Exhibit 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 3rd day of April, 2003, by and among MARKET CENTRAL, INC., a Delaware
corporation ("Buyer"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual resident of the
State of Georgia ("Rissanen"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., an individual resident of
the State of Georgia ("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual resident of the
State of Tennessee ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual resident of
the State of Georgia ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual resident of
the State of Georgia ("▇▇▇▇▇▇"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual resident of
the State of Georgia ("▇▇▇▇▇▇" and collectively with Rissanen, Switzer,
DeSimone, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, the "Sellers") with respect to the transfer and
acquisition of the capital stock of U.S. Convergion, Inc., a Georgia corporation
(together with its predecessors, the "Company").
W I T N E S S E T H :
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WHEREAS, the authorized capital stock of the Company consists of (a)
1,000,000 shares of common stock having a par value of $.01 per share (the
"Company Common Stock"), and (b) 1,000,000 shares of preferred stock having a
par value of $.01 per share, of which one hundred six thousand nine hundred
ninety two (106,992) shares have been designated as Series A Convertible
Redeemable Preferred Stock (the "Series A Preferred Stock"); and
WHEREAS, each of the Sellers is the holder of the number of shares of
Company Common Stock and/or Series A Preferred Stock set forth opposite such
Seller's name on Schedule 3.2 annexed hereto (all such shares, collectively, the
"Exchanged Shares"); and
WHEREAS, the Sellers desire to transfer to Buyer, and Buyer desires to
acquire from the Sellers, all of the Exchanged Shares, in accordance with the
terms and conditions of this Agreement;
WHEREAS, the parties hereto intend that, following the consummation of the
transactions contemplated by this Agreement, Buyer will own all of the issued
and outstanding capital stock of the Company; and
WHEREAS, the parties intend that the acquisition of the Exchanged Shares
shall constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
SALE OF STOCK
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1.1 Transfer of Stock. Subject to the terms and conditions of this
Agreement, and on the basis of the representations and warranties hereinafter
set forth, at the Closing (as hereinafter defined), the Sellers agree to
transfer and deliver the Exchanged Shares to Buyer, and Buyer agrees to acquire
the Exchanged Shares from the Sellers, free and clear of all liens,
encumbrances, equities, restrictions, claims and obligations to other persons of
any nature, kind or character whatsoever (collectively, "Liens").
1.2 Purchase Price.
(a) Series A Purchase Price. The aggregate consideration for all of the
issued and outstanding shares of the Series A Preferred Stock (the "Series A
Consideration") shall be 247,781 shares (the "Series A Consideration Shares") of
the Common Stock, par value $.001 per share, of Buyer ("Buyer's Common Stock").
(b) Common Stock Purchase Price. The aggregate consideration for all of the
issued and outstanding shares of the Company Common Stock (the "Common Stock
Consideration") shall be 126,849 shares of Buyer's Common Stock (the "Common
Stock Consideration Shares"). (The Series A Consideration Shares and the Common
Stock Consideration Shares are sometimes hereinafter collectively referred to as
the "Consideration Shares").
1.3 Consideration; Escrowed Shares.
(a) Issuance of Consideration Shares. At the Closing, Buyer shall issue to
its transfer agent an irrevocable instruction (the "Transfer Agent Instruction")
to issue the Consideration Shares to the Sellers according to the distribution
set forth on Schedule 1.3(a). All certificates issued in the names of the
Sellers representing any of the Consideration Shares shall bear the following
restrictive legend:
"THE SECURITIES EVIDENCED HEREBY WERE ISSUED AND SOLD WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE
"FEDERAL ACT"), OR THE SECURITIES LAWS OF ANY STATE, IN RELIANCE UPON
CERTAIN EXEMPTIVE PROVISIONS OF SAID ACTS, PARTICULARLY INCLUDING
SECTION 10-5-9(13) OF THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED.
SAID SECURITIES CANNOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR
TRANSFER IS MADE: (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE FEDERAL ACT OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION; AND (2) IN A TRANSACTION WHICH IS EXEMPT UNDER APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH LAWS, OR IN A TRANSACTION WHICH IS OTHERWISE IN
COMPLIANCE WITH SUCH LAWS."
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(b) Escrowed Shares. At the Closing, all of the Common Stock Consideration
Shares to be issued to ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ (collectively, the "Indemnifying
Sellers") pursuant to Section 1.2(b) above (collectively, the "Escrowed Shares")
shall be deposited with Buyer as security for the indemnification obligations of
the Indemnifying Sellers pursuant to this Agreement. Accordingly, the Transfer
Agent Instruction shall provide (i) that the Escrowed Shares be represented by a
separate certificate issued in the name of the Indemnifying Seller to whom such
stock is issuable pursuant to subsection (a) above, (ii) that each such
certificate bear the following legend (in addition to the legend set forth in
subsection (a) above): "THE SHARES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN
RIGHTS OF OFFSET IN FAVOR OF THE ISSUER AND MAY NOT BE TRANSFERRED EXCEPT WITH
THE CONSENT OF THE ISSUER", and (iii) that each such certificate be deposited
with Buyer to be held in escrow pursuant to this Section 1.3(b). At the Closing,
the Indemnifying Sellers shall each deliver to Buyer proper instruments of
transfer relating to the Escrowed Shares issued in such Indemnifying Seller's
name, duly executed in blank. In the event any Indemnifying Seller defaults on
such Indemnifying Seller's indemnification obligations pursuant to this
Agreement, Buyer shall be entitled to cancel a number of such Indemnifying
Seller's Escrowed Shares having an aggregate value equal to the amount in
default or any portion thereof (with each Escrowed Share being valued at $3.00);
provided that such cancellation shall not affect Buyer's right to recover any
remaining amount from such Indemnifying Seller pursuant to Article IX or Article
X of this Agreement. Buyer shall release any remaining Escrowed Shares upon the
first (1st) anniversary of the Closing Date (the "Escrow Release Date"), unless
a Notice of Claim (as defined in Article IX below) shall have been delivered by
Buyer prior to such date and the claims set forth in such Notice of Claim shall
not have been finally resolved prior to such date, in which case Buyer shall
release such remaining Escrowed Shares promptly following the final resolution
of all such claims. Notwithstanding the foregoing, Buyer shall be entitled to
retain all of the Escrowed Shares until such time as the litigation matters and
claims described in Section 9.2(d) and (f), which matters or claims are pending
on the Escrow Release Date, shall have been finally resolved.
1.4 Closing of Purchase and Sale. The closing of the purchase and sale of
the Exchanged Shares provided for herein (the "Closing") shall take place at the
offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, Suite 3100, Promenade II, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, beginning at 10:00 A.M. on
April ____, 2003, or at such other time and place as the parties shall mutually
agree upon. Notwithstanding the foregoing, but subject to Article XI below, the
parties agree that the Closing shall occur not later than the fifth (5th)
business day following the date on which all conditions precedent to the Closing
as set forth in Articles VI and VII below have been satisfied. The date upon
which the Closing actually occurs shall be referred to in this Agreement as the
"Closing Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY
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As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, and with the knowledge that Buyer shall
rely thereon, Switzer, DeSimone, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ (collectively, the
"Article II Sellers"), jointly and severally, represent and warrant to Buyer the
following (both as of the Closing Date and as of the date hereof):
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2.1 Due Incorporation, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia. The Company has the corporate power and lawful
authority to carry on its business as now being conducted, and to own or lease
and operate its properties and assets as now owned, leased or operated by the
Company. The Company is duly qualified or otherwise authorized to do business as
a foreign corporation, and is in good standing, in each jurisdiction set forth
on Schedule 2.1 annexed hereto, which are the only jurisdictions in which the
character of the properties owned, leased or operated by it, or the nature of
its business, makes such qualification or authorization necessary.
2.2 Outstanding Capital Stock. The authorized capital stock of the Company
consists of (a) 1,000,000 shares of Company Common Stock, of which (i) 65,728
shares are issued and outstanding, and (ii) no shares are held by the Company as
treasury stock; and (b) 1,000,000 shares of preferred stock, of which 106,992
shares have been designated as Series A Convertible Redeemable Preferred Stock,
all of which are issued and outstanding. No other class or series of capital
stock of the Company is authorized or outstanding. All of the issued and
outstanding shares of Company Common Stock and Series A Preferred Stock are duly
authorized and are validly issued, fully paid and non-assessable. Except as
described on Schedule 2.2 annexed hereto, there is no outstanding right,
subscription, warrant, conversion right, call, unsatisfied preemptive right,
commitment, option or other contract or right of any kind pursuant to which any
person or entity has the right or option to purchase or otherwise to receive
from the Company any shares of the capital stock or any other security of the
Company, and there is no outstanding security of any kind convertible into or
redeemable or exchangeable for any shares of the capital stock or any other
security of the Company. Except as described in Schedule 2.2 annexed hereto,
there is no shareholders' agreement, voting trust or similar contract to which
the Company is a party or which affects or restricts in any way any Sellers'
rights and obligations with respect to the Company Common Stock or the Series A
Preferred Stock.
2.3 [Reserved.]
2.4 Subsidiaries and Investments. The Company does not have any
subsidiaries nor does the Company own, directly or indirectly, any capital stock
or other equity or ownership or proprietary interest in, or have any investment
in, any other corporation, limited liability company, partnership, association,
trust, joint venture or other entity.
2.5 Articles of Incorporation and Bylaws. The copies of the articles of
incorporation and bylaws of the Company provided to Buyer by the Sellers are
true and complete and contain all amendments thereto.
2.6 Books and Records. The corporate minute books, stock certificate books,
stock registers and other corporate records of the Company furnished to Buyer
for inspection are true, correct and complete in all material respects. The
signatures appearing on all documents contained in such books and records are
the true signatures of the persons purporting to have signed the same. All
actions reflected in such books and records were duly and validly taken in
compliance with all applicable statutes, laws and regulations.
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2.7 [Reserved.]
2.8 Financial Statements. Attached hereto as Schedule 2.8 are true and
complete copies of the unaudited balance sheets and related statements of income
and retained earnings and changes in financial position of the Company as of and
for the fiscal years ended on December 31, 2002, and December 31, 2001 (such
financial statements together with the accompanying footnotes and supporting
schedules thereto, are sometimes hereinafter referred to collectively as the
"Financial Statements"; the unaudited balance sheet of the Company as of
December 31, 2002 (the "Balance Sheet Date") is sometimes hereinafter referred
to as the "Latest Balance Sheet"). The Financial Statements, including the
footnotes thereto, have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods indicated
("GAAP"). The Financial Statements fairly present the financial condition of the
Company at the dates thereof, and the related statements of income and retained
earnings and changes in financial position fairly present the results of the
operations and the changes in financial position of the Company for the periods
indicated.
2.9 No Undisclosed Liabilities. Except and to the extent reflected and
reserved against in the Latest Balance Sheet or in Schedule 2.9 annexed hereto
and except for commercial liabilities and obligations incurred since the Balance
Sheet Date in the ordinary course of business consistent with past practices,
the Company does not have any liabilities or obligations (whether long term or
current and whether accrued, absolute or contingent).
2.10 Litigation. Except as described in Schedule 2.10 annexed hereto, there
is no (a) action, suit or proceeding, at law or in equity, by any person or
entity, or (b) any arbitration, or (c) any investigation or administrative or
other proceeding by or before any court or any governmental or regulatory body
or agency, in each case, pending, or, to the knowledge of any officer of the
Company or any Article II Seller, threatened, against or affecting the Company,
any of its properties, assets or rights or any of the capital stock of the
Company. Except as disclosed on Schedule 2.10, no officer of the Company nor any
Article II Seller knows of any valid basis for any such action, suit,
proceeding, arbitration, investigation or proceeding. The Company is not subject
to any judgment, order, award or decree entered in any lawsuit or proceeding
which may have an adverse effect on any of its respective operations, business
practices or on its respective ability to acquire any property or conduct
business in any area.
2.11 Taxes. Except as disclosed on Schedule 2.11 (with each exception
applying only to the clauses of this Section referenced on such Schedule with
respect thereto):
(a) For purposes of this Agreement, (i) "Taxes" shall mean all federal,
state, local and foreign income, gross receipts, profits, windfall profits,
capital gains, franchise, sales, use, license, occupation, property, property
transfer, capital stock, premium, excise, employment, payroll, withholding,
estimated, severance, stamp, environmental, customs duties, social security,
unemployment, disability, registration, value added, alternative or add-on
minimum and other taxes, assessments or governmental charges of any nature, kind
or character, and including any interest, additions to tax and penalties
thereon; and (ii) "Tax Returns" shall mean all returns, declarations, reports
and forms, claims for refunds, or information returns and reports relating to
Taxes, including any schedule or attachment thereto, and including any
amendments thereof.
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(b) The Company has filed all Tax Returns that the Company was required to
file. All such Tax Returns were correct and complete in all material respects.
All Taxes owed by the Company (whether or not shown on any Tax Return) that are
due and payable (i) on or before the date of this Agreement have been paid, and
(ii) after the date of this Agreement but on or before the Closing Date have
been adequately reserved for on the Financial Statements. The Company is not
currently the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction where the
Company does not file Tax Returns that the Company is or may be subject to
taxation by that jurisdiction. There are no Liens on any of the assets or
properties of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax other than Taxes that that are not yet due and payable
for which the Company has established adequate reserves.
(c) Neither an Article II Seller, nor any officer or director of the
Company, nor any employee, agent or representative of the Company responsible
for Tax matters, has knowledge that any authority plans to assess any additional
Taxes for any period for which Tax Returns have been filed. No dispute or claim
exists concerning any Tax liability of the Company either (i) claimed or raised
by any authority in writing or (ii) as to which any Article II Seller, any
officer or director of the Company or any employee, agent or representative of
the Company responsible for Tax matters has knowledge. Schedule 2.11(c) annexed
hereto lists all federal, state, local, and foreign income Tax Returns filed
with respect to the Company for taxable periods ended on or after December 31,
1997. Schedule 2.11(c) further identifies those Tax Returns that have been
audited and those Tax Returns that currently are the subject of an audit.
Sellers have delivered or have caused the Company to deliver to Buyer correct
and complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by the Company since
December 31, 1997. The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(d) The Company has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. The Company has not made any payments, is
not obligated to make any payments, and is not party to an agreement that under
certain circumstances could obligate it to make any payments, which, in each
case when considered separately or in the aggregate, will not be deductible
under Section 280G or Section 162(m) of the Code.
(e) The Company has never been a "real property holding corporation" within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(f) The Company (i) is not party to any tax allocation or sharing
agreement, (ii) has never been a member of an affiliated group filing a
consolidated federal income Tax Return (other than with respect to a group of
which the Company was the common parent), and (iii) has never incurred any
liability for the Taxes of any person or entity (other than the Company) under
Reg. ss.1.1502-6 (or any similar provision of state, local or foreign statute,
law or regulation), as a transferee or successor, by contract or otherwise.
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(g) All unpaid Taxes of the Company (i) did not, as of the Balance Sheet
Date, exceed the reserve for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth on the Latest Balance Sheet (rather than any notes thereto) and (ii) will
not, as of the Closing Date, exceed the reserve for Tax liability set forth on
the Latest Balance Sheet as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company in filing
its Tax Returns.
(h) The Company will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (A) change in
method of accounting for a taxable period ending on or prior to the Closing
Date; (B) "closing agreement" as described in Code ss.7121 (or any corresponding
or similar provision of state, local or foreign income Tax law) executed on or
prior to the Closing Date; (C) intercompany transactions or any excess loss
account described in Treasury Regulations under Code ss.1502 (or any
corresponding or similar provision of state, local or foreign income Tax law);
(D) installment sale or open transaction disposition made on or prior to the
Closing Date; or (E) prepaid amount received on or prior to the Closing Date.
(i) The Company has not distributed stock of another Person, or has had its
stock distributed by another Person, in a transaction that was purported or
intended to be governed in whole or in part by Code ss.355 or ss.361.
(j) The facts and representations set forth on Schedule 2.11(j), which are
relevant to the qualification of the purchase and sale of the Exchanged Shares
as a reorganization within the meaning of Section 368(a) of the Code, are true,
correct, and complete on the date hereof and will be true, correct, and complete
as of the Closing Date (unless the Article II Sellers notify Buyer to the
contrary in writing prior to the Closing Date).
2.12 Title to Properties. The Company has good, valid and marketable title
to all of its assets and properties, including, without limitation, all of the
assets and properties shown on the Latest Balance Sheet and all assets and
properties acquired by the Company since the Balance Sheet Date, in each case,
free and clear of all Liens other than (a) Liens for current taxes, assessments
or governmental charges or levies on property not yet due or delinquent, and (b)
Liens described on Schedule 2.12 annexed hereto. Except as described on Schedule
2.12 annexed hereto, the Company owns, or leases or licenses pursuant to a
written agreement expressly identified in the schedules annexed to this
Agreement, all of the assets, properties and rights necessary for the conduct of
its business as presently conducted.
2.13 Compliance with Laws. The Company (including each and all of its
operations, practices, properties, real or personal, owned or leased, and
assets) is in compliance with, and has at all times been in compliance with, all
applicable federal, state, local and foreign laws, ordinances, orders, rules and
regulations (collectively, "Laws"), including without limitation, those
applicable to registration for the offer or sale of securities, discrimination
in employment, the Americans with Disabilities Act, occupational safety and
health, protection of the environment, trade practices, competition and pricing,
product warranties, zoning, building and sanitation, employment, unemployment,
retirement and labor relations and product advertising, except where the failure
to so comply has not had, and cannot reasonably be expected to have, a material
adverse effect on the business of the Company. Without limiting the generality
of the foregoing, neither the Company nor any director, officer, or employee of
the Company has, in the course of its actions for, or on behalf of, the Company,
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended; or made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee. Except as disclosed on Schedule 2.13
annexed hereto, all reports and returns required to be filed by the Company with
any governmental authority have been filed and were accurate and complete in all
material respects when filed.
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2.14 Contracts and Other Agreements. Schedule 2.14 annexed hereto contains
a complete and accurate list (sorted by reference to the clauses of this
Section) of all of the following contracts to which the Company is a party or by
or to which the Company or its assets or properties are bound or subject:
(a) contracts with any current or former officer, director or employee of
the Company or with any Affiliate (as hereinafter defined) of the Company or any
such person;
(b) contracts for the supply to any person of all or a portion of such
person's requirements of any product or service sold by the Company;
(c) contracts for the sale of any of their respective assets or properties,
other than sales made in the ordinary course of business, or for the grant to
any person of any preferential rights to purchase any of their respective assets
or properties;
(d) joint venture or partnership contracts;
(e) contracts of guaranty or relating to matters of suretyship to which the
Company is a party or by which its assets or properties are subject or bound;
(f) contracts calling for an aggregate price or fee, or payments in any one
year, of more than $25,000;
(g) contracts that cannot be canceled without liability, premium or penalty
upon thirty (30) days' notice;
(h) contracts with customers or suppliers for the sharing of fees, the
rebating of charges or other similar arrangements;
(i) contracts containing obligations or liabilities of any kind to holders
of any security of the Company (including, without limitation, an obligation to
register any of such securities under any federal or state securities laws);
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(j) contracts containing covenants of the Company not to compete in any
line of business or with any person in any geographical area or covenants of any
other person or entity not to compete with the Company in any line of business
or in any geographical area;
(k) contracts relating to the merger of the Company with any other entity
or the acquisition by the Company of any operating business or securities of any
entity (other than this Agreement);
(l) contracts relating to Intellectual Property (as hereinafter defined)
owned, licensed or used by the Company in the course of its business, including,
without limitation, all contracts relating to the development and use of
Software (as hereinafter defined);
(m) contracts requiring the payment to any person of a royalty, override,
commission or similar fee;
(n) contracts relating to the borrowing of money by the Company or
subjecting any of its assets or properties to Liens or other liabilities or
obligations;
(o) contracts with respect to which a change in the ownership (whether
directly or indirectly) of the shares of Company Common Stock or Series A
Preferred Stock or a change in the composition of the Board of Directors of the
Company or any of the other transactions contemplated by this Agreement may
result in a violation of or default under, or give rise to a right of
termination, modification, cancellation or acceleration of any obligation or
loss of benefits under, such contract;
(p) any contract not made in the ordinary course of business; or
(q) any other contract material to the Company or the operation of its
business (whether or not made or entered into in the ordinary course of
business).
The Article II Sellers have delivered to Buyer true and complete copies of
all of the contracts described on Schedule 2.14 or, if such contract is an oral
arrangement, the Article II Sellers have fully and accurately described such
arrangement on Schedule 2.14. All of such contracts are in full force and
effect. The Company has performed all obligations required to be performed by it
to date and is not in default under any such contract and has not taken any
action that constitutes or with notice or lapse of time, or both, or would
constitute a default, breach or anticipatory breach under any such contract. To
the knowledge of any officer of the Company or any Article II Seller, no other
party to any such contract is in default in the performance of its obligations
thereunder or has taken any action which constitutes, or with notice or lapse of
time or both would constitute, a default, breach or anticipatory breach under
any such contract. Except as separately identified on Schedule 2.14 annexed
hereto, no approval or consent of any person is needed for any contract set
forth on Schedule 2.14 or on any other schedule annexed to this Agreement to
continue in full force and effect following the consummation of the transactions
contemplated by this Agreement.
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2.15 Leases.
(a) Schedule 2.15(a) annexed hereto contains a complete and accurate list
of all real property leases to which the Company is a party (collectively, "Real
Property Leases"). Each such Real Property Lease is in full force and effect.
The Company has performed all obligations required to be performed by it to date
under each Real Property Lease, is not in default under any Real Property Lease,
and has not taken any action that constitutes or with notice or lapse of time,
or both, or would constitute a default, breach or anticipatory breach under any
Real Property Lease. The Company's use and occupancy of each premises that is
the subject matter of a Real Property Lease does not violate any of the terms of
such Real Property Lease, does not violate the conditions of any of the
Company's policies of insurance and, to the knowledge of any officer of the
Company or any Article II Seller, is in conformity with all applicable building,
zoning, health, fire, safety and other statutes, laws and regulations. Except as
disclosed on Schedule 2.15(a), all of the buildings, structures and
appurtenances situated on the premises that are the subject matter of a Real
Property Lease are in good operating condition and state of maintenance and
repair and will be adequate and suitable for the purposes for which they are
presently being or are intended to be used. Adequate rights of ingress and
egress and utility services are available for each premises that is the subject
matter of a Real Property Lease. To the knowledge of any officer of the Company
or any Article II Seller, no lessor or landlord under any such Real Property
Lease is in default in the performance of its obligations thereunder or has
taken any action which constitutes, or with notice or lapse of time or both
would constitute, a default, breach or anticipatory breach under any such Real
Property Lease. Neither the Article II Sellers nor the Company has received
notice from any such lessor or landlord of its intention to exercise any option
thereunder which would adversely affect or terminate the Company's use or
occupancy of any premises that is the subject matter of any Real Property Lease.
Except as described in Schedule 2.15(a), each Real Property Lease permits the
consummation of the transactions contemplated hereby without modification of the
terms thereof and without the consent of the applicable lessor or landlord. The
Company does not own, and has never owned, any real property.
(b) Schedule 2.15(b) annexed hereto contains a complete and accurate list
of all personal property leases to which the Company is a party (collectively,
"Personal Property Leases"). Each such Personal Property Lease is in full force
and effect. The Company has performed all obligations required to be performed
by it to date and is not in default under any such Personal Property Lease and
has not taken any action that constitutes, or with notice or lapse of time or
both, would constitute a default, breach or anticipatory breach under any such
Personal Property Lease. The Company's use of the items of personal property
that are the subject matter of any Personal Property Lease does not violate any
of the terms of such Personal Property Lease, does not violate the conditions of
any of the Company's policies of insurance and, to the knowledge of any officer
of the Company or any Article II Seller, is in conformity with all applicable
statutes, laws and regulations. All of the items of personal property which are
the subject matter of a Personal Property Lease are in good operating condition
and state of maintenance and repair and are adequate and suitable for the
purposes for which they are presently being used. To the knowledge of the
Company or any Article II Seller, no lessor under any such Personal Property
Lease is in default in the performance of its obligations thereunder or has
taken any action which constitutes, or with notice or lapse of time or both,
would constitute, a default, breach or anticipatory breach under any such
Personal Property Lease. Neither the Article II Sellers nor the Company has
received notice from any such lessor of its intention to exercise any option
thereunder which would adversely affect or terminate the Company's use of the
items of personal property which are the subject matter of any Personal Property
Lease. Except as described in Schedule 2.15(b), each of the Personal Property
Leases permits the consummation of the transactions contemplated hereby without
modification of the terms thereof and without the consent of the applicable
lessor.
10
2.16 Trade Names and Other Intangibles. Schedule 2.16 annexed hereto
contains a complete and accurate list of all patents, patent rights, licenses,
methodologies, know-how, computer software, trademarks, trademark rights, trade
names, trade name rights, service marks, service ▇▇▇▇ rights, copyrights or
similar rights, including, without limitation, any and all applications therefor
("Intellectual Property") which are either (i) wholly or partly owned or
licensed by the Company, or (ii) used in the conduct of the business of the
Company (other than Software listed separately on Schedule 2.17) (collectively,
the "Intellectual Property Assets"). Except as described on Schedule 2.16
annexed hereto, no person or entity, other than the Company, has any right under
or in respect of any of the Intellectual Property Assets. To the knowledge of
the Company or any Article II Seller, no person is infringing or otherwise
acting adversely with respect to the Company's rights under or in respect of the
Intellectual Property Assets. The Company is the exclusive owner of all such
rights, and there is no claim for damages or any proceeding pending or, to the
knowledge of the Company or any Article II Seller, threatened with respect
thereto. The Company is not infringing or otherwise acting adversely to the
right of any person under or in respect to any Intellectual Property (including
without limitation the rights of any third party software vendor), and there is
no claim for damages or any proceeding pending or, to the knowledge of any
officer of the Company or any Article II Seller, threatened with respect
thereto.
2.17 Software. Schedule 2.17 annexed hereto contains a complete list of all
computer software which is material to the business of the Company and which has
been designed specifically for use by the Company or as to which the Company
claims any proprietary rights (the "Software"). Except as described in Schedule
2.17 annexed hereto, the Company is the exclusive owner of all patents,
copyrights, trademarks, intellectual property rights, trade secrets and other
proprietary information, processes, and formulae used in connection with the
Software. Except as described in Schedule 2.17 annexed hereto, all work
performed by employees, independent contractors or others in connection with the
Software on behalf of the Company has been either (a) pursuant to a written
"work-for-hire" contract with the Company in accordance with all applicable
statutes, laws and regulations, that has accorded the Company full, effective,
exclusive and original ownership of all tangible and intangible property arising
thereby, or (b) subject to an executed instrument of assignment in favor of the
Company that has conveyed to the Company full, effective and exclusive ownership
of all tangible and intangible property arising in connection with the work
performed. The Company has exclusive ownership, possession and control of all
source codes, system documentation, statements of principles of operation, and
schematics for all the Software that may be necessary to render such materials
understandable and usable by a trained computer programmer. The Company has
taken adequate measures consistent with industry practice to safeguard the
confidentiality of any confidential information or trade secrets relating to the
Software. The Software is not in the public domain. The Software performs in
accordance with the documentation and other written material used in connection
with the Software and is free from material defects in programming or operation.
11
2.18 Personnel, Compensation and Benefits.
(a) Schedule 2.18(a) annexed hereto contains a true and correct list of the
names and current compensation levels of (i) all of the salaried, hourly and
other employees of the Company, and (ii) all independent contractors and
consultants engaged by the Company.
(b) Other than amounts which have not yet become payable in accordance with
the Company's customary practices, all of which will be paid in a timely manner,
(i) the Company has paid in full all wages, salaries, commissions, bonuses and
other direct compensation for all services performed by its employees to date,
and (ii) the Company has paid, or will pay in a timely manner, all severance
pay, benefits and vacation pay, if any, for all of its respective employees. The
Company is not subject to any claim for non-payment or non-performance of any of
the foregoing.
(c) The Company has withheld and paid all Taxes required to have been
withheld and paid by such entity in connection with amounts paid or owing to any
employee, consultant, independent contractor, creditor, stockholder or other
third party. The Company has not improperly characterized as an independent
contractor or consultant, any individual who should have been treated as an
employee of the Company for tax withholding or any other purpose.
(d) Schedule 2.18 (d) sets forth a complete list of all "employee benefit
plans" (as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and all employment contracts, bonus programs,
and pension, profit sharing, deferred compensation, incentive compensation,
excess benefit, stock, stock option, severance, termination pay, change in
control or other employee benefit plans, programs or arrangements, whether
written or unwritten, qualified or unqualified, funded or unfunded, foreign or
domestic, currently maintained, or contributed to, or required to be maintained
or contributed to, by the Company or any other person or entity that, together
with the Company, is treated as a single employer under Section 414 of the Code
(each an "ERISA Affiliate") for the benefit of any current or former employees,
officers or directors of the Company or with respect to which the Company has
any liability (collectively, the "Benefit Plans"). As applicable with respect to
each Benefit Plan, the Company has delivered or made available to Buyer, true
and complete copies of (A) each Benefit Plan, including all amendments thereto,
and in the case of an unwritten Benefit Plan, a written description thereof, (B)
all trust documents, investment management contracts, custodial agreements and
insurance contracts relating thereto, (C) the current summary plan description
and each summary of material modifications thereto, (D) the most recent annual
reports (Form 5500 and all schedules thereto) filed with the Internal Revenue
Service ("IRS"), (E) the most recent IRS determination letter and each currently
pending application to the IRS for a determination letter, (F) the most recent
financial statements and trustee reports, (G) all records, notices and filings
concerning IRS or Department of Labor audits or investigations, "prohibited
transactions" within the meaning of Section 406 of ERISA or Section 4975 of the
Code and "reportable events" within the meaning of Section 4043 of ERISA, (H)
all personnel, payroll, and employment manuals and policies; (I) all collective
bargaining agreements pursuant to which contributions have been made or
obligations incurred (including both pension and welfare benefits) by the
Company and the ERISA Affiliates, and all collective bargaining agreements
pursuant to which contributions are being made or obligations are owed by such
entities; (J) all registration statements filed with respect to any Benefit
Plan; (K) all insurance policies purchased by or to provide benefits under any
Benefit Plan; (L) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that relate
12
to any Benefit Plan; (M) the most recent reports submitted by third party
administrators, actuaries, investment managers, consultants, or other
independent contractors with respect to any Benefit Plan; (N) all notices that
were given by the Company or any ERISA Affiliate or any Benefit Plan to the IRS,
the Pension Benefit Guaranty Corporation ("PBGC"), or any participant or
beneficiary, pursuant to statute, within the four years preceding the date of
this Agreement; and (O) with respect to Benefit Plans subject to Title IV of
ERISA, the Form PBGC-1 filed for the most recent plan year.
(e) No event has occurred and, to the knowledge of any the Article II
Seller or any officer of the Company, there exists no condition or set of
circumstances in connection with which the Company or any ERISA Affiliate is or
would reasonably be expected to be subject to any material liability under the
terms of any Benefit Plan, under ERISA, or, with respect to any Benefit Plan,
under the Code or any other applicable law, rule or regulation, domestic or
foreign. Neither the Company nor any ERISA Affiliate has incurred or would
reasonably be expected to incur any material liability in respect of any
employee benefit plan maintained by an ERISA Affiliate but not included within
the term "Benefit Plan" or by any person other than the Company or any ERISA
Affiliate. No statement, either written or oral, has been made by the Company or
an ERISA Affiliate to any person with regard to any Benefit Plan that was not in
accordance with the terms of the Benefit Plan and that would have a material
adverse effect on the Company or an ERISA Affiliate. All filings required by
ERISA and the Code as to each Benefit Plan have been timely, completely and
accurately filed, and all notices and disclosures to participants required by
either ERISA or the Code have been timely, completely and accurately provided.
All contributions and payments made or accrued with respect to all Benefit Plans
are deductible under Section 162 or 404 of the Code. No amount, or any asset of
any Benefit Plan is subject to tax as unrelated business taxable income. The
Company has no material liability to the IRS with respect to any Benefit Plan,
including any liability imposed by Chapter 43 of the Code.
(f) Neither the Company nor any ERISA Affiliate has, at any time, (A)
maintained or contributed to any employee pension benefit plan subject to Title
IV of ERISA or Code Section 412, or (B) been required to contribute to, or
incurred any withdrawal liability within the meaning of ERISA Section 4201 to,
any multiemployer plan as defined in ERISA Section 3(37).
(g) Except as set forth on Schedule 2.18(d) or as contemplated by this
Agreement, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement will not (A)
require the Company or any ERISA Affiliate to pay greater compensation or make a
larger contribution to, or pay greater benefits or accelerate payment or vesting
of a benefit under, any Benefit Plan or (B) create or give rise to any
additional vested rights or service credits under any Benefit Plan.
(h) Except for requirements under applicable law, as set forth on Schedule
2.18(d) or as contemplated by this Agreement, neither the Company nor any ERISA
Affiliate is a party to or is bound by any severance agreement, program or
policy.
13
(i) Except as set forth on Schedule 2.18(d), no Benefit Plan provides
benefits, including without limitation, death or medical benefits, beyond
termination of employment or retirement other than (A) coverage mandated by law
or (B) death or retirement benefits under a Benefit Plan qualified under Section
401(a) of the Code. Neither the Company nor any ERISA Affiliate is contractually
obligated to provide any person with life, medical, dental or disability
benefits for any period of time beyond retirement or termination of employment,
other than as required by the provisions of Sections 601 through 608 of ERISA
and Section 4980B of the Code.
(j) With respect to any Benefit Plan that is an employee welfare benefit
plan (as defined in Section 3(1) of ERISA), (A) no such Benefit Plan is funded
through a "welfare benefit fund", as such term is defined in Section 419(e) of
the Code, (B) each such Benefit Plan that is a "group health plan", as such term
is defined in Section 5000(b)(l) of the Code, complies in all respects with the
applicable requirements of Sections 601 through 608 of ERISA and Section
4980B(f) of the Code, and (iii) each such Benefit Plan (including any such Plan
covering retirees or other former employees), as in effect on the date hereof,
may be amended or terminated as to future benefit accruals without material
liability to the Company or any ERISA Affiliate on or at any time after the
Closing Date.
(k) Except as disclosed on Schedule 2.18(d), and except for the
transactions contemplated by this Agreement, there is no contract, agreement,
Benefit Plan or other arrangement covering any employee or former employee of
the Company that would give rise to the payment of any amount that would not be
deductible under Section 280G of the Code.
(l) To the knowledge of any officer of the Company or any Article II
Seller, no event has occurred or circumstance exists that would result in a
material increase in premium costs of any Benefit Plan that is insured, or a
material increase in benefit costs of such Plan that is self-insured.
(m) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any Benefit Plan
is pending or, to the knowledge of any officer of the Company or any Article II
Seller, is threatened which, if adversely determined, would individually or in
the aggregate have a material adverse effect on the business of the Company.
(n) Each current or former employee of the Company who has taken a leave of
absence under the Family and Medical Leave Act of 1994, as amended, was, upon
his or her return to employment with the Company, placed in the same position
with respect to all eligibility requirements and benefits of any Benefit Plan as
had been applicable to such employee immediately before the leave commenced.
2.19 Insurance. Schedule 2.19 annexed hereto contains a list and brief
description (specifying the insurer, the policy or covering note number and the
amount of any deductible therefor, describing each pending claim thereunder, the
aggregate amounts paid out under each such policy through the date hereof, and
the aggregate limit, if any, of the insurer's liability thereunder) of all
policies or binders of fire, liability, product liability (or completed
operations liability), workmen's compensation, vehicular, unemployment and other
insurance held by or on behalf of the Company. Such policies and binders are
valid and enforceable in accordance with their terms, are in full force and
effect, and insure against risks and liabilities to the extent and in the manner
14
reasonably determined by the Company to be appropriate and sufficient to
adequately protect the Company and its assets and properties. The Company has
paid all premiums due thereon, is not in default with respect to any provision
contained in any such policy or binder, and has not failed to give any notice or
present any claim under any such policy or binder in due and timely fashion.
Except for claims described on Schedule 2.19, there are no outstanding unpaid
claims under any such policy or binder. The Company has not received notice of
cancellation or non-renewal of any such policy or binder. Except as disclosed on
Schedule 2.19, none of the policies listed thereon provides that premiums paid
in respect of the periods prior to the Closing Date may be adjusted or
recomputed based on claims-paying experience of such policies or otherwise.
Neither the Company nor any Article II Seller has received notice from any of
the Company's insurance carriers that any insurance premiums will be increased
in the future or that any insurance coverage listed on Schedule 2.19 will not be
available in the future on the same terms as now in effect.
2.20 Transactions with Affiliates.
(a) Except as disclosed on Schedule 2.20, no Affiliate of the Company nor
any Seller (i) has any ownership interest, directly or indirectly, in any
competitor, supplier or customer of the Company, or (ii) has any outstanding
loan to or receivable to or from the Company, or (iii) is a party to or has any
interest in any contract with the Company.
(b) For purposes of this Agreement, the term "Affiliate" means (i) any
entity that, directly or indirectly, controls, is controlled by or is under
common control with the person or entity in question; (ii) the shareholders,
officers or directors of any entity referred to in the preceding clause, (iii)
the spouse of any person referenced to in each of the preceding clauses; and
(iv) any entity in which any of the foregoing has a direct or indirect interest,
except for the ownership of less than five percent (5%) of the outstanding
shares of any entity whose securities are listed on a national securities
exchange or traded in the national over-the-counter market.
2.21 No Changes Prior to Closing Date. Since the Balance Sheet Date, except
as expressly contemplated hereby or as disclosed on Schedule 2.21, the Company
has not (a) incurred any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except in the ordinary course of business,
consistent with past practices (b) permitted any of its assets or properties to
be subjected to any Lien, (c) sold, transferred or otherwise disposed of any
assets except inventory sold in the ordinary course of business, (d) made any
capital expenditure or commitment therefor, (e) declared or paid any dividend or
made any distribution on any shares of its capital stock, or redeemed, purchased
or otherwise acquired any shares of its capital stock or granted or canceled any
option, warrant or other right to purchase or acquire any such shares, (f) made
any bonus or profit sharing distribution or similar payment of any kind, (g)
increased its indebtedness for borrowed money, or made any loan to any person,
(h) except in the ordinary course of business, consistent with past practices,
made or permitted any amendment or termination of any contract to which the
Company is a party or by which it or any of its respective assets and properties
are subject or bound, (i) entered into any contract granting any preferential
rights to purchase any of the Company's assets or properties or requiring the
consent of any party to the transfer and assignment of any of the Company's
assets or properties, (j) written off as uncollectible any notes or accounts
receivable, except write-offs in the ordinary course of business charged to
applicable reserves, none of which individually or in the aggregate is material
to the Company, (k) granted any increase in the rate of wages, salaries, bonuses
or other remuneration of any executive employee or other employees, except in
the ordinary course of business, (l) canceled or waived any claims or rights of
substantial value, (m) made any change in any method of accounting or auditing
practice, (n) otherwise conducted its business or entered into any transaction,
except in the usual and ordinary manner and in the ordinary course of its
business, or (o) agreed, whether or not in writing, to do any of the foregoing.
15
2.22 Disclosure. Neither this Agreement nor any Sellers' Document,
schedule, exhibit or certificate furnished in connection with the transactions
contemplated hereby by or on behalf of the Sellers or the Company's officers or
directors, contains or will contain any untrue statement of a material fact, or
omits or will omit any statement of a material fact necessary in order to make
the statements contained herein or therein not misleading.
2.23 [Reserved.]
2.24 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of any Seller or the Company is, or will be, entitled to any commission
or broker's or finder's fees from any of the parties hereto, or from any person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AS TO THE EXCHANGED SHARES
---------------------------------------------
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, and with the knowledge that Buyer shall
rely thereon, the Sellers, jointly and severally, represent and warrant to Buyer
the following (both as of the Closing Date and as of the date hereof):
3.1 Outstanding Capital Stock. Except as described on Schedule 3.1 annexed
hereto, there is no outstanding right, subscription, warrant, conversion right,
call, unsatisfied preemptive right, commitment, option or other contract or
right of any kind pursuant to which any person or entity has the right or option
to purchase or otherwise to receive from any of the Sellers any shares of the
capital stock or any other security of the Company, and there is no outstanding
security of any kind convertible into or redeemable or exchangeable for any
shares of the capital stock or any other security of the Company. Except as
described on Schedule 3.1, there is no shareholders' agreement, voting trust or
similar contract to which any of the Sellers are a party or which affects or
restricts in any way any of the Sellers' respective rights and obligations with
respect to such Seller's Exchanged Shares.
3.2 Title to Stock. Each Seller owns, beneficially and of record, and has
full power and authority to convey, free and clear of all Liens, all of the
shares of Company Common Stock and Series A Preferred Stock set forth opposite
his or her name on Schedule 3.2 annexed hereto. Upon delivery of and payment for
the Exchanged Shares as provided in this Agreement, Buyer will acquire good and
marketable title to all of the issued and outstanding shares of the Company
Common Stock and Series A Preferred Stock, free and clear of all Liens.
16
3.3 Authority of Sellers. Each Seller has full power and legal capacity to
execute and deliver this Agreement and the other agreements, certificates and
instruments required to be executed and delivered by such Seller hereunder
(collectively, the "Sellers' Documents") and to carry out the transactions
contemplated hereby and thereby. This Agreement and each of the Sellers'
Documents are valid and binding agreements of each Seller enforceable against
such Seller in accordance with their respective terms. Except as described in
Schedule 3.3 annexed hereto, no (a) consent, authorization or approval of, or
declaration, filing or registration with, any governmental or regulatory
authority, or (b) consent, authorization or approval of any other third party is
necessary in order to enable any Seller to enter into and perform his or her
respective obligations under this Agreement or any of the Sellers' Documents.
Neither the execution and delivery of this Agreement or any of the Sellers'
Documents nor the consummation of the transactions contemplated hereby or
thereby will:
(a) conflict with, require any consent under, result in the violation of or
constitute a breach of any provision of the articles of incorporation or the
bylaws of the Company;
(b) conflict with, require any consent under, result in the violation of,
constitute a breach of or accelerate the performance required on the part of the
Company or any Seller by the terms of, any contract or evidence of indebtedness
to which the Company or any Seller is a party, including, without limitation,
any contract, mortgage or deed of trust creating a Lien to which any property or
asset of the Company or any shares of the capital stock of the Company is
subject, or permit the termination of any such contract by another person, in
each case, with or without notice or lapse of time or both;
(c) result in the creation or imposition of any Lien upon, or restriction
on the use of, any property or asset of the Company or any shares of the capital
stock of the Company under any contract to which the Company or any Seller is
bound;
(d) accelerate, or constitute an event entitling, or which would, on notice
or lapse of time or both, entitle the holder of any indebtedness of the Company
or any Seller to accelerate the maturity of any such indebtedness;
(e) conflict with or result in the breach or violation of any writ,
judgment, order, injunction, decree or award of any court or governmental body
or agency or arbitration tribunal that is binding on the Company or any Seller;
or
(f) constitute a violation by the Company or any Seller of any applicable
statute, law or regulation.
3.4 Securities Law Matters. Each Seller is acquiring the Consideration
Shares issuable to such Seller hereunder for investment for such Seller's own
account, not on behalf of others and not with a view to resell or otherwise
distribute such stock in a transaction that would be in violation of the
securities laws of the United States or any state thereof. Each Seller
acknowledges that the Consideration Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and, therefore, cannot be resold unless registered under the
17
Securities Act and applicable state securities laws or unless an exemption from
such registration is available and, as a result, such Seller must bear the risk
of an investment in the Consideration Shares for an indefinite period of time.
The financial condition of each Seller is currently adequate to bear the
substantial economic risk of an investment in the Consideration Shares. Each
Seller, in conjunction with a "purchaser representative" within the meaning of
Regulation D, has sufficient knowledge and experience in investment and business
matters to understand the economic risk of such an investment and the risk
involved in a commercial enterprise such as Buyer. ▇▇▇▇▇▇▇▇ is a bona fide
resident of the State of Tennessee, and each other Seller is a bona fide
resident of the State of Georgia. All communications and information, written or
oral, concerning the Consideration Shares and this Agreement have been directed
to the Sellers and have been received by such Sellers in their respective States
of residence. Each Seller has received Buyer's Proxy Statement dated January 13,
2003, Buyer's most recent Annual Report on Form 10-KSB for the fiscal year ended
August 31, 2002, Buyer's Quarterly Report on Form 10-QSB for the quarter ended
November 30, 2002, and Buyer's Current Report on Form 8-K dated February 5,
2003, each filed with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act. Each Seller has had the opportunity to ask
questions of, and receive answers from, officers of Buyer concerning Buyer, its
business and Buyer's Common Stock and to obtain any additional information which
such Seller reasonably requested. Each Seller understands that Buyer will rely
upon the statements made by such Seller in this Section 3.4 for purposes of
establishing and relying upon an exemption from the registration requirements of
the Securities Act for the issuance of the Consideration Shares.
ARTICLE IV
REPRESENTATIONS OF BUYER
------------------------
As an inducement to the Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that the
Sellers shall rely thereon, Buyer represents and warrants to the Sellers the
following (both as of the Closing Date and as of the date hereof):
4.1 Incorporation and Qualification. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and lawful authority to carry on its business as now
being conducted, and to own, lease and operate its properties and assets as now
owned, leased or operated by Buyer.
4.2 Authority of Buyer. Buyer has all requisite corporate power and
authority to execute and deliver this Agreement and the other agreements
required to be executed and delivered by Buyer hereunder (collectively, the
"Buyer's Documents") and to carry out the transactions contemplated hereby and
thereby. The execution, delivery and performance of the Buyer Documents by Buyer
have been duly authorized by all necessary action on the part of Buyer. The
Buyer Documents are valid and binding agreements of Buyer enforceable against
Buyer in accordance with their respective terms. No consent, authorization or
approval of, or declaration, filing or registration with, any governmental or
regulatory authority, or any consent, authorization or approval of any third
party, is necessary in order to enable Buyer to enter into and perform Buyer's
obligations under the Buyer Documents, and neither the execution and delivery of
the Buyer Documents nor the consummation of the transactions contemplated
thereby will:
18
(a) conflict with, require any consent under, result in the violation of,
or constitute a breach of any provision of the certificate of incorporation or
bylaws of Buyer;
(b) conflict with, require any consent under, result in the violation of,
constitute a breach of, or accelerate the performance required on the part of
Buyer by the terms of, any contract to which Buyer is a party, in each case,
with or without notice for lapse of time or both;
(c) conflict with or result in the breach of or violation of any writ,
judgment, order, injunction, decree or award of any court of governmental body
or agency or arbitration tribunal that is binding on Buyer; or
(d) constitute a violation by Buyer of any applicable statute, law, or
regulation.
4.3 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of Buyer is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated herein.
4.4 Securities Law Matters. Buyer is purchasing the Exchanged Shares for
its own account for investment and not for resale or distribution in any
transaction that would be in violation of the securities laws of the United
States of America or any state thereof. Buyer is an "accredited investor" as
that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act. Buyer acknowledges and agrees that the Exchanged Shares have not
been registered under the Securities Act or any applicable state securities law
and that the Exchanged Shares may not be offered or sold in the United States or
to a U.S. person unless such Exchanged Shares are first registered under the
Securities Act and under any applicable state securities law, or an exemption
from the foregoing registration requirements is identified and complied with.
4.5 Buyer's Capital Structure. The capital structure of Buyer as set forth
on Schedule 4.5 annexed hereto accurately reflects the capital structure of
Buyer as of the date of this Agreement and as of the Closing Date. All of the
Consideration Shares will be, at the time of issuance and delivery, validly
issued, fully paid, nonassessable and free of preemptive rights.
4.6 Tax-free Reorganization. The facts and representations set forth on
Schedule 4.6 annexed hereto, which are relevant to the qualification of the
purchase and sale of the Exchanged Shares as a reorganization within the meaning
of Section 368(a) of the Code, are true, correct, and complete on the date
hereof and will be true, correct, and complete as of the Closing Date (unless
Buyer notifies the Indemnifying Sellers to the contrary in writing prior to the
Closing Date).
19
4.7 SEC Reports and Financial Statements. Except as disclosed on Schedule
4.7 annexed hereto, since January 1, 1999, Buyer has filed with the SEC all
forms, statements, reports and documents (including all exhibits, post-effective
amendments and supplements thereto) required to be filed by it under each of the
Securities Act, the Securities Exchange Act of 1934, as amended, and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied when filed in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder. No
subsidiary of Buyer is required to file any form, report or other document with
the SEC. [The audited financial statements for the fiscal year ended August 2002
and the two prior fiscal years have been prepared in accordance with GAAP
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of Buyer and its
subsidiaries as of the dates thereof and the results of operations and changes
in financial position for the periods then ended.]
4.8 Disclosure. Neither this Agreement nor any other agreement,
certificate, instrument, schedule, exhibit or certificate furnished in
connection with the transactions contemplated hereby by or on behalf of Buyer or
Buyer's officers or directors, contains or will contain any untrue statement of
a material fact, or omits or will omit any statement of a material fact
necessary in order to make the statements contained herein or therein not
misleading.
ARTICLE V
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
----------------------------------------------
The parties hereto covenant and agree that between the date hereof and the
Closing Date:
5.1 Operation in Ordinary Course. From the date hereof to the Closing Date,
except with the prior written consent of Buyer, the Sellers shall cause the
Company to (a) conduct its respective business only in the ordinary course and
in substantially the same manner as conducted at the date hereof, and in all
cases in such a manner as to ensure that it, at all times, has sufficient cash
to meet obligations that are due or that will become due within 30 days, (b) use
its reasonable best efforts to preserve its respective business organization
intact and to retain the services of its present officers, key employees,
purchasing and sales personnel and representatives, (c) use its reasonable best
efforts to preserve favorable relations with its respective employees,
customers, suppliers and others having business relations with it, (d) use its
reasonable best efforts to comply with all applicable Laws, (e) refrain from
entering into, amending in any material respect or terminating any contract to
which it is a party, (f) refrain from changing in any material respect any
employee's compensation or employment benefits; (g) refrain from making any
distribution to its shareholders, and (h) conduct its respective business in
such a manner that the representations and warranties contained in Article II of
this Agreement shall continue to be true and correct on and as of the Closing
Date as if made on and as of the Closing Date. In addition, until the Closing,
the Sellers shall cause the Company to refrain from making any expenditures or
commitments for expenditures (regardless of whether such expenditures or
commitments are within the ordinary course of business) without the prior
written consent of Buyer. The Sellers shall jointly and severally indemnify and
hold Buyer harmless from and against any claim or loss incurred by Buyer or the
Company or any of their respective shareholders, resulting from or arising out
of any act or omission of Buyer under this Section 5.1 if such act or omission
was taken or made in good faith and in a commercially reasonable manner.
20
5.2 Notice of Events. The Sellers shall promptly notify Buyer of (a) any
event, condition or circumstance occurring from the date hereof through the
Closing Date that would constitute a violation or breach of this Agreement, (b)
any event, occurrence, transaction or other item which would have been required
to have been disclosed on any schedule or certificate delivered by or on behalf
of any Seller, the Company or the Company's officers or directors hereunder had
such event, occurrence, transaction or item existed on the date hereof, and (c)
any lawsuits, claims, proceedings or investigations that after the date hereof
are threatened or commenced against the Sellers or against the Company or any of
its officers, directors, employees, consultants, agents or shareholders with
respect to the affairs of the Company.
5.3 Exclusive Dealing. During the period beginning on the date hereof and
ending on May 11, 2003 (the "Exclusivity Period"), the Sellers shall refrain,
and shall cause the Company and each of its representatives, directors,
officers, stockholders, agents or affiliates to refrain, from (i) entertaining
or discussing a possible sale, merger, recapitalization or other disposition of
the Company, any capital stock or assets of the Company or any interest therein
with any other party or provide any information to any other party in connection
therewith, or (ii) disclose to any other party the contents of this Agreement or
the details of the transactions proposed herein. In addition, the Sellers will
inform Buyer of, and provide Buyer with information regarding, any other offers
or expressions of interest for the Company.
5.4 Examinations and Investigations. Prior to the Closing Date, Buyer shall
be entitled, through its employees and representatives, including, without
limitation, its counsel and accountants, to make such investigation of the
assets, properties, business and operations of the Company, and such examination
of the books, records and financial condition of the Company as Buyer deems
necessary or advisable. Any such investigation and examination shall be
conducted at reasonable times during normal business hours and under reasonable
circumstances, and the Sellers shall cause the Company to cooperate fully
therein. No investigation by Buyer (or failure to conduct such an investigation)
shall diminish or obviate any of the representations, warranties, covenants or
agreements of the Sellers under this Agreement, or Buyer's rights under Article
IX or X of this Agreement. In order that Buyer may have full opportunity to make
such business, accounting and legal review, examination or investigation as it
may wish of the business and affairs of the Company, the Sellers shall furnish,
and shall cause the Company to furnish, the representatives of Buyer during such
period with all such information and copies of such documents concerning the
affairs of the Company as such representatives may reasonably request and cause
its and their respective officers, employees, consultants, agents, accountants
and attorneys to cooperate fully with such representatives in connection with
such review and examination.
5.5 Further Assurances. Each Seller agrees to cure at any time after the
Closing, without further compensation, any deficiencies with respect to the
endorsement of the certificates representing the Exchanged Shares owned by such
Seller or with respect to the stock power executed by such Seller and
accompanying such certificates.
21
5.6 Tax Treatment of Transaction. This Agreement is a "plan of
reorganization" within the meaning of Section 1.368-1(c) and Section 1.368-2(g)
of the Treasury Regulations promulgated under the Code. From the date hereof
until the Closing Date, each party hereto shall use commercially reasonable
efforts to (i) act consistently with the characterization of the purchase and
sale of the Exchanged Shares as a reorganization under the provisions of Section
368(a) of the Code, (ii) refrain from taking any action inconsistent with the
terms of this Agreement that would cause the purchase and sale of the Exchanged
Shares to fail to qualify as a reorganization within the meaning of Section
368(a) of the Code, and (iii) except to the extent otherwise required by
applicable law, report the purchase and sale of the Exchanged Shares as a
tax-free reorganization within the meaning of Section 368(a) of the Code for all
applicable Tax purposes. Following the Closing Date, neither Buyer nor the
Company shall knowingly take any action that would cause the purchase and sale
of the Exchanged Shares to cease to qualify as a reorganization within the
meaning of Section 368(a) of the Code.
5.7 Tax Matters. Without the prior written consent of Buyer, the Company
shall not make or change any election, change an annual accounting period, adopt
or change any accounting method, file any amended Tax Return, enter into any
closing agreement, settle any Tax claim or assessment relating to the Company,
surrender any right to claim a refund of Taxes, consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment
relating to the Company, or take any other similar action relating to the filing
of any Tax Return or the payment of any Tax, if such election, adoption, change,
amendment, agreement, settlement, surrender, consent or other action would have
the effect of increasing the Tax liability of the Company for any period ending
after the Closing Date or decreasing any Tax attribute of the Company existing
on the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE
--------------------------------------------------------
The obligation of Buyer to enter into and complete the Closing is subject,
at Buyer's option, to the fulfillment on or prior to the Closing Date of the
following conditions, any one or more of which may be waived by Buyer only in
writing:
6.1 Representations and Covenants. The representations and warranties of
the Sellers contained in this Agreement shall be true on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date. Each Seller shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be performed or
complied with by such Seller on or prior to the Closing Date. At the Closing,
the Sellers shall have delivered to Buyer a certificate to such effect.
6.2 Litigation. No action, suit or proceeding shall have been instituted
before any court or governmental or regulatory body, or instituted or threatened
by any governmental or regulatory body, to restrain, modify or prevent the
carrying out of the transactions contemplated by this Agreement or to seek
damages or a discovery order in connection with such transactions, or that has
or could reasonably be expected to have a materially adverse effect on the
assets, properties, business, operations or financial condition of the Company.
At the Closing, the Sellers shall have delivered to Buyer a certificate to such
effect.
6.3 Governmental Permits and Approvals. All permits and approvals from any
governmental or regulatory body required for the lawful consummation of the
Closing and the continued operation of the business of the Company shall have
been obtained.
22
6.4 Third Party Consents. All consents, permits, waivers and approvals from
parties to material contracts with any Seller or the Company that may be
required in connection with the performance by any Seller of such Seller's
obligations under this Agreement or the continuance of such contracts with the
Company without material modification after the Closing shall have been obtained
(with satisfactory written evidence thereof, in recordable form where necessary,
to be furnished to Buyer at the Closing).
6.5 Due Diligence. Buyer shall have completed its due diligence review of
the Company and shall be satisfied with the results thereof, including, without
limitation, Buyer's satisfaction with the Financial Statements.
6.6 No Material Adverse Change. There shall have been no material adverse
change in the assets or liabilities, the business or condition, (financial or
otherwise) of the Company or its employees or customers regardless of reason,
including, without limitation, to those changes that are the result of any
legislative or regulatory change, the announcement of the transactions described
herein, revocation of any license or rights to do business, fire, explosion,
accident, casualty, labor trouble, flood, riot, storm, condemnation or act of
God or other public force or otherwise. At the Closing, the Sellers shall have
delivered to Buyer a certificate to such effect.
6.7 Books and Records. Buyer shall have received the minute books, stock
certificate books, stock transfer books, corporate seals, books of account and
all books, papers, records, correspondence and instruments of, or relating to,
the Company and its business and operations.
6.8 Board of Directors Approval. The Board of Directors of Buyer shall have
approved this Agreement and the transactions contemplated hereby.
6.9 Good Standing Certificates, Etc. The Sellers shall have delivered all
certified resolutions, certificates, documents or instruments with respect to
the Company's corporate existence and authority as Buyer may have reasonably
requested prior to the Closing Date.
6.10 Non-Competition Agreements. Each of the Sellers shall have executed
and delivered to the Company a Non-Competition Agreement in the form of Exhibit
6.10 attached hereto.
6.11 [Reserved.]
6.12 Compliance with Securities Laws. Buyer shall have determined, in its
reasonable discretion, that the consummation of the transactions contemplated by
this Agreement, including without limitation, the transfer of the Exchanged
Shares and the issuance of the Consideration Shares, complies with all
applicable securities laws.
6.13 Termination of Shareholders Agreement. The Company and each of the
Sellers shall have terminated that certain Amended and Restated Shareholders
Agreement dated March 21, 2003, by and among such parties.
6.14 Amendment of ▇▇▇▇▇▇▇▇ Employment Agreement. The Company and ▇▇▇▇▇▇▇▇
shall have amended and restated that certain Employment Agreement, dated as of
May 10, 2002, by and among such parties, in a manner satisfactory to Buyer in
its sole discretion (such agreement, as so amended and restated, the "Restated
Employment Agreement").
23
6.15 Termination of Outstanding Stock Options. The Sellers shall have
caused the Company to terminate all outstanding options to purchase capital
stock of the Company and provided to Buyer written evidence of such terminations
signed by the respective optionees and otherwise satisfactory to Buyer in its
sole discretion.
6.16 Cancellation of Debt owed to ▇▇▇▇▇▇▇. The existing debt owed to
▇▇▇▇▇▇▇ by the Company shall have been cancelled in exchange for the issuance by
Buyer to ▇▇▇▇▇▇▇ of a warrant to purchase, at the Post-Closing Price (as defined
below), a number of shares of Buyer's Common Stock equal to the aggregate amount
of indebtedness so cancelled divided by the Post-Closing Price (the "▇▇▇▇▇▇▇
Warrant"). As used herein, the term "Post-Closing Price" means the average
closing price of a share of Buyer's Common Stock on the OTC Bulletin Board over
the five trading days commencing on the first trading day following the Closing
Date.
6.17 Cancellation of Debt owed to ▇▇▇▇▇▇▇▇. The existing joining bonus
obligation owed to ▇▇▇▇▇▇▇▇ by the Company pursuant to her employment agreement
with the Company prior the amendment and restatement thereof pursuant to Section
6.14 above shall have been cancelled in exchange for the issuance by Buyer to
▇▇▇▇▇▇▇▇ of a warrant to purchase, at the Post-Closing Price, a number of shares
of Buyer's Common Stock equal to the aggregate amount of such obligation so
cancelled divided by the Post-Closing Price (the "▇▇▇▇▇▇▇▇ Warrant").
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SELLERS TO CLOSE
--------------------------------------------------------------
The obligation of the Sellers to enter into and complete the Closing is
subject, at the Sellers' option, to the fulfillment of the following conditions,
any one or more of which may be waived by the Sellers only in writing:
7.1 Representations and Covenants. The representations and warranties of
Buyer contained in this Agreement shall be true on and as of the Closing Date
with the same force and effect as though made on and as of the Closing Date.
Buyer shall have performed and complied with in all material respects all
covenants and agreements required by this Agreement to be performed or complied
with by it on or prior to the Closing Date. At the Closing, Buyer shall have
delivered to the Sellers a certificate to such effect.
7.2 Litigation. No action, suit or proceeding shall have been instituted
before any court or governmental or regulatory body, or instituted or threatened
by any governmental or regulatory body, to restrain, modify or prevent the
carrying out of the transactions contemplated hereby, or to seek damages or a
discovery order in connection with such transaction. At the Closing, Buyer shall
have delivered to the Sellers a certificate to such effect.
7.3 Governmental Permits and Approvals. All permits and approvals from any
governmental or regulatory body required for the lawful consummation of the
Closing and the continued operation of the business of the Company shall have
been obtained.
24
7.4 Resolutions. Buyer shall have delivered to the Sellers a copy of the
resolutions duly adopted by the board of directors of Buyer, certified accurate
by an officer of Buyer as of the Closing Date, authorizing and approving the
execution and delivery by Buyer of this Agreement and the consummation by Buyer
of the transactions contemplated hereby.
7.5 Registration Rights Agreement. Buyer shall have executed and delivered
to Rissanen a registration rights agreement in the form of Exhibit 7.5 attached
hereto.
ARTICLE VIII
ACTIONS TO BE TAKEN AT THE CLOSING
----------------------------------
The following actions shall be taken at the Closing, each of which shall be
conditioned on completion of all the others and all of which shall be deemed to
have taken place simultaneously:
8.1 Stock Certificates. The Sellers shall deliver to Buyer any and all
certificates representing the Exchanged Shares, accompanied by stock powers duly
executed in blank by each Seller with all necessary transfer tax and other
revenue stamps, acquired and duly paid by each Seller, affixed thereto and
cancelled.
8.2 Initial Consideration. Buyer shall deliver to its transfer agent the
Transfer Agent Instruction in accordance with the terms of this Agreement.
8.3 Opinion of Counsel to the Sellers. The Sellers shall deliver to Buyer
an opinion of ▇▇▇▇▇▇ & Bird, LLP, counsel to the Sellers, dated the Closing
Date, in form and substance acceptable to Buyer's counsel.
8.4 Opinion of Counsel to Buyer. Buyer shall deliver to the Sellers an
opinion of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, counsel to Buyer, dated the Closing
Date, in form and substance acceptable to the Sellers' counsel.
8.5 Other Documents and Certificates. Buyer and the Sellers shall deliver,
or, with respect to the Sellers, cause the Company to deliver, the agreements,
certificates, consents, permits, waivers, approvals and other documents
described in Articles VI and VII of this Agreement, respectively, or reasonably
requested by counsel for Buyer or the Sellers, as the case may be, to satisfy
the conditions precedent to Closing set forth in Articles VI and VII of this
Agreement.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
9.1 Survival of Representations and Warranties. Except as is otherwise
expressly provided for in this Section 9.1, the representations and warranties
of any party hereto set forth in this Agreement shall survive the Closing for a
period of one year. All representations and warranties of the Sellers contained
in Sections 2.11 (Taxes), 2.12 (Title to Properties) 2.18 (Personnel,
Compensation and Benefits) and 3.2 (Title to Stock) shall survive the Closing
until the expiration of the applicable statute of limitations with respect to
the liability in question. Any claim any party makes against another in writing
25
prior to the expiration of the applicable survival period provided for in this
Section 9.1 shall survive the expiration of such period and the party asserting
the claim shall have the right to pursue the same in accordance with the
applicable indemnification provisions provided for in this Agreement. This
Article IX (together with Section 1.3(b) above and Article X below) shall
provide the sole and exclusive remedy for any and all damages, claims, losses,
liabilities or expenses arising out of or relating to this Agreement or the
transactions contemplated herein provided, however, the provisions of this
Section 9.1 shall not in any manner diminish, restrict or otherwise limit any
party's right to obtain either (i) a remedy in addition to the indemnification
provided for in this Article IX or Article X, with respect to any breach or
violation or failure to fully perform, any covenant, agreement, undertaking or
obligation of any party set forth in this Agreement based on or arising out of
fraud, fraudulent inducement or intentional misrepresentation, or (ii)
injunctive or other provisional relief as necessary or appropriate.
9.2 Indemnifying Seller's Indemnity Agreement. The Indemnifying Sellers
shall, jointly and severally, defend, indemnify and hold harmless Buyer (and its
directors, officers, employees, agents, affiliates, successors and assigns) from
and against any and all direct or indirect requests, demands, claims, payments,
defenses, obligations, recoveries, deficiencies, fines, penalties, interest,
assessments, actions, liens, causes of action, suits, proceedings, judgments,
losses, damages, liabilities, costs, and expenses of any kind (including without
limitation (i) interest, penalties and reasonable attorneys' fees and expenses,
(ii) attorneys' fees and expenses necessary to enforce their rights to
indemnification hereunder, and (iii) consultants' fees and other costs of
defending or investigating any claim hereunder), and interest on any amount
payable as a result of the foregoing, whether accrued, absolute, contingent,
known, unknown, or otherwise as of the Closing Date or thereafter asserted
against, imposed upon or incurred by Buyer, the Company, or any of their
respective directors, officers, employees, agents, affiliates, successors or
assigns by reason of, resulting from, arising out of, based upon, awarded or
asserted against in respect of or otherwise in respect of:
(a) any breach of any representation or warranty on the part of the
Indemnifying Sellers contained in this Agreement (without giving effect to any
materiality qualifications contained in any such representation or warranties)
or any misrepresentation in or omission on the part of the Sellers contained in
any certificate furnished or to be furnished to Buyer by the Sellers pursuant to
this Agreement;
(b) any breach or non-fulfillment on the part of the Indemnifying Sellers
of any covenant contained in this Agreement;
(c) any liability or loss to the Company arising from facts in existence
prior to the Closing Date, unless such liability was reserved against or accrued
on the Latest Balance Sheet or disclosed on Schedule 2.9;
(d) any liability or loss to the Company arising from the following
litigation matters and claims: (i) AmSouth Bank vs. UITSG, LLC, Convergion, Inc.
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, filed on November 2, 2002, in the Sixth Circuit for
Davidson County, Tennessee, Docket No. 02C-3096, (ii) ▇▇▇▇▇▇▇▇ ▇▇▇▇ Services,
Inc., Agent for AMB Property, LP vs. Technical Business Services, LLC (f/k/a
UITSG, LLC) and U.S. Convergion, Inc., filed on February 5, 2003, in the
Chancery Court of Shelby County, Tennessee for the Thirtieth Judicial District
at Memphis, Docket No. CH-03-0232-3, and (iii) any and all other claims asserted
against the Company and/or Buyer arising out of or relating to the Company's
acquisition of certain assets of UITSG, LLC on or about May 2002, whether or not
currently pending or asserted;
26
(e) any claims with respect to brokers' or finders' fees due with respect
to the transactions contemplated herein and alleged to arise from any contract
entered into by an Indemnifying Seller or the Company; or
(f) any liability or loss to the Company arising from the following
litigation matter: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ vs. U.S. Convergion, Inc., U.S. District Court
for the Western District of Wisconsin, Case No. 03-C-0111-C.
9.3 Buyer's Indemnity Agreement. Buyer shall indemnify and hold harmless
the Sellers from and against any and all direct or indirect requests, demands,
claims, payments, defenses, obligations, recoveries, deficiencies, fines,
penalties, interest, assessments, actions, liens, causes of action, suits,
proceedings, judgments, losses, damages, liabilities, costs, and expenses of any
kind (including without limitation interest, penalties and reasonable attorneys'
fees and expenses attorneys' fees and expenses necessary to enforce their rights
to indemnification hereunder, and consultants' fees and other costs of defending
or investigating any claim hereunder, and interest on any amount payable as a
result of the foregoing) whether accrued, absolute, contingent, known, unknown
or otherwise as of the Closing Date or thereafter asserted against, imposed upon
or incurred by a Seller or any Seller's representatives or assigns, by reason
of, resulting from, arising out of, based upon, awarded or asserted against in
respect of or otherwise in respect of:
(a) any breach of any representation or warranty or non-fulfillment of any
covenant or agreement on the part of Buyer contained in this Agreement, or any
misrepresentation in or omission from or non-fulfillment of any covenant on the
part of Buyer contained in any certificate furnished or to be furnished to the
Sellers by Buyer pursuant to this Agreement; or
(b) any claims with respect to brokers' or finders' fees due with respect
to the transactions contemplated herein and alleged to arise from any contract
entered into by Buyer.
9.4 Indemnification By Sellers. Each Seller shall defend, indemnify and
hold harmless Buyer (and its directors, officers, employees, agents, affiliates,
successors and assigns) from and against any and all direct or indirect
requests, demands, claims, payments, defenses, obligations, recoveries,
deficiencies, fines, penalties, interest, assessments, actions, liens, causes of
action, suits, proceedings, judgments, losses, damages, liabilities, costs, and
expenses of any kind (including without limitation (i) interest, penalties and
reasonable attorneys' fees and expenses, (ii) attorneys' fees and expenses
necessary to enforce their rights to indemnification hereunder, and (iii)
consultants' fees and other costs of defending or investigating any claim
hereunder), and interest on any amount payable as a result of the foregoing,
whether accrued, absolute, contingent, known, unknown, or otherwise as of the
Closing Date or thereafter asserted against, imposed upon or incurred by Buyer,
or its directors, officers, employees, agents, affiliates, successors or assigns
by reason of, resulting from, arising out of, based upon, awarded or asserted
against in respect of or otherwise in respect of:
27
(a) any breach of any representation or warranty on the part of such Seller
contained in Article III or any misrepresentation in or omission on the part of
such Seller contained in any certificate furnished or to be furnished to Buyer
by such Seller pursuant to this Agreement;
(b) any breach or non-fulfillment on the part of such Seller with respect
to any covenant contained in this Agreement;
(c) any failure of such Seller to transfer his Exchanged Shares to Buyer,
free and clear of all Liens; or
(d) any claims with respect to brokers' or finders' fees due with respect
to the transactions contemplated herein and alleged to arise from any contract
entered into by such Seller.
9.5 Indemnification Procedure.
(a) With respect to any claim for indemnification under this Agreement, the
party seeking indemnification (the "Indemnitee") shall promptly notify the
indemnifying party hereunder (the "Indemnitor") in writing of any damage, claim,
loss, liability or expense or other matter which the Indemnitee has determined
has given or could give rise to a claim for which indemnification rights are
granted hereunder (such written notice referred to as the "Notice of Claim").
The Notice of Claim shall specify, in reasonable detail, the nature and
estimated amount of any such claim giving rise to a right of indemnification, to
the extent the same can reasonably be estimated. Any failure on the part of an
Indemnitee to give timely notice to the Indemnitor of a claim shall not affect
the right of the Indemnitee to obtain indemnification from the Indemnitor with
respect to such claim unless the Indemnitor is actually harmed by such failure
to notify, and then only to the extent of such actual harm.
(b) With respect to any matter set forth in a Notice of Claim relating to a
third party claim (other than claims by any Taxing authority, which claims are
covered by Article X below), the Indemnitor shall defend, in good faith and at
its expense, any such claim or demand, and the Indemnitee, at its expense, shall
have the right to participate in the defense of any such third party claim. So
long as the Indemnitor is defending any such third party claim in good faith,
the Indemnitee shall not settle or compromise such third party claim. The
Indemnitee shall make available to the Indemnitor or its representatives all
records and other materials reasonably required by them for use in contesting
any third party claim and shall cooperate fully with the Indemnitor in the
defense of all such claims. If the Indemnitor does not defend any such third
party claim or if the Indemnitor does not provide the Indemnitee with prompt and
reasonable assurances that the Indemnitor will satisfy the third party claim,
the Indemnitee may, at its option, elect to defend any such third party claim,
at the Indemnitor's expense. An Indemnitor may not settle or compromise any
claim without obtaining a full and unconditional release of the Indemnitee,
unless the Indemnitee consents in writing to such settlement or compromise.
Notwithstanding the foregoing, if there is a reasonable probability that a third
party claim for which Buyer has indemnification rights against the Sellers
hereunder will materially and adversely affect Buyer or the Company other than
as a result of money damages or other payments, Buyer shall be entitled to
conduct the defense of such claim at the Sellers' expense.
28
9.6 Limits on Indemnification.
(a) Neither Buyer nor the Sellers shall be entitled to assert a claim for
indemnification from the other party (the Sellers being considered one party for
purposes of this subsection only) under the provisions of Sections 9.2, 9.3 or
9.4, as the case may be, until such time as the claims subject to
indemnification by such other party exceed, in value in the aggregate, $37,500,
at which time all claims, including without limitation those included in
determining that such threshold amount has been met, may be asserted. Indemnity
claims asserted under Section 10.1 below shall be included in determining
whether such threshold amount has been met.
(b) The aggregate indemnification obligation of the Indemnifying Sellers
under Section 9.2(a), (b), (c), (e), and (f) and Section 10.1 shall be limited
to an amount equal to the sum of $283,047. The aggregate indemnification
obligation of the Indemnifying Sellers under Section 9.2(d) shall be limited to
an amount equal to the sum of $783,047. The respective indemnification
obligation of each Seller (other than the Indemnifying Sellers) under Section
9.4 shall be limited to the aggregate value of the shares of Buyer's Common
Stock acquired by such Seller pursuant to this Agreement (valued in accordance
with subsection (d) below); provided such Seller satisfies the entire amount of
such obligation pursuant to subsection (d) below. Notwithstanding any provision
hereof to the contrary, each Indemnifying Seller's obligation under Section 9.4
shall be unlimited and to the extent any Indemnifying Seller indemnifies Buyer
with respect to a breach of such Indemnifying Seller's own representations,
warranties or covenants, such indemnification shall be deemed to have been made
under Section 9.4. The aggregate indemnification obligation of Buyer under
Section 9.3 shall be limited to $283,047. In the event the Indemnifying Sellers
default on their obligations under this Article IX, Buyer shall have the right
to suspend its performance of the ▇▇▇▇▇▇▇ Warrant and the ▇▇▇▇▇▇▇▇ Warrant
(collectively, the "Warrants") until such default is removed. Any such
suspension shall not be deemed to delay the expiration of the Warrants.
(c) Notwithstanding the foregoing, the limitations set forth in this
Section 9.6 shall not apply to fraudulent misrepresentations or intentional
misconduct.
(d) Subject to the following provisions, in the event any payment of the
indemnity obligations of the Sellers set forth in Sections 9.2 or 9.4 is
required to be made, the Sellers may satisfy such payment by the delivery to
Buyer of shares of Buyer's Common Stock acquired by them pursuant to this
Agreement, which shares, for such purpose, shall be valued at $2.50 per share in
the case of Rissanen, or $3.00 per share in the case of any other Seller. The
number of shares of Buyer's Common Stock any Seller may use to satisfy such
indemnity obligations shall not exceed the number of shares of Buyer's Common
Stock acquired by such Seller pursuant to this Agreement, minus the number of
shares of Buyer's Common Stock sold by such Seller following the date of this
Agreement. If, prior to the Escrow Release Date, any Indemnifying Seller elects
to satisfy a Unicorp Claim (as defined below) by tendering shares of Buyer's
Common Stock pursuant to this subsection, Buyer may elect to retain such shares
29
in the escrow created pursuant to Section 1.3(b) above notwithstanding such
tender, and, by written notice to such Indemnifying Seller delivered within the
forty-five (45) day period beginning on the Escrow Release Date refuse such
tender with respect to any Retainable Shares (as defined below) and demand cash
payment from such Indemnifying Seller of the aggregate value of such Retainable
Shares (with each share being valued at $3.00) in lieu of such Indemnifying
Seller's tender thereof. Such Indemnifying Seller shall make such cash payment
to Buyer within thirty (30) days following his or her receipt of such demand. As
used herein, the term "Unicorp Claim" shall mean any indemnification claim
properly asserted by Buyer against the Indemnifying Sellers pursuant to Section
9.2(d) above. As used herein, the term "Retainable Shares" means any shares
tendered by an Indemnifying Seller pursuant to this subsection, which if
cancelled in respect of a Unicorp Claim would leave the aggregate number of
shares subject to the escrow created pursuant to Section 1.3(b) (with each such
share being valued at $3.00) insufficient to secure the aggregate amount of any
and all pending claims for indemnification asserted by Buyer against the
Indemnifying Sellers or either of them that are not Unicorp Claims. Unless
otherwise agreed in writing between the Indemnifying Sellers, in the event both
Indemnifying Sellers have tendered shares pursuant to this subsection, Buyer
shall, to the extent possible, allocate the Retainable Shares equally between
such Indemnifying Sellers.
9.7 Right of Offset. As additional security for their respective
obligations of indemnity under this Agreement, each Indemnifying Seller hereby
agrees that Buyer may offset any amounts owed by such Indemnifying Seller
pursuant to such obligations against amounts any owed to such Indemnifying
Seller by the Company, including without limitation, compensation for services
rendered as an employee of the Company. In the event Buyer asserts a claim of
offset pursuant to the foregoing, any resulting non-payment shall not be deemed
a default by the Company of any applicable agreement requiring such payment, and
such Indemnifying Seller shall be required to continue observing the all of the
terms, agreements, obligations and covenants contained in such agreement
notwithstanding such non-payment.
ARTICLE X
TAX MATTERS
-----------
The following provisions shall govern the allocation of responsibility as
between Buyer and Sellers for certain tax matters following the Closing Date:
10.1 Tax Indemnification. Each Indemnifying Seller shall jointly and
severally indemnify the Company and Buyer on a Grossed-Up Basis (as defined
below) and, hold them harmless from and against (i) all Taxes (or the
non-payment thereof) of the Company for all Taxable periods ending on or before
the Closing Date and the portion through the end of the Closing Date for any
Taxable period that includes (but does not end on) the Closing Date (each such
Taxable period or portion of a Taxable period, hereinafter, a "Pre-Closing Tax
Period"), (ii) any and all Taxes of any member of an affiliated, consolidated,
combined, or unitary group of which the Company (or any predecessor of the
Company) is or was a member on or prior to the Closing Date, including pursuant
to Treasury Regulation ss.1.1502-6 or any analogous or similar state, local, or
foreign law or regulation, (iii) any and all Taxes of any person (other than the
Company) imposed on the Company as a transferee or successor, by contract or
pursuant to any law, rule or regulation, which Taxes relate to an event or
transaction occurring before the Closing, and (iv) to the extent not described
by clauses (i) through (iii) above, any Tax arising, directly or indirectly, as
30
a result of a breach or inaccuracy of a representation or warranty set forth in
Section 2.11, Schedule 2.11(j) or any certification of either thereof; provided,
however, that in the case of clauses (i), (ii) and (iii) above, the Indemnifying
Sellers shall be liable only to the extent that such Taxes are in excess of the
amount, if any, reserved for Taxes (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) on the
face of the Latest Balance Sheet (rather than in any notes thereto), as such
reserve is adjusted for the passage of time through the Closing Date in
accordance with past custom and practice of the Company in filing its Tax
Returns. The Indemnifying Sellers shall reimburse Buyer for any Taxes of the
Company which are the responsibility of the Indemnifying Sellers pursuant to
this Section 10.1 within fifteen (15) business days after payment of such Taxes
by Buyer or the Company. As used above, the term "Grossed-Up Basis" means a
basis such that the amount of the payment, after being reduced by the amount of
all Taxes imposed on the recipient of the payment as a result of the receipt or
accrual of the payment, and after taking into account all Tax benefits (whether
in the form of a credit, deduction, allowance or other reduction in Tax)
actually received by such recipient from the event or circumstance giving rise
to such payment, will equal the specified sum.
10.2 Straddle Period. In the case of any Taxable period that includes (but
does not end on) the Closing Date (a "Straddle Period"), the amount of any Taxes
for the Pre-Closing Tax Period shall be determined based on an interim closing
of the books as of the close of business on the Closing Date (and for such
purpose, the Taxable period of any partnership or other pass-through entity in
which the Company holds a beneficial interest shall be deemed to terminate at
such time).
10.3 Preparation of Tax Returns. Buyer shall prepare or cause to be
prepared and file or cause to be filed with the relevant Taxing authorities all
Tax Returns of the Company which are filed after the Closing Date. Buyer shall
permit the Indemnifying Sellers to review and comment on each such Tax Return
relating to a Pre-Closing Tax Period prior to filing and shall make such
revisions to thereto as are reasonably requested by the Indemnifying Sellers.
10.4 Cooperation on Tax Matters.
(a) Buyer, the Company and the Sellers shall (and after the Closing Date
Buyer shall cause the Company to) cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of Tax
Returns pursuant to this Article X and any audit or other administrative or
judicial proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit or other
administrative or judicial proceeding. Buyer, the Company and the Sellers agree
(A) to retain all books and records with respect to Tax matters pertinent to the
Company relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent notified by
Buyer or Sellers, any extensions thereof) of the respective Taxable periods, and
to abide by all record retention agreements entered into with any taxing
authority, and (B) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if the
other party so requests, the Company or Sellers, as the case may be, shall allow
the other party to take possession of such books and records.
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(b) Buyer and Sellers further agree, upon request, to use their best
efforts to obtain any certificate or other document from any governmental
authority or any other person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(c) Buyer and Sellers further agree, upon request, to provide the other
Party with all information that either party may be required to report pursuant
to Code ss.6043 and all Treasury Regulations promulgated thereunder.
(d) Following the Closing Date, if an audit or other administrative or
judicial proceeding is initiated by any Tax authority with respect to Taxes of
the Company for which the Indemnifying Sellers may have an indemnification
obligation under Section 10.1, Buyer or the Company, as the case may be, shall
notify the Indemnifying Sellers of such audit or proceeding, stating the nature
and basis of such claim and the amount thereof, to the extent known; provided,
however, that any failure on the part of Buyer to provide to the Indemnifying
Sellers any such notification shall not affect the right of the Buyer and/or the
Company to obtain indemnification from the Indemnifying Sellers with respect to
such Tax Liability unless the Indemnifying Sellers are actually harmed by such
failure and, then, only to the extent of such actual harm. Buyer or the Company
shall control the conduct of all stages of such audit or other administrative or
judicial proceeding with respect to Taxes of the Company. Buyer or the Company
shall consult in good faith with the Indemnifying Sellers with respect to the
conduct of such audit or other administrative or judicial proceeding (to the
extent such audit or proceeding relates to Taxes of the Company for which the
Indemnifying Sellers may have an indemnification obligation under Section 10.1),
but the decisions regarding what actions to be taken shall be made by the Buyer
or the Company in its sole judgment. Buyer and the Company shall not accept any
proposed adjustment or enter into any settlement or agreement in compromise
regarding any Taxes of the Company for which the Indemnifying Sellers have an
indemnification obligation under Section 10.1 without the express written
consent of the Indemnifying Sellers; provided that (x) Sellers have advanced to
Buyer or the Company on an interest-free basis the amount of the Taxes for which
Sellers have such an indemnification obligation or have provided to Buyer and
the Company such other bond or other security with respect to the amount of such
indemnification obligation as is acceptable to Buyer and the Company, and (y)
the Indemnifying Sellers are not in default of any of their obligations under
this Agreement, including, without limitation, their obligations under this
subsection with respect to the payment of the costs and expenses of the
applicable audit or administrative or judicial proceeding. In the event of an
audit or proceeding before any Taxing authority or court, (a) with respect to
such an audit or proceeding that relates solely to Tax liability of the Company
for one or more Tax periods that end on or before the Closing Date, the
Indemnifying Sellers shall be responsible for the costs of such audit or
proceeding, and (b) with respect to such an audit or proceeding that is
applicable to both a Pre-Closing Tax Period and a post-Closing Tax period, the
liability for the costs of conducting such audit or proceeding shall be
allocated as follows: the Indemnifying Sellers shall be liable for that amount
of such costs of conducting such audit or proceeding as is equal to the product
of (i) the total of such costs and (ii) a fraction, the numerator of which is
the number of days in the Pre-Closing Tax Period subject to such proceeding and
the denominator of which is the number of days in the entire period subject to
such audit or proceeding; and Buyer shall be liable for the balance of such
costs of conducting such audit or proceeding. The Indemnifying Sellers shall pay
directly or shall reimburse Buyer and the Company on demand for any costs and
expenses of conducting any such audit or proceeding incurred by Buyer or the
Company and for which Indemnifying Sellers are responsible or liable pursuant to
this subsection.
32
10.5 Amended Tax Returns. Buyer shall not amend, and shall not permit any
of its affiliates to amend, any Tax Return filed by the Company prior to the
Closing Date without the prior written consent of the Indemnifying Sellers if
the effect of filing such amended return would be to increase the liability for
Taxes for which the Indemnifying Sellers are responsible pursuant to Section
10.1 hereof.
10.6 Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder.
10.7 Certain Taxes and Fees. All transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and interest) incurred in
connection with the consummation of the transactions contemplated by this
Agreement shall be borne by Sellers.
ARTICLE XI
TERMINATION OF AGREEMENT
------------------------
11.1 Termination. This Agreement may be terminated prior to the Closing
only as follows:
(a) at the election of the Sellers, if any one or more of the conditions to
the obligations of the Sellers to close has not been fulfilled as of the Closing
Date, or if Buyer has breached in any material respect any representation,
warranty, covenant or agreement contained in this Agreement;
(b) at the election of Buyer, if any one or more of the conditions to its
obligations to close has not been fulfilled as of the Closing Date, or if a
Seller has breached in any material respect any representation, warranty,
covenant or agreement contained in this Agreement;
(c) at the election of the Sellers or Buyer, if any legal proceeding is
commenced or threatened by any governmental or regulatory body or other person
directed against the consummation of the Closing or any other transaction
contemplated under this Agreement and either the Sellers or Buyer, as the case
may be, reasonably and in good ▇▇▇▇▇ ▇▇▇▇ it impractical or inadvisable to
proceed in view of such legal proceeding or threat thereof;
(d) at any time on or prior to the Closing Date, by mutual written consent
of Buyer and the Sellers; or
(e) at any time after the expiration of the Exclusivity Period, at the
election of either Buyer or the Sellers, provided that the party electing to
terminate is not then in material breach of any representation, warranty,
covenant or agreement contained in this Agreement.
33
11.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 11.1 above, then except as otherwise provided herein, all further
obligations of the parties under or pursuant to this Agreement shall immediately
terminate without further liability of any party to the others; provided,
however, that (i) nothing in this Section 11.2 shall relieve the liability or
obligations hereunder of any party (the "Defaulting Party") to the other party
or parties (each, a "Non-Defaulting Party") on account of a breach by the
Defaulting Party of any covenant, agreement, representation or warranty of the
Defaulting Party contained herein; and (ii) the provisions of Section 12.1
(relating to publicity) and Section 12.5 (relating to expenses) shall survive
any such termination.
ARTICLE XII
MISCELLANEOUS
-------------
12.1 Publicity. Except as otherwise required by statute, law or regulation,
none of the parties to this Agreement shall issue any press release or make any
other public statement, in each case relating to or in connection with or
arising out of this Agreement or the matters contained herein, without obtaining
the prior written approval of Buyer and ▇▇▇▇▇▇▇ as to the contents and manner of
presentation and publication thereof, which consent shall not be unreasonably
withheld.
12.2 Knowledge. Where any representation or warranty contained in this
Agreement is expressly qualified by reference to the knowledge of the Sellers,
the Sellers confirm that they have made due and diligent inquiry as to the
matters that are the subject of such representations and warranties.
12.3 Contract. As used in this Agreement, the term "contract" means any
written or oral agreement, commitment, understanding or other arrangement
binding upon the Company.
12.4 Gender. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
12.5 Expenses. Buyer shall pay its expenses, including the fees and
disbursements of its counsel in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the transactions
contemplated hereby. Any expenses reasonably incurred by the Sellers in
connection with the negotiation, preparation and execution of this Agreement and
the consummation of the transaction contemplated hereby shall be borne by the
Company.
12.6 Entire Agreement. This Agreement, including all schedules and exhibits
hereto, constitutes the entire agreement of the parties with respect to the
subject matter hereof, supersedes all prior agreements, negotiations or letters
of intent, and may not be modified, amended or terminated except by a written
instrument specifically referring to this Agreement signed by each of the
parties hereto.
12.7 Waivers and Consents. All waivers and consents given hereunder shall
be in writing. No waiver by any party hereto of any breach or anticipated breach
of any provision hereof by any other party shall be deemed a waiver of any other
contemporaneous, preceding or succeeding breach or anticipated breach, whether
or not similar, on the part of the same or any other party.
34
12.8 Notices. All notices, requests, demands, tenders or other
communications required or permitted hereunder ("Notices") must be in writing
and are deemed to have been duly given if (a) delivered personally, (b) sent by
facsimile, followed with an original by mail, (c) mailed, certified or
registered mail, return receipt requested, postage prepaid, (d) sent by Federal
Express or other nationally recognized overnight courier service or overnight
express U.S. Mail, postage prepaid, as follows:
(a) If to any or all of the Sellers to:
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
412 Ranger Passage
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile:
----------------------------------
With a copy in like manner (which shall not
constitute notice) to:
▇▇▇▇▇▇ & Bird LLP
One Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, Esq.
(b) If to Buyer to:
Market Central, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
With a copy in like manner (which shall not
constitute notice) to:
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
1230 Peachtree Street, N.E.
Suite 3100, Promenade II
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: A. ▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Each party may change its address for the giving of notices and communications
to it, and/or copies thereof, by written notice to the other parties in
conformity with the foregoing.
35
12.9 Rights of Third Parties. All conditions of the obligations of the
parties hereto, and all undertakings herein, are solely and exclusively for the
benefit of the parties hereto and their respective successors and assigns, and
no other person or entity shall have standing to require satisfaction of such
conditions or to enforce such undertakings in accordance with their terms, or be
entitled to assume that any party hereto will refuse to consummate the purchase
and sale contemplated hereby in the absence of strict compliance with any or all
thereof, and no other person or entity shall, under any circumstances, be deemed
a beneficiary of such conditions or undertakings, any or all of which may be
freely waived in whole or in part, by mutual consent of the parties hereto at
any time, if in their sole discretion they deem it desirable to do so.
12.10 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.11 Governing Law. The internal laws of the State of Georgia shall govern
the interpretation and construction of and all matters relating to this
Agreement.
12.12 Parties in Interest. This Agreement may not be transferred, assigned,
pledged or hypothecated by either party hereto, other than by operation of law
or with the consent of the other party. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
12.13 Counterparts; Facsimile Signatures. This Agreement may be executed in
two or more counterparts, all of which taken together shall constitute one and
the same instrument. The parties may execute and deliver this Agreement by
facsimile, and any signature hereto delivered by facsimile shall be deemed to be
an original.
12.14 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
12.15 Arbitration.
(a) Any controversy or claim arising out of or relating to this Agreement
shall be settled by arbitration to be held at the office of the American
Arbitration Association ("AAA") in Atlanta, Georgia, U. S. A. The arbitration
shall be conducted in accordance with the United States Arbitration Act (9
U.S.C. ss. 1 et seq.) and the AAA Commercial Arbitration Rules then in effect;
provided, however, that the parties agree that any arbitration shall be
conducted under AAA's expedited procedures then in effect, regardless of the
amount in controversy. Each party may be represented by counsel in such
arbitration proceeding. AAA shall select one (1) neutral arbitrator to conduct
such arbitration proceeding. The parties agree to request the arbitrator to
render a written decision within three (3) months of the request for arbitration
or within two (2) months after appointment of the arbitrator, whichever is
earlier. To the extent permitted under applicable law, such award shall be final
and binding upon both parties. Any costs, fees or expenses incident to enforcing
the award shall, to the maximum extent permitted by law, be charged against the
party resisting such enforcement. Judgment upon an award rendered by the
arbitrator may be entered in any court of competent jurisdiction, or application
may be made to such court for a judicial acceptance of the award and an order of
enforcement, as the law of such jurisdiction may require or allow. The costs and
expenses of the arbitration proceedings, including attorney's fees, shall be
borne by the losing party to the arbitration or, at the discretion of the
arbitrator, may be allocated among the parties to properly reflect any partial
prevailing or losing of the parties to the arbitration, as determined by the
arbitrator.
36
(b) Notwithstanding subsection (a) above to the contrary, any party may
seek temporary or preliminary injunctive relief against the other party in any
court of proper jurisdiction, pending the outcome of any arbitration proceeding.
[Signatures appear on following page]
37
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement, under seal, as of the date first above written.
BUYER:
MARKET CENTRAL, INC.
By: /s/▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
[CORPORATE SEAL]
SELLERS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (L.S.)
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.(L.S.)
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (L.S.)
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (L.S.)
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (L.S.)
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (L.S.)
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
38