THIS DOCUMENT IS A COPY OF THE FORM 10-Q FILED ON SEPTEMBER 16 , 1998
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number 0-631
ROSE'S HOLDINGS, INC.
Incorporated Under the Laws of Delaware
I.R.S Employer Identification No. 56-2043000
150 East 52nd Street, 21st Floor
New York, New York
10022
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: 212-813-1500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
As of August 1, 1998 of the 10,007,730 shares of common stock delivered
to First Union National Bank of North Carolina, as Escrow Agent ("FUNB"),
pursuant to the Modified and Restated First Amended Joint Plan of
Reorganization, 8,655,391 of such shares of common stock are outstanding.
The remaining 19,680 shares held in escrow will be distributed by FUNB in
satisfaction of disputed Class 3 claims as and when such claims are resolved.
If all pending claims are resolved adversely to the Company, approximately
8,655,391 shares of common stock will be outstanding. If all pending claims
are resolved in accordance with the Company's records, approximately
8,635,711 shares of common stock will be outstanding. To the extent that
escrowed shares of common stock are not used to satisfy claims, they will
revert to the Company and will be retired or held in the treasury of the
Company. As of August 18, 1998 the remaining 19,680 shares held in escrow
were returned to the Company and retired, leaving 8,935,711 shares of common
stock outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements
(Amounts in thousands except per share amounts)
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in Thousands Except Per Share Amounts)
For the Thirteen Weeks Ended
August 1, 1998 July 26, 1997
Selling, general and administrative expenses $ 297 -
Total costs and expenses 297 -
Other Income
Interest income 185 -
Loss from operation of
Discontinued business - (3,986)
Net Loss $ (112) $ (3,986)
Net Loss Per Share-Basic $ (.01) $ (.46)
Weighted Average Shares 8,632 8,632
For the Twenty-six Weeks Ended
August 1, 1998 July 26, 1997
Selling, general and administrative expenses $ 544 -
Total costs and expenses 544 -
Other Income
Interest income 393 -
Loss from operation of
discontinued business - (5,294)
Net Loss $ (151) $ (5,294)
Net Loss Per Share-Basic $ (.02) $ (.61)
Weighted Average Shares 8,632 8,632
See notes to financial statements
<PAGE>
ROSE'S HOLDINGS, INC.
CONDENSED BALANCE SHEETS
(Amounts in thousands)
August 1, January 31, July 26,
1998 1998 1997
(Unaudited) (Audited) (Unaudited)
___________________________________
Assets
Current Assets
Cash and cash equivalents $ 13,180 $ 13,465 $ 595
Cash restricted in escrow 1,977 1,920 -
Accounts receivable - - 11,320
Inventories - - 156,442
Other current assets 32 - 3,041
Total current assets 15,189 15,385 171,398
Property and Equipment, at cost,
less accumulated depreciation
and amortization - - 8,692
Other Assets 157 23 644
________ ________ ________
$ 15,346 $ 15,408 $ 180,734
Liabilities and Stockholders' Equity
Current Liabilities
Short-term debt - - 59,408
Bank drafts outstanding - - 2,729
Accounts payable 95 6 29,644
Accrued salaries and wages - - 6,124
Pre-petition liabilities - - 1,079
Other current liabilities - - 11,533
________ ________ ________
Total current liabilities $ 95 $ 6 $ 110,517
Excess of Net Assets Over Reorganization Value,
Net of Amortization - - 20,122
Reserve for Income Taxes - - 13,033
Deferred Income - - 34
Other Liabilities - - 1,382
Stockholders' Equity
Preferred stock, authorized 10,000 shares;
none issued - - -
Common stock, authorized 50,000 shares;
issued 8,655, 8,613, & 8,613 at 8/1/98,
1/31/98, & 7/26/97, respectively 35,000 35,000 35,000
Paid-in capital 1,159 1,159 1,159
Accumulated Deficit (20,908) (20,757) (513)
Total stockholders' equity 15,251 15,402 35,646
$ 15,346 $ 15,408 $ 180,734
See notes to financial statements
<PAGE>
ROSE'S HOLDINGS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
For the Twenty-six Weeks Ended
August 1, 1998 July 26,1997
Cash flows from operating activities:
Net Loss $ (151) $ (5,294)
Expenses not requiring the outlay of cash
Depreciation and amortization - (1,012)
Amortization of deferred financing costs - 362
Settlement of pre-petition liabilities - (754)
Provision for closed store - 189
Cash provided by (used in) assets and liabilities:
(Increase) decrease in accounts receivable - (6,219)
(Increase) decrease in inventories - (15,155)
(Increase) decrease in other assets (223) 1,466
Increase (decrease) in accounts payable 89 10,414
Increase (decrease) in other liabilities - (168)
Increase (decrease) in income tax reserves - 37
Increase (decrease) in reserve for store closings - (530)
Increase (decrease) in deferred income - (305)
_________ _________
Net cash used in operating activities (285) (16,969)
_________ _________
Cash flows from investing activities:
Purchases of property and equipment - (847)
_________ _________
Net cash used in investing activities - (847)
_________ _________
Cash flows from financing activities:
Net activity on line of credit - 15,270
Payments of unsecured priority and administrative
claims - (151)
Principal payments on capital leases - (148)
Increase (decrease) in bank drafts outstanding - 2,729
Payments of deferred financing costs - (530)
_________ _________
Net cash provided by financing activities - 17,170
_________ _________
Net decrease in cash (285) (646)
Cash and cash equivalents at beginning of period 13,465 1,241
_________ _________
Cash and cash equivalents at end of period $ 13,180 $ 595
Supplemental disclosure of additional non-cash
investing and financing activities: Retirement of
net book value assets in reserve for store closing $ - $ 14
See notes to financial statements
<PAGE>
ROSE'S HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS:
Twenty-six Weeks Ended August 1, 1998; 53 Weeks Ended January 31, 1998
(Amounts in thousands except per share amounts)
1. DISCONTINUED OPERATIONS
On August 7, 1997, pursuant to an agreement and plan of merger among
Rose's Stores, Inc. ("Stores") and two newly created, wholly-owned
subsidiaries of Stores, Stores became a wholly-owned subsidiary of the
Company. As a result of such merger, each share of common stock, no par
value ("Store's Common Stock"), of Stores was converted into common stock, no
par value ("Common Stock"), of the Company and each warrant, option or other
right entitling the holder thereof to purchase or receive shares of Stores
Common Common Stock was converted into a warrant, option or other right
(as the case may be) entitling the holder thereof to purchase or receive
shares of Common Stock on identical terms. The powers, rights and other
provisions of the Common Stock was identical to the powers, rights and other
provisions of the Stores Common Stock.
On December 2, 1997, Rose's Holdings, Inc. consummated the sale to
Variety Wholesalers, Inc. of all the outstanding capital stock of Rose's
Stores, Inc., a wholly-owned subsidiary of the Company pursuant to a Stock
Purchase Agreement, dated as of October 24, 1997, between the Company and
Variety. The Sale constituted the disposition by the Company of
substantially all of its assets and was approved by the holders of a majority
of the outstanding shares of Common Stock of the Company at a special stock
ompany on December 2, 1997. The total purchase price for the Sale was
$19,200, including $1,920 which was placed in escrow. The proceeds of the
Sale, net of certain transaction, closing, and other costs, were $15,331
(including the $1,920 in escrow). The loss resulting from the Sale was
$22,446.
2. REORGANIZATION AND FRESH START REPORTING
The Company filed a petition for reorganization under Chapter 11 of the
United states Bankruptcy Code ("Chapter 11") on September 5, 1993 (the
"Filing Date"). The Company's Modified and Restated First Amended Joint Plan
of Reorganization (the "Plan") was consummated on April 28, 1995 (the
"Effective Date").
In 1990, the American Institute of Certified Public Accountants issued
Statement of Position 90-7 ("SOP 90-7") "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" (sometimes called "Fresh-Start
Reporting"). The application of Fresh-Start Reporting changed the Company's
basis for accounting for financial purposes. In accordance with SOP 90-7, the
reorganization value of the Company was determined as of the Effective Date.
The reorganization value of $35,000 was derived by an outside company using
various valuation methods, including discounted cash flow analyses (utilizing
the Company's projections), analyses of the market value of other publicly
traded companies whose businesses are reasonably comparable, and analyses of
the present value of the Company's equity.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--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 the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Nature of Operations--The Company currently has no business operations
and its principal asset is cash. The Company is actively seeking
acquisitions and/or merger transactions in which to employ its cash but there
can be no assurance that suitable acquisitions will be located.
Cash Equivalents--The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash
equivalents. Cash equivalents are stated at cost, which approximates market.
Bank drafts outstanding have been reported as a current liability.
Earnings (Loss) Per Share--For the year ended January 31, 1998, the
Company adopted SFAS No. 128 "Earnings Per Share" ("SFAS No. 128"). In
accordance with this statement, primary net loss per common share is replaced
with basic loss per common share which is calculated by dividing net loss by
the weighted-average number of common shares outstanding for the period.
Fully diluted net income per common share is replaced with diluted net income
per common share reflecting the maximum dilutive effect of common stock
issuable upon exercise of stock options and stock warrants. Diluted net
earnings (loss) per common share is not shown, as common equivalent shares
from stock options and stock warrants would have an anti-dilutive effect.
Prior period per share data has been restated to reflect the adoption of SFAS
No. 128.
Stock Based Compensation--Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," encourages, but does not
require companies to record compensation cost for stock-based employee
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock.
Discontinued Operations--Discontinued Operations are excluded from the
income from continuing operations and included in net income before
extraordinary items. Prior years have been restated to conform with generally
accepted accounting principles.
4. CONTINGENCIES
As a result of the Sale on December 2, 1997 to Variety of all of the
outstanding capital stock of the Registrant's wholly owned subsidiary and
sole operating entity, Stores, the Registrant was relieved of liability for
claims against Stores except to the extent of its indemnification, obligation
of certain claims, as set forth in the Stock Purchase Agreement. Pursuant to
the Stock Purchase Agreement, ten percent ($1,920,000) of the purchase price
for the sale of stock to Variety was placed in escrow for payment of
indemnified losses to Variety. The Stock Purchase Agreement further provided
that if the aggregate cumulative indemnifiable losses as of December 2, 1998
are less than such amount, the balance of the escrowed amount will be
disbursed to the registrant at such time and any further claims for
indemnification by Variety shall be satisfied directly by the Registrant.
As of the date hereof, the only material claim arising under the
indemnification obligation of the Registrant to Variety relates to the
assertion by a third party, of a right to a fee in the amount of $1.3
million. The Company disputes its obligation to pay any such fee.
Certain claims, suits and complaints arising in the ordinary course of
business have been filed or are pending against the Company. In the opinion
of management and counsel, all contingencies are
either adequately covered by insurance or are without merit.
5. SUBSEQUENT EVENTS
On August 31, 1998, Rose's International, Inc. ("Rose's"), a newly formed,
wholly owned Delaware subsidiary of Rose's Holdings, Inc. (the "Company"),
consummated the acquisition of 90 percent of the outstanding common stock
("Bank Common Stock") of WebBank Corporation, a Utah industrial loan
corporation (the "Bank"), pursuant to an assignment (the "Assignment") from
Praxis Investment Advisers, a Nevada limited liability company ("PIA"), of a
stock purchase agreement, dated January 20, 1998 (the "Purchase Agreement"),
between PIA and Block Financial Corporation ("Block"), relating to the
purchase by PIA of all of the issued and outstanding Bank Common Stock.
Pursuant to the Assignment, Rose's paid Block $4,914 for the shares of Bank
Common Stock purchased by it. The source of the funds used by Rose's was the
Company's working capital. Reference is made to the Purchase Agreement and
the Assignment, which are filed as exhibits hereto and incorporated by
reference herein.
In connection with the purchase of the Bank Common Stock, Rose's entered
into a subscription and stockholders agreement, dated as of August 31, 1998
(the "Stockholders Agreement"), with Andrew Winokur ("AW"), the owner of the
10 percent of the outstanding shares of Bank Common stock not owned by Rose's.
Pursuant to the Stockholders' Agreement, Rose's agreed to purchase 90 percent,
and AW agreed to purchase 10 percent, of the common stock (the "Praxis
Common Stock") of Praxis Investment Advisors, Inc., a newly formed Delaware
corporation ("Praxis"). The Stockholders Agreement also provides for
certain restrictions on the disposition by AW of his Bank Common Stock and
Praxis Common Stock and certain rights and obligations of Rose's and the
Company to purchase the shares of Bank Common Stock and Praxis Common Stock
owned by AW. Reference is made to the Stockholders Agreement, which is
filed as an exhibit hereto and which is incorporated by reference herein.
Rose's, AW and Praxis have entered into a management agreement (the
"Management Agreement") under which Praxis has agreed to provide certain
management services to AW and Rose's in connection with the ownership and
operation of the Bank. Reference is made to the Management Agreement which
is filed as an exhibit hereto and which is incorporated by reference herein.
The Management Agreement provides that Praxis may make recommendations to and
consult with, the management and board of directors of the Bank with respect
to the deploment of Bank's capital, the development of the Bank's business
lines, the Bank's acquisition of assets and the Bank's distributions to its
stockholders.
Praxis and AW have also entered into an employment agreement (the
"Employment Agreement"), providing for the employment of AW by Praxis.
Reference is made to the Employment Agreement, which is filed as an exhibit
hereto and which is incorporated by reference herein. Under the Employment
Agreement, Mr. Winokur agrees to serve as President and chief executive
officer of Praxis for a term commencing on the date of the approval of the
Employment Agreement. Under the Employment Agreement, Mr. Winokur is granted
the authority to formulate the recommendations to the Bank on behalf of
Praxis pursuant to the Management Agreement.
The Company intends to file the financial statements and proforma
financial information required by Item 7 of Form 8-K within the time period
specified in such Item 7.
Effective August 18, 1998 19,680 shares of common stock held in escrow
reverted to the Company and were retired.
Options to purchase shares of Rose's stock have been granted to officers,
directors and employees. Option purchase prices are at or above fair
market value at grant date, consequently no compensation costs have been
recognized. The total number of options granted from January 26, 1997 through
August 25, 1998 is 940.417. Between June 25, 1998 and August 25, 1998, Warren
Lichtenstein and Jack Howard were granted 400 and 225 options,
respectively, in lieu of monetary remuneration for their service as officers
and board members.
ROSE'S HOLDINGS, INC.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Amounts in thousands)
Costs and Expenses--Selling, general and administrative expenses (SG&A)
of $544 for the first six months of 1998 include audit fees and legal fees of
$95 and $26, respectively, for Variety Wholesalers post closing matters.
Legal fees and travel expenses during the same time period for a potential
acquisition totaled $96.
Revenue--The Company reported no sales revenue for the first half of
1998. Excluding the results of discontinued operations (Stores), the
Company had no revenue for 1997.
Other Income--for the first six months of 1998 consisted of money market
interest and escrow account interest for $336 and $57, respectively.
Liquidity and Capital Resources The Company currently has no business
operations and its principal asset is the net proceeds from the Sale. The
Company is actively seeking acquisitions and/or merger transactions in which
to employ its cash so that the Company's stockholders may benefit by owning
an interest in a viable enterprise. There can be no assurance that the
Company will be able to locate or purchase a business, or that such business,
if located and purchased, will be profitable. In order to finance an
acquisition, the Company may be required to incur or assume indebtedness or
issue securities. Pending the use of the net proceeds of the Sale, the
Company has invested, and plans to continue to invest, such net proceeds in
liquid, high quality investments. The Company's management believes that the
Company's current cash flows are adequate to meet its liquidity needs.
PART II. OTHER INFORMATION
ITEM 5. Other Information
On August 31, 1998, Rose's International, Inc. ("Rose's"), a newly
formed, wholly owned Delaware subsidiary of Rose's Holdings, Inc. (the
"Company") consummated the acquisition of 90 percent of the outstanding
common stock ("Bank Common Stock") of WebBank Corporation, a Utah industrial
loan corporation (the "Bank"), pursuant to an assignment (the "Assignment")
from Praxis Investment Advisers, a Nevada limited liability company ("PIA")
and Block Financial Corporation ("Block"), relating to the purchase by PIA
of all the issued and outstanding Bank Common Stock. Pursuant to the
Assignment, the Company paid Block $ 4,914,000 for the shares of Bank Common
Stock purchased by it. The source of the funds used by the Company was its
working capital. Reference is made to the Purchase Agreement and the
Assignment, which are filed as exhibits hereto and incorporated by reference
herein.
In connection with the purchase of the Bank Common Stock, Rose's entered
into a subscription and stockholders agreement, dated as of August 31, 1998
("the Stockholders Agreement") with Andrew Winokur ("AW"), the owner of the
10 percent of the outstanding shares of the Bank Common stock not owned by
Rose's. Pursuant to the Stockholders' Agreement, Rose's agreed to purchase
90 percent , and AW agreed to purchase 10 percent, of the common stock (the
"Praxis Common Stock") of Praxis Investment Advisors, Inc. a newly formed
Delaware corporation ("Praxis"). The Stockholders Agreement also provides
for certain restrictions on the disposition by AW of his Bank Common Stock
and Praxis Common Stock and certain rights and obligations of Rose's and the
Company to purchase the shares of Bank Common Stock and Praxis common Stock
owned by AW. Reference is made to the Stockholders Agreement, which is filed
as an exhibit hereto and which is incorporated by reference herein.
Rose's, AW and Praxis have entered into a management agreement (the
"Management Agreement") under which Praxis has agreed to provide certain
management services to AW and Rose's in connection with the ownership and
operation of the Bank. Reference is made to the Management Agreement which
is filed as an exhibit hereto and which is incorporated by reference herein.
The Management Agreement provides that Praxis may make recommendations to and
consult with, the management and board of directors of the Bank with respect
to the deployment of the Bank's capital, the development of the Bank's
business lines, the Bank's acquisition of assets and the Bank's distributions
to its stockholders.
Praxis and AW have also entered into an employment agreement (the
"Employment Agreement"), providing for the employment of AW by Praxis.
Reference is made to the Employment Agreement, which is filed as an exhibit
hereto and which is incorporated by reference herein. Under the Employment
Agreement, Mr. Winokur agrees to serve as President and chief executive
officer of Praxis for a term commencing on the date of the approval of the
Employment Agreement. Under the Employment Agreement, Mr. Winokur is
formulate the recommendations to the Bank on behalf of Praxis pursuant to
the Management Agreement.
The Company intends to file the financial statements and proforma
financial information required by Item 7 of Form 8-K within the time period
specified in such Item 7.
Effective August 18, 1998 19,680 shares of common stock held in escrow
reverted to the Company and were retired.
Options to purchase shares of Rose's stock have been granted to
officers, directors, and employees. Option purchase prices are at or above
fair market value at grant date, consequently no compensation costs have been
recognized. The total number of options granted from January 26, 1997 through
August 25, 1998 is 940,417. Between June 25, 1998 and August 25, 1998,
Warren Lichtenstein and Jack Howard were granted 400,000 and 225,000 options,
respectively, in lieu of monetary remuneration for their service as officers
and board members.
ITEM 6. Exhibits and Reports in Form 8-K.
a. Exhibits
1 Purchase Agreement
2 Stockholders Agreement
3 Assignment
4 Employment Agreement
5 Management Agreement
b. Reports in Form 8-K: none
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROSE'S HOLDINGS, INC.
By: /s/ Warren G. Lichtenstein
__________________________________
Warren G. Lichtenstein
President, Chief Executive Officer,
and Chief Accounting Officer
By: /s/ Jack L. Howard
__________________________________
Jack L. Howard
Vice President, Secretary, Treasurer,
and Chief Financial Officer
Date: September 16, 1998
<PAGE>
Exhibit 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of January
20, 1998, by and between PRAXIS INVESTMENT ADVISORS, a Nevada limited
liability company ("Buyer"), and BLOCK FINANCIAL CORPORATION, a Delaware
corporation ("Seller") (Buyer and Seller each a "Party" and together "Parties").
RECITALS
Buyer desires to purchase from Seller, on the following terms and conditions,
all of the issued and outstanding shares of capital stock (the "Shares") of
WebBank Corporation, a Utah corporation (the "Bank"); and
Seller desires to sell to Buyer, on the following terms and conditions, the
Shares.
NOW, THEREFORE, in consideration of the recitals and the mutual covenants,
representations, warranties, conditions, and agreements hereinafter
expressed, the Parties agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1. The Shares. Upon the terms and subject to the conditions set forth in
this Agreement, at Closing, Seller shall sell and deliver to Buyer and Buyer
shall purchase and accept from Seller the Shares, free and clear of all
security interests, claims, and restrictions.
1.2. Consideration. The total purchase price (the "Purchase Price") payable
to the Seller by the Buyer for the Shares shall consist of (i) the tangible
net equity value of the Bank on the Closing Date (which shall not be greater
than $2,500,000), plus (ii) $900,000 (the "Base Premium"), plus (iii) an
amount equal to the product of (a) $3000 per day, and (b) the number of days
elapsed from the one hundred fifth (105th) day after the earlier of the date
of this Agreement and January 1, 1998, to (and including) the Closing Date
(the "Additional Premium").
1.3. Closing; Cooperation. The consummation of the transactions contemplated
hereby ("Closing") shall take place at the offices of the Bank, 136 Heber
Avenue, #209, Park City, UT 84060 or at such place as the Parties may
mutually agree on the fifth business day following the date on which the
conditions to Closing are satisfied or waived (other than conditions with
respect to actions to be taken at the Closing) or such earlier date as the
Parties may mutually agree (the "Closing Date"). Each Party shall reasonably
cooperate, take all commercially reasonable steps necessary or desirable and
and proceed diligently and in good faith, as to matters under such Party's
control, to satisfy the conditions to the obligations of the Parties at
Closing; provided that the foregoing shall not require either Party to waive
any condition herein to its obligations at Closing or to incur any substantial
cost not otherwise required hereunder.
1.4. Deliveries of Seller at Closing. Subject to the conditions to Seller's
obligations in Article V, at Closing, Seller shall deliver to Buyer:
(a) a certificate or certificates evidencing the Shares, duly endorsed in
blank or accompanied by a duly executed stock power;
(b) the minute books, stock record books, and other corporate documents
relating to the Bank;
(c) written tenders of resignation of such directors of the Bank as
requested by Buyer; and
(d) the documents identified in Article IV.
(e) a certificate of Seller confirming that the Closing Balance Sheet
(referred to in Section 2.17 below) presents fairly the condition of the Bank
as of the Closing, or confirming the same, as adjusted by such immaterial
adjustments as are described in detail in the Certificate as to amount.
1.5 Deliveries of Buyer at Closing. Subject to the conditions to Buyer's
obligations in Article IV, at Closing, Buyer shall deliver to Seller:
(a) the Purchase Price by wire transfer of immediately available funds to
such account as has been designated by Seller to Buyer at least two (2)
business days prior to the Closing Date; and
(b) the documents identified in Article V.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer, as of the date of this
Agreement and as of the Closing Date, as follows:
2.1. Enforceable Agreement; Stock Ownership.
(a) Seller has the corporate power and authority and has taken all corporate
actions necessary to authorize it to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the transactions
contemplated hereby. This Agreement constitutes the valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms
except to the extent enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar laws
relating to or affecting the rights and remedies of creditors generally and
by general principles of equity (regardless of whether enforcement is sought
in an action at law or in equity), including without limitation concepts of
materiality, reasonableness, good faith and fair dealing.
(b) Seller is the sole holder of record and beneficial owner of the Shares.
The Shares consist of one million five hundred thousand (1,500,000) shares of
common stock of the Bank and are owned by Seller free and clear of all
security interests, claims, and restrictions.
2.2. Capitalization; Related Matters. The authorized capital stock of the
Bank consists solely of one hundred million (100,000,000) shares of common
stock, par value $0.10 per share, of which the Shares are the only shares
issued or outstanding. All the Shares were duly authorized and validly
issued and are fully paid and non-assessable. Except for Buyer's rights
hereunder, (a) there are no outstanding (i) other securities of the Bank,
(ii) shares held in treasury, or (iii) rights or options to acquire securities
of the Bank, and (b) neither Seller nor the Bank is subject to any obligation
to issue, deliver, redeem, or otherwise acquire or retire the Shares or any
other securities of the Bank.
2.3. Corporate Existence; Qualification; Minute Books.; The Bank is a
corporation duly incorporated, validly existing, and in good standing under
the laws of the State of Utah and it is duly qualified and in good standing
in each foreign jurisdiction where such qualification is required, except
where the failure to so qualify and be in good standing will not have a
material adverse effect on the business, financial condition, or operations
of the Bank. The Bank has the corporate power and authority to own
and to transact the business in which it is engaged. The Bank is duly
licensed as an industrial loan corporation by the Department of Financial
Institutions of the State of Utah (the "Department") under Utah law, and its
deposits are insured by the Federal Deposit Insurance Corporation ("FDIC")
within the limits prescribed by law. The minute books of the Bank, a copy of
which has been delivered to the Buyer, accurately reflect in all material
respects all material actions taken to date by the shareholders, board of
directors and committees of the Bank and contain true and complete copies of
the Articles of Incorporation, bylaws and other charter documents and all
amendments thereto.
2.4. Property; Permits. Except as set forth on Schedule 2.4, the Bank is the
sole owner of all right, title, and interest in and to all assets reflected on
the Call Report. The Bank holds all permits, licenses and other approvals
necessary to conduct the business in which it is engaged. Schedule 2.4 sets
forth a list of all furnishings, fixtures and equipment of the Bank, and
their respective book values as of September 30, 1997. The Bank does not own
any real property.
2.5. Call Report. Attached as Exhibit 2.5 is the Consolidated Reports of
Condition and Income for a Bank with Domestic Offices Only and Total Assets
of less than $100 Million, filed by the Bank for the period ending September
30, 1997 (the "Call Report"). The Call Report has been prepared in all
material respects in accordance with the regulatory requirements of the FDIC
for the completion and filing of such reports and has been furnished to Buyer.
2.6. No Undisclosed Liabilities. (a) As of the date hereof, the Bank does
not have any liabilities or obligations whatsoever, accrued, absolute,
contingent, or other, except (i) as set forth in the Call Report, (ii) as set
forth on Schedule 2.6 or other Schedules to this Agreement, or (iii) to the
extent they arise in the ordinary course of the business of the Bank and are
not required to be set forth on a Schedule hereto: (A) Taxes incurred since
the date of the Call Report and (B) performance and payment obligations
lawfully incurred under arm's-length contracts for goods or services,
ncurred under arm's-length contracts for goods or services, and (b) as of the
Closing, the Bank has no liabilities or obligations whatsoever, accrued,
absolute, contingent, or other, including without limitation any claim by a
third party arising from the conduct of the Bank prior to the Closing,
whether or not such claim was asserted prior to the Closing, except, to the
extent they arise in the ordinary course of business of the Bank, for (i) to
the extent accrued as liabilities on the Closing Balance Sheet, (A) Taxes
incurred since the date of the Call Report and and (B) performance and
payment obligations lawfully incurred under arm's-length contracts for goods
or services, and (ii) performance and payment obligations lawfully incurred
under arm's-length contracts for goods or services to be delivered to or
performed for the Bank after the Closing.
2.7. Taxes.
(a) The Bank has filed or caused to be filed with the appropriate Government
entity all tax returns and reports required to be filed by or on behalf of
the Bank ("Tax Returns"). All such Tax Returns are described on Schedule 2.7,
and the Bank has made copies of the Tax Returns available to the Buyer for
inspection.
(b) All Taxes payable by the Bank with respect to all periods reflected on
Tax Returns have been fully paid (other than Taxes that are being contested
in good faith), and there are no grounds for the assertion or assessment of
any additional Taxes against the Bank or its assets with respect to such
periods. To the knowledge of Seller, there are no audits of any Tax Returns
in process or threatened. There is no waiver of any statute of limitations
in effect with respect to any Tax Returns.
(c) The Bank has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any officer, director,
employee or agent in compliance with all Tax withholding provisions of
applicable law.
(d) The Bank has timely complied with all requirements under applicable laws
relating to information, reporting and withholding and other similar matters
for customer and other accounts.
(e) As used in this Agreement, "Taxes" means all taxes, charges, fees,
levies, or other like assessments, including without limitation income, gross
receipts, ad valorem, value added, premium, excise, real property, personal
property, windfall profit, sales, use, transfer, license, withholding,
employment, payroll, and franchise taxes imposed by: the United States or
any other nation, state, or bilateral or multilateral governmental authority,
any local governmental unit or subdivision thereof, or any branch agency, or
judicial body thereof ("Government"); and shall include any interest, fines,
penalties, assessments, or additions to tax resulting from, attributable to,
or incurred in connection with any such Taxes or any contest or dispute
thereof. 2.8. Absence of Certain Changes. Since September 30, 1997, except
as set forth in the Call Report or Schedule 2.8 hereto, and except for such
transactions as are contemplated by Section 6.9 hereof, there has not been:
(a) Any material adverse change in (i) the business, financial condition, or
operations of the Bank, or (ii) the condition of the assets and property,
real and personal, tangible and intangible, of the Bank (the "Property");
(b) Any transaction entered into or carried out by the Bank other than in the
ordinary course of business; or
(c) Any change made by the Bank in its methods of doing business or of
accounting.
2.9. No Breach of Law or Governing Document. The Bank is not in default
under or in breach or violation of any applicable statute, law, treaty,
convention, ordinance, decree, order, injunction, rule, directive, or
regulation of any Government ("Law") or the provisions of any Government
permit, franchise, or license, or any provision of its articles of
incorporation or its bylaws, except where such breach, default or violation
would not have a material adverse effect on the business, financial condition
or operations of the Bank. The Bank has filed all documents and reports
required to be filed by it with the FDIC, the Department or any other
Government entity, and all such reports conform in all material respects with
the requirements promulgated by such Government entity. Except as set forth
on Schedule 2.9, the Bank has not received any notice alleging such default,
breach or violation. Neither the execution of this Agreement nor the Closing
will constitute or result in any such default, breach or violation.
2.10. Litigation. Except as set forth on Schedule 2.10, (a) there is no
suit, claim, litigation, proceeding (administrative, judicial, or in
arbitration, mediation or alternative dispute resolution), Government or
grand jury investigation, or other action (any of the foregoing, "Action")
pending or, to the knowledge of Seller, threatened against the Bank or
involving its business, any of its Property, or, in connection with its
business, any of its shareholders, directors, officers, agents, or other
personnel, including without limitation any Action challenging, enjoining, or
preventing this Agreement or the consummation of the transactions contemplated
hereby, and (b) the Bank is not subject to any order, writ, injunction, or
decree of any court or other Government entity ("Order") other than Orders of
general applicability. The FDIC has not initiated or, to the knowledge of
Seller, threatened to initiate any formal enforcement action (including a
written agreement) under Section 8 of the Federal Deposit Insurance Act or
any informal enforcement action (including a memorandum of understanding).
2.11. Contracts.
(a) Set forth on Schedule 2.11 is a list of each contract, agreement, lease,
indenture, and evidence of indebtedness, to which the Bank is a party or of
which it is a beneficiary which involves outstanding, contingent, or
continuing liability or obligation of or to the Bank ("Contract") and which
(i) is material to the business, financial condition, or operations of the
Bank, (ii) involves (A) a guaranty, indemnity, or power of attorney, (B) a
sharing of payments or joint venture, (C) a sales agency, representation,
distributorship or franchise arrangement, (D) restrictions on competition,
(E) collective bargaining, works council, or union representation, or (F) an
obligation in excess of $5,000, (iii) is not terminable upon 30 days' notice
without liability, or (iv) is not in the ordinary course of business of the
Bank. The Bank has delivered copies of the Contracts to the Buyer.
(b) Each of the Contracts is a valid, binding and enforceable obligation of
the Bank and, to the knowledge of Seller, the other parties thereto, except
to the extent enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar laws
relating to or affecting the rights and remedies of creditors generally and
by general principles of equity (regardless of whether enforcement is sought
in an action at law or in equity), including without limitation concepts of
materiality, reasonableness, good faith and fair dealing. Except as set
forth on Schedule 2.11, the Bank is not, and to the knowledge of Seller,
no other party to a Contract is, in default under or in breach or violation
of any Contract, and no event has occurred that, through the passage of time
or the giving of notice, or both, would constitute, and neither the execution
of this Agreement nor the Closing hereunder will constitute or result in,
such a default, breach or violation, cause the acceleration of any obligtion
of any party thereto or the creation of a lien or encumbrance upon any
Property or the Shares, or require any consent thereunder.
(c) There is no Contract pursuant to which assets of the Bank have been sold
for which any party has any recourse against the Bank, whether pursuant to
explicit or implicit representations or warranties, or otherwise.
2.12 Intellectual Property. Set forth on Schedule 2.12 is a complete list
of each patent, trademark, trade name, service mark, and copyrighted work,
and registrations thereof and applications therefor, trade secret, software
program, invention, proprietary process, and item of proprietary know-how and
other intellectual property, and all licenses, sublicenses, and agreements in
respect thereof, used or licensed by or to the Bank, to which the Bank is a
party, or which are otherwise included in the Property of the Bank. The Bank
is not infringing or violating any intellectual property rights owned or
otherwise held by any other party, and the Bank has not used any intellectual
property owned or otherwise held by any other party, unless a valid license
for such use has been held by the Bank.
2.13 Insurance. The Bank has at all times maintained: (i) general
comprehensive liability, fidelity, errors and omission and directors' and
officers' liability insurance against such risks as are customarily insured
against by companies similar to the Bank and in at least such amounts as are
usually carried by persons engaged in the same or a similar business; and
(ii) insurance as required by law or under any agreement to which the Bank is
or has been a party. No insurer under any such insurance policy notified the
Bank of an intention to cancel or not to renew any such policy or bond or
generally disclaimed liability thereunder.
2.14 Labor Matters; Employee Benefit Matters.
(a) Except as set forth on Schedule 2.14: (i) the Bank is not and has not
engaged in any unfair labor practice; (ii) there is no labor strike, dispute,
slowdown, or work stoppage pending or, to the knowledge of Seller, threatened
against the Bank; (iii) no right of representation exists respecting the Bank's
employees; and (iv) no collective bargaining agreement is currently being
negotiated and, to the knowledge of Seller, no organizing effort is currently
being made with respect to the Bank's employees.
(b) Except as set forth on Schedule 2.14, the Bank does not have outstanding
and is not a party to or subject to liability under any agreement,
arrangement, plan, or policy, whether or not considered legally binding, that
involves any pension, retirement, profit sharing, deferred compensation,
bonus, stock option, stock purchase, health, welfare, or incentive plan, and
the Bank has no written or oral agreements with any employee or officer that
are inconsistent with the status of all employees and officers of the Bank
being "at-will" employees. Copies of all such plans and agreements listed
on Schedule 2.14 have been delivered to the Buyer.
(c) (i) The Bank has not made any contributions to any multi-employer plan
(as defined in ERISA) or to any pension plan subject to the minimum funding
standards of ERISA or Title IV of ERISA, (ii) the Bank has never been a
member of a controlled group which contributed to any such plans, and (iii)
the Bank has never been under common control with an employer which
contributed to any such plans.
2.15 Approvals; Filings. Except as set forth on Schedule 2.15, neither
Seller nor the Bank is required to obtain any approval, consent, or
authorization of, or to make any declaration or filing with, any Government
or any other third party for the valid execution and delivery of this
Agreement or any other agreement to be delivered hereunder, the purchase and
sale of the Shares, or the performance or consummation of the respective
transactions contemplated hereby or thereby.
2.16 Brokers; Finders. No finder, broker, agent, or other intermediary,
acting on behalf of Seller or the Bank, is entitled to a commission, fee, or
other compensation or obligation in connection with the negotiation or
consummation of this Agreement or any of the transactions contemplated hereby.
2.17 Closing Balance Sheet.
(a) Schedule 2.17 sets forth a pro forma balance sheet of the Bank as of the
Closing (the "Pro Forma Closing Balance Sheet"). The Pro Forma Closing
Balance Sheet reflects those assets and liabilities to be held by the Bank at
Closing, together with the anticipated tangible net equity on which the
Purchase Price is partially based. Accruals for Taxes, vacation pay, bonuses
and other expenses required to be accrued in accordance with generally
accepted accounting principles, consistently applied ("GAAP") have been
prepared on an estimated basis.
(b) No later than ten (10) days prior to the Closing Date, Seller shall
prepare and deliver to Buyer as Exhibit 2.17 the balance sheet of the Bank as
it shall appear on the Closing Date (the "Closing Balance Sheet"). The
Closing Balance Sheet shall be prepared in accordance with GAAP, showing the
same assets and liability items as contained in the Pro Forma Closing Balance
Sheet, shall set forth the accruals for Taxes, vacation pay, bonuses and other
expenses required to be accrued in accordance with GAAP as of the Closing Date
and shall otherwise (with such adjustments as are set forth in the Seller's
certificate referenced in Section 1.4(e)) fairly set forth the financial
condition of the Bank as of the Closing Date in accordance with GAAP. All
investment securities shall be shown on the Closing Balance Sheet as
securities available for sale.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants, as of the date of this Agreement and as of
the Closing Date, to Seller, as follows:
3.1. Authorization. Buyer is a limited liability company, duly organized,
validly existing and in good standing under the laws of Nevada. Buyer has
the corporate power and authority and has taken all corporate actions
necessary to authorize it to execute and deliver this Agreement, to perform
its obligations hereunder, and to consummate the transactions contemplated
hereby. This Agreement constitutes the valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except
ility may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws relating to or affecting
rights and remedies of creditors generally and by general principles of
equity (regardless of whether enforcement is sought in an action at law or in
equity), including without limitation concepts of materiality, reasonableness,
good faith and fair dealing.
3.2. Investment Representation. Buyer is acquiring the Shares for its own
account, for investment and without any view to resale or distribution of the
Shares or any portion thereof in violation of federal or state securities laws.
3.3. Approvals; Filings. Except as set forth on Schedule 3.3, Buyer is not
required to obtain any approval, consent, or authorization of, or to make any
declaration or filing with, any Government or any other third party for the
valid execution and delivery of this Agreement or any other agreement to be
delivered hereunder, the purchase and sale of the Shares, or the performance
or consummation of the respective transactions contemplated hereby or thereby.
3.4. No Conflict. Buyer's execution and delivery of this Agreement, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby will not (a) violate any Law or the
provisions of any Government permit, franchise, or license; (b) violate any
provision of its articles of incorporation or its bylaws; or (c) result in a
default, breach or violation, or cause the acceleration of any obligation or
the creation of any lien under any Contract to which Buyer is a party or
by which any of its assets or properties may be bound.
3.5. Litigation. There is no Action pending or, to the knowledge of Buyer,
threatened against Buyer or involving its business, any of its Property, or,
in connection with its business, any of its shareholders, directors,
officers, agents, or other personnel challenging, enjoining, or preventing
this Agreement or the consummation of the transactions contemplated hereby.
3.6. Brokers; Finders. Except as set forth on Schedule 3.6, no finder,
broker, agent, or other intermediary, acting on behalf of Buyer, is entitled
to a commission, fee, or other compensation or obligation in connection with
the negotiation or consummation of this Agreement or any of the transactions
contemplated hereby. Buyer will be solely responsible for any and all items,
including indemnification obligations, set forth on Schedule 3.6.
3.7. Buyer's Reliance. In entering into this Agreement and consummating the
transactions contemplated hereby, Buyer has relied solely on the written
representations, warranties and Schedules of Seller contained in this
Agreement or in any document delivered to Buyer by Seller pursuant to Article
II or IV and on Buyer's examination of the Bank, and has not relied on any
other information provided by Seller.
3.8. Buyer's Examination. Buyer and its representatives have received or
been given access to all of the information described or referred to in this
Agreement and all other information requested by any of them, including,
without limitation, the minute books of the Bank, the Call Report, the Tax
Returns, the Contracts, the plans and agreements listed on Schedule 2.14 and
the Closing Balance Sheet as of the date thereof. Buyer and its
representatives have been afforded the opportunity to meet with, ask questions
of and receive answers from Seller in connection with the determination by
Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, and all such questions were answered to the full
satisfaction of Buyer.
3.9. Financing. Buyer has and, at the Closing, Buyer will have, all funds
necessary to pay the Purchase Price and related fees and expenses and has,
and as of the Closing with have, the financial capacity to perform all of its
other obligations under this Agreement.
ARTICLE IV
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer at Closing shall be subject to the satisfaction at
or prior to Closing of each of the following conditions (unless waived in
writing by Buyer in its sole discretion):
4.1. Representations and Warranties. Seller's representations and warranties
set forth in Article II shall have been true and correct in all material
respects on the Closing Date as though such representations and warranties
were made at and as of such date and time; provided, however, that for
purposes of determining satisfaction of this condition, no breaches of any
representations or warranties of the Seller shall be deemed to have been
"material" unless such breaches, in the aggregate, would result in
excess of $45,000.
4.2. Performance of Agreement. Seller and the Bank shall have fully
performed and complied with all covenants, conditions, and other obligations
under this Agreement to be performed or complied with by them at or prior to
Closing.
4.3. No Adverse Proceeding. No Action shall have been instituted and remain
pending before a grand jury or court or other Government entity, and no
statute, rule, regulation executive order or decree shall have been
promulgated by any Government entity, in any case (a) for the purpose of
enjoining or preventing the consummation of this Agreement or any of the
transactions contemplated hereby, (b) which claims that this Agreement, such
transactions, or their consummation, is illegal, or makes them illegal
otherwise materially restricts consummation of the transactions contemplated
by this Agreement.
4.4. Approvals. Buyer shall have obtained all required consents and
approvals and all waiting periods required by Law shall have expired,
including the approval of the Department to the acquisition of control of the
Bank, including the transfer of the Industrial Loan Corporation Charter (the
"Charter") and the approval (or non-objection to the filing of the notice of
change of control within the applicable notice period) of the FDIC to the
transfer of control of the Bank.
4.5. Certificate. Seller shall have delivered to Buyer at Closing a
certificate executed by an officer of Seller, dated the Closing Date, to the
effect that the conditions set forth in Sections 4.1 and 4.2 have been
satisfied.
4.6. Resolutions. The Board of Directors of Seller and H & R Block, Inc.
shall each have approved the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby on or before January 31,
1998, and Buyer shall have received from Seller certified copies of resolutions
duly adopted by the Board of Directors of Seller authorizing the execution and
performance of this Agreement and the other documents contemplated hereby and
the consummation of the transactions contemplated hereby or thereby.
4.7. Legal Opinion. Buyer shall have received from Seller's counsel (which
may be in-house counsel of Seller) a legal opinion addressed to Buyer, with
standard and customary exceptions and qualifications reasonably satisfactory
to Buyer's counsel, to the following effect:
(a) The Bank is duly organized, validly existing and in good standing and has
the full corporate power to carry on its business as it is now being conducted;
(b) Seller has the corporate power and authority to execute and deliver, and
to perform and observe the provisions of, the Agreement.
(c) The Agreement has been duly authorized, executed and delivered by the
Seller and is enforceable against the Seller in accordance with its terms.
(d) No registration with, consent or approval of, notice to, or other action
by, any governmental entity is required on the part of Seller for the
execution, delivery or performance by Seller of the Agreement, or if
required, such registration has been made, such consent or approval has been
obtained, such notice has been given or such other appropriate action has
been taken.
(e) The execution, delivery and performance of the Agreement by Seller are
not in violation of Seller's Articles and Bylaws.
(f) The authorized capital stock of Bank is 100,000,000 shares of common
stock, par value $.10 per share. At the Closing, 1,500,000 shares are issued
and outstanding, and all issued and outstanding shares are duly authorized,
validly issued, fully paid and nonassessable.
(g) To the actual knowledge of such counsel,
(i) there are no outstanding subscriptions, options, warrants, rights,
convertible securities or other agreements of any character relating to the
issued or unissued capital stock or other securities of the Bank obligating
the Bank to issue, deliver or sell, or to cause to be issued, delivered or
sold, additional shares of the capital stock of the Bank or obligating the
Bank to grant, extent or enter into any subscription, option, warrant, right
convertible security or other similar agreement or commitment,
of capital stock of Bank are subject to any preemptive rights, and
(ii) there are no outstanding contractual obligations of the Bank to
repurchase, redeem or otherwise acquire any outstanding shares of its capital
stock, and there are no outstanding stock appreciation rights granted by the
Bank with respect thereto.
4.8. No Banking Moratorium. There shall not have occurred any general
banking or economic crisis, natural disaster, or general banking moratorium
or general suspension of payments in respect of banks in Utah or the United
States.
4.9. Directors and Officers. Arrangements reasonably satisfactory to Buyer
shall have been made with the current directors, officers and employees
(other than Karie Newton ) of Bank to stay on after the Closing to ensure the
continuing integrity of operations.
4.10. Termination of Amended and Restated Operating and Regulatory Compliance
Agreement. The Amended and Restated Operating and Regulatory Compliance
Agreement dated as of December 9, 1997, by and among Seller, Bank and H&R
Block, Inc. shall have been terminated with Bank having no further
obligations under such agreement after the Closing.
ARTICLE V
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller at Closing shall be subject to the satisfaction at
or prior to the Closing of the following conditions (unless waived in
writing by Seller in its sole discretion):
5.1 Representations and Warranties. Buyer's representations and warranties
set forth in Article III shall have been true and correct in all material
respects on the Closing Date as though such representations and warranties
were made at and as of such date and time; provided, however, that for
purposes of determining satisfaction of this condition, no breaches of any
representations or warranties of the Buyer shall be deemed to have been
"material" unless such breaches, in the aggregate, would result in damages to
the Seller in excess of $45,000.
5.2 Performance of Agreement. Buyer shall have fully performed and complied
with all covenants, conditions, and other obligations under this Agreement to
be performed or complied with by it at or prior to the Closing.
5.3 Approvals. Buyer shall have obtained all required consents and approvals
and all waiting periods required by Law shall have expired, including the
approval (or non-objection to the filing of the notice of change of control
within the applicable notice period) of the Department and the FDIC. Buyer
shall have delivered to Seller at Closing a copy of the Order issued by the
Department authorizing the acquisition of control of the Bank by Buyer and
written evidence of approval (or non-objection to the filing of the notice of
change of control within the applicable notice period) by the FDIC of
acquisition of control of the Bank by Buyer.
5.4 No Adverse Proceeding. No Action shall have been instituted and remain
pending before a grand jury or court or other Government entity, and no
statute, rule, regulation executive order or decree shall have been
promulgated by any Government entity, in any case (a) for the purpose of
enjoining or preventing the consummation of this Agreement or any of the
transactions contemplated hereby, (b) which claims that this Agreement, such
transactions, or their consummation, is illegal, or makes them illegal or
(c) which otherwise materially restricts consummation of the transactions
contemplated by this Agreement.
5.5 Certificate. Buyer shall have delivered to Seller at Closing a
certificate of Buyer executed by an officer of Buyer, dated the Closing Date,
to the effect that the conditions set forth in Sections 5.1 and 5.2 have been
satisfied.
5.6 Resolutions. Seller shall have received from Buyer certified copies of
resolutions duly adopted by the Board of Directors of Buyer authorizing the
execution and performance of this Agreement and the other documents
contemplated hereby and the consummation of the transactions contemplated
hereby or thereby.
5.7 No Banking Moratorium. There shall not have occurred any general
banking or economic crisis, natural disaster, or general banking moratorium
or general suspension of payments in respect of banks in Utah or the United
States.
5.8 Board Approval. The Boards of Directors of Seller and H & R Block, Inc.
shall each have approved the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF THE PARTIES
6.1. Conduct of Business Before Closing. Until the Closing, and except for
those transactions contemplated by Section 6.9 hereof, Seller shall (a) cause
the Bank to operate in the ordinary course of business and (b) not permit the
Bank to, without the prior written consent of Buyer:
(i) declare, set aside, or pay any dividend or any distribution (in cash or in
kind) to any shareholder of the Bank with respect to any securities of the
Bank, or make any direct or indirect redemption, purchase, or other
acquisition by the Bank of any of its securities;
(ii) enter into, modify or terminate any employment agreement or any agreement,
arrangement, plan or policy that involves any pension, retirement, profit
sharing, or deferred compensation, bonus, stock option, stock purchase,
health, welfare or incentive plan ("Plan") or increase the compensation or
other remuneration payable to or for the benefit of or committed to be paid
to or for the benefit of any shareholder, director, officer, agent, or
employee of the Bank, or increase any benefits granted under any Plan
of any such shareholder, director, officer, agent, or employee;
(iii) enter into or carry out any transaction other than in the ordinary
course of business;
(iv) borrow or incur any other indebtedness, contingent or other, (except in
the ordinary course of business) or endorse, assume, or guarantee payment or
performance of any loan or obligation of any other person or entity;
(v) change its methods of doing business or of accounting;
(vi) grant any mortgage, security interest, or other encumbrance with respect
to the Property;
(vii) sell, lease, or dispose of, or agree to sell, lease, or dispose of, any
of its Property other than in arm's-length sales, leases, or dispositions in
the ordinary course of business to persons other than Affiliates of Seller or
the Bank;
(viii) modify or terminate any Contract set forth on Schedule 2.11 or any
material term thereof;
(ix) purchase any capital assets in excess of $5,000;
(x) make any loan or advance to any person or entity except for loans and
advances made in the ordinary course of business; or
(xi) enter into any binding commitment or agreement to do any of the
foregoing items (i) through (x).
Notwithstanding the above, nothing herein shall be construed as prohibiting
the Bank from selling its credit card receivables portfolio to any party,
including Seller or an Affiliate of Seller.
6.2. Access to Records.
(a) Until the Closing, Seller shall cause the Bank to afford to authorized
representatives of Buyer access during normal business hours to such books,
records, and data of the Bank as Buyer may reasonably request; provided that
(i) such investigation will not unreasonably interfere with the operations of
the Bank, (ii) such access is only upon no less than 48 hours prior notice to
Seller, and (iii) the provision of such information will not violate any Law
or Contract.
(b) From and after the Closing, Buyer shall cause the Bank to afford to
authorized representatives of Seller reasonable access during normal business
hours to such books, records, and data of the Bank as the Seller may
reasonably require to prosecute or defend any litigation or investigation by
Government (including without limitation tax audits); provided that Seller
shall reimburse Buyer for all expenses and costs incurred in connection
therewith.
6.3. Application to Transfer Charter. Within 45 days after the date of this
Agreement, Buyer shall file with the Department a "section 7-1-705
Application for Acquisition of Control" and such other supporting documents
as may be requested or required requesting approval to acquire the Charter of
the Bank from Seller. Within 45 days after the date of this Agreement, Buyer
shall file with the FDIC an "Interagency Notice of Change in Control," as
required by the Change in Bank Control Act, as amended (12 U.S.C. 1817(j) and
such other supporting documents as may be requested or required, including an
"Interagency Biographical and Financial Report" for each person named in the
Notice. Buyer shall provide copies of the nonconfidential portions of the
Application and Notice to Seller for its approval prior to their filing,
which approval shall not be unreasonably withheld. For purposes of this
Section, the term "nonconfidential portions" means those portions that would
be exempt from disclosure to the public pursuant to the Freedom of
Information Act (5 U.S.C. section 552(b)).
6.4. Confidentiality. Neither Party to this Agreement shall make any public
disclosure of the terms hereof or the transactions contemplated hereby
without the prior written consent of the other Party, except as required by
law. Buyer and Seller have entered into a Confidentiality Agreement dated
December 5, 1997 (the "Confidentiality Agreement"). The Confidentiality
Agreement shall survive the termination of this Agreement or the Closing in
accordance with the terms thereof.
6.5. Further Assurances. From and after the Closing, the Parties shall do
such acts and execute such documents and instruments as may be reasonably
required to make effective the transactions contemplated hereby.
6.6. Employee
s. Upon the Closing and for six months thereafter, Buyer shall
cause the Bank to provide to active employees of the Bank terms and
conditions of employment, including compensation and benefits, which are
substantially comparable (with the exception of the availability of stock
options) in the aggregate with respect to all such employees as pertained to
them on the day immediately preceding the Closing Date. If any employees of
the Bank are on leave (including medical, maternity, disability, or family
leave) on the Closing Date. Buyer shall cause the Bank to recall or reinstate
such employees in accordance with Law and the leave policy of the Bank which
is in effect on the date of this Agreement.
6.7. Insurance. Until the Closing, Seller shall cause the Bank to maintain:
(i) general comprehensive liability, fidelity, errors and omission and
directors' and officers' liability insurance against such risks as are
customarily insured against by companies similar to the Bank and in at least
such amounts as are usually carried by persons engaged in the same or a
similar business, and (ii) insurance as required by law or under any
agreement to which the Bank is a party; provided that such insurance will
er the Closing, Seller shall cooperate with Buyer to make available to the
Bank the benefit of any applicable insurance carried by Seller or Bank
covering occurrences on or prior to the Closing. Except as provided above,
from and after the Closing, Buyer shall be responsible for obtaining such
insurance on its own.
6.8. No Solicitation. Unless and until this Agreement has been terminated,
Seller will not, and will cause its officers, directors, employees,
representatives and agents not to, directly or indirectly (i) disclose (other
than to Buyer and its authorized representatives) any information concerning
the business or affairs of the Bank which is not either customarily disclosed
in the ordinary course of business or required to be disclosed under
applicable law; (ii) solicit, initiate discussions with respect to or
encourage any offer by any person for the acquisition of the Bank or provide
any information to any person in connection with or negotiate, accept,
facilitate, recommend or enter into any agreement relating to any such offer
or agreement, or (iii) agree to do any of the foregoing.
6.9. Restructuring of the Bank. On or before the Closing, Seller shall
purchase or otherwise transfer out of the Bank all assets which do not appear
on the Closing Balance Sheet, and shall pay off or assume all liabilities
which do not appear on the Closing Balance Sheet and shall otherwise engage
in such transactions as it reasonably requires or finds convenient to cause
the balance sheet of the Bank at the Closing to conform in all material
respects to the Closing Balance Sheet.
6.10. Board Approval. The Seller hereby agrees that it will present to its
Board of Directors and to the Board of Directors of H & R Block, Inc., with a
favorable recommendation, the terms and conditions of this Agreement and that
it will use its best efforts to obtain the approval of both Boards of
Directors to the execution and delivery of this Agreement and to the
consummation of the transactions contemplated hereby; provided, however, that
nothing contained in this Section 6.10 shall be deemed to be a guaranty that
such approval will be obtained, and Seller shall have no liability for the
failure to obtain such approval except as specifically provided in Section 7.9.
6.11. Termination of Amended and Restated Operating and Regulatory Compliance
Agreement. The Seller hereby agrees that it will cause the termination at or
prior to the Closing of the Amended and Restated Operating and Regulatory
Compliance Agreement dated as of December 9, 1997, by and among Seller, Bank
and H&R Block, Inc., with Bank having no further obligations under such
agreement after the Closing.
6.12. Tax Covenants.
(a) Seller shall duly file or cause to be filed all Federal and state Tax
Returns required to be filed with the appropriate Government entity by or
with respect to the Bank for any periods, or portions thereof, through and
including the Closing Date, and will pay or cause to be paid any Tax with
respect to such periods required to be paid by the Bank. No later than
thirty (30) days following any such Tax payment by or on behalf of Seller,
Seller shall send to Bank an invoice in the amount of such payment a
ause the Bank to pay) the invoiced amount to Seller within thirty (30) days
of the date of any such invoice. Notwithstanding the foregoing, Buyer shall
not be obligated to make any payment to Seller under this Section 6.12 to the
extent that the aggregate of all such payments to Seller would exceed the
amount shown as an accrued tax payable to H&R Block, Inc. on the Closing
Balance Sheet.
(b) Buyer will prepare and timely file, or cause the Bank to prepare and
timely file, at the Buyer's expense, all required Tax returns and reports of
Taxes due by the Bank after the Closing Date for any period which begins and
ends after the Closing Date. The Buyer or Bank shall timely pay any unpaid
liability for Taxes owing by the Bank reflected on each return and report
prepared by it.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1. Limitations on Survival of Representations and Warranties;
Indemnification.
(a) The representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Closing Date for a
period of one year, except that the representations and warranties contained
in Section 2.7 shall survive the Closing Date for the applicable statute of
limitations period; provided, however, that this Section 7.1 shall not limit
any covenant or agreement of the Parties that by its terms contemplates
performance after the Closing Date.
(b) Seller shall indemnify, defend and hold harmless Buyer and Bank and the
officers, directors, employees and agents of each of them (collectively, the
"Buyer Indemnitees") against any and all losses, claims, damages or
liabilities and actions, and any reasonable legal or other expenses or costs
incurred by Buyer Indemnitees in connection with investigating or defending
any such loss, claim, damage, liability or action (regardless of whether an
action or claim has been filed or asserted) arising from or with respect to
(i) inaccuracy in any representation or warranty made by Seller under this
Agreement; (ii) any breach by Seller of this Agreement; or (iii) any claim
asserted against any Buyer Indemnitee based on any act, omission, event,
occurrence or condition relating to the business or operation of the Bank
arising prior to the Closing and not disclosed or required to be disclosed
pursuant to Section 2.6 of this Agreement ("Buyer Indemnified Losses").
(c) Buyer shall indemnify, defend and hold harmless Seller and the officers,
directors, employees and agents of Seller (collectively, the "Seller
Indemnitees") against any and all losses, claims, damages or liabilities and
actions, and any reasonable legal or other expenses or costs incurred by
Seller Indemnitees in connection with investigating or defending any such
loss, claim, damage, liability or action (regardless of whether an action or
claim has been filed or asserted) arising from or with respect to
epresentation or warranty made by Buyer under this Agreement; (ii) any breach
by Buyer of this Agreement; or (iii) any claim asserted against any Seller
Indemnitee based on any act, omission, event, occurrence or condition
relating to the business or operation of the Bank arising after the Closing
("Seller Indemnified Losses").
(d) Any party seeking indemnification pursuant to this Section 7.1 for an
inaccuracy of a representation or warranty made under this Agreement shall be
required to make its claim within one year from the date hereof (except for
claims for indemnification for any inaccuracy of the representation and
warranty made in Section 2.7, which claim may be made within the applicable
statute of limitations), and any indemnification sought by a Party by reason
of the assertion of a claim against such Party by a third-party shall be
pursued in accordance with the following procedure:
(i) If there is asserted by a third party any claim, liability or obligation
(a "Claim") against a Buyer Indemnitee or a Seller Indemnitee (an
"Indemnitee") that in the judgment of the Indemnitee may give rise to any
Buyer Indemnified Losses or Seller Indemnified Losses ("Indemnified Losses")
or if the Indemnitee determines the existence of a Claim (whether or not
asserted), the Indemnitee shall give the party from whom indemnification is
sought (the "Indemnitor") notice within 30 days of assertion of any Claim
or within 10 days of receipt of notice of the filing of any lawsuit based upon
such assertion (or with respect to a Claim not yet asserted, promptly upon
the determination by Indemnitee ofthe existence of the same). The notice
shall describe the Claim in reasonable detail and shall include the amount
(estimated if necessary) of the related Indemnified Loss.
Failure by the Indemnitee to give timely notice pursuant to this paragraph
shall not relieve the Indemnitor of its obligation except to the extent that
the Indemnitor is actually and materially prejudiced by such failure to give
timely notice.
(ii) The Indemnitee shall permit the Indemnitor to assume the defense of such
Claim and any litigation resulting therefrom upon receipt by the Indemnitee of
the Indemnitor's written agreement to assume the defense of all claims or
counts of such Claim. After giving such notice of assumption, the
Indemnitor shall not be liable under this Agreement for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such
defense but the Indemnitor shall be responsible for all such expenses (as
provided herein) incurred by the Indemnitee in connection with the Claim prior
to such assumption. Notwithstanding the foregoing, any indemnitee shall be
entitled to conduct its own defense at the cost and expense of the Indemnitor
if the Indemnitee can establish, by reasonable evidence, that the conduct of
its defense by the Indemnitor would reasonably be likely to prejudice
materially the Indemnitee due to the nature of any claims or counterclaims
presented or by virtue of a conflict between the interest of the Indemnitee
and the Indemnitor, and provided further that in any event the Indemnitee may
participate in such defense at its own expense. Counsel selected by the
Indemnitor or by the Indemnitee to defend any Claim shall be subject to the
reasonable approval of the other party. If the Indemnitor fails to assume
the defense of any such Claim as provided above within a reasonable time after
due notice has been given of a Claim, then until such time as the Indemnitor
shall make such assumption, the Indemnitee shall have the right to prosecute
and conduct its own defense by counsel of its choice, and in connection
therewith shall have full right to conduct the defense thereof and to enter
into any compromise or settlement thereof; provided, however, that Indemnitee
shall not consent to the entry of any judgment or decree or consent to the
terms of any compromise or settlement of any Claim or litigation defended by
Indemnitee in accordance herewith without the prior written consent of the
Indemnitor, which consent will not be unreasonably withheld or delayed. Such
defense shall be at the cost and expense of the Indemnitor if the Indemnitor
subsequently assumes such defense as provided above, or if it is subsequently
determined that the Indemnitor is or was obligated to defend or indemnify the
Indemnitee with respect to such Claim.
(iii) The Indemnitor shall not, without the prior written consent of the
Indemnitee, consent to the terms of any compromise or settlement of any Claim
or litigation defended by the Indemnitor in accordance herewith, which
consent will not be unreasonably withheld or delayed. The Indemnitor shall
not, except with the prior written consent of Indemnitee, which consent will
not be unreasonably withheld or delayed, consent to entry of any judgment or
enter into any compromise or settlement of an action or portion of an action
relating to the Indemnitee which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the Indemnitee of an
unconditional release in respect of such Claim or litigation. If the
Indemnitor chooses to defend any Claim, the Indemnitee shall cooperate with
the Indemnitor and make available to the Indemnitor any personnel or any
books, records or other documents within its control that are necessary or
appropriate for such defense. The Indemnitor shall pay the Indemnitee's
actual out-of-pocket expenses incurred in connection with such cooperation.
(e) Notwithstanding anything to the contrary contained herein, Buyer shall
not be entitled to make any claims against Seller, and Seller shall not be
entitled to make any claims against Buyer, pursuant to this Section 7.1 for
indemnification or otherwise until, and only to the extent that, the
aggregate amount of all such claims exceeds $45,000 (the "Threshold").
(f) With respect to Buyer Indemnified Losses arising under an inaccuracy in
Seller's representations at Section 2.6, Seller's liability shall be limited
to one hundred percent (100%) of the first $630,000 of such Buyer Indemnified
Losses, plus fifty percent (50%) of the next $2,740,000 of such Buyer
Indemnified Losses. Notwithstanding the foregoing, with respect to Buyer
Indemnified Losses which arose from or were related to the purchase, sale,
assignment or creation of any banking asset which is not retaining by the Bank
at the Closing, Seller's liability for such Buyer Indemnified Losses shall not
be limited by this subsection (f), except as otherwise provided in this
subsection (f), an Indemnitor shall have no liability with respect to
Indemnified Losses arising under this Agreement to the extent such
Indemnified Losses exceed in the aggregate $630,000.
(g) In determining the foregoing Threshold and in otherwise determining the
amount to which Buyer or Seller is entitled to assert a claim against the
other pursuant to this Section 7.1 or otherwise, only actual losses, net of
all tax benefits, and no consequential or other special losses or damages,
shall be considered. All parties hereto waive any claim to exemplary or
punitive damages.
(h) Buyer acknowledges and agrees that any event, transaction, circumstance,
or liability, whether contingent or accrued, for which adequate reserves have
been established on the Closing Balance Sheet shall not be used at any time
as the basis for a claim by Buyer or considered in any way in determining
whether the Threshold has been reached. In addition, in connection with an
alleged breach of Seller's representations, warranties and covenants under
this Agreement, the Buyer's damages shall be net of any reserves established
on the Closing Balance Sheet in connection with the particular item or
contingency in dispute.
(i) All indemnification payments under this Section 7.1 shall be deemed to
constitute adjustments to the Purchase Price.
(j) The remedies provided in this Section 7.1 shall be the exclusive remedies
of the Parties from and after the Closing Date for any breach of a
representation or warranty, or nonperformance, partial or total, of any
covenant or agreement contained herein.
7.2. Notice. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given and made upon being delivered either by
courier or fax delivery to the Party for whom it is intended, provided, that
a copy thereof is deposited, postage prepaid, certified or registered mail,
return receipt requested, in the United States mail, bearing the address
shown in this Section 7.2 for, or such other address as may be designated in
writing hereafter by, such Party:
If to Buyer:
Praxis Investment Advisors
1620 L Street NW, Suite 1210
Washington, D.C. 20036
Attention: Andrew S. Winokur
Phone: (202) 463-3516
Fax: (202) 955-6070
With a copy to:
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, California 90013
Attention: Henry M. Fields
Phone: (213) 892-5275
Fax: (213) 892-5454
If to Seller:
Block Financial Corporation
4400 Main Street
Kansas City, Missouri 64111
Attention: John R. Cox, Esq.
Phone: (816) 932-4919
Fax: (816) 932-8489
7.3. Entire Agreement. Except for the Confidentiality Agreement, this
Agreement and the Schedules hereto (which are incorporated by reference
herein and made a part hereof) embody the entire agreement and understanding
of the Parties with respect to the subject matter hereof, and supersede all
prior and contemporaneous agreements and understandings relative to such
subject matter.
7.4. Amendment; Waiver. This Agreement may be amended at any time by an
instrument in writing signed by both Buyer and Seller. No attempted waiver
of compliance with any provision or condition hereof, or consent pursuant to
this Agreement, or amendment, modification or supplement will be effective
unless evidenced by an instrument in writing signed by the party against
whom enforcement is sought.
7.5. Assignment; Binding Agreement. This Agreement and various rights and
obligations arising hereunder shall inure to the benefit of and be binding
upon Buyer, its successors, and permitted assigns and Seller, its successors,
and permitted assigns. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be transferred, delegated, or
assigned (by either of the Parties without the prior written consent of the
other Party (which consent shall not be unreasonably withheld); provided,
that Buyer may assign its rights hereunder to an affiliate, principal or
client as long as Buyer remains fully liable for the performance of Buyer's
and any such assignee's obligations hereunder.
7.6. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
7.7. Headings; Interpretation. The article and section headings contained in
this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of the Agreement. Each reference in this
Agreement to an Article, Section, or Schedule, unless otherwise indicated,
shall mean an Article or a Section of this Agreement or a Schedule attached
to this Agreement, respectively. References herein to "days", unless
otherwise indicated, are to consecutive calendar days. The parties have
participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires othersies. As used in this Agreement, knowledge
of any person of or with respect to any matter means that such person (if a
natural person) or any of the officers, directors, and senior management of
such person (if not a natural person) has actual awareness or knowledge of
such matter, without independent inquiry. Any matter disclosed in a Schedule
hereto shall be deemed to be disclosed in all Schedules where such matter is
required to be disclosed, regardless of whether such matter is specifically
cross-referenced. The disclosure of any matter in a Schedule is not to be
deemed an indication that such matter is material.
7.8. Expenses. Each Party shall pay all costs and expenses incurred on
behalf of itself in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the transaactions
contemplated hereby, including, without limitation, fees and expenses of
attorneys and accountants.
7.9. Termination of the Agreement. This Agreement may be terminated (i) by
the mutual agreement of the parties hereto at any time prior to the Closing
Date, or (ii) by a Party, by written notice to the other Party in the manner
provided herein, without further liability or obligation except as provided
in this Section 7.9, if (a) such Party is not in breach or violation hereof
and (b) the conditions to such Party's obligations at Closing have not been
or cannot be satisfied on or before June 30, 1998 (unless such failure
results primarily from such Party's breach of any of its representations,
warranties or covenants contained in this Agreement); provided, however,
that if the Closing has not occurred by June 30, 1998 as a result of a delay
in the receipt of regulatory approvals, each Party shall have the unilateral
right, if there exists a reasonable basis to believe that such regulatory
approvals are likely to be received during such extension, to extend such
deadline by sixty (60) days by giving written notice to the other Party prior
to 5:00 p.m. (Mountain time) on June 15, 1998, which notice shall specify the
basis for such Party's belief that regulatory approvals are likely to be
received during such extension. Notwithstanding anything to the contrary
contained herein, (i) in the event this Agreement is terminated for any
reason (other than lack of satisfaction of the conditions to Closing set
forth in Sections 4.1, 4.2, 4.5, 4.6, 4.7 or 4.9), on the date of such
termination (the "Termination Date"), Buyer shall pay to Seller an amount
equal to the product of (a) $3,000 per day, and (b) the number of days
elapsed from the earlier of the date of this Agreement and January 1, 1998,
to (and including) the Termination Date; and (ii) in the event this Agreement
is terminated by Buyer on or before February 15, 1998 by reason of failure by
Buyer to comply with the condition set forth in Section 4.6, Seller shall
pay to Buyer an amount equal to any reasonable out-of-pocket expenses
actually incurred by Buyer, including reasonable attorneys' and consultants'
fees, in connection with the preparation and negotiation of, and the
transactions contemplated by, this Agreement, and all diligence and
investigation conducted in connection therewith.
7.10. Remedies Cumulative. All rights and remedies of the Parties under this
Agreement are cumulative and without prejudice to any other rights or remedies
under Law.
7.11. Governing Law. This Agreement shall in all respects be construed in
accordance with and governed by the substantive laws of the State of Utah,
without reference to its choice of law rules. In the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal Court located in the State of Utah or
any Utah State court, and (b) agrees that it will not initiate any action in
any court other than a Federal court in the State of Utah or a Utah State
court.
7.12. No Third Party Beneficiaries. Nothing contained in this Agreement,
express or implied, is intended to confer upon any person other than the
parties hereto, and their successors in interest and permitted assignees,
any rights or remedies under or by reason of this Agreement unless expressly
so stated.
[the next page is the signature page]
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed as of the date first above written.
BUYER:
PRAXIS INVESTMENT ADVISORS
By: /s/ Andrew Winokur
Name: Andrew Winokur
Title: 100% owner/CEO
SELLER
BLOCK FINANCIAL CORPORATION
By: /s/ Bret G. Wilson
Name: Bret G. Wilson
Title: Vice President
<PAGE>
Exhibit 2
SUBSCRIPTION AND STOCKHOLDERS AGREEMENT
AGREEMENT, dated as of August 31, 1998, among Andrew Winokur ("AW"), whose
address is P. O. Box 383, Calistoga, California 94515, Rose's International,
Inc., a Delaware corporation ("Rose's" and, collectively with AW and any
other person or entity that becomes a party hereto, the "Stockholders"), the
address of which is 150 East 52nd Street, New York, New York 10022, WebBank
Corporation, a Utah industrial loan corporation (the "Bank"), the address of
which is 136 Haber Avenue, Suite 209, Park City, Utah 84060, Praxis Investment
Advisors, Inc., a Delaware corporation ("Praxis"), the address of which is
1308 Main Street, Suite 112, Saint Helena, California 94574, and Rose's
Holdings, Inc., a Delaware corporation ("Holdings"), the address of which is
150 East 52nd Street, New York, New York 10022.
W I T N E S S E T H :
WHEREAS, AW and Rose's have accepted the assignment (the "Assignment") from
Praxis Investment Advisers, a Nevada limited liability company ("PIA"), of a
stock purchase agreement, dated January 20, 1998 (the "Purchase Agreement"),
between PIA and Block Financial Corporation ("Block"), relating to the
purchase by PIA of all of the issued and outstanding common stock of the Bank
("Bank Common Stock");
WHEREAS, upon the consummation of the Purchase Agreement, AW and Rose's
desire to subscribe for all of the issued and outstanding Common Stock, par
value $.01 per share (the "Praxis Common Stock"), of Praxis;
WHEREAS, the parties wish to provide certain restrictions which the parties
agree are reasonable on the disposition by AW of his Stock of the Bank and
Stock of Praxis (as hereinafter defined), and certain rights of Rose's and
Holdings to purchase from AW his shares of Stock of the Bank and certain
rights of Rose's to purchase from AW his shares of Stock of Praxis under
certain circumstances;
WHEREAS, Praxis and AW have entered into an employment agreement (the
"Employment Agreement") and the Stockholders wish to agree as to certain
matters relating to the Employment Agreement; and
WHEREAS, Rose's AW and Praxis have entered into a management agreement (the
"Management Agreement") under which Praxis has agreed to provide to the
Stockholders certain services relating to the Bank;
NOW, THEREFORE, in consideration of the foregoing, and the mutual agreements
and covenants contained herein, the parties hereto agree as follows:
1. Definitions.For purposes of this Agreement, the following terms shall have
the meanings indicated:"Appraised Value" shall mean the value of the Stock of
the Bank owned by AW as of the Valuation Date, with reference to the Valuation
and reflecting the compensation payable to AW under the Employment Agreement
as a result of the Valuation, as determined by the investment bank retained
to perform the Valuation.
"Dispose Of" shall mean to sell, assign, pledge, hypothecate, grant an option
with respect to, or otherwise transfer or encumber.
"Permitted Transfer" shall mean a transfer of Stock of the Bank or Stock of
Praxis (a) by AW to his (i) parent, sibling, spouse, lineal descendant, or a
trust for the benefit of any of the foregoing or (ii) personal representative
or estate, provided in each case the transferee becomes a party to this
Agreement in accordance with Section 5 hereof, and (b) by AW to Rose's, the
Bank or Praxis.
"Permitted Transferee" shall mean a person who receives Stock of the Bank or
Stock of Praxis from AW in a Permitted Transfer.
"Pro Rata Portion" shall mean, as to a Stockholder, that portion of an
obligation or benefit which is equal to the percentage determined by dividing
(i) the number of shares of Bank Common Stock owned by such Stockholder by
(ii) the total number of shares of Bank Common Stock owned by all Stockholders.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock of the Bank" shall mean Bank Common Stock, any other capital stock or
other security of the Bank, or any option, warrant or other right exercisable
for, or convertible into, Bank Common Stock or other capital stock or
securities of the Bank.
"Stock of Praxis" shall mean Praxis Common Stock, any other capital stock or
other security of Praxis, or any option, warrant or other right exercisable
for, or convertible into, Praxis Common Stock or other capital stock or
securities of Praxis.
"Valuation" shall have the meaning set forth in the Employment Agreement.
2. Purchase by AW.Subject to the terms and conditions of this Agreement, AW
hereby agrees: (a) pursuant to the Assignment, to pay to Block $___________
and to receive therefor 100,000 shares of Bank Common Stock, representing 10% of
the Common Stock being purchased from Block thereunder and (b) to purchase
from Praxis, for $___________, and Praxis hereby agrees to sell to AW, 10
shares of Praxis Common Stock.
3. Purchase by Rose's.Subject to the terms and conditions of this Agreement,
Rose's hereby agrees: (a) pursuant to the Assignment, to pay to Block $_____
and to receive therefor 900,000 shares of Bank Common Stock, representing 90%
of the Common Stock being purchased from Block thereunder and (b) to purchase
from Praxis, for $________, and Praxis hereby agrees to sell to Rose's, 90
shares of Praxis Common Stock.
4. Payment.Subject to the terms and conditions of this Agreement, upon the
date of the consummation of the transactions (the "Closing") contemplated in
the Purchase Agreement, pursuant to the Assignment whereby the rights of PIA
under the Purchase Agreement, or will be at the Closing, assigned to AW and
Rose's, (a) AW shall pay, by certified check or wire transfer, (i) to Block,
the full amount of the purchase price described in Section 2(a) and (ii) to
Praxis, the full amount of the purchase price of the Praxis Common Stock being
purchased by him hereunder, and (b) Rose's shall pay, by certified check or
wire transfer, (i) to Block, the full amount of the purchase price described
in Section 3(a) and (ii) to Praxis, the full amount of the Praxis Common
Stock being purchased by it hereunder; provided, however that funds
previously advanced by AW and Rose's (or its parent, Rose's Holdings, Inc.
("Holdings")) with respect to the potential acquisition of the Bank
(as previously documented to the satisfaction of the parties hereto and as
hereto), shall be deemed to be a credit to, and deducted from, the purchase
price of the Praxis Common Stock purchased hereunder. The closing of such
purchases and sales of the Bank Common Stock and the Praxis Common Stock
hereunder shall take place at the offices of the Bank, Park City, Utah.
5. Restrictions on Transfer. (a) Subject to Section 5(b), AW shall not
Dispose Of any Stock of the Bank or Stock of Praxis, except (i) in a
Permitted Transfer, provided that the Permitted Transferee becomes a party to
this Agreement (by executing and delivering to the parties hereto a copy of
this Agreement or an agreement to be bound hereby) and the Management
Agreement simultaneously with such Permitted Transfer and thereupon and
thereafter such Permitted Transferee shall be deemed to have identical rights
and obligtions hereunder as a successor to AW or (ii)in accordance with
Section 6 hereof. Any other attempt by AW to Dispose of Stock of the Bank or
Stock of Praxis shall be null and void.
(b) Any attempt by AW or any subsequent transferee of AW (including a
Permitted Transferee or a person or entity receiving Stock of the Bank or
Stock of Praxis pursuant to Section 6 or their transferees) to Dispose Of
Stock of the Bank or Stock of Praxis shall be null and void, unless such
transferee becomes a party to this Agreement (other than Sections 5(a) and
6), by executing and delivering to the parties hereto a copy of this
Agreement or an agreement to be bound hereby, and the Management Agreement
simultaneously with such transfer and thereupon and thereafter such
transferee shall be deemed to have identical rights and obligations hereunder as
a successor to AW.
6. Right of First Refusal.(a) If AW or a successor to AW pursuant to
Section 5 or 6 (a "Selling Stockholder") desires to sell Stock of the Bank
("Offered Bank Shares") or Stock of Praxis ("Offered Praxis Shares") to any
person other than a Permitted Transferee (a "Prospective Buyer"), he shall
give written notice thereof (an "Offering Notice") to Rose's. The Offering
Notice shall include a copy of the offer from the Prospective Buyer (which
shall be a bona fide offer and shall include reasonable evidence of the offer
from the Prospective Buyer (which shall be a bona fide offer and shall include
reasonable evidence of the Prospective Buyer's ability to pay for the Offered
Bank Shares or Offered Praxis Shares) and shall state (i) the number of
Offered Bank Shares or Offered Praxis Shares proposed to be sold to the
Prospective Buyer, (ii) the name and address of the Prospective Buyer and
(iii) the price per Offered Bank Share or Offered Praxis Share (which shall
be payable in cash) at which the Selling Stockholder proposes to sell the
Offered Shares to the Prospective Buyer.
(b) Rose's shall have the irrevocable option, but not the obligation, to
purchase from the Selling Stockholder all, but not less than all, of the
Offered Bank Shares or the Offered Praxis Shares on the same terms and
conditions offered by the Prospective Buyer; provided, however, that Rose's
shall not be required to pay for the Offered Bank Shares or the Offered
Praxis Shares earlier than 60 days after the receipt by Rose's of the
Offering Notice. To exercise such option, Rose's shall, within 30 days after
e the Offered Bank Shares or the Offered Praxis Shares at the per share
purchase price and other terms specified in the Offering Notice (subject to
the proviso contained in the first sentence of this Section 6(b)). The
exercise of such option and the purchase and sale of the Offered Bank Shares
or the Offered Praxis Shares resulting from the exercise of such option shall
take place at the principal offices of Rose's on the fifteenth business day
following the date of delivery of the Acceptance Notice, or at such other
place, on such other date, or both, as the Selling Stockholder and Rose's
shall agree upon in writing (the "Closing Date"). On the Closing Date, the
Selling Stockholder shall deliver to Rose's the certificates representing the
number of Offered Bank Shares or the Offered Praxis Shares in proper form for
transfer with appropriate stock powers executed in blank attached and with all
documentary or transfer tax stamps affixed. By delivering such certificates,
the Selling Stockholder shall be deemed to represent that Rose's will receive
good title to the shares represented by such certificate(s), free and clear of
all liens, security interests, pledges, charges, stockholders' agreements,
voting trusts and other encumbrances of any kind.
(c) If the Offered Bank Shares and Offered Praxis Shares are not purchased by
Rose's, the Selling Stockholder shall be free, during the 60-day period
commencing on the date the option granted pursuant to this Section 6 expires
unexercised, to sell or transfer all but not less than all of the Offered
Bank Shares and Offered Praxis Shares to the Prospective Buyer at a per share
price and other terms which shall not be less than the price, or on more
favorable terms to the Prospective Buyer, as specified in the Offering Notice,
provided such Prospective buyer becomes a party to this Agreement (other than
Sections 5(a), 6 and 7 hereof) and theManagement Agreement. After such 60-day
period, the Selling Stockholder shall not Dispose of any Stock of the Bank or
Stock of Praxis except in accordance with Section 5 or this Section 6.
7. Put and Call Options.(a) If, pursuant to Section 8(c) of the Employment
Agreement, Rose's shall accept the Valuation, AW shall have the irrevocable
option, but not the obligation, to cause Rose's to purchase all, but not less
than all, of the Stock of the Bank owned by AW at the Appraised Value
thereof. To exercise such option, AW shall, within 30 days after the date of
Rose's acceptance of the Valuation (the "Put Period"), deliver to Rose's a
notice of his intention to exercise such option (a "Put Notice"). By so
delivering the the Put Notice, AW shall irrevocably be committed to exercise
the option to sell all of the Stock of the Bank owned by AW at the Appraised
Value thereof. AW and Rose's agree to use their best efforts to cause the
investment bank retained to perform the Valuation also to determine the
Appraised Value.
(b) If AW does not exercise his option pursuant to Section 7(a), Holdings
shall have the irrevocable option, but not the obligation, to cause AW to
sell to Holdings all, but not less than all, of the Stock of the Bank owned
by AW at the Appraised Value thereof. To exercise such option, Holdings
shall, within 30 days after the termination of the Put Period, deliver to AW
a notice of its intention to exercise such option (a "Call Notice"). By so
delivering the Call Notice, Holdings shall irrevocably be committed to
exercise the option to purchase all of the Stock of the Bank owned by AW at
the Appraised Value thereof.
(c) The purchase and sale of the shares resulting from the exercise of the
option described in Section 7(a) or (b) shall take place at the principal
offices of Rose's or Holdings (as the case may be) on the fifteenth business
day following the date of delivery of the Put Notice or the Call Notice (as
the case may be), or at such other place, on such other date, or both, as AW
and Rose's or Holdings (as the case may be) shall agree upon in writing (the
"Option Closing Date"). On the Option Closing Date, AW shall deliver to Rose's
or Holdings (as the case may be) the certificates representing the Stock of
the Bank being sold by him in proper form for transfer with appropriate stock
powers executed in blank attached and with all documentary or transfer tax
stamps affixed. By delivering such certificates, AW shall be deemed to
represent that Rose's or Holdings (as the case may be) will receive good
title to the shares represented by such certificate(s), free and clear of all
liens, security interests, pledges, charges, stockholders' agreements, voting
trusts and other encumbrances of any kind. The total purchase price for the
Stock of the Bank purchased by, and sold to, Holdings pursuant to Section 7(b)
shall be payable on the Option Closing Date. The total purchase price for the
Stock of the Bank purchased and sold pursuant to Section 7(a), with interest
at the rate described below, will be payable on the first anniversary of the
date of the final payment by Praxis (or Rose's pursuant to its guarantee) to
AW under Section 8(c) of the Employment Agreement. Interest shall accrue at
the following rates:
For the first six months after the Option Closing Date: LIBOR
From six to 12 months after the Option Closing Date: LIBOR+2%
From 12 to 18 months after the Option Closing Date: LIBOR+4%
From 18 months until the full payment of the purchase price: LIBOR+6%
8. Legend.The following legend shall be noted conspicuously on all
certificates representing shares of Stock of the Bank or Stock of Praxis
heretofore or hereafter issued which are subject to the terms of this
Agreement:"The securities represented by this certificate are subject to
certain options and restrictions on transfer as provided in an agreement,
dated as of August 31, 1998, among the Company and certain holders of its
capital stock, a copy of which is on file with the Secretary of the Company."
9. Tax Sharing.Praxis and the Bank will not be required to make payments to
Holdings to fund their share of the consolidated group's federal income tax
liability to the extent Holdings' net operating losses carryover ("NOLs") are
available to offset the taxable income produced by such corporations, and
therefore the taxable income produced by such corporations does not increase
the consolidated group's federal income tax liability. In connection
herewith, Rose's hereby represents to AW that Note 13 to the audited financial
statements of Holdings, as of January 31, 1998 and for the fiscal year then
ended, fairly presents the amount of Holdings' available NOLs as of such date.
10. Contribution to Guarantee Obligations.If, and to the extent that, Rose's
is obligated to make a payment under Section 17 of the Employment Agreement
(a "Guarantee Obligation"), Rose's shall so notify the other Stockholders and
the amount of the Guarantee Obligation. Each of the other Stockholders agrees
to pay to Rose's his Pro Rata Portion of such Guarantee Obligation within
three days after such notice from Rose's.
11. Payments by AW to Rose's.Upon the sale of the Bank as contemplated by
Section 3 of the Employment Agreement, if Rose's has not received (taking
into account prior distributions by the Bank and Praxis to Rose's) a
Cumulative Rate of Return (as defined in, and determined in accordance with
the Employment Agreement) of 10 percent or more, AW will make a payment to
Rose's of such amount that will provide Rose's with such 10 percent
Cumulative Rate of Return; provided, however, that AW's obligation to make
such payment will be limited to the amount of all prior distributions he has
received as a stockholder of the Bank and Praxis and to the amount he would
otherwise be entitled to receive, as a stockholder of the Bank and Praxis,
from the sale of the Bank.
12. Indemnification.Upon the sale of the Bank as contemplated by Section 3 of
the Employment Agreement, if and to the extent there are indemnification
obligations in connection therewith, each of the Stockholders shall be liable
for such indemnification obligations in the same proportion that the net
proceeds from such sale received by such Stockholder (including, in the case
of AW, whether or not he is then a stockholder of the Bank, amounts received
as a result of such sale pursuant to the Employment Agreement) bears to the
total net proceeds from the sale of the Bank. Notwithstanding the foregoing,
AW's proportionate share of any liability for indemnification shall not take
into account incentive compensation payable to him if his employment under
the Employment Agreement shall have terminated under Section 7(a), and Rose's
shall have accepted the Valuation, as contemplated by Section 8(c) of the
Employment Agreement.
13. After Acquired Stock and Options.The provisions of this Agreement shall
apply equally to any Stock of the Bank or Stock of Praxis acquired or
beneficially owned by a party hereto (other than Rose's or Holdings) after
the date hereof.
14. Availability of Equitable Remedies.Since a breach of the provisions of
this Agreement could not adequately be compensated by money damages, any
non-breaching party shall be entitled, in addition to any other right or
remedy available to him, to an injunction restraining such breach and to
specific performance of any such provision of this Agreement, and in either
case no bond or other security shall be required in connection therewith, and
each party hereto hereby consents to such injunction and to the ordering of
such specific performance.
15. Modification.This Agreement sets forth the entire understanding of the
parties hereto with respect to the subject matter hereof, supersedes all
existing agreements among them concerning such subject matter, and may be
modified only by a written instrument duly executed by the parties hereto.
16. Notices.Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be either personally delivered,
sent by facsimile transmission (with written confirmation of receipt), sent
by overnight courier service (which obtains a written receipt evidencing
delivery) or mailed by certified mail (postage prepaid, return receipt
requested), to the party to whom it is to be given at the address of such
party set forth in the preamble to this Agreement or, in the case of a person
who becomes a party hereto after the date of this Agreement, at the address of
such party set forth in his agreement to be bound by the terms of this
Agreement pursuant to Section 5 or 6 (or to such other address as such party
shall have furnished in writing to the other parties hereto in accordance
with the provisions of this Section 16). Notice shall be deemed received
when so personally delivered, sent by facsimile transmission, one business
day after being so delivered to an overnight courier service, or three
business days after being so mailed.
17. Waiver.Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver of
any provision of this Agreement must be in writing.
18. Binding Effect.The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
heirs, and personal representatives.19. Separability.If any provision of this
Agreement is invalid, illegal, or unenforceable, the balance of this Agreement
shall remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons
and circumstances.
20. Pronouns.Any masculine personal pronoun used herein shall be considered
to mean the corresponding feminine or neuter personal pronoun, as the context
requires.
21. Counterparts.This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. Governing Law.This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
the rules of such state respecting conflicts of law.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
ROSE'S INTERNATIONAL, INC.
By
Name:
Title:
WEBBANK CORPORATION
By
Name:
Title:
PRAXIS INVESTMENT ADVISORS, INC.
By
Name:
Title:
Andrew Winokur
ROSE'S HOLDINGS, INC.
By
Name:
Title:
<PAGE>
Exhibit 3
ASSIGNMENT, TRANSFER AND DELEGATION AGREEMENT
Assignment, Transfer and Delegation Agreement, dated as of July __, 1998, by
and between Praxis Investment Advisors, LLC, a Nevada limited liability
company ("PIA"), on the one hand, and Andrew Winokur, an individual ("AW"),
and Rose's International, Inc., a Delaware corporation ("Rose's" and together
with AW, the "Transferees"), on the other hand.
W I T N E S S E T H:
WHEREAS, PIA and Block Financial Corporation ("Block") are parties to a Stock
Purchase Agreement, dated January 20, 1998 (the "Purchase Agreement"),
relating to the purchase by PIA from Block of all of the issued and
outstanding stock ("Bank Common Stock") of WebBank Corporation, a Utah
corporation;
WHEREAS, PIA desires to assign all of its rights, title and interest in and
to, and to delegate all of its duties under, the Purchase Agreement to the
Transferees, and the Transferees desire to accept such assignment and
delegation;
NOW, THEREFORE, in consideration of the covenants hereinafter set forth and
for other good and valuable consideration, it is hereby agreed by PIA and the
Transferees as follows:
1. PIA hereby assigns all of its rights, title and interest in and to, and
delegates all of its duties under, the Purchase Agreement to the Transferees,
and the Transferees hereby accept such assignment, transfer and delegation,
and pursuant hereto and the Purchase Agreement, (a) AW agrees to pay to Block
10 percent of the purchase price described in Section 1.2 of the Purchase
Agreement (the "Purchase Price") and to receive therefor 150,000 shares of
Bank Common Stock and (b) Rose's agrees to pay to Block 90 percent of the
Purchase Price and to receive therefor 1,350,000 shares of Bank Common Stock.
2. This Agreement shall be construed in accordance with the laws of the State
of Utah without giving effect to rules governing the conflict of laws.
3. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors, assigns and personal
representatives.
4. This Agreement shall not be modified or amended except in a writing signed
by the parties hereto.
5. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
PRAXIS INVESTMENT ADVISORS, LLC
By
Name:
Title:
ROSE'S INTERNATIONAL, INC.
By
Name:
Title:
Andrew Winokur
Agreed to:
BLOCK FINANCIAL CORPORATION
By ______________________________
Name:
Title:
Exhibit 4
EMPLOYMENT AGREEMENT
Agreement made as of the ___th day of July, 1998, by and between Praxis
Investment Advisors, Inc. ("Praxis"), a Delaware corporation, with its
principal place of business at 1308 Main Street, Suite 112, Saint Helena,
California 94574, and Andrew Winokur, whose address is P. O. Box 383,
Calistoga, California 94515 ("Executive").
W I T N E S S E T H :
WHEREAS, it is anticipated that Rose's International, Inc. ("Rose's"), a
Delaware corporation and a wholly-owned subsidiary of Rose's Holdings, Inc.
("Holdings"), and Executive will enter into a Subscription and Stockholders
Agreement, pursuant to which Rose's will purchase and own 90 percent, and
Executive will purchase and own 10 percent, of the common stock of Praxis and
of WebBank Corporation, a Utah industrial loan corporation (the "Bank" and,
together with Praxis, the "Companies");
WHEREAS, it is anticipated that Praxis will enter into a management agreement
(the "Management Agreement") under which Praxis will agree to provide Rose's
and the other stockholders of the Bank management services in connection with
the ownership and operation of the Bank;
WHEREAS, Praxis desires to employ Executive as President and chief executive
officer and Executive is willing to serve in such capacity; and
WHEREAS, Praxis and Executive desire to set forth the terms and conditions of
such employment;
NOW, THEREFORE, in consideration of the promises and of the mutual covenants
and agreements herein contained, Praxis and Executive agree as follows:
1. Employment.(a) Praxis hereby agrees to employ Executive, and Executive
agrees to be employed by Praxis, on the terms and conditions herein contained
as President and chief executive officer. Executive shall report to the
Board of Directors of Praxis (the "Board") and the Chairman of the Board.
Executive agrees that in such office he shall perform such duties and
functions as are commensurate with his status as President and chief
executive officer as may from time to time be determined by the Board in
accordance with reasonable and customary practice, including, but not limited
to, the ability to hire and discharge employees and to set their compensation
and other customary duties and functions of presidents and chief executive
officers of companies. The Executive shall promptly follow all legal
directions of the Board. The Executive shall devote substantially all of
his business time, energy, skill and efforts to the performance of his duties
hereunder and shall faithfully and diligently serve Praxis.
(b) The Management Agreement provides that Praxis may make recommendations
to, and consult with, the management and Board of Directors of the Bank with
respect to the deployment of the Bank's capital, the development of the
Bank's business lines, the Bank's acquisition of assets and the Bank's
distributions to its stockholders (the "Recommendations"). Executive shall
have the authority to formulate the Recommendations on behalf of Praxis.
(c) Each of the parties hereto agrees to execute and deliver on the Effective
Date (as hereinafter defined), and to use its best efforts to cause its
affiliates (including the Bank) to execute and deliver on the Effective Date,
the Subscription and Stockholders Agreement and the Management Agreement,
substantially in the forms annexed hereto as Exhibits 1 and 2, respectively.
2. Term of Employment.(a) Executive's employment under this Agreement (the
"Employment") shall be for a term commencing on the date of the purchase by
Rose's and Executive of the stock of the Bank (the "Effective Date") and
terminating on the fifth anniversary of the Effective Date, or such earlier
date as is provided in Section 6 hereof, subject to the Employment being
extended pursuant to the renewal provisions described in Sections 2(b) and
2(c) hereof (the "Employment Term"). Notwithstanding anything to the contrary
herein, the provisions of Sections 12 and 13 hereof shall survive and remain
in effect notwithstanding the termination of Employment or a breach by Praxis
or Executive of this Agreement.
(b) The Employment Term shall be extended to the sixth anniversary of the
Effective Date if Praxis and the Executive shall agree, in writing during the
30-day period beginning 48 months after the Effective Date, to renew this
Agreement on the same terms as described herein.
(c) If the Employment Term shall be extended as described in Section 2(b),
this Agreement shall be renewed, on the same terms as described herein, by
Praxis and the Executive for one or more 12-month periods by agreeing in
writing to renew the Agreement during the applicable 30-day period preceding
the anniversary of the Effective Date.
3. Compensation.(a) Subject to Sections 3(d) and 14 hereof, as compensation
for his services under this Agreement, Praxis shall pay to the Executive an
amount (the "Compensation") which shall be measured by reference to the
receipt by stockholders (the "Stockholders") of cash ("Cash") as a result of
distributions ("Dividends") by the Companies to their respective Stockholders
and as a result of the sale of the Bank or Praxis (the "Sale" and, together
with Dividends, the "Measuring Event") during the Employment Term, as follows:
(1) After the Stockholders have received Cash in an aggregate amount
(i) equal to the capital invested by them in the Companies and (ii) providing
them with a Cumulative Rate of Return (as defined in Section 3(b)) of 10
percent, Executive shall be paid an amount equal to 29.03 percent of the
cumulative amount received by the Stockholders under clause (ii); provided,
however, that if Praxis does not have sufficient liquidity to make the
foregoing payment to Executive and the amount payable to Executive arises as a
result of a Dividend, such amount shall be accrued and shall be paid to
Executive out of subsequent available liquid resources, if any, before the
Stockholders are entitled to receive any further Cash. If such amount
otherwise payable to Executive arises from a Sale (of the Bank) and the
amount of the purchase price and the amount of Praxis' assets does not allow
Praxis to make such payment in full, Executive shall be entitled to no
further payment after the utilization of Praxis' assets to satisfy the amount
due to Executive.
(2) Of the remaining Cash (after deducting all amounts described in Section
3(a)(1)), until such time as the Stockholders have received aggregate Cash
providing them with a Cumulative Rate of Return of 25 percent, Executive
shall be paid an amount equal to 22.5 percent of the amount of the Cash.
(3) Once the Stockholders have received aggregate Cash providing them with a
Cumulative Rate of Return of 25 percent, Executive shall be paid an amount
equal to 50 percent of the amount of the remaining Cash (after deducting all
amounts described in Sections 3(a)(1) and (a)(2)).
Examples illustrating the application of this Section 3(a) are attached hereto
as Exhibit A.
(b) For purposes of Section 3(a), the Stockholders' "Cumulative Rate of
Return" of 10 percent or 25 percent, as the case may be, as of any particular
time, means an amount equal to the aggregate Cash that would be required to be
received by the Stockholders at that time (including, without limitation, the
return of the amount of the capital invested in the Companies) in order to
provide the Stockholders with the following rate of return of 10 percent or
25 percent, as the case may be: the rate of return (calculated as provided in
Section 3(c)which (i) the total amount that has been received by the
Stockholders, and retained by them after the payment of any Compensation to
Executive, as of that time, represents on (ii) the total amount of capital
invested by them in theCompanies as of that time.
Section 3(c)) which (i) the total amount that has been received by the
Stockholders, and retained by them after the payment of any Compensation to
Executive, as of that time, represents on (ii) the total amount of capital
invested by them in the Companies as of that time.
(c) The rate of return referred to in Section 3(b) is an annual rate and
shall be calculated with compounding on an annual basis, taking into account
the period of time from the date or dates that capital was invested by the
Stockholders in the Companies to the dates of the receipt of Cash by the
Stockholders.
(d) No Compensation shall be paid to Executive under this Agreement until the
Compensation Committee of Holdings (the "Compensation Committee") shall
certify in writing that the performance goals specified in Section 3(a) have
been satisfied. At least three business days prior to a proposed occurrence
of a Measuring Event, the Compensation Committee shall determine whether,
following such Measuring Event, Executive is entitled to any payment of
Compensation, and, if so, the amount of such payment. If the Compensation
Committee shall determine that Executive is entitled to the payment of
Compensation, such payment shall be made promptly following the Measuring
Event.
(e) If the proceeds of a Measuring Event involve property other than cash,
the fair market value of such property shall be determined by the Board,
acting in its reasonable discretion, for purposes of applying the performance
goals described in Section 3(a). If Executive shall be entitled to the
payment of Compensation, the payment of such property shall be equitably
apportioned between Executive and the Stockholders based on the respective
amounts they are entitled to receive.
4. Insurance.Praxis shall purchase, at its expense of up to $6,000 per year,
a term life insurance policy for Executive in the amount of the lesser of (i)
$5,000,000 or (ii) the maximum amount of term insurance that may be purchased
for an annual premium of $6,000. The proceeds of such policy shall be
payable to the estate of Executive or as he otherwise directs.
5. Expenses.Praxis shall reimburse Executive in accordance with its expense
reimbursement policy as in effect from time to time for all reasonable
expenses incurred by Executive in connection with the performance of his
duties under this Agreement upon the presentation by Executive of an itemized
account of such expenses and appropriate receipts.
6. Termination Events. The Employment shall terminate upon the earliest to
occur of the following:(a) The termination or expiration of the Management
Agreement unless (i) the ability of Praxis to make Recommendations is not
terminated or (ii) such termination is due to the sale of the Bank and the
Executive's Employment has not been terminated or, if terminated, Section
7(a) hereof does not apply;
(b) The expiration of the Employment Term, as it may be extended under
Section 2(b) or 2(c);
(c) The termination of Employment by Praxis without
Cause (as defined in Section 10);
(d) The termination of Employment by Praxis
for disability in accordance with Section 9;
(e) The termination of Employment
by the Executive for Good Reason (as defined in Section 11);
(f) The termination of Employment by Praxis for Cause (as defined in Section
10);
(g) The Executive's death; or
(h) The termination of Employment by the Executive other than for Good Reason
(as defined in Section 11).
7. Termination
(a) If the Employment shall terminate upon the occurrence of any of the events
described in Sections 6(a), 6(b), 6(c), 6(d), or 6(e), then Executive shall be
entitled to receive payments as described in Section 8 below.
(b) If the Employment shall terminate upon the occurrence of any of the
events described in Sections 6(f), 6(g) or 6(h), then Executive shall be
entitled to no further payments of any kind.
8. Termination Payments.
(a)Pursuant to Section 7(a), the Bank shall be valued, as provided in Section
8(b) (the "Valuation"), and Rose's shall have 90 days from the date of the
completion of the Valuation (the "Valuation Date") to accept or reject the
Valuation. If Rose's shall accept the Valuation, then such amount due to
Executive shall be payable on the terms set forth in Section 8(c). If Rose's
shall reject the Valuation, then Section 8(e) shall apply.
(b) Praxis and Executive shall mutually engage a nationally recognized or
regionally recognized investment bank that has experience in valuing
financial institutions in order to determine the Valuation as of the date of
the cessation of employment. If Praxis and Executive are unable to agree
mutually on such investment bank to determine the Valuation, Praxis and
Executive shall each select an investment bank having the qualifications
described in the first sentence of this Section 8(b), and such investment
banks shall select a third investment bank with such qualifications to
determine the Valuation.
(c) If Rose's shall accept the Valuation, the Compensation Committee shall
determine in writing the amount the Executive would have been entitled to
receive under Section 3 if the Bank had been sold (as of the date of
cessation of employment) for an amount equal to the Valuation after taking
into account transaction expenses, and any amounts due to Executive shall be
paid as follows:
(1) To the extent that cash available to the Companies allows, and, in the
case of the Bank, it is permitted to make a distribution to its Stockholders
under applicable law, Executive shall be paid in full within 90 days (the
"Payment Date") after the Valuation Date.
(2) To the extent that (i) the Chief Financial Officer of each of Praxis and
the Bank shall certify to Executive on or before the Payment Date, and on
each of the first three anniversaries of the Valuation Date ("Valuation Date
Anniversaries"), that the Companies do not have sufficient liquidity to
permit them to prudently pay all amounts due to Executive, or (ii) in the
case of the Bank, it is not permitted to make a distribution under applicable
law, then, subject to clause (ii), that portion of the amount due to Executive
that the liquidity of the Companies allows to be paid shall be paid on the
Payment Date and on the date which is 15 days after each of the Valuation Date
Anniversaries, and any remaining unpaid amounts shall not be immediately due
but shall be deferred until a date which is not more than three years
following the Valuation Date (the "Third Valuation Date Anniversary").
Notwithstanding the foregoing, if the Companies do not have sufficient
liquidity on the Third Valuation Date Anniversary to pay to Executive all
amounts due him, or, in the case of the Bank, it is not permitted to make a
distribution under applicable law, the remaining unpaid amount (the
"Unpaid Claim") shall be paid as provided in Section 8(c)(3). Any amounts
not paid shall be paid prior to any payments of any kind by the Companies to
their respective Stockholders and in any case in full upon the sale of the
Bank and the receipt by the stockholders thereof. The companies shall use
reasonable commercial efforts to achieve sufficient liquidity to allow such
unpaid amounts to be paid as soon as practicable. Any amounts not paid on the
Payment Date shall bear interest from the Valuation Date at the following rates:
For the first six months after the Valuation Date: LIBOR
From six to 12 months after the Valuation Date: LIBOR+2%
From 12 to 18 months after the Valuation Date: LIBOR+4%
From 18 to 36 months after the Valuation Date: LIBOR+6%
(3) The Unpaid Claim shall have a term of nine years and shall bear interest,
payable quarterly, at LIBOR plus 6% (with LIBOR being determined and reset
every 12 months). The principal of the Unpaid Claim shall be paid in 36
equal installments.
(d) Upon the acceptance by Rose's of the Valuation, the amount due to
Executive may be assignable by him.(e) If Rose's shall reject the Valuation,
the Bank shall promptly be put up for sale and Section 3 shall apply. If the
purchase price of the Bank consists of property other than cash, in addition
to or in lieu of cash, then the amount due to Executive shall be paid in the
form of his pro rata portion of each element of such consideration.
(f) Praxis shall promptly identify the projects which have been completed by
Praxis as of the date of the termination of Employment (the "Termination
Date") and provide or will provide Praxis with revenue (the "Project
Revenue"). Following his termination of Employment, in addition to any
Compensation payable to Executive pursuant to Section 3(a) and Section 8(c)
or 8(e), Dividends (whenever paid) by Praxis and consisting of Project
Revenue received by Praxis within five years of the Termination Date, plus
s on hand on the Termination Date, less allocable costs and expenses ("Net
Project Revenue"), shall be taken into account in computing the Compensation
payable to Executive pursuant to Section 3(a). Praxis hereby agrees to
exercise its best efforts to timely pay Dividends of Net Project Revenue to
its Stockholders. Notwithstanding the foregoing, if Praxis shall owe any
amount to Executive pursuant to Section 8(c)(2), the amount that would
otherwise be paid by Praxis as a Dividend of Net Project Revenue to
be applied against Executive's claim, but shall still be taken into account
in computing the Compensation payable to Executive.
9. Disability. If the Executive becomes unable to perform his duties and
responsibilities as provided in Section 1 of this Agreement for a period of
at least 180 consecutive days by reason of disability, Praxis shall terminate
the Employment hereunder. In such event, Praxis shall have no other
obligation to the Executive other than the termination payments as set forth
in Section 8.
10. Cause. Cause shall mean any of the following:(a) Any act by Executive
involving willful misconduct or gross negligence, which is materially
injurious to either of the Companies;
(b) The commission of any act by Executive constituting fraud on either of
the Companies (excluding any good faith expense account disputes); (c) The
conviction of Executive of (or the pleading by Executive nolo contendere to)
a felony or any other crime which would materially interfere with Executive's
ability to perform his responsibilities and duties, other than felonies or
other crimes related to the operation of a motor vehicle; or
(d) The breach by Executive of any material obligations under this Agreement
and his failure to remedy such breach after having been given notice of the
breach and a reasonable opportunity to cure it.
11. Good Reason. Good Reason shall mean any of the following:(a) The
repeated failure to implement the Recommendations made by Executive as a
result of the action or inaction of Praxis or Rose's, provided that:
(1) The Recommendations have been accepted by the Bank's Board of Directors
and management and have not been opposed by the government agencies
responsible for regulating the Bank;
(2) The Recommendations do not require additional capital contributions by
Rose's;
(3) The Recommendations would not limit, in any material respect, the
purchase, ownership or operation by Rose's or Holdings, directly or through
any subsidiary, of other businesses under laws and regulations regulating the
activities that may be conducted by stockholders of the Bank; and
(4) The Recommendations do not involve a financing by the Bank outside of the
ordinary course of its business or a sale of the Bank.
(b) Any material diminution of the role, responsibilities or authority of
Executive as an employee of Praxis, which the parties agree will be deemed to
have occurred upon the sale of the Bank.
12 Covenant not to Compete.
(a) Executive agrees that during the Employment Term he will not, directly or
indirectly, for his own benefit or for, with or through any other person,
firm or corporation, (i) manage, operate, control or participate in the
management, operation or control of, or be connected as a director, officer,
employee, partner, consultant, agent, independent contractor or otherwise
with, or permit his name to actively be used in connection with, the
operation of any business or organization or (ii) invest in or loan money to
any business or organization competing with, or of a nature similar to, the
business of Praxis or the Bank; provided, however, Executive may purchase or
hold not more than five percent of any class of equity securities of any
publically traded company without restriction.
(b) If (i) Executive shall resign voluntarily from his Employment other than
for Good Reason or (ii) his Employment shall be terminated for Cause, then
during the period commencing on the Termination Date and for a period of two
years thereafter, Executive will not directly or indirectly, for his own
benefit or for, with or through any other person, firm or corporation,
manage, operate, control or participate in the management, operation or
control of, or be connected as a director, officer, employee, partner,
consultant, agent, independent contractor or otherwise with, or permit his
name to actively be used in connection with, or invest in or loan money to
(collectively, "Participate In"), any business or organization which is then
competing with or of a similar nature to the business of the Bank or Praxis;
provided, however, Executive may purchase or hold not more than five percent
of
any class of equity securities of any publicly traded company without
restriction. If Executive's Employment shall terminate under any other
circumstances, then during the period commencing on the Termination Date and
for a period of two years thereafter, he will not Participate In or with
respect to any other Utah industrial loan corporation.
(c) Notwithstanding the provisions of subsections (a) and (b) above,
Executive shall be entitled to own, and to receive revenues or payments with
respect to, nominal investments held by Executive as of the date of the
signing of this Agreement as to which Executive's role is passive. Executive
shall make reasonable efforts to disclose the nature of such investments to
Rose's, but shall not be required to make any disclosure where such
disclosure would conflict with a confidentiality obligation of Executive with
respect to such investment. In addition, (i) Executive may contineu to hold
his current investments (approximately nine percent of the outstanding equity
on a fully diluted basis in Goodrich & Pennington Mortgage Fund Inc. (the
"Fund"), a mortgage and loan origination company operating primarily in the
western United States, (ii) Executive may serve as a member of the board of
directors of the Fund, and (iii) Executive may continue to provide, in his
capacity as a member of the board of directors, limited consulting services to
the Fund, provided that the performance of such services does not interfere
with the performance of services by Executive under this Agreement.
(d) If any restriction set forth with regard to this Section 12 is found by
any court of competent jurisdiction or an arbitrator to be unenforceable
because it extends for too long a period of time or over too great a range of
activities or in too broad a geographic area, it shall be interpreted to
extend over the maximum period of time, range of activities or geographic
area as to which it may be enforceable.
13 Confidential Information(a) During and after the Employment Term,
Executive shall not use for his own benefit or any other person or entity
other than the Companies and its affiliates any secret or confidential
information, knowledge or data relating to the Company and its affiliates,
and their respective businesses, including any confidential information as to
customers of the Bank or its affiliates: (i) obtained by Executive during his
employment by Praxis, and (ii) not otherwise public knowledge or known within
the Bank's or its affiliates' industry. Executive shall not, without prior
written consent of Praxis, unless compelled pursuant to the order of a court
or other governmental or legal body having jurisdiction over such matter,
communicate or divulge any such information, knowledge or data to anyone.
(b) Upon termination of Employment, Executive shall promptly deliver to
Praxis all documents (whether prepared by Praxis, the Bank, an affiliated
entity, Executive or a third party) relating to Praxis, the Bank or an
affiliate of either or any of their businesses or property which Executive
may possess or have under his direction or control.
14 Stockholder Approval.This Agreement shall be effective only if it is
approved by the stockholders of a majority of the outstanding shares of
common stock of Holdings, and if such stockholders do not approve this
Agreement on or prior to October 31, 1998, it shall become null and void.
Holdings agrees to call and convene a stockholders meeting as soon as
practicable and to use its reasonable best efforts to obtain the required
stockholder approval of this Agreement.
15 Withholding.Praxis shall withhold from any and all amounts payable under
this Agreement such federal, state and local taxes as may be required to be
withheld pursuant to any applicable law or regulation. Accordingly, all
dollar amounts referenced herein are "gross" amounts as opposed to "net"
amounts.
16 Executive Representation.Executive represents and warrants that he is
under no contractual or other limitation that prevents him from entering
into this Agreement and performing his obligations hereunder.
17 Guarantee by Rose's.Rose's shall guarantee the obligations of Praxis to
make payments to Executive pursuant to Sections 3 and 8(c)(3) and if the Bank
has sufficient liquidity available to pay Dividends, subject to applicable
law, Rose's shall exercise its reasonable best efforts to cause the Bank to
pay Dividends and thereby allow Rose's to make payments to Praxis under the
Management Agreement in order to enable Praxis to make payments that may be
due to Executive pursuant to Section 8(c)(1) or 8(c)(2); provided, however,
that Holdings shall have no liability hereunder.
18 Entire Agreement; Modification.This Agreement constitutes the full and
complete understanding of the parties hereto and supersedes all prior
agreements and understandings, oral or written, with respect to the subject
matter hereof. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, oral or otherwise, have
been made by either party, or anyone acting on behalf of either party, which
are not embodied herein and that no other agreement, statement or promise not
contained in this Agreement shall be valid or binding. This Agreement may not
be modified or amended except by an instrument in writing signed by the party
against whom or which enforcement may be sought.
19 Severability.Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms of
provisions of this Agreement in any other jurisdiction.
20 Waiver of Breach.The waiver by any party of a breach of any provisions of
this Agreement, which waiver must be in writing to be effective, shall not
operate as or be construed as a waiver of any subsequent breach.
21 Notices.All notices hereunder shall be in writing and shall be deemed to
have been duly given when delivered by hand, or one day after sending by
express mail or other "overnight mail service," or three days after sending
by certified or registered mail, postage prepaid, return receipt requested.
Notice shall be sent as follows: if to Executive, to the address as listed
in the records of Praxis; and if to Praxis, to Praxis at its office as set
forth at the head of this Agreement, to the attention of the Chairman. Either
party may change the notice address by notice given as aforesaid.
22 Assignability.This Agreement, and the rights and benefits conferred upon
Executive hereunder, may not be sold, transferred, pledged or otherwise
assigned by Executive.
23 Governing Law.All issues pertaining to the validity, construction,
execution and performance of this Agreement shall be construed and governed
in accordance with the laws of the State of New York, without giving effect
to the conflict or choice of law provisions thereof.
24 Headings.The headings in this Agreement are intended solely for
convenience or reference and shall be given no effect in the construction or
interpretation of this Agreement.
25 Counterparts.This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
26 Availability of Equitable Remedies.Since a breach of the provisions of
Section 12 or 13 of this Agreement could not adequately be compensated by
money damages, Praxis shall be entitled, in addition to any other right or
remedy available to it, to an injunction restraining such breach or a
threatened breach and to specific performance of any such provision of this
Agreement, and in either case no bond or other security shall be required
in connection therewith and the parties hereby consent to the issuance of such
injunction and to the ordering of specific performance.
IN WITNESS WHEREOF, Praxis has caused this Agreement to be duly executed and
Executive has hereunto set his hand as of the date first set forth above.
PRAXIS INVESTMENT ADVISORS, INC.
By:
Name:
Title:
Andrew Winokur
<PAGE> Exhibit 5
MANAGEMENT AGREEMENT
Management Agreement, dated as of ________, l998, between Rose's
International, Inc., a Delaware corporation ("Rose's"), the address of which
is 150 East 52nd Street, New York, New York l0022, Andrew Winokur ("AW" and,
together with Rose's and such other persons or entities who may become
stockholders of the Bank and become parties hereto, the "Stockholders"),
whose address is P. O. Box 383, Calistoga, California 94515, and Praxis
Investment Advisors, Inc., a Delaware corporation (the "Manager"), the
address150 East 52nd Street, New York, New York l0022.
W I T N E S S E T H :
WHEREAS, the Stockholders own all of the outstanding common stock ("Bank
Common Stock") of WebBank Corporation, a Utah industrial loan corporation
(the "Bank"), and, in administering such investment, the Stockholders desire
to avail themselves of the experience, sources of information, advice and
assistance of the Manager and to have the Manager perform for them various
management services;
WHEREAS, the Manager is willing to furnish such advice and services to the
Stockholders on the terms and conditions hereinafter set forth;
WHEREAS, the Manager has entered into an Employment Agreement of even date
herewith with AW (the "Employment Agreement"); and
WHEREAS, AW and Rose's have entered into a Subscription and Stockholders
Agreement of even date herewith (the "Stockholders Agreement"), which
provides, among other things, that other persons or entities that become
stockholders of the Bank shall become a party to this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, it is hereby agreed as follows:
1. Services to be Provided. The Manager shall furnish to the Stockholders
advice and recommendations and shall consult with the Board of Directors and
officers of the Bank with respect to the deployment of the Bank's capital,
the development of the Banks' business lines, the Bank's distributions to its
stockholders and the Bank's acquisition (by purchase, exchange, subscription
or otherwise) of securities, and advice and recommendations with respect to
other aspects of the business and affairs of the Bank.
2. Information Concerning the Bank. Subject to applicable law, including
the fiduciary obligations of the Stockholders and the Bank and their
respective Boards of Directors, the Stockholders shall use their best efforts
to ensure that the Manager is fully informed with regard to the investments,
business, affairs and condition of the Bank, and the Stockholders shall use
their best efforts to cause the Bank to furnish the Manager with copies of
all financial statements and such other information with regard to the affairs
of the Bank as the Manager may from time to time reasonably request.
3. Compensation. As compensation for the services to be performed by the
Manager hereunder, each of the Stockholders shall pay to the Manager a
management fee equal to such Stockholder's Pro Rata Portion of the
compensation payable by the Manager to AW under the Employment Agreement. As
used herein, "Pro Rata Portion" means, as to a Stockholder, the percentage
determined by dividing (a) the number of shares of Bank Common Stock owned by
by such Stockholder by (b) the total number of shares of Bank Common Stock owned
by all Stockholders.
4. Effectiveness and Termination. This Agreement shall become effective
on the date that the Employment Agreement becomes effective and shall
continue in effect until the date of expiration or termination of the
Employment Agreement.
5. Non-Assignability. This Agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by any of the parties hereto
without the prior written consent of the other parties hereto.
6. Modification. This Agreement sets forth the entire understanding of the
parties hereto with respect to the subject matter hereof, supersedes all
existing agreements among them concerning such subject matter, and may be
modified only by a written instrument duly executed by the parties hereto.
7. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be either personally delivered,
sent by facsimile transmission (with written confirmation of receipt), sent
by overnight courier service (which obtains a written receipt evidencing
delivery) or mailed by certified mail (postage prepaid, return receipt
requested), to the party to whom it is to be given at the address of such
party set forth in the preamble to this Agreement or, in the case of a person
who becomes a party hereto after the date of this Agreement, at the address of
such party set forth in his agreement to be bound by the terms of this
Agreement (or to such other address as such party shall have furnished in
writing to the other parties hereto in accordance with the provisions of this
Section 7). Notice shall be deemed received when so personally delivered,
sent by facsimile transmission, one business day after being so delivered to an
overnight courier service, or three business days after being so mailed.
8. Waiver. Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver of
any provision of this Agreement must be in writing.
9. Binding Effect. The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors, assigns, heirs, and personal representatives.
10. Separability. If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
11. Pronouns. Any masculine personal pronoun used herein shall be
considered to mean the corresponding feminine or neuter personal pronoun, as
the context requires.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
the rules of such state respecting conflicts of law.IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed the day and
year first above written.
ROSE'S INTERNATIONAL, INC.
By __________________________________
Name:
Title:
PRAXIS INVESTMENT ADVISORS, INC.
By ___________________________________
Name:
Title:
Andrew Winokur
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUGUST
1, 1998 CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> AUG-01-1998
<CASH> 15,157
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,189
<PP&E> 0
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<TOTAL-ASSETS> 15,346
<CURRENT-LIABILITIES> 95
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0
0
<COMMON> 35,000
<OTHER-SE> (19,749)
<TOTAL-LIABILITY-AND-EQUITY> 15,346
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 544
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (151)
<INCOME-TAX> 0
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