EXHIBIT 1
STOCK PURCHASE AGREEMENT
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Among
PINNACLE BUSINESS MANAGEMENT, INC.,
a Nevada corporation
And
Xxxxxxx X Xx Xxxxxx and Xxx Xx Xxxxxx
And
Xxxxxxx X. Xxxx and Xxxx Xxxxxx
Dated as of December 27, 2000
STOCK PURCHASE AGREEMENT
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This Stock Purchase Agreement (this "Agreement") is dated as of December 27,
2000 and to be effective as of January 1, 2000 (the "Effective Date") among
Pinnacle Business Management, Inc., a Nevada corporation (the "Buyer"), Xxxxxxx
X. Lo Xxxxxx ("Lo Xxxxxx") and Xxx Xx Xxxxxx (collectively with Lo Xxxxxx, the
"Sellers"), and Xxxx Xxxxxx ("Xxxxxx") and Xxxxxxx X. Xxxx ("Hall" and
collectively with Turino, the "Guarantors").
PREAMBLE
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The Sellers are the owners of all of the issued and outstanding shares
of the Capital stock (the "Stock") of to Xxxxxx & Associates, Inc, Pennsylvania
corporation (the "Company"). The Sellers wish to sell the Stock to the Buyer,
and the Buyer wishes to purchase the Stock from the Sellers, all upon the terms
and subject to the conditions set forth herein. Therefore, in consideration of
their mutual promises set forth herein and intending to be legally bound, the
parties hereby agree as follows.
ARTICLE I.
THE TRANSACTION
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1. Sale and Purchase of Stock; Purchase Price.
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At the Closing referred to in Section 1.02, the Sellers shall sell all
of the Stock owned by them to the Buyer, and the Buyer shall purchase the Stock
from the Sellers. The aggregate purchase price for all of the Stock (the
"Purchase Price") shall be (a) an amount equal to the (i) the book value of the
Company's assets as of December 31, 2000 plus (ii) five times the Company's
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annualized earnings based on the third quarter of its fiscal year ending
December 31, 2000 (such amount, the "Formula Amount") and (b) shares of the
Purchaser's common stock, par value $0.000l ("Common Stock"), payable as
follows: (a) by delivery by the Buyer at Closing of a promissory note in the
form of Exhibit A (the "Promissory Note"): and (b) by delivery by Buyer and the
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Guarantors at Closing of 83,300,000 shares of the Purchaser's common stock which
will immediately after the Closing constitute 16.66% of the Purchaser's total
authorized Common Stock (the "Closing Shares"). The Formula Amount shall be
determined by an independent third party to be mutually agreed upon by the
parties.
1.2 Closing.
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(a) Time and Place. The closing under this Agreement (the
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"Closing") will take place at 10:00 a.m., local time, on December,. 2000 at the
offices of Xxxxxxxx Ingersoll, Professional Corporation. One Oxford Centre, 20th
Floor, Pittsburgh, Pennsylvania, or at such other time, date or place as to
which the parties shall mutually agree. The date on which the Closing occurs is
sometimes referred to in this Agreement as the "Closing Date."
(b) Deliveries and Proceedings at the Closing. At the
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Closing:
(i) Stock Certificates. The Sellers shall deliver to Xxxx
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Xxxxxxx (the "Pledge Agent") certificates for their Stock, duly endorsed in
negotiable form and with stock powers duly executed in blank attached
(collectively, the "Certificates and Stock Powers").
(ii) Promissory Note; Closing Shares. The Buyer shall execute
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and deliver the Promissory Note to Sellers; and the Buyer and the
Guarantors shall cause to be delivered to the Sellers the Closing Shares.
(iii) Stock Pledge Agreement. As security for the Buyer's
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obligations under the Promissory Note and this Agreement, the Buyer shall
execute and deliver to the Sellers, a Stock Pledge Agreement in a form
satisfactory to the Sellers (the "Pledge Agreement").
(iv) Mortgage and Security Agreement. As additional security for
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the Buyer's obligations under the Promissory Note, the Buyer shall cause
the Company to execute and deliver to the Sellers a Mortgage arid Security
Agreement in the form of Exhibit B (the "Mortgage and Security Agreement").
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(v) Guaranty Agreement. As additional security for the
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buyer's obligations under the Promissory Note and this Agreement, the Buyer
shall deliver to Sellers a Guaranty Agreement in the form of Exhibit C
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executed by Xxxx Xxxxxx and Xxxxxxx X. Xxxx (the "Guaranty Agreement").
(vi) Shareholders Rights Agreement. The Buyer and the Guarantors
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shall execute and deliver to Sellers a Shareholders Rights Agreement in a
form satisfactory to Sellers. (the "Shareholders Rights Agreement and
collectively with the Promissory Note, the Mortgage and Security Agreement,
the Pledge Agreement, and the Guaranty Agreement, the "Related Agreements")
(vii) Other Deliveries. The closing certificates, opinions of
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counsel and other documents required to be delivered pursuant to this
Agreement shall be exchanged.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
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2. The Sellers hereby jointly and severally represent and warrant
to the Buyer as follows:
2.1 Organization.
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The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania. The Company
has the full corporate power to own or lease its properties and assets as now
owned or leased, to carry on its business as and where now being conducted and
to make, execute, deliver and perform the Related Agreements to which it is a
party. The copies of the articles of incorporation and bylaws of the Company, as
amended to date, which have been delivered to the Buyer, are correct and
complete and are in fall force and effect.
2.2 Capitalization and Ownership.
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The Company's authorized stock consists solely of 100,000 shares of
common stock, par value $1.00 per share, 1000 of which are issued and presently
outstanding and none of which are held in its treasury. The Sellers are the
record and beneficial owner of 1000 shares of Stock, free and clear of all
liens, security interests, claims or encumbrances (collectively, "Liens"). All
of the outstanding shares of the Company have been duly authorized, validly
issued and are fully paid and nonassessable, were not issued in violation of the
terms of any agreement or other understanding binding upon the Company and were
issued in compliance with all applicable federal and state securities or
"blue-sky" laws and regulations. There are no outstanding options, warrants.
rights, agreements, calls, commitments or demands of any character relating to
the shares of the Company and no securities convertible into or exchangeable for
any of such shares. Each Seller has the full legal right, power and authority
to enter into this Agreement, transfer their Stock to the Buyer in accordance
with this Agreement and to perform their other obligations hereunder, without
the need for the consent of any other person or entity.
2.3 Subsidiaries.
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The Company does not, directly or indirectly, own any stock of, or any
other interest in, any corporation or business entity.
2.4 Good Standing.
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The Company is duly qualified and in good standing in the Commonwealth
of Pennsylvania.
2.5 Authorization and Enforceability: Title to Stock.
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This Agreement and the Related Agreements have been or will be duly
executed and delivered by the Sellers and constitute or will constitute legal,
valid and binding obligations of the Sellers enforceable against each of them in
accordance with their respective terms. Upon delivery to the Buyer at the
Closing of certificates representing the Stock in accordance herewith, the Buyer
will acquire good and valid title to the Stock, free and clear of all Liens
except for the Lien contemplated by the Pledge Agreement.
2.6 No Violation of Laws or Agreements.
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Except to the extent the consents of third parties listed on Schedule
2.23 are required, the execution and delivery of this Agreement and the Related
Agreements do not, and the consummation of the transactions contemplated by this
Agreement and the Related Agreements and the compliance with the terms,
conditions and provisions hereof and thereof by the Sellers and the Company will
not: (a) contravene any provision of the articles of incorporation or bylaws of
the Company; (b) conflict with or result in a breach of or constitute a default
(or an event which might, with the passage of time or the giving of notice or
both, constitute a default) under any of the terms, conditions or provisions of
any indenture, mortgage, loan or credit agreement or any other agreement or
instrument to which the Company or any Seller is a party or by which any of them
or any of their assets may be bound or affected, or any judgment or order (a
"Judgment") of any court, any governmental department, commission, board, agency
or instrumentality or any arbitrator (each a "Judicial Authority"), or any
applicable law, statute, rule, regulation, code or ordinance (a "Law") of any
federal, state or local government authority (each a "Government Authority");
(c) result in the creation or imposition of any Lien upon any of the assets of
the Company or give to others any interests or rights therein; (d) result in the
maturation or acceleration of any liability or obligation of the Company or give
others the right to cause such a maturation or acceleration; or (e) result in
the termination of or loss of any right, or give others the right to cause such
a termination or loss, under any agreement or contract to which the Company is a
party or by which it is bound.
2.7 Financial Statements.
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The books of account and related records off Company fairly reflect in
reasonable detail the assets and liabilities and transactions in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis.
The Company's balance sheet for the nine month period ending September 30, 2000
(the "Balance Sheet") is accurate it all material respects.
2.8 No Undisclosed Liabilities.
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The Company has no known liability or obligation required to be
included in its financial statements, including without limitation liabilities
for or in respect of Taxes (as hereinafter defined) and any interest or
penalties relating thereto, except as are reflected on the Company's balance
sheet dated June 30, 2000 which have been provided to Buyer.
2.9 No Chances.
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Except as disclosed on Schedule 2.9 hereto, since the June 1, 2000
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(the "Balance Sheet Date") the Company has conducted its business only in the
ordinary course. Without limiting the generality of the foregoing sentence,
except as disclosed on Schedule 2.9, since the Balance Sheet Date, there has not
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been:
(a) any material change in the financial condition, assets,
liabilities, prospects, net worth, earning power or business of the Company
except changes in the ordinary course of business, none of which, individually
or in the aggregate, has been or will be materially adverse to the Company;
(b) any material damage, destruction or loss, whether or not
covered by insurance, adversely affecting the properties, business or prospects
of the Company, or any material deterioration in the operating condition of the
assets of the Company;
(c) any mortgage or pledge on, or subjection to any Lien of,
any of the Company's assets, tangible or intangible;
(d) any strike, walkout or labor trouble;
(e) any declaration, setting aside or payment of a dividend
or other distribution in respect of any of the shares of the Company, or any
direct or indirect redemption, purchase or other acquisition of any shares of
the Company or any rights to purchase such shares or securities convertible into
or exchangeable for such shares;
(f) any increase in the salaries or other compensation
payable or to become payable to. or any advance (excluding advances for ordinary
business expenses) or loan to, any officer, director, employee or shareholder of
the Company (except increases made in the ordinary course of business and
consistent with past practice), or any increase in or any addition to other
benefits (including without limitation any bonus, profit-sharing, pension or
other plan) to which any of its officers, directors, employees or shareholders
may be entitled, or any payments to any pension, retirement, profit-sharing,
bonus or similar plan except payments in the ordinary course of business and
consistent with past practice;
(g) any making of or commitment to make any capital
expenditures in excess of $10,000;
(h) any cancellation or waiver of any right material to the
operation of the business of the Company or any cancellation or waiver of any
debts or claims of substantial value or any cancellation or waiver of any debts
or claims against any Related Party (as defined in Section 2.25 below);
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(i) any payment, discharge or satisfaction of any liability
or obligation (whether accrued, absolute, contingent or otherwise) by the
Company other than the payment, discharge or satisfaction, in the ordinary
course of business, of liabilities or obligations shown or reflected on the
Balance Sheet or incurred in the ordinary course of business since the Balance
Sheet Date;
(j) any sale, transfer or other disposition of any assets of the
Company, except sales of inventory in the ordinary course of business;
(k) any material adverse change or any threat of any adverse
change in the relations of the Company with, or any loss or threat of loss of,
any of the important suppliers, clients or customers of the Company, except for
the Receivership status of Daewoo Motor in Korea;
(l) any creation, incurrence, assumption or guarantee by the
Company of any obligations or liabilities (whether absolute, accrued, contingent
or otherwise and whether due or to become due), except in the ordinary course of
business, or any creation, incurrence, assumption or guarantee by the Company of
any indebtedness for money borrowed, other than trade payables; or
(m) any creation, incurrence, assumption or guarantee by the
Company of any obligations or liabilities (whether absolute, accrued, contingent
or otherwise and whether due or to become due), except in the ordinary course of
business, or any creation, incurrence, assumption or guarantee by the Company of
any indebtedness for money borrowed, other than trade payables.
2.10 Taxes.
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The Company has (a) timely filed all returns and reports required to
be filed by it with respect to all foreign, federal, state and local income,
payroll, withholding, excise, sales, use, personal property, use and occupancy,
business and occupation. mercantile, real estate, stock, franchise or other tax
(all the foregoing taxes, including interest and penalties thereon and including
estimated taxes, being hereinafter collectively called "Taxes"), (b) paid all
Taxes shown to have become due pursuant to such returns and reports and (c) paid
all other Taxes due, including without limitation Taxes for which a notice of or
assessment or demand for payment has been received. All Taxes for periods ended
after the Balance Sheet Date through the date hereof have been paid or are
adequately reserved against on the books of the Company. The Company has timely
filed all information returns or reports which are required to be filed and has
accurately reported all information required to be reflected on such returns or
reports. There are no proposed assessments of Tax against the Company or
proposed adjustments to any tax returns or reports filed pending against the
Company.
2.11 Inventory.
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The Company has good title to all its inventories free and clear of
all Liens, except the Liens securing the Company's indebtedness to Laurel Bank
and purchase money security interests.
2.12 Accounts Receivable.
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All of the accounts receivable of the Company represent amounts
receivable for merchandise actually delivered or services actually provided (or,
in the case of non-trade accounts or notes, represent amounts receivable in
respect of other bona fide business transactions), and have arisen in the
ordinary course of business except for the Company's receivable from Xxxxxxx
Xxxxx in the face amount of $43,500.
2.13 Real Property.
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(a) The Company is not a lessee (or the subleasee or assignee
of the lessee) under any leases for real property except as described on
Schedule 2.13.
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(b) The Company presently owns (beneficially or of record)
the real properties described on Schedule 2.13.
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2.14 Debt Instruments. Except as described on Schedule 2.14, the
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Company is not a party to any loan agreements, notes, mortgages, deeds of trust,
indentures, security agreements and other agreements, instruments and
arrangements, written or oral, which evidence, secure or otherwise relate to any
indebtedness of the Company for borrowed money, other than trade payables.
2.15 Material Agreements.
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Except as listed on Schedule 2.15, the Company is not a party to or
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bound by any agreement, contract or commitment, oral or written, formal or
informal which involve payments or receipts of more than $10,000 in any single
year, or which were entered into other than in the ordinary and usual course of
the business of the Company, and which are not listed on any other Schedule
hereto (all such agreements listed on Schedule 2.15 are collectively referred to
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as "Material Agreements").
All such Material Agreements arc in full force and effect, all parties
to such Material Agreements have complied with the provisions thereof (including
without limitation any provision relating to hiring practices, equal opportunity
of employment or affirmative action), and no default or event which, with the
giving of notice or the passage of time or both, would constitute a default
exists with respect to any party under any of such Material Agreements.
2.16 Patents and Intellectual Property Rights.
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The manufacture, sale or use of any products manufactured or sold by
the Company did not and does not infringe (nor has any claim been made that any
such action infringes) the patents or rights of others.
2.17 Title to Assets.
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Except as set forth on Schedule 2.17 or Schedule 2.13, the Company has
good and marketable title (fee or leasehold) to all of its properties and
assets, including the properties and assets reflected in the Balance Sheet
(except those disposed of in the ordinary course of business since the Balance
Sheet Date), free and clear of any Liens except (a) minor imperfections of
title, none of which, individually or in the aggregate, materially detracts from
the value of or impairs the use of the affected properties or impairs the
operations of the Company, (b) Liens for current taxes not yet due and payable
and (c) Liens disclosed on Schedule 2.17 (collectively, "Permitted Liens").
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2.18 Condition of Assets.
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The buildings, equipment, machinery, furniture, improvements and other
assets of the Company, including those reflected in the Balance Sheet, are in
operating condition and repair and are suitable for the purposes for which they
are used in the business of the Company.
2.19 Permits.
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The Company holds material permits, certificates, licenses,
registrations, franchises, authorizations and other approvals from all
Government Authorities (collectively, "Permits") required under all Laws which
are material to its business. All such Permits are described on Schedule 2.19
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and are in full force and effect.
2.20 Compliance with Laws.
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The Company has complied and is in compliance with all material Laws,
except where a failure to be in compliance would not have a material adverse
effect on the Company. No notice, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened by any Government Authority or other entity
which has had or could have a material effect on the business of the Company
with respect to any alleged violation by the Company of any Law.
2.21 Environmental Matters.
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Neither the Company nor the Sellers have received notice that:
(a) there has been any discharge, disposal, spillage,
emission, escape, pumping, pouring, injection, release, seepage or filtration of
any Hazardous Substance (as hereinafter defined) at, upon, under or within any
of the Company Properties in violation of any applicable Environmental Laws (as
hereinafter defined) which has not been corrected;
(b) there has been any transport, disposal, abandonment or
discarding by the Company or its employees, agents or independent contractors,
of any Hazardous Substance in violation of any applicable Environmental Laws; or
(c) there has been any material violation of or noncompliance
with any Environmental Law by the Company which has not been corrected.
As used herein, "Environmental Laws" shall mean any Laws which relate
to the environment or human health or safety, including without limitation Laws
relating to the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal of any Hazardous Substance, and
"Hazardous Substance" shall mean (i) any flammable substances, explosives,
radioactive materials, hazardous materials, hazardous wastes, toxic substances,
pollutants, contaminants or any related materials or substances specified in any
applicable Environmental Laws (including any "hazardous substance" as defined in
the Comprehensive Environmental Response Compensation Liability Act, 42 U.S.C.
69Ol et seq.), and (ii) asbestos, polychlorinated biphenyls, radon, petroleum
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products and urea formaldehyde.
2.22 Employee Retirement Income Security Act of 1974 as amended
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("ERISA").
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(a) The Company does not sponsor or maintain and is not
required, either by law or by contract, to contribute to any employee welfare
benefit plan, within the meaning of section 3(1) of ERISA, nor to any employee
pension benefit plan, within the meaning of section 3(2) of ERISA. The Company
has not contributed to, nor is it required to contribute to, any multiemployer
plan, within the meaning of section 3(37) of ERISA.
(b) All contributions and reports required, by law or by
contract, to be made to or with respect to the Pension Plan for any plan year or
other period on the basis of which contributions are required ending before the
date hereof have been made as of the date hereof or, with respect to
contributions, have been adequately provided for in the Financial Statements.
2.23 Consents.
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No consent, approval or authorization of, or registration or filing
with, any person or entity, including any Government Authority, is required in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except as otherwise disclosed on
Schedule 2.23 to this Agreement.
2.24 No Pending Litigation or Proceedings.
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There are no actions, suits, investigations, or proceedings pending
or, to the best knowledge of the Sellers, threatened against the Company or any
of its assets or affecting the Stock or any Seller's rights thereto, at law or
in equity, by or before any Judicial or Government Authority. There are
presently no outstanding Judgments against or affecting the Company or any of
its assets or its business or affecting the Stock or any Seller's rights
thereto.
2.25 Transactions with Related Parties.
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Except as disclosed on Schedule 2.25, no Related Party has:
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(a) borrowed money from, or loaned money to, the Company;
(b) entered into any contractual relationship with the
Company;
(c) made any claim, express or implied, of any kind
whatsoever against the Company;
(d) obtained any interest in any property or assets owned or used
by the Company; or
(e) engaged in any other transaction with the Company.
As used herein: (i) "Related Party" means any Seller, any relative of
any Seller, any officer or director of the Company and any affiliate of any of
the foregoing or the Company; (ii) "affiliate" means any person or entity who
controls, is controlled by of is under common control with another person or
entity; and (iii) "control" of an entity means ownership of an equity interest
in such entity greater than 50%.
2.26 Compensation Arrangements; Bank Accounts; Officers
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and Directors.
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Schedule 2.26 hereto sets forth the following information:
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(a) the names and current annual salary, including any bonus,
if applicable, of all present officers and employees of the Company whose
current annual salary, including any promised, expected or customary bonus,
equals or exceeds $100,000;
(b) the name of each bank in which the Company has an account
or safe deposit box, the identifying numbers or symbols thereof and the names of
all persons authorized to draw thereon or to have access thereto; and
(c) the names and titles of all directors and officers of the
Company.
2.27 Labor Relations.
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The relations of the Company with its employees are good. (a) No
employee of the Company is represented by any union or other labor organization,
and the Company is not party to any union or collective bargaining agreement;
(b) no employees of the Company are party to, or are the target of, any union
organizing drive or similar activity; (c) there is no unfair labor practice
charge or complaint against the Company pending or, to the best knowledge of the
Sellers, threatened before the National Labor Relations Board or any other
Government or Judicial Authority; (d) there is no labor strike, dispute, slow
down or stoppage pending or, to the best knowledge of the Sellers, threatened
against or involving the Company; (e) no labor grievance which might have an
adverse affect on the Company or the conduct of its business is pending or, to
the best knowledge of the Sellers, threatened; (f) the Company is not and has
not engaged in any unfair or discriminatory labor practices; and (g) the Company
has not experienced any work stoppage in the past three years.
2.28 Warranty Liability.
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Except for lawsuits, claims, damages and expenses adequately covered
by insurance, there are no liabilities of the Company, fixed or contingent,
asserted or unasserted, with respect to (i) any product manufactured or sold by
the Company or (ii) any claim for the breach of any express or implied product
warranty or any other similar claim with respect to any product sold by the
Company.
2.29 Insurance.
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All policies of insurance of which the Company is the owner, insured
or beneficiary, or covering any of its property are outstanding and in full
force and effect and are listed on Schedule 2.29.
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2.30 Brokerage.
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Neither the Company nor any Seller has made any agreement which might
cause any other person to become entitled to a finder's or broker's fee or
commission as a result of the transactions contemplated hereunder.
2.31 Disclosure.
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No representation or warranty by the Sellers in this Agreement or any
Related Agreement, and no Exhibit, Schedule, document, statement or certificate
furnished or to be furnished to the Buyer pursuant hereto or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to (a) make the statements or facts contained herein or therein not
misleading or (b) provide the Buyer with adequate and complete information as to
the Company and its affairs and the Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
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OF THE BUYER
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The Buyer represents and warrants to the Sellers as follows:
3. Organization.
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The Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has all requisite
corporate power and authority to own and lease its properties, to carry on its
business as presently conducted and as proposed to be conducted and to carry out
the transactions contemplated by this Agreement. The Buyer is duly qualified as
a foreign corporation and is in good standing in all such jurisdictions (which
jurisdictions are listed in Schedule 3.1.A) in which the conduct of its business
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or its ownership or leasing of property requires such qualification. Schedule
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3.1.B contains a true, complete and accurate copy of the certificate of
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incorporation (the "Certificate of Incorporation") and by-laws (the "By-Laws"),
each as amended to date, of the Buyer.
3.2 Capitalization.
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The entire authorized capital stock of the Buyer consists of:
(a) 500,000,000 shares of Common Stock, of which (i) ____ shares
have been issued and are outstanding, fully paid and nonassessable owned and
(ii) no shares are held as treasury shares.
Schedule 3.2 sets forth a description of all other capital stock of
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the Buyer and contains a list of all holders of capital stock of the Buyer and
options, warrants or rights to purchase such capital stock that will be
outstanding immediately before the Closing, in each case including the number of
shares of capital stock held by, or subject to purchase pursuant to the exercise
of any option, warrant or right held by, each such holder. Except as set forth
in Schedule 3.2, there are no outstanding shares of capital stock of the Buyer
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or warrants, options, agreements, convertible securities or other commitments
pursuant to which the Buyer is or may become obligated to issue any shares of
its capital stock or other securities of the Buyer. Except as set forth in
Schedule 3.2, the number of shares of capital stock, if any, issuable in
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connection with the securities described in the first sentence of this paragraph
is not subject to adjustment by reason of the issuance of the Closing Shares or
the Conversion Shares (as defined in Section 3.23). There are no preemptive or
similar rights to purchase or otherwise acquire shares of capital stock of the
Corporation from the Buyer pursuant to any provision of law, the Certificate of
Incorporation or the By-Laws or, any agreement to which the Buyer is a party, or
otherwise, and except as described in Schedule 3.2, there is no agreement,
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restriction or encumbrance with respect to the sale or voting of any shares of
the Buyer's capital stock (whether outstanding or issuable upon conversion or
exercise of outstanding securities). Neither MAS Acquisition X19 Corp. (the
"Predecessor Corporation") nor the Corporation has violated the Securities Act
of 1933, as amended (the "Securities Act") or any securities law of any state or
other jurisdiction in connection with the issuance of any securities prior to
the date hereof (collectively "Applicable Securities Laws").
3.3 Equity Investments.
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Except as described on Schedule 3.3, the Buyer does not currently own,
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directly or indirectly, any capital stock or other proprietary interest in any
corporation, association, trust, partnership, limited liability company, limited
liability partnership, joint venture or other entity.
3.4 Financial Statements.
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Attached as Schedule 3.4.A is the audited balance sheet of the Buyer
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as of December 31, 1999, and the related audited statement of income,
stockholders' equity and cash flows for Buyer for the year ending December 31,
1999, and attached as Schedule 3.4.B is the unaudited balance sheet of the Buyer
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as of June 30, 1999, and the related unaudited statement of income for the Buyer
for the 6-month period ending June 30, 1999 (the financial statements contained
in Schedule 3.4.A and Schedule 3.4.B are hereinafter referred to as the
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"Financial Statements"; the balance sheet of the Buyer is hereinafter referred
to as the "Balance Sheet," and December 31, 1999 is hereafter referred to as the
"Balance Sheet Date"). The Financial Statements (a) are true and correct in all
material respects, (b) are in accordance with the books and records of Buyer,
and (c) present fairly the financial position and results of operations of the
Buyer as of the dates and for the periods indicated in accordance with generally
accepted accounting principles applied on a consistent basis.
3.5 Absence of Undisclosed Liabilities.
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Except as set forth in Schedule 3.5 or as reflected in the Balance
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Sheet, the Buyer has no liabilities of any nature (matured or unmatured, fixed
or contingent) in excess of $10,000.
3.6 Absence of Changes.
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Except as set forth in Schedule 3.6, since the Balance Sheet Date
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there has not been (a) any material adverse change in the financial condition,
results of operations, assets, liabilities, business or prospects of Buyer, (b)
any material asset or property of the Buyer made subject to a lien of any kind
except liens for taxes not yet due and payable, (c) any waiver of any valuable
right of the Buyer, or the cancellation of any debt or claim held by the Buyer,
(d) any payment of dividends on, or other distribution with respect to, or any
direct or indirect redemption or acquisition of, any shares of the capital stock
of the Buyer or any agreement or commitment therefor, (e) any mortgage, pledge,
sale, assignment or transfer of any tangible or intangible assets of the Buyer,
except in the ordinary course of business (f) any loan by the Buyer to, or any
loan to the Buyer from, any officer, director, employee, stockholder of the
Buyer, or any agreement or commitment therefor, (g) any damage, destruction or
loss (whether or not covered by insurance) materially and adversely affecting
the assets, property or business of the Buyer, or (h) any change in the
accounting methods or practices followed by the Buyer.
3.7 Encumbrances.
------------
Except as set forth in Schedule 3.7, the Buyer has good and marketable
------------
title to all of its property and assets, real, personal or mixed, tangible or
intangible, free and clear of all liens, security interests, charges and other
encumbrances of any kind, except liens for taxes not yet due and payable.
3.8 Burdensome Restrictions.
-----------------------
The Buyer is not obligated under any contract or agreement or subject
to any charter or other corporate restriction which materially and adversely
affects its financial condition results of operations, assets, liabilities,
business or prospects or could reasonably be expected to do so in the future.
3.9 Intellectual Property Rights.
----------------------------
3.9.1 The Buyer owns or has the right to use all Intellectual
Property Rights identified in Schedule 3.9.1, which Intellectual Property Rights
--------------
are the only Intellectual Property Rights necessary or required for the conduct
of its business as presently conducted or as proposed to be conducted;
3.9.2 Except as set forth in Schedule 3.9.2, no royalties or other
--------------
amounts are payable by the Corporation to any other person by reason of the
ownership or use of the Intellectual Property Rights identified in Schedule
--------
3.9.1;
-----
3.9.3 No product or service marketed or sold or proposed to be
marketed or sold by the Buyer violates or will violate any license or infringes
or will infringe any Intellectual Property Rights of another.
3.9.4 There are no claims pending or, to the Buyer's knowledge,
threatened with respect to any Intellectual Property Rights necessary or
required for the conduct of the Corporation's business as currently conducted or
as proposed to be conducted, nor does there exist any basis therefor.
As used herein, the term "Intellectual Property Rights" means all
patents, trademarks, service marks, trade names, copyrights, inventions, trade
secrets, know-how, proprietary processes and formulae, applications for patents,
trademarks, service marks and copyrights, and other industrial and intellectual
property rights.
3.10 Litigation.
----------
Except as described on Schedule 3.10, there is no action, suit, claim,
proceeding or investigation, at law, in equity or otherwise, or by or before any
governmental instrumentality or other agency, now pending or otherwise affecting
the Buyer, or, to the Buyer's knowledge, threatened against the Buyer or any
affiliate of the Buyer, and, to the Buyer's knowledge, there exists no basis
therefor. An adverse decision with respect to any litigation set forth on
Schedule 3.10 would not have a material adverse effect on the Buyer.
3.11 No Defaults.
------------
The Buyer is not in violation or breach of, or in default under, any
provision of (a) the Certificate of Incorporation or the By-Laws or (b) except
as set forth on Schedule 3.11, any note, indenture, mortgage, lease, contract,
-------------
purchase order or other instrument, document or agreement to which the Buyer is
a party or by which it or any of its property is bound or affected or any
ruling, writ, injunction, order, judgment or decree of any court, administrative
agency or other governmental body. To the Buyer's knowledge, there exists no
condition, event or act which after notice, lapse of time, or both, may
constitute a violation or breach of; or a default under, any of the foregoing.
3.12 Employment of Employees and Consultants.
---------------------------------------
No third party may assert any valid claim against the Buyer, the
Predecessor Corporation or any affiliate of the Buyer, with respect to (a) the
continued employment by or association with the Buyer of any of the present
employees of. or consultants to, the Buyer or (b) a violation of Applicable
Securities Laws.
3.13 Taxes.
-----
Each of the Predecessor Corporation and the Buyer has filed all
Federal, state, local and foreign tax returns which are required to be filed by
it and all such returns are true and correct. Each of the Predecessor
Corporation and the Buyer has paid all taxes pursuant to such returns or
pursuant to any assessments received by it or which it is obligated to withhold
from amounts owing to any employee, creditor or third party, except, in each
case, for those which are not yet due and payable pursuant to such returns.
3.14 Consultants.
-----------
The Buyer has not registered any shares of its stock on Form S-8 that
were issued to third parties in payment of finder's, broker's or other similar
fees.
3.15 Material Agreements.
--------------------
Except as set forth in Schedule 3.15, the Buyer is not a party to any
-------------
written or oral (a) contract with any labor union; (b) contract for the future
purchase of fixed assets or for the future purchase of materials, supplies or
equipment in excess of normal operating requirements; (c) contract for the
employment of any officer, employee or other person or any contract with any
person on a consulting basis; (d) bonus, pension, profit-sharing, retirement,
stock purchase, stock option, hospitalization, medical insurance or similar
plan, contract or understanding in effect with respect to employees or any of
them or the employees of others; (e) agreement or indenture relating to the
borrowing of money or to the mortgaging, pledging or otherwise placing a lien on
any assets of the Buyer; (f) guaranty of any obligation for borrowed money or
otherwise; (g) lease or agreement under which the Buyer is lessee of or holds or
operates any property, real or personal, owned by any other party; (h) lease or
agreement under which the Buyer is lessor of or permits any third party to hold
or operate any property, real or personal, owned or controlled by the Buyer; (i)
license or lease agreement with respect to any Intellectual Property Rights; (j)
agreement or other commitment for capital expenditures in excess of $25,000; (k)
contract. agreement or commitment under which the Buyer is obligated to pay any
broker's fees, finder's fees or any such similar fees, to any third party; or
(l) any other contract, agreement, arrangement or understanding which is
material to the business of the Buyer or which is material to a prudent
investor's understanding of the business of the Buyer. Except as set forth in
Schedule 3.15, the Buyer is not engaged in any negotiations which could lead to
--------------
any such contract, agreement, arrangement, understanding or commitment. Each
contract, agreement, arrangement, understanding or commitment listed on Schedule
--------
3.15 (each a "Material Agreement") is a valid and binding obligation of the
----
Buyer, and, to the knowledge of the Buyer, each other party thereto, enforceable
in accordance with its terms subject to Limits on Enforceability (as defined
below), and has been duly executed and delivered by the Buyer and, to the
knowledge of the Buyer, each other party thereto. With respect to each Material
Agreement, (a) each party to such agreement has performed in all material
respects all obligations required to be performed to date under such Material
Agreement; (b) no party to such Material Agreement is in default or arrears
under the terms of such Material Agreement; and (c) no condition exists or event
has occurred that, with the giving of notice or lapse of time or both, would
constitute a default under such Material Agreement. The Buyer has furnished to
the Sellers true and correct copies of all such agreements and other documents
requested by the Sellers or their authorized representatives.
As used herein, the term "Limits on Enforceability" means limitations
on enforceability (a) arising under applicable bankruptcy, reorganization,
insolvency. moratorium or similar law from time to time in effect and relating
to or affecting the rights or remedies of creditors generally; or (b) relating
to the availability of specific performance, injunctive relief or any other
equitable remedy.
3.16 ERISA.
-----
Except as listed in Schedule 3.16, neither the Buyer nor any entity
-------------
required to be aggregated with the Buyer under Sections 414(b), (c), (m) or (n)
of the Internal Revenue Code of 1986, as amended (the "Code"), sponsors,
maintains, has any obligation to contribute to, has any liability under, or is
otherwise a party to, any Benefit Plan. For purposes of this Agreement, "Benefit
Plan" shall mean any plan, fund, program, policy, arrangement or contract,
whether formal or informal, which is in the nature of (i) an employee pension
benefit plan (as defined in Section (2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) or (ii) an employee welfare benefit
plan (as defined in section 3(1) of ERISA). With respect to each Benefit Plan
listed in Schedule 3.16, to the extent applicable:
--------------
(a) Each such Benefit Plan has been maintained and operated in all
material respects in compliance with its terms and with all applicable
provisions of ERISA, the Code and all regulations, rulings and other authority
issued thereunder;
(b) All contributions required by law to have been made under each
such Benefit Plan (without regard to any waivers granted under Section 412 of
the Code) to any fund or trust established thereunder in connection therewith
have been made by the due date thereof:
(c) Each such Benefit Plan intended to qualify under Section
401(a) of the Code is the subject of a favorable unrevoked determination letter
issued by the Internal Revenue Service as to its qualified status under the
Code, which determination letter may still be relied upon as to such tax
qualified status, and no circumstances have occurred that would adversely affect
the tax qualified status of any such Benefit Plan;
(d) The actuarial present value of all accrued benefits under each
such Benefit Plan subject to Title IV of ERISA did not, as of the latest
valuation date of such Benefit Plan, exceed the then current value of the assets
of such Benefit Plan allocable to such accrued benefits, all as based upon the
actuarial assumptions and methods currently used for such Benefit Plan;
(e) None of such Benefit Plans that are "employee welfare benefit
plans" as defined in Section 3(1) of ERISA provides for continuing benefits or
coverage for any participant or beneficiary of any participant after such
participant's termination of employment; and
(f) Neither the Predecessor Corporation, the Buyer nor any trade
or business (whether or not incorporated) under common control with the
Predecessor Corporation or the Buyer within the meaning of Section 4001 of ERISA
has, or at any time has had, any obligation to contribute to any "multiemployer
plan" as defined in Section 3(37) of ERISA.
3.17 Environmental Protection.
------------------------
Neither the Predecessor Corporation nor the Buyer has caused or
allowed, or contracted with any party for, the generation, use, transportation,
treatment, storage or disposal of any Hazardous Substances (as defined below) in
connection with the operation of its business or otherwise. The Buyer, the
operation of its business, and any real property that the Buyer owns, leases or
otherwise occupies or uses (the "Premises") are in compliance with all
applicable Environmental Laws (as defined below) and orders or directives of any
governmental authorities having jurisdiction under such Environmental Laws,
including, without limitation, any Environmental Laws or orders or directives
with respect to any cleanup or remediation of any release or threat of release
of Hazardous Substances. Neither the Predecessor Corporation nor the Buyer has
received any citation, directive, letter or other communication, written or
oral, or any notice of any proceeding, claim or lawsuit, from any person arising
out of the ownership or occupation of the Premises, or the conduct of its
operations, and neither the Predecessor Corporation nor the Buyer is aware of
any basis therefor. The Buyer has obtained and is maintaining in full force and
effect all necessary permits, licenses and approvals required by all
Environmental Laws applicable to the Premises and the business operations
conducted thereon (including operations conducted by tenants on the Premises),
and is in compliance with all such permits, licenses and approvals. Neither the
Predecessor Corporation nor the Buyer has caused or allowed a release, or a
threat of release, of any Hazardous Substance onto, at or near the Premises,
and, to the Buyers knowledge, neither the Premises nor any property at or near
the Premises has ever been subject to a release, or a threat of release, of any
Hazardous Substance. For the purposes of this Agreement, the term "Environmental
Laws" shall mean any Federal, state or local law or ordinance or regulation
pertaining to the protection of human health or the environment, including,
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Sections 9601, et seq., the Emergency Planning and
-- ---
Community Right-to-Know Act, 42 U.S.C. Sections 11001, et seq., and the Resource
-- ---
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq. For purposes of
-- ---
this Agreement, the term "Hazardous Substances" shall include oil and petroleum
products, asbestos, polychlorinated biphenyls, urea formaldehyde and other
materials classified as hazardous or toxic under any Environmental Laws.
3.18 Federal Reserve Regulations.
-----------------------------
The Buyer is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin securities (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System).
3.19 Compliance.
----------
Each of the Predecessor Corporation and the Buyer has complied with
all Federal, state, local and foreign laws applicable to its business end the
issuance of its capital stock. The Buyer has all Federal, state, local and
foreign governmental licenses, registrations and permits material to or
necessary for the conduct of its business, such licenses, registrations and
permits are in full force and effect, and there have been no violations of any
such licenses, registrations or. No proceeding is pending or, to the Buyer's
knowledge, threatened, to revoke or limit any thereof.
3.20 Insurance.
---------
The Buyer maintains casualty and comprehensive general liability and
other liability insurance policies, with extended coverage, on the properties,
assets, business and personnel of the Buyer, in amounts deemed adequate by the
Buyer and in accordance with the standards of the industry in which the Buyer
operates. The Buyer will obtain on or before January 31, 2001, directors and
officers liability insurance with coverage amounts satisfactory to Sellers.
3.21 Authorization of Related Documents.
-----------------------------------
The execution, delivery and performance by the Buyer of (a) this
Agreement and (b) each of the Related Agreements has duly authorized by the
Buyer. This Agreement, and each Related Agreement when executed and delivered by
the Buyer, constitutes or will constitute, as the ease may be, the valid and
binding obligation of the Buyer, enforceable in accordance with its terms
subject to Limits on Enforceability. The execution, delivery and performance of
the Related Agreements, and compliance with the provisions hereof and thereof by
the Buyer do not and will not, with Or without the passage of time or the giving
of notice or both, violate, conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Buyer under, the Certificate of Incorporation or
By-Laws, any Material Agreement, or any provision of law, statute, rule or
regulation or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body.
3.22 Authorization of Closing Shares and Reserved Shares.
-------------------------------------------------------
The issuance, sale and delivery hereunder by the Buyer of a portion of
the Closing Shares have been duly authorized by all requisite corporate action
of the Buyer, and when so issued, sold and delivered the Closing Shares will be
validly issued and outstanding, fully paid and nonassessable, and not subject to
preemptive or any other similar rights of the stockholders of the Buyer or
others.
3.23 Related Transactions.
---------------------
Except as set forth in Schedule 3.25, no director, officer or employee
-------------
of the Buyer nor any "associate" (as defined in the rules and regulations
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") of any such person is indebted to the Buyer, nor is the Buyer indebted (or
committed to make loans or extend or guarantee credit) to any such person, nor
is any such person a party to any transaction (other than as an employee or
consultant) with the Buyer providing for the furnishing of services by, or
rental of real or personal property from, or otherwise requiring cash payments
to, any such person.
3.24 No Governmental Consent or Approval Required.
----------------------------------------------
No authorization, consent, approval or other order of, declaration to,
or filing with, any governmental agency or body is required to be made or
obtained by the Buyer for or in connection with the valid and lawful
authorization, execution and delivery by the Buyer of the Transaction Documents,
for or in connection with the valid and lawful authorization, issuance, sale and
delivery of the Closing Shares, except the exceptive filings under applicable
securities laws set forth on Schedule 3.24, which are not required to be made
-------------
until after the Closing and which shall be made on a timely basis.
3.25 Registration Rights.
-------------------
No person has any right to cause the Buyer to effect the registration
under the Securities Act of any shares of Common Stock or any other securities
of the Buyer.
ARTICLE IV
CERTAIN RIGHTS AND OBLIGATIONS OF
---------------------------------
THE PARTIES PRIOR TO CLOSING
----------------------------
4. Conduct of Business Pending Closing.
---------------------------------------
From and after the date hereof and pending the Closing, and unless the
Buyer shall otherwise consent or agree in writing, the Sellers covenant and
agree that:
(a) Ordinary Course. The businesses of the Company shall be
----------------
conducted only in the ordinary course and consistent with past practice,
including without limitation billing, shipping and collection practices,
inventory transactions and payment of accounts payable.
(b) Preservation of Business. The Sellers shall use all reasonable
--------------------------
efforts to preserve the business organization of the Company intact, to keep
available to the Buyer the services of the present officers and employees of the
Company and to preserve for the Buyer the good will of the suppliers, customers
and others having business relations with the Company.
(c) Material Transactions. Except as contemplated by this
----------------------
Agreement, the Sellers shall not permit the Company to:
(i) amend its articles of incorporation or bylaws;
(ii) change its authorized or issued stock or issue any options,
warrants or other rights to acquire shares of its stock;
(iii) enter into any contract or commitment the performance of which
may extend beyond the Closing, except those made in the ordinary coarse of
business the terms of which are consistent with past practice and
reasonable in light of current conditions;
(iv) enter into any employment or consulting contract or arrangement
with any person which is not terminable at will, without penalty or
continuing obligation;
(v) incur, create, assume or suffer to exist any Lien, tenancy or
other matter affecting title to any of its assets, except Permitted Liens;
(vi) make any agreement or settlement with any taxing authority;
(vii) loan or advance funds to, or make an investment in or capital
contribution to, any person or entity;
(viii) sell, transfer or otherwise dispose of any of the assets of the
Company except for (i) sales of inventory in the ordinary course of
business;
(ix) merge or consolidate the Company with or into any other entity,
or negotiate or enter into any agreement with any person or entity to do
any of the foregoing;
(x) take any action or omit to take any action which will result in a
violation of any material Law or cause a breach of any material agreements,
contracts or commitments; or
(xi) incur any other obligation or liability, absolute or contingent,
except in the ordinary course of business and consistent with past
practice.
4.2 Sale of Stock to Others.
---------------------------
The Sellers shall not sell, transfer or otherwise dispose of any of
the Stock in any manner. nor shall the Sellers negotiate or enter into any
agreement, or permit the Company to negotiate or enter into any agreement, with
any person or entity to do any of the foregoing.
4.3 Insurance.
---------
The Company shall maintain in full force and effect all policies of
insurance, subject only (i) to variations required by the ordinary operations of
its business, or else will obtain, prior to the lapse of any such policy,
substantially similar coverage with insurers of recognized standing and approved
by the Buyer
4.4 Satisfaction of Closing Conditions.
-------------------------------------
The Buyer and each Seller shall (a) use their or its respective best
efforts to cause all of the conditions to the obligations of the others under
Article V of this Agreement to be satisfied on or prior to the Closing Date and
(b) promptly notify the others of any event or fact which represents or is
likely to cause a breach of any of his or its representations, warranties,
covenants or agreements hereunder. The Sellers shall promptly advise the Buyer
in writing of the occurrence of any condition or development (exclusive of
general economic factors affecting business in general) of a nature that is or
may be materially adverse to the businesses, operations, assets, prospects or
conditions (financial or otherwise) of the Company.
4.5 Access. Information and Documents: Confidential.
---------------------------------------------------
The Sellers shall cause the Company to give to the Buyer and to the
Buyer's counsel, accountants and other representatives (collectively,
"Representatives") full access during normal business hours to all of the
Company's properties, books, tax returns, contracts, commitments, records,
officers, personnel and accountants and will furnish to the Buyer all such
documents and copies of documents and all such other information with respect to
the affairs of the Company as the Buyer may reasonably request. The Buyer agrees
that it will hold in strict confidence, and cause its Representatives to hold in
strict confidence, all information obtained from the Company under this Section
4.05 and will not disclose, and will cause its Representatives not to disclose,
any portion of such information to any third party. In the event this Agreement
is terminated pursuant to Section 5.03(a) or the transactions contemplated by
this Agreement are otherwise not consummated), the Buyer shall immediately upon
request of the Sellers return, and shall cause its Representatives to
immediately return, all copies of documents and other information obtained
pursuant to this Section 4.05 without retaining copies or extracts thereof.
ARTICLE V
CONDITIONS TO CLOSING: TERMINATION
----------------------------------
5. Conditions Precedent to Obligations of Buyer.
-------------------------------------------------
The obligations of the Buyer to proceed with the Closing is subject to
the fulfillment on or prior to the Closing Date of the following conditions (any
one or more of which may be waived in whole or in part by the Buyer at the
Buyer's option):
(a) Bringdown of Representations and Warranties. The
-----------------------------------------------
representations and warranties of the Sellers contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date with
the same force and effect as though such representations and warranties had been
made on and as of such date, and the Buyer shall have received a certificate to
such effect sinned by the Sellers.
(b) Performance and Compliance. The Sellers shall have
----------------------------
performed all of the covenants and complied with all of the provisions required
by this Agreement to be performed or complied with by them on or before the
Closing Date in all material respects, and the Buyer shall have received a
certificate to such effect signed by the Sellers.
(c) Satisfactory Instruments. All instruments and documents
-------------------------
required on the Sellers' part to effectuate and consummate the transactions
contemplated hereby shall be delivered to the Buyer and shall be in form and
substance reasonably satisfactory to the Buyer.
(d) Consents. All consents and regulatory approvals necessary
--------
to the consummation of the transactions contemplated by this Agreement shall
have been obtained.
(e) Litigation. No Judgment shall be in effect which
----------
restrains or prohibits the transactions contemplated hereby or which would limit
or adversely affect the Buyer's ownership or control of the Company, the
business of the Company or the Stock, and there shall not be pending or
threatened, by or before any Judicial or Government Authority, any action or
proceeding (i) challenging any of the transactions contemplated by this
Agreement or the Related Agreements or seeking monetary relief by reason of the
consummation of such transactions, (ii) by any present or former owner of any
stock or equity interest in the Company (whether through a derivative action or
otherwise) against the Company or any officer, director or shareholder of the
Company in his capacity as such or (iii) which might have a material adverse
effect on the business, prospects or condition (financial or otherwise) of the
Company.
(i) (Omitted).
--------
(g) Resignations. The Buyer shall have received from the
------------
Sellers resignations of the directors and officers of the Company whose names
are listed on Schedule 5.01(g).
-----------------
(h) No Material Adverse Change. There shall have been no
-----------------------------
material adverse change since the Balance Sheet Date in the businesses,
operations, assets, inventories, prospects or condition (financial or otherwise)
of the Company.
5.2 Conditions Precedent to the Obligations of the Sellers.
-------------------------------------------------------------
The obligation of the Sellers to proceed with the Closing is subject
to the fulfillment on or prior to the Closing Date of the following conditions
(any one or more of which may be waived in whole or in part by the Sellers at
the Sellers' option):
(a) Bringdown of Representations and Warranties. The
---------------------------------------------
representations and warranties of the Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties bad been
made on as of such date, and the Buyer shall have delivered to the Sellers a
certificate to such effect.
(b) Performance and Compliance. The Buyer and the Guarantors
---------------------------
shall have performed all of the covenants and complied with all the provisions
required by this Agreement to be performed or complied with by them on or before
the Closing Date, and the Buyer shall have delivered to the Sellers a
certificate to such effect.
(c) Satisfactory Instruments. All instruments and documents
-------------------------
required on the part of the Buyer to effectuate and consummate the transactions
contemplated hereby shall be delivered to the Sellers and shall be in form and
substance reasonably satisfactory to the Sellers and their counsel.
(d) Litigation. No Judgment shall be in effect which
----------
restrains or prohibits the transactions contemplated hereby and there shall not
be pending or threatened, by or before any Judicial or Government Authority, any
action or proceeding challenging any of the transactions contemplated by this
Agreement or the Related Agreements or seeking monetary relief by reason of the
consummation of such transactions. No litigation or other proceeding shall be
instituted or threatened (ii) by any present or former owner of any stock or
equity interest in the Buyer (whether through a derivative action or otherwise)
against the Buyer or any officer, director or shareholder of the Company in his
capacity as such or (iii) which might have a material adverse effect on the
business, prospects or condition (financial or otherwise) of the Company.
(e) Consents. All consents and regulatory approvals necessary
--------
to the consummation of the transactions contemplated by this Agreement shall
have been obtained.
(f) No Material Adverse Chance. There shall have been no
-----------------------------
material adverse change in the businesses, operations, assets, inventories,
prospects or condition (financial or otherwise) of the Buyer or either
Guarantor.
5.3 Termination.
-----------
(a) When Agreement May Be Terminated. This Agreement may be
----------------------------------
terminated at any time prior to Closing:
(i) by mutual consent of the Buyer and the Sellers;
(ii) by the Buyer if there has been a misrepresentation by the
Sellers hereunder of any material fact, a material breach by the Sellers of
any of their warranties or covenants set forth herein, or if any of the
conditions specified in Section 5.01 hereof shall not have been fulfilled
within the time required and shall not have been waived by the Buyer,
(iii) by the Sellers if there has been a misrepresentation by the
Buyer or either Guarantor hereunder of any material fact, a material breach
by the Buyer or either Guarantor of any of their respective warranties or
covenants set forth herein or if any of the conditions specified in Section
5.02 hereof shall not have been fulfilled within the time required and
shall not have been waived by the Sellers.
(b) Effect of Termination. In the event of termination of
-----------------------
this Agreement by either the Sellers or the Buyer as provided above, this
Agreement shall forthwith terminate and there shall be no liability on the part
of either the Sellers or the Buyer, except for liabilities arising from a breach
of this Agreement prior to such termination.
ARTICLE VI
INDEMNIFICATION
---------------
6. Indemnification by Sellers.
----------------------------
The Sellers hereby jointly and severally agree to indemnify and hold
harmless the Buyer and the Company from and against:
(a) any lore, liability (including without limitation any Tax
liability), claim, obligation, damage or deficiency of or to the Buyer or the
Company arising out of or resulting from (i) any misrepresentation, breach of
warranty or nonfulfillment of any covenant on. the part of the Sellers contained
in this Agreement or in any statement or certificate furnished or to be
furnished to the Buyer pursuant hereto or in connection with the transactions
contemplated hereby, or (ii) any investigation by any Government or Judicial
Authority of the Company or its business or affairs, to the extent such
investigation arises from events occurring prior to the Closing Date; and
(b) any actions, judgments, costs and expenses (including
without limitation reasonable attorneys fees and all other expenses incurred in
investigating, preparing or defending any litigation, proceeding or
investigation. commenced or threatened) incident to any of the foregoing or the
enforcement of this Section 6.01.
6.2 Indemnification by Buyer.
--------------------------
The Buyer hereby agrees to indemnify and hold harmless the Sellers
from and against:
(a) any loss, liability, claim, obligation, damage or
deficiency of or to the Sellers arising out of or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant on the
part of the Buyer contained in this Agreement or in any statement or certificate
furnished or to be furnished to the Sellers in connection with the transactions
contemplated hereby; and
(b) any actions judgments, costs and expenses (including
reasonable attorneys fees and all other expenses reasonably incurred in
investigating, preparing or defending any litigation or proceeding, commenced or
threatened) incident to any of the foregoing or the enforcement of this Section
6.02.
6.3 Representation. Cooperation and Settlement.
-------------------------------------------
(a) A party seeking indemnification pursuant to this Article VI
(an Indemnitee") shall give prompt written notice to the party from whom
indemnification is sought (an "Indemnitor") of any claim asserted against such
Indemnitee which might give rise to a claim by such Indemnitee against such
Indemnitor based on the indemnity agreement contained in this Article VI,
stating the nature and basis of the first-mentioned claim and the amount (or a
good faith estimate) thereof.
(b) An Indemnitor shall have full responsibility and authority
with respect to the disposition of any action, suit or proceeding brought
against an Indemnitee with respect to which such Indemnitor may have liability
under the indemnity agreement contained in this Article VI (an "Action");
provided that notwithstanding the foregoing, if such Indemnitor shall fail or
refuse to exercise such responsibility and authority, then such Indemnitee may
do so at such Indemnitor's expense. If any Action is brought against an
Indemnitee which is defended by an Indemnitor, such Indemnitee shall have the
right, at its own expense, to be represented by counsel of its own choosing and
with whom counsel for such lndemnitor shall confer in connection with the
defense of any such Action. Each of such Indemnitee and Indemnitor shall make
available to the counsel and accountants of the other all of its books and
records relating to such Action, and the parties agree to render to each other
such assistance as may reasonably be requested in order to insure the proper and
adequate defense of any such Action.
(c) The amount payable by any Indemnitor shall be determined
to give effect to any tax savings accruing to the benefit of the Indemnitee as a
result of the payment of any amounts in indemnification under this Article VI.
6.4 Duration of Indemnification Obligations.
-----------------------------------------
No claim for indemnification pursuant to this Article VI shall be made
after December 31, 2002.
6.5 Satisfaction of Claims Against Sellers.
----------------------------------------
Any claims for indemnification against the Sellers shall be satisfied
only by a set-off against amounts owed to Sellers under the Promissory Note. In
no event shall the indemnification obligations of Sellers exceed an amount equal
to the unpaid principal amount of the Promissory Note.
6.6 Settlement of Disputes.
------------------------
If an Indemnitor receives notice from an Indemnitee seeking
indemnification or otherwise asserting a claim under this Article VI, and such
Indemnitor (for purposes of this Section 6.06, the "Disputing Party") disputes
such claim made by such Indemnitee (for purposes of this Section 6.06, the
"Claiming Party"), then the Disputing Party shall provide written notice to such
Claiming Party of such dispute, including a description of the basis for such
dispute (the "Notice of Dispute"). Such dispute shall be settled by mutual
agreement of the Claiming Party and the Disputing Party, evidenced by a writing
signed by each such party, provided, however, that if no resolution or
--------- -------
settlement shall be reached within 60 days following receipt by the Claiming
Party from the Disputing Party of the Notice of Dispute, then either such party
may submit the disputed matter to arbitration, in which event the parties agree
as follows:
Both the Claiming Party and the Disputing Party agree, that if
either party elects to submit a disputed matter under this Article VI to
arbitration, then such dispute shall be settled by arbitration in the City of
Pittsburgh, Pennsylvania in accordance with the laws of the Commonwealth of
Pennsylvania by three arbitrators, one to be appointed by the Claiming Party,
one to be appointed by the Disputing Party, and the third to be appointed by the
first two arbitrators. The arbitration shall be conducted in accordance with the
rules of the American Arbitration Association, except with respect to the
selection of arbitrators, which shall be as provided above. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
ARTICLE VII
POST CLOSING COVENANTS
----------------------
7. Affirmative Covenants.
----------------------
Until such time as the obligations of Buyer under the terms of the
Convertible Note have been fully satisfied, the each of the Buyer and each of
the Guarantors covenants and agrees as follows:
(a) Reporting Requirements. The Buyer shall comply with
-----------------------
all applicable reporting requirements of the Securities Act of 1934.
(b) Preservation of Existence and Franchises. The Buyer shall
------------------------------------------
maintain the Company's corporate existence, and shall keep all its rights and
franchises in full force and effect in the respective jurisdictions of
incorporation.
(c) Insurance. The Buyer shall maintain, with financially
---------
sound and reputable insurers, insurance with respect to the Company's equipment,
property and inventory against such liabilities, casualties and contingencies,
and of such types and in such amounts, as is customary in the case of
corporations engaged in the same or a similar business. Each such policy of
insurance shall name Sellers as an additional insured. The Buyer shall deliver
to the Sellers certificates evidencing such insurance promptly upon obtaining or
renewing any such policy.
(d) Maintenance of Equipment. The Buyer shall cause the
--------------------------
Company to maintain its equipment in good repair and working order and shall
make all necessary repairs thereto and replacements thereof.
(e) Board of Directors. So long as Sellers own at least 5% of
------------------
the Purchaser's issued and outstanding common stock, they shall have the right
to designate one person to serve as a member of Buyer's Board of Directors which
will be comprised of no more than three persons. Approval of any transaction
involving issuance of capital stock of the Buyer or which would be otherwise be
material to the Buyer shall require the affirmative vote of three directors. In
the event of a default under the terms of the Conversion Note or any of the
other Related Agreements, the size of the Purchaser's Board of Directors shall
be increased to five, and Sellers shall have the right to designate two
additional persons to the Board of Directors.
7.2 Negative Covenants.
-------------------
Until such time as the obligations of Buyer under the terms of the
Promissory Note have been fully satisfied, without the prior written consent of
the Sellers, the Buyer shall not cause or permit:
(a) Dividends. The Company to pay dividends or make any other
---------
distributions of any kind.
(b) Merger. The Company to merge with or into or consolidate
------
with any other entity unless the Company is the surviving entity.
(c) Place of Business, etc. The Company to (i) change its
-------------------------
principal place of business, (ii) change its name or (iii) locate any of its
assets or any of its books and records pertaining thereto at a location other
than its principal places of business.
(d) Sale of Assets; Liens. The Company to (i) sell any of its
---------------------
assets (other than sales of inventory in the ordinary course of business) or
(ii) grant any mortgage, lien, security interest or other encumbrance on any of
its assets; provided however, that the Company may ~., grant security interests
in its (x) accounts receivable ("Permitted Receivables Lien") and (y) inventory
acquired after the Closing ("After Acquired Inventory"), in each case for the
sole purpose of obtaining working capital financing for its business operations
(the "Permitted Inventory Lien"); provided, further, however, that in no event
shall (i) the Permitted Receivables Lien secure an indebtedness in excess of an
amount equal to seventy percent (70%) of the face amounts of such accounts
receivable, or (ii) the Permitted Inventory Lien secure an indebtedness in
excess of an amount equal to fifty percent (50%) of the cost of such Inventory.
ARTICLE VIII
MISCELLANEOUS
-------------
8. Further Assurances; Subordination.
---------------------------------
From time to time after the Closing Date, upon the request of the
Buyer each Seller shall (i) make available to the Buyer any records, documents
or other information relating to the Company and retained by such Seller and
(ii) execute, deliver and acknowledge all such further instruments of transfer
and conveyance and take all such other actions as the Buyer may reasonably
require.
8.2 Notices.
-------
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given and received (a)
upon delivery, if personally delivered, (b) on the tenth day after being
deposited with the U.S. Postal Service, if sent by certified or registered mail,
return receipt requested, (c) on the next day after being deposited with a
reliable overnight delivery service or (d) upon receipt of an answerback, if
transmitted by telefax, postage prepaid in all cases other than telefax,
addressed to the other party at the following addresses, or telefax numbers in
the case of a telefax (or at such other address or telefax number as shall be
given in writing by any party to the others):
If to the Buyer, to:
Pinnacle Business Management, Inc.
0000 Xxxx Xx Xxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (727)_________
If to the Sellers, to:
Xxxxxxx Xx Xxxxxx
Lo Xxxxxx & Associates, Inc.
0000 Xxxxxxxxxx Xxxx
XxXxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And:
Xxxx Xxxxxxx
Lo Xxxxxx & Associates, Inc.
0000 Xxxxxxxxxx Xxxx
XxXxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a required copy to:
Xxxxxxxx Xxxxxxxxx Professional Corporation
One Oxford Centre, 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxxxxx, Esq.
Telephone Number: (000) 000-0000
Telefax Number: (000) 000-0000
8.3 Successors and Assigns.
------------------------
This Agreement and all rights and powers granted hereby shall bind and
inure to the benefit of the parties hereto and their respective heirs,
successors and assigns. Notwithstanding the foregoing, the Agreement may not be
assigned by any party without the written consent of each of the other parties.
8.4 Governing Law.
--------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
8.5 Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but which together shall constitute one and
the same instrument.
8.6 Amendment.
---------
To be effective, any amendment or waiver to this Agreement must be in
writing and be signed by the party against whom enforcement of the same is
sought
8.7 Severability.
------------
If any portion of this Agreement shall for any reason be held by a
court of competent jurisdiction to be invalid and unenforceable, the valid and
enforceable provisions will continue to be given effect and bind the parties
hereto.
8.8 Entire Agreement.
-----------------
This Agreement and the Schedules and Exhibits hereto, and the Related
Agreements, each of which is hereby incorporated herein, set forth all of the
promises, covenants, agreements, conditions and undertakings between the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.
8.9 Seller Agent.
------------
The Sellers hereby appoint XxXxxxxx and Xxxx Xxxxxxx, or either of
them, as their agent for the purposes of giving all communications which the
Sellers may give to the Buyer.
8.10 Covenant Not to Compete.
-----------------------
(a) Each of the Sellers agrees that for a two year period
after the Closing, he or she will not directly or indirectly:
(i) enter into or attempt to enter into the "Restricted
Business" (as defined below) within the Commonwealth of Pennsylvania; or
(ii) induce or attempt to persuade any former, current or
future employee, agent, manager, consultant, director, or other participant
in the Company's business to terminate such employment or other
relationship in order to enter into any relationship with him, any business
organization in which he is a participant in any capacity whatsoever, or
any other business organization in competition with the Company's business.
(b) The term "indirectly," as used in this Section 8.10,
includes acting as a paid or unpaid director, officer, agent, representative,
employee of, or consultant to any enterprise, or acting as a proprietor of an
enterprise, or holding any direct or indirect participation in any enterprise as
an owner, partner, limited partner, joint venturer, shareholder, or creditor.
(c) The term "Restricted Business" as used in this Section
8.10 means the sale of automobiles, wireless telephone equipment and business
telephone systems. Nevertheless, the Sellers may own less than five percent of
the outstanding equity securities of a corporation that is engaged in the
Restricted Business if the equity securities of such corporation are listed for
trading on a national stock exchange or are registered under the Securities
Exchange Act of 1934. Buyer acknowledges that XxXxxxxx presently performs
services for the New Auto Toy Store, Inc. and any activities either Seller shall
take on behalf of the New Auto Toy Store, Inc. shall not be deemed to constitute
a breach of this Section 8.10. Buyer acknowledges that Seller is not conveying
their ownership interest in the New Auto Toy Store, Inc. as part of this
Agreement. If Seller enters into an Agreement to sell their interest in the New
Auto Toy Store, Inc., Buyer acknowledges that they are only entitled to the then
current book value of the investment on the balance sheet of the Company on the
date of such sale.
(d) Scverability; No Default. The covenants set forth in
--------------------------
Section 8.10 shall be construed as a series of separate covenants, one for each
county in each of the states of the United States to which such restriction
applies. If, in any judicial proceeding, a court of competent jurisdiction shall
refuse to enforce any of the separate covenants deemed included in this
Agreement, or shall find that the term or geographic scope of one or more of the
separate covenants is unreasonably broad, the parties shall use their best good
faith efforts to attempt to agree on a valid provision which shall be a
reasonable substitute for the invalid provision. The reasonableness of the
substitute provision shall be considered in light of the purpose of the
covenants and the reasonable protectable interests of the Buyer, the Company and
the Sellers. The substitute provision shall be incorporated into this Agreement.
If the parties are unable to agree on a substitute provision then the invalid or
unreasonably broad provision shall be deemed deleted or modified to the minimum
extent necessary to permit enforcement. The covenants set forth in this Section
8.10 shall be terminated and of no further force or effect upon the occurrence
of an "Event of Default" as defined in the Promissory Note.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
[SIGNATURES ON THE FOLLOWING PAGE]
BUYER:
ATTESTED: PINNACLE BUSINESS MANAGEMENT,
INC.
By: By:
----------------------------- ------------------------------
President
SELLERS:
/s/ /s/ Xxxxxxx X. Lo Xxxxxx
-------------------------------- ---------------------------------
Witness Xxxxxxx X. Lo Xxxxxx
/s/ /s/ Xxx Xx Xxxxxx
-------------------------------- ---------------------------------
Witness Xxx Xx Xxxxxx
Guarantors:
/s/ /s/ Xxxx Xxxxxx
-------------------------------- ---------------------------------
Witness Xxxx Xxxxxx
/s/ /s/ Xxxxxxx X. Xxxx
-------------------------------- ---------------------------------
Witness Xxxxxxx X. Xxxx
Schedule 2.13
Real Properties
1. 0000 Xxxxxxxxxx Xxxx, XxXxxxxx, Xxxxxxxxxxxx, 00000. (Deeded in the
name of Arnoni, Lo Xxxxxx and Associates)
Schedule 2.14
Debt Instruments
1. Attached Schedule of automobile installment loans and capitalized lease
obligations.
2. Laurel Bank Floor Plan Agreement and related Demand Note dated October
29, 1999 ($1,000,000 Maximum).
3. National City Bank of Pennsylvania Commercial Note: Demand Line of Credit
dated February 13, 1998 (Original amount $1,500,000).
4. National City Bank of Pennsylvania Open-End Mortgage and Security
Agreement dated December 2, 1997 (Original amount $1,260,000).
Schedule 2.15
Material Agreements
1. "Dealer Sales and Service Agreement" with Daewoo Motor America, Inc.
2. "Associate Agreement" with NEC America, Inc.
3. Exclusive Retail Dealer Agreement" with Pittsburgh Cellular Telephone
Company, a Pennsylvania partnership, by its majority partner, XxXxx
Communications of Pittsburgh, Inc., d/b/a AT&T Wireless Services
4. Consulting Agreement by and between New Auto Toy Store, Inc. and Lo
Xxxxxx & Associates, Inc.
Schedule 2.17
Permitted Liens
1. That certain purchase money security interest in (i) the equipment in
existence now or hereinafter acquired from AT&T Wireless Services and
(ii) the proceeds from the sale or other disposition thereof.
2. A security interest in (i) the products purchased from NEC America. Inc.
and (ii) the proceeds of the sale, lease, installation, servicing,
repair, or maintenance of all such products.
3. Liens on any of the Leasehold Improvements and Company Vehicles listed on
the balance sheet, such liens being included in the detail in item 1. of
Schedule 2.14, Debt Instruments.
Schedule 2.19
Permits
1. Commonwealth of Pennsylvania, Department of Revenue Sales Tax License No.
00-000 000 issued to All Pro Communications.
2. Commonwealth of Pennsylvania, Department of Revenue Sales Tax License No.
00-000 000 issued to All Pro Auto Mall.
3. Commonwealth of Pennsylvania, Department of Revenue Public Transportation
Assistance License No. 09-536 04 issued to Lo Xxxxxx & Associates, Inc.
4. Commonwealth of Pennsylvania, Department of Banking Installment Seller
License No. 5883.
5. Commonwealth of Pennsylvania, Department of Transportation Full Agent
Certificate of Authorization No. 00859030.
6. Commonwealth of Pennsylvania, Department of State Vehicle Dealer
Certificate No. VD-021339-L.
7. Commonwealth of Pennsylvania, Department of Banking Sales Finance Company
License No. 2190.
8. Commonwealth of Pennsylvania, Department of Transportation Official
Inspection Station Permit No. D598.
Schedule 2.23
Consents
1. Laurel Bank requires notice of the change in the form of ownership under
the terms of the Floor Plan Agreement dated October 29, 1999.
2. AT&T Wireless Services requires prior written consent of the material
change in ownership under the terms of the "Exclusive Retail Dealer
Agreement" dated effective January 1, 2000.
3. NEC America, Inc. requires the prior written approval of the transfer of
control of the outstanding stock under the terms of the "Associate
Agreement" dated effective May 24, 2000.
4. Daewoo Motor America, Inc. requires the prior written consent to the
change in ownership under the terms of the "Dealer Sales and Service
Agreement" dated effective October 5, 1999.
5. National City Bank of Pennsylvania requires the prior written consent of
the change in control and sale of the property under the terms of the
"Open-End Mortgage and Security Agreement" dated December 2, 1997.
Schedule 2.25
Transactions with Related Parties
1. Lo Xxxxxx and Associates, Inc. is a party to a residual income sharing
agreement with All Pro Telecommunications, Inc., (a Nevada Corporation),
which is a related party.
Schedule 2.26
Part A-Compensation Arrangements
1. Xxxxx X. Xx Xxxxxx $120,000.00
2. Xxxxxxx X. Lo Xxxxxx $250,000.00
3. Xxx X. Lo Xxxxxx $130,680.00
Schedule 5.01
Resignations
1. Xxx X. Lo Xxxxxx, Director and Officer
