SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): October 29, 1998
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GREG MANNING AUCTIONS, INC.
(Exact name of registrant as specified in its charter)
New York 001-11988 22-2365834
(State or other jurisdiction of (Commission file number) (I.R.S. employer
incorporation or organization) identification no.)
775 Passaic Avenue,
West Caldwell, New Jersey 07006
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (973) 882-0004
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Item 2. Acquisition or Disposition of Assets.
On October 29, 1998, Greg Manning Auctions, Inc. (the "Company")
completed the acquisition (the "Acquisition") of all of the capital stock of
Teletrade, Inc. from Leon Liebman, Richard Makely and Bernard Rome. The purchase
price for the Acquisition was approximately $6 million, consisting of $1.8
million in securities of the Company, $3.0 million in cash and $0.75 million in
promissory notes. The amount of consideration paid was determined by arm's
length negotiations among the Company and Messrs. Liebman, Makely and Rome. The
cash used for the Acquisition was available from (i) the purchase by each of
Leon Liebman, Greg Manning and Afinsa Bienes Tangibles S.A. of 200,000 shares of
common stock of the Company and (ii) a term loan, as described below.
Mr. Liebman will continue to have a relationship with the Company. He
was elected to the board of directors of the Company and will be employed by the
Company as a consultant.
Teletrade, Inc. is a New York-based company which operates an
electronic online, telephone and internet-based auction system for the sale of
collectibles, principally certified coins, gemstones, sports trading cards and
sports memorabilia.
Prior to the consummation of the Acquisition, the Company secured an
additional term loan (the "Term Loan") from Brown Brothers Harriman & Co. in the
amount of $1,500,000, bearing interest at the rate of 10% per annum, payable
monthly. The Term Loan is secured by all personal property and fixtures of the
Company, including accounts, contract rights, equipment, inventory and general
intangibles, and including the personal property and fixtures of Teletrade, Inc.
The foregoing description of the Acquisition is qualified in its
entirety by reference to the full text of the Stock Purchase Agreement, dated as
of October 29, 1998, by and among the Company, Leon Liebman, Richard Makely and
Bernard Rome, which is filed herewith as Exhibit 10.1 and which is incorporated
in its entirety herein by reference.
The foregoing description of the Term Loan is qualified in its entirety
by reference to the secured promissory note, which is filed herewith as Exhibit
10.3 and which is incorporated in its entirety herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements
In accordance with Item 7(a)(4), such financial statements shall be
filed no later than 60 days after November 13, 1998.
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(b) Pro Forma Financial Information
In accordance with Item 7(a)(4), such financial statements shall be
filed no later than 60 days after November 13, 1998.
(c) Exhibits
10.1 Stock Purchase Agreement dated as of October 29, 1998
among the Company, Leon Liebman, Richard Makely and
Bernard Rome
10.2 Consulting Agreement dated as of October 29, 1998
between the Company and Leon Liebman
10.3 Secured Promissory Note dated October 29, 1998 by the
Company, as maker, in favor of Brown Brothers Harriman
& Co., as payee
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Greg Manning Auctions, Inc. has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: November 13, 1998 GREG MANNING AUCTIONS, INC.
By: /s/ GREG MANNING
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Greg Manning
President and Chief Executive Officer
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STOCK PURCHASE AGREEMENT
Between
Leon H. Liebman,
Richard F. Makely
and
Bernard Rome,
as Sellers,
and
Greg Manning Auctions, Inc.,
as Purchaser
Dated as of October 29, 1998
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TABLE OF CONTENTS
Sections Page
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1. Sale of Stock........................................................1
2. Purchase Price.......................................................1
3. Intentionally Blank..................................................2
4. Closing ........................................................2
5. Obligations at Closing; Further Assurances...........................2
6. Representations and Warranties of Sellers and Teletrade..............4
6.1 Organization, Standing and Qualification................4
6.2 Business................................................5
6.3 Subsidiaries............................................5
6.4 Transactions with Certain Persons.......................5
6.5 Execution, Delivery and Performance of Agreement;
Authority; Consents and Approvals......................5
6.6 Capitalization; Ownership...............................6
6.7 Financial Statements....................................7
6.8 Absence of Undisclosed Liabilities......................7
6.9 Taxes...................................................8
6.10 Absence of Changes or Events...........................10
6.11 Litigation.............................................13
6.12 Compliance with Laws and Other Instruments.............13
6.13 Title to and Condition of Properties...................14
6.14 Schedules..............................................14
6.15 Insurance..............................................17
6.16 Patents, etc...........................................17
6.17 No Guarantees..........................................17
6.18 Receivables............................................18
6.19 Employee Benefit Plans; ERISA..........................18
6.20 Labor Matters..........................................21
6.21 Environmental Matters..................................21
6.22 No Brokers; Absence of Certain Business
Practices..............................................22
6.23 Disclosure.............................................22
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7. Representations and Warranties of Purchaser.........................23
7.1 Organization, Standing and Qualification...............23
7.2 Execution, Delivery and Performance
of Agreement; Authority, Consents and Approvals........23
7.3 Capitalization; Ownership..............................23
7.4 Financial Statements and Reports.......................24
7.5 No Brokers.............................................24
7.6 Disclosure.............................................24
8 Conduct of Business Prior to Closing................................25
9 Covenants 27
9.1 Covenants of Sellers...................................27
9.1.1 Access to Information and Documents ...................27
9.1.2 Certain Financial Information..........................28
9.1.3 Consulting Agreement...................................28
9.2 Covenants of Purchaser.................................28
9.2.1 Access to Information and Documents....................28
9.3 Covenants of Sellers and Purchaser.....................28
10. Covenants Relating to Taxes.........................................29
10.1 Prior to the Closing...................................29
10.2 Post-Closing Matters...................................30
10.3 Other Tax Matters......................................31
11. Conditions Precedent to Purchaser's Obligations.....................31
12. Conditions Precedent to Sellers' Obligations........................32
13. Indemnification.....................................................33
14. Termination ........................................................36
15. Non-Competition, etc................................................37
15.1 Non-Competition........................................37
15.2 Proprietary Information; Confidentiality...............38
15.3 Non Solicitation.......................................40
15.4 Miscellaneous..........................................40
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16. Nature of Representations and Warranties............................41
17. Notices.............................................................41
18. Legal and Other Costs...............................................43
19. Right of Set Off....................................................43
20. Miscellaneous ......................................................44
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of October 29, 1998, by and among
Leon H. Liebman, an individual ("Liebman"), Richard F. Makely, an individual
("Makely"), and Bernard Rome, an individual ("Rome"), on the one hand; and Greg
Manning Auctions, Inc., a New York corporation having its principal office at
775 Passaic Avenue, West Caldwell, New Jersey 07006 ("Purchaser" or "GMAI"), on
the other hand. (Liebman, Makely and Rome are sometimes hereinafter referred to
individually as a "Seller"and collectively as the "Sellers".)
W I T N E S S E T H :
WHEREAS, Sellers are the owners of all of the issued and outstanding
capital stock of Teletrade, Inc., a Delaware corporation ("Teletrade");
WHEREAS, Teletrade is engaged in the business of auctioning
collectibles;
WHEREAS, Purchaser desires to acquire from Sellers, and Sellers desire
to transfer to Purchaser, all of the issued and outstanding capital stock of
Teletrade on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Sellers and Purchaser, intending to be legally bound, hereby agree
as follows:
1. Sale of Stock. Subject to and upon the terms and conditions set
forth in this Agreement, each Seller hereby agrees to sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser hereby agrees to purchase and
accept delivery from Sellers, at the Closing hereunder (the "Closing"), 15,100
shares of common stock, par value $.01 per share, of Teletrade, constituting in
the aggregate all of the issued and outstanding shares of capital stock of
Teletrade (the "Teletrade Stock").
2. Purchase Price. In consideration of the sale, transfer, conveyance,
assignment and delivery of the Teletrade Stock by Sellers to Purchaser
hereunder, and in reliance upon the representations and warranties made herein
by Sellers, Purchaser will, in full payment therefor, issue and deliver to the
Sellers the following (collectively, the "Purchase Price"; the amounts set forth
in clauses (a)(ii) and (a)(iii) of this Section 2 are hereinafter referred to
collectively as the "Cash Consideration"):
(a) At the Closing:
(i) to Liebman, an aggregate of 750,000 shares of Common Stock, par
value $.01 per share, of GMAI (the "GMAI Stock");
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(ii) to Makely, $1.5 million in cash; and
(iii) to Rome, $1.5 million in cash.
(b) At the Closing, to evidence additional consideration due to
Sellers:
(i) to Liebman, a promissory note substantially in the form attached
hereto as Exhibit [ ] (a "Promissory Note") in the principal amount of $150,000;
(ii) to Makely, a Promissory Note in the principal amount of $300,000;
and
(iii) to Rome, a Promissory Note in the principal amount of $300,000.
(c) As promptly as practicable after the Closing, to each Seller in
accordance with his respective interest in Teletrade, the amount set forth in
Section 10.2(a).
(d) If any payment or delivery of a portion of the Purchase Price is
due on a date that is not a Business Day, such payment or delivery shall be made
on the first Business Day immediately following such payment or delivery date.
"Business Day" means any day other than a Saturday, Sunday or legal holiday on
which banks are authorized or required to be closed in the City of New York, New
York.
(e) Payment of the Cash Consideration hereunder shall be made by wire
transfer in immediately available funds to such account as may be designated by
the party entitled thereto, or in such other manner as such party may designate.
All such designations shall be made at least two Business Days prior to the
Closing Date.
[3. Intentionally Blank]
4. Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place at 10:00 A.M., local time, on October 29, 1998, at
the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York,
New York 10022, or such other time and place as the parties may agree upon. The
day on which the Closing actually takes place is herein sometimes referred to as
the Closing Date. In the event any of the parties is entitled not to close on
the scheduled date because a condition to such party's obligation to close set
forth in Section 11 or 12 hereof has not been met (or waived by the party or
parties entitled to waive it), such party may (subject to Section 14 hereof)
postpone the Closing, from time to time, by giving at least three days' prior
notice to the other parties, until the condition has been met but in no event
beyond October 31, 1998.
5. Obligations at Closing; Further Assurances. (a) At the Closing,
Sellers will deliver or cause to be delivered to Purchaser:
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(i) stock certificates representing the Teletrade
Stock, duly endorsed in blank or accompanied by stock powers
or other instruments of transfer duly executed in blank, and
accompanied by all requisite stock transfer stamps;
(ii) such other good and sufficient instruments of
conveyance, assignment and transfer, in form and substance
reasonably satisfactory to Purchaser and its counsel, as shall
be effective to transfer to Purchaser all of Sellers' right,
title and interest in and to the Teletrade Stock;
(iii) copies of the certificate of incorporation
(certified by the appropriate state authority) and by-laws,
good standing certificate, minute book, stock book and stock
transfer ledger of Teletrade, such certificates of Sellers,
Teletrade and the officers of Teletrade as GMAI or its counsel
shall reasonably request, and all other documents required to
be delivered on or before the Closing by Sellers to the
Purchaser under the provisions of this Agreement (to the
extent not previously delivered), including without limitation
under Section 11 hereof, or as may otherwise be reasonably
requested by Purchaser or its counsel in connection herewith;
and
(b) At the Closing, Purchaser shall deliver or cause to be delivered:
(i) to Liebman, (A) a stock certificate or
certificates, or evidence of irrevocable instructions to the
transfer agent for GMAI Stock to issue a stock certificate or
certificates, representing 750,000 shares of the GMAI Stock,
registered in Liebman's name, and (B) a Promissory Note in the
principal amount of $150,000;
(ii) to Makely, (A) the Cash Consideration which he
is entitled to receive at the Closing pursuant to Section 2(a)
hereof, and (B) a Promissory Note in the principal amount of
$300,000,
(iii) to Rome, (A) the Cash Consideration which he is
entitled to receive at the Closing pursuant to Section 2(a)
hereof, and (B) a Promissory Note in the principal amount of
$300,000; and
(iv) to each Seller, such certificates of Purchaser
and the officers of Purchaser as such Seller or his counsel
shall
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reasonably request, and all other documents required to be
delivered on or before the Closing by Purchaser to any Seller
under the provisions of this Agreement (to the extent not
previously so delivered), including without limitation under
Section 12 hereof, or as may otherwise be reasonably required
by any Seller or his counsel in connection herewith.
(c) At any time and from time to time after the Closing, at Purchaser's
request and without further consideration, each Seller will, at the expense of
Purchaser, execute and deliver such other documents or instruments of sale,
transfer, conveyance, assignment, delivery and confirmation, and deliver such
other documents and take such other action as Purchaser or its counsel may
reasonably deem necessary or desirable in order more effectively to sell,
transfer, convey, assign and deliver to Purchaser, and vest in Purchaser all
right, title and interest in and to, the Teletrade Stock and to otherwise carry
out the intent and purpose of this Agreement, and each Seller shall take all
further actions which may be reasonably requested by Purchaser or its counsel to
effectuate any other provision of this Agreement.
6. Representations and Warranties of Sellers. Each Seller hereby
severally, but not jointly, represents and warrants to Purchaser (without
qualification in the case of Sections 6.1, 6.2 and 6.3; without qualification as
to such Seller himself in the case of Section 6.5 and the last two sentences of
Section 6.6; without qualification in the case of the first three sentences of
Section 6.6; and without qualification in the case of Section 6.23 as such
Section 6.23 relates to Sections 6.1, 6.2 and 6.3, Section 6.5 and the last two
sentences of Section 6.6 as to such Seller himself, and the first three
sentences of Section 6.6, but in each other case, to the best knowledge of such
Seller after due investigation) as follows:
6.1 Organization, Standing and Qualification; (a) Teletrade is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware. Teletrade has all requisite corporate power and authority and is
entitled to carry on its business as now being conducted and to own, lease or
operate its properties as and in the places where such business is now conducted
and such properties are now owned, leased or operated; and is duly qualified,
licensed or domesticated and in good standing as a foreign corporation
authorized to do business in every jurisdiction where the nature of the
activities conducted by it or the character of the properties owned, leased or
operated by it requires such qualification, licensing or domestication, except
where the failure to be so qualified, licensed or domesticated would not have a
material adverse effect on the Business or the financial condition or results of
operations of Teletrade. Sellers have delivered to Purchaser true and complete
copies of the certificate of incorporation and all amendments thereto of
Teletrade, certified by the Secretary of State of the State of Delaware, and the
by-laws of Teletrade as presently in effect, certified as true, complete and
correct by its Secretary, and such documents are in full force and effect as of
the date hereof.
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(b) The books of account, minute book, stock certificate book and stock
transfer ledger of Teletrade to be delivered to Purchaser are complete and
correct, and there have been no transactions involving the business of Teletrade
which are, individually or in the aggregate, material, which properly should
have been set forth therein and which have not been accurately so set forth.
6.2 Business. The only business of Teletrade (the "Business") involves
the sale of collectibles, principally certified coins, gemstones, sports trading
cards and sports memorabilia, through an electronic online, telephone and
internet-based auction system. The Business has not been conducted through any
direct or indirect subsidiary or affiliate of Sellers other than Teletrade.
6.3 Subsidiaries. Teletrade has no subsidiaries. Teletrade has no
interest, direct or indirect, and has no commitment to purchase any interest,
direct or indirect, in any other corporation or in any partnership, joint
venture or other business enterprise or entity. The Business is conducted
exclusively by Teletrade.
6.4 Transactions with Certain Persons. Except as set forth on Schedule
6.4, during the past three years Teletrade has not purchased, leased from others
or otherwise acquired any property or obtained any services from, or sold,
leased to others or otherwise disposed of any property or furnished any services
to, or otherwise dealt with (except with respect to remuneration to persons for
services rendered as a director, officer, employee consultant or independent
contractor of Teletrade), in the ordinary course of business or otherwise, any
Seller or any affiliates of Teletrade or any Seller. Except as set forth on
Schedule 6.4(a), Teletrade does not owe any amount to, or have any contract with
or commitment to, such Seller or any director, officer, employee or consultant
of Teletrade (other than compensation for current services not yet due and
payable and reimbursement of expenses arising in the ordinary course of
business), and none of such persons owes any amount to Teletrade. No part of the
property or assets of such Seller or any affiliate of such Seller is used by
Teletrade. Except as set forth on Schedule 6.4(b), neither any Seller nor any of
his affiliates (other than Teletrade) owns, conducts or operates any business or
operations similar to the Business. As used in this Agreement, the term
"affiliate" means, with respect to any person, any other person controlled by or
under common control with such person.
6.5 Execution, Delivery and Performance of Agreement; Authority;
Consents and Approvals. (a) Neither the execution, delivery nor performance of
this Agreement or any of the Ancillary Agreements to which Sellers are parties
by Sellers will, with or without the giving of notice or the passage of time, or
both, conflict with, result in a default, right to accelerate or loss of rights
under, or result in the creation of any lien, charge or encumbrance pursuant to,
any provision of Teletrade's certificate of incorporation or by laws, or any
franchise, mortgage, deed of trust, lease, license, agreement (whether oral or
written), law, ordinance, rule or regulation or any order, judgment or decree to
which any Seller or
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Teletrade is a party or by which any of them is bound. Such Seller has full
power and authority to execute and deliver this Agreement and the Ancillary
Agreements contemplated hereby to which he is a party and to carry out the
transactions contemplated hereby and thereby, including, without limitation, the
transfer of such Seller's Teletrade Stock to Purchaser. All proceedings required
to be taken by or on behalf of such Seller to authorize the execution, delivery
and performance of this Agreement and the Ancillary Agreements to which he is a
party have been properly taken (or, in the case of any performance following the
date hereof, will be taken prior to such performance) and this Agreement
constitutes, and the Ancillary Agreements to which he is a party, when executed
and delivered pursuant hereto, will constitute, valid and binding obligations of
such Seller, enforceable against him in accordance with their respective terms.
As used in this Agreement, "Ancillary Agreements" shall mean (individually or
collectively as the context requires), (i) the Consulting Agreement, (ii) the
Registration Rights Agreement, (iii) the Representation Agreement, (iv) the
Promissory Notes and (v) the Guaranty.
(b) Except as identified on Schedule 6.5(b) or disclosed pursuant to
Section 6.14 hereof, no filing with, and no permit, authorization, consent,
waiver or approval of, any governmental or regulatory agency or any lender,
trustee, security holder of any Seller or Teletrade or any other person is
necessary in connection with the execution, delivery or performance by any
Seller of this Agreement or any of the Ancillary Agreements or for the
consummation by him of the transactions contemplated hereby and thereby.
6.6 Capitalization; Ownership. The authorized capital stock of
Teletrade consists solely of 50,000 shares of common stock, par value $.01 per
share, of which 45,300 shares of common stock are issued and outstanding as of
the date of this Agreement. The issued and outstanding shares of capital stock
of Teletrade are duly authorized, validly issued, fully paid and nonassessable,
and 15,100 of such shares are owned of record by Liebman; 15,100 of such shares
are owned of record by Makely; and 15,100 of such shares are owned of record by
Rome. Sellers own of record all of the issued and outstanding shares of capital
stock of Teletrade. Such Seller beneficially owns 15,100 shares of Teletrade
Stock and has and will have at the Closing, valid and marketable title to the
respective shares of Teletrade Stock owned by him, free and clear of any liens,
claims, charges, security interests or other legal or equitable encumbrances,
limitations or restrictions, including without limitation, any that affect
transferability (collectively, "Liens"). At the Closing, such Seller's Teletrade
Stock shall be transferred to Purchaser free and clear of all such Liens. Except
as set forth on Schedule 6.6, there are no outstanding (a) securities
convertible into or exchangeable or exercisable for the capital stock of
Teletrade, (b) subscriptions, options, warrants, calls, or other rights to
purchase or subscribe for or otherwise acquire capital stock of Teletrade or (c)
contracts, demands, commitments, or other agreements or arrangements of any
character or nature whatever under which Teletrade is or may become required to
issue, assign or transfer any shares of the capital stock of Teletrade or
purchase or make payment in respect of any shares of its capital stock, as the
case may be, now or heretofore outstanding.
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6.7 Financial Statements. Sellers have delivered to Purchaser copies of
the following financial statements: (a) audited balance sheet of Teletrade as of
December 31, 1997 and 1996 and the related statements of earnings, stockholders'
equity and statements of cash flows, including the notes thereto, together with
the reports thereon of Trien Rosenberg Rosenberg Weinberg Ciullo & Fazzari LLP,
certified public accountants ("TRR"), for the fiscal years then ended
(respectively, the "1997 Financial Statements and the "1996 Financial
Statements"), (b) audited balance sheet of Teletrade as of December 31, 1995 and
1994 and the related statements of earnings, stockholders' equity and statements
of cash flows, including the notes thereto, together with the reports thereon of
TRR, for the fiscal years then ended (respectively, the "1995 Financial
Statements and the "1994 Financial Statements"), (c) audited balance sheet of
Teletrade (the "Balance Sheet") as at June 30, 1998 (the "Balance Sheet Date")
and the related statement of earnings, stockholders' equity and statements of
cash flow including the notes thereto, together with the reports thereon of TRR,
for the six months then ended (the "1998 Financial Statements") and (d) an
unaudited balance sheet of Teletrade as of September 30, 1998 and the related
unaudited statement of earnings and stockholders' equity for the three months
then ended (the "September 1998 Financial Statements"). Each of the 1998, 1997,
1996, 1995 and 1994 Financial Statements were prepared in accordance with
generally accepted accounting principles consistently applied and maintained
throughout the periods indicated (except as otherwise noted in such financial
statements) and fairly present the financial condition of Teletrade as at their
respective dates and the results of its operations for the periods covered
thereby. The September 1998 Financial Statements are complete and correct in all
material respects, have been prepared from the books and records of Teletrade in
accordance with generally accepted accounting principles consistently applied
and maintained throughout the periods indicated and fairly present the financial
condition of Teletrade as at such date and the results of its operations for the
period covered thereby subject to normal year-end adjustments which shall
consist only of normal recurring accruals necessary for such fair presentation.
The statements of earnings included in the September 1998 Financial Statements,
the 1998 Financial Statements, the 1997 Financial Statements, the 1996 Financial
Statements, the 1995 Financial Statements and the 1994 Financial Statements do
not contain any items (which are material individually or in the aggregate) of
special or nonrecurring income or loss or any other income not earned or loss
not incurred in the ordinary course of business, except as expressly specified
therein, and all such financial statements include all adjustments, which
consist only of normal recurring accruals, necessary for such fair presentation.
6.8 Absence of Undisclosed Liabilities. Except as identified on
Schedule 6.8 and to the extent reflected or reserved against in the Balance
Sheet, as of the Balance Sheet Date, Teletrade had no direct or indirect debts,
liabilities, claims, losses, damages, commitments, deficiencies or obligations
(whether absolute, accrued, known or unknown, contingent or otherwise or whether
due or to become due) of any nature whatsoever which are, individually or in the
aggregate, material, including, without limitation, any foreign or domestic
liabilities for Taxes or deferred liabilities for Taxes for any period prior to
the close
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of business on the Balance Sheet Date or any other debts, liabilities or
obligations relating to or arising out of any act, transaction, circumstance or
state of facts which occurred or existed on or before the Balance Sheet Date,
whether or not then known, due or payable, and which are, individually or in the
aggregate, material, including, without limitation:
(a) debts, liabilities or obligations of any nature owed to
any past or present stockholder of Teletrade or any affiliate of
Teletrade or any Seller; or
(b) liabilities or obligations resulting or arising from
claims for personal injury or property damage or out of any breach or
nonperformance by Teletrade of any contract, agreement, lease, license,
commitment or obligation imposed by law or otherwise, except to the
extent covered by insurance proceeds payable to or on behalf of
Purchaser; or
(c) debts, liabilities or obligations relating to or arising
under any environmental laws; or
(d) debts, liabilities or obligations relating to or arising
under ERISA, or otherwise relating to employees or benefits payable to
employees; or
(e) debts, liabilities or obligations, whether civil or
criminal, relating to or arising under any contract or subcontract as a
result of a failure to comply with government specifications or
requirements; or
(f) debts, liabilities or obligations arising under any
contract, agreement, commitment or undertaking with any affiliate; or
(g) debts, liabilities or obligations arising under any
contract, agreement, commitment between Teletrade and any commercial
banking institution.
6.9 Taxes. (a) "Taxes" shall mean all taxes, charges, fees, liens,
customs, duties or other assessments, however denominated, including any
interest, penalties, additions to tax or additional taxes that may become
payable in respect thereof, imposed by the United States government, any state,
local or foreign government, or any agency or political subdivision of any such
government (a "Tax Authority"), which taxes shall include, without limiting the
generality of the foregoing, all income taxes, payroll and employee withholding
taxes, unemployment insurance, social security, sales and use taxes, excise
taxes, capital taxes, franchise taxes, gross receipt taxes, occupation taxes,
real and personal property taxes, value added taxes, stamp taxes, transfer
taxes, workers' compensation taxes, taxes relating to benefit plans and other
obligations of the same or similar nature.
(b) Teletrade has timely filed with the appropriate Tax Authorities all
returns and reports in respect of Taxes ("Returns") required to be filed (taking
into account any
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extensions of time to file granted to or on behalf of Teletrade). The
information on such Returns is complete and accurate in all material respects.
Teletrade has paid on a timely basis all Taxes (whether or not shown on any
Return) due and payable. There are no liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of Teletrade.
(c) No unpaid (or unreserved in accordance with generally accepted
accounting principles) deficiencies for Taxes have been claimed, proposed or
assessed by any Tax Authority or other governmental authority with respect to
Teletrade for any period prior to the Closing, and there are no pending or
threatened audits, investigations or claims for or relating to any liability in
respect of Taxes of Teletrade. Except as set forth on Schedule 6.9 hereto,
Teletrade has not requested any extension of time within which to file any
currently unfiled Returns in respect of any Taxes and no extension of a statute
of limitations relating to any Taxes is in effect with respect to Teletrade.
(d) (i) Teletrade has made provision for all Taxes payable by it with
respect to any period prior to the Closing which are not payable prior to the
Closing Date; (ii) the provisions for Taxes with respect to Teletrade for any
period prior to the Closing (excluding any reserve for deferred Taxes
established to reflect timing differences between book and tax income) are
adequate to cover all Taxes with respect to such period; (iii) Teletrade has
withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party; (iv) all material
elections with respect to Taxes made by Teletrade or by any Seller with respect
to Teletrade as of the date hereof are set forth on Schedule 6.9 hereof; (v)
Teletrade is not a "consenting corporation" under Section 341(f) of the Code or
any corresponding provision of state, local or foreign law; (vi) there are no
private letter rulings in respect of any Tax pending between Teletrade and any
Tax Authority; (vii) Teletrade has never been a member of an affiliated group
within the meaning of Section 1504 of the Code, or filed or been included in a
combined, consolidated or unitary return of any person or entity other than
Teletrade; (viii) Teletrade is not liable for Taxes of any other person or
entity, and is neither currently under any contractual obligation to indemnify
any person or entity with respect to Taxes, nor a party to any tax sharing
agreement or other agreement providing for payments by Teletrade with respect to
Taxes; (ix) Teletrade is not, and has never been, "a United States real property
holding corporation" (as defined in Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code); (x)
Teletrade is not a person other than a "United States person" within the meaning
of Section 7701(a)(30) of the Code; (xi) Teletrade is not a party to any joint
venture, partnership or other arrangement or contract which could be treated as
a partnership for federal income tax purposes; (xii) Teletrade has not entered
into any sale-leaseback or other leveraged lease transaction that fails to meet
the requirements of Revenue Procedure 75-21 (or similar provision of foreign
law); (xiii) Teletrade has not agreed and is not required, as a result of a
change in the method of accounting or otherwise, to include any adjustment under
Section 481 of the Code (or any corresponding provision of state, local or
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foreign law) in taxable income; (xiv) Teletrade is not a party to any agreement,
contract, arrangement or plan that could result (taking into account the
transactions contemplated by this Agreement), separately or in the aggregate, in
the payment of "excess parachute payments" within the meaning of Section 280(G)
of the Code; (xv) Schedule 6.9 hereto contains a list of all jurisdictions to
which any Tax is properly payable by Teletrade; (xvi) Teletrade has never been a
party to an agreement relating to the sharing of any liability for, or payment
of, Taxes, with any other person or entity; (xvii) Teletrade has been a validly
electing S corporation (within the meaning of Sections 1361 and 1362 of the
Code, and any corresponding provisions of New York state law) since December 7,
1992, and Teletrade will be an S corporation up to and including the Closing
Date; (xviii) (A) Teletrade will not be liable for any Tax under Section 1374 of
the Code in connection with the deemed sale of Teletrade's assets caused by the
Section 338(h)(10) Election; (B) Teletrade has not, in the past 10 years,
acquired assets from another corporation in a transaction in which Teletrade's
Tax basis for the acquired assets was determined, in whole or in part, by
reference to the Tax basis of the acquired assets (or any other property) in the
hands of the transferor, or acquired the stock of any corporation which is a
qualified Subchapter S subsidiary.
6.10 Absence of Changes or Events. Except as set forth in Schedule
6.10, since the Balance Sheet Date and through the date of this Agreement,
Teletrade has conducted its business only in the ordinary course consistent with
past practice and has not:
(a) incurred any material obligation or liability,
absolute, accrued, known or unknown, contingent or otherwise,
whether due or to become due, except current liabilities
incurred in the ordinary course of business and consistent
with its prior practice, none of which obligations or
liabilities, in any case or in the aggregate, has had or is
reasonably likely to result in a material adverse effect on
its business;
(b) discharged or satisfied any liabilities,
obligations, claims, liens, mortgages, charges, security
interests, restrictions and other encumbrances (collectively,
"Encumbrances") which are, individually or in the aggregate,
material, other than those then required to be discharged or
satisfied, or paid any obligations or liabilities, absolute,
accrued, contingent or otherwise, whether due or to become due
which are, individually or in the aggregate, material, other
than current liabilities shown on the Balance Sheet and
current liabilities incurred since the Balance Sheet Date in
the ordinary course of business and consistent with its prior
practice;
(c) declared or made any payment of dividends or
other distribution to its stockholders or upon or in respect
of any
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shares of its capital stock, or purchased, retired or
redeemed, or obligated itself to purchase, retire or redeem,
any of its shares of capital stock or other securities;
(d) mortgaged, pledged or subjected or permitted to
be subjected to any Encumbrances any of its property, business
or assets, tangible or intangible, which Encumbrances are,
individually or in the aggregate, material or recognizably
restrict the use of such property, business or assets;
(e) sold, transferred, leased to others or otherwise
disposed of any of its assets (other than in the ordinary
course of business), or cancelled or compromised any debts or
claims, or waived or released any rights of substantial value,
which in each case are, individually or in the aggregate,
material;
(f) received any notice of termination of any
contract, lease or other agreement or suffered any damage,
destruction or loss (whether or not covered by insurance)
which, in any case or in the aggregate, has had or is
reasonably likely to result in a material adverse effect on
its business;
(g) had any change in its relations with any of its
consignors, clients, employees, agents or suppliers which, in
any case or in the aggregate, has had or is reasonably likely
to result in a material adverse effect on its business;
(h) transferred or granted any rights under, or
entered into any settlement regarding the breach or
infringement of, or entered into any agreement or commitment
relating to, any United States or foreign license, patent,
copyright, trademark, service mark, trade name, permit,
consent, approval, invention or similar rights, or modified
any existing rights with respect thereto, which is or are,
individually or in the aggregate, material;
(i) made any material change in the rate of
compensation, commission, bonus or other direct or indirect
remuneration payable, or paid or agreed or orally promised to
pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, which is
or are, individually or in the aggregate, material, to any
director, officer, employee, consultant, project manager or
agent;
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(j) acquired any capital stock or other securities of
any corporation or any interest in any business enterprise, or
otherwise made any loan or advance to or investment in any
person, firm or corporation which is or are, individually or
in the aggregate, material to its business;
(k) made any capital expenditures or capital
additions or betterments in excess of an aggregate of $10,000;
(l) changed its banking or safe deposit arrangements;
(m) instituted, settled or agreed to settle or
suffered any adverse determination in, any litigation, action
or proceeding before any court or governmental body, which is
or are, individually or in the aggregate, material;
(n) failed to replenish its supplies in a normal and
customary manner consistent with its prior practice or made
any purchase commitment in excess of the normal, ordinary and
usual requirements of its business or at any price in excess
of the then current market price, or made any change in its
business, advertising or personnel practices inconsistent with
its prior practice which, in any case or in the aggregate, has
had or is reasonably likely to result in a material adverse
effect on its business;
(o) suffered any change, event or condition which, in
any case or in the aggregate, has had or is reasonably likely
to result in a material adverse effect on its business,
including, without limitation, any change in revenues, costs,
backlog or relations with employees, agents, customers or
suppliers;
(p) entered into any transaction, contract or
commitment other than in the ordinary course of business or
paid or agreed to pay any legal, accounting, brokerage,
finder's fee, taxes or other expenses in connection with, or
incurred any severance pay obligations by reason of, this
Agreement or the transactions contemplated hereby (except
certain fees of TRR for services rendered in connection with
the audit of the 1998 Financial Statements or in connection
with this Agreement);
(q) made any change in any method of accounting or
auditing practices; made any change in depreciation or
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amortization policies or rates adopted by it or made any
change in its method of carrying its inventory on its books;
(r) amended its certificate of incorporation or
by-laws or merged with or into or consolidated with any other
person or changed in any manner the rights of its outstanding
capital stock or the character of the Business;
(s) made any withdrawal or charge against any cash,
checking or other account, other than withdrawals or charges
in the ordinary course of business;
(t) incurred any damage, destruction or loss to any
of its properties or assets by reason of fire, explosion,
earthquake, accident, casualty, requisition or taking of
property by any government or any agency of any government,
flood, windstorm, embargo, riot, act of God or any enemy, or
other similar casualty or event (whether or not the same has
been insured against), which is or are, individually or in the
aggregate, material; or
(u) entered into any agreement or made any commitment
to take any of the types of action described in subparagraphs
(a) through (t) above.
6.11 Litigation. Except as set forth in Schedule 6.11, there is no
claim, legal action, suit, arbitration, governmental investigation or other
legal or administrative proceeding, nor any order, decree, writ, award or
judgment (collectively, "Suits") in progress, pending or in effect, or to the
knowledge of Sellers, threatened, against or relating to Teletrade or its
officers, directors or employees, properties, assets or business or the
transactions contemplated by this Agreement which, in any case or in the
aggregate, has had or is reasonably to result in a material adverse effect on
Teletrade or its business, and there is no basis for any Suit. None of the Suits
set forth on Schedule 6.11, individually or together with any other Suit, is
likely, except as otherwise set forth on such Schedule, to result in any order,
judgment, injunction, award, writ or decree of any court, governmental or
regulatory body, or arbitration tribunal that is not adequately reserved against
on the 1998 Financial Statements.
6.12 Compliance with Laws and Other Instruments. (a) Sellers and
Teletrade have complied with all existing laws (other than laws relating to
Benefit Plans, Labor Laws and environmental laws, which are dealt with
specifically in Sections 6.19, 6.20 and 6.21 hereof), rules, regulations,
ordinances, orders, judgments and decrees applicable to the Business, except
where the failure to comply has not had and is not reasonably likely to
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result in a material adverse effect on the Business. Neither the ownership nor
use of its properties nor the conduct of its business by Teletrade or Sellers
conflicts in any material respect, with the rights of any other person, firm or
corporation or entity or violates, or with or without the giving of notice or
the passage of time, or both, will violate, conflict with or result in a breach
or default, right to accelerate or loss of rights under, any terms or provisions
of its certificate of incorporation or by-laws or, in any material respect,
individually or in the aggregate, any lien, encumbrance, franchise, mortgage,
deed of trust, lease, license, agreement (whether oral or written), law,
ordinance, rule or regulation, or any order, judgment, restriction or decree to
which Sellers or Teletrade is a party or by which any of them is bound or
affected or by which their respective properties may be bound or affected.
Neither Sellers nor Teletrade has received any notice of violation of any
applicable regulation, ordinance or other law, order or regulation, whether
foreign, domestic, federal, state or local, which would be applicable, either
before or after the Closing, to the business, operations, properties, assets or
prospects of the Business.
(b) Sellers and Teletrade have complied with all material
specifications of all governmental agencies required to be complied with for the
operation of the Business.
6.13 Title to and Condition of Properties. (a) Teletrade has good and
marketable title to all the properties and assets it owns or uses in its
business or purports to own, including, without limitation, those reflected in
its books and records and in the Balance Sheet (except property sold after the
Balance Sheet Date in the ordinary course of business). None of such properties
and assets is subject to any Encumbrance, whether accrued, absolute, contingent
or otherwise, except (i) as expressly set forth in the Balance Sheet as securing
specific liabilities or as otherwise expressly contemplated by the terms hereof,
or (ii) those imperfections of title and encumbrances, if any, which (A) are not
substantial in character, amount or extent and do not materially detract from
the value of the properties subject thereto, and (B) do not interfere with
either the present and continued use of such property or the conduct of normal
operations.
(b) All of the properties and assets owned, leased or used by
Teletrade, which are, individually or in the aggregate, material to its business
are in good operating condition and repair, are suitable for the purposes used,
are adequate and sufficient for all current operations of Teletrade and are
directly related to the Business. Teletrade does not own any real property.
6.14 Schedules. Schedule 6.14 contains an accurate and complete list
of:
(a) All real property in which Teletrade has a
leasehold or other interest or which is used by Teletrade in
connection with the operation of its business, together with
each lease, sublease, license or any other instrument under
which Teletrade claims or holds such leasehold or other
interest or right to the
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use thereof or pursuant to which Teletrade has assigned,
sublet or granted any rights therein, identifying the parties
thereto, the rental or other payment terms, expiration date
and cancellation and renewal terms thereof.
(b) As of a date no earlier than [September 30],
1998, all of Teletrade's receivables (which shall include
accounts receivable, loans receivable and any advances),
together with detailed information as to each such listed
receivable in excess of $5,000 for any one item or series of
related items.
(c) All equipment, motor vehicles and other tangible
personal property (other than supplies), owned, leased or used
by Teletrade, except for items having a value of less than
$5,000 which do not, in the aggregate, have a total value of
more than $25,000, setting forth with respect to all such
listed property a list of all Encumbrances affecting such
listed property, which Encumbrances are, individually or in
the aggregate, material or recognizably restrict the use of
such property.
(d) All patents, patent applications, patent
licenses, trademarks, trademark registrations, and
applications therefor, service marks, service names, trade
names, brand names, copyrights and copyright registrations,
and applications therefor, wholly or partially owned or held
by Teletrade or used in the operation of the Business, and all
contracts, agreements, commitments or licenses relating to the
foregoing to which Teletrade is a party and which are,
individually or in the aggregate, material, identifying the
parties thereto, the royalty or other payment terms,
expiration date and cancellation and renewal terms thereof.
(e) All fire, theft, property, casualty, liability,
workers' compensation, directors and officers liability,
surety bonds, key man life insurance and other insurance
policies and binders insuring Teletrade (the "Insurance"),
specifying with respect to each such policy the name of the
insurer, the risk insured against, the limits of coverage, the
deductible amount (if any), the premium rate and the date
through which coverage will continue by virtue of premiums
already paid.
(f) [Intentionally Blank]
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(g) All loan agreements, indentures, mortgages,
pledges, conditional sale or title retention agreements (other
than consignment agreements with customers with respect to
consigned goods which are not reflected as assets of Teletrade
for any purpose), security agreements, equipment obligations
or guarantees to which Teletrade is a party or by which it or
any of its property is bound or affected and which are,
individually or in the aggregate, material.
(h) All contracts, agreements and commitments,
whether or not fully performed, pursuant to which Teletrade
has acquired any material portion of the Business or its
assets related thereto.
(i) All contracts, agreements, commitments or other
arrangements (whether oral or written) to which Teletrade is a
party or by which it or any of its property is bound or
affected, in respect of which Teletrade may have any
liability, whether absolute or contingent, excluding contracts
entered into in the ordinary course of business and involving
payments or receipts by Teletrade of less than $5,000 in the
case of any single contract but not more than $25,000 in the
aggregate.
(j) The names of all directors and officers of
Teletrade; the name of each bank in which Teletrade has an
account or safe deposit box and the names of all persons
authorized to draw thereon or have access thereto; and the
names of all persons, if any, holding tax or other powers of
attorney from Teletrade and a summary of the terms thereof.
(k) A complete and accurate list as of a date within
two business days of the date hereof of the names of all
employees of Teletrade, including job title, current
annualized compensation (including any applicable commission,
bonus or other incentive rates), and the amount and date on
which any commission bonus and incentive amount was last paid.
All of the contracts, agreements, leases, licenses and commitments required to
be listed on Schedule 6.14 (other than those which have been fully performed)
are valid, binding and enforceable against Teletrade, in accordance with their
respective terms and are in full force and effect. Except as specified in
Schedule 6.14, no such contract, agreement, lease, license or commitment
requires any consent or waiver to remain in full force and effect following the
Closing and to entitle the Purchaser to the full benefits thereof. Except as
disclosed in
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Schedule 6.14, none of the payments required to be made under any such contract,
agreement, lease, license or commitment has been prepaid more than 30 days prior
to the due date of such payment thereunder, and there is not thereunder any
existing default by Teletrade or event which, after notice or lapse of time, or
both, would constitute a default by Teletrade or result in a right to accelerate
or loss of rights by Teletrade and which, individually or in the aggregate,
would have a material adverse effect on Teletrade or the Business. None of the
existing or completed contracts of Teletrade is subject to renegotiation with
any governmental body, except as otherwise specifically set forth therein. In
addition, no such contract, agreement, lease, license or commitment contains any
provision that would alter or amend any of the terms thereto following the
Closing as a result of the transfer of the Teletrade Stock contemplated hereby.
True and complete copies of all such contracts, agreements, leases, licenses and
other documents listed on Schedule 6.14 (together with any and all amendments
thereto) have been made available for review by Purchaser.
6.15 Insurance. Each Insurance policy is in full force and effect as of
the date of this Agreement and will be in full force and effect on the Closing
Date and, in light of the business, operations and affairs of Teletrade, is in
amounts and, to the Sellers' reasonable belief, provides coverage that is
reasonable, adequate and customary for persons in similar businesses or for
similar property. Sellers have previously delivered to Purchaser copies of any
claims or reports prepared or received during the last 3 years relating to: (i)
accidents, casualties or damages occurring on or to the properties or assets of
Teletrade; and (ii) claims by Teletrade for damages, reimbursement of losses,
contribution or indemnification under any insurance policy and settlements or
negotiations of settlements relating thereto. Sellers have provided or made
available to Purchaser all workers' compensation ratings and unemployment
insurance ratings and contributions of Teletrade with respect to the employees
of Teletrade. Sellers have no knowledge of any proposed increase therein. All
premiums due with respect to any insurance maintained by Teletrade which are due
or payable by its terms on or prior to the Closing Date will have been paid by
the Closing Date.
6.16 Patents, etc. Teletrade owns or possesses the royalty-free
licenses or other rights to use all copyrights, trademarks, service marks,
service names, trade names, patents, inventions, trade secrets and other
proprietary rights necessary to conduct its business as it is presently
operated. Teletrade is not infringing upon or otherwise acting adversely to any
copyrights, trademarks, trademark rights, service marks, service names, trade
names, patents, patent rights, inventions, licenses, trade secrets or other
proprietary rights owned by any other person or persons, and there is no claim
or action by any such person pending or threatened with respect thereto. Neither
Sellers nor any of their affiliates (other than Teletrade) owns or possesses
licenses or other rights to use any copyrights, trademarks, service marks,
service names, trade names, patents, inventions, trade secrets and other
proprietary rights relating to the Business.
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6.17 No Guarantees. Except as set forth on Schedule 6.17, none of the
obligations or liabilities of Teletrade is guaranteed by any other person, firm
or corporation, nor has Teletrade guaranteed or otherwise become contingently
liable for the obligations or liabilities of any other person, firm or
corporation.
6.18 Receivables. All receivables of Teletrade (including accounts
receivable, loans receivable and advances) which are reflected in the Balance
Sheet, and all such receivables which have arisen since the Balance Sheet Date,
have arisen only from bona fide transactions and are fully collectible, without
resort to litigation and without offset or counterclaim, in the aggregate face
amounts thereof, subject to normal allowances for uncollectible amounts. The
reserves for doubtful or uncollectible accounts shown on the Balance Sheet are
adequate in light of and consistent with the historical experience of Teletrade.
6.19 Employee Benefit Plans; ERISA.
(a) Schedule 6.19(a) sets forth a true, complete and correct list of
all employee benefit plans, programs, policies and arrangements, including,
without limitation, all employee benefit plans (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), employment agreements, consulting agreements, deferred compensation,
executive compensation, incentive bonus or other bonus, pension, profit-sharing,
savings, retirement, stock option, stock purchase, severance pay, vacation,
life, health, disability or accident insurance plan, program, arrangement or
commitment, whether written or oral, currently sponsored or maintained by
Teletrade or any corporation, business or other entity that is a member of a
controlled group including Teletrade or is under common control with Teletrade
or is a member of an affiliated service group with Teletrade (within the meaning
of Section 414(b), (c) or (m) of the Code, and for purposes of Title IV of ERISA
("Teletrade's Group")) and as to which Sellers or Teletrade may have any
obligation or liability (actual or contingent, and including without limitation,
any liability arising out of an indemnification, guarantee, hold-harmless or
similar agreement) ("Plans").
(b) Teletrade has provided to Purchaser prior to the date hereof true
and complete copies of (i) any employment agreements and any material procedures
and policies relating to the employment of employees of the Business and the use
of temporary employees, independent contractors or leased employees by Teletrade
in connection with the Business (including summaries of any material procedures
and policies that are unwritten), (ii) plan instruments and amendments thereto
for all Plans and related trust agreements, insurance and other contracts,
summary plan descriptions, written descriptions of any unwritten Plans and
summaries of material modifications, and material communications distributed, or
otherwise communicated, to the participants of each Plan or sent to or received
from any governmental authority (including, without limitation, the Internal
Revenue Service), (iii) the three most recent annual reports on Form 5500
required to be
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filed with respect to any Plan (including all schedules thereto), (iv) where
applicable, the most recent (A) Internal Revenue Service determination letter as
to the qualification of such Plan under Sections 401 and 501 of the Code, (B)
audited financial statements of any Plan and (C) actuarial valuation reports for
any Plan.
(c) No event has occurred and no event is likely to occur in connection
with which any member of Teletrade's Group or any Plan, directly or indirectly,
could be subject to any material liability under ERISA, the Code or any other
law, regulation or governmental order applicable to any Plan (including, without
limitation, Section 4971, 4975 or 4976 of the Code or Section 406, 409, 502(i),
or 502(l) of ERISA).
(d) With respect to each Plan, (i) the members of Teletrade's Group
have complied with, and each such Plan conforms in form and operation to, all
applicable laws, regulations and governmental orders, including, but not limited
to, the applicable provisions of ERISA and the Code, in all material respects
and (ii) each Plan that is intended to qualify under Section 401 of the Code has
received a favorable determination letter from the Internal Revenue Service with
respect to such qualification, its related trust has been determined to be
exempt from taxation under Section 501(a) of the Code, and nothing has occurred
since the date of such letter that has or is likely to materially adversely
affect such qualification or exemption.
(e) Neither Teletrade nor any member of Teletrade's Group currently
contributes to, ever has contributed to or otherwise may have any liability in
respect of, and no Plan is, an employee benefit plan subject to Title IV of
ERISA or the funding requirements of Section 302 of ERISA or Section 412 of the
Code (including, without limitation, a "multiemployer plan" within the meaning
of Section 3(37) of ERISA).
(f) Except as set forth on Schedule 6.19(f), the consummation of the
transactions contemplated hereby, either alone or in combination with another
event, will not (i) entitle any employee or former employee of any member of
Teletrade's Group to any payment, (ii) increase the amount of compensation due
to any such employee, (iii) accelerate the time of vesting of any compensation,
stock incentive or other benefit or (iv) result in any "parachute payment" under
section 280G of the Code (whether or not such payment is considered to be
reasonable compensation for services rendered).
(g) None of the members of Teletrade's Group are parties to any
collective bargaining agreements and there are no labor unions or other
organizations representing, purporting to represent, or attempting to represent
any employee of Teletrade or any of the members of Teletrade's Group.
(h) No member of Teletrade's Group has any announced plan or commitment
(whether or not legally binding) to create any additional Plan or to amend,
modify or terminate any existing Plan.
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(i) No member of Teletrade's Group could incur, directly or indirectly,
any material liability (including a material liability arising out of an
indemnification, guarantee, hold harmless or similar agreement) with respect to
any employees or former employees of the Business arising out of any divestiture
by any member of Teletrade's Group of any business or assets.
(j) Schedule 6.19(j) sets forth any and all indebtedness in excess of
$10,000 owed by any employee or former employee of the Business to any member of
Teletrade's Group for money loaned or advanced to such employee or former
employee.
(k) Except as set forth on Schedule 6.19(k), no employee of the
Business participates in any Plan that provides any benefits or provides for
payments based on or measured by the value of any equity security of or interest
in a member of Teletrade's Group.
(l) With respect to each Plan, (i) all material payments due from the
relevant member of Teletrade's Group to the date hereof have been made and all
material amounts properly accrued to the date hereof, or as of the Closing Date,
as liabilities of Teletrade's Group that have not been paid have been properly
recorded on the books of Teletrade's Group, and (ii) there are no material
proceedings pending (other than routine claims for benefits) or threatened with
respect to such Plan or against the assets of such Plan.
(m) No Plan provides for benefits, including, without limitation,
medical or health benefits (through insurance or otherwise) or provides for the
continuation of such benefits or coverage for any participant or any dependent
or beneficiary of any participant after such participant's retirement or other
termination of employment except (i) as may be required by applicable law, (ii)
retirement or death benefits under any employee pension plan, (iii) disability
benefits under any employee welfare plan that have been fully provided for by
insurance or otherwise, (iv) deferred compensation benefits accrued as
liabilities on the books of Teletrade; or (v) benefits in the nature of
severance pay.
(n) No member of Teletrade's Group is a contractor or subcontractor
with obligations under any federal, state or local government contracts as
result of any business engaged in by Teletrade.
(o) There are no material liabilities, whether absolute or contingent,
to or in respect of any employee of the Business relating to workers'
compensation benefits that are not fully insured against by a bona fide
third-party insurance carrier. With respect to each workers' compensation
arrangement that is funded wholly or partially through an insurance policy or
public or private fund, all premiums required to have been paid to date under
the insurance policy or fund have been paid, all premiums required to be paid
under the insurance policy or fund through the Closing Date will have been paid
on or before the
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Closing Date and, as of the Closing Date, there will be no material liability of
any member of Teletrade's Group under any such insurance policy, fund or
ancillary agreement with respect to such insurance policy or fund in the nature
of a retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing Date.
(p) No Plan is a plan, agreement or arrangement providing for benefits
in the nature of severance benefits, and Teletrade's Group does not have
outstanding any liabilities with respect to any severance benefits available
under any Plan.
6.20 Labor Matters. (a) Teletrade has a satisfactory relationship with
its employees.
(b) Teletrade is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours, and is not engaged in any unfair labor practice.
(c) There are no complaints or charges against Teletrade pending
threatened before the National Labor Relations Board or any state, local or
foreign labor agency involving or affecting Teletrade.
(d) There are no strikes, slowdowns, work stoppages, or other labor
troubles pending or threatened with respect to the employees of Teletrade, and
none of the above has occurred or been threatened since the Balance Sheet Date.
(e) There is no representation claim or petition pending before the
National Labor Relations Board and no question concerning representation is
presently being raised, or is threatened, respecting the employees of Teletrade.
(f) No charges with respect to or relating to Teletrade are pending
before the Equal Employment Opportunity Commission, or any state, local or
foreign agency responsible for the prevention of unlawful employment practices.
(g) None of Sellers or Teletrade has received notice of the intent of
any federal, state, local or foreign agency responsible for the enforcement of
labor or employment laws to conduct an investigation of or relating to
Teletrade, and no such investigation is in progress.
(h) Schedule 6.20 sets forth for each employee of Teletrade listed on
Schedule 6.14(k) (a) employment date, (b) title or position, (c) current weekly
or monthly salary rates and bonus payments for the period ending June 30, 1998,
and (d) accrued vacation and sick days not taken as of such date.
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6.21 Environmental Matters. (a) Teletrade holds, and is in compliance
with, all permits, licenses and governmental authorizations required for
Teletrade to conduct the Business under applicable environmental laws, and
Teletrade is otherwise in compliance with all applicable environmental laws,
except where the failure to comply has not had and is not reasonably likely to
result in a material adverse effect on the Business; (b) Teletrade has not
received any written request for information, and has not been notified that it
is a potentially responsible party, under the Comprehensive Environmental
Response, Compensation, and Liability Act, or any similar state law with respect
to any on-site or off-site location; and (c) Teletrade has not entered into or
agreed to any consent decree or order, and is not subject to any judgment,
decree or order relating to compliance with any environmental law or to
investigation or cleanup of regulated substance under any environmental law.
6.22 No Brokers; Absence of Certain Business Practices. Neither such
Seller nor any agent of such Seller, any other Seller, Teletrade or any agent,
officer or director of any other Seller or Teletrade, has employed any
investment banker, business consultant, broker or finder or incurred any
liability for any investment banking, business consultant, brokerage or finders'
fee or commission in connection with the execution or delivery of this Agreement
or the other agreements contemplated hereby or the consummation of the
transactions contemplated hereby or thereby. Neither such Seller nor any agent
of such Seller, nor any other Seller, Teletrade or any officer, employee or
agent of any other Seller or Teletrade has, directly or indirectly, within the
past three years given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other person who is or may be in a
position to help or hinder the Business which (i) has a reasonable possibility
of subjecting Teletrade to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) if not given in the past, has a
reasonable possibility of having had an adverse effect on the Business, or (iii)
if not continued in the future, has a reasonable possibility of resulting in an
adverse effect or which has a reasonable possibility of subjecting Teletrade to
suit or penalty in any private or governmental litigation or proceeding.
6.23 Disclosure. No representation or warranty by such Seller contained
in this Agreement or in any document, instrument or certificate furnished or to
be furnished by such Seller to Purchaser or its representatives in connection
herewith or pursuant hereto contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact required to make
the statements herein or therein contained not misleading or necessary in order
to provide a prospective purchaser of the Teletrade Stock with adequate
information as to such Seller, Teletrade, the Business and the operations,
condition (financial and otherwise), properties, assets, liabilities and
prospects of Teletrade. Except as set forth in Section 8(b) of this Agreement in
the event that Purchaser chooses to close the purchase transaction contemplated
by this Agreement notwithstanding the supplementing or amending of Schedules or
representations and warranties pursuant to such Section 8(b), the
representations and warranties contained in this Section 6 or elsewhere in this
Agreement or in any documents or certificate furnished or to be furnished as
aforesaid in connection
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herewith or pursuant hereto shall not be affected or deemed waived by reason of
the fact that Purchaser and/or its representatives knew or should have known
that any such representation or warranty is or might be inaccurate in any
respect, except to the extent, if any, that any Seller (having the burden of
proof) demonstrates that the chief executive, chief operating or chief financial
officers of Purchaser had actual personal knowledge of the facts that made such
representation or warranty inaccurate and were actually personally aware that
such representation or warranty was inaccurate by reason of such facts.
7. Representations and Warranties of Purchaser. Purchaser represents
and warrants to Sellers as follows:
7.1 Organization, Standing and Qualification. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of New York. Purchaser has all requisite corporate power and authority and is
entitled to carry on its business as now being conducted and to own, lease or
operate its properties as and in the places where such business is now conducted
and such properties are now owned, leased or operated; and Purchaser is duly
qualified, licensed or domesticated and in good standing as a foreign
corporation authorized to do business in every jurisdiction where the nature of
the activities conducted by it or the character of the properties owned, leased
or operated by it requires such qualification, licensing or domestication,
except where the failure to be so qualified, licensed or domesticated would not
have a material adverse on its business or the financial condition or results of
operations of Purchaser.
7.2 Execution, Delivery and Performance of Agreement; Authority,
Consents and Approvals. (a) Neither the execution, delivery nor performance of
this Agreement or the Ancillary Agreements by Purchaser will, with or without
the giving of notice or the passage of time, or both, conflict with, result in a
default, right to accelerate or loss of rights under, or result in the creation
of any lien, charge or encumbrance pursuant to, any provision of Purchaser's
certificate of incorporation or by-laws or any franchise, mortgage, deed of
trust, lease, license, agreement (whether oral or written), law, ordinance, rule
or regulation or any order, judgment or decree to which Purchaser is a party or
by which it is bound, the result of which could have a material adverse effect
on Purchaser. Purchaser has full corporate power and authority to enter into
this Agreement and the Ancillary Agreements to which it is a party and to carry
out the transactions contemplated hereby and thereby, all proceedings required
to be taken by Purchaser to authorize the execution, delivery and performance of
this Agreement and the Ancillary Agreements to which it is a party have been
properly taken and this Agreement constitutes, and the Ancillary Agreements to
which it is a party, when executed and delivered pursuant hereto, will
constitute, a valid and binding obligation of Purchaser enforceable against
Purchaser in accordance with its terms.
(b) Except as identified on Schedule 7.2(b) hereof, no filing with, and
no permit, authorization, consent, waiver or approval of, any governmental or
regulatory agency or any lender, trustee, security holder of Purchaser or any of
its subsidiaries or any other
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person is necessary in connection with the execution, delivery or performance by
Purchaser of this Agreement or any of the Ancillary Agreements or for the
consummation by it of the transactions contemplated hereby and thereby.
7.3 Capitalization; Ownership. All of the authorized capital stock of
Purchaser consists of (a) 20,000,000 shares of common stock, par value $.01 per
share, and (b) 10,000,000 shares of preferred stock, par value $.01 per share.
At September 30, 1998, (i) 4,419,997 shares of common stock were issued and
outstanding; (ii) no shares of preferred stock were outstanding; and (iii)
certain shares of common stock of Purchaser were reserved for issuance upon the
exercise of outstanding warrants and options, as more fully described in the SEC
Filings (as hereinafter defined). The issued and outstanding shares of capital
stock of Purchaser are duly authorized, validly issued, fully paid and
nonassessable. All of the issued and outstanding shares of capital stock of each
subsidiary of Purchaser are duly authorized, validly issued, fully paid and non
assessable and are owned beneficially and of record by Purchaser. All shares of
GMAI Stock to be issued hereunder, when issued and delivered in accordance with
this Agreement, will be validly authorized, duly issued, fully paid and
nonassessable.
7.4 Financial Statements and Reports. Purchaser has heretofore
delivered to Sellers copies of (i) Purchaser's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1998, as amended; and (ii) all other reports,
statements and registration statements filed by Purchaser (which include all
material reports, statements and registration statements required to be filed)
with the Securities and Exchange Commission (the "SEC") since May 14, 1993 and
prior to the date of this Agreement (collectively, the "SEC Filings"). The
financial statements of Purchaser included in or incorporated by reference into
the SEC Filings were prepared in accordance with generally accepted accounting
principles consistently applied (except as otherwise noted in such financial
statements) and maintained throughout the periods indicated and fairly present
the consolidated financial condition of Purchaser and its consolidated
subsidiaries as at their respective dates and the consolidated results of their
operations for the periods covered thereby, subject, in the case of interim
financial statements, to year-end audit adjustments consisting only of normal
recurring accruals.
7.5 No Brokers. Neither Purchaser, any of its subsidiaries nor any
agent, officer or director of Purchaser or any of its subsidiaries has employed
any investment banker, business consultant, broker or finder or incurred any
liability for any investment banking, business consultant, brokerage or finders'
fee or commission in connection with the execution or delivery of this Agreement
or the other agreements contemplated hereby or the consummation of the
transactions contemplated hereby or thereby.
7.6 Disclosure. No representation or warranty by Purchaser contained in
this Agreement or in any document, instrument or certificate furnished or to be
furnished by Purchaser to Sellers or their representatives in connection
herewith or pursuant hereto
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contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact required to make the statements herein or
therein contained not misleading or necessary in order to provide a prospective
purchaser of the GMAI Stock with adequate information as to Purchaser and the
operations, condition (financial and otherwise), properties, assets, liabilities
and prospects of Purchaser. Except as set forth in Section 9.2.1 of this
Agreement in the event that any Seller chooses to close the purchase transaction
contemplated by this Agreement notwithstanding the supplementing or amending of
Schedules or representations and warranties, the representations and warranties
contained in this Section 7 or elsewhere in this Agreement or in any documents
or certificate furnished or to be furnished as aforesaid in connection herewith
or pursuant hereto shall not be affected or deemed waived by reason of the fact
that Sellers and/or their representatives knew or should have known that any
such representation or warranty is or might be inaccurate in any respect, except
to the extent, if any, that Purchaser (having the burden of proof) demonstrates
that any of Sellers had actual personal knowledge of the facts that made such
representation or warranty inaccurate and was actually personally aware that
such representation or warranty was inaccurate by reason of such facts.
8. Conduct of Business Prior to Closing. (a) Prior to the Closing,
Sellers will use their best efforts to cause Teletrade to conduct its business
and affairs only in the ordinary course and consistent with its prior practice
and shall maintain, keep and preserve its assets and properties in good
condition and repair and maintain insurance thereon in accordance with present
practices, and Teletrade and Sellers will use their best efforts (i) to preserve
the business and organization of Teletrade intact, (ii) to keep available to
Purchaser the services of the present officers, employees, agents and
independent contractors of Teletrade (other than Sellers), (iii) to preserve for
the benefit of Purchaser the goodwill of consignors, clients, suppliers,
customers, landlords and others having business relations with Teletrade, (iv)
to cooperate with Purchaser and to assist Purchaser in obtaining the consent of
any landlord or other party to any lease or contract with Teletrade where the
consent of such landlord or other party may be required by reason of the
transactions contemplated hereby. Without limiting the generality of the
foregoing, prior to the Closing, without Purchaser's prior written approval,
Sellers will not, and will use their best efforts to cause Teletrade not to:
(i) change its certificate of incorporation or by-laws or
merge or consolidate or obligate itself to do so with or into any
other entity;
(ii) enter into any contract, agreement, commitment or
other understanding or arrangement except for those of the type
which would not have to be listed and described under subparagraph
(j) of Section 6.14 hereof;
(iii) adopt any new plan or arrangement for the benefit of
any employee of Teletrade or amend any Benefit Plan or
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arrangement maintained by Teletrade other than amendments (x)
required to be made under applicable laws or regulations or (y) as
contemplated under the terms of this Agreement;
(iv) perform, take any action or incur or permit to exist
any of the acts, transactions, events or occurrences of the type
(1) described in subparagraphs (a), (b), (c), (d), (e), (h), (i),
(j), (k), (l), (m), (n), (p), (q), (r), (s), (t) or (u) of Section
6.10 hereof which would have been inconsistent with the
representations and warranties set forth therein had the same
occurred after the Balance Sheet Date and prior to the date
hereof, or (2) described in Section 6.4 hereof which would be
required to be set forth on Schedule 6.4 if it had taken place
during the past three years; provided, however, that distributions
may be made to each Seller, in accordance with Teletrade's past
practice, to permit him to pay his income tax liabilities with
respect to his allocable share of Teletrade's income for the S
Short Year (as defined in Section 10.3 of this Agreement);
provided, however, that such distributions (together with any
prior distributions to Sellers during the S Short Year) shall not
exceed 43.7% of Teletrade's taxable income for the S Short Year.
(v) grant any increase in the compensation, commissions or
bonus opportunities payable to or to become payable to any
employee of Teletrade, excluding any increases in the ordinary
course of business consistent with past practice;
(vi) enter into any new compensation arrangement with any
director, officer or employee or pay or agree to pay any pension,
retirement allowance or other employee benefit to any director,
officer or employee (whether past or present) or declare, approve
or make any deposit into or contribution or payment to any benefit
plan, other than such amounts as may be contributed in the normal
course of business or which are necessary in order to comply with
applicable law; or
(vii) increase the regularly scheduled hours per week for
any employee.
(b) Sellers shall give Purchaser prompt written notice of any material
change in any of the information contained in the representations and warranties
made in Section 6 or elsewhere in this Agreement or the Schedules referred to
herein which occurs prior to the Closing; provided, however, that neither the
supplementing or amending of any Schedules by
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Sellers or Teletrade, nor the discovery of any matters by Purchaser in the
course of its investigations, shall be deemed to cure any breach of
representation or warranty made in this Agreement, to have been disclosed as of
the date of this Agreement or to constitute any waiver by Purchaser of any of
its rights hereunder, except that if Purchaser chooses to close the purchase
transaction contemplated by this Agreement notwithstanding such supplement or
amendment or discovery of such matter, then such representations and warranties
or such Schedules shall be deemed to have been as so supplemented or amended for
all purposes of this Agreement and Purchaser may not thereafter pursue any claim
for indemnification by reason of the information disclosed in such supplement or
amendment.
(c) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use their respective 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.
(d) In the event that during the period between the date hereof and the
Closing Date, all or any portion of the properties of Teletrade is damaged by
fire or other casualty, Sellers shall promptly give notice thereof to Purchaser.
If such damage in the aggregate materially affects the ability of Teletrade at
Closing to conduct the Business as contemplated herein, Purchaser shall have the
right to terminate this Agreement. In such event, all parties shall be released
from all liability hereunder except as otherwise provided in this Agreement.
(e) From the date hereof through the earlier of the Closing or the
termination of this Agreement, none of Sellers, Teletrade, any of their
respective affiliates nor any of the officers, directors, employees,
representatives or agents of, or professional advisors to (collectively, the
"Representatives"), Sellers, Teletrade or any of their respective affiliates,
shall, directly or indirectly, solicit, initiate, participate in discussions
with, provide any information or assistance to (including, but not limited to,
affording access to the properties, books and records of Teletrade) or enter
into any agreement with any person or group of persons (other than Purchaser)
concerning any transaction that would result, directly or indirectly, in the
transfer to any such person or persons of control of any properties or assets of
Teletrade or the Business.
9. Covenants.
9.1 Covenants of Sellers. Each Seller hereby covenants and agrees as
follows:
9.1.1 Access to Information and Documents. Upon reasonable
notice, Sellers shall cause Teletrade to give Purchaser and Purchaser's
Representatives full access to the officers and other personnel of
Teletrade and all properties, documents, contracts,
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books and records of Teletrade (including, without limitation, books
and records relating to backlog, payroll and personnel matters) and to
furnish Purchaser with copies of such documents (certified by
Teletrade's appropriate officers if so requested) and with such
information with respect to the Business and Teletrade's assets as
Purchaser may from time to time reasonably request, and Purchaser will
not improperly disclose the same prior to the Closing. Except to the
extent specified in the last clause of Section 6.23, any such
furnishing of such information to Purchaser or any investigation by
Purchaser shall not affect Purchaser's right to rely on any
representation or warranty made in this Agreement or in any document or
certificate furnished or to be furnished by Teletrade or Sellers to
Purchaser or its Representatives in connection herewith or pursuant
hereto.
9.1.2 Certain Financial Information. No later than 15 days
following the end of each month from September 30, 1998 to the Closing,
Sellers shall cause to be delivered to Purchaser the unaudited balance
sheets of Teletrade and the related statement of earnings and
stockholders' equity for the one month then ended (collectively, the
"Interim Financial Statements"). The Interim Financial Statements will
be complete and correct in all material respects, will have been
prepared from the books and records of Teletrade in accordance with
generally accepted accounting principles consistently applied and
maintained throughout the periods indicated and will fairly present the
financial condition of Teletrade as at their respective dates and the
results of their operations for the periods covered thereby subject to
normal year-end adjustments, which shall consist only of normal
recurring accruals necessary for such fair presentation. The statements
of earnings included in the Interim Financial Statements will not
contain any items of special or nonrecurring income or loss or any
other income not earned or loss not incurred in the ordinary course of
business, except as expressly specified therein, and all such financial
statements include all adjustments, which consist only of normal
recurring accruals necessary for such fair presentation.
9.1.3 Consulting Agreement. Liebman shall enter into a
consulting agreement with Purchaser (the "Consulting Agreement"),
substantially in the form of Exhibit 9.1.3 annexed hereto, effective
upon the Closing.
9.2 Covenants of Purchaser. Purchaser hereby covenants and
agrees as follows:
9.2.1 Access to Information and Documents. Upon reasonable
notice, Purchaser will give Sellers and Sellers' Representatives full
access to the officers and other personnel of Purchaser and its
subsidiaries and all properties, documents, contracts, books and
records of Purchaser and its subsidiaries and will furnish Sellers with
copies of such documents (certified by Purchaser's officers if so
requested) and with such information with respect to the business,
assets, properties and affairs of
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Purchaser as Sellers may from time to time reasonably request, and
Sellers will not improperly disclose the same prior to the Closing.
Except to the extent specified in the last clause of Section 7.6, any
such furnishing of such information to Sellers or any investigation by
Sellers shall not affect Sellers' right to rely on any representation
or warranty made in this Agreement or in any document or certificate
furnished or to be furnished to Sellers by Purchaser or its
Representatives in connection herewith or pursuant hereto.
9.3 Covenants of Sellers and Purchaser. (a) Each Seller and Purchaser
hereby covenants and agrees that he or it shall use his or its best efforts to
render their respective representations and warranties in this Agreement
accurate as of the Closing Date, and shall refrain from taking any action that
would render any of such representations and warranties inaccurate as of the
Closing Date.
(b) Sellers and Purchaser shall cooperate fully in connection with the
preparation and filing by any party hereto of all documents and reports required
to be filed by such party in accordance with applicable state and federal
securities laws. Such cooperation shall include, upon any party's request, the
other parties' best efforts to cause the provision of records, information and
consents which are reasonably relevant to any such filing and making employees,
accountants and other persons reasonably available on a mutually convenient
basis to provide such information and explanation of any material provided
hereunder.
10. Covenants Relating to Taxes
10.1 Prior to the Closing. (a) Sellers shall use best efforts to cause
Teletrade to prepare and timely file all Returns and amendments thereto required
to be filed by or for Teletrade for the taxable periods for which a return is
due on or before the Closing Date. Purchaser will be given a reasonable
opportunity to review and comment upon such Returns and amendments thereto.
Sellers shall use best efforts to cause Teletrade to pay and discharge all
Taxes, assessments and governmental charges upon or against it or any of its
properties or assets, and all liabilities at any time existing which are,
individually or in the aggregate, material, before the same shall become
delinquent and before penalties accrued thereon, except to the extent and as
long as: (a) the same are being contested in good faith and by appropriate
proceedings pursued diligently and in such a manner as not to cause any material
adverse effect upon the condition (financial or otherwise) or operations of
Teletrade; and (b) Teletrade shall have set aside on its books reserves in the
amount of the demanded principal imposition (together with interest and
penalties relating thereto, if any). Between the date of this Agreement and the
Closing Date, Sellers shall and shall use best efforts to cause Teletrade to
give Purchaser and its authorized representatives full access to all properties,
books, records and Returns of or relating to Teletrade, whether in possession of
Teletrade, Sellers or third-party professional advisors or representatives in
order that Purchaser may have full opportunity to make such investigations as it
shall desire to make of
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the affairs of Teletrade. Sellers shall and shall cause Teletrade to ensure that
all third-party advisors and representatives of Sellers and Teletrade, including
without limitation accountants and attorneys, fully cooperate and are available
to Purchaser in connection with such investigation.
(b) No new elections with respect to Taxes, or any changes in current
elections with respect to Taxes, of Teletrade which may have an effect on
Teletrade for periods ending after the Closing Date shall be made after the date
of this Agreement without the prior written consent of Purchaser. Without
limiting the generality of the foregoing, Sellers will not and will use best
efforts to cause Teletrade not to (i) revoke Teletrade's election to be taxed as
an S corporation within the meaning of Sections 1361 and 1362 of the Code, or
(ii) take or allow any action (other than the sale of the Teletrade Stock
hereunder) that would result in the termination of Teletrade's status as a
validly electing S corporation within the meaning of Sections 1361 and 1362 of
the Code.
10.2 Post-Closing Matters.
(a) At Purchaser's option, each Seller will join with Purchaser in
making an election under Section 338(h)(10) of the Code (and any corresponding
election under state, local and foreign tax law with respect to the purchase and
sale of the Teletrade Stock (a "Section 338(h)(10) Election"). Sellers will
include any income, gain, loss, deduction or other tax item resulting from the
Section 338(h)(10) Election on their Returns to the extent permitted by
applicable law. Purchaser shall pay any Tax imposed on Teletrade or any Seller
attributable to the making of the Section 338(h)(10) Election, including but not
limited to (i) any Tax imposed under Code ss.1374, (ii) any Tax imposed under
Reg. ss.1338(h)(10)-1(e)(5), or (iii) any state, local or foreign Tax imposed on
Teletrade's gain, and Sellers shall indemnify Purchaser and Teletrade against
any loss, liability or damages arising out of the failure to pay such Taxes.
(b) Purchaser shall be responsible for the preparation and filing of
all forms and documents required in connection with the Section 338(h)(10)
Election. Each Seller shall execute and deliver to Purchaser such documents or
forms as are reasonably requested and are required by any tax laws to properly
complete the Section 338(h)(10) Election no later than 30 days after receipt
thereof from Purchaser.
(c) To the extent permitted by state and local laws, the principles and
procedures of this Section 10.2 shall also apply with respect to the Section
338(h)(10) Election or equivalent or comparable provision under state or local
law.
(d) Purchaser and Sellers agree that the Purchase Price and the
liabilities of Teletrade (plus other relevant items) will be allocated to the
assets of Teletrade for all purposes (including Tax and financial accounting) as
shown on Schedule 10.2(b) hereto. Purchaser and Sellers will file, and shall
cause Teletrade to file, all Returns (including
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amended returns and claims for refund) and information reports in a manner
consistent with such allocation.
(e) Purchaser shall cause Teletrade to file, and control any Returns
required to be filed by Teletrade after the Closing Date. Sellers and their
professional advisers shall be given a reasonable opportunity to review and
comment upon Teletrade's federal and state income tax Returns (and any
amendments thereto) for the S Short Year (as defined in Section 10.3 of this
Agreement). Each Seller agrees that he shall provide, and shall cause his
accountants and other representatives to provide, to Purchaser on a timely basis
the information, including but not limited to all work papers and records
relating to Teletrade, that it or the accountants or other representatives have
within their control and that may be reasonably necessary or related to (i) the
preparation of any and all Returns required to be filed by Purchaser or
Teletrade and (ii) audits or other tax determinations or proceedings by or
before governmental agencies, such information to be provided in the form in
which it has in the past been maintained by Sellers, Teletrade, their
accountants or other representatives.
10.3 Other Tax Matters. Each Seller shall (a) duly include in his
federal and state income Tax Returns his respective allocable share of all items
of income, gain, loss, deduction or credit attributable to the S Short Year of
Teletrade in a manner consistent with the federal Tax Form 1120S and the
schedules thereto (and the corresponding state income tax forms and schedules)
to be sent by Teletrade to the Sellers with respect to such period; and (b) pay
all federal and state income Taxes required to be paid for all taxable years of
such Seller, including the taxable year that includes the S Short Year, that are
attributable to such Seller's stock ownership of Teletrade. For purposes of this
provision, the "S Short Year" means the tax year of Teletrade that ends as a
result of the termination of the S corporation status of Teletrade pursuant to
Section 1362 of the Code (and the corresponding provisions of applicable state
law).
11. Conditions Precedent to Purchaser's Obligations. All obligations of
Purchaser hereunder are subject, at the option of Purchaser, to the fulfillment
of each of the following conditions at or prior to the Closing, and each Seller
shall use his best efforts to cause each such condition to be so fulfilled:
(a) All representations and warranties of Sellers contained herein or
in any document or certificate delivered pursuant hereto shall be true and
correct when made and shall be deemed to have been made again at and as of the
date of the Closing, and shall then be true and correct in all material
respects.
(b) All covenants, agreements and obligations required by the terms of
this Agreement to be performed by Sellers at or before the Closing shall have
been duly and properly performed in all material respects.
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(c) Since the date of this Agreement there shall not have occurred any
change, event or condition which in any case or in the aggregate has had or is
reasonably likely to result in a material adverse effect on the business,
operations, assets, results of operations, condition (financial or otherwise),
liabilities or prospects (a "Material Adverse Effect") of Teletrade.
(d) There shall be delivered to Purchaser a certificate executed by the
President and Secretary of Teletrade, dated the date of the Closing, certifying
to the best knowledge of such person after due investigation that the conditions
set forth in paragraphs (a), (b) and (c) of this Section 11, as they relate to
Teletrade, have been fulfilled.
(e) The Consulting Agreement and all other documents required to be
executed and delivered to Purchaser at or prior to the Closing pursuant to this
Agreement shall have been so executed and delivered.
(f) Liebman shall have executed and delivered to Purchaser a
representation agreement with Purchaser (the "Representation Agreement"),
reasonably satisfactory to the Purchaser and dated as of the Closing, pursuant
to which Liebman (A) acknowledges that (i) the securities issued to Liebman
hereunder have not been registered under the Act or any state securities laws,
and cannot be sold unless such securities are registered under the Act and any
applicable state securities laws, or is exempt from registration, and (ii) the
certificates representing such securities will contain a restrictive legend; (B)
represents that he is acquiring such securities for investment purposes only and
not with a view towards distribution; (C) agrees that such securities may not be
sold, pledged, transferred or otherwise disposed of for a period of one year
after the Closing Date; (D) represents that he is an "accredited investor", as
defined in the Securities Act, and has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of an investment in Purchaser; (E) acknowledges that he has been afforded
the opportunity to ask questions of representatives of Purchaser regarding an
investment in Purchaser and to review publicly available information regarding
Purchaser; and (F) addresses such other related matters as Purchaser may
reasonably request.
(g) Purchaser shall have received an opinion of Piper & Marbury L.L.P.,
counsel to Sellers and Teletrade, dated the date of the Closing, substantially
in the form attached hereto as Exhibit .
(h) Sellers and Teletrade shall have obtained, with respect to the
transaction contemplated hereby, all necessary waivers, consents and approvals,
in form reasonably satisfactory to Purchaser.
(i) Except as set forth in Schedule 6.11, there shall not exist any
Suit in any court or by or before any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, pending or known
by Purchaser to be threatened against
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Sellers or Teletrade which, in the reasonable judgment of Purchaser, if
adversely determined, would have a Material Adverse Effect on Teletrade.
12. Conditions Precedent to Sellers' Obligations. All obligations of
Sellers at the Closing are subject, at the option of Sellers, to the fulfillment
of each of the following conditions at or prior to the Closing, and Purchaser
shall use its best efforts to cause each such condition to be so fulfilled:
(a) All representations and warranties of Purchaser contained herein or
in any document or certificate delivered pursuant hereto shall be true and
correct when made and shall be deemed to have been made again at and as of the
date of the Closing, and shall then be true and correct in all material
respects.
(b) All covenants, agreements and obligations required by the terms of
this Agreement to be performed by Purchaser at or before the Closing shall have
been duly and properly performed in all material respects.
(c) Since the date of this Agreement, there shall not have occurred any
change, event or condition which in any case or in the aggregate has had or is
reasonably likely to result in a Material Adverse Effect on Purchaser.
(d) There shall be delivered to Sellers a certificate executed by the
Chief Executive Officer and Secretary of Purchaser, dated the date of the
Closing, certifying to the best knowledge of such persons after due
investigation that the conditions set forth in paragraphs (a), (b), (c) of this
Section 12 have been fulfilled.
(e) There shall be delivered to Sellers a certificate executed by the
Secretary of Purchaser, dated the Closing, attaching a true, correct and
complete copy of the resolutions of the Board of Directors of Purchaser
approving execution and delivery of this Agreement and the Ancillary Agreements
to which Purchaser is a party and the consummation of all of the transactions
contemplated hereby and thereby.
(f) Purchaser shall have executed and delivered to Liebman a
Registration Rights Agreement, substantially in the form of Exhibit 12(f)
annexed hereto.
(g) All of the other documents required to be executed and delivered to
Sellers at or prior to the Closing pursuant to this Agreement shall have been so
executed and delivered.
(h) Each Seller shall have received a guarantee of GMAI (the
"Guaranty") of certain obligations of Teletrade to such Seller, substantially in
the form of Exhibit 12(h) annexed hereto.
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(i) The Board of Directors of Purchaser shall have taken all corporate
action that may be required to cause Liebman to be appointed to the Board of
Directors of Purchaser, effective as of the Closing, to fill the vacancy in the
class of directors whose term expires in [ ].
(j) Sellers shall have received an opinion of Kramer Levin Naftalis &
Frankel LLP, counsel to Purchaser, dated the date of the Closing, substantially
in the form attached hereto as Exhibit .
13. Indemnification.
13.1 (a) Each Seller hereby jointly, but not severally indemnifies and
agrees to hold Purchaser, any subsidiary and affiliate thereof, and their
respective successors, if any, and their officers, directors and controlling
persons (collectively, the "Purchaser Group") harmless from, against and in
respect of (and shall on demand reimburse the Purchaser Group for):
(i) any and all loss, liability or damage suffered or
incurred by the Purchaser Group by reason of any untrue
representation, breach of warranty or nonfulfillment of any
covenant or agreement by such Seller in connection with this
Agreement and the transactions contemplated hereby;
(ii) any and all loss, liability or damage suffered
or incurred by Purchaser by reason of or in connection with
the litigation set forth on Schedule 6.11 hereto and subject
to the qualifications set forth on said Schedule 6.11;
(iii) any and all loss, liability or damage suffered
or incurred by Purchaser by reason of or in connection with
any claim for finder's fee or brokerage or other commission
arising by reason of any services alleged to have been
rendered to or at the instance of Sellers or Teletrade with
respect to this Agreement or any of the transactions
contemplated hereby;
[(iv) the matters set forth in Section 10.2(a) hereof;
and]
(v) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses,
including, without limitation, reasonable legal fees and
expenses, incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
(b) Purchaser hereby indemnifies and agrees to hold each of the
Sellers, any affiliate thereof, and their respective heirs and successors, if
any (collectively, the Seller Group"),
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harmless from, against and in respect of (and shall on demand reimburse the
Seller Group for):
(i) any and all loss, liability or damage suffered or
incurred by the Seller Group by reason of any untrue
representation , breach of warranty or nonfulfillment of any
covenant or agreement by Purchaser contained herein or in any
certificate, document or instrument delivered to any Seller
pursuant hereto; and
(ii) any and all loss, liability or damage suffered
or incurred in connection with any claim for finders fee or
brokerage or other commission arising by reason of any
services alleged to have been rendered to or at the instance
of Purchaser with respect to this Agreement or any of the
transactions contemplated hereby; and
(iii) any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs and expenses,
including, without limitation, reasonable legal fees and
expenses, incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
13.2 The right to make a claim for indemnification under this Agreement
shall survive the Closing Date for a period of three years provided that any
claim by Purchaser for indemnification relating to Taxes shall survive until 60
days after all applicable statutes of limitations, including waivers and
extensions, have expired with respect to each matter addressed therein.
13.3 A person seeking indemnification pursuant to Section 13.1(a) or
(b) (an "Indemnified Party") with respect to a claim, action or proceeding shall
give prompt written notice to the party from whom such indemnification is sought
(the "Indemnifying Party") of the assertion of any claim, or the commencement of
any action or proceeding, in respect of which indemnity may be sought hereunder;
provided, that the failure to give such notice shall not affect the Indemnified
Party's rights to indemnification hereunder, except to the extent such failure
prejudices in any material respect the Indemnifying Party's ability to defend
such claim, action or proceeding. The Indemnifying Party shall have the right to
assume the defense of any such action or proceeding at its expense, provided,
that (a) such claim, action or proceeding does not seek criminal penalties or
injunctive or other equitable relief that is reasonably likely to have a
material adverse effect on the business, properties, assets, financial condition
or results of operations of the Indemnified Party, (b) the selection of counsel
is approved by the Indemnified Party (which approval will not be unreasonably
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withheld, conditioned or delayed), and (c) prior to assuming such defense, the
Indemnifying Party has agreed in writing that it is liable under this Article 13
to indemnify the Indemnified Party in accordance with the terms contained herein
in respect of such claim, action or proceeding, shall conduct such defense
diligently, shall have full and complete control over the conduct of such
proceeding on behalf of the Indemnified Party and shall, in his, her or its sole
discretion, have the right to decide all matters of procedure, strategy,
substance and settlement relating to such proceeding. If the Indemnifying Party
shall elect not to assume the defense of any such action or proceeding, or fails
to make such an election within 20 days after it receives such notice pursuant
to the first sentence of this Section 13.3, the Indemnified Party may assume
such defense at the expense of the Indemnifying Party. The Indemnified Party
shall have the right to participate in (but not control) the defense of an
action or proceeding defended by the Indemnifying Party hereunder and to retain
its own counsel in connection with such action or proceeding, but the fees and
expenses of such counsel shall be at the Indemnified Party's expense unless (i)
the Indemnifying Party and the Indemnified Party have mutually agreed in writing
to the retention of such counsel or (ii) the named parties in any such action or
proceeding (included impleaded parties) include the Indemnifying Party and the
Indemnified Party, and representation of the Indemnifying Party and the
Indemnified Party by the same counsel would create a conflict (in which case the
Indemnifying Party shall not have the right to control such defense on behalf of
the Indemnified Party); provided, that, unless otherwise agreed by the
Indemnifying Party, if the Indemnifying Party is obligated to pay the fees and
expenses of such counsel, the Indemnifying Party shall be obligated to pay only
the reasonable fees and expenses associated with one law firm for the
Indemnified Party, as well as local counsel as required. If the Indemnifying
Party is assuming the defense of any claim, action or proceeding in respect of
which indemnity may be sought hereunder, such Indemnifying Party shall not be
liable under Section 13.1(a) or (b) for any settlement of any such claim, action
or proceeding effected without its written consent. No Indemnifying Party shall
settle or compromise any claim, action or proceeding unless the Indemnified
Party is fully discharged and released as a result thereof. Notwithstanding the
foregoing, Purchaser shall have no right to participate in the defense of any
claim referred to in Section 13.1(a)(ii) (but shall be consulted regarding the
non-financial aspects of any resolution or settlement thereof). Notwithstanding
the foregoing, no Indemnifying Party shall settle or compromise any claim,
action or proceeding with respect to Taxes without the prior consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
13.4 Basket and Cap on Indemnity. Notwithstanding anything in this
Section 13 to the contrary, the Indemnifying Parties shall not have any
obligation to indemnify the Indemnified Party pursuant to Section 13.1: (i)
(except in the case of matters subject to Section 13.1(a)(ii)) until the
Indemnified Party has suffered aggregate damages, by reason of all breaches, in
excess of $50,000, provided that, once the Indemnified Party's aggregate damages
exceed $50,000, the Indemnifying Party shall indemnify the Indemnified Party for
all damages suffered by the Indemnified Party in excess of $50,000, and (ii) to
the extent the aggregate damages the Indemnified Party has suffered by reason of
all such breaches by all
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Indemnifying Parties in excess of such $50,000 exceed $750,000 (the "Cap"), in
the absence of fraud or intentional misrepresentation, no Indemnifying Party
will have any obligation to indemnify the Indemnified Party for further damages
in excess of the Cap (except in the case of a breach by any Seller of such
Seller's representations set forth in Section 6.6 as to such Seller himself, in
which case such Sellers liability shall be limited to the value of the Purchase
Price received by such Seller).
13.5 Reimbursement; Cumulative Remedies. In the event it is determined
by a court of competent jurisdiction in a final, non-appealable judgement that
an Indemnified Party is not entitled to indemnification hereunder, then such
Indemnified Party shall promptly reimburse to the Indemnifying Party any amounts
advanced to such Indemnified Party pursuant to this Article 13.
14. Termination. (a) This Agreement may be terminated and the
transactions contemplated hereby may be abandoned prior to the Closing:
(i) by the mutual consent of Purchaser and Sellers;
(ii) by Sellers or Purchaser if the Closing Date shall not
have occurred on or before [October 31], 1998; provided, however, that the right
to terminate this Agreement under this subsection (iii) shall not be available
to any party whose failure to fulfill any obligation under this Agreement has
been the cause of the failure of the Closing Date to occur on or before such
date;
(iii) by Purchaser if on the Closing Date any of the
conditions provided for in Section 11 have not been met and have not been waived
by Purchaser, or by Sellers if on the Closing Date any of the conditions
provided for in Section 12 have not been met and have not been waived by the
Sellers; and
(iv) by Purchaser if, despite Purchaser's reasonable efforts
in good faith from the date hereof through the Closing Date to obtain financing,
on the Closing Date it has been unable to obtain financing reasonably acceptable
to it in order to consummate the transactions contemplated hereby.
(b) In the event of the termination and abandonment of this
Agreement pursuant to this Section 14, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party hereto
or its affiliates, directors, officers or stockholders except as otherwise set
forth in this Agreement; provided, however, that a termination of this Agreement
shall not defeat or impair the right of any party to pursue such relief as may
otherwise be available to it on account of any breach of this Agreement or any
of the representations, warranties, covenants or agreements contained herein.
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15. Non-Competition; Confidentiality; Proprietary Information; Public
Announcements; Non-Solicitation.
15.1 Non-Competition. (a) Each Seller agrees, for himself only and not
any other Seller, that during the Non-Competition Period (as hereinafter
defined) he will not, directly or indirectly, alone or with others, individually
or through or by a corporate or other business entity in which he may be
interested as a partner, trustee, director, officer, employee,
consultant-shareholder, option holder, lender of money or guarantor, engage in
or participate in, or become employed by or render services (including research
or consulting services), advice or assistance to any person, firm, corporation
or other entity ("Person") engaged or participating in a Competing Business (as
hereinafter defined) in any state of the United States or its territories or
possessions or elsewhere in the world. For purposes of this Section 15,
"Non-Competition Period" shall mean the period commencing on the Closing Date
and ending three years after the Closing Date, and "Competing Business" shall
mean any business or venture which engages in the sale of collectibles
(including without limitation, certified coins, gemstones, sports trading cards
and sports memorabilia) through auction or in any auction form.
(b) For purposes of this Section 15.1, ownership of up to 5% of any
class of publicly traded securities of any corporation, the stock of which is
regularly traded on any stock exchange or on the over-the-counter market, shall
not be deemed to constitute ownership or participation in the ownership of the
business of such corporation.
(c) Each Seller acknowledges that the time, scope, geographic area and
other provisions of this Section 15.1 have been specifically negotiated by
sophisticated commercial parties and agree that all such provisions are
reasonable under the circumstances.
15.2. Proprietary Information; Confidentiality (a) Each Seller
acknowledges and agrees, for himself only and not any other Seller, that in
connection with his employment with and control of Teletrade to date, of
necessity he has participated in the development of and had access to, and use
of, Proprietary Information and Confidential Records (as each such term is
defined below). Each Seller covenants that he shall not at any time hereafter,
directly or indirectly, use for his own purpose or for the benefit of any Person
other than Purchaser, Teletrade or any successor to the Business, at Purchaser's
request, or disclose, any Proprietary Information to anyone, unless such
disclosure has been authorized in writing by Purchaser. For purposes of this
Agreement, the term "Proprietary Information" shall include, but is not limited
to: (i) the name and address of any current or former clients, consignors or
customers, any prospective clients, consignors or customers individually
solicited, or vendors of Teletrade and any information concerning the
transactions or relations of any current or former clients, consignors or
customers, any such prospective clients, consignors or customers, or vendors of
Teletrade with Teletrade or any of its stockholders, directors, officers,
principals, employees, independent contractors or agents; (ii) any information
concerning any product, technology or procedure employed by Teletrade
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but not generally known to its clients, consignors, customers or vendors or
competitors, or under development by or being tested by Teletrade but not at the
time offered generally to clients, consignors, customers or vendors; (iii) any
information relating to computer software or systems used by Teletrade or
Teletrade's pricing or marketing methods, research techniques, sales margins,
capital structure, operating results, borrowing arrangements or business plans;
(iv) any information which is generally regarded as confidential or proprietary
in the Business; (v) any business plans, budgets, advertising or marketing plans
with respect to Teletrade; (vi) any information contained in any written or oral
policies and procedures or employee manuals of Teletrade; (vii) all written,
graphic and other material relating to any of the foregoing; (viii) any software
and computer program relating to any of the foregoing; and (ix) any compilation
or arrangements of any information relating to any of the foregoing. Information
that is not novel or copyrighted or patented may nonetheless be proprietary
information. The term "Proprietary Information" shall not include any
information to the extent such information is disclosed in published materials,
is generally known to the public, is rightfully obtained by such Seller from any
third party reasonably believed by such Seller to be lawfully in possession of
and entitled to disclose such information or is required to be disclosed by law.
(b) Each Seller agrees, for himself only and not any other Seller, that
he will not at any time directly or indirectly publish, make known or in any
fashion disclose any Confidential Records to, or permit any inspection or
copying of Confidential Records by, any third party (other than counsel and
other advisors under an obligation of confidentiality to such Seller and who
agree to be bound by the terms of this Section), nor shall he retain, and will
deliver promptly to Purchaser, any of the same upon the Closing, provided that
each Seller may retain copies of records reasonably required for the completion
of such Seller's tax returns. For purposes hereof, "Confidential Records" means
all correspondence, memoranda, files, manuals, books, lists, financial,
operating or marketing records, magnetic tape, or electronic or other media or
equipment of any kind which may be in such Seller's possession or under his
control or accessible to him which contain any Proprietary Information. All
Confidential Records shall be and remain the sole property of Purchaser from and
after the Closing.
(c) Each of the parties hereto, for themselves and their directors,
officers, employees, agents and representatives, covenant and agree with each
other that they will use all information relating to the other party and any
affiliate thereof acquired by them pursuant to the provisions of this Agreement
or in the course of negotiations with or examinations of the other party or any
affiliate thereof in connection with this Agreement only in connection with the
transactions contemplated hereby and shall cause all information obtained by
them pursuant to this Agreement and such negotiations and examinations, which is
not publicly available, to be treated as confidential except as may be otherwise
required by law or as may be necessary or appropriate in connection with the
enforcement of this Agreement or any instrument or document referred to herein
or contemplated hereby. In the event of termination of this Agreement, each
party will cause to be delivered to the other party all
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documents, work papers and other material obtained by it from the other, whether
so obtained before or after execution of this Agreement, and each party agrees
that it or he shall not use or disclose. directly or indirectly, any information
so obtained, and will have all such information in any way that is detrimental
to the other party, provided that (i) any party may use and disclose any such
information that has been disclosed publicly (other than by such party or an
affiliate thereof in breach of its obligations under this Section 19(a)) and
(ii) to the extent that any party or any affiliate thereof may become legally
compelled to disclose any such information.
(d) The parties hereto shall cooperate in issuing any press release or
other public announcement concerning this Agreement or the transactions
contemplated hereunder; provided, that nothing herein shall affect Purchaser's
obligation under law or applicable rules or regulations to make appropriate
public filings and disclosures.
(e) This Section 15.2 shall not prevent any disclosure required by law
or order of a court or governmental agency, provided that the party subject to
any such requirement shall, prior to any such disclosure, give the other party
prompt notice of any such requirement and shall cooperate with such other party
in obtaining a protective order or other means of protecting the confidentiality
of the information required to be disclosed.
15.3 Non-Solicitation. (a) During the Non-Competition Period, no Seller
shall, for himself or for any other Person as to which he is an officer,
director, employee, independent contractor, partner, consultant, advisor, agent,
proprietor, trustee or investor, as applicable, directly or indirectly:
(i) contact, solicit or do business with any Person (or any affiliate
thereof) which is then or at any time during the two years preceding the Closing
was a client, consignor, customer of Teletrade or has otherwise received
services from Teletrade;
(ii)(A) employ or engage any Person who is then or at any time during
the two years preceding the Closing was in the employ of Teletrade; or (B)
attempt to do any of the foregoing or assist any other Person to do or attempt
to do any of the foregoing;
(iii) persuade or seek to persuade any consignor, customer, any
prospective client, consignor or customer individually solicited, or vendors of
Teletrade to cease to do business or to reduce the amount of business which it
has customarily done or contemplates doing with Teletrade, whether or not the
relationship between Teletrade and such Person was originally established in
whole or in part through such Seller's efforts; or
(iv) take any action which is intended, or would reasonably be
expected, to harm Purchaser, Teletrade or any of their affiliates or their
reputations or which would reasonably be expected to lead to unwanted or
unfavorable publicity to any of them.
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15.4 Miscellaneous. (a) Each of the Sellers acknowledges and agrees
that it is fair, reasonable and necessary for the protection of the value of the
Business, and the operations, prestige, reputation and goodwill of Teletrade
that the Sellers make the agreements and covenants contained in this Article 15.
(b) Sellers acknowledge and agree that, by virtue of the extraordinary
value of the Proprietary Information and Confidential Records, their access to
and use of such Proprietary Information and Confidential Records and their
unique knowledge of and contacts relating to the Business, any violation by any
of them of the undertakings contained in this Article 15 would cause Purchaser
immediate, substantial and irreparable injury for which it has no adequate
remedy at law. Accordingly, each Seller agrees and consents to the entry of an
injunction or other equitable relief by a court of competent jurisdiction
restraining any violation or threatened violation by him of any undertaking
contained in this Article 15. Each Seller waives posting by Purchaser of any
bond otherwise required or any proof of actual damages necessary to secure such
injunction or other equitable relief. The rights and remedies provided for in
this Section 15.4(b) are cumulative and shall be in addition to rights and
remedies otherwise available to the parties hereunder or under any other
agreement or applicable law or otherwise.
(c) If any provision of this Article 15 or the application of any such
provision to any party or circumstances shall be determined by any court of
competent jurisdiction to be invalid or unenforceable to any extent, the
remainder of this Agreement, or the application of such provision to such Person
or circumstances other than those to which it is so determined to be invalid or
unenforceable, shall not be affected thereby, and each provision hereof shall be
enforced to the fullest extent permitted by law. If any provision of this
Article 15, or any part thereof, is held to be invalid or unenforceable because
of the scope or duration of or the area covered by such provision, the parties
hereto agree that the court making such determination shall reduce the scope,
duration and/or area of such provision (and shall substitute appropriate
provisions for any such invalid or unenforceable provisions) in order to make
such provision enforceable to the fullest extent permitted by law and/or shall
delete specific words and phrases, and such modified provision shall then be
enforceable and shall be enforced.
(d) The provisions of this Article 15 shall be in addition to and not
in abrogation of all obligations of Sellers set forth in the Consulting
Agreement (in the case of Liebman) or any other employment or consultant
agreement between GMAI and/or Teletrade, on the one hand, and such Seller, on
the other hand.
(e) From and after the Closing Date, no Seller (other than in his
capacity as an employee of or consultant to Teletrade) shall use the name
"Teletrade" as part of the name of any business, or other activity in which he
engages, nor shall he use any corporate, trade or service name including such
word or any confusingly similar words.
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16. Nature of Representations and Warranties. Each statement,
representation, warranty, indemnity, covenant and agreement made by any Seller
in this Agreement or in any document, certificate or other instrument delivered
by or on behalf of such Seller pursuant to this Agreement or in connection
herewith shall be the representation, warranty, indemnity, covenant and
agreement solely of such Seller, and the other Sellers shall not be liable
therefor. Each statement, representation, warranty, indemnity, covenant and
agreement made by Purchaser or any of its subsidiaries in this Agreement or in
any document, certificate or other instrument delivered by or on behalf of
Purchaser or any of its subsidiaries pursuant to this Agreement or in connection
herewith shall be deemed the representation, warranty, indemnity, covenant and
agreement of Purchaser.
17. Notices. Any notice or consent required or permitted to be given
hereunder shall be in writing and hand delivered or sent by registered or
certified mail, return receipt requested, or by Federal Express or other similar
courier service or by facsimile, as follows:
if to Liebman:
2 Neville Terrace
London SW7 3AT
ENGLAND
if to Makely:
Richard F. Makely
P.O. Box 532
Windham, New York 12496
Facsimile:
if to Rome:
Mr. Bernard Rome
P. O. Box 290
Killington, Vermont 05751
Facsimile:
Copies of all notices sent to any Seller shall be sent to:
Piper & Marbury L.L.P.
1251 Avenue of the Americas
New York, New York 10020
Facsimile: 212-835-6252
Attention: Michael A. Varet, Esq.
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if to Purchaser:
Greg Manning Auctions, Inc.
775 Passaic Avenue
West Caldwell, New Jersey 07006
Attn: Greg Manning, President and Chief Executive Officer
Fax: 973-882-2981
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attn: Scott S. Rosenblum, Esq.
Fax: 212-715-8000
or at such other address (or to such other person's attention) as shall be
specified by like notice. Any notice hereunder shall be deemed to have been duly
given to the party to whom it is directed upon actual receipt by such party (or
its agent for notices hereunder). Any notice which is sent by facsimile shall be
conclusively presumed to have been received upon receipt if sent during normal
business hours to the recipient's location or if not, at 11:00 a.m. on the next
day recipient's office is open which is not a Saturday, Sunday or holiday; any
such notice shall be confirmed by mail.
18. Legal and Other Costs.
(a) In the event that any party (the "Defaulting Party") defaults in
its obligations under this Agreement and, as a result thereof, the other party
(the "Non-Defaulting Party") seeks to legally enforce its rights hereunder
against the Defaulting Party, then, in addition to all damages and other
remedies to which the Non-Defaulting Party is entitled by reason of such
default, the parties shall agree and stipulate in connection with any proceeding
to enforce such rights that the court resolving such matter shall be requested
to order, if such court determines that the Defaulting Party acted in bad faith
or without a reasonable and substantial basis for its position, that the
Defaulting Party shall promptly pay to the Non-Defaulting Party an amount equal
to all costs and expenses (including reasonable attorneys' fees) paid or
incurred by the Non-Defaulting Party in connection with such enforcement.
(b) In the event that the Non Defaulting Party is entitled to receive
an amount of money by reason of the Defaulting Party's default hereunder, then,
in addition to such amount of money, the Defaulting Party shall promptly pay to
the Non Defaulting Party a sum equal to the interest on such amount of money
accruing at the rate of 2% per month (but if such rate is not permitted under
the laws of the State of New York, then at the highest rate
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at which is permitted to be paid under the laws of the State of New York) during
the period between the date such payment should have been made hereunder and the
date of the actual payment thereof.
(c) Except as provided in Section 13 hereof, each party hereto shall
pay its own legal, accounting and other expenses in connection with the
preparation, negotiation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
19. Right of Set Off. Notwithstanding any provision of this Agreement
or any Ancillary Agreement to the contrary, the parties acknowledge and agree
that, in addition to any other right or remedy of Purchaser or any other member
of the Purchaser Group under this Agreement, any Ancillary Agreement or
otherwise, Purchaser shall be entitled from time to time to set off against any
amounts otherwise required to be paid by Purchaser to any Seller pursuant to any
Promissory Note (but not against any other amounts required to be paid by
Purchaser or Teletrade to any Seller) any amounts owed at such time by such
Seller to Purchaser or any other member of the Purchaser Group under this
Agreement, any Ancillary Agreement or otherwise. In the case of any such set off
by Purchaser, Purchaser's obligation to make such payment (or any portion
thereof) pursuant to any Promissory Note shall be deemed fully satisfied and
discharged to the extent of such set off. Notwithstanding the foregoing, any
amount due and payable to any Seller pursuant to a Promissory Note at a time
when an amount is or may be owed to Purchaser or any other member of the
Purchaser Group by such Seller, to the extent of the amount claimed to be owing
by such Seller, shall not be retained by Purchaser, but rather shall be paid by
Purchaser at the time due into an interest-bearing escrow account for payment to
such Seller or to Purchaser or another member of the Purchaser Group as
determined by written mutual agreement or final judgment of a court of competent
jurisdiction.
20. Miscellaneous. (a) This writing constitutes the entire agreement of
the parties with respect to the subject matter hereof, supersedes all prior
understandings, whether written or oral, with respect thereto and may not be
modified, amended or terminated except by a written agreement specifically
referring to this Agreement signed by all of the parties hereto. Nothing herein
expressed or implied is intended to or shall be construed to confer upon or give
any person, corporation, group or other entity (of any nature) other than the
parties hereto, their successors or permitted assigns, any rights or remedies
under or by reason of this Agreement.
(b) No waiver of any provision hereof or of any breach or default
hereunder shall be considered valid unless in a writing specifically identifying
such provision, breach or default and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any other provision or any
subsequent breach or any other default of the same or similar nature.
-44-
<PAGE>
(c) This Agreement shall be binding upon and inure to the benefit of
each party hereto and its successors and permitted assigns. This Agreement may
not be assigned by Purchaser without the consent of Sellers, or by any Seller
without the consent of Purchaser and other Sellers.
(d) The section and paragraph headings contained herein are for the
purposes of convenience only and are not intended to define or limit the
contents of said sections or paragraphs, or otherwise affect the meaning or
interpretation of this Agreement.
(e) Each party hereto shall cooperate, shall take such further action
and shall execute and deliver such further documents as may be reasonably
requested by any other party in order to carry out the provisions and purposes
of this Agreement.
(f) This Agreement may be executed by facsimile or manual signatures.
This Agreement may be executed in one or more counterparts, all of which taken
together shall be deemed one original and shall be effective only when all
parties have executed one or more such counterparts.
(g) This Agreement and all amendments hereof shall be governed by and
construed in accordance with the law of the State of New York applicable to
contracts made and to be performed entirely therein.
(h) Should any provision of this Agreement be determined to be invalid,
it shall be severed from this Agreement and the remaining provisions hereof
shall remain in full force and effect as if this Agreement had been executed
with the invalid portion eliminated.
(i) Each party hereby consents to the jurisdiction of the State and
Federal courts sitting in New York City in any action arising out of or
connected in any way with this Agreement, and each party further agrees that the
service of process or of any other papers upon him or it by registered mail at
his or its address set forth herein shall be deemed good, proper and effective
service upon him or it.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
/s/
--------------------
Leon H. Liebman
/s/
--------------------
Richard F. Makely
/s/
--------------------
Bernard Rome
Greg Manning Auctions, Inc.
By /s/
--------------------
Title:
-46-
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement"), effective as of October 29,
1998 (the "Effective Date"), by and between Greg Manning Auctions, Inc. (the
"Company"), a New York corporation, and Leon Liebman, a United States citizen
residing at 2 Neville Terrace, London SW7 3AT, England ("Consultant"). WHEREAS,
the Company desires to engage Consultant on the terms and conditions provided in
this Agreement;
WHEREAS, Consultant desires to accept such engagement and to render
services to the Company on the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. ENGAGEMENT: The Company shall engage Consultant and Consultant shall
accept such engagement and shall render services under the conditions and terms
set forth herein. During the period of his engagement, Consultant shall make
himself available to the Company during normal business hours, by telephone or
otherwise, for at least 40 hours per month, and the Company shall be entitled to
the profits and other benefits arising from or incident to the services and
advice of Consultant. Consultant shall abide by the practices and policies of
the Company governing the conduct of employees and consultants generally, to the
extent Consultant has been informed of such practices and policies in writing or
otherwise with reasonable specificity.
2. TERM; TERMINATION: This Agreement shall be effective from the
Effective Date and shall terminate on the second anniversary of the date hereof
(the "Consulting Term"). This Agreement may be terminated by the Company prior
to the expiration of the Consulting Term only for "Cause" (as defined below),
upon 30 days' prior written notice. Upon termination of this Agreement, all
rights, remedies, duties and obligations of the parties hereunder shall
immediately cease, except (i) for those rights, remedies, duties and obligations
which survive the termination of this Agreement as specifically set forth herein
and (ii) that the Consultant shall remain entitled to all then accrued but
unpaid amounts due hereunder from the Company. For purposes of this Agreement,
"Cause" means (i) Consultant's willful and continued substantial failure to
perform his obligations under this Agreement (other than such failure resulting
from disability or death of Consultant), such failure to be supported by
appropriate documentation, if such breach is not cured, if curable, within
fifteen (15) days after written notice thereof to Consultant; (ii) any
intentional dishonesty affecting the Company, or any client, customer, consignor
or employee of the Company or any of its affiliates; (iii) conviction of a
felony; or (iv) any material breach of fiduciary duty to the Company or any of
its affiliates, if such breach is not cured, if curable, within fifteen (15)
days after written notice thereof to Consultant.
<PAGE>
3. SERVICES:
Consultant shall perform such duties as the Board of Directors from
time to time deemed to be in the best interest of the Company. It is expected
that Consultant's duties shall include (but shall not be limited to):
development of a strong business plan for the Company; monitoring technological
advances that might be utilized by the Company in conducting its auctions, and
making recommendations on the implementation of these technologies; monitoring
competing auctions which use Internet and/or advanced telephony applications,
and recommending to the Board actions that would allow the Company a business
advantage over competition; searching out new business endeavors and presenting
them to the Board; making specific recommendations to the Board for using
technology to streamline operations; acting as the primary person in making
investor relations presentations; and development of web marketing and Internet
services in cooperation with management.
4. BOARD MEMBERSHIP: The Company shall use reasonable efforts to cause
Consultant to be elected a member of the Board of Directors of the Company to
serve during the Consulting Term. Consultant shall also have the right to
designate another member of the Board of Directors of the Company to serve
during the Consulting Term; if such designee is acceptable to the Board of
Directors the Company shall use reasonable efforts to cause such designee to be
elected a member of the Board of Directors. In the event such designee fails to
serve his term as a member of the Board of Directors through the Consulting
Term, Consultant may designate a replacement designee acceptable to the Board of
Directors. The Company's efforts to cause election of Consultant and such
designee shall include nomination and recommendation by the Company's Chief
Executive Officer in his capacity as an officer and as a shareholder.
5. COMPENSATION; BENEFITS; STOCK OPTIONS:
(a) During the term of this Agreement, the Company shall pay Consultant
a consulting fee at the annual rate of $50,000 per year. Consultant's consulting
fee shall be paid monthly in arrears, without payroll or other deductions, in
accordance with the Company's standard practices as in effect from time to time.
(b) Upon Consultant's initial appointment to the Board of Directors of
the Company, Consultant shall be granted options to purchase 15,000 shares of
the Company's Common Stock, par value $.01 per share, pursuant to the Company's
1997 Stock Option Plan (the "Plan"). Such options shall vest over a four-year
period, shall be exercisable at a price equal to the "Fair Market Value" (as
defined in the Plan) as of the date of the grant and shall otherwise be subject
to the terms of the Plan and the Company's then-current form of stock option
agreement. It is expected that, in its discretion, the Board may from time to
time during the Consulting Term grant Consultant additional stock options, upon
such terms and conditions as it deems appropriate.
-2-
<PAGE>
6. REIMBURSEMENT OF EXPENSES:
The Company shall reimburse Consultant for reasonable business expenses
incurred by him in the performance of consulting services pursuant to this
Agreement, upon submission of receipts or other evidence of such expenditures
that is reasonably satisfactory to the Company. Consultant shall not be entitled
to reimbursement for travel expenses associated with his serving on the Board of
Directors of the Company unless and until the Company adopts a policy of
reimbursing all such Board members for such expenses; provided that the Company
shall reimburse Consultant for the cost of a round-trip economy class airplane
ticket between London and New York for up to five trips per year.
7. NON-SOLICITATION:
Consultant agrees that Consultant will not, directly or indirectly,
individually or on behalf of other persons, (i) during the Consulting Term and
for three years thereafter, solicit or induce any employee of the Company or any
of its affiliates to leave their employment with the Company or its affiliates
for any reason, or (ii) during the Consulting Term and for eighteen months
thereafter, solicit or induce any current client, customer or consignor (or
prospective client, customer or consignor solicited during the Consulting Term)
of the Company or its affiliates to purchase or make use of goods or services of
a type offered by the Company or its affiliates immediately prior to the end of
the Consulting Term from another individual, firm, corporation or other entity
("Person") or assist or aid any other Person in identifying or soliciting any
such current or prospective client, customer or consignor.
8. NON-DISCLOSURE: Consultant shall not, at any time after the
Effective Date of this Agreement, divulge, furnish or make accessible to anyone
any "proprietary information". For purposes of this Agreement, the term
"proprietary information" shall include, but is not limited to, as to the
Company or any of its affiliates: (i) the name and address of any current or
former clients, customers or consignors, prospective clients, customers or
consignors solicited during the Consulting Term, or vendors, and any information
concerning the transactions or relations of any such current, former or
prospective clients, customers or consignors or vendors with the Company or any
of its affiliates or any of their respective stockholders, directors, officers,
principals, employees, independent contractors or agents; (ii) any information
concerning any product, technology or procedure employed by the Company or any
of its affiliates but not generally known to clients, customers, consignors,
vendors or competitors, or under development by or being tested by the Company
or any of its affiliates but not at the time offered generally to clients,
customers, consignors or vendors; (iii) any information relating to computer
software or systems, pricing or marketing methods, research techniques, sales
margins, capital structure, operating results, borrowing arrangements or
business plans; (iv) any information which is generally regarded as confidential
or proprietary in any line of business engaged in by the Company or any of its
affiliates prior to or during the Consulting Term; (v) any business plans,
budgets, advertising or marketing plans; (vi) all written, graphic and other
material relating to any of the foregoing; (vii) any Company-owned or customized
software or computer program relating to any of the foregoing; and (viii) any
compilation or arrangements of any information relating to any of the foregoing.
The foregoing shall not apply to disclosures made in the regular course of the
business of the Company
-3-
<PAGE>
consistent with its policies and practices or the duties and obligations to be
performed by Consultant in accordance with this Agreement, or disclosure to the
extent required by applicable law. In addition, the term "proprietary
information" shall not include (i) any information generally available to and
known by the public but shall include information which becomes public as a
result of a breach of any obligation of confidentiality by Consultant or any of
his affiliates, (ii) any information known to or developed by Consultant other
than in connection with his services under this Agreement or otherwise through
his affiliation with the Company or any of its affiliates, or (iii) any
information received by Consultant from a third party reasonably believed by
Consultant to be lawfully in possession of such information and entitled to
disclose such information to him.
9. NON-COMPETITION: (a) Consultant agrees that during the
Non-Competition Period (as hereinafter defined) he will not, directly or
indirectly, alone or with others, individually or through or by a corporate or
other business entity in which he may be interested as a partner, trustee,
director, officer, employee, consultant, shareholder, option holder, lender of
money or guarantor, engage in or participate in, or become employed by or render
services (including research or consulting services), advice or assistance to
any Person engaged or participating in a Competing Business (as hereinafter
defined) in any state of the United States or its territories or possessions or
elsewhere worldwide. For purposes of this Section 9, "Non-Competition Period"
shall mean the period commencing on the date hereof and one year after the end
of the Consulting Term, and "Competing Business" shall mean any business or
venture which engages in the sale of collectibles or gemstones through auction
or in any auction form.
(b) For purposes of this Section 9, ownership of up to 5% of any class
of publicly traded securities of any corporation, the stock of which is
regularly traded on any stock exchange or on the over-the-counter market, shall
not be deemed to constitute ownership or participation in the ownership of the
business of such corporation.
(c) Consultant acknowledges that the time, scope, geographic area and
other provisions of this Section 9 have been specifically negotiated by
sophisticated commercial parties and agrees that all such provisions are
reasonable under the circumstances.
10. BUSINESS OPPORTUNITIES: During the Consulting Term and for six
months thereafter, if Consultant becomes aware of any project, investment,
venture, business or other opportunity (any of the preceding, an "Opportunity")
that is similar to, related to or in the same field as the business of the
Company or any affiliate of the Company or any project, investment, venture or
business of the Company or any affiliate of the Company (but which Consultant is
not precluded from pursuing by the provisions of Section 9 hereof), then
Consultant shall notify the Company in writing of such Opportunity and shall use
good-faith efforts to cause the Company or the Company's affiliate to have the
opportunity to invest in or otherwise participate in such Opportunity. If the
Company has been given the opportunity to so invest or participate but declines
to do so, Consultant may pursue such Opportunity on terms comparable to those
offered to the Company (provided that under no circumstances may Consultant
pursue any Opportunity which would violate the provisions of Section 9 hereof).
-4-
<PAGE>
11. SCOPE OF RESTRICTIONS: It is the intent of the parties hereto that
the covenants contained in Sections 7, 8, 9 and 10 hereof shall be enforced to
the fullest extent permissible under the laws of and public policies of each
jurisdiction in which enforcement is sought. Company and Consultant hereby
acknowledge that such restrictions are reasonably necessary for the protection
of the Company. If any one or more of the provisions of Section 7, 8, 9 or 10,
or any portion thereof, shall be adjudicated to be invalid or unenforceable for
any reason whatsoever, such provision shall be (only with respect to the
operation thereof in the particular jurisdiction in which such adjudication is
made) construed by limiting and reducing it so as to be enforceable to the
maximum extent permissible.
12. REMEDIES: Consultant acknowledges that irreparable damages would
result to the Company if the provisions of Section 7, 8, 9 or 10 are not
complied with, and agrees that the Company shall be entitled to any appropriate
legal, equitable or other remedy, including injunctive relief, in respect of any
failure to comply with the provisions of Section 7, 8, 9 or 10 hereof.
13. ASSIGNMENT: This Agreement is personal in its nature and neither of
the parties hereto shall, without the consent of the other, assign or transfer
this Agreement or any rights or obligations hereunder, except that the Company
may assign or transfer this Agreement to (a) a successor organization in the
event of merger, consolidation, or transfer of sale of all or substantially all
of the assets of the Company, or (b) any entity controlling, under common
control with or controlled by the Company.
14. NOTICES: Any notice or consent required or permitted to be given
hereunder shall be in writing and hand delivered or sent by registered or
certified mail, return receipt requested, or by Federal Express or other similar
courier service or by facsimile, as follows:
To the Company: Greg Manning Auctions, Inc.
775 Passaic Avenue
West Caldwell, New Jersey 07006
Facsimile: 973-882-3499
Attention: President
To Consultant: Leon Liebman
2 Neville Terrace
London SW7 3AT
England
with a copy to: Piper & Marbury L.L.P.
1251 Avenue of the Americas
New York, NY 10020
Attn: Michael Varet
-5-
<PAGE>
or to such other address (or to such other person's attention) as shall
be specified by like notice. Any notice hereunder shall be deemed to have been
duly given to the party to whom it is directed upon actual receipt by such party
(or its agent for notices hereunder). Any notice which is sent by facsimile
shall be conclusively presumed to have been received upon receipt if sent during
normal business hours to the recipient's location or if not, at 11:00 a.m. on
the next day recipient's office is open which is not a Saturday, Sunday or
holiday; any such notice shall be confirmed by mail.
15. SEVERABILITY: To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted from this Agreement
and the remainder of such provision and of this Agreement shall be unaffected
and shall continue in full force and effect.
16. GOVERNING LAW: This Agreement and all performance under this
Agreement shall be governed by the internal laws of the State of New York.
17. WAIVER, MODIFICATION: No waiver or modification of this Agreement
or of any covenant, condition or limitation contained herein shall be valid or
effective unless it is in writing and duly executed by Consultant and the
Company. No failure or delay by either the Company or Consultant in exercising
any right or remedy under this Agreement will waive any provision of this
Agreement, nor will any single or partial exercise by either the Company or
Consultant of any right or remedy under this Agreement preclude either of them
from otherwise or further exercising the rights or remedies contained herein, or
any other rights or remedies granted by any law or any related document.
18. ENTIRE AGREEMENT: The terms and provisions of this Agreement shall
constitute the entire agreement by the Company and Consultant with respect to
the subject matter hereof and shall supersede any and all prior agreements or
understandings between the parties (or between Teletrade, Inc. and Consultant),
whether written or oral, including without limitation the Consulting Agreement
between Consultant and Teletrade, Inc. dated July 1, 1996.
19. JURISDICTION; FORUM: Each party hereto consents and submits to the
jurisdiction of any state court sitting in the county of New York or Newark, New
Jersey or federal court sitting in the Southern District of the State of New
York or the District of the State of New Jersey in connection with any dispute
arising out of or relating to this Agreement. Each party hereto waives any
objection to the laying of venue in such courts and any claim that any such
action has been brought in an inconvenient forum. To the extent permitted by
law, any judgment in respect of a dispute arising out of or relating to this
Agreement may be enforced in any other jurisdiction within or outside the United
States by suit on the judgment, a certified copy of such judgment being
conclusive evidence of the fact and amount of such judgment. Each party hereto
consents to the service of process in any such action or proceeding by certified
or registered mailing of the summons and complaint therein given as provided in
Section 14. The foregoing shall not limit the rights of any party to serve
process in any other manner permitted by law.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
GREG MANNING AUCTIONS, INC.
By: /s/
----------------------------------------
Title:
/s/
--------------------------------------------
Leon Liebman
-7-
SECURED PROMISSORY NOTE (GRID)
(PLEDGE OF COLLATERAL)
$ 1,500,000.00 Date: OCTOBER 27, 1998
Name of Maker: GREG MANNING AUCTIONS, INC.
Address of Maker: 775 Passaic Avenue
West Caldwell, NJ 07006
State of Incorporation (if applicable): New York
Partnership Certificate Filed With (if applicable): N/A
Due On: DEMAND
Interest Payable on: LAST DAY OF EACH MONTH
FOR VALUE RECEIVED the Maker promises to pay on the due date set
forth above, to the order of BROWN BROTHERS HARRIMAN & CO. ("Payee') at its
office at 59 Wall Street, New York, New York 10005, the face amount hereof.
Interest on the balance from time to time outstanding shall accrue at the rate
of (B+2) 10% per annum, and shall be payable as set forth above.
All advances pursuant to this Note and all repayments of principal due
hereunder shall be endorsed by the Payee on the schedule on the reverse side
hereof, or any continuation of such schedule attached hereto and denominated a
part hereof. Said endorsement on such schedule by an authorized agent of the
Payee shall be conclusive evidence of the unpaid balance due on this Note.
The indebtedness evidenced hereunder, as well as all other indebtedness
now or hereafter owing by the Maker to the Payee ("Obligation(s)") is secured by
certain collateral more fully described in the annexed Schedule "A', together
with all the Maker's personal property now or hereafter existing or acquired, of
any type or description, including but not limited to inventory, documents of
title covering any inventory, equipment, accounts, contract rights, general
intangibles (including tax refunds, instruments, investment securities, chattel
paper, notes, drafts, acceptances and all bank balances of the undersigned
("Collateral") which the Maker has pledged, deposited and delivered to the Payee
and granted to the Payee a security interest in.
The rate of interest hereunder is based upon the Payee's present base
rate of 8% per annum (the "Base Rate"). In the event of an increase or decrease
in the Base Rate, then the rate of interest hereunder shall be automatically
increased or decreased to the same extent and on the same day as any increase or
decrease in the Base Rate. Post-maturity or post-demand (as the case may be)
interest shall accrue and be payable at 120% of the rate payable on the due date
or demand, computed from said date to the date of actual payment.
Maker affirms and certifies that the Obligation evidenced by this Note
was not and will not be incurred for the purposes of purchasing, carrying or
trading in securities as defined in the Federal Reserve Board's Regulation
T, except in compliance with said Regulation.
In no contingency or event whatsoever shall the interest rate charged
hereunder exceed the highest rate permissible under any law which a court
of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such a court determines that the Payee has received
interest hereunder in excess of said highest permissible rate, Payee shall
promptly refund such excess interest to Maker.
So long as the Obligations are not in default, the Maker shall have the
right to vote any shares of stock included in the Collateral on all corporate
questions and the Payee shall, if required, execute due and timely proxies in
favor of the Maker to this end.
The Maker warrants and represents that there are no restrictions
upon the transfer of the Collateral, other than may appear on the face of the
certificates, and that the Maker has the right to pledge the Collateral free of
any encumbrances and without obtaining the consents of the other shareholders.
In the event that, prior to repayment of the Obligations, any stock dividend,
reclassification, readjustment or other change is declared or made in the
capital structure of any issuer of the Collateral, all new, substituted and
additional shares or other securities issued to Maker by reason of any such
change shall be delivered to Payee in kind to be held by the Payee under the
terms of this agreement in the same manner as all other Collateral. The
Payee may at any time, without notice to the Maker, transfer to and/or
register in Payee's name, or in the name of Payee's nominee, any or all of
the Collateral.
In the event that it becomes necessary, in Payee's opinion, to
comply with any Federal or State law or regulation or to make or file any
registration thereunder in order for Payee to exercise any of its rights
hereunder, Maker expressly agrees to do or will cause to be done all acts and
prepare and execute all documents necessary to effect such compliance or
registration, and to bear all costs in connection therewith. Maker agrees
to indemnify and to hold Payee harmless from and against any claim or liability
caused by any untrue statement of material fact, or omission to state a
material fact, as may be required in any registration statement or
prospectus; or caused by a failure to register or comply with any such law or
regulation. The Maker shall pay any and all expenses, including reasonable
attorneys' fees incurred by Payee in registering the Collateral, or in securing
an exemption for any such registration.
The Payee shall have no responsibility of any kind, nature or
description to arrange for the redelivery of the Collateral or any part
thereof to any issuer or transfer agent in order to preserve or maintain any
conversion or dividend rights with respect thereto; the Payee's only obligation
being to maintain physical possession or control thereof. The Payee agrees
to comply with any request received by it from Maker with respect to conversion,
reclassification, or the like of the Collateral, to the extent that such
instructions are not inconsistent with the intents and purposes hereof. Upon
payment and performance of all Obligations the Payee shall, at the request of
the Maker, redeliver the Collateral to the Maker.
Upon the occurrence of any of the following events of default, to wit:
the non-payment when due of any Obligation; the failure of the Maker
forthwith, upon demand, to furnish satisfactory additional Collateral, or to
make payments on account as may be agreed in any of the Obligations; the death,
failure in business, dissolution or termination of existence of the Maker of
any endorser, guarantor or surety of any Obligation (hereinafter referred to as
"Obligor(s)"); any petition for relief under the Bankruptcy Code being filed
by or against any Obligor or any proceedings in bankruptcy, or under any Acts
of Congress relating to the relief of debtors, being commenced for the relief
or readjustment of any indebtedness of any Obligor either through
reorganization, composition, extension or otherwise; the making by any Obligor
of an assignment for the benefit of creditors or for taking advantage by any
of the same of any insolvency law; any seizure, vesting or intervention by or
under authority of a government, by which the management of any Obligor is
displaced or its authority in the conduct of its business is curtailed; the
appointment of any receiver of any property of any Obligor; the attachment or
distraint of any of the Collateral or of same becoming subject at any time to
any mandatory court order or other legal process; the failure of any Obligor
to perform any of its duties as specified in any agreement(s) with respect to
the Obligations; the expulsion or suspension of any Obligor from membership in
any national securities association or any national securities exchange or other
organized exchange, or any clearing association; the admission in writing by any
Obligor of inability to pay its debts generally as they become due; the
commencement of any proceedings against any Obligor under Article 51 or 52 of
the New York Civil Practice Law and Rules (as heretofore or hereafter amended);
the Pension Benefit Guaranty Corporation shall commence proceedings (including
proceedings under Section 4042 of the Employee Retirement Income Security Act
of 1974) to terminate any employee pension benefit plan of the Maker; any
misstatement or false statement of any Obligor in connection with any
agreement between any Obligor and the Payee has been made; then in such event
the Maker shall immediately be liable without notice and shall pay on demand all
Obligations(whether or not otherwise due), together with all collection costs
and expenses, including reasonable attorneys' fees, in connection with the
collection of such indebtedness.
Payee shall have all rights and remedies of a secured party under the
Uniform Commercial Code. Further, upon the occurrence of any Event of Default,
all Obligations shall automatically become due and payable without notice and
Payee's commitment to make further loans or extensions of credit or other
financial accommodations to the Maker shall thereupon automatically and without
notice be terminated. In addition thereto, the Maker further agrees that (i) in
the event notice is necessary under applicable law, written notice mailed to the
Maker at the address then reflected in Payee's records 5 business days
prior to the date of public sale of any of the Collateral or prior to the date
after which private sale or any other disposition of the Collateral will be
made shall constitute reasonable notice, but notice given in any other
reasonable manner or at any other time shall be sufficient; (ii) in the event
of the sale or other disposition of any Collateral, Payee may apply the net
proceeds thereof first to the satisfaction of Payee's reasonable attorneys'
fees, legal expenses, and other costs and expenses incurred in connection with
Payee's taking, re-taking, holding, preparing for sale, and selling of the
Collateral; then to repayment of principal and interest on the Obligations,
with the Maker remaining liable for any deficiency; (iii) without precluding
any other methods of sale, the sale of Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of banks disposing of similar property, but in any event
Payee may sell on such terms as Payee may choose, without assuming any credit
risk and without any obligation to advertise or give notice of any kind; and
(iv) Payee may require the Maker to assemble Collateral, taking all necessary
or appropriate action to preserve and keep in good condition; and make such
available to Payee at a place and time convenient to both parties; all at the
expense of the Maker. To the extent permitted under applicable law, full
power and authority is hereby given Payee to sell, assign, and deliver all or
any part of the Collateral, at any time at any brokerage board, or at
public or private sale, at Payee's option, and no delay on Payee's part in
exercising any power of sale or any other rights or options hereunder, and no
notice or demand, which may be given to or made upon the Maker by Payee with
respect to any power or sale or other right or option hereunder, shall
constitute a waiver thereof, or limit or impair Payee's right to take any
action or to exercise any power of sale and any other rights' hereunder,
without notice or demand, or prejudice Payee's rights as against the Maker in
any respect. Payee may be a purchaser, free from any right of redemption
(which the Maker hereby expressly waives and releases) at any public or
private sale of Collateral. Should such net proceeds be inadequate to pay all
the Obligations, the Maker agrees to pay the Payee on demand any balance that
may be due to the Payee.
The Maker recognizes that the Payee may be unable to effect a
public sale of all or part of the Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, as now or hereafter in
effect, or applicable Blue Sky or other state securities law, as now or
hereafter in effect, but may be compelled to resort to one or more private sales
to a restricted group of purchasers who will be obliged to agree, among other
things, to acquire the Collateral for their own account, for investment and not
with a view to the distribution or resale thereof. The Maker agrees that
private sales so made may be at prices and other terms less favorable to the
Payee than if such Collateral were sold at public sales, and that the
Payee has no obligation to delay sale of any such Collateral for the period
of time necessary to permit the issuer of the Collateral, even if such issuer
would agree, to register the Collateral for public sale under such applicable
securities laws. The Maker agrees that private sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable
manner.
The Maker at the request of the Payee will sign and deliver to the
Payee a security agreement or a trust receipt or other writing, together with
financing statement(s) or a statement of trust receipt financing or other
writing, covering any Collateral in order to comply with or to enable the
Payee to obtain the benefits of the Uniform Commercial Code or any other
similar statute now or hereafter enacted, of New York or of any other
jurisdiction where the Collateral may at any time be located. The Maker
agrees to supply the Payee with any information the Payee may reasonably
request with respect to any financing statement(s) or security agreement
relating to the Maker or to any property of the Maker, and the Maker agrees that
without written consent of the Payee the Maker will not enter into any security
agreement which creates a security interest in any category of the Maker's
personal property generally (as distinguished from any specific items
thereof) or in any after-acquired property other than accessions and fixtures.
The rights of the Payee specified herein shall be in addition to those
previously or otherwise created or existing. The Maker agrees to use every
effort and to take every action that may be necessary or appropriate to enable
the Payee to enforce, protect and preserve its rights and interests hereunder,
hereby granting unto the Payee, as the Maker's attorney-in fact, full power
and authority to take any and all such action, either in the name of the
Payee or in the name of the Maker as the Payee may in its sole discretion
determine.
The Maker authorizes the Payee, with or without notice to the
Maker, to cause to be transferred or registered at the expense of the Maker
any of the Collateral into the name of the Payee or its nominee and to
receive any income derived therefrom and to hold such income as security for
any of the Obligations or apply it upon principal or interest due on any
such Obligations. The Maker will execute and deliver to the Payee such
consents, endorsements, assignments and stock powers as may appear to
the Payee proper to further the negotiability of any of the Collateral
and will pay the expenses and charges of so furthering negotiability. The
Payee may at any time demand, sue for, collect or make any compromise or
settlement with reference to the Collateral as the Payee in its sole
discretion may determine. Any bonds or other obligations of or guaranteed by
the United States Government constituting part of the Collateral may be
pledged by the Payee (either alone or so mingled with other securities) to
secure deposits or other obligations of the Payee, whether or not such
deposits or other obligations be in excess of the Obligations.
The Maker agrees that the Payee assumes no responsibility
for the correctness, validity, genuineness or sufficiency of the instruments,
documents and/or chattel paper constituting the Collateral, or for the
existence, character, quantity, quality, condition, weight, packing, value or
delivery of any goods specified in any such documents. The Payee shall not be
required to take any steps necessary to preserve any rights against
prior parties to any of the Collateral. The Maker hereby waives presentment,
notice of dishonor and protest of all instruments evidencing or included in the
Obligations and the Collateral. The Maker will keep the Collateral adequately
covered by insurance satisfactory to the Payee, and will assign the
policies or certificates of insurance to the Payee, or make the loss or
adjustment payable to the Payee, at the option of the Payee; and the Maker
will furnish to the Payee evidence of acceptance by the insurers of such
assignment. Should the Maker fail to effect and maintain such insurance, the
Payee may do so for the account of the Maker.
No failure on the part of Payee to exercise, and no delay in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by Payee of any right.
power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
If any provision hereof is held invalid or unenforceable, the
remainder and the application of such provision to other parties or
circumstances will not be affected thereby, the provisions being severable
in any such instance.
In any litigation hereunder, all Obligors hereby waive trial by jury
and waive the right to interpose any defense based upon any Statute of
Limitations or any claim of laches. Each Obligor hereby consents to the in
personam jurisdiction of the Courts of New York State, and the United
States District Court, the Southern District of New York in connection
with any claim arising hereunder. In the event that any action is commenced
hereunder in any such court, service of process may be made on any Obligor
by mailing a copy of the Summons to said party at its address then reflected in
Payee's records.
This Note shall be governed by the laws of the State of New York.
All Obligors hereby forever waive presentment, demand, protest,
notice of protest and notice of dishonor of this Note and consent without
notice to any and all extensions of time or terms of payment including any
compromise or settlement thereof.
GREG MANNING AUCTIONS, INC. GREG MANNING AUCTIONS, INC.
BY:/s/ BY: /s/
---------------------------- ----------------------------
NAME: William Tully NAME: James A. Smith
-------------------------- --------------------------
TITLE: COO TITLE: CFO
------------------------ -------------------------
ENDORSEMENT
FOR VALUE RECEIVED each of the undersigned endorsers assent to
all of the terms and conditions of the within Note and hereby forever waive
presentment, demand, protest, notice of protest, and notice of dishonor of
the within Note, and trial by jury, and the undersigned and each of them
guarantees the payment of said Note when due and consents without notice to
any and all extensions of time or terms of payment, and the release or
substitution, or failure to perfect a security interest in any collateral
made, agreed to or granted to or by the Payee.
SCHEDULE'A'
LIST OF COLLATERAL
07-160-001 (Rev. 3/85)
0038v
ALL PERSONAL PROPERTY AND FIXTURES OF THE DEBT0R, WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHEREVER LOCATED, OF EVERY KIND AND
DESCRIPTION, TANGIBLE OR INTANGIBLE, INCLUDING WITHOUT LIMITATION ALL GOODS,
INCLUDING WITHOUT LIMITATION EQUIPMENT AND INVENTORY; ACCOUNTS; CONTRACT
RIGHTS; DOCUMENTS, INCLUDING WITHOUT LIMITATION BILLS OF LADING, DOCK WARRANTS,
DOCK RECEIPTS, WAREHOUSE RECEIPTS AND OTHER DOCUMENTS OF TITLE; CHATTEL PAPER;
GENERAL INTANGIBLES, INCLUDING WITHOUT LIMITATION TAX REFUNDS, DUTY
DRAWBACKS AND PROCEEDS OF INSURANCE AS TO ANY PROPERTY OF THE DEBTOR
DESCRIBED HEREIN; INSTRUMENTS, INCLUDING WITHOUT LIMITATION LETTERS OF CREDIT
NAMING DEBTOR AS BENEFICIARY; THE BALANCE OF EVERY DEPOSIT ACCOUNT; ALL
SECURITIES, OPTIONS, FUTURES CONTRACTS AND OTHER ASSETS DUE FROM OR HELD WITH
ANY BANK, BROKER OR DEPOSITORY INSTITUTION; MONEY; COMMODITIES; CREDITS, CLAIMS,
DEMANDS AND SECURITY INTERESTS ARISING IN FAVOR OF THE DEBTOR AND ANY OTHER
PROPERTY, RIGHTS AND INTERESTS OF THE DEBTOR; AND ALL CASH AND NON-CASH
PROCEEDS, PRODUCTS AND ACCESSIONS FROM THE SALE, LIQUIDATION OR DISPOSITION OF
ANY OF THE FOREGOING.
