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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1999
Commission File Number: 0-17597
ELITE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
NOT APPLICABLE
(Former name of registrant if changed since last report)
Texas 76-0252296
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3700 Crestwood Parkway, Suite 1000
Duluth, GA 30096
(Address of principal executive offices, including zip code)
(770) 381-8089
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant computed as of July 15, 1999 is $65,287,510.
The number of issued and outstanding shares of the issuer's class of capital
stock as of September 8, 1999, the latest practicable date, is as follows:
16,987,670(1) shares of Common Stock $.001 par value.
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(1) Excludes 1,250,000 shares issued to Randy Troxtel in connection with the
acquisition of Temporary Help Connection. These shares are being held in escrow
pending disposition of the Company's attempt to reverse the acquisition. (See
Legal Proceedings.)
<PAGE>
Elite Technologies, Inc. (the "Company") a Texas corporation, is filing
this Amendment No. 1 on Form 10-K/A (this "Amendment") to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1999 (the "Original
Report") in order to provide the information required by Part III of the Form
10-K (Items 10, except for Executive Officers which is included in Part I of the
Original Report, 11, 12 and 13), which information was omitted from the Original
Report as provided in General Instruction G(3) of the instructions to Form 10-K
and certain information required by Part IV of the Form 10-K. This Amendment to
the Original Report speaks as of the original date of filing of the Original
Report.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
TABLE OF DIRECTORS AND EXECUTIVE OFFICERS
The following table provides a summary of the Company's directors and executive
officers as of May 31, 1999
Name Age Position Held
Scott Schuster 35 (1),(2) Director, Chairman of the Board and CEO
David Aksoy 35 (1),(2) Director, Senior Vice President and CFO
Lee Davis 32 Director, Senior Vice President of Acquisitions
Jason Kiszonak 27 Senior Vice President of Public Relations
(1) Member of Compensation Committee
(2) Member of Audit Committee
There is no arrangement or understanding between any director or executive
officer and any other person pursuant to which he was selected as a director or
an officer. Directors hold office until the next annual meeting of shareholders
and until their successors have been elected and qualified. The executive
officers of the Company are elected at the annual meeting of the Board of
Directors and hold office until their successors have been elected and
qualified. No family relationship currently exists among any of the executive
officers and directors of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
officers and directors of the Registrant and holders of more than 10% of the
Registrant's common stock (collectively, "Reporting Persons") to file reports of
ownership and changes in ownership of such common stock with the Securities and
Exchange Commission ("SEC") and to furnish the Registrant with copies of all
such reports. Based solely on its review of the copies of such reports furnished
to the Registrant by such Reporting Persons or on the written representations of
such Reporting Persons with respect to whether any reports on Form 3 or Form 5
were required, the Registrant believes that during the year ended May 31, 1999,
Scott Schuster has not filed a Form 3 upon his election as a director and
officer of the Company, or upon becoming a ten percent beneficial owner. Mr.
Schuster has not filed a Form 4 reporting a change in beneficial ownership for
one transaction. David Aksoy has not filed a Form 3 upon his election as a
director and officer of the Company, or upon becoming a ten percent owner. Mr.
Aksoy has not filed a Form 4 reporting a change in beneficial ownership for one
transaction. Neither Jason Kiszonak nor Lee Davis have filed Form 3's reporting
their election as directors and officers of the Company.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth certain information regarding compensation
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awarded or paid to, or earned by, each of the following persons during each of
the last three fiscal years: (i) the person who served as the Registrant's Chief
Executive Officer during the fiscal year ended May 31, 1999 ("Fiscal 1999") and
(ii) the Registrant's Senior Vice President of Public Relations (collectively,
the "Named Officers").
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation
Name
and
Principal
Position Year Salary ($)
-------- ---- ----------
Scott Schuster 1999 $250,000
(Chairman of the
Board and CEO)
Jason Kiszonak 1999 $125,000
(Senior Vice
President of
Public Relations)
No other officer or director received compensation in excess of $100,000
for the fiscal year ended May 31, 1999. No officer or director received
compensation in excess of $100,000 for the fiscal year ended May 31, 1998 or for
the fiscal year end May 31, 1997, nor was the Company obligated to pay any
officer or director compensation in excess of $100,000 per year. No member of
the Board of Directors has received or is entitled to receive compensation for
attendance at Board of Directors meetings nor has any officer received any
compensation in such capacity since inception.
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Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End at FY-End ($)
Shares
Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
---- ------------ ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Scott Schuster --- --- 0/2,000,000 0/10,760,000
Jason Kiszonak --- --- 0/250,000 0/1,345,000
</TABLE>
<PAGE>
Description of Employment Agreements
Scott Schuster and Jason Kiszonak perform their duties according to a
standard Employment Agreement (the "Agreement"). The Agreement provides for a
fixed three year term renewable or terminable according to evaluation by the
Employment Committee of the Board of Directors. A base compensation is paid on a
weekly or bi-weekly basis plus bonuses not to exceed three percent of the
adjusted net profit, which is paid after the Company's fiscal year-end, at May
31. In addition, stock options are offered as an incentive and are available at
$0.10 per share and fully vest and become exercisable during the second year of
employment, on the 31st of August, or on the 12- month anniversary of such
officer or directors start date, whichever is later. Depending on the position
held by the officer or director, low interest loans and automobile allowances
are also made available. Standard employment provisions of insurance, sick
leave, vacation time and deferred retirement compensation are described in the
Agreement. All compensation and benefits made available to the officer are
subject to his or her continuous satisfactory performance of job duties and
responsibilities.
Directors' Fees
The Company's non-employee directors currently receive no compensation for
service on the Company's Board of Directors or any committee thereof.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between the Company's Board of
Directors or Compensation Committee and the Board of Directors of compensation
committee of any other company, nor has such interlocking relationship existed
in the past. The Compensation Committee currently consists of Scott Schuster and
David Aksoy.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 31, 1999, the number of shares
of Common Stock owned of record or beneficially by (i) each director of the
Company, (ii) by each executive officer of the Company listed in the Summary
Compensation Table above, (iii) by all such executive officers and directors of
the Company as a group, which amount includes the number of shares which each
such person may have the right to acquire within sixty days after such date upon
exercise of stock options, and (iv) by each holder of 5% or greater of the
Company's common stock. The footnotes reflect the ownership by such persons of
each class of equity securities of certain entities some or all of which may be
deemed to be "subsidiaries" of the Registrant within the meaning of the federal
securities laws.
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NAME OF NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER OF COMMON STOCK CLASS (1)
---------------------------------- ---------------- -------------
Scott Schuster 2,353,750 13.86%
3700 Crestwood Pkwy
Suite 1000
Duluth, GA 30096
David Aksoy 2,681,250 15.78%
3700 Crestwood Pkwy
Suite 1000
Duluth, GA 30096
Lee Davis 450,000 2.65%
Jason Kiszonak 350,000 2.06%
All directors and executive officers 5,835,000 34.35%
as a group (4 persons)
(1) Based on 16,987,670 shares of Common Stock issued and outstanding on
September 8, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Notes Receivable from Officers
The Company has made loans to Scott Schuster in the total amount of $215,583.
These loans are evidenced by a promissory note payable in not more than 60
monthly principal and interest installments starting with the first day of the
month following the month in which the loan is made, with interest at the rate
of 3% per year on the unpaid balance of the loan outstanding. In the event of
default of any installment of principal and interest when due, the entire
balance of principal and accrued interest becomes payable on demand. As of May
31, 1999, no repayments have been made on these loans and, accordingly, notes
receivable from officers were classified as current assets.
(b) Advances
As of May 31, 1998, Scott Schuster had advanced $22,073 to the Company to fund
operations. These advances were repaid during the year ended May 31, 1999
without interest.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
3. Exhibits
Exhibit
Number Description
- ------- -----------
2.4 Agreement dated November 5, 1998 by and between Scott Schuster and
Scanlan Music, Inc.
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2.4.1 Assignment Agreement dated November 9, 1998 by and between Scott
Schuster and CONCAP, Inc.
2.5 Agreement dated April 1, 1999 by and between CONCAP, Inc. and
Virtual Enterprise, Inc.
10.1 Employment Agreement dated July 15, 1998 by and between CONCAP, Inc.
and Scott Schuster
10.2 Employment Agreement dated March 15, 1999 by and between CONCAP,
Inc. and Jason Kiszonak
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
ELITE TECHNOLOGIES, INC.
(Registrant)
/s/ Scott Schuster
--------------------------
Scott Schuster
Chief Executive Officer
Date: September 28, 1999
STOCK PURCHASE AGREEMENT
MADE AS OF
NOVEMBER 5, 1998,
BETWEEN
SCOTT A. SCHUSTER,
BUYER,
AND
SCANLAN MUSIC, INC.
SELLER
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TABLE OF CONTENTS
Page
----
1. DEFINITIONS. 1
1.1. "APPLICABLE CONTRACT" 1
1.2. "BEST EFFORTS" 1
1.3. "BREACH" 1
1.4. "BUYER" 1
1.5. "CLOSING" 1
1.6. "CLOSING DATE" 1
1.7. "CONSENT" 2
1.8. "CONTEMPLATED TRANSACTIONS" 2
1.9. "CONTRACT" 2
1.10. "DAMAGES" 2
1.11. "DISCLOSURE SCHEDULE" 2
1.12. "ENCUMBRANCE" 2
1.13. "ENVIRONMENTAL REQUIREMENTS" 2
1.14. "ERISA" 2
1.15. "FACILITIES" 3
1.16. "GAAP" 3
1.17. "GOVERNMENTAL AUTHORIZATION" 3
1.18. "GOVERNMENTAL BODY" 3
1.19. "IRC" 3
1.20. "IRS" 3
1.21. "KNOWLEDGE" 3
1.22. "LEGAL REQUIREMENT" 4
1.23. "OPERATING INCOME" 4
1.24. "ORDER" 4
1.25. "ORDINARY COURSE OF BUSINESS" 4
1.26. "ORGANIZATIONAL DOCUMENTS" 4
1.27. "PERSON" 5
1.28. "PLAN" 5
1.29. "PROCEEDING" 5
1.30. "RELATED PERSON" 5
1.31. "REPRESENTATIVE" 6
1.32. "SECURITIES ACT" 6
1.33. "SELLER" 6
1.34. "SHARES" 6
1.35. "SUBSIDIARY" 6
1.36. "TAX RETURN" 6
1.37. "THREATENED" 6
2. TRANSFER OF SHARES; REIMBURSEMENT AMOUNT; CLOSING. 6
2.1. SHARES. 6
2.2. CLOSING. 6
2.3. CLOSING OBLIGATIONS. 7
3. REPRESENTATIONS AND WARRANTIES OF SELLER. 7
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3.1. ORGANIZATION AND GOOD STANDING. 7
3.2. AUTHORITY; NO CONFLICT. 8
3.3. CAPITALIZATION. 9
3.4. FINANCIAL STATEMENTS. 9
3.5. BOOKS AND RECORDS. 9
3.6. TITLE TO PROPERTIES; ENCUMBRANCES. 10
3.7. NO UNDISCLOSED LIABILITIES. 10
3.8. TAXES. 10
3.9. NO MATERIAL ADVERSE CHANGE. 11
3.10. EMPLOYEE BENEFITS MATTERS. 11
3.11. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS. 12
3.12. LEGAL PROCEEDINGS; ORDERS. 13
3.13. ABSENCE OF CERTAIN CHANGES AND EVENTS. 14
3.14. CONTRACTS; NO DEFAULTS. 15
3.15. INSURANCE. 16
3.16. ENVIRONMENTAL MATTERS. 17
3.17. EMPLOYEE MATTERS. 17
3.18. INTELLECTUAL PROPERTY RIGHTS OF SELLER. 18
3.19. CERTAIN PAYMENTS. 18
3.20. DISCLOSURE. 18
3.21. BROKERS OR FINDERS. 18
3.22. FAIRNESS OPINION. 19
4. REPRESENTATIONS AND WARRANTIES OF BUYER. 19
4.1. ORGANIZATION AND GOOD STANDING. 19
4.2. AUTHORITY. 19
4.3. INVESTMENT INTENT. 19
4.4. CERTAIN PROCEEDINGS. 19
4.5. BROKERS OR FINDERS. 19
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE. 19
5.1. ACCESS AND INVESTIGATION. 19
5.2. OPERATION OF THE BUSINESS OF SELLER. 20
5.3. NEGATIVE COVENANT. 20
5.4. REQUIRED APPROVALS. 20
5.5. NOTIFICATION. 20
5.6. NO NEGOTIATION. 21
5.7. CLOSING OF BANK ACCOUNTS. 21
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE. 21
6.1. APPROVALS OF GOVERNMENTAL BODIES/THIRD PARTY CONSENTS. 21
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. 21
7.1. ACCURACY OF REPRESENTATIONS. 21
7.2. SELLER'S PERFORMANCE. 22
7.3. CONSENTS. 22
7.4. ADDITIONAL DOCUMENTS. 22
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7.5. NO PROCEEDINGS. 22
7.6. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. 22
7.7. NO PROHIBITION. 22
7.8. EMPLOYMENT AGREEMENT. 23
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. 23
8.1. ACCURACY OF REPRESENTATIONS. 23
8.2. BUYER'S PERFORMANCE. 23
8.3. CONSENTS. 23
8.4. ADDITIONAL DOCUMENTS. 23
8.5. NO INJUNCTION. 23
9. TERMINATION. 23
9.1. TERMINATION EVENTS. 23
9.2. EFFECT OF TERMINATION. 24
10. INDEMNIFICATION; REMEDIES. 24
10.1. AGREEMENT BY SELLER TO INDEMNIFY. 24
10.2. AGREEMENTS BY BUYER TO INDEMNIFY. 25
10.3. MATTERS INVOLVING THIRD PARTIES. 26
11. POST-CLOSING AGREEMENTS. 27
11.1. CONSISTENCY IN REPORTING. 27
12. GENERAL PROVISIONS. 27
12.1. EXPENSES. 27
12.2. PUBLIC ANNOUNCEMENTS. 28
12.3. CONFIDENTIALITY. 28
12.4. NOTICES. 28
12.5. JURISDICTION; SERVICE OF PROCESS. 29
12.6. FURTHER ASSURANCES. 29
12.7. WAIVER. 29
12.8. ENTIRE AGREEMENT AND MODIFICATION. 30
12.9. DISCLOSURE SCHEDULE. 30
12.10. ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS. 30
12.11. SEVERABILITY. 30
12.12. SECTION HEADINGS; CONSTRUCTION. 31
12.13. TIME OF ESSENCE. 31
12.14. GOVERNING LAW. 31
12.15. COUNTERPARTS. 31
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<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of November 5,
1998, by Scott Schuster, an individual, ("Buyer"), and Scanlan Music, Inc., a
Michigan company ("Seller").
RECITALS:
Seller desire to sell, and Buyer desires to purchase, all of the issued
and outstanding shares (the "Shares") of capital stock of Seller, for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.:
1.1. "Applicable Contract" - any Contract (i) under which Seller has or
may acquire any rights; (ii) under which Seller has or may become subject to
any obligation or liability or (iii) by which Seller or any of the assets owned
or used by it is or may become bound.
1.2. "Best Efforts" - the efforts that a prudent Person desirous of
achieving a result would reasonably use in similar circumstances to ensure that
such result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation to take actions that would result in a materially
adverse change in the benefits to such Person of this Agreement and the
Contemplated Transactions.
1.3. "Breach" - a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (i) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision or
(ii) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence or circumstance.
1.4. "Buyer" - as defined in the first paragraph of this Agreement.
1.5. "Closing" - as defined in Section 2.4.
1.6. "Closing Date" - the date and time as of which the Closing actually
takes place.
<PAGE>
1.7. "Consent" - any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
1.8. "Contemplated Transactions" - all of the transactions contemplated by
this Agreement, including:
A. The transfer of the Shares by Seller to Buyer;
B. The execution, delivery, and performance of the Closing Obligations set
forth in Section 2.5;
C. The performance by Buyer and Seller of their respective covenants and
obligations under this Agreement;
D. Buyer's acquisition and ownership of the Shares and exercise of control
over the Seller; and
E. The transfer of Buyer's Stock to Seller; and
F. Payment by Buyer to Seller of the Reimbursement Amount.
1.9. "Contract" - any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
1.10. "Damages" - any loss, liability, claim, damages (including, without
limitation, incidental and consequential damages), expense (including, without
limitation, costs of investigation and defense and reasonable attorneys' fees)
or diminution of value, whether or not involving a third party.
1.11. "Disclosure Schedule" - the disclosure schedule delivered by Seller
to Buyer concurrently with the execution and delivery of this Agreement.
1.12. "Encumbrance" - any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
1.13. "Environmental Requirements" - means federal, state and local laws
relating to pollution or protection of the environment, including laws or
provisions relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials, substances, or wastes
into air, surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials, substances, or wastes.
1.14. "ERISA" - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
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1.15. "Facilities" - any real property, leaseholds, or other interests
currently or formerly owned or operated by Seller and any buildings, plants,
structures, or equipment (including motor vehicles) currently or formerly owned
or operated by Seller.
1.16. "GAAP" - generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the financial statements
referred to in Section 3.4. were prepared.
1.17. "Governmental Authorization" - any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
1.18. "Governmental Body" - any:
A. Nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
B. Federal, state, local, municipal, foreign, or other government;
C. Governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
D. Multi-national organization or body; or
E. Body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
1.19. "IRC" - the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
1.20. "IRS" - the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
1.21. "Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
A. Such individual is actually aware of such fact or other matter; or
B. A prudent individual given his position with Seller could be expected
to discover or otherwise become aware of such fact or other matter.
C. A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer within the last five (5) years,
partner, executor, or trustee of such Person (or in any similar capacity) has,
or at any time had, Knowledge of such fact or other matter.
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1.22. "Legal Requirement" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
1.23. "Operating Income" - means the net income of Seller determined in
accordance with GAAP before income taxes and after all other charges except:
A. Unless otherwise approved by Buyer, any general and administrative
expense (i.e., allocation of Seller's general corporate overhead) attributable
to the Seller and all subsidiaries of Seller that is not directly related to the
operation of Seller in the Ordinary Course of Business; provided, however,
Operating Income shall include reimbursement by Seller of expenses at a fair
market price mutually agreed to by Buyer and Seller for expenses previously
incurred by Seller, but that have for administrative convenience or efficiency
reasons been centralized with Buyer; and
B. Any amortization of goodwill of Seller and all Subsidiaries of Seller.
C. In the event that certain expenses incurred by the Seller are for the
principal or partial benefit of Seller or other subsidiaries of Seller, then the
parties hereto shall endeavor to track and determine in a fair and equitable
manner that portion of such expenses that should fairly and reasonably be
allocated to Seller or such other subsidiaries of Seller, and therefore not
included in arriving at Operating Income for purposes of this Agreement.
1.24. "Order" - any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
1.25. "Ordinary Course of Business" - an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
A. Such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
B. Such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority); and
C. Such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line of
business as such Person.
1.26. "Organizational Documents" - (i) the Articles or Certificate of
Incorporation and the Bylaws of a corporation; (ii) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person and (iii) any amendment to any of the foregoing.
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1.27. "Person" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
1.28. "Plan" - as defined in Section 3.10.1.
1.29. "Proceeding" - any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
1.30. "Related Person" - with respect to a particular individual:
A. Each other member of such individual's Family;
B. Any Person that is directly or indirectly controlled by such individual
or one (1) or more members of such individual's Family;
C. Any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
D. Any Person with respect to which such individual or one (1) or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
A. Any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
B. Any Person that holds a Material Interest in such specified Person;
C. Each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
D. Any Person in which such specified Person holds a Material Interest;
E. Any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
Any Related Person of any individual described in clause B. or C.
For purposes of this definition, (i) the "Family" of an individual
includes (1) the individual; (2) the individual's spouse and former spouses; (3)
any other natural person who is related to the individual or the individual's
spouse within the second degree and (4) any other natural person who resides
with such individual and (2) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of voting securities or other voting interests representing at least
[five percent (5%)] of the
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outstanding voting power of a Person or equity securities or other equity
interests representing at least [five percent (5%)] of the outstanding equity
securities or equity interests in a Person.
1.31. "Representative" - with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
1.32. "Securities Act" - the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
1.33. "Seller" - as defined in the first paragraph of this Agreement.
1.34. "Shares" - as defined in the Recitals of this Agreement.
1.35. "Subsidiary" - with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one (1) or more of its
Subsidiaries; [when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of Seller].
1.36. "Tax Return" - any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
1.37. "Threatened" - a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
2. TRANSFER OF SHARES; REIMBURSEMENT AMOUNT; CLOSING.
2.1. Shares. In exchange for the execution of a Promissory Note, as set
forth in Section 2.2, and subject to the terms and conditions of this Agreement,
at the Closing, Seller will transfer the Shares of Seller to Buyer.
2.2. Closing. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Morris, Manning & Martin, L.L.P., at
1600 Atlanta Financial Center, 3343 Peachtree Road, N.E., Atlanta, Georgia
30326, at 10:00 a.m. (local time) on November 15, 1998, or at such other time
and place as the parties may agree. Except as otherwise provided in Section 9.,
failure to consummate the purchase and sale provided for in
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this Agreement on the date and time and at the place determined pursuant to this
Section 2.3. will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.3. Closing Obligations. At the Closing:
A. Seller will deliver to Buyer:
(i) Certificates. Certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers) for transfer to Buyer;
(ii) Good Standing Certificate. Seller shall have delivered to
Buyer a certificate evidencing the good standing of Seller as of a recent
practicable date;
(iii) Certificate. A certificate substantially in the form of
Exhibit B hereto, executed by Seller representing and warranting to Buyer that
each of Seller's representations and warranties in this Agreement was accurate
in all respects as of the date of this Agreement and is accurate in all respects
as of the Closing Date as if made on the Closing Date (giving full effect to any
supplements to the Disclosure Schedule that were delivered by Seller to Buyer
prior to the Closing Date in accordance with Section 5.5.); and
(v) Mutual Release. Seller shall have delivered to Buyer a
mutual release, executed by Seller, substantially in the form of Exhibit C
B. Buyer will deliver to Seller:
(i) Note. A Promissory Note in an amount equal to thirty five
thousand dollars ($35,000.00), due on the first date each month. The monthly
payment of said note shall be in the amount of Two Thousand Nine Hundred Sixteen
& 66/100 Dollars ($2,916.66).
(ii) Certificate. A certificate in the form of Exhibit D
hereto executed by Buyer to the effect that, except as otherwise stated in such
certificate, each of Buyer's representations and warranties in this Agreement
was accurate in all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing Date; and
(iii) Mutual Release. Buyer shall have delivered to Seller a
Mutual Release, executed by Buyer, substantially in the form of Exhibit C.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer as follows:
3.1. Organization and Good Standing.
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A. Schedule 3.1 of the Disclosure Schedule contains a complete and
accurate list of Seller's name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each).
Seller is a corporation duly organized, validly existing, and in
good standing under the laws of Michigan, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts.
B. Seller has delivered to Buyer copies of the Organizational
Documents of Seller, as currently in effect.
3.2. Authority; No Conflict.
A. This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
Upon the execution and delivery by Seller of the closing documents set forth in
Section 2.4A (collectively, the "Seller's Closing Documents"), the Seller's
Closing Documents will constitute the legal, valid, and binding obligations of
Seller, enforceable against Seller in accordance with their respective terms.
Seller has the absolute and unrestricted right, power, authority,
and capacity to execute and deliver this Agreement and the Seller's Closing
Documents and to perform his obligations under this Agreement and the Seller's
Closing Documents.
B. Except as set forth in Schedule 3.2 of the Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) Contravene, conflict with, or result in a violation of (1)
any provision of the Organizational Documents of Seller or (2) any resolution
adopted by the board of directors or the stockholders of Seller;
(ii) Contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which Seller or Seller, or any of the
assets owned or used by Seller, may be subject;
(iii) Contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Seller or that otherwise relates to the business
of, or any of the assets owned or used by, Seller;
(iv) Cause Buyer or Seller to become subject to, or to become
liable for the payment of, any Tax;
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(v) Cause any of the assets owned by Seller to be reassessed
or revalued by any taxing authority or other Governmental Body;
(vi) Contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(vii) Result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by Seller.
Except as set forth in Schedule 3.2 of the Disclosure Schedule, Seller nor
Seller is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
3.3. Capitalization. The authorized equity securities of Seller consist of
50,000 shares of common stock, $1.00 par value per share, of which 50,000 shares
are issued and outstanding and constitute the Shares.
Seller is and will be on the Closing Date the record and beneficial owners
and holders of the Shares, free and clear of all Encumbrances.
With the exception of the Shares (which are owned by Seller), all of the
outstanding equity securities and other securities of Seller are owned of record
and beneficially by Seller, free and clear of all Encumbrances. No legend or
other reference to any purported Encumbrance appears upon any certificate
representing equity securities of Seller.
All of the outstanding equity securities of Seller have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of Seller, including, but not limited to, stock options,
warrants, convertible securities, redemption rights, registration rights and the
like.
None of the outstanding equity securities or other securities of Seller
was issued in violation of the Securities Act or any other Legal Requirement.
Seller does not own, nor does it have any Contract to acquire, any equity
securities or other securities of any Person (other than Seller) or any direct
or indirect equity or ownership interest in any other business.
3.4. Financial Statements. Seller has delivered to Buyer, as set forth on
Schedule 3.4:
A. In lieu of finanical statements of the Seller, Buyer shall accept tax
returns for fiscal year end June 30, 1998.
3.5. Books and Records. The books of account, minute books, stock record
books, and other records of Seller, all of which have been made available to
Buyer, are complete and correct and have been maintained in accordance with
sound business practices.
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The minute books of Seller contain accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of Seller, and no meeting
of any such stockholders, Board of Directors, or committee has been held for and
no material action has been taken at any meeting for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of Seller.
3.6. Title to Properties; Encumbrances. Seller owns (with good and
marketable title in the case of real property, subject only to the Encumbrances
permitted by this Section) all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that they purport to own
located in the facilities owned or operated by Seller or reflected as owned in
the books and records of Seller, including all of the properties and assets
reflected in the Closing Date Financial Statements (except for assets held under
capitalized leases disclosed or not required to be disclosed in Schedule 3.6 of
the Disclosure Schedule).
A. Mortgage is current and not in default
B. Liens for current taxes not yet due; and
C. With respect to real property:
(i) Minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of Seller; and
(ii) Zoning laws and other land use restrictions that do not
impair the present or anticipated use of the property subject thereto.
All property and assets of the Seller shall be in the possession and
control of Seller at Closing, including but not limited to, all Facilities owned
and not leased.
3.7. No Undisclosed Liabilities. Except as set forth in Schedule 3.7 of
the Disclosure Schedule, Seller has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Closing Date Financial Statements and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
3.8. Taxes. Except as set forth on Schedule 3.8 to the Disclosure
Schedule, Seller has timely filed all tax returns and reports required to be
filed by it, including, without limitation, all federal, state and local tax
returns, and has paid in full or made adequate provision by the establishment of
reserves for all taxes and other charges which have become due or which are
attributable to the conduct of Seller's business prior to Closing. Seller will
continue to make adequate provision for all such taxes and other charges for all
periods through the Closing Date.
Except as set forth on Schedule 3.8 to the Disclosure Schedule, Seller
have no Knowledge of any tax deficiency proposed or threatened against Seller.
There are no tax liens upon any property or assets of Seller.
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Except as set forth on Schedule 3.8 to the Disclosure Schedule, Seller has
made all payments of estimated taxes when due in amounts sufficient to avoid the
imposition of any penalty.
Except as set forth on Schedule 3.8 to the Disclosure Schedule, all taxes
and other assessments and levies which Seller was required by law to withhold or
to collect have been duly withheld and collected, and have been paid over to the
proper governmental entity.
Except as set forth in Schedule 3.8 to the Disclosure Schedule, the
federal and state income tax returns and local returns, if any, of Seller have
never been audited by the income tax authorities, nor are any such audits in
process. Except as set forth in Schedule 3.8, to the Disclosure Schedule there
are no outstanding agreements or waivers extending the statute of limitations
applicable to any federal or state income tax returns of Seller for any period.
3.9. No Material Adverse Change. Since December 27, 1993, there has not
been any material adverse change in the business, operations, properties,
prospects, assets, or condition of Seller, and no event has occurred or
circumstance exists that may result in such a material adverse change.
3.10. Employee Benefits Matters.
3.10.1 Schedule 3.10.1 lists all plans, programs, and similar
agreements, commitments or arrangements, whether oral or written, maintained by
or on behalf of Seller or any other party that provide benefits or compensation
to, or for the benefit of, current or former employees of Seller ("Plan" or
"Plans"). Except as set forth on Schedule 3.10.1 to the Disclosure Schedule only
current and former employees of Seller participate in the Plans. Copies of all
Plans and, to the extent applicable, all related trust agreements, actuarial
reports, and valuations for the most recent year, all summary plan descriptions,
prospectuses, Annual Report Form 5500s or similar forms (and attachments
thereto) for the most recent year, all Internal Revenue Service determination
letters, and any related documents requested by Buyer, including all amendments,
modifications and supplements thereto, have been delivered to Buyer, and all of
the same are or will be true, correct and complete.
3.10.2 With respect to each Plan to the extent applicable:
A. No litigation or administrative or other proceeding is
pending or threatened involving such Plan;
B. To the Knowledge of Seller, such Plan has been administered
and operated in substantial compliance with, and has been amended to comply with
all applicable laws, rules, and regulations, including, without limitation,
ERISA, the Internal Revenue Code, and the regulations issued under ERISA and the
Internal Revenue Code;
C. Seller and its predecessors, if any, have made and as of
the Closing Date will have made or accrued, all payments and contributions
required, or reasonably expected to be required, to be made under the provisions
of such Plan or required to be made under
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applicable laws, rules and regulations, with respect to any period following,
such amounts to be determined using the ongoing actuarial and funding
assumptions of the Plan;
D. Such Plan is fully funded in an amount sufficient to pay
all liabilities accrued (including liabilities and obligations for health care,
life insurance and other benefits after termination of employment) and claims
incurred to the date hereof;
E. On the Closing Date such Plan will be fully funded in an
amount sufficient to pay all liabilities accrued (including liabilities and
obligations for health care, life insurance and other benefits after termination
of employment) and claims incurred to the Closing Date, or adequate reserves
will be set up on Seller's books and records, or paid-up insurance will be
provided, therefor; and
F. Such Plan has been administrated and operated only in the
ordinary and usual course and in accordance with its terms, and there has not
been in the year prior hereto any increase in the liabilities of such Plan
beyond increases typically experienced by employers similar to Seller.
3.11. Compliance With Legal Requirements; Governmental Authorizations.
A. Except as set forth in Schedule 3.11 of the Disclosure Schedule:
(i) Seller is, and at all times since December 27, 1993, has
been, in full compliance with each Legal Requirement that is or was applicable
to it or to the conduct or operation of its business or the ownership or use of
any of its assets;
(ii) No event has occurred or circumstance exists that (with
or without notice or lapse of time) (1) may constitute or result in a violation
by Seller of, or a failure on the part of Seller to comply with, any Legal
Requirement or (2) may give rise to any obligation on the part of Seller to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature; and
(iii) Seller has not received, at any time since December 27,
1993, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (1) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement or (2) any actual, alleged, possible, or potential obligation on the
part of Seller to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
B. Schedule 3.11 Except as set forth in Schedule 3.11 of the
Disclosure Schedule:
(i) Seller is, and at all times since December 27, 1993, has
been, in full compliance with all of the terms and requirements of any
applicable Governmental Authorization;
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(ii) No event has occurred or circumstance exists that may
(with or without notice or lapse of time) (1) constitute or result directly or
indirectly in a violation of or a failure to comply with any tern or requirement
of any applicable Governmental Authorization or (2) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any applicable Governmental
Authorization;
(iii) Seller has not received, at any time since December 27,
1993, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (1) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization or (2) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) All applications required to have been filed for the
renewal of the Governmental Authorizations have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Seller has obtained any Governmental Authorizations necessary to
permit Seller to lawfully conduct and operate their businesses in the manner
they currently conduct and operate such businesses and to permit Seller to own
and use their assets in the manner in which they currently own and use such
assets.
3.12. Legal Proceedings; Orders.
A. Except as set forth in Schedule 3.12 of the Disclosure Schedule,
there is no pending Proceeding:
(i) That has been commenced by or against Seller or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, Seller; or
(ii) That challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Seller, (i) no such Proceeding has been Threatened and
(ii) no event has occurred or circumstance exists that may give rise to or serve
as a basis for the commencement of any such Proceeding. Seller have delivered to
Buyer copies of all pleadings, correspondence, and other documents relating to
each Proceeding listed in Schedule 3.12 of the Disclosure Schedule. The
Proceedings listed in Schedule 3.12 of the Disclosure Schedule will not have a
material adverse effect on the business, operations, assets, condition, or
prospects of Seller.
B. Except as set forth in Schedule 3.12 of the Disclosure Schedule:
(i) There is no Order to which any of Seller, or any of the
assets owned or used by Seller, is subject;
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(ii) Seller is not subject to any Order that relates to the
business of, or any of the assets owned or used by, Seller; and
(iii) No officer, director, agent, or employee of Seller is
subject to any Order that prohibits such officer, director, agent, or employee
from engaging in or continuing any conduct, activity, or practice relating to
the business of Seller.
C. Except as set forth in Schedule 3.12 of the Disclosure Schedule:
(i) Seller is, and at all times since December 27, 1993, has
been, in full compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been subject;
(ii) No event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which Seller,
or any of the assets owned or used by Seller, is subject; and
(iii) Seller has not received, at any time since December 27,
1993, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which Seller, or any of the assets owned or used by Seller, is or
has been subject.
3.13. Absence of Certain Changes and Events. Except as set forth in
Schedule 3.13 of the Disclosure Schedule, since December 27, 1993, Seller has
conducted its business only in the Ordinary Course of Business and there has not
been any:
A. Change in Seller's authorized or issued capital stock; grant of
any stock option or right to purchase shares of capital stock of Seller;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
Seller of any shares of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of shares of capital stock;
B. Amendment to the Organizational Documents of Seller;
C. Payment or increase by Seller of any bonuses, salaries, or other
compensation to any stockholder, director, officer, or (except in the Ordinary
Course of Business) employee or entry into any employment, severance, or similar
Contract with any director, officer, or employee;
D. Adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of Seller;
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E. Damage to or destruction or loss of any asset or property of
Seller, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of Seller,
taken as a whole;
F. Entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement or (ii) any Contract or transaction
involving a total remaining commitment by or to Seller of at least Five Thousand
and No/l00 Dollars ($5,000.00);
G. Sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of Seller or
mortgage, pledge, or imposition of any lien or other encumbrance on any material
asset or property of Seller, including the sale, lease, or other disposition of
any of the Software and Intangibles;
H. Cancellation or waiver of any claims or rights with a value to
Seller in excess of Five Thousand and No/100 Dollars ($5,000.00);
I. Material change in the accounting methods used by Seller; or
J. Agreement, whether oral or written, by Seller to do any of the
foregoing.
3.14. Contracts; No Defaults.
A. Except as set forth in Schedule 3.17(A) of the Disclosure
Schedule:
(i) Seller (and no Related Person of Seller) has not or may
not acquire any rights under, and Seller has not or may not become subject to
any obligation or liability under, any Contract that relates to the business of,
or any of the assets owned or used by, Seller; and
(ii) To the Knowledge of Seller, no officer, director, agent,
employee, consultant, or contractor of Seller is bound by any Contract that
purports to limit the ability of such officer, director, agent, employee,
consultant, or contractor to (1) engage in or continue any conduct, activity, or
practice relating to the business of Seller or (2) assign to Seller or to any
other Person any rights to any invention, improvement, or discovery.
B. Except as set forth in Schedule 3.17(B) of the Disclosure
Schedule, each material Contract is in full force and effect and is valid and
enforceable in accordance with its terms.
C. Except as set forth in Schedule 3.17(C) of the Disclosure
Schedule:
(i) Seller is, and at all times since December 27, 1993, has
been, in full compliance with all applicable terms and requirements of each
Contract under which such Seller has or had any obligation or liability or by
which such Seller or any of the assets owned or used by such Seller is or was
bound;
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(ii) Each other Person that has or had any obligation or
liability under any Contract under which Seller has or had any rights is, and at
all times since December 27, 1993, has been, in full compliance with all
applicable terms and requirements of such Contract;
(iii) No event has occurred or circumstance exists that (with
or without notice or lapse of time) may contravene, conflict with, or result in
a violation or breach of, or give Seller or other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; and
(iv) Seller has not given to or received from any other
Person, at any time since December 27, 1993, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
F. There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to Seller
under current or completed Contracts with any Person and no such Person has made
written demand for such renegotiation.
G. The Contracts relating to the sale, design, manufacture, or
provision of products or services by Seller have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
3.15. Insurance.
A. Seller have delivered to Buyer:
(i) True and complete copies of all policies of insurance to
which Seller is a party or under which Seller, or any director of Seller, is or
has been covered at any time within the two (2) years preceding the date of this
Agreement;
(ii) True and complete copies of all pending applications for
policies of insurance; and
(iii) Any statement by the auditor of Seller's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
B. Except as set forth on Schedule 3.15(B) of the Disclosure
Schedule:
(i) All policies to which Seller is a party or that provide
coverage to Seller, Seller, or any director or officer of an Seller:
(1) Are valid, outstanding, and enforceable;
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(2) Taken together in the reasonable judgment of Seller,
provide adequate insurance coverage for the assets and the operations of Seller
for all risks to which Seller are normally exposed;
(3) Are sufficient for compliance with all Legal
Requirements and Contracts to which Seller is a party or by which it is bound;
(4) Will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(5) Do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of Seller.
(ii) Neither Seller nor Seller has received (1) any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights or (2) any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to perform its obligations
thereunder.
(iii) Seller has paid all premiums due, and have otherwise
performed all of their respective obligations, under each policy to which Seller
is a party or that provides coverage to Seller or director thereof.
(iv) Seller has given notice to the insurer of all claims that
may be insured thereby.
3.16. Environmental Matters. Except as set forth in Schedule 3.16 of the
Disclosure Schedule, at all times since December 27, 1993, Seller has obtained
and is in compliance with all permits, licenses and other authorizations
required to do business by Environmental Requirements. To each Seller's
Knowledge, there are no conditions, circumstances, activities, practices,
incidents, or actions (collectively, "Conditions") resulting from the conduct of
its business which Conditions may reasonably form the basis of any claim or suit
against Seller based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling by Seller, or the
emission, discharge, release or threatened release by Seller into the
environment, of any pollutant, contaminant, or hazardous or toxic materials,
substances or wastes.
3.17. Employee Matters.
Except as set forth on Schedule 3.17, at all times since December 27,
1993, Seller has complied in all respects with all Legal Requirements relating
to employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health and plant closing.
Except as set forth on Schedule 3.17, Seller is not liable for the payment
of any compensation, Damages, taxes, fines, penalties. or other amounts,
however, designated, for failure to comply with any of the foregoing Legal
Requirements.
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3.18. Intellectual Property Rights of Seller.
A. Seller does not hold any trademarks, patents, copyrights or other
intellectual property.
B. Ownership and Right to License.
(i) Seller warrants that the name Scanlan Music, Inc., was
purchased from Jim Victor in December, 1993, and Seller further warrants that no
encomerbrances or disputes exist with regard to the rights of ownership, use, or
right to license said name.
3.19. Certain Payments. Since December 27, 1993,, neither Seller nor any
director, officer, agent, or employee of Seller, nor to Seller's Knowledge any
other Person associated with or acting for or on behalf of Seller, has directly
or indirectly:
A. Made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business; (ii) to pay for favorable treatment for business
secured; (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of Seller or any affiliate of Seller or (iv) in
violation of any Legal Requirement.
B. Established or maintained any fund or asset that has not been
recorded in the books and records of Seller.
3.20. Disclosure,
A. No representation or warranty of Seller in this Agreement and no
statement in the Disclosure Schedule omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
B. No notice given pursuant to Section 5.5. will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
C. There is no fact known to Seller that has specific application to
Seller or Seller (other than general economic or industry conditions) and that
materially adversely affects or, as far as Seller can reasonably foresee,
materially threatens, the assets, business, prospects, financial condition, or
results of operations of Seller (on a consolidated basis) that has not been set
forth in this Agreement or the Disclosure Schedule.
3.21. Brokers or Finders. Seller and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
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3.22. Fairness Opinion. Buyer waives the request for a fairness opinion
from Seller's counsel.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller as follows:
4.1. Organization and Good Standing. Buyer is an individual.
4.2. Authority. This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the closing documents set forth in
Section 2.5.B (collectively, the "Buyer's Closing Documents"), the Buyer's
Closing Documents will constitute the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement and the Buyer's Closing Documents and to perform its
obligations under this Agreement and the Buyer's Closing Documents.
4.3. Investment Intent. Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
4.4. Certain Proceedings. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.5. Brokers or Finders. Buyer and its agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold Seller harmless from any such payment alleged to be due by or
through Buyer as a result of the action of Buyer or its officers or agents.
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE.
5.1. Access and Investigation. Between the date of this Agreement and the
Closing Date, Seller will, and will cause Seller and its Representatives to:
A. Afford Buyer and its Representatives and prospective lenders and
their Representatives (collectively, "Buyer's Advisors") full and free access to
Seller's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data;
B. Furnish Buyer and Buyer's Advisors with copies of all such
contracts, books and records, and other existing documents and data as Buyer may
reasonably request; and
C. Furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information as Buyer may reasonably
request.
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5.2. Operation of the Business of Seller. Between the date of this
Agreement and the Closing Date, Seller will:
A. Conduct the business of Seller only in the Ordinary Course of
Business;
B. Use its Best Efforts to preserve intact the current business
organization of Seller, keep available the services of the current officers,
employees, and agents of Seller, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and others having
business relationships with Seller;
C. Confer with Buyer concerning operational matters of a material
nature; and
D. Otherwise report periodically to Buyer concerning the status of
the business, operations, and finances of Seller.
5.3. Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
not without the prior consent of Buyer, take any affirmative action, or fail to
take any reasonable action within their or its control, as a result of which any
of the changes or events listed in Section 3.13. is likely to occur.
5.4. Required Approvals. As promptly as practicable after the date of this
Agreement, Seller will, and will cause Seller to, make all filings required by
Legal Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Seller
will, and will cause Seller to:
A. Cooperate with Buyer with respect to all filings that Buyer
reasonably elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions; and
B. Cooperate with Buyer in obtaining all required Consents.
5.5. Notification. Between the date of this Agreement and the Closing
Date, Seller will promptly notify Buyer in writing if Seller becomes aware of
any fact or condition that causes or constitutes a Breach of any of Seller's
representations and warranties as of the date of this Agreement, or if Seller
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition.
Should any such fact or condition require any change in the Disclosure
Schedule if the Disclosure Schedule were dated the date of the occurrence or
discovery of any such fact or condition, Seller will promptly deliver to Buyer a
supplement to the Disclosure Schedule specifying such change. During the same
period, each Seller will promptly notify Buyer of the occurrence of any Breach
of any covenant of Seller in this Section 5. or of the occurrence of any event
that may make the satisfaction of the conditions in Section 7. impossible or
unlikely.
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5.6. No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 9., Seller will not, and will cause its
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of Seller, or any of the capital stock of Seller, or any merger,
consolidation, business combination, or similar transaction involving Seller.
5.7. Closing of Bank Accounts. Seller shall cause the removal of Seller
from the banks of Seller, without causing the closing of said accounts. Seller
shall cause the closing of savings accounts of Seller
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1. Approvals of Governmental Bodies/Third Party Consents. As promptly as
practicable after the date of this Agreement, Buyer will, and will cause each of
its Related Persons to, make all filings required by Legal Requirements to be
made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and
will cause each Related Person to:
A. Cooperate with Seller with respect to all filings that Seller is
required by Legal Requirements to make in connection with the Contemplated
Transactions; and
B. Cooperate with Seller in obtaining all consents identified in
Schedule 3.2 of the Disclosure Schedule; provided that this Agreement will not
require Buyer to dispose of or make any change in any portion of its business or
to incur any other burden to obtain a Governmental Authorization.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1. Accuracy of Representations,
A. All of Seller's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Schedule.
B. Each of Seller's representations and warranties in Article 3.
must have been accurate in all respects as of the date of this Agreement, and
must be accurate in all respects
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as of the Closing Date as if made on the Closing Date, without giving effect to
any supplement to the Disclosure Schedule.
7.2. Seller's Performance.
A. All of the covenants and obligations that Seller is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
B. Each document required to be delivered pursuant to Section 2.4.
must have been delivered, and each of the other covenants and obligations in
Section 5. must have been performed and complied with in all respects.
C. The results of any investigation performed by Buyer in connection
with Section 5.1. shall be satisfactory to Buyer in its sole discretion.
7.3. Consents. Each of the Consents identified in Schedule 3.2 of the
Disclosure Schedule must have been obtained and must be in full force and
effect.
7.4. Additional Documents. Seller shall deliver such other documents as
Buyer may reasonably request for the purpose of (i) evidencing the accuracy of
any of Seller's representations and warranties; (ii) evidencing the performance
by Seller of, or the compliance by Seller with, any covenant or obligation
required to be performed or complied with by such Seller; (iii) evidencing the
satisfaction of any condition referred to in this Section 7. or (iv) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
7.5. No Proceedings. Since the date of this Agreement, there must not have
been commenced or Threatened against Buyer, or against any Person affiliated
with Buyer, any Proceeding (i) involving any challenge to, or seeking Damages or
other relief in connection with, any of the Contemplated Transactions or (ii)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
7.6. No Claim Regarding Stock Ownership or Sale Proceeds. There must not
have been made or Threatened by any Person any claim asserting that such Person
(i) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in, any of Seller or (ii) is entitled to all or any portion
of the Purchase Price payable for the Shares.
7.7. No Prohibition. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (i) any applicable Legal
Requirement or Order or (ii) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
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7.8. Employment Agreement. On or before the Closing Date, Richard Criag
shall have entered into an employment agreement with Seller.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.
Seller's obligation to sell the Shares and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
8.1. Accuracy of Representations. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2. Buyer's Performance.
A. All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
B. Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.5.
8.3. Consents. Each of the Consents identified in Schedule 3.2 of the
Disclosure Schedule must have been obtained and must be in full force and
effect.
8.4. Additional Documents, Buyer must have caused the following documents
to be delivered to Seller such other documents as Seller may reasonably request
for the purpose of (i) enabling their counsel to provide the opinion referred to
in Section 2.5.A.(iii); (ii) evidencing the accuracy of any representation or
warranty of Buyer; (iii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be performed or
complied with by Buyer; (iv) evidencing the satisfaction of any condition
referred to in this Section 8. or (v) otherwise facilitating the consummation of
any of the Contemplated Transactions.
8.5. No Injunction. There must not be in effect any Legal Requirement or
any injunction or other Order that (i) prohibits the sale of the Shares by
Seller to Buyer and (ii) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
9. TERMINATION.
9.1. Termination Events.
This Agreement may, by notice given prior to or at the Closing, be
terminated:
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A. By either Buyer or Seller if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived;
B. (i) By Buyer if any of the conditions in Section 7. have not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date;
(ii) By Seller, if any of the conditions in Section 8. have
not been satisfied of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Seller to comply with
their obligations under this Agreement) and Seller has not waived such condition
on or before the Closing Date; or
C. By mutual consent of Buyer and Seller; or
D. By either Buyer or Seller if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before November
15, 1998, or such later date as the parties may agree upon.
9.2. Effect of Termination. Each party's right of termination under
Section 9.1. is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.1., all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 12.1. and 12.3. will survive; provided,
however, that if this Agreement is terminated by a party because of the Breach
of the Agreement by the other party or because one (1) or more of the conditions
to the terminating party's obligations under this Agreement is not satisfied as
a result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES.
10.1. Agreement by Seller to Indemnify. Seller (the "Seller Indemnifying
Party"), agrees that they will indemnify and hold Buyer harmless in respect of
the aggregate of all indemnifiable Damages of Buyer.
For this purpose, "indemnifiable Damages" of Buyer means the aggregate of
all Damages incurred or suffered by Buyer resulting from:
A. Any inaccurate representation or warranty made by Seller in or
pursuant to this Agreement;
B. Any default in the performance of any of the covenants or
agreements made by Seller in this Agreement; or
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C. The failure of any Seller to pay, discharge or perform any
liability or obligation of Seller or of Seller resulting from the operation of
Seller's business prior to the Closing Date.
Without limiting the generality of the foregoing, with respect to the
measurement of "indemnifiable Damages". Buyer shall have the right to be put in
the same financial position as it would have been had each of the
representations and warranties of Seller been true and correct and had each of
the covenants of Seller been performed in full.
The amount of any indemnifiable Damages otherwise payable to Buyer
hereunder shall be reduced if the indemnifiable Damages incurred by Buyer will
provide Buyer with income tax deductions or credits. The amount of the reduction
shall be the amount of the actual cash tax savings realized by Buyer as a result
of such deductions or credits, discounted to its present value as of the date of
the payment of the indemnifiable Damages from the date such indemnifiable
Damages were incurred by Buyer at the rate of interest charged on such date by
the Internal Revenue Service on underpayment of taxes.
The foregoing obligation of Seller Indemnifying Party to indemnify Buyer
shall be subject to each of the following principles or qualifications:
1. Each of the representations and warranties made by Seller in this
Agreement or pursuant hereto, shall survive for a period of one (1) year after
the Closing; provided, however, that the representations and warranties made by
Seller to the extent they relate to Seller's title to the Shares shall survive
forever and that the representations and warranties made by Seller and
Shareholder in Section 3.8. hereof ("Taxes") shall in each case survive until
the first (1st) anniversary of the later of:
A. The date on which applicable period of limitation on
assessment or refund of tax has expired; or
B. The date on which the applicable taxable year (or portion
thereof) has been closed.
No claim for the recovery of indemnifiable Damages may be asserted by
Buyer against Seller Indemnifying Party or their successors in interest after
such representations and warranties shall be thus extinguished; provided,
however, that claims first asserted in writing within the applicable period
shall not thereafter be barred.
10.2. Agreements by Buyer to Indemnify. Buyer (the "Buyer Indemnifying
Party"), agrees to indemnify and hold Seller (the "Seller Indemnified Party")
harmless in respect of the aggregate of all indemnifiable Damages of any of
Seller Indemnified Parties.
For this purpose, "indemnifiable Damages" of the of Seller Indemnified
Party means the aggregate of all Damages incurred or suffered by the Seller
Indemnified Party resulting from:
A. Any inaccurate representation or warranty made by Buyer or
pursuant to this Agreement; or
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B. Any default in the performance of any of the covenants or
agreements made by Buyer in this Agreement.
Without limiting the generality of the foregoing, with respect to the
measurement of "indemnifiable Damages", the Seller Indemnified Party shall have
the right to be put in the same financial position as they would have been had
each of the representations and warranties of Buyer Indemnifying Party been true
and correct and had each of the covenants of Buyer Indemnifying Party been
performed in full.
The amount of any indemnifiable Damages otherwise payable to any Seller
Indemnified Party hereunder shall be reduced if the indemnifiable Damages
incurred by Seller Indemnified Party will provide such Party with income tax
deductions or credits. The amount of the reduction shall be the amount of the
actual cash tax savings realized by Seller Indemnified Party as a result of such
deductions or credits discounted to its present value as of the date of the
payment of the indemnifiable Damages from the date such indemnifiable Damages
were incurred by Seller Indemnified Party at the rate of interest charged on
such date by the Internal Revenue Service on underpayment of taxes.
The foregoing obligation of Buyer Indemnifying Party to indemnify Seller
Indemnified Party shall be subject to each of the following principles or
qualifications:
10.2.1 Each of the representations and warranties made by Buyer in
Article 4 of this Agreement shall survive for a period of one (1) year after the
Closing Date, and thereafter all such representations and warranties shall be
extinguished.
No claim for the recovery of indemnifiable Damages pursuant to clause (i)
of Section 10.2. may be asserted by Seller Indemnified Party against Buyer
Indemnifying Party or its successors in interest after such representations and
warranties shall be thus extinguished; provided, however, that claims first
asserted in writing within the applicable period shall not thereafter be barred.
10.3. Matters Involving Third Parties. If any third party shall notify
Buyer or Seller (the "Indemnified Party") with respect to any matter which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 10., then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent that) the Indemnifying Party thereby is
Damaged.
If any Indemnifying Party notifies the Indemnified Party within fifteen
(15) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then:
A. The Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice satisfactory to the Indemnified Party;
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B. The Indemnified Party may retain separate co-counsel at its sole
cost and expense (except that the Indemnifying Party will be responsible for the
fees and expenses of the separate co-counsel to the extent the Indemnified Party
concludes that the counsel the Indemnifying Party has selected has a conflict of
interest);
C. The Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably); and
D. The Indemnifying Party will not consent to the entry of any
judgment with respect to the matter, or enter into any settlement which does not
include a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld or delayed unreasonably).
If no Indemnifying Party notifies the Indemnified Party within fifteen
(15) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then the Indemnified Party
may defend against, or enter into any settlement with respect to, the matter in
any manner it may deem appropriate.
11. POST-CLOSING AGREEMENTS.
11.1. Consistency in Reporting. Each party hereto agrees that: (i) the
transaction is intended to qualify as a tax-free transaction under the I.R.C.;
(ii) the transaction shall be reported for Federal income tax purposes as a
tax-free transaction; (iii) for purposes of all financial statements, tax
returns and reports, and communications with third parties, the transactions
contemplated in this agreement and ancillary or collateral transactions will be
treated as a tax-free transaction; and (iv) if the characterization of any
transaction contemplated in this agreement or any ancillary or collateral
transaction is challenged, each party hereto will testify, affirm and ratify
that the characterization contemplated in such agreement was with the
characterization intended by the party; provided, however, that nothing herein
shall be construed as giving rise to any obligation if the reporting position is
determined to be incorrect by final decision of a court of competent
jurisdiction.
12. GENERAL PROVISIONS.
12.1. Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
Seller will cause Seller not to incur any out-of-pocket expenses in
connection with the Contemplated Transactions. In the event of termination of
this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
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12.2. Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer determines. Unless consented
to by Buyer in advance or required by Legal Requirements, prior to the Closing
Seller shall, and shall cause Seller to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Seller and Buyer will consult with each other concerning the means by
which Seller's employees, customers, and suppliers and others having dealings
with Seller will be informed of the Contemplated Transactions, and Buyer will
have the right to be present for any such communication.
12.3. Confidentiality. Between the date of this Agreement and the Closing
Date, Buyer and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and Seller to
maintain in confidence, and not use to the detriment of another party or an
Seller any written, oral, or other information obtained in confidence from
another party or an Seller in connection with this Agreement or the Contemplated
Transactions, unless:
A. Such information is already known to such party or to others not
bound by a duty of confidentiality or such information becomes publicly
available through no fault of such party;
B. The use of such information is necessary or appropriate in making
any filing or obtaining any consent or approval required for the consummation of
the Contemplated Transactions; or
C. The furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Seller waives, and
will upon Buyer's request cause Seller to waive an cause of action, right, or
claim arising out of the access of Buyer or its representatives to any trade
secrets or other confidential information of Seller.
12.4. Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (i) delivered by hand (with written confirmation of receipt); (ii)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested or (iii) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
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Seller: Glenda Illes
6821 Boston Hill Lane
Canton, MI 48187
With a copy to:
Richard Craig
15856 Centralia
Redford, MI 48239
Buyer: Scott Schuster
3700 Crestwood Parkway
Suite 1000
Duluth, GA 30096
With a copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326-1044
Attention; Bryan G. Harrison, Esq.
Telecopy No.: (404) 365-9532
12.5. Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Georgia, County of DeKalb, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of Georgia, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
12.6. Further Assurances. The parties agree (i) to furnish upon request to
each other such further information; (ii) to execute and deliver to each other
such other documents and (iii) to do such other acts arid things, all as the
other party may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to in this Agreement.
12.7. Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege.
To the maximum extent permitted by applicable law:
-29-
<PAGE>
A. No claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one (1) party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the other party;
B. No waiver that may be given by a party will be applicable except
in the specific instance for which it is given; and
C. No notice to or demand on one (1) party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12.8. Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Seller dated October 31, 1998)
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
12.9. Disclosure Schedule.
A. The disclosures in the Disclosure Schedule, and those in any
Supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
B. In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Schedule (other than an
exception expressly set forth as such in the Disclosure Schedule with respect to
a specifically identified representation or warranty), the statements in the
body of this Agreement will control.
12.10. Assignments, Successors and No Third-Party Rights. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, which will not be unreasonably withheld, except that Buyer
may assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
12.11. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
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<PAGE>
12.12. Section Headings; Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
12.13. Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
12.14. Governing Law. This Agreement will be governed by the laws of the
State of Georgia without regard to conflicts of laws principles.
12.15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER: SELLER:
By: /s/ Scott Schuster /s/ Rick Craig /s/ Glenda Illes
------------------------- ----------------------------------
Title: Title: Pres. Vice President
---------------------- ---------------------------
Date: 11/8/98 Date: 11-5-98
----------------------- ----------------------------
-31-
<PAGE>
SCHEDULES
-32-
<PAGE>
EXHIBITS
Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
-33-
<PAGE>
We, the undersigned, hereby certify that all representations and warranties as
stated in the Stock Purchase Agreement, incorporated hereto, are true and
accurate.
/s/ Scott Schuster
- -----------------------------
Scott Schuster
<PAGE>
We, the undersigned, hereby certify that all representations and warranties as
stated in the Stock Purchase Agreement, incorporated hereto, are true and
accurate.
/s/ Rick Craig
- -----------------------------
Rick Craig, President
/s/ Glenda Illes
- -----------------------------
Glenda Illes, Vice President
<PAGE>
We, the undersigned, hereby state the Corporation, Scanlan Music Corporation,
Inc., is in good standing with the State of Michigan
/s/ Rick Craig
- -----------------------------
Rick Craig, President
/s/ Glenda Illes
- -----------------------------
Glenda Illes, Vice President
<PAGE>
Amendment of Disclosure Schedule
to Stock Purchase Agreement Dated November 5, 1998
3.1 Name: Scanlan Music, Inc.
Incorporated in Michigan
Capitalization:
3.2 None
3.3 N/A
3.4 N/A
3.5 N/A
3.6 With the exception of inventory, all items are owned outright.
3.7 Back Gross Wages to Nicole Craig totaling Three Thousand Two Hundred
Forty Dollars ($3,240.00)
3.8 All Taxes are Current
3.9 N/A
3.10.1 Only health insurance through Health Alliance Plan which is current in
payment.
3.17(A) Past due balances to vendors as listed in attached exhibit
3.17 Back Gross wages to Nicole Craig totaling Three Thousand Two Hundred
Forty Dollars ($3,240.00)
Agreement of Assignment
Scott A. Schuster hereby assigns for the amount of US $10 (ten dollars) and
other good and valuable considerations, all rights, titles and inventory by
virtue of the Stock Purchase Agreement between Scott Schuster and Scanlan Music
entered into on November 8, 1998 to CONCAP, Inc.
Hereby entered into as of this 9th day of November, 1998.
Signed: /s/ Scott Schuster
-------------------------
STOCK PURCHASE AGREEMENT
MADE AS OF
APRIL 1, 1999,
BETWEEN
CONCAP, INC.,
BUYER,
AND
VIRTUAL ENTERPRISE, INC.
KRIS HUTCHINSON, STEPHEN HYSER, TAMMY HUTCHINSON,
AND CLARKSTON & WILLIAMS, LLC, INDIVIDUALLY
SELLER(S)
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS....................................................... 1
1.1. "APPLICABLE CONTRACT"...................................... 1
1.2. "BREACH"................................................... 1
1.3. "BUYER".................................................... 1
1.4. "BUYER'S STOCK"............................................ 1
1.5. "CLOSING".................................................. 1
1.6. "CLOSING DATE"............................................. 1
1.8. "CONSENT".................................................. 2
1.9. "CONTEMPLATED TRANSACTIONS"................................ 2
1.10. "CONTRACT"................................................. 2
1.11. "DAMAGES".................................................. 2
1.12. "DISCLOSURE SCHEDULE"...................................... 2
1.13. "ENCUMBRANCE".............................................. 2
1.14. "ENVIRONMENTAL REQUIREMENTS"............................... 2
1.15. "ERISA".................................................... 2
1.16. "FACILITIES"............................................... 3
1.17. "GAAP"..................................................... 3
1.18. "GOVERNMENTAL AUTHORIZATION"............................... 3
1.19. "GOVERNMENTAL BODY"........................................ 3
1.20. "IRC"...................................................... 3
1.21. "IRS"...................................................... 3
1.22. "KNOWLEDGE"................................................ 3
1.23. "LEGAL REQUIREMENT"........................................ 3
1.24. "OPERATING INCOME"......................................... 3
1.25. "ORDER".................................................... 4
1.26. "ORDINARY COURSE OF BUSINESS".............................. 4
1.27. "ORGANIZATIONAL DOCUMENTS"................................. 4
1.28. "PERSON"................................................... 4
1.29. "PLAN"..................................................... 4
1.30. "PROCEEDING"............................................... 5
1.31. "RELATED PERSON"........................................... 5
1.32. "REPRESENTATIVE"........................................... 5
1.33. "SECURITIES ACT"........................................... 6
1.34. "SELLER" OR "SELLERS"...................................... 6
1.35. "SHARES"................................................... 6
1.36. "SUBSIDIARY"............................................... 6
1.37. "TAX RETURN"............................................... 6
1.38. "THREATENED"............................................... 6
2. TRANSFER OF SHARES; REIMBURSEMENT AMOUNT; CLOSING................. 6
2.1. SHARES..................................................... 6
2.2 BUYER'S STOCK.............................................. 6
2.3 CLOSING.................................................... 6
2.4 CLOSING OBLIGATIONS........................................ 7
3. REPRESENTATIONS AND WARRANTIES OF SELLERS......................... 7
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<PAGE>
3.1. ORGANIZATION AND GOOD STANDING............................. 7
3.2. AUTHORITY; NO CONFLICT..................................... 8
3.3. CAPITALIZATION............................................. 9
3.4. FINANCIAL STATEMENTS....................................... 9
3.5. BOOKS AND RECORDS.......................................... 10
3.6. TITLE TO PROPERTIES; ENCUMBRANCES.......................... 10
3.7. NO UNDISCLOSED LIABILITIES................................. 11
3.8. TAXES...................................................... 11
3.9. NO MATERIAL ADVERSE CHANGE................................. 11
3.10 EMPLOYEE BENEFITS MATTERS.................................. 12
3.11 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS. ............................ 13
3.12 LEGAL PROCEEDINGS; ORDERS. ................................ 14
3.13 ABSENCE OF CERTAIN CHANGES AND EVENTS. .................... 15
3.14 CONTRACTS; NO DEFAULTS..................................... 16
3.15 INSURANCE.................................................. 17
3.16 ENVIRONMENTAL MATTERS...................................... 18
3.17 EMPLOYEE MATTERS........................................... 18
3.18 INTELLECTUAL PROPERTY RIGHTS OF SELLER..................... 18
3.19 CERTAIN PAYMENTS........................................... 20
3.20 DISCLOSURE................................................. 21
3.21 BROKERS OR FINDERS......................................... 21
3.22 FAIRNESS OPINION........................................... 21
4. REPRESENTATIONS AND WARRANTIES OF BUYER........................... 21
4.1. ORGANIZATION AND GOOD STANDING............................. 21
4.2. AUTHORITY.................................................. 21
4.3. INVESTMENT INTENT.......................................... 22
4.4. CERTAIN PROCEEDINGS........................................ 22
4.5. BROKERS OR FINDERS......................................... 22
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE......................... 22
5.1. ACCESS AND INVESTIGATION................................... 22
5.2. OPERATION OF THE BUSINESS OF THE COMPANY................... 22
5.3. NEGATIVE COVENANT.......................................... 23
5.4. REQUIRED APPROVALS......................................... 23
5.5. NOTIFICATION............................................... 23
5.6. NO NEGOTIATION............................................. 23
5.7. CLOSING OF BANK ACCOUNTS................................... 23
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.......................... 24
6.1. APPROVALS OF GOVERNMENTAL BODIES/
THIRD PARTY CONSENTS..................................... 24
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE............... 24
7.1. ACCURACY OF REPRESENTATIONS................................ 24
7.2. SELLERS' PERFORMANCE....................................... 24
7.3. CONSENTS................................................... 25
7.4. ADDITIONAL DOCUMENTS....................................... 25
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<PAGE>
7.5. NO PROCEEDINGS............................................. 25
7.6. NO CLAIM REGARDING STOCK OWNERSHIP
OR SALE PROCEEDS......................................... 25
7.7. NO PROHIBITION............................................. 25
7.8. EMPLOYMENT AGREEMENT....................................... 25
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.............. 25
8.1. ACCURACY OF REPRESENTATIONS................................ 25
8.2. BUYER'S PERFORMANCE........................................ 26
8.3. CONSENTS................................................... 26
8.4. ADDITIONAL DOCUMENTS....................................... 26
8.5. NO INJUNCTION.............................................. 26
9. TERMINATION....................................................... 26
9.1. TERMINATION EVENTS......................................... 26
9.2. EFFECT OF TERMINATION...................................... 27
10. INDEMNIFICATION; REMEDIES......................................... 27
10.1. AGREEMENT BY SELLERS TO INDEMNIFY.......................... 27
10.2. AGREEMENTS BY BUYER TO INDEMNIFY........................... 28
10.3. MATTERS INVOLVING THIRD PARTIES............................ 29
11. POST-CLOSING AGREEMENTS........................................... 30
11.1. CONSISTENCY IN REPORTING................................... 30
11.2. PERFORMANCE OF THE COMPANY................................. 30
11.3. REMEDIES FOR BREACH OF AGREEMENT BY SELLERS................ 30
12. GENERAL PROVISIONS................................................ 31
12.1. EXPENSES................................................... 31
12.2. PUBLIC ANNOUNCEMENTS....................................... 31
12.3. CONFIDENTIALITY............................................ 31
12.4. NOTICES.................................................... 32
12.5. JURISDICTION; SERVICE OF PROCESS........................... 33
12.6. FURTHER ASSURANCES......................................... 33
12.7. WAIVER..................................................... 33
12.8. ENTIRE AGREEMENT AND MODIFICATION.......................... 33
12.9. DISCLOSURE SCHEDULE........................................ 33
12.10. ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS.......... 34
12.11. SEVERABILITY............................................... 34
12.12. SECTIONS HEADINGS; CONSTRUCTION............................ 34
12.13. TIME OF ESSENCE............................................ 34
12.14. GOVERNING LAW.............................................. 34
12.15. COUNTERPARTS............................................... 34
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<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of April 1, 1999,
by and among CONCAP, Inc., a Texas corporation, ("Buyer"), and Virtual
Enterprise, Inc., a Georgia Corporation, Kris Hutchinson, Stephen Hyser, Tammy
Hutchinson and Clarkston & Williams, LLC (each individually, a "Seller" and
collectively "Sellers") and Virtual Enterprise, Inc. (the "Company")
RECITALS:
Seller desire to sell, and Buyer desires to purchase, all of the issued
and outstanding shares (the "Shares") of capital stock of the Company for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.:
1.1. "Applicable Contract" - any Contract (i) under which the Company has
or may acquire any rights; (ii) under which the Company has or may become
subject to any obligation or liability or (iii) by which the Company or any of
the assets owned or used by it is or may become bound.
1.2. "Breach" - a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (i) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision or
(ii) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence or circumstance.
1.3. "Buyer" - as defined in the first paragraph of this Agreement.
1.4. "Buyer's Stock" - 100,000 restricted shares of Buyer's capital stock.
1.5. "Closing" - as defined in Section 2.4.
1.6. "Closing Date" - the date and time as of which the Closing actually
takes place.
1.7 "Company" - Virtual Enterprise, Inc.
<PAGE>
1.8. "Consent" - any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
1.9. "Contemplated Transactions" - all of the transactions contemplated by
this Agreement, including:
A. The transfer of the Shares by Sellers to Buyer;
B. The execution, delivery, and performance of the Closing Obligations set
forth in Section 2.5;
C. The performance by Buyer and Sellers of their respective covenants and
obligations under this Agreement;
D. Buyer's acquisition and ownership of the Shares and exercise of control
over the Company; and
E. The transfer of Buyer's Stock to Sellers; and
1.10. "Contract" - any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
1.11. "Damages" - any loss, liability, claim, damages (including, without
limitation, incidental and consequential damages), expense (including, without
limitation, costs of investigation and defense and reasonable attorneys' fees)
or diminution of value, whether or not involving a third party.
1.12. "Disclosure Schedule" - the disclosure schedule delivered by Sellers
to Buyer concurrently with the execution and delivery of this Agreement.
1.13. "Encumbrance" - any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
1.14. "Environmental Requirements" - means federal, state and local laws
relating to pollution or protection of the environment, including laws or
provisions relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials, substances, or wastes
into air, surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials, substances, or wastes.
1.15. "ERISA" - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
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<PAGE>
1.16. "Facilities" - any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles) currently or
formerly owned or operated by the Company.
1.17. "GAAP" - generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the financial statements
referred to in Section 3.4. were prepared.
1.18. "Governmental Authorization" - any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
1.19. "Governmental Body" - any:
A. Nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
B. Federal, state, local, municipal, foreign, or other government;
C. Governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
D. Multi-national organization or body; or
E. Body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
1.20. "IRC" - the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
1.21. "IRS" - the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
1.22. "Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
A. Such individual is actually aware of such fact or other matter; or
B. A prudent individual given his position with the Company could be
reasonably expected to discover or otherwise become aware of such fact or other
matter.
1.23. "Legal Requirement" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
1.24. "Operating Income" - means the net income of the Company determined
in accordance with GAAP before income taxes and after all other charges except:
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<PAGE>
A. Unless otherwise approved by Buyer, any general and administrative
expense (i.e., allocation of the Company's general corporate overhead)
attributable to the Company and all subsidiaries of the Company that is not
directly related to the operation of the Company in the Ordinary Course of
Business; provided, however, Operating Income shall include reimbursement by the
Company of expenses at a fair market price mutually agreed to by Buyer and
Sellers for expenses previously incurred by Seller, but that have for
administrative convenience or efficiency reasons been centralized with Buyer;
and
B. Any amortization of goodwill of the Company and all Subsidiaries of the
Company.
C. In the event that certain expenses incurred by the Company are for the
principal or partial benefit of the Company or other subsidiaries of the
Company, then the parties hereto shall endeavor to track and determine in a fair
and equitable manner that portion of such expenses that should fairly and
reasonably be allocated to the Company or such other subsidiaries of the
Company, and therefore not included in arriving at Operating Income for purposes
of this Agreement.
1.25. "Order" - any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
1.26. "Ordinary Course of Business" - an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
A. Such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
B. Such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority); and
C. Such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line of
business as such Person.
1.27. "Organizational Documents" - (i) the Articles or Certificate of
Incorporation and the Bylaws of a corporation; (ii) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person and (iii) any amendment to any of the foregoing.
1.28. "Person" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
1.29. "Plan" - as defined in Section 3.10.1.
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<PAGE>
1.30. "Proceeding" - any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
1.31. "Related Person" - with respect to a particular individual:
A. Each other member of such individual's Family;
B. Any Person that is directly or indirectly controlled by such individual
or one (1) or more members of such individual's Family;
C. Any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
D. Any Person with respect to which such individual or one (1) or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
A. Any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
B. Any Person that holds a Material Interest in such specified Person;
C. Each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
D. Any Person in which such specified Person holds a Material Interest;
E. Any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
Any Related Person of any individual described in clause B. or C.
For purposes of this definition, (i) the "Family" of an individual
includes (1) the individual; (2) the individual's spouse and former spouses; (3)
any other natural person who is related to the individual or the individual's
spouse within the second degree and (4) any other natural person who resides
with such individual and (2) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of voting securities or other voting interests representing at least
five percent (5%) of the outstanding voting power of a Person or equity
securities or other equity interests representing at least five percent (5%) of
the outstanding equity securities or equity interests in a Person.
1.32. "Representative" - with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
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<PAGE>
1.33. "Securities Act" - the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
1.34. "Seller" or "Sellers" - as defined in the first paragraph of this
Agreement.
1.35. "Shares" - as defined in the Recitals of this Agreement.
1.36. "Subsidiary" - with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one (1) or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
1.37. "Tax Return" - any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
1.38. "Threatened" - a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
that would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
2. TRANSFER OF SHARES; REIMBURSEMENT AMOUNT; CLOSING.
2.1. Shares. In exchange for the transfer of Buyer's Stock, as set forth
in Section 2.2, and subject to the terms and conditions of this Agreement, at
the Closing, Sellers will transfer the Shares to Buyer.
2.2. Buyer's Stock. In exchange for the transfer of Shares as set forth in
Section 2.1, and subject to the terms and conditions of this Agreement, at the
Closing, Buyer shall transfer to Sellers the Buyer's Stock as mutually agreed by
the parties.
2.3. Closing. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Paul, Hastings, Janofsky & Walker,
LLP, Suite 2400, 600 Peachtree Street, N.E., Atlanta, Georgia 30308-2222, at
10:00 a.m. (local time) on April 1, 1999, or at such other time and place as the
parties may agree. Except as otherwise provided in Section 9., failure to
consummate the purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section 2.3. will not result
in the termination of this Agreement and will not relieve any party of any
obligation under this Agreement.
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<PAGE>
2.4. Closing Obligations. At the Closing:
A. Seller will deliver to Buyer:
(i) Certificates. Certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers) for transfer to Buyer;
(ii) Opinion of Counsel. Buyer shall have received an opinion
dated the Closing Date from Clarkston & Williams, LLC, counsel for Sellers,
substantially in the form of Exhibit A attached hereto;
(iii) Good Standing Certificate. Sellers shall have delivered
to Buyer a certificate evidencing the good standing of the Company as of a
recent practicable date;
(iv) Certificate. A certificate substantially in the form of
Exhibit B hereto, executed by each Seller representing and warranting to Buyer
that each of Sellers' representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date (giving full
effect to any supplements to the Disclosure Schedule that were delivered by
Sellers to Buyer prior to the Closing Date in accordance with Section 5.5.); and
B. Buyer will deliver to Sellers:
(i) Certificates. Certificates representing Buyer's Stock,
duly endorsed (or accompanied by duly executed stock powers) for transfer to
Sellers;
(ii) Certificate. A certificate in the form of Exhibit C
hereto executed by Buyer to the effect that, except as otherwise stated in such
certificate, each of Buyer's representations and warranties in this Agreement
was accurate in all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing Date; and
3. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers hereby jointly and severally represent and warrant to Buyer as
follows:
3.1. Organization and Good Standing.
A. Schedule 3.1 of the Disclosure Schedule contains a complete and
accurate list of the Company's name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each).
The Company is a corporation duly organized, validly existing, and
in good standing under the laws of Georgia, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts.
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The Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.
B. Sellers have delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
3.2. Authority; No Conflict.
A. This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms.
Upon the execution and delivery by Sellers of the closing documents set forth in
Section 2.4A (collectively, the "Sellers' Closing Documents"), the Sellers'
Closing Documents will constitute the legal, valid, and binding obligations of
Sellers, enforceable against Sellers in accordance with their respective terms.
Sellers have the absolute and unrestricted right, power, authority,
and capacity to execute and deliver this Agreement and the Sellers' Closing
Documents and to perform his obligations under this Agreement and the Sellers'
Closing Documents.
B. Except as set forth in Schedule 3.2 of the Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) Contravene, conflict with, or result in a violation of (1)
any provision of the Organizational Documents of the Company or (2) any
resolution adopted by the board of directors or the stockholders of the Company;
(ii) Contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which Sellers or the Company, or any of
the assets owned or used by the Company, may be subject;
(iii) Contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) Cause Buyer or the Company to become subject to, or to
become liable for the payment of, any Tax;
(v) Cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
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(vi) Contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(vii) Result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the Company.
Except as set forth in Schedule 3.2 of the Disclosure Schedule, Company
nor Seller is or will be required to give any notice to or obtain any Consent
from any Person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated Transactions.
3.3. Capitalization. The authorized equity securities of Seller consists
of 1,000 shares of common stock, $1.00 par value per share, of which 1,000
shares are issued and outstanding and constitute the Shares.
Sellers are and will be on the Closing Date the record and beneficial
owners and holders of the Shares, free and clear of all Encumbrances.
With the exception of the Shares (which are owned by Sellers), all of the
outstanding equity securities and other securities of the Company are owned of
record and beneficially by Sellers free and clear of all Encumbrances. No legend
or other reference to any purported Encumbrance appears upon any certificate
representing equity securities of the Company.
All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of the Company, including, but not limited to, stock
options, warrants, convertible securities, redemption rights, registration
rights and the like.
None of the outstanding equity securities or other securities of the
Company issued in violation of the Securities Act or any other Legal
Requirement. The Company does not own, nor does it have any Contract to acquire,
any equity securities or other securities of any Person or any direct or
indirect equity or ownership interest in any other business.
3.4. Financial Statements. Sellers have delivered to Buyer, as set forth
on Schedule 3.4:
A. Unaudited balance sheets of the Company as of February 28, 1999,
and as of December 31, 1998, together with the related statements of income,
changes in stockholder equity and cash flow (collectively, the "Financial
Statements") for the periods referred to in such financial statements.
B. The Financial Statements were prepared in accordance with this
Agreement and with GAAP consistently applied.
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The Financial Statements and notes, if any, fairly present the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of the Company as at the respective dates of and for the periods
referred to in such Financial Statements, all in accordance with GAAP, subject,
in the case of interim Financial Statements, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes.
No financial statements of any Person, other than the Company, are
required by GAAP to be included in the Financial Statements of the Company.
3.5. Books and Records. - The books of account, minute books, stock record
books, and other records of the Company, all of which have been provided to
Buyer, are complete and correct and have been maintained in accordance with
sound business practices.
The minute books of the Company contain accurate and complete records of
all meetings held of, and corporate action taken by, the stockholders, the
Boards of Directors, and committees of the Boards of Directors of the Company,
and no meeting of any such stockholders, Board of Directors, or committee has
been held for and no material action has been taken at any meeting for which
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of those books and records will be in the possession of the
Company.
3.6. Title to Properties; Encumbrances. The Company owns (with good and
marketable title in the case of real property, subject only to the Encumbrances
permitted by this Section) all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that they purport to own
located in the facilities owned or operated by the Company or reflected as owned
in the books and records of the Company, including all of the properties and
assets reflected in the Closing Date Financial Statements (except for assets
held under capitalized leases disclosed or not required to be disclosed in
Schedule 3.6 of the Disclosure Schedule).
All material properties and assets reflected in the Closing Date Financial
Statements are free and clear of all Encumbrances and are not, in the case of
real property, subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets:
A. Mortgages or security interests shown on the Closing Date
Financial Statements as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists;
B. Liens for current taxes not yet due; and
C. With respect to real property:
(i) Minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of the Company; and
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(ii) Zoning laws and other land use restrictions that do not
impair the present or anticipated use of the property subject thereto.
All buildings, plants, and structures owned by the Company lie wholly
within the boundaries of the real property owned by the Company and do not
encroach upon the property of, or otherwise conflict with the property rights
of, any other Person. All property and assets of the Company shall be in the
possession and control of the Company at Closing, including but not limited to,
all Facilities.
3.7. No Undisclosed Liabilities. Except as set forth in Schedule 3.7 of
the Disclosure Schedule, Seller has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Closing Date Financial Statements and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
3.8. Taxes. Except as set forth on Schedule 3.8 to the Disclosure
Schedule, the Company has timely filed all tax returns and reports required to
be filed by it, including, without limitation, all federal, state and local tax
returns, and has paid in full or made adequate provision by the establishment of
reserves for all taxes and other charges which have become due or which are
attributable to the conduct of the Company's business prior to Closing. The
Company will continue to make adequate provision for all such taxes and other
charges for all periods through the Closing Date.
Except as set forth on Schedule 3.8 to the Disclosure Schedule, Sellers
have no Knowledge of any tax deficiency proposed or threatened against Seller.
There are no tax liens upon any property or assets of the Company.
Except as set forth on Schedule 3.8 to the Disclosure Schedule, the
Company has made all payments of estimated taxes when due in amounts sufficient
to avoid the imposition of any penalty.
Except as set forth on Schedule 3.8 to the Disclosure Schedule, all taxes
and other assessments and levies which the Company was required by law to
withhold or to collect have been duly withheld and collected, and have been paid
over to the proper governmental entity.
Except as set forth in Schedule 3.8 to the Disclosure Schedule, the
federal and state income tax returns and local returns, if any, of the Company
have never been audited by the income tax authorities, nor are any such audits
in process. Except as set forth in Schedule 3.8, to the Disclosure Schedule
there are no outstanding agreements or waivers extending the statute of
limitations applicable to any federal or state income tax returns of the Company
for any period.
3.9. No Material Adverse Change. Since February 17, 1996, there has not
been any material adverse change in the business, operations, properties,
prospects, assets, or condition of the Company, and no event has occurred or
circumstance exists that may result in such a material adverse change.
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3.10. Employee Benefits Matters.
3.10.1 Schedule 3.10.1 lists all plans, programs, and similar
agreements, commitments or arrangements, whether oral or written, maintained by
or on behalf of the Company or any other party that provide benefits or
compensation to, or for the benefit of, current or former employees of the
Company ("Plan" or "Plans"). Except as set forth on Schedule 3.10.1 to the
Disclosure Schedule only current and former employees of the Company participate
in the Plans. Copies of all Plans and, to the extent applicable, all related
trust agreements, actuarial reports, and valuations for the most recent year,
all summary plan descriptions, prospectuses, Annual Report Form 5500s or similar
forms (and attachments thereto) for the most recent year, all Internal Revenue
Service determination letters, and any related documents requested by Buyer,
including all amendments, modifications and supplements thereto, have been
delivered to Buyer, and all of the same are or will be true, correct and
complete.
3.10.2 With respect to each Plan to the extent applicable:
A. No litigation or administrative or other proceeding is
pending or threatened involving such Plan;
B. To the Knowledge of Sellers, such Plan has been
administered and operated in substantial compliance with, and has been amended
to comply with all applicable laws, rules, and regulations, including, without
limitation, ERISA, the Internal Revenue Code, and the regulations issued under
ERISA and the Internal Revenue Code;
C. The Company and its predecessors, if any, have made and as
of the Closing Date will have made or accrued, all payments and contributions
required, or reasonably expected to be required, to be made under the provisions
of such Plan or required to be made under applicable laws, rules and
regulations, with respect to any period following, such amounts to be determined
using the ongoing actuarial and funding assumptions of the Plan;
D. Such Plan is fully funded in an amount sufficient to pay
all liabilities accrued (including liabilities and obligations for health care,
life insurance and other benefits after termination of employment) and claims
incurred to the date hereof;
E. On the Closing Date such Plan will be fully funded in an
amount sufficient to pay all liabilities accrued (including liabilities and
obligations for health care, life insurance and other benefits after termination
of employment) and claims incurred to the Closing Date, or adequate reserves
will be set up on the Company's books and records, or paid-up insurance will be
provided, therefor; and
F. Such Plan has been administrated and operated only in the
ordinary and usual course and in accordance with its terms, and there has not
been in the year prior hereto any increase in the liabilities of such Plan
beyond increases typically experienced by employers similar to the Company.
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(iii) The Company has not received, at any time since February
17, 1996, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which the Company, or any of the assets owned or used by the
Company, is or has been subject.
3.13. Absence of Certain Changes and Events. Except as set forth in
Schedule 3.13 of the Disclosure Schedule, since February 17, 1996, Seller has
conducted its business only in the Ordinary Course of Business and there has not
been any:
A. Change in the Company's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of the Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
the Company of any shares of any such capital stock; or declaration or payment
of any dividend or other distribution or payment in respect of shares of capital
stock;
B. Amendment to the Organizational Documents of the Company;
C. Payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
D. Adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
E. Damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of the
Company, taken as a whole;
F. Entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least Five
Thousand and No/l00 Dollars ($5,000.00);
G. Sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the Company, including the sale, lease, or other
disposition of any of the Software and Intangibles;
H. Cancellation or waiver of any claims or rights with a value to
Seller in excess of Five Thousand and No/100 Dollars ($5,000.00);
I. Material change in the accounting methods used by the Company; or
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J. Agreement, whether oral or written, by the Company to do any of
the foregoing.
3.14. Contracts; No Defaults.
A. Except as set forth in Schedule 3.17(A) of the Disclosure
Schedule:
(i) The Company (and no Related Person of the Company) has not
or may not acquire any rights under, and the Company has not or may not become
subject to any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, the Company; and
(ii) To the Knowledge of Sellers, no officer, director, agent,
employee, consultant, or contractor of the Company is bound by any Contract that
purports to limit the ability of such officer, director, agent, employee,
consultant, or contractor to (1) engage in or continue any conduct, activity, or
practice relating to the business of the Company or (2) assign to the Company or
to any other Person any rights to any invention, improvement, or discovery.
B. Except as set forth in Schedule 3.17(B) of the Disclosure
Schedule, each material Contract is in full force and effect and is valid and
enforceable in accordance with its terms.
C. Except as set forth in Schedule 3.17(C) of the Disclosure
Schedule:
(i) The Company is, and at all times since February 17, 1996,
has been, in full compliance with all applicable terms and requirements of each
Contract under which the Company has or had any obligation or liability or by
which the Company or any of the assets owned or used by the Company is or was
bound;
(ii) Each other Person that has or had any obligation or
liability under any Contract under which the Company has or had any rights is,
and at all times since February 17, 1996, has been, in full compliance with all
applicable terms and requirements of such Contract;
(iii) No event has occurred or circumstance exists that (with
or without notice or lapse of time) may contravene, conflict with, or result in
a violation or breach of, or give the Company or other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; and
(iv) Seller has not given to or received from any other
Person, at any time since February 17, 1996, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
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F. There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
G. The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
3.15. Insurance.
A. Sellers have delivered to Buyer:
(i) True and complete copies of all policies of insurance to
which the Company is a party or under which the Company, or any director of the
Company, is or has been covered at any time within the two (2) years preceding
the date of this Agreement;
(ii) True and complete copies of all pending applications for
policies of insurance; and
(iii) Any statement by the auditor of the Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
B. Except as set forth on Schedule 3.15(B) of the Disclosure
Schedule:
(i) All policies to which the Company is a party or that
provide coverage to the Company, Sellers, or any director or officer of the
Company:
(1) Are valid, outstanding, and enforceable;
(2) Taken together in the reasonable judgment of
Sellers, provide adequate insurance coverage for the assets and the operations
of the Company for all risks to which the Company are normally exposed;
(3) Are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or by which it is
bound;
(4) Will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(5) Do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of the Company.
(ii) Neither Sellers nor the Company has received (1) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights or (2) any notice
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of cancellation or any other indication that any insurance policy is no longer
in full force or effect or will not be renewed or that the issuer of any policy
is not willing or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and have
otherwise performed all of their respective obligations, under each policy to
which the Company is a party or that provides coverage to the Company or
director thereof.
(iv) Seller has given notice to the insurer of all claims that
may be insured thereby.
3.16. Environmental Matters. Except as set forth in Schedule 3.16 of the
Disclosure Schedule, at all times since February 17, 1996, the Company has
obtained and is in compliance with all permits, licenses and other
authorizations required to do business by Environmental Requirements. To each
Sellers' Knowledge, there are no conditions, circumstances, activities,
practices, incidents, or actions (collectively, "Conditions") resulting from the
conduct of its business which Conditions may reasonably form the basis of any
claim or suit against the Company based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling by the Company, or the emission, discharge, release or threatened
release by the Company into the environment, of any pollutant, contaminant, or
hazardous or toxic materials, substances or wastes.
3.17.Employee Matters.
Except as set forth on Schedule 3.17, at all times since February 17,
1996, Seller has complied in all respects with all Legal Requirements relating
to employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health and plant closing.
Except as set forth on Schedule 3.17, Seller is not liable for the payment
of any compensation, Damages, taxes, fines, penalties, or other amounts,
however, designated, for failure to comply with any of the foregoing Legal
Requirements.
3.18. Intellectual Property Rights of Seller.
A. Definitions. As used in this Agreement, and in addition to any
other terms defined in this Agreement, the following terms shall have the
following meanings.
(i) "Software" means any computer program, operating system,
applications system, firmware or software of any nature, whether operational,
under development or inactive, including all object code, source code, technical
manuals, compilation procedures, execution procedures, flow charts, programmers
notes, user manuals and other documentation thereof, whether in machine-readable
form, programming language or any other language or symbols and whether stored,
encoded, recorded or written on disk, tape, film, memory device, paper or other
media of any nature.
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(ii) "Owned Software" means all Software owned by the Company,
whether purchased from a third party, developed by or on behalf of the Company,
currently under development or otherwise.
(iii) "Customer Software" means all Software, other than the
Owned Software, that is, directly or through Distributors, either (x) offered or
provided to customers of the Company or (y) used by the Company to provide
information or services to customers of the Company for a fee.
(iv) "Company Software" means the Owned Software and the
Customer Software.
(v) "Other Software" means all Software, other than the
Company Software, that is licensed by the Company from third parties or
otherwise used by Seller for any purpose whatsoever.
(vi) "Intangible" means:
(1) Patents, patent applications, patent disclosures,
all re-issues, divisions, continuations, renewals, extensions and
continuation-in-parts thereof and improvements thereto;
(2) Trademarks, service marks, trade dress, logos, trade
names, and corporate names and registrations and applications for Registration
thereof and all goodwill associated therewith;
(3) Copyrights, Registrations thereof and applications
for Registration thereof;
(4) Maskworks, Registrations thereof and applications
for Registration thereof;
(5) Trade secrets and confidential business information
(including ideas, formulas, compositions, inventions, whether patentable or
unpatentable and whether or not reduced to practice, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, flow charts, processes, ideas, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing, and
business data, pricing and cost information, business and marketing plans, and
customer and supplier lists and information);
(6) Other proprietary rights;
(7) All income, royalties, Damages and payments due at
Closing or thereafter with respect to the Owned Software, Customer Software,
Other Software, other Intangibles and all other rights thereunder including,
without limitation, Damages and
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payments for past, present or future infringements or misappropriations thereof,
the right to sue and recover for past, present or future infringements or
misappropriations thereof;
(8) All rights to use all of the foregoing forever; and
(9) All other rights in, to, and under the foregoing in
all countries.
B. Ownership and Right to License.
(i) Except as set forth in Schedule 3.18 of the Disclosure
Schedule, to the Knowledge of the Sellers, at all times since February 17, 1996,
the Company has good and marketable title to the Owned Software and Intangibles
attributable to the Owned Software, and have the full right to use all of the
Customer Software and Other Software, and Intangibles attributable thereto, as
used or required to operate the Company's businesses as currently conducted and
as contemplated in the future in accordance with the Company's written business
plans, free and clear of any liens, claims, charges or encumbrances which would
affect the use of such Software in connection with the operation of the
Company's business as currently conducted and as contemplated in the future in
accordance with the Company's written business plans.
(ii) To the Knowledge of Sellers, no rights of any third party
not previously obtained are necessary to market, license, sell, modify, update,
and/or create derivative works for any Software as to which the Company take any
such action in its respective business as currently conducted and as
contemplated in the future in accordance with the Company's written business
plans.
(iii) To the Knowledge of Sellers, none of the Software or
Intangibles or their respective past or current uses by or through the Company
has violated or infringed upon, or is violating or infringing upon, any
Software, patent, copyright, trade secret or other Intangible of any Person. To
the knowledge of Sellers, the Company has adequately maintained all trade
secrets and copyrights with respect to such Software.
To the Knowledge of Sellers, the Company has performed all obligations
imposed upon them with regard to the Customer Software and Other Software which
are required to be performed by them on or prior to the date hereof, and the
Company nor, to the Knowledge of Sellers, any other party, is in breach of or
default thereunder in any respect, nor to the Sellers' Knowledge is there any
event which with notice or lapse of time or both would constitute a default
thereunder.
3.19. Certain Payments. Since February 17, 1996, neither the Company nor
any director, officer, agent, or employee of the Company, nor to Sellers'
Knowledge any other Person associated with or acting for or on behalf of the
Company, has directly or indirectly:
A. Made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in
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money, property, or services (i) to obtain favorable treatment in securing
business; (ii) to pay for favorable treatment for business secured; (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of the Company or any affiliate of the Company or (iv) in violation
of any Legal Requirement.
B. Established or maintained any fund or asset that has not been
recorded in the books and records of the Company.
3.20. Disclosure.
A. No representation or warranty of Sellers in this Agreement and no
statement in the Disclosure Schedule omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
B. No notice given pursuant to Section 5.5. will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
C. There is no fact known to Sellers that has specific application
to the Company or Sellers (other than general economic or industry conditions)
and that materially adversely affects or, as far as Sellers can reasonably
foresee, materially threatens, the assets, business, prospects, financial
condition, or results of operations of Seller (on a consolidated basis) that has
not been set forth in this Agreement or the Disclosure Schedule.
3.21. Brokers or Finders. The Company, Sellers and its agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
3.22. Fairness Opinion. The Board of Directors of the Company has received
the opinion of Clarkston & Williams, LLC, dated as of the Closing Date, to the
effect that, as of the date of such opinion, the terms of the Contemplated
Transactions are fair, from a financial point of view, to the Company's
shareholders.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers as follows:
4.1. Organization and Good Standing. Buyer is a Texas corporation.
4.2. Authority. This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the closing documents set forth in
Section 2.5.B (collectively, the "Buyer's Closing Documents"), the Buyer's
Closing Documents will constitute the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this
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Agreement and the Buyer's Closing Documents and to perform its obligations under
this Agreement and the Buyer's Closing Documents.
4.3. Investment Intent. Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
4.4. Certain Proceedings. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.5. Brokers or Finders. Buyer and its agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold Seller harmless from any such payment alleged to be due by or
through Buyer as a result of the action of Buyer or its officers or agents.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE.
5.1. Access and Investigation. Between the date of this Agreement and the
Closing Date, the Company will, and will cause the Company and its
Representatives to:
A. Afford Buyer and its Representatives and prospective lenders and
their Representatives (collectively, "Buyer's Advisors") full and free access to
the Company's personnel, properties (including subsurface testing), contracts,
books and records, and other documents and data;
B. Furnish Buyer and Buyer's Advisors with copies of all such
contracts, books and records, and other existing documents and data as Buyer may
reasonably request; and
C. Furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information as Buyer may reasonably
request.
5.2. Operation of the Business of the Company. Between the date of this
Agreement and the Closing Date, the Company will:
A. Conduct the business of the Company only in the Ordinary Course
of Business;
B. Use its commercially reasonable efforts to preserve intact the
current business organization of the Company, keep available the services of the
current officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
C. Confer with Buyer concerning operational matters of a material
nature; and
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D. Otherwise report periodically to Buyer concerning the status of
the business; operations, and finances of the Company.
5.3. Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, the Company
will not without the prior consent of Buyer, take any affirmative action, or
fail to take any reasonable action within their or its control, as a result of
which any of the changes or events listed in Section 3.13. is likely to occur.
5.4. Required Approvals. As promptly as practicable after the date of this
Agreement, Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company to:
A. Cooperate with Buyer with respect to all filings that Buyer
reasonably elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions; and
B. Cooperate with Buyer in obtaining all required Consents.
5.5. Notification. Between the date of this Agreement and the Closing
Date, Sellers will promptly notify Buyer in writing if Sellers become aware of
any fact or condition that causes or constitutes a Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if Sellers
become aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition.
Should any such fact or condition require any change in the Disclosure
Schedule if the Disclosure Schedule were dated the date of the occurrence or
discovery of any such fact or condition, Sellers will promptly deliver to Buyer
a supplement to the Disclosure Schedule specifying such change. During the same
period, each Seller will promptly notify Buyer of the occurrence of any Breach
of any covenant of Sellers in this Section 5. or of the occurrence of any event
that may make the satisfaction of the conditions in Section 7. impossible or
unlikely.
5.6. No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 9., the Company and Sellers will not, and will
cause their Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of the Company, or any of the capital stock of the
Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
5.7. Closing of Bank Accounts. Sellers shall cause the closing of all the
Company bank accounts for which Sellers, or its officers and directors, have
sole signature authority.
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6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1. Approvals of Governmental Bodies/Third Party Consents. As promptly as
practicable after the date of this Agreement, Buyer will, and will cause each of
its Related Persons to, make all filings required by Legal Requirements to be
made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and
will cause each Related Person to:
A. Cooperate with Sellers with respect to all filings that the
Company is required by Legal Requirements to make in connection with the
Contemplated Transactions; and
B. Cooperate with Sellers in obtaining all consents identified in
Schedule 3.2 of the Disclosure Schedule; provided that this Agreement will not
require Buyer to dispose of or make any change in any portion of its business or
to incur any other burden to obtain a Governmental Authorization.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1. Accuracy of Representations.
A. All of Sellers' representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Schedule.
B. Each of Sellers' representations and warranties in Article 3.
must have been accurate in all respects as of the date of this Agreement, and
must be accurate in all respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure
Schedule.
7.2. Sellers' Performance.
A. All of the covenants and obligations that Seller or the Company
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
B. Each document required to be delivered pursuant to Section 2.4.
must have been delivered, and each of the other covenants and obligations in
Section 5. must have been performed and complied with in all respects.
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C. The results of any investigation performed by Buyer in connection
with Section 5.1. shall be satisfactory to Buyer in its sole discretion.
7.3. Consents. Each of the Consents identified in Schedule 3.2 of the
Disclosure Schedule must have been obtained and must be in full force and
effect.
7.4. Additional Documents. Sellers shall deliver such other documents as
Buyer may reasonably request for the purpose of (i) evidencing the accuracy of
any of Sellers' representations and warranties; (ii) evidencing the performance
by Seller or the Company of, or the compliance by Sellers or the Company with,
any covenant or obligation required to be performed or complied with by such
Sellers or the Company; (iii) evidencing the satisfaction of any condition
referred to in this Section 7. or (iv) otherwise facilitating the consummation
or performance of any of the Contemplated Transactions.
7.5. No Proceedings. Since the date of this Agreement, there must not have
been commenced or Threatened against Buyer, or against any Person affiliated
with Buyer, any Proceeding (i) involving any challenge to, or seeking Damages or
other relief in connection with, any of the Contemplated Transactions or (ii)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
7.6. No Claim Regarding Stock Ownership or Sale Proceeds. There must not
have been made or Threatened by any Person any claim asserting that such Person
(i) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in, the Company or (ii) is entitled to all or any portion of
the Purchase Price payable for the Shares.
7.7. No Prohibition. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (i) any applicable Legal
Requirement or Order or (ii) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
7.8. Employment Agreement. On or before the Closing Date, Kris Hutchinson,
Stephen Hyser and shall have entered into an employment agreement with Seller.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing are subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
8.1. Accuracy of Representations. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this
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Agreement and must be accurate in all material respects as of the Closing Date
as if made on the Closing Date.
8.2. Buyer's Performance.
A. All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
B. Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.5.
8.3. Consents. Each of the Consents identified in Schedule 3.2 of the
Disclosure Schedule must have been obtained and must be in full force and
effect.
8.4. Additional Documents. Buyer must have caused the following documents
to be delivered to Sellers such other documents as Sellers may reasonably
request for the purpose of (i) enabling their counsel to provide the opinion
referred to in Section 2.5.A.(iii); (ii) evidencing the accuracy of any
representation or warranty of Buyer; (iii) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer; (iv) evidencing the satisfaction of any
condition referred to in this Section 8. or (v) otherwise facilitating the
consummation of any of the Contemplated Transactions.
8.5. No Injunction. There must not be in effect any Legal Requirement or
any injunction or other Order that (i) prohibits the sale of the Shares by
Sellers to Buyer and (ii) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
9. TERMINATION.
9.1. Termination Events.
This Agreement may, by notice given prior to or at the Closing, be
terminated:
A. By either Buyer or Sellers if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived;
B. (i) By Buyer if any of the conditions in Section 7. have not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date;
(ii) By Sellers, if any of the conditions in Section 8. have
not been satisfied of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Sellers to comply with
their obligations under this Agreement) and Sellers have not waived such
condition on or before the Closing Date; or
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C. By mutual consent of Buyer and Sellers; or
D. By either Buyer or Sellers if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before April 1,
1999, or such later date as the parties may agree upon.
9.2. Effect of Termination. Each party's right of termination under
Section 9.1. is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.1., all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 12.1. and 12.3. will survive; provided,
however, that if this Agreement is terminated by a party because of the Breach
of the Agreement by the other party or because one (1) or more of the conditions
to the terminating party's obligations under this Agreement is not satisfied as
a result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES.
10.1. Agreement by Sellers to Indemnify. Sellers (the "Seller Indemnifying
Party"), agree that they will jointly and severally indemnify and hold Buyer
harmless in respect of the aggregate of all indemnifiable Damages of Buyer.
For this purpose, "indemnifiable Damages" of Buyer means the aggregate of
all Damages incurred or suffered by Buyer resulting from:
A. Any inaccurate representation or warranty made by Sellers in or
pursuant to this Agreement;
B. Any default in the performance of any of the covenants or
agreements made by Sellers or the Company in this Agreement; or
C. The failure of any Seller to pay, discharge or perform any
liability or obligation of Sellers or of the Company resulting from the
operation of the Company's business prior to the Closing Date.
Without limiting the generality of the foregoing, with respect to the
measurement of "indemnifiable Damages", Buyer shall have the right to be put in
the same financial position as it would have been had each of the
representations and warranties of Sellers been true and correct and had each of
the covenants of Sellers and the Company been performed in full.
The amount of any indemnifiable Damages otherwise payable to Buyer
hereunder shall be reduced if the indemnifiable Damages incurred by Buyer will
provide Buyer with income tax deductions or credits. The amount of the reduction
shall be the amount of the actual cash tax savings realized by Buyer as a result
of such deductions or credits, discounted to its present value
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as of the date of the payment of the indemnifiable Damages from the date such
indemnifiable Damages were incurred by Buyer at the rate of interest charged on
such date by the Internal Revenue Service on underpayment of taxes.
The foregoing obligation of Seller Indemnifying Party to indemnity Buyer
shall be subject to each of the following principles or qualifications:
1. Each of the representations and warranties made by Sellers in
this Agreement or pursuant hereto, shall survive for a period of two (2) years
after the Closing; provided, however, that the representations and warranties
made by Sellers to the extent they relate to Sellers' title to the Shares shall
survive forever and that the representations and warranties made by Sellers in
Section 3.8. hereof ("Taxes") shall in each case survive until the second (2nd)
anniversary of the later of:
A. The date on which applicable period of limitation on
assessment or refund of tax has expired; or
B. The date on which the applicable taxable year (or portion
thereof) has been closed.
No claim for the recovery of indemnifiable Damages may be asserted by
Buyer against Seller Indemnifying Party or their successors in interest after
such representations and warranties shall be thus extinguished; provided,
however, that claims first asserted in writing within the applicable period
shall not thereafter be barred.
10.2. Agreements by Buyer to Indemnify. Buyer (the "Buyer Indemnifying
Party"), agrees to indemnify and hold Sellers (the "Seller Indemnified Party")
harmless in respect of the aggregate of all indemnifiable Damages of any of
Seller Indemnified Parties.
For this purpose, "indemnifiable Damages" of the of Seller Indemnified
Party means the aggregate of all Damages incurred or suffered by the Seller
Indemnified Party resulting from:
A. Any inaccurate representation or warranty made by Buyer or
pursuant to his Agreement; or
B. Any default in the performance of any of the covenants or
agreements made by Buyer in this Agreement.
Without limiting the generality of the foregoing, with respect to the
measurement of "indemnifiable Damages", the Seller Indemnified Party shall have
the right to be put in the same financial position as they would have been had
each of the representations and warranties of Buyer Indemnifying Party been true
and correct and had each of the covenants of Buyer Indemnifying Party been
performed in full.
The amount of any indemnifiable Damages otherwise payable to any Seller
Indemnified Party hereunder shall be reduced if the indemnifiable Damages
incurred by Seller Indemnified
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Party will provide such Party with income tax deductions or credits. The amount
of the reduction shall be the amount of the actual cash tax savings realized by
Seller Indemnified Party as a result of such deductions or credits discounted to
its present value as of the date of the payment of the indemnifiable Damages
from the date such indemnifiable Damages were incurred by Seller Indemnified
Party at the rate of interest charged on such date by the Internal Revenue
Service on underpayment of taxes.
The foregoing obligation of Buyer Indemnifying Party to indemnify Seller
Indemnified Party shall be subject to each of the following principles or
qualifications:
10.2.1 Each of the representations and warranties made by Buyer in
Article 4 of this Agreement shall survive for a period of two (2) years after
the Closing Date, and thereafter all such representations and warranties shall
be extinguished.
No claim for the recovery of indemnifiable Damages pursuant to clause (i)
of Section 10.2. may be asserted by Seller indemnified Party against Buyer
Indemnifying Party or its successors in interest after such representations and
warranties shall be thus extinguished; provided, however, that claims first
asserted in writing within the applicable period shall not thereafter be barred.
10.3. Matters Involving Third Parties. If any third party shall notify
Buyer or Sellers (the "Indemnified Party") with respect to any matter which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 10., then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent that) the Indemnifying Party thereby is
Damaged.
If any Indemnifying Party notifies the Indemnified Party within fifteen
(15) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then:
A. The Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice satisfactory to the Indemnified Party;
B. The Indemnified Party may retain separate co-counsel at its sole
cost and expense (except that the Indemnifying Party will be responsible for the
fees and expenses of the separate co-counsel to the extent the Indemnified Party
concludes that the counsel the Indemnifying Party has selected has a conflict of
interest);
C. The Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably); and
D. The Indemnifying Party will not consent to the entry of any
judgment with respect to the matter, or enter into any settlement which does not
include a provision whereby the
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plaintiff or claimant in the matter releases the Indemnified Party from all
liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld or delayed unreasonably).
If no Indemnifying Party notifies the Indemnified Party within fifteen
(15) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then the Indemnified Party
may defend against, or enter into any settlement with respect to, the matter in
any manner it may deem appropriate.
11. POST-CLOSING AGREEMENTS.
11.1. Consistency in Reporting. Each party hereto agrees that: (i) the
transaction is intended to qualify as a tax-free transaction under the I.R.C.;
(ii) the transaction shall be reported for Federal income tax purposes as a
tax-free transaction; (iii) for purposes of all financial statements, tax
returns and reports, and communications with third parties, the transactions
contemplated in this agreement and ancillary or collateral transactions will be
treated as a tax-free transaction; and (iv) if the characterization of any
transaction contemplated in this agreement or any ancillary or collateral
transaction is challenged, each party hereto will testify, affirm and ratify
that the characterization contemplated in such agreement was with the
characterization intended by the party; provided, however, that nothing herein
shall be construed as giving rise to any obligation if the reporting position is
determined to be incorrect by final decision of a court of competent
jurisdiction.
11.2. Performance of the Company. Sellers asserts that the "Corporate
Twelve (1.2) month Budget" (Exhibit D) is sound and that the projected revenues
and profits are reasonable and will be attained. Based on the limited operating
history of the Company, monthly performance reviews will be conducted by Buyer
and should the Company fall to achieve at least eighty-five percent (85%) of the
revenues and profits, cumulative year to date as projected per Exhibit D,
notwithstanding that the foregoing would constitute a breach of this agreement,
changes and adjustments may be implemented by Buyer to reduce Sellers' funding
requirements and Buyer's capital exposure.
11.3. Remedies for Breach of Agreements by Sellers. Should Sellers or the
Company [ILLEGIBLE] each any term or condition of this Section, the following
shall, at the option of Buyer, occur:
A. The Company and the former shareholders of the Company shall
execute a stock swap with Buyer, whereby such shareholders shall return all
Buyer Stock to Buyer, and shall receive one hundred percent (100%) of the
capital stock, voting and nonvoting of the Company. Buyer shall not guarantee
that the Company shall be returned to the Shareholders in same or greater net
worth determined in accordance with standard accounting principles, as of the
date of Buyer's acquisition of the Company. Any outstanding notes or unpaid
loans to the Company by Buyer, unless otherwise agreed upon by both parties,
will immediately become due payable.
B. These remedies shall not be exclusive.
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11.4 Authorized Buyer's Stock. On each of the first and second year
anniversaries hereof, Buyer shall transfer to each of Stephen Hyser and Kris
Hutchinson an aggregate of 75,000 shares of Buyer's Stock provided that the
Employment Agreements with each of Stephen Hyser and Kris Hutchinson are still
in effect on such dates. If one of such Employment Agreement is not in effect on
either of such dates, the non-employed party shall not receive any stock and the
employed party shall receive 37,500 shares of Buyer's Stock. If none of such
Employment Agreements are not in effect as of such dates, no share of Buyer's
Stock shall be transferred to the non-employed parties.
B. These remedies shall not be exclusive.
12. GENERAL PROVISIONS.
12.1. Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
Sellers will cause the Company not to incur any out-of-pocket expenses in
connection with the Contemplated Transactions. In the event of termination of
this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
12.2. Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer determines. Unless consented
to by Buyer in advance or required by Legal Requirements, prior to the Closing
Seller shall, and shall cause the Company to, keep as Agreement strictly
confidential and may not make any disclosure of this Agreement to any person. If
one of such Employment Agreement is not effective as of such dates the
non-employed party shall not receive any stock and the employed party shall
receive 37,500 shares of Buyer's Stock. If none of such Employment Agreements
are effective as of such dates no shares of Buyer's Stock shall be transferred
to the non-employed parties.
Sellers and Buyer will consult with each other concerning the means by
which the Company's employees, customers, and suppliers and others having
dealings with the Company will be informed of the Contemplated Transactions, and
Buyer will have the right to be present [ILLEGIBLE] any such communication.
12.3. Confidentiality. Between the date of this Agreement and the Closing
Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, [ILLEGIBLE] advisors of Buyer, Sellers
and Company to maintain in confidence, and not use to the detriment of another
party or any written, oral, or other information obtained in confidence from
other party or in connection with this Agreement or the Contemplated
Transactions, unless:
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A. Such information is already known to such party or to others not
bound by a duty of confidentiality or such information becomes publicly
available through no fault of such party;
B. The use of such information is necessary or appropriate in making
any filing or obtaining any consent or approval required for the consummation of
the Contemplated Transactions; or
C. The furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Seller waives, and
will upon Buyer's request cause Seller to waive, any cause of action, right, or
claim arising out of the access of Buyer or its representatives to any trade
secrets or other confidential information of Seller.
12.4. Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (i) delivered by hand (with written confirmation of receipt); (ii)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested or (iii) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller: Virtual Enterprise, Inc.
1526 A Dekalb Avenue
Atlanta, Georgia 30307
With a copy to: Clarkston & Williams, LLC
4323 Mundy Mill Road
Suite 200
Oakwood, Georgia 30566
Buyer: CONCAP, Inc.
3700 Crestwood Parkway
Suite 1000
Duluth, GA 30096
With a copy to: Paul, Hastings, Janofsky & Walker, LLP
Suite 2400
600 Peachtree Road, N.E.
Atlanta, Georgia 30308-2222
Attention: Michael T. Voytek
Telecopy No.: (404) 815-2227
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12.5. Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Georgia, County of DeKalb, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of Georgia, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
12.6. Further Assurances. The parties agree (i) to furnish upon request to
each other such further information; (ii) to execute and deliver to each other
such other documents and (iii) to do such other acts and things, all as the
other party may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to in this Agreement.
12.7. Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege.
To the maximum extent permitted by applicable law:
A. No claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one (1) party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the other party;
B. No waiver that may be given by a party will be applicable except
in the specific instance for which it is given; and
C. No notice to or demand on one (1) party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12.8. Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
12.9. Disclosure Schedule.
A. The disclosures in the Disclosure Schedule; and those in any
Supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
-33-
<PAGE>
B. In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Schedule (other than an
exception expressly set forth as such in the Disclosure Schedule with respect to
a specifically identified representation or warranty), the statements in the
body of this Agreement will control.
12.10. Assignments, Successors and No Third-Party Rights. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, which will not be unreasonably withheld, except that Buyer
may assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
12.11. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.12. Section Headings; Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
12.13. Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
12.14. Governing Law. This Agreement will be governed by the laws of the
State of Georgia without regard to conflicts of laws principles.
12.15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
-34-
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER: SELLERS:
CONCAP, INC.
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
---------------------- ------------------------------------
Title: MEMBER OF THE BOARD Title: President
------------------- ---------------------------------
Individually By:
By: /s/ [ILLEGIBLE]
------------------------------------
By: /s/ [ILLEGIBLE]
------------------------------------
By:
------------------------------------
By:
------------------------------------
COMPANY:
VIRTUAL ENTERPRISE, INC.
By: /s/ Kris Hutchinson
------------------------------------
Name: Kris Hutchinson
------------------------------
Title: President
-----------------------------
-35-
<PAGE>
SCHEDULES
-36-
<PAGE>
Disclosure Schedules to Virtual Enterprise, Inc. Stock Purchase Agreement
SELLER:
CLARKSON & WILLIAMS, L.L.C.
/s/ Jason Williams
----------------------------------------
/s/ Principal/Owner
----------------------------------------
INDIVIDUALLY BY:
/s/ Kris Hutchinson
----------------------------------------
KRIS HUTCHINSON
/s/ Tammy Hutchinson
----------------------------------------
TAMMY HUTCHINSON
/s/ Stephen Hyser
----------------------------------------
STEPHEN HYSER
COMPANY:
VIRTUAL ENTERPRISES, INC.
Kristofer Hutchinson
----------------------------------------
President
----------------------------------------
/s/ Kris Hutchinson
<PAGE>
AMENDMENT TO STOCK PURCHASE AGREEMENT
MADE AS OF
MARCH 31, 1999,
BETWEEN
CONCAP, INC.,
BUYER,
AND
VIRTUAL ENTERPRISE, INC.
KRIS HUTCHINSON, STEPHEN HYSER, TAMMY HUTCHINSON,
AND CLARKSON & WILLIAMS, LLC, INDIVIDUALLY
SELLERS
<PAGE>
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (the "First Amendment") is made as of
March 31, 1999, by among CONCAP, Inc., a Texas corporation (the "Buyer"), and
Virtual Enterprises, Inc., a Georgia Corporation, Kris Hutchinson, Stephen
Hyser, Tammy Hutchinson and Clarkson & Williams, L.L.C. (each individually, a
"Seller" and collectively "Sellers") and Virtual Enterprise, Inc. (the
"Company").
WHEREAS, the Buyer, the Sellers and the Company (hereinafter referred to as the
"Parties") desire to make certain amendments to the Stock Purchase Agreement
(the "Agreement") entered into by the Parties as of March 31, 1999 pursuant to
Section 12.8 of the Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein, the Parties hereby agree as follows:
1. Buyer agrees to forgive the fact that the financial statements submitted
in the due diligence package were misstated as outlined in the Financial
Amendment.
2. Buyer assumes the following debts in the form of minimum monthly payments:
GE Capital Card Services with a balance of $6,780.68; MBNA Platinum Plus
card with a balance of $11,121.53; and a Suntrust loan in the amount of
$23,000.00.
3. Seller agrees to, within five (5) days of Closing, execute a convertible
debenture with shareholders who have outstanding debts to Company.
4. Buyer reserves the right to rescind the Agreement if the gross revenues
generated in the Elitetech.com division falls below twenty thousand
dollars ($20,000.00) per month. Furthermore, if the transaction is
rescinded, Buyer will recoup all monies expended for the payment of the
loans listed in item number two of this Amendment.
5. Notwithstanding anything to the contrary contained herein or in the
Agreement, Tammy Hutchinson shall have no liability to Buyer whatsoever
(including, without limitation, pursuant to Section 10.1 of the Agreement)
for any representation or warranty made in the Agreement or this First
Amendment. In exchange for Buyer agreeing to release Tammy Hutchinson from
any liabilities she might have or may have under the Agreement or this
First Amendment, Tammy Hutchinson hereby waives and releases any claims
whatsoever that she has or may have against Buyer or Buyer's employees,
directors, officers, agents and affiliate companies.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
to Stock Purchase Agreement as of the date first written above.
BUYER: SELLER:
CONCAP, INC. CLARKSON & WILLIAMS, L.L.C.
By: /s/ Jason Kiszonak /s/ Jason Williams
------------------- ----------------------------------------
JASON KISZONAK /s/ Principal/Owner
- ----------------------- ----------------------------------------
Sr. VP Public Relations
INDIVIDUALLY BY:
/s/ Kris Hutchinson
----------------------------------------
KRIS HUTCHINSON
/s/ Tammy Hutchinson
----------------------------------------
TAMMY HUTCHINSON
/s/ Stephen Hyser
----------------------------------------
STEPHEN HYSER
COMPANY:
VIRTUAL ENTERPRISES, INC.
By: Kris Hutchinson
----------------------------------------
President
----------------------------------------
/s/ Kris Hutchinson
<PAGE>
Financial Amendment
Seller agrees that the financial statements submitted in the due diligence
package were misstated due to the inclusion of Hutchworks, Inc., which is not a
party to this transaction.
BUYER: SELLER:
CONCAP, INC. CLARKSON & WILLIAMS, L.L.C.
By: /s/ Jason Kiszonak /s/ Jason Williams
------------------- ----------------------------------------
JASON KISZONAK /s/ Principal/Owner
- ----------------------- ----------------------------------------
Sr. VP Public Relations
INDIVIDUALLY BY:
/s/ Kris Hutchinson
----------------------------------------
KRIS HUTCHINSON
/s/ Tammy Hutchinson
----------------------------------------
TAMMY HUTCHINSON
/s/ Stephen Hyser
----------------------------------------
STEPHEN HYSER
COMPANY:
VIRTUAL ENTERPRISES, INC.
Kris Hutchinson
----------------------------------------
President
----------------------------------------
/s/ Kris Hutchinson
<PAGE>
CERTIFICATE
In compliance with Section 2.4 of the Stock Purchase Agreement dated as of
March 31, 1999 (the "Agreement"), by and between CONCAP, INC. (the "Company"),
and each of Virtual Enterprises, Inc., Kris Hutchinson, Stephen Hyser, Tammy
Hutchinson and Clarkston & Williams, LLC, the undersigned Scott Schuster,
President of the Company, does hereby certify on behalf of the Company and not
individually, that the representations and warranties contained in Section 4 of
the Agreement and in any certificate, instrument, schedule or agreement or other
writing delivered by the Company or Sellers in connection with the transactions
contemplated by the Agreement are true and correct as of the Closing Date (as
defined in the Agreement).
IN WITNESS WHEREOF, the undersigned has hereunto executed this Certificate
this 29th day of April, 1999.
CONCAP, INC.
By: /s/ Lee Davis
------------------------------------
Name: Lee Davis
Title: Sr. V.P. of Mergers
and Acquisition
<PAGE>
CERTIFICATE
In compliance with Section 2.4 of the Stock Purchase Agreement dated as of
March 31, 1999 (the "Agreement"), by and between CONCAP, INC. and each of
Virtual Enterprises, Inc. (the "Company"), Kris Hutchinson, Stephen Hyser, Tammy
Hutchinson and Clarkston & Williams LLC the undersigned do hereby certify that
the representations and warranties contained in Section 3 of the Agreement and
in any certificate, instrument, schedule or agreement or other writing delivered
by the Company or Sellers (as defined in the Agreement) in connection with the
transactions contemplated by the Agreement are true and correct as of the
Closing Date (as defined in the Agreement).
IN WITNESS WHEREOF, the undersigned has hereunto executed this Certificate
this 29th day of April, 1999.
VIRTUAL ENTERPRISES, INC.
By: /s/ Kris Hutchinson
------------------------------------
Name: Kris Hutchinson
Title: President
/s/ Stephen Hyser (Seal)
----------------------------------------
Stephen Hyser
/s/ Kris Hutchinson (Seal)
----------------------------------------
Kris Hutchinson
/s/ Tammy Hutchinson
----------------------------------------
Tammy Hutchinson
CLARKSTON & WILLIAMS, LLC
By: /s/ Jason Williams
------------------------------------
Name: Jason Williams
Title: Principal/Owner
<PAGE>
LEGAL OPINION OF COUNSEL TO VIRTUAL ENTERPRISE, INC.
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia and is duly qualified to
do business. To our knowledge, the Company has no office and owns no
property outside Georgia.
2. The Company has the corporate power and authority to own or lease its
property and to carry on its business as it is now being conducted. To our
knowledge, the Company has complied in all material respects with all
federal, state and local laws, rules and regulations applicable to its
properties and the conduct of its business.
3. The authorized capital stock of the Company consists of 10,000 shares of
common stock, no par value per share, or which 1000 shares of common stock
of the Company are issued and outstanding as of the date hereof. As of the
date of this opinion, all of the issued and outstanding shares of capital
stock of the Company ore owned by the Shareholders as follows: All of the
outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid, and nonassessable. No outstanding shares have
been issued in violation of any preemptive rights that have not been
waived. The Shareholders have not made any transfer of the outstanding
shares of the capital-stock of the Company except for the transfer to the
Buyer as provided in the Definitive Agreement (the "Agreement"). Upon the
transfer, and assuming the Purchaser is a bona fide purchaser and has
complied with all of the requirements of the Agreement, the Purchaser will
have good and marketable title to such shares, free from any claims,
liens, encumbrances or charges whatsoever.
4. We have no knowledge of any outstanding options, warrants, subscriptions,
calls or other rights, commitments, undertakings or understandings by
which any person has the right to purchase or otherwise acquire any shares
of capital stock of the Company, whether issued or unissued, except for
rights in favor of the Purchaser pursuant to the Acquisition Agreement. We
have no knowledge that there are any rights, obligations, or undertakings
convertible into capital stock of the Company.
5. The Company has the corporate power and authority to enter into the
Agreement, any agreements, certificates or documents contemplated thereby
or in connection therewith (the "Operative Documents") to which it is
party and to perform its obligations provided for therein, all of which
have been duly authorized by the necessary and proper action of the
directors of the Company. Each of the Shareholders has the power and
authority to execute and deliver the Operative Documents to which he or
she is a party and to perform his or her obligations thereunder. Kris
Hutchinson and Stephen Hyser, as officers of the Company, have the
authority to execute and deliver the Operative Documents to which the
Company is party on behalf of the Company and to cause the Company to
perform its obligations thereunder. We have no knowledge of any agreement
(other than the Agreement) that contains restrictions on the voting, sale
or transfer or any outstanding shares of capital stock of the Company
other than those which shall have been waived by the necessary parties
prior to Closing.
6. The Agreement has been duly executed by and constitutes the binding
obligation of all of the signatories thereto, enforceable against them in
accordance with their terms except as hereinafter provided. Neither the
execution and deliver of the Operative Documents by the Company, as
applicable, nor the performance of its obligations under the Operative
Documents will constitute a violation of, or any breach or default (with
or without the giving of notice or the passage of time) under, (i) the
articles of incorporation or bylaws of the Company, or (ii) to our
knowledge, any judgment, writ, order or decree, specific to the Company,
of any federal or state court or other governmental authority or, (iii) to
our knowledge, any material provision of any contract or agreement listed
in the Disclosure Schedules to the Agreement.
7. To our knowledge, there are no actions, suits, claims, investigations or
proceedings pending or threatened against the Company at law or in equity
or before or by any federal, state, municipal or
<PAGE>
other governmental department, commission, board, bureau, agency or
instrumentality that would, if decided adversely, after consideration of
all defenses, have a material adverse effect on the assets or operation of
the business of the Company.
8. All proceedings required by law or by the provisions of the Operative
Documents to be taken by the Shareholders or the Company in connection
with the transactions contemplated therein have been duly and validly
taken.
This 28th day of April, 1999.
Clarkson & Williams, L.L.C.
/s/ Jason Williams
----------------------------------------
Jason Williams
4323 Mundy Mill Road
Suite 200
Oakwood, GA 30566
(t) 770-297-0000
(f) 770-448-5846
[email protected]
EMPLOYMENT AGREEMENT
AGREEMENT made this 15th day of July 1998, between Elite, Inc., a Texas
corporation, hereinafter sometimes called the "Employer", having its principal
place of business in Duluth, Georgia, and Scott Schuster, hereinafter sometimes
called the "Employee".
WHEREAS, the Employee and Employer desire to set forth in writing their
contract with respect to Employee's employment by Employer;
NOW, THEREFORE, in consideration of their mutual promises set forth
herein, the parties hereby agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby accepts
such employment, upon the terms and conditions set forth in this
Agreement.
2. DUTIES AND AUTHORITY.
A. Employee will occupy the position of Chief Executive Officer,
(hereinafter referred to as "Position" or "Assignment") with the
Employer. Employee will also be appointed as a member of the board.
B. In this position, Employee will have the responsibility and
authority associated with said position, subject to the control of
the Board of Directors, and have general supervision, direction and
control, as necessary, over the business and affairs of the
Corporation and its Employees. Employee will be primarily
responsible for carrying out orders and resolutions of the Board of
Directors and such duties as may from time to time be assigned to
Employee by the Board of Directors.
C. Employee agrees to devote his full time attention and best efforts
to the performance of employment hereunder.
3. TERM OF EMPLOYMENT. The term of employment shall begin on the date of this
Agreement, and shall extend for a period of three (3) consecutive years or
until terminated as provided herein.
4. COMPENSATION. Employee will receive compensation during the term of this
Agreement as follows:
A. A base annual salary of two hundred fifty thousand dollars per year
($250,000) payable either bi-monthly, weekly, semi-weekly or monthly
at the discretion of the Employer. The base salary shall be adjusted
at the end of each year of employment as an increase.
B. An incentive salary (Bonus) equal to a maximum of three percent (3)
of the adjusted net profits (hereinafter defined) of the Employer
during each fiscal year beginning or ending during the term of this
Agreement. "Adjusted net profit" shall be the net profit before
federal and state income taxes, determined in accordance with
accepted accounting practices by the independent accounting firm
employed by the Employer as auditors and adjusted to exclude: (i)
any incentive salary payments paid pursuant to this Agreement; (ii)
any contributions to pension and/or profit-sharing plans; (iii) any
extraordinary gains or losses (including, but not limited to, gains
or losses on disposition of assets); (iv) any refund or deficiency
of federal and state income taxes paid in a prior year; and (v) any
provision for federal or state income taxes made in prior years
which is subsequently determined as unnecessary. The determination
of the adjusted net profits made by the independent accounting firm
employed by the Employer shall be final and binding upon Employee
and the Employer. For the first and last fiscal years ending and
beginning, respectively, during the term of this Agreement, the
incentive salary shall be computed for the proportion of the fiscal
year coextensive with this Agreement. The incentive salary shall be
paid within sixty (60) days after the end of each fiscal year. The
maximum incentive salary payable for any one year shall not exceed
two hundred percent of Employee's base salary unless authorized by
the Board of Directors.
<PAGE>
5. DEFERRED COMPENSATION. In the event that Employee retires after performing
services for the Employer up until Employee reaches the age of 65 or
retires at an earlier age with the approval of the Employer, Employee will
be entitled to deferred compensation payments after retirement upon the
following terms and conditions:
A. For a period of twenty (20) years ("Retirement Period") Employee
will receive all of the following: (i) Base Payments equal to thirty
percent (30%) of the average total salary (base salary plus
incentive salary) paid to Employee during the last three (3) full
years of employment or based upon his/her total period of
employment, should that period be less that three (3) full years,
prior to the month of retirement ("Retirement Salary Base"); (ii)
Advisor Payments equal to thirty percent (30%) of the Retirement
Salary Base, provided that Employee serves as an advisor and
consultant to the Employer regarding its business. Employee will
hold himself available to perform services at reasonable times at
the request of the Board of Directors of the Employer, consistent
with any business activities Employee may be engaged in at such
time. The Board of Directors of the Employer shall have the right to
require the presence of Employee at any Board of Directors meeting,
not exceeding more than one meeting per month, to act and serve in
the advisory capacity. Attendance at these Board of Directors
meetings shall not be required should Employee's health prevent
attendance; however, Employer shall have the right to demand a
written statement from Employee prepared by a licensed medical
examiner evidencing inability of Employee to attend the meeting or
meetings. Employee will be reimbursed for all reasonable and
necessary travel and incidental expenses incurred by Employee in
connection with the performance of advisory services; and (iii) Non
competition Payments equal to forty percent (40%) of the Retirement
Base Salary provided that Employee will not, directly or indirectly,
perform any business, commercial, or consulting services to any
person, firm, or organization or become associated as a manager,
Employee, director, or owner of any business organization competing
directly or indirectly with the Employer, whether or not compensated
without the prior written consent of Employer. In the event that
Employer and Employee are unable to agree on whether a particular
business in which Employee attempts to engage is directly or
indirectly in competition with the Employer, the matter will be
submitted to arbitration under the provisions of Paragraph 22 of
this agreement.
B. The deferred compensation payments shall be made in equal monthly
installments on the first day of each month, starting in the month
following the month of retirement.
C. In the Event of the death of Employee prior to the expiration of the
"Retirement Period", the Employer will pay all remaining Base
Payments specified in subparagraph A(i), and no other deferred
compensation payments, to any beneficiary of Employee designated by
Employee in a written document filed with the Employer, or in the
absence of such designation, the estate of Employee. The Employer
may elect to pay these remaining Base Payments in a lump sum or in
the equal monthly installments specified in subparagraph B.
D. Employee shall not sell, assign, transfer, or pledge, or in any
other way dispose of or encumber, voluntarily or involuntarily, by
gift, testamentary disposition, inheritance, transfer to any
inter-vivos trust, seizure and sale by legal process, operation of
law, bankruptcy, winding up of a corporation, or otherwise, the
right to receive any deferred compensation pursuant to this
Agreement.
6. RELOCATION. In the event Employee is transferred and assigned to a new
principal place of work located more than fifty (50) miles from Employee's
present residence, Employer will pay for all reasonable relocation
expenses including:
A. Transportation fares, meals, and lodging for Employee, his spouse,
and family from Employee's present residence to any new residence
located near the new principal place of work.
<PAGE>
B. Moving of Employee's household goods and the personal effects of
Employee and Employee's family from Employee's present residence to
the new residence.
C. Lodging and meals for Employee and Employee's family for a period of
not more than sixty (60) consecutive days while occupying temporary
living quarters located near the new principal place of work.
D. Round trip travel, meals and lodging expenses for Employee's family
for no more than two (2) house hunting trips to locate a new
residence, each trip not to exceed fourteen (14) days; and
E. Expenses in connection with the sale of the residence of Employee
including Realtor fees, property appraisals, mortgage prepayment
penalties, termite inspector fees, title insurance policy and
revenue stamps, escrow fees, fees for drawing documents, state or
local sales taxes, mortgage discount points (if in lieu of a
prepayment penalty), and seller's attorney's fees (not to exceed one
percent (1%) of the sales price). At the option of Employee and in
lieu of reimbursement for these expenses, Employee may sell the
residence of Employee to the Employer at the fair market value of
the residence determined by an appraiser chosen by the Employer. The
appraisal will be performed within ten (10) days after notice of
transfer and notice of appraised value will be submitted by report
to Employee. Employee will have the right to sell the residence to
the Employer at the appraised price by giving notice of intent to
sell within thirty (30) days from the date of the appraisal report.
The term "residence" shall mean the property occupied by Employee as
the principal residence at the time of transfer and does not include
summer homes, multiple-family dwellings, houseboats, boats, or
airplanes but does include condominium or cooperative apartment
units and duplexes (two family) occupied by Employee.
7. MEDICAL AND GROUP INSURANCE. At the expense of the Employer, Employer
agrees to include Employee in the group medical and hospital plan of
Employer, when such plan is established.
8. STOCK OPTIONS. Options to acquire common stock of two million (2,000,000)
shares of which options to acquire one million (1,000,000) shares of
common stock at a price of Ten Cents ($0.10) fully vest and become
exercisable on August 31, 2000, options to acquire one million (1,000,000)
shares of common stock at a price of Ten Cents ($0.10) fully vest and
become exercisable on August 31, 2001. The options described above expire
one year after fully vesting and must be exercised on or before that date.
Company agrees to provide exemption registration upon written notification
of Employee. Employee shall provide Company written notice not less than
60 days prior to the intent to exercise said option.
9. VACATION. Employee shall be entitled to four (4) weeks of paid vacation
during each year of employment; for the fourth year and each years
thereafter, said vacation time shall increase to five (5) weeks during
each year. The time for the vacation shall be mutually agreed upon by
Employee and Employer. If vacation is not taken, for the benefit of the
Employer, Employee shall be compensated at one and one half (1 1/2) times
his base salary rate for time not taken. Employee shall receive 30 days
Sick/Personal Leave for each year of employment. Unused Sick/Personal
Leave will accrue and be retained by Employee to be used at his
discretion.
10. AUTOMOBILE. Employer will provide to Employee, during the term of this
agreement, the use of a new luxury automobile of the Employee's choice,
said automobile may be leased, rented or purchased by Employer at
Employer's discretion. Value of said automobile shall be determined by the
following guidelines: for the initial automobile; a vehicle that could
normally be purchased with a twenty percent (20%) down payment and total
monthly payments not to exceed $3,500.00 for a period of five (5) years.
The Employer will procure and maintain in force an automobile liability
policy for the automobile with coverage, including Employee, in the
minimum amount of One Million Dollars ($1,000,000) combined single limit
on bodily injury and property damage.
<PAGE>
11. EXPENSE REIMBURSEMENT. Employee shall be entitled to reimbursement for all
reasonable expenses, including travel and entertainment, incurred by
Employee in the performance of Employee's duties. Employee will maintain
records and written receipts as required by federal and state tax
authorities to substantiate expenses as an income tax deduction for
Employer and shall submit vouchers for expenses for which reimbursement is
made
12. LOW INTEREST LOAN.
A. From time to time, Employee may borrow sums from Employer up to a
maximum aggregate of $500,000 provided the Employer has excess funds
available for such purposes. The Board of Directors shall establish
the amount of such funds available annually. Each loan shall be
evidenced by a Promissory Note payable in not more than sixty (60)
monthly principal and interest installment payments starting with
the first day of the month following the month in which the loan is
made, with interest at the rate of three percent (3%) per year on
the unpaid balance of the loan or loans outstanding.
B. In the event Employee severs employment with Employer for reasons
other than permanent disability, death, or retirement while a loan
or loans are outstanding, the unpaid principal amount then
outstanding shall be due and payable within thirty (30) days after
the date of termination. In the event severance of employment is due
to permanent disability, death, or retirement, Employee, or the
legal representative of Employee, shall repay any outstanding loan
in accordance with the terms of the promissory note.
C. Should there be a default in the payment of any installment of
principal and interest when due, then the entire sum of principal
and interest, at the option of the Employer, shall immediately
become due and payable without demand or notice. In case this note
shall not be paid when due according to its terms, Employee shall
pay all costs of collection and reasonable attorney's fees whether
or not suit is filed on the note
13. PERMANENT DISABILITY.
A. In the event Employee becomes permanently disabled (hereinafter
defined) during employment with Employer, Employer may terminate
this agreement by giving thirty (30) days notice to Employee of its
intent to terminate, and, unless Employee resumes performance of the
duties set forth in Paragraph 2 within five (5) days of the date of
notice and continues performance for the remainder of the notice
period, this agreement will terminate at the end of the thirty (30)
day period. "Permanently disabled" for the purpose of this agreement
will mean the inability, due to physical or mental ill health, or
any reason beyond the control of Employee to perform Employee's
duties for sixty (60) consecutive days or for an aggregate of ninety
(90) days during any one employment year irrespective of whether
such days are consecutive.
B. Upon termination of employment under the provisions of subparagraph
(12A) above, Employee will be entitled to any deferred compensation
to which the Employee may be entitled under the provisions of
Paragraph 5 herein paid to him upon giving notice to the Employer.
For the purposes of Paragraph 5, termination under subparagraph
(12A) of this agreement shall be considered "retirement"; Employee
will be excused from performing advisory services as required under
Paragraph 5(B)(ii.) but shall nevertheless be entitled to Advisory
Payments except the extent limited by death of Employee as set forth
in Paragraph 5(C) herein.
C. Employer shall maintain, at its expense, a disability Policy
covering Employee for a dollar amount specified by the Board of
Directors of Employer. This amount may not exceed one hundred
percent (100%) of the base salary. Benefits of this policy shall
begin on the date the Employee's Sick/Personal Leave days are
exhausted and shall continue until the Employee's deferred
compensation as outlined in paragraph 5 of this agreement goes into
effect.
<PAGE>
14. DEATH. In the event that Employee dies during the term of this agreement,
this agreement shall immediately terminate except as provided in paragraph
5C, herein.
15. TERMINATION.
A. This agreement may be terminated by Employer by giving ten (10) days
notice to Employee if Employee willfully breaches or habitually
neglects the duties to be performed under Paragraph 2, habitually
engages in the use of illegal substances or the excessive use of
alcohol, or engages in any conduct which is illegal or dishonest
resulting in damage to the reputation of Employer, or potential
damage to reputation of Employer.
B. In the event employment is terminated pursuant to subparagraphs (A),
Employee will be entitled to only base salary compensation earned
prior to the date of termination as provided for in Paragraph 3 of
this agreement computed pro rata up to and including the date of
termination, plus one twelfth (1/12) of one years base salary.
Employee shall not receive the incentive salary payments or the
deferred compensation payments provided for in Paragraphs 3(B) and
4, respectively.
C. Should Employer wish to terminate the Employee or change the Duties
and Authority(as defined in 2A), for any reason, other than those
listed in subparagraph 14A of this agreement, Employee shall receive
the compensation due for the remainder of the Term of Employment
(defined in paragraph three (3) of this agreement) plus one year,
said compensation shall be in a lump sum equal to the total amount
of the base salary as defined in subparagraph four "A" (4A) of this
agreement, in this case "cost of living" increases would not be
applicable. Employee would still receive the "Bonus" as defined in
paragraph four "B" (4B) and "C"(4C) of this agreement. Upon
termination as defined in this paragraph, Employee would, regardless
of age, tenure or Employer approval, immediately become eligible to
also receive Deferred Compensation as defined in sub-paragraphs five
"A" through five "D" (5A-5D) of this agreement.
D. In the event Employer is acquired, is a non surviving party in a
merger, or transfers substantially all of its assets, this agreement
shall not be terminated and Employer agrees to take all actions
necessary to ensure that the transferee or surviving company is
bound by the provisions of this agreement.
1. NOTICES. Any notice provided for in this Agreement shall be given in
writing. Notices shall be effective from the date of service, if served
personally on the party to whom notice is to be given, or on the second
day after mailing, if mailed by first class mail, postage prepaid. Notices
shall be properly addressed to the parties at their respective addresses:
<PAGE>
Employer:
3700 Crestwood Parkway
Suite 1000
Duluth, GA 30096
Employee:
----------------------
----------------------
----------------------
or to such other address as either party may later specify by notice to
the other.
2. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings., oral or written, with
respect to the subject matter hereof. This Agreement may be changed only
by an agreement in writing signed by the party against whom any waiver,
change, amendment or modification is sought.
3. WAIVER. The waiver by the Employer of a breach of any of the provisions of
this Agreement by the Employee shall not be construed as a waiver of any
subsequent breach by the Employee.
4. GOVERNING LAW; VENUE. This Agreement shall be construed and enforced in
accordance with the laws of the State of Georgia. Gwinnett County,
Georgia, shall be the proper venue for any litigation arising out of this
Agreement.
5. PARAGRAPH HEADINGS. Paragraph headings are for convenience only and are
not intended to expand or restrict the scope or substance of the
provisions of this Agreement.
6. ASSIGNABILITY. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer. This Agreement is a personal
employment agreement and the rights, obligations and interests of the
Employee hereunder may not be sold, assigned, transferred, pledged or
hypothecated.
7. SEVERABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid or unenforceable, the remainder of
the Agreement shall remain in full force and effect and shall in no way be
impaired.
8. ARBITRATION. Any controversy or claim arising out of or relating to this
contract, or breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association and judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
Hereby entered into and agreed upon this 15th day of July, 1998, by:
- -------------------------- --------------------------
Scott A. Schuster Elite Technologies, Inc.
EMPLOYMENT AGREEMENT
AGREEMENT made this 15th day of March 1999, between Elite, Inc., a Texas
corporation, hereinafter sometimes called the "Employer", having its principal
place of business in Duluth, Georgia, and Jason Kiszonak, hereinafter sometimes
called the "Employee".
WHEREAS, the Employee and Employer desire to set forth in writing their
contract with respect to Employee's employment by Employer;
NOW, THEREFORE, in consideration of their mutual promises set forth
herein, the parties hereby agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby accepts
such employment, upon the terms and conditions set forth in this
Agreement.
2. DUTIES AND AUTHORITY.
A. Employee will occupy the position of Vice President, (hereinafter
referred to as "Position" or "Assignment") with the Employer.
Employee will also be appointed as a member of the board.
B. In this position, Employee will have the responsibility and
authority associated with said position, subject to the control of
the Board of Directors, and have general supervision, direction and
control, as necessary, over the business and affairs of the
Corporation and its Employees. Employee will be primarily
responsible for carrying out orders and resolutions of the Board of
Directors and such duties as may from time to time be assigned to
Employee by the Board of Directors.
C. Employee agrees to devote his full time attention and best efforts
to the performance of employment hereunder.
3. TERM OF EMPLOYMENT. The term of employment shall begin on the date of this
Agreement, and shall extend for a period of three (3) consecutive years or
until terminated as provided herein.
4. COMPENSATION. Employee will receive compensation during the term of this
Agreement as follows:
A. A base annual salary of one hundred twenty five thousand dollars per
year ($125,000) payable either bi-monthly, weekly, semi-weekly or
monthly at the discretion of the Employer. The base salary shall be
adjusted at the end of each year of employment as an increase.
B. An incentive salary (Bonus) equal to a maximum of three percent (3)
of the adjusted net profits (hereinafter defined) of the Employer
during each fiscal year beginning or ending during the term of this
Agreement. "Adjusted net profit" shall be the net profit before
federal and state income taxes, determined in accordance with
accepted accounting practices by the independent accounting firm
employed by the Employer as auditors and adjusted to exclude: (i)
any incentive salary payments paid pursuant to this Agreement; (ii)
any contributions to pension and/or profit-sharing plans; (iii) any
extraordinary gains or losses (including, but not limited to, gains
or losses on disposition of assets); (iv) any refund or deficiency
of federal and state income taxes paid in a prior year; and (v) any
provision for federal or state income taxes made in prior years
which is subsequently determined as unnecessary. The determination
of the adjusted net profits made by the independent accounting firm
employed by the Employer shall be final and binding upon Employee
and the Employer. For the first and last fiscal years ending and
beginning, respectively, during the term of this Agreement, the
incentive salary shall be computed for the proportion of the fiscal
year coextensive with this Agreement. The incentive salary shall be
paid within sixty (60) days after the end of each fiscal year. The
maximum incentive salary payable for any one year shall not exceed
two hundred percent of Employee's base salary unless authorized by
the Board of Directors.
<PAGE>
5. DEFERRED COMPENSATION. In the event that Employee retires after performing
services for the Employer up until Employee reaches the age of 65 or
retires at an earlier age with the approval of the Employer, Employee will
be entitled to deferred compensation payments after retirement upon the
following terms and conditions:
A. For a period of twenty (20) years ("Retirement Period") Employee
will receive all of the following: (i) Base Payments equal to thirty
percent (30%) of the average total salary (base salary plus
incentive salary) paid to Employee during the last three (3) full
years of employment or based upon his/her total period of
employment, should that period be less that three (3) full years,
prior to the month of retirement ("Retirement Salary Base"); (ii)
Advisor Payments equal to thirty percent (30%) of the Retirement
Salary Base, provided that Employee serves as an advisor and
consultant to the Employer regarding its business. Employee will
hold himself available to perform services at reasonable times at
the request of the Board of Directors of the Employer, consistent
with any business activities Employee may be engaged in at such
time. The Board of Directors of the Employer shall have the right to
require the presence of Employee at any Board of Directors meeting,
not exceeding more than one meeting per month, to act and serve in
the advisory capacity. Attendance at these Board of Directors
meetings shall not be required should Employee's health prevent
attendance; however, Employer shall have the right to demand a
written statement from Employee prepared by a licensed medical
examiner evidencing inability of Employee to attend the meeting or
meetings. Employee will be reimbursed for all reasonable and
necessary travel and incidental expenses incurred by Employee in
connection with the performance of advisory services; and (iii) Non
competition Payments equal to forty percent (40%) of the Retirement
Base Salary provided that Employee will not, directly or indirectly,
perform any business, commercial, or consulting services to any
person, firm, or organization or become associated as a manager,
Employee, director, or owner of any business organization competing
directly or indirectly with the Employer, whether or not compensated
without the prior written consent of Employer. In the event that
Employer and Employee are unable to agree on whether a particular
business in which Employee attempts to engage is directly or
indirectly in competition with the Employer, the matter will be
submitted to arbitration under the provisions of Paragraph 22 of
this agreement.
B. The deferred compensation payments shall be made in equal monthly
installments on the first day of each month, starting in the month
following the month of retirement.
C. In the Event of the death of Employee prior to the expiration of the
"Retirement Period", the Employer will pay all remaining Base
Payments specified in subparagraph A(i), and no other deferred
compensation payments, to any beneficiary of Employee designated by
Employee in a written document filed with the Employer, or in the
absence of such designation, the estate of Employee. The Employer
may elect to pay these remaining Base Payments in a lump sum or in
the equal monthly installments specified in subparagraph B.
D. Employee shall not sell, assign, transfer, or pledge, or in any
other way dispose of or encumber, voluntarily or involuntarily, by
gift, testamentary disposition, inheritance, transfer to any
inter-vivos trust, seizure and sale by legal process, operation of
law, bankruptcy, winding up of a corporation, or otherwise, the
right to receive any deferred compensation pursuant to this
Agreement.
6. RELOCATION. In the event Employee is transferred and assigned to a new
principal place of work located more than fifty (50) miles from Employee's
present residence, Employer will pay for all reasonable relocation
expenses including:
A. Transportation fares, meals, and lodging for Employee, his spouse,
and family from Employee's present residence to any new residence
located near the new principal place of work.
<PAGE>
B. Moving of Employee's household goods and the personal effects of
Employee and Employee's family from Employee's present residence to
the new residence.
C. Lodging and meals for Employee and Employee's family for a period of
not more than sixty (60) consecutive days while occupying temporary
living quarters located near the new principal place of work.
D. Round trip travel, meals and lodging expenses for Employee's family
for no more than two (2) house hunting trips to locate a new
residence, each trip not to exceed fourteen (14) days; and
E. Expenses in connection with the sale of the residence of Employee
including Realtor fees, property appraisals, mortgage prepayment
penalties, termite inspector fees, title insurance policy and
revenue stamps, escrow fees, fees for drawing documents, state or
local sales taxes, mortgage discount points (if in lieu of a
prepayment penalty), and seller's attorney's fees (not to exceed one
percent (1%) of the sales price). At the option of Employee and in
lieu of reimbursement for these expenses, Employee may sell the
residence of Employee to the Employer at the fair market value of
the residence determined by an appraiser chosen by the Employer. The
appraisal will be performed within ten (10) days after notice of
transfer and notice of appraised value will be submitted by report
to Employee. Employee will have the right to sell the residence to
the Employer at the appraised price by giving notice of intent to
sell within thirty (30) days from the date of the appraisal report.
The term "residence" shall mean the property occupied by Employee as
the principal residence at the time of transfer and does not include
summer homes, multiple-family dwellings, houseboats, boats, or
airplanes but does include condominium or cooperative apartment
units and duplexes (two family) occupied by Employee.
7. MEDICAL AND GROUP INSURANCE. At the expense of the Employer, Employer
agrees to include Employee in the group medical and hospital plan of
Employer, when such plan is established.
8. STOCK OPTIONS. Options to acquire common stock of two million (2,000,000)
shares of which options to acquire one million (1,000,000) shares of
common stock at a price of Ten Cents ($0.10) fully vest and become
exercisable on August 31, 2000, options to acquire one million (1,000,000)
shares of common stock at a price of Ten Cents ($0.10) fully vest and
become exercisable on August 31, 2001. The options described above expire
one year after fully vesting and must be exercised on or before that date.
Company agrees to provide exemption registration upon written notification
of Employee. Employee shall provide Company written notice not less than
60 days prior to the intent to exercise said option.
9. VACATION. Employee shall be entitled to four (4) weeks of paid vacation
during each year of employment; for the fourth year and each years
thereafter, said vacation time shall increase to five (5) weeks during
each year. The time for the vacation shall be mutually agreed upon by
Employee and Employer. If vacation is not taken, for the benefit of the
Employer, Employee shall be compensated at one and one half (1 1/2) times
his base salary rate for time not taken. Employee shall receive 30 days
Sick/Personal Leave for each year of employment. Unused Sick/Personal
Leave will accrue and be retained by Employee to be used at his
discretion.
10. AUTOMOBILE. Employer will provide to Employee, during the term of this
agreement, the use of a new luxury automobile of the Employee's choice,
said automobile may be leased, rented or purchased by Employer at
Employer's discretion. Value of said automobile shall be determined by the
following guidelines: for the initial automobile; a vehicle that could
normally be purchased with a twenty percent (20%) down payment and total
monthly payments not to exceed $1,500.00 for a period of five (5) years.
The Employer will procure and maintain in force an automobile liability
policy for the automobile with coverage, including Employee, in the
minimum amount of One Million Dollars ($1,000,000) combined single limit
on bodily injury and property damage.
<PAGE>
11. EXPENSE REIMBURSEMENT. Employee shall be entitled to reimbursement for all
reasonable expenses, including travel and entertainment, incurred by
Employee in the performance of Employee's duties. Employee will maintain
records and written receipts as required by federal and state tax
authorities to substantiate expenses as an income tax deduction for
Employer and shall submit vouchers for expenses for which reimbursement is
made
12. LOW INTEREST LOAN.
A. From time to time, Employee may borrow sums from Employer up to a
maximum aggregate of $500,000 provided the Employer has excess funds
available for such purposes. The Board of Directors shall establish
the amount of such funds available annually. Each loan shall be
evidenced by a Promissory Note payable in not more than sixty (60)
monthly principal and interest installment payments starting with
the first day of the month following the month in which the loan is
made, with interest at the rate of three percent (3%) per year on
the unpaid balance of the loan or loans outstanding.
B. In the event Employee severs employment with Employer for reasons
other than permanent disability, death, or retirement while a loan
or loans are outstanding, the unpaid principal amount then
outstanding shall be due and payable within thirty (30) days after
the date of termination. In the event severance of employment is due
to permanent disability, death, or retirement, Employee, or the
legal representative of Employee, shall repay any outstanding loan
in accordance with the terms of the promissory note.
C. Should there be a default in the payment of any installment of
principal and interest when due, then the entire sum of principal
and interest, at the option of the Employer, shall immediately
become due and payable without demand or notice. In case this note
shall not be paid when due according to its terms, Employee shall
pay all costs of collection and reasonable attorney's fees whether
or not suit is filed on the note
13. PERMANENT DISABILITY.
A. In the event Employee becomes permanently disabled (hereinafter
defined) during employment with Employer, Employer may terminate
this agreement by giving thirty (30) days notice to Employee of its
intent to terminate, and, unless Employee resumes performance of the
duties set forth in Paragraph 2 within five (5) days of the date of
notice and continues performance for the remainder of the notice
period, this agreement will terminate at the end of the thirty (30)
day period. "Permanently disabled" for the purpose of this agreement
will mean the inability, due to physical or mental ill health, or
any reason beyond the control of Employee to perform Employee's
duties for sixty (60) consecutive days or for an aggregate of ninety
(90) days during any one employment year irrespective of whether
such days are consecutive.
B. Upon termination of employment under the provisions of subparagraph
(12A) above, Employee will be entitled to any deferred compensation
to which the Employee may be entitled under the provisions of
Paragraph 5 herein paid to him upon giving notice to the Employer.
For the purposes of Paragraph 5, termination under subparagraph
(12A) of this agreement shall be considered "retirement"; Employee
will be excused from performing advisory services as required under
Paragraph 5(B)(ii.) but shall nevertheless be entitled to Advisory
Payments except the extent limited by death of Employee as set forth
in Paragraph 5(C) herein.
C. Employer shall maintain, at its expense, a disability Policy
covering Employee for a dollar amount specified by the Board of
Directors of Employer. This amount may not exceed one hundred
percent (100%) of the base salary. Benefits of this policy shall
begin on the date the Employee's Sick/Personal Leave days are
exhausted and shall continue until the Employee's deferred
compensation as outlined in paragraph 5 of this agreement goes into
effect.
<PAGE>
14. DEATH. In the event that Employee dies during the term of this agreement,
this agreement shall immediately terminate except as provided in paragraph
5C, herein.
15. TERMINATION.
A. This agreement may be terminated by Employer by giving ten (10) days
notice to Employee if Employee willfully breaches or habitually
neglects the duties to be performed under Paragraph 2, habitually
engages in the use of illegal substances or the excessive use of
alcohol, or engages in any conduct which is illegal or dishonest
resulting in damage to the reputation of Employer, or potential
damage to reputation of Employer.
B. In the event employment is terminated pursuant to subparagraphs (A),
Employee will be entitled to only base salary compensation earned
prior to the date of termination as provided for in Paragraph 3 of
this agreement computed pro rata up to and including the date of
termination, plus one twelfth (1/12) of one years base salary.
Employee shall not receive the incentive salary payments or the
deferred compensation payments provided for in Paragraphs 3(B) and
4, respectively.
C. Should Employer wish to terminate the Employee or change the Duties
and Authority(as defined in 2A), for any reason, other than those
listed in subparagraph 14A of this agreement, Employee shall receive
the compensation due for the remainder of the Term of Employment
(defined in paragraph three (3) of this agreement) plus one year,
said compensation shall be in a lump sum equal to the total amount
of the base salary as defined in subparagraph four "A" (4A) of this
agreement, in this case "cost of living" increases would not be
applicable. Employee would still receive the "Bonus" as defined in
paragraph four "B" (4B) and "C"(4C) of this agreement. Upon
termination as defined in this paragraph, Employee would, regardless
of age, tenure or Employer approval, immediately become eligible to
also receive Deferred Compensation as defined in sub-paragraphs five
"A" through five "D" (5A-5D) of this agreement.
D. In the event Employer is acquired, is a non surviving party in a
merger, or transfers substantially all of its assets, this agreement
shall not be terminated and Employer agrees to take all actions
necessary to ensure that the transferee or surviving company is
bound by the provisions of this agreement.
1. NOTICES. Any notice provided for in this Agreement shall be given in
writing. Notices shall be effective from the date of service, if served
personally on the party to whom notice is to be given, or on the second
day after mailing, if mailed by first class mail, postage prepaid. Notices
shall be properly addressed to the parties at their respective addresses:
<PAGE>
Employer:
3700 Crestwood Parkway
Suite 1000
Duluth, GA 30096
Employee:
----------------------
----------------------
----------------------
or to such other address as either party may later specify by notice to
the other.
2. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings., oral or written, with
respect to the subject matter hereof. This Agreement may be changed only
by an agreement in writing signed by the party against whom any waiver,
change, amendment or modification is sought.
3. WAIVER. The waiver by the Employer of a breach of any of the provisions of
this Agreement by the Employee shall not be construed as a waiver of any
subsequent breach by the Employee.
4. GOVERNING LAW; VENUE. This Agreement shall be construed and enforced in
accordance with the laws of the State of Georgia. Gwinnett County,
Georgia, shall be the proper venue for any litigation arising out of this
Agreement.
5. PARAGRAPH HEADINGS. Paragraph headings are for convenience only and are
not intended to expand or restrict the scope or substance of the
provisions of this Agreement.
6. ASSIGNABILITY. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer. This Agreement is a personal
employment agreement and the rights, obligations and interests of the
Employee hereunder may not be sold, assigned, transferred, pledged or
hypothecated.
7. SEVERABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid or unenforceable, the remainder of
the Agreement shall remain in full force and effect and shall in no way be
impaired.
8. ARBITRATION. Any controversy or claim arising out of or relating to this
contract, or breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association and judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
Hereby entered into and agreed upon this 15th day of March, 1999, by:
- -------------------------- --------------------------------
Jason Kiszonak Elite Technologies, Inc.
