
Company and its clearing broker provides that the Company is
obligated to assume any exposure related to such non-performance by
its customers. The Company seeks to control the aforementioned
risks by requiring customers to maintain margin collateral in
compliance with various regulatory requirements and the clearing
brokers internal guidelines. The Company monitors its customer
activity by reviewing information it receives from its clearing
broker on a daily basis, and requiring customers to deposit
additional collateral, or to reduce position when necessary.
F- 16
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
UNAUDITED
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents ....................................... $254,017
Receivable from clearing organization ........................... 210,986
Other receivables ............................................... 10,145
Prepaid expenses ................................................ 9,091
Securities owned, at market value ............................... 324,343
--------
TOTAL CURRENT ASSETS ..................................... 808,582
--------
PROPERTY AND EQUIPMENT, net ........................................ 23,674
--------
OTHER ASSETS:
Security Deposits ................................................ 5,204
Clearing Deposit ................................................. 136,204
--------
TOTAL OTHER ASSETS ....................................... 141,408
--------
$973,664
========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities ........................ $ 64,613
Securities sold but not yet purchased, at market value .......... 94,225
Income taxes payable ............................................ 146,007
--------
TOTAL CURRENT LIABILITIES ................................ 304,845
--------
STOCKHOLDER'S EQUITY:
Common stock, authorized 200 shares, no par,
issued and outstanding, 22 shares .............................. 13,200
Retained earnings ............................................... 655,619
--------
TOTAL STOCKHOLDER'S EQUITY ............................... 668,819
--------
$973,664
========
</TABLE>
F-17
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
UNAUDITED
<TABLE>
<CAPTION>
REVENUES:
<S> <C>
Commissions ................................................. $2,342,480
Net dealer inventory and investment losses .................. 231,156
Interest and dividends ...................................... 149,608
----------
TOTAL REVENUES .................. 2,723,244
----------
OPERATING EXPENSES:
Clearing and other transaction costs ........................ 1,201,913
Employee compensation and benefits .......................... 812,430
Occupancy and administration ................................ 278,923
Interest expense ............................................ 8,140
Depreciation ................................................ --
----------
TOTAL OPERATING EXPENSES ........ 2,301,406
----------
INCOME (LOSS) BEFORE INCOME TAXES ................... 421,838
INCOME TAX PROVISION ........................................... 150,520
----------
NET INCOME (LOSS) .................................... $ 271,318
==========
</TABLE>
F-18
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
UNAUDITED
<TABLE>
<CAPTION>
Common Stock
---------------------------
Shares Amount at Retained
Issued Par Value Earnings Totals
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BALANCES, January 1, 1999 .............................. 22 $ 13,200 $384,301 $397,501
Net income for the nine months
ended September 30, 1999 .............................. -- -- 271,318 271,318
-------- -------- -------- --------
BALANCES, September 30, 1999 ........................... 22 $ 13,200 $655,619 $668,819
======== ======== ======== ========
</TABLE>
F-19
<PAGE>
NEWPORT DISCOUNT BROKERAGE, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
UNAUDITED
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net income ..................................................... $ 271,318
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in certain assets and liabilities:
Receivable from clearing organization ................... 95,785
Other receivables ....................................... 739
Prepaid expenses ........................................ (9,090)
Securities owned at market value ........................ (258,403)
Accounts payable and accrued expenses ................... (9,414)
Profit sharing plan contribution payable ................ (20,000)
Income taxes payable .................................... 134,151
Securities sold but not yet purchased, at market value .. 94,225
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............... 299,311
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ............................. (10,511)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in clearing deposit ................................... (84,249)
---------
NET INCREASE IN CASH .................................... 204,551
CASH AND CASH EQUIVALENTS, January 1, 1999 ........................ 49,466
---------
CASH AND CASH EQUIVALENTS, September 30, 1999 ..................... $ 254,017
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes ..................................... $ --
=========
Cash paid for interest ......................................... $ 8,140
=========
</TABLE>
F-20
<PAGE>
ONLINETRADINGINC.COM CORP.
CONSOLIDATED PROFORMA STATEMENTS OF FINANCIAL CONDITION
AS OF JANUARY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROFORMA
ONLINE NEWPORT ADJUSTMENTS CONSOLIDATED
----------- ------------ ----------- -----------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents ...................... $ 1,005,944 $ 49,466 $12,889,558 a $13,944,968
Receivable from clearing organization .......... 572,433 306,771 879,204
Other receivables .............................. 6,163 10,884 (10,884) b 6,163
Securities owned, at market value .............. 381,084 65,940 (65,940) b 381,084
Deferred tax asset ............................. -- -- --
Other current assets ........................... 9,420 -- 9,420
----------- ------------ ----------- -----------
TOTAL CURRENT ASSETS .................... 1,975,044 433,061 12,812,734 15,220,839
----------- ------------ ----------- -----------
PROPERTY AND EQUIPMENT, net ....................... 136,146 13,163 (13,163) b 136,146
----------- ------------ ----------- -----------
OTHER ASSETS:
Other Assets .................................... 43,398 5,205 48,603
Goodwill, net ................................... -- -- 2,682,000 c 2,682,000
Clearing Deposit ................................ -- 51,955 (51,955) b --
----------- ------------ ----------- -----------
TOTAL OTHER ASSETS ...................... 43,398 57,160 2,630,045 2,730,603
----------- ------------ ----------- -----------
$ 2,154,588 $ 503,384 $15,429,616 $18,087,588
=========== ============ =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities ....... $ 948,422 $ 74,027 $ -- $ 1,022,449
Profit sharing plan contribution payable ....... -- 20,000 (20,000) b --
Income taxes payable ........................... 38,230 11,856 50,086
----------- ------------ ----------- -----------
TOTAL CURRENT LIABILITIES ............... 986,652 105,883 (20,000) 1,072,535
----------- ------------ ----------- -----------
DEFERRED INCOME TAXES ............................. 15,400 -- -- 15,400
----------- ------------ ----------- -----------
SUBORDINATED LOANS ................................ 525,000 -- -- 525,000
----------- ------------ ----------- -----------
STOCKHOLDER'S EQUITY:
Preferred stock ................................ 300,000 -- 300,000
Common stock ................................... 80,000 13,200 21,563 d 114,763
Additional paid-in capital ..................... 111,951 -- 15,586,261 e 15,698,212
Retained earnings .............................. 135,585 384,301 (158,208) b 361,678
----------- ------------ ----------- -----------
TOTAL STOCKHOLDER'S EQUITY .............. 627,536 397,501 15,449,616 16,474,653
----------- ------------ ----------- -----------
$ 2,154,588 $ 503,384 $15,429,616 $18,087,588
=========== ============ =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
P-1
<PAGE>
ONLINETRADINGINC.COM CORP.
CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
01/01/98 to
12/31/98 PROFORMA
ONLINE NEWPORT ADJUSTMENTS CONSOLIDATED
----------- ----------- ----------- ------------
REVENUES:
<S> <C> <C> <C> <C>
Commissions ........................................ $ 5,525,427 $ 2,876,761 $(148,366) f $8,253,822
Net trading gains (losses) ......................... 328,495 (316,621) 316,621 f 328,495
Interest and dividends ............................. 138,142 151,034 289,176
----------- ----------- -------- ----------
TOTAL REVENUES ................................ 5,992,064 2,711,174 168,255 8,871,493
----------- ----------- -------- ----------
OPERATING EXPENSES:
Employee compensation and benefits ................. 3,356,688 1,007,193 (234,537) f 4,129,344
Clearing and other transaction costs ............... 2,002,055 1,174,445 (462,563) g 2,713,937
Occupancy and administration ....................... 406,814 448,790 (76,445) f 779,159
Interest expense ................................... 36,566 16,194 52,760
Depreciation and amortization ...................... 29,918 10,086 178,800 h 218,804
----------- ---------- -------- ---------
TOTAL OPERATING EXPENSES ............ 5,832,041 2,656,708 (594,745) 7,894,004
----------- ---------- -------- ---------
INCOME BEFORE INCOME TAXES .................. 160,023 54,466 763,000 977,489
PROVISION FOR INCOME TAXES ............................ 52,080 11,821 308,000 i 371,901
----------- --------- --------- ----------
NET INCOME ............................. $ 107,943 $ 42,645 $ 455,000 $ 605,588
=========== ========= ========= ==========
EARNINGS (LOSS) PER SHARE:
Basic .............................................. $ 0.01 $ 0.08
=========== ==========
Diluted ............................................ $ 0.01 $ 0.08
=========== ==========
Weighted average common shares outstanding -
basic & diluted ................................... 7,971,510 7,971,510
=========== =========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
P-2
<PAGE>
ONLINETRADINGINC.COM CORP.
CONSOLIDATED PROFORMA STATEMENTS OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROFORMA
ONLINE NEWPORT ADJUSTMENTS CONSOLIDATED
------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents ............................ $ 18,385,178 $ 254,017 $ (2,936,017) j $15,703,178
Receivable from clearing organization ................ 539,273 210,986 750,259
Other receivables .................................... 46,488 10,145 (10,145) b 46,488
Securities owned, at market value .................... 334,950 324,343 (324,343) b 334,950
Other current assets ................................. 12,306 9,091 (9,091) b 12,306
------------ ------------ ------------ -----------
TOTAL CURRENT ASSETS .......................... 19,318,195 808,582 (3,279,596) 16,847,181
------------ ------------ ------------ -----------
PROPERTY AND EQUIPMENT, net ............................. 223,801 23,674 (23,674) b 223,801
------------ ------------ ------------ -----------
OTHER ASSETS:
Other Assets .......................................... 73,387 5,204 78,591
Goodwill, net ......................................... -- -- 2,682,000 k 2,682,000
Clearing Deposit ...................................... 100,184 136,204 (136,204) b 100,184
------------ ------------ ------------ -----------
TOTAL OTHER ASSETS ............................ 173,571 141,408 2,545,796 2,860,775
------------ ------------ ------------ -----------
$ 19,715,567 $ 973,664 $ (757,474) $19,931,757
============ ============ ============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities ............. $ 816,438 $ 64,613 $ -- $ 881,051
Income taxes payable ................................. 547,309 146,007 693,316
Securities sold but not yet purchased, at market value 1,023,626 94,225 (94,225) b 1,023,626
Other current liabilities ............................ 36,180 -- 36,180
------------ ------------ ------------ -----------
TOTAL CURRENT LIABILITIES ..................... 2,423,553 304,845 (94,225) 2,634,173
------------ ------------ ------------ -----------
DEFERRED INCOME TAXES ................................... 13,481 -- -- 13,481
------------ ------------ ------------ -----------
SUBORDINATED LOANS ...................................... 400,000 -- -- 400,000
------------ ------------ ------------ -----------
STOCKHOLDER'S EQUITY:
Common stock ......................................... 114,763 13,200 (13,200) b 114,763
Additional paid-in capital ........................... 15,753,312 -- 15,753,312
Retained earnings .................................... 1,010,458 655,619 (650,049) b 1,016,028
------------ ------------ ------------ -----------
TOTAL STOCKHOLDER'S EQUITY .................... 16,878,533 668,819 (663,249) 16,884,103
------------ ------------ ------------ -----------
$ 19,715,567 $ 973,664 $ (757,474) $19,931,757
============ ============ ============ ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
P-3
<PAGE>
ONLINETRADINGINC.COM CORP.
CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS
FOR THE EIGHT MONTHS ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
01/01/99 to
09/30/99 PROFORMA
ONLINE NEWPORT ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- -------------
REVENUES:
<S> <C> <C> <C> <C>
Commissions ............................................... $5,381,679 $2,342,480 $(151,587) f $7,572,572
Net trading gains ......................................... 878,578 231,156 (231,156) f 878,578
Other revenue ............................................. 175,000 -- 175,000
Interest - revenue sharing ................................ 209,672 -- 209,672
Interest and dividends .................................... 259,340 149,608 408,948
---------- ---------- --------- ----------
TOTAL REVENUES ....................................... 6,904,269 2,723,244 (382,743) 9,244,770
---------- ---------- --------- ----------
OPERATING EXPENSES:
Employee compensation and benefits ........................ 3,199,584 812,430 (136,916) f 3,875,098
Clearing and other transaction costs ...................... 1,659,770 1,201,913 (538,401) g 2,323,282
Occupancy and administration .............................. 527,202 278,923 (43,426) f 762,699
Interest expense .......................................... 17,938 8,140 26,078
Depreciation and amortization ............................. 31,239 -- 119,200 h 150,439
---------- ---------- --------- ----------
TOTAL OPERATING EXPENSES ................... 5,435,733 2,301,406 (599,543) 7,137,596
---------- ---------- --------- ----------
INCOME BEFORE INCOME TAXES ......................... 1,468,536 421,838 216,800 2,107,174
PROVISION FOR INCOME TAXES ................................... 563,661 150,520 87,000 i 801,181
---------- ---------- --------- ----------
NET INCOME .................................... $ 904,875 $ 271,318 $ 129,800 $1,305,993
========== ========== ========= ==========
EARNINGS (LOSS) PER SHARE:
Basic ..................................................... $ 0.09 $ 0.13
========== ==========
Diluted ................................................... $ 0.09 $ 0.13
========== ==========
Weighted average common shares outstanding - Basic ........ 9,877,039 9,877,039
========== ==========
Weighted average common shares outstanding - Diluted ...... 9,892,269 9,892,269
========== ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
P-4
<PAGE>
ONLINETRADINGINC.COM CORP.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED JANUARY 31, 1999
AND AS OF AND FOR THE EIGHT MONTHS ENDED SEPTEMBER 30, 1999
The Company, ("online"), acquired all of the rights, title, and interest in the
customers and the customers respective brokerage accounts of Newport Discount
Brokerage, Inc. ("Newport"). Those balance sheet accounts not directly
associated with the revenues or expenses from the transactions of the customers
have been eliminated in the pro forma adjustments as those balances would not
have a continuing impact on the Company subsequent to the acquisition.
a) Pro forma adjustments to cash and cash equivalents as of January 31, 1999:
Net proceeds from Company's initial public offering $ 15,621,024
Cash consideration for acquisition of Newport customers (2,682,000)
Elimination of Newport's cash balances not acquired (49,466)
-------------
$ 12,889,558
=============
The proceeds used for the acquisition were provided by the Company's
initial public offering effective June 11, 1999. Accordingly, to reflect
the source of the proceeds of the acquisition, the net proceeds of the
public offering was included.
b) Elimination of those balance sheet accounts not directly associated with
the revenues or expenses from the transactions of the customers of Newport.
c) Represents the acquisition of Newport as if the acquisition took place on
January 31, 1999.
d) Pro forma adjustments to common stock as of January 31, 1999:
The Company's initial public offering on June 11, 1999 $ 25,875
Stock Split of 11.1111 shares for each 10 shares on
April 3, 1999 8,888
Elimination of Newport's common stock (13,200)
---------
$ 21,563
=========
e) Pro forma adjustments to additional paid in capital as of January 31, 1999:
Represents the Company's initial public offering on
June 11, 1999 to reflect the proper source of
funds for the acquisition. $ 15,595,149
Stock Split of 11.1111 shares for each 10 shares
on April 3, 1999 (8,888)
-------------
$ 15,586,261
=============
P-5
<PAGE>
f) Represents revenues and expenses which is included in the historical
statements of operations of Newport which will not have a continuing impact
on us subsequent to the acquisition.
January September
31, 1999 30, 1999
--------- ----------
Payment for order flow $ 148,366 $ 151,587
Net proprietary trading gains (losses) (316,621) 231,156
Compensation and related benefits from
former branch office of Newport 234,537 136,916
Rent and utilities from former branch office
of Newport 76,445 43,426
g) Pro forma adjustments to clearing and other transaction costs:
Reduction in clearing and transaction costs $ 462,563 $ 410,960
Unsecured customer debit - 127,441
--------- ---------
$ 462,563 $ 538,401
========= =========
h) Represents amortization of goodwill over 15 years
from the purchase price allocation $ 178,800 $ 119,200
i) To reflect tax impact at an effective rate of 38% for other pro forma
adjustments
j) Pro forma adjustments to cash and cash equivalents as of September 30, 1999:
Cash consideration for acquisition of Newport customers $ 2,682,000
Elimination of Newport's cash balances not acquired 254,017
-----------
$ 2,936,017
===========
k) Represents the acquisition of Newport as if the acquisition took place on
September 30, 1999
P-6
<PAGE>
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 thereunto duly authorized.
onlinetradinginc.com corp.
December 21, 1999 By: /s/ Anthony M. Palermo
- ----------------- -------------------------------------------
Date Anthony M. Palermo, Chief Financial Officer
<PAGE>
EXHIBIT INDEX
- --------------------------------------------------------------------------------
EXHIBIT NUMBER DESCRIPTION
- -------------- ----------------------------------------------------------------
2.1 Asset purchase agreement, dated September 21, 1999, between
onlinetradinginc.com corp. and Newport Discount Brokerage, Inc.
10.1 Employment agreement, dated September 21, 1999, between
onlinetradinginc.com corp. and Robert Scarpetti
10.2 Non-compete agreement, dated September 21, 1999, between
onlinetradinginc.com corp. and Robert Scarpetti
10.3 Employment agreement, dated September 21, 1999, between
onlinetradinginc.com corp. and Raymond Chodkowski
10.4 Non-compete agreement, dated September 21, 1999, between
onlinetradinginc.com corp. and Raymond Chodkowski
<PAGE>
Exhibit 2.1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") dated as of the __21___ day of
September, 1999, between onlinetradinginc.com corp., a Florida corporation (the
"Purchaser"), and Newport Discount Brokerage, Inc., a New York corporation (the
"Seller").
Seller wishes to sell to the Purchaser and the Purchaser wishes to purchase,
upon the terms and subject to the conditions set forth herein, the assets of
Seller set forth in Section 1.1, for the consideration set forth in Section 1.3.
In consideration of the mutual covenants contained herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Purchase and Sale
1.1. Purchase and Sale of Assets. Subject to the terms and conditions
of this Agreement, on the Closing Date (as defined herein) the Seller shall
sell, transfer, convey, assign, and deliver to the Purchaser, and the Purchaser
shall purchase, acquire, and accept from the Seller, the following assets (the
"Transferred Assets"):
(a) All of the Seller's right, title, and interest in
and to its current and former clients and their
respective securities brokerage accounts (the
"Clients") including, by way of enumeration and not
of limitation, the right to offer and provide
securities brokerage and other related services to
said Clients and to charge and receive fees and
commissions from said Clients (more specifically set
forth on Schedule A).
(b) All of the Seller's right, title, and interest
in and to the following telephone numbers:(561)997-0471,
(561) 997-0647, 1-800-999-3278 and 1-800-421-6133.
Notwithstanding the foregoing, all commission and other revenues earned
by Seller with respect to the Clients prior to the Closing will be
retained by Seller or, if received by Purchaser, paid over by it to
Seller, notwithstanding that payment of such commission or other
revenue is received after the Closing.
1.2. No Assumption of Liabilities or Obligations. Notwithstanding any
contrary provision, the Purchaser shall not assume any liabilities, contracts or
other obligations of the Seller and nothing herein shall be construed as
imposing any such liability or obligation upon the Purchaser. Seller shall
indemnify Purchaser from all said liabilities, contracts or other obligations
pursuant to Section 10.3. Notwithstanding the foregoing, Purchaser hereby
assumes all future obligations with respect to the above referenced telephone
numbers and all obligations to the Clients arising after the Closing (the
"Assumed Obligations"). Purchaser shall indemnify Seller from all said Assumed
Obligations pursuant to Section 10.2.
1.3. Consideration.
(a) $2,182,000.00 in cash; and
(b) 125,000 shares of the common stock of
onlinetradinginc.com corp., subject to escrow and
adjustment pursuant to Section 1.4.
1.4 Account Loss, Escrow and Adjustment.
(a) The parties hereby acknowledge that certain accounts
serviced from Seller's former office in Colmar, Pennsylvania (collectively the
"295 Accounts" or individually a "295 Account") were, or will be, lost,
transferred or closed due to the closing of said office on August 1, 1999, or
circumstances related thereto (an "Office Closing Loss"). The parties also
acknowledge and agree that a percentage of accounts may be lost due to the
transfer of accounts to Purchaser as contemplated herein (a "Transfer Loss").
The parties agree that the Office Closing Losses shall be the difference between
the total 295 Accounts lost and the Transfer Losses of the 295 Accounts during
the "Adjustment Period" (defined below). The Transfer Losses of the 295 Accounts
shall be determined by multiplying the percentage of accounts serviced from
Seller's former office in Boca Raton, Florida (collectively the "294 Accounts"
or individually a "294 Account") which are lost during the "Adjustment Period"
(defined below) times the total number of 295 Accounts. Notwithstanding any
contrary provision, the parties agree that 40,000 shares of the common stock of
Purchaser to be delivered pursuant paragraph 1.3(b) shall be held by Purchaser
pending adjustment pursuant to paragraph 1.4(b) and delivery pursuant to
paragraph 1.4(c).
(b) For each $1.00 in value of any 295 Account that is an
Office Closing Loss between August 1, 1999 and 180 days from closing (the
"Adjustment Period"), the consideration set forth in paragraph 1.3 (b) shall be
reduced by .0009 shares up to a total of 40,000 shares (whether Office Closing
Loss was the result of an ACAT from Seller or Purchaser, account closing,
account liquidation or other). For example, if a 295 Account had value of
$10,000.00 on the date said account was lost during the Adjustment Period, the
consideration granted in paragraph 1.3(b) would be reduced by 9 shares (i.e.
$10,000 x .0009).
(c) On or before 180 days after the Closing Date Purchaser
shall deliver to the Seller a written calculation of the reduction of shares
("Share Reduction"), together with such supporting documentation as the Seller
may reasonably request. The Seller shall review the Share Reduction calculation
and shall give written notice to Purchaser of any objections to said calculation
within 15 days after its receipt thereof. Purchaser and the Seller shall
endeavor in good faith to resolve any objections within 10 days after the
receipt by Purchaser of any objection from the Seller. If any such objection or
dispute has not been resolved at the end of such 10 day period, the disputed
portion shall be submitted to and determined within the following 30 days by a
nationally recognized firm of independent accountants mutually agreed to by
Purchaser and the Seller (the "Accounting Firm") and the calculation of the
reduction of shares determined by the Accounting Firm shall be final and binding
upon the parties (the "Final Share Reduction"). Purchaser and the Seller shall
bear equally the fees and expenses arising in connection with such determination
by the Accounting Firm (the "Accounting Firm Fees"); provided, however, that the
Accounting Firm Fees shall be borne in full by the Seller if the Final Share
Reduction is an amount within 2,500 shares of the Share Reduction and shall be
borne in full by Purchaser if the Final Share Reduction differs from the
Adjusted Net Cash Value by an amount equal to or greater than 2,500 shares. If
Seller does not serve on Purchaser written objections to the Share Reduction
within the 10 days referenced above, the Share Reduction shall become the Final
Share Reduction. Purchaser shall retain the amount of shares stated in the Final
Share Reduction and shall deliver the balance, if any, to Seller within 10 days
from the date the Share Reduction becomes the Final Share Reduction.
1.5 Lockup Period.
(a) Seller hereby irrevocably agrees that he will not, without
the prior written approval of Purchaser's Chief Executive Officer, offer, sell,
contract to sell, make any short sale (including, without limitation, a "short
against the box") pledge or otherwise dispose of directly or indirectly in the
public market, or in any manner which would require notice of the proposed sale
pursuant to Rule 144(h) of the Securities and Exchange Act of 1933, any of
Purchaser's common stock received pursuant to the Stock Purchase Agreement or
any other rights to purchase or acquire Purchaser's common stock pursuant to the
Stock Purchase Agreement, for a period beginning on the date hereof and ending
one (1) year following the Closing (the "Lockup Period"). The foregoing
restriction is expressly agreed to preclude the Seller from directly or
indirectly engaging in any hedging or other transaction that is designed to or
reasonably expected to lead to, or result in, a disposition of and of
Purchaser's common stock received pursuant to the Asset Purchase Agreement
during the Lockup Period even if said stock would actually be disposed of by
Seller subsequent to the Lockup Period. It shall be a condition of any private
sale by Seller during the Lockup Period that the purchaser, pledgee or
transferee, enter into a lock-up agreement in substantially the form hereof
covering the remainder of the Lockup Period under this Section 1.5.
(b) Notwithstanding the foregoing, any transfer by Seller of
Purchaser's common stock received pursuant to the Stock Purchase Agreement which
either (i) will not result in any change in beneficial ownership, including
without limitation, pro rata partnership distributions and transfers into trusts
for the benefit of Seller or the sole stockholder of Seller, or (ii) constitute
bona fide gifts of such shares, will not require Purchaser's consent; provided,
that the transferee enters into a lock-up agreement in substantially the form
hereof covering the remainder of the Lockup Period under this Section 1.5.
2. Covenants of the Parties pending Closing
The respective parties hereto agree as follows with respect to the
period between the date of this Agreement and the Closing Date:
2.1 Regulatory Approvals and Compliance. (a) Purchaser shall file or
consent to be filed with the NASD and SEC any notifications required to be filed
with respect to the transactions contemplated hereby. Each of Purchaser and the
Seller agree to make available to each other such information as each of them
may reasonably request relative to their business, assets and property as may be
required of each of them to file the required applications and notices with the
NASD and SEC.
(b) Purchaser shall use its best efforts to have the shares of
Purchaser Common Stock to be issued pursuant to this Agreement to be listed,
subject to official notice of issuance, on the Nasdaq Small Cap Stock Market.
2.2 Approvals. Each of Purchaser and Seller will act diligently and
reasonably to secure all Approvals required to be obtained by each of them,
respectively, to satisfy the conditions set forth in Section 3.2 with respect to
each of Purchaser and Section 4.2 with respect to Newport and the Seller.
2.3 Access to Information. (a) Seller shall, and shall cause its
officers, directors, employees and agents to, afford the officers, employees,
representatives and agents of Purchaser to (i) have full access at reasonable
times to all facilities, books, records and documents relating to the Business,
(ii) make copies of such books, records and documents, (iii) confer with the
employees, officers, directors, attorneys, accountants and other representatives
of Seller with respect to all matters regarding Seller or the Business and (iv)
confer with authorities of the regulatory agencies overseeing Seller with
respect to all matters regarding Seller or the Business. Seller shall have the
right to have a representative present at any conference undertaken by Purchaser
pursuant to clauses (iii) or (iv) in the preceding sentence.
(b) No investigation pursuant to this Section 2.3 shall
affect, add to or subtract from any representations or warranties or the
conditions to the obligations of the parties hereto to consummate the
transaction contemplated by this agreement.
2.4 Notification of Certain Matters. The Seller shall give prompt
notice to Purchaser, and Purchaser shall give prompt notice to Seller, of (i)
the occurrence, or failure to occur, of any event which such party believes
would be likely to cause any of its representations or warranties contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Effective Time and (ii) any material failure of
Seller or Purchaser, as the case may be, or of any officer, director, employee
or agent of Seller or Purchaser, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such party hereunder;
provided, however, that failure to give such notice shall not constitute a
waiver of any defense which may be validly asserted.
2.5 Seller covenants and agrees not to, directly or indirectly, sell,
transfer, assign, pledge, hypothecate or otherwise dispose of any of the assets
set forth in section 1.1 except pursuant to the terms of this Agreement and in
the ordinary course of business pursuant to its clearing agreement with U.S.
Clearing.
2.6 During the term of this agreement and for a period of 30 days after
termination of this agreement for any reason, Seller agrees not to solicit,
invite or accept solicitation from any other potential or actual purchasers or
merger participants. During this period, Seller agrees that Seller and its
assets shall be off the market and agrees not to discuss or negotiate any
potential or actual sale, assignment or transfer of Seller or its assets (except
in the ordinary course of business) or any potential or actual sale, assignment
or transfer of any share(s) of Seller's stock.
2.7 Seller warrants and covenants that, except as specifically provided
herein, Seller shall not take any action to modify or change its current
business practices and policies prior to the Closing, including without
limitation: reducing customer charges, fees and/or rates; changes in staff
(except as a result of staff departures); changes in employee compensation
and/or benefits; or changes in contract terms resulting in a materially adverse
effect to Seller's business.
3. Conditions to the Obligations of Purchaser.
The obligations of Purchaser to consummate, on the Closing Date, the
transactions contemplated by this Agreement will be subject to the satisfaction,
on or before the Closing Date, of each of the following conditions, unless
waived in writing by Purchaser:
3.1 Representations and Warranties; Performance. All representations
and warranties made by Seller in this Agreement shall be true and correct in all
material respects on the Closing Date as though made on the Closing Date, except
for changes contemplated by this Agreement. The Seller shall have performed and
complied in all material respects with all agreements, covenants and conditions
required to be performed and complied with by them, prior to the Closing Date.
3.2 Approvals. All approvals required to be obtained by Seller to
consummate the transactions contemplated by this Agreement shall have been
validly obtained and shall be in full force and effect and all statutory waiting
periods in respect thereof shall have expired or been terminated and copies of
all such approvals shall have been delivered to Purchaser.
3.3 No Proceeding or Litigation. No action, suit or proceeding before
any court or any other governmental authority or regulatory agency shall have
been commenced or threatened, and no investigation by any governmental authority
or regulatory agency shall have been threatened, against any of the parties to
this Agreement or any of the principals, officers, directors or stockholders of
any of them seeking to restrain, prevent or change the transactions contemplated
hereby or questioning the validity or legality of any of such transactions or
seeking damages in connection with any of such transactions.
3.4 Other Documents. The Seller shall have furnished or caused to be
furnished to Purchaser the documents set forth in Section 5.2 and such other
documents and certificates as may be reasonably requested by Purchaser.
3.5 Corporate Action. Seller shall have taken all corporate action
necessary to approve the transactions contemplated by the Agreement and Seller
shall have furnished Purchaser with copies of resolutions, adopted by the Board
of Directors of Seller and certified by the secretary of Seller as of the
Closing Date, in form and substance reasonably satisfactory to counsel for
Purchaser, in connection with such transactions.
4 Conditions to the Obligations of Seller.
The obligations of Seller to consummate, on the Closing Date, the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions, unless waived in writing by Seller:
4.1 Representations and Warranties; Performance. All representations
and warranties made by Purchaser in this Agreement shall be true and correct in
all material respects on the Closing Date as though made on the Closing Date,
except for changes contemplated by this Agreement. Purchaser shall have
performed and complied in all material respects with all agreements, covenants
and conditions required by this Agreement to be performed and complied with by
them prior to the Closing Date.
4.2 Approvals. All Approvals required to be obtained by Purchaser to
consummate the transactions contemplated by this Agreement shall have been
validly obtained and shall be in full force and effect and all statutory waiting
periods in respect thereof shall have expired or been terminated and copies of
such Approvals shall have been delivered to Seller.
4.3 No Proceeding or Litigation. No action, suit or proceeding before
any court or any other governmental authority or regulatory agency shall have
been commenced or threatened, and no investigation by any governmental authority
or regulatory agency shall have been threatened, against any of the parties to
this Agreement or any of the principals, officers or directors of any of them
seeking to restrain, prevent or change the transactions contemplated hereby or
questioning the validity or legality of any of such transactions or seeking
damages in connection with any of such transactions.
4.4 Employment Agreements. The Seller's sole shareholder
and principal employee shall have received executed employment agreements.
4.5 Other Documents. Purchaser shall have furnished Seller with the
documents set forth in Section 5.3 and such other documents and certificates as
may be reasonably requested by Seller.
4.6 Corporate Action. Purchaser shall have taken all corporate action
necessary to approve the transactions contemplated by the Agreement, and
Purchaser shall have furnished Seller with copies of resolutions, adopted by the
Board of Directors of Purchaser and certified by the secretary of Purchaser as
of the Closing Date, in form and substance reasonably satisfactory to counsel
for Seller, in connection with such transactions.
5 Closing
5.1 Closing. Unless this Agreement shall have been terminated pursuant
to the provisions of Article 6, the closing of the transactions contemplated by
this Agreement (the "Closing") shall be held at the officer of Purchaser at 8:30
a.m., five business days from the first date the closing can occur under NASD
rules (the "Closing Date") or October 1, 1999 which ever is later.
5.2 Delivery of Documents by the Seller. The Seller agrees to execute
and deliver, or cause to be executed and delivered, to Purchaser at the Closing,
the following:
(a) All of the instruments and documents required to be
delivered by it under Article 3.
(b) Resolutions of the Board of Directors of Seller,
authorizing and approving all matters in connection with this Agreement and the
transactions contemplated hereby, certified by the Secretary or Assistant
Secretary of Seller as of the Closing Date.
(c) Such other documents as Purchaser may reasonably request.
5.3 Delivery of Documents by Purchaser. Purchaser agrees to execute and
deliver, or cause to be executed and delivered, to the Seller, as the case may
be, at the Closing, the following:
(a) All of the instruments and documents required to be
delivered under Article 4.
(b) The cash consideration set forth in paragraph 1.3(a)
above.
(c) The Purchaser common stock set forth in paragraph
1.3(b) above, subject to escrow and adjustment
pursuant to Section 1.4.
(d) Such other documents as the Seller may reasonably
request.
6 Termination and Remedies
6.1 Methods of Termination. This Agreement may be terminated prior to
the Closing Date under the following circumstances:
(a) by mutual written consent of the Seller and Purchaser;
(b) subject to the provisions of Section 6.2, by Purchaser
giving written notice to Seller if all of the conditions to the obligations of
Seller set forth in Article 3 have not been satisfied on or before the Closing
Date;
(c) subject to the provisions of Section 6.2, by the Seller
giving written notice to Purchaser if all of the conditions to the obligations
of Purchaser set forth in Article 4 have not been satisfied on or before the
Closing Date; or
(d) by any party if the Closing has not occurred for any
reason by October 30, 1999, provided that such terminating party is not then in
breach of this Agreement.
6.2 Opportunity to Cure. Notwithstanding anything contained in this
Agreement to the contrary and subject to the provisions of Section 6.1(b) and
6.1(d) respectively, neither the Seller or Purchaser shall terminate this
Agreement under Section 6.1(b) or (d) unless such party shall have first given
the other parties notice of its intent to terminate this Agreement, setting
forth the nature of the condition to the terminating party's obligation to close
which remains unsatisfied and the other parties shall have failed to satisfy
such condition within 10 days after receipt of such notice; provided that if
such condition is of a nature that it cannot be reasonably satisfied within such
10 day period, then, if the defaulting or breaching party shall have commenced
an attempt to satisfy such condition within such 10 day period, the period to
satisfy such condition shall be extended until the date which is 20 days after
receipt of such notice.
6.3 Procedure Upon Termination. In the event of termination
pursuant to Section 6.1:
(a) each party will return all documents and other materials
of the other parties relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing the same;
and
(b) such termination shall not relieve any party of any
liability or further obligation to any other party for breach of this Agreement.
7. Representations, Warranties and Covenants of the Seller.
7.1 The Seller represents and warrants to the Purchaser as follows:
(a) The Seller is duly authorized to execute and deliver this
Agreement and this Agreement is a valid and binding agreement of the Seller,
enforceable against the Seller in accordance with its terms;
(b) The execution of this Agreement and the consummation by
the Seller of the transactions contemplated will not: (1) constitute a violation
of, conflict with or constitute a default under, any contract, commitment,
agreement, understanding, arrangement or restriction of any kind to which the
Seller is a party or by which the Seller is bound; (2) violate any registration,
qualification, consent approval, or filing under, (i) any law, statute,
ordinance, rule or regulation (hereinafter collectively referred to as "laws")
of any federal, state or local government (hereinafter collectively referred to
as "governments") or any agency, bureau, commission, or instrumentality of any
governments (hereinafter collectively referred to as "governmental agencies")
assuming the approvals and consents contemplated hereby are obtained or (ii) any
judgment, injunction, order, writ or decree of any court, arbitrator, government
or government agency by which Seller or any of its assets or properties is
bound; (3) conflict with any provision of, constitute a default under, result in
the acceleration of the performance of Seller's obligations under or result in
the creation of any claimed security interest, lien, charge, or encumbrances
upon any of Seller's material properties, material assets, or business pursuant
to (i) Seller's articles of incorporation or by-laws, (ii) any indenture,
mortgage, deed or trust, license, permit, approval, consent, franchise, lease,
contract or any other instrument to which Seller is a party or by which it is
bound, (iii) any judgment, injunction, order, writ or decree of any court,
arbitrator, government or government agency by which Seller or any of its assets
or properties is bound.) except such violations, conflicts and defaults as
individually or in the aggregate will not have a material adverse effect on the
ability of Seller to consummate the transactions contemplated herein, the
validity of such transactions once consummated or the value to Purchaser of the
Transferred Assets (a "Material Adverse Effect on the Sale").
(c) Seller has, and at the Closing the Seller will have
(without exception), good, valid and marketable title to the Transferred Assets
free and clear of all claims, liens, charges, encumbrances and security
interests, and the transfer of the Transferred Assets to the Purchaser will pass
good and marketable title to the Transferred Assets, free and clear of all
claims, liens, charges, encumbrances and security interests (collectively
"Encumbrances"), except those attributable to actions or inactions of Purchaser.
(d) The Seller understands that the receipt of Purchaser
Shares contemplated herein involves various risks, including that no market may
exist for any resale;
(e) The sole owner of Seller has a net worth is not less
than $1,000,000;
(f) The sole owner of Seller and its financial advisors (if
any) have knowledge, skill and experience in business, financial and investment
matters that they are capable of evaluating the merits and risks of this
transaction, and have reviewed the his financial condition and commitments and
are satisfied that he (1) has adequate means of providing for its financial
needs and possible contingencies, (2) has no present or contemplated future need
to dispose of all or any portion of the Purchaser Shares received hereunder to
satisfy any existing or contemplated undertaking, need or indebtedness, (3) is
capable of bearing the economic risk of an investment in Purchaser Shares for
the indefinite future and (4) can afford to suffer the loss of its entire
investment in Purchaser Shares;
(g) Seller is acquiring the Purchaser Shares solely for its
own beneficial account, for investment purposes, and not with a view to, or for
resale in connection with, any distribution, except as contemplated by paragraph
9.1.
(h) Seller does not have any liabilities or obligations
(absolute, accrued, contingent or otherwise) which individually, or in the
aggregate, would have a Material Adverse Effect on the Sale.
(i) Seller is a corporation duly organized, validly existing
and is in good standing under the laws of the state of its incorporation. Seller
is qualified to do business and is in good standing in all other states in which
Seller currently conducts business and is required to be so registered, except
for such failures to qualify as will not have a Material Adverse Effect on the
Sale. Seller has the full right, power and authority to own properties and
assets and to carry on the business of a securities broker/dealer. Seller's
articles of incorporation and by-laws are in full force and effect and Seller is
not in breach or violation of any of the provisions thereof.
(j) Seller has conducted, is conducting, and will continue to
conduct Seller's business to the Closing Date in compliance with all applicable
laws of all governments and governmental agencies, except for such failures as
will not have a Material Adverse Effect on the Sale. Neither the real or
personal properties owned, operated, leased or occupied by Seller, nor the use
operation or maintenance thereof, (1) violates any laws of any government or
governmental agency, or (2) violates any restrictive or similar covenant,
agreement, commitment, understanding or arrangement, except for such violations
as will not have a Material Adverse Effect on the Sale.
(k) Except as previously disclosed to the President of
Purchaser, Seller possesses all licenses, permits, consents, approvals,
authorizations, qualifications and orders (hereinafter collectively referred to
as "Permits") of all governments and governmental agencies, lawfully required to
enable Seller to conduct business as a securities brokerage firm in all
jurisdictions in which it does business, except for such Permits which the
failure to have will not result in a Material Adverse Effect on the Sale. All of
the Permits are in full force and effect, and no suspension, modification or
cancellation of any of the Permits is pending or threatened, except in
accordance with the normal course of business of Seller.
(l) There is no action, suit, proceeding, claim, arbitration
or investigation by any government, governmental agency or other person (1)
pending to which Seller is a party, other than those deriving as a result of
ordinary business as a securities broker/dealer and listed on Schedule B
attached hereto or any claims made against the Seller arising from the closing
of Seller's Pennsylvania office, (2) to Seller's knowledge, threatened against
or relating to Seller or any of Seller's assets or business, (3) to Seller's
knowledge, challenging Seller's right to execute, acknowledge, seal, deliver,
perform under or consummate the transactions contemplated by this Agreement, or
(4) to the Seller's knowledge, asserting any right with respect to any of
Seller's assets, and Seller knows of no basis for any such action, suit,
proceeding, claim arbitration or investigation.
(m) Seller has duly and timely filed with all appropriate
governmental agencies, all tax returns, informational returns and reports
(collectively "Returns") required to be filed by Seller, except for such
failures to file as will not have a Material Adverse Effect on the Sale. Seller
has paid in full all taxes (including taxes withheld from employees' salaries
and other withholding taxes and obligations) interest, penalties, assessments
and deficiencies owed by Seller to all taxing authorities. All information
reported on any Return is true, accurate and complete in all material respects.
All claims by the any governmental agency for taxes due and payable by Seller
have been paid.
(p) Seller does not own any real estate. Except as identified
on Schedule A, all of Newport's real property leases are terminable within 60
days or with no more than 60 days notice.
(q) Since the date of the July 31, 1999 consolidated financial
statements, except as set forth in exhibits attached hereto, Seller has not,
except in the ordinary course of its business, (1) incurred any indebtedness,
obligation or liability except normal trade or business obligations; (2)
discharged or satisfied any security interest, lien or encumbrance or paid any
indebtedness, obligation or liability except current liabilities and/or
scheduled payments; (3) mortgaged, pledged or subjected to lien, charge,
security interest, or other encumbrance to any of its material assets or
material properties; (4) sold, assigned, transferred, leased disposed of its
material assets, (5) acquired or leased any material assets or material property
of any other person, (6) canceled or compromised any debt or claim, (7) waived
or released any material rights, (8) granted or made any contract, agreement,
promise or commitment to grant any wage, salary, or employee benefit increase to
any officer, employee or other person, (9) made any material capital expenditure
or entered into any commitment therefor, or (10) suffered any material casualty,
loss or damage, whether or not such loss or damage was covered by insurance
except for such matters as will not have a Material Adverse Effect on the Sale.
8 Representations of Purchaser
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser hereby represents and
warrants to Seller as follows:
8.1 Organization, Qualification and Authority of Purchaser. (a)
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida. Purchaser has full corporate power and
authority and all material licenses, permits and authorizations necessary to
own, lease and operate its properties and to carry on its business as presently
conducted and presently proposed to be conducted. Purchaser has been duly
qualified or licensed as a foreign corporation for the transaction of business
in, and is in good standing under the laws of, each jurisdiction in which it
owns, leases or uses property or conducts any business so as to require such
qualification or licensing.
(b) Purchaser has full corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by Purchaser and the performance of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Purchaser, as appropriate, and no further corporate action on the part of
Purchaser is necessary to authorize this Agreement and its performance of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser and constitutes its legal, valid and binding obligation
enforceable against it in accordance with its terms.
8.2 No Conflict. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (a) conflict
with or result in a breach of the terms, conditions or provisions of, (b)
violate or constitute a default, an event of default (or an event which, with
notice or lapse of time or both, would constitute a default or an event of
default) or an event creating rights of modification, acceleration, termination,
cancellation or other additional rights, or loss of rights under, or (c) result
in the creation of any Encumbrance upon any of the capital stock, assets or
property of Purchaser pursuant to, the charter or by-laws of Purchaser, or any
note, bond, mortgage, indenture, deed of trust, lease, contract, permit,
agreement, or other instrument or any order of any governmental authority or
regulatory agency to which Purchaser is a party or subject, or by which any of
its capital stock, assets or property is bound or (d) contravene any applicable
provision of any laws.
8.3 Consents. Except for filings of applications and notices with the
NASD and SEC, no consent, approval or authorization of, exemption of other
action by notice or declaration, filing or registration with, any person is
required to be obtained, made or given by Purchaser in connection with the
execution, delivery and performance of this Agreement or the consummation by
Purchaser of the transactions contemplated by this Agreement.
8.4 Purchaser Common Stock. All of the shares of Purchaser Common Stock
to be issued or delivered to the Seller in connection with the transactions
contemplated hereby, on the date of issuance or delivery thereof, shall (a) be
duly authorized, validly issued, fully paid and nonassessable and (b) free and
clear of any Encumbrances.
8.5 Filings with the Commission. All documents filed by Purchaser with
the SEC pursuant to reporting obligations arising under the Securities Act of
1933 and the Securities Exchange Act of 1934 were true and correct in all
material respects as of the date specified in such documents or if no date was
so specified as of the date such documents were filed. Except for consummation
of the transactions contemplated hereby, as of the date hereof, there has been
no event, development or change in the business of Purchaser which would give
rise to an obligation on behalf of Purchaser to amend, modify or supplement a
filing with the SEC previously made or to file additional reports, schedules or
documents with the SEC.
8.6 Recapitalizations. Since July 1, 1999, there has not been any stock
split or consolidation or other recapitalization involving the Purchaser Common
Stock.
9. Covenants of the Parties subsequent to the Closing
9.1 Registration of Purchaser Common Stock; Availability of Rule 144.
(a) Together with the first registration statement filed after the Closing Date
(as "piggy back"), Purchaser shall prepare and file with the SEC a Registration
Statement on Form SB-2 (or such other registration statement as may hereafter
replace or supersede Form SB-2) relating to the shares of Purchaser Common Stock
issued pursuant to this Agreement and the offer and sale of such shares by the
Seller or the Escrow Agent from time to time pursuant to Rule 415 (or any
successor rule or rule broadening Rule 415) under the Securities Act and in
accordance with the methods of distribution set forth therein (which shall be
specified in a written notice by Seller to Purchaser), which registration
statement may be substituted for by one or more subsequent registration
statements each relating to the offer and sale by the Seller from time to time
of the shares of Purchaser Common Stock issued pursuant to the Agreement (as in
effect from time to time, the "Registration Statement"), and Purchaser shall use
its reasonable best efforts to cause such Registration Statement to be declared
effective by the Commission as promptly as practicable. Purchaser shall use its
reasonable best efforts to keep the Registration Statement continuously
effective, supplemented and amended for a period (the "Effectiveness Period")
following the Closing Date that will terminate at the earlier of the date when:
(i) all the shares of Purchaser Common Stock covered by the Registration
Statement are sold or (ii) such shares could be sold pursuant to Rule 144(k)
under the Securities Act, as Rule 144(k) may be subsequently amended,
supplemented or modified. The Seller will provide such cooperation as Purchaser
may reasonably request with respect to the preparation of the Registration
Statement. Purchaser shall bear all expenses of preparing and filing the
Registration Statement, and, the Seller shall be responsible for the fees and
expenses of counsel he may retain in connection therewith and any commissions or
discounts upon sale of the shares registered thereby. Purchaser will not become
a party to any underwriting agreement related to sales by the Seller, but will
indemnify the Seller for any liability incurred by the Seller arising out of or
based upon an untrue statement contained in the Registration Statement or
arising out of or based upon an omission to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading. The Seller shall indemnify Purchaser for any liability incurred by
Purchaser as a result of statements or omissions from the Registration made or
omitted in reliance upon information furnished by the Seller for use in the
Registration Statement.
(b) At any time after the Closing that the Registration
Statement is not available for resale by the Seller of the Purchaser Common
Stock issued pursuant to this Agreement, Purchaser shall use all commercially
reasonable efforts to file with the Commission all reports required to be filed
therewith pursuant to the Exchange Act and to make publicly available such
information as is required by Rule 144 to enable the Seller to make sales of
such stock pursuant to Rule 144 (or any successor rule).
(c) If the Registration Statement is not effective within nine
months after the Closing, or such other mutually agreeable time, or if the
Registration Statement thereafter fails to be effective for a period of (i) 60
consecutive days or (ii) more than 70 days in any period of 120 consecutive days
during the Effectiveness Period, and Rule 144 is not available for the resale by
the Seller of all or any portion of the Purchaser Common Stock issued to the
Seller hereunder and proposed to be sold by the Seller (the "Subject Shares"),
then the Seller may, by notice delivered during such period as the Registration
Statement fails to be effective, elect to have Purchaser purchase all or such
number of the Subject Shares as the Seller may designate and Purchaser agrees to
purchase the Subject Shares. Such purchase shall be consummated within fourteen
days after delivery of such notice and shall be at a per share purchase price
equal to the average (rounded to the nearest whole cent) of the last sale price
of the day of one share of Purchaser Common Stock as reported on the Nasdaq
Stock Market on the three days preceding delivery of such notice. The purchase
price shall be paid in cash against delivery of the certificate(s) representing
the Subject Shares accompanied by appropriate documents of transfer to
Purchaser. Once delivered by the Seller, the notice contemplated by this Section
9.1(c) may not be withdrawn without the consent of Purchaser.
9.2 Transfer of Clients. Following the Closing Date, Seller shall
cooperate in the transfer of said Clients and their account pursuant to
Purchaser's instructions.
9.3 Further Assurances. (a) Upon the terms and subject to the
conditions provided herein, each of Purchaser, and the Seller shall use
commercially reasonable efforts to take, cause to be taken, all action or do, or
cause to be done, all things or execute or cause to be executed any documents
necessary, proper or advisable under applicable laws to consummate and make
effective the transactions contemplated by this Agreement, and the other
agreements contemplated hereby.
(b) On and after the Closing Date, each of Purchaser and the
Seller shall take all commercially reasonable appropriate action and execute any
additional documents, instruments or conveyances of any kind (not containing
additional representations and warranties) which may be reasonably necessary to
carry out any of the provisions of this Agreement.
9.4 Employment. As of the Closing, Purchaser will offer employment to
each of Seller's then current employees at salary levels at least equivalent to
those paid to such employees by Seller. Such new employees will be afforded
benefits consistent with Purchaser's practices pertaining to its other
employees. Purchaser will treat Seller's employees consistent with Purchaser's
practices pertaining to its other employees in future advancement and
compensation decisions.
9.5 Stock Option Grant. At the Closing, Purchaser shall grant 85,000
options to purchase Purchaser's Common Stock, exercisable at 120% of the closing
price of the Purchaser's Common Stock on the date of this Agreement. Such
options will be granted pursuant to, and be subject to, Purchaser's 1999 Stock
Option Plan. Such options will be distributed to Seller's current employees that
continue their employment after the Closing Date in such manner as the Seller
may designate in its sole discretion.
9.6 Non-Compete. Until the seventh anniversary of the date of the
Closing, the Seller will not, directly or indirectly, either as a principal,
manager, agent, consultant, officer, stockholder, partner, investor, lender or
employee (or in any other capacity), carry on, be engaged in or have any
financial interest in any business which is directly or indirectly in
competition with the business of Purchaser as of the date the Robert Scarpetti
ceases to be affiliated with the Purchaser; provided, however, that this clause
(i) shall not be breached by (x) the Seller's passive investment in not more
than 5% of the equity of a public company engaged in direct or indirect
competition with Purchaser or (y) the Seller's involvement as a consultant to a
business directly or indirectly in competition with the business of Purchaser as
of the date the Robert Scarpetti ceases to be affiliated with the Purchaser (a
"Competitor") so long as Seller is not involved in any activity(ies) of such
Competitor, which, as performed by Purchaser, comprise more than 20% of the
revenues of Purchaser, individually or collectively, as shown in its most recent
SEC filings as of the date the Robert Scarpetti ceases to be affiliated with
Purchaser.
9.7 No Solicitation or Acceptance. Notwithstanding any contrary
provision, Seller will not at any time after Closing persuade or attempt to
persuade any person or entity which is or was a customer, client or supplier of
Purchaser or Newport at or within one year prior to termination of Seller's
employment with Purchaser or Newport for any reason, to cease doing business
with Purchaser or Newport with regard to any of Purchaser's or Newport's
business activities, or to reduce in any way the amount of business it does with
Purchaser or Newport with regard to any of Purchaser's or Newport's business
activities or accept any un-solicited business from said person(s) or entities.
9.8 Acknowledgement. The Seller acknowledges that the restrictive
covenants (the "Restrictive Covenants") contained in Sections 9.6 and 9.7 are a
condition of this Agreement and are reasonable and valid in geographic and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part of any of the Restrictive Covenants, is
invalid or unenforceable, the remainder of the Restrictive Covenants and parts
thereof shall not thereby be affected and shall be given full effect, without
regard to the invalid portion. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable because
of the geographic or temporal scope of such provision, such court shall have the
power to reduce the geographic or temporal scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be enforceable.
9.9 Remedies. If the Seller breaches, or threatens to breach, any of
the Restrictive Covenants, Purchaser, in addition to and not in lieu of any
other rights and remedies it may have at law or in equity, shall have the right
to injunctive relief; it being acknowledged and agreed to by the Seller that any
such breach or threatened breach would cause irreparable and continuing injury
to Purchaser and that money damages would not provide an adequate remedy to
Purchaser.
9.10 Newport Customer Receivables. If at any time after Closing,
Purchaser collects any "Customer Receivable," Purchaser shall pay said amount to
Seller within 30 days of actual receipt.
10. Survival of Representations, Warranties and Covenants; Indemnification
10.1 Survival of Representations, Warranties and Covenants. Except for
the Unlimited Representations and Covenants (as such terms are defined below),
the other representations, warranties, agreements and covenants of the parties
contained in this Agreement (the "Limited Representations and Covenants") shall
survive the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby until the second
anniversary of the Closing, or if the Closing shall not have taken place, for a
period of six (6) months following the date hereof. The representations,
warranties, covenants and agreements of the parties contained in Section 7.1(c)
and Articles 9, 10, 11 and 14 (collectively, the "Unlimited Representations and
Covenants") shall continue in full force after the Closing Date, or if the
Closing shall not have taken place, following the date hereof without any time
limitation other than under applicable statutes of limitation. No suit, action
or proceeding may be commenced by a party with respect to any claim arising out
of or relating to the Limited Representations and Covenants after the second
anniversary of the Closing. Notwithstanding the foregoing sentence and subject
to the other provisions of this Article 10, the parties shall have the right to
commence a suit, action or proceeding after the second anniversary of the
Closing with respect to the Unlimited Representations and Covenants.
10.2 Indemnification by Purchaser. Subject to Sections 10.1 and 10.4,
Purchaser shall indemnify Seller and its directors and officers for, and shall
hold each of them harmless from, any and all damages, claims, suits, actions,
causes of action, proceedings, investigations, losses, liabilities, assessments,
judgments, deficiencies and expenses (including, without limitation, reasonable
legal, accounting and other professional expenses) ("Indemnified Liabilities")
asserted against or incurred or sustained by any of them relating to, associated
with or arising out of (a) any breach of any of the warranties or
representations of Purchaser set forth in Article 8 or the covenants and
agreements of Purchaser set forth in this Agreement and (b) operation of the
Purchaser's business after the Closing Date.
10.3 Indemnification by the Seller. Subject to Sections 10.1 and 10.4,
the Seller shall indemnify Purchaser and its directors and officers for, and
shall hold each of them harmless from, any and all Indemnified Liabilities
asserted against or incurred or sustained by it or its Affiliates relating to,
associated with or arising out of any breach of any of the warranties or
representations set forth in Article 7 or the covenants and agreements of Seller
set forth in this Agreement. In addition, the Seller shall indemnify Purchaser
and its directors and officers for, and shall hold each of them or its
Affiliates harmless from, any and all Indemnified Liabilities asserted against,
incurred and sustained by any of them relating to all liabilities or obligations
of Seller and/or its shareholders, officers, directors, employees and/or agents.
10.4 Indemnification Procedure. (a) Reasonably promptly after
obtaining knowledge thereof, a Person who may be entitled to indemnification
hereunder (the "Indemnitee") shall promptly give the party who may be obligated
to provide such indemnification (the "Indemnitor") written notice of any
Indemnified Liability which the Indemnitee has determined has given or could
give rise to a claim for indemnification hereunder (a "Notice of Claim");
provided, however, that no failure or delay in giving any such Notice of Claim
shall relieve the Indemnitor of its obligations except, and only to the extent,
that it is prejudiced thereby. A Notice of Claim shall specify in reasonable
detail the nature and all known particulars related to an Indemnified Liability.
The Indemnitor shall perform its indemnification obligations in respect of an
Indemnified Liability described in a Notice of Claim under Sections 10.2 or
10.3, as the case may be, within 30 days after the Indemnitor shall have
received such Notice of Claim; provided, however, such obligation shall be
suspended so long as the Indemnitor is in good faith performing its obligations
under Section 10.4(b) with respect to such Indemnified Liability.
(b) The Indemnitor shall (i) promptly inform the Indemnitee of
all material developments with respect to a matter which is the subject of a
Notice of Claim and (ii) inform the Indemnitee promptly after the Indemnitor has
made a good faith determination, based on the facts alleged in such Notice of
Claim or which have otherwise become known to the Indemnitor, either that the
Indemnitor acknowledges that it has an indemnification obligation hereunder in
respect of such Indemnified Liability or that the Indemnitor has made a good
faith determination that it has no indemnification obligation hereunder in
respect of such Indemnified Liability. Except as set forth in Section 10.4(c),
the Indemnitee shall have the right, but not the obligation, to participate, at
its own cost and expense, in the defense, contest or other opposition of any
such third party claim, demand, suit, action or proceeding through legal counsel
selected by it and shall have the right, but not the obligation, to assert any
and all cross-claims or counterclaims which it may have. So long as the
Indemnitor is in good faith performing its obligations under this Section
10.4(b), the Indemnitee shall (i) at Indemnitor's cost and expense, cooperate in
all reasonable ways with, make its relevant files and records available for
inspection and copying by, make its employees reasonably available to and
otherwise render reasonable assistance to the Indemnitor upon request and (ii)
not compromise or settle any such claim, demand, suit, action or proceeding
without the prior written consent of the Indemnitor. Notwithstanding the
foregoing, the Indemnitee shall (x) make its employees reasonably available to
the Indemnitor without cost and expense to the Indemnitor provided that the
Indemnitor is in good faith performing its obligations under Section 10.4(b) and
the availability of such employee to the Indemnitor does not materially impair
the performance of such employee's duties to the Indemnitee, and (y) bear all
costs and expenses which it would have incurred in connection with any third
party action, demand, claim, suit or proceeding involving the Indemnitee without
regard for the transactions contemplated by this Agreement. If the Indemnitor
fails to perform its obligations under this Section 10.4(b), or if the
Indemnitor shall have informed the Indemnitee in writing in accordance herewith
that the Indemnitor does not have an indemnification obligation hereunder in
respect of such Liability, then the Indemnitee shall have the right, but not the
obligation, to take the actions which the Indemnitor would have had the right to
take in connection with the performance of such obligations and, if the
Indemnitee is entitled to indemnification hereunder in respect of the event or
circumstance as to which the Indemnitee takes such actions, then the Indemnitor
shall, in addition to indemnifying Indemnitee for the Liability, indemnify the
Indemnitee for all of the legal, accounting and other costs, fees and expenses
reasonably and actually incurred in connection therewith. If the Indemnitor
proposes to settle or compromise any such third party action, demand, claim,
suit or proceeding, the Indemnitor shall give written notice to that effect
(together with a statement in reasonable detail of the terms and conditions of
such settlement or compromise) to the Indemnitee a reasonable time prior to
effecting such settlement or compromise. Notwithstanding anything contained
herein to the contrary, the Indemnitee shall have the right to object to the
settlement or compromise of any such third party action, demand, claim, suit or
proceeding whereupon (A) the Indemnitee will assume the defense, contest or
other opposition of any such third party action, demand, claim, suit or
proceeding for its own account and as if it were the Indemnitor and (B) the
Indemnitor shall be released from any and all liability with respect to any such
third party action, demand, claim, suit or proceeding to the extent that such
liability exceeds the liability which the Indemnitor would have had in respect
of such a settlement or compromise. If an Indemnitee obtains any payment in
respect of a matter related to an indemnification claim pursuant to insurance,
recovery from a third party or otherwise, it shall promptly pay over to
Indemnitor, such amount received by Indemnitee up to the amount actually paid by
Indemnitor.
11 Confidentiality
11.1 Confidentiality. (a) All data, reports, records and other written
and oral information of any kind received by any party hereto or affiliates,
shareholders, directors, partners, officers, employees, agents, representatives,
consultants or lenders of such party (such party being hereinafter referred to
as the "Receiving Party") from any other party hereto or affiliates,
shareholders, partners, directors, officers, employees, agents, representatives
or consultants of such other party (such other party being hereinafter referred
to as the "Delivering Party") under this Agreement or in connection with the
transactions contemplated hereby shall be treated as confidential (collectively,
"Confidential Information"). Except as otherwise provided herein, the Receiving
Party shall not disclose or use (and shall not permit its affiliates,
shareholders, directors, officers, partners, employees, agents, representatives
or consultants to use) Confidential Information for its own (or their own)
benefit and shall use commercially reasonable efforts (and shall cause its
affiliates, shareholders, partners, directors, officers, employees, agents,
representatives or consultants to use commercially reasonable efforts) to
maintain the confidentiality of Confidential Information. If the Receiving Party
or any of its affiliates, shareholders, directors, officers, partners,
employees, agents, representatives or consultants is required to disclose
Confidential Information by or to any court, arbitrator, governmental authority
or regulatory agency of competent jurisdiction, the Receiving Party shall, prior
to such disclosure, promptly notify the Delivering Party of such requirement and
all particulars related to such requirement. The Delivering Party shall have the
right, at its own cost and expense, to object to such disclosure and to seek
confidential treatment of any Confidential Information to be so disclosed on
such terms as it shall determine.
(b) The restrictions set forth in Section 11.1(a) shall not
apply to the use or disclosure of Confidential Information to the extent, but
only to the extent, (i) permitted or required pursuant to any other agreement
between or among the parties hereto, (ii) necessary by a party hereto in
connection with exercising its, his or their rights or performing its, his or
their duties or obligations under this Agreement, or the other agreements
described in clause (i) of this sentence, (iii) contemplated by the last two
sentences of Section 11.1(a) or (iv) that the Receiving Party can demonstrate
such Confidential Information (A) is or becomes generally available to the
public through no fault or neglect of the Receiving Party, (B) is received in
good faith on a non-confidential basis from a third party who discloses such
Confidential Information without violating any obligations of secrecy or
confidentiality or (C) was already possessed at the time of receipt as shown by
prior dated written records.
(c) For the purposes of this Section 11.1, (i) information
which is specific shall not be deemed to be within an exception set forth in
Section 11.1(b) merely because it is embraced by general information which is
within such an exception and (ii) a combination of information shall not be
deemed to be within an exception set forth in Section 11.1(b) merely because
individual aspects of such combination are within such an exception unless the
combination of information itself, its principle of operation and its value or
advantages are within such an exception.
11.2 Publicity. Prior to Closing, no party hereto shall or shall permit
its affiliates principals, associates, directors, officers, representatives or
agents to issue any publicity, release or announcement concerning the execution
and delivery of this Agreement, the provisions hereof or the transactions
contemplated hereby without the prior written approval of the form and content
of such publicity, release or announcement by the other parties hereto, which
shall not be unreasonably withheld; provided, however, that no such approval
shall be required when such publicity, release or announcement is required by
(i) applicable Law, (ii) applicable rules or regulations of, or any listing
agreement with, a national or foreign stock exchange or NASDAQ or (iii) any
order; and, provided further, that, prior to issuing any publicity, release or
announcement without such prior written approval, the party issuing or whose
principal, affiliate, associate, directors, officer, representative or agent is
issuing such publicity, release or announcement shall have given reasonable
prior notice to the parties hereto which have withheld their consent (the
"Non-consenting Party") of such intended issuance and, if requested by the
Non-consenting Party, shall have used reasonable efforts at the Non-consenting
Party's own cost and expense to obtain a protective order or similar protection
for the benefit of the Non-consenting Party. Nothing contained herein shall
prevent the communication of information with any governmental authority or
regulatory agency.
11.3 Return of Confidential Information. At any time prior to the
Closing, at the request of Newport or its legal counsel, Purchaser shall (and
shall use all commercially reasonable efforts to cause their respective
affiliates, shareholders, partners, directors, officers, employees, agents,
representatives and consultants to) promptly return to Newport all Confidential
Information and shall not retain any copies or other reproductions or extracts
thereof, and Purchaser shall (and shall use all commercially reasonable efforts
to cause their respective affiliates, shareholders, partners, directors,
officers, employees, agents, representatives and consultants to) destroy or have
destroyed all memoranda, notes, reports and documents, and all copies and other
reproductions and extracts thereof prepared by it in connection with a review of
the Confidential Information.
11.4 Injunctive Relief. The parties recognize that any breach of this
Article 11 would cause irreparable injury and that monetary damages alone would
not be sufficient with respect thereto. Accordingly, each party agrees that if
it breaches or threatens to breach the provisions of this Article 11 each other
party shall have, in addition to and not in lieu of any other rights and
remedies available at law or in equity, the right to injunctive relief.
12. Broker's and Finder's Fees. The Seller, on the one hand, and the Purchaser,
on the other hand, represent and warrant to each other that neither party nor
any of its affiliates has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated herein, and agrees to indemnify and hold the
other party harmless from and against any and all claims, liabilities or
obligations with respect to any fees or commissions asserted by any person on
the basis of any act or statement alleged to have been made by that party.
13. Expenses. Each party shall pay its own expenses incurred in connection
with this Agreement.
14. Miscellaneous Provisions
14.1 Amendment. No addition to, and no cancellation, renewal,
extension, modification or amendment of, or approval under this Agreement shall
be binding upon a party unless such addition, cancellation, renewal, extension,
modification, amendment or approval is set forth in a written instrument which
states that it adds to, amends, cancels, renews or extends this Agreement or
grants an approval hereunder and which is executed and delivered on behalf of
each party, and for each party which is an entity by an officer of, or
attorney-in-fact for, such party.
14.2 Waiver. No waiver of any provision of this Agreement shall be
binding upon a party unless such waiver is expressly set forth in a written
instrument which is executed and delivered on behalf of such party, and for each
party which is an entity by an officer of, or attorney-in-fact for such party.
Such waiver shall be effective only to the extent specifically set forth in such
written instrument. Neither the exercise (from time to time or at any time) nor
the delay or failure (at any time or for any period of time) to exercise any
right, power or remedy shall operate as a waiver of, the right to exercise, or
impair, limit or restrict the exercise of part of any party of any such right,
power or remedy any other right, power or remedy at any time and from time to
time thereafter. No waiver of any right, power or remedy of a party shall be
deemed to be a waiver of any other right, power or remedy of such party or
shall, except to the extent so waived, impair, limit or restrict the exercise of
such right, power or remedy.
14.3 Investigations. The respective representations and warranties of
the parties contained herein or in any certificates or other documents delivered
prior to or at the Closing shall not be deemed waived or otherwise affected by
any investigation made by any party hereto.
14.4 Headings. The article and section headings contained in this
Agreement are for references purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14.5 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been given as follows: on the day established by the sender as
having been delivered personally or by telecopier (with confirmation); on the
day delivered by a private courier as established by the sender by evidence
obtained from the courier; or on the third day after the date mailed, by
certified or registered mail, return receipt requested, postage prepaid. Such
communications, to be valid, must be addressed as follows:
(a) If to Seller:
Newport Discount Brokerage, Inc.
5499 N. Federal Highway, Suite N
Boca Raton, FL 33487
Attention: Robert Scarpetti, President
Telecopy No.: (561) 997-0471
with a copy to:
Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
Attention: Jay R. Schifferli
Telecopy No.: (203) 327-2669
(b) If to Purchaser:
onlinetradinginc.com corp.
2700 N. Military Trail, Suite 200
Boca Raton, FL 33431
Attention: Roger L. Shaffer, Jr.
Telecopy No.: (561) 995-1076
or to such other address or to the attention of person or persons as the
recipient party has specified by prior written notice to the sending party (or
in the case of counsel, to such other readily ascertainable business address as
such counsel may hereafter maintain). If more than one method for sending notice
as set forth above is used, the earliest notice date established as set forth
above shall control.
14.6 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. No party shall assign any of its rights or delegate any of
its duties hereunder without the prior written consent of the other parties
hereto. Any assignment of rights or delegation of duties under this Agreement by
a party without the prior written consent of the other parties shall be void.
14.7 Governing Law. This Agreement shall be governed by the law of the
State of Florida as to all matters, including, but not limited to, matters of
validity, construction, effect and performance without giving effect to the
principles of conflicts of laws thereof.
14.8. Counterparts. This Agreement may be executed by the parties in
any number of counterparts, each of which when so executed and delivered shall
constitute an original instrument, but all such counterparts shall together
constitute one and the same instrument. This Agreement shall become effective
and deemed to have been executed and delivered by all of the parties at such
time as counterparts shall have been executed and delivered by each of the
parties, regardless of whether each of the parties has executed the same
counterpart. It shall not be necessary when making proof of this Agreement to
account for any counterparts other than a sufficient number of counterparts
which, when taken together, contain signatures of each of the parties.
14.9. No Third Party Beneficiaries. This Agreement shall not confer any
rights on any Persons other than parties to this Agreement as provided herein.
14.10. Severability. If any provision of this Agreement shall hereafter
be held to be invalid, unenforceable or illegal, in whole or in part, in any
jurisdiction under any circumstances for any reason, (i) such provision shall be
reformed to the minimum extent necessary to cause such provision to be valid,
enforceable and legal while preserving the intent of the parties as expressed
in, and the benefits to the parties provided by, this Agreement or (ii) if such
provision cannot be so reformed, such provision shall be severed from this
Agreement and an equitable adjustment shall be made to this Agreement
(including, without limitation, addition of necessary further provisions to this
Agreement) so as to give effect to the intent as so expressed and the benefits
so provided. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other circumstances. Neither such holding nor such reformation or severance
shall affect or impair the legality, validity or enforceability of any other
provision of this Agreement.
14.11. Entire Agreement. This Agreement (including the Schedules and
Exhibits attached hereto) and the agreements referred to herein contain the
entire agreement and understanding among the parties with respect to the subject
matter hereof, and cancels and supersedes all previous or contemporaneous
written or verbal negotiations, representations, warranties, commitments,
offers, bids, bid solicitations, and other understandings between or among
Purchaser and Seller. There are no agreements, covenants, representations or
warranties with respect to the transactions contemplated hereby other than those
expressly set forth herein or in any agreement or other instrument contemplated
hereby.
In witness, the parties have caused this Agreement to be duly executed and
delivered on the day and year first above written.
onlinetradinginc.com corp. Newport Discount Brokerage, Inc.
By: _/s/ Farshid Tafazzoli By: _/s/ Robert Scarpetti
Farshid Tafazzoli, CIO Robert Scarpetti, President
<PAGE>
SCHEDULE A
Newport's Clients
"Clients," as that term is used in this Agreement, shall include those
persons listed on the August 12, 1999 reports produced by U.S. Clearing,
Inc. titled "BNA-10, Name and Address Roster" for branches 294 and 295 (which
reports are incorporated herein by reference).
<PAGE>
ADDENDUM
THIS ADDENDUM, dated this 29th day of October, 1999, amends and modifies that
certain Asset Purchase Agreement, dated as of the 21st day of September, 1999,
(the "Asset Purchase Agreement"), between onlinetradinginc.com corp., a Florida
corporation, (the "Purchaser"), and Newport Discount Brokerage, Inc. (the
"Seller").
Seller and Purchaser wish to modify the Asset Purchase Agreement pursuant to the
terms and subject to the conditions set forth herein.
Notwithstanding any contrary provision in the Asset Purchase Agreement, and in
consideration of the mutual covenants contained herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
A. Purchaser and Seller hereby agree that upon the execution of this
Addendum, Purchaser's October 15, 1999 Notice of Intent to Terminate
(the "Notice") shall be considered withdrawn.
B. Purchaser and Seller hereby agree the Asset Purchase Agreement shall be
modified as follows:
(i) The shares to be held by Purchaser pursuant to paragraph
1.4(a), shall be increased from 40,000 to 75,000 and all other
references in the to the 40,000 shares thereafter are hereby
modified to be 75,000 shares.
(ii) All references to 180 days found in Section 1.4 shall are hereby
modified to be 365 days.
C. Purchaser and Seller hereby agree to proceed to closing on November
5, 1999, contingent upon: (i) Purchaser obtaining a temporary
clearing agreement with U.S. Clearing on terms satisfactory to Purchaser
and (ii) a satisfactory release from Benjamin Gulinello.
D. Seller hereby represents that all documents and information
related to its Florida clients (the "294 Accounts") are, and at
all times have been, secure and not disclosed to, or in the
possession of Benjamin Gulinello, or any other third party,
excluding Seller's clearing firm.
In witness, the parties have caused this Agreement to be duly executed and
delivered on the day and year first above written.
onlinetradinginc.com corp. Newport Discount Brokerage, Inc.
By: _/s/ E. Steven zum Tobel By: _/s/ Robert Scarpetti
E. Steven zum Tobel, President Robert Scarpetti, President
<PAGE>
ADDENDUM
THIS ADDENDUM, dated this 4th day of December, 1999, further amends and modifies
that certain Asset Purchase Agreement, dated as of the 21st day of September,
1999, (the "Asset Purchase Agreement"), between onlinetradinginc.com corp., a
Florida corporation, (the "Purchaser"), and Newport Discount Brokerage, Inc.
(the "Seller").
Recitals:
On September 21, 1999, onlinetradinginc.com corp. ("Online") and
Newport Discount Brokerage, Inc. ("Newport") entered into an Asset Purchase
Agreement relating to the purchase by Online of certain assets owned by Newport
(hereinafter referred to as the Asset Purchase Agreement).
Prior to said agreement and/or thereafter, certain disputes arose among
Newport, Robert Scarpetti, Aimee Scarpetti, Benjamin Gulinello and/or Odette
Gulinello regarding, among other things, the ownership of Newport and the
proportionate shares of the proceeds from the sale of Newport and/or its assets
to Online.
On or about October 13, 1999, Benjamin Gulinello, Robert Scarpetti and
Aimee Scarpetti entered into a Court approved settlement of their dispute which
was read onto the record and further confirmed and clarified on the record at a
hearing held on October 20, 1999.
As a result of such events, Seller and Purchaser wish to modify the
Asset Purchase Agreement pursuant to the terms and subject to the conditions set
forth herein.
Notwithstanding any contrary provision in the Asset Purchase Agreement,
in consideration of the foregoing recitals, which are incorporated herein, and
to induce Online to close the transaction set forth in the Asset Purchase
Agreements, and other good and valuable consideration receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
A. Subject to Newport's cooperation with Online to negotiate a rent reduction
from Newport's landlord, Online shall agree to pay Newport's current rental
charges as they come due on Newport's current premises for up to six (6) months
after Online provides written instruction to Newport to terminate its lease.
B. Online shall agree to reimburse Newport for the cost of computers Newport
purchased during the period from November 22, 1999 and December 1, 1999 (not to
exceed $8,000.00) upon Newport's presentation of paid invoices, subject to
Newport's cooperation with Online to return any or all of said computers and
attempt to obtain refunds. Notwithstanding any contrary provision, upon payment
to Newport said computers shall become the property of Online.
C. Newport hereby agrees that USC shall receive $300,000.00 from the cash
consideration due to Newport under the Asset Purchase Agreement. Online shall
transfer said funds directly to USC upon Closing.
D. Newport hereby agrees that Benjamin Gulinello shall receive $590,000.00 from
the cash consideration due to Newport under the Asset Purchase Agreement. Said
funds shall be sent by the escrow agent immediately upon Online's receipt of
written confirmation from USC that all Newport accounts have been transferred to
Online.
E. Newport hereby agrees that Section 1.4 is hereby modified to provide an
alternative calculation for the potential "Share Reduction" set forth in Section
1.4, and to provide that Online shall submit both calculations to Newport
pursuant to paragraph 1.4(c) provided that Online shall be entitled to retain
the larger of the two Share Reduction calculations.
F. The shares to be held by Purchaser pursuant to Section 1.4, which were
previously increased from 40,000 to 75,000 shall hereby be increased to 125,000
and all other references in the Asset Purchase Agreement or any subsequent
addendum to the 40,000 or 75,000 shares are hereby modified to be 125,000.
G. Section 1.4 is hereby modified so that the asset value of the Office Closing
Losses (as defined in paragraph 1.4(a)), shall be reduced by the asset value of
all accounts opened by Newport from August 1, 1999 through the date of closing.
H. The alternative Share Reduction calculation referenced in paragraph E. above
shall be as follows: Upon the (1) year anniversary date of Closing, Online shall
determine the amount of gross revenue received from all Newport accounts
received pursuant to the Asset Purchase Agreement (the "Newport Accounts") and
in the event that the gross revenue earned in said year from all Newport
Accounts is less than $3,000,000.00, the Share Reduction shall be equal to the
percentage that the gross revenue earned in said year from all Newport Accounts
is less than $3,000,000.00.
I The examples set forth on the attached Schedule A are incorporated herein for
purposes of reference and illustration but not as a limitation. All actual
calculations shall be rounded to the nearest share.
J. All other consideration payable or deliverable pursuant to the Asset Purchase
Agreement shall be held in escrow by Shaffer & Shaffer, P.A., pursuant to an
escrow agreement consistent with this Addendum, until Online's receipt of
written confirmation, from USC of the transfer of all of Newport's accounts to
Online.
K. Purchaser shall appoint Seller's designee to Purchaser's Board of Directors
until the election of directors at Purchaser's next annual Stockholder's meeting
(estimated to be held in June 2000).
In witness, the parties have caused this Agreement to be duly executed
and delivered on the day and year first above written.
onlinetradinginc.com corp. Newport Discount Brokerage, Inc.
By: _/s/ Andrew A. Allen By: _/s/ Robert Scarpetti
Andrew A. Allen, CEO Robert Scarpetti, President
<PAGE>
"SCHEDULE A"
Examples of the Share Reduction calculations pursuant to Section 1.4 as
modified:
1. Office Closing Losses Example -
Office Closing Losses are the difference between the total 295 Accounts lost and
the Transfer Losses of the 295 Accounts.
Assuming that on August 1, 1999 the asset value of Newport's 294 Accounts was
$350,000,000.00 and the value of Newport's 295 accounts was $100,000,000.00 and
that one year from closing, the asset value of Newport's 294 Accounts is
$300,000,000.00 and the value of Newport's 295 accounts was $80,000,000.00. The
total 295 Accounts lost equals $20,000,000.00.
The Transfer Losses are calculated as follows: Total 295 Accounts ($100,000,000)
multiplied by the percentage of 294 Accounts lost (14%) or $14,000,000.00
($100,000,00 x 14% (i.e. $50,000,000 / 350,000,000)) . Therefore the Office
Closing Losses would be $6,000,000.00 (i.e. $20,000,000.00 less $14,000,000.00).
Assuming that, between August 1, 1999 and closing, Newport opened accounts
totaling $1,000,000.00 in asset value, the Office Closing Losses would be
reduced to $5,000,000.00.
Applying the formula from paragraph 1.4(b), the Share Reduction for Office
Closing Losses would be 4,500 shares (i.e. $5,000,000.00 x .0009).
2. Loss of Revenue Example -
Assuming that the gross revenue earned from all Newport Accounts in the one year
period following closing is $2,900,000.00, the Share Reduction shall be
approximately 3.33% of the 125,000 shares or 4,163 shares (i.e.
$2,900,000 is approximately 3.33% less than $3,000,000)
3. Alternative Calculation selection -
Online would retain the larger of the two forgoing examples or 4,500 shares.
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement is made on this 4th day of December, 1999,
between onlinetradinginc.com corp. ("Employer"), whose principal place of
business at 2700 N. Military Trail, Suite 200, Boca Raton, Florida 33431, and
ROBERT SCARPETTI ("Employee").
WHEREAS, Employer is actively engaged in the business of a securities
brokerage firm; and,
WHEREAS, Employer wishes to employ Employee and Employee wishes to be
employed pursuant to the terms of this Employment Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Employment Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
Article 1
Employment of Employee
Employer agrees to employ Employee, and Employee accepts employment
with Employer, on and subject to the terms and conditions set forth in this
Employment Agreement upon receipt of written confirmation from U.S. Clearing of
the transfer of all Newport Discount Brokerage, Inc. accounts to Employer.
Article 2
Duties of Employee
Section 2.1. Position and Duties. Employer agrees to employ Employee to
act as "Director of Customer Service" for Employer. Employee shall be
responsible for performing the duties customarily performed by a director of
customer service including without limitation, management of customer service
department and customer retention functions. Employer reserves the right from
time to time to change the nature of Employee's duties and job title.
Section 2.2. Time Devoted to Work. Employee agrees to devote Employee's
entire business time, attention, and energies to the business of Employer in
accordance with Employer's instructions and directions and shall not be engaged
in any other business activity, whether or not the activity is pursued for gain,
profit, or other pecuniary advantage, during the term of this Employment
Agreement without Employer's prior written consent provided that Employee shall
be permitted reasonable time to "wind down" the business of Newport Discount
Brokerage, Inc.
Article 3
Place of Employment
Section 3.1. Place of Employment. Employee shall be based at Employer's
principal office at 2700 N. Military Trail, Suite 200, Boca Raton, Florida 33431
and shall not be required to travel away from that office on business more than
sixty (60) days during a calendar year. Employer agrees that during the term of
this Employment Agreement it shall not assign Employee to work at any location
which is more than 100 miles from said principal office without Employee's
consent.
Section 3.2. Moving Expenses. If Employer relocates its principal
office more than 100 miles from its current principal office, or requests that
Employee relocate to one of its offices which is more than 100 miles from its
current principal office, and Employee consents to relocate to that new
location, Employer shall promptly pay or reimburse Employee for all reasonable
moving expenses incurred by Employee in connection with the relocation plus an
amount to reimburse Employee for any federal and state income taxes that it has
to pay on amounts reimbursed. Employer also shall indemnify Employee against any
loss incurred in connection with the sale of Employee's principal residence. The
amount of any loss shall be determined by taking the difference between the
average of two appraisal prices set by two independent appraisers agreed to by
Employer and Employee and the actual sales price of Employee's principal
residence.
Article 4
Compensation of Employee
Section 4.1. Base Salary. For all services rendered by Employee under
this Employment Agreement, Employer agrees to pay Employee an annual base salary
of $100,000.00, which shall be payable to Employee in such installments, but not
less frequently than monthly, as are consistent with Employee's practice for its
other Employees. Employee's base salary shall be reviewed at least once a year
by Employer and shall be increased at a minimum by the percentage increase in
the Consumer Price Index for the previous year.
Section 4.2. Incentive Compensation. In addition to the base
salary, Employee shall be entitled to receive incentive compensation, as
determined by Employer's Board of Directors.
Section 4.3. Reimbursement for Business Expenses. Employer shall
promptly pay or reimburse Employee for all reasonable business expenses incurred
by Employee in performing Employee's duties and obligations under this
Employment Agreement, but only if Employee properly accounts for expenses in
accordance with Employer's policies.
Article 5
Vacations and Other Paid Absences
Section 5.1. Vacation Days. Employee shall be entitled to three (3)
weeks paid vacation days each calendar year during the term of this Employment
Agreement. During the first calendar year of this Employment Agreement, Employee
shall be entitled to two (2) weeks paid vacation days.
Section 5.2. Holidays. Employee shall be entitled to the same paid
holidays as authorized by Employer for its other Employees.
Section 5.3. Sick Days and Personal Absence Days. Employee shall be
entitled to the same number of paid sick days and personal absence days
authorized by Employer for its other Employees.
Article 6
Fringe Benefits
Employee shall be entitled to participate in and receive benefits from
all of Employer's Employee benefit plans that currently are maintained by
Employer for its Employees. Employee shall be entitled to participate in and
receive benefits under any retirement plan, profit-sharing plan, or other
Employee benefit plan that Employer establishes for the benefit of its Employees
after the date of this Employment Agreement. No amounts paid to Employee from an
Employee benefit plan shall count as compensation due Employee as base salary or
incentive compensation. Nothing in this Employment Agreement shall prohibit
Employer from modifying or terminating any of its Employee benefit plans in a
manner that does not discriminate between Employee and other Employees of
Employer.
Article 7
Disability
If, because of illness or injury, Employee becomes unable to work full
time for Employer for a period of more than thirty (30) days, Employer may, in
its sole discretion at any time after that period give Employee thirty (30) days
written notice that it will replace Employee if Employee is unable to return to
work full time before the date specified in the written notice. Replacement of
Employee shall not be considered a termination of Employee's employment under
this Employment Agreement.
Article 8
Termination of Employment
Section 8.1. Term of Employment. Employee's employment shall commence
on the date of execution by Employer and shall continue for three (3) years
("end-of-employment date"), unless extended or terminated sooner, as provided by
this article of the Employment Agreement.
Section 8.2. Extension of Employment. On the end-of-employment date and
every three (3) years thereafter, Employee's employment with Employer may be
extended upon terms mutually agreeable to the parties.
Section 8.3. Termination at Employee's Death. Employee's employment
with Employer shall terminate at Employee's death.
Section 8.4. Termination by Employee. Employee may, but is not
obligated to, terminate this Employment Agreement at any time under the
following circumstances:
(a) Employee's health becomes so impaired that continued performance of
Employee's duties under this Employment Agreement would be hazardous to
Employee's physical or mental health, as determined by qualified medical
professionals.
(b) Employee's fringe benefits or other compensation are materially
reduced, unless similar reductions are made to all employees.
(c) Employer becomes insolvent or files a bankruptcy petition.
(d) Employer breaches this Agreement and such breach is not cured
within 15 days after Employee gives written notice of such breach to Employer.
Section 8.5. Termination by Employer.
(a) Termination for Cause. Employer may terminate Employee's
employment for Cause.
(b) "Cause" Defined. Employer shall have cause to terminate Employee's
employment if Employee fails to substantially perform any duties required by
this Employment Agreement, Employee is grossly negligent in the performance of
required duties, Employee engages in conduct that damages Employer, Employee is
convicted of a felonious act of moral turpitude, or Employee discloses material
confidential information in violation of Article 9 of this Employment Agreement.
Employer shall have cause to terminate Employee's employment should Employee's
performance, attitude, or work habits become unreasonable as determined by the
Board of Directors after notice to Employee and a reasonable cure period .
Section 8.6. Notice of Termination. Any termination of Employee's
employment by Employer or Employee must be communicated to the other party by a
written notice of termination. The notice must specify the provision of this
Employment Agreement authorizing the termination and must set forth in
reasonable detail the facts and circumstances providing the basis for
termination of Employee's employment.
Section 8.7. Date Termination Is Effective. If Employee's employment
terminates because this Employment Agreement expires, then Employee's employment
will be considered to have terminated on that expiration date. If Employee's
employment terminates because of Employee's death, then Employee's employment
will be considered to have terminated on the date of Employee's death. If
Employee's employment is terminated by Employee, then Employee's employment will
be considered to have terminated on the date that notice of termination is
given. If Employee's employment is terminated by Employer for Cause, then
Employee's employment will be considered to have terminated on the date
specified by the notice of termination.
Section 8.8. Compensation Following Termination.
(a) If Employee's employment is terminated by Employer for Cause or
Employee terminates his employment other than for the reasons set forth in
Section 8.4, Employer shall pay Employee/Employee's then current base salary
through the date employment is terminated, and Employer shall have no further
obligations to Employee under this Employment Agreement, except to pay benefits
accrued under Employer's benefit plans through the date of termination (in
accordance with the terms thereof) and to pay incentive payments earned prior to
the termination date but payable after such date.
(b) If Employer terminates Employee's employment other than for Cause,
or if Employer's termination of Employee's employment for Cause is found to be
without basis or in bad faith or if Employee terminates his employment pursuant
to Section 8.4(b), (c) or (d), Employer shall pay Employee Employee's then
current base salary through the date employment is terminated and any legal fees
and expenses incurred by Employee to enforce Employee's rights under this
Employment Agreement. In addition, Employer shall pay Employee as liquidated
damages an amount equal to the sum of Employee's then current annual base salary
plus the annualized amount of incentive compensation paid to Employee most
recently before the date Employee's employment was terminated, divided by 12 and
then multiplied by the number of full and partial months remaining in the term
of this Employment Agreement, including extensions. In addition, Employer shall
pay benefits accrued under Employer's benefit plans through the date of
termination (in accordance with the terms thereof) and to pay incentive payments
earned prior to the termination date but payable after such date.
Article 9
Confidential Information
Section 9.1. Confidential Information Defined. "Confidential
Information" as used in this Employment Agreement shall mean any and all
technical and non-technical information belonging to, or in the possession of,
Employer or its officers, directors, Employees, affiliates, subsidiaries,
clients, vendors, or Employees, including without limitation, patent, trade
secret, and proprietary information; techniques, sketches, drawings, models,
inventions, know-how, processes, apparatus, equipment, algorithms, source codes,
object codes, software programs, software source documents, and formulae related
to Employer's business or any other current, future and/or proposed business,
product or service contemplated by Employer; and includes, without limitation,
all information concerning research, experimental work, development, design
details and specifications, engineering, financial information, procurement
requirements, purchasing, manufacturing, customer lists, vendor lists, business
forecasts, sales and merchandising, and marketing plans or similar information.
Section 9.2 Disclosures. Employee agrees that it shall, at no time
during or after termination of this Employment Agreement, directly or indirectly
make use of, disseminate, or in any way disclose Confidential Information to any
person, firm or business, except to the extent necessary for performance of this
Employment Agreement. Employee agrees that it shall disclose Confidential
Information only to Employer's other Employees who need to know such information
and who have previously agreed to be bound by the terms and conditions of a
substantially similar confidentiality provision and shall be liable for damages
for the intentional or negligent disclosure of Confidential Information.
Employee's obligations with respect to any portion of Confidential Information
shall terminate only when Employee can demonstrate to Employer that (a) such
information (i) is or becomes generally available to the public through no fault
or neglect of the Receiving Party, (ii) is received in good faith on a
non-confidential basis from a third party who discloses such Confidential
Information without violating any obligations of secrecy or confidentiality or
(iii) was already possessed at the time of receipt as shown by prior dated
written records; or (b) the communication was in response to a valid order by a
court of competent jurisdiction or was necessary to establish the rights of
Employer under this Employment Agreement.
Section 9.3. Survival. This Article 9 shall survive any termination
of this Agreement and all extended periods.
Article 10
Section 10.1. Non-Compete. Until the second anniversary of the date of
Employee's termination for any reason, Employee will not, directly or
indirectly, either as a principal, manager, agent, consultant, officer,
stockholder, partner, investor, lender or employee (or in any other capacity),
carry on, be engaged in or have any financial interest in any business which is
directly or indirectly in competition with the business of Employer or its
subsidiaries as of the date Employee ceases to be affiliated with Employer;
provided, however, that this clause (i) shall not be breached by (x) Employee's
passive investment in not more than 5% of the equity of a public company engaged
in direct or indirect competition with the business of Employer or its
subsidiaries or (y) Employee's involvement as an employee of or consultant to a
business directly or indirectly in competition with the Employer or its
subsidiaries as of the date Employee ceases to be affiliated with Employer (a
"Competitor") (and related equity positions therein arising as a result of
Competitor's standard employee equity plans) so long as Employee is not involved
in any activity(ies) of such Competitor, which, as performed by Employer and/or
its subsidiaries individually, or in the aggregate, comprise more than 20% of
the revenues of Employer or its subsidiaries, individually or collectively, as
shown in its most recent SEC filings as of the date Employee ceases to be
affiliated with Employer.
Section 10.2. No Solicitation or Acceptance. Notwithstanding
any contrary provision, Employee will not at any time after termination for any
reason, persuade or attempt to persuade any person or entity which is or was a
customer, client or supplier of Employer or its subsidiaries at or within one
year prior to termination of Employee's employment with Employer or its
subsidiaries for any reason, to cease doing business with Employer or its
subsidiaries with regard to any of Employer's or its subsidiaries' business
activities, or to reduce in any way the amount of business it does with Employer
or its subsidiaries with regard to any of Employer's or its subsidiaries'
business activities or accept any un-solicited business from said person(s) or
entities.
Section 10.3. Employee acknowledges that the restrictive
covenants (the "Restrictive Covenants") contained in Sections 10.1 and 10.2 are
a condition of this Agreement and are reasonable and valid in geographic and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part of any of the Restrictive Covenants, is
invalid or unenforceable, the remainder of the Restrictive Covenants and parts
thereof shall not thereby be affected and shall be given full effect, without
regard to the invalid portion. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable because
of the geographic or temporal scope of such provision, such court shall have the
power to reduce the geographic or temporal scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be enforceable.
Section 10.4. If Employee breaches, or threatens to breach, any of the
Restrictive Covenants, Employer, in addition to and not in lieu of any other
rights and remedies it may have at law or in equity, shall have the right to
injunctive relief; it being acknowledged and agreed to by Employee that any such
breach or threatened breach would cause irreparable and continuing injury to
Employer and that money damages would not provide an adequate remedy to
Employer.
Section 10.5. Survival. This Article 10 shall survive any termination
of this Agreement and all extended periods.
Article 11
Notices
Any notice given under this Employment Agreement to either party shall
be made in writing. Notices shall be deemed given when delivered by hand or when
mailed by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the party at the address set forth below.
Employee's address: Mr. Robert Scarpetti
5499 N. Federal Highway, Suite N
Boca Raton, FL 33487
Telecopy No.: (561) 997-0471
Employer's address: onlinetradinginc.com corp.
2700 N. Military Trail, Suite 200
Boca Raton, FL 33431
Each party may designate a different address for receiving notices by giving
written notice of the different address to the other party. The written notice
of the different address will be deemed given when it is received by the other
party.
Article 12
Binding Agreement
Section 12.1. Employer's Successors. The rights and obligations of
Employer under this Employment Agreement shall inure to the benefit of and shall
be binding in all respects upon the successors and assigns of Employer.
Section 12.2. Employee's Successors. This Employment Agreement shall
inure to the benefit and be enforceable by and upon Employee's personal
representatives, legatees, and heirs. If Employee dies while amounts are still
owed, such amounts shall be paid to Employee's legatees or, if no such person or
persons have been designated, to Employee's estate.
Article 13
Waivers
The waiver by either party of a breach of any provision of this
Employment Agreement shall not operate or be construed as a waiver of any
subsequent breach.
Article 14
Entire Agreement
Section 14.1. No Other Agreements. This instrument contains the entire
agreement of the parties with respect to employment. The parties have not made
any agreements or representations, oral or otherwise, express or implied,
pertaining to the subject matter of this Employment Agreement other than those
specifically included in this Employment Agreement.
Section 14.2. Prior Agreements. This Employment Agreement supersedes
any prior agreements pertaining to or connected with or arising in any manner
out of the employment of Employee by Employer. All such prior agreements are
terminated and are of no force or effect whatsoever.
Article 15
Amendment of Agreement
No change or modification of this Employment Agreement shall be valid
unless it is in writing and signed by the party against whom the change or
modification is sought to be enforced.
Article 16
Severability of Provisions
If any provision of this Employment Agreement is invalidated or held
unenforceable, the invalidity or unenforceability of that provision or
provisions shall be deemed modified or severed only to the minimum extent
necessary to make said provision(s) valid and enforceable while maintaining the
intent of said provision(s). No such modification shall affect the validity or
enforceability of any other provision of this Employment Agreement.
Article 17
Governing Law, Arbitration, Injunctive Relief
17.1 Governing Law. All questions regarding the validity and
interpretation of this Employment Agreement shall be governed by and construed
and enforced in all respects in accordance with the laws of the State of
Florida.
17.2. Arbitration. Except as specifically provided herein, all disputes
between the parties arising out of and under this Agreement shall be submitted
to the American Arbitration Association (AAA) located in Palm Beach County,
Florida. The decision of the AAA shall be binding on all parties.
17.3. Preliminary Injunctive Relief. Notwithstanding any provision to
the contrary, either party is entitled to seek preliminary injunctive relief
(e.g. temporary restraining or temporary injunction) from a court of competent
jurisdiction prior to and while any arbitration proceeding is pending.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
in duplicate on the date and year first above written.
EMPLOYEE:
/s/ Robert Scarpetti
Robert Scarpetti
EMPLOYER:
onlinetradinginc.com corp.
/s/ Andrew A. Allen
Andrew A. Allen, CEO
Exhibit 10.2
NON-COMPETE AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of the ___21___ day of September,
1999, between onlinetradinginc.com corp., a Florida corporation ("Online "), and
Robert Scarpetti ("Scarpetti").
WHEREAS, Scarpetti is a principal employee of Newport Discount Brokerage, Inc.
("Newport"); and
WHEREAS, Online and Newport have entered into an Asset Purchase Agreement in
which Online has agreed to purchase Newport's clients; and
WHEREAS, Online desires to protect said purchase and its future business with
said clients pursuant to the terms of this Agreement.
NOW, THEREFORE, In consideration of the mutual covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Non-Compete. Until the fifteenth (15) anniversary of the date of
this Agreement or the fifteenth (15) anniversary of the termination of
Scarpetti's employment with Online for any reason (which ever is later),
Scarpetti shall not persuade or attempt to persuade any person or entity which
is or was a customer, client or supplier of Online or Newport at or within one
year prior to the date of this Agreement, or the termination of Scarpetti's
employment with Online for any reason (which ever is later), to cease doing
business with Online with regard to any of Online's business activities, or to
reduce in any way the amount of business it does with Online with regard to any
of Online's business activities or accept any un-solicited business from said
person(s) or entities.
2. Acknowledgement. Scarpetti acknowledges that the restrictive
covenants (the "Restrictive Covenants") contained in Section 1 is a condition of
the Asset Purchase Agreement and are reasonable and valid in geographic and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part of any of the Restrictive Covenants, is
invalid or unenforceable, the remainder of the Restrictive Covenants and parts
thereof shall not thereby be affected and shall be given full effect, without
regard to the invalid portion. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable because
of the geographic or temporal scope of such provision, such court shall have the
power to reduce the geographic or temporal scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be enforceable.
4. Monetary Consideration. In exchange for the Restrictive Covenants
and other covenants contained herein, Online shall pay Scarpetti the sum of
$250,000.00 upon Closing of the transaction set forth in the Asset Purchase
Agreement.
5. Remedies. If Scarpetti breaches, or threatens to breach, any of the
Restrictive Covenants, Online, in addition to and not in lieu of any other
rights and remedies it may have at law or in equity, shall have the right to
injunctive relief; it being acknowledged and agreed to by the Scarpetti that any
such breach or threatened breach would cause irreparable and continuing injury
to Online and that money damages would not provide an adequate remedy to Online.
6. Waiver. The waiver by either party of a breach of any provision of this
Employment Agreement shall not operate or be construed as a waiver of any
subsequent breach.
7. Successors and Assigns. The rights and obligations of Online under this
Agreement shall inure to the benefit of and shall be binding in all respects
upon its successors and assigns.
8. Amendments. No change or modification of this Agreement shall be valid unless
it is in writing and signed by the party against whom the change or modification
is sought to be enforced.
9. Governing Law. All questions regarding the validity and interpretation of
this Employment Agreement shall be governed by and construed and enforced in all
respects in accordance with the laws of the State of Florida.
10. Arbitration. Except as specifically provided herein, all disputes between
the parties arising out of and under this Agreement shall be submitted to the
American Arbitration Association (AAA) located in Palm Beach County, Florida.
The decision of the AAA shall be binding on all parties.
11. Preliminary Injunctive Relief. Notwithstanding any provision to the
contrary, Online is entitled to seek preliminary injunctive relief (e.g.
temporary restraining or temporary injunction) from a court of competent
jurisdiction prior to and while any arbitration proceeding is pending.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement in
duplicate on the date and year first above written.
onlinetradinginc.com corp.
_/s/ Robert Scarpetti _/s/ Farshid Tafazzoli
Robert Scarpetti Farshid Tafazzoli, CIO
Exhibit 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement is made on this 4th day of December, 1999,
between onlinetradinginc.com corp. ("Employer"), whose principal place of
business at 2700 N. Military Trail, Suite 200, Boca Raton, Florida 33431, and
RAYMOND CHODKOWSKI ("Employee").
WHEREAS, Employer is actively engaged in the business of a securities
brokerage firm; and,
WHEREAS, Employer wishes to employ Employee and Employee wishes to be
employed pursuant to the terms of this Employment Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Employment Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
Article 1
Employment of Employee
Employer agrees to employ Employee, and Employee accepts employment
with Employer, on and subject to the terms and conditions set forth in this
Employment Agreement upon receipt of written confirmation from U.S. Clearing of
the transfer of all Newport Discount Brokerage, Inc. accounts to Employer.
Article 2
Duties of Employee
Section 2.1. Position and Duties. Employer agrees to employ Employee to
act as "Trading Supervisor" for Employer. Employee shall be responsible for
performing the duties customarily performed by a trading supervisor and as
reasonably requested by Employer. Employer reserves the right from time to time
to change the nature of Employee's duties and job title.
Section 2.2. Time Devoted to Work. Employee agrees to devote Employee's
entire business time, attention, and energies to the business of Employer in
accordance with Employer's instructions and directions and shall not be engaged
in any other business activity, whether or not the activity is pursued for gain,
profit, or other pecuniary advantage, during the term of this Employment
Agreement without Employer's prior written consent.
Article 3
Place of Employment
Section 3.1. Place of Employment. Employee shall be based at Employer's
principal office at 2700 N. Military Trail, Suite 200, Boca Raton, Florida 33431
and shall not be required to travel away from that office on business more than
sixty (60) days during a calendar year. Employer agrees that during the term of
this Employment Agreement it shall not assign Employee to work at any location
which is more than 100 miles from said principal office without Employee's
consent.
Section 3.2. Moving Expenses. If Employer relocates its principal
office more than 100 miles from its current principal office, or requests that
Employee relocate to one of its offices which is more than 100 miles from its
current principal office, and Employee consents to relocate to that new
location, Employer shall promptly pay or reimburse Employee for all reasonable
moving expenses incurred by Employee in connection with the relocation plus an
amount to reimburse Employee for any federal and state income taxes that it has
to pay on amounts reimbursed. Employer also shall indemnify Employee against any
loss incurred in connection with the sale of Employee's principal residence. The
amount of any loss shall be determined by taking the difference between the
average of two appraisal prices set by two independent appraisers agreed to by
Employer and Employee and the actual sales price of Employee's principal
residence.
Article 4
Compensation of Employee
Section 4.1. Base Salary. For all services rendered by Employee under
this Employment Agreement, Employer agrees to pay Employee an annual base salary
of $100,000.00, which shall be payable to Employee in such installments, but not
less frequently than monthly, as are consistent with Employee's practice for its
other Employees. Employee's base salary shall be reviewed at least once a year
by Employer and shall be increased at a minimum by the percentage increase in
the Consumer Price Index for the previous year.
Section 4.2. Incentive Compensation. In addition to the base
salary, Employee shall be entitled to receive incentive compensation, as
determined by Employer's Board of Directors.
Section 4.3. Reimbursement for Business Expenses. Employer shall
promptly pay or reimburse Employee for all reasonable business expenses incurred
by Employee in performing Employee's duties and obligations under this
Employment Agreement, but only if Employee properly accounts for expenses in
accordance with Employer's policies.
Article 5
Vacations and Other Paid Absences
Section 5.1. Vacation Days. Employee shall be entitled to two (2)
weeks paid vacation days each calendar year during the term of this Employment
Agreement.
Section 5.2. Holidays. Employee shall be entitled to the same paid
holidays as authorized by Employer for its other Employees.
Section 5.3. Sick Days and Personal Absence Days. Employee shall be
entitled to the same number of paid sick days and personal absence days
authorized by Employer for its other Employees.
Article 6
Fringe Benefits
Employee shall be entitled to participate in and receive benefits from
all of Employer's Employee benefit plans that currently are maintained by
Employer for its Employees. Employee shall be entitled to participate in and
receive benefits under any retirement plan, profit-sharing plan, or other
Employee benefit plan that Employer establishes for the benefit of its Employees
after the date of this Employment Agreement. No amounts paid to Employee from an
Employee benefit plan shall count as compensation due Employee as base salary or
incentive compensation. Nothing in this Employment Agreement shall prohibit
Employer from modifying or terminating any of its Employee benefit plans in a
manner that does not discriminate between Employee and other employees of
Employer.
Article 7
Termination of Employment
Section 7.1. Term of Employment. Employee's employment shall commence
on the date of execution by Employer and shall continue for two (2) years
("end-of-employment date"), unless extended or terminated sooner, as provided by
this article of the Employment Agreement.
Section 7.2. Extension of Employment. On the end-of-employment date and
every year thereafter, Employee's employment with Employer may be extended upon
terms mutually agreeable to the parties.
Section 7.3. Termination at Employee's Death. Employee's employment
with Employer shall terminate at Employee's death.
Section 7.4. Termination by Employee. Employee may, but is not
obligated to, terminate this Employment Agreement at any time under the
following circumstances:
(a) Employee's health becomes so impaired that continued performance of
Employee's duties under this Employment Agreement would be hazardous to
Employee's physical or mental health, as determined by qualified medical
professionals.
(b) Employee's fringe benefits or other compensation are materially
reduced, unless similar reductions are made to all employees.
(c) Employer becomes insolvent or files a bankruptcy petition.
Section 7.5. Termination by Employer.
(a) Termination for Cause. Employer may terminate Employee's
employment for cause.
(b) "Cause" Defined. Employer shall have cause to terminate Employee's
employment if Employee fails to substantially perform any duties required by
this Employment Agreement, Employee is grossly negligent in the performance of
required duties (including without limitation, violation of Employer's written
supervisory procedures, or violation of any rule or regulation promulgated by
the NASD, Securities and Exchange Commission, or any federal or state law, rule
or regulation relating to securities regulation), Employee engages in conduct
that damages Employer, Employee is convicted of a felonious act of moral
turpitude, or Employee discloses material confidential information in violation
of Article 8 of this Employment Agreement. Employer shall have cause to
terminate Employee's employment should Employee's performance, attitude, or work
habits become unreasonable.
Section 7.6. Notice of Termination. Any termination of Employee's
employment by Employer or Employee, other than termination pursuant to the
"end-of-employment date" (defined above), must be communicated to the other
party by a written notice of termination. The notice must specify the provision
of this Employment Agreement authorizing the termination and must set forth in
reasonable detail the facts and circumstances providing the basis for
termination of Employee's employment.
Section 7.7. Date Termination Is Effective. If Employee's employment
terminates because this Employment Agreement expires, then Employee's employment
will be considered to have terminated on that expiration date. If Employee's
employment terminates because of Employee's death, then Employee's employment
will be considered to have terminated on the date of Employee's death. If
Employee's employment is terminated by Employee, then Employee's employment will
be considered to have terminated on the date that notice of termination is
given. If Employee's employment is terminated by Employer for cause, then
Employee's employment will be considered to have terminated on the date
specified by the notice of termination.
Section 7.8. Compensation Following Termination.
(a) If Employee's employment is terminated by Employer for cause,
Employer shall pay Employee/Employee's then current base salary through the date
employment is terminated, and Employer shall have no further obligations to
Employee under this Employment Agreement.
(b) If Employer terminates Employee's employment other than for cause,
or if Employer termination of Employee's employment for cause is found to be
without basis or in bad faith, Employer shall pay Employee Employee's then
current base salary through the date employment is terminated and any legal fees
and expenses incurred by Employee to enforce Employee's rights under this
Employment Agreement. In addition, Employer shall pay Employee as liquidated
damages an amount equal to the sum of Employee's then current annual base salary
paid to Employee most recently before the date Employee's employment was
terminated, divided by 12 and then multiplied by the number of full and partial
months remaining in the term of this Employment Agreement, including extensions.
Article 8
Confidential Information
Section 8.1. Confidential Information Defined. "Confidential
Information" as used in this Employment Agreement shall mean any and all
technical and non-technical information belonging to, or in the possession of,
Employer or its officers, directors, Employees, affiliates, subsidiaries,
clients, vendors, or Employees, including without limitation, patent, trade
secret, and proprietary information; techniques, sketches, drawings, models,
inventions, know-how, processes, apparatus, equipment, algorithms, source codes,
object codes, software programs, software source documents, and formulae related
to Employer's business or any other current, future and/or proposed business,
product or service contemplated by Employer; and includes, without limitation,
all information concerning research, experimental work, development, design
details and specifications, engineering, financial information, procurement
requirements, purchasing, manufacturing, customer lists, vendor lists, business
forecasts, sales and merchandising, and marketing plans or similar information.
Section 8.2 Disclosures. Employee agrees that it shall, at no time
during or after termination of this Employment Agreement, directly or indirectly
make use of, disseminate, or in any way disclose Confidential Information to any
person, firm or business, except to the extent necessary for performance of this
Employment Agreement. Employee agrees that it shall disclose Confidential
Information only to Employer's other Employees who need to know such information
and who have previously agreed to be bound by the terms and conditions of a
substantially similar confidentiality provision and shall be liable for damages
for the intentional or negligent disclosure of Confidential Information.
Employee's obligations with respect to any portion of Confidential Information
shall terminate only when Employee has documented to Employer that (a) such
information was lawfully in the public domain at the time it was communicated to
Employee by Employer; or (b) the communication was in response to a valid order
by a court of competent jurisdiction or was necessary to establish the rights of
Employer under this Employment Agreement.
Section 8.3. Survival. This Article 8 shall survive any termination
of this Agreement and all extended periods.
Article 9
Section 9.1. Non-Compete. Until the second anniversary of the date of
Employee's termination for any reason, Employee will not, directly or
indirectly, either as a principal, manager, agent, consultant, officer,
stockholder, partner, investor, lender or employee (or in any other capacity),
carry on, be engaged in or have any financial interest in any business which is
directly or indirectly in competition with Employer or its subsidiaries;
provided, however, that this clause (i) shall not be breached by (x) Employee's
passive investment in not more than 5% of the equity of a public company engaged
in direct or indirect competition with Employer or its subsidiaries or (y)
Employee's involvement as an employee of or consultant to a business directly or
indirectly in competition with the Employer or its subsidiaries (a "Competitor")
(and related equity positions therein arising as a result of Competitor's
standard employee equity plans) so long as Employee is not involved in any
activity(ies) of such Competitor, which, as performed by Employer and/or its
subsidiaries individually, or in the aggregate, comprise more than 20% of the
revenues of Employer or its subsidiaries, individually or collectively.
Section 9.2. No Solicitation or Acceptance. Notwithstanding
any contrary provision, Employee will not at any time after termination for any
reason, persuade or attempt to persuade any person or entity which is or was a
customer, client or supplier of Employer or its subsidiaries at or within one
year prior to termination of Employee's employment with Employer or its
subsidiaries for any reason, to cease doing business with Employer or its
subsidiaries with regard to any of Employer's or its subsidiaries' business
activities, or to reduce in any way the amount of business it does with Employer
or its subsidiaries with regard to any of Employer's or its subsidiaries'
business activities or accept any un-solicited business from said person(s) or
entities.
Section 9.3. Employee acknowledges that the restrictive
covenants (the "Restrictive Covenants") contained in Sections 9.1 and 9.2 are a
condition of this Agreement and are reasonable and valid in geographic and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part of any of the Restrictive Covenants, is
invalid or unenforceable, the remainder of the Restrictive Covenants and parts
thereof shall not thereby be affected and shall be given full effect, without
regard to the invalid portion. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable because
of the geographic or temporal scope of such provision, such court shall have the
power to reduce the geographic or temporal scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be enforceable.
Section 9.4. If Employee breaches, or threatens to breach, any of the
Restrictive Covenants, Employer, in addition to and not in lieu of any other
rights and remedies it may have at law or in equity, shall have the right to
injunctive relief; it being acknowledged and agreed to by Employee that any such
breach or threatened breach would cause irreparable and continuing injury to
Employer and that money damages would not provide an adequate remedy to
Employer.
Section 9.5. Survival. This Article 9 shall survive any termination
of this Agreement and all extended periods.
Article 10
Notices
Any notice given under this Employment Agreement to either party shall
be made in writing. Notices shall be deemed given when delivered by hand or when
mailed by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the party at the address set forth below.
Employee's address: Mr. Raymond Chodkowski
5499 N. Federal Highway, Suite N
Boca Raton, FL 33487
Telecopy No.: (561) 997-0471
Employer's address: onlinetradinginc.com corp.
2700 N. Military Trail, Suite 200
Boca Raton, FL 33431
Each party may designate a different address for receiving notices by giving
written notice of the different address to the other party. The written notice
of the different address will be deemed given when it is received by the other
party.
Article 11
Binding Agreement
Section 11.1. Employer's Successors. The rights and obligations of
Employer under this Employment Agreement shall inure to the benefit of and shall
be binding in all respects upon the successors and assigns of Employer.
Section 11.2. Employee's Successors. This Employment Agreement shall
inure to the benefit and be enforceable by and upon Employee's personal
representatives, legatees, and heirs. If Employee dies while amounts are still
owed, such amounts shall be paid to Employee's legatees or, if no such person or
persons have been designated, to Employee's estate.
Article 12
Waivers
The waiver by either party of a breach of any provision of this
Employment Agreement shall not operate or be construed as a waiver of any
subsequent breach.
Article 13
Entire Agreement
Section 13.1. No Other Agreements. This instrument contains the entire
agreement of the parties with respect to employment. The parties have not made
any agreements or representations, oral or otherwise, express or implied,
pertaining to the subject matter of this Employment Agreement other than those
specifically included in this Employment Agreement.
Section 13.2. Prior Agreements. This Employment Agreement supersedes
any prior agreements pertaining to or connected with or arising in any manner
out of the employment of Employee by Employer. All such prior agreements are
terminated and are of no force or effect whatsoever.
Article 14
Amendment of Agreement
No change or modification of this Employment Agreement shall be valid
unless it is in writing and signed by the party against whom the change or
modification is sought to be enforced.
Article 15
Severability of Provisions
If any provision of this Employment Agreement is invalidated or held
unenforceable, the invalidity or unenforceability of that provision or
provisions shall be deemed modified or severed only to the minimum extent
necessary to make said provision(s) valid and enforceable while maintaining the
intent of said provision(s). No such modification shall affect the validity or
enforceability of any other provision of this Employment Agreement.
Article 16
Governing Law, Arbitration, Injunctive Relief
16.1 Governing Law. All questions regarding the validity and
interpretation of this Employment Agreement shall be governed by and construed
and enforced in all respects in accordance with the laws of the State of
Florida.
16.2. Arbitration. Except as specifically provided herein, all disputes
between the parties arising out of and under this Agreement shall be submitted
to the American Arbitration Association (AAA) located in Palm Beach County,
Florida. The decision of the AAA shall be binding on all parties.
16.3. Preliminary Injunctive Relief. Notwithstanding any provision to
the contrary, either party is entitled to seek preliminary injunctive relief
(e.g. temporary restraining or temporary injunction) from a court of competent
jurisdiction prior to and while any arbitration proceeding is pending.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
in duplicate on the date and year first above written.
EMPLOYEE:
/s/ Raymond Chodkowski
Raymond Chodkowski
EMPLOYER:
onlinetradinginc.com corp.
/s/ Andrew A. Allen
Andrew A. Allen, CEO
Exhibit 10.4
NON-COMPETE AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of the ___21___ day of September,
1999, between onlinetradinginc.com corp., a Florida corporation ("Online "), and
Raymond Chodkowski ("Chodkowski").
WHEREAS, Chodkowski is a principal employee of Newport Discount Brokerage, Inc.
("Newport"); and
WHEREAS, Online and Newport have entered into an Asset Purchase Agreement in
which Online has agreed to purchase Newport's clients; and
WHEREAS, Online desires to protect said purchase and its future business with
said clients pursuant to the terms of this Agreement.
NOW, THEREFORE, In consideration of the mutual covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Non-Compete. Until the fifteenth (15) anniversary of the date of
this Agreement or the fifteenth (15) anniversary of the termination of
Chodkowski's employment with Online for any reason (which ever is later),
Chodkowski shall not persuade or attempt to persuade any person or entity which
is or was a customer, client or supplier of Online or Newport at or within one
year prior to the date of this Agreement, or the termination of Chodkowski's
employment with Online for any reason (which ever is later), to cease doing
business with Online with regard to any of Online's business activities, or to
reduce in any way the amount of business it does with Online with regard to any
of Online's business activities or accept any un-solicited business from said
person(s) or entities.
2. Acknowledgement. Chodkowski acknowledges that the restrictive
covenants (the "Restrictive Covenants") contained in Section 1 is a condition of
the Asset Purchase Agreement and are reasonable and valid in geographic and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part of any of the Restrictive Covenants, is
invalid or unenforceable, the remainder of the Restrictive Covenants and parts
thereof shall not thereby be affected and shall be given full effect, without
regard to the invalid portion. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable because
of the geographic or temporal scope of such provision, such court shall have the
power to reduce the geographic or temporal scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be enforceable.
4. Monetary Consideration. In exchange for the Restrictive Covenants
and other covenants contained herein, Online shall pay Chodkowski the sum of
$250,000.00 upon Closing of the transaction set forth in the Asset Purchase
Agreement.
5. Remedies. If Chodkowski breaches, or threatens to breach, any of the
Restrictive Covenants, Online, in addition to and not in lieu of any other
rights and remedies it may have at law or in equity, shall have the right to
injunctive relief; it being acknowledged and agreed to by the Chodkowski that
any such breach or threatened breach would cause irreparable and continuing
injury to Online and that money damages would not provide an adequate remedy to
Online.
6. Waiver. The waiver by either party of a breach of any provision of this
Employment Agreement shall not operate or be construed as a waiver of any
subsequent breach.
7. Successors and Assigns. The rights and obligations of Online under this
Agreement shall inure to the benefit of and shall be binding in all respects
upon its successors and assigns.
8. Amendments. No change or modification of this Agreement shall be valid unless
it is in writing and signed by the party against whom the change or modification
is sought to be enforced.
9. Governing Law. All questions regarding the validity and interpretation of
this Employment Agreement shall be governed by and construed and enforced in all
respects in accordance with the laws of the State of Florida.
10. Arbitration. Except as specifically provided herein, all disputes between
the parties arising out of and under this Agreement shall be submitted to the
American Arbitration Association (AAA) located in Palm Beach County, Florida.
The decision of the AAA shall be binding on all parties.
11. Preliminary Injunctive Relief. Notwithstanding any provision to the
contrary, Online is entitled to seek preliminary injunctive relief (e.g.
temporary restraining or temporary injunction) from a court of competent
jurisdiction prior to and while any arbitration proceeding is pending.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement in
duplicate on the date and year first above written.
onlinetradinginc.com corp.
_/s/ Raymond Chodkowski _/s/ Farshid Tafazzoli
Raymond Chodkowski Farshid Tafazzoli, CIO