Exhibit 10.0
STOCK PURCHASE AND EXCHANGE AGREEMENT
THIS STOCK PURCHASE AND EXCHANGE AGREEMENT (hereinafter referred to as the
"Agreement") is made and entered into this 19th day of July, 1999, by and among
HomeSmart.com, Inc., a Colorado corporation (hereinafter referred to as the
"Company"), on the one hand, and HomeSmartUSA, Inc, a Colorado corporation
(hereinafter referred to as HomeSmartUSA"), and Rico Adamo, Tim Bolin, Gordon
and Joan Bourne, John Bowen, Jared Brandt, William Brody, Rob Burriesci, John
Coombs, Ray Daddario, Susan Evans, Jamie Farrell, Paul Gienger, Lou Getman, Dina
Guillen, A.L. Hamilton, Rosalie Hamilton, John Hertle, Jim Howeson, Elise
Jackson, Bill Karr, John Kuntz, Dave Leonhard, Alma Lynch, Jim Murphy, Tony
Nanci, Marion Pollard, Brent Powell, Patrick Shannahan, Linda Shuls, Linda
Shuls, as trustee for HomeSmart agents, Doug Spring, Mike Stafford, Bev Waters,
Bruce Waters, Mike Wilcox, Brandon Wilson, John Wilson, Warren Wilson and Sharon
Yofan (hereinafter referred to, collectively, as the "Purchasers"), on the other
hand.
RECITALS:
WHEREAS, the Company desires to issue, sell and deliver to the Purchasers,
and the Purchasers desire to purchase, acquire and receive from the Company, an
aggregate of 16,385,000 authorized and unissued shares of common stock, no par
value per share (the "HomeSmart.com Common Shares"), of the Company in
consideration of the exchange therefor of all 16,385,000 issued and outstanding
shares of common stock, no par value per share (the "HomeSmartUSA Common
Shares"), of HomeSmartUSA, representing 100% of the issued and outstanding
HomeSmartUSA Common Shares, which are owned of record, collectively, by the
Purchasers, on the terms and subject to the conditions set forth herein.
WHEREAS, the parties hereto intend that the issuance, sale and delivery of
16,385,000 HomeSmart.com Common Shares in consideration of the exchange therefor
of all 16,385,000 HomeSmartUSA Common Shares, shall qualify as a "tax-free"
reorganization as contemplated by the provisions of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants, agreements, representations and warranties contained herein, the
parties hereto agree as follows:
ARTICLE 1
ISSUANCE, SALE AND PURCHASE OF SHARES
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At the Closing, as defined and to be held in accordance with the provisions
of Article 2 below, the Company agrees to issue, sell and deliver a total of
16,385,000 HomeSmart.com Common Shares to the Purchasers and the Purchasers
agree, severally and not jointly, to purchase, acquire and receive said
aggregate number of HomeSmart.com Common Shares from the Company. In
consideration for the issuance and sale of said 16,385,000 HomeSmart.com Common
Shares to the Purchasers pursuant to the provisions of this Agreement, and as
payment in full of the purchase price for the said HomeSmart.com Common Shares
to be issued and sold to, and purchased and acquired by, each of them pursuant
to the provisions of this Agreement, at the Closing each Purchaser shall sell,
assign, transfer, convey and deliver to the Company the stock certificates, duly
executed, endorsed and/or authenticated for transfer to the Company, evidencing
that respective number of HomeSmartUSA Common Shares owned of record and
beneficially by each which is set forth opposite his, her or their name(s) on
Exhibit A attached hereto and incorporated herein by this reference.
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ARTICLE 2
CLOSING
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The consummation of the issuance and sale to and purchase and acquisition
by the Purchasers of the HomeSmart.com Common Shares (hereinafter referred to as
the "Closing") shall occur at the offices of the Company, 2976 Alhambra Drive,
Cameron Park, California 95682, at 1:00 p.m., Pacific Daylight Time, on July 21,
1999, or at such other place and/or on such other date not later than August 21,
1999, as the parties may agree upon in writing (hereinafter referred to as the
"Closing Date"). If the Closing fails to occur by July 21, 1999, or by such
later date to which the Closing may be extended as provided hereinabove, then
this Agreement shall automatically terminate, all parties shall pay their own
expenses incurred in connection herewith and no party hereto shall have any
further obligations hereunder; provided, however, that no such termination shall
constitute a waiver by any party or parties which is not in default of any of
his, her or their respective representations, warranties or covenants herein, of
any rights or remedies he, she or they might have at law if any other party or
parties are in default of any of his, her or their respective representations,
warranties or covenants under this Agreement.
At or prior to the Closing, as conditions thereto,
(a) The Company shall deliver, or cause to be delivered, to the Purchasers:
(i) Newly-issued stock certificates representing such number of
HomeSmart.com Common Shares set forth opposite the respective names of the
Purchasers on Exhibit A which are being purchased and acquired for their
respective accounts, in form and substance reasonably satisfactory to the
Purchasers and their counsel.
(ii) The certified resolutions of the Company's Board of Directors
specified in Section 6.3 (a) below.
(iii) The certificate of the Company specified in Section 6.3 (b)
below.
(iv) The opinion letter of the Company's counsel specified in Section
6.3 (c) below in the form attached hereto as Exhibit B and incorporated herein
by this reference.
(v) The letter of resignation of the current director and officer of
the Company specified in Section 7.3 (d) below.
(b) The Purchasers shall deliver to the Company:
(i) The stock certificate(s) evidencing such number of HomeSmartUSA
Common Shares owned of record and beneficially by each Purchaser as set forth
opposite his, her or their respective name(s) on Exhibit A which are being sold,
assigned, transferred and conveyed to the Company, duly executed, endorsed
and/or authenticated for transfer to the Company.
(ii) The certified resolutions of the HomeSmart's Board of Directors
specified in Section 6.4 (a) below.
(ii) The certificate of HomeSmartUSA and the Purchasers specified in
Section 6.4 (b) below.
(iii) The opinion letter of counsel to the Purchasers specified in
Section 6.4 (c) below in the form attached hereto as Exhibit C and incorporated
herein by this reference.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to HomeSmartUSA and the
Purchasers, and each of them, as follows (it being acknowledged that
HomeSmartUSA and the Purchasers are entering into this Agreement in material
reliance upon each of the following representations and warranties, and that the
truth and accuracy of each of which constitutes a condition precedent to the
obligations of HomeSmartUSA and the Purchasers hereunder):
3.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which such qualification is required and
where the failure to be so qualified would have a materially adverse effect upon
the Company. The Company has all requisite corporate power and authority to
conduct its business as now being conducted and to own the intangible assets
which it now owns. The Articles of Incorporation of the Company, certified by
the Secretary of State of Colorado, and the Bylaws of the Company, certified by
the President, who is also the Secretary, of the Company, which have been
delivered to the Purchasers prior to the execution hereof, are true and complete
copies thereof as in effect as of the date of this Agreement.
3.2 Authorization. The Company has full power, legal capacity and authority
to enter into this Agreement and all attendant documents and instruments
necessary to consummate the transactions herein contemplated; to issue, sell and
deliver the HomeSmart.com Common Shares to the Purchasers; and to perform all of
the obligations to be performed by the Company hereunder. This Agreement and all
other agreements, documents and instruments to be executed in connection
herewith by the Company have been effectively authorized by all necessary
action, corporate or otherwise, on the part of the Company, which authorizations
remain in full force and effect and have been duly executed and delivered by the
Company, and no other corporate proceedings on the part of the Company are
required to authorize the execution and delivery of this Agreement, such other
agreements, documents and instruments and the transactions contemplated hereby.
This Agreement and such other agreements, documents and instruments have been
duly executed and delivered by the Company; constitute the legal, valid and
binding obligation of the Company; and are enforceable with respect to the
Company in accordance with their respective terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, priority or other laws
or court decisions relating to or affecting generally the enforcement of
creditors' rights or affecting generally the availability of equitable remedies.
Neither the execution and delivery of this Agreement, the consummation by the
Company of any of the transactions contemplated hereby nor the compliance by the
Company with any of the provisions hereof will (i) conflict with or result in a
breach of, violation of or default under any of the terms, conditions or
provisions of any agreement, document, instrument or obligation (including,
without limitation, any of the Company's charter documents) to which the Company
is a party or by which the Company or any of the assets of the Company may be
bound or (ii) violate any judgment, order, injunction, decree, statute, rule or
regulation applicable to the Company or any of the assets of the Company. To the
best knowledge of the Company, no authorization, consent or approval of any
public body or authority is necessary for the consummation by the Company of the
transactions contemplated by this Agreement.
3.3 Capitalization.
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(a) The authorized capital stock of the Company consists of 50,000,000
shares of common stock, no par value per share (defined above as the
"HomeSmart.com Common Shares"), and 5,000,000 shares of preferred stock, no par
value per share (hereinafter referred to as the "Preferred Shares"). At the date
hereof, there are 2,600,000 HomeSmart.com Common Shares issued and outstanding,
with no HomeSmart.com Common Shares held in the Company's treasury and no
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Preferred Shares outstanding or held in the Company's treasury. All of the
outstanding HomeSmart.com Common Shares have been duly authorized and validly
issued and are fully-paid and nonassessable.
(b) There are no warrants, options, calls, commitments or other rights to
subscribe for or to purchase from the Company any capital stock of the Company,
or any securities convertible into or exchangeable for any shares of capital
stock of the Company or any other securities or agreement pursuant to which the
Company is or may become obligated to issue any shares of capital stock, nor is
there outstanding any commitment, obligation or agreement on the part of the
Company to repurchase, redeem or otherwise acquire any of the outstanding
HomeSmart.com Common Shares.
(c) There currently are no rights, agreements or commitments of any
character obligating the Company, contingently or otherwise, to register any
shares of its capital stock under any applicable Federal or state securities
laws.
3.4 Financial Statements. Attached hereto as Exhibit D are true and
complete copies of the unaudited balance sheets of the Company as of March 31,
1999 (the "Company Balance Sheet"), December 31, 1998, December 31, 1997 and
December 31, 1996, the related statements of operations and shareholders'
deficit for the three months and years then ended and for the period of July 14,
1995 (date of inception), to March 31 1999, and the related notes thereto which
have been certified to by the President, who is also the Chief Financial
Officer, of the Company. Such financial statements (and the notes related
thereto) are herein sometimes collectively referred to as the "Company Financial
Statements." The Company Financial Statements (i) are derived from the books and
records of the Company, which books and records have been consistently
maintained in a manner which reflects, and such books and records do fairly and
accurately reflect, the assets and liabilities of the Company, (ii) fairly and
accurately present the financial condition of the Company on the respective
dates of such statements and the results of its operations for the periods
indicated, except as may be disclosed in the notes thereto, and (iii) have been
prepared in all material respects in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
(except as otherwise disclosed in the notes thereto).
3.5 Subsidiaries. The Company has no subsidiaries and no investments,
directly or indirectly, or other financial interest in any other corporation or
business organization, joint venture or partnership of any kind whatsoever.
3.6 Absence of Undisclosed Liabilities. The Company has no liability(s) or
obligation(s) (whether accrued, to become due, contingent or otherwise) which
individually or in the aggregate could have a materially adverse effect on the
business, assets, condition (financial or otherwise) or prospects of the
Company.
3.7 Absence of Certain Developments. Except as described on Exhibit E
attached hereto and incorporated herein by this reference, there has been since
the date of the Company Balance Sheet (i) no materially adverse change in the
condition (financial or otherwise) of the Company or in the assets, business,
operations or prospects of the Company; (ii) no declaration, setting aside or
payment of any dividend or other distribution with respect to the HomeSmart.com
Common Shares or redemption, purchase or other acquisition of any HomeSmart.com
Common Shares or any split-up or other recapitalization relative to any
HomeSmart.com Common Shares or any action authorizing or obligating the Company
to do any of the foregoing; (iii) no loss, destruction or damage to any material
asset of the Company; (iv) no acquisition or disposition of assets (or any
contract or arrangement therefor), or any other transaction by the Company
otherwise than for fair value and in the ordinary course of business; (v) no
payment by the Company of any obligation or liability (absolute or contingent)
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other than current liabilities incurred since the date thereof in the ordinary
course of business; (vi) no sale, assignment or transfer by the Company of any
of the intangible assets of the Company, cancellation by the Company of any
debts, claims or obligations or waiver by the Company of any rights of value
which, in any such case, is material to the business of the Company (whether or
not in the ordinary course of business); (vii) no payment of any compensation to
the sole officer and director of the Company, whether directly or by means of
any bonus, pension plan, contract or commitment; (viii) no disposition or lapse
of rights as to any intangible property which is material to the business of the
Company; (ix) no loans or extensions of credit to shareholders or the sole
officer and director of the Company; (x) no entry into any commitment or
transaction by the Company (including, without limitation, any borrowing or
capital expenditure) involving an amount in excess of $1,000; (xi) no issuance
of any capital stock, or of any other security convertible into any of the
capital stock, of the Company; and (xii) no agreement to do any of the things
described in this Section 3.7.
3.8 Tax Matters. Since inception, there have been no Federal, state, county
or local tax returns required to have been filed by the Company in any
jurisdiction where the nature or conduct of its business requires such filing
and where the failure to so file would be materially adverse to it. No amount is
required to be reflected in the Company Balance Sheet as a liability or reserve
for taxes which are due but not yet payable and, to the best knowledge of the
Company, it has no accrued and unpaid Federal, state, county or local taxes.
3.9 Contracts and Commitments. The Company has no contract, agreement,
obligation or commitment, written or verbal, express or implied, which involves
a commitment or liability in excess of $1,000 or for a term of more than six
months, and no employee or consulting contracts, financing agreements, debtor or
creditor arrangements, leases or bonus, health or stock option plans. The sole
officer of the Company has no knowledge of any circumstances which would affect
the validity or enforceability of any of such contracts and other agreements in
accordance with their respective terms. The Company has performed and complied
in all material respects with all obligations required to be performed by it to
date under, and is not in default (without giving effect to any required notice
or grace period) under, or in breach of, the terms, conditions or provisions of
any of such contracts and other agreements. The validity and enforceability of
any contract or other agreement described herein shall not in any manner be
affected by the execution and delivery of this Agreement without any further
action.
3.10 No Pending Material Litigation or Proceedings. To the best knowledge
of the Company, there are no actions, suits or proceedings pending, threatened
against or affecting the Company at law or in equity or before or by any
Federal, state, municipal or other governmental department, commission, court,
board, bureau, agency or instrumentality, domestic or foreign, or affecting the
sole officer and director of the Company in connection with the business,
operations or affairs of the Company which might result in any adverse change in
the business, properties or assets, or in the condition (financial or otherwise)
of the Company, or which might prevent the sale of the HomeSmart.com Common
Shares pursuant to this Agreement. The Company has not, since inception, been
threatened with any action, suit, proceeding or claim, nor has the Company been
a party to or threatened with proceedings brought by or before any Federal or
state agency. The Company is not subject to any voluntary or involuntary
proceeding under the United States Bankruptcy Code and has not made an
assignment for the benefit of creditors.
3.11 Compliance with Laws. To the best knowledge of the Company, the
Company holds all licenses, franchises, permits and authorizations necessary for
the lawful conduct of its business as presently conducted, and has complied with
all applicable statutes, laws, ordinances, rules and regulations of all
governmental bodies, agencies and subdivisions having, asserting or claiming
jurisdiction over it, with respect to any part of the conduct of its business
and corporate affairs.
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3.12 Brokerage. The Company has no obligation to any person or entity for
brokerage commissions, finder's fees or similar compensation in connection with
the transactions contemplated by this Agreement, and the Company shall indemnify
and hold the Purchasers, or any of them, harmless against any liability or
expenses arising out of any such claim asserted against the Purchasers, or any
of them, by any party.
3.13 Investment Representation. The Company, through its officers, has the
knowledge and experience in business and financial matters to meaningfully
evaluate the merits and risks of the issuance and sale of the HomeSmart.com
Common Shares in exchange and consideration for the HomeSmartUSA Common Shares
as contemplated hereby. The Company shall conduct an independent review for the
purpose of satisfying itself as to the truth, accuracy and completeness of the
representations and warranties made by the Purchasers. The Company understands
and acknowledges that the HomeSmartUSA Common Shares were originally issued to
the Purchasers and will be sold and transferred to the Company in the
transactions contemplated hereby without registration or qualification or other
filings being made under the U.S. Securities Act of 1933, as amended, or any
applicable state securities or "Blue Sky" law, in reliance upon specific
exemptions therefrom, and in furtherance thereof the Company represents that the
HomeSmartUSA Common Shares will be taken and received by the Company for its
account for investment, with no present intention of a distribution or
disposition thereof to others. The Company further acknowledges and agrees that
the certificates representing the HomeSmartUSA Common Shares transferred to the
Company shall be subject to a stop-transfer order and shall bear a restrictive
legend, in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
ARE "RESTRICTED SECURITIES," AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, IS NOT REQUIRED TO BE REGISTERED UNDER
THE ACT."
3.14 Disclosure. Neither this Agreement, nor any certificate, exhibit or
other written document or statement, furnished to the Purchasers by the Company
in connection with the transactions contemplated by this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to be stated in order to make the statements
contained herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF HOMESMARTUSA AND THE PURCHASERS
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Each of the Purchasers and HomeSmartUSA, severally and not jointly, hereby
represents and warrants to the Company as follows (it being acknowledged that
the Company is entering into this Agreement in material reliance upon each of
the following representations and warranties, and that the truth and accuracy of
each of which constitutes a condition precedent to the obligations of the
Company hereunder):
4.1 Authorization.
(a) HomeSmartUSA has full power, legal capacity and authority to enter
into this Agreement and all attendant documents and instruments necessary to
consummate the transactions herein contemplated; and to perform all of the
obligations to be performed by HomeSmartUSA hereunder. This Agreement and all
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other agreements, documents and instruments to be executed in connection
herewith by HomeSmartUSA have been effectively authorized by all necessary
action, corporate or otherwise, on the part of HomeSmartUSA, which
authorizations remain in full force and effect and have been duly executed and
delivered by HomeSmartUSA and/or the Purchasers, and no other corporate
proceedings on the part of HomeSmartUSA are required to authorize the execution
and delivery of this Agreement, such other agreements, documents and instruments
and the transactions contemplated hereby. This Agreement and such other
agreements, documents and instruments have been duly executed and delivered by
HomeSmartUSA; constitute the legal, valid and binding obligation of
HomeSmartUSA; and are enforceable with respect to HomeSmartUSA in accordance
with their respective terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, priority or other laws or court
decisions relating to or affecting generally the enforcement of creditors'
rights or affecting generally the availability of equitable remedies. Neither
the execution and delivery of this Agreement, the consummation by HomeSmartUSA
of any of the transactions contemplated hereby nor the compliance by
HomeSmartUSA with any of the provisions hereof will (i) conflict with or result
in a breach of, violation of or default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, lease, credit
agreement or other agreement, document, instrument or obligation (including,
without limitation, any of HomeSmartUSA's charter documents) to which
HomeSmartUSA is a party or by which HomeSmartUSA or any of the assets or
properties of HomeSmartUSA may be bound or (ii) violate any judgment, order,
injunction, decree, statute, rule or regulation applicable to HomeSmartUSA or
any of the assets or properties of HomeSmartUSA. To the best knowledge of
HomeSmartUSA and the Purchasers, no authorization, consent or approval of any
public body or authority is necessary for the consummation by HomeSmartUSA of
the transactions contemplated by this Agreement.
(b) Each of the Purchasers has full power, legal capacity and authority
to enter into this Agreement and all attendant documents and instruments
necessary to consummate the transactions herein contemplated; to sell, assign,
transfer, convey and deliver the HomeSmartUSA Common Shares to the Company and
to perform all of the obligations to be performed by them hereunder. This
Agreement has been duly executed and delivered by each of the Purchasers,
constitutes the legal, valid and binding obligation of each of the Purchasers
and is enforceable with respect to each of the Purchasers in accordance with its
terms, except as enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, priority or other laws or court decisions relating to or
affecting generally the enforcement of creditors' rights or affecting generally
the availability of equitable remedies. Neither the execution and delivery of
this Agreement nor the consummation by the Purchasers of any of the transactions
contemplated hereby, or compliance by the Purchasers with any of the provisions
hereof, will (i) conflict with or result in a breach of, violation of or default
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, lease, credit agreement or other agreement, document,
instrument or obligation to which any of the Purchasers are parties or by which
any of the Purchasers or any of the assets or properties of any of the
Purchasers may be bound or (ii) violate any judgment, order, injunction, decree,
statute, rule or regulation applicable to any of the Purchasers or any of the
assets or properties of any of the Purchasers. To the best knowledge of the
Purchasers, no authorization, consent or approval of any public body or
authority is necessary for the consummation by the Purchasers of the
transactions contemplated by this Agreement.
4.2 Ownership of HomeSmartUSA. The Purchasers together collectively own all
16,385,000 HomeSmartUSA Common Shares, constituting 100% of the issued and
outstanding shares of capital stock of HomeSmartUSA, free and clear of (i) any
lien, charge, mortgage, pledge, conditional sale agreement or other encumbrance
of any kind or nature whatsoever and (ii) any claim as to ownership thereof or
any rights, powers or interest therein by any third party, whether legal or
beneficial, and whether based on contract, proxy or other document or otherwise.
All of said 16,385,000 HomeSmartUSA Common Shares have been duly authorized and
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validly issued and are fully-paid and nonassessable. Except as set forth in this
Section 4.2, there are no warrants, options, calls, commitments or other rights
to subscribe for or to purchase from HomeSmartUSA any capital stock of
HomeSmartUSA or any securities convertible into or exchangeable for any shares
of capital stock of HomeSmartUSA, or any other securities or agreement pursuant
to which HomeSmartUSA is or may become obligated to issue any shares of its
capital stock, nor is there outstanding any commitment, obligation or agreement
on the part of HomeSmartUSA to repurchase, redeem or otherwise acquire any of
the outstanding shares of HomeSmartUSA.
4.3 Organization and Corporate Power. HomeSmartUSA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which such qualification is required and
where the failure to be so qualified would have a materially adverse effect upon
HomeSmartUSA. HomeSmartUSA has all requisite corporate power and authority to
conduct its business as now being conducted and to own and lease the properties
which it now owns and leases. The Articles of Incorporation of HomeSmartUSA, as
amended to date, certified by the Secretary of State of Colorado, and the Bylaws
of HomeSmartUSA, as amended to date, certified by the President and the
Secretary of HomeSmartUSA, which have been delivered to the Company prior to the
execution hereof, are true and complete copies thereof as in effect as of the
date of this Agreement.
4.4 Financial Statements. Attached hereto as Exhibit F is a true and
complete copy of the unaudited balance sheet of HomeSmartUSA as of June 30, 1999
(the "HomeSmartUSA Balance Sheet"), the related unaudited statement of profit or
loss for the period then ended and the related notes thereto, which have been
certified to by the chief executive officer and the chief financial officer of
HomeSmartUSA. Such financial statements (and the notes related thereto) are
herein sometimes collectively referred to as the "HomeSmartUSA Financial
Statements." The HomeSmartUSA Financial Statements (i) are derived from the
books and records of HomeSmartUSA, which books and records have been
consistently maintained in a manner which reflects, and such books and records
do fairly and accurately reflect, the assets and liabilities of HomeSmartUSA,
(ii) fairly and accurately present the financial condition of HomeSmartUSA on
the respective dates of such statements and the results of its operations for
the periods indicated, except as may be disclosed in the notes thereto, and
(iii) have been prepared in all material respects in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved (except as otherwise disclosed in the notes thereto).
4.5 Subsidiaries. HomeSmartUSA has no subsidiaries and no investments,
directly or indirectly, or other financial interest in any other corporation or
business organization, joint venture or partnership of any kind whatsoever.
4.6 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the HomeSmartUSA Balance Sheet, and as to
matters arising in the ordinary course of the business of HomeSmartUSA since the
date of the HomeSmartUSA Balance Sheet which are disclosed on Exhibit G hereto,
HomeSmartUSA has no liability(s) or obligation(s) (whether accrued, to become
due, contingent or otherwise) which individually or in the aggregate could have
a materially adverse effect on the business, assets, properties, condition
(financial or otherwise) or prospects of HomeSmartUSA.
4.7 Absence of Certain Developments. Except as described on Exhibit G,
since the date of the HomeSmartUSA Balance Sheet, there has been (i) no
materially adverse change in the condition (financial or otherwise) of
HomeSmartUSA or in the assets, liabilities, properties, business, operations or
prospects of the corporation; (ii) no declaration, setting aside or payment of
any dividend or other distribution with respect to the HomeSmartUSA Common
Shares or redemption, purchase or other acquisition of any HomeSmartUSA Common
Shares or any split-up or other recapitalization relative to any HomeSmartUSA
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Common Shares or any action authorizing or obligating HomeSmartUSA to do any of
the foregoing; (iii) no loss, destruction or damage to any material property or
asset of HomeSmartUSA, whether or not insured; (iv) no acquisition or
disposition of assets (or any contract or arrangement therefor), or any other
transaction by HomeSmartUSA otherwise than for fair value and in the ordinary
course of business; (v) no discharge or satisfaction by HomeSmartUSA of any lien
or encumbrance or payment of any obligation or liability (absolute or
contingent) other than current liabilities shown on the HomeSmartUSA Balance
Sheet, or current liabilities incurred since the date thereof in the ordinary
course of business; (vi) no sale, assignment or transfer by HomeSmartUSA of any
of the tangible or intangible assets of the corporation, cancellation by
HomeSmartUSA of any debts, claims or obligations, or mortgage, pledge,
satisfaction of any assets to any lien, charge, security interest or other
encumbrance or waiver by HomeSmartUSA of any rights of value which, in any such
case, is material to the business of HomeSmartUSA (whether or not in the
ordinary course of business); (vii) no payment of any bonus to or change in the
compensation of any director, officer or employee of HomeSmartUSA, whether
directly or by means of any bonus, pension plan, contract or commitment and no
change in employee compensation, whether directly or by means of any bonus,
pension plan, contract or commitment; (viii) no write-off or material reduction
in the carrying value of any asset which is material to the business of
HomeSmartUSA; (ix) no disposition or lapse of rights as to any intangible
property which is material to the business of HomeSmartUSA; (x) except for
ordinary travel advances, no loans or extensions of credit to shareholders,
officers, directors or employees of HomeSmartUSA; (xi) no entry into any
commitment or transaction by HomeSmartUSA (including, without limitation, any
borrowing or capital expenditure) involving an amount in excess of $5,000.00;
(xii) no issuance of any capital stock, or of any other security convertible
into any of the capital stock, of HomeSmartUSA; or (xiii) any agreement to do
any of the things described in this Section 4.7.
4.8 Real Property. Exhibit G attached hereto contains a complete and
accurate legal description of each parcel of real property owned by, leased to
and/or occupied by HomeSmartUSA, and HomeSmartUSA neither owns, leases nor
occupies any other real property. The buildings and all fixtures and
improvements located on such real property are in good operating condition,
ordinary wear and tear excepted. HomeSmartUSA is not in violation of any zoning,
building or safety ordinance, regulation or requirement or other law or
regulation applicable to the operation of owned or leased properties, and
HomeSmartUSA has not received any notice of violation with which it has not
complied. HomeSmartUSA has, and on the Closing Date will have, good and
marketable title to all such real property owned by HomeSmartUSA, free and clear
of all liens, mortgages, encumbrances, easements, leases, restrictions and
claims of any kin whatsoever except for (i) those matters shown on Exhibit G,
(ii) liens for taxes for the current year and tax assessments not yet due and
payable and (iii) mechanics' or similar liens for materials or services
furnished or to be furnished after the date hereof. All leases of real property
to which HomeSmartUSA is a party and which are material to the business of
HomeSmartUSA are fully effective in accordance with their respective terms and
afford HomeSmartUSA peaceful and undisturbed possession of the subject matter of
the lease, and there exists no default on the part of HomeSmartUSA or
termination thereof, except as may be set forth on Exhibit G.
4.9 Tangible Personal Property. Exhibit G sets forth a complete list of
all items of tangible personal property owned or leased and used by HomeSmartUSA
in the current conduct of its business where the original cost was in excess of
$5,000.00. Except as set forth on Exhibit G, HomeSmartUSA has, and at the
Closing will have, good and marketable title to, and be in possession of, all
such items of personal property owned by it, free and clear of all title
defects, mortgages, pledges, security interests, conditional sales agreements,
liens, restrictions or encumbrances whatsoever. Included on Exhibit G is a list
of all outstanding equipment leases and maintenance agreements to which
HomeSmartUSA is a party as lessee and which individually provide for future
lease payments in excess of $5,000.00, with the identities of the other parties
to all such leases and agreements shown thereon. All leases of tangible personal
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property to which HomeSmartUSA is a party and which are material to the business
of HomeSmartUSA are fully effective in accordance with their respective terms,
and there exists no default on the part of HomeSmartUSA or termination thereof,
except as may be set forth on Exhibit G. Each item of capital equipment which is
used in the current conduct of HomeSmartUSA's business is, and on the Closing
Date will be, in good operating and usable condition and repair, ordinary wear
and tear excepted, and is and will be suitable for use in the ordinary course of
HomeSmartUSA's business and fit for its intended purposes, except as may be set
forth on Exhibit G.
4.10 Tax Matters. HomeSmartUSA has, since its inception, duly filed all
Federal, state, county and local tax returns required to have been filed by it
in those jurisdictions where the nature or conduct of its business requires such
filing and where the failure to so file would be materially adverse to
HomeSmartUSA. Copies of all such tax returns have been furnished to the Company
prior to the execution hereof. All Federal, state, county and local taxes,
including but not limited to those taxes due with respect to HomeSmartUSA's
properties, income, gross receipts, excise, occupation, franchise, permit,
licenses, sales, payroll and inventory due and payable as of the Closing by
HomeSmartUSA have been paid. No amount is required to be reflected in the
HomeSmartUSA Balance Sheet as a liability or reserve for taxes which are due but
not yet payable are sufficient for the payment of all accrued and unpaid taxes
of the types referred to hereinabove.
4.11 Contracts and Commitments. HomeSmartUSA has no contract, agreement,
obligation or commitment, written or verbal, express or implied, which involves
a commitment or liability in excess of $5,000.00 or for a term of more than six
months, and no union contracts, employee or consulting contracts, financing
agreements, debtor or creditor arrangements, licenses, franchise, manufacturing,
distributorship or dealership agreements, leases or bonus, health or stock
option plans, except as described on Exhibit G. True and complete copies of all
such contracts and other agreements listed on Exhibit G have been made available
to the Company prior to the execution hereof. Neither HomeSmartUSA nor the
Purchasers have any knowledge of any circumstances which would affect the
validity or enforceability of any of such contracts and other agreements in
accordance with their respective terms. HomeSmartUSA and the Purchasers have
performed and complied in all material respects with all obligations required to
be performed by them to date under, and are not in default (without giving
effect to any required notice or grace period) under, or in breach of, the
terms, conditions or provisions of any of such contracts and other agreements.
The validity and enforceability of any contract or other agreement described
herein shall not in any manner be affected by the execution and delivery of this
Agreement without any further action.
4.12 Patents, Trade Secrets and Customer Lists. HomeSmartUSA does not have
any patents, applications for patents, trademarks, applications for trademarks,
trade names, licenses or service marks relating to the business of HomeSmartUSA
except as set forth on Exhibit G hereto, nor does any present or former officer,
director or employee of HomeSmartUSA own any patent rights relating to any
products manufactured, rented or sold by HomeSmartUSA. Except as disclosed on
Exhibit G, HomeSmartUSA has the unrestricted right to use, free and clear of any
claims or rights of others, all trade secrets, customer lists and manufacturing
and secret processes reasonably necessary to the manufacture and marketing of
all products made or proposed to be made by HomeSmartUSA, and the continued use
thereof after the Closing by HomeSmartUSA and will not conflict with, infringe
upon or otherwise violate any rights of others. Except as set forth on Exhibit
G, HomeSmartUSA has not used and is not making use of any confidential
information or trade secrets of any present or past employee of HomeSmartUSA.
4.13 No Pending Material Litigation or Proceedings. Except as disclosed on
Exhibit G, there are no actions, suits or proceedings pending or threatened
against or affecting HomeSmartUSA (including actions, suits or proceedings where
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liabilities may be adequately covered by insurance) at law or in equity or
before or by any Federal, state, municipal or other governmental department,
commission, court, board, bureau, agency or instrumentality, domestic or
foreign, or affecting any of the officers or directors of HomeSmartUSA in
connection with the business, operations or affairs of HomeSmartUSA, which might
result in any adverse change in the business, properties or assets, or in the
condition (financial or otherwise) of HomeSmartUSA, or which might prevent the
sale of the HomeSmartUSA Common Shares pursuant to this Agreement. Except as
disclosed on Exhibit F HomeSmartUSA has not, since its inception on June 3,
1999, been threatened with any action suit, proceeding or claim (including
actions, suits, proceedings or claims where its liabilities may be adequately
covered by insurance) for personal injuries allegedly attributable to products
sold or services performed by HomeSmartUSA asserting a particular defect or
hazardous property in any of HomeSmartUSA's respective products, services or
business practices or methods, nor has HomeSmartUSA been a party to or
threatened with proceedings brought by or before any Federal or state agency;
and the Company has no knowledge of any defect or hazardous property claimed or
actual in any such product, service or business practice or method. HomeSmartUSA
is not subject to any voluntary or involuntary proceeding under the United
States Bankruptcy Code and has not made an assignment for the benefit of
creditors.
4.14 Insurance. HomeSmartUSA maintains insurance with reputable insurance
companies on such of HomeSmartUSA's equipment, tools, machinery, inventory and
properties as are usually insured by companies similarly situated and to the
extent customarily insured, and maintain products and personal liability
insurance, workers' compensation insurance and such other insurance against
hazards, risks and liability to persons and property as is customary for
companies similarly situated. A true and complete listing and general
description of each of HomeSmartUSA's insurance policies as currently in force
is set forth on Exhibit G hereto. All such insurance policies are, and at the
Closing shall be, in full force and effect.
4.15 Arrangements with Personnel. Except as set forth on Exhibit G hereto,
no stockholder, director, officer or employee is presently a party to any
transaction with HomeSmartUSA, including without limitation any contract, loan
or other agreement or arrangement providing for the furnishing of services by,
the rental of real or personal property from or to, or otherwise requiring loans
or payments to, any such stockholder, director, officer or employee, or to any
member of the family of any of the foregoing, or to any corporation,
partnership, trust or other entity in which any stockholder, director, officer
or employee or any member of the family of any of them has a substantial
interest or is an officer, director, trustee, partner or employee. There is set
forth on Exhibit G a list showing (i) the name, title, date and amount of last
compensation increase, and aggregate compensation, including amounts paid or
accrued pursuant to any bonus, pension, profit sharing, commission, deferred
compensation or other plans or arrangements in effect as of the date of this
Agreement, of each officer, employee, agent or contractor of HomeSmartUSA whose
salary and other compensation, in the aggregate, received from HomeSmartUSA or
accrued is at an annual rate (or aggregated for the most recently completed
fiscal year) in excess of $5,000.00, as well as any employment agreements
relating to any such persons; (ii) all powers of attorney from HomeSmartUSA to
any person or entity; (iii) the name of each person or entity authorized to
borrow money or incur or guarantee indebtedness on behalf of HomeSmartUSA; (iv)
all safes, vaults and safe deposit boxes maintained by or on behalf of
HomeSmartUSA and the names of all persons authorized to have access thereto; and
(v) all bank and savings accounts of HomeSmartUSA and the names of all persons
who are authorized signatories with respect to such accounts, the capacities in
which they are authorized and the terms of their authorizations.
4.16 Labor Relations. HomeSmartUSA has no obligations under any collective
bargaining agreement or other contract with a labor union, under any employment
contract or consulting agreement or under any executive's compensation plan,
agreement or arrangement, nor is any union, labor organization or group of
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employees of HomeSmartUSA presently seeking the right to enter into collective
bargaining with HomeSmartUSA on behalf of any of the employees of either
corporation, except as set forth on Exhibit G. HomeSmartUSA has furnished to the
Company a copy of all written personnel policies, including without limitation
vacation, severance, bonus, pension, profit sharing and commissions policies,
applicable to any of HomeSmartUSA's employees.
4.17 Compliance with Laws. To the best knowledge of HomeSmartUSA and the
Purchasers, HomeSmartUSA holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business as presently
conducted, and has complied with all applicable statutes, laws, ordinances,
rules and regulations of all governmental bodies, agencies and subdivisions
having, asserting or claiming jurisdiction over said corporations, with respect
to any part of the conduct of its businesses and corporate affairs.
4.18 Relationships with Customers and Suppliers. No present customer or
substantial supplier to HomeSmartUSA has indicated an intention to terminate or
materially and adversely alter its existing business relationship with
HomeSmartUSA, and the Purchaser has no reason to believe that any of
HomeSmartUSA's present customers or substantial suppliers intends to do so.
4.19 Brokerage. Neither the Purchasers nor HomeSmartUSA have any obligation
to any person or entity for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement,
and any person(s) having any such obligation shall indemnify and hold the other
Purchaser(s), HomeSmart.com and the Company, as appropriate, harmless against
any liability or expenses arising out of any such claim asserted against any
such person(s) by any party.
4.20 Investment Representation. Each of the Purchasers and HomeSmartUSA,
through the Purchasers, have the knowledge and experience in business and
financial matters to meaningfully evaluate the merits and risks of the purchase
and acquisition of the HomeSmart.com Common Shares in exchange and consideration
for the issuance and sale of the HomeSmartUSA Common Shares as contemplated
hereby. Each of the Purchasers and HomeSmartUSA shall conduct an independent
review of the business, assets, properties, books and records of the Company for
the purpose of satisfying themselves as to the truth, accuracy and completeness
of the representations and warranties made by the Company. Each of the
Purchasers understands and acknowledges that the HomeSmart.com Common Shares to
be issued, sold, assigned, transferred, conveyed and/or delivered to him, her or
them in the transactions contemplated hereby will be issued, sold, assigned,
transferred, conveyed and/or delivered by the Company without registration or
qualification or other filings being made under the U.S. Securities Act of 1933,
as amended, or any applicable state securities or "Blue Sky" law, in reliance
upon specific exemptions therefrom, and in furtherance thereof each of the
Purchasers represents that the HomeSmart.com Common Shares will be taken and
received by him, her or them for his, her or their own account for investment,
with no present intention of a distribution or disposition thereof to others.
Each of the Purchasers further acknowledges and agrees that the certificate(s)
representing the HomeSmart.com Common Shares issued and sold to him, her or them
shall be subject to a stop-transfer order and shall bear a restrictive legend,
in substantially the following form:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
ARE "RESTRICTED SECURITIES," AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, IS NOT REQUIRED TO BE REGISTERED UNDER
THE ACT."
4.21 Disclosure. Neither this Agreement, nor any certificate, exhibit or
other written document or statement, furnished to the Company by the Purchasers
or HomeSmartUSA in connection with the transactions contemplated by this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to be stated in order to
make the statements contained herein or therein not misleading.
ARTICLE 5
OBLIGATIONS OF THE COMPANY PRIOR TO CLOSING
-------------------------------------------
The Company hereby covenants to and agrees with HomeSmart.com and the
Purchasers that between the date hereof and the Closing:
5.1 Access to Properties and Records.
(a) The sole officer of the Company shall cause the Company to give to
HomeSmart.com, the Purchasers and their authorized representatives full access,
during reasonable business hours, in such a manner as not unduly to disrupt
normal business activities, to any and all of the premises, properties,
contracts, books, records and affairs of the Company and will cause the sole
officer of the Company to furnish any and all data and information pertaining to
the business of the Company that HomeSmart.com, the Purchasers and their
authorized representatives may from time to time reasonably require.
(b) Unless and until the transactions contemplated by this Agreement have
been consummated, HomeSmart.com, the Purchasers and their representatives shall
hold in confidence all information so obtained and if the transactions
contemplated hereby are not consummated will return all documents hereinabove
referred to and obtained. Such obligation of confidentiality shall not extend to
any information which is shown to have been previously (i) known to
HomeSmart.com or any of the Purchasers; (ii) generally known to others engaged
in the trade or business of the Company; (iii) part of public knowledge or
literature; or (iv) lawfully received by HomeSmart.com, any of the Purchasers or
their authorized representatives from a third party.
5.2 Corporate Existence, Rights and Franchises. The sole officer of the
Company shall take all necessary actions to cause the Company to maintain in
full force and effect its corporate existence, rights, franchises and good
standing. No change shall be made in the Articles of Incorporation or Bylaws of
the Company.
5.3 Conduct of Business in the Ordinary Course. The sole officer of the
Company shall not permit to be done any act which would result in the breach of
any of the covenants of the Company contained herein or which would cause the
representations and warranties of the Company contained herein to become untrue
or inaccurate as of any date subsequent to the date hereof. Without limiting the
generality of the foregoing, the sole officer of the Company shall take all
necessary actions to cause the Company to (i) operate its business diligently in
the ordinary course of business as an ongoing concern and will use his best
efforts to preserve intact the organization and operations of the Company at
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current levels; (ii) maintain the books, accounts and records of the Company in
the usual, regular and ordinary manner on a basis consistent with past practice
in recent periods;) (iii) refrain from entering into any contract, agreement,
sales order, lease, capital expenditure or other commitment of a value in excess
of $1,000.00, or from modifying, amending, canceling or terminating any of such
contracts, agreements or other commitments presently in force, except as
expressly contemplated by this Agreement, without the prior approval of
HomeSmart.com and the Purchasers (which approval shall not be unreasonably
withheld and which may be verbal to be followed by written confirmation); (iv)
refrain from paying any bonus to the sole officer and director and from
declaring or paying any dividend, or making any other distribution in respect
of, or from redeeming, the HomeSmart.com Common Shares; and (v) refrain from
issuing any capital stock of the Company or any other securities convertible
into such capital stock.
ARTICLE 6
OBLIGATIONS OF HOMESMARTUSA AND THE PURCHASERS PRIOR TO CLOSING
---------------------------------------------------------------
HomeSmartUSA and the Purchasers hereby jointly and severally covenant to
and agree with the Company that between the date hereof and the Closing:
6.1 Access to Properties and Records.
(a) The Purchasers shall cause HomeSmartUSA to give to the Company and its
authorized representatives full access, during reasonable business hours, in
such a manner as not unduly to disrupt normal business activities, to any and
all of the premises, properties, contracts, books, records and affairs of
HomeSmartUSA, and will cause the officers of HomeSmartUSA to furnish any and all
data and information pertaining to the business of HomeSmartUSA that the Company
and its authorized representatives may from time to time reasonably require.
(b) Unless and until the transactions contemplated by this Agreement have
been consummated, the Company and its representatives shall hold in confidence
all information so obtained and if the transactions contemplated hereby are not
consummated will return all documents hereinabove referred to and obtained from
HomeSmartUSA or the officers of HomeSmartUSA. Such obligation of confidentiality
shall not extend to any information which is shown to have been previously (i)
known to the Company; (ii) generally known to others engaged in the trade or
business of HomeSmartUSA; (iii) part of public knowledge or literature; or (iv)
lawfully received by the Company or its authorized representatives from a third
party.
6.2 Corporate Existence, Rights and Franchises. The Purchasers shall take
all necessary actions to cause HomeSmartUSA to maintain in full force and effect
the corporate existence, rights, franchises and good standing of HomeSmartUSA.
No change shall be made in the Articles of Incorporation, as amended, or Bylaws,
as amended, of HomeSmartUSA.
6.3 Insurance. The Purchasers shall take all necessary actions to cause
HomeSmartUSA to maintain in force all of its existing insurance policies,
subject only to variations in amounts required by the ordinary operation of
HomeSmartUSA's business.
6.4 Conduct of Business in the Ordinary Course. The Purchasers shall not
permit to be done any act which would result in the breach of any of the
covenants of the Purchasers or HomeSmartUSA contained herein or which would
cause the representations and warranties of the Purchasers or HomeSmartUSA
contained herein to become untrue or inaccurate as of any date subsequent to the
date hereof. Without limiting the generality of the foregoing, the Purchasers
shall take all necessary actions to cause HomeSmartUSA to (i) operate its
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business diligently in the ordinary course of business as an ongoing concern and
will use their best efforts to preserve intact HomeSmartUSA's organization and
operations at current levels, to retain the services of HomeSmartUSA's present
employees and to preserve HomeSmartUSA's relationships with its suppliers and
customers and others having business relationships with HomeSmartUSA; (ii)
maintain in good operating condition, ordinary wear and tear excepted, all of
HomeSmartUSA's assets and properties which are in such condition as of the date
hereof; (iii) maintain the books, accounts and records of HomeSmartUSA in the
usual, regular and ordinary manner on a basis consistent with past practice in
recent periods; (iv) refrain from entering into any contract, agreement, sales
order, lease, capital expenditure or other commitment of a value in excess of
$5,000.00 (other than purchases of raw materials and sales of inventory in the
ordinary course of business), or from modifying, amending, canceling or
terminating any of such contracts, agreements, leases or other commitments
presently in force, except as expressly contemplated by this Agreement, without
the prior approval of the Company (which approval shall not be unreasonably
withheld and which may be verbal to be followed by written confirmation); (v)
refrain from paying any bonus to any employee, officer or director and from
declaring or paying any dividend, or making any other distribution in respect
of, or from redeeming, the HomeSmartUSA Common Shares; and (vi) refrain from
issuing any capital stock of HomeSmartUSA or any other securities convertible
into such capital stock.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
--------------------------------------------
The respective obligations of the parties hereto to consummate the
transactions contemplated hereby shall be subject to the fulfillment, at or
prior to the Closing, of the following conditions:
7.1 Regulatory Approvals. There shall have been obtained any and all
permits, approvals and qualifications of, and there shall have been made or
completed all filings, proceedings and waiting periods required by, any
governmental body, agency or regulatory authority which, in the reasonable
opinion of counsel to the Company, HomeSmart.com and the Purchasers, are
required for the consummation of the transactions contemplated hereby.
7.2 No Action or Proceeding. No claim, action, suit, investigation or other
proceeding shall be pending or threatened before any court or governmental
agency which presents a substantial risk of the restraint or prohibition of the
transactions contemplated by this Agreement or the obtaining of material damages
or other relief in connection therewith.
7.3 Obligations of HomeSmart.com and the Purchasers. The obligations of
HomeSmart.com and the Purchasers hereunder to consummate the transactions
contemplated by this Agreement are expressly subject to the satisfaction of each
of the further conditions set forth below, any or all of which may be waived by
HomeSmart.com and the Purchasers, jointly and not severally, in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by HomeSmart.com or the Purchasers of any other
condition or of any of their rights or remedies, at law or in equity, if the
Company shall be in default or breach of any of its representations, warranties
or covenants under this Agreement:
(a) HomeSmart.com and the Purchasers, severally and not jointly, shall have
received copies of resolutions (certified as of the date of the Closing as being
in full force and effect by the sole officer of the Company) duly adopted by the
Board of Directors of the Company adopting and approving this Agreement, which
shall be in form and substance reasonably satisfactory to HomeSmart.com and the
Purchasers and their counsel.
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(b) The Company shall have performed the agreements and covenants required
to be performed by it under this Agreement prior to the Closing, and there shall
have been no material adverse change in the condition (financial or otherwise),
assets, liabilities, earnings or business of the Company since the date hereof,
and the representations and warranties of the Company contained herein shall,
except as contemplated or permitted by this Agreement or as qualified in a
writing dated as of the Closing Date delivered by the Company to HomeSmart.com
and the Purchasers, with the approval of HomeSmart.com and all of the Purchasers
indicated thereon (which writing is to be attached hereto as Exhibit H), be true
in all material respects on and as of the Closing Date as if made on and as of
such date, and the Purchasers shall have received certificates, dated as of the
Closing Date, signed by the President, who is also the Treasurer, of the
Company, reasonably satisfactory to the Purchasers, to such effect.
(c) The opinion letter of counsel to the Company in the form attached
hereto as Exhibit B.
7.4 Obligations of the Company. The obligations of the Company hereunder to
consummate the transactions contemplated by this Agreement are expressly subject
to the satisfaction of each of the further conditions set forth below, any or
all of which may be waived by the Company, in whole or in part without prior
notice; provided, however, that no such waiver of a condition shall constitute a
waiver by the Company of any other condition or of any of its rights or
remedies, at law or in equity, if HomeSmart.com or the Purchasers shall be in
default or breach of any of their representations, warranties or covenants under
this Agreement:
(a) The Company shall have received copies of resolutions (certified as of
the date of the Closing as being in full force and effect by the appropriate
officer of the Company) duly adopted by the Board of Directors of HomeSmart.com
adopting and approving this Agreement, which shall be in form and substance
reasonably satisfactory to the Company and its counsel.
(b) HomeSmart.com and the Purchasers shall have performed the agreements
and covenants required to be performed by them under this Agreement prior to the
Closing, and there shall have been no material adverse change in the condition
(financial or otherwise), assets, liabilities, earnings or business of
homeSmart.com since the date hereof, and the representations and warranties of
HomeSmart.com and the Purchasers contained herein shall, except as contemplated
or permitted by this Agreement or as qualified in a writing dated as of the
Closing Date delivered by Homesmart.com and the Purchasers to the Company, with
the approval of the Company indicated thereon (which writing is to be attached
hereto as Exhibit I, be true in all material respects on and as of the Closing
Date as if made on and as of such date, and the Company shall have received
certificates, dated as of the Closing Date, signed by the chief executive
officer and the chief financial officer of Homesmart.com and by each of the
Purchasers, reasonably satisfactory to the Company, to such effect.
(c) The opinion letter of counsel to the Purchasers in the form attached
hereto as Exhibit C.
ARTICLE 8
ADDITIONAL AGREEMENTS OF THE PARTIES
------------------------------------
8.1 Taxes and Expenses.
------------------
(a) Except as otherwise expressly provided in subsection (b) immediately
below, the Company, on the one hand, and HomeSmart.com and the Purchasers, on
the other hand, shall each pay all of their own respective taxes, attorneys'
fees and other costs and expenses payable in connection with or as a result of
the transactions contemplated hereby and the performance and compliance with all
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agreements and conditions contained in this Agreement respectively to be
performed or observed by each of them.
(b) The Company shall pay any and all Colorado and California taxes, if
any, which become due on account of the issuance, sale, and delivery of the
HomeSmart.com Common Shares to the Purchasers and the sale, assignment,
transfer, conveyance and delivery of the HomeSmartUSA Common Shares to the
Company.
8.2 Expiration of Representations and Warranties.
--------------------------------------------
(a) The representations and warranties of the Company contained herein and
in any other document or instrument delivered by or on behalf of the Company, as
such may be qualified in Exhibit E, shall survive the Closing and any
investigations made by or on behalf of HomeSmart.com or the Purchasers prior
thereto, and shall remain in full force and effect for a period of three (3)
years after the date of Closing (the "Company's' Warranty Period") and thereupon
expire.
(b) The representations and warranties of HomeSmart,com and the Purchasers
contained herein and in any other document or instrument delivered by or on
behalf of them, as such may be qualified in Exhibit G, shall survive the Closing
and any investigations made by or on behalf of the Company prior thereto, and
shall remain in full force and effect for a period of three (3) years after the
date of Closing (the "Purchasers' Warranty Period") and thereupon expire.
8.3 Indemnification.
---------------
(a) The Company hereby agrees to indemnify and hold the Purchasers, and
each of them, harmless with respect to any and all claims, losses, damages,
obligations, liabilities and expenses, including, without limitation, reasonable
legal and other costs and expenses of investigating and defending any actions or
threatened actions, which the Purchasers, or any of them, may incur or suffer
following the Closing by reason of any breach of any of the representations and
warranties of the Company contained herein, during the Company's Warranty Period
following the Closing during which any such representation and warranty shall
survive as provided herein, provided that the Purchasers comply with the
following indemnification procedure:
(i) One or more of the Purchasers shall give written notice to the
Company of a claim for indemnification within the Company's Warranty
Period; which notice shall set forth the amount involved in the claim for
indemnification and contain a reasonably thorough description of the facts
constituting the basis of such claim.
(ii) The Company shall have a period of thirty (30) days from the
receipt of the notice referred to above to respond to the indemnity claim
to the mutual satisfaction of the Purchasers and the Company.
(iii) If a third party claim is asserted which might result in a claim
for indemnification hereunder, all information within the Purchasers'
knowledge or control relevant and material to the defense of any such claim
shall promptly be made available to the Company and its authorized
representatives, and the Purchasers shall otherwise cooperate with the
Company in the defense of the claim. The Purchasers shall not settle or
compromise any such claim without the prior written consent of the Company
unless suit shall have been instituted against the Purchasers and the
Company shall have failed, after reasonable notice of institution of the
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suit, to take control of such suit as provided below. If the Company admits
in writing that it will be liable to the Purchasers with respect to the
full amount and as to all material elements of a third party claim alleging
damages, should the third party prevail in such suit, the Company shall
have the right to assume full control of the defense of such claim.
Otherwise, the Purchasers shall have and retain the right to control the
defense of such claim, and the Company shall be entitled to participate in
the defense of such claim only with the consent of the Purchasers.
(b) Each of the Purchasers hereby jointly and severally agrees to indemnify
and hold the Company harmless with respect to any and all claims, losses,
damages, obligations, liabilities and expenses, including, without limitation,
reasonable legal and other costs and expenses of investigating and defending any
actions or threatened actions, which the Company may incur or suffer following
the Closing by reason of any breach of any of the representations and warranties
of the Purchasers contained herein, during the Purchasers' Warranty Period
following the Closing during which any such representation and warranty shall
survive as provided herein, provided that the Company complies with the
following indemnification procedure:
(i) The Company shall give written notice to the Purchasers of a claim
for indemnification within the Purchasers' Warranty Period; which notice
shall set forth the amount involved in the claim for indemnification and
contain a reasonably thorough description of the facts constituting the
basis of such claim.
(ii) The Purchasers shall have a period of thirty (30) days from the
receipt of the notice referred to above to respond to the indemnity claim
to the mutual satisfaction of the Company and the Purchasers.
(iii) If a third party claim is asserted which might result in a claim
for indemnification hereunder, all information within the Company's
knowledge or control relevant and material to the defense of any such claim
shall promptly be made available to the Purchasers and their authorized
representatives, and the Company shall otherwise cooperate with the
Purchasers in the defense of the claim. The Company shall not settle or
compromise any such claim without the prior written consent of the
Purchasers unless suit shall have been instituted against the the Company
and the Purchasers shall have failed, after reasonable notice of
institution of the suit, to take control of such suit as provided below. If
the Purchasers admit in writing that they will be liable to the Company
with respect to the full amount and as to all material elements of a third
party claim alleging damages, should the third party prevail in such suit,
the Purchasers shall have the right to assume full control of the defense
of such claim. Otherwise, the Company shall have and retain the right to
control the defense of such claim, and the Purchasers shall be entitled to
participate in the defense of such claim only with the consent of the
Company.
ARTICLE 9
MISCELLANEOUS
-------------
9.1 Other Documents. Each of the parties hereto shall execute and deliver
such other and further documents and instruments, and take such other and
further actions, as may be reasonably requested of him, her or it for the
implementation and consummation of this Agreement and the transactions herein
contemplated.
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<PAGE>
9.2 Parties in Interest. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, and the heirs, personal representatives,
successors and assigns of all of them, but shall not confer, expressly or by
implication, any rights or remedies upon any other party.
9.3 Governing Law. This Agreement is made and shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Colorado.
9.4 Notices. All notices, requests or demands and other communications
hereunder must be in writing and shall be deemed to have been duly made if
personally delivered or mailed, postage prepaid, to the parties as follows:
(a) If to the Company, to:
HomeSmart.com, Inc.
4096 West Union Avenue
Denver, Colorado 80236
Attention: Mr. Andrew N. Peterie, Sr., President
(b) If to the Purchasers, to:
HomeSmartUSA, Inc.
2976 Alhambra Drive
Cameron Park, California 95682
Attention: Mr. John Wilson, President
Any party hereto may change his, her or its address by written notice to the
other parties given in accordance with this Section 8.4.
9.5 Entire Agreement. This Agreement and the exhibits attached hereto
contain the entire agreement between and among the parties and supersede all
prior agreements, understandings and writings between or among the parties with
respect to the subject matter hereof and thereof. Each party hereto acknowledges
that no representations, inducements, promises or agreements, verbal or
otherwise, have been made by any party, or anyone acting with authority on
behalf of any party, which are not embodied herein or in an exhibit hereto, and
that no other agreement, statement or promise may be relied upon or shall be
valid or binding. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated verbally. This Agreement may be amended or any
term hereof may be changed, waived, discharged or terminated by an agreement in
writing signed by all parties hereto.
9.6 No Equitable Conversion. Prior to the Closing, neither the execution of
this Agreement nor the performance of any provision contained herein shall cause
any party hereto to be or become liable in any respect for the operations of the
business of any other party, or the condition of property owned by any other
party, for compliance with any applicable laws, requirements or regulations of,
or taxes, assessments or other charges now or hereafter due to, any governmental
authority or for any other charges or expenses whatsoever pertaining to the
conduct of the business or the ownership, title, possession, use or occupancy of
any other party.
9.7 Headings. The captions and headings used herein are for convenience
only and shall not be construed as part of this Agreement.
9.8 Attorneys' Fees. In the event of any litigation between or among the
parties hereto, the non-prevailing party or parties shall pay the reasonable
expenses, including but not limited to the attorneys' fees, of the prevailing
party in connection therewith.
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<PAGE>
9.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which taken together shall
constitute but one and the same document.
IN WITNESS THEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date and year first above mentioned.
THE COMPANY:
HOMESMART.COM, INC.
By: /s/ Andrew N. Peterie, Sr.
---------------------------------
Andrew N. Peterie, Sr.,
President/Secretary
HOMESMARTUSA:
HOMESMARTUSA, INC.
By: /s/ John Wilson
---------------------------------
John Wilson, President
THE PURCHASERS:
By: /s/ Rico Adamo By: /s/ Tim Bolin
------------------------------ ---------------------------------
Rico Adamo Tim Bolin
By: /s/ Gordon and Joan Bourne By: /s/ John Bowen
------------------------------ --------------------------------
Gordon and Joan Bourne John Bowen
By: /s/ Jared Brandt By: /s/ William Brody
------------------------------ --------------------------------
Jared Brandt William Brody
By: /s/ Rob Burriesci By: /s/ John Coombs
------------------------------ --------------------------------
Rob Burriesci John Coombs
By: /s/ Ray Daddario By: /s/ Susan Evans
------------------------------ --------------------------------
Ray Daddario Susan Evans
By: /s/ Jamie Farrell By: /s/ Lou Getman
------------------------------ --------------------------------
Jamie Farrell Lou Getman
By: /s/ Paul Gienger By: /s/ Dina Guillen
------------------------------ --------------------------------
Paul Gienger Dina Guillen
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<PAGE>
Attached to and incorporated in that certain Stock Purchase and Exchange
Agreement dated July 16, 1999, by and among HomeSmart.com, Inc., on the one
hand, and HomeSmartUSA, Inc., and Rico Adamo, Tim Bolin, Gordon and Joan Bourne,
John Bowen, Jared Brandt, William Brody, Rob Burriesci, John Coombs, Ray
Daddario, Susan Evans, Jamie Farrell, Paul Gienger, Lou Getman, Dina Guillen,
A.L. Hamilton, Rosalie Hamilton, John Hertle, Jim Howeson, Elise Jackson, Bill
Karr, John Kuntz, Dave Leonhard, Alma Lynch, Jim Murphy, Tony Nanci, Marion
Pollard, Brent Powell, Patrick Shannahan, Linda Shuls, Linda Shuls, as trustee
for HomeSmart agents, Doug Spring, Mike Stafford, Bev Waters, Bruce Waters, Mike
Wilcox, Brandon Wilson, John Wilson, Warren Wilson and Sharon Yofan (hereinafter
referred to, collectively, as the "Purchasers"), on the other hand., on the
other hand.
By: /s/ A.L. Hamilton By: /s/ Rosalie Hamilton
------------------------------ --------------------------------
A.L. Hamilton Rosalie Hamilton
By: /s/ John Hertle By: /s/ Jim Howeson
------------------------------ --------------------------------
John Hertle Jim Howeson
By: /s/ Elise Jackson By: /s/ Bill Karr
------------------------------ --------------------------------
Elise Jackson Bill Karr
By: /s/ John Kuntz By: /s/ Dave Leonhard
------------------------------ --------------------------------
John Kuntz Dave Leonhard
By: /s/ Alma Lynch By: /s/ Jim Murphy
------------------------------ --------------------------------
Alma Lynch Jim Murphy
By: /s/ Tony Nanci By: /s/ Marion Pollard
------------------------------ --------------------------------
Tony Nanci Marion Pollard
By: /s/ Brent Powell By: /s/ Patrick Shannahan
------------------------------ --------------------------------
Brent Powell Patrick Shannahan
By: /s/ Linda Shuls By: /s/ Linda Shuls
------------------------------ --------------------------------
Linda Shuls Linda Shuls, as trustee
for HomeSmart agents
By: /s/ Doug Spring By: /s/ Mike Stafford
------------------------------ --------------------------------
Doug Spring Mike Stafford
By: /s/ Bev Waters By: /s/ Bruce Waters
------------------------------ --------------------------------
Bev Waters Bruce Waters
-21-
<PAGE>
Attached to and incorporated in that certain Stock Purchase and Exchange
Agreement dated July 16, 1999, by and among HomeSmart.com, Inc., on the one
hand, and HomeSmartUSA, Inc., and Rico Adamo, Tim Bolin, Gordon and Joan Bourne,
John Bowen, Jared Brandt, William Brody, Rob Burriesci, John Coombs, Ray
Daddario, Susan Evans, Jamie Farrell, Paul Gienger, Lou Getman, Dina Guillen,
A.L. Hamilton, Rosalie Hamilton, John Hertle, Jim Howeson, Elise Jackson, Bill
Karr, John Kuntz, Dave Leonhard, Alma Lynch, Jim Murphy, Tony Nanci, Marion
Pollard, Brent Powell, Patrick Shannahan, Linda Shuls, Linda Shuls, as trustee
for HomeSmart agents, Doug Spring, Mike Stafford, Bev Waters, Bruce Waters, Mike
Wilcox, Brandon Wilson, John Wilson, Warren Wilson and Sharon Yofan (hereinafter
referred to, collectively, as the "Purchasers"), on the other hand., on the
other hand.
By: /s/ John Wilson By: /s/ Warren Wilson
------------------------------ --------------------------------
John Wilson Warren Wilson
By: /s/ Sharon Yofan
------------------------------
Sharon Yofan
