STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of April 21,
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2004, by and between SPIDER BOY INTERNATIONAL INC., a Minnesota corporation (the
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"Purchaser"), and XXXXXX X. XXXXXX XX. and XXXX X. XXXXXXXX, jointly and
severally (the "Seller"), the holders of all of the outstanding shares of
capital stock of INNOVATIVE CORPORATE STRATEGIES INC., a corporation existing
under the laws of the state of Georgia with its principal place of business
located at 0000 Xxxxxxxxx Xxxxxx Xxxx Xxxxx X-000 Xxxxxxx, Xxxxxxx 00000 (the
"Corporation").
ARTICLE 1 PURCHASE OF STOCK AND PURCHASE PRICE
1.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, the Seller agrees to sell, and the Purchaser agrees to purchase from
the Seller, all of the issued and outstanding shares of capital stock of the
Corporation (the "Shares"). The number of Shares which are the subject of this
Agreement and the stock certificates evidencing the Shares are described in
Schedule 1.1 hereto.
1.2 PRICE. In reliance on the representations and warranties of the
Seller contained herein, and in consideration of the sale, conveyance, transfer
and delivery of the Shares and the consummation of the other agreements and
transactions referred to in this Agreement, the Purchaser agrees to pay to the
Seller the aggregate consideration calculated in accordance with the provisions
of Section 1.3 hereto (the "Purchase Price") on the Closing Date (as defined in
Section 9.1 hereof), payable as hereinafter set forth.
1.3 PURCHASE PRICE DETERMINATION.
(a) THE "Purchase Price" shall be the sum often dollars ($10.00) and
an amount equal to the sum of the annual earnings of the Corporation over a
period commencing on Closing and ending on the last day of Purchaser's fiscal
year 2006, calculated according to GAAP before interest, taxes, depreciation and
amortization, as determined by the Financial Statements of the Corporation (the
"EBITDA"), multiplied by 3.5 (the "EARNOUT"), up to a maximum of Twelve Million
Four Hundred Thousand Dollars ($12,400,000) ( the "EARNOUT CAP"), subject to
increase pursuant to Section 1.3(e), which shall be paid and or adjusted as
follows:
(b) Within 30 days after the filing of the Form 10-K of Purchaser for
the Purchaser's fiscal year 2004 (the "FIRST YEAR DETERMINATION PERIOD"), the
EBITDA of the operations of Purchaser attributable to operation of the
Corporation during the period between the Closing and the last day of the fiscal
year of Purchaser for 2004 shall be determined by the independent auditors of
Purchaser (the "FIRST YEAR EBITDA") and paid to the Seller as follows: Purchaser
shall pay to Seller 3.5 times the FIRST YEAR EBITDA (the "FIRST YEAR EARNOUT")
as follows: Twelve Percent (12%) of the FIRST YEAR EARNOUT in cash, and Eighty
Eight Percent (88%) in Common Stock of Purchaser valued at the lesser of [x]
$4.00 per share or [y] the Weighted Average Sale Price for Purchaser's Common
Stock for the 3 trading days prior to the end of the FIRST YEAR DETERMINATION
PERIOD as determined pursuant to Section 1.3 (f) below (the "FIRST YEAR EARNOUT
PAYMENT") with the difference between (x) and (y) to be paid in either cash or
unregistered Common Stock of Purchaser at Purchaser's option.
(c) Within 30 days after the filing of the Form 10-KSB of Purchaser for
the Purchaser's fiscal year 2005 (the "SECOND YEAR DETERMINATION PERIOD"), the
EBITDA of the operations of Purchaser attributable to operation of the
Corporation during the period between the Closing and the last day of fiscal
year of Purchaser for 2005 shall be determined by the independent auditors of
Purchaser and paid to the Seller (the "SECOND YEAR EBITDA") as follows:
Purchaser shall pay to Seller 3.5 times the SECOND YEAR EBITDA (the "SECOND YEAR
EARNOUT") as follows: Thirty Percent (30%) of
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the SECOND YEAR EARNOUT in cash, and Seventy Percent (70%) in Common Stock of
Purchaser valued at the lesser of [x] $6.00 per share or [y] the Weighted
Average Sale Price for Purchaser's Common Stock for the 3 trading days prior to
the end of the SECOND YEAR DETERMINATION PERIOD, as determined pursuant to
Section 1.3(f) below (the "SECOND YEAR EARNOUT PAYMENT") with the difference
between (x) and (y) to be paid in either cash or unregistered Common Stock of
Purchaser at Purchaser's option.
(d) Within 30 days after the filing of the Form 10-KSB of Purchaser for the
fiscal year 2006 (the "THIRD YEAR DETERMINATION PERIOD"), the EBITDA of the
operations of Purchaser attributable to operation of the Corporation during the
period between the Closing and the last day of fiscal year of Purchaser for 2006
shall be determined by the independent auditors of Purchaser and paid to the
Seller (the "THIRD YEAR EBITDA") as follows: Purchaser shall pay to Seller 3.5
times the THIRD YEAR EBITDA (the "THIRD YEAR EARNOUT") as follows: that amount
of cash and Common Stock of Purchaser so that the total of the FIRST YEAR
EARNOUT, the SECOND YEAR EARNOUT and the THIRD YEAR EARNOUT is Fifty Percent
(50%) cash and Fifty Percent (50%) Common Stock of Purchaser, valued at the
lesser of [x] $8.00 per share or [y] ] the Weighted Average Sale Price for
Purchaser's Common Stock for the 3 trading days prior to the end of the THIRD
YEAR DETERMINATION PERIOD as determined pursuant to Section 1.3(f) below (the
"THIRD YEAR EARNOUT PAYMENT") with the difference between (x) and (y) to be paid
in either cash or unregistered Common Stock of Purchaser at Purchaser's option.
(e) In the event the FIRST YEAR EARNOUT PAYMENT is equal to or greater than
One Hundred and Eleven Thousand Nine Hundred and Ninety One Dollars
($111,991.00), and the SECOND YEAR EARNOUT PAYMENT is equal to or greater than
One Million One Hundred and Forty Nine Thousand Six Hundred Fifty One Dollars
($1,149,651), and the THIRD YEAR EARNOUT PAYMENT is equal to or greater than
Three Million Five Hundred Thirty One Thousand Four Hundred Fifty One Dollars
($3,531,451), then the EARNOUT CAP shall be increased from $12,400,000 to an
amount equal to the FIRST YEAR EBITDA, SECOND YEAR EBITDA AND THIRD YEAR EBITDA
multiplied by FOUR (the "Incentive Purchase Price"). The difference between the
Purchase Price and the Incentive Purchase Price is to be paid fifty percent in
cash and fifty percent in unregistered Common Stock of Purchaser, valued at the
lesser of [x] $8,00 per share or [y] the Weighted Average Sale Price for
Purchaser's Common Stock for the 3 trading days prior to the end of the THIRD
YEAR DETERMINATION PERIOD as determined pursuant to Section 1.3(f) below (the
"THIRD YEAR EARNOUT PAYMENT") with the difference between (x) and (y) to be paid
in either cash or unregistered Common Stock of Purchaser at Purchaser's option.
(f) "Weighted Average Sale Price" shall be determined on the applicable
determination dates set forth above on the basis of the weighted average sale
price of the Buyer's Common Stock on the principal stock exchange, or the
National Association of Securities Dealers' Automated Quotation National Market
System ("NASDAQ/NMS"), as the case may be, on which such Common Stock is then
listed or admitted to trading, (ii) if the Common Stock is not then listed or
admitted to trading on any stock exchange or the NASDAQ/NMS, as the case may be,
the average of the last reported closing bid and asked prices on such day in the
over-the-counter market, as furnished by the NASDAQ system or the National
Quotation Bureau, Inc., (iii) if neither NASDAQ, or the National Quotation
Bureau is at the time engaged in the business of reporting such prices, then as
furnished by any similar firm then engaged in such business, or (iv) if there is
no such firm, as furnished by any member of the National Association of
Securities Dealers ("NASD") selected by the Buyer, with the consent of the Buyer
(which consent shall not be unreasonably refused or delayed), and which is not
an Affiliate of the Buyer.
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AND CORPORTATON
Seller and Corporation hereby represent and warrant to Purchaser as of
the date hereof and as of the Closing Date:
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2.1 Corporate Organization, etc. Corporation is a corporation duly
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organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and proposed to be conducted, and
to own, operate and lease its properties and assets. Corporation is duly
qualified or licensed to do business in good standing in every jurisdiction in
which the conduct of its business, the ownership or lease of its properties, the
proposed conduct of its business or ownership or lease of its properties, or the
transactions contemplated by this Agreement, require it to be so qualified or
licensed . Such jurisdictions are set forth in Schedule 2.l(a) hereto. True,
complete and correct copies of Corporation's charter and bylaws as presently in
effect are set forth in Schedule 2.1(b) hereto.
2.2 Subsidiaries and Affiliates. Corporation has no subsidiaries or
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affiliates.
2.3 Capital Stock. The stock record book of Corporation has been
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delivered to the Purchaser for inspection prior to the date hereof and are
complete and correct, and all requisite Federal and State documentary stamps
have been affixed thereon and cancelled. The authorized, issued and outstanding
shares of capital stock of Corporation is as set forth in Schedule 2.3 hereto.
2.4 Corporate Record Books. The corporate minute books of Corporation
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has been made available to the Purchaser, is complete and correct and contains
all of the proceedings of the shareholders and directors of the Corporation.
2.5 Title to Stock. All of the outstanding shares of the capital stock
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of Corporation is owned by Seller, is duly authorized, validly issued and fully
paid and non-assessable, and are free of all Liens (as defined in Section 12.3).
Upon payment of the Purchase Price to the Seller at closing, Seller will convey
good and marketable title to the Shares free and clear of all Liens or
contractual restrictions or limitations whatsoever.
2.6 Options and Rights. There are no outstanding subscriptions,
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options, warrants, rights, securities, contracts, commitments, understandings,
or arrangements by which Corporation is bound to issue any additional shares of
its capital stock or rights to purchase shares of its capital stock. There are
no existing agreements between Seller and Corporation or between the Seller or
the Corporation, on the one hand, and any other Person (as defined in Section
12.3), on the other hand, regarding the Shares.
2.7 Authorization, etc. The Seller has full power and authority to
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enter into this Agreement and the agreements contemplated hereby and to deliver
the Shares and the certificates evidencing such Shares to Purchaser as provided
for herein, free and clear of all Liens. The execution, delivery and performance
of this agreement and all other agreements and transactions contemplated hereby
have been duly authorized by the Board of Directors and Shareholders of the
Corporation and no other corporate proceedings on its part are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement and all other agreements contemplated hereby to be entered into by
Seller constitute a legal, valid and binding obligation of Seller enforceable
against the Seller in accordance with its terms.
2.8 No Violation. The execution and delivery by Seller and Corporation
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of this Agreement, and all other agreements contemplated hereby, and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Seller and Corporation do not and will not (a) conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default or
event of default under (with due notice, lapse of time or both) of any contract
to which either Corporation or Seller is a party; b) or result in the creation
of any Lien upon any of the Seller's assets or the Corporation's capital stock
or assets; c) give any third party the right to accelerate any obligations of
either Seller or Corporation; d) result in a violation of or require any
authorization, consent, approval, exemption or other action by or notice to any
court or Authority (as defined in Section 12.3) pursuant to, the charter or
bylaws of Seller or
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Corporation or any Regulation (as defined in Section 12.3), Order (as defined in
Section 12.3) or Contract (as defined in Section 12.3) to which the Seller or a
Corporation or their respective properties are subject. The Seller will comply
with all applicable Regulations and Orders in connection with the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
2.9 Financial Statements.
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(a) Attached as SCHEDULE 2.9(a)(l) hereto are audited year-end balance
sheets and statements of operations, stockholders equity and cash flow of
Corporation as of the 31 day of MARCH for the year 2004 AND UN-AUDITED BALANCE
SHEETS FOR THE PERIOD COMMENCING APRIL 1, 2004 AND ENDING APRIL 12, 2004. Such
balance sheets and the notes thereto fairly present the financial position of
Corporation as at the respective dates thereof, and such statements of
operations, stockholders equity and cash flow and the notes thereto (i) fairly
present the results of operations for the periods therein referred to, all in
accordance with GAAP (as defined in Section 12.3) (except as stated therein or
in the notes thereto) applied on a consistent basis and (ii) fairly present the
financial condition of Corporation at the respective date of, and for the period
covered by such statements and (iii) except as disclosed in SCHEDULE 2.9(a)(2)
hereto, are in accordance with the required or permitted statutory accounting
requirements or practices applied on a consistent basis under the laws of the
State of Georgia. Corporation has no liability, whether accrued, absolute or
contingent, of a type required to be reflected on a balance sheet or described
in the notes thereto in accordance with GAAP, other than (i) liabilities which
have been reflected or reserved against in the Financial Statements, (ii)
liabilities incurred since the Financial Statement Date (as hereinafter defined)
in the ordinary course of business, (iii) liabilities covered by insurance or
reinsurance, and (iv) liabilities disclosed in Schedule 2.9(a)(2) hereto. The
balance sheet, the statement of income and the statement of changes in financial
position as at MARCH 31, 2004, and the notes thereto are herein collectively
referred to as the "Financial Statements" and March 31, 2004, is referred to
herein as the "Financial Statement Date".
(b) Except as set forth in SCHEDULE 2.9(b) hereto, Corporation does not
have any Indebtedness (as defined in Section 12.3), obligation or liability
(whether accrued, absolute, contingent, un-liquidated or otherwise, known or
unknown to Seller or Corporation, whether due or to become due) arising out of
transactions entered into or Occurrences (as defined in Section 12.3) that
occurred at or prior to the Closing Date, other than: (a) liabilities set forth
in the Financial Statements and (b) liabilities and obligations which have
arisen after the Financial Statement Date in the ordinary course of business
(none of which is a liability resulting from breach of Contract, breach of
warranty, tort, infringement, Claim or lawsuit
(c) Except as set forth in SCHEDULE 2.9(c) hereto: (i) the amounts shown in
the balance sheet for Corporation as of the Financial Statement Date included in
the Financial Statements with respect to policy reserves were computed in
accordance with commonly accepted actuarial standards, and were fairly stated in
accordance with sound actuarial principles; and (ii) the insurance and annuity
policy reserves, if any, reflected in the balance sheets included in the
Financial Statements and Corporation's Internal Statutory Financial Statements
at MARCH 31, 2004, and in the balance sheets included in the Financial
Statements at the Financial Statement Date were determined under generally
accepted actuarial principles applied on a consistent basis to cover the total
amount of all reasonably anticipated liabilities of the Company under such
policies, and on the Closing Date shall be on a basis consistent with reserving
methods applied by the Company in prior years, except as otherwise required by
law or regulation.
(d) From the date of this Agreement and until the Closing, Seller shall
provide Purchaser, within twenty-five (25) days after the last day of the period
covered thereby, with a true and correct copy of any internal statutory
financial statements of Corporation prepared for the interim quarterly periods
subsequent to MARCH 31, 2004.
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(e) The balance sheet of Corporation as of the Closing Date is set forth as
SCHEDULE 2.9(e) hereto which is true and complete in all material respects.
2.10 Employees. SCHEDULE 2.10 lists all employees or independent
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contractors providing services to Corporation. Corporation has been for the past
four years, and currently is, in compliance with all Federal, state and local
Regulations or Orders affecting employment and employment practices of such
Corporation (including those Regulations promulgated by the Equal Employment
Opportunity Commission), including terms and conditions of employment and wages
and hours. At the Closing Corporation will have no liability to any of past or
present employees, officers or directors or independent contractors.
2.11 Absence of Certain Changes. Since the Financial Statement Date
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there has not been (a) any Material Adverse Change (as defined in Section 12.3)
in the business, prospects, financial condition or in the operations of the
Corporation's businesses; (b) any damage, destruction or loss, whether covered
by insurance or not, having a Material Adverse Effect, with regard to the
Corporation's properties and businesses; (c) any declaration, setting aside or
payment of any dividend or distribution (whether in cash, Stock or property) in
respect of the Corporation's capital stock, or any redemption or other
acquisition of such stock by Corporation: (d) any increase in the compensation
payable to or to become payable by Corporation to its officers or employees or
any adoption of or increase in any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such officers or
employees or any Affiliate of Corporation; (e) any entry into any material
Contract not in the ordinary course of business, including without limitation
any borrowing or capital expenditure; or (f) any change by either of the
Corporation in accounting methods or principles.
2.12 Contracts.
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(a) Except as expressly contemplated by this Agreement or as set forth
on SCHEDULE 2.12(a) hereto, as of the Closing Date, Corporation is not a party
to any written or oral:
(i) pension, profit sharing, stock options, employee stock purchase or
other plan providing for deferred or other compensation to employees or any
other employee benefit plan, or any Contract with any labor union;
(ii) Contract for the employment of any officer, individual employee or
other person on a full-time, part-time, consulting or other basis or Contract
relating to loans to officers, directors or Affiliates;
(iii) Contract relating to the borrowing of money or the mortgaging,
pledging or otherwise placing a Lien on any asset of Corporation;
(iv) Guarantee (as defined in Section 12.3) of any obligation;
(v) Contract under which the Corporation has advanced or loaned any
Person amounts;
(vi) Contract under which the Corporation is lessee of or holds or
operates any property, real or personal, owned by any other party, except for
any lease of real or personal property described in SCHEDULE 2.12 (VI);
(vii) Contract under which Corporation is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by the Corporation;
(viii) Contract or group of related Contracts with the same party or
group of affiliated parties the performance of which involves a consideration in
excess of $1,000;
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(ix) assignment, license, indemnification or Contract with respect to
any intangible property (including, without limitation, any Proprietary Rights
(as defined in Section 12.3);
(x) warranty Contract with respect to its services rendered or its
products sold or leased;
(xi) Contract under which it has granted any Person any registration
rights (including piggyback rights) with respect to any securities;
(xii) Contract prohibiting it from freely engaging in any business or
competing anywhere in the world;
(xiii) Contract for the purchase, acquisition or supply of property and
assets, whether for resale or otherwise;
(xiv) Contracts with independent agents or brokers;
(xv) employment, consulting, sales, commissions or marketing
contracts;
(xvi) Contracts providing for "take or pay" or similar unconditional
purchase or payment obligations;
(xvii) Contracts with Persons with which, directly or indirectly, the
Seller also has a Contract;
or
(xviii) any other contract which is material to its operations and
business prospects or involves a consideration in excess of $2,000 annually
excluding any purchase orders in the ordinary course of business.
(b) The Corporation has performed in all material respects all
obligations required to be performed by it and is not in default in any material
respect under or in breach of nor in receipt of any claim of default or breach
under any Contract to which the Corporation is subject; no event has occurred
which with the passage of time or the giving of notice or both would result in a
default, breach or event of noncompliance under any Contract to which the
Corporation is subject; the Corporation has no present expectation or intention
of not fully performing all such obligations; the corporation has no knowledge
of any breach or anticipated breach by the other parties to any Contract to
which it is a party; and the Corporation is not a party to any materially
adverse Contract.
(c) Attached hereto as SCHEDULE 2.12(c) is a true and complete copy of
each of the Corporation's Contracts with any Person who sells products or
services to Corporation or who has a Contract to resell any product or service
provided by Corporation.
2.13 True and Complete Copies. Copies of Contracts and documents
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delivered and to be delivered hereunder by the Seller or Corporation are and
will be true and complete copies of such agreements, contracts and documents.
2.14 Title and Related Matters.
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(a) Except as set forth in SCHEDULE 2.14(a) hereto,
Corporation has good and marketable title to all of the properties and assets
reflected in the Financial Statements or acquired after the date thereof and for
properties sold or otherwise disposed of since the date thereof in the ordinary
course of business), free and clear of all Liens, except (i) statutory Liens not
yet delinquent, (ii) such imperfections or irregularities of title, Liens,
easements, charges or encumbrances as do not detract from or interfere with the
present use of the properties or assets subject thereto or affected thereby,
otherwise
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impair present business operations at such properties; or do not detract from
the value of such properties and assets, taken as a whole, (iii) as reflected in
the Financial Statements or the notes thereto.
(b) The Corporation owns, and will on the Closing Date, own
good and marketable title to all the personal property and assets, tangible or
intangible, used in their respective businesses except as to those assets
leased as set forth in Schedule 2.14(b) hereto, all of which leases are in good
standing and no party is in default thereunder. Except as set forth in Schedule
2.14(b) hereto, none of the assets belonging to or held by the Corporation is or
will be on the Closing date subject to any (i) Contracts of sale or lease, or
(ii) Liens.
(c) There has not been since the Financial Statement date and
will not be prior to the Closing Date, any sale, lease, or any other disposition
or distribution by the Corporation of any of its assets or properties and any
other assets now or hereafter owned by it, except transactions in the ordinary
and regular course of business or as otherwise consented to by the Purchaser.
After the Closing, the Purchaser will own, or have the unrestricted right to
use, all properties and assets that are currently used in connection with the
businesses of the Corporation.
2.15 Litigation. There is no Claim (as defined in Section 12.3) pending
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or threatened against the Seller or the Corporation. Nor is there any Order
outstanding against the Seller or the Corporation.
2.16 Tax Matters.
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(a) Corporation has filed all federal, state, and local tax
reports, returns, information returns and other documents (collectively the "Tax
Returns") required to be filed and has duly paid or accrued on the Financial
Statements all relevant taxes, including without limitation income, premium,
gross receipts, net proceeds, alternative or add-on minimum, ad valorem, value
added, turnover, sales, use, property, personal property (tangible and
intangible), stamp, leasing, lease, user, excise, duty, franchise, transfer,
license, withholding, payroll, employment, fuel, excess profits, occupational
and interest equalization, windfall profits, severance, and other charges
(including interest and penalties) (collectively, the "Taxes") due claimed to be
due or may be due by federal, state, or local authorities (collectively, the
"Taxing Authorities"). All Taxes required or anticipated to be paid for all
periods prior to and including the Closing Date have been paid or fully reserved
against in accordance with GAAP, except as provided in SCHEDULE 2.16 hereto. All
Taxes which are required to be withheld or collected by Corporation have been
duly withheld or collected and, to the extent required, have been paid to the
proper Taxing Authority or properly segregated or deposited as required by
applicable laws. There are no Liens for Taxes upon any property or assets of the
Corporation except for liens for Taxes not yet due and payable. Corporation has
not executed a waiver of the statute of limitations on the right of the Internal
Revenue Service or any other Taxing Authority to assess additional Taxes or to
contest the income or loss with respect to any Tax Return. The basis of any
depreciable assets, and the methods used in determining allowable depreciation
(including cost recovery), of Corporation is substantially correct and
incompliance with the Internal Revenue Code of 1986, as amended and the
regulations there under (the "Code").
(b) No issues have been raised that are currently pending by
any Taxing Authority in connection with any Tax Returns. No material issues have
been raised in any examination by any Taxing Authority with respect to the
Corporation which, by application of similar principles, reasonably could be
expected to result in a proposed deficiency for any other period not so
examined. There are no unresolved issues or unpaid deficiencies relating to such
examinations. The items relating to the business, properties or operations of
Corporation on the Tax Returns filed by or on behalf of Corporation for all
taxable years (including the supporting schedules filed therewith), available
copies of which have been supplied to the Purchaser, state accurately, in all
material respects the information requested with respect to Corporation and such
information was derived from the books and records of Corporation.
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(c) Corporation is not subject to any joint venture, partnership, or
other arrangement or Contract which is treated as a partnership for federal
income tax purposes. Corporation is not a party to any tax sharing agreement.
(d) Corporation is not a "consenting corporation", within the meaning
of Section 34l(f)(1) of the Code, or comparable provisions of any state
statutes, and none of the assets of the Corporation is subject to an election
under Section 341(f) of the Code or comparable provisions of any state statutes.
(e) The most recent review of the Tax Returns of Corporation by the
Internal Revenue Service is set forth in SCHEDULE 2.16 hereto.
(f) Corporation is not and will not be required to recognize after the
Closing Date any taxable income in respect of accounting method adjustments
required to be made under the Tax Reform Act of 1986 or the Revenue Act of 1987.
(g) None of the assets of Corporation constitutes tax-exempt bond
financed property or tax exempt use property within the meaning of Section 168
of the Code, and none of the assets of Corporation are subject to a lease, safe
harbor lease, or other arrangement as a result of which Corporation are not
treated as the owner for federal income tax purposes.
(h) Corporation has not made or become obligated to make, and will as a
result of any event connected with the Closing become obligated to make, any
"excess parachute payment" as defined in Section 280G of the Code (without
regard to subsection (b)(4) thereof).
(i) Tax Sharing Agreements. Corporation is not a party to any Tax
-------------------------
Sharing Agreement.
(j) Returns and Reports. Corporation shall file all Tax Returns and
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reports with respect to Taxes which are required to be filed for Tax periods
ending on or before the Closing Date (a "Pre-Closing Tax Return") and shall pay
all amounts shown to be due on such Pre-Closing Tax Returns to the appropriate
taxing authority.
(k) Tax Books and Records. The Purchaser and the Seller shall furnish
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or cause to be furnished to each other, upon request, as promptly as
practicable, such information (including access of books and records) and
assistance relating to the Corporation as is reasonably necessary for the filing
of any return or report, for the preparation for any audit, and for the
prosecution or defense of any claim relating to any proposed adjustment or
refund Claim.
2.17 Compliance with Law and Applicable Government Regulations.
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Corporation is presently complying in respect of its operations, practices, real
property, plants, structures, and other property, and all other aspects of its
business, with all applicable Regulations and Orders, including, but not limited
to, all Regulations relating to the safe conduct of business, environmental
protection, quality and labeling, antitrust, Taxes, consumer protection, equal
opportunity, discrimination, health, sanitation, fire, zoning, building and
occupational safety where such failure or failures would individually or in the
aggregate have a Material Adverse Effect. There are no Claims pending, nor to
the best knowledge of the Seller or threatened, nor has the Seller or the
Corporation received any written notice, regarding any violations of any
Regulations and Orders enforced by any Authority claiming jurisdiction over the
Seller or the Corporation including any requirement of OSHA or any pollution and
environmental control agency (including air and water).
2.18 ERISA and Related Matters.
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(a) Benefit Plans: Obligations to Employees. Corporation is not a party to
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or participates in or have any liability or contingent liability with respect
to:
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(i) any "employee welfare benefit plan", "employee pension benefit
plan" or "multiemployer plan" (as those terms are respectively defined in
Sections 3(1), 3(2) and 3(37) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"));
(ii) any retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance or hospitalization
program or any other fringe benefit arrangements (referred to collectively
hereinafter as "fringe benefit arrangements") for any employee, director,
consultant or agent, whether pursuant to contract, arrangement, custom or
informal understanding, which does not constitute an "employee benefit plan" (as
defined in Section 3(3) of ERISA); or
(iii) any employment agreement not terminable on 30 days' or less
written notice, without further liability.
2.19 Banks, Brokers and Proxies. SCHEDULE 2.19 hereto sets forth (i)
-----------------------------
the name of each bank, trust company, securities or other broker or other
financial institution with which the Corporation has an account, credit line or
safe deposit box or vault, or otherwise maintains relations; (ii) the name of
each person authorized by the Corporation to draw thereon or to have access to
any such safe deposit box or vault; (iii) the purpose of each such account, safe
deposit box or vault; and (iv) the names of all persons authorized by proxies,
powers of attorney or other instruments to act on behalf of the Corporation in
matters concerning its business or affairs. All such accounts, credit lines,
safe deposit boxes and vaults are maintained by the Corporation for normal
business purposes, and no such proxies, powers of attorney or other like
instruments are irrevocable. At the Closing, the Seller shall cause each such
bank., trust company, broker or financial institution to prepare an account
summary for each account owned by the Corporation which shall be of a date not
less than two business days prior to the Closing Date, and shall be attached
hereto as Schedule 2.19. The account statements attached hereto as Schedule
2,19 are true and complete in all respects.
2.20 Intellectual Property.
----------------------
(a) Corporation has no trade name, service xxxx, patent, copyright or
trademark related to its business, except those which are set forth in SCHEDULE
2.20, which are all those necessary for the operation of their respective
businesses.
(b) Corporation has the right to use each Proprietary Right listed in
Schedule 2.20, and except as otherwise set forth therein, each of such
Proprietary Rights is, and will be on the Closing Date, free and clear of all
royalty obligations and Liens. There are no Claims pending, or to the best
knowledge of the Seller and the Corporation, threatened, against Corporation
that its use of any of the Proprietary Rights listed on Schedule 2.20 infringes
the rights of any Person. The Seller and Corporation have no knowledge of any
conflicting use of any of such Proprietary Rights.
(c) Corporation is not a party in any capacity to any franchise,
license or royalty agreement respecting any Proprietary Right and there is no
conflict with the rights of others in respect to any Proprietary Right now used
in the conduct of its business.
2.21 Dealings with Affiliates. Schedule 2.21 hereto sets forth
-------------------------
a complete list, including the parties, of all oral or written agreements and
arrangements to which the Corporation is, will be or has been a party at any
time and to which any one or more Affiliates is also a party,
2.22 Insurance. Corporation currently has, and through the
----------
Closing Date will have, insurance contracts or policies (the "Policies") in full
force and effect which provide for coverages that are usual and customary as to
amount and scope in the businesses of the Corporation. SCHEDULE 2.22 hereto
sets forth a summary of all insurance contracts or policies that relate to
liability or excess liability
12
insurance (collectively, the "Liability Policies") and all other Policies,
including the name of the insurer, the types, dates and amounts of coverages,
and any material coverage exclusions. Except as set forth in Schedule 2.22
hereto all of the Policies and Liability Policies remain in full force and
effect The Corporation has not breached or otherwise failed to perform in any
material respects their obligations under any of the Policies or the Liability
Policies nor has the Seller or the Corporation received any adverse notice or
communication from any of the insurers party to the Policies or the Liability
Policies with respect to any such alleged breach or failure in connection with
any of the Policies or the Liability Policies. All Policies are sufficient for
compliance with all Regulations, Orders and all Contracts to which either
Corporation is subject; are valid, outstanding, collectible and enforceable
policies; and will not in any way be affected by, or terminate or lapse by
reason of, the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby. Neither the Seller nor the Corporation has
ever been refused any insurance with respect to the Corporation assets or
operations, nor has coverage ever been limited by any insurance carrier to which
the Corporation have applied for any Policy or with which either Corporation has
carried a Policy.
2.23 Disclosure. Neither this Agreement nor any of the exhibits,
-----------
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Purchaser by or on behalf of the Seller or the
Corporation with respect to the transactions contemplated hereby contains any
untrue statement of a material fact or omits a material fact necessary to make
each statement contained herein or therein not misleading. There is no fact
which the Seller or the Corporation have not disclosed to the Purchaser in
writing and of which the Seller or the Corporation or any of their respective
officers, directors or executive employees is aware and which could reasonably
be anticipated to have a Material Adverse Effect on either of the Corporation or
the ability of the Purchaser to continue the businesses of the Corporation in
the same manner as the Corporation conducted their businesses prior to the
Closing Date.
2.24. Intentionally Omitted.
2.25 The Seller has received information from books and records of the
Purchaser, has carefully reviewed and relied on the disclosures contained
therein, and information otherwise provided to him in writing by the Purchaser.
The Seller understands that all documents, records and books pertaining to this
investment have been made available for inspection by his attorney and/or his
accountant and him. The Seller and/or his advisers have had a reasonable
opportunity to ask questions of and receive answers from the Purchaser, or a
person or persons acting on its behalf, concerning the Common Stock of the
Purchaser, and all such questions have been answered to the full satisfaction of
the Seller. No oral representations have been made or oral information
furnished to the Seller or his advisers in connection with Common Stock of the
Purchaser were in any way inconsistent with the information furnished.
2.26 The Seller (i) has adequate means of providing for his current
needs and possible personal contingencies, (ii) has no need for liquidity in
this investment, (iii) is able to bear the substantial economic risks of an
investment in the Common Stock of the Purchaser for an indefinite period, and
(iv) at the present time, could afford a complete loss of such investment.
2.27 The Seller recognizes that the Purchaser has a limited financial
and operating history and no history of profitable operations, and that the
Common Stock of the Purchaser as an investment involves special risks, including
those disclosed to the Seller by the Purchaser.
2.28 The Seller understands that the Common Stock of the Purchaser has
not been nor will be registered under the Securities Act or the securities laws
of any state, in reliance upon an exemption therefrom for non-public offerings.
The Seller understands that the Common Stock of the Purchaser must be held
indefinitely unless it is subsequently registered, or an exemption from such
registration is available. The Seller further understands that the Purchaser has
not agreed to file and the Purchaser does not anticipate the filing of a
registration statement under the Securities Act to allow a public resale of the
13
Common Stock of the Purchaser. However, pursuant to that certain Registration
Rights Agreement described in SCHEDULE 2.28 attached hereto, the Purchaser has
agreed to registration rights under certain conditions with respect to the
resale of the common stock underlying the Common Stock of the Purchaser.
2.29 The Common Stock of the Purchaser is being purchased solely for
his own account for investment and not for the account of any other person and
not for distribution, assignment, or resale to others and no other person has a
direct or indirect beneficial interest in the Common Stock of the Purchaser. The
Seller or his advisers have such knowledge and experience in financial, tax, and
business matters to enable him to utilize the information, made available to him
in connection with Common Stock of the Purchaser to evaluate the merits and
risks of the prospective investment and to make an informed investment decision
with respect thereto.
2.30 The Seller realizes that he may not be able to sell or dispose of
his Common Stock of the Purchaser as there will be no public market. In
addition, the Seller understands that his right to transfer the Common Stock of
the Purchaser will be subject to restrictions against transfer unless the
transfer is not in violation of the Securities Act, and the securities laws of
any state (including investor suitability standards), and the Purchaser consents
to such transfer. The Seller also acknowledges that he shall be responsible for
compliance with all conditions on transfer imposed by the Securities Act, or the
securities law of any state and for any expenses incurred in connection with
such a proposed transfer.
2.31 All information which the Seller has provided to the Purchaser
concerning himself, his financial position, and his knowledge of financial and
business matters, is correct and complete as of the date set forth at the end
hereof, and if there should be any adverse change in such information prior to
his subscription being accepted, he will immediately provide the Purchaser with
such information.
2.32 Pursuant to Regulation D under the Securities Act, the Seller
understands and agrees that the following restrictions and limitations are
applicable to his purchase, resales, hypothecations or other transfers of the
Common Stock of the Purchaser:
i. The Seller agrees that the Common Stock of the Purchaser shall
not be sold, pledged, hypothecated or otherwise transferred
unless the Common Stock of the Purchaser is registered under the
Securities Act, and the securities laws of any state, or are
exempt therefrom;
ii. A legend in substantially the following form has been or will be
placed on any certificate(s) or other document(s) evidencing the
Common Stock of the Purchaser:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY
STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT UPON DELIVERY TO
THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO
THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION
OF THE SECURITIES ACT OF 1933, AS AMENDED, THE SECURITIES LAW OF ANY
STATE, OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
14
iii. Stop transfer instructions to the transfer agent of the Common
Stock of the Purchaser have been or will be placed with respect
to the Common Stock of the Purchaser so as to restrict the
resale, pledge, hypothecation or other transfer thereof, subject
to the further items hereof, including the provisions of the
legend set forth in subparagraph (ii) above;
iv. The legend and stop transfer instructions described in
subparagraphs (ii) and (iii) above will be placed with respect to
any new certificate(s) or other document(s) issued upon
presentment by the Seller of certificate(s) or other document(s)
for transfer.
2.33 The Seller acknowledges that Seller will be responsible for
compliance with all conditions on transfer imposed by any federal or state
securities statute and securities law administrator and for any expenses
incurred by the Purchaser for legal or accounting services in connection with
reviewing such a proposed transfer and/or issuing opinions in connection
therewith.
2.34 The Seller understands that neither the Securities and Exchange
Commission nor the securities commission of any state has made any finding or
determination relating to the fairness for public investment in the Common Stock
of the Purchaser and that the Securities and Exchange Commission as well as the
securities commission of any state will not recommend or endorse any offering of
securities.
2.35 The Seller understands that:
i. No assurances are or have been made regarding any economic advantages
(including tax) which may inure to the benefit of the Seller;
ii. No assurances are or have been made concerning the distribution of
profits to the Purchaser's investors; and
iii. He is aware that this subscription is independent of any other
subscription for the Common Stock of the Purchaser.
2.36. The Seller acknowledges and is aware that it never has been
represented, guaranteed, or warranted to him by the Purchaser, its directors,
officers, agents or employees, or any other person, expressly or by implication,
as to any of the following:
i. The approximate or exact length of time that he will be required to
remain as an owner of his Common Stock of the Purchaser;
ii. The percentage of profit and/or amount of or type of consideration,
profit or loss to be realized, if any, as a result of this investment; or
iii. That the limited past performance or experience on the part of the
Purchaser, or any future projections will in any way indicate the predictable
results of the ownership of the Common Stock of the Purchaser or of the overall
financial performance of the Purchaser.
2.37 The Seller acknowledges that the Purchaser has made available to
him or his purchaser representative, if any, or other personal advisers the
opportunity to obtain additional information to verify the accuracy of the
information furnished to him and to evaluate the merits and risks of this
investment.
15
2.38 The Seller confirms that he has consulted with his purchaser
representative, if any, or other personal advisers and that said purchaser
representative or other advisers have analyzed the information furnished to him
and the documents relating thereto on his behalf and have advised him of the
business and financial aspects and consequences of and liabilities associated
with his investment in the Common Stock of the Purchaser. The Seller represents
that he has made other risk capital investments or other investments of a
speculative nature, and by reason of his business and financial experience and
of the business and financial experience of those persons he has retained to
advise him with respect to investments of this nature. In reaching the
conclusion that he desires to acquire the Common Stock of the Purchaser, the
Seller has carefully evaluated his financial resources and investments and
acknowledges that he is able to bear the economic risks of this investment.
2.39 The Seller acknowledges that all information made available to him
and/or his purchaser representative, if any, and/or personal advisers in
connection with his investment in the Common Stock of the Purchaser, including
the information furnished to him is and shall remain confidential in all
respects and may not be reproduced, distributed or used for any other purpose
without the prior written consent of the Purchaser.
2.40 All of the representations and warranties of Seller and Purchaser
contained in this Agreement or in any of the Closing Documents are material,
none shall merge into the deed herein provided for and all shall survive the
Closing Date or termination of this Agreement for a period equal to the
applicable statute of limitations (the "Survival Period"). The provisions of
this Section shall survive the Closing.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows as of
the date hereof and as of the Closing Date:
3.1 Corporate Organization, etc. The Purchaser is a corporation
-----------------------------
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets.
3.2 Authorization, etc. The Purchaser has full corporate power and
-------------------
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Board of Directors of Purchaser has duly authorized
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby, and no other corporate proceedings on its part are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement constitutes the legal, valid and binding obligation of the
Purchaser enforceable against it in accordance with its terms.
ARTICLE IV COVENANTS OF THE SELLER
Until the Closing Date, except as otherwise consented to or approved
by the Purchaser in writing, the Seller covenants and agrees that it shall act,
and shall cause Corporation so to act or refrain from acting where required
hereinafter, to comply with the following:
4.1 Regular Course of Business. The Corporation shall operate its
----------------------------
respective businesses diligently and in good faith, consistent with past
management practices; shall maintain all of their respective properties in good
order and condition, shall maintain (except for expiration due to lapse of time)
all leases and Contracts described herein in effect without change except as
expressly provided herein; shall comply with the provisions of all Regulations
and Orders applicable to the Corporation and the conduct of their respective
businesses; shall not cancel, release, waive or compromise any debt, Claim or
right in its favor having a value in excess of $1,000; shall not alter the rate
or basis of compensation of
16
any of its officers, directors or employees; shall maintain insurance and
reinsurance coverage up to the Closing Xxxx with at least the coverage and in
the amounts set forth in Schedule 2.22.
4.2 Amendments. Except as required for the transactions
-----------
contemplated in this Agreement, no change or amendment shall be made in the
charter or by-laws of the Corporation. The Corporation shall not merge into or
consolidate with any other corporation or person, or change the character of
their businesses.
4.3 Capital Changes: Pledges. Corporation shall not issue or
---------------------------
sell any shares of its capital stock of any class or issue or sell any
securities convertible into, or options, warrants to purchase or rights to
subscribe to, any shares of its capital stock and Corporation shall not pledge
or otherwise encumber any shares of its capital stock.
4.4 Dividends. Corporation shall not declare, pay or set aside
----------
for payment any dividend or other distribution in respect of its capital stock,
nor shall the Corporation, directly or indirectly, redeem, purchase or otherwise
acquire any shares of its capital stock.
4.5 Capital and Other Expenditures. Corporation shall
----------------------------------
not make any capital expenditures, or commitments with respect thereto,
except as provided herein. Corporation shall not make any loan or advance to any
Affiliate and the Corporation shall collect in full any amounts outstanding now
due from any Affiliate.
4.6 Borrowing. Corporation shall not incur, assume or guarantee
----------
any Indebtedness not reflected on the Financial Statements except in the
ordinary course of business or for purposes of consummation of transactions
contemplated by this Agreement and in any case only after consultation with the
Purchaser.
4.7 Other Commitments. Except as set forth in this Agreement,
------------------
incurred or transacted in the ordinary course of business, or permitted in
writing by the Purchaser, Corporation shall not enter into any transaction or
make any commitment or incur any obligation (including entering into any real
property leases).
4.8 Interim Financial Information and Audit. Corporation shall
--------------------------------------------
supply the Purchaser with unaudited monthly operating statements within 30 days
after the end of each month ending between the date hereof and the Closing Date,
certified by the Corporation' chief financial officer as having been prepared in
accordance with procedures employed by the Corporation in preparing prior
monthly operating statements and certifying that such financial statements were
prepared in accordance with GAAP and include all adjustments (all of which were
normal recurring adjustments) necessary to fairly present, in all material
respects, the Corporation financial position, results of operations and changes
in financial position at and for such period.
4.9 Full Access and Disclosure.
-----------------------------
(a) Seller and Corporation shall afford to the Purchaser and its counsel,
accountants and other authorized representatives reasonable access during
business hours to each of the Corporation facilities, properties, books and
records in order that the Purchaser may have full opportunity to make such
reasonable investigations as it shall desire to make of the affairs of the
Corporation; and Seller shall cause Corporation officers, employees and auditors
to furnish such additional financial and operating data and other information as
the Purchaser shall from time to time reasonably request including, without
limitation, any internal control recommendations applicable to the Corporation
made by the Seller's independent auditors in connection with any audit of
Corporation.
17
(b) From time to time prior to the Closing Date, Seller shall promptly
supplement or amend information previously delivered to the Purchaser with
respect to any matter hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth herein or
disclosed.
4.10 Consents. Seller and Corporation shall use their best efforts
---------
to obtain on or prior to the Closing Date, all consents necessary to the
consummation of the transactions contemplated hereby.
4.11 Breach of Agreement. Corporation shall not take, and the
----------------------
Seller shall not take any action or permit the Corporation to take any action
which if taken prior to the Closing Date would constitute a breach of this
Agreement.
ARTICLE V COVENANTS OF THE PURCHASER
5.1 Confidentiality. The Purchaser shall, and shall cause its
----------------
principals, officers and other personnel and authorized representatives to, hold
in confidence, and not disclose to any other party without the Seller's prior
consent, all information received by it from the Seller's or the Corporation's
officers, directors, employees, agents, counsel and auditors in connection with
the transactions contemplated hereby except as may be required by applicable law
or as otherwise contemplated herein.
ARTICLE VI OTHER AGREEMENTS
As a condition to the parties' obligation to consummate the
transactions contemplated hereby:
6.1 Agreement to Defend. In the event any action, suit, proceeding
--------------------
or investigation of the nature specified in Section 7.5 or Section 8.3 hereof is
commenced, whether before or after the Closing Date, all the parties hereto
agree to cooperate and use their best efforts to defend against and respond
thereto.
6.2 Employment and Non-Competition. The Seller and its Affiliates
--------------------------------
will, at the Closing, execute and deliver the Employment and Non-Competition
Agreements in the form of EXHIBIT 6.2 hereto (the "Non-Competition Agreement").
6.3 Further Assurances. Subject to the terms and conditions of
-------------------
this Agreement, each of the parties hereto shall use its best efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Regulations to consummate and
make effective the transactions contemplated by this Agreement. If at any time
after the Closing Date the Purchaser shall consider or be advised that any
further deeds, assignments or assurances in law or in any other things are
necessary, desirable or proper to vest, perfect or confirm, of record or
otherwise, in the Purchaser, the title to any property or rights of any of the
Corporation acquired or to be acquired by reason of, or as a result of, the
acquisition, the Seller agrees that the Seller and its proper officers shall
execute and deliver all such proper deeds, assignments and assurances in law and
do all things necessary, desirable or proper to vest, perfect or confirm title
to such property or rights in the Corporation and otherwise to carry out the
purpose of this Agreement, and that the proper officers and directors of the
Seller, and are fully authorized in the name of the Seller or otherwise to take
any and all such action.
6.4 Consents. Without limiting the generality of Section 6.3, each
---------
of the parties hereto shall use its best efforts to obtain all permits,
authorizations, consents and approvals of all persons and governmental
authorities necessary, proper or advisable in connection with the consummation
of the transactions contemplated by this Agreement prior to the Closing Date.
18
6.5 No Solicitation or Negotiation. Unless and until this
---------------------------------
Agreement is terminated, the Seller and the Corporation shall not, and each
shall use its, best efforts to cause its directors, officers, employees,
representatives, agents, advisors, accountants and attorneys not to, initiate or
solicit, directly or indirectly, any inquiries or the making of any proposal
with respect to, or engage in negotiations concerning, or provide any
confidential information or data to any person with respect to, or have any
discussions with any persons relating to, any acquisition, business combination
or purchase of all or any significant asset of, or any equity interest in,
directly or indirectly, the Corporation, or otherwise facilitate any effort or
attempt to do or seek any of the foregoing, and shall immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing.
6.6 Deliveries After Closing. From time to time after the Closing,
------------------------
at the Purchaser's request and without expense to the Seller and without further
consideration from the Purchaser, the Seller shall execute and deliver such
other instruments of conveyance and transfer and take such other action as the
Purchaser reasonably may require to convey, transfer to and vest in the
Purchaser and to put the Purchaser in possession of any rights or property to be
sold, conveyed, transferred and delivered hereunder.
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Purchaser:
7.1 Representations and Warranties; Performance. The
----------------------------------------------
representations and warranties of Seller and Corporation contained in this
Agreement and all information contained in any exhibit, schedule or attachment
hereto or in any writing delivered by, or on behalf of, the Seller or the
Corporation, the Purchaser, shall be true and correct in all material respects
when made and shall be true and correct in all material respects on the Closing
Date as though then made, except as expressly provided herein. Seller and the
Corporation shall have performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement to be performed
and complied with by them prior to the Closing Date. The Seller, and the
President of each of the Corporation, shall each have delivered to the Purchaser
a certificate (which shall be addressed to the Purchaser), dated the Closing
Date, in the form of Exhibit 7.1 hereto, certifying to the foregoing.
7.2 Consents and Approvals. Purchaser, Seller and Corporation
------------------------
shall have obtained any and all material consents, approvals, orders,
qualifications, licenses, permits or other authorizations, required by all
applicable Regulations, Orders and Contracts of the Corporation or binding on
their respective properties and assets, with respect to the execution, delivery
and performance of the Agreement, the consummation of the transactions
contemplated hereby and the conduct by the Purchaser of the business of
Corporation in the same manner after the Closing Date as before the Closing
Date.
7.3 Opinion of Seller's Counsel. The Purchaser shall have received
---------------------------
an opinion of the Seller's outside counsel (which will be addressed to the
Purchaser), dated the Closing Date, in the form of Exhibit 7.3 hereto.
7.4 No Material Adverse Change. There shall have been no
-----------------------------
Material Adverse Change since the date of this Agreement. The Purchaser shall
have received certificates (which shall be addressed to the Purchaser), dated
the Closing Date, of the president and chief financial officer of each of the
Seller and the Corporation, in the form designated Exhibit 7.4 hereto,
certifying to the foregoing.
7.5 No Proceeding or Litigation. No preliminary or permanent
------------------------------
injunction or other Order, decree or ruling issued by any Authority, or any
Regulation promulgated or enacted by any
19
Authority shall be in effect, which would prevent the consummation of the
transactions contemplated hereby.
7.6 Accounting Certificates. The Purchaser shall have received a
-----------------------
certificate, dated the Closing Date, of the Seller's chief financial officer in
the form of Exhibit 7.6 hereto as to THE accuracy of all of the Corporation
financial statements for the fiscal years ending MARCH 31, 2004, respectively,
which certificate shall contain a statement by the Seller's independent auditors
that each such year-end financial statement was incorporated, without change,
into the respective year-end audited financial statements of the Seller.
7.7 Proceedings and Documents. All corporate and other
---------------------------
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchaser and the Purchaser's counsel,
and the Seller and the Corporation shall have made available to the Purchaser
for examination the originals or true, complete and correct copies of all
records and documents relating to the business and affairs of the Corporation
which the Purchaser may reasonably request in connection with said transaction.
7.8 Secretary's Certificate. The Purchaser shall have
------------------------
received a certificate, substantially in the form of Exhibit 7.8 hereto, by the
respective secretary of the Seller and each of the Corporation, as to the
charter and bylaws of the Seller and the Corporation, the resolutions adopted by
the directors and stockholders of the Seller in connection with this Agreement
and the incumbency of the Seller's officers.
7.9 Certificates of Good Standing. At the Closing, the Seller
--------------------------------
and the Corporation shall have delivered to the Purchaser certificates issued
by the appropriate governmental authorities evidencing the good standing, with
respect to both the conduct of business and the payment of all franchise taxes,
of the Seller and Corporation as of a date not more than fifteen (15) days prior
to the Closing Date as a corporation organized under the laws of the states and
as a foreign corporation authorized to do business under the laws of the
jurisdictions listed in the Schedules hereto.
7.10 Other Documents. The Seller and Corporation shall furnish
----------------
the Purchaser with such other and further documents and certificates including
certificates of the Corporation officers and others as the Purchaser shall
reasonably request to evidence compliance with the conditions set forth in this
Agreement.
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF THE SELLER
Each and every obligation of the Seller under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Seller:
8.1 Representations and Warranties; Performance. The
-----------------------------------------------
representations and warranties of the Purchaser contained in Article III and
elsewhere in this Agreement and all information contained in any exhibit,
schedule or attachment hereto, the Purchaser, to the Seller, shall be true and
correct in all material respects when made and shall be true and correct in all
material respects on the Closing Date as though then made, except as expressly
provided herein. The Purchaser shall have performed and complied in all material
respects with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by them prior to the Closing Date.
The president of the Purchaser shall have delivered to the Seller a certificate,
dated the Closing Date, in the form of Exhibit 8.1 hereto, certifying to the
foregoing.
20
8.2 Consents and Approvals. Purchaser, Seller and Corporation
------------------------
shall have obtained any and all material consents, approvals, orders,
qualifications, licenses, permits or other authorizations, required by all
applicable Regulations, Orders or Contracts of the Corporation or binding on
their properties and assets, with respect to the execution, delivery and
performance of the Agreement, the financing consummation of the transactions
contemplated herein and the conduct by the Purchaser of the business of the
Corporation in the same manner after the Closing Date as before the Closing
Date.
8.3 No Proceeding or Litigation. No preliminary or permanent
------------------------------
injunction or other Order, decree or ruling issued by any Authority, or any
Regulation promulgated or enacted by any Authority shall be in effect, which
would prevent the consummation of the transactions contemplated hereby.
ARTICLE IX CLOSING
9.1 Closing. Unless this Agreement shall have been terminated
-------
or abandoned pursuant to the provisions of Article X hereof, a closing of the
transactions contemplated by this Agreement (the "Closing") shall be held on
April 21, 2004, or on such other mutually agreed to date (the "Closing Date").
9.2 Intervening Litigation. If prior to the Closing Date any
-----------------------
preliminary or permanent injunction or other Order issued by a court of
competent jurisdiction or by any other Authority shall restrain or prohibit this
Agreement or the consummation of the transactions contemplated herein for a
period of fifteen days or longer, the Closing shall be adjourned at the option
of either party for a period of thirty days. If at the end of such thirty day
period such injunction or Order shall not have been favorably resolved, either
party may, by written notice thereof to the other, terminate this Agreement,
without liability or further obligation hereunder.
ARTICLE X TERMINATION AND ABANDONMENT
10.1 Methods of Termination. This Agreement may be
------------------------
terminated and the transactions herein contemplated may be abandoned at any
time prior to Closing:
(a) by mutual consent of the Purchaser and the Seller;
(b) by the Purchaser or the Seller if this Agreement is not consummated
on or before April 30, 2004; provided that if any xxxxx has breached or
defaulted with respect to its respective obligations under this Agreement on or
before such date, such party may not terminate this Agreement pursuant to this
Section 10.l(b), and each other party to this Agreement shall at its option
enforce its rights against such breaching or defaulting party and seek any
remedies against such party, in either case as provided hereunder and by
applicable law;
(c) by the Purchaser if as of the Closing Date any of the conditions
specified in Article VI hereof have not been satisfied in any material respect
or if the Seller or any of the Corporation are otherwise in default in any
material respect under this Agreement; or
(d) by the Purchaser or the Seller, if they do not accept or are not
deemed to have accepted the Schedules.
(e) by Seller after Closing and within 30 days following the closing of
fiscal 2004.
10.2 Procedure Upon Termination. In the event of termination and
--------------------------
abandonment pursuant to Section 10.1 hereof, and subject to the proviso
contained in Section 10.l(b) this Agreement
21
shall terminate and shall be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated as provided herein:
(a) each party shall redeliver all documents and other material of any
other party relating to the transactions contemplated hereby, whether obtained
before or after the execution hereof, to the party furnishing the same;
(b) all information received by any party hereto with respect to the
business of any other party or the Corporation (other than information which is
a matter of public knowledge or which has heretofore been or is hereafter
published in any publication for public distribution or filed as public
information with any governmental authority) shall not at any time be used for
the advantage of, or disclosed to third parties by, such party to the detriment
of the party furnishing such information; and
(c) no party hereto shall have any liability or further obligation to
any other party to this Agreement.
(d) in the event of termination under Section 10.1 (e) the following
shall apply: Purchaser shall transfer all of the capital stock of Corporation to
Seller in exchange for:
(i) the return to Purchaser, of all of the consideration paid in
connection with this Agreement; and
(ii) the satisfaction in full of all indebtedness and other
liabilities owed to Purchaser by the Corporation or, if such action would
render Corporation insolvent, then by SELLER, including the return by
dividend or otherwise to Purchaser of all capital contributions by
Purchaser to Corporation; and
(iii) the assumption by Seller, without recourse to, and with the
release of, Purchaser, of all obligations or liabilities of Corporation,
guaranteed or otherwise previously assumed by Purchaser, and
(iv) the release of Purchaser with respect to all obligations or
liabilities of Corporation to third parties and the undertaking to defend,
hold harmless and indemnify Purchaser with respect to the foregoing in the
form of the Indemnity Agreement attached hereto as Schedule 10.2 (d)(iii).
If each of the foregoing conditions to the exchange of the capital
stock of the Corporation can not be satisfied by the Corporation or the
Seller, as the case may be, then Purchaser's obligations to transfer such
capital stock shall be tolled until such conditions are satisfied;
provided, however, that Purchaser may, in its sole and absolute discretion,
-------- -------
elect to proceed to transfer title to the capital stock of Corporation to
Seller subject to the retention of a perfected first priority security
interest in such shares of capital stock of the Corporation, which shall
secure the satisfaction of such liabilities and the performance of such
obligations. Purchaser shall have no obligation to release such security
interest until all obligations and liabilities shall have been indefeasibly
satisfied. If Corporation and the Seller cannot, or shall not, satisfy each
of the conditions precedent by 90 Days then all of Purchaser's obligations
to return the capital stock of Corporation shall terminate and Purchaser's
first priority security interest shall be deemed foreclosed, all of the
right title and interest in the shares of the Corporation shall vest in the
Purchaser, and Purchaser shall have no further obligations under this
Section.
--------
22
ARTICLE XI SURVIVAL OF TERMS; INDEMNIFICATION
11.1 Survival. All of the terms and conditions of this Agreement,
--------
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that (a) the agreements and covenants
(other than the indemnification provisions set forth in this Article XI, which
shall survive as provided below) set forth in this Agreement shall survive and
continue until all obligations set forth therein shall have been performed and
satisfied; and (b) all representations and warranties, and the agreements of the
Seller, the Corporation and the Purchaser to indemnity each other set forth in
this Article XI, shall survive and continue for, and all Claims with respect
thereto shall be made prior to the end of, the fourth anniversary of the Closing
Date, except for (i) the representations and warranties set forth in Article
II_,__ and___, and the indemnities and agreements related thereto which shall
survive until the expiration of the applicable statute of limitations, and (ii)
representations, warranties and indemnities for which an indemnification Claim
shall be pending as of the end of the applicable period referred to above, in
which event such indemnities shall survive with respect to such Claim until the
final disposition thereof.
11.2 Indemnification by Seller. Subject to this Article XI, the
-------------------------
Purchaser and its officers, directors, employees, shareholders, representatives
and agents shall be indemnified and held harmless by the Seller at all times
after the date of this Agreement, against and in respect of any and all damage,
loss, deficiency, liability, obligation, commitment, cost or expense (including
the fees and expenses of counsel) resulting from, or in respect of, any of the
following:
(a) Any misrepresentation, breach of warranty, or non-fulfillment of
any obligation on the part of the Seller or the Corporation under this
Agreement, any document relating thereto or contained in any schedule or exhibit
to this Agreement or from any misrepresentation in or omission from any
certificate, schedule, other agreement or instrument by the Seller or the
Corporation hereunder;
(b) Any and all liabilities of any of the Corporation of any nature
whether accrued, absolute, contingent or otherwise, and whether known or
unknown, existing at the Closing Date to the extent not reflected and reserved
against in the Financial Statements or not otherwise adequately disclosed in
this Agreement or the schedules or exhibits thereto, including, without
limitation:
(i) All Tax liabilities of the Seller and the Corporation, including
federal, state and local Tax liability, together with any interest or penalties
thereon or related thereto, through the Closing Date but excluding any Taxes for
which there is an adequate accrual and reserve on the Financial Statements and
any Tax liability of the Seller arising in connection with the transactions
contemplated hereby. Any Taxes, penalties or interest attributable to the
operations of the Seller or any of the Corporation payable as a result of an
audit of any tax return shall be deemed to have accrued in the period to which
such Taxes, penalties or interest are attributable;
(ii) Liabilities that arise from Claims, of whatever nature, (A)
relating to contracts underlying the Commutation Agreement or (B) which arose
from an Occurrence that took place prior to the Closing Date and was not accrued
for in the full amount of such Claim on the Financial Statements.
(c) All demands, assessments, judgments, costs and reasonable legal and
other expenses arising from, or in connection with any Claim incident to any of
the foregoing.
11.5 Indemnification by the Purchaser. Subject to this Article XI, the
---------------------------------
Purchaser agrees to, and shall, indemnify the Seller and its respective
officers, directors, employees, shareholders, representatives
23
and agents and hold each of them harmless at all times after the date of this
Agreement, against and in respect of any and all damage, loss, deficiency,
liability, obligation, commitment, cost or expense (including the fees and
expenses of counsel) resulting from, or in respect of, any of the following:
(a) Any misrepresentation, breach of warranty, or non-fulfillment of
any obligation of the part of the Purchaser under this Agreement, any document
relating hereto or thereto or contained in any schedule or exhibit to this
Agreement or from any misrepresentation in or omission from any certificate,
other agreement or instrument by the Purchaser hereunder.
(b) All demands, assessments, judgments, costs and reasonable legal and
other expenses arising from, or in connection with, any action, suit, proceeding
or claim incident to any of the foregoing.
11.6 Third-Party Claims. Except as otherwise provided in this
-------------------
Agreement, the following procedures shall be applicable with respect to
indemnification for third-party Claims. Promptly after receipt by the party
seeking indemnification hereunder (hereinafter referred to as the "Indemnitee")
of notice of the commencement of any (a) Tax audit or proceeding for the
assessment of Tax by any taxing authority or any other proceeding likely to
result in the imposition of a Tax liability or obligation or (b) any action or
the assertion of any Claim, liability or obligation by a third-party (whether by
legal process or otherwise), against which Claim, liability or obligation the
other party to this Agreement (hereinafter the "indemnitor") is, or may be,
required under this Agreement to indemnify such indemnitee, the indemnitee will,
if a Claim thereon is to be, or may be, made against the indemnitor, notify the
indemnitor in writing of the commencement or assertion thereof and give the
indemnitor a copy of such Claim, process and all legal pleadings. The indemnitor
shall have the right to participate in the defense of such action with counsel
of reputable standing. The indemnitor shall have the right to assume the defense
of such action unless such action (i) may result in injunctions or other
equitable remedies in respect of the indemnitee or its business; (ii) may result
in liabilities which, taken with other then existing Claims under this Article
XI, would not be fully indemnified hereunder; or (iii) may have an adverse
impact on the business or financial condition of the indemnitee after the
Closing Date (including an effect on the tax liabilities, earnings or ongoing
business relationships of the indemnitee). The indemnitor and the Indemnitee
shall cooperate in the defense of such Claims. In the case that the indemnitor
shall assume or participate in the defense of such audit, assessment or other
proceeding as provided herein, the indemnitee shall make available to the
indemnitor all relevant records and take such other action and sign such
documents as are necessary to defend such audit, assessment or other proceeding
in a timely manner. If the indemnitee shall be required by judgment or a
settlement agreement to pay any amount in respect of any obligation or liability
against which the indemnitor has agreed to indemnify the indemnitee under this
Agreement, the indemnitor shall promptly reimburse the Indemnitee in any amount
equal to the amount of such payment plus all reasonable expenses (including
legal fees and expenses) incurred by such Indemnitee in connection with such
obligation or liability subject to this Article XI.
Prior to paying or settling any Claim against which an indemnitor is,
or may be, obligated under this Agreement to indemnify an indemnitee, the
indemnitee must first supply the indemnitor with a copy of a final court
judgment or decree holding the Indemnitee liable on such claim or failing such
judgment or decree, must first receive the written approval of the terms and
conditions of such settlement from the indemnitor. An indemnitor shall have the
right to settle any Claim against it, subject to the prior written approval of
the other, which approval shall not be unreasonably withheld.
An Indemnitee shall have the right to employ its own counsel in any
case, but the fees and expenses of such counsel shall be at the expense of the
Indemnitee unless (a) the employment of such counsel shall have been authorized
in writing by the indemnitor in connection with the defense of such action or
Claim, (b) the indemnitor shall not have employed counsel in the defense of such
action or Claim, or (c) such indemnitee shall have reasonably concluded that
there may be defenses available to it which are contrary to, or inconsistent
with, those available to the indemnitor, in any of which events such fees and
expenses of not more than one additional counsel for the indemnified parties
shall be borne by
24
the indemnitor. Any and all Claims made by the Purchaser against the Seller for
indemnification under this Article XI may be, but are not required to be,
settled by payment from the Escrow Account.
ARTICLE XII MISCELLANEOUS PROVISIONS
12.1 Amendment and Modification. Subject to applicable law, this
----------------------------
Agreement may be amended, modified and supplemented only by written agreement of
the parties hereto.
12.2 Entire Agreement. This Agreement, including the schedules and
-----------------
exhibits hereto and the documents, certificates and instruments referred to
herein, embodies the entire agreement and understanding of the parties hereto in
respect of the transactions contemplated by this Agreement and supersedes all
prior agreements, representations, warranties, promises, covenants,
arrangements, communications and understandings, oral or written, express or
implied, between the parties with respect to such transactions. There are no
agreements, representations, warranties, promises, covenants, arrangements or
understandings between the parties with respect to such transactions, other than
those expressly set forth or referred to herein.
12.3 Certain Definitions.
--------------------
"Affiliate" means, with regard to any Person (a) any Person, directly or
---------
indirectly, controlled by, under common control of, or controlling such Person,
(b) any Person, directly or indirectly, in which such Person holds, of record or
beneficially, five percent or more of the equity or voting securities, (c) any
Person that holds, of record or beneficially, five percent or more of the equity
or voting securities of such Person, (d) any Person that, through Contract,
relationship or otherwise, exerts a substantial influence on the management of
such person's affairs, (e) any Person that, through Contract, relationship or
otherwise, is influenced substantially in the management of their affairs by
such Person, or (f) any director, officer, partner or individual holding a
similar position in respect of such Person.
"Authority" means any governmental, regulatory or administrative body,
---------
agency, arbitrator or authority, any court or judicial authority, any public,
private or industry regulatory agency, arbitrator authority, whether
international, national, federal, state or local.
"Claim" means any action, claim, obligation, liability, expense, lawsuit,
-----
demand, suit, inquiry, hearing, investigation, notice of a violation,
litigation, proceeding, arbitration, or other dispute, whether civil, criminal,
administrative or otherwise, whether pursuant to contractual obligations or
otherwise.
"Contract" means any agreement, contract, commitment, instrument or other
--------
binding arrangement or understanding, whether written or oral.
"GAAP" means generally accepted accounting principles, applied on a
----
consistent basis with the Financial Statements, as in existence at the date
hereof.
"Guarantee" means any guarantee or other contingent liability (other than
---------
any endorsement for collection or deposit in the ordinary course of business),
direct or indirect with respect to any obligations of another Person, through an
agreement or otherwise, including, without limitation, (a) any endorsement or
discount with recourse or undertaking substantially equivalent to or having
economic effect similar to a guarantee in respect of any such obligations and
(b) any Contract (i) to purchase, or to advance or supply funds for the payment
or purchase of, any such obligations, (ii) to purchase, sell or lease property,
products, materials or supplies, or transportation or services, in respect of
enabling such other Person to pay any such obligation or to assure the owner
thereof against loss regardless of the delivery or nondelivery of the property,
products, materials or supplies or transportation or services or (iii) to make
any loan, advance or capital contribution to or other investment in, or to
otherwise provide funds to or for, such other Person in respect of enabling such
Person to satisfy an obligation (including any liability for a
25
dividend, stock liquidation payment or expense) or to assure a minimum equity,
working capital or other balance sheet condition in respect of any such
obligation.
"Indebtedness" with respect to any Person means any obligation of such
------------
Person for borrowed money, but in any event shall include (a) any obligation
incurred for all or any part of the purchase price of property or other assets
or for the cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current liabilities and
incurred in respect of property purchased in the ordinary course of business,
(b) the face amount of all letters of credit issued for the account of such
Person and all drafts drawn thereunder, (c) obligations (whether or not such
Person has assumed or become liable for the payment of such obligation) secured
by Liens, (d) capitalized lease obligations, and (e) all Guarantees of such
Person.
"Lien" means any security interest, lien, mortgage, pledge, hypothecation,
----
encumbrance, Claim, easement, restriction or interest of another Person of any
kind or nature.
"Marketable Securities" means any investment in (a) obligations issued or
----------------------
guaranteed by the United States government (or agencies thereof) maturing in
less than four years from the Closing Date, (b) certificates of deposit or
repurchase agreements due within one year of the Closing Date of domestic United
States banks having capital and surplus of $250,000,000 or more and having a
rating of A or better from Xxxxx'x Investors Service, Inc. and A or better from
Standard & Poor's Corporation, and (c) investments in commercial paper issued by
any company organized and existing under the laws of the United States or any
state thereunder having a rating (at the time of investment) of "P-1" if rated
by Xxxxx'x Investors Service, Inc. or of "A-1" if rated by Standard & Poor's
Corporation and maturing within one year of the Closing Date.
"Material Adverse Change" means any developments or changes which would
-------------------------
have a material adverse effect.
"Material Adverse Effect" means any circumstances, state of facts or
-------------------------
matters which might reasonably be expected to have a material adverse effect in
respect of a Corporation's business, operations, properties, assets, condition
(financial or otherwise), results, plans, strategies or prospects.
"Occurrence" means any accident, happening or event which occurs or has
----------
occurred at any time prior to the Closing Date, which results in or could result
in a claim against a Corporation or creates or could create a liability or loss
for a Corporation.
"Order" means any decree, judgment, award, order, injunction, rule, consent
-----
of or by an Authority.
"Person" means any corporation, partnership, joint venture, organization,
------
entity, Authority or natural person.
"Proprietary Rights" means any patent, patent application, copyright,
-------------------
trademark, trade name, service xxxx, service name, trade secret, know-how,
confidential information or other intellectual property or proprietary rights.
"Regulation" means any law, statute, rule, regulation, ordinance,
----------
requirement, announcement or other binding action of or by an Authority.
12.4 Notices. All notices, requests, demands and other
-------
communications required when delivered by hand or mailed, first class certified
mail with postage paid or by overnight receipted courier service:
26
(a) If to the Seller or the Corporation, to:
0000 Xxxxxxxxxx Xx.
-------------------
Xxxxxxxx, Xx 00000
------------------
Attn: Xxxx D, Andrizzi
----------------
with a copy to:
0000 Xxxxxxxx Xxxx Xx.
----------------------
Xxxxxx, Xx 00000
----------------
Attn: Xxxxxx X. Xxxxxx Xx.
--------------------
or to such other person or address as Seller shall furnish by notice to the
Purchaser in writing.
(b) If to the Purchaser, to:
or to such other person or address as the Purchaser shall furnish by notice to
Seller in writing.
12.5 Assignment. This Agreement and all of the provisions hereof shall
----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Purchaser may assign its rights, interests and obligations
hereunder to any Affiliate, and may grant Liens or security interests in respect
of its rights and interests hereunder without the prior approval of the Seller
or the Corporation.
12.6 Governing Law, Attorneys Fees and Venue. The Agreement shall be
----------------------------------------
governed by the internal laws of the State of Florida as to all matters,
including but not limited to matters of validity, construction, effect and
performance. Any action brought to enforce any of the terms hereof shall be
brought exclusively in the state or federal courts of the State of Georgia,
County of Xxxxxx and the prevailing party in any such action shall be entitled
to an award of reasonable attorney fees and court costs.
12.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.8 Headings. The article and section headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.9 Binding Effect. This Agreement shall not be construed so as to
---------------
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
12.10 Injunctive Relief. The parties hereto agree that in the event of
------------------
a breach of any provision of this Agreement, the aggrieved party or parties may
be without an adequate remedy at law. The parties therefore agree that in the
event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
12.11 Delays or Omissions. No delay or omission to exercise any
---------------------
right, power or remedy accruing to any party hereto, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such party nor shall it be construed to be a waiver of any such
27
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the party of any party hereto of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
12.12 Severability. Unless otherwise provided herein, if any provision
------------
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
12.13 Expenses. The Purchaser shall bear its own expenses, including
--------
without limitation, legal fees and expenses, with respect to this Agreement and
the transactions contemplated hereby. The Seller shall bear its own and the
Corporation' expenses, including without limitation, legal fees and expenses,
with respect to this Agreement and the transactions contemplated hereby.
12.14 Limitation of Liability. NEITHER PURCHASER NOR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, OR AGENTS AND OR ATTORNEYS OR PROFESSIONAL
ADVISORS REPERESENT1NG ANY OF THEM IN THIS TRANSACTION, (THE "SECTION 12.14
PARTIES') SHALL HAVE ANY LIABILITY TO SELLER OR TO THE CORPORATION WITH RESPECT
TO ANY OBLIGATIONS UNDER THIS AGREEMENT, OR THE OTHER AGREEMENTS AS HEREIN
DEFINED, OR OTHERWISE, FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL OR
PUNITIVE DAMAGES EVEN IF ANY OF THEM HAVE BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. IN ANY EVENT, THE JOINT AND SEVERAL LIABILITY OF THE SECTION 12.14
PARTIES TO SELLER OR TO THE CORPORATION OR ANY OTHER PARTY FOR ANY REASON AND
UPON ANY CAUSE OF ACTION ARISING DIRECTLY OR INDIRECTLY FROM THIS AGREEMENT
SHALL BE LIMITED TO THE AGGREGATE AMOUNT OF FIVE THOUSAND DOLLARS ($5,000). THIS
LIMITATION APPLIES TO ALL CAUSES OF ACTION IN THE AGGREGATE, INCLUDING WITHOUT
LIMITATION TO BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT
LIABILITY, MISREPRESENTATIONS, AND OTHER TORTS. IN THE EVENT THE TERMS OF THIS
SECTION CONFLICT WITH ANY OF THE OTHER TERMS OF THIS AGREEMENT OR WITH THE TERMS
OF ANY OF THE OTHER AGREEMENTS, AS THAT TERM IS DEFINED HEREIN, THE TERMS OF
THIS SECTION SHALL CONTROL AND THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE
CLOSING FOR SEVEN YEARS.
12.15. Post Closing Undertakings.
a. Acquisitions. Immediately after Closing Purchaser shall cause a
-------------
meeting of the Board of Directors of Purchaser to be held in
order to establish guidelines to be used by the seller for future
acquisitions of entities similar or related to the Seller. The
Purchaser will establish a pool of stock along with a pool of
cash or debt to be used for acquisitions meeting the guidelines
established by the Purchasers Board of Directors which should
approximate the same terms and conditions established to acquire
the Seller. Seller will be able to act on Acquisitions that meet
all pre-established guidelines established by the Purchasers
Board.
b. Corporate Governance. Immediately after Closing Purchaser shall
----------------------
establish policies for operation of the Corporation. These
policies will include but not be limited to: 1) The makeup of a
Board of Directors for ICS that will be made up of insiders of
ICS with a liaison from Purchaser's Board attending each Board
meeting, The liaison shall not have voting rights. 2) That ICS
shall have the right to enter into debt obligations with
28
outside lenders at certain pre-set limits 3) That ICS shall have
the ability to enter into inter-company debt obligations. This
debt instrument would allow ICS to borrow from Purchaser or their
lenders with interest charged at the incremental rate of
borrowing by the Purchaser
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement the date first hereinabove set forth.
Attest: SPIDER BOY INTERNATIONAL,
/s/ XXXX X. XXXXXXXX By /s/ DATE: 4-21-04
---------------------- -------------------------------------
Title CEO
-----------------------------
Attest: INNOVATIVE CORPORATE STRATEGIES INC
By /s/ Xxxx X. Xxxxxxxx
---------------------- -------------------------------------
Title CEO
-----------------------------
XXXX X. XXXXXXXX
By /s/ Xxxx X. Xxxxxxxx DATE: 4-21-04
-------------------------------------
XXXXXX X. XXXXXX XX.
By /s/ Xxxxxx X. Xxxxxx Xx. DATE: 4-21-04
-------------------------------------
29
SCHEDULE 1.1
STOCK CERTIFICATES
30
Schedule 2.1(A)
---------------
JURISDICITIONS
Currently incorporated in the State of Georgia and have a business license
to conduct business from Xxxxxx County Georgia. This is all that is needed to
conduct business throughout the United States at this time.
31
SCHEDULE 2.1(B)
---------------
ICS'S CHARTER AND BYLAWS
32
SCHEDULE 2.3
------------
AUTHORIZED, ISSUED AND OUTSTANDING STOCK OF ICS
33
SCHEDULE 2.9(A)(1)
------------------
AUDITED YEAR-END BANANCE SHEETS AND STATEMENTS AS OF
MARCH 31, 2004
34
SCHEDULE 2.9(B)
---------------
LIABILITIES OF ICS
ICS has some liabilities to it's current, officers. They are as
follows:
Xxxx X. Xxxxxxxx
$29,750 Accrued Salary from 1/1/04 to 4/15/04
100 Misc. expenses
-------
$29,850 Total
Xxxxxx Group
$ 333 Business License
600 Misc. Expenses
$ 933 Total
Xxxxxx & Associates
$ 500 Incorporation
SCHEDULE 2.9(C)
---------------
NA
SCHEDULE 2.10
-------------
EMPLOYEES AND INDEPENDENT CONTRACTORS OF ICS
Xxxx X. Xxxxxxxx
Xxxxxx X Xxxxxx, Xx.
SCHEDULE 2.12(VI)
-----------------
CONTRACT AS LESSEE
NA
35
Schedule 2.12(C)
----------------
TRUE AND COMPLETE CONTRACTS AND DOCUMENTS FOR
EMPLOYEES
NA
Schedule 2.14 (A)
-----------------
EXCEPTIONS TO MARKETABLE TITLE
NA
Schedule 2.14
-------------
EXCEPTIONS TO LEASES
NA
Schedule 2.16
-------------
EXCEPTIONS TO TAX RESERVES
NA
Schedule 2.19
-------------
BANK, TRUST COMPANY, FINANCIAL INSTUSTION ACCOUNTS
NA
Schedule 2.20
-------------
TRADE NAME, SERVICE XXXX, PATENT, TRADEMARK OR
COPYRIGHT
36
SCHEDULE 2.22
-------------
INSURANCE POLICIES NA
SCHEDULE 2.28
FORM OF REGISTRATION RIGHTS AGREEMENT
---------------------------- --------
THIS AGREEMENT is entered into as of April 21, 2004. by and between
SPIDERBOY INTERNATIONAL, INC., a Minnesota corporation (the "Corporation"), and
XXXXXX X. XXXXXX XX. and XXXX X. XXXXXXXX (collectively, the "Holder"), by and
between SPIDER BOY INTERNATIONAL INC., a Minnesota corporation (the
"Purchaser").
WHEREAS, on even date herewith, for value received, pursuant to that
certain Stock Purchase Agreement, the Holder received ____________ shares of the
common stock of the Company, par value $0,001 per share (the "Common Stock");
and
WHEREAS, the shares of the Common Stock and any other securities issued or
issuable at any time or from time to time in respect of the Common Stock as a
result of a merger, consolidation, reorganization, stock split, stock dividend,
recapitalization or other similar event involving the Company are hereinafter
referred to as the "Registrable Securities":
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Piggyback Registration Rights Available. Provided that the Registrable
Securities have not been registered, if at any time after the date hereof but
before the third anniversary of the date hereof, the Company proposes to
register any of its securities under the Securities Act of 1933, as amended (the
"Securities Act"), other than by a registration in connection with an
acquisition in a manner which would not permit registration of the Registrable
Securities for sale to the public, on Form S-8, or any successor form thereto,
on Form S-4, or any successor form thereto on an underwritten basis (either
"best-efforts" or "firm-commitment"), then, the Company will each such time give
prompt written notice to the Holder of its intention to do so and of the
Holder's rights under this Agreement. Upon the written request of the Holder
made within 10 days after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by the Holder and
the intended method of disposition thereof), the Company will, subject to the
terms of this Agreement, use its commercially reasonable best efforts to effect
the registration under the Securities Act of the Registrable Securities, to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so to be registered,
by inclusion of the Registrable Securities in a registration statement filed by
the Company on Form X-0, XX-0, xx X-0, or some other similar form pursuant to
the Securities Act to register the securities which the Company proposes to
register (the "Registration Statement"), provided that if, at any time after
written notice of its intention to register any securities and prior to the
effective date of the Registration Statement filed in connection with such
registration, the
37
Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to the Holder and, thereupon:
(a) In the case of a determination not to register, shall be relieved of
this obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith); and
(b) In the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities, for the same period
as the delay in registering such other securities.
2. Payment of Registration Expenses. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this Agreement. The right provided the Holder pursuant to
this Agreement shall be exercisable at its sole discretion.
3. Priority in Incidental Registrations. If the managing underwriter of the
underwritten offering contemplated by this Agreement shall inform the Company
and the Holder by letter of its belief that the number of securities requested
to be included in such registration exceeds the number which can be sold in such
offering, then the Company will include in such registration, to the extent of
the number which the Company is so advised can be sold in such offering:
(a) First, securities proposed by the Company to be sold for its own
account; and
(b) Second, Registrable Securities and securities of other selling
security holders requested to be included in such registration pro rate on the
basis of the number of shares of such securities so proposed to be sold and so
requested to be included; provided, however, the Holder shall have pro rata
rights of registration with all shares sought to be included by officers and
directors of the Company as well as holders of 10 percent or more of the Common
Stock.
4. Registration Procedures. If and whenever the Company is required to affect
the registration of any Registrable Securities under the Securities Act as
provided in herein, the Company shall, as expeditiously as possible:
(a) Prepare and file with the Securities and Exchange Commission (the
"SEC") the Registration Statement, or amendments thereto, to effect such
registration (including such audited financial statements as may be required by
the Securities Act or the rules and regulations promulgated thereunder) and
thereafter use its commercially reasonable best efforts to cause the
Registration Statement to be declared effective by the SEC, as soon as
practicable; provided, however, that before filing the Registration Statement or
any amendments thereto, the Company will furnish to the counsel selected by the
Holder, copies of all such documents proposed to be filed;
(b) Furnish to the Holder such number of conformed copies of the
Registration Statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in the Registration Statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as the Holder and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by the Holder;
(c) Use its commercially reasonable best efforts to register or qualify
all Registrable Securities and other securities covered by the Registration
Statement under such other securities laws or blue sky laws as the Holder shall
reasonably request, to keep such registrations or qualifications in effect for
so long as the Registration Statement remains in effect, and take any other
action which may be reasonably necessary to enable the Holder to consummate the
disposition in such jurisdictions of the
38
securities owned by the Holder, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
subparagraph be obligated to be so qualified or to consent to general service of
process in any such jurisdiction;
(d) Use its commercially reasonable best efforts to cause all Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the Holder to consummate the disposition of such Registrable
Securities;
(e) Furnish to the Holder a signed counterpart, addressed to the Holder,
and the underwriters, if any, of an opinion of counsel for the Company, dated
the effective date of the Registration Statement (or, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), reasonably satisfactory in form and
substance to the Holder including that the prospectus and any prospectus
supplement forming a part of the Registration Statement does not contain an
untrue statement of a material fact or omits a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(f) Notify the Holder and its counsel promptly and confirm such advice in
writing promptly after the Company has knowledge thereof:
(i) When the Registration Statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the Registration
Statement has been filed, and, with respect to the Registration Statement
or any post-effective amendment thereto, when the same has become
effective;
(ii) Of any request by the SEC for amendments or supplements to the
Registration Statement or the prospectus or for additional information;
(iii) Of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings by any Person for that purpose; and
(iv) Of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose;
(g) Notify each holder of the Registrable Securities covered by the
Registration Statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material facts required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of the Holder promptly prepare
and furnish to the Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(h) Use its best efforts to obtain the withdrawal of any order suspending
the effectiveness of the Registration Statement at the earliest possible moment;
(i) Otherwise use its commercially reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning
39
with the first full calendar month after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
1l(a) of the Securities Act and Rule 158 thereunder;
(j) Enter into such agreements and take such other actions as the Holder
shall reasonably request in writing (at the expense of the requesting or
benefiting Holder) in order to expedite or facilitate the disposition of the
Registrable Securities; and
(k) Use its commercially reasonable best efforts to list all of the
Registrable Securities covered by the Registration Statement on any securities
exchange on which any of the Registrable Securities are then listed.
5. Information to be Furnished by the Holder. The Company may require
the Holder of the Registrable Securities as to which any registration is being
affected to furnish the Company such information regarding the Holder and the
distribution of such securities as the Company may from time to time reasonably
request in writing.
6. Discontinuance of Disposition of the Registrable Securities. The
Holder agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in Paragraph 4(g) hereof, the
Holder will forthwith discontinue the Holder's disposition of the Registrable
Securities pursuant to the Registration Statement relating to such Registrable
Securities until the Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Paragraph 4(g) and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in the Holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
7. Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by this Agreement and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by the Holder,
use its commercially reasonable best efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by the Holder
among the securities to be distributed by such underwriters.
8. Holdback Agreements. Subject to such other reasonable requirements
as may be imposed by the underwriter as a condition of inclusion of the
Registrable Securities in the Registration Statement, the Holder agrees by
acquisition of the Registrable Securities, if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of,
except as part of such underwritten registration, any equity securities of the
Company, during such reasonable period of time requested, by the underwriter,
provided however:
(a) The secondary offering is intended to raise a minimum of $8,000,000
on behalf of the Company and
(b) Such period shall not exceed the 90-day period commencing with the
completion of an underwritten offering.
The Company agrees and acknowledges that during any holdback period, the Holder
may sell, in the holdback period, Registrable Securities in the amount of up to
one percent per week of the shares of the Common Stock held by the Holder as
long as this Agreement remains effective.
9. Participation in Underwritten Offerings. The Holder may not
participate in any underwritten offering under this Agreement unless the
Holder:
40
(a) Agrees to sell its securities on the basis provided in any
underwriting arrangements approved, subject to the terms and conditions hereof,
by the Holder; and
(b) Completes and executes all questionnaires, indemnities,
underwriting agreements and other documents (other than powers of attorney)
required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement in
connection with such offering) shall require the Holder to make a representation
or warranty to or agreements with the Company or the underwriters other than
representations and warranties contained in a writing furnished by the Holder
expressly for use in the related Registration Statement or representations,
warranties or agreements regarding the Holder, the Holder and the Holder's
intended method of distribution and any other representation required by law.
10. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each Registration Statement under the Securities Act
pursuant to this Agreement, the Company will give the Holder and its counsel and
accountants, the opportunity to participate in the preparation of the
Registration Statement, each prospectus included therein or filed with the SEC,
and each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
reasonable opinion of the Holder's and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
11. Indemnification by the Company. In the event of any registration of
any securities of the Company under the Securities Act, the Company will, and
hereby does agree to indemnify and hold harmless the Holder, its directors and
officers, each other Person ("Person" means an individual, partnership, firm,
limited liability company, trust, joint venture, association, corporation, or
any other legal entity) who participates as an underwriter in the offering or
sale of such securities and each other Person, if any, who controls the Holder
or any such underwriter within the meaning of the Securities Act against any
losses, claims, damages or liabilities, joint or several, to which the Holder or
any such director or officer or underwriter or controlling person may become
subject tinder the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse the Holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability, (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by the Holder or underwriter stating that it is for use in the
preparation thereof and, provided further that the Company shall not be liable
to any Person who participates as an underwriter in the offering or sale of the
Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
within the time required by the Securities Act to the Person asserting the
existence of an untrue statement or alleged untrue statement or omission or
alleged omission
41
at or prior to the written confirmation of the sale of the Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus or an amendment or supplement thereto. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Holder or any such director, officer, underwriter or controlling
person and shall survive the transfer of such securities by the Holder.
12. Indemnification by the Holder, The Company may require, as a
condition to including any of the Registrable Securities in any Registration
Statement filed pursuant to this Agreement, that the Company shall have received
an undertaking satisfactory to it from the Holder, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Paragraph 11
hereof) the Company, each director of the Company, each officer of the Company
and each other Person, if any, who controls the Company within the meaning of
the Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from the Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by the Holder specifically stating that it is for use in the preparation of the
Registration Statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by the Holder.
13. Notices of Claims, Etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in Paragraph 11 and Paragraph 12 hereof, such indemnified
party will, if claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under
Paragraph 11 and Paragraph 12 hereof, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that the
indemnifying party may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
Indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such action which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability, or a covenant not to
xxx, in respect to such claim or litigation. No indemnified party shall consent
to entry of any judgment or enter into any settlement of any such action the
defense of which has been assumed by an indemnifying party without the consent
of such indemnifying party.
14. Other Indemnification. Indemnification similar to that specified
in Paragraph 11 and Paragraph 12 hereof (with appropriate modifications) shall
be given by the Company and the Holder (but only if and to the extent required
pursuant to the terms hereof) with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority, other than the Securities Act.
15. Indemnification Payments. The indemnification required by Paragraph
11 and Paragraph 12 hereof shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
42
16. Contribution. If the indemnification provided for in Paragraph 11
and Paragraph 12 hereof is unavailable to an indemnified party in respect of any
expense, loss, claim, damage or liability referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified, party as a result
of such expense, loss., claim, damage or liability:
(a) In such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Holder or underwriter,
as the case may be, on the other from the distribution of the Regiatrable
Securities; or
(b) If the allocation provided by clause (a) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (a) above but also the relative fault of
the Company on the one hand and of the Holder or underwriter, as the case may
be, on the other in connection with the statements or omissions which resulted
in such expense, loss, damage or liability, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the Holder or
underwriter, as the case may be, on the other in connection with the
distribution of the Registrable Securities shall be deemed to be in the same
proportion as the total net proceeds received by the Company from the initial
sale of the Registrable Securities by the Company to the purchasers bear to the
gain, if any, realized by all selling holders participating in such offering or
the underwriting discounts and commissions received by the underwriter, as the
case may be. The relative fault of the Company on the one hand and of the Holder
or underwriter, as the case may be, on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission to state a material fact relates to information
supplied by the Company, by the Holder or by the underwriter and the parties'
relative intent, knowledge, access to information supplied by the Company, by
the Holder or by the underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, provided that the foregoing contribution agreement shall not inure to
the benefit of any indemnified party if indemnification would be unavailable to
such indemnified party by reason of the provisions contained hereof, and in no
event shall the obligation of any indemnifying party to contribute under this
Paragraph 16 exceed the amount that such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided for
hereunder had been available under the circumstances.
The Company and the Holder agree that it would not be just and equitable if
contribution pursuant to this Paragraph 16 were determined by pro rata
allocation (even if the Holder and any underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
herein, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
17. Limitation on Contributions. Notwithstanding the provisions of
Paragraph 16, the Holder and an underwriter shall not be required to contribute
any amount in excess of the amount by which (a) in the case of the Holder, the
net proceeds received by the Holder from the sale of Registrable Securities, or
(b) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that the Holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section ll(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
43
18. Rule 144. The Company shall timely file the reports required to be
filed by it under the Securities Act and the Securities Exchange Act of 1934, as
amended (including but not limited to the reports under Sections 13 and 15(d) of
the Securities Exchange Act of 1934 referred to in subparagraph (c) of Rule 144
adopted by the SEC under the Securities Act) and the rules and regulations
adopted by the SEC thereunder (or, if the Company is not required to file such
reports, will, upon the request of the Holder, make publicly available other
information) and will take such further action as the Holder may reasonably
request, all to the extent required from time to time to enable the Holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of the Holder, the
Company will deliver to the Holder a written statement as to whether it has
complied with the requirements of this Paragraph.
19. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51 percent or more of the shares of (a) the
Registrable Securities issued at such time, plus (b) the Registrable Securities
issuable upon exercise or conversion of the securities of the Company then
constituting derivative securities (if such securities were not fully exchanged
or converted in full as of the date such consent if sought). Each holder of
any Registrable Securities at the time or thereafter outstanding shall be bound
by any consent authorized by this Paragraph, whether or not such Registrable
Securities shall have been marked to indicate such consent.
20. Nominees for Beneficial Owners. In the event that any of the
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election, be treated as the holder of
such Registrable Securities for purposes of any request or other action by any
holder or holders of the Registrable Securities pursuant to this Agreement or
any determination of any number of percentage of shares of the Registrable
Securities held by a holder or holders of the Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership or such Registrable Securities.
21. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given (a) on the date they are
delivered if delivered in person; (b) on the date initially received if
delivered by facsimile transmission followed by registered or certified mail
confirmation; (c) on the date delivered by an overnight courier service; or (d)
on the third business day after it is mailed by registered or certified mall,
return receipt requested with postage and other fees prepaid, if to the Company
addressed to Xx. Xxxxx Xxx at 000 Xxxxx Xxxxx Xxxxx, Xxxxxxx, Xxxxxxx 00000, and
if to the Holder addressed to the Holder at the address specified on the
signature page hereof. Any party hereto may change its address upon 10 days'
written notice to any other party hereto.
22. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
of the Registrable Securities.
23. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
24. Law Governing; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia, without
regard to any conflicts of laws provisions thereof. Each party hereby
irrevocably submits to the personal jurisdiction of the United States District
44
Court for the _______ District of Georgia, as well as of the Courts of the State
of Georgia in ______ County, Georgia over any suit, action or proceeding arising
out of or relating to this Agreement. Each party hereby irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such mediation, arbitration, suit, action
or proceeding brought in any such county and any claim that any such mediation,
arbitration, suit, action or proceeding brought in such county has been brought
in an inconvenient forum.
25. Severability. If any provision of this Agreement, or the
application of such provisions to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
26. Binding Effect. All the terms and provisions of this Agreement
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives., heirs, successors and assignees.
27. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty, covenant or agreement herein, nor
shall nay single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
28. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto.
29. Entire Agreement. This Agreement embodies the entire agreement
and understanding between the Company and each other party hereto relating to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.
SPIDERBOY INTERNATIONAL INC Xxxx X. Xxxxxxxx
By:______________ ______________________________
Name Printed:
Title: Name Printed:________________
Witness:______________________ Witness:______________________
Name Printed Name Printed:________________
Witness:______________________ Witness:______________________
Name Printed Name Printed:________________
By:
______________________________
45
Xxxxxx X. XXXXXX Xx.
Name Printed:________________
Witness:______________________
Name Printed:
Witness:______________________
Name Printed:_________________
46
SCHEDULE 6.2
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EMPLOYMENT AND NON-COMPETITION
47
SCHEDULE 10.2
INDEMNITY AGREEMENT - CHARYS
48
