<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 15, 1999
RUSHMORE FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 000-24057 75-2375969
------------- ------------- --------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
13355 NOEL ROAD, SUITE 650, DALLAS, TEXAS 75240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972)450-6000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
ACQUISITION OF THE JOHN VANN COMPANY
On July 15, 1999, Rushmore Financial Group, Inc. ("the Company")
acquired via merger The John Vann Company, a Texas corporation engaged in
business as a registered investment adviser (Vann). The transaction is
structured as a merger of the Company's wholly owned subsidiary, Rushmore
Investment Advisors, Inc., into Vann in exchange for 550,000 shares of the
Company's common stock. The surviving corporation changed its name in the merger
back to Rushmore Investment Advisors, Inc. The purchase price was determined by
means of arms-length negotiations between the Company and the shareholder of
Vann. Vann is a privately owned corporation owned by an affiliate of Mr. John A.
Vann of Dallas. Mr. Vann will remain with the advisory firm as its chairman,
chief executive officer and chief investment officer, pursuant to a three year
Employment Agreement. Mr. Vann and D.M. Moore, Jr., Chief Executive Officer of
the Company, entered into a three year Voting Agreement to vote their shares to
elect each other to the Board of Directors of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) (b) Pursuant to Item 310(c) of Regulation S-B, financial statements
and pro forma financial information regarding Vann are not required.
(c) Exhibits
2.2 Agreement and Plan of Merger dated June 30, 1999 with
The John Vann Company
10.1.3. Employment Agreement with John Vann
10.12. Voting Agreement between John A. Vann and
D.M. Moore, Jr.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RUSHMORE FINANCIAL GROUP, INC.
Dated: July 24, 1999 By: /s/ D. M. Moore, Jr.
Name: D. M. Moore, Jr.
Title Chief Executive Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.2 Agreement and Plan of Merger dated June 30, 1999 with The John Vann Company
10.1.3. Employment Agreement with John Vann
10.12. Voting Agreement between John A. Vann and D.M. Moore, Jr.
</TABLE>
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of June 30, 1999,
among THE JOHN VANN COMPANY, a Texas corporation (the "Company"); JOHN A. VANN
("VANN") JVC Financial, L.L.C., ("JVC") the owner of 100% of the issued and
outstanding common stock of the Company; RUSHMORE FINANCIAL GROUP, INC., a Texas
corporation (the "Parent"); and RUSHMORE INVESTMENT ADVISORS, INC., a Texas
corporation, and a wholly owned Subsidiary of Parent ("Purchaser").
WHEREAS, JVC and the respective Boards of Directors of Parent, the
Purchaser and the Company have duly approved the acquisition of the Company by
means of a Merger of the Purchaser with and into the Company pursuant to the
terms of this Agreement, it is therefore agreed as follows:
ARTICLE I.
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the Texas Business
Corporation Act (the "Act"), the Company shall be merged with the Purchaser (the
"Merger") as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions set forth in Article VI hereof. Following the
Merger the Company shall continue as the surviving corporation (the "Surviving
Corporation") and continue its existence under the laws of the State of Texas,
and the separate corporate existence of the Purchaser shall cease.
SECTION 1.2 Effective Time. The Merger shall be consummated by filing
with the Secretary of State of Texas the Articles of Merger in the form attached
hereto as Exhibit "A" (the "Articles of Merger") (the time of such filing being
the "Effective Time"). The effective date of the Merger for all purposes shall
be July 1, 1999, notwithstanding a later filing of the Articles of Merger.
SECTION 1.3 Effects of the Merger. The Merger shall have the effects
set forth in Article 5.06 of the Act. As of the Effective Time, the Purchaser
shall merge with and into the Company, and the Company shall become a direct
wholly owned Subsidiary of Parent. It is the intention of the parties that the
Merger will constitute a tax-free reorganization pursuant to the provisions of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986 (as amended) (the
"Code").
SECTION 1.4 Articles of Incorporation and Bylaws. The Articles of
Incorporation of the Company and the Bylaws of the Company, both as in effect at
the Effective Time, shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation. The Articles of Incorporation of the Company will be
amended in the Merger to change its name to "Rushmore Investment Advisors,
Inc.", and the Company will file an Assumed Name Certificate to use the name
"The John Vann Company" on a transitional basis.
SECTION 1.5 Directors. As of the Effective Time, all directors of the
Company shall resign or be removed, and the directors of the Purchaser will be
elected to become the directors of the Surviving Corporation. Vann shall also be
elected to become a director of the Surviving Corporation and will be the
Chairman of its Board of Directors.
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SECTION 1.6 Officers. Upon execution of this Agreement and satisfaction
of all conditions to the Closing of the Merger, the officers of the Purchaser
will be elected to become officers of the Surviving Corporation as of the
Effective Time. Vann will become the Chairman, Chief Executive Officer and Chief
Investment Officer of the Surviving Corporation. Vann will also be elected to
the offices in the Parent as set forth in Section 5.8.
SECTION 1.7 Transfer of and Payment for Shares.
(a) All shares of common stock, no par value ("Shares"), of
the Company issued and outstanding immediately prior to the Effective Time,
shall, by virtue of the Merger and without any action on the part of any holder
thereof, be cancelled and reissued as newly issued, fully paid, and
non-assessable shares of the common stock, par value $0.01 per share, of the
Parent issued in the name of JVC. Until surrendered in accordance with the
provisions of this Section, each certificate representing shares of the Company
shall represent for all purposes the right to receive the Merger Consideration.
At and after the Effective Time there shall be no transfers of Shares which were
outstanding immediately prior to the Effective Time on the stock transfer books
of the Company. If, after the Effective Time, certificates are presented to the
Company, they shall be cancelled and exchanged for the Merger Consideration
provided in this Article I. At the close of business on the day prior to the
Effective Time the stock ledger of the Company shall be closed. From and after
the Effective Time, holders of certificates formerly evidencing Shares of the
Company shall cease to have any rights as stockholders of the Company, except as
provided herein or by law.
(b) In exchange for the cancelled shares of the Company, JVC
shall be entitled to receive the following (referred to as the "Merger
Consideration"):
(i) 500,000 restricted shares of the Parent's common
stock, issued within 10 days after the Effective Time upon listing of
such shares with the Nasdaq Stock Market.
(ii) 50,000 restricted shares of the Parent's common
stock issued 90 days from the Effective Time, subject to adjustment
downward for any cash paid or debt assumed prior to the issuance of the
shares to JVC from the Company in excess of Vann's normal monthly draw.
The number of shares to be reduced under this subsection will be based
on the amount of such cash payment or debt assumed divided by $6.00 per
share.
(iii) a number of restricted shares of Parent's
common stock equal to $3,300,000, divided by the average closing sales
price of the common stock on Nasdaq for the trading days between June
18, 1999 and the Closing Date, less 550,000 shares, shall be issued and
held by the Chief Financial Officer of Parent and will be delivered to
JVC twelve months after Closing unless the Parent common stock shall
have achieved a closing sales price for at least 30 trading days during
such twelve month period equal to or greater than $6.00 per share.
<PAGE> 3
SECTION 1.8 Closing. Upon the terms and subject to the conditions
hereof, as soon as practicable after the mutual agreement of the Company, the
Parent and the Purchaser that all conditions described in Article VI have been
satisfied or waived by the applicable party, the Company and Purchaser shall
execute in the manner required by the Act and deliver to the Texas Secretary of
State duly executed and verified Articles of Merger, and the parties shall
forthwith thereafter take such other and further actions as may be required by
law to make the Merger effective. Contemporaneous with the filings referred to
in this Section, a closing (the "Closing") will be held at the offices of Glast,
Phillips & Murray, P.C., 13355 Noel Road, Suite 2200, Dallas, Texas 75240, for
the purpose of implementing all transactions described in this Agreement.
SECTION 1.9 Excluded Assets. Prior to the Effective Time, the Company
shall take appropriate action to convey to JVC or its designee the assets and
any liabilities associated with such assets that are listed in the Disclosure
Schedule.
SECTION 1.10 Conveyed Assets. Prior to the Effective Time, JVC shall
convey to the Company the assets and their associated liabilities that are
identified in the Disclosure Schedule, comprising all assets utilized by the
Company in its investment advisory and management business not theretofore owned
by the Company.
ARTICLE II.
APPRAISAL RIGHTS
SECTION 2.1 Stockholders Rights. By virtue of the Act, the stockholders
of the Company are entitled to exercise any appraisal rights in connection with
the Merger. It is a condition to Parent's and Purchaser's obligation to complete
the Merger that no stockholder of the Company, including JVC, shall exercise any
dissenter's rights.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, VANN AND JVC
The Company, JVC and Vann jointly and severally represent and warrant
to the Parent and Purchaser as follows:
SECTION 3.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. The Company has all requisite power and authority to own
or operate its properties and conduct its business as it is now being conducted.
The Company is duly qualified and in good standing as a foreign corporation or
entity authorized to do business in each of the jurisdictions in which the
character of the properties owned or held under lease by it or the nature of the
business transacted by it makes such qualification necessary, except where the
failure to qualify would not have a Material Adverse Effect. The Company has
delivered to Purchaser true and correct copies of the Articles of Incorporation
and Bylaws of the Company.
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SECTION 3.2 Capitalization; Subsidiaries.
(a) The authorized capital stock of the Company consists of
1,000,000 Shares. As of June 30, 1999, 930 Shares were issued and outstanding.
Except as described in the Disclosure Schedule, since June 30, 1999, the Company
has not issued any shares or other capital stock, and has not repurchased or
redeemed any Shares. The Company does not have any shares of its capital stock
reserved for issuance. All issued and outstanding Shares are validly issued,
fully paid, non-assessable and free of preemptive rights.
(b) The Company does not have and has never had any
subsidiaries or owned securities comprising more than 10% of the ownership of
any of the Company, entity or person
SECTION 3.3 Authority Relative to this Agreement. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby shall, as of the Closing, have been duly and validly authorized by the
Board of Directors and JVC, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by the Company and, assuming this Agreement constitutes a valid
and binding obligation of each of Parent and Purchaser, this Agreement
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with and subject to its terms and conditions.
SECTION 3.4 Financial Statements. The Company has delivered to
Purchaser copies of its financial statements as of and for the years ended
September 30, 1998, certified by Cheshier & Fuller, and for the six months ended
March 31, 1999 (the "Company Financial Statements"). Each of the Company
Financial Statements fairly presents the financial position of the entity or
entities to which it relates as of its date, and each of the related statements
of operations and retained earnings and cash flows or equivalent statements in
the Company Financial Statements (including any related notes and schedules)
fairly presents the results of operations, retained earnings and cash flows, as
the case may be, of the entity or entities to which it relates for the period
set forth therein in each case in accordance with generally accepted accounting
principles applicable to the particular entity consistently applied throughout
the periods involved, except as may be noted therein. The accounts receivable,
notes receivable and any other contingent asset reflected on the latest balance
sheet of the Company arose from bona fide transactions in the ordinary course of
business, and, to the best of the Company's knowledge, are not subject to any
offset or counterclaim.
SECTION 3.5 Consents and Approvals; No Violation. Except as described
in the Disclosure Schedule, neither the execution and delivery of this Agreement
by the Company nor the consummation of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (a) conflict
with or result in any breach of any provision of the Articles of Incorporation,
Bylaws or other organization documents of the Company, (b) require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority (as defined herein), except (i) the filing of the
Articles of Merger pursuant to the Act, (ii) filing of amended Forms ADV by both
the Company and Purchaser, or (iii) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not in the aggregate have a Material Adverse Effect (as defined herein), (c)
result in a material default (with or without due notice or lapse of time or
both) (or give rise to any right
<PAGE> 5
of termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, Contract (as hereinafter
defined), license, agreement or other instrument or obligation to which the
Company is a party or by which the Company or its assets may be bound, except
for such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been requested, (d) result in the
creation or imposition of any lien, charge or other encumbrance on the assets of
the Company, or (e) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company, or any of its assets.
SECTION 3.6 Litigation, etc. Except as described in the Disclosure
Schedule, (a) there is no action, claim, or proceeding pending or, to the
knowledge of the Company, threatened, to which the Company or is or would be a
party before any court or Governmental Authority acting in an adjudicative
capacity, or any arbitrator or arbitration tribunal; (b) the Company is not
subject to any outstanding order, writ, injunction or decree; and (c) since
December 31, 1998, there have been no claims made or actions or proceedings
brought against any officer or director of the Company arising out of or
pertaining to any action or omission within the scope of his employment or
position with the Company. All litigation and other administrative, judicial or
quasi-judicial proceedings to which the Company is a party or to which it has
been threatened to the Company's knowledge to be made a party, are described in
the Disclosure Schedule.
SECTION 3.7 Changes. Except as expressly contemplated by this Agreement
or as reflected in the Disclosure Schedule or in the Company Financial
Statements, since March 31, 1999, the Company has conducted its business only in
the ordinary and usual course, and, except as set forth in the Disclosure
Schedule or in the Company Financial Statements, none of the following has
occurred, except as shall have occurred in the ordinary course of its business:
(a) any material adverse change in the condition (financial or
other), results of operations, business, assets, customer, supplier and employee
relations of the Company, taken as a whole;
(b) any change in accounting methods, principles or practices
by the Company materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in generally accepted accounting
principles;
(c) any damage, destruction or loss, whether or not covered by
insurance, resulting in a Material Adverse Change of the Company and its
Subsidiaries;
(d) any declaration, setting aside or payment of dividends or
distributions in respect of the Shares, or any redemption, purchase or other
acquisition of any of the securities of the Company;
(e) any issuance by the Company of, or commitment of the
Company to issue, any Shares or other capital stock or securities convertible
into or exchangeable or exercisable for Shares or other capital stock;
(f) any entry by the Company into any commitment or
transaction material to the condition (financial or other), business or
operations of the Company, taken as a whole, which is not in the ordinary course
of business and consistent with past practice;
<PAGE> 6
(g) any revaluation by the Company of any of its assets,
including without limitation, writing down the value of assets or writing off
notes or accounts receivable other than in the ordinary course of business and
consistent with past practice;
(h) any agreement by the Company to do any of the things
described in the preceding clauses (a) through (g) other than as expressly
contemplated or provided for herein; or
(i) any waiver by the Company of any rights that, singularly
or in the aggregate, are material to the business, assets, financial condition,
or results of operation of the Company, taken as a whole.
SECTION 3.8 Real Property.
(a) The Disclosure Schedule sets forth the location and legal
description of each parcel of Real Property owned, leased or utilized by the
Company.
(b) The Real Property and the present uses thereof comply in
all material respects with all material laws and regulations (including zoning
laws and ordinances) of each Government having jurisdiction over the Real
Property, and the Company has not received any notice from any Government
alleging that the Real Property or any improvements erected or situated thereon,
or the uses conducted thereon or therein, violate any regulations of any
Government having jurisdiction over the Real Property.
(c) The Company holds all Environmental Permits necessary for
conducting the Business and has conducted, and is presently conducting, the
Business in material compliance with all applicable Environmental Laws and
Environmental Permits held by it, including, without limitation, all record
keeping and filing requirements. To the Company's, JVC's and Vann's knowledge,
all Hazardous Materials and Solid Waste, on, in, or under Real Property have
been properly removed and disposed of, and to the Company's, JVC's and Vann's
knowledge no past or present disposal, discharge, spill, or other release of, or
treatment, transportation, or other handling of Hazardous Materials or Solid
Waste on, in, under, or off-site from any Real Property will subject the
Purchaser, or any subsequent owner, occupant, or operator of the Real Property
to corrective or compliance action or any other liability. There are no pending,
or to the Company's, JVC's and Vann's knowledge, threatened Actions or Orders
against or involving the Company relating to any alleged past or ongoing
violation of any Environmental Laws or Environmental Permits with respect to the
Real Property, nor to the Company's, JVC's and Vann's knowledge is the Company
subject to any liability for any such past or ongoing violation.
SECTION 3.9 ERISA Matters. The Company and all "Employee Benefit Plans"
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), that cover any of its or their employees (which
Employee Benefit Plans are listed on the Disclosure Schedule), comply in all
material respects with all applicable laws, requirements and orders under ERISA
and the Internal Revenue Code of 1986, as amended (the "Code"), the breach or
violation of which would have a Material Adverse Effect on the Company, taken as
a whole; the present value of all the assets of each of its Employee Benefit
Plans that it is subject to Title IV of ERISA equals or exceeds to the knowledge
of the Company the present value of all of the benefits accrued under each such
Employee Benefit Plan as of the end of most recent plan year with respect to
such plan ending prior to the date hereof, calculated on the basis of the
actuarial assumptions used in the last actuarial evaluation for each such plan;
none of the employees of the
<PAGE> 7
Company is covered by a collective bargaining agreement; the Company has never
contributed to a "multi-employer plan" as defined in Section 3(37) of ERISA;
neither the Employee Benefit Plans nor any fiduciary or administrator thereof
has engaged in a "prohibited transaction" as defined in Section 406 of ERISA or,
where applicable, Section 4975 of the Code for which no exemption is applicable,
that may have any Material Adverse Effect on the Company, taken as a whole, nor
to the knowledge of the Company have there been any "reportable events" as
defined in Section 4043 of ERISA for which the thirty-day notice has not been
waived.
SECTION 3.10 Taxes, Tax Returns.
(a) The Company has delivered to Parent copies of the federal
income tax returns of the Company for each of the last three fiscal years and
all schedules and exhibits thereto. Except as set forth on the Disclosure
Schedule, the Company has duly and timely filed in correct form all federal,
state and local information returns and tax returns required to be filed by it
on or prior to the date hereof (all such returns to the knowledge of the Company
being accurate and complete in all material respects) and, to the knowledge of
the Company, has duly paid or made provision for the payment of all taxes and
other governmental charges which have been incurred or are due or claimed to be
due from them by any Governmental Authority (including, without limitation,
those due in respect of their properties, income, business, capital stock,
franchises, licenses, sales and payrolls) other than taxes or other charges (i)
which are not yet delinquent or are being contested in good faith and set forth
in the Disclosure Schedule, (ii) have not been finally determined or (iii) that
would not have a Material Adverse Effect on the Company. The liabilities and
reserves for taxes in the Company Financial Statements are sufficient to the
best of the Company's knowledge in the aggregate for the payment of all unpaid
federal, state and local taxes (including any interest or penalties thereon),
whether or not disputed or accrued, for the period ended September 30, 1998, or
for any year or period prior thereto, and for which the Company may be liable in
its own right or as transferee of the assets of, or successor to, any
corporation, person, association, partnership, joint venture or other entity.
(b) To the knowledge of the Company, (i) proper and accurate
amounts have been withheld by the Company from their employees and others for
all prior periods in compliance in all material respects with the tax
withholding provisions of applicable federal, state and local laws and
regulations, and proper due diligence steps have been taken in connection with
back-up withholding, (ii) federal, state and local returns which are accurate
and complete in all material respects have been filed by the Company for all
periods for which returns were due with respect to income tax withholding,
Social Security and unemployment taxes and (iii) the amounts shown on such
returns to be due and payable have been paid in full, or adequate provision
therefore has been included by the Company in the most recent Company Financial
Statements.
SECTION 3.11 Tax Audits. Except as disclosed in the Disclosure
Schedule, (i) no audit of any material federal, state or local U.S. return of
the Company is currently in progress, nor has the Company been notified that
such an audit is contemplated by any taxing authority, (ii) the Company has not
extended any statute of limitations with respect to the period for assessment of
any federal, state or local U.S. tax, (iii) the Company does not contemplates
the filing of an amendment to any return, which amendment would have a Material
Adverse Effect on the Company, and (iv) the Company has no actual or potential
material liability for any tax obligation of any taxpayer other than the
Company. Except as disclosed in the Disclosure
<PAGE> 8
Schedule, there are no material tax claims pending against the Company and there
are no material tax claims to the knowledge of the Company threatened to be
asserted against the Company. For purposes of this Section 3.11, "tax" and
"taxes" shall include all income, gross receipt, franchise, excise, real and
personal property, sales, ad valorem, employment, withholding and other taxes
imposed by any foreign, federal, state, municipal, local, or other Governmental
Authority including assessments in the nature of taxes.
SECTION 3.12 Undisclosed Liabilities. The Company is not liable for or
subject to any material Liabilities (as hereinafter defined), except (a)
Liabilities adequately disclosed or reserved for in the most recent Company
Financial Statements and not heretofore paid or discharged, (b) Liabilities
under any contract, commitment or agreement specifically disclosed on the
Disclosure Schedule, or (c) Liabilities incurred, consistent with past practice,
in or as a result of the ordinary course of business of the Company since the
date of the most recent Company Financial Statements. As used in this Agreement,
the term "Liability" or "Liabilities" includes any material direct or indirect
liability, indebtedness, obligation, guarantee or endorsement (other than
endorsements of notes, bills, and checks presented to banks for collection or
deposit in the ordinary course of business), whether known or unknown, accrued,
absolute, contingent or otherwise.
SECTION 3.13 No Default; Compliance.
(a) Except as set forth in the Disclosure Schedule, to the
knowledge of JVC and Vann, the Company is not in material default under, and no
condition exists that with notice or lapse of time or both would constitute a
material default under, (i) any mortgage, loan agreement, indenture, evidence of
indebtedness or other instrument evidencing borrowed money to which the Company
is a party or by which the Company or its properties is bound, (ii) any
judgment, order or injunction of any court, arbitrator or governmental agency or
(iii) any other agreement, contract, lease, license or other instrument, which
default or potential default might reasonably be expected to have a Material
Adverse Effect.
(b) Except as set forth in the Disclosure Schedule, the
Company has complied in all material respects with all laws, regulations,
orders, judgments or decrees of any federal or state court or Governmental
Authority applicable to its business and operations, non-compliance with which
might reasonably be expected to have a Material Adverse Effect.
SECTION 3.14 Representations and Warranties Continuing. The
representations and warranties set forth herein shall be true and correct on the
date hereof and subject to an update of the Disclosure Schedule from time to
time, at all times prior to the Effective Time as if made from time to time,
including, without limitation, at the Effective Time and the Closing.
SECTION 3.15 Contracts and Commitments. Except as listed and described
in the Disclosure Schedule or the Company Financial Statements, the Company is
not a party to, nor is it or its assets bound by any written or oral covenant,
contract, agreement or understanding (a "Contract"), excluding the Franchise
Agreements referred to in Section 3.22, but including the following:
(a) Contract with any present or former stockholder, director,
officer, employee or consultants;
<PAGE> 9
(b) Contract with any labor union or other representative of
employees;
(c) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of services by a third party,
involving payment or potential payment by the Company of $10,000 or more under
any one Contract or series of related Contracts;
(d) any Contract, including, without limitation, any
outstanding quotations, bids or proposals, to sell goods or to perform services
in an aggregate amount in excess of $10,000;
(e) distributorship, representative or sales agency agreement,
contract or commitment;
(f) conditional sale agreement or lease under which the
Company is either the seller or purchaser, lessor or lessee, involving
annualized payments or potential payments by or to the Company that is in excess
of $10,000;
(g) Contract (including, without limitation, any note,
debenture, bond, conditional sale or equipment trust agreement, letter of credit
agreement or loan agreement) for the borrowing or lending of money more than
$10,000 (including, without limitation, those to or from officers, directors or
stockholders of the Company, or any affiliates or members of their immediate
families, for a line of credit, or for a guarantee, security, indemnitee, pledge
or undertaking of the indebtedness or obligations of any other person);
(h) Contract for any charitable or political contribution;
(i) Contract for any capital expenditure involving future
payments, which, together with future payments under all other existing
Contracts for the same capital project, are in excess of $10,000;
(j) Contract limiting or restraining the Company from engaging
or competing in any lines of business with any person, nor is any officer or
employee of the Company subject to any such agreement, contract or commitment;
(k) license, franchise, distributorship or other Contract
relating in whole or in part to any ideas, technical assistance or other
know-how of or used by the Company;
(l) Contract greater than $10,000 which is expected to
continue for more than six months from the date hereof;
(m) Contract not made in the ordinary course of business;
(n) any guaranty, direct or indirect, of any person of any
contract, lease or agreement in an amount greater than $10,000 entered into by
the Company;
Except as may be disclosed on the Disclosure Schedule: each of the Contracts
listed on the Disclosure Schedule is valid and enforceable in accordance with
its terms; to the best of the Company's knowledge, the Company and the other
parties thereto are in substantial compliance with the provisions thereof;
except as
<PAGE> 10
may be disclosed on the Disclosure Schedule, neither the Company nor any other
party is (or by reason of the consummation of the transactions contemplated by
this Agreement, will be) in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained therein and no
event has occurred or is anticipated to occur (including the consummation of the
transactions contemplated by this Agreement) which with or without the giving of
notice or lapse of time, or both, would constitute a default or give the right
of termination thereunder.
SECTION 3.16 Compliance with Law and Permits. To its knowledge, the
Company has owned and operated its properties and assets in substantial
compliance with the provisions and requirements of all laws, orders,
regulations, rules and ordinances issued or promulgated by all Governmental
Authorities having jurisdiction with respect thereto, specifically including the
Investment Advisers Act of 1940 and the Texas Securities Act, except where the
failure to own and operate such properties and assets in compliance with such
provisions and requirements would not reasonably be expected to have a Material
Adverse Effect. All material governmental certificates, consents, permits,
licenses or other authorizations with regard to the ownership or operation by
the Company of its properties and assets have been obtained, and to the
knowledge of the Company no violation exists in respect of such licenses,
permits or authorizations, except where the failure to obtain and hold such
permits, or any violation thereof by the Company, would not reasonably be
expected to have a Material Adverse Effect. To the knowledge of JVC and Vann,
none of the documents and materials filed with or furnished to any Governmental
Authority with respect to the properties, assets or businesses of the Company
contains any untrue statement of a material fact or fails to state a material
fact necessary to make the statements therein not misleading.
SECTION 3.17 Title to Property. Except as disclosed on the Disclosure
Schedule, the Company has good and marketable title, insured with respect to
properties and assets which currently are of a type for which insurance is
generally available, free and clear (except as indicated in the Disclosure
Statement or in the most recent Company Financial Statements and liens for
current taxes not yet due and payable), of all security interests, liens,
encumbrances and encroachments of a material nature, to its real property and
other property and assets that are material to the Company's business on a
consolidated basis.
SECTION 3.18 Insurance and Bank Accounts
(a) The Disclosure Schedule sets forth a complete and accurate
list and description of all insurance policies in force naming the Company or
any employees as an insured or beneficiary or as a loss payable payee or for
which the Company has paid or is obligated to pay all or part of the premiums.
The Company has not received notice of any pending or threatened termination or
retroactive premium increase with respect thereto, and the Company is in
compliance in all material respects with all conditions contained therein. There
are no pending material claims against such insurance by the Company as to which
insurers have denied liability, no defenses provided by insurers under
reservations of rights, and no material claim under such insurance that has not
been properly filed by the Company.
(b) The Disclosure Schedule contains a list of all bank and
investment accounts maintained by the Company, including the account numbers,
recent balance, institution, and persons having signing authority.
SECTION 3.19 Employees. The Disclosure Statement sets forth a list of
the employees of the
<PAGE> 11
Company, stating with respect to each the name, date of hire, rate of
compensation and any commission or bonus arrangement. Except as described in the
Disclosure Statement, there are no claims or disputes pending with any employee
regarding workers' compensation, unemployment benefits, discrimination
(including discrimination based on any disability), or compensation, and no
employment or collective bargaining agreements are in effect covering any such
person.
SECTION 3.20 Tangible Personal Property. The Disclosure Statement
contains a complete and accurate description and the location of all equipment,
furniture, supplies, and other tangible personal property owned by, in the
possession of, or used by any of the Company. Except as stated in the Disclosure
Schedule hereof, no personal property used by the Company in connection with the
Business is held under any lease, security agreement, conditional sales
contract, or other title retention or security arrangement, or is other than in
the possession and under the control of the Company. The tangible personal
property reflected in those books and records constitutes all such tangible
personal property necessary for the conduct of the Business as now conducted by
the Company.
SECTION 3.21 Trade Names, Trademarks, and Copyrights. The Disclosure
Schedule sets forth all trade names, trademarks, service marks, and copyrights
and their registrations, owned by the Company or in which they have any rights
or licenses, together with a brief description of each. JVC has no knowledge of
any infringement or alleged infringement by others of any trade name, trademark,
service mark, or copyright. The Company has not infringed, nor is it now
infringing, on any trade name, trademark, service mark, or copyright belonging
to any other person, firm, or corporation. Except as set forth in the Disclosure
Schedule, the Company is not a party to any license, agreement, or arrangement,
whether as licensor, licensee, franchisor (other than as franchisor pursuant to
the franchise agreements set forth in the Disclosure Schedule), franchisee, or
otherwise, with respect to any trade names, trademarks, service marks, or
applications for them, or any copyrights. The Company owns, or holds adequate
licenses or other rights to use, all trade names, trademarks, service marks, and
copyrights necessary for its respective business as now conducted by it, and
that use does not, and will not, conflict with, infringe on, or otherwise
violate any rights of others. The Company has the right to sell or assign to
Purchaser all owned trade names, trademarks, service marks, and all such
licenses and other rights.
SECTION 3.22 Title to Assets. The Company has good and marketable title
to all of its assets, whether real, personal, mixed, tangible, or intangible,
which constitute all the assets and interests in assets that are used in the
Business. All of the assets are free and clear of restrictions on or conditions
to transfer or assignment, and of mortgages, liens, pledges, charges,
encumbrances, equities, claims, easements, rights of way, covenants, conditions,
or restrictions, except for (a) those disclosed in the Financial Statements or
in the Disclosure Schedule; (b) the lien of current taxes not yet due and
payable; and (c) possible minor matters that, in the aggregate, are not
substantial in amount and do not materially detract from or interfere with the
present or intended use of any of these assets or materially impair business
operations. The Company is not in default or in arrears in any material respect
under any lease of property used in the Business. All tangible personal property
of Seller are in good operating condition and repair, ordinary wear and tear
expected.
SECTION 3.23 Millennium Compliance. To the current, actual knowledge of
the Company, JVC and Vann, the computer hardware and software systems used for
the storage and processing of data ("Systems") by the Company are Millennium
Compliant. The Company has received reasonable assurances
<PAGE> 12
that none of the Systems, operations, or business functions relating to the
Business will be materially adversely affected by any third party's failure to
be Millennium Compliant and that all of the suppliers and third party providers
of the Business are Millennium Compliant. To the best knowledge of JVC and Vann
based on advice from service providers the Company is taking or has taken all
necessary and appropriate action to address and remedy any deficiencies in
Systems from becoming Millennium Compliant. For purposes of this Section 3.23,
"Millennium Compliant" shall mean the ability of Systems to provide the
following functions, without human intervention, individually and in combination
with other products or systems: (a) consistently handle date information before,
during, and after January 1, 2000, including but not limited to accepting date
input, providing date output, and performing calculations on dates or portions
of dates; (b) function accurately and without interruption before, during, and
after January 1, 2000 (including leap year computations), without any change in
operations associated with the advent of a new century; (c) respond to two-digit
date input in a way that resolves any ambiguity as to century in a disclosed,
defined, and predetermined manner; and (d) store and provide output of date
information in ways that are unambiguous as to century.
SECTION 3.24 Accounts Receivable. The accounts receivable set forth in
the Company Financial Statements and those accounts receivable accruing through
the Effective Time represent valid and bona fide sales to third parties incurred
in the ordinary course of business, collectible in accordance with their terms,
subject to no defenses, set-offs or counterclaims, except to the extent of any
reserves for doubtful accounts reflected in the March 31, 1999, balance sheet
included in the Company Financial Statements.
SECTION 3.25 Interests in Customers, Suppliers, Etc. No shareholder,
officer, director or affiliate of the Company possesses, directly or indirectly,
any financial interest in, or is a director, officer, employee or affiliate of,
any corporation, firm, association or business organization that is a client,
supplier, customer, lessor, lessee or competitor of such Company. Ownership of
securities of a corporation whose securities are registered under the 1934 Act
not in excess of five percent (5%) of any class of such securities shall not be
deemed to be a financial interest for purposes of this Section.
SECTION 3.26 Investment Purpose. JVC and Vann represent that each is
acquiring and will acquire, as the case may be, the shares of Parent issuable to
it pursuant hereto solely for its own account for investment purposes only and
not with a view toward resale or distribution thereof other than pursuant to an
effective registration statement or applicable exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act").
JVC and Vann understand that such shares of Parent common stock will be issued
in reliance upon an exemption from the registration requirements of the
Securities Act and that subsequent sale or transfer of such securities is
prohibited absent registration or exemption from the provisions of the
Securities Act. JVC and Vann hereby agree that they will not sell, assign,
transfer, pledge or otherwise convey any of the shares of the Parent common
stock issuable pursuant hereto, except in compliance with the provisions of the
Securities Act and in accordance with any transfer restrictions or similar terms
set forth on the certificates representing such securities or otherwise set
forth herein.
<PAGE> 13
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Parent and Purchaser jointly and severally represent and warrant to the
Company, JVC and Vann as follows:
SECTION 4.1 Authority Relative to this Agreement. The Parent and
Purchaser have all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
sole stockholder of the Purchaser and the Boards of Directors of the Parent and
Purchaser, and no other corporate proceedings on the part of the Parent and
Purchaser are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by the Parent and Purchaser and, assuming this Agreement
constitutes a valid and binding obligation of the Company, this Agreement
constitutes a valid and binding agreement of the Parent and Purchaser,
enforceable against the Parent and Purchaser in accordance with and subject to
its terms and conditions.
SECTION 4.2 SEC Reports. Since January 1, 1998, to the best of its
knowledge the Parent has filed all required forms, reports and documents
("Parent SEC Reports") with the Securities and Exchange Commission (the "SEC")
required to be filed by it pursuant to the federal securities laws and the SEC
rules and regulations thereunder, all of which have complied in all material
respects with all applicable requirements of the Securities Act and the
Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and
interpretive releases promulgated thereunder. None of such Parent SEC Reports,
including without limitation any financial statements, notes, or schedules
included therein, at the time filed, contained, or, if to be filed in the future
will contain, any untrue statement of a material fact, or omitted, omit or will
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
Each of the consolidated balance sheets in or incorporated by reference
into the Parent SEC Reports fairly presents or will fairly present the financial
position of the entity or entities to which it relates as of its date, and each
of the related consolidated statements of operations and retained earnings and
cash flows or equivalent statements in the Parent SEC Reports (including any
related notes and schedules) fairly presents or will fairly present the results
of operations, retained earnings and cash flows, as the case may be, of the
entity or entities to which it relates for the period set forth therein (subject
in the case of unaudited interim statements, to normal year-end audit
adjustments) in each case in accordance with generally-accepted accounting
principles applicable to the particular entity consistently applied throughout
the periods involved, except as may be noted therein. The consolidated financial
statements included or to be included in the Parent SEC Reports are hereinafter
sometimes collectively referred to as the "Parent Financial Statements."
SECTION 4.3 Consents and Approvals; No Violation. Except as described
in the Disclosure Schedule, neither the execution and delivery of this Agreement
by the Parent and Purchaser nor the consummation of the transactions
contemplated hereby nor compliance by the Parent and Purchaser with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Articles of Incorporation or By-laws of the Parent, (ii)
require any consent, approval, authorization or permit of, or
<PAGE> 14
filing with or notification to, any Governmental Authority, except (A) the
filing of Articles of Merger pursuant to the Act, or (B) where the failure to
obtain such consent, approval, authorization or permit, or to make such filing
or notification, would not in the aggregate have a Material Adverse Effect,
(iii) result in a material default (with or without due notice or lapse of time
or both) (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, Contract, license, agreement or other instrument or
obligation to which the Parent is a party or by which the Parent, or any of
their respective assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been requested or which, in the aggregate, would not have a
Material Adverse Effect, (iv) result in the creation or imposition of any lien,
charge or other encumbrance on the assets of the Parent, or (v) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Parent, or any of their respective assets, except for violations which would not
in the aggregate have a Material Adverse Effect.
ARTICLE V.
COVENANTS
SECTION 5.1 Conduct of Business of the Company. Except as contemplated
by this Agreement or disclosed in the Disclosure Schedule, during the period
from the date of this Agreement to the Effective Time, the Company will conduct
its operations according to their ordinary and usual course of business and
consistent with past practice. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in this Agreement or disclosed in the
Disclosure Schedule, the Company will not, prior to the Effective Time, without
the prior written consent of Parent (a) issue, sell or pledge, or authorize or
propose the issuance, sale or pledge of (i) additional shares of capital stock
of any class, or securities convertible into any such shares, or any rights,
warrants or options to acquire any such shares or other convertible securities,
or (ii) any other securities in respect of, in lieu of or in substitution for,
capital stock outstanding on the date hereof; (b) purchase or otherwise acquire,
or propose to purchase or otherwise acquire, any outstanding securities; (c)
declare or pay any dividend or distribution on any shares of its capital stock;
(d) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into an agreement in principle or an agreement
with respect to, any merger, consolidation or business combination (other than
the Merger), any acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities or any material change
in its capitalization, or any entry into a material contract or any release or
relinquishment of any material contract rights, not in the ordinary course of
business; (e) propose or adopt any amendments to its charter or by-laws; (f)
enter into, assign or terminate, or amend in any material respect, any Contract
other than in the ordinary course of business; (g) acquire, dispose of, encumber
or relinquish any material asset (other than sale of real properties at prices
equal to or greater than their carrying values); (h) waive, compromise or settle
any right or claim that would adversely affect the ownership, operation or value
of any asset; (i) make any capital expenditures other than pursuant to existing
capital expenditure programs that are disclosed in the Disclosure Schedule; (j)
allow or permit the expiration, termination or cancellation at any time prior to
the Effective Time of any of the insurance policies or coverages or surety bonds
currently maintained by or on behalf of the Company unless replaced with a
policy, coverage or bond having substantially the same coverage and similar
terms and conditions; (k) increase, directly or indirectly, the salary or other
compensation of any officer or member of management, enter into any employment
agreement with any person or pay or enter into any agreement to pay any bonuses
or other extraordinary compensation to any officer of the Company or to any
member
<PAGE> 15
of management or other employees, or institute any general increase in rates of
compensation for its employees, or increase, directly or indirectly, any
provisions or other benefits of any of such persons; or (l) waive, settle or
compromise any material litigation or other claim on a basis materially adverse
to the Company.
SECTION 5.2 No Solicitations. Neither the Parent nor any of its
subsidiaries shall, and they shall use their best efforts to ensure that none of
their respective affiliates, officers, directors, representatives or agents
shall, directly or indirectly, solicit, initiate or encourage (including by way
of furnishing information) any corporation, partnership, person, entity or group
concerning any merger, sale of substantial assets (except as permitted by
Section 5.1(g)) outside the ordinary course of business, sale of shares of
capital stock or similar transaction involving the Company (other than the
transactions contemplated by this Agreement). The Company will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing. The
parties will promptly communicate to the other the terms of any proposal or
inquiry, oral or written, which may be received in respect of any such
transaction, and will inform the other prior to the time that it furnishes any
information to, or engages in negotiations or discussions with, any third party
with respect to the acquisition of either party.
SECTION 5.3 Access to Information
(a) Between the date of this Agreement and the Effective Time,
the parties will afford to one another and their authorized representatives
reasonable access to the other Real Property and to the books and records of
such party, will permit the parties and their representatives to make such
reasonable inspections as they may require and will cause their officers to
furnish the parties and their representatives with such financial and operating
data, environmental assessments and other information with respect to the
business and Real Property of the parties as they and their representatives may
from time to time reasonably request. No inspection or examination by either
party will constitute a waiver of any claim against the other party for
misrepresentation or breach of this Agreement.
(b) The parties will hold and will cause their representatives
to hold in strict confidence, unless compelled to disclose by judicial or
administrative process, or, in the opinion of counsel, by other requirements of
law, all documents and information concerning the parties furnished to them and
their representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(i) in the public domain through no fault of the parties or their
representatives, or (ii) later lawfully acquired by the parties or their
representatives from other sources unless they or their representatives know
that such other sources are not entitled to disclose such information) and will
not release or disclose such information to any other person, except their
auditors, attorneys, financial advisors and other consultants and advisors in
connection with this Agreement, provided that such person shall have first been
advised of the confidentiality provision of this Section 5.3. If the
transactions contemplated by this Agreement are not consummated, such confidence
shall be maintained except to the extent such information can be shown to have
been (i) in the public domain through no fault of Parent, Purchaser or their
representatives, or (ii) later lawfully acquired by the parties or
representatives from other sources, and, if requested by the other party will,
and will cause its agents, auditors, consultants, representatives and advisors
to, return to the other or destroy all copies of written information furnished.
<PAGE> 16
SECTION 5.4 Best Efforts. Subject to the terms and conditions herein
provided, and to the fiduciary duties of the Boards of Directors of the parties
under applicable law, each of the parties hereto agrees to use its best efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
SECTION 5.5 Consents. Parent and the Company each will use its best
efforts to obtain such consents of third parties to agreements which would
otherwise be violated by any provisions hereof, to take all actions necessary to
effect the transactions contemplated hereby, and to make such filings with
Governmental Authorities necessary to consummate the transactions contemplated
by this Agreement including, without limitation, (a) the vigorous defense of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transaction contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or Governmental Authority vacated or reviewed, and (b) the
execution and delivery of any additional instruments (including any required
supplemental indentures) necessary to consummate the transactions contemplated
by this Agreement.
SECTION 5.6 Public Announcements. Parent and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the existence of this Agreement or the Merger and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange.
SECTION 5.7 Noncompete Agreements. In consideration of the terms of
this Agreement and in order to protect the rights of Parent and Purchaser and
its subsidiaries to its trade secrets, confidential information, and client
relationships, JVC and Vann hereby agrees as follows:
(a) JVC and Vann agree that for a period of 18 months
following the Closing, JVC and Vann shall not be an officer, director, employee,
agent or representative, or an owner of more than five percent (5%) of the
outstanding capital stock of any corporation, or an owner of any interest in, or
employee, agent or representative of, any other form of business association,
sole proprietorship or partnership that solicits, hires (whether or not
solicited) or otherwise attempts to induce any employees (excluding Carmen
Milbury), agents or representatives of Parent and its subsidiaries to terminate
their position as employee, agent or representative therewith.
(b) JVC and Vann agree that, for a period of 18 months
following the Closing, they shall not, directly or indirectly by being an
officer, director, employee, agent, representative or consultant, or a record or
beneficial owner of more than five percent of the outstanding capital stock of
any corporation or an owner of any interest in, or employee of, any other form
of business association, sole proprietorship or partnership, conduct a financial
services business or organization which engages or participates, directly or
indirectly, in any business or activity that is engaged in the sale of
insurance, securities or other investment products that solicits business from
any person that was a client of Parent or its subsidiaries at or within 12
months prior to the time of termination of Vann's employment, anywhere within
the State of Texas or any
<PAGE> 17
city of the United States in which parent and its subsidiaries maintains a
retail office.
(c) In the event that any adjudicative body shall finally hold
that this Section 5.7 constitutes an unreasonable restriction upon JVC and Vann,
the parties hereby expressly agree that the provisions of this Section 5.7 shall
not be rendered void, but shall apply as to time and territory or to such other
extent as such body may indicate constitutes a reasonable restriction under the
circumstances involved.
(d) JVC and Vann agree that irreparable harm would occur if
any of the provisions of this Section 5.7 were breached and that the Parent
shall be entitled to obtain an injunction or other equitable relief to enforce
specifically the provisions thereof in any court of competent jurisdiction.
SECTION 5.8 Employment Agreement. Vann and Parent shall enter into at
Closing the Employment Agreement in the form attached hereto as Exhibit "B".
Such agreement provides that Vann will be elected to the following positions:
Chairman, Chief Executive Officer and Chief Investment Officer of the Surviving
Corporation; Chief Investment Officer of Parent; and director of the Parent and
Surviving Corporation.
SECTION 5.9 Form ADV. Company and Purchaser shall each amend their
Forms ADV and file such amendments on or about the time of Closing in order to
reflect the transactions hereby.
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1 Conditions to the Closing. Immediately prior to the
Effective Time, the Company and the Parent shall cause to be delivered to each
other or to have received the following:
(a) A certificate, dated the date of the Effective Time of the
chief executive officer certifying that all representations and warranties made
herein are true and correct as of the date made and as of the Effective Time and
that all agreements or other actions required to be performed prior to the
Effective Time as a condition to consummating the Merger have been performed or
taken and such conditions satisfied in accordance with the terms of this
Agreement.
(b) No statute, rule, regulation, executive order, decree, or
injunction shall have been enacted, entered, promulgated or enforced by any
court of competent jurisdiction in the United States or domestic Governmental
Authority which prohibits or restricts the consummation of the Merger.
(c) There shall have been no material adverse change in the
business, properties, or financial condition of any party to this Agreement.
(d) All parties shall have delivered all documents, exhibits
and schedules and taken all other actions required by this Agreement.
(e) All representations and warranties of any party shall be
true and effective as of the Effective Time.
<PAGE> 18
(f) At the Closing, JVC shall deliver a release of all claims
it may have against the Company.
(g) The parties to the Merger shall have executed and
delivered agreements in the form of Exhibits "A" and "B".
(h) The parties shall be satisfied with the results of their
examinations of the books, records and affairs of the other party.
(i) The Company shall have received a conveyance of the assets
described in Section 1.10, and shall have divested the assets and liabilities
described in Section 1.9.
ARTICLE VII.
TERMINATION, AMENDMENTS; WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the Parent and Company, but prior to the Effective Time:
(a) by mutual written consent duly authorized by the Boards of
Directors of Company, Parent and Purchaser;
(b) by Parent or the Company if the Effective Time shall not
have occurred on or before July 31, 1999, unless such failure is caused by the
party seeking termination;
(c) by Parent or the Company if any court of competent
jurisdiction or other Governmental Authority shall have issued an order, decree
or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger or if litigation or proceedings shall be pending that are
reasonably likely to result in any of the foregoing;
(d) by the Company, if Parent or Purchaser shall not have
performed all obligations required to be performed by them under this Agreement,
except where any failure to perform would, in the aggregate, not materially
impair or delay the ability of Parent, Purchaser and the Company to effect the
Merger;
(e) by the Parent, if there shall have been a breach of any of
the covenants contained herein or if any representation or warranty made by JVC
or Company is untrue in any material respect; or
(f) by JVC or Parent if that party in its discretion is
dissatisfied with the results of their respective examinations of the books,
records and affairs of the other party.
SECTION 7.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party or its directors, officers, or stockholders, other than the provisions
of
<PAGE> 19
Sections 5.3(b) and 9.9.
SECTION 7.3 Amendment. This Agreement may be amended only by means of
an instrument in writing signed on behalf of all the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, Parent and Purchaser, may (a) extend the time for the
performance of any of the obligations or other acts of any other applicable
party hereto, (b) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by an other applicable party, or (c) waive
compliance with any of the agreements of any other applicable party or with any
conditions to its own obligations. Any agreement on the part of any other
applicable party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1 Purchaser's Right to Indemnification. Company, JVC and
Vann, jointly and severally, shall and do hereby indemnify and hold harmless,
Parent, Purchaser, and their stockholders, directors, officers, employees,
agents and representatives from any and all liabilities, obligations, claims,
contingencies, damages, costs and expenses (including all court costs and
reasonable attorneys' fees) that Purchaser or any such other indemnified party
may suffer or incur as a result of or relating to the material breach or
inaccuracy of any of the representations, warranties, covenants or agreements
made by Company, JVC and Vann herein or pursuant hereto.
SECTION 8.2 Company's or JVC's Right to Indemnification. Purchaser and
Parent shall and do hereby indemnify and hold Company, JVC and Vann, and their
directors, officers, employees, agents and representatives harmless from any and
all liabilities, obligations, claims, contingencies, damages, costs and expenses
(including all court costs and reasonable attorneys' fees) that Company or any
such indemnified party may suffer or incur as a result of or relating to: (a)
the breach or inaccuracy, or any alleged breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by Purchaser and
Parent herein or pursuant hereto; and (b) those liabilities, obligations,
claims, contingencies and encumbrances accruing or arising after the Closing in
connection with the business of the Purchaser, except to the extent that such
liabilities, obligations, claims, contingencies or encumbrances are attributable
to a breach of warranty, representation or covenant by Company, JVC and Vann
prior to the Closing.
SECTION 8.3 Notice. The party seeking indemnification hereunder
("Indemnitee") shall promptly, and within 30 days after notice to it (notice to
Indemnitee being the filing of any action, receipt of any claim in writing or
similar form of actual notice) of any claim as to which it asserts a right to
indemnification, notify the party from whom indemnification is sought
("Indemnitor") of such claim. Indemnitee shall bill Indemnitor for any such
claims no more frequently than on a monthly basis, and Indemnitor shall promptly
pay (or cause to be paid) Indemnitee upon receipt of any such bill. The failure
of Indemnitee to give the notification to Indemnitor contemplated above in this
Section shall not relieve Indemnitor from any liability or obligation that it
may have pursuant to this Agreement unless the failure to give such notice
within such
<PAGE> 20
time shall have been materially prejudicial to it, and in no event shall the
failure to give such notification relieve Indemnitor from any liability it may
have other than pursuant to this Agreement.
SECTION 8.4 Third-Party Claims. If any claim for indemnification by
Indemnitee arises out of an action or claim by a person other than Indemnitee,
Indemnitor may, by written notice to Indemnitee, undertake to conduct the
defense thereof and to take all other steps or proceedings to defeat or
compromise any such action or claim, including the employment of counsel;
provided that Indemnitor shall reasonably consider the advice of Indemnitee as
to the defense or compromise of such actions and claims, and Indemnitee shall
have the right to participate, at its own expense, in such proceedings, but
control of such proceedings shall remain exclusively with Indemnitor. Indemnitee
shall provide all reasonable cooperation to Indemnitor in connection with such
proceedings. Counsel and auditor costs and expenses and court costs and fees of
all proceedings with respect to any such action or claim shall be borne by
Indemnitor. If any such claim is made hereunder and Indemnitor does not elect to
undertake the defense thereof by written notice to Indemnitee, Indemnitee shall
be entitled to control such proceedings and shall be entitled to indemnity with
respect thereto pursuant to the terms of this Article VIII. To the extent that
Indemnitor undertakes the defense of such claim by written notice to Indemnitee
and diligently pursues such defense at its expense, Indemnitee shall be entitled
to indemnification hereunder only to the extent that such defense is
unsuccessful as determined by a final judgment of a court of competent
jurisdiction, or by written acknowledgment of the parties.
SECTION 8.5 Time to Assert Claims. Any claim asserted pursuant to
Section 8.1 or Section 8.2 above must be asserted by written notice given by one
party to the other on or before the date of the release of the first audit
report of the Parent containing combined financial statements of the Parent and
the Company, not to exceed one (1) year from the date of Closing.
SECTION 8.6 Access to Records. JVC, Vann and their agents, shall be
afforded reasonable access to the Parent's and Purchaser's books and records
during normal business hours upon reasonable notice for the purpose of verifying
any claim against JVC or Vann hereunder. JVC, Vann and their agents may be
required to sign an appropriate confidentiality agreement prior to any
inspection of books and records hereunder.
SECTION 8.7 Offset Right. Any claim against JVC or Vann under this
Article VIII may be satisfied by offsetting any obligation owed from the Company
or Parent to JVC, or Vann.
SECTION 8.8 Limitation on Indemnification. Neither the Company nor JVC
or Vann shall have any obligation to indemnify the Parent or Purchaser until the
total of all losses and claims exceed the sum of $50,000, and then JVC and Vann
shall be liable for all amounts of such losses and claims.
SECTION 8.9 Arbitration. All disputes under this Article VIII shall be
settled by arbitration in Dallas, Texas, before three arbitrators pursuant to
the rules but not under the auspices of the American Arbitration Association.
Each of JVC and the Parent shall select one arbitrator and the two arbitrators
shall select a third. Arbitration may be commenced at any time by any party
hereto giving written notice to each other party to a dispute that such dispute
has been referred to arbitration under this Section 8.7. Any award rendered by
the arbitrators shall be conclusive and binding upon the parties hereto;
provided, however, that any such award shall be accompanied by a written opinion
giving the reasons for the award. This provision
<PAGE> 21
for arbitration shall be specifically enforceable by the parties and the
decision of the arbitrators shall be final and binding and there shall be no
right of appeal therefrom. Each party shall pay its own expenses of arbitration
and the expenses of the arbitrators shall be equally shared; provided, however,
that if in the opinion of the arbitrators any claim for indemnification or any
defense or objection thereto was unreasonable, the arbitrators may assess, as
part of their award, all or any part of the arbitration expenses of the other
party (including reasonable attorney's fees) and of the arbitrators against the
party raising such unreasonable claim, defense or objection.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.1 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person or persons any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 9.2 Brokerage Fees and Commissions. Each party represents that
it has incurred no obligation to any broker or finder in connection with the
transactions described in this Agreement and agrees to indemnify the other
parties and hold them harmless against any liability to any such broker or
finder.
SECTION 9.3 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof and (b) shall not be assigned by operation of law or otherwise.
SECTION 9.4 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, each of which shall remain in full force
and effect.
SECTION 9.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by facsimile telegram or telex, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
If to the Company (pre-closing), Vann or JVC:
Mr. John A. Vann
JVC Financial, L.L.C.
1800 Preston Park Blvd., Suite 101
Plano, Texas 75093
<PAGE> 22
If to Parent or Purchaser:
Mr. D. M. Moore, Jr.
Rushmore Financial Group, Inc.
13355 Noel Road, Suite 650
Dallas, Texas 75240
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, REGARDLESS OF THE
LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF.
SECTION 9.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
SECTION 9.9 Expenses. Except as otherwise provided herein, the Parent,
Purchaser and Company shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial or other consultants,
investment bankers, accountants and counsel.
SECTION 9.10 Performance by Purchaser. Parent agrees to cause Purchaser
to comply with its obligations hereunder and to cause Purchaser to consummate
the Merger as contemplated herein.
SECTION 9.11 Disclosure Schedule. Concurrent with the execution hereof,
the Company and the Parent shall deliver the Disclosure Schedule to each other.
The Disclosure Schedule shall be updated from time to time and prior to the
Closing to report any changes in the information contained therein. The
Disclosure Schedule shall contain all information required to disclose fully any
exception or qualification to this Agreement and shall cross reference the
section of this Agreement so qualified.
ARTICLE X.
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
"ACTION" shall mean any action, suit, litigation, complaint,
counterclaim, claim, petition, mediation
<PAGE> 23
contest, or administrative proceeding, whether at law, in equity, in arbitration
or otherwise, and whether conducted by or before any Government or other Person.
"BUSINESS" shall mean the business of owning and operating the
investment advisory operations of the Company as conducted prior to the Closing
by Seller.
"CLOSING" shall have the meaning set forth in Section 1.8 hereof.
"CLOSING DATE" shall mean the time and date that the Closing occurs.
"CODE" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"CONSENTS" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts without
resulting in any default thereunder.
"CONTRACTS" shall mean all contracts, agreements, and leases of
equipment or other personal property that relate exclusively to the Business.
"DEFAULT" shall mean an event of default as defined in any contract or
other agreement or instrument, or any event which, with the passage of time or
giving of notice or both, would constitute an event of default or other breach
under such document or instrument.
"DISCLOSURE MEMORANDUM" shall mean the set of numbered schedules
referencing Sections of this Agreement delivered by Seller and dated of even
date herewith, as supplemented by new or amended schedules delivered by Seller
prior to the Closing.
"EFFECTIVE TIME" shall have the meaning set forth in Section 1.2
hereof.
"ENVIRONMENTAL LAWS" shall mean all federal, state, municipal, and
local laws, statutes, ordinances, rules, regulations, conventions, and decrees
relating to the environment, including without limitation, those relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or Hazardous Materials or wastes
of every kind and nature into the environment (including without limitation
ambient air, surface water, ground water, soil, and subsoil), or otherwise
relating to the manufacture, generation, processing, distribution, application,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all laws, rules, regulations, codes, directives, orders,
decrees, judgments, injunctions, consent agreements, stipulations, provisions,
and conditions of Environmental Permits, licenses, injunctions, consent
agreements, stipulations, certificates of authorization, and other operating
authorizations, entered, promulgated, or approved thereunder.
"ENVIRONMENTAL PERMITS" shall mean all permits, licenses, certificates,
approvals, authorizations, regulatory plans or compliance schedules required by
applicable Environmental Laws, or issued by a
<PAGE> 24
Government pursuant to applicable Environmental Laws, or entered into by
agreement of the party to be bound, relating to activities that affect the
environment, including without limitation, permits, licenses, certificates,
approvals, authorizations, regulatory plans and compliance schedules for air
emissions, water discharges, pesticide and herbicide or other agricultural
chemical storage, use or application, and Hazardous Material or Solid Waste
generation, use, storage, treatment and disposal.
"FORUM" shall mean any federal, state, local, municipal, or foreign
court, governmental agency, administrative body or agency, tribunal, private
alternative dispute resolution system, or arbitration panel.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.4.
"GOVERNMENT" shall mean any federal, state, local, municipal, or
foreign government or any department, commission, board, bureau, agency,
instrumentality, unit, or taxing authority thereof.
"HAZARDOUS MATERIAL" shall mean all substances and materials designated
as hazardous or toxic as of the date hereof pursuant to any applicable
Environmental Law.
"KNOWLEDGE" (or words of like effect) when used to qualify a
representation, warranty, or other statement shall mean the actual knowledge of
such party's executive officers.
"LIABILITIES" shall have the meaning set forth in Section 3.12.
"MATERIAL ADVERSE EFFECT" shall mean any adverse change in the
financial condition, assets, business or operations of any party which is
material to such party taken as a whole.
"ORDERS" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"PERSON" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, a government, and any other legal entity.
"REAL PROPERTY" shall mean the land and improvements owned or leased by
the Company and all buildings, fixtures, signs, parking facilities, and other
improvements located thereon and appurtenances thereto.
"SCHEDULES" shall mean the numbered sections of the Disclosure
Memorandum.
"SOLID WASTE" shall mean any garbage, refuse, sludge from a waste
treatment plant, water supply treatment plant, or air pollution control
facility, and other discarded material, including solid, liquid, semisolid, or
contained gaseous material resulting from industrial, commercial, mining, and
agricultural operations, and from community activities.
"SUBSIDIARY" shall mean, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity. Such term shall also refer to any other
partnership, limited partnership, joint venture, trust, or other business entity
in which a
<PAGE> 25
party hereto owns a material interest.
"TERMINATION DATE" shall mean July 31, 1999.
SIGNATURES FOLLOW
<PAGE> 26
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year set forth above.
RUSHMORE FINANCIAL GROUP, INC.,
a Texas corporation
By: /s/ D.M. Moore, Jr.
----------------------------
D. M. Moore, Jr., President
RUSHMORE INVESTMENT ADVISORS, INC.,
a Texas corporation
By: /s/ D.M. Moore, Jr.
--------------------------
D. M. Moore, Jr., Chairman
THE JOHN VANN COMPANY,
a Texas corporation
By: /s/ John A Vann
--------------------------
John Vann, President
JVC FINANCIAL, L.L.C.
By: /s/ John A. Vann
--------------------------
John A. Vann President
<PAGE> 1
EMPLOYMENT AGREEMENT
This Employment Agreement dated as of the 30th day of June, 1999,
between Rushmore Investment Advisors, Inc., a Texas corporation (hereinafter
referred to as "Rushmore"), John A. Vann (hereinafter referred to as
"Officer"), and Rushmore Financial Group, Inc., a Texas corporation ("RFG")
(which joins herein as co-obligor with Rushmore as and to the same extent as
Rushmore is obligated herein).
WITNESSETH:
WHEREAS, Officer is Chairman and Chief Executive Officer of Rushmore,
a Texas corporation and registered investment advisor, a wholly owned subsidiary
of Rushmore Financial Group, Inc. ("RFG") (Rushmore, its subsidiaries and RFG
are hereinafter collectively referred to as the "Companies"), and Officer has
other supervisory responsibilities for other functions of the Companies; and
WHEREAS, Rushmore desires that Officer continue to use his experience
and abilities in the business of the Companies in a capacity similar to that in
which he has heretofore served; and
WHEREAS, Officer desires to accept such employment upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as
follows:
1. Employment. Rushmore hereby agrees to employ Officer and Officer
hereby agrees to serve Rushmore as Chairman, Chief Executive Officer
and Chief Investment Officer of Rushmore; as Chief Investment Officer
and Chairman of the Investment Committees of RFG and Rushmore Life
Insurance Company ("RLICO"); and as a director of Rushmore and RFG to
fill a vacancy in the Board created by a resignation for the term and
on the conditions hereinafter set forth. The duties of Officer as
Chief Investment Officer of Rushmore, RFG and RLICO are set forth on
attached Exhibit A. These offices shall not be abolished nor the
duties described in Exhibit A changed without Officer's consent during
the tenure of his employment. Officer shall have such executive duties
to the Companies during the term of this Agreement as shall be
determined by the Board of Directors of Rushmore and RFG; however,
Officer shall not be assigned to a position which shall substantially
diminish his prestige or responsibility compared to that which he
enjoys during the first 90 days of this Agreement. Subject to the
foregoing, Officer hereby agrees to serve in any comparable executive
position in the State of Texas to which he shall be directed by the
Board of Directors of the Companies, and further agrees to use his
best efforts to promote the efficient and profitable operation of the
business of Rushmore.
2. Term of Employment. The term of Officer's employment shall commence as
of the date hereof and shall be deemed to recommence on each day of
the term hereof and continue in effect for a period of three years,
unless terminated due to death, disability, or good cause as specified
in Section 6.
<PAGE> 2
3. Compensation.
a. Base Compensation. As base compensation for services provided
pursuant to this Agreement, Rushmore shall initially pay
Officer compensation at the rate of $100,000.00 per year,
which amount shall be paid beginning July 1, 1999. Within
three months prior to each January 1st, the Board of
Directors of Rushmore will evaluate the performance of
Officer and the compensation paid to executives in other
companies in the Financial Services Sector of similar size
and scope of operations, during the previous year and fix his
Base Compensation for the next following year at an amount
which shall not be less than the prior year's Base
Compensation as determined by the Board of Directors. When a
new Base Compensation is fixed by the Board of Directors of
Rushmore under this paragraph, it shall become the new Base
Compensation and thereafter the Base Compensation shall not
be less than that amount, without regard to any elective
deferral of compensation by Officer. The Base Compensation
provided for in this Paragraph 3 shall be payable in equal
semimonthly installments on the fifteenth and last business
days of each month.
b. Incentive Compensation. As incentive compensation for the
management of Rushmore, Rushmore shall pay to Officer: (i)
monthly payments equal to 1/12 of 0.01% (one basis point) of
total assets under management by Rushmore as of the previous
month end; and (ii) quarterly payments equal to 2-1/2% of the
net profit of Rushmore as of the previous quarter end (with
net profit including an allocation of occupancy, tax and
other indirect expenses of Rushmore that are paid by RFG),
pursuant to existing policies and practices of RFG and its
profit centers.
c. Additional Compensation. The Board of Directors of Rushmore
reserves the right to pay to Officer compensation and any
other bonus or incentive compensation, in money, stock
options, or any other form, as the Board in its discretion
deems appropriate. Stock options shall be issued in amounts
commensurate with the amount of options granted to other
senior executive officers. The total of the Base
Compensation, Incentive Compensation and Additional
Compensation shall be Combined Compensation hereunder. In any
year in which Officer shall elect to defer a portion of the
Base Compensation to which he is entitled, such deferred
amount shall be paid to Officer in the following year of this
Agreement or its termination.
d. Reimbursement. Rushmore shall provide Officer with an
automobile allowance of $500.00 per month. So long as Officer
shall be employed by Rushmore, he shall be entitled and
authorized to incur reasonable and necessary expenses in
connection with or related to his business duties, including
without limitation, expenses for travel, entertainment, and
similar expenses. Rushmore will pay all such expenses
directly or will reimburse Officer for them.
4. Participation in Employee Benefit Programs. Officer will be entitled
to participate on the same
<PAGE> 3
basis as other senior executive employees in any employee benefit
programs presently in force or subsequently adopted by Rushmore,
including such pension and profit-sharing plans, hospitalization,
medical and health and accident insurance programs, policies and
benefits, life insurance programs and pension and retirement benefit
plans as may from time to time be in effect.
5. Payments Upon Death or Disability. In the event that Officer should
die or become disabled, Rushmore shall pay to the beneficiary as may
have been designated in writing by Officer or, failing such
designation, to Officer's estate, the sum of 90 days Combined
Compensation at the then existing rate. Such payment shall be made in
cash within one hundred twenty (120) days after Officer's death or
disability.
6. Severance Pay Upon Termination. In the event Officer's employment is
terminated by Rushmore, except for "cause" and except for Officer=s
death or total disability, Rushmore shall pay to Officer as severance
pay the sum of three years' Base Compensation at the then existing
rate, plus any sums due in respect of increases in Base Compensation
pursuant to Paragraph 3(a) hereof. Such payment shall be made in
thirty-sixty (36) equal monthly installments. Termination for "cause"
shall mean termination by Rushmore for any of the following reasons:
a. Willfully and significantly damaging Rushmore's property,
business, reputation or goodwill;
b. The commission of and indictment for a felony offense;
c. Stealing, dishonesty, fraud or embezzlement;
d. Deliberate neglect of duty;
e. Resignation; or
f. Willful and material insubordination.
Notwithstanding any other provision of this Agreement, if during any
period of time, Officer receives severance pay pursuant to this
Paragraph 6 and concurrently therewith is paid any Combined
Compensation (as defined in Paragraph 3 hereof), then the amount of
severance pay to which Officer would otherwise be entitled hereunder
shall be reduced during such period by an amount equal to the Combined
Compensation paid during such period.
Upon termination of officer's employment by Rushmore, whether such
termination in initiated by Rushmore or by Officer, Rushmore shall
assign to Officer the name "The John Vann Company."
7. Trade Secrets and Confidential Information. During the term of this
Agreement, Officer will have access to customer lists and compilations
of information and records specific to and regularly used in the
operation of the business of RFG and its subsidiaries including
Rushmore.
<PAGE> 4
Officer acknowledges that such information constitutes valuable and
confidential information of RFG. Officer shall not disclose any of the
aforesaid private company secrets, directly or indirectly, nor use
them in any way, either during the term of this Agreement or after
termination of employment. All files, records, electronic and magnetic
files, documents, specifications, equipment and similar information
relating to the business of RFG, whether prepared by Officer or
otherwise coming into Officer's possession, shall remain the exclusive
property of RFG and shall not be removed from the premises of RFG
except as shall be necessary for Officer to perform Officer's duties
under this Agreement. Upon termination of this Agreement for any
reason, Officer will deliver all such materials in his possession and
all copies thereof to RFG.
8. Restrictive Covenants. In consideration the severance provisions of
this Agreement and of the provision to Officer of RFG's trade secrets
and confidential information, and in order to protect the rights of
RFG and its subsidiaries including Rushmore to its trade secrets,
confidential information, and client relationships, Officer hereby
agrees as follows:
a. Officer agrees that during the term of this Agreement and for
a period of 18 months following any termination of
employment, Officer shall not be an officer, director,
employee, agent or representative, or an owner of more than
five percent (5%) of the outstanding capital stock of any
corporation, or an owner of any interest in, or employee,
agent or representative of, any other form of business
association, sole proprietorship or partnership that
solicits, hires (whether or not solicited) or otherwise
attempts to induce any employees (excluding Carmen Milbury),
agents or representatives of RFG and its subsidiaries
including Rushmore to terminate their position as employee,
agent or representative therewith.
b. Officer agrees that, during the term of this Agreement and
for a period of 18 months following termination for any
reason, Officer shall not, directly or indirectly by being an
officer, director, employee, agent, representative or
consultant, or a record or beneficial owner of more than five
percent of the outstanding capital stock of any corporation
or an owner of any interest in, or employee of, any other
form of business association, sole proprietorship or
partnership, conduct a financial services business or
organization which engages or participates, directly or
indirectly, in any business or activity that is engaged in
the sale of insurance, securities or other investment
products and that solicits business from any person that was
a client of Rushmore or other RFG subsidiary at or within 12
months prior to the time of termination, anywhere within the
State of Texas or any city of the United States in which RFG
and its subsidiaries including Rushmore maintains a retail
office at the time of Officer's termination.
c. In the event that any adjudicative body shall finally hold
that this Section 9 constitutes an unreasonable restriction
upon Officer, the parties hereby expressly agree that the
provisions of this Section 9 shall not be rendered void, but
shall apply as to time and territory or to such other extent
as such body may indicate constitutes a reasonable
restriction under the circumstances involved.
d. Officer agrees that irreparable harm would occur if any of
the provisions of Section 8 or
<PAGE> 5
9 were breached and that the Company shall be entitled to
obtain an injunction or other equitable relief to enforce
specifically the provisions thereof in any court of competent
jurisdiction.
9. Vacation/Sick Days. Officer shall be entitled to an annual vacation of
three (3) weeks each year at full compensation at a time mutually
satisfactory to Rushmore and Officer. Unused vacation and sick days
shall not accrue.
10. Approval by the Board of Directors. This Agreement has been approved
by the Board of Directors of Rushmore.
11. Agreement is Personal. This Agreement is a personal agreement and the
rights and interests hereunder (except that of Rushmore) may not be
sold, transferred, assigned, pledged or hypothecated. This Agreement
shall be binding on the heirs, executors and administrators of Officer
and on the successors and assigns of Rushmore. During, Officer's
lifetime, the parties hereto by mutual agreement may amend, modify or
rescind this Agreement without the consent of any other person.
12. Severability of Provisions. If any of the provisions of this Agreement
shall be held invalid, the remainder of this Agreement shall not be
affected thereby.
13. Governing Law. This instrument contains the entire agreement between
the parties and shall be governed by the laws of the State of Texas.
It may be amended only by agreement in writing signed by each of the
parties.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
RUSHMORE INVESTMENT ADVISORS, INC.
By: /s/ D. M. Moore, Jr
-------------------------------
D. M. Moore, Jr., Chairman
RUSHMORE FINANCIAL GROUP, INC.
By: /s/ D. M. Moore, Jr.
-------------------------------
D. M. Moore, Jr., Chairman
/s/ John A. Vann
- -----------------------------------
JOHN A. VANN
<PAGE> 7
EXHIBIT A
(DUTIES OF CHIEF INVESTMENT OFFICER)
1. To preside over meetings of the Investment Committees of Parent and
each affiliate; and
2. To direct and supervise implementation of such investment committees'
decisions.
<PAGE> 1
VOTING AGREEMENT
AGREEMENT dated as of June 30,1999, between JOHN A. VANN ("VANN") and
D. M. MOORE, JR. ("Moore").
WHEREAS, Vann is the owner of 550,000 shares of the common stock of
Rushmore Financial Group, Inc. (the "Company"), and Moore is the owner of
535,398 shares of such common stock, and each may receive additional shares
during the term of this Agreement; and
WHEREAS, Vann and Moore desire to ensure that both will be elected to
the Board of Directors of the Company,
IT IS THEREFORE AGREED AS FOLLOWS:
1. Voting of Shares. At each annual meeting, special meeting, or
consent action taken to elect members of the Board of Directors of the Company,
each of Vann and Moore agree to vote their respective shares to elect both Vann
and Moore to become members of the Board.
2. Term. The term of this Agreement shall be for a period of three
years.
3. Copies of Agreement. This Agreement may be executed in multiple
counterparts but shall not otherwise be separable or divisible. Upon the
execution of this Agreement the parties shall cause a copy of this Agreement to
be filed in the registered office of the Company. This Agreement shall be open
to inspection in the manner provided for inspection under the laws of the State
of Texas.
4. Place of Performance. THIS AGREEMENT IS EXECUTED AND ENTERED INTO
AT DALLAS, TEXAS, AND IT IS MUTUALLY AGREED THAT THE PERFORMANCE OF ALL PARTS
OF THIS CONTRACT SHALL BE AT DALLAS, TEXAS.
5. Governing Law. THIS AGREEMENT IS INTENDED BY THE PARTIES TO BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
6. Severability. This Agreement shall not be severable or divisible in
any way, but it is specifically agreed that, if any provision should be
invalid, the invalidity shall not affect the validity of the remainder of the
Agreement.
Executed as June 30, 1999. /s/ John A. Vann
------------------------------------
John A Vann
/s/ D.M. Moore, Jr.
------------------------------------
D.M. Moore, Jr.
