Exhibit 2.1
MEMBERSHIP PURCHASE
AGREEMENT
This MEMBERSHIP PURCHASE AGREEMENT
(this “Agreement”), dated as of January 19, 2005, is by
and among Paragon Financial Corporation, a Delaware corporation
(“PFC”), and each of the Members (each, a
“Member” and collectively, the “Members”)
of First Charleston Mortgage LLC, a South Carolina limited
liability company (the “Company”).
WITNESSETH:
WHEREAS, the Company operates a
residential mortgage brokering service (“mortgage
broker”);
WHEREAS, the Members own all of the
issued and outstanding membership interests of the Company (the
“Shares”); and
WHEREAS, the Members desire to
transfer to PFC, and PFC desires to purchase, all of the Shares in
a transaction (the “Transfer”) intended to qualify as a
reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the
“Code”).
NOW, THEREFORE, in consideration of
the premises, the mutual covenants set forth herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
Section 1. Transfer of
Shares . In accordance
with the terms and conditions set forth herein, on the Closing Date
(as hereinafter defined), the Members will transfer, convey, assign
and deliver, and PFC will purchase, all of the Shares free and
clear of any and all liens, claims and encumbrances
whatsoever.
Section 2. Purchase Price;
Exchange of Certificates.
(a) Purchase Price . As of
the Closing Date (as hereinafter defined) and subject to the
provisions of this Section 2, in exchange for certificates
representing all of the Shares, the Members will receive from PFC
aggregate consideration equal to three time Pro-Forma Earnings (as
hereinafter defined), referred to as the “Purchase
Price”, consisting of certificates representing that number
of shares of Common Stock, par value $.0001 per share, of PFC (the
“PFC Common Stock”) which is equal to the quotient of
the Purchase Price (subject to the adjustments set forth in this
Section 2), divided by the Closing Price rounded up to the next
whole share in cases where the calculation of Purchase Price would
require the issuance of a fractional share of PFC Common Stock. The
Closing Price shall equal the average closing sales price of a
share of PFC Common Stock as quoted on the Over The Counter (OTC)
Exchange for the twenty (20) trading days ending on the second
trading day immediately preceding the Closing Date.
(b) Escrow Agreement .
Certificates representing shares of PFC Common Stock equal to- the
Purchase Price, as adjusted pursuant to this Section 2, shall be
held in escrow pursuant to the terms and conditions of the escrow
agreement attached hereto as Schedule 2(b) (the “Escrow
Agreement”) for a period not to exceed five years (the
“Escrow Period”).
(c) Pro-Forma Earnings :
Pro-Forma Earnings shall be calculated from Company’s
operating income before interest income, interest expense and other
income and expense as determined by the application of generally
accepted accounting principals and is based upon a twelve month
period. Schedule 2(c) contains the calculation of Pro-Forma
Earnings as agreed by PFC and Members and forms the basis for
determining the Purchase Price. Further, Schedule 2(c) contains a
monthly schedule of distributions that Company will make to PFC
from the Pro-Forma Earnings generated by Company for the first
twelve months following the Closing Date.
(d) Release from Escrow : PFC
shall cause to be released from escrow the number of shares of PFC
Common Stock equal to one third of the Purchase Price for each
twelve month period after the Closing Date in which Company meets
or exceeds the Pro-Forma Earnings until all shares of PFC Common
Stock have been released from escrow or the Escrow Period has
expired. PFC shall cause the aforementioned release from escrow
within 60 days after the expiration of the twelve-month period
related to the Pro Forma Earnings calculation. The Company must
meet Pro-Forma Earnings in three of the first five years after the
Closing Date to receive the Purchase Price. At the end of the
Escrow Period, if all of the PFC Common Stock has not been released
from escrow pursuant to this Section 2, then PFC shall purchase the
remaining PFC Common Stock from Members at its par
value.
(e) Additional Consideration
: If Company exceeds Pro-Forma Earnings in any twelve month period
after the Closing Date in which Members have not received all of
the PFC Common Stock representing the Purchase Price, Members shall
receive 50% of the excess of Company’s actual Pro-Forma
Earnings over the Pro-Forma Earnings used to calculate the Purchase
Price as Additional Consideration. The calculation of
Company’s Pro-Forma Earnings after the Closing Date shall be
in the same manner as that shown on Schedule 2(c) of this
Agreement. PFC will pay to Members the Additional Consideration
within 60 days after the twelve month period after the Closing Date
within which Company exceeds Pro-Forma Earnings. Payment of
Additional Consideration shall be in either cash or shares of PFC
Common Stock as determined by PFC at its sole
discretion.
(f) Adjustments to Purchase
Price . In the event that the Company’s Pro-Forma
Earnings do not cause PFC to release all of the Purchase Price from
escrow, then PFC shall repurchase the remaining number of shares of
PFC Common Stock in escrow for the par value of the PFC Common
Stock remaining in escrow.
(g) Fractional Shares . No
fractional shares of PFC Common Stock shall be issued pursuant to
this Agreement.
(h) Adjustment of Shares of
Stock . In the event that, subsequent to the date of this
Agreement but prior to the Closing Date, the outstanding shares of
PFC Common Stock shall have been changed into a different number of
shares or a different class as a result of a stock split, reverse
stock split, stock dividend, subdivision, reclassification, split,
combination, exchange, recapitalization or other similar
transaction, the number of shares of PFC Common Stock to be
delivered pursuant to this Agreement shall be appropriately
adjusted.
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Section 3. The Closing
. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall
take place, following the satisfaction of all of the conditions set
forth in Sections 8, 9 and 10 hereof, or the waiver thereof, on a
date (the “Closing Date”) and at a place to be
specified by the parties.
Section 4. Deliveries at
Closing . At the Closing,
the Members shall deliver to PFC the various certificates,
instruments and documents referenced in Section 10 below, including
without limitation stock certificates representing the Shares,
together with accompanying stock transfer powers or instruments of
assignment, duly endorsed in blank. At the Closing, PFC shall
deliver to the Members the various certificates, instruments and
documents referenced in Section 9 below.
Section 5. Representations and
Warranties of the Members . Each of the Members, jointly and severally,
represents and warrants to PFC as follows as of the date hereof and
also as of the Closing Date:
(a) Corporate Organization;
Governing Documents of the Company .
(i) The Company is a limited
liability company duly organized, validly existing and in good
standing under the laws of its state of formation. The Company has
all requisite power and authority to own or lease all of its
properties or assets and to carry on its business as it is now
being conducted. The Company has in effect and holds all licenses,
permits and other required authorizations from governmental
authorities necessary for it to own or lease its properties and to
conduct its business as it is now being conducted. The Company is
duly qualified to do business and is in good standing in the
jurisdictions set forth in Schedule 5(a), which includes every
jurisdiction in which the failure to be so qualified or in good
standing would have a material adverse effect on (A) the
Company’s ability to perform its obligations under the
Transaction Documents (as hereinafter defined) to be executed and
delivered by the Company or (B) the assets, results of operations
or prospects of the Company. As used in this Agreement,
“Transaction Documents” shall mean all documents to be
executed and delivered by the Company or by a Member in connection
with the Transfer.
(ii) True and complete copies of the
Company’s Articles of Organization and the Operating
Agreement, as amended to the date hereof, minute books, membership
record books and other records of the Company have been delivered
to PFC. All of such records are complete and correct and have been
maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls. The
minute books of the Company contain accurate and complete records
of all meetings of, and corporate action taken by, the Members, the
Board of Directors and committees of the Board of Directors of the
Company, and no meeting of any such Members, Board of Directors or
committee has been held for which minutes have not been prepared
and are not contained in such minute books.
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(b) Membership Interests
.
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(i)
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There is one
class of authorized Shares (“membership interests”) of
the Company and Schedule 5(b) includes all membership interests
which are issued and outstanding as of the date hereof and
constitute the Membership Interests. All of the Shares are owned by
the Members as set forth on Schedule 5(b) hereto. There are no
other classes of securities of the Company outstanding. All of the
Shares of Company have been duly authorized, validly issued and are
fully paid, nonassessable and free of preemptive rights. Other than
this Agreement, there are no contracts, commitments, understandings
or arrangements relating to the issuance, sale, transfer or
registration of the Company Shares or any other securities of the
Company. Other than this Agreement, there are no options, warrants,
preemptive rights, calls, subscriptions, convertible securities or
other rights, agreements or commitments that obligate the Company
or a Member to issue, transfer or sell any Shares of the Company or
any other securities of the Company.
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(ii)
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All offers and
sales of Company Shares, and any other securities issued by the
Company, prior to the date hereof were at all relevant times exempt
from the registration requirements of the Securities Act of 1933,
as amended (the “1933 Act”), and were duly registered
or the subject of an available exemption from the registration
requirements of the applicable state securities or Blue Sky
laws.
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(iii)
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Each Member is
the legal and beneficial owner of and has good and marketable title
to the Shares of the Company set forth opposite its name on
Schedule 5(b), free and clear of any and all liens, claims,
pledges, encumbrances, charges, options and contractual
restrictions whatsoever. Each Member has full, absolute and
unrestricted right, power, capacity and authority to sell,
transfer, assign and deliver its Shares to PFC and the delivery of
such Shares to PFC will convey to PFC valid, marketable and
indefeasible title to such Shares, free and clear of any and all
liens, claims, pledges, encumbrances, charges, options or
contractual restrictions whatsoever.
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(iv)
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There is no
plan or intention by any of the Members to sell, exchange or
otherwise dispose of any of the shares of PFC Common Stock to be
received by such Members in the Transfer.
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(c) Authorization and
Validity . Each Member is a natural person and has the full
authority and legal capacity to execute and deliver this Agreement
and all other Transaction Documents to be executed and delivered by
such Member and to consummate the transactions contemplated hereby
or thereby. No corporate proceedings on the part of the Company are
necessary to consummate the transactions contemplated hereby. This
Agreement, when
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executed, will constitute the legal, valid and
binding obligation of each Member, enforceable against each Member
in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws and subject to general principles of
equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(d) No Defaults; Absence of
Conflicts . The Company is not in default under, nor has any
event occurred which, with or without notice or the lapse of time
or action by a third party, could result in a default under, any
outstanding indenture, mortgage, contract, lease, insurance policy
or agreement to which the Company is a party or by which its
assets, business or operation may be bound or affected. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement
will not (i) violate any provision of, or result in the breach of,
or constitute a default under, or conflict with, (A) any terms or
provisions of the Articles of Organization or Operating Agreement
of the Company, any resolution of the Members or of the Company or
any agreements between or among the Members and the Company or
between the Company and any current or former owner of the Shares,
(B) any law the violation of which would result in a material
liability to the Company, or (C) any order, writ, injunction or
decree of any court, governmental agency or arbitration tribunal;
(ii) constitute a violation of or a (or an event that with or
without notice or lapse of time or both would constitute a) default
under, termination of or a conflict with, any term or provision of
any contract, commitment, indenture, lease or other agreement, or
any other restriction of any kind to which the Company or a Member
is a party or by which the Company or a Member is bound; (iii)
cause, or give any party grounds to cause (with or without notice,
the passage of time or both) the maturity of any liability or
obligation of the Company to be accelerated, or increase any such
liability or obligation; or (iv) create any lien, security
interest, charge, encumbrance or restriction upon any of the assets
or properties of the Company or upon any share of Company
Shares.
(e) Subsidiaries and Investments.
Except as set forth on Schedule 5(e), neither the Company nor the
Members currently own, directly or indirectly, beneficially or
equitably, any capital stock or other equity, ownership or
proprietary interest in any corporation, partnership, limited
liability company, association, trust, joint venture or other
entity. Neither the Company nor the Members own any shares of PFC
Common Stock or other securities convertible into PFC Common
Stock.
(f) Financial Statements .
Schedule 5(f) contains the description of the unaudited financial
statements of the Company for the fiscal years ended 2003 and 2004
provided to PFC. The Financial Statements have been prepared from
the books and records of the Company which accurately and fairly
reflect, in all material respects, the transactions of the Company.
The Financial Statements are true, correct and complete, have been
prepared in accordance with generally accepted accounting
principles, consistently applied, and fairly and accurately present
the financial and business condition of the Company as of the dates
thereof and the results of the operations of the Company for the
periods covered thereby. The Financial Statements accurately
reflect or adequately provide for all claims against, and all debts
and liabilities of, the Company, fixed or contingent, existing at
the dates thereof. The Company has adequately funded all accrued
employee benefit costs and such funding is reflected on the
Financial Statements.
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(g) Accounts Receivable and
Payable . The accounts receivable reflected on the Financial
Statements arose in the ordinary course of business and, except as
reserved against on the Financial Statements, are collectible in
the ordinary course of business and consistent with past practices,
free of any claims, rights or defenses of any account debtor. No
accounts payable of the Company are over forty-five (45) days
old.
(h) Absence of Certain
Changes . Except as disclosed on Schedule 5(h), the Company has
not since December 31, 2004:
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(i)
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changed the
Company’s authorized or issued membership interests; granted
any option or right to purchase membership interest of the Company;
issued any security convertible into such membership interests;
granted any registration rights; purchased, redeemed, retired, or
otherwise acquired any of any such Shares; or declared or paid any
dividend, other than normal member distributions, or payment in
respect of Shares;
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(ii)
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amended the
Articles of Organization, Operating Agreement other organizational
documents of the Company;
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(iii)
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incurred any
indebtedness or other liabilities (whether accrued, absolute,
contingent or otherwise), guaranteed any indebtedness or sold any
assets, except in the ordinary course of business consistent with
past practice;
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(iv)
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suffered any
damage, destruction or loss to any of the tangible assets of the
Company, whether or not covered by insurance;
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(v)
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increased the
regular rate of compensation payable by it to any employee or
increased such compensation by bonus, percentage, compensation
service award or similar arrangement theretofore in effect for the
benefit of any of its employees, and no such increase is
required;
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(vi)
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hired,
committed to hire or terminated any employee;
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(vii)
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established or
agreed to establish any pension, retirement or welfare plan for the
benefit of its employees not theretofore in effect;
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(viii)
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experienced any
labor organizational efforts, strikes or formal complaints or
entered into any collective bargaining agreements with any
union;
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(ix)
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suffered any
change in its financial condition, assets, liabilities, business or
prospects or suffered any other event or condition of any character
which individually or in the aggregate has or might reasonably be
expected to have a material adverse effect on its business or
prospects;
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(x)
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entered into
any commitments or transactions or made any capital expenditures
involving aggregate amount or value in excess of Five Thousand and
No/100 Dollars ($5,000.00) or made any single capital expenditure
which exceeded Five Thousand and No/100 Dollars
($5,000.00);
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(xi)
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disposed of any
of its assets, written down the value of any assets, written off as
uncollectible any accounts receivable or revalued any of its
assets, except in the ordinary course of business consistent with
past practice;
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(xii)
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subjected any
of its assets, tangible or intangible, to any lien, encumbrance or
restriction whatsoever, except for liens for current property taxes
not yet due and payable;
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(xiii)
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paid,
discharged or satisfied any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), except in the
ordinary course of business consistent with past practice; entered
into, terminated or received notice of termination of (A) any
license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (B) any contract or
transaction involving a total remaining commitment by or to the
Company of at least Five Thousand and No/100 Dollars
($5,000.00);
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(xiv)
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canceled or
waived any claims or rights with a value to the Company in excess
of Five Thousand and No/100 Dollars ($5,000.00);
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(xv)
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made any change
in any method of accounting or accounting practice;
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(xvi)
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canceled, or
failed to continue, insurance coverage; or
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(xvii)
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agreed, whether
in writing or otherwise, to take any action described in this
Section 5(h).
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(i) Ownership of Properties. The
Company owns the assets (the “Assets”) reflected on the
December 31, 2004, balance sheet which constitute all of the
operating assets of the Company necessary or appropriate for the
continued operation of the business of the Company. The Company has
sufficient title in and to the Assets necessary or advisable to
operate and conduct the business of the Company in the same fashion
as the Company is currently conducting such business. Except as set
forth on Schedule 5(i), the Company has good and marketable title
to all of the Assets owned by it including furniture, fixtures and
equipment, fixed assets and inventory, and all contract rights and
intangible assets, and good and valid leasehold estates in all of
the Assets leased by it, free and clear of mortgages, security
interests, liens, defects, charges, encumbrances, restrictions and
rights of third parties (excluding accounts payable in the ordinary
course of business). All equipment and other personal property
constituting a portion of the Assets are in good operating
condition and repair, ordinary wear and tear excepted. Following
the Transfer, the Company will have all of its rights under the
leases for the premises now leased by the Company free and clear of
any claims, liens and encumbrances, except to the extent expressly
set forth in said leases, and the Transfer will not result in any
increase in rents or charges under such leases.
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(j) Taxes. The Company has timely
filed all federal, state and local tax returns and information
returns required to be filed by it and will deliver to PFC true and
correct copies of such returns for the fiscal years 2002 through
2004 as requested by PFC. All of such returns have been prepared
accurately and filed in accordance with applicable laws and
regulations. The Company has paid all taxes and assessments
(including, without limitation, income, excise, unemployment,
social security, occupation, franchise, property, sales and use
taxes, import duties or charges, and all penalties and interest in
respect thereof) due and payable by it and the reserves for taxes
contained on the most recent Financial Statements (other than any
reserve for deferred taxes established to reflect timing
differences between book and tax income) are adequate to cover all
tax liabilities as of the date of this Agreement. The Company and
any predecessors in interest have withheld or collected from each
payment made to each of their employees the amount of all taxes
required to be withheld or collected therefrom, and the Company and
any predecessors in interest have paid the same to the proper tax
depositories or collecting authorities. The Company has not (i)
been audited by any taxing authority, (ii) received notice that any
taxing authority contemplates such an audit, (iii) signed any
extension agreement with any taxing authority, (iv) received notice
of any deficiencies, adjustments, assessments or other charges with
respect to taxes paid or payable or (v) made any payment, or
provided any benefit, to any officer, employee, former officer or
former employee that is not allowable as a deduction under the Code
or the regulations thereunder.
(k) Insurance. True and correct
copies of all insurance policies maintained by the Company, and all
endorsements thereto, have been or will be delivered to PFC. All
such policies are valid, outstanding and enforceable and taken
together, provide adequate insurance coverage for the Assets and
operations of the Company. All such policies are in full force and
effect, with no premium arrearages, and will continue in full force
and effect following the completion of the Transfer. Except as set
forth on Schedule 5(k), there are no pending claims against such
insurance by the Company as to which insurers are defending under
reservation of rights or have denied liability, and except as set
forth on Schedule 5(k), there exists no claim under such insurance
that has not been properly filed by the Company.
(l) Environmental
Conditions.
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(i)
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The Company is
currently in compliance with all Environmental Laws (as defined
below), which compliance includes, without limitation, the
possession by the Company of all permits and other governmental
authorization required under applicable Environmental Laws to
operate the business as currently operated, and is in compliance
with the terms and conditions thereof.
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(ii)
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Neither the
Company nor any Member has stored any Hazardous Substances (as
defined below) on any of the real property owned or leased by the
Company (the “Real Property”), except in compliance
with applicable Environmental Laws.
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(iii)
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Neither the
Company nor any Member has disposed of or released any Hazardous
Substances on any of the Real Property.
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(iv)
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The Company has
not arranged for disposal or utilized any transporters or disposal
facilities for the transport or disposal of Hazardous Substances
except as indicated on Schedule 5(l)(iv).
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(v)
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The Company has
not received any communication (written or oral), whether from a
governmental authority, citizen’s group, employee or
otherwise, that alleges that the Company is not in full compliance
with Environmental Laws, and there are no circumstances that may
prevent, interfere with, or make more expensive such full
compliance in the future. There is no environmental Claim (as
defined below) pending or threatened against the
Company.
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(vi)
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There have been
no actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the generation, handling,
transportation, treatment, storage, release, emission, discharge,
presence or disposal of any Hazardous Substances that could form
the basis of any Environmental Claim against the Company, and
neither the Company nor any Member knows of any such actions,
activities, circumstances, conditions, events or
incidents.
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(vii)
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The Real
Property and, to the best knowledge of the Company and the Members,
adjoining properties, have never been utilized for any industrial
or commercial operation involving any Hazardous
Substance.
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(viii)
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Without in any
way limiting the generality of the foregoing, (A) all underground
storage tanks, and the capacity, uses, date of installation, and
contents of such tanks, located on the Real Property, are
identified on Schedule 5(l)(viii); (B) there are no, nor have there
ever been, collection dumps, pits, and disposal facilities or
surface impoundments located on the Real Property, except as
identified on Schedule 5(l)(viii); (C) all underground storage
tanks are in full compliance with the Environmental Laws; (D) there
is no asbestos contained in or forming part of the Real Property;
and (E) no polychlorinated biphenyls (“PCBs”) have been
used or stored on the Real Property.
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The following terms shall have the
following meanings:
“Environmental Claim”
means any claim, action, cause of action, investigation or notice
(written or oral) by any person or entity alleging potential
liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (a) the
presence, or release into the environment, of Hazardous Substances
at any
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location which is or has been owned, leased,
operated or utilized by the Company or (b) circumstances forming
the basis of any violation, or alleged violation, of any
Environmental Law.
“Environmental Laws”
means the federal, state, regional, county or local environmental,
health or safety laws, regulations, ordinances, rules and policies
and common law in effect on the date hereof and the Closing Date
relating to the use, refinement, handling, treatment, removal,
storage, production, manufacture, transportation or disposal,
emissions, discharges, releases or threatened releases of Hazardous
Substances, or otherwise relating to protection of human health or
the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata), as
the same may be amended or modified to the date hereof and the
Closing Date.
“Hazardous Substances”
means any toxic or hazardous waste, pollutants or substances,
including, without limitations, asbestos containing materials
(“ACMs”), polychlorinated biphenyls
(“PCBs”), petroleum products, byproducts, or other
hydrocarbon substances, substances defined or listed as a
“hazardous waste”, “hazardous substance”,
“toxic substance”, “toxic pollutant”, or
similarly identified substance or mixture, in or pursuant to any
Environmental Law and medical or infectious waste.
(m) Contracts and Commitments.
Except as described on Schedule 5(m) hereto, the Company is not a
party or subject to any agreement, commitment, contract or
obligation, whether written or oral, express or implied:
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(i)
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that limits the
right of the Company to engage in or to compete with any person or
entity in any business;
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(ii)
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for the
purchase or sale of supplies, services or other items in excess of
Five Thousand and No/100 Dollars ($5,000.00) in any one
instance;
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(iii)
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for the
purchase or sale of any equipment or machinery in excess of Five
Thousand and No/100 Dollars ($5,000.00);
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(iv)
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for the
performance of services for others in excess of Five Thousand and
No/100 Dollars ($5,000.00) in any one instance;
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(v)
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for the
performance of services for others in excess of Five Thousand and
No/100 Dollars ($5,000.00) for a period of more than ninety (90)
days;
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(i)
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for the lease
of any property, tangible or intangible;
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(ii)
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with any
Member, partner, officer or director of the Company or any
affiliate of such persons;
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(iii)
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not in the
ordinary course of business;
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(iv)
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for any power
of attorney, whether limited or general, granted by or to the
Company; or
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(v)
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otherwise
material to the assets, business or operations of the
Company.
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The Company has delivered to PFC
true and complete copies of all of the contracts, leases and
agreements described on Schedule 5(m) (the “Company
Agreements”). Except as noted in Schedule 5(m), the Company
Agreements are valid and in full force and effect; each is a legal,
valid and binding contract; there has been no threatened
cancellation thereof and there are no outstanding disputes
thereunder; each is with unrelated third parties and was entered
into on an arms-length basis in the ordinary course of business;
all will continue to be binding in accordance with their terms
after consummation of the transactions contemplated herein; there
is no material default (or an event which, with the giving of
notice or lapse of time or both would be a material default) by the
Company; and to the knowledge of the Company and the Members, there
is no pending or threatened bankruptcy, insolvency or similar
proceeding with respect to any other party to the Company
Agreements. There are no contracts, leases, agreements or other
instruments to which the Company is a party or is bound (other than
insurance policies) which could either singularly or in the
aggregate have an adverse effect on the value of the
Company.
(n) No Undisclosed Liabilities. With
the exception of the liabilities set forth on Schedule 5(n) or as
reflected on the Financial Statements, the Company does not have
any material liabilities or obligations of any nature, whether
absolute, accrued, asserted or unasserted, contingent or otherwise
or whether due or to become due, relating to or arising out of any
act, omission, transaction, circumstance, sale of goods or services
or other condition which occurred or existed on or before the date
hereof, and neither the Company nor any Member knows or has reason
to know of any basis for the assertion against the Company of any
such liability or obligation of any nature not described in
Schedule 5(n).
(o) Employees and Labor
Matters.
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(i)
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Schedule 5(o)
contains a complete and accurate list of the following information
for each employee or director of the Company: name; job title;
current compensation paid or payable and any change in compensation
since JANUARY 1, 2004; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under any
pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, or
any other employee benefit plan or any director plan.
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(ii)
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No employee or
director of the Company is a party to, or is otherwise bound by,
any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such
employee or director and any other person or entity that in any way
adversely affects or will affect (A) the performance of his duties
as an employee or director of the Company, or (B) the ability of
the Company to conduct its business.
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11
To the knowledge of the Company and
each Member, no director, officer, or other key employee of the
Company intends to terminate his employment with the
Company.
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(iii)
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The Company is
in compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety and
health, including laws concerning unfair labor practices within the
meaning of Section 8 of the National Labor Relations Act, and the
employment of non-residents under the Immigration Reform and
Control Act of 1986.
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(iv)
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Except as
disclosed on Schedule 5(o),
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(A)
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there are no
charges, governmental audits, investigations, administrative
proceedings or complaints concerning the Company’s employment
practices pending or, to the knowledge of the Company and each
Member, threatened before any federal, state or local agency or
court, and, to the knowledge of the Company and each Member, no
basis for any such matter exists;
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