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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
EBUSINESSLABS, INC.,
BRAINWORKS VENTURES, INC.,
EBL ACQUISITION CORPORATION
AND
CERTAIN STOCKHOLDERS OF EBUSINESSLABS, INC.
SIGNATORY HERETO
AS OF DECEMBER 29, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE 1. TERMS OF MERGER 1
Section 1.1 Merger............................................................................1
Section 1.2 Time and Place of Closing.........................................................1
Section 1.3 Effective Time....................................................................2
ARTICLE 2. ARTICLES, BYLAWS, MANAGEMENT 2
Section 2.1 Articles of Incorporation.........................................................2
Section 2.2 Bylaws............................................................................2
Section 2.3 Directors and Officers............................................................2
ARTICLE 3. MANNER OF CONVERTING AND EXCHANGING SHARES 2
Section 3.1 Conversion of Shares..............................................................2
Section 3.2 Exchange of Shares................................................................4
Section 3.3 Anti-Dilution Provisions..........................................................5
Section 3.4 Shares Held by TARGET or PURCHASER................................................5
Section 3.5 Status of TARGET after the Effective Time.........................................5
Section 3.6 Rights of Former TARGET Stockholders..............................................5
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF TARGET 5
Section 4.1 Organization, Standing and Power..................................................5
Section 4.2 Authority; No Breach..............................................................6
Section 4.3 Capital Stock.....................................................................7
Section 4.4 Financial Statements..............................................................7
Section 4.5 Absence of Undisclosed Liabilities................................................8
Section 4.6 Absence of Certain Changes of Events..............................................8
Section 4.7 Tax Matters.......................................................................8
Section 4.8 TARGET Patents, Trademarks and Trade Names........................................9
Section 4.9 Proprietary Information...........................................................9
Section 4.10 Assets...........................................................................10
Section 4.11 Environmental Matters............................................................10
Section 4.12 Compliance with Laws.............................................................12
Section 4.13 Labor Relations..................................................................12
Section 4.14 Employee Benefit Plans...........................................................12
Section 4.15 Material Contracts...............................................................14
Section 4.16 Legal Proceedings................................................................14
Section 4.17 Reports..........................................................................15
Section 4.18 Statements True and Correct......................................................15
Section 4.19 Accounting, Tax and Regulatory Matters...........................................15
Section 4.20 Charter Provisions...............................................................16
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER 16
Section 5.1 Organization, Standing and Power.................................................16
Section 5.2 Authority; No Breach.............................................................16
Section 5.3 Capital Stock....................................................................17
Section 5.4 PURCHASER SEC Reports............................................................17
Section 5.5 Financial Statements.............................................................18
Section 5.6 Absence of Undisclosed Liabilities...............................................18
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Section 5.7 Absence of Certain Changes or Events.............................................18
Section 5.8 Tax Matters......................................................................18
Section 5.9 Environmental Matters............................................................19
Section 5.10 Compliance with Laws.............................................................20
Section 5.11 Legal Proceedings................................................................21
Section 5.12 Reports..........................................................................21
Section 5.13 Statements True and Correct......................................................21
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF MERGER SUB 22
Section 6.1 Organization, Standing and Power.................................................22
Section 6.2 Authority; No Breach.............................................................22
ARTICLE 7. CONDUCT OF BUSINESS PENDING CONSUMMATION 23
Section 7.1 Affirmative Covenants of TARGET..................................................23
Section 7.2 Negative Covenants of TARGET.....................................................23
Section 7.3 Covenants of PURCHASER...........................................................24
Section 7.4 Adverse Changes in Condition.....................................................25
Section 7.5 Reports..........................................................................25
ARTICLE 8. ADDITIONAL AGREEMENTS 25
Section 8.1 Stockholder Approval.............................................................25
Section 8.2 Applications.....................................................................26
Section 8.3 Agreement as to Efforts to Consummate............................................26
Section 8.4 Investigation and Confidentiality................................................26
Section 8.5 Press Releases...................................................................27
Section 8.6 No Solicitation..................................................................27
Section 8.7 Employee Benefits and Contracts..................................................29
Section 8.8 Indemnification Against Certain Liabilities......................................29
Section 8.9 Tax Reporting....................................................................29
Section 8.10 Cancellation of TARGET Options...................................................29
ARTICLE 9. CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE 30
Section 9.1 Conditions to Obligations of Each Party..........................................30
Section 9.2 Conditions to Obligations of PURCHASER and MERGER SUB............................30
Section 9.3 Conditions to Obligations of TARGET..............................................32
ARTICLE 10. TERMINATION 33
Section 10.1 Termination......................................................................33
Section 10.2 Effect of Termination............................................................34
ARTICLE 11. ESCROW AND INDEMNIFICATION 34
Section 11.1 Escrow Fund......................................................................34
Section 11.2 Indemnification..................................................................35
Section 11.3 Escrow Period: Release From Escrow...............................................36
Section 11.4 Claims Upon Escrow Fund..........................................................37
Section 11.5 Objections to Claims.............................................................37
Section 11.6 Resolution of Conflicts and Arbitration..........................................38
Section 11.7 Stockholders' Agent..............................................................38
Section 11.8 Actions of the Stockholders' Agent...............................................39
Section 11.9 Third-Party Claims...............................................................39
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ARTICLE 12. MISCELLANEOUS 39
Section 12.1 Definitions......................................................................39
Section 12.2 Expenses.........................................................................46
Section 12.3 Brokers and Finders..............................................................46
Section 12.4 Entire Agreement.................................................................46
Section 12.5 Amendments.......................................................................47
Section 12.6 Waivers..........................................................................47
Section 12.7 Assignment.......................................................................47
Section 12.8 Notices..........................................................................47
Section 12.9 Governing Law....................................................................48
Section 12.10 Counterparts.....................................................................49
Section 12.11 Captions.........................................................................49
Section 12.12 Enforcement of Agreement.........................................................49
Section 12.13 Severability.....................................................................49
Section 12.14 Survival.........................................................................49
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LIST OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION
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1 Articles of Incorporation of TARGET (ss. 2.1).
2 Form of Investor Representation Statement (ss. 9.2(h)).
3 Form of Registration Rights Agreement (ss. 9.2(h)).
4 Form of Escrow Agreement (ss. 11.1).
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of December 29, 2000, by and among EBUSINESSLABS, INC. ("TARGET"), a
corporation organized and existing under the laws of the State of Georgia, with
its principal office located at 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxx 00000, BRAINWORKS VENTURES, INC. ("PURCHASER"), a corporation organized
and existing under the laws of the State of Nevada, with its principal office
located at 0000 Xxxxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxx 00000, certain
stockholders of TARGET signatory hereto and EBL ACQUISITION CORPORATION ("MERGER
SUB"), a corporation organized and existing under the laws of the State of
Georgia and a wholly-owned subsidiary of PURCHASER.
PREAMBLE
Certain terms used in this Agreement are defined in Section 12.1
hereof.
The Boards of Directors of TARGET, MERGER SUB and PURCHASER are of the
opinion that the transactions described herein are in the best interests of the
parties and their respective stockholders. This Agreement provides for the
combination of TARGET with MERGER SUB by virtue of the merger of MERGER SUB with
and into TARGET, as a result of which the outstanding shares of the capital
stock of TARGET (to the extent provided herein) shall be converted into the
right to receive the consideration provided for herein, and the stockholders of
TARGET shall become stockholders of PURCHASER. The transactions described in
this Agreement are subject to the approval of the stockholders of TARGET, and
the satisfaction of certain other conditions described in this Agreement.
Following the Closing of the Merger, TARGET will be operated as a
separate subsidiary of PURCHASER.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE 1.
TERMS OF MERGER
SECTION 1.1 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, MERGER SUB shall be merged with and into
TARGET in accordance with the provisions of Section 14-2-1101 of the OCGA and
with the effect provided in Section 14-2-1106 of the OCGA (the "Merger"). TARGET
shall be the Surviving Corporation resulting from the Merger and a wholly-owned
subsidiary of PURCHASER. The Merger shall be consummated pursuant to the terms
of this Agreement.
SECTION 1.2 TIME AND PLACE OF CLOSING. The Closing shall take
place at 10:00 a.m. on the date that the Effective Time occurs or at such other
time as the Parties, acting through their chief executive officers or chief
financial officers, may mutually agree (the
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"Closing Date"). The place of Closing shall be at the offices of Xxxxxx & Xxxxxx
LLP located at 000 Xxxxxxxxx Xxxxxx, XX, 0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxx,
Xxxxxxx 00000, or such other place as may be mutually agreed upon by the
Parties.
SECTION 1.3 EFFECTIVE TIME. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Certificate of Merger reflecting the Merger shall be filed with the
Secretary of State of the State of Georgia in accordance with the relevant
provisions of the OCGA (the "Effective Time"). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by the chief
executive officers of each Party, the Parties shall use their reasonable efforts
to cause the Effective Time to occur (a) within three (3) business days of the
date on which the stockholders of TARGET approve this Agreement; or (b) such
later date as may be mutually agreed upon in writing by the chief executive
officers of each Party.
ARTICLE 2.
ARTICLES, BYLAWS, MANAGEMENT
SECTION 2.1 ARTICLES OF INCORPORATION. The Articles of
Incorporation of TARGET in effect immediately prior to the Effective Time shall
be the Articles of Incorporation of the Surviving Corporation until otherwise
amended or repealed. A copy of the Articles of Incorporation of TARGET is
attached as Exhibit 1 to this Agreement.
SECTION 2.2 BYLAWS. The Bylaws of TARGET in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until otherwise amended or repealed.
SECTION 2.3 DIRECTORS AND OFFICERS. The Officers and Directors of
TARGET immediately prior to the Effective Time shall continue to serve as
Officers and Directors of the Surviving Corporation.
ARTICLE 3.
MANNER OF CONVERTING AND EXCHANGING SHARES
SECTION 3.1 CONVERSION OF SHARES. Subject to the provisions of
this Article 3, at the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, the shares of PURCHASER, MERGER SUB
and TARGET shall be converted as follows:
(a) Each share of the common stock, par value $.01 per share, of
MERGER SUB issued and outstanding immediately prior to the Effective Time shall
be converted solely into 100 fully paid and non-assessable shares of the
Surviving Corporation.
(b) Subject to the remaining provisions of this Section 3.1, each
share of TARGET Common Stock (including any shares currently subject to options
or warrants which are exercised prior to the Effective Time, if any, and
including shares of TARGET Common Stock issued up on conversion of TARGET
Preferred Stock) outstanding immediately prior to the Effective Time, other than
shares with respect to which statutory dissenters' rights have been perfected
(the "Dissenting Shares") and shares held by TARGET or by PURCHASER or any of
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the PURCHASER Subsidiaries, in each case other than in a fiduciary capacity or
as a result of debts previously contracted (the "Outstanding TARGET Shares"),
shall automatically be converted at the Effective Time into the right to receive
whole shares of PURCHASER Common Stock, plus cash in lieu of fractional shares
pursuant to Section 3.1(c) below, if applicable, as follows: each holder of a
certificate or certificates theretofore representing Outstanding TARGET Shares
immediately prior to the Effective Time shall thereafter surrender such
certificate or certificates and shall be entitled, upon such surrender, to
receive in exchange therefor such holder's Pro-Rata Share of the Merger Price
payable in shares of PURCHASER Common Stock equal to the quotient obtained by
dividing (x) an amount equal to such holder's Pro-Rata Share of the Merger
Price, by (y) the Stock Price (the "Stock Consideration").
(c) Notwithstanding any other provision of this Agreement, each
holder of shares of TARGET Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of PURCHASER
Common Stock (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of PURCHASER Common Stock multiplied by
the Stock Price. No such holder will be entitled to dividends, voting rights, or
any other rights as a stockholder in respect of any fractional shares.
(d) Except as contemplated in Section 3.1 hereof, each share of
the TARGET Capital Stock that is not an Outstanding TARGET Share, as of the
Effective Time shall be cancelled without consideration therefor, and all
options and warrants to purchase shares of TARGET Capital Stock (collectively,
"TARGET Options") shall be cancelled in accordance with Section 8.10 hereof.
(e) Outstanding TARGET Shares held by TARGET stockholders who,
prior to the Effective Time, have met the requirements of Sections 14-2-1321 and
14-2-1323 of the OCGA with respect to stockholders dissenting from the Merger
shall not be converted in the Merger, but all such shares shall be cancelled and
the holders thereof shall thereafter have only such rights as are granted to
dissenting stockholders under the OCGA; provided, however, that if any such
stockholder fails to perfect his or her rights as a dissenting stockholder with
respect to his or her Outstanding TARGET Shares in accordance with the OCGA,
such shares held by such stockholder shall, upon the happening of that event, be
treated the same as all other holders of TARGET Common Stock who have not
dissented as to the Merger.
(f) Notwithstanding anything herein to the contrary, 50,000 shares
of PURCHASER Common Stock comprising the Stock Consideration that the Warranting
Stockholders would otherwise be entitled to receive (collectively, the "Escrow
Shares") shall be issued in the name of the Escrow Agent as nominee for the
Warranting Stockholders, which Escrow Shares shall be allocated pro rata among
the Warranting Stockholders on the basis of their ownership of shares of TARGET
Capital Stock unless they agree to a different allocation. The Escrow Shares
shall be beneficially owned by the Warranting Stockholders pro rata, as
described in the preceding sentence, and the Escrow Shares shall be held in
escrow and shall be available to compensate PURCHASER for certain damages as
provided in Article 11. To the extent not used for such purposes, the Escrow
Shares shall be released, all as provided in Article 11 hereof.
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SECTION 3.2 EXCHANGE OF SHARES.
(a) From and after the Effective Time, upon exchange of a
certificate or certificates which immediately prior thereto represents
outstanding shares of TARGET Common Stock, a TARGET stockholder shall be
entitled to receive, upon surrender to PURCHASER of such certificate or
certificates duly endorsed in blank, (i) one or more certificates as requested
by such stockholder (properly issued, executed and countersigned, as
appropriate) representing that number of whole shares of PURCHASER Common Stock
representing the Stock Consideration to which such stockholder shall have become
entitled pursuant to the provisions of subsection 3.1(b) hereof, and the cash
payable to such stockholder pursuant to Section 3.1(c) hereof, and all of the
certificate or certificates for such TARGET Common Stock so surrendered shall
forthwith be canceled. No interest will be paid or accrued on the cash payable
upon the surrender of any certificate. No portion of the consideration to be
received pursuant to Section 3.1 hereof upon exchange of a certificate (whether
a certificate representing shares of PURCHASER Common Stock or by check
representing any cash payable hereunder) may be issued or paid to a person other
than the person in whose name the certificate surrendered in exchange therefor
is registered. From the Effective Time until surrender in accordance with the
provisions of this Section 3.2, each certificate shall represent for all
purposes only the right to receive the consideration provided in Section 3.1
hereof. All payments in respect of shares of TARGET Common Stock that are made
in accordance with the terms hereof shall be deemed to have been made in full
satisfaction of all rights pertaining to such securities.
(b) In the case of any lost, mislaid, stolen or destroyed
certificate, the TARGET stockholder may be required, as a condition precedent to
delivery to the stockholder of the consideration described in Section 3.1
hereof, to deliver to PURCHASER a reasonably satisfactory indemnity agreement as
PURCHASER may direct as indemnity against any claim that may be made against
PURCHASER or the Surviving Corporation with respect to the certificate alleged
to have been lost, mislaid, stolen or destroyed.
(c) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of TARGET
Capital Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, certificates representing the TARGET Capital Stock are
presented to the Surviving Corporation or PURCHASER for transfer, they shall be
canceled and exchanged for the consideration (if any) described in Section 3.1
hereof.
(d) Any shares of PURCHASER Common Stock or cash due former
stockholders of TARGET pursuant to Section 3.1 hereof that remains unclaimed by
such former stockholders for six months after the Effective Time shall be held
by PURCHASER, and any former holder of TARGET Capital Stock who has not
theretofore complied with Sections 3.2 (a) and (b) hereof shall thereafter look
only to PURCHASER for issuance of the number of shares of PURCHASER Common Stock
and cash to which such holder has become entitled pursuant to the provisions of
Section 3.1 hereof; provided, however, that neither PURCHASER nor any party
hereto shall be liable to a former holder of shares of TARGET Common Stock for
any amount required to be paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
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SECTION 3.3 ANTI-DILUTION PROVISIONS. In the event TARGET or
PURCHASER changes the number of shares of TARGET Capital Stock or PURCHASER
Common Stock, respectively, issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date therefor (in the case of a stock split or
similar recapitalization) shall be prior to the Effective Time, the
consideration payable pursuant to this Article 3 shall be equitably adjusted.
SECTION 3.4 SHARES HELD BY TARGET OR PURCHASER. Except as
contemplated in Section 3.1(b) hereof, each of the shares of TARGET Capital
Stock held by TARGET or PURCHASER or any PURCHASER Company, in each case other
than in a fiduciary capacity or as a result of debts previously contracted,
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
SECTION 3.5 STATUS OF TARGET AFTER THE EFFECTIVE TIME. After
consummation of the Merger, TARGET shall be a separate subsidiary of PURCHASER.
SECTION 3.6 RIGHTS OF FORMER TARGET STOCKHOLDERS. To the extent
permitted by Law, former stockholders of record of TARGET shall be entitled to
vote after the Effective Time at any meeting of PURCHASER stockholders the
number of whole shares of PURCHASER Common Stock into which their respective
shares of TARGET Common Stock may have been converted, regardless of whether
such holders have exchanged their certificate or certificates for TARGET Common
Stock for certificates representing PURCHASER Common Stock in accordance with
the provisions of this Agreement. Whenever a dividend or other distribution is
declared by PURCHASER on the PURCHASER Common Stock, the record date for which
is at or after the Effective Time, the declaration shall include dividends or
other distributions on all shares issuable pursuant to this Agreement, but no
dividend or other distribution payable to the holders of record of PURCHASER
Common Stock as of any time subsequent to the Effective Time shall be delivered
to the former holder of TARGET Common Stock until such holder surrenders such
holder's certificate or certificate which formerly represented such shares of
TARGET Common Stock for exchange as provided in Section 3.2 hereof this
Agreement. However, upon surrender thereof, both the PURCHASER Common Stock
certificate (together with all such undelivered dividends or other distributions
without interest) and any cash to be paid for fractional share interests (all
without interest) shall be delivered and paid with respect to each share
represented by such certificate.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF TARGET
With such exceptions, if any, as may be set forth in a letter (the
"TARGET Disclosure Letter") to be delivered by TARGET to PURCHASER on the date
hereof, TARGET hereby represents and warrants to PURCHASER as follows:
SECTION 4.1 ORGANIZATION, STANDING AND POWER. TARGET is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Georgia.
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TARGET has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. TARGET is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET. Each TARGET Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
Laws of the state of its incorporation. Each TARGET Subsidiary has the corporate
power and authority to carry on its business as now conducted and to own, lease
and operate its Assets. Each TARGET Subsidiary is duly qualified or licensed to
transact business as a foreign corporation in good standing in the States of the
United States and foreign jurisdictions where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or licensed,
except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET.
SECTION 4.2 AUTHORITY; NO BREACH.
(a) TARGET has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of TARGET,
subject to the approval of this Agreement by the holders of a majority of the
outstanding TARGET Capital Stock (determined on an as-converted basis). Subject
to such requisite stockholder approval, this Agreement represents a legal,
valid, and binding obligation of TARGET, enforceable against TARGET in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
TARGET, nor the consummation by TARGET of the transactions contemplated hereby,
nor compliance by TARGET with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of TARGET's Articles of
Incorporation or Bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of TARGET under, any Contract or Permit of TARGET, where such Default or
Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other than Consents,
filings or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET, no notice to,
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filing with, or Consent of any public body or authority is necessary for the
consummation by TARGET of the Merger and the other transactions contemplated in
this Agreement.
SECTION 4.3 CAPITAL STOCK.
(a) The authorized capital stock of TARGET consists of (i)
50,000,000 shares of TARGET Common Stock, of which 9,900,000 shares are issued
and outstanding as of the date of this Agreement; and (ii) 50,000,000 shares of
TARGET Preferred Stock, of which 910,000 shares designated as Series A Preferred
Stock are issued and outstanding as of the date of this Agreement. All of the
issued and outstanding shares of capital stock of TARGET are duly and validly
issued and outstanding and are fully paid and nonassessable under the OCGA. None
of the outstanding shares of capital stock of TARGET has been issued in
violation of any preemptive rights of the current or past stockholders of
TARGET. The TARGET Disclosure Letter sets forth the aggregate liquidation
preference of the TARGET Preferred Stock.
(b) Except as set forth in Section 4.3(a) above, there are no
shares of capital stock or other equity securities of TARGET outstanding and no
outstanding options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of TARGET or
contracts, commitments, understandings, or arrangements by which TARGET is or
may be bound to issue additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its capital
stock.
(c) The TARGET Disclosure Letter sets forth a true, correct and
complete list of all shares of capital stock or other ownership interests
authorized, issued and outstanding of each TARGET Subsidiary. The outstanding
shares of capital stock or other ownership interests of each TARGET Subsidiary
have been duly authorized and are validly issued, fully paid and nonassessable,
are owned either directly or indirectly by TARGET and are free and clear of all
Liens. Except as set forth in the TARGET Disclosure Letter, there are no shares
of capital stock or other equity securities of any TARGET Subsidiary outstanding
and no outstanding options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of any TARGET
Subsidiary or contracts, commitments, understandings, or arrangements by which
any TARGET Subsidiary is or may be bound to issue additional shares of its
capital stock or options, warrants, or rights to purchase or acquire any
additional shares of its capital stock.
SECTION 4.4 FINANCIAL STATEMENTS. TARGET has previously
delivered to PURCHASER copies of all TARGET Financial Statements for periods
ended prior to the date hereof and will deliver to PURCHASER copies of all
TARGET Financial Statements prepared subsequent to the date hereof. The TARGET
Financial Statements (as of the dates thereof) (a) are in accordance with the
books and records of TARGET, which are complete and correct in all material
respects and which have been or will have been, as the case may be, maintained
in accordance with good business practices, and (b) present or will present, as
the case may be, fairly in all material respects the financial position of
TARGET as of the dates indicated and the results of operations, changes in
stockholders' equity, and cash flows of TARGET for the periods indicated.
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SECTION 4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set
forth in the TARGET Disclosure Letter, no TARGET Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET, except Liabilities which are accrued or reserved
against in the balance sheets of TARGET as of September 30, 2000 included in the
TARGET Financial Statements or reflected in the notes thereto. Except as set
forth in the TARGET Disclosure Letter, no TARGET Company has incurred or paid
any Liability since September 30, 2000, except for such Liabilities incurred or
paid in the ordinary course of business consistent with past business practice
and which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET.
SECTION 4.6 ABSENCE OF CERTAIN CHANGES OF EVENTS. Except as set
forth in the TARGET Disclosure Letter, since September 30, 2000, (a) there have
been no events, changes or occurrences which have had, or are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on TARGET,
and (b) the TARGET Companies have not taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if taken
after the date of this Agreement, would represent or result in a material breach
or violation of any of the covenants and agreements of TARGET provided in
Article 7 of this Agreement.
SECTION 4.7 TAX MATTERS.
(a) All Tax returns required to be filed by or on behalf of any of
the TARGET Companies have been duly filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
September 30, 2000, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on TARGET, and all returns filed are complete and accurate to the
Knowledge of TARGET. All Taxes shown on filed returns have been paid. As of the
date of this Agreement, there is no audit examination, deficiency, or refund
Litigation with respect to any Taxes that is reasonably likely to result in a
determination that would have, individually or in the aggregate, a Material
Adverse Effect on TARGET, except as reserved against in the TARGET Financial
Statements delivered prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid.
(b) None of the TARGET Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect, and no unpaid tax deficiency has been asserted
in writing against or with respect to any TARGET Company, which deficiency is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET.
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(c) Adequate provision for any Taxes due or to become due for the
TARGET Companies for the period or periods through and including the date of the
respective TARGET Financial Statements has been made and is reflected on such
TARGET Financial Statements.
(d) Deferred Taxes of the TARGET Companies have been provided for
in accordance with GAAP.
(e) The TARGET Companies are in compliance with, and its records
contain all information and documents (including, without limitation, properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code, except for such
instances of noncompliance and such omissions as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on TARGET.
SECTION 4.8 TARGET PATENTS, TRADEMARKS AND TRADE NAMES. The
TARGET Disclosure Letter sets forth a true and complete list of: (a) all
material patents, trademarks and trade names (including all federal, state and
foreign registrations pertaining thereto) and all material copyright
registrations owned by any TARGET Company (collectively, the "Proprietary
Intellectual Property"); and (b) all patents, trademarks, trade names,
copyrights and all technology and processes used by any TARGET Company in its
business which are material to its business and are used pursuant to a license
or other right granted by a third party (collectively, the "Licensed
Intellectual Property" and, together with the Proprietary Intellectual Property,
herein referred to as "Intellectual Property"), excluding off the shelf
commercially available software. A true and complete list of all such licenses
with respect to Licensed Intellectual Property is set forth in the TARGET
Disclosure Letter, excluding off the shelf commercially available software.
TARGET has a valid license for all off the shelf software it currently uses.
Each of the material federal, state and foreign registrations pertaining to the
Proprietary Intellectual Property is valid and in full force and effect. All
material required filings in association with such registrations have been
properly made and all required fees have been paid. The TARGET Companies own, or
have the right to use pursuant to valid and effective agreements, all
Intellectual Property, and the consummation of the transactions contemplated
hereby will not alter or impair any such rights, except for such defects in
title or other matters which in the aggregate would not have a Material Adverse
Effect on TARGET. No claims are pending against any TARGET Company by any person
with respect to the use of any Intellectual Property or challenging or
questioning the validity or effectiveness of any license or agreement relating
to the same, and, to the Knowledge of TARGET, the current use by any of the
TARGET Companies of the Intellectual Property does not infringe on the rights of
any third party. The TARGET Disclosure Letter sets forth a list of all
jurisdictions in which any TARGET Company is operating under a trade name, and
each jurisdiction in which any such trade name is registered.
SECTION 4.9 PROPRIETARY INFORMATION. TARGET is the sole owner of
or possesses sufficient legal rights to all data, trade secrets, information and
proprietary rights and processes presently used by TARGET or necessary for the
conduct of the TARGET's business as conducted and as presently proposed to be
conducted (the "Information Rights"), free and
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clear of any Liens of any nature whatsoever except as described in TARGET
Disclosure Letter. TARGET has taken all reasonable actions to protect the
Information Rights. The business conducted or proposed to be conducted by TARGET
does not and will not cause TARGET to infringe or violate any of the Information
Rights of any other Person, and except as set forth in TARGET Disclosure Letter,
does not and will not require TARGET to obtain any license or other agreement to
use any Information Rights currently in existence of others. There are no
outstanding options, licenses or agreements of any kind relating to the
Information Rights, nor is TARGET bound by or a party to any options, licenses
or agreements of any kind with respect to the Information Rights of any other
Person. Except as set forth in TARGET Disclosure Letter, TARGET has not received
any communications alleging that TARGET has violated or, by conducting its
business as presently conducted or as proposed to be conducted, would violate
any of the Information Rights of any Person. TARGET is not aware that any
employee of TARGET is obligated under any contract (including any license,
covenant or commitment of any nature), or subject to any judgment, decree or
order of any court or administrative agency, that would conflict or interfere
with (i) the performance of such employee's duties as an officer, employee or
director of TARGET, (ii) the use of such employee's best reasonable efforts to
promote the interests of TARGET, or (iii) TARGET's business as conducted or as
proposed to be conducted. TARGET does not believe that it is or will be
necessary to use any inventions or works of authorship of its employees (or
persons it currently intends to hire) made prior to their employment by TARGET.
SECTION 4.10 ASSETS. Except as set forth in the TARGET Disclosure
Letter or as disclosed or reserved against in the TARGET Financial Statements,
each TARGET Company has good and marketable title, free and clear of all Liens,
to all of its Assets. All material tangible properties used in the businesses of
the TARGET Companies are AS IS WHERE IS, and no other warranty as to their
condition or fitness for any use is expressed or implied hereby. All Assets
which are material to the business of the TARGET Companies, held under leases or
subleases by any TARGET Company are held under valid Contracts enforceable in
accordance with their respective terms (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. The
policies of fire, theft, liability, and other insurance maintained with respect
to the Assets or business of the TARGET Companies previously provided to
PURCHASER are in full force and effect (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought). The Assets of the TARGET Companies include all assets which are
used in the operation of the business of the TARGET Companies as presently
conducted.
SECTION 4.11 ENVIRONMENTAL MATTERS. Except as set forth in the
TARGET Disclosure Letter:
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(a) Each TARGET Company, (and to its Knowledge its Participation
Facilities and its Loan Properties) are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on TARGET.
(b) There is no Litigation pending or, to the Knowledge of TARGET,
threatened before any court, governmental agency or authority or other forum in
which any TARGET Company or any of its Participation Facilities has been or,
with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous Material
or oil, whether or not occurring at, on, under or involving a site owned, leased
or operated by any TARGET Company or any of its Participation Facilities, except
for such Litigation pending or, to the Knowledge of TARGET, threatened that is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
(c) There is no Litigation pending which TARGET has received
proper notice or service thereof or, to the Knowledge of TARGET, threatened
before any court, governmental agency or board or other forum in which any of
its Loan Properties (or any TARGET Company in respect of such Loan Property) has
been or, with respect to threatened litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material or oil, whether or not occurring at, on,
under or involving a Loan Property, except for such Litigation pending or, to
the Knowledge of TARGET, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
(d) To the Knowledge of TARGET, there is no reasonable basis for
any Litigation of a type described in subsections (b) or (c) of this Section
4.11, except such as is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(e) During the period of (i) any TARGET Company's ownership or
operation of any of their respective current properties, (ii) any TARGET
Company's participation in the management of any Participation Facility, or
(iii) any TARGET Company's holding of a security interest in a Loan Property,
there have been no releases of Hazardous Material or oil in, on, under or
affecting any such property, Participation Facility, or to the Knowledge of
TARGET, Loan Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
(f) Prior to the period of (i) any TARGET Company's ownership or
operation of any of their respective current properties, (ii) any TARGET
Company's participation in the management of any Participation Facility, or
(iii) any TARGET Company's holding of a security interest in a Loan Property, to
the Knowledge of any TARGET Company, there were no releases of Hazardous
Material or oil in, on, under or affecting any such property, Participation
Facility or Loan Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET.
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SECTION 4.12 COMPLIANCE WITH LAWS.
(a) Each TARGET Company has in effect all Permits necessary for it
to own, lease or operate its Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
TARGET, and there has occurred no Default under any such Permit, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(b) Except as set forth in the TARGET Disclosure Letter, no TARGET
Company:
(i) is in violation of any Laws, Orders or Permits
applicable to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET; and
(ii) to its Knowledge, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (A) asserting that
any TARGET Company is not in compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET, (B) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET, or (C) requiring any TARGET
Company to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment or memorandum of understanding, or to
adopt any Board resolution or similar undertaking, which restricts materially
the conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of dividends.
SECTION 4.13 LABOR RELATIONS. No TARGET Company is the subject of
any Litigation asserting that it has committed an unfair labor practice (within
the meaning of the National Labor Relations Act or comparable state law) or
seeking to compel it to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike or other labor dispute
involving any TARGET Company, pending or, to the Knowledge of any TARGET
Company, threatened, nor to the Knowledge of any TARGET Company, is there any
activity involving any TARGET Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
SECTION 4.14 EMPLOYEE BENEFIT PLANS.
(a) TARGET has set forth in the TARGET Disclosure Letter,
and delivered or made available to PURCHASER, copies in each case of all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plans, all medical, vision, dental, or other health plans, all life insurance
plans, and all other employee benefit plans or fringe benefit plans, including,
without limitation, "employee benefit plans," as that term is defined in Section
3(3) of ERISA, currently adopted,
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maintained by, sponsored in whole or in part by, or contributed to by TARGET or
any Affiliate thereof for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries and under
which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "TARGET Benefit Plans"). Any of the TARGET Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "TARGET ERISA Plan." Each TARGET ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j)) of the
Internal Revenue Code) is referred to herein as a "TARGET Pension Plan." No
TARGET Pension Plan is or has been a multi-employer plan within the meaning of
Section 3(37) of ERISA.
(b) All TARGET Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on TARGET. Each
TARGET ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and TARGET is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. To the
Knowledge of TARGET, TARGET has not engaged in a transaction with respect to any
TARGET Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof would subject TARGET to a tax or penalty imposed
by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA
in amounts which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(c) No TARGET ERISA Plan which is a defined benefit
pension plan has any "unfunded current liability," as that term is defined in
Section 302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for such
plan's most recent actuarial valuation. Since the date of the most recent
actuarial valuation, there has been (i) no material change in the financial
position of any TARGET Pension Plan, (ii) no change in the actuarial assumptions
with respect to any TARGET Pension Plan, and (iii) no increase in benefits under
any TARGET Pension Plan as a result of plan amendments or changes in applicable
law, which is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on TARGET or materially adversely affect the funding
status of any such plan. Neither any TARGET Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by TARGET, or the single-employer plan of any
entity which is considered one employer with TARGET under Section 4001 of ERISA
or Section 414 of the Internal Revenue Code or Section 302 of ERISA (whether or
not waived) (an "ERISA Affiliate") has an "accumulated funding deficiency"
within the meaning of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, which is reasonably likely to have a Material Adverse Effect on TARGET.
TARGET has not provided, and is not required to provide, security to a TARGET
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(d) Within the six-year period preceding the Effective
Time, to TARGET's Knowledge, no Liability under Subtitle C or D of Title IV or
ERISA has been or is expected to be incurred by any TARGET Company with respect
to any ongoing, frozen or terminated single-employer plan or the single-employer
plan of any ERISA Affiliate, which Liability is
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reasonably likely to have a Material Adverse Effect on TARGET. Except as set
forth in the TARGET Disclosure Letter, no TARGET Company has incurred any
withdrawal Liability with respect to a multi-employer plan under Subtitle B of
Title TV or ERISA (regardless of whether based on contributions of an ERISA
Affiliate), which Liability is reasonably likely to have a Material Adverse
Effect on TARGET. No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any TARGET Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(e) No TARGET Company has any obligations for retiree
health and life benefits under any of the TARGET Benefit Plans and there are no
restrictions on the rights of TARGET to amend or terminate any such Plan without
incurring any Liability thereunder, which Liability is reasonably likely to have
a Material Adverse Effect on TARGET.
(f) Except as set forth in the TARGET Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of any TARGET Company
from any TARGET Company under any TARGET Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any TARGET Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including, without limitation, entitlements under any
executive compensation, supplemental retirement, or employment agreement) of
employees and former employees of the TARGET Companies and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the TARGET Financial
Statements to the extent required by and in accordance with GAAP.
SECTION 4.15 MATERIAL CONTRACTS. Except as set forth in the
TARGET Disclosure Letter or otherwise reflected in the TARGET Financial
Statements, no TARGET Company, nor any of their respective Assets, businesses or
operations, is a party to, or is bound or affected by, or receives benefits
under, (a) any employment, severance, termination, consulting or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $50,000, and (b) any Contract relating to the borrowing of money by
any TARGET Company or the guarantee by any TARGET Company of any such obligation
(other than Contracts evidencing deposit liabilities, purchases of federal
funds, fully secured repurchase agreements, trade payables, and Contracts
relating to borrowings or guarantees made in the ordinary course of business)
(together with all Contracts referred to in Sections 4.10 and 4.14 of this
Agreement, the "TARGET Contracts"). No TARGET Company is in Default under any
TARGET Contract, except for such defaults as would not have a Material Adverse
Effect on TARGET. All of the indebtedness of any TARGET Company for money
borrowed is prepayable at any time by such TARGET Company without penalty or
premium.
SECTION 4.16 LEGAL PROCEEDINGS. Except as set forth in the TARGET
Disclosure Letter, there is no Litigation instituted or pending or, to the
Knowledge of TARGET, threatened
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(or unasserted but considered probable of assertion and which, if asserted,
would have at least a reasonable probability of an unfavorable outcome) against
TARGET, or against any Asset, interest, or right of any TARGET Company, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on TARGET, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any TARGET Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on TARGET.
SECTION 4.17 REPORTS. Except as set forth in the TARGET
Disclosure Letter, since September 30, 2000, each TARGET Company has timely
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with all Regulatory
Authorities, except for such reports, the failure of which to file would not
have a Material Adverse Effect on TARGET. As of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of their respective dates, none of such reports or documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
SECTION 4.18 STATEMENTS TRUE AND CORRECT. No statement,
certificate, instrument or other writing furnished or to be furnished by TARGET
or any Affiliate thereof to PURCHASER pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by TARGET or any Affiliate thereof for inclusion in any documents to be
filed by TARGET or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that TARGET or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
SECTION 4.19 ACCOUNTING, TAX AND REGULATORY MATTERS. Except as
set forth in the TARGET Disclosure Letter, neither TARGET nor any Affiliate
thereof has taken any action or has any Knowledge of any fact or circumstance
that is reasonably likely to materially impede or delay receipt of any Consents
of Regulatory Authorities referred to in Section 9.1(b) of this Agreement or
result in the imposition of a condition or restriction of the referred to in the
second sentence of such Section. To the Knowledge of TARGET, there exists no
fact, circumstance, or reason why the requisite Consents referred to in Section
9.1(b) of this Agreement cannot be received in a timely manner without the
imposition of any condition or restriction of the type described in the second
sentence of such Section 9.1(b).
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SECTION 4.20 CHARTER PROVISIONS. TARGET has taken all action so
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws or other governing instruments of TARGET or restrict or impair the
ability of PURCHASER to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of TARGET that may be acquired or controlled
by it.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
With such exceptions, if any, as may be set forth in a letter (the
"PURCHASER Disclosure Letter") to be delivered by PURCHASER to TARGET on the
date hereof or as set forth in PURCHASER's SEC Documents, PURCHASER hereby
represents and warrants to TARGET as follows:
SECTION 5.1 ORGANIZATION, STANDING AND POWER. PURCHASER is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada. PURCHASER has the corporate power and authority to
carry on its business as now conducted and to own, lease and operate its Assets.
PURCHASER is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER.
SECTION 5.2 AUTHORITY; NO BREACH.
(a) PURCHASER has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of PURCHASER.
This Agreement represents a legal, valid, and binding obligation of PURCHASER,
enforceable against PURCHASER in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
PURCHASER, nor the consummation by PURCHASER of the transactions contemplated
hereby, nor compliance by PURCHASER with any of the provisions hereof will (i)
conflict with or result in a breach of
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any provision of PURCHASER's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any PURCHASER Company under,
any Contract or Permit of any PURCHASER Company, where such Default or Lien, or
any failure to obtain such Consent, is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on PURCHASER, or, (iii) subject
to receipt of the requisite approvals referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to any PURCHASER Company or any
of their respective Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, no notice to, filing with, or Consent of
any public body or authority is necessary for the consummation by PURCHASER of
the Merger and the other transactions contemplated in this Agreement.
SECTION 5.3 CAPITAL STOCK.
(a) The authorized capital stock of PURCHASER consists of
25,000,000 shares of PURCHASER Common Stock, of which 950,953 shares are issued
and outstanding as of the date of this Agreement. All of the issued and
outstanding shares of PURCHASER Common Stock are, and all of the shares of
PURCHASER Common Stock to be issued in exchange for shares of TARGET Capital
Stock upon consummation of the Merger, when issued in accordance with the terms
of this Agreement, will be, duly and validly issued and outstanding and fully
paid and nonassessable under the NGCL. None of the outstanding shares of
PURCHASER Common Stock has been, and none of the shares of PURCHASER Common
Stock to be issued in exchange for shares of TARGET Capital Stock upon
consummation of the Merger will be, issued in violation of any preemptive rights
of the current or past stockholders of PURCHASER.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
set forth in the PURCHASER Disclosure Letter or in PURCHASER's sec Documents,
there are no shares of capital stock or other equity securities of PURCHASER
outstanding and no outstanding options, warrants, scrip, rights to subscribe to,
calls, or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of
PURCHASER or contracts, commitments, understandings, or arrangements by which
PURCHASER is or may be bound to issue additional shares of its capital stock or
options, warrants, or rights to purchase or acquire any additional shares of its
capital stock.
SECTION 5.4 PURCHASER SEC REPORTS. PURCHASER has heretofore made
available to TARGET its SEC Documents. As of the date thereof, PURCHASER's SEC
Documents were prepared in all material respects in accordance with the 1934 Act
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under
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which they were made, not misleading. Except as set forth in the Purchaser
Disclosure Letter, PURCHASER has timely filed all SEC Documents required to be
filed by it pursuant to the 1933 Act and the 1934 Act which complied as to form,
at the time such form, document or report was filed, in all material respects
with the applicable requirements of the 1933 Act and the 1934 Act.
SECTION 5.5 FINANCIAL STATEMENTS. The PURCHASER Financial
Statements (as of the dates thereof and for the periods covered thereby) (a) are
or, if dated after the date of this Agreement, will be in accordance with the
books and records of the PURCHASER Companies, which are or will be, as the case
may be, complete and correct in all material respects and which have been or
will have been, as the case may be, maintained in accordance with good business
practices, and (b) present or will present, as the case may be, fairly in all
material respects the consolidated financial position of the PURCHASER Companies
as of the dates indicated and the consolidated results of operations, changes in
stockholders' equity, and cash flows of the PURCHASER Companies for the periods
indicated, in accordance with GAAP (subject to exceptions as to consistency
specified therein or as may be indicated in the notes thereto or, in the case of
interim financial statements, to normal recurring year-end adjustments that are
not material and the absence of notes and schedules).
SECTION 5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set
forth in the PURCHASER Disclosure Letter or in PURCHASER's SEC Documents, no
PURCHASER Company has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER, except
Liabilities which are accrued or reserved against in the PURCHASER Financial
Statements or reflected in the notes thereto. Except as set forth in the
PURCHASER Disclosure Letter or in PURCHASER's SEC Documents, no PURCHASER
Company has incurred or paid any Liability since September 30, 2000, except for
such Liabilities incurred or paid in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
SECTION 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in the PURCHASER Disclosure Letter or in PURCHASER's SEC Documents, since
September 30, 2000, except as disclosed in SEC Documents filed by PURCHASER
prior to the date of this Agreement, (a) there have been no events, changes or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PURCHASER, and (b) the PURCHASER
Companies have not taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after the date of this
Agreement, would represent or result in a material breach or violation of any of
the covenants and agreements of PURCHASER provided in Article 7 of this
Agreement.
SECTION 5.8 TAX MATTERS.
(a) All Tax returns required to be filed by or on behalf of any of
the PURCHASER Companies have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
September 30, 2000, and on or before the date of
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the most recent fiscal year end immediately preceding the Effective Time, except
to the extent that all such failures to file, taken together, are not reasonably
likely to have a Material Adverse Effect on PURCHASER, and all returns filed are
complete and accurate to the Knowledge of PURCHASER. All Taxes shown on filed
returns have been paid. As of the date of this Agreement, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes that is
reasonably likely to result in a determination that would have, individually or
in the aggregate, a Material Adverse Effect on PURCHASER, except as reserved
against in the PURCHASER Financial Statements delivered prior to the date of
this Agreement. All Taxes and other Liabilities due with respect to completed
and settled examinations or concluded Litigation have been paid.
(b) None of the PURCHASER Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect, and no unpaid tax deficiency has been asserted
in writing against or with respect to any PURCHASER Company, which deficiency is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER.
(c) Adequate provision for any Taxes due or to become due for any
of the PURCHASER Companies for the period or periods through and including the
date of the respective PURCHASER Financial Statements has been made and is
reflected on such PURCHASER Financial Statements.
(d) Deferred Taxes of the PURCHASER Companies have been provided
for in accordance with GAAP.
SECTION 5.9 ENVIRONMENTAL MATTERS. Except as set forth in the
PURCHASER Disclosure Letter or in PURCHASER's SEC Documents:
(a) Each PURCHASER Company, its Participation Facilities and its
Loan Properties are, and have been, in compliance with all Environmental Laws,
except for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PURCHASER.
(b) There is no Litigation pending or, to the Knowledge of
PURCHASER, threatened before any court, governmental agency or authority or
other forum in which any PURCHASER Company or any of its Participation
Facilities has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material (as defined below) or oil, whether or not occurring at, on,
under or involving a site owned, leased or operated by any PURCHASER Company or
any of its Participation Facilities, except for such Litigation pending or, to
the Knowledge of PURCHASER, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
(c) There is no Litigation pending or, to the Knowledge of
PURCHASER, threatened before any court, governmental agency or board or other
forum in which any of its Loan Properties (or any PURCHASER Company in respect
of such Loan Property) has been or, with respect to threatened Litigation, may
be named as a defendant or potentially responsible
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party (i) for alleged noncompliance (including by any predecessor), with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material or oil, whether or not occurring at, on, under or involving a
Loan Property, except for such Litigation pending or, to the Knowledge of
PURCHASER, threatened that is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PURCHASER.
(d) To the Knowledge of PURCHASER, there is no reasonable basis
for any Litigation of a type described in subsections (b) or (c), except such as
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
(e) During the period of (i) any PURCHASER Company's ownership or
operation of any of their respective current properties, (ii) any PURCHASER
Company's participation in the management of any Participation Facility, or
(iii) any PURCHASER Company's holding of a security interest in a Loan Property,
there have been no releases of Hazardous Material or oil in, on, under or
affecting such property, Participation Facility, or to the Knowledge of
PURCHASER, Loan Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PURCHASER.
(f) Prior to the period of (i) any PURCHASER Company's ownership
or operation of any of their respective current properties, (ii) any PURCHASER
Company's participation in the management of any Participation Facility, or
(iii) any PURCHASER Company's holding of a security interest in a Loan Property,
to the Knowledge of PURCHASER, there were no releases of Hazardous Material or
oil in, on, under or affecting any such property, Participation Facility or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PURCHASER.
SECTION 5.10 COMPLIANCE WITH LAWS.
(a) Each PURCHASER Company has in effect all Permits necessary for
it to own, lease or operate its Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
PURCHASER, and there has occurred no Default under any such Permit, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER.
(b) Except as set forth in the PURCHASER Disclosure Letter or in
PURCHASER's SEC Documents, no PURCHASER Company:
(i) is in violation of any Laws, Orders or Permits
applicable to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER; or
(ii) to its Knowledge, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (A) asserting that
any PURCHASER Company is not in compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on PURCHASER, (B) threatening to revoke any Permits, the
revocation of
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which is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER, or (C) requiring any PURCHASER Company to enter
into or consent to the issuance of a cease and desist order, formal agreement,
directive, commitment or memorandum of understanding, or to adopt any Board
resolution or similar undertaking, which restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, its credit or
reserve policies, its management, or the payment of dividends.
SECTION 5.11 LEGAL PROCEEDINGS. Except as set forth in the
PURCHASER Disclosure Letter or in PURCHASER's SEC Documents, there is no
Litigation instituted or pending or, to the Knowledge of PURCHASER, threatened
(or unasserted but considered probable of assertion and which, if asserted,
would have at least a reasonable probability of an unfavorable outcome) against
PURCHASER, or against any asset, interest, or right of PURCHASER, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PURCHASER, nor are there any Orders of any Regulatory Authorities,
other governmental authorities, or arbitrators outstanding against PURCHASER,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PURCHASER.
SECTION 5.12 REPORTS. Except as set forth in the PURCHASER
Disclosure Letter or in PURCHASER's SEC Documents, since September 30, 2000,
each PURCHASER Company has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with all Regulatory Authorities. As of their respective dates,
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all
applicable Laws. As of its respective date, none of such reports and documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 5.13 STATEMENTS TRUE AND CORRECT. No statement,
certificate, instrument or other writing furnished or to be furnished by any
PURCHASER Company or any Affiliate thereof to TARGET pursuant to this Agreement
or any other document, agreement or instrument referred to herein contains or
will contain any untrue statement of material fact or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any PURCHASER Company or any Affiliate
thereof for inclusion in any documents to be filed by any PURCHASER Company or
any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that any PURCHASER Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
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ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
MERGER SUB hereby represents and warrants to TARGET as follows:
SECTION 6.1 ORGANIZATION, STANDING AND POWER. MERGER SUB is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Georgia. MERGER SUB has the corporate power and authority
to carry on its duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdiction where the character of its assets or the nature of conduct of its
business required it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on MERGER SUB.
SECTION 6.2 AUTHORITY; NO BREACH.
(a) MERGER SUB has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of MERGER SUB.
This Agreement represents a legal, valid, and binding obligation of MERGER SUB,
enforceable against MERGER SUB in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by MERGER
SUB, nor the consummation by MERGER SUB of the transactions contemplated hereby,
nor compliance by MERGER SUB with any of the provisions hereof will (i) conflict
with or result in a breach of any provision of MERGER SUB's Articles of
Incorporation or Bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of MERGER SUB under, any Contract or Permit of MERGER SUB, where such
Default or Lien, or any failure to obtain such Consent, is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on MERGER SUB,
or, (iii) subject to receipt of the requisite approvals referred to in Section
9.1(b) of this Agreement, violate any Law or Order applicable to MERGER SUB or
any of its Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other than Consents,
filings or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
MERGER SUB, no notice
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to, filing with, or Consent of any public body or authority is necessary for the
consummation by MERGER SUB of the Merger and the other transactions contemplated
in this Agreement.
ARTICLE 7.
CONDUCT OF BUSINESS PENDING CONSUMMATION
SECTION 7.1 AFFIRMATIVE COVENANTS OF TARGET. Unless the prior
written consent of PURCHASER and MERGER SUB shall have been obtained, and except
as otherwise contemplated herein, TARGET shall: (a) operate its business in the
usual, regular, and ordinary course; (b) preserve intact its business
organization and Assets and maintain its rights and franchises; (c) use its
reasonable efforts to cause its representations and warranties to be correct at
all times; (d) use its reasonable efforts to retain its key employees and to
preserve its current relationships with all Persons with whom it has significant
business relations; and (e) take no action which would (i) adversely affect the
ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the second sentence of Section 9.1(b) of this Agreement or (ii)
adversely affect in any material respect the ability of either Party to perform
its covenants and agreements under this Agreement.
SECTION 7.2 NEGATIVE COVENANTS OF TARGET. Except as otherwise
contemplated by this Agreement, from the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, TARGET
covenants and agrees that it will not do or agree or commit to do any of the
following without the prior written consent of the chief executive officer or
chief financial officer of PURCHASER, which consent shall not be unreasonably
withheld, conditioned or delayed:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of TARGET; or
(b) incur any additional debt obligation or other obligation for
borrowed money other than pursuant to existing lines of credit, trade debt or
additional bridge financing not in excess of an aggregate of $50,000 except in
the ordinary course of the business of TARGET consistent with past practices, or
impose, or suffer the imposition, on any share of stock held by TARGET of any
Lien or permit any such Lien to exist, except with regard to Liens on the stock
of TARGET set forth in the TARGET Disclosure Letter; or
(c) repurchase, redeem, or otherwise acquire or exchange (other
than exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of TARGET, or declare or pay any dividend or make any other
distribution in respect of TARGET's capital stock; or
(d) except for this Agreement, or pursuant to the exercise of
stock options outstanding as of the date hereof and pursuant to the terms
thereof in existence on the date hereto, or as set forth in the TARGET
Disclosure Letter, issue, sell, pledge, encumber, authorize the issuance of, or
enter into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of or otherwise permit to become outstanding, any additional shares of
TARGET
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Common Stock or any other capital stock of TARGET, or any stock appreciation
rights, or any option, warrant, conversion, or other right to acquire any such
stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of
TARGET or issue or authorize the issuance of any other securities in respect of
or in substitution for shares of TARGET Common Stock or sell, lease, mortgage or
otherwise dispose of or otherwise encumber (i) any shares of capital stock of
TARGET or (ii) any Asset having a book value in excess of $50,000 other than in
the ordinary course of business for reasonable and adequate consideration; or
(f) grant any increase in compensation or benefits to the
employees or officers of TARGET (including such discretionary increases as may
be contemplated by existing employment agreements), except in accordance with
past practice set forth in the TARGET Disclosure Letter or as required by Law;
pay any bonus except in accordance with past practice set forth in the TARGET
Disclosure Letter or the provisions of any applicable program or plan adopted by
its Board of Directors prior to the date of this Agreement; enter into or amend
any severance agreements with officers of TARGET; grant any increase in fees or
other increases in compensation or other benefits to directors of TARGET except
in accordance with past practice as described in the TARGET Disclosure Letter;
or
(g) except with regard to the employment agreements referenced in
Section 7.2(g) of the TARGET Disclosure Schedule, enter into or amend any
employment Contract between TARGET and any Person (unless such amendment is
required by Law) that TARGET does not have the unconditional right to terminate
without Liability (other than Liability for services already rendered), at any
time on or after the Effective Time; or
(h) adopt any new employee benefit plan of TARGET or make any
material change in or to any existing employee benefit plans of TARGET other
than any such change that is required by Law or that, in the opinion of counsel,
is necessary or advisable to maintain the tax qualified status of any such plan;
or
(i) make any significant change in any accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in regulatory accounting requirements or GAAP; or
(j) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of TARGET for money
damages in excess of $50,000 or which involves material restrictions upon the
operations of TARGET; or
(k) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims; or
(l) make, or commit itself to make, any capital expenditures in
excess of $50,000.
SECTION 7.3 COVENANTS OF PURCHASER. Unless the prior written
consent of TARGET shall have been obtained, and except as otherwise contemplated
herein, PURCHASER shall: (a) operate its business in the usual, regular, and
ordinary course; (b) preserve intact its business organization and Assets and
maintain its rights and franchises; (c) use
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its reasonable efforts to cause its representations and warranties to be correct
at all times; (d) use its reasonable efforts to retain its key employees and to
preserve its current relationships with all Persons with whom it has significant
business relations; and (e) take no action which would (i) adversely affect the
ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the second sentence of Section 9.1(b) of this Agreement or (ii)
adversely affect in any material respect the ability of either Party to perform
its covenants and agreements under this Agreement.
SECTION 7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to
give written notice promptly to the other Party upon becoming aware of the
occurrence or impending occurrence of any event or circumstance relating to it
or any of its Subsidiaries which (a) is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on it or (b) is reasonably likely
to cause or constitute a material breach of any of its representations,
warranties, or covenants contained herein, and to use its reasonable best
efforts to prevent or promptly to remedy the same.
SECTION 7.5 REPORTS. Each Party shall file all reports required
to be filed by it with Regulatory Authorities between the date of this Agreement
and the Effective Time and shall deliver to the other Party copies of all such
reports promptly after the same are filed. If financial statements are contained
in any such reports filed with the SEC, such financial statements will fairly
present in all material respects the consolidated financial position of the
entity filing such statements as of the dates indicated and the consolidated
results of operations, changes in stockholders' equity, and cash flows for the
periods then ended in accordance with GAAP (subject in the case of interim
financial statements to normal recurring year-end adjustments that are not
material). As of their respective dates, such reports filed with the SEC will
comply in all material respects with the Securities Laws and will not contain
any untrue statement of a material fact or omit to state 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. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in accordance with Laws applicable to
such reports.
ARTICLE 8.
ADDITIONAL AGREEMENTS
SECTION 8.1 STOCKHOLDER APPROVAL.
(a) TARGET shall promptly after the date hereof take all necessary
action in accordance with the OCGA and its Articles of Incorporation and Bylaws
to obtain the written consent of the TARGET stockholders approving the Merger as
soon as practicable. TARGET shall use its reasonable best efforts to solicit
from TARGET stockholders written consents in favor of the Merger and shall take
all other action necessary or advisable to secure the vote or consent of
stockholders required to effect the Merger.
(b) At a vote of the stockholders of TARGET to consider and
approve the Merger and this Agreement, Xxxx X. Xxxxxx, Xxxx X. Xxxxxxxx and Xxxx
X. Xxxxx hereby agree that
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each shall vote all shares of TARGET Capital Stock held by him in favor of the
Merger and this Agreement.
SECTION 8.2 APPLICATIONS. PURCHASER shall promptly prepare and
file, and TARGET shall cooperate in the preparation and, where appropriate,
filing of, applications with all Regulatory Authorities having jurisdiction over
the transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. As soon
as practicable after delivery thereof to or receipt thereof from the appropriate
Regulatory Authorities, PURCHASER shall deliver or cause to be delivered to
TARGET two (2) copies of (a) each application or notice filed with such
Regulatory Authorities in connection with the Merger, (b) all correspondence
between such Regulatory Authorities and PURCHASER in connection with the Merger,
and (c) any responses to any requests for additional information delivered by
PURCHASER to such Regulatory Authorities in connection with the Merger.
SECTION 8.3 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the
terms and conditions of this Agreement, each Party agrees to use, and to cause
its Subsidiaries to use, its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable Laws, as promptly as practicable so as to
permit consummation of the Merger at the earliest possible date and to otherwise
enable consummation of the transactions contemplated hereby and shall cooperate
fully with the other Party hereto to that end, including, without limitation,
using its reasonable best efforts to lift or rescind any Order adversely
affecting its ability to consummate the transactions contemplated herein and to
cause to be satisfied the conditions referred to in Article 9 of this Agreement.
Each Party shall use, and shall cause each of its Subsidiaries to use, its
reasonable best efforts to obtain all Consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement.
SECTION 8.4 INVESTIGATION AND CONFIDENTIALITY.
(a) Between the date of this Agreement and the Effective Time,
TARGET will provide PURCHASER and its accountants, investment bankers, counsel
and other authorized representatives full access, during reasonable business
hours and under reasonable circumstances to any and all of TARGET's premises,
properties, contracts, commitments, books, records and other information
(including tax returns filed and those in preparation) and will cause its
respective officers and employees to furnish to PURCHASER and its authorized
representatives any and all financial, technical and operating data and other
information pertaining to TARGET's business, as PURCHASER shall from time to
time reasonably request. Prior to the Effective Time, each Party will keep the
other Party advised of all material developments relevant to its business and to
consummation of the Merger.
(b) Except as may be required by applicable law or legal process,
and except for such disclosure to those of its directors, officers, employees
and representatives as may be appropriate or required in connection with the
transactions contemplated hereby, each Party shall hold in confidence all
nonpublic information obtained from the other Party (including work papers and
other material derived therefrom) as a result of this Agreement or in connection
with the
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transactions contemplated hereby (whether so obtained before or after the
execution hereof) until such time as the Party providing such information
consents to its disclosure or such information becomes otherwise publicly
available. Promptly following any termination of this Agreement, each of the
Parties agrees to use its reasonable best efforts to cause its respective
directors, officers, employees and representatives to destroy or return to the
providing party all such nonpublic information (including work papers and other
material retrieved therefrom), including all copies thereof. Each Party shall,
and shall cause its advisers and agents to, maintain the confidentiality of all
confidential information furnished to it by the other Party concerning its
business, operations, and financial position and shall not use such information
for any purpose except in furtherance of the transactions contemplated by this
Agreement. If this Agreement is terminated prior to the Effective Time, each
Party shall promptly return all documents and copies thereof and all work papers
containing confidential information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
SECTION 8.5 PRESS RELEASES. Prior to the Effective Time, TARGET
and PURCHASER shall consult with each other as to the form and substance of any
press release or other public disclosure materially related to this Agreement or
any other transaction contemplated hereby; provided, however, that nothing in
this Section 8.5 shall be deemed to prohibit any Party from making any
disclosure which its counsel deems necessary or advisable in order to satisfy
such Party's disclosure obligations imposed by Law.
SECTION 8.6 NO SOLICITATION.
(a) TARGET shall not, nor shall it authorize or permit any
officer, director of employee of, or any investment banker, attorney or other
advisor or representative of, TARGET to, (i) solicit or initiate, or encourage
the submission of, any takeover proposal or (ii) participate in any discussions
or negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
takeover proposal; provided, however, that, if in the opinion of its Board of
Directors, after consultation with counsel, such failure to act would violate
its fiduciary duties under applicable law, TARGET may, in response to an
unsolicited takeover proposal, and subject to compliance with subparagraph (c)
below, (A) furnish information with respect to TARGET to any Person pursuant to
a confidentiality agreement and (B) participate in negotiations regarding such
takeover proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the immediately preceding sentence by
any executive officer of TARGET or any investment banker, attorney or other
advisor or representative of TARGET, whether or not such person is purporting to
act on behalf of TARGET or otherwise, shall be deemed to be a breach of this
Section 8.6 by TARGET. For purposes of this Agreement, "takeover proposal" means
an inquiry, proposal or acquisition or purchase of a substantial amount of
assets of TARGET (other than investors in the ordinary course of business) or of
over 15% of any class of equity securities of TARGET or any tender offer or
exchange offer that if consummated would result in any
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Person beneficially owning 15% or more of any class of equity securities of
TARGET, or any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or similar
transaction involving TARGET other than the transactions contemplated by this
Agreement, or any other transaction the consummation of which would reasonably
be expected to impede, interfere with, prevent or materially delay the Merger or
which would reasonably be expected to dilute materially the benefits to
PURCHASER of the transactions contemplated hereby.
(b) Except as set forth herein, neither the Board of Directors of
TARGET nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to PURCHASER, the approval or
recommendation of such Board of Directors or any such committee of this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any takeover proposal or (iii) enter into any agreement with respect
to any takeover proposal. Notwithstanding the foregoing, if in the opinion of
the TARGET Board of Directors, after consultation with counsel, failure to do so
would violate its fiduciary duties under applicable law, then, prior to the
approval of the Merger by the TARGET stockholders, the TARGET Board of Directors
may (subject to the terms of this and the following sentences) withdraw or
modify its approval or recommendation of this Agreement or the Merger, approve
or recommend a superior proposal, or enter into an agreement with respect to a
superior proposal, in each case at any time after the second business day
following PURCHASER's receipt of written notice (a "Notice of Superior
Proposal") advising PURCHASER that the TARGET Board of Directors has received a
superior proposal, specifying the material terms and conditions of such superior
proposal and identifying the Person making such superior proposal; provided that
TARGET shall not enter into an agreement with respect to a superior proposal
unless TARGET shall have furnished PURCHASER with written notice no later than
12:00 noon one (1) day in advance of any date that it intends to enter into such
agreement. In addition, if TARGET proposes to enter into an agreement with
respect to any takeover proposal, it shall concurrently with entering into such
agreement pay, or cause to be paid, to PURCHASER the Expenses (to the extent
provided by Section 12.2(b)) and the Termination Fee. For purposes of this
Agreement, a "superior proposal" means any bona fide takeover proposal to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the shares of TARGET Capital Stock then outstanding
or all or substantially all of the assets of TARGET and otherwise on terms which
the TARGET Board of Directors determines in its good faith judgment (based on
the advice of a financial advisor of nationally recognized reputation) to be
more favorable to its stockholders than the Merger.
(c) In addition to the obligations of TARGET set forth in
subsection (b) above, TARGET shall immediately advise PURCHASER orally and in
writing of any request for information or of any takeover proposal, or any
inquiry with respect to or which could lead to any takeover proposal, the
material terms and conditions of such request, takeover proposal or inquiry, and
the identity of the person making any takeover proposal or inquiry. TARGET shall
keep PURCHASER fully informed of the status and details (including amendments or
proposed amendments) of any such request, takeover proposal or inquiry.
(d) Nothing contained in this Section 8.6 shall prohibit TARGET
from making any disclosure to TARGET's stockholders if, in the opinion of the
TARGET Board of Directors, after consultation with counsel, failure to so
disclose would violate its fiduciary duties under
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applicable law; provided that TARGET does not, except as permitted by Section
8.6(b) above, withdraw or modify, or propose to withdraw or modify, its position
with respect to the Merger or approve or recommend, or propose to approve or
recommend, a takeover proposal.
(e) The provisions of this Section 8.6 shall expire on June 30,
2001, and TARGET shall be free to take any and all the actions restricted by
this Section after such date, without payment of penalty or resulting in a
breach hereof.
SECTION 8.7 EMPLOYEE BENEFITS AND CONTRACTS. Following the
Effective Time, PURCHASER shall provide generally to officers and employees of
TARGET employee benefits under employee benefit plans (other than stock option
or other plans involving the potential issuance of PURCHASER Common Stock), on
terms and conditions which when taken as a whole are substantially similar to
those currently provided by the PURCHASER Companies to their similarly situated
officers and employees. For purposes of participation and vesting under such
employee benefit plans, (i) the service of the employees of TARGET prior to the
Effective Time shall be treated as service with a PURCHASER Company
participating in such employee benefit plans, and (ii) all deductible amounts
paid by the employees of TARGET through the Closing Date under the TARGET
Benefit Plans shall be credited to such employees for the current plan year
under PURCHASER's employee benefits plans after the Closing Date. PURCHASER also
shall honor in accordance with their terms all employment, severance, consulting
and other compensation Contracts set forth in the TARGET Disclosure Letter
between TARGET and any current or former director, officer, or employee thereof
and all provisions for vested benefits or other vested amounts earned or accrued
through the Effective Time under the TARGET Benefit Plans.
SECTION 8.8 INDEMNIFICATION AGAINST CERTAIN LIABILITIES.
PURCHASER agrees that all rights to indemnification and all limitations of
liability existing in favor of the officers and directors of TARGET as provided
in its Articles of Incorporation and Bylaws as of the date hereof with respect
to matters occurring prior to the Effective Time shall survive the Merger and
shall continue in full force and effect, without any amendment thereto, for a
period of not less than four (4) years from the Effective Time; provided,
however, that all rights to any indemnification in respect of any claim asserted
or made within such period shall continue until the final disposition of such
claim.
SECTION 8.9 TAX REPORTING. The Parties agree to report the Merger
as a tax free "reorganization" and not as a taxable sale of stock of TARGET.
SECTION 8.10 CANCELLATION OF TARGET OPTIONS. TARGET agrees to use
its reasonable best efforts to obtain, prior to the Effective Time, a binding
written agreement, acceptable to PURCHASER, from each holder of TARGET Options
whereby such holder agrees that if the TARGET Option(s) held by such holder have
not been exercised prior to the Effective Time, then such TARGET Options shall
not be exercised on or after the Effective Time and shall be cancelled as of
Effective Time without any further action.
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ARTICLE 9.
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
SECTION 9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The
respective obligations of each Party to perform this Agreement and consummate
the Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by both Parties pursuant
to Sections 12.6(a) and 12.6(b) of this Agreement:
(a) All corporate action necessary by TARGET to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby shall have been duly and validly taken,
including, but not limited to, the approval and adoption by the respective
Boards of Directors of TARGET, MERGER SUB and PURCHASER and the requisite
approval and adoption by the stockholders of TARGET.
(b) All Consents of, filings and registrations with, and
notifications to, all Regulatory Authorities required for consummation of the
Merger shall have been obtained or made and shall be in full force and effect,
and all waiting periods required by Law shall have expired. No Consent obtained
from any Regulatory Authority which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in a manner (including,
without limitation, requirements relating to the raising of additional capital
or the disposition of Assets) which, in the reasonable judgment of the Board of
Directors of either Party, would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement so as to
render inadvisable the consummation of the Merger; provided, however, that no
such condition or restriction shall be deemed to be materially adverse unless it
materially differs from terms and conditions customarily imposed by any
Regulatory Authority in connection with similar transactions.
(c) Each Party shall have obtained any and all Consents required
for consummation of the Merger (other than those referred to in Section 9.3 of
this Agreement) or for the preventing of any Default under any Contract or
Permit of such Party which, if not obtained or made, is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on such Party.
(d) No court or governmental or regulatory authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law or Order (whether temporary, preliminary or permanent) or taken any other
action which prohibits, materially restricts or makes illegal consummation of
the transactions contemplated by this Agreement.
(e) All necessary approvals under state securities Laws or the
1933 Act or 1934 Act relating to the issuance or trading of the shares of
PURCHASER Common Stock issuable pursuant to the Merger shall have been received.
SECTION 9.2 CONDITIONS TO OBLIGATIONS OF PURCHASER AND MERGER
SUB. The obligations of PURCHASER and MERGER SUB to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the
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satisfaction of the following conditions, unless waived by PURCHASER and MERGER
SUB pursuant to Section 12.6(a) of this Agreement:
(a) The representations and warranties of TARGET set forth or
referred to in this Agreement shall be true and correct in all respects as of
the date of this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are confined
to a specified date shall speak only as of such date), except (i) as expressly
contemplated by this Agreement, or (ii) for representations and warranties
(other than the representations and warranties set forth in Section 4.3 of this
Agreement, which shall be true in all respects) the inaccuracies of which relate
to matters that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on TARGET.
(b) Each and all of the agreements and covenants of TARGET to be
performed and complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Effective Time shall have been duly performed
and complied with in all material respects.
(c) TARGET shall have delivered to PURCHASER (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief executive
officer, to the effect that the conditions of its obligations set forth in
Sections 9.2(a) and 9.2(b) of this Agreement have been satisfied in all material
respects, and (ii) certified copies of resolutions duly adopted by TARGET's
Board of Directors and stockholders evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as PURCHASER and its counsel shall reasonably request.
(d) TARGET shall have delivered to PURCHASER an opinion of Xxxxxx
& Xxxxxx, LLP, counsel to TARGET, in form and substance reasonably acceptable to
PURCHASER.
(e) TARGET shall have amended its Articles of Incorporation to
provide that the Merger shall not be deemed a dissolution, liquidation or
winding up of the TARGET.
(f) no proceeding or lawsuit shall have been commenced by any
Person for the purpose of obtaining any injunction, writ or preliminary
restraining order to the effect that the Merger may not be consummated as
provided herein.
(g) The holders of TARGET Capital Stock that represent all the
outstanding shares of TARGET Preferred Stock and TARGET Common Stock shall have
either approved the Merger or delivered to PURCHASER irrevocable waivers of
their right to demand payment for their shares in accordance with Sections
14-2-1302 and 14-2-1321 of the OCGA, which waivers shall be acceptable as to
form to PURCHASER.
(h) Each of the holders of the Outstanding TARGET Shares shall
have delivered to the PURCHASER a fully-executed copy of the Investor
Representation in substantially the form of Exhibit 2 hereto and a counterpart
signature page to the Registration Rights Agreement in substantially the form of
Exhibit 3 hereto (the "Registration Rights Agreement").
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(i) All TARGET Options outstanding at the Effective Time shall be
cancelled as provided in Section 8.10 hereof.
(j) Each TARGET Principal shall have delivered to PURCHASER a
fully executed copy of a Non-Competition Agreement.
(k) All shares of TARGET Preferred Stock shall have been converted
to TARGET Common Stock.
(l) That certain Registration Rights Agreement between TARGET and
marchFIRST, Inc., a Delaware corporation ("marchFIRST"), dated September 22,
2000, and that certain Stockholders Agreement between TARGET and marchFIRST
dated September 22, 2000 shall have been terminated.
SECTION 9.3 CONDITIONS TO OBLIGATIONS OF TARGET. The obligations
of TARGET to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by TARGET pursuant to Section 12.6(b) of
this Agreement:
(a) The representations and warranties of PURCHASER set forth or
referred to in this Agreement shall be true and correct in all respects as of
the date of this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are confined
to a specified date shall speak only as of such date), except (i) as expressly
contemplated by this Agreement, or (ii) for representations and warranties
(other than the representations and warranties set forth in Section 5.3 of this
Agreement, which shall be true in all respects) the inaccuracies of which relate
to matters that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PURCHASER.
(b) Each and all of the agreements and covenants of PURCHASER to
be performed and complied with pursuant to this Agreement and the other
agreements contemplated hereby prior to the Effective Time shall have been duly
performed and complied with in all material respects.
(c) PURCHASER shall have delivered to TARGET (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief executive
officer and its chief financial officer, to the effect that the conditions of
its obligations set forth in Section 9.3(a) and 9.3(b) of this Agreement have
been satisfied in all material respects, and (ii) certified copies of
resolutions duly adopted by PURCHASER's Board of Directors evidencing the taking
of all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as TARGET and its counsel
shall reasonably request.
(d) no proceeding or lawsuit shall have been commenced by any
Person for the purpose of obtaining any injunction, writ or preliminary
restraining order to the effect that the Merger may not be consummated as
provided herein.
(e) PURCHASER shall have executed a counterpart signature page to
the Registration Rights Agreement.
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(f) PURCHASER shall have amended its Bylaws and taken all
necessary corporate action to cause its Board of Directors to expand so as to
consist of five (5) directors. In order to fill the vacancies on the Board of
Directors of PURCHASER created by such amendment, the PURCHASER shall cause,
pursuant to its Bylaws, three Persons to be elected to serve, from and after the
Effective Time in accordance with Bylaws of PURCHASER, on the Board of Directors
of PURCHASER, two of such Persons shall be selected by TARGET and the remaining
Person shall be jointly selected by TARGET and PURCHASER.
(g) All shares of TARGET Preferred Stock shall have been converted
to TARGET Common Stock.
ARTICLE 10.
TERMINATION
SECTION 10.1 TERMINATION. Notwithstanding any other provision of
this Agreement, and notwithstanding the approval of this Agreement by the
stockholders of TARGET, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By consent of the Boards of Directors of PURCHASER, MERGER SUB
and TARGET; or
(b) By the Board of Directors of any Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
of a material breach by any other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within thirty
(30) days after the giving of written notice to the breaching Party of such
breach and which breach would provide the non-breaching party the ability to
refuse to consummate the Merger under the standard set forth in Section 9.2(a)
of this Agreement in the case of PURCHASER and Section 9.3(a) of this Agreement
in the case of TARGET; or
(c) By the Board of Directors of any Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
of a material breach by any other Party of any covenant or agreement contained
in this Agreement which cannot be or has not been cured within (30) days after
the giving of written notice to the breaching Party of such breach; or
(d) By the Board of Directors of any Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
(i) any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions contemplated hereby has been denied by final
nonappealable action of such authority or if any action taken by such authority
is not appealed within the time limit for appeal, or (ii) if the stockholders of
TARGET fail to approve this Agreement and the transactions contemplated hereby
as required by the OCGA at the Stockholders' Meeting where the transactions were
presented to such stockholders for approval and voted upon; or
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(e) By the Board of Directors of any Party in the event that the
Merger shall not have been consummated by March 31, 2001, but only if the
failure to consummate the transactions contemplated hereby on or before such
date is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of any Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
that any of the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date specified in
Section 10.1(e) of this Agreement; or
(g) By the Board of Directors of TARGET in connection with
entering into a definitive agreement in accordance with Section 8.6(b), provided
that it has complied with all provisions thereof, including the notice
provisions therein, and that it makes simultaneous payment of the Expenses and
the Termination Fee.
(h) By the Board of Directors of TARGET if the Sixty Day Average
Trading Price of PURCHASER's Common Stock is less than $4.00 per share;
(i) By the Board of Directors of PURCHASER if the Sixty Day
Average Trading Price of PURCHASER's Common Stock exceeds $12.00 per share.
SECTION 10.2 EFFECT OF TERMINATION. In the event of the
termination and abandonment of this Agreement pursuant to Section 10.1 of this
Agreement, this Agreement shall become void and have no effect, except that (i)
the provisions of this Section 10.2 and Sections 8.4(b), 8.6(b), 12.2 and 12.14
this Agreement shall survive any such termination and abandonment, and (ii) a
termination pursuant to Section 10.1 of this Agreement shall not relieve the
breaching Party from Liability for an uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination.
ARTICLE 11.
ESCROW AND INDEMNIFICATION
SECTION 11.1 Escrow Fund.
(a) At the Closing, the Escrow Shares shall be registered in the
name of, and be deposited with, Fidelity National Bank (or other institution
agreeable to both PURCHASER and TARGET) as escrow agent (the "Escrow Agent"),
such deposit and any Additional Escrow Shares to constitute the Escrow Fund and
to be governed by the terms set forth herein and in the Escrow Agreement in
substantially the form attached hereto as Exhibit 4. The Escrow Fund shall be
available to compensate PURCHASER pursuant to the indemnification obligations of
the Warranting Stockholders. In the event PURCHASER issues any Additional Escrow
Shares (as defined below), such shares will be issued in the name of the Escrow
Agent and delivered to the Escrow Agent in the same manner as the Escrow Shares
delivered at the Closing.
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(b) Except for dividends paid in stock declared with respect to
the Escrow Shares ("Additional Escrow Shares"), which shall be treated as Escrow
Shares pursuant to Section 11.1(a) hereof, any cash dividends, dividends payable
in securities or other distributions of any kind made in respect of the Escrow
Shares will be delivered to the Warranting Stockholders based on each such
Warranting Stockholder's Proportional Allotment. Each Warranting Stockholder
shall have voting rights with respect to the Escrow Shares deposited in the
Escrow Fund with respect to such stockholder's Proportional Allotment so long as
such Escrow Shares are held in escrow, and PURCHASER will take all reasonable
steps necessary to allow the exercise of such rights. While the Escrow Shares
remain in the Escrow Agent's possession pursuant to this Agreement and the
Escrow Agreement, the Warranting Stockholders shall retain and shall be able to
exercise all other incidents of ownership of such Escrow Shares which are not
inconsistent with the terms and conditions of this Agreement.
SECTION 11.2 INDEMNIFICATION.
(a) All representations and warranties made by TARGET herein, or
in any certificate, schedule or exhibit delivered pursuant hereto, shall survive
the Closing and continue in full force and effect until the twelve (12) month
anniversary of the Closing Date (sometimes referred to herein as the
"Termination Date").
(b) (i) Subject to the limitations set forth in this
Article 11, the Warranting Stockholders shall (severally and not jointly)
indemnify and hold harmless PURCHASER and the Surviving Corporation and its
respective officers, directors, agents, attorneys and employees, and each
person, if any, who controls or may control PURCHASER or the Surviving
Corporation within the meaning of the Securities Act (hereinafter referred to
individually as an "PURCHASER Indemnified Person" and collectively as "PURCHASER
Indemnified Persons") from and against any and all losses, costs, damages,
liabilities and expenses arising from claims, demands, actions, causes of
action, including, without limitation, legal fees, (collectively, "Damages")
arising out of any misrepresentation or breach of or default in connection with
any of the representations, warranties, covenants and agreements given or made
by TARGET in this Agreement, the TARGET Disclosure Letter or any exhibit or
schedule to this Agreement. The sole recourse of the Indemnified Persons shall
be against the Escrow Fund and claims against the Escrow Fund shall be the sole
and exclusive remedy of Indemnified Persons for any Damages hereunder; provided,
however, if any Warranting Stockholder so desires, the indemnification to be
paid by such Warranting Stockholder may be paid in cash.
(ii) Nothing in this Agreement shall limit the liability
in amount or otherwise (i) of TARGET for any breach of any representation,
warranty or covenant if the Merger does not close, or (ii) of any TARGET
stockholder in connection with any breach by such stockholder of any
representation or covenant in the Investor Representation Statement, or (iii) of
TARGET with respect to fraud, criminal activity or intentional breach of any
covenant contained in this Agreement.
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(c) Prior to the Termination Date, no claim for Damages shall be
made under Article 11 unless the aggregate of Damages exceeds $50,000 for which
claims are made hereunder by the PURCHASER Indemnified Persons, in which case
the PURCHASER Indemnified Persons shall be entitled to seek compensation for all
Damages without regard to the limitation set forth in this Section 11.2(c) (the
"Limitation"). At the Termination Date, PURCHASER may make a claim for Damages
under Article 11 without regard to the Limitation.
SECTION 11.3 ESCROW PERIOD: RELEASE FROM ESCROW.
(a) The Escrow Period shall terminate upon the twelve (12) month
anniversary of the Effective Time; provided, however, that a portion of the
Escrow Fund, which, in the reasonable judgment of PURCHASER, subject to the
objection of the Stockholders' Agent and the subsequent arbitration of the
matter in the manner provided in Section 11.6 hereof, is necessary to satisfy
any unsatisfied claims specified in any Officer's Certificate theretofore
delivered to the Escrow Agent prior to termination of the Escrow Period with
respect to facts and circumstances existing prior to expiration of the Escrow
Period, shall remain in the Escrow Fund until such claims have been resolved.
(b) Within five (5) business days after the Termination Date (the
"Release Date"), the Escrow Agent shall release from escrow to the Warranting
Stockholders each such stockholder's Proportional Allotment of the Escrow Shares
and Additional Escrow Shares (if any), less with respect to each such
stockholder the number of Escrow Shares and Additional Shares with a value (as
determined pursuant to Section 11.4) equal to (A) such stockholder's
Proportional Allotment of any liability delivered to PURCHASER in accordance
with Section 11.4 in satisfaction of indemnification claims by Indemnitee and
(B) such stockholder's Proportional Allotment of any liability subject to
delivery to PURCHASER in accordance with Section 11.3(a) with respect to any
pending but unresolved indemnification claims of PURCHASER. Any Escrow Shares
and Additional Escrow Shares held as a result of clause (B) shall be released to
such Warranting Stockholders or released to PURCHASER (as appropriate) promptly
upon resolution of each specific indemnification claim involved. Escrow Shares
and Additional Escrow Shares shall be released to the Warranting Stockholders
based on each such stockholder's Proportional Allotment thereof. PURCHASER will
take such action as may be necessary to cause such certificates to be issued in
the names of the appropriate persons. Certificates representing Escrow Shares
and Additional Escrow Shares so issued that are subject to resale restrictions
under applicable securities laws will bear a legend to that effect. No
fractional shares shall be released and delivered from Escrow to the Warranting
Stockholders. In lieu of any fraction of an Escrow Share to which a Warranting
Stockholder would otherwise be entitled, such stockholder will receive from
PURCHASER an amount of cash (rounded to the nearest whole cent) equal to the
product of such fraction multiplied by the Average Closing Price.
(c) No Escrow Shares or Additional Escrow Shares or any beneficial
interest therein may be pledged, sold, assigned or transferred, including by
operation of law, by any Warranting Stockholder or be taken or reached by any
legal or equitable process in satisfaction of any debt or other liability of any
such stockholder, prior to the delivery to such stockholder of his Proportional
Allotment of the Escrow Fund by the Escrow Agent as provided herein.
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(d) The Escrow Agent is hereby granted the power to effect any
transfer of Escrow Shares contemplated by this Agreement. PURCHASER will
cooperate with the Escrow Agent in promptly issuing stock certificates to effect
such transfers.
SECTION 11.4 CLAIMS UPON ESCROW FUND. Upon receipt by the Escrow
Agent on or before the Release Date of a certificate signed by any officer of
PURCHASER (an "Officer's Certificate") stating that with respect to the
indemnification obligations of the Warranting Stockholders set forth in Section
11.2, Damages exist and specifying in reasonable detail the individual items of
such Damages included in the amount so stated, the date each such item was paid,
or properly accrued or arose, and the nature of the misrepresentation, breach of
warranty, covenant or claim to which such item is related, the Escrow Agent
shall, subject to the provisions of this Article 11, deliver to PURCHASER out of
the Escrow Fund, as promptly as practicable, PURCHASER Common Stock or other
assets held in the Escrow Fund having a value equal to such Damages. For the
purpose of compensating PURCHASER for its Damages pursuant to this Agreement,
the PURCHASER Common Stock in the Escrow Fund shall be valued at its Per Share
Market Value on the date the Escrow Agent receives a claim upon the Escrow Fund
by PURCHASER pursuant to Section 11.4.
SECTION 11.5 OBJECTIONS TO CLAIMS.
(a) At the time of delivery of any Officer's Certificate to the
Escrow Agent, a duplicate copy of such Officer's Certificate shall be delivered
to the Stockholders' Agent and for a period of thirty (30) days after such
delivery, the Escrow Agent shall make no delivery of PURCHASER Common Stock or
other property pursuant to Section 11.4 hereof unless the Escrow Agent shall
have received written authorization from the Stockholders' Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of the PURCHASER Common Stock or other property in the
Escrow Fund in accordance with Section 11.4 hereof, provided that no such
payment or delivery may be made if the Stockholders' Agent shall object in a
written statement to the claim made in the Officer's Certificate, and such
statement shall have been delivered to the Escrow Agent and to PURCHASER prior
to the expiration of such thirty (30) day period.
(b) In case the Stockholders' Agent shall so object in writing to
any claim or claims by PURCHASER made in any Officer's Certificate, PURCHASER
shall have thirty (30) days to respond in a written statement to the objection
of the Stockholders' Agent. If after such thirty (30) day period there remains a
dispute as to any claims, then the Stockholders' Agent and PURCHASER shall
attempt in good faith for sixty (60) days to agree upon the rights of the
respective parties with respect to each of such claims. If the Stockholders'
Agent and PURCHASER should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and shall distribute the PURCHASER Common Stock or other property from the
Escrow Fund in accordance with the terms thereof.
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SECTION 11.6 RESOLUTION OF CONFLICTS AND ARBITRATION.
(a) If no agreement can be reached after good faith negotiation
between the parties pursuant to Section 11.5, either PURCHASER or the
Stockholders' Agent may, by written notice to the other, demand arbitration of
the matter unless the amount of the Damages is at issue in pending litigation
with a third party, in which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration; and in either such
event the matter shall be settled by arbitration conducted and resolved in
accordance with the Expedited Rules of Commercial Arbitration of the American
Arbitration Association.
(b) Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Xxxxxx County, Georgia under the commercial rules then in effect of the American
Arbitration Association. The arbitrator shall have the right to apportion the
fees and expenses of the arbitration as he or she deems just.
SECTION 11.7 STOCKHOLDERS' AGENT.
(a) Xxxx X. Xxxxxx shall be constituted and appointed as agent
("Stockholders' Agent") for and on behalf of the Warranting Stockholders to give
and receive notices and communications, to authorize delivery to PURCHASER of
the PURCHASER Common Stock or other property from the Escrow Fund in
satisfaction of claims by PURCHASER, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Stockholders' Agent for the accomplishment of the foregoing. Such agency may be
changed by the holders of a majority in interest of the Escrow Fund from time to
time upon not less than 10 days' prior written notice to PURCHASER. No bond
shall be required of the Stockholders' Agent, and the Stockholders' Agent shall
receive no compensation for his services. Notices or communications to or from
the Stockholders' Agent shall constitute notice to or from each of the
Warranting Stockholders.
(b) The Stockholders' Agent shall not be liable for any act done
or omitted hereunder as Stockholder' Agent while acting in good faith and in the
exercise of reasonable judgment and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The
Warranting Stockholders shall severally indemnify the Stockholders' Agent and
hold him harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Stockholders' Agent and arising out
of or in connection with the acceptance or administration of his duties
hereunder.
(c) The Stockholders' Agent shall have reasonable access to
information about TARGET and/or TARGET Business and the reasonable assistance of
TARGET's and/or TARGET Business's officers and employees for purposes of
performing his duties and exercising his rights hereunder, provided that the
Stockholders' Agent shall treat confidentially and not disclose any nonpublic
information from or about TARGET and TARGET Business to
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anyone (except on a need to know basis to individuals who agree to treat such
information confidentially).
SECTION 11.8 ACTIONS OF THE STOCKHOLDERS' AGENT. A decision, act,
consent or instruction of the Stockholders' Agent shall constitute a decision of
all Warranting Stockholders for whom shares of PURCHASER Common Stock otherwise
issuable to them are deposited in the Escrow Fund and shall be final, binding
and conclusive upon each such Warranting Stockholder, and the Escrow Agent and
PURCHASER may rely upon any decision, act, consent or instruction of the
Stockholders' Agent as being the decision, act, consent or instruction of each
and every such Warranting Stockholder. The Escrow Agent and PURCHASER are hereby
relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Stockholders'
Agent.
SECTION 11.9 THIRD-PARTY CLAIMS. In the event PURCHASER becomes
aware of a third-party claim which PURCHASER believes may result in a demand
against the Escrow Fund, PURCHASER shall notify the Stockholders' Agent of such
claim, and the Stockholders' Agent and the Warranting Stockholders for whom
shares of PURCHASER Common Stock otherwise issuable to them are deposited in the
Escrow Fund shall be entitled, at their expense, to participate in any defense
of such claim with the consent of PURCHASER which shall not be unreasonably
withheld. PURCHASER shall have the right in its sole discretion to settle any
such claim. In the event that the Stockholders' Agent has consented to any such
settlement, the Stockholders' Agent shall have no power or authority to object
under Section 11.5 or any other provision of this Article 11 to the amount of
any claim by PURCHASER against the Escrow Fund for indemnity with respect to
such settlement.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.1 DEFINITIONS. Except as otherwise provided herein, the
capitalized terms set forth below (in their singular and plural forms as
applicable) shall have the following meanings:
"Additional Escrow Shares" shall have the meaning provided in Section
11.1(b).
"Affiliate" of a Person shall mean: (a) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person or (b) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person.
"Agreement" shall mean this Agreement and Plan of Merger, the TARGET
Disclosure Letter, the PURCHASER Disclosure Letter and the Exhibits delivered
pursuant hereto and incorporated herein by reference.
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"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"Closing" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"Closing Date" shall have the meaning provided in Section 1.2 of this
Agreement.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"Damages" shall have the meaning provided in Section 11.2(b)(i).
"Default" shall mean (a) any breach or violation of or default under
any Contract, Order or Permit, (b) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (c) any
occurrence of any event that with or without the passage of or the giving of
notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
"Dissenting Shares" shall have the meaning provided in Section 3.1(b)
of this Agreement.
"Effective Time" shall mean the date and time at which the Merger
becomes effective as defined in Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws which are administered,
interpreted or enforced by the United States Environmental Protection Agency and
state and local agencies with primary jurisdiction over pollution or protection
of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Escrow Agent" shall have the meaning provided in Section 11.1(a).
"Escrow Shares" shall have the meaning provided in Section 3.1(f).
"Exhibits" 1 through 4, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made
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a part hereof and may be referred to in this Agreement and any other related
instrument or document without being attached hereto.
"Expenses" shall have the meaning provided in Section 12.2 of this
Agreement.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Hazardous Material" shall mean any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601
et seq., or any similar federal, state or local Law.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" as used with respect to a TARGET shall mean the actual
knowledge, without requirement of inquiry, of Xxxx X. Xxxxxx, Xxxx X. Xxxxx and
Xxxxx X. Xxxxx, and as used with respect to PURCHASER and MERGER SUB shall mean
the actual knowledge, without requirement of inquiry, of Xxxx X. Xxxxxxxx and
Xx. Xxxxxx Xxxxxxxxx.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory Authorities.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than endorsements
of notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Licensed Intellectual Property" shall have the meaning provided in
Section 4.8 of this Agreement.
"Lien" shall mean any conditional sale agreement, easement,
encroachment, encumbrance, hypothecation, lien, mortgage, pledge, restriction,
security interest, title retention or other security arrangement, or any adverse
right or interest, charge, or claim of any nature whatsoever of, on, or with
respect to any property or property interest, other than (i) Liens for current
property Taxes not yet due and payable, (ii) pledges to secure deposits and
other Liens incurred in the ordinary course of the banking business, and (iii)
Liens which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on a Party.
"Limitation" shall have the meaning provided in Section 11.2(c).
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"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative or other proceeding.
"Loan Property" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question, provided that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.
"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (b) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement, provided that "material adverse impact" shall not be deemed to
include the impact of (x) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(y) changes in generally accepted accounting principles or regulatory accounting
principles generally applicable to banks and their holding companies, and (z)
the Merger and compliance with the provisions of this Agreement on the operating
performance of the Parties.
"Merger" shall mean the merger of MERGER SUB with and into TARGET
referred to in Section 1.1 of this Agreement.
"Merger Price" shall mean $6,400,000 in the aggregate.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NGCL" shall mean the Nevada General Corporation Law.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Non-Competition Agreement" shall mean an agreement between a Target
Principal and Purchaser that sets forth certain covenants, with such agreement
in a form acceptable to both parties to such agreement.
"Notice of superior Proposal" shall have the meaning provided in
Section 8.6(b) of this Agreement.
"OCGA" shall mean the Official Code of Georgia Annotated.
"Officer's Certificate" shall have the meaning provided in Section
11.4.
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"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Outstanding TARGET Shares" shall have the meaning provided in Section
3.1(b) of this Agreement.
"Participation Facility" shall mean any facility or property in which
the Party in question participates in the management (including any property or
facility held in a joint venture) and, where required by the context, said term
means the owner or operator of such facility or property, but only with respect
to such facility or property.
"Party" shall mean TARGET, PURCHASER and MERGER SUB, and "Parties"
shall mean all of TARGET, PURCHASER and MERGER SUB.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, or permit to which any, Person is a party or that is or may be binding
upon or inure to the benefit of any Person or its capital stock, Assets,
Liabilities, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Per Share Market Value" shall mean on any particular date: the closing
bid price for a share of PURCHASER Common Stock in the over-the-counter market,
as reported by the OTC Bulletin Board or in the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date; or if the PURCHASER
Common Stock is not then reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), then the average of the "Pink Sheet" quotes
for the relevant conversion period, as determined in good faith by the Board of
Directors of PURCHASER; or if the PURCHASER Common Stock is not then publicly
traded, the fair market value of a share of Common Stock as determined by an the
Board of Directors of PURCHASER in good faith.
"Proportional Allotment" shall mean, with respect to each Warranting
Stockholder, the quotient obtained by dividing (a) the total number of Escrow
Shares beneficially owned by such Warranting Stockholder by (b) the total number
of Escrow Shares.
"Proprietary Intellectual Property" shall have the meaning provided in
Section 4.8 of this Agreement.
"Pro-Rata Share" shall mean, with respect to each holder of TARGET
Common Stock, the quotient obtained by dividing (a) the total number of shares
of TARGET Common Stock held by such holder by (b) the total number of shares of
TARGET Common Stock issued and outstanding immediately prior to the Effective
Time.
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"PURCHASER Common Stock" shall mean the $.01 par value common stock of
PURCHASER.
"PURCHASER Companies" shall mean, collectively, PURCHASER and all
PURCHASER Subsidiaries.
"PURCHASER Disclosure Letter" shall have the meaning set forth in
Article 5 hereof.
"PURCHASER Financial Statements" shall mean the consolidated financial
statements of PURCHASER contained in PURCHASER's SEC Documents, including the
notes thereto.
"PURCHASER Indemnified Person" or "PURCHASER Indemnified Persons" shall
have the meaning provided in Section 11.2(b).
"PURCHASER Stock Plans" shall mean the existing stock option and other
stockbased compensation plans of PURCHASER.
"PURCHASER Subsidiaries" shall mean the Subsidiaries of PURCHASER.
"Registration Rights Agreement" shall have the meaning set forth in
Section 9.2(h) of this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the NASD, the SEC and all
state securities agencies.
"Release Date" shall have the meaning provided in Section 11.3(b).
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act and the 0000 Xxx, xxxxx blue
sky laws, and the rules and regulations of any Regulatory Authority promulgated
thereunder.
"Sixty Day Average Trading Price" shall mean the arithmetic average of
the daily closing price of PURCHASER COMMON STOCK as reported on the Over The
Counter Bulletin Board for the sixty (60) consecutive trading days prior to the
Closing.
"Stock Consideration" shall have the meaning provided in Section 3.1(b)
of this Agreement.
"Stock Price" shall mean $8.00 per share.
"Stockholders' Agent" shall have the meaning provided in Section
11.7(a).
"Subsidiaries" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 5% or more of
the outstanding equity securities
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either directly or through an unbroken chain of entities as to each of which 5%
or more of the outstanding equity securities is owned directly or indirectly by
its parent; provided, however, there shall not be included any such entity
acquired through foreclosure or any such entity the equity securities of which
are owned or controlled in a fiduciary capacity.
"Superior Proposal" shall have the meaning set forth in Section 8.6(b)
of this Agreement.
"Surviving Corporation" shall mean TARGET as the surviving corporation
resulting from the Merger.
"TARGET Benefit Plans" shall have the meaning set forth in Section 4.14
of this Agreement.
"TARGET Business" shall mean the business of technology venture
development, which business may be conducted through a division or unit of the
PURCHASER or any PURCHASER Company after the Effective Time.
"TARGET Capital Stock" shall mean, collectively, TARGET Common Stock
and TARGET Preferred Stock.
"TARGET Companies" shall mean, collectively, TARGET and all TARGET
Subsidiaries.
"TARGET Common Stock" shall mean the $.01 par value, common stock of
TARGET.
"TARGET Disclosure Letter" shall have the meaning set forth in Article
4 hereof.
"TARGET ERISA Plan" shall have the meaning provided in Section 4.13 of
this Agreement.
"TARGET Financial Statements" shall mean the unaudited balance sheets
(including related notes and schedules, if any) of TARGET as of September 30,
2000, for the nine month period then ended, and the related statements of
income, changes in stockholders' equity, and cash flows (including related notes
and schedules, if any), as previously furnished by TARGET to PURCHASER.
"TARGET Options" shall have the meaning provided in Section 3.1(d) of
this Agreement.
"TARGET Preferred Stock" shall mean $.01 par value preferred stock of
TARGET designated as the Series A Preferred Stock.
"TARGET Principal" shall mean each of the following individuals: Xxxx
X. Xxxxxx, Xxxxx X. Xxxxx and Xxxxx X. Xxxxxxxx.
"TARGET Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of TARGET.
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"TARGET Subsidiaries" shall mean the Subsidiaries of TARGET.
"Taxes" shall mean any federal, state, county, local, foreign and other
taxes, assessments, charges, fares, and impositions, including interest and
penalties thereon or with respect thereto.
"Termination Date" shall have the meaning provided in Section 11.2(a).
"Termination Fee" shall have the meaning provided in Section 12.2 of
this Agreement.
"Warranting Stockholders" shall mean each of the following stockholders
of TARGET: Xxxx X. Xxxxxx, Xxxx X. Xxxxx and Xxxx X. Xxxxxxxx.
SECTION 12.2 EXPENSES.
(a) Except as otherwise provided in this Section 12.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel (the "Expenses"), provided that any expenses of TARGET in excess of
$15,000 shall be paid by stockholders of TARGET.
(b) TARGET shall pay, or cause to be paid, in same day funds to
PURCHASER the sum of $320,000 (the "Termination Fee") upon demand if (A) TARGET
terminates this Agreement pursuant to Section 10.1(g) or (B) prior to the
termination of this Agreement (other than by TARGET pursuant to Section 10.1(b)
or (c)), a takeover proposal shall have been made and within three (3) months of
the date hereof, TARGET enters into an agreement with respect to, or approves or
recommends or takes any action to facilitate, such takeover proposal.
SECTION 12.3 BROKERS AND FINDERS. Except as set forth in the
TARGET Disclosure Letter, each of the Parties represents and warrants that
neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby. In the event of a claim by any broker or finder based upon its
representing or being retained by or allegedly representing or being retained by
TARGET, PURCHASER or MERGER SUB, each of TARGET, PURCHASER and MERGER SUB, as
the case may be, agrees to indemnify and hold the other Parties harmless of and
from any Liability in respect of any such claim.
SECTION 12.4 ENTIRE AGREEMENT. Except as otherwise expressly
provided herein, this Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement between the Parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. Nothing in
this Agreement expressed or implied, is intended to confer upon any Person,
other than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Sections 8.8 and 8.10 of this Agreement.
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SECTION 12.5 AMENDMENTS. To the extent permitted by Law, this
Agreement may be amended by a subsequent writing signed by each of the Parties
upon the approval of the Boards of Directors of each of the Parties; provided,
however, that after any such approval by the holders of TARGET Capital Stock,
there shall be made no amendment decreasing the consideration to be received by
TARGET stockholders without the further approval of such stockholders.
SECTION 12.6 WAIVERS.
(a) Prior to or at the Effective Time, PURCHASER, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by TARGET, to waive or extend the time for the compliance or
fulfillment by TARGET of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
PURCHASER under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of PURCHASER.
(b) Prior to or at the Effective Time, TARGET, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by PURCHASER or MERGER SUB, to waive or extend the time for the
compliance or fulfillment by PURCHASER or MERGER SUB of any and all of their
respective obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of TARGET under this Agreement, except
any condition which, if not satisfied, would result in the violation of any Law.
No such waiver shall be effective unless in writing signed by a duly authorized
officer of TARGET.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
SECTION 12.7 ASSIGNMENT. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the immediately
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by the Parties and their respective successors and
assigns.
SECTION 12.8 NOTICES. All notices or other communications which
are required or permitted hereunder shall be in writing and sufficient if
delivered by hand, by facsimile transmission, by registered or certified mail,
postage pre-paid, or by courier or overnight carrier, to the persons at the
addresses set forth below (or at such other address as may be provided
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hereunder), and shall be deemed to have been delivered as of the date so
delivered:
PURCHASER or
MERGER SUB: Brainworks Ventures, Inc.
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
Copy to Counsel (which shall not constitute notice to PURCHASER or
MERGER SUB):
Xxxxxx & Xxxxxx LLP
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxx X. Hussle, Esq.
TARGET: eBusinessLabs, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxx X. Xxxxxx
Copy to Counsel (which shall not constitute notice to TARGET):
Xxxxxx & Xxxxxx, LLP
0000 Xxxxxxxxx Xxxxxx X.X.
Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
SECTION 12.9 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Georgia, without
regard to any applicable conflicts of Laws, except to the extent that the
federal laws of the United States may apply to the Merger.
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SECTION 12.10 COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
SECTION 12.11 CAPTIONS. The captions contained in this Agreement
are for reference purposes only and are not part of this Agreement.
SECTION 12.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 12.13 SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
SECTION 12.14 SURVIVAL. The respective representations, warranties,
obligations, covenants and agreements of the Parties shall not survive the
Effective Time or the termination and abandonment of this Agreement except that
(i) Articles 2, 3, 11 and 12 and Sections 8.4(b), 8.7, 8.8 and 8.9 of this
Agreement shall survive the Effective Time and Article 4 shall survive the
Effective Time to the extent provided in Article 11; and (ii) Sections 8.4(b),
8.6(b), 10.2, 12.2 and 12.14 shall survive the termination and abandonment of
this Agreement.
[SIGNATURES NEXT PAGE]
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed and delivered on its behalf as of the day and year first above written.
BRAINWORKS VENTURES, INC.
By:/s/Xxxxxx Xxxxxxxxx
----------------------------------------
Its: Chairman and CEO
-------------------------------------
EBUSINESSLABS, INC.
By: /s/Xxxx Xxxxxx
----------------------------------------
Its: President and CEO
-------------------------------------
EBL ACQUISITION CORPORATION
By: /s/Xxxx X. Xxxxxxxx
----------------------------------------
Its: President
-------------------------------------
WARRANTING STOCKHOLDERS
/s/ Xxxx X. Xxxxxx
-------------------------------------------
XXXX X. XXXXXX
/s/Xxxx X. Xxxxx
-------------------------------------------
XXXX X. XXXXX
/s/Xxxx X. Xxxxxxxx
-------------------------------------------
XXXX X. XXXXXXXX
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EXHIBIT 1
ARTICLES OF INCORPORATION OF TARGET
[INTENTIONALLY OMITTED]
57
EXHIBIT 2
FORM OF INVESTOR REPRESENTATION STATEMENT
[INTENTIONALLY OMITTED]
58
EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the ___ day of _______________, by and among Brainworks
Ventures, Inc., a Nevada corporation ("PURCHASER"), and each of the stockholders
of eBusinessLabs, Inc., a Georgia corporation ("TARGET"), listed on Schedule 1
hereto (each such person a "Seller" and, collectively, the "Sellers").
IN CONSIDERATION of the mutual promises and covenants set forth herein,
and intending to be legally bound, the parties hereto hereby agree as follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. Any capitalized terms used herein without
definition shall have the meaning ascribed to such terms in the Agreement and
Plan of Merger dated as of December __, 2000 to which PURCHASER and certain
other persons are parties relating to the merger of EBL Acquisition Corporation,
a Georgia corporation and a wholly-owned subsidiary of PURCHASER, with and into
TARGET (the "Merger Agreement"). In addition, the following terms shall have the
meanings set forth below:
(a) "Holder" shall mean any Seller who holds Registrable
Securities and any holder of Registrable Securities to whom the rights conferred
by this Agreement have been transferred in compliance with Section 1.2 hereof.
(b) "Other Stockholders" shall mean persons who, by
virtue of agreements with PURCHASER other than this Agreement, whether PURCHASER
executed such agreements prior to the date hereof or subsequent to such date,
are entitled to include their securities in certain registrations hereunder.
(c) "Registrable Securities" shall mean shares of
PURCHASER Common Stock issued to the Sellers pursuant to Section 3.1(c) of the
Merger Agreement provided that a Registrable Security ceases to be a Registrable
Security when (i) it is registered under the Securities Act; (ii) it is sold or
transferred in accordance with the requirements of Rule 144 (or similar
provisions then in effect); (iii) it is eligible to be sold or transferred under
Rule 144 without holding period or volume limitations; or (iv) it is sold in a
private transaction in which the transferor's rights under this Agreement are
not assigned.
(d) The terms "register," "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and applicable rules and regulations thereunder and the
declaration or ordering of the effectiveness of such registration statement.
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(e) "Registration Expenses" shall mean all expenses
incurred in effecting any registration pursuant to this Agreement, including,
without limitation, all federal and state registration, qualification, and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for PURCHASER and one counsel selected to represent the Holders, which counsel
shall be reasonably satisfactory to PURCHASER, blue sky fees and expenses, and
expenses of any regular or special audits incident to or required by any such
registration, but shall not include (i) Selling Expenses, (ii) the compensation
of regular employees of PURCHASER, which shall be paid in any event by
PURCHASER, and (iii) blue sky fees and expenses incurred in connection with the
registration or qualification of any Registrable Securities in any state,
province or other jurisdiction in a registration pursuant to Section 1.3 hereof
only to the extent that PURCHASER shall otherwise be making no offers or sales
in such state, province or other jurisdiction in connection with such
registration.
(f) "Restricted Securities" shall mean any Registrable
Securities required to bear the legend set forth in Section 1.2(c) hereof.
(g) "Rule 144" shall mean Rule 144 as promulgated by the
SEC under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the SEC.
(h) "Rule 145" shall mean Rule 145 as promulgated by the
SEC under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the SEC.
(i) "SEC" shall mean the Securities and Exchange
Commission.
(j) "Selling Expenses" shall mean all underwriting
discounts, selling commissions and stock transfer taxes applicable to the sale
of Registrable Securities.
1.2 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all
or any portion of the Registrable Securities unless and until (i) there is then
in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement, or (ii) (A) such Holder shall have notified PURCHASER of
the proposed disposition and shall have furnished PURCHASER with a detailed
statement of the circumstances surrounding the proposed disposition and (B) if
reasonably requested by PURCHASER, such Holder shall have furnished PURCHASER
with an opinion of counsel, reasonably satisfactory to PURCHASER, that such
disposition will not require registration of such shares under the Securities
Act, it being understood that PURCHASER will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
(b) Notwithstanding the provisions of subparagraphs (i)
and (ii) of paragraph (a) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by a Holder which is (A) a partnership
to its partners in accordance with their partnership interests, (B) a limited
liability company to its members in accordance with their member
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interests, or (C) to the Holder's family member or a trust for the benefit of an
individual Holder or one or more of his family members, provided the transferee
will be subject to the terms of this Section 1.2 to the same extent as if it
were an original Holder hereunder.
(c) Each certificate representing Registrable Securities
shall (unless otherwise permitted by the provisions of this Agreement) be
stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD
OR TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT OR UNLESS PURCHASER HAS
RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
SATISFACTORY TO PURCHASER AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
(d) PURCHASER shall be obligated to promptly reissue
unlegended certificates at the request of any Holder thereof if the Holder shall
have obtained an opinion of counsel (which counsel may be counsel to PURCHASER)
reasonably acceptable to PURCHASER to the effect that the securities proposed to
be disposed of may lawfully be so disposed of in compliance with the Securities
Act without registration, qualification or legend.
(e) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by PURCHASER of an order of the
appropriate blue sky authority authorizing such removal or if the Holder shall
request such removal and shall have obtained and delivered to PURCHASER an
opinion of counsel reasonably acceptable to PURCHASER to the effect that such
legend and/or stop-transfer instructions are no longer required pursuant to
applicable state securities laws.
1.3 PURCHASER REGISTRATION.
(a) Right to Piggyback. If at any time prior to the 2
year anniversary of the date hereof PURCHASER shall determine to register any of
shares of PURCHASER Common Stock for its own account, other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a Rule 145 transaction, or a registration on any registration form that does not
permit secondary sales, PURCHASER will:
(i) promptly give to each Holder written notice
thereof, which notice briefly describes the Holders' rights under this Section
1.3 (including notice deadlines);
(ii) use its best efforts to include in such
registration (and any related filing or qualification under applicable blue sky
laws), except as set forth in Section 1.3(b) below, and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made by any Holder and received by PURCHASER within ten (10)
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days after the written notice from PURCHASER described in clause (i) above is
mailed or delivered by PURCHASER, provided that such Holders shall have
requested for inclusion in such registration at least ten (10%) of the aggregate
number of the Registrable Securities which have been issued to the Holders prior
to the date of such written request. Such written request may specify all or a
part of a Holder's Registrable Securities; and
(iii) keep such registration effective for a
period of one hundred eighty (180) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs.
(b) Underwriting. If the registration of which PURCHASER
gives notice is for a registered public offering involving an underwriting,
PURCHASER shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with PURCHASER and the other holders of securities of PURCHASER with
registration rights to participate therein distributing their securities through
such underwriting) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected by PURCHASER.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises PURCHASER in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of Registrable Securities to be
included in, the registration and underwriting. PURCHASER shall so advise all
Holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated first to PURCHASER for securities being sold for its own
account and thereafter as set forth in Section 1.10. If any person does not
agree to the terms of any such underwriting, he shall be excluded therefrom by
written notice from PURCHASER or the underwriter. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
If shares are so withdrawn from the registration and if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, PURCHASER shall then offer
to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.10. hereof.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
Section 1.3 hereof shall be borne by PURCHASER. All Selling Expenses relating to
securities so registered shall be borne by the Holders of such securities pro
rata on the basis of the number of shares of securities so registered on their
behalf.
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1.5 REGISTRATION PROCEDURES. In the case of each registration
effected by PURCHASER pursuant to Section 1.3 hereof, PURCHASER will keep each
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, PURCHASER will use its best efforts to:
(a) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(b) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request;
(c) notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such Holder, prepare and
furnish to such 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 Registrable 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 or incomplete in the light of the circumstances then
existing; provided, however, PURCHASER shall not be obligated to prepare and
furnish any such prospectus supplements or amendments relating to any material
nonpublic information at any such time as the Board of Directors of PURCHASER
has determined that, for good business reasons, the disclosure of such material
nonpublic information at that time is contrary to the best interests of
PURCHASER in the circumstances and is not otherwise required under applicable
law (including applicable securities laws);
(d) cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange and/or included in
any national quotation system on which similar securities issued by PURCHASER
are then listed or included;
(e) provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such registration statement and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration; and
(f) otherwise use its 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 twelve (12) months, but not more than eighteen months,
beginning with the first month after the effective date of the
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registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
1.6 INDEMNIFICATION.
(a) PURCHASER will indemnify each Holder, each of its
officers, directors, partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on 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, or any violation by
PURCHASER of the Securities Act or any rule or regulation thereunder applicable
to PURCHASER or relating to action or inaction required of PURCHASER in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
provided that PURCHASER will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to
PURCHASER by such Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
1.6(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of PURCHASER (which consent shall not be unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by
him are included in the securities as to which such registration, qualification,
or compliance is being effected, indemnify PURCHASER, each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if any,
of PURCHASER's securities covered by such a registration statement, each person
who controls PURCHASER or such underwriter within the meaning of Section 15 of
the Securities Act, each other such Holder and Other Stockholder, and each of
their officers, directors, and partners, and each person controlling such Holder
or Other Stockholder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular, or other document, 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 will reimburse
PURCHASER and such Holders, Other Stockholders, directors, officers, partners,
legal counsel, and accountants, persons, underwriters, or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability, or action,
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in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to PURCHASER
by such Holder and stated to be specifically for use therein; provided, however,
(i) that the obligations of such Holder hereunder shall not apply to amounts
paid in settlement of any such claims, losses, damages, or liabilities (or
actions in respect thereof) if such settlement is effected without the consent
of such Holder (which consent shall not be unreasonably withheld) and (ii) that
in no event shall any indemnity under this Section 1.6(b) exceed the gross
proceeds from the offering received by such Holder.
(c) Each party entitled to indemnification under this
Section 1.6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
1.6, to the extent such failure is not prejudicial. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff of a release to such Indemnified Party from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section
1.6 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the other
in connection with the conduct, statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into by the
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Indemnifying Party and the Indemnified Party in connection with the underwritten
public offering are in conflict with the foregoing provisions, the provisions in
the underwriting agreement shall control.
1.7 INFORMATION BY HOLDER. Each Holder of Registrable Securities
shall furnish to PURCHASER such information regarding such Holder and the
distribution proposed by such Holder as PURCHASER may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 1.
1.8 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the SEC that may permit the sale of
the Restricted Securities to the public without registration, PURCHASER agrees
to use its best efforts to:
(a) make and keep adequate public information regarding
PURCHASER available as those terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of PURCHASER under the Securities Act and the Exchange
Act; and
(c) so long as a Holder owns any Restricted Securities,
furnish to the Holder forthwith upon written request a written statement by
PURCHASER as to its compliance with the reporting requirements of Rule 144 and
of the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of PURCHASER, and such other reports and documents so filed as
a Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing a Holder to sell any such securities without registration.
1.9 DELAY OF REGISTRATION.
(a) Notice to Discontinue. Each Holder agrees by
acquisition of such securities that, upon receipt of any notice from PURCHASER
of any event of the kind described in Section 1.5(c), the Holder will
discontinue disposition of Registrable Securities until the Holder receives
copies of the supplemented or amended prospectus contemplated by Section 1.5(c).
In addition, if PURCHASER requests, the holder will deliver to PURCHASER (at
PURCHASER's expense) all copies, other than permanent file copies then in the
Holder's possession, of the prospectus covering the Registrable Securities
current at the time of receipt of such notice. If PURCHASER gives any such
notice, the time period mentioned in Section 1.3(a)(iii) shall be extended by
the number of days elapsing between the date of notice and the date that each
Holder who has included Registrable Securities in such registration receives the
copies of the supplemented or amended prospectus contemplated in Section 1.5(c).
(b) Notice by Holders. Whenever the Holders have
requested that any Registrable Securities be registered pursuant to this
Agreement, those Holders shall notify PURCHASER, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event, which as to any Holder is (i) to its respective
knowledge; (ii) solely within its respective knowledge; and (iii) solely as to
matters concerning
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that Holder, as a result of which the prospectus included in the registration
statement, then in effect, contains an untrue statement of a material fact or
omits to state any material fact necessary to make the statements therein, in
light of the circumstances then existing, not misleading.
1.10 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance
in which all of the Registrable Securities and other shares of PURCHASER with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or Other Stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and Other Stockholders requesting inclusion of
shares pro rata on the basis of the number of shares of Registrable Securities
and Other Shares held by such Holders and Other Stockholders; provided, however,
that such allocation shall not operate to reduce the aggregate number of
Registrable Securities and Other Shares to be included in such registration, if
any Holder or Other Stockholder does not request inclusion of the maximum number
of shares of Registrable Securities and Other Shares allocated to him pursuant
to the above-described procedure, the remaining portion of his allocation shall
be reallocated among those requesting Holders and Other Stockholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares which would be held by such
Holders and Other Stockholders, assuming conversion, and this procedure shall be
repeated until all of the shares of Registrable Securities and Other Shares
which may be included in the registration on behalf of the Holders and Other
Stockholders have been so allocated.
2. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND THE SELLERS
2.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER. PURCHASER
represents and warrants to the Sellers as follows:
(a) The execution, delivery and performance of this
Agreement by PURCHASER have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the Articles of Incorporation or Bylaws of
PURCHASER, or any provision of any material indenture, agreement or other
instrument to which it or any of its properties or assets is bound, or conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such material indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of
PURCHASER.
(b) This Agreement has been duly executed and delivered
by PURCHASER and constitutes the legal, valid and binding obligation of
PURCHASER, enforceable against PURCHASER in accordance with its terms, subject
to applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles, the
discretion of courts in granting equitable remedies and public policy
considerations.
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2.2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each Seller
(severally and not) represents and warrants to PURCHASER as follows:
(a) The execution, delivery and performance of this
Agreement by such Sellers will not violate any provision of law, any order of
any court or any agency or government, or any provision of any material
indenture or agreement or other instrument to which they or any of their
respective properties or assets is bound, or conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default under any
such material indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge, or encumbrance of any nature
whatsoever upon any of the properties or assets of the Sellers except as would
not reasonably be expected to result in a material adverse effect on such
Sellers.
(b) This Agreement has been duly executed and delivered
by such Seller and constitutes the legal, valid and binding obligation of such
Seller, enforceable against such Seller in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles, the
discretion of courts in granting equitable remedies and public policy
considerations.
3. MISCELLANEOUS
3.1 DELAY OF REGISTRATION. No Holder shall have any right to take
any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of Section 1 hereof.
3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subject hereof and thereof. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated, except by a
written instrument signed by PURCHASER and the Holders of at least fifty-one
percent (51%) of the Registrable Securities and any such amendment, waiver,
discharge or termination shall be binding on all the Holders, but in no event
shall the obligation of any Holder hereunder be materially increased, except
upon the written consent of such Holder.
3.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or nationally
recognized courier addressed (a) if to a Holder, as indicated in the stock
records of PURCHASER or at such other address as such Holder shall have
furnished to PURCHASER in writing, or (b) if to PURCHASER, at 0000 Xxxxxxxx Xxxx
Xxxxx, Xxxxxxx, Xxxxxxx 00000, or at such other address as PURCHASER shall have
furnished to each Holder in writing, together with a copy to Xxxxxx & Xxxxxx
LLP, 2700 International Tower, 000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000,
Attn: Xxxxxx X. Hussle,
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Esq. All such notices and other written communications shall be effective on the
date of mailing or delivery.
3.5 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any Holder, upon any breach or default of
PURCHASER under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such 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 therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder 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 Holder, shall be cumulative and
not alternative.
3.6 RIGHTS; SEVERABILITY. Unless otherwise expressly provided
herein, a Holder's rights hereunder are several rights, not rights jointly held
with any of the other Holders. In case any provision of the 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.
3.7 INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless PURCHASER has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.
3.8 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
3.9 COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in any number of counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
3.10 GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the State
of Georgia without reference to Georgia's choice of law rules and each of the
parties hereto hereby consents to personal jurisdiction in any federal or state
court in the State of Georgia.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement or have caused this Agreement to be duly executed on its behalf by an
officer or representative thereto duly authorized, all as of the date first
above written.
BRAINWORKS VENTURES, INC.
By:
--------------------------------
Its:
----------------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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SELLERS:
-----------------------------------
-----------------------------------
-----------------------------------
[MORE TO COME]
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EXHIBIT 4
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made and entered into as of
_______________ by and among BRAINWORKS VENTURES, INC., a Nevada corporation
("PURCHASER"), ___________________ (the "Escrow Agent"), and XXXX X. XXXXXX (the
"Stockholders' Agent") for and on behalf of the Warranting Stockholders, as that
term is defined in that certain Agreement and Plan of Merger dated as of
December __, 2000 (the "Merger Agreement") by and among PURCHASER, EBL
Acquisition Corporation, a Georgia corporation and a wholly-owned subsidiary of
PURCHASER ("MERGER SUB"), and eBusinessLabs, Inc., a Georgia corporation
("TARGET").
WITNESSETH:
WHEREAS, pursuant to the Merger Agreement whereby MERGER SUB will be
merged with and into TARGET (the "Merger"), PURCHASER will issue to the
Warranting Stockholders shares of PURCHASER Common Stock and make cash payments
in lieu of fractional shares of such stock to the Warranting Stockholders;
WHEREAS, pursuant to Article 11 of the Merger Agreement, which is
incorporated herein by reference and a copy of which is attached hereto as Annex
A, the Warranting Stockholders have agreed to make available to PURCHASER and
certain of its affiliates an escrow fund to compensate such parties for certain
damages incurred as permitted therein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual obligations herein, the parties agree as follows:
1. DEFINITIONS. All capitalized terms used herein without
definitions shall have the meanings specified in the Merger Agreement.
2. ESCROW ARRANGEMENTS. Except as otherwise expressly set forth
herein, all matters pertaining to the Escrow, the Escrow Fund and the Escrow
Shares (each as hereinafter defined) shall be governed by the provisions of
Article 11 of the Merger Agreement; provided, however, that if any express
provision of this Agreement conflicts with the provisions of Article 11 of the
Merger Agreement, the provisions of Article 11 of the Merger Agreement shall
control.
3. ESTABLISHMENT OF ESCROW. Within ten (10) business days of
Closing, PURCHASER shall cause its transfer agent to deliver to the Escrow Agent
for deposit into escrow (the "Escrow Fund") a certificate representing that
certain number of shares of PURCHASER Common Stock comprising the Stock
Consideration that each Warranting Stockholder is entitled to receive in the
amount set forth on Annex B attached hereto (the "Escrow Shares") as required by
Section 3.1(g) of the Merger Agreement.
The Escrow Agent agrees to establish the Escrow Fund in the manner set forth in
Section 11.1 of the Merger Agreement.
72
4. MAINTENANCE OF THE ESCROW. The Escrow Agent shall establish a
separate account for each Warranting Stockholder showing the number of Escrow
Shares held in the Escrow for such Warranting Stockholder on the basis of the
provisions of the Merger Agreement and Annex B. The Escrow Agent shall maintain
records showing each Warranting Stockholder's Proportional Allotment of the
Escrow Fund and shall adjust each Warranting Stockholder's account to reflect
distributions from, and additions or substitutions to, the property held for the
account of such Warranting Stockholder in the Escrow. The Escrow Agent is hereby
granted the power to effect any transfer of Escrow Shares required by this
Agreement. PURCHASER shall cooperate with the Escrow Agent in promptly issuing,
or causing its transfer agent to promptly issue, such stock certificates as
shall be required to effect such transfers. All Escrow Shares held in the Escrow
Fund shall be registered in the name of the Escrow Agent or its nominee on
behalf of the Warranting Stockholders in the respective amounts set forth on
Annex B.
5. ADMINISTRATION OF ESCROW FUND. The Escrow Agent shall
administer the Escrow Fund as set forth in Article 11 of the Merger Agreement.
6. TERM OF ESCROW AGREEMENT. This Agreement shall terminate upon
the termination of the Escrow Period, as set forth in Section 11.3 of the Merger
Agreement, and the distribution by the Escrow Agent of all property held in the
Escrow Fund.
7. FEES OF THE ESCROW AGENT. The fees of the Escrow Agent,
including (i) the normal costs of administering the Escrow as set forth on the
Fee Schedule attached hereto as Annex C and (ii) all fees and costs associated
with the Escrow Agent's administration of Claims, shall be paid by PURCHASER and
not out of the Escrow Fund. In the event that the Escrow Agent renders any
service hereunder not provided for herein or there is any assignment of any
interest in the subject matter of the Escrow or modification hereof, the Escrow
Agent shall be reasonably compensated for such extraordinary services by the
party that is responsible for or requests such services and not out of the
Escrow Fund.
8. LIABILITY OF THE ESCROW AGENT. In performing any of its duties
under this Agreement, the Escrow Agent shall not be liable to any party for
damages, losses or expenses, except in the event of gross negligence or willful
misconduct on the part of the Escrow Agent. The Escrow Agent shall not incur any
such liability for (i) any act or failure to act made or omitted in good faith
or (ii) any action taken or omitted in reliance upon any instrument, including
any written statement or affidavit provided for in this Agreement that the
Escrow Agent shall in good faith believe to be genuine; nor will the Escrow
Agent be liable or responsible for forgeries, fraud, impersonations or
determining the scope of any agent's authority. In addition, the Escrow Agent,
at the expense of PURCHASER, may consult with legal counsel in connection with
its duties under this Agreement and shall be fully protected in any act taken,
suffered or permitted by it in good faith in accordance with the advice of
counsel. The Escrow Agent is not responsible for determining and verifying the
authority of any person acting or purporting to act on behalf of any party to
this Agreement.
9. CONTROVERSIES. If any controversy arises between the parties
to this Agreement, or with any other party, concerning the subject matter of the
Escrow, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and funds and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Escrow Agent's
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discretion, it may require, despite what may be set forth elsewhere in this
Agreement. In such event, the Escrow Agent will not be liable for interest or
damage. Furthermore, the Escrow Agent may at its option, file an action of
interpleader requiring the parties to answer and litigate any claims and rights
among themselves. The Escrow Agent is authorized to deposit with the clerk of
the court all documents and funds held in the Escrow, except all costs,
expenses, charges and reasonable attorneys' fees incurred by it due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of the
Escrow, and the action will be deemed to be solely a dispute between the parties
subject to Article 11 of the Merger Agreement.
10. INDEMNIFICATION OF ESCROW AGENT. PURCHASER and its successors
and assigns agree jointly and severally to indemnify and hold the Escrow Agent
harmless against any and all losses, claims, damages, liabilities and expenses,
including reasonable costs of investigation, counsel fees, including allocated
costs of in-house counsel, and disbursements that may be imposed on the Escrow
Agent, or incurred by it in connection with the performance of its duties under
this Agreement, including but not limited to any arbitration or litigation
arising from this Agreement or involving its subject matter, unless such loss,
claim, damage, liability or expense shall be caused by the gross negligence or
willful misconduct on the part of the Escrow Agent. Nothing contained in this
Section 10 shall impair the rights of the Warranting Stockholders and PURCHASER,
as between themselves.
11. RESIGNATION OF ESCROW AGENT. The Escrow Agent may resign at
any time upon giving at least 30 days written notice to the other parties;
provided, however, that no such resignation shall become effective until the
appointment of a successor Escrow Agent which shall be accomplished as follows:
PURCHASER and the Stockholders' Agent shall use their best efforts to agree on a
successor Escrow Agent within 30 days after receiving such notice. If the
parties fail to agree on a successor Escrow Agent within such time, then the
Escrow Agent shall have the right to appoint a successor Escrow Agent authorized
to do business in the State of Georgia, provided that the successor so chosen
shall have capital, surplus and undivided profits of at least $200,000,000. The
successor Escrow Agent shall execute and deliver to the Escrow Agent an
instrument accepting such appointment, and the successor Escrow Agent shall,
without further acts, be vested with all the estates, property rights, powers
and duties of the predecessor Escrow Agent as if originally named as Escrow
Agent herein. The predecessor Escrow Agent then shall be discharged from any
further duties and liability under this Agreement.
12. MISCELLANEOUS.
(a) ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. None
of the parties hereto may assign any of its rights or obligations hereunder
without the prior written consent of the other parties. This Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(b) SEVERABILITY. If any provision of this Agreement, or
the application thereof, shall for any reason and to any extent be held to be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. The parties further agree
to replace such invalid or unenforceable provision of this Agreement
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74
with a valid and enforceable provision which will achieve, to the extent
possible, the economic, business and other purposes of the invalid or
unenforceable provision.
(c) ENTIRE AGREEMENT. This Agreement, the Merger
Agreement, the Annexes hereto, the documents referenced herein, and the exhibits
thereto, constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and thereof and supersede all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect hereto and
thereto. The express terms hereof control and thereof supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof and
thereof.
(d) NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed duly delivered if delivered
personally (upon receipt), or three business days after being mailed by
registered or certified mail, postage prepaid (return receipt requested), or one
business day after it is sent by reputable nationwide overnight courier service,
or upon transmission, if sent via facsimile (with confirmation of receipt) to
the parties at the following address (or at such other address for a party as
shall be specified by like notice):
(i) if to PURCHASER, to:
Brainworks Ventures, Inc.
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx LLP
2700 International Tower
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Hussle, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(ii) if to Escrow Agent, to:
----------------------------------
----------------------------------
----------------------------------
Attention:
-----------------------
Facsimile:
-----------------------
Telephone:
-----------------------
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(iii) if to TARGET, to:
eBusinessLabs, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention:
-----------------------
Facsimile:
-----------------------
Telephone:
-----------------------
with a copy to:
Xxxxxx & Xxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxx
Facsimile:
-----------------------
Telephone:
-----------------------
(iv) if to Stockholders' Agent, to:
Xxxx X. Xxxxxx
----------------------------------
----------------------------------
----------------------------------
Attention:
-----------------------
Facsimile:
-----------------------
Telephone:
-----------------------
with a copy to:
----------------------------------
----------------------------------
----------------------------------
Attention:
-----------------------
Facsimile:
-----------------------
Telephone:
-----------------------
(e) OTHER REMEDIES. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party shall be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy shall not preclude the
exercise of any other.
(f) AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default
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76
in payment of any amount due hereunder or default in the performance hereof
shall not be deemed to constitute a waiver of any other default or any
succeeding breach or default.
(g) FURTHER ASSURANCES. Each party agrees to cooperate
fully with the other parties and to execute such further instruments, documents
and agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
(h) ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No
provisions of this Agreement are intended, nor shall be interpreted, to provide
or create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, shareholder, partner of any party hereto or any
other person or entity unless specifically provided otherwise herein and except
for the Stockholders, and, except as so provided, all provisions hereof shall be
solely between the parties to this Agreement.
(i) GOVERNING LAW. It is the intention of the parties
hereto that the internal laws of the State of Georgia (irrespective of its
choice of law principles) shall govern the validity of this agreement, the
construction of its terms, and the interpretation and enforcement of the rights
and duties of the parties hereto.
(j) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall constitute an original and all of
which together shall constitute one and the same instrument.
[SIGNATURES ON FOLLOWING PAGE]
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77
IN WITNESS WHEREOF, the parties have executed this Escrow
Agreement as of the date first set forth above.
BRAINWORKS VENTURES, INC.
By:
--------------------------------
Title:
-----------------------------
[STOCKHOLDERS' AGENT]
By:
--------------------------------
Its:
-------------------------------
[ESCROW AGENT]
By:
--------------------------------
Its:
-------------------------------
7
78
ANNEX A
ARTICLE 11
ESCROW AND INDEMNIFICATION
[INTENTIONALLY OMITTED]
79
ANNEX B
WARRANTING STOCKHOLDERS' CONTRIBUTIONS TO ESCROW
[INTENTIONALLY OMITTED]
80
ANNEX C
SCHEDULE OF FEES
FOR ESCROW AGENT SERVICES
[INTENTIONALLY OMITTED]
