Exhibit 2.1
NEW MILLENNIUM MULTIMEDIA, INC.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into this
5th day of May, 1999 by and among NEW MILLENNIUM MULTIMEDIA, INC., a Georgia
corporation having its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter "New Millennium") and ▇▇▇▇▇ Key, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇ Corner and ▇▇▇▇ ▇▇▇▇▇▇ (hereinafter jointly and severally
"Sellers") of AVANA COMMUNICATIONS CORPORATION, a Georgia corporation having its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ (hereinafter "Avana").
W I T N E S S E T H
WHEREAS, Sellers own or have rights to all of the capital stock, and
interests therein, of Avana, and
WHEREAS, NEW MILLENNIUM wishes to buy, and Sellers wish to sell, subject to
the provisions of this Agreement, all right, title and interest in such capital
stock.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties agree as follows:
1. Purchase and Sale and License
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1.01. Purchase and Sale of Avana Shares. NEW MILLENNIUM agrees to acquire
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from Sellers and Sellers agree to transfer, assign, convey and deliver to NEW
MILLENNIUM at the Closing, all right, title and interest in and to an aggregate
of Sixty-Eight Thousand, One Hundred Seventy-Three (68,173) shares of capital
stock of Avana (hereinafter the "Avana Shares"), representing all of the current
issued and outstanding Avana Shares, in exchange for a total purchase price of
Four Hundred and Fifty Thousand Dollars ($450,000) and an aggregate Ninety-Seven
Thousand, Eight Hundred and Thirty (97,830) shares of common stock of NEW
MILLENNIUM (hereinafter the "NEW MILLENNIUM Shares"). Sellers shall receive a
number of NEW MILLENNIUM Shares as follows: ▇▇▇▇▇ Key - 38,578 Shares, ▇▇▇▇
▇▇▇▇▇▇▇ - 38,578 Shares, ▇▇▇▇ Corner - 10,668 Shares, ▇▇▇▇ ▇▇▇▇▇▇ - 10,000
Shares and the sum of Fourteen Thousand Dollars ($14,000) cash. Such exchange
is intended as an exchange exempt from registration under the Georgia Securities
Act of 1973 by virtue of Section 10-5-9(13) thereof. One Hundred Thousand
Dollars ($100,000.00) of the cash price specified above shall be contingent upon
retention of at least ninety-five percent (95%) of the aggregate number of
accounts currently serviced by Avana for one (1) year following the Closing
Date. Any account attrition above five percent (5%) of the total number of
accounts held as of the date of closing, which accounts are not replaced within
thirty (30) days, and which are not attributable to any negligence or fault of
NEW MILLENNIUM, shall reduce the deferred cash balance by Two Hundred Dollars
($200.00) per account. The deferred amount shall be payable on the anniversary
date of the Closing or immediately upon the sale by NEW MILLENNIUM of more than
twenty-five percent (25%) of the aggregate accounts previously serviced by
Avana, payable in proportionate shares based upon Avana Stock ownership to ▇▇▇▇▇
Key, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ Corner. NEW MILLENNIUM Shares received
by Sellers shall not be subject to dilution in a future stock issue
except in the same proportion as NEW MILLENNIUM Shares owned by Messrs.
Granville, Weed and ▇▇▇▇▇.
1.02. Proprietary Rights. In addition to the shares exchanged pursuant to
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Section 1.01, effective at the Closing, Sellers hereby grant to NEW MILLENNIUM a
royalty-free, irrevocable, nonexclusive license (assignable by NEW MILLENNIUM or
any successor in interest to any of its business) to use all other intangible
assets of Sellers, including patents, patent applications, copyrights,
inventions, trade secrets, and other technical know-how, which at or prior to
Closing, Avana uses or has used in connection with its business or operations.
Such license, with respect to copyrighted works heretofore published by any of
the Sellers, is limited to a right to use consistent with such copyrights.
2. Closing
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Unless extended by NEW MILLENNIUM, the Closing of the transactions
contemplated hereby shall be held on May 5, 1999 at 2:30 p.m. at the Law Office
of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ as
shall otherwise be mutually agreed to in writing by the parties. The date on
which the Closing occurs is herein referred to variously as the "Closing Date"
and the "Closing."
2.01. Sellers. At or before the Closing, Sellers shall deliver or cause to
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be delivered to NEW MILLENNIUM:
(a) certificates representing the Avana Shares duly endorsed for transfer
and conveyance to NEW MILLENNIUM;
(b) a corporate resolution of the Board of Directors and stockholders of
Avana approving the transactions contemplated by this Agreement;
(c) the resignation of each officer and director of Avana, effective on
the Closing Date;
(d) a list of all accounts in which the funds or other assets of Avana are
deposited, and
(e) the corporate records, including the charter documents, minutes of
meetings and actions of the board of directors and minutes of meetings and
actions of the stockholders, the corporate seal and all books of accounts of
Avana.
2.02. NEW MILLENNIUM. At Closing, NEW MILLENNIUM shall deliver to the
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respective Sellers a stock certificate in the name of each Seller representing
the number of NEW MILLENNIUM Shares described in Section 1.01;
3. Representations and Warranties of Avana and Sellers.
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Except as set forth in the disclosure schedule delivered to NEW MILLENNIUM
on the date hereof, and signed by the President and Secretary of Avana (the
"Avana Disclosure Schedule"), the sections of which are numbered to correspond
to the subsection numbers of this Agreement, Avana hereby represents and
warrants to NEW MILLENNIUM as follows:
3.01. Organization, Qualification.
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(a) Avana is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia. Avana has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and is duly qualified and in good
standing to do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to have such power and
authority or to be so duly qualified and in good standing would not, in the
aggregate, have a material adverse effect on the business, operations or
financial condition of Avana. Avana has no assets, offices or operations
located in any place other than within the state of Georgia.
(b) Avana has delivered to NEW MILLENNIUM complete and accurate copies of
its Articles of Incorporation and Bylaws, each as amended, minutes of all its
directors' and shareholder meetings, and a shareholder list correctly setting
forth the record ownership as of the date of this Agreement of all outstanding
shares and all outstanding rights to purchase or convert into shares of the
stock of Avana.
3.02. Capitalization. As of the Closing Date, Avana shall have authorized
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capital stock of 100,000 shares of Common Stock, without par value, of which
68,173 shares will be issued and outstanding as of such date. All such
outstanding shares of Avana capital stock have been duly authorized, validly
issued, fully paid and nonassessable and are not subject to preemptive rights
created by statute, the Articles of Incorporation or Bylaws of Avana or any
agreement to which Avana is a party or by which it is bound. As of the Closing
Date there will be no outstanding rights, warrants, options, agreements or
commitments giving anyone any right to require Avana to sell or issue any
capital stock or other securities. Between the date hereof and the Closing,
Avana will not, without the prior written consent of NEW MILLENNIUM, issue any
additional shares of stock, stock options, warrants, convertible notes or other
securities exercisable for or convertible into shares of equity securities of
Avana. The Avana Disclosure contains a listing of all outstanding shareholders
and persons holding rights to acquire any equity interest in Avana.
3.03. Subsidiaries. Avana does not have and has never had any subsidiaries
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and does not directly or indirectly own any equity interest in, or any interest
convertible into or exchangeable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
3.04. Authority Relative to this Agreement. Avana has full corporate power
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to execute and deliver this Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by the Board of Directors, and as of the
Closing Date will have been duly and validly authorized by the shareholders of
Avana, and no other corporate proceedings on the part of Avana are necessary for
Avana to authorize this Agreement or to consummate the transactions contemplated
hereby and thereby. This Agreement has been duly and validly executed and
delivered by Avana. This Agreement constitutes the valid and binding agreement
of Avana, enforceable against Avana in accordance with its terms.
3.05. Consents and Approvals; No Violation. Except as may be required by
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the Securities Act of 1933, as amended (the "Securities Act"), state securities
laws, and applicable corporate law, there is no requirement applicable to Avana
to make any filing with, or to obtain any permit,
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authorization, consent or approval of, any governmental or regulatory authority
as a condition to the lawful consummation by Avana of the transactions
contemplated by this Agreement. Avana does not know of any reason why any
required permit, authorization, consent or approval could not be obtained.
Neither the execution and delivery of this Agreement by Avana nor the
consummation by Avana of the transactions contemplated by this Agreement will
(a) conflict with or result in any breach of any provision of the Articles of
Incorporation or Bylaws of Avana, (b) result in a material breach or default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license agreement, lease or other material contract, instrument or obligation to
which Avana is a party or by which Avana or any of its assets may be bound, (c)
or violate in any material respect any statute, rule, regulation, order, writ,
injunction or decree applicable to Avana or any of its assets, or (d) result in
the creation of any material (individually or in the aggregate) liens, charges
or encumbrances on any of the material assets of Avana.
3.06. Financial Statements of Avana. Avana has delivered to NEW MILLENNIUM
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(i) an unaudited balance sheet of Avana as of March 31, 1999, and an unaudited
statement of operations, stockholders' equity and cash flows for the fiscal
years ended December 31, 1998 (the "Avana Financials"). Said Financials shall be
updated within thirty (30) days following the completion of each fiscal quarter
between the date of execution and Closing. The Avana Financials have been
prepared in accordance with generally accepted accounting principles, applied on
a consistent basis throughout the periods covered by such statements. The Avana
Financials, with any notes thereto, are in accordance with the books and records
of Avana and present fairly Avana's financial position and results of operations
and cash flows as of the dates and for the periods indicated therein.
3.07. Undisclosed Liabilities. Avana does not have any material
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liabilities, whether absolute, accrued, contingent or otherwise, and whether due
or to become due, except for those liabilities which (i) are accrued or fully
reserved against in the balance sheet of the Avana Financials; or (ii) are of a
normally recurring nature and were incurred after December 31, 1998 in the
ordinary course of business consistent with past practice. Section 3.07 of the
Avana Disclosure Schedule lists all liabilities of Avana incurred after December
31, 1998 which are of a type required to be disclosed or reflected in financial
statements and which either (A) are not in the ordinary course of business, or
(B) exceed $5,000 with respect to any single transaction or single series of
related transactions. NEW MILLENNIUM acknowledges disclosure of potential
liability of Avana to MCI-WorldCom, Inc.
3.08. Absence of Changes. Since March 31, 1999, there has not been:
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(a) any material adverse change in the business, assets, liabilities,
financial condition, results of operations or prospects of Avana taken as a
whole;
(b) any material damage, destruction or casualty loss, whether or not
covered by insurance, to any. assets or properties of Avana that amounts to more
than $5,000 in the aggregate;
(c) any increase in the compensation payable or to become payable by Avana
to its employees (other than adjustments consistent with prior practice) or any
increase in any bonus, insurance, pension or other employee benefit plan or
program, payment or arrangement (other
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than adjustments consistent with prior practice) made to, for or with any such
directors, officers or employees except as contemplated by this Agreement;
(d) any termination or notification of intended termination of a
relationship with any material customer or supplier of Avana;
(e) any entry by Avana into any commitment or transaction exceeding $5,000
in any instance (including, without limitation, any borrowing or capital
expenditure;
(f) any material change by Avana in accounting methods, principles or
practices;
(g) any repurchase or retirement of any securities of Avana, or any
declaration, payment or setting aside for payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the capital
stock of Avana;
(h) any act, omission or event which would be prohibited after the date of
this Agreement under Section 4.1 hereof;
(i) any sales returns or allowances not adequately provided for by the
reserve in the Unaudited Financial Statements;
(j) recognition of revenue on any transaction where a substantial or
contingent right of return exists; or
(k) any agreement, whether in writing or otherwise, to take any action
described in this Section 3.08.
3.09. Properties and Inventories. Avana has good and marketable title to,
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valid leasehold interests in or other valid right to use all of the material
assets used in its operations or necessary for the conduct of its business,
subject to no security interests, licenses, encumbrances, restrictions or
adverse claims, except as disclosed in the notes to the Avana Financials and
except for any lien for taxes not yet due and payable and except for any
statutory liens for which payment is not delinquent.
3.10. Real Property. Section 3.10 of the Avana Disclosure Schedule
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contains a list and description of all real property owned and all real property
leased by Avana. Prior to the Closing, Avana will provide NEW MILLENNIUM with
copies of all of the referenced leases. Avana has either fee simple title or
enforceable leasehold interests in all property shown in the Avana Disclosure
Schedule.
3.11. Insurance. Avana has fire, casualty and general liability insurance
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policies, with extended coverage (subject to deductibles) sufficient to cover
the material assets, properties and business of Avana. All such policies
maintained by Avana are identified in Section 3.11 of the Avana Disclosure
Schedule. Prior to the Closing, Avana will make copies of each of such policies
available to NEW MILLENNIUM. Avana has not, to its knowledge, done anything by
way of action or inaction which might invalidate any of such policies in whole
or in part.
3.12. Litigation. Except as set forth in Section 3.12 of the Avana
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Disclosure Schedule, Avana is not engaged in, nor has it been threatened with,
any material litigation (which for this
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purpose shall mean a potential liability in excess of $5,000 or potential
liabilities in the aggregate in excess of $5,000), arbitration, investigation or
other legal proceeding relating to Avana or its business, property or employee
benefit plans or policies, nor, to the knowledge of Avana, is there any valid
basis for any such proceeding.
3.13. Purchase, Sale and Other Agreements.
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(a) All of the following (whether written or oral) to which Avana is a
party or to which Avana is subject are identified in Section 3.13 of the Avana
Disclosure Schedule:
(i) every contract or agreement for the purchase by Avana of
inventory, supplies, equipment or other real or personal property, or the
procurement of services, except individual purchase orders, or aggregate
purchase orders to a single vendor, involving payments of less than $1,000;
(ii) lease of equipment, machinery or other personal property
involving aggregate annual payments in excess of $1,000;
(iii) contract or agreements for the sale or lease of products or
furnishing of services by Avana, except individual purchase orders, or aggregate
purchase orders from a single customer, involving payments of less than $1,000;
(iv) joint venture, partnership or other contract or arrangement
involving the sharing of profits;
(v) contract or agreement, other than in the ordinary course of
business, relating to the purchase or acquisition, by merger or otherwise, of a
significant portion of the business, assets or securities of Avana by any other
person or of any other person by Avana;
(vi) contract or agreement containing a covenant or covenants which
purport to limit to a material extent the ability or right of Avana to engage in
any lawful business activity or compete with any person or entity; or
(vii) material contract or agreement not otherwise described in this
Section 3.13 which is not terminable by and without penalty to Avana within six
months after the date of this Agreement.
(b) A complete and accurate copy of each written contract, agreement and
other document identified in Section 3.13 of the Avana Disclosure Schedule will
be made available to NEW MILLENNIUM prior to the Closing. Each contract,
agreement or arrangement identified in Section 3.13 of the Avana Disclosure
Schedule is, except to the extent fully performed at the date hereof, in full
force and effect and valid and binding in accordance with its terms in all
material respects; there is no material default under any such material
contract, agreement or arrangement; and no party to any such contract, agreement
or arrangement has notified Avana that it intends to cancel, withdraw, modify or
amend such contract, agreement or arrangement.
3.14. Licenses, Trademarks, Patents and Other Rights. To the best of
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Avana's knowledge, Avana owns, is licensed or otherwise entitled to use, or can
obtain the right to use on a basis which is commercially reasonable, all
patents, trademarks, trade names, service marks, copyrights, if any, and other
proprietary rights, necessary to the business of Avana as currently
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conducted or as contemplated by its current business plan. Section 3.14(a) of
the Avana Disclosure Schedule lists all Avana patents and registered trademarks,
trade names and service marks and copyrights, and applications for any of the
foregoing, and all licenses, the subject matter of which is incorporated into
any Avana product, to which Avana is a party (the "Avana Intellectual
Property"), other than licenses to readily available commercial software. Except
as set forth in Section 3.14(b) of the Avana Disclosure Schedule, no claims
(including any request to enter into a license agreement) have been asserted or
threatened by any person (i) to the effect that any activity in which Avana is
engaged infringes on any patents or other proprietary rights, (ii) against the
use by Avana of any trademarks, trade names, technology, know-how or processes
necessary for the operation of the business of Avana as currently conducted or
presently contemplated, or (iii) challenging or questioning the validity or
effectiveness of any of the Avana Intellectual Property; and Avana is not aware
of any valid basis for any such claim. To the best of its knowledge, no party is
infringing the Avana Intellectual Property.
3.15. Employees.
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(a) Section 3.15(a) of the Avana Disclosure Schedule identifies all
consulting or employment agreements and other agreements with individual
consultants or employees to which Avana is a party and which are either
currently effective or will become effective at the Closing, as well as any
employee handbooks, policy manuals and job application forms used by Avana.
Copies of all such written agreements will be delivered to NEW MILLENNIUM prior
to the Closing. Also shown on Section 3.15(a) of the Avana Disclosure Schedule
are the names and dates of hire of each full-time employee of Avana and as of
April 1, 1999, each such person's base salary (excluding sales commissions and
bonuses) and accrued vacation pay. No officer, manager or other key employee of
Avana has notified Avana of an intention to terminate employment or to seek a
material change in his terms of employment, except as identified in the Avana
Disclosure Schedule.
(b) Section 3.15(b) of the Avana Disclosure Schedule contains a complete
list of "Plans" consisting of each employment, severance or other similar
contract, arrangement or policy (written or oral) and each plan or arrangement
(written or oral) providing for insurance coverage, workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or deferred compensation, profit sharing, bonuses, stock
options, stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which is
maintained or administered by Avana, or to which Avana contributes, and which
covers any employee or former employee of Avana or under which Avana has any
liability, including" employee welfare benefit plan," "employee benefit plan"
and "employee pension benefit plan" as defined under ERISA;
(c) With respect to the Plans, Avana shall deliver to NEW MILLENNIUM
prior to the Closing, a copy of each Plan and any amendment(s) thereto, together
with (i) any written descriptions or summaries thereof, (ii) all trust
agreements, insurance contracts, annuity contracts or other funding instruments,
and (iii) the last two annual reports (IRS Form 5500 Series, together with all
required schedules) prepared in connection with any such Plan. The Plans comply,
to the extent applicable, with the requirements of ERISA and the Code, and any
Plan intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") to be so qualified;
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(d) Section 3.15(d) of the Avana Disclosure Schedule identifies all
collective bargaining agreements to which Avana is a party or by which Avana is
bound. There are no strikes or labor disputes or lawsuits, unfair labor or
unlawful employment practice charges, contract grievances or similar charges or
actions pending or threatened by any of the employees, former employees or
employment applicants of Avana that could have a material adverse effect on
Avana.
(e) To Avana's knowledge, no employee of Avana is obligated under any
agreement or judgment that would conflict with such employee's obligation to use
his best efforts to promote the interests of Avana or would conflict with
Avana's business as conducted or proposed to be conducted. To Avana's
knowledge, no employee of Avana is in violation of the terms of any employment
agreement or any other agreement relating to such employee's relationship. with
any previous employer and no litigation is pending or threatened with regard
thereto.
3.16. Borrowing and Guarantees. Section 3.16 of the Avana Disclosure
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Schedule identifies all agreements and undertakings pursuant to which Avana (a)
is borrowing or is entitled to borrow any money, (b) is lending or has committed
itself to lend any money, or (c) is or may become a guarantor or surety with
respect to the obligations of any person. Complete and accurate copies of all
such written agreements will be delivered to NEW MILLENNIUM prior to the
Closing.
3.17. Bank Accounts and Powers of Attorney. Section 3.17 of the Avana
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Disclosure Schedule identifies all bank and credit card accounts used in
connection with the operations of Avana whether or not such accounts are held in
the name of Avana and lists their respective signatories, and lists the names of
all persons holding a power of attorney from Avana and summarizes the terms
thereof.
3.18. Compliance with Contracts. Avana has performed all material
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obligations required to be performed by it as of the date of this Agreement
under each material contract, obligation, commitment, agreement, undertaking,
arrangement or lease referred to in this Agreement or the Avana Disclosure
Schedule and has not received any notice that it is in default thereunder. To
its knowledge no other party is in default under such material agreements. The
Merger and the actions contemplated thereby will not conflict with or result in
a breach of the terms, conditions or provisions of any such material agreement
or cause any acceleration of maturity of any such material agreements.
3.19. Compliance with Laws. Avana has substantially complied with all
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laws, regulations, judgments, decrees or orders of any court or governmental
agency or entity applicable in any material respect to the conduct of its
business.
3.20. Taxes. All United States, foreign, state and local tax returns and
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reports (collectively "Returns") required to be filed to date with respect to
the operations of Avana have been accurately prepared in all material respects
and duly filed, or an extension therefrom has been duly obtained, and, except
for Taxes contested in good faith and disclosed in Section 3.20 of the Avana
Disclosure Schedule, all Taxes payable have been paid when due; there is no
examination or audit known to Avana or any claim, asserted deficiency or
assessment for additional Taxes in progress, pending, or threatened, nor to the
knowledge of Avana is there any reasonable basis for the assertion of any such
claim, deficiency or assessment; no material special charges, penalties, fines,
liens, or similar encumbrances have been asserted against Avana with respect to
payment of or failure to pay any Taxes which have not been paid or resolved
without further liability to
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Avana. Avana has not executed or filed with any taxing authority any agreements
extending the period for assessment or collection of any Taxes. Proper amounts
have been withheld by Avana from its employees' compensation payments for all
periods in compliance with the tax withholding provisions of applicable federal
and state laws. Avana is not a party to any tax-sharing or tax-allocation
agreement, nor does Avana owe any amounts under any tax-sharing or tax-
allocation agreement. As used in this Agreement, "Taxes" means all taxes,
however denominated, imposed by any federal, territorial, state, local or
foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including but not limited to, federal
income taxes and state income taxes), payroll and employee withholding taxes,
unemployment insurance, social security taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipts taxes, business license
taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected.
3.21. Transactions with Associates of Management. Except as otherwise
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disclosed herein, no executive officer or director of Avana has, either directly
or indirectly through another entity, any material interest in any property or
assets of Avana (except as a shareholder). It is hereby acknowledged that ▇▇▇▇▇
Key is a principal of Key Computers, Inc., which is an equipment lessor to
Avana.
3.22. Accounts Receivable. All accounts receivable reflected on the
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balance sheet of Avana as of December 31, 1998 are bona fide, arose in the
ordinary course of business in the aggregate amount thereof.
3.23. Investment Banking and Finder Fees. Avana has not incurred nor will
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incur any obligation for investment banking or finder fees in connection with
this Agreement or the transactions contemplated hereby.
3.24. Investment Representations. Sellers understand and acknowledge that
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the NEW MILLENNIUM Shares will not be registered under the Securities Act nor
qualified under the securities law of Georgia, by virtue of exemptions thereto.
Each of the Sellers (either alone or in conjunction with his or her professional
advisers) has such experience and knowledge in investment, financial and
business matters in investments similar to the stock of the NEW MILLENNIUM that
they are capable of protecting their own interest in connection therewith and
qualifying for such exemptions. Further, each Seller is acquiring the NEW
MILLENNIUM Shares for investment purposes only for Seller's own account, and not
on behalf of any other person nor with a view to, or for resale in connection
with any distribution thereof. Sellers understand that the certificates
representing the NEW MILLENNIUM Shares will be stamped with a legend
substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES")
HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT")
AND SECTION 10-5-9(13) OF THE OFFICIAL CODE OF GEORGIA ANNOTATED
(THE "GEORGIA CODE"). THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD OR TRANSFERRED OTHER THAN (I) PURSUANT TO AN EFFECTIVE
REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT AND THE
GEORGIA CODE AND (II) UPON RECEIPT BY THE ISSUER OF EVIDENCE
SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933 ACT, THE
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GEORGIA CODE AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER
JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION
OF COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE
ABOVE LAWS.
3.25. Tax sequences. Although the exchange of shares and subsequent
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liquidation of Avana contemplated by this Agreement, which liquidation shall be
completed as promptly as commercially feasible following the Closing, is
intended to be a "tax free reorganization" pursuant to Section 368(a)(1)(C) of
the Internal Revenue Code of 1986, as amended, and in reliance in part on
Revenue Ruling 67-274, Seller understands that no assurance is given by NEW
MILLENNIUM that such transaction shall be deemed by the Internal Revenue Service
to be a transaction upon which no gain or loss is recognized. Each Seller
assumes the obligation for the payment of taxes, if any, related to any gain or
loss to such Seller as a result of the transactions contemplated by this
Agreement.
4. Representations and Warranties of NEW MILLENNIUM.
-------------------------------------------------
NEW MILLENNIUM hereby represents and warrants to the Sellers as follows:
4.01. Capitalization. The authorized capital stock of NEW MILLENNIUM
---------------
consists of One Million (1,000,000) shares of common stock, of which Four
Hundred and Thirty-Six Thousand (436,000) shares are issued and outstanding, all
of which outstanding shares are duly authorized, validly issued, fully paid and
nonassessable. In addition, NEW MILLENNIUM has agreed to issue warrants to
equipment suppliers to NEW MILLENNIUM covering an aggregate of 200,000 shares of
common stock. NEW MILLENNIUM has no other outstanding subscriptions, warrants,
options, rights, agreements or arrangements to issue its capital stock or other
securities. NEW MILLENNIUM is under no obligation to purchase, redeem or
otherwise acquire any of its securities.
4.02. Issuance and Delivery of NEW MILLENNIUM Shares. The issuance and
-----------------------------------------------
delivery of the NEW MILLENNIUM Shares has been duly authorized, and such shares,
when issued and delivered in accordance with the terms of this Agreement, shall
be duly authorized, validly issued, fully paid and nonassessable.
4.03. Organization. NEW MILLENNIUM (a) is a corporation (i) duly
-------------
organized, validly existing and in good standing under the laws of the State of
Georgia, and (ii) duly qualified and in good standing as a foreign corporation
in each state in which it does business, except where the failure to so qualify
would not have a materially adverse effect on its business or assets, and (b)
has the corporate power and authority to own its properties and to carry on its
business as now being conducted.
4.04. Authority, Binding Agreement. This Agreement has been approved by
-----------------------------
the Board of Directors of NEW MILLENNIUM. No consents, authorizations or
approvals, whether of a governmental agency or instrumentality or otherwise, are
necessary in order to enable NEW MILLENNIUM to enter into and perform this
Agreement. This Agreement constitute legal, valid and binding obligations of NEW
MILLENNIUM and is enforceable against NEW MILLENNIUM in accordance with its
terms.
4.05. Litigation. There is no suit, action or other legal or
----------
administrative proceeding pending or threatened against NEW MILLENNIUM, and to
its knowledge, no circumstances exist
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or have occurred which may lead to any suit, action, proceeding or investigation
which could materially and adversely affect its business, assets or financial
condition. NEW MILLENNIUM has received no notice from any federal, state or
local governmental agency asserting any violation by NEW MILLENNIUM of any law,
ordinance or regulation.
4.06. Special Shareholders' Meeting. There shall be a specially called
------------------------------
meeting of the shareholders of NEW MILLENNIUM to be held ten (10) days after
closing for the purpose of amending the corporate Bylaws to increase the number
of Directors to four (4), and to vote upon the nomination of Seller ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇. to the Board of Directors.
5. Conditions to the Closing.
--------------------------
The obligations of the parties hereunder are subject to the satisfaction at
or by the Closing of each of the conditions set forth below. Any of such
conditions may be waived by the other party but only in writing.
5.01. Compliance with Terms. On the Closing Date, all the terms,
----------------------
conditions and covenants of this Agreement to be complied with and performed by
the respective parties shall have been complied with and performed in all
material respects.
5.02. No Material Change in Avana. There shall be no material change in
----------------------------
the business, assets, liabilities or financial condition of Avana from that set
forth in Schedule 3 hereto; and there shall be no significant change in the
personnel of Avana, except for the hiring of such personnel by NEW MILLENNIUM
and such other actions as NEW MILLENNIUM shall have consented to in writing.
5.03. Employment Agreements. ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ Key shall each
----------------------
have executed and delivered an employment contract in the form attached hereto
as Schedule 5.04.
5.04. Opinions of Counsel. At or before the Closing:
--------------------
a) NEW MILLENNIUM shall have received an opinion of counsel for Avana,
dated as of the Closing, to the effect that:
(i) Avana is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia, and has the corporate
power and authority to own its properties and to carry on its business as now
being conducted. To the knowledge of such counsel, Avana is duly qualified and
in good standing as a foreign corporation in each state in which it does
business, except where the failure to so qualify would not have a materially
adverse effect on its business or assets.
(ii) No consents, authorizations or approvals, whether of Avana
(other than the approvals provided for herein), governmental agencies or
instrumentalities or otherwise, are necessary in order to enable Sellers to
enter into and perform this Agreement. This Agreement constitute legal, valid
and binding obligations of the Sellers and is enforceable against the Sellers in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting enforcement of creditors' rights generally or by principles governing
the availability of equitable remedies.
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(iii) Based in part on the representations of NEW MILLENNIUM, the
transfer and conveyance of the Avana Shares and the issuance and delivery of the
NEW MILLENNIUM Shares, in each case pursuant to the terms of this Agreement, is
exempt from registration or qualification under any "Blue Sky," securities or
similar laws of the state of Georgia by virtue of exemptions thereto.
b) Avana shall have received an opinion of counsel for NEW MILLENNIUM,
dated as of the Closing, to the effect that:
(i) NEW MILLENNIUM is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia, and has the
corporate power and authority to own its properties and to carry on its business
as now being conducted. To the knowledge of such counsel, NEW MILLENNIUM is duly
qualified and in good standing as a foreign corporation in each state in which
it does business, except where the failure to failure to so qualify would not
have a materially adverse effect on its business or assets.
(ii) All corporate and other actions required to be taken by or on
the part of NEW MILLENNIUM to authorize it to enter into and perform this
Agreement have been duly taken. No consents, authorizations or approvals,
whether of governmental agencies or instrumentalities or otherwise, are
necessary in order to enable NEW MILLENNIUM to enter into and perform this
Agreement. This Agreement constitute legal, valid and binding obligations of NEW
MILLENNIUM and is enforceable against NEW MILLENNIUM in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting enforcement of
creditors' rights generally or by principles governing the availability of
equitable remedies.
(iii) based in part on the representations of the Sellers, the
transfer and conveyance of the Avana Shares and the issuance and delivery of the
NEW MILLENNIUM Shares, in each case pursuant to the terms of this Agreement, is
exempt from registration under the Securities Act of 1933, as amended, by virtue
of Section 4(2) thereof and from the qualification requirements of the
securities law of Georgia.
5.05. Escrow. The principals of Avana have executed personal guarantees
-------
regarding certain accounts. NEW MILLENNIUM shall establish an escrow of Thirty-
Eight Thousand Dollars ($38,000.00) to ensure payment on said personal
guarantees.
6. Covenants
---------
6.01. Waiver. Each of the Sellers hereby waives any claim or cause of
-------
action such Seller may have against ▇▇▇▇▇ Key and ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. based on a
claim that the consideration for the NEW MILLENNIUM Shares, as initially
negotiated by him on behalf of Sellers, was insufficient or otherwise
inadequate.
6.02. Right of First Refusal. No Seller (nor any estate of a Seller, in
-----------------------
the event of a Seller's death) shall dispose of any of his or her NEW MILLENNIUM
Shares, until such Seller shall have first offered, for a period of thirty (30)
days, to sell such shares to NEW MILLENNIUM at the same sales price and terms of
payment. If NEW MILLENNIUM does not purchase all of the shares offered before
the expiration of the foregoing 30 day period, then such Seller may dispose of
such shares in any lawful manner during a period of one hundred and eighty (180)
days following the
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end of such notice period, except that such Seller shall not sell any shares to
any other person at a lower price or upon more favorable terms than those
offered to NEW MILLENNIUM. The foregoing rights of first refusal shall terminate
upon the closing of an underwritten public offering of NEW MILLENNIUM Common
Stock pursuant to a registration statement under the Securities Act.
Each Seller understands that the certificates representing the NEW
MILLENNIUM Shares shall bear a legend substantially as follows:
The transfer, sale, assignment, encumbrance, or alienation of the
shares represented by this certificate is restricted by a "right
of first refusal" provision in favor of the issuer contained in a
stock purchase agreement among the issuer and certain of its
shareholders, dated April 27, 1999. A copy of such agreement is
available for inspection during normal business hours at the
principal executive office of the issuer. All terms and
conditions of such restrictive provision are incorporated herein
by reference.
Any transfer, sale, assignment, encumbrance, or alienation of any NEW
MILLENNIUM Shares (voluntarily or involuntarily) other than according to the
terms of this Section 6.02 is void.
6.03. Non-Competition Agreement. Those Sellers who are not offered
--------------------------
employment with NEW MILLENNIUM, or if offered, decline same, covenant and agree
that they shall not enter into competition with NEW MILLENNIUM as part of their
consideration for the transaction. Prior to closing, each such Seller shall
have executed and delivered a non-competition contract in the form attached
hereto as Schedule 6.03.
7. Miscellaneous.
--------------
7.01. Other Documents. Sellers shall, at any time after the Closing upon
----------------
the request of NEW MILLENNIUM, execute and deliver to NEW MILLENNIUM such
documents or instruments of conveyance, license or assignment or take such other
action as is reasonably necessary to complete the transfer of the Avana Shares
or other transactions contemplated by this Agreement or to perfect the interest
of NEW MILLENNIUM therein. Further, the parties agree to take all actions and
file such documents required to comply with Georgia securities laws, including
the filing any notices as contemplated by Section 1.01.
7.02. Costs. Except as otherwise specifically provided herein, NEW
------
MILLENNIUM shall pay the Closing costs and transfer cost applicable to this
Agreement and the transfer of NEW MILLENNIUM Shares hereunder. Each party
hereto shall bear the costs of their respective counsel and all other legal fees
and costs related thereto. Both NEW MILLENNIUM and Sellers each hold the other
harmless from any obligation for the payment of any finders fees or commissions
in connection with the transactions contemplated by this Agreement as a result
of any action of the indemnifying party.
7.03. Invalidity, Modification and Waiver. If any provision of this
------------------------------------
Agreement shall be held to be invalid or void, the remaining provisions shall
nevertheless remain in effect. No provision of this Agreement may be modified
and the performance or observance thereof may not be waived except by written
agreement of the parties affected thereby. No waiver of any violation or
nonperformance of any provision of this Agreement shall be deemed to be a waiver
of any subsequent violation or nonperformance of the same or any other provision
of this Agreement.
-13-
7.04. Disputes, Choice of Law. This Agreement, the performance of the
------------------------
parties hereunder and any disputes related hereto shall be governed by the laws
of the state of Georgia and subject to the exclusive jurisdiction of the courts
therein. If either party shall initiate a legal proceeding to enforce its
rights hereunder, the prevailing party in such legal proceedings shall be
entitled to recover from the other party all costs, expenses and reasonable
attorney's fees incurred in connection with such proceedings.
7.05. Abandonment. If this Agreement shall fail to Close as provided for
------------
in Section 2 as a result of a failure of any of the conditions precedent set
forth in Section 5, all further obligations of the parties hereto under this
Agreement shall terminate without further liability, and each party shall bear
its own costs incident to the negotiation, preparation and anticipated Closing
of this Agreement. In such event, each party shall return any data, material or
assets of the other party received by it in contemplation of the Closing.
7.06. Entire Agreement. This Agreement is and represents the entire
-----------------
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any prior or contemporaneous discussions or agreements related
thereto.
7.07. Counterparts. This Agreement may be executed in two or more
-------------
counterparts, all of which shall be originals and enforceable, and together
shall constitute a single agreement.
7.08. Time is of the Essence. Time is of the essence as to all provisions
-----------------------
of this Agreement.
7.09. Number and Gender. Whenever required by the context, the singular
------------------
number shall include the plural and the masculine gender shall include the
feminine and the neuter.
7.10. Headings. Headings of sections, subsections, and paragraphs in this
---------
Agreement are for convenience only and neither limit nor amplify the provisions
of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized representative as of the date first
written above.
NEW MILLENNIUM MULTIMEDIA, INC AVANA COMMUNICATIONS CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III By /s/ ▇▇▇▇▇ Key
------------------------------------ --------------------------------
President President
By /s/ M. ▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
------------------------------------ --------------------------------
Secretary Secretary
SELLERS:
▇▇▇▇▇ Key /s/ ▇▇▇▇▇ Key
------------------ -----------------------(L.S.)
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
------------------ -----------------------(L.S.)
▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------ -----------------------(L.S.)
▇▇▇▇ Corner /s/ ▇▇▇▇ Corner
------------------ -----------------------(L.S.)
(Name) (Signature)
EXHIBITS
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Schedule 1.01 - Promissory Notes
Schedule 3-Avana Disclosure Schedule
Schedule 5.03 - Employment Agreements
Schedule 5.05 - Escrow Agreement
Schedule 6.03 - Non-Competition Agreements
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