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EXHIBIT 10.5
STOCK PURCHASE AGREEMENT
AMONG
SOLUTIONS AMERICA, INC.
SENTINEL SOFTWARE, INC.,
AND
THE SHAREHOLDER OF SENTINEL SOFTWARE, INC.
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TABLE OF CONTENTS
Page
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1. Certain Definitions.................................................... 1
2. Purchase and Sale of Stock............................................. 7
2.1. Tax-Free Reorganization........................................ 7
2.2. Sale of Stock.................................................. 7
2.3. Purchase Price and Payment for Stock........................... 7
2.4. Employment Agreement........................................... 10
3. Representations and Warranties......................................... 10
3.1. Organization................................................... 10
3.2. Articles of Incorporation; Bylaws; Minutes..................... 10
3.3. Capitalization................................................. 11
3.4. Ownership of Shares............................................ 11
3.5. Due Execution and Authority.................................... 11
3.6. Subsidiaries and Affiliates.................................... 12
3.7. No Violation................................................... 12
3.8. Financial Statements........................................... 13
3.9. Absence of Certain Changes or Events........................... 13
3.10. Absence of Undisclosed Liabilities............................. 14
3.11. Broker's Fees.................................................. 15
3.12. Assets ...................................................... 15
3.13. Intangible Personal Property................................... 16
3.14. Real Property.................................................. 17
3.15. Contracts...................................................... 17
3.16. Litigation..................................................... 18
3.17. Tax Matters.................................................... 18
3.18. Compliance With Laws........................................... 19
3.19. Government Licenses and Permits................................ 20
3.20. Environmental Matters.......................................... 20
3.21. Insurance...................................................... 21
3.22. Condition of Assets............................................ 22
3.23. Labor and Employment Agreements................................ 22
3.24. Employee Benefit Plans; ERISA.................................. 23
3.25. Business Locations............................................. 23
3.26. Accounts Receivable............................................ 23
3.27. No Restrictions................................................ 24
3.28. Computer Systems............................................... 24
3.29. Bank Accounts.................................................. 24
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TABLE OF CONTENTS
(Continued)
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3.30. Investment .................................................... 24
3.31. No Omissions or Untrue Statements ............................. 26
3.32. Limitation on Representations and Warranties .................. 26
4. Representations and Warranties of Purchaser ........................... 26
4.1. Organization .................................................. 27
4.2. Stock of Buyer ................................................ 27
4.3. Due Execution and Authority ................................... 27
4.4. No Violation .................................................. 27
4.5. Financial Statements .......................................... 27
4.6. Absence of Undisclosed Liabilities ............................ 28
4.7. Tax Matters ................................................... 28
4.8. Compliance With Laws .......................................... 29
4.9. Computer Systems .............................................. 29
5. Covenants and Agreements .............................................. 30
5.1. Conduct of Business ........................................... 30
5.2. Subsequent Events ............................................. 31
5.3. Access by Purchaser ........................................... 31
6. Covenants Re: Confidential Information; Covenants Not to Compete ...... 32
6.1. Covenants ..................................................... 32
6.2. Remedies ...................................................... 34
6.3. Severability .................................................. 34
7. Additional Agreements ................................................. 35
7.1. Shareholder Guarantees ........................................ 35
7.2. Cooperation; Reasonable Commercial Efforts .................... 35
7.3. Shareholder Release of Company ................................ 35
8. Closing ............................................................... 36
8.1. Closing Date .................................................. 36
8.2. Shareholder' Closing Deliveries ............................... 36
8.3. Purchaser's Closing Deliveries ................................ 37
9. Conditions to Obligations of Shareholder .............................. 38
9.1. Compliance by Purchaser ....................................... 38
9.2. Accuracy of Purchaser's Representations ....................... 38
9.3. Documents ..................................................... 38
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TABLE OF CONTENTS
(Continued)
Page
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9.4. Litigation .................................................... 38
9.5. Employment Agreement .......................................... 38
10. Conditions to Obligations of Purchaser ................................ 39
10.1. Compliance by Shareholder ..................................... 39
10.2. Accuracy of Representations of Shareholder and Shareholder .... 39
10.3. Material Adverse Change ....................................... 39
10.4. Litigation .................................................... 39
10.5. Employment Agreement .......................................... 39
10.6. Required Consents ............................................. 39
11. Termination ........................................................... 40
11.1. Termination Prior to Closing; General ......................... 40
11.2. Consequences of Termination ................................... 40
12. Survival of Representations; Indemnification; Escrow .................. 41
12.1. Survival ...................................................... 41
12.2. Indemnification by Shareholder ................................ 41
12.3. Time for Claims ............................................... 41
12.4. Claims for Indemnification .................................... 42
12.5. Threshold ..................................................... 42
12.6. Claims Procedure .............................................. 42
12.7. Limitation on Indemnity ....................................... 43
13. Miscellaneous ......................................................... 43
13.1. Expenses ...................................................... 43
13.2. Publicity ..................................................... 44
13.3. Succession and Assignments; Third Party Beneficiaries ......... 44
13.4. Notices ....................................................... 44
13.5. Construction .................................................. 45
13.6. Consent to Jurisdiction; Service of Process ................... 45
13.7. Counterparts .................................................. 46
13.8. No Implied Waiver; Remedies ................................... 46
13.9. Entire Agreement .............................................. 46
13.10. Amendments; Actual Waivers .................................... 47
13.11. Headings ...................................................... 47
13.12. Severability .................................................. 47
13.13. Continuing Indemnity .......................................... 47
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into on
December 30, 1999, by and among Solutions America, Inc., a Delaware corporation
("Purchaser"), Sentinel Software, Inc., a Virginia corporation (the "Company"),
and Xxxx Xxxxxxx who is the sole shareholder of the Company (the "Shareholder"),
with reference to the following facts:
A. The Shareholder owns all of the issued and outstanding shares of
capital stock of the Company (the "Stock").
B. The Company is engaged in the business of developing real time
computer software systems and applications for internet and e-commerce
businesses, including data base and transaction processing applications
(collectively, the "Business").
C. Purchaser desires to purchase from the Shareholder and the
Shareholder desires to sell to Purchaser the Stock.
In consideration of the foregoing and the mutual agreements, covenants
and other provisions herein contained, the parties hereto agree as follows:
1. Certain Definitions
As used in this Agreement, the following terms shall have the meaning
set forth below. All terms used in this Agreement that are not defined in this
Article 1 shall have the meanings set forth elsewhere in this Agreement.
1.1. "Act" is defined in Section 3.3.
1.2. "Affiliate" shall mean, with respect to any specified Person, (a)
any other Person who, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person;
(b) any other Person who is a director, officer or partner or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of any class of
equity securities of the specified Person or a Person described in clause (a) of
this Section; and (c) each Subsidiary of such Persons.
1.3. "Affiliated Group" shall mean affiliated group as defined in
Section 1504(a) of the Code.
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1.4. "Capitalized Lease" shall mean a lease of real or personal
property which, in accordance with generally accepted accounting principles, has
been or should have been capitalized by the lessee.
1.5. "Closing" shall mean the closing of the transactions contemplated
by this Agreement on the Closing Date in accordance with Articles 2 and 8 hereof
and subject to all of the other terms and conditions hereof.
1.6. "Closing Date" shall mean the date of Closing.
1.7. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.8. "Company" is defined in the Preamble.
1.9. "Confidential Information" is defined in Section 6.1.
1.10. "Contract" shall mean any lease, commitment, understanding, sales
order, purchase order, agreement, indenture, note, bond, right or warrant,
whether written or oral, which is intended or purports to be binding and
enforceable or which is offered to any Person and acted upon or relied upon by
such Person.
1.11. "Damages" shall mean all demands, claims, actions or causes of
action, assessments, losses, damages, costs, expenses, liabilities, judgments,
awards, fines, sanctions, penalties, charges and amounts paid in settlement, net
of insurance proceeds actually received, including without limitation (i)
interest on cash disbursements in respect of any of the foregoing at the Bank of
America Reference Rate, compounded quarterly, from the date each such cash
disbursement is made until the Person incurring the same shall have been
indemnified in respect thereof and (ii) reasonable costs, fees and expenses of
attorneys, accountants, experts and other agents of such Person.
1.12. "Employment Agreement" is defined in Section 2.4.
1.13. "Employee Benefit Plan" shall mean any employee benefit plan, as
defined in Section 3(3) of ERISA, that is sponsored or contributed to by Company
or its Subsidiaries covering employees or former employees of Company or its
Subsidiaries.
1.14. "Employee Pension Benefit Plan" means any employee pension
benefit plan, as defined in Section 3(1) of ERISA, that is subject to Title IV
of ERISA, other than a Multiemployer Plan.
1.15. "Environmental Law" shall mean any federal, state, local and
foreign laws, statutes, regulations having the force and effect of law, permits,
court decrees, judgments, injunctions
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and written orders concerning (i) public health and safety relating to exposure
of humans to toxic or hazardous substances, or (ii) pollution or protection of
the environment or natural resources.
1.16. "Environmental Permit" shall mean any permit, license, approval,
consent or other authorization required by or pursuant to any applicable
Environmental Law.
1.17. "EPA" shall mean the United States Environmental Protection
Agency, or any successor United States governmental agency.
1.18. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
1.19. "GAAP" shall mean United States Generally Accepted Accounting
Principles as in effect at the time in question.
1.20. "Governmental Authority" shall mean the government of the United
States, any foreign country or any state, or political subdivision thereof and
any entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, including
the Pension Benefit Guaranty Corporation and other quasi-governmental entities
established to perform such functions.
1.21. "Governmental Licenses and Permits" shall mean the licenses,
permits or other authorizations required by any law or Governmental Authority to
be held by a Person in order to operate the business of the Company as it has
been operated historically.
1.22. "Indebtedness" of any Person shall mean at any date any of the
following: (i) all obligations, unconditional or contingent for borrowed money
including, without limitation, principal, interest, premium, penalties and costs
(whether or not the recourse of the lender is to the whole of the assets of the
obligor or only to a portion thereof, and including for this purpose all
obligations incurred under Capitalized Leases), or obligations evidenced by
bonds, notes, debentures or similar instruments (including, without limitation,
obligations with respect to letters of credit or bankers' acceptances); (ii) all
obligations to pay the balance deferred and unpaid of the purchase price of any
business, real property, other assets or interest therein, except any such
balance that constitutes a trade payable arising in the ordinary course of
business; (iii) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become liable
for payment thereof, and (iv) all guarantees made by such Person.
1.23. "Indemnitee" is defined in Sections 12.2 and 12.3.
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1.24. "Indemnitor" is defined in Sections 12.2 and 12.3.
1.25. "Intangible Personal Property" is defined in Section 3.13.
1.26. "Knowledge" shall mean with respect to a Person's awareness of
the presence or absence of a fact, event or condition, (a) actual knowledge
plus, if different, (b) knowledge that would be obtained if such Person made
such inquiries as a reasonably prudent person would make in the management of
its, his or her own affairs.
1.27. "Law" shall mean any law, common law, statute, regulation,
ordinance, rule, order, decree, judgment or consent decree enacted, promulgated
or imposed by any Governmental Authority.
1.28. "Liabilities" shall mean all (a) obligations at any date which
are or should be reflected and classified as liabilities on the balance sheet of
the Company in accordance with GAAP; (b) all contingent liabilities (including,
without limitation, guarantees, endorsements or obligations to pay, assume or
purchase liabilities or any obligation to purchase, sell or otherwise furnish
assets, properties or services primarily for the purpose of enabling such other
Person to make payment of such liabilities or of assuring the owner of such
liabilities against loss with respect thereto); (c) amounts (calculated on an
actuarial basis) that could be payable pursuant to any contract, or other plan
or arrangement by which the Company is bound with respect to or affecting its
employees, officers, directors, representatives or agents; (d) penalties,
charges and assessments payable by the Company to any other Person, including
penalties, charges or assessments that are triggered by virtue of the occurrence
of a transaction or event; and (e) liabilities secured by any Lien affecting any
assets or properties owned by the Company (whether or not any such liability has
been assumed by the Company, and whether it arises under a conditional sale or
other title retention agreement given as a security device).
1.29. "License" is defined in Section 3.14.
1.30. "Liens" shall mean all, with respect to any given property(ies),
encumbrances, defects of title, deeds of trust, mortgages, security agreements,
security interests, pledges, liens, claims, adverse interests, and/or rights of
third parties of every kind and character arising or existing by operation of
law, by judicial decree or judgment or arbitral decision, by contract or
otherwise.
1.31. "Material Adverse Change" or "Material Adverse Effect" shall
mean, with respect to a party, a change or an effect which would have a material
adverse effect on the assets, liabilities
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(whether absolute, accrued, contingent or otherwise), condition (financial or
otherwise), results of operations, business or prospects of such party in an
amount which exceeds Fifty Thousand Dollars ($50,000).
1.32. "Material Contract" is defined in Section 3.15.
1.33. "Permitted Liens" shall mean (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings; (ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons and other Liens
imposed by Law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith; (iii) Liens relating to deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or to
secure the performance of leases, trade contracts or other similar agreements;
and (iv) other Liens set forth on Schedule 1.32 hereto.
1.34. "Person" shall mean an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization including, but not limited to, a Governmental Authority.
1.35. "Personal Property" shall mean all machinery, equipment,
vehicles, tools, furniture and other tangible personal property owned or leased
by the Company.
1.36. "Personal Property Leases" shall mean Personal Property lease
agreements, as amended, to which the Company is a party (as lessor or lessee).
1.37. "Purchase Price" is defined in Section 2.2(a).
1.38. "Purchaser" is defined in the Preamble.
1.39. "Real Property" shall mean real property, including tenant
improvements and fixtures.
1.40. "Reasonable Commercial Efforts" shall mean the reasonable efforts
that a prudent Person desirous of achieving a result based on an economic
analysis would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible; provided, however, that an obligation to
use Reasonable Commercial Efforts under this Agreement does not require the
Person subject to that obligation to take actions that would result in a
materially adverse change in the benefits to such Person of this Agreement and
the Transactions.
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1.41. "Required Consent" shall mean all consents required to be
obtained by the Company or the Shareholder to comply with or eliminate the
exceptions to Section 3.7 of this Agreement.
1.42. "Returns" shall mean all returns (including, without limitation,
information returns) and other material information, reports and forms relating
to Taxes.
1.43. "Schedule" shall mean any schedule, and the term Schedule shall
mean all schedules, attached hereto and incorporated herein.
1.44. "Shareholder" is defined in the Preamble.
1.45. "Shares" is defined in Section 2.2(a).
1.46. "Stock" is defined in Recital A.
1.47. "Stock Liens" is defined in Section 2.1.
1.48. "Subsidiary," with respect to a specified Person, shall mean a
corporation or other legal entity which such person beneficially owns, controls
or has the ability to control, directly or indirectly, (a) in excess of fifty
percent (50%) of the stock, the holders of which are ordinarily and generally,
in the absence of contingencies, entitled to vote for the election of a majority
of the directors or (b) in excess of fifty percent (50%) of the aggregate total
ownership thereof.
1.49. "Tax Claims" are defined in Section 12.1.
1.50. "Taxes" shall mean, with respect to any Person, (a) any net
income, gross income, alternative or add-on minimum, business, gross receipts,
sales, use, ad valorem, franchise, fuel, profits, license, withholding, payroll,
employment, excise, severance, stamp, transfer, occupation, premium, property or
windfall profit tax, custom duty or other tax, fee, assessment or charge of any
kind or nature whatsoever, together with any interest and any penalty thereon or
any other related addition to any such taxes, imposed by any Governmental
Authority on such Person or with respect to the assets or operations of such
Person, and (b) any liability of such Person for the payment of any amount of
the type described in the immediately preceding clause (a) as a result of such
Person's being a member of an Affiliated Group or combined group.
1.51. "Transactions" shall mean, in respect of any party, all
transactions set forth in or contemplated by this Agreement that involve, relate
to or affect such party.
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2. Purchase and Sale of Stock
2.1. Tax-Free Reorganization. Purchaser, Company and Shareholder adopt
this Agreement as a plan of reorganization under Code Section 368(a)(1)(b).
2.2. Sale of Stock. Subject to the terms and conditions herein, on the
Closing Date, the Shareholder shall sell to Purchaser and Purchaser shall
purchase from the Shareholder the Stock, free and clear of all Liens and
conditional sales agreements, claims, restrictions, charges, options, purchase
rights or voting trusts (collectively "Stock Liens").
2.3. Purchase Price and Payment for Stock.
2.3.(a) Purchase Price. The Purchase Price (the "Purchase Price")
for the Stock shall be Seventy-Nine Thousand Four Hundred Ninety-One (79,491)
shares of Buyer's fully paid and non-assessable Common Stock, par value $.0001
(the "Shares").
2.3.(b) Payment of Purchase Price. The Purchase Price shall be
paid at the Closing, by the issuance and delivery to the Shareholder of a
certificate evidencing the Shares.
2.3.(c) Adjustment to Purchase Price. The Purchase Price for the
Stock shall be increased or decreased based on the "Net Income" of the Company
for the Calculation Period (as defined herein), in accordance with the following
schedule:
Net Income Increase/Decrease
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None to less than $100,000 a maximum of 26,497 Shares decreasing
at the rate of .26497 Shares per each
dollar below $100,000
$100,000 to less than $300,000 0 Share decrease or increase
$300,000 or more a maximum of 26,497 Shares increasing
at the rate of .26497 Shares per each
dollar above $300,000 up to $400,000
with no additional increase thereafter
The Purchaser shall not be required to issue fractional shares. Fractional
shares resulting from the calculation of the adjustment to the Purchase Price
shall be rounded to the nearest whole share. For
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purposes of this Agreement, the Calculation Period shall be a twelve (12) month
period commencing with the first day of April, May or June, 2000 as designated
by Purchaser in writing to Shareholder. For purposes of this Agreement, "Net
Income" means Company's net income before taxes calculated in accordance with
U.S. generally accepted accounting principles, on a standalone basis
unconsolidated with Purchaser, as determined by the independent public
accounting firm engaged by Purchaser. On conclusion of Purchaser's year-end
audit, and the determination of Company's Net Income for the Calculation Period,
Purchaser shall provide Shareholder with a notice of the required adjustment to
the Purchase Price ("Notice') accompanied by a copy of the accountant's
calculation of Net Income. At such time, either Purchaser shall issue, along
with such Notice, such additional Shares to Shareholder in accordance with the
above Schedule or Shareholder shall surrender Shares to Purchaser for
cancellation without additional consideration. If Shareholder is required to
surrender Shares for cancellation, such Shares shall be cancelled effective as
of the date of the Notice, and Shareholder shall thereafter have no further
rights as a Shareholder of Purchaser with respect to such canceled Shares. The
Purchase Price may be further adjusted based on the fair market value of the
Purchaser at the last day of the Calculation Period. If the Purchase Price has
not decreased, such that Shareholder owns at least 79,491 Shares (unadjusted for
any capitalization changes) and such Shares do not have a fair market value on a
non-discounted basis (i.e., a pro rata portion of the Company's fair market
value) ("Fair Market Value") of $1,500,000 or more, then Purchaser shall issue
Shareholder that number of Shares which are required so that Shareholder's stock
ownership in the Company would have a Fair Market Value of $1,500,000. In
addition, if the Purchase Price is adjusted by the maximum amount such that
Shareholder owns 105,998 Shares (unadjusted for any capitalization changes) and
such Shares do not have a Fair Market Value of $2,400,000 then Company shall
issue Shareholder that number of Shares which are required so that
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Shareholder's stock ownership in the Company would have a Fair Market Value of
$2,400,000. If the Purchase Price is decreased, then no Shares will be issued to
Shareholder based on these valuation calculations. The value of the Purchaser
shall be the value ascribed to the Purchaser in the most recent debt or equity
financing transaction closed by the Purchaser prior to the end of the
Calculation Period (a "Bench-Xxxx Transaction"). Within ninety (90) days after
the end of the Calculation Period, Purchaser shall provide Shareholder with its
calculation of Fair Market Value and any evidence on which such calculation is
based. If no Bench-Xxxx Transaction has occurred prior to the expiration of the
Calculation Period, then for thirty (30) days following the expiration of the
Calculation Period Shareholder and Purchaser shall engage in good faith
negotiations to establish a mutually agreeable Fair Market Value for the Shares.
If the parties are unable to agree on the Fair Market Value of the Shares each
party shall notify the other as to its final determination of Fair Market Value
of the Shares, and shall submit the question of valuation to Xxxxxxxx Xxxxx
Xxxxxx & Xxxxx ("HLHZ"), or its successor, for determination by appraisal. If
HLHZ ceases to exist without a successor, then the appraiser shall be appointed
either by mutual agreement of Shareholder and Purchaser or by submission to the
Los Angeles Superior Court for appointment. Each of Purchaser and Shareholder
shall bear its own expenses in presenting evidence to the appraiser. In
determining the Fair Market Value of the Shares, HLHZ shall consider all
opinions and relevant evidence submitted to them by the parties or otherwise
obtained by them, shall not reduce the value of the Purchaser as a result of the
loss of services of any person, shall not apply lack of control, minority
interest or marketability discounts or other discounts in establishing
valuation, and shall set forth their determination in writing together with
their opinions and considerations on which the opinions are based, with a signed
counterpart delivered to each party within sixty (60) days of commencing
appraisal. HLHZ's fees and expenses shall be shared equally by the Purchaser
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and the Shareholder. However, if HLHZ's determination of Fair Market Value of
the Shares is equal to or greater than Purchaser's final determination, such
expenses shall be borne entirely by Shareholder, and if HLHZ's determination is
equal to or less than Shareholder's final determination, such expenses shall be
borne entirely by Purchaser.
2.4. Employment Agreement. At the Closing, Purchaser shall enter into
an Employment Agreement with the Shareholder, which Employment Agreement shall
be in the form attached hereto as Exhibit "A" (the "Employment Agreement').
3. Representations and Warranties
Except as provided in the Schedules attached hereto, and except for
claims, events or facts which in the aggregate do not have a Material Adverse
Effect, the Shareholder represents and warrants to Purchaser as follows:
3.1. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Virginia,
has all the corporate power and authority to carry on its business as now being
conducted and to own or lease and operate its properties and assets. It is not
licensed or qualified as a foreign corporation in any other jurisdiction and it
is not required to be so licensed or so qualified. All of the officers (and
their respective titles) and directors of the Company are set forth on Schedule
3.1. Each of such officers and directors has been duly elected or appointed and
qualify in accordance with applicable law, the Company's Articles of
Incorporation, its Bylaws, agreements, arrangements or understandings relating
thereto.
3.2. Articles of Incorporation; Bylaws; Minutes. The Company has
delivered or will prior to Closing deliver to Purchaser true and complete copies
of its Articles of Incorporation and Bylaws.
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3.3. Capitalization. The entire authorized capital stock of the
Company consists of Five Thousand (5,000) shares of common stock, of which One
Hundred (100) shares are issued and outstanding, and no shares are issued but
not outstanding. The Stock has been validly issued and is fully paid and
non-assessable, and has not been issued in violation of the Securities Act of
1933, as amended (the "Act"), or the applicable securities or "blue sky" laws of
any jurisdiction. There are no outstanding options, warrants or other rights of
any kind to acquire any additional shares of capital stock of the Company or
securities convertible or exchangeable for, or which otherwise confer on the
holder thereof any right to acquire, any such additional shares, nor is the
Company committed to issue any such option, warrant, right or security, nor are
there any outstanding stock options, stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company, nor is the Company
committed to issue any such right, except as set forth on Schedule 3.3. Exhibit
A sets forth each and every Shareholder of the Company as of the date hereof.
3.4. Ownership of Shares. The Shareholder is the lawful record and
beneficial owner of one hundred (100) shares of Stock. The Stock is free and
clear of all Liens and Stock Liens. Upon delivery of the Stock hereunder,
Purchaser will acquire the beneficial and legal and valid title to such Stock,
free and clear of all Liens and Stock Liens. Ownership of the Stock will result
in Purchaser owning, directly or indirectly, one hundred percent (100%) of any
interest in the Business.
3.5. Due Execution and Authority. The Company and the Shareholder have
full capacity, power and authority to enter into this Agreement and the
Employment Agreement and to consummate the Transactions contemplated hereby and
thereby. This Agreement has been, and the Employment Agreement will be when
delivered at the Closing, duly executed and delivered by the Company and the
Shareholder, as applicable, and this Agreement constitutes, and the Employment
Agreement when executed and delivered will constitute, a valid and binding
obligation of the
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Company and the Shareholder, as applicable, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally or by
limitations upon the availability of equitable remedies.
3.6. Subsidiaries and Affiliates. The Company is not affiliated with,
and does not own, directly or indirectly, any capital stock or other equity
securities of any corporation or other entity or have any direct or indirect
equity or ownership interest, including interests in partnerships, joint
ventures or limited liability companies, in any business.
3.7. No Violation. Schedule 3.7 sets forth all consents necessary to
consummate the transactions contemplated by this Agreement consistent with the
representations and warranties contained in this Section 3.7 (the "Required
Consents"). Neither the execution nor delivery of this Agreement or the
Employment Agreement, nor the consummation of the Transactions contemplated
hereby and thereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge or other restriction
of any Governmental Authority or any provision of the operational documents of
the Company; or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under the
organizational documents of the Company; or any agreement, contract, lease,
license, instrument or other arrangement to which the Shareholder or the Company
is a party or by which such Person is bound or to which any of its assets is
subject (or result in the imposition of any Lien upon any of its assets).
Neither the Shareholder nor the Company is required to give any notice to, make
any filing with or obtain any authorization, consent or approval of, any
Governmental Authority in order for the parties to consummate the transactions
contemplated by this Agreement or the Other Agreements.
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3.8. Financial Statements. The Company and the Shareholder have
previously delivered to Purchaser the unaudited balance sheet and statement of
operations as of and for the ten (10) months ended October 31, 1999 (the
"Financial Statements") for Company, which Financial Statements are attached
hereto as Exhibit "B". The Financial Statements have been prepared on a tax
basis consistent with past practices and present fairly the financial position
of Company at the date thereof and the results of its operations for the period
then ended. The books of account of Company are in all material respects in
accordance with sound business practices and there have been no transactions
that properly should have been set forth therein that have not been accurately
so set forth.
3.9. Absence of Certain Changes or Events. Except as set forth on
Schedule 3.9, since October 31, 1999, there has not been (i) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the capital stock of the Company or any
purchase by the Company of any shares of capital stock of the Company; (ii) any
increase (other than increases in accordance with past custom and practice or in
accordance with agreements in effect at October 31, 1999) in the compensation
(including, without limitation, bonuses and compensatory options) payable or to
become payable by the Company to any of its shareholder or directors or to any
of its officers or employees who received or were entitled to receive
compensation during the 10-month period ended October 31, 1999 in excess of Ten
Thousand Dollars ($10,000); (iii) any payment by the Company of, or agreement by
the Company to pay, any pension, retirement allowance or other employee benefit
to any of its past or present shareholder, directors, officers or employees,
except as required by previously existing plans, agreements or arrangements and
in accordance with past custom and practice; (iv) any establishment by the
Company of any additional pension, profit sharing, bonus, incentive, deferred
compensation,
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group insurance, retirement or other employee benefit plan, or of any employment
or consulting agreement in excess of Ten Thousand Dollars ($10,000) with or for
the benefit of any Person; (v) any sale, assignment or transfer of any of the
property, assets or business of the Company not in the ordinary course of
business; (vi) cancellation of any of the claims or rights of the Company in
excess of Fifty Thousand Dollars ($50,000) in the aggregate; (vii) any change or
amendment to the Articles of Incorporation or Bylaws (or similar governing
documents) of the Company; (viii) any discharge or satisfaction of any Lien or
payment of any material obligation or Liability (fixed or contingent) by the
Company not in the ordinary course of business; (ix) any mortgaging, pledging or
subjecting to any Lien of any assets or properties of the Company not in the
ordinary course of business; (x) any new investment of a capital nature by the
Company in any Person, either by purchase of stock or securities, contribution
to capital, property transfer, purchase of property or assets or otherwise, not
in the ordinary course of business or not reflected in the Financial Statements;
(xi) any waiver or release of any rights by the Company not in the ordinary
course of business; (xii) any new loan to, or any new transaction of any other
nature with, any shareholder, director, officer or employee of the Company in
excess of Ten Thousand Dollars ($10,000) in the aggregate; (xiii) any entering
into any written or oral contracts not in the ordinary course of business that
extend beyond the first anniversary hereof or have obligations thereunder in
excess of Ten Thousand Dollars ($10,000); (xiv) any transaction whether or not
covered by the foregoing not in the ordinary course of business; or (xv) any
commitment by the Company to do any of the things specified in clauses (i)
through (xiv) above, inclusive; or (xvi) any Material Adverse Change in the
business, operations or condition (financial or other) or prospects of the
Company.
3.10. Absence of Undisclosed Liabilities. To the Knowledge of the
Shareholder, the Company has no obligations or Liabilities (whether accrued,
absolute, contingent, unliquidated or
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otherwise) other than (i) Liabilities reflected in the Financial Statements,
including the notes thereto, and (ii) obligations and Liabilities which have
arisen subsequent to the Financial Statements in the ordinary course of
business.
3.11. Broker's Fees. Neither the Shareholder nor the Company has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the Transactions.
3.12. Assets. Except for assets and properties which are subject to
Licenses, as set forth on Schedule 3.13, the Company has good and marketable
title to all of the assets and properties which it purports to own as reflected
on the Financial Statements, or thereafter acquired. The Company has a valid
leasehold interest in all material properties of which it is the lessee
including the Personal Property Leases set forth on Schedule 3.13 which
constitute all of the leases (operating or capital) to which the Company is a
party. Each such lease is legal, valid, binding, enforceable and in full force
and effect in accordance with its terms. The Company has not received notice of
any breach or default on its part with respect to such leases nor to the
Shareholder's Knowledge has the Company breached any such leases. To the
Knowledge of the Shareholder, there are no defaults or events or circumstances
which, with the giving of notice, lapse of time, or both, would constitute a
default or breach thereunder. No material portion of the assets of the Company
is subject to any Lien (other than Permitted Liens) except as set forth in
Schedule 3.12. No material portion of the assets of the Company is subject to
any governmental decree or order to be sold or is being condemned, expropriated
or otherwise taken by any public authority with or without payment of
compensation therefor nor, to the Knowledge of the Shareholder, has any such
condemnation, expropriation or taking been proposed. None of the material assets
of the Company are subject to any restriction which would prevent continuation
of the use currently made thereof or materially adversely affect
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the value thereof. The Company is, and on the Closing Date will be, the rightful
and lawful owner, licensee or lessee of all significant items of Personal
Property used by the Company in the conduct of the Business. All of the Personal
Property located at the business premises of the Company is either owned or
leased by the Company and is not owned or leased by any other Person (other than
the lessor thereof with respect to leased personal property).
3.13. Intangible Personal Property.
3.13.(a) Schedule 3.13 sets forth (i) a complete and correct list
of each copyright, copyright application, trademark, trademark application,
service xxxx, service xxxx application (in any such case, whether registered or
to be registered in the United States of America or elsewhere), process,
invention, trade secret, trade name, computer program, formula, customer list
and any other proprietary intellectual property (collectively, the "Intangible
Personal Property") of the Company, and (ii) a complete and correct list of all
material licenses or similar agreements ("License(s)") to which the Company is a
party either as a licensee or licensor for each such item of Intangible Personal
Property.
3.13.(b) There are no pending actions or other judicial or
adversary proceedings involving the Company concerning any item of Intangible
Personal Property and, to the Knowledge of the Shareholder, no such action or
proceeding is threatened and no claim or other demand has been made or
threatened by any Person relating to any item of Intangible Personal Property,
except as set forth on Schedule 3.13.
3.13.(c) The Company has all right, title and interest in, a
valid and binding License to use, or has the requisite permission and authority
to use each item of Intangible Personal Property in connection with the conduct
of the Business in the manner presently conducted and to convey such right and
authority, and, to the Knowledge of the Shareholder, such use does not
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conflict with, infringe upon or violate any patent, trademark, copyright or
registration of any other Person or entity, except as set forth on Schedule
3.13.
3.13.(d) There are no outstanding or, to the Knowledge of the
Shareholder, threatened disputes or disagreements with respect to any Licenses.
3.13.(e) The conduct by the Company of the Business does not
conflict with the valid patents, trademarks, trade secrets, trade names or
copyrights of others.
3.13.(f) The Company owns no patents, nor are any patent
applications pending with the U.S. Patent & Trademark Office.
3.14. Real Property. The Company does not own any Real Property, except
for leasehold improvements upon the real property leased to the Company.
Schedule 3.14 lists all real property leased or subleased to or by the Company.
The Shareholder or the Company has delivered to Purchaser true, complete and
correct copies of all such leases and subleases of real property. Each such
lease and sublease is legal, valid, binding, enforceable and in full force and
effect in accordance with its terms. The Company has not received notice of any
breach or default on its part with respect to such leases and subleases nor has
the Company breached any such lease or sublease and, to the Knowledge of the
Shareholder, there are no defaults or events or circumstances which, with the
giving of notice, lapse of time, or both, would constitute a default or breach
thereunder.
3.15. Contracts. Schedule 3.15 consists of a true and complete list of
all Contracts to which the Company is a party or by which it is bound except for
contracts covered by Section 3.23: (A) relating to the provision of the
Company's services; and (B) all other Contracts except those (i) requiring
payments or receipts less than Ten Thousand Dollars ($10,000) per year, and (ii)
made in the ordinary course of business or terminable by the Company on notice
of thirty (30) days or less without penalty or the Company being liable for
Damages. All such contracts are herein referred
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to as "Material Contracts." To the Knowledge of the Shareholder, all of the
Material Contracts are legal, valid, binding, in full force and effect and
enforceable in accordance with their terms. Neither the Company nor, to the
Knowledge of the Shareholder, any other party to any Material Contract has
breached any material provision of, and no event has occurred which, with the
lapse of time or action by a third party, could result in a material default
under the terms thereof.
3.16. Litigation. Except as set forth on Schedule 3.16, there is no
claim, action, proceeding or, to the Knowledge of the Shareholder, investigation
pending against or affecting the Company before any court, arbitrator or
Governmental Authority. To the Knowledge of the Shareholder, there is no claim,
action, proceeding or investigation threatened against or threat which would
affect the Company before or by any court, arbitrator or Governmental Authority
which could have a Material Adverse Effect on the Company. There are no decrees,
injunctions or orders of any court, Governmental Authority or arbitration
outstanding against the Company and, with respect to any action or claim covered
by insurance, the Company has complied with all requirements of any such policy
which are conditions to the defense and continued defense of such claim or
action.
3.17. Tax Matters.
3.17.(a) The Company has duly prepared and timely filed all
Returns required to be filed by it and has paid all Taxes required to be paid by
it in connection with the periods covered by such Returns. Except as disclosed
on Schedule 3.17, adequate provision has been made on the books and records of
the Company and in the Financial Statements for all Taxes required to be paid
but not yet paid or otherwise assessed or assessable against it or payable with
respect to its business or assets, through the date hereof.
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3.17.(b) None of the Returns have been audited or currently is
the subject of an audit. The Company has made available to Purchaser a true,
complete and correct copy of the Company's most recently filed annual and other
periodic Returns.
3.17.(c) The Company has not waived any statute of limitations
with respect to Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
3.17.(d) To the Knowledge of the Shareholder, there are no tax
liens upon the assets of the Company.
3.17.(e) To the Knowledge of the Shareholder, there is no valid
basis for any assessment, deficiency notice, 30-day letter or similar intention
to assess any Tax to be issued to the Company by any Governmental Authority,
except as set forth on Schedule 3.17.
3.17.(f) The Company is not a party to any Tax allocation or
sharing agreement.
3.17.(g) The Company has not been a member of an Affiliated Group
filing a consolidated United States federal income Tax Return.
3.18. Compliance With Laws. To the Knowledge of the Shareholder, the
Company has complied and is complying in all material respects with all Laws
applicable to the operation of the Business in all jurisdictions where the
Business is conducted or to which it is subject, including, without limitation,
all applicable federal and state securities laws, communications laws, civil
rights and equal opportunity employment laws and regulations, and all antitrust,
anti-monopoly and fair trade practice laws, except where the failure to so
comply would not have a Material Adverse Effect. Without limiting the foregoing,
no notice from any Governmental Authority has been received by the Company
claiming any violation of any Law or requiring any work, construction or
expenditure.
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To the Knowledge of the Shareholder, no Person has asserted that the Company is
in violation in material respect of any such Laws.
3.19. Government Licenses and Permits. To the Knowledge of the
Shareholder, the Company is duly licensed with all Governmental Licenses and
Permits required by applicable law for the purpose of conducting the Business or
owning its properties or both, in each jurisdiction in which it does business or
owns property or in which such Governmental Licenses and Permits are otherwise
required except where the failure to be so qualified or authorized would not
have a Material Adverse Effect. The Company is in compliance in all material
respects with all Governmental Licenses and Permits. Schedule 3.19 sets forth a
list of all such Governmental Licenses and Permits and the expiration dates
thereof. There are no proceedings pending or, to the Knowledge of the
Shareholder, threatened to revoke or terminate any such Governmental Licenses
and Permits.
3.20. Environmental Matters.
3.20.(a) The Company has obtained all Environmental Permits
required for the proper management and operation of the Business and all such
Environmental Permits are in good standing, and the Company is in compliance
with the terms and conditions of such Environmental Permits, or if the Company
has not obtained all such Environmental Permits or is not in compliance
therewith, such failure(s) will not have a Material Adverse Effect;
3.20.(b) To the Knowledge of the Shareholder, the Company is in
material compliance with all Environmental Laws;
3.20.(c) To the Knowledge of the Shareholder, the Company has not
received at any time prior to the date hereof a summons, citation, notice,
directive, letter or other
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communication, written or oral, from the EPA or any other Governmental Authority
or any other party, of any potential claim or liability or violation under any
Environmental Law.
3.21. Insurance. The Company is covered by insurance policies, or
renewals thereof, as identified and described in Schedule 3.21 which set forth
the carrier, premium, coverage, deductible amount and expiration date. There is
no liability under any insurance policy in the nature of a retroactive rate
adjustment or loss sharing or similar arrangement. Schedule 3.21 is a complete
and correct list of all insurance with respect to which the policy period has
expired, but for which certain of the coverage years are still subject to audit
or retrospective adjustment by the carrier, and accurately sets forth such
coverage years and the coverages, deductible amounts, carriers and expiration
dates thereof. There are no outstanding requirements of recommendations by any
insurance company that issued any policy of insurance to the Company or by any
Board of Fire Underwriters or other similar body exercising similar functions or
by any Governmental Authority exercising similar functions that require or
recommend any changes in the conduct of the business of the Company or any
action to be undertaken with respect to any of their assets. No notice or other
communication has been received by the Company from any insurance company within
the two (2) years preceding the date hereof canceling or materially amending or
materially increasing the annual or other premiums payable under any of its
insurance policies and, to the Knowledge of the Shareholder, no such
cancellation, amendment or increase of premiums is threatened. Any and all
premiums owing with respect to the Company's insurance policies have been timely
paid and coverage under such policies will be in effect at least through the
Closing Date. To the Knowledge of the Shareholder, such policies are sufficient
for compliance with (i) all requirements of Law and (ii) all Contracts to which
the Company is a party. The Company has not been refused any insurance with
respect to its assets or operations, and coverage has not been limited by any
insurance carrier
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to which it has applied for any such insurance or with which it has carried
insurance, during the last three (3) years. There are no pending or threatened
claims under any insurance policy.
3.22. Condition of Assets. The equipment, fixtures and other tangible
property of the Company are free and clear of all Liens (other than Permitted
Liens), and, to the Knowledge of the Shareholder, are in good operating
condition and repair (ordinary wear and tear excepted) for the conduct of the
Business as presently being conducted.
3.23. Labor and Employment Agreements.
3.23.(a) The Company does not have any employees and therefore,
is not a party to, or bound by, any (i) collective bargaining agreement,
consulting agreement or employment agreement; (ii) profit sharing, deferred
compensation, bonus, severance, pension, change of control, retainer,
consulting, retirement, health, welfare or incentive plan; (iii) plan or
agreement under which "fringe benefits" (including, without limitation, vacation
plans or programs, sick leave plans or programs, dental or medical plans or
programs and related or similar benefits) are afforded to employees of the
Company; or informal arrangement or understanding for the payment of post-
retirement benefits.
3.23.(b) No organization effort, and no sex discrimination,
racial discrimination, age discrimination or other employment-related
allegation, claim, suit or proceeding, has been made or is pending with respect
to the employees or agents of the Company and to the Knowledge of the
Shareholder, no such effort, allegation, claim, suit or proceeding has been
made, raised or brought prior to the date of this Agreement and, to the
Knowledge of the Shareholder, there is no basis for any such claim.
3.23.(c) All reasonably anticipated material obligations of the
Company, whether arising by operation of law, contract, past custom or
otherwise, for unemployment
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compensation benefits, pension benefits, advances, salaries, bonuses, vacation
and holiday pay, sick leave and other forms of compensation payable to the
employees or agents of the Company in respect of the services rendered by any of
them on or prior to the date of the Financial Statements, have been paid or
adequate accruals therefor have been made in the books and records of the
Company and in the Financial Statements. All such material obligations in
respect of services rendered on or prior to the date hereof have been paid as of
the date hereof or adequate accruals therefor have been made. All accrued
material obligations of the Company applicable to its employees or agents,
whether arising by operation of Law, Contract, past custom or otherwise, for
payments to trusts or other funds or to any Governmental Authority with respect
to unemployment compensation benefits, social security benefits or any other
benefits for employees, with respect to employment of said employees through the
date of the Financial Statements, have been paid or adequate accruals therefor
have been made on the books and records of the Company and in the Financial
Statements. All such material obligations with respect to employment of
employees through the date hereof, have been paid as of the date hereof or
adequate accruals therefor have been made.
3.24. Employee Benefit Plans; ERISA. The Company does not maintain or
contribute to any Employee Benefit Plan.
3.25. Business Locations. The Company does not own or lease any Real
or Personal Property in any state or country other than Virginia. The Company
has no executive offices or places of business except as otherwise set forth on
Schedule 3.25.
3.26. Accounts Receivable. All accounts receivable reflected on the
balance sheet as of October 31, 1999 included in the Financial Statements and
all accounts receivable which have arisen since the date of such Financial
Statements arose from bona fide transactions in the ordinary course
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of business with unaffiliated third parties and otherwise represent valid
receivables. To the Knowledge of the Shareholder, no such account receivable is
subject to any right of set-off.
3.27. No Restrictions. There exist no restrictions or other
impediments on the Company's ability to make future investments or acquisitions,
and the Company is not subject to any agreement entitling any Person to
participate in any such future investments or acquisitions of the Company.
3.28. Computer Systems. The Company's current computer hardware,
software and systems, used in the conduct of the Business are "Y2K Compliant."
"Y2K Compliant" means that computer hardware, software and systems perform in a
consistent manner and function accurately and without interruption or
extraordinary manual intervention regardless of the date in time and regardless
of the dates used in data input, whether before, on or after January 1, 2000 and
whether or not the dates are affected by leap years. The Company has taken all
requisite action to ensure that, in respect of the Business, the Company's
products and services delivered to its customers are and shall be Y2K Compliant.
3.29. Bank Accounts. Schedule 3.29 sets forth each and every bank
account, banking arrangement and safe deposit box of the Company as of the date
hereof, specifying the bank, type of account or other arrangement and the names
of all persons authorized to draw thereon or to have access thereto.
3.30. Investment. The Shareholder understands that the Shares are
restricted securities and that he will not be able to transfer such Shares
unless such transfer is registered under the Act, registered or qualified under
applicable state blue sky laws or an exemption from registration and
qualification is available. The Shareholder acknowledges that the certificates
representing such Shares will bear a legend, and that the stock transfer books
of Purchaser will contain a notation, to the foregoing effect. The Shareholder
recognizes that Purchaser does not represent and has not
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represented that it will register such Shares under the Act, under state blue
sky laws or comply with any requirements for exemption therefrom. As a result,
the Shareholder is prepared to bear the economic risk involved in his investment
in such Shares for an indefinite period of time. The Shareholder is acquiring
the Shares to be issued to him hereunder for his own account for investment and
not with a view towards distribution. The Shareholder shall not sell,
hypothecate, transfer or otherwise dispose of such Shares unless such
transaction has been registered under the Act and applicable state blue sky laws
or, in the opinion of counsel for Purchaser, an exemption from registration is
available. The Shareholder has adequate means of providing for his current needs
and possible contingencies and has no need for liquidity of such Shares. The
Shareholder's overall commitment to investments is not disproportionate to his
net worth, and his investment in such Shares will not cause such overall
commitment to become excessive. Prior to the execution and delivery of this
Agreement, the Shareholder had the opportunity to examine and read all
documents, records and books pertaining to his acquisition of such Shares
including, without limitation, all of the representations and warranties of
Purchaser contained herein. The Shareholder is familiar with the business,
management and condition (financial and other) of Purchaser and has had the
opportunity to ask questions of, and receive answers from, representatives of
Purchaser concerning the business, management and condition (financial and
other) of Purchaser and to obtain any additional information which the
Shareholder deems necessary to make this investment decision. The Shareholder is
knowledgeable and experienced in financial and business matters. The Shareholder
is fully cognizant that the ownership of the Shares involves a high degree of
risk. The Shareholder is able to evaluate the merits and risks of his investment
in the Shares. The Shareholder is an "accredited investors" as such term is
defined in the Act and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
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3.31. No Omissions or Untrue Statements. To the Knowledge of the
Shareholder, no representation or warranty made by the Shareholder to Purchaser
in this Agreement, in the Schedules or in any certificate required to be
delivered to Purchaser pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not misleading
as of the date hereof and as of the Closing Date.
3.32. Limitation on Representations and Warranties. The Shareholder
shall not be deemed to have made to Purchaser any representation or warranty,
other than those as expressly made by the Shareholder in Section 3 hereof.
Without limiting the generality of the foregoing, and notwithstanding any other
express representations and warranties made by the Shareholder, the Shareholder
makes no representation or warranty to Purchaser with respect to: (i) any
projections, estimates or budgets heretofore delivered to or made available to
Purchaser of future revenues, expenses or expenditures or future results of
operations; or (ii) any other information or documents made available to
Purchaser or its counsel, accountants or advisors, except as expressly covered
by representations and warranties contained in Section 3 hereof. Purchaser
acknowledges that: (i) it is a sophisticated investor capable of making all
investment decisions regarding acquisition of the Stock; (ii) it has conducted
due diligence regarding the Company; and (iii) it has not relied on any
representations or warranties regarding the Company or its Business except those
set forth in Section 3 hereof.
4. Representations and Warranties of Purchaser
Purchaser represents, warrants to and agrees with Shareholder as
follows:
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4.1. Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware. Purchaser
has the corporate power and authority to own and lease its properties and to
carry on its business as now being conducted.
4.2. Stock of Buyer. The authorized capital stock of Purchasers
consists of 10,000,000 shares of common stock having a par value of $.0001 each
of which 3,180,000 shares are issued and outstanding. The Shares when issued
will be, validly issued, fully paid, and nonassessable.
4.3. Due Execution and Authority. This Agreement is duly authorized,
executed and delivered by Purchaser and is a valid and legally binding agreement
of Purchaser enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by limitations upon the
availability of equitable remedies.
4.4. No Violation. Neither the execution and delivery of this
Agreement by Purchaser, nor the performance by Purchaser of its obligations
hereunder, constitutes or will constitute a breach or violation of, or result in
a default under, any law, rule or regulation, or any order, ruling, decree,
judgment, stipulation, mortgage, indenture, loan, agreement or other agreement
or instrument to which Purchaser is a party, by which it is bound or to which
any of its property is subject or of the Certificate of Incorporation or Bylaws
of Purchaser.
4.5. Financial Statements. Purchaser has previously delivered to the
Shareholder the unaudited, pro forma, consolidated balance sheet and statement
of operations, as of and for the period ended September 30, 1999 ( the
"Financial Statements") for Purchaser, which Financial Statements are attached
hereto as Exhibit "C". The Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis and present fairly the financial
position of Purchaser at the date thereof and the results of its operations for
the period then ended, subject to
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normal year-end adjustments and the absence of notes thereto. The books of
account of Purchaser are in all material respects in accordance with sound
business practices and there have been no transactions that properly should have
been set forth therein in accordance with GAAP that have not been accurately so
set forth.
4.6. Absence of Undisclosed Liabilities. To the Knowledge of
Purchaser, Purchaser has no obligations or Liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) other than (i) Liabilities
reflected in the Financial Statements, including the notes thereto, and (ii)
obligations and Liabilities which have arisen subsequent to the Financial
Statements in the ordinary course of business.
4.7. Tax Matters.
4.7.(a) Purchaser has duly prepared and timely filed all Returns
required to be filed by it and has paid all Taxes required to be paid by it in
connection with the periods covered by such Returns. Except as disclosed on
Schedule 4.7, adequate provision has been made on the books and records of
Purchaser and in the Financial Statements for all Taxes required to be paid but
not yet paid or otherwise assessed or assessable against it or payable with
respect to its business or assets, through the date hereof.
4.7.(b) None of the Returns have been audited or currently is the
subject of an audit.
4.7.(c) Purchaser has not waived any statute of limitations with
respect to Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
4.7.(d) To the Knowledge of Purchaser, there are no tax liens
upon the assets of Purchaser.
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4.7.(e) To the Knowledge of Purchaser, there is no valid basis
for any assessment, deficiency notice, 30-day letter or similar intention to
assess any Tax to be issued to Purchaser by any Governmental Authority, except
as set forth on Schedule 4.7.
4.7.(f) Purchaser is not a party to any Tax allocation or sharing
agreement.
4.8. Compliance With Laws. To the Knowledge of Purchaser, Purchaser
has complied and is complying in all material respects with all Laws applicable
to the operation of its business in all jurisdictions where its business is
conducted or to which it is subject, including, without limitation, all
applicable federal and state securities laws, communications laws, civil rights
and equal opportunity employment laws and regulations, and all antitrust,
anti-monopoly and fair trade practice laws, except where the failure to so
comply would not have a Material Adverse Effect. Without limiting the foregoing,
no notice from any Governmental Authority has been received by Purchaser
claiming any violation of any Law or requiring any work, construction or
expenditure. To the Knowledge of Purchaser, no Person has asserted that
Purchaser is in violation in material respect of any such Laws.
4.9. Computer Systems. Purchaser's current computer hardware, software
and systems, used in the conduct of its business are "Y2K Compliant." "Y2K
Compliant" means that computer hardware, software and systems perform in a
consistent manner and function accurately and without interruption or
extraordinary manual intervention regardless of the date in time and regardless
of the dates used in data input, whether before, on or after January 1, 2000 and
whether or not the dates are affected by leap years. Purchaser has taken all
requisite action to ensure that, in respect of its business, Purchaser's
products and services delivered to its customers are and shall be Y2K Compliant.
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5. Covenants and Agreements
5.1. Conduct of Business. The Shareholder and the Company covenant
and agree that between the date hereof and the Closing Date and except as
otherwise contemplated or permitted by this Agreement or as consented to by
Purchaser in writing:
5.1.(a) The business of the Company shall be conducted in the
ordinary and regular course, including without limitation, the Company's
ordinary conduct in the payment of expenses and liabilities.
5.1.(b) The Company will use its Reasonable Commercial Efforts to
preserve intact its business organization, the services of its present employees
and the good will of its suppliers, customers and others having business
relations with the Company.
5.1.(c) The Company's material assets and material properties
will be in as good condition and repair on the Closing as they are at the date
hereof, subject only to ordinary wear.
5.1.(d) The Company shall not do any of the things specified in
clauses (i) through (xv), inclusive, of Section 3.9; provided, however, that the
Company may hire additional employees in the ordinary course of business.
5.1.(e) The Company will use Reasonable Commercial Efforts not to
materially default under, or become materially in breach of, any term or
provision of, or suffer or permit to exist any condition or event which, after
notice or lapse of time or both, would constitute a material default under any
contract, agreement, lease, license, commitment, instrument or obligation.
5.1.(f) The Company shall not issue any other certificates
representing shares of common stock of the Company between the date hereof and
the Closing (except to issue replacement stock certificates to the Shareholder
or except for transfers of the stock to Shareholder's spouse or
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issue directly or in trust for their benefit, and conditioned on such transferee
agreeing in writing to be bound by this Agreement with respect to such
transferred stock.).
5.2. Subsequent Events. Between the date of this Agreement and the
Closing Date, the Company and the Shareholder shall not directly or indirectly
enter into, nor shall the Shareholder allow the Company to enter into, any
transaction or take any action which would result in any of the representations
and warranties of Shareholder not being materially true and correct at and as of
(i) the time immediately following the occurrence of such transaction or event,
or (ii) the Closing Date. In addition, the Company and the Shareholder shall use
Reasonable Commercial Efforts not to permit or suffer, by action or inaction, an
event to occur which would result in any of the Shareholder's representations
and warranties not being materially true and correct at and as of the times
specified in clauses (i) and (ii) above. The Shareholder shall promptly give
written notice to Purchaser upon becoming aware of (a) any event, fact or
circumstance which, if known on the date hereof, would have been required to be
set forth or disclosed pursuant to this Agreement, and (b) any fact, event or
circumstance which constitutes an impending or threatened rendering of any of
the representations and warranties contained in this Agreement not being true
and correct as of the times specified in clauses (i) and (ii) above.
5.3. Access by Purchaser. The Shareholder and the Company covenant
that between the date hereof and the Closing Date, the Company shall afford to
Purchaser and to Purchaser's counsel, accountants and other representatives full
access, during normal business hours upon reasonable advance notice, throughout
such period, (i) to all of the books, contracts and records of the Company shall
furnish Purchaser during such period with all information concerning the Company
that Purchaser may reasonably request and (ii) to the properties of the Company
in order to conduct inspections at Purchaser's expense to determine that Company
is operating in material compliance
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with all applicable federal, state and local and foreign statutes, rules and
regulations, and that the Company and its assets are substantially in the
condition and of the capacities represented and warranted in this Agreement. Any
such investigation or inspection by Purchaser shall not be deemed a waiver of,
or otherwise limit, the representations, warranties and covenants contained
herein. The investigations and inspections will be conducted (i) so as not to
unreasonably interfere with the conduct of the business of the Company, and (ii)
using reasonable efforts to maintain the confidentiality of this Agreement and
the Transactions. The parties and their employees, consultants, agents and
others exposed to such information will hold any such information which is
nonpublic in strict confidence. If this Agreement is terminated in accordance
with its terms, each party shall promptly return all nonpublic documents
provided by any other party and any copies, extracts or other reproductions in
whole or in part of such documents. In addition, in the event of such
termination, all documents, memoranda, notes and other writing whatsoever
prepared by each party based on the information in such material shall be
destroyed (and each party shall use its best efforts to cause its advisors and
their representatives to similarly destroy their respective documents, memoranda
and notes), and such destruction (and best efforts) shall be certified in
writing to the other party by an authorized officer supervising such
destruction; provided, however, that, with the exception of privileged
information, at the direction of the other party, such material shall be
delivered to the other party.
6. Covenants Re: Confidential Information; Covenants Not to Compete
6.1. Covenants.
6.1.(a) The Shareholder covenants that from and after the Closing
Date, he will not reveal, divulge or make known to any Person, (other than to
Purchaser or Purchaser's Affiliates) any
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trade secrets or confidential information relating to the Business of the
Company. As used herein, "Confidential Information" shall mean any and all
business or financial information, financial statements, cost and expense
information, employment contracts, pricing and discount information, production
data, trade secrets, secret or proprietary processes and formulae, software
applications, technology, marketing and customer data (including but not limited
to identity of customers and customer lists), and such other information as may
be supplied, delivered or disclosed, now, previously or hereafter, by the
Company that has not been previously disclosed to the public and is not
ascertainable from public or published information or trade sources.
6.1.(b) The Shareholder covenants that, for so long as Purchaser,
its parent, subsidiary, Affiliates or related companies or the successor(s) or
assign(s) to any of them is engaged in the Business in which the Company is now
engaged, the Shareholder shall not, directly or indirectly, for himself or as
agent of or on behalf of or in conjunction with any person, corporation or other
entity, or as partner of any partnership, or as a shareholder or member of any
corporation or other entity, compete with Purchaser or the Company, or with any
parent, subsidiary, Affiliate or related company of Purchaser, or with any
successor of Purchaser (collectively, the "Purchaser Group"), or engage in any
aspect of the Business, nor will he permit any person or entity in which he is
financially interested or has assisted financially, or which he is an owner or
agent, so to compete or so to engage in such Business. The applicable Business
for purposes of this Section shall mean the Business presently operated and/or
planned for by the Company (including any extensions thereof implemented by
Purchaser). Notwithstanding the foregoing, the Shareholder may make solely
passive investments in any such applicable or competing business which is
publicly held and of which the Shareholder shall not own or control, directly or
indirectly, in the aggregate securities which constitute more than four and
nine/tenths percent (4.9%) of the voting rights or equity
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ownership of such publicly held business. This Section 6.1(b) shall terminate
and be of no further force and effect one (1) year after the expiration of the
Term of the Employment Agreement, unless Shareholder's employment with Purchaser
is terminated by Purchaser without cause pursuant to Section 6.1 of the
Employment Agreement in which event this Section 6.1(b) shall terminate
concurrently with the effective date of the termination without cause of
Shareholder's employment with Purchaser.
6.2. Remedies. The Shareholder agrees that the remedy at law for any
breach or threatened breach of the covenants set forth in this Section 6 will be
inadequate and that any breach or attempted breach would cause such immediate
and permanent damage as would be irreparable and the exact amount of which would
be impossible to ascertain and, therefore, he agrees and consents that in the
event of any breach or threatened breach of any of said covenants by him, in
addition to any and all other legal and equitable remedies which may be
available, Purchaser and any successor or assign may obtain preliminary or
permanent injunctive relief without the necessity of proving actual damage by
reason of such breach and, to the extent permissible under the applicable
statutes and rules of procedure, a temporary restraining order may be granted
immediately on commencement of any such suit and without notice.
6.3. Severability. Each and every covenant, provision, term and
clause contained in this Section 6 is severable from the others and each such
covenant, provision, term and clause shall be valid and effective
notwithstanding the invalidity or unenforceability of any other such covenant,
provision, term or clause. The parties expressly agree that the court or
arbitrator shall modify any such unenforceable or invalid provision in a manner
that will preserve the intent of this Section 6 to the greatest extent possible.
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7. Additional Agreements
7.1. Shareholder Guarantees. Purchaser agrees that it shall use its
Reasonable Commercial Efforts to remove Shareholder from any guarantees of
obligations or Indebtedness of the Company to unrelated third parties. Purchaser
shall defend, indemnify and hold harmless Shareholder from and against any and
all Damages of every kind, nature and description that result from or arise out
of any claim upon or liability under any such guarantee.
7.2. Cooperation; Reasonable Commercial Efforts. Subject to the terms
and conditions of this Agreement, each of the parties hereto shall use his, her
or its Reasonable Commercial Efforts to take, or cause to be taken, all actions
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions contemplated by this Agreement, including providing information and
using reasonable efforts necessary or appropriate to obtain waivers, consents
and approvals to this Agreement and the Transactions contemplated hereby, to
effect all necessary registrations and filings, and to lift any injunctions or
other legal bar to the Transactions contemplated hereby (and, in each case, to
proceed with the Transactions as expeditiously as possible).
7.3. Shareholder Release of Company. The Shareholder, for himself, his
heirs, estate, representatives, successors, assigns, agents and attorneys, fully
and forever releases the Company and its representatives, successors, assigns,
officers, directors, agents and attorneys, from any and all claims, demands,
debts, obligations, liabilities, costs, expenses (including reasonable
attorneys' fees), rights of action, causes of action or judgments of any kind or
character whatsoever, whether known, unknown, suspected or unsuspected, arising
from, resulting from or related in any manner to, his relationship with the
Company, including without limitation the Company's issuance of the Stock to the
Shareholder (collectively, the "Released Claims"). Notwithstanding the
foregoing, the
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Released Claims shall not include the Company's obligations set forth in Section
13.13 of this Agreement. The Shareholder understands and agrees that the
Released Claims include all claims of every nature and kind whatsoever with
respect to such Released Claims, whether known or unknown, suspected or
unsuspected, and the Shareholder has read and understand, and hereby expressly
waives the benefits of, Section 1542 of the Civil Code of California, which
provides as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected is settlement with the debtor."
The Shareholder acknowledges that he may discover facts different from or in
addition to those which he now knows or believes to be true with respect to the
Released Claims and agrees that this release shall be and remain effective in
all respects notwithstanding such different or additional facts or the discovery
thereof.
8. Closing
8.1. Closing Date. The closing of the transactions covered by this
Agreement shall occur on December 30, 1999 at the offices of Xxxxxxxxx Xxxxxxx
Fields Claman & Machtinger LLP, Suite 2100, 1900 Avenue of the Stars, Xxx
Xxxxxxx, Xxxxxxxxxx 00000-0000 or at such other earlier or later time and place
as the parties may agree (the "Closing Date").
8.2. Shareholder' Closing Deliveries. At the Closing, Shareholder
shall deliver or cause to be delivered to Purchaser:
8.2.(a) certificates representing all the Stock, duly endorsed,
or if certificates have
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been lost or destroyed, an Affidavit and Indemnity Agreement in form reasonably
satisfactory to Purchaser.
8.2.(b) a certificate, dated as of the Closing Date, executed by
Shareholder to the effect that representations and warranties of the Shareholder
contained in this Agreement are true and correct in all respects at and as of
the Closing Date and that the Company and the Shareholder have complied with or
performed in all material respects all terms, covenants and conditions to be
complied with by the Company and the Shareholder on or prior to the Closing
Date;
8.2.(c) certificates of good standing for the Company;
8.2.(d) evidence of existence of all Required Consents;
8.2.(e) Employment Agreement between Purchaser and the
Shareholder; and
8.2.(f) such documents as Purchaser or its counsel may reasonable
require.
8.3. Purchaser's Closing Deliveries. At the Closing, Purchaser shall
deliver or cause to be delivered to Shareholder:
8.3.(a) a certificate, dated as of the Closing Date, of the
Secretary or an Assistant Secretary of Purchaser evidencing all necessary or
appropriate corporate action to enable Purchaser to comply with the terms of
this Agreement;
8.3.(b) a certificate, dated as of the Closing Date, executed by
the Chief Executive Officer of Purchaser to the effect that representations and
warranties contained in this Agreement are true and correct in all material
respects at and as of the Closing Date and that Purchaser has complied with or
performed in all material respects all terms, covenants and conditions to be
complied with or performed by Purchaser on or prior to the Closing Date;
8.3.(c) stock certificates for the Shares in payment of the
Purchase Price provided for in Section 2.2 issued to the Shareholder;
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8.3.(d) Employment Agreement between Purchaser and the
Shareholder; and
8.3.(e) such other documents as the Shareholder or his counsel
may reasonably require.
9. Conditions to Obligations of Shareholder
The obligation of Shareholder to consummate the Transactions is subject
to the following conditions, any of which may be waived by them in their sole
discretion:
9.1. Compliance by Purchaser. Purchaser shall have performed and
complied in all material respects with all agreements and conditions required by
this Agreement to be performed or complied with by Purchaser prior to or on the
Closing Date.
9.2. Accuracy of Purchaser's Representations. Purchaser's
representations and warranties contained in this Agreement or any schedule,
certificate or other instrument delivered pursuant to the provisions hereof or
in connection with the transactions contemplated hereby shall be true and
correct in all material respects at and as of the Closing Date (except for such
changes permitted by this Agreement) and shall be deemed to be made again as of
the Closing Date.
9.3. Documents. All documents and instruments required hereunder to
be delivered by Purchaser to Shareholder at the Closing shall be delivered in
form and substance reasonably satisfactory to the Shareholder and his counsel.
9.4. Litigation. No litigation seeking to enjoin the Transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or threatened.
9.5. Employment Agreement. The Purchaser shall have entered into the
Employment Agreement with the Shareholder.
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9.6. Transaction Tax-Free The Shareholder shall not have received a
legal opinion from his counsel that this Transaction does not constitute a
tax-free reorganization under the Code.
10. Conditions to Obligations of Purchaser
The obligation of Purchaser to consummate the Transactions is subject to
the following conditions, any of which may be waived by it in its sole
discretion:
10.1. Compliance by Shareholder. Shareholder and Company shall have
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by
Shareholder and Company prior to or on the Closing Date.
10.2. Accuracy of Representations of Shareholder and Shareholder. The
representations and warranties of Shareholder and the Shareholder contained in
this Agreement or any schedule, certificate or other instrument delivered
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby shall be true and correct in all material respects at and as
of the Closing Date (except for such changes permitted by this Agreement) and
shall be deemed to be made again as of the Closing Date.
10.3. Material Adverse Change. No Material Adverse Change shall have
occurred subsequent to the date hereof with respect to the Company, nor shall
any event or circumstance have occurred which would result in a Material Adverse
Change with respect to the Company.
10.4. Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement, to obtain damages on account hereof shall be
pending or threatened.
10.5. Employment Agreement. The Shareholder shall have entered into
the Employment Agreement with Purchaser.
10.6. Required Consents. The Company shall have obtained the Required
Consents in form
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and substance satisfactory to Purchaser.
11. Termination
11.1. Termination Prior to Closing; General.
11.1.(a) If the Closing has not occurred on or before December
31, 1999, either Shareholder or Purchaser may terminate this Agreement at any
time thereafter by giving written notice of termination to the other; provided,
however, that no party may terminate this Agreement hereunder if such party has
materially breached any of the terms and conditions hereof or has not in good
faith used Reasonable Commercial Efforts to effectuate the Closing.
11.1.(b) Prior to December 31, 1999, either Shareholder or
Purchaser may terminate this Agreement following the insolvency or bankruptcy of
the other, or if any one or more of the conditions to Closing set forth in
Articles 9 or 10 shall become incapable of fulfillment or there shall have
occurred a material breach of this Agreement and either such condition or breach
shall not have been waived by the party for whose benefit the condition was
established or cured within ten (10) business days after notice, then either
Shareholder (in the case of a condition in Article 9 or a breach by Purchaser)
or Purchaser (in the case of a condition specified in Article 10 or a breach by
Shareholder) may terminate this Agreement.
11.2. Consequences of Termination. Upon termination of this Agreement
pursuant to this Article 11 or any other express right of termination provided
elsewhere in this Agreement, the parties shall be relieved of any further
obligation to the others; provided, however, that no termination of this
Agreement pursuant to this Article 11 or under any other express right of
termination provided elsewhere in this Agreement shall operate to release any
party from any liability to any other party
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incurred before the date of such termination or from any liability resulting
from any material misrepresentation made in connection with this Agreement or
material breach hereof.
12. Survival of Representations; Indemnification; Escrow
12.1. Survival. All statements contained in any certificate delivered
by or on behalf of Shareholder or Purchaser pursuant to Section 8 of this
Agreement shall be deemed representations, warranties and covenants by
Shareholder or Purchaser, as the case may be, hereunder. All representations,
warranties and covenants made by Shareholder or Purchaser in this Agreement, or
pursuant hereto, shall survive the Closing, but shall terminate forty-eight (48)
months from the Closing Date, except with respect to Damages constituting Tax
Claims or with respect to Damages governed by Section 12.3, for which the
representations, warranties and covenants shall survive for the applicable
period of the statutes of limitations. Tax Claims are obligations asserted by
any Governmental Authority which would constitute a breach of Section 3.18
hereof.
12.2. Indemnification by Shareholder. The Shareholder ("Indemnitor")
shall indemnify, defend and hold Purchaser ("Indemnitee") harmless from and
against any and all Damages that result from or arise out of (i) the breach of
any representation or warranty of the Shareholder set forth in this Agreement
(including the exhibits hereto) or in any certificate, schedule, or other
instrument delivered to Purchaser pursuant hereto; (ii) the breach of any of the
covenants of the Shareholder contained in this Agreement; or (iii) any claims
made by any employees of the Company arising out of or in connection with
commitments by the Company to grant stock options to such employees.
12.3. Time for Claims. No Indemnitee shall be entitled to
indemnification pursuant to this Article 12 unless a written claim for
indemnification is made upon the Indemnitor within forty-eight (48) months from
the Closing Date with respect to all claims other than Damages for Tax Claims
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or Damages governed by Section 12.2 herein, for which such claims may be made
during the applicable period of the statute of limitations.
12.4. Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the Indemnitee shall promptly notify in writing the
Indemnitor of the claim and, when known, the facts constituting the basis for
such claims. In the event of any claim for indemnification hereunder resulting
from or in connection with any claim or legal proceedings by a third party, the
notice to the Indemnitor shall specify, if known, the amount or an estimate of
the amount of the liability arising therefrom.
12.5. Threshold. The Shareholder shall not be liable to Purchaser for
any Damages (including Tax Claims) unless and until the aggregate amount of such
Damages exceeds Fifty Thousand Dollars ($50,000), in which event they shall be
liable for all Damages in excess of Fifty Thousand Dollars ($50,000).
Notwithstanding the foregoing, the Shareholder shall be liable for all Damages
without regard to any minimum amount for breaches of the representations and
warranties set forth in Sections 3.3, 3.4 and 3.5 and the covenants set forth in
Sections 6.1(a) and 6.1(b).
12.6. Claims Procedure. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party to this Agreement, the Indemnitor at
its sole cost and expense and with counsel reasonably satisfactory to the
Indemnitee may, upon written notice to the Indemnitee, assume the defense of any
such claim or legal proceeding if (a) the Indemnitor acknowledges to the
Indemnitee in writing, within fifteen (15) days after receipt of notice from the
Indemnitor, its obligations to indemnify the Indemnitee with respect to all
elements of such claim, (b) the Indemnitor will have the financial resources to
defend against such third-party claim and fulfill its indemnification
obligations hereunder, (c) the third-party claim involves only money damages and
does not seek an injunction
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or other equitable relief, and (d) settlement or an adverse judgment of the
third-party claim is not, in the good faith judgment of the Indemnitee, likely
to establish a pattern or practice adverse to the continuing business interests
of the Indemnitee. The Indemnitee shall be entitled to participate in (but not
control) the defense of any such action, with its counsel and at its own
expense; provided, however, that if there are one or more legal defenses
available to the Indemnitee that conflict with those available to the
Indemnitor, or if the Indemnitor fails to take reasonable steps necessary to
defend diligently the claim after receiving notice from the Indemnitee that it
believes the Indemnitor has failed to do so, the Indemnitee may assume the
defense of such claim; in such event the Indemnitee may settle such claim upon
such basis as the Indemnitee deems reasonable. If the Indemnitee assumes the
defense of the claim, the Indemnitor shall reimburse the Indemnitee for the
reasonable fees and expenses of counsel retained by the Indemnitee and the
Indemnitor shall be entitled to participate in (but not control) the defense of
such claim, with its counsel at its own expense. The parties agree to render,
without compensation, to each other such assistance as they may reasonably
require of each other in order to insure the proper and adequate defense of any
action, suit or proceeding, whether or not subject to indemnification hereunder.
12.7. Limitation on Indemnity. Except for Damages related to claims for
which there is no minimum threshold provided for in Section 12.5, the
Shareholder shall not be liable to Purchaser for any Damages in excess of the
aggregate fair market value of the Purchase Price.
13. Miscellaneous
13.1. Expenses. Except as otherwise provided herein, Shareholder and
Purchaser shall each pay their own expenses incident to the negotiation,
preparation, and carrying out of this Agreement, including all fees and expenses
of its counsel and
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accountants for all activities of such counsel and accountants undertaken
pursuant to this Agreement, irrespective of whether or not the Transactions
contemplated hereby are consummated; provided, however that Company may
reimburse Shareholder for, or directly pay, Shareholder's legal and accounting
expenses incurred in this Transaction up to a maximum of Seven Thousand Five
Hundred Dollars ($7,500).
13.2. Publicity. Purchaser and Shareholder shall not issue any press
release or make any other public statement, in each case, relating to, in
connection with or arising out of this Agreement or the transactions
contemplated hereby, without obtaining the prior approval of the other, which
shall not be unreasonably withheld or delayed, except that prior approval shall
not be required if, in the reasonable judgment of Purchaser, prior approval by
Shareholder would prevent the timely dissemination of such release or statement
in violation of applicable Federal securities laws, rules or regulations.
13.3. Succession and Assignments; Third Party Beneficiaries. This
Agreement may not be assigned (either voluntarily or involuntarily) by any party
hereto without the express written consent of the other party. Any attempted
assignment in violation of this Section shall be void and ineffective for all
purposes. In the event of an assignment permitted by this Section, this
Agreement shall be binding upon the heirs, successors and assigns of the parties
hereto. There shall be no third party beneficiaries of this Agreement.
13.4. Notices. All notices, requests, demands, or other communications
with respect to this Agreement shall be in writing and shall be (i) personally
delivered, (ii) sent by facsimile transmission, (iii) sent by the United States
Postal Service, registered or certified mail, return receipt requested, or (iv)
delivered by a nationally recognized express overnight courier service, charges
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prepaid, to the following addresses (or such other addresses as the parties may
specify from time to time in accordance with this Section):
To Purchaser: Solutions America, Inc.
0000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx Xxx Xxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Chairman
Fax No.: (000) 000-0000
With copies to: Xxxxxxxxx Glusker Fields
Claman & Machtinger LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
To Shareholder Sentinel Software, Inc.
and Company: 000 X. Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
With copy to: Xxxxxx & Silek, P.L.C.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx Xx.
Fax No.: (000) 000-0000
Any such notice shall, when sent in accordance with the preceding sentence, be
deemed to have been given and received on the earliest of (i) the day delivered
to such address, (ii) the day sent by facsimile transmission, (iii) the fifth
business day following the date deposited with the United States Postal Service,
or (iv) 24 hours after shipment by such courier service.
13.5. Construction. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of California without giving
effect to the principles of conflicts of law thereof.
13.6. Consent to Jurisdiction; Service of Process. Each of the parties
hereto, by his or its execution of this Agreement, irrevocably submits to the
exclusive jurisdiction of any state or federal court sitting in the City of Los
Angeles, California over any suit, action or proceeding arising out
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of or relating to this Agreement. Each of the parties hereto, by his or its
execution of this Agreement, irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in such court and any claim
that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum. Each of the parties hereto, by his or its
execution of this Agreement, agrees that a final judgment in any such suit,
action or proceeding brought in such a court, after all available appeals, shall
be conclusive and binding upon it. Process may be served upon any party hereto
in any suit, action, counterclaim or proceeding of the nature referred to in
this Section 13.6 by mailing copies thereof by registered or certified mail,
postage prepaid, return receipt requested, to the address of such party set
forth in Section 13.4 or to any other address of which such party shall have
given written notice to the other parties hereto as provided in this Agreement.
Each of the parties hereto, by his or its execution of this Agreement, agrees
that such service (i) shall be deemed in every respect effective service of
process upon it in any such suit, action, counterclaim or proceeding, and (ii)
shall to the fullest extent enforceable by law, be taken and held to be valid
personal service upon and personal delivery to it. Nothing in this Agreement, or
any modification, waiver, or amendment hereto, shall affect the right of any
party hereto to serve process in any manner permitted by law or limit the right
of any party hereto to bring proceedings against any party hereto in the courts
of any jurisdiction or jurisdictions.
13.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
13.8. No Implied Waiver; Remedies. No failure or delay on the part of
the parties hereto to exercise any right, power, or privilege hereunder or under
any instrument executed pursuant hereto shall operate as a waiver nor shall any
single or partial exercise of any right, power, or privilege preclude any other
or further exercise thereof or the exercise of any other right, power, or
privilege. All rights, powers, and privileges granted herein shall be in
addition to other rights and remedies to which the parties may be entitled at
law or in equity.
13.9. Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto, sets forth the entire understandings of the parties
with respect to the subject matter hereof,
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and it incorporates and merges any and all previous communications,
understandings, oral or written as to the subject matter hereof.
13.10. Amendments; Actual Waivers. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto. At any time prior to the Closing, the parties hereto may, (a) extend the
time for the performance of any of the obligations or other acts or the other
parties hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered by any of the other parties
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein which are for the benefit of such party. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
13.11. Headings. The headings of the Sections of this Agreement, where
employed, are for convenience only and do not form a part hereof and in no way
modify, interpret or construe the meanings of the parties.
13.12. Severability. Any provision of this Agreement which is invalid
or unenforceable shall be ineffective only to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions of this Agreement.
13.13. Continuing Indemnity. Purchaser agrees that on or after the
Closing Date it will not alter any indemnification rights of any Person who has
a right to indemnification from the Company pursuant to the Articles of
Incorporation and Bylaws of the Company in effect on the date of this Agreement.
In addition, Purchaser shall be bound by all determinations made by the Board of
Directors of the Company prior to the Closing relating to determinations of
whether officers or directors acted in good faith subject, however, to the terms
and provisions of the Articles of Incorporation and Bylaws of the Company.
Purchaser shall cause the Company not to cancel D & O insurance policy or
policies in existence prior to Closing (if any), or if such policies are
canceled, appropriate replacement policies shall be purchased with equivalent
coverage. In the event Purchaser is disposed of, sold or reorganized (regardless
of the method or structure of such disposition, sale or reorganization),
Purchaser shall either: (i) continue to provide the same coverage for such
Persons as required hereby or (ii) require the acquiring entity with which it is
dealing to assume and continue its obligations under this Section 13.13.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
"PURCHASER"
SOLUTIONS AMERICA, INC., a Delaware
corporation
By: /s/ XXXXX X. XXXXXXX
------------------------------
Xxxxx X. Xxxxxxx, Chairman
"COMPANY"
SENTINEL SOFTWARE, INC., a Virginia
corporation
By: /s/ XXXX XXXXXXX
------------------------------
Xxxx Xxxxxxx, President
"SHAREHOLDER"
/s/ XXXX XXXXXXX
-----------------------------------
Xxxx Xxxxxxx
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EXHIBIT A
EMPLOYMENT AGREEMENT
1. Identification
This Employment Agreement (the "Agreement") is entered into as of
December 30, 1999 by and between Solutions America, Inc., a Delaware corporation
("Company"), and Xxxx Xxxxxxx, an individual ("Executive").
2. Recitals
2.1. Company is engaged in the business of providing goods and services
through the Internet and e-commerce industries.
2.2. Executive has special skills and abilities in the technology
industry and was a principal and shareholder of Sentinel Software, Inc., a
Virginia corporation ("Sentinel"), all of the stock of which was acquired by
Company. Sentinel is engaged in the software development business.
2.3. Company desires to employ Executive as Vice President of Internet
Operations of Paycom Billing Services, Inc., a wholly-owned subsidiary of
Company ("Paycom") and as President of Sentinel and Executive is willing to
undertake such employment on the terms and conditions set forth in this
Agreement. Therefore, Company and Executive agree as follows:
3. Term of the Agreement
Executive's employment under this Agreement shall be for approximately
two (2) years, commencing on December 30, 1999 and continuing through December
31, 2001. (the "Term"), subject, however, to prior termination as provided in
Section 6.
4. Employment, Duties and Covenants
4.1. Employment. Executive shall be employed during the Term as Vice
President of Internet Operations of Paycom and as President of Sentinel or in
such other capacities, offices or positions with Company or any subsidiary or
affiliate of Company as Company's Board of Directors (the "Board"), Chairman of
the Board ("Chairman") or President may prescribe from time to time. All
references to Company herein shall include its subsidiaries and affiliates,
including Paycom and Sentinel.
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4.2. Duties. The powers, duties and responsibilities to be held or
performed by Executive hereunder shall include, without limitation, overall
supervision and management of Paycom's Internet Operations and Sentinel's
management and operations and such other powers, duties and responsibilities
typically held or performed by executives in the technology, internet and
e-commerce industries. Executive agrees that Company, the Board, the Chairman
and the President retain the sole discretion to modify, add to, or subtract from
Executive's powers, duties and responsibilities at any time, provided, however,
that any such modifications or additions shall be consistent with Executive's
position, experience and level of compensation. Executive shall report to, and
be under the direct supervision of, Company's Chairman and President, or such
other person or persons as Company may direct from time to time.
4.3. Performance of Duties. Executive shall discharge the duties
described herein in a diligent and professional manner. Executive shall render
services incidental to Executive's position, primarily during normal business
hours primarily at Employer's place of business in Warrenton, Virginia, or at
such of the Company's other locations as may be required by Company during the
Term. Executive understands that Executive shall be required to travel to
offices of the Company, to prospective and existing clients' locations, for
business and corporate meetings and to handle other matters in the course of
performing Executive's duties.
4.4. Extent of Services.
4.4. (a) Executive shall devote Executive's full and exclusive
productive time, energy, effort, attention and ability solely to the performance
of Executive's duties as set forth herein, and to the proper and efficient
management and development of the business and operations of Company and
Sentinel. Executive shall perform industriously and to the best of Executive's
ability, experience and talents all of the duties which may be required of
Executive from time to time. During the Term, as provided in this Section 4.4
and in Section 4.8, Executive shall not, directly or indirectly, render services
of a business, professional or commercial nature to any other person, firm or
entity, whether with or without compensation, without Company's prior written
consent. Notwithstanding the foregoing, Executive may act for Executive's own
account in passive-type investments, or engage in charitable activities;
provided that any such activities do not interfere with the discharge of
Executive's duties for Company and Sentinel.
4.4.(b) Notwithstanding Section 4.4(a) to the contrary, Executive
shall be entitled to continue to conduct his existing businesses: SolarHost,
L.L.C., a webhosting service, eClicks, Inc., an internet advertising agency, and
O & A, Inc., principally, a personnel leasing and lawn care business (the
"Existing Businesses") so long as the conduct of the Existing Businesses does
not materially conflict with or interfere with the discharge of his duties and
responsibilities hereunder, which duties and responsibilities to Company shall
be Executive's primary obligation.
4.5. Company's Authority. Executive shall observe and comply at all times
with the orders, directives and policies as may be issued from time to time,
either orally or in writing, by Company, the Board, the Chairman or the
President. Executive shall carry out and perform any and
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all orders, directions, and policies, consistent with Executive's position, as
may be so stated by the Board, the Chairman or the President from time to time,
either orally or in writing.
4.6. Nonsolicitation of Gifts. Without Company's prior written consent in
each instance, Executive shall not solicit or accept, for Executive or for the
benefit of any third party or entity, any contribution, donation, gift, discount
or rebate or the like of material value or in violation of applicable law from
any person, firm or entity with whom Company maintains any business
relationship.
4.7. No Personal Interest. Executive shall not have any personal
interest, direct or indirect, in any supplier, vendor or client of Company, its
affiliates or subsidiaries, including Paycom or Sentinel or in any transaction
between, any supplier, vendor or client and Company, its affiliates or
subsidiaries, including Paycom or Sentinel; provided, however, that this shall
not apply to Executive's ownership of the Existing Businesses.
4.8. Competitive Activities Prohibited. During the Term, Executive shall
not, directly or indirectly (unless disclosed to Company and approved by Company
in its sole and absolute discretion):
4.8.(a) engage in, have any interest in, or perform any services
for any activity or enterprise which is competitive with or adverse to the
business, activities or welfare of Company or any affiliate or subsidiary of
Company, including Paycom or Sentinel, whether alone or as an agent, employee,
consultant, advisor, promoter, lender, member, general or limited partner,
officer, director, owner or shareholder; provided, however, that nothing in this
Section 4.8 shall prohibit Executive from owning less than 4.9% of the stock of
any publicly traded company;
4.8.(b) solicit, divert, obtain business from or attempt to
solicit, divert or obtain business from any client or prospective client of
Company or any affiliate or subsidiary, including Paycom or Sentinel, or anyone
who was a client or prospective client of Company or any affiliate or
subsidiary, including Paycom or Sentinel during the Term;
4.8.(c) engage in any conduct or activity which would cause
Company or any affiliate or subsidiary of Company, including Paycom or Sentinel
or Executive to be in a position of conflict of interest or cause Company or any
affiliate or subsidiary of Company, including Sentinel to be in violation of any
law, regulation, policy, statement or rule of any applicable governmental
authority; or
4.8.(d) plan for or organize, or assist any other person, firm or
entity in planning for or organizing, any business activity which is competitive
with the business of Company or any affiliate or subsidiary of Company,
including Paycom or Sentinel.
4.9. Representations and Warranties. Executive represents and warrants
that he has the right to grant Company all of the rights that are granted
hereunder and that no permission, grant or consent of any person is necessary in
order for Executive to grant to Company the rights hereunder
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and that Company's use of any information provided to Company by Executive will
not violate the rights of any third party, Executive's rights or the rights of
anyone claiming by or through Executive. Executive represents and warrants to
Company that he has not entered into any agreements with any other party that
would interfere with or be inconsistent with his covenants, representations and
warranties herein.
5. Compensation and Other Benefits
5.1. Base Salary. As compensation for all of the services rendered by
Executive during the Term, Company shall pay Executive an annual salary in the
amount of One Hundred Sixty Eight Thousand Dollars ($168,000), for each year of
the Term prorated for any partial period. The annual salary shall be payable in
accordance with Company's regular payroll practices. Such base salary shall be
paid to Executive in accordance with Company's normal payroll practices.
5.2. Bonus. In addition to the annual base salary described in Section
5.1 above, for each of Sentinel's fiscal years during the Term (prorated for any
partial period of Executive's employment) Executive shall be entitled to a bonus
("Bonus") in an amount equal to ten percent (10%) of Sentinel's net income
before taxes ("Net Income") calculated in accordance with U.S. generally
accepted accounting principles, on a standalone basis unconsolidated with
Company, as determined by the independent public accounting firm engaged by the
Company. The Bonus shall be payable no later than ten (10) days after the
calculation of such Bonus amount.
5.3. Employment Taxes. All compensation shall be subject to all normal
and customary employment related withholding tax and other employment taxes as
required with respect to compensation paid by a company to an employee,
statutory or otherwise, including, without limitation, as applicable, state and
federal income taxes, state disability insurance and FICA.
5.4. Expenses. Company and Executive hereby acknowledge that Executive
may be required to incur certain expenses in connection with Executive's
employment hereunder including, but not limited to, parking, travel,
entertainment and other expenses. Company shall reimburse Executive
for ordinary and necessary business expenses incurred by Executive in the
performance of Executive's duties hereunder in accordance with Company's
policies and procedures for making such reimbursements if:
5.4.(a) Each such expenditure is of a nature qualifying it as a
proper deduction on the federal and state income tax returns of Company as a
business expense and not as deductible compensation to Executive; and
5.4.(b) Executive furnishes Company with adequate records and
other documentary evidence required by either federal or state statutes or
regulations issued by appropriate taxing authorities for the substantiation of
such expenditures as deductible business expenses of Company and not as
deductible compensation to Executive.
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5.5. Vacation. Executive shall accrue a total of twenty (20) days of paid
time off for each full year of the Term. If Executive's earned but unused paid
time off reaches twenty (20) days, Executive will not continue to accrue
additional paid time off until Executive uses enough paid time off to fall below
this maximum amount. Time off shall be scheduled in Executive's discretion,
subject to and taking into account the business exigencies of Company and
Sentinel. Time off in excess of two (2) consecutive weeks shall be subject to
the reasonable approval of the Board, the Chairman or the President.
5.6. Other Benefits. During the Term of this Agreement, Executive shall
receive such other life insurance, pension, disability insurance, health
insurance, holiday and sick pay benefits which Company extends, as a matter of
policy, to its executive employees and, except as otherwise provided herein,
shall be entitled to participate in all deferred compensation and other
incentive plans of Company on the same basis as other similarly situated
executives of Company.
6. Termination of the Agreement.
6.1. Termination Without Cause. Notwithstanding anything in this
Agreement to the contrary, Company may terminate Executive's employment without
cause upon ninety (90) days' prior written notice.
6.2. Termination For Good Cause by Company. Notwithstanding anything in
this Agreement to the contrary, Company may terminate Executive's employment for
Good Cause without prior notice. For purposes of this Agreement, Good Cause for
termination of Executive's employment shall be deemed to exist if:
6.2.(a) In the subjective judgment of Company, Executive breaches
a material obligation under this Agreement;
6.2.(b) Executive is convicted of or pleads guilty or nolo
contendere to a misdemeanor charge involving financial misconduct or moral
turpitude or any felony;
6.2.(c) Executive misappropriates funds or property of Company; or
any of its subsidiaries or affiliates, including Paycom or Sentinel;
6.2.(d) Executive fails to comply with the reasonable oral or
written orders, directives or policies of Company, the Board, the Chairman or
the President;
6.2.(e) In the subjective judgment of Company, Executive is
incompetent in performing his assigned duties, neglects his duties or performs
his duties in a grossly negligent or malfeasant manner; or
6.2.(f) Executive violates Company's policies regarding unfair
competition, trade secrets or confidentiality;
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6.2.(g) In the subjective judgment of Company, Executive engages
in any act of sexual harassment;
6.2.(h) Executive commits any other act or fails to take any
action which an arbitrator or court of competent jurisdiction deems to
constitute Good Cause for dismissal.
6.3. Death. Executive's employment with Company shall terminate
immediately in the event of Executive's death.
6.4. Disability. Company shall have the right to immediately terminate
this Agreement in the event of Executive's "Disability". For purposes of this
Agreement, "Disability" shall mean that because of a physical or mental
disability, Executive is unable to perform the essential functions of
Executive's job, even when Company provides such reasonable accommodations as it
can without incurring undue hardship, and Executive has exhausted all leave
allowances available to Executive pursuant to state and federal laws. If
Executive is granted a leave of absence due to Executive's physical or mental
disability, Company shall have no obligation to pay Executive any salary or
bonus compensation for the period of the leave of absence except as required by
law or as provided for pursuant to any disability insurance plans Company may
carry.
6.5. Legal Obligations Following Termination. If this Agreement is
terminated by Company as provided in Sections 6.1, 6.2, 6.3 or 6.4, Company's
sole obligation shall be the following: (i) payment of Executive's base salary
through and including the effective date of termination; (ii) payment of any
earned Bonus not yet paid; (iii) payment of the salary equivalent of all accrued
and unused vacation time; and (iv) reimbursement within thirty (30) days of
Executive's termination of any ordinary and necessary business expenses
previously incurred by Executive pursuant to Section 5.4.
7. Trade Secrets; Confidentiality
7.1. "Confidential Information". "Confidential Information" is all
information, data and knowledge of a business, professional or technical nature
relating to Company, Paycom, Sentinel, and/or their respective subsidiaries and
affiliates; and Company's, Paycom's, Sentinel's, and/or their subsidiaries' and
affiliates' business, finances, operations, properties, services and clients;
information which is not generally known outside of Company, Paycom, Sentinel,
or their respective subsidiaries and affiliates; and includes information known
to Executive as confidential or secret or which Executive shall have reason to
know or reasonably should know is confidential or secret, to the extent that
such information derives potential or actual independent economic value from not
being generally known to, and not being readily ascertainable by proper means
by, other persons who can obtain economic value from this disclosure or use and
is the subject of efforts reasonable under the circumstances to maintain its
secrecy, and shall include Discoveries (as defined in Section 7.5). Confidential
Information may relate, for example, to trade secrets, client lists, clients'
names and requirements, client businesses, client profiles, client finances,
client accounts, client contracts, employees, business methods, business or
marketing plans, personnel information, credit information, financial
information, the names and locations of vendors and suppliers, equipment,
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equipment design, development, engineering, manufacturing, purchasing,
accounting, selling, marketing, contractors, compositions, computer software,
computer hardware, technology, research, infrastructures, products, procedures,
calculations, specifications, formulae, compilations, inventions, designs,
plans, databases, database structure, data, accounts, billing methods, pricing,
costs, systems, internal affairs, legal affairs, security methods, creative
ideas and concepts, projects, advertising, merchandising techniques and any and
all information entrusted to Company, Paycom, Sentinel or their respective
subsidiaries or affiliates by third parties. This information may be contained
in materials ("Company Materials") such as books, records, files, notes, lists,
computer programs, tapes, cd roms, hard disk and soft disk drive mechanisms,
other mechanisms for electronic or digital storage of information, computer
printouts, data input to computers, drawings, documents, data, reports,
customer, price and supplier lists, specifications, or other miscellaneous
embodiments, or may be in the nature of, or consist of, verbal communication or
unwritten knowledge, techniques, formulas, processes, practices or know-how.
7.2. Acknowledgment by Executive. Executive acknowledges that Company
will be required hereunder to make Confidential Information available to
Executive which has been developed at great expense and effort by Company
because knowledge of such Confidential Information will be essential to the
performance of Executive's duties under this Agreement. Executive recognizes
that Company has expert knowledge in its field and that many of its methods, and
much of its know-how is expert and unique and its customer and potential
customer contracts are of substantial commercial value. Executive further
acknowledges, without limiting the generality of the foregoing, that the
identity, business needs, desires and peculiarities of customers and suppliers
of Company constitutes valuable Confidential Information. Executive also
acknowledges that prior to or during his employment with Company he may be given
access to or become acquainted with Confidential Information. Executive
acknowledges that such Confidential Information is a valuable, special, unique
asset of Company's business.
7.3. No Use or Disclosure. In consideration of Executive's employment by
Company, Executive agrees that, unless Executive has received the prior written
consent of Company in each instance, whether during the Term or after the
Executive's employment with Company has terminated, Executive shall not use
Confidential Information for any purpose not related to the business interests
of Company, and shall not directly or indirectly disclose or communicate any
Confidential Information to any person except as required to perform Executive's
duties for Company. If any Confidential Information or Company Materials are
sought by legal process, Executive agrees to notify Company promptly in writing
and to cooperate with Company to preserve the confidentiality of such
information in connection with any legal proceeding. If Executive becomes aware
of any unauthorized use, disclosure or communication of Confidential Information
by anyone, Executive agrees to inform Executive's supervisor immediately.
7.4. Ownership Rite. Executive acknowledges and agrees that all
Confidential Information and Company Materials, and all work product, materials
and the results and proceeds of Executive's services hereunder which Executive
makes or conceives, either solely or with others, during Executive's employment
by Company which are applicable directly or indirectly to any phase of Company's
business and that of its affiliates and subsidiaries, including Sentinel shall
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automatically become Company's sole and exclusive property and Company shall be
the owner and author thereof. Executive further acknowledges that all such work
product, materials and the results and proceeds shall constitute "works made for
hire" within the meaning of the copyright laws of the United States. Executive
hereby irrevocably assigns to Company, in perpetuity, all rights, title and
interest of any kind or character in and to all such work product, materials and
the results and proceeds including, without limitation, all copyrights and
patents pertaining thereto and all renewals, extensions, subdivisions and
continuations-in-interest thereof.
7.5. Inventions. Executive shall promptly disclose in writing to Company
all Confidential Information, ideas, programs, systems, devices, processes,
business concepts, discoveries and inventions, whether or not patentable, which
are related to Company's business or planned business or that of its affiliates
and subsidiaries, including Paycom or Sentinel or are used by Company or its
affiliates or subsidiaries, including Paycom or Sentinel or arise out of or in
connection with the duties performed by Executive hereunder and which he
conceives, makes, develops, acquires or reduces to practice, whether alone or
with others during the Term and whether during or after usual working hours
(collectively, "Discoveries"). Executive hereby irrevocably and perpetually
transfers and assigns to Company all right, title and interest in and to all
Discoveries, including any and all domestic and foreign patent rights therein
and any renewals thereof. Notwithstanding the foregoing, no assignment to the
Company is required for any Discoveries which were created by Executive during
Executive's employment with Company for which no equipment, supplies, facilities
or Confidential Information of the Company were used and which were developed
entirely on Executive's own time, and (i) which do not relate either to
Company's business or Company's actual or demonstrably anticipated research or
development, or (ii) which do not result from any work performed by Executive
for Company. THIS SECTION 7.5 DOES NOT APPLY TO ANY DISCOVERIES WHICH QUALIFY
FULLY UNDER THE PROVISIONS OF CALIFORNIA LABOR CODE SECTION 2870.
7.6. Further Assurances. On request of Company, Executive shall, from
time to time during or after the Term, execute such further reasonable
instruments (including, without limitation, applications for letters patent and
assignments thereof) and do all such other reasonable and legal acts and things
as may be deemed necessary or desirable by Company to protect and enforce its
rights pursuant to Sections 7.4 and 7.5. Company shall pay all expenses of
filing or prosecuting any patent application, copyright registration or other
filings, but Executive shall cooperate in filing and prosecuting any such
application, registration and filings. Executive shall not be entitled to any
additional compensation for the performance of his obligations hereunder.
7.7. No Removal or Duplication. Without Company's prior written consent
in each instance, or except as expressly required by Company in connection with
Executive's duties as an employee of Company, Executive shall not at any time,
whether prior to or after Executive's employment with Company ends, remove,
reproduce, summarize or copy any Confidential Information or Company Materials,
or authorize, participate in, aid or abet such removal, reproduction,
summarizing or copying. Executive shall immediately return to Company all
Confidential Information and Company
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Materials, including all copies and summaries thereof, when Executive's
employment by Company ends for any reason or at any time when Company may
otherwise require that such Confidential Information or Company Materials be
returned.
7.8. No Solicitation. While employed by Company and for a period of two
(2) years thereafter, without the express prior written approval of the Chairman
or President of Company, Executive shall not: (a) solicit or attempt to solicit
any clients of Company, Paycom, Sentinel or their respective subsidiaries and
affiliates, either for Executive or for any other person, firm or corporation;
(b) employ, attempt to employ, entice, encourage or solicit for employment by
others, any employees of the Company, Paycom, Sentinel or their respective
subsidiaries and affiliates; (c) induce or attempt to induce a consultant,
independent contractor, licensee or other third party to sever their
relationship with Company, Paycom, Sentinel or their respective subsidiaries or
affiliates; or (d) assist any other person, firm or entity in the solicitation
of any consultants, independent contractors, licensees, or employees of the
Company, Sentinel or their respective subsidiaries and affiliates.
7.9. No Employment Requiring Disclosure. Without Company's prior written
approval, Executive shall not, either during or after Executive's employment by
Company, accept employment with, acquire any financial interest in, or perform
any services for a business or entity in which Executive's interest, duties or
activities would explicitly or inherently require Executive to disclose or
communicate any Confidential Information.
7.10. Material Term. Executive acknowledges that maintaining the
confidentiality of such Confidential Information is necessary to the successful
conduct of the business of Company and its goodwill, and that any breach of any
term of this Section 7 shall be a material breach of this Agreement.
7.11. Indemnification. Executive agrees to indemnify and hold harmless
Company, Sentinel, their respective subsidiaries, affiliates and joint ventures,
and any current or former officer, director or employee of any of them, against
any claim, loss, liability, damage or expense (including, without limitation,
attorneys' fees) they may incur as a result of any breach by Executive of the
terms of this Section 7.
7.12. Survival of Obligation. Executive's obligation to maintain the
confidentiality of Confidential Information shall survive the ending of
Executive's employment by Company, and such obligation shall continue for all
time, regardless of whether such Confidential Information was obtained before,
during or after the Term of this Agreement. All covenants and agreements
contained in this Section 7 shall survive the termination of this Agreement and
Executive's employment with Company.
7.13. Specific Performance. Without in any manner limiting the provisions
of this Section 7, Executive recognizes and acknowledges that all of the
Confidential Information, as it may exist from time to time, is a valuable,
special and unique trade secret asset of Company. Executive agrees that the
remedy at law for a breach of the covenants contained in this Section 7 is
inadequate and that
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therefore in the event of a breach, or threatened breach by Executive of the
provisions of this Section 7, Company shall be entitled to an injunction or
restraining order restraining Executive from disclosing in whole or in part any
Confidential Information, or from rendering any services to any person, firm,
corporation, association or other entity to whom such Confidential Information,
in whole or in part, may have been disclosed or is threatened to be disclosed or
from breaching the covenants contained in this Section 7. Nothing herein shall
be construed as prohibiting Company from pursuing any other remedies available
to Company for such breach or threatened breach, including the recovery of
damages from Executive. To the extent permissible by law, Executive specifically
waives the necessity for Company to post bond in any injunctive or similar
proceeding, and in any event, consents to the posting of the smallest bond
allowed by law.
7.14. Reasonableness of Restrictions. Executive acknowledges that his
covenants contained in this Section 7 are a material part of the consideration
for this Agreement, are reasonably necessary to protect legitimate interests of
Company, are reasonable in scope and duration and are not unduly restrictive.
8. Indemnification.
Company shall indemnify Executive to the maximum extent permitted under
Section 317(a) through 317(e) of the California General Corporation Law, or any
successor thereto, and shall advance any expenses incurred by Executive prior to
the final disposition of the proceeding to which such indemnity relates upon
receipt from Executive of a written undertaking to repay the amount so advanced
if it shall be determined ultimately that Executive is not entitled to indemnity
under the standards set forth in such Section 317, which undertaking shall, if
so requested by Company, be secured in a manner reasonably acceptable to
Company. Such indemnity obligation shall cover all claims made against
Executive, whether prior to, during or after the Term, to the extent otherwise
covered pursuant to Section 317(a) through 317(e) of the California General
Corporation Law. Company shall use commercially reasonable efforts to obtain
directors' and officers' liability insurance for the benefit of Executive.
9. Arbitration.
9.1. Tort and Contract Claims. Company and Executive agree that, as a
condition of Executive's employment by Company, any controversy, claim or
dispute arising out of or in any way relating to this Agreement or the
interpretation or breach thereof, or to Executive's employment with Company or
the termination therefrom, that Company may have against Executive or that
Executive may have against Company or any of its subsidiaries, affiliates,
parents, joint ventures or affiliated entities including Paycom or Sentinel, or
against any then current or former officer, director, owner, shareholder,
employee, member or agent of any of them, in their capacity as such or
otherwise, including any claims of wrongful termination and breach of contract,
but excluding any statutory claims of discrimination or harassment, shall be
settled by final and binding arbitration.
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9.2. Harassment and Discrimination Claims. Company and Executive agree
that any statutory claims of discrimination or harassment shall be settled by
final and binding arbitration. EXECUTIVE ACKNOWLEDGES THAT BY INITIALING THIS
SECTION EXECUTIVE HAS VOLUNTARILY ELECTED TO ARBITRATE ALL STATUTORY
DISCRIMINATION AND HARASSMENT CLAIMS RATHER THAN LITIGATE THEM IN A COURT OF LAW
AND THAT AGREEMENT TO ARBITRATE THOSE CLAIMS WAS NOT MADE A CONDITION OF
EXECUTIVE'S EMPLOYMENT BY COMPANY.
________ (INITIAL HERE)
9.3. Claims Exempted. Notwithstanding the foregoing, this Section 9 does
not apply to claims by Executive for workers' compensation benefits, claims by
Executive for unemployment compensation benefits or claims by Executive based
upon an employee pension or benefit plan which contains an arbitration or other
dispute resolution procedure, in which case the arbitration or other dispute
resolution provision of such plan shall control.
9.4. Procedure. All arbitrable claims shall be settled by final and
binding arbitration in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association ("AAA") in effect at
the time the claim is made. Such arbitration shall be filed with the AAA and
shall be heard on an expedited basis in Los Angeles, California. The arbitrator
shall apply, as applicable, California or federal substantive law and law of
remedies. Executive and Company agree that discovery may be conducted by any
party pursuant to the provisions of Section 1283.05 of the California Code of
Civil Procedure which are hereby incorporated into, and made a part of, this
Agreement. Any arbitrator acting hereunder shall have the full power of a court
of the State of California to issue and enforce subpoenas. A judgment upon any
award rendered by the arbitration may be entered in any court having
jurisdiction. In reaching a decision, the arbitrator shall have no authority to
change, extend, modify or suspend any of the terms of this agreement. The
parties agree that any arbitrator acting hereunder shall be empowered to assess
any remedy including, but not limited to, injunctive orders (including
temporary, preliminary and permanent relief) when appropriate. Either Executive
or Company may bring an action in any court of competent jurisdiction, if
necessary, to compel arbitration under this arbitration provision, to obtain
preliminary relief in support of claims to be prosecuted in arbitration or to
enforce an arbitration award. EXECUTIVE AND COMPANY UNDERSTAND AND ACKNOWLEDGE
THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AND COMPANY ARE GIVING UP THE RIGHT TO
A JURY TRIAL AND TO A TRIAL IN A COURT OF LAW.
10. General Provisions.
10.1. Injunctive Relief. In the event of a breach by Executive of any of
his undertakings hereunder, Executive agrees that in addition to any other
rights or remedy provided by law or equity, a restraining order or an injunction
may issue against Executive to enforce compliance with this Agreement.
11
64
10.2. Assignment. Neither this Agreement nor any rights or benefits
hereunder shall be subject to execution, attachment or similar process and
Executive may not assign, transfer, pledge or hypothecate this Agreement or any
rights or benefits hereunder without the prior written consent of Company. Any
such assignment, transfer, pledge or hypothecation hereof by Executive in
violation of this provision shall be null, void and of no effect. Subject to the
foregoing, this Agreement and all of the terms and conditions hereof shall
benefit and bind Company and its successors and assigns and shall benefit and
bind Executive and Executive's successors. Company's rights hereunder shall
accrue to the benefit of any person, firm, or corporation which may succeed to
its business by merger, purchase of stock or assets, or otherwise.
10.3. Notices.
10.3.(a) All notices, requests, payments, statements, demands or
other communications given under this Agreement (collectively "Communications")
shall be in writing. Notice shall be sufficiently given for all purposes as
follows:
(1) PERSONAL DELIVERY. When personally delivered to the
recipient. Notice is effective on delivery.
(2) FIRST-CLASS MAIL. When mailed first class to the last
address of the recipient known to the party giving notice. Notice is effective
three (3) mail delivery days after deposit in a United States Postal Service
office or mailbox.
(3) CERTIFIED MAIL. When mailed certified mail, return
receipt requested. Notice is effective on receipt, if delivery is confirmed by a
return receipt.
(4) OVERNIGHT DELIVERY. When delivered by overnight
delivery, charges prepaid or charged to the sender's account. Notice is
effective on delivery, if delivery is confirmed BY THE DELIVERY SERVICE.
(5) TELEX OR FACSIMILE TRANSMISSION. When sent by telex or
fax to the last telex or fax number of the recipient known to the party giving
notice. Notice is effective on receipt, provided that (a) a duplicate copy of
the notice is promptly given by first-class or certified mail or by overnight
delivery, or (b) the receiving party delivers a written confirmation of receipt.
Any notice given by telex or fax shall be deemed received on the next business
day if it is received after 5:00 p.m. (recipient's time) or on a nonbusiness
day.
12
65
10.3.(b) Addresses for purpose of giving notice are as follows:
If to Company:
SolutionsAmerica, Inc.
0000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx Xxx Xxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Chairman
Fax: (000) 000-0000
If to Executive:
Sentinel Software, Inc.
000 X Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
10.3.(c) Any correctly addressed notice that is refused,
unclaimed, or undeliverable because of an act or omission of the party to be
notified shall be deemed effective as of the first date that said notice was
refused, unclaimed, or deemed undeliverable by the postal authorities,
messenger, or overnight delivery service.
10.3.(d) Either party may change its address or telex or fax
number for purposes of this Section 10.3 by notifying the other party of its new
address in the manner set forth in this Section 10.3
10.4. Governing Law. This Agreement is made under and shall be construed
in accordance with the laws of the State of California.
10.5. SEVERABILITY. Nothing in this Agreement shall be construed to
require the Commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement and any present or future
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail, but in such event the
provision of this Agreement so affected shall be curtailed and limited only to
the extent necessary to bring it within the requirement of the law. If any term
or provision of this Agreement is determined by a court of competent
jurisdiction to be illegal, invalid, or unenforceable for any reason whatsoever,
such illegality, invalidity, or unenforceability shall not affect the remaining
terms and provisions of this Agreement, which remaining terms and provisions
shall remain in full force and effect.
10.6. Waiver. A waiver of any of the terms and conditions hereof by
Company or Executive shall not constitute a waiver of any other term or
condition hereof, nor shall it constitute a general waiver by the waiving party,
and the waiving party shall be free to reinstate any such term or condition
without notice to the other party.
13
66
10.7. Integration. Neither of the parties hereto have made any
representations, statements, warranties or other agreements other than those
contained herein. This Agreement embodies the entire understanding of the
parties with respect to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations, or understandings,
written or oral, between the parties. This Agreement may be amended or modified
only by a written agreement, signed by the parties hereto.
10.8. Headings. The Section headings used herein are for convenience only
and are not a part of this Agreement.
10.9. Survival. THE COVENANTS, REPRESENTATIONS AND WARRANTIES IN SECTIONS
4.9, 7, 8, 9 AND 10 OF THIS AGREEMENT SHALL SURVIVE AND CONTINUE AFTER THE
TERMINATION OF THIS AGREEMENT FOR ANY REASON WHATSOEVER.
10.10. Pronouns. Whenever required by the context hereof, the singular
shall be deemed to include the plural and the plural to include the singular,
and the masculine, feminine and neuter gender shall each be deemed to include
the others.
10.11. Counterparts. This agreement maybe executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
"COMPANY"
SOLUTIONSAMERICA, INC.
By:
-------------------------------------
Xxxxx X. Xxxxxxx, Chairman
"EXECUTIVE"
----------------------------------------
Xxxx Xxxxxxx
67
SENTINEL SOFTWARE, INC.
BALANCE SHEET
OCTOBER 31, 1999
ASSETS
Current Assets
Xxxxx Cash $ 2,000.00
Regular Checking Account 1,186.33
Money Market Savings 9,045.08
Employee Advances 750.00
----------
Total Current Assets 12,981.41
Property and Equipment
Furniture and Fixtures 2,962.47
Equipment 2,673.94
Computer Equipment 15,165.93
----------
Total Property and Equipment 20,802.34
Other Assets
----------
Total Other Assets 0.00
----------
Total Assets $33,783.75
==========
LIABILITIES AND CAPITAL
Current Liabilities
Income Tax Reserve (45% of NI) $ 4,711.00
----------
Total Current Liabilities 4,711.00
Long-Term Liabilities
Total Long-Term Liabilities 0.00
----------
Total Liabilities 4,711.00
Capital
Common Stock 1,000.00
Retained Earnings 10,406.56
Net Income 17,666.19
----------
Total Capital 29,072.75
----------
Total Liabilities & Capital $33,783.75
==========
Unaudited - For Management Purposes Only
EXHIBIT "B"
68
SENTINEL SOFTWARE, INC.
INCOME STATEMENT
FOR THE TEN MONTHS ENDING OCTOBER 31, 1999
Current Month Year to Date
Revenues
Programming Fees 352,916.08 63.27 352,916.08 63.27
Delphi programming 0.00 0.00 0.00 0.00
Design Fees 0.00 0.00 0.00 0.00
ATN earnings 0.00 0.00 0.00 0.00
NLM Earnings 0.00 0.00 0.00 0.00
PS Earnings 217.80 0.04 217.80 0.04
XP Earnings 210.00 0.04 210.00 0.04
Futurescape Earnings 0.00 0.00 0.00 0.00
System Design Ads Earnings 3,360.03 0.60 3,360.03 0.60
VM Earnings 0.00 0.00 0.00 0.00
RJBT Earnings 5,879.00 1.05 5,879.00 1.05
Misc. 1004 Earnings 15,203.62 2.73 15,203.62 2.73
DMR Income 55,958.74 10.03 55,958.74 10.03
WideNet Earnings 112,786.47 20.22 112,786.47 20.22
Web800 Earnings 10,362.72 1.86 10,362.72 1.86
Software Sales 0.00 0.00 0.00 0.00
Software License Revenue 0.00 0.00 0.00 0.00
Customer Purchases (ODC) 0.00 0.00 0.00 0.00
Interest Income 940.77 0.17 940.77 0.17
Other Income 0.00 0.00 0.00 0.00
Finance Charge Income 0.00 0.00 0.00 0.00
Fee Refunds 0.00 0.00 0.00 0.00
Fee Discounts 0.00 0.00 0.00 0.00
----------- ------ ---------- ------
Total Revenues 557,835.23 100.00 557,835.23 100.00
----------- ------ ---------- ------
Cost of Sales
Cost of Sales 0.00 0.00 0.00 0.00
Cost of Sales-Salaries and Wa 0.00 0.00 0.00 0.00
----------- ------ ---------- ------
Total Cost of Sales 0.00 0.00 0.00 0.00
----------- ------ ---------- ------
Gross Profit 557,835.23 100.00 557,835.23 100.00
----------- ------ ---------- ------
Expenses
Advertising Expense 47,265.61 8.47 47,265.61 8.47
Amortization Expense 0.00 0.00 0.00 0.00
Auto Expenses 687.93 0.12 687.93 0.12
Auto Repairs 875.00 0.16 875.00 0.16
Auto Gas Expense 1,269.26 0.23 1,269.26 0.23
Bad Debt Expense 0.00 0.00 0.00 0.00
Bank Charges 445.15 0.08 445.15 0.08
BHC Income Expenses (sale) 15,262.81 2.74 15,262.81 2.74
Town business tax expense 1,665.54 0.30 1,665.54 0.30
Cash Over and Short 0.00 0.00 0.00 0.00
Charitable Contributions Exp 295.02 0.05 295.02 0.05
Commissions and Fees Exp 750.00 0.13 750.00 0.13
Contractor Labor 22,772.56 4.08 22,772.56 4.08
Programming Labor 22,620.00 4.05 22,620.00 4.05
Depreciation Expense 0.00 0.00 0.00 0.00
Books and Research Materials 1,504.55 0.27 1,504.55 0.27
Dues and Subscriptions Exp 449.98 0.08 449.98 0.08
Domain purchase expense 2,000.00 0.36 2,000.00 0.36
Employee Benefit Programs Exp 1,538.88 0.28 1,538.88 0.28
Freight Expense 0.00 0.00 0.00 0.00
For Management Purposes Only
69
Page: 2
Sentinel Software, Inc.
Income Statement
For the Ten Months Ending October 31, 1999
Current Month Year to Date
Gifts Expense 0.00 0.00 0.00 0.00
Hardware (non-asset) 5,930.83 1.06 5,930.83 1.06
Income Tax Expense 0.00 0.00 0.00 0.00
Insurance Expense 1,115.30 0.20 1,115.30 0.20
Interest Expense 0.00 0.00 0.00 0.00
Laundry and Cleaning Exp 0.00 0.00 0.00 0.00
Legal and Professional Expense 8,598.75 1.54 8,598.75 1.54
Licenses Expense 0.00 0.00 0.00 0.00
Loss on NSF Checks 0.00 0.00 0.00 0.00
Maintenance Expense 0.00 0.00 0.00 0.00
Management fees expense 130,360.00 23.37 130,360.00 23.37
Marketing Expenses 0.00 0.00 0.00 0.00
Meals and Entertainment Exp 4,606.51 0.83 4,606.51 0.83
Office Expense 4,683.42 0.84 4,683.42 0.84
Other Taxes 0.00 0.00 0.00 0.00
Owner's compensation - medical (1,538.88) (0.28) (1,538.88) (0.28)
Owner's compensation - auto 0.00 0.00 0.00 0.00
Owner's compensation - other 1,032.00 0.19 1,032.00 0.19
Personal Property Tax 506.52 0.09 506.52 0.09
Payroll Tax Expense 0.00 0.00 0.00 0.00
FUTA Expense 0.01 0.00 0.01 0.00
SUTA Expense 0.00 0.00 0.00 0.00
Medicare and SS Expense 0.00 0.00 0.00 0.00
Penalties and Fines Exp 0.00 0.00 0.00 0.00
Pension/Profit-Sharing Plan Ex 0.00 0.00 0.00 0.00
Postage Expense 849.31 0.15 849.31 0.15
Rent or Lease Expense 6,180.00 1.11 6,180.00 1.11
Car Lease Expense 9,998.58 1.79 9,998.58 1.79
Referral Fee Expense 0.00 0.00 0.00 0.00
Salaries Expense (1,566.55) (0.28) (1,566.55) (0.28)
Software Purchase Expense 4,454.77 0.80 4,454.77 0.80
Supplies Expense 2,962.19 0.53 2,962.19 0.53
Telephone Expense 5,568.25 1.00 5,568.25 1.00
Pager Expense 502.68 0.09 502.68 0.09
Cellular Phone Expense 1,195.42 0.21 1,195.42 0.21
Training and Education Expense 235.00 0.04 235.00 0.04
Travel Expense 14,796.97 2.65 14,796.97 2.65
Utilities Expense 0.00 0.00 0.00 0.00
Internet Expense 1,966.56 0.35 1,966.56 0.35
Internet Network fees 85.80 0.02 85.80 0.02
Web contract labor 2,147.45 0.38 2,147.45 0.38
Web Management 2,100.00 0.38 2,100.00 0.38
Web Development 0.00 0.00 0.00 0.00
Web Hosting Fees 18,881.43 3.38 18,881.43 3.38
Web Content 77,004.00 13.80 77,004.00 13.80
Web Pay Site Fees 1,456.14 0.26 1,456.14 0.26
Web Advertisement 116,761.25 20.93 116,761.25 20.93
Wages Expense 0.00 0.00 0.00 0.00
Other Expense 6,143.04 1.10 6,143.04 1.10
Purchase Disc - Expense Items 0.00 0.00 0.00 0.00
Gain/Loss on Sale of Assets 0.00 0.00 0.00 0.00
Income Tax Reserve (6,250.00) (1.12) (6,250.00) (1.12)
----------- -----------
Total Expenses 540,169.04 96.83 540,169.04 96.83
----------- -----------
Net Income $ 17,666.19 3.17 $ 17,666.19 3.17
=========== ===========
For Management Purposes Only
70
UNAUDITED
SOLUTIONS AMERICA, INC.
COMBINED BALANCE SHEET
SEPTEMBER 30, 1999
(Amount in 000's)
ASSETS
CURRENT ASSETS:
Cash and cash equivalent 273
Restricted Cash 824
Accounts Receivable - less allowance
for doubtful accounts of $80K 1,302
Due from Merchant banks 7,354
Inventory 250
Prepaid Expenses 60
Due from officers 525
Receivable from affiliate 3,719
------
Total current assets 14,308
======
PROPERTY PLANT AND EQUIPMENT
Property and Equipment 740
Accumulated Depreciation (129)
------
Net property plant and equipment 611
GOODWILL 42
OTHER ASSETS 147
------
TOTAL ASSETS 15,108
======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable - Clients 6,339
Other Accounts Payable and Accrued Expenses 509
Accrued Payroll and Payroll Taxes 162
Income Tax Payable 1,512
Secured Line of Credit - Amtrade 1,000
Reserve for Merchant Losses 2,984
Note Payable - short-term 274
------
Total current liabilities 12,769
NOTE PAYABLE - LONG-TERM 962
------
Total Liabilities 13,732
STOCKHOLDERS' EQUITY
Common Stock - 10,000,000 shares authorized,
3,280,000 shares issued and outstanding 3
Preferred Stock - 1,000,000 shares authorized,
0 shares issued and outstanding --
Shares Held in Escrow (950)
Retained Earnings 2,323
------
Total Shareholders' Equity 1,376
------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY 15,108
======
EXHIBIT "C"
71
SOLUTIONS AMERICA, INC.
COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
(Amount in 000's)
Revenues 7,195
Cost of Services 3,144
-----
Gross Profit 4,051
Operating Expenses 1,985
-----
Net income before other (income) expense
and provision for income taxes 2,066
Other (Income) Expense 25
-----
Net income before provision for income taxes 2,041
Income taxes 817
-----
Net Income 1,224
=====
72
SCHEDULE 3.1
OFFICERS AND DIRECTORS
XXXX XXXXXXX, SOLE DIRECTOR AND PRESIDENT/SECRETARY OF CORPORATION
73
SCHEDULE 3.3
OPTIONS AND WARRANTS
NONE
74
SCHEDULE 3.7
CONSENTS
SOLE SHAREHOLDER - XXXX XXXXXXX
75
SCHEDULE 3.9
ABSENCE OF CERTAIN CHANGES OR EVENTS
NONE
76
SCHEDULE 3.12
ASSETS
NONE
77
SCHEDULE 3.13
NONE
78
SCHEDULE 3.14 REAL PROPERTY
A. We lease office space at 000 X Xxxxx Xxxxxx, Xxxxxxxxx, XX from Villa Park.
This is a one year long, monthly lease which terminates April 30th.
79
SCHEDULE 3.15 CONTRACTS
We have no contracts for services.
80
SCHEDULE 3.16
LITIGATION
NONE
81
SCHEDULE 3.17
TAX MATTERS
NONE
82
SCHEDULE 3.19 GOVERNMENT LICENSES AND PERMITS
A. Town of Warrenton, Virginia Business License Account #2084, Issued 7/14/99,
Expires 5/31/00
B. Sales and Use License Account #001779876-6
83
SCHEDULE 3.21 INSURANCE
A. Worker's Comp Policy, Insured by The Hartford, Policy #42WECIF7213,
Expires 12/28/99, Premium $263.00 per year
Coverage:
Bodily injury by accident: $100K per accident
Bodily injury by disease: $500K policy limit
Bodily injury by disease: $100K per employee
B. Commercial Multi-Peril (Business) policy, Insured by The Hartford, Policy
#42SBAGL6134, Expires 10/28/00, Deductible is $250 per occurrence, Premium is
$810.00 per year (see attached exhibits)
84
SPECTRUM POLICY DECLARATIONS (CONTINUED)
POLICY NUMBER: 42 SBA GL6134
BUSINESS LIABILITY LIMITS OF COVERAGE
LIABILITY AND MEDICAL EXPENSES $2,000,000
MEDICAL EXPENSES - ANY ONE PERSON $ 10,000
PERSONAL AND ADVERTISING INJURY $2,000,000
FIRE LEGAL LIABILITY - FIRE,
LIGHTNING, OR EXPLOSION $ 300,000
AGGREGATE LIMITS
PRODUCTS - COMPLETED OPERATIONS EXCLUDED
FORM SS 05 09
GENERAL AGGREGATE $4,000,000
EMPLOYMENT PRACTICES LIABILITY
COVERAGE: FORM SS 09 01
EACH CLAIM LIMIT $ 5,000
DEDUCTIBLE - EACH CLAIM LIMIT
NOT APPLICABLE
AGGREGATE LIMIT $ 5,000
RETROACTIVE DATE: 10/28/99
This EMPLOYMENT PRACTICES LIABILITY COVERAGE contains claims made coverage.
Except as may be otherwise provided herein, specified coverages of this
insurance are limited generally to liability for injuries for which claims are
first made against the insured while the insurance is in force. Please read and
review the insurance carefully and discuss the coverage with your Hartford
Agent or Broker.
The Limits of Insurance stated in this Declarations will be reduced, and may be
completely exhausted, by the payment of "defense expense" and, in such event,
The Company will not be obligated to pay any further "defense expense" or sums
which the insured is or may become legally obligated to pay as "damages".
BUSINESS LIABILITY OPTIONAL
COVERAGE
HIRED/NON-HIRED AUTO LIABILITY $2,000,000
FORM: SS 04 38
FORM SS 00 02 11 93 T Printed in U.S.A. (NS) PAGE 005 (CONTINUED ON NEXT PAGE)
PROCESS DATE: 09/27/99 POLICY EXPIRATION DATE: 10/28/00
85
SPECTRUM POLICY DECLARATIONS (CONTINUED)
POLICY NUMBER: 42 SBA GL6134
Location(s), Building(s), Business of Named Insured and Schedule of Coverages
for Premises as designated by Number below.
LOCATION: 001 BUILDING: 001
PROPERTY OPTIONAL COVERAGES APPLICABLE LIMITS OF INSURANCE
TO THIS LOCATION
COMPUTERS AND MEDIA COVERAGE $150,000
FORM SS 04 41
DEDUCTIBLE: $250
STRETCH COVERAGES: FORM SS 04 08
THIS FORM INCLUDES MANY
ADDITIONAL COVERAGES AND
EXTENSIONS OF COVERAGE. SOME
OF THE MAJOR COVERAGES ARE:
ACCOUNTS RECEIVABLE $ 25,000
VALUABLE PAPERS AND RECORDS $ 25,000
EMPLOYEE DISHONESTY $ 10,000
COMPUTERS AND MEDIA $ 10,000
PERSONAL PROPERTY OF OTHERS $ 10,000
PROPERTY OFF PREMISES $ 15,000
TEMPERATURE CHANGE $ 10,000
FORGERY OR ALTERATION $ 10,000
MONEY ORDERS AND COUNTERFEIT $ 10,000
PAPER CURRENCY
BACK-UP OF SEWERS AND DRAINS $ 25,000
FORM SS 00 02 11 93 T Printed in U.S.A. (NS) PAGE 003 (CONTINUED ON NEXT PAGE)
PROCESS DATE: 09/27/99 POLICY EXPIRATION DATE: 10/28/00
86
SPECTRUM POLICY DECLARATIONS (CONTINUED)
POLICY NUMBER: 42 SBA GL6134
PROPERTY OPTIONAL COVERAGES APPLICABLE LIMITS OF INSURANCE
TO ALL LOCATIONS
BUSINESS INCOME AND EXTRA EXPENSE
COVERAGE 12 MONTHS ACTUAL LOSS SUSTAINED
COVERAGE INCLUDES THE FOLLOWING
COVERAGE EXTENSIONS:
ACTION OF CIVIL AUTHORITY: 30 DAYS
EXTENDED BUSINESS INCOME: 30 CONSECUTIVE DAYS
EQUIPMENT BREAKDOWN COVERAGE
COVERAGE FOR DIRECT PHYSICAL LOSS
DUE TO:
MECHANICAL BREAKDOWN,
ARTIFICIALLY GENERATED CURRENT
AND STEAM EXPLOSION
THIS ADDITIONAL COVERAGE INCLUDES
THE FOLLOWING EXTENSIONS
HAZARDOUS SUBSTANCES $ 25,000
CFC REFRIGERANTS $ 25,000
FORM SS 00 02 11 93 T Printed in U.S.A. (NS) PAGE 004 (CONTINUED ON NEXT PAGE)
PROCESS DATE: 09/27/99 POLICY EXPIRATION DATE: 10/28/00
87
SCHEDULE 3.25
BUSINESS LOCATIONS
000 X XXXXX XXXXXX
XXXXXXXXX, XXXXXXXX 00000
88
SCHEDULE 3.29 BANK ACCOUNTS
A. Fauquier Bank, Money Market Account, Account #601135501, Authorized Signors
Xxxx Xxxxxxx and Xxxxxx Xxxxxxx
B. Southern Financial Bank, Business Checking, Account #00365310910, Authorized
Signors Xxxx Xxxxxxx and Xxxxxx Xxxxxxx
