AGREEMENT
FOR SALE AND PURCHASE OF ASSETS
THIS AGREEMENT
(the “Agreement”) is entered into by and among MBI
Mortgage, Inc., a Texas corporation (the “Buyer”), New
Horizons Financial, Inc., a California corporation d/b/a New
Horizons (the “Seller”), and Brett
Faryniarz_(“Shareholder”), (Seller, and Shareholder are
collectively referred to herein as the “Seller
Parties”).
WHEREAS, the
Seller is in the business of providing mortgage finance marketing
services in Orange County, California (the “Business”);
and
WHEREAS, subject
to the terms and conditions of this Agreement, the Seller desires
to sell to Buyer and the Buyer desires to purchase from Seller
substantially all of the assets of Seller relating to the Business
(the “Purchase Transaction”); and
WHEREAS, the terms
Closing, Closing Date, and Effective Date, as used in this
Agreement, shall have the definitions as set forth in this
Agreement; and
WHEREAS, the
parties hereto have entered into this Agreement to set forth their
agreements and understandings related to the Purchase
Transaction.
NOW, THEREFORE, in
consideration of the mutual promises contained herein and for other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, it is hereby agreed as
follows:
1. Sale
and Purchase of Tangible Assets . At the Closing, the Seller
shall sell, assign and transfer to Buyer, and Buyer shall purchase
from Seller, all of the Seller’s rights, title and interest
in and to the following assets of the Business (herein collectively
referred to as the “Tangible Assets”):
a.
All of Seller’s accounts receivable from clients or others
which are billed or unbilled for all time periods on or prior to
the Closing Date.
b.
The Seller’s interest in any litigation or collection
proceedings, collection efforts or other actions related to the
collection of any past due, reserved or written-off litigation or
collection proceedings accounts receivable outstanding as of the
Closing Date.
c.
Such security deposits, utility deposits and other similar deposits
or pre-paid expenses held by companies or other entities as a
condition of supplying any service, product, or other item related
to or used by Seller in the conduct of the Business, as set forth
on the Schedule of Security Deposits attached hereto as
Exhibit 1-C.
d.
All office equipment, computer equipment, computer software,
furniture, fixtures, improvements, and other items owned by Seller
and used in or related to the conduct of the Business, including
but not limited to the property set forth on the Schedule of Office
Equipment, Computers, Furniture and Fixtures attached hereto as
Exhibit 1-E.
e.
All telephone equipment, systems and related software owned by
Seller and used in or related to the conduct of the Business,
including all local and (800) telephone numbers associated
with the offices of Seller, including but not limited to the
property set forth on the Schedule of Telephone Systems and
Telephone Numbers attached hereto as Exhibit 1-F.
f.
All inventory of office supplies, promotional materials, and other
miscellaneous items owned by Seller and used in the conduct of the
Business.
g.
The Seller’s rights to any discounts, rebates, premiums, or
other payments from third parties earned prior to, but due on or
after, the Closing Date.
h.
All other tangible assets and personal property owned by Seller and
used in or relating to the conduct of the Business other than the
Excluded Assets.
i.
Escrow business of Seller used in or for the conduct of
Business.
2. Sale
and Purchase of Intangible Assets . At the Closing, the Seller
shall sell, assign and transfer to Buyer, and Buyer shall purchase
from Seller, all of the Seller’s rights, title and interest
in and to the following intangible assets of the Business (together
herein referred to as the “Intangible Assets”) (the
Tangible Assets and Intangible Assets are sometimes collectively
referred to herein as the “Assets”):
a.
All client lists, correspondence, purchase orders, contracts,
agreements and files related to the Business.
b.
All sales prospects lists, correspondence, notes of previous
contacts and related files.
c.
Any mailing lists and related data base information concerning
either current, past, or prospective clients of Seller.
d.
All lists of personnel and related files held by Seller for past or
future use in providing mortgage finance marketing services to the
clients of Seller.
e.
Current employee records, employment, non-compete or other
agreements with current employees, either permanent or contract,
and all other correspondence, performance reviews, and employee
files for those corporate employees to be hired by the
Buyer.
f.
Any designs, text, or concepts for promotional materials, including
photographs or other graphics owned by Seller in its marketing and
sales functions.
g.
The Seller’s rights to and interest in any internet Web site
including the site address, the site design and related software,
related e-mail addresses, and any and all intellectual property or
rights to such property associated with the development, operation,
or functions of any Web site owned or used by Seller.
h.
All supplier and vendor lists, purchase orders, contracts,
agreements, mortgage loan commitments, and files including the
assignment of any distributor, dealer, or other supply agreements,
extended payment agreements, or other such agreements or contracts,
either written or verbal, between Seller and its suppliers and
vendors which relate to its operation of the Business.
i.
Seller’s interest in all other contracts, agreements,
partnership agreements and interests, purchase orders, and
understandings with clients, suppliers, vendors and others which
relate to the conduct of the Business.
j.
Other books, records and files, or copies thereof, which are
necessary for the future conduct of the Business as it is currently
being conducted.
k.
Equipment operation and service manuals or other instructions
related to any of the office equipment being purchased by Buyer
pursuant to this Agreement.
l.
Computer software and/or user licenses, including operation and
service manuals and all computer data base information stored by or
related to such software.
m.
Any occupational licenses, permits, or other government approvals
issued to Seller which may be assigned or transferred to the
Buyer.
n.
Any and all other licenses, permits, and agreements necessary to
the conduct of the Business.
o.
Any and all documents related to know-how and/or trade secrets in
connection with the conduct of the Business by Seller.
p.
The names “New Horizons”, and “New Horizons
Financial, Inc.“, and any and all other trade, assumed or
fictitious names together with their related logos or other
identifying marks used in the sale or promotion of Seller’s
services by Seller or which relate to the conduct of the
Business.
q.
All other intangible assets which, together with the above,
represent all intellectual property and all intangible assets owned
by Seller and used in connection with or related to the conduct of
the Business but specifically excluding the Excluded Assets,
attorney/client communications and other similar information
subject to attorney/client confidentiality rules.
3.
Excluded Assets . Notwithstanding anything to the contrary
contained in Sections 1 and 2 of this Agreement, the following
assets of the Business are specifically excluded from the Purchase
Transaction, the definitions herein of Tangible Assets, Intangible
Assets or Assets, and are specifically not being sold by Seller to
Buyer (such excluded assets are herein collectively referred to as
the “Excluded Assets”):
a.
All of Seller’s cash, cash equivalents and short term
investments on hand or on deposit on the Closing Date.
b.
The Seller’s rights to refunds of all or any part of federal,
state or local taxes.
c.
The corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating
to foreign qualifications, taxpayer and other identification
numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization,
maintenance, and existence of Seller.
d.
The rights of Seller under this Agreement or under any other
agreement entered into in connection with the transactions
contemplated hereunder.
e.
All insurance policies that relate to the Business.
f.
Any voting or other securities of or other interests in any
subsidiary entity.
g.
Other tangible assets not specifically listed in Section 1 of
this Agreement and in the related exhibits.
h.
The land and building located
at ,
,
.
i.
Accounts receivable, if any, and all other receivables of Seller
under the terms of any and all notes, installment sales agreements,
supply contracts, other debt instruments or other similar contracts
or agreements related to the conduct of the Business by
Seller.
4.
Purchase Price and Allocation .
a.
The purchase price for the Assets (the “Purchase
Price”) shall be THREE-MILLION FOUR-HUNDRED THOUSAND and
NO/100 dollars ($3,400,000), and is payable as follows:
i. FIVE-HUNDRED
THOUSAND and NO/100 dollars ($500,000) in cash or other immediately
available funds (“Cash”) payable by Buyer to Seller on
the Closing Date.
ii. A
promissory note, in the form attached hereto as Exhibit 4-A2
(collectively, the “Promissory Note”), in the principal
amount of ONE-MILLION TWO-HUNDRED THOUSAND and NO/100 dollars
($1,200,000) plus an amount equal to the rent set forth in
Section 5(a)(iv) below that has been prepaid by Seller Parties
through March 2007.
iii. ONE-MILLION
THREE-HUNDRED SIXTY THOUSAND (1,360,000) shares of common stock
(the “Parent Shares”), par value of $.0167 (the
“Parent Common”), of MBI Financial, Inc., a Nevada
corporation (the “Parent”). For purposes of the amount
of the Purchase Price, the Parent Shares are valued at $1.25 per
share.
iv. Sufficient
Tax Funds shall be made available to Shareholder to provide
Shareholder with sufficient funding to pay his federal and state
tax liability due to the receipt of Cash and Parent Shares provided
under this Agreement. Such Tax Funds shall be paid on
December 27, 2006 (“Tax Funding Date”). Any Tax
Funds provided to Shareholder shall be evidence by a non-interest
bearing promissory note, in the form set forth on Exhibit 4-A,
and have a term no greater than one (1) year (“Term
Period”) from the Tax Funding Date. If Tax Funds are not paid
by the end of the Term Period, Seller shall have the right to
satisfy the amount of the unpaid balance of the Tax Funds by
returning to Buyer the number of Parent Shares that, when
multiplied by $1.25, are equal to the amount of the unpaid balance
of the Tax Funds.
b.
It is understood and agreed that none of the Parent Shares have
been registered under the Securities Act of 1933, as amended (the
“Act”). Parent agrees to include Selling Parties’
Parent Shares in any Parent’s filing of a SB-2. Such SB-2
filing is expected to be made by Parent within forty-five days of
the Closing Date. Notwithstanding any of the foregoing, Parent
shall file an SB-2, including no less than FIVE HUNDRED THOUSAND
(500,000) of the Parent Shares, no later than December 31,
2006.
c.
At the time of Closing, Seller and Buyer shall agree to a schedule
(the “Allocation Schedule”), allocating the Purchase
Price among the Assets and the non-competition provisions herein.
In the event that the parties are unable to agree upon the
Allocation Schedule, the determination of the amounts to be
allocated to the Assets and
to the
non-competition provisions shall be shall be subject to arbitration
as herein provided.
d.
In the event that the Parent sells, at any time during the period
of twelve (12) months from the Closing Date (the “Adjustment
Period”), to a third party purchaser or investor, any shares
of the Parent Common for less than $1.50 per share (herein such
shares sold in the future are collectively referred to as the
“Discount Shares”), Buyer agrees to the following:(i)
each time the Parent sells and issues any Discount Shares during
the Adjustment Period, Buyer shall determine the average selling
price per share (the “Adjusted Price”) for both the
Parent Shares and all of the Discount Shares sold and issued during
the Adjustment Period (by adding together the total purchase price
of the Parent Shares and the purchase price of all the Discount
Shares sold and issued during the Adjustment Period, and by
dividing such combined number by the total number of Discount
Shares sold and issued during the Adjustment Period, and the number
of Parent Shares; it is understood that subsequent to determining
the Adjusted Price per share, the purchase price per share of the
Parent Shares will be equal to the Adjusted Price per share then in
effect for purposes of future calculations of the Adjusted Price,
and (ii) shall provide Seller with the results of such
calculations, and (iii) shall cause to be issued and delivered
to Seller additional shares of Parent Common in an amount
sufficient to reduce the average price of the Parent Shares then
held by Seller to the Adjusted Price per share then in effect.
Notwithstanding the foregoing, it is understood and agreed that
(i) there shall be no adjustment in the number of Parent
Shares if the Parent sells any shares of Parent Common for less
than $1.50 per share, and (ii) there shall be no decrease in
the number of Parent Shares if the Parent sells any shares of
Parent Common for an amount in excess of $1.25 per
share.
5.
Assumption of Certain Liabilities .
a.
Notwithstanding anything contained in this Agreement or in any
Exhibit to the contrary, Buyer is not and shall not assume any
liabilities of the Business or of the Seller, except for the
following liabilities of the Seller pertaining solely to the
operation of the Business after the Closing Date (the
“Assumed Liabilities”):
i. The
obligations of Seller and related payment requirements from and
after the Closing Date under the unexpired facility leases for the
office of Seller as set forth on the Schedule of Lease Obligations
attached hereto as Exhibit 5-A1.
ii. The
obligations of Seller and related payment requirements from and
after the Closing Date under any equipment lease, lease/purchase or
maintenance agreements for those items of office equipment to be
purchased by Buyer pursuant to this Agreement, as set forth on the
Schedule of Equipment Leases attached hereto as
Exhibit 5-A2.
iii. The
obligation to pay the Buyer’s customary and normal
commissions with respect to mortgage transactions which are pending
at the time of Closing and which are finalized following
Closing.
iv. The
obligation to pay to Shareholder monthly rent in the amount of SIX
THOUSAND FOUR HUNDRED ELEVEN and 45/100 Dollars ($6,411.45), as
well as one prorated payment of THREE THOUSAND TWO HUNDRED FIVE and
73/100 Dollars ($3,205.73), that has been prepaid by Seller Parties
through March 2007. Such amount shall be paid pursuant to the
Promissory Note.
b.
Notwithstanding anything contained in this Agreement or in any
Exhibit to the contrary, Buyer does not assume any liability not
being identified herein as being assumed by Buyer, and in
particular (by way of illustration and not limitation) Buyer does
not assume any of the following liabilities, which liabilities will
remain the obligations of Seller (such liabilities are herein
collectively referred to as the “Excluded
Liabilities”):
i. Any
and all trade payables outstanding, accrued to, or due as of the
Closing Date.
ii. Any
and all accrued salaries, overtime pay, vacation pay, holiday pay,
accrued time off pay of any type, expenses and other employee
compensation for both temporary and permanent employees of Seller
payable up to the Closing Date unless otherwise assumed
hereunder.
iii. FICA,
withholding, and other payroll related taxes payable up to the
Closing Date for any and all periods prior to the Closing
Date.
iv. Sales
tax obligations for any and all services rendered prior to the
Closing Date.
v. Other
taxes, fees and assessments payable by Seller or accrued as of the
Closing Date.
vi. Audit
or other similar adjustments, including any penalties or fines,
related to FICA and other payroll taxes, sales taxes, retirement
plan contributions, workers’ compensation insurance and
similar expenses subject to audits and adjustments for occurrences
and time periods prior to the Closing Date.
vii. Federal
and state taxes on income earned by Seller prior to the Closing
Date and accrued to or payable as of the Closing Date.
viii. Revolving
credit line obligations or other short term bank borrowings, long
term bank loans or installment payment debts of Seller.
ix. Notes
and other financial instruments payable by Seller.
x. Any
and all notes payable, advances, deferred compensation or other
debts owed to Shareholders, or any other employee of, or contractor
to, Seller, including any payments related to compensation,
vacation pay, sick pay, fringe benefits, or reimbursable expenses
related to the employment of, or services performed by, any of such
individuals prior to the Closing Date.
xi. Any
and all other liabilities of Seller existing as of the Closing Date
and not specifically listed as being assumed by Buyer in
Section 5a of this Agreement.
xii. Any
contingent or unstated liabilities of Seller including, but not
limited to, liabilities occurring as a result of legal actions,
suits or other claims and resulting from actions or other
occurrences which took place prior to the Closing Date.
c.
All of the Assets shall be free of any liens, claims, liabilities,
charges, restrictions, royalties, fees or other encumbrances other
than (i) liens for Taxes which are not due and payable as of
the Closing Date, (ii) the leases set forth on the Schedule of
Lease Obligations at Exhibit 5-A1, (iii) the equipment leases,
lease/purchase or maintenance agreements set forth on the Schedule
of Equipment Leases at Exhibit 5-A2, and
(iv) encumbrances which would not have a material adverse
effect on the Business (collectively, the “Permitted
Encumbrances”). No later than the Closing Date, the Seller
shall secure written releases for the Assets acquired from the
holder of any lien, security interest or other obligation of the
Seller related to any lien, security interest or other encumbrance
attaching to all or any category of the assets of
Seller.
As a material
inducement for Buyer to enter into this Agreement, Shareholder
covenants that for a period of two (2) years after Closing,
Shareholder will not, directly of indirectly, own an interest in,
operate, join, control or participate in, or be connected as an
officer, director, shareholder, employee, agent, independent
contractor, partner, or principal of any corporation, partnership,
sole proprietorship, firm, association, person, or other entity
providing, soliciting, selling, or marketing services that directly
or indirectly compete with Buyer’s business within sixty
(60) miles of Buyer’s nearest office to Seller’s
facility. In the event Shareholder breaches, threatens to breach,
the obligation not to compete, Buyer shall be entitled to temporary
and injunctive relief without proof of actual damages that have
been or may be caused by such breach.
7.
Employment Agreements . At Closing, Buyer and Shareholders
shall enter into employment agreements (the “Employment
Agreements”), substantially in the form attached hereto as
Exhibit 7. This shall be a condition precedent to
Buyer’s obligation to close.
In the event
that Buyer terminates Shareholder’s employment without cause,
or terminates Shareholder’s employment with stated cause that
is later ruled to be invalid cause, prior to the expiration of the
employment term set forth in the Employment
Agreement, then
Shareholder’s covenant not to compete set forth in
Section 6 above shall become invalid and ineffective. In the
event that Shareholder voluntarily terminates Shareholder’s
employment, or Buyer terminates Shareholder’s employment with
valid cause, prior to the expiration of the employment term set
forth in the Employment Agreement, then Shareholder shall remain
bound by the covenant not to compete set forth in Section 6
above.
8. Option
to Hire . It is the intention, but not the obligation, of the
Buyer to hire as its employees substantially all of the employees,
both contract and permanent, of Seller. The employment of all such
employees as might be hired by Buyer will be terminable by Buyer at
will. Seller and Shareholder will each use commercially reasonable
efforts to assist Buyer in any hiring effort and to assist Buyer in
retaining such employees in their current positions, and the Seller
will assign to the Buyer any employment and non-competition
agreements that Seller possesses, whether pertaining to current or
previous employees. Nothing in this Agreement will vest in any
employee of Seller, either contract or permanent (other than the
Shareholders with respect to their employment agreements with
Buyer), or in any other party, any rights whatsoever as a third
party beneficiary to this Agreement.
9.
Effective Date . The effective date for the transactions
contemplated under this Agreement shall be at 11:59 p.m. on
June 30, 2006 (the “Closing Date” or
“Effective Date”). The transactions contemplated to be
taken on the Closing Date are herein referred to as the
“Closing.” Notwithstanding the foregoing, in the event
the transactions contemplated under this Agreement have not closed
on or before 5:00 p.m. PDT on July 7, 2006, then the Seller
Parties shall be entitled to terminate this Agreement without any
further obligation to Buyer.
10.
Instruments of Conveyance . At the Closing:
a.
Seller will deliver to the Buyer each of the following:
(i) such bills of sale, assignments and other good and
sufficient instruments of conveyance and transfer in form
sufficient to sell, assign and transfer the Assets, such documents
to be effective to vest in the Buyer good and marketable title to
the Assets of the Business being transferred to the Buyer by
Seller, free and clear of all liens, charges, encumbrances and
restrictions of any kind, except for the Permitted Encumbrances and
the Assumed Liabilities, (ii) all governmental approvals
required to consummate the Purchase Transaction, (iii) an
investment letter with respect to the parent Shares, (iv) certified
copies of the resolutions of the Board of Directors and
stockholders of Seller approving the Purchase Transaction,
(v) good standing certificates for Seller from both the
Comptroller and the Secretary of State of California, (vi) a
lease assignment and assumption, in form and substance acceptable
to Buyer, that transfers, assigns and conveys to Buyer all of
Seller’s rights, titles and interests in, to and under each
of any leases to be assumed by Buyer, and (vii) such other
documents as are required of Seller by this Agreement.
Simultaneously with conveyance of title to the Assets, the Seller
will use all reasonable efforts to put the Buyer in actual
possession, operation and control of the Assets to be transferred
hereunder.
b.
Shareholders will execute and deliver to Buyer the following:
(i) the Employment Agreements, and (ii) such other
documents as are required of Shareholders by this
Agreement.
c.
Buyer shall deliver to Seller the following: (i) the cash
portion of the Purchase Price, (ii) the duly executed
Promissory Note, (iii) certificates representing the Parent
Shares, and (iv) such other documents as are required of Buyer
by this Agreement.
d.
Buyer shall execute and deliver to the Shareholders the following:
(i) the Employment Agreements, and (ii) such other
documents as are required of Buyer by this Agreement.
e.
Both Buyer and Seller shall take such other action as is
contemplated by this Agreement to be taken to consummate the
Purchase Transaction.
11. Sales
and Transfer Taxes/Fees . All applicable sales, transfer, use,
filing and other taxes and fees that may be due or payable as a
result of the conveyance, assignment, transfer or delivery of the
Assets of the Business to be conveyed and transferred as provided
herein shall be borne by Seller.
12.
Representations and Warranties Pertaining to Seller . As a
material inducement to the Buyer to execute and perform its
obligations under this Agreement, the Seller Parties hereby jointly
and severally represent and warrant to the Buyer as
follows:
a.
Seller is a corporation duly organized, validly existing and in
good standing under the laws of the state of California, has
requisite corporate power and authority to carry on its business as
it is presently being conducted, to enter into this Agreement and
to carry out and perform the terms and provisions of this
Agreement. At Closing, Seller shall deliver to Buyer a Certificate
of Good Standing from its state of incorporation. The names of all
holders of the stockholders of Seller, and the percentage of
ownership interest held in each, are as reflected in
Exhibit 12-A to this Agreement.
b.
Except for the legal actions (the “Pending Litigation”)
disclosed on the Schedule of Pending Litigation attached hereto as
Exhibit 12-B, there are no actions, suits or proceedings
affecting the Assets which are pending or, to the knowledge of the
Seller Parties, threatened against Seller or affecting any of its
properties or rights, at law or in equity, or before any federal,
state, municipal or other governmental agency or instrumentality,
domestic or foreign. Seller is not in default with respect to any
order or decree of any court or of any such governmental agency or
instrumentality. Buyer is specifically not assuming any of
Seller’s liability obligations under the Pending Litigation
or any other pending or threatened litigation pertaining to the
operation of the Business prior to the Closing Date, and the Seller
Parties shall remain fully liable for all of such liability
obligations.
c.
The execution and delivery of, and performance and compliance with,
this Agreement will not result in the violation of or be in
conflict with or constitute a default under any term or provision
of any charter, bylaw, mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation or
result in the creation of any mortgage, lien, encumbrance or charge
upon any of the Assets pursuant to any such term or provision other
than Permitted Encumbrances.
d.
The sale and transfer of the Assets by the Seller, as provided for
in this Agreement, have been approved and consented to
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