STOCK PURCHASE AGREEMENT
BETWEEN
CHARYS HOLDING COMPANY, INC. (A DELAWARE CORPORATON)
AND
XXXXX X. XXX, XX.
REGARDING ALL OF THE ISSUED AND OUTSTANDING STOCK OF
PERSONNEL RESOURCES OF GEORGIA, INC.
ARTICLE I
1.1 Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 4
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1.2 Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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1.3 Purchase Price Adjustment. . . . . . . . . . . . . . . . . . . . . . 4
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1.4 Registration Rights Agreement. . . . . . . . . . . . . . . . . . . . 2
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ARTICLE II
2.1 Corporate Organization, etc. . . . . . . . . . . . . . . . . . . . . 6
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2.2 Subsidiaries and Affiliates. . . . . . . . . . . . . . . . . . . . . 6
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2.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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2.4 Corporate Record Books . . . . . . . . . . . . . . . . . . . . . . . 6
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2.5 Title to Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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2.6 Options and Rights . . . . . . . . . . . . . . . . . . . . . . . . . 6
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2.7 Authorization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 6
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2.8 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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2.9 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 7
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2.10 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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2.11 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . 8
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2.12 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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2.13 True and Complete Copies. . . . . . . . . . . . . . . . . . . . . . 9
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2.14 Title and Related Matters . . . . . . . . . . . . . . . . . . . . . 9
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2.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
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2.16 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
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2.17 Compliance with Law and Applicable Government Regulations. . . .11
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2.18 ERISA and Related Matters . . . . . . . . . . . . . . . . . . . . .12
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2.19 Banks, Brokers and Proxies. . . . . . . . . . . . . . . . . . . . .12
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2.20 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . .12
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2.21 Dealings with Affiliates . . . . . . . . . . . . . . . . . . . . . .13
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2.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
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2.23 SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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2.40 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
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ARTICLE III
3.1 Corporate Organization, etc. . . . . . . . . . . . . . . . . . . . .16
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3.2 Authorization, etc. . . . . . . . . . . . . . . . . . . . . . . . . .17
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ARTICLE IV
4.1 Regular Course of Business. . . . . . . . . . . . . . . . . . . . .17
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4.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
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4.3 Capital Changes; Pledges . . . . . . . . . . . . . . . . . . . . . .17
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4.4 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
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4.5 Capital and Other Expenditures. . . . . . . . . . . . . . . . . . .17
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4.6 Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
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4.7 Other Commitments . . . . . . . . . . . . . . . . . . . . . . . . . .18
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4.8 Interim Financial Information and Audit. . . . . . . . . . . . . .18
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4.9 Full Access and Disclosure. . . . . . . . . . . . . . . . . . . . .18
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4.10 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
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4.11 Breach of Agreement. . . . . . . . . . . . . . . . . . . . . . . . .18
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ARTICLE V
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5.1 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
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ARTICLE VI
6.1 Agreement to Defend. . . . . . . . . . . . . . . . . . . . . . . . .19
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6.2 Non-Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
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6.3 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . .20
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6.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
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6.5 No Solicitation or Negotiation. . . . . . . . . . . . . . . . . . .20
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6.6 Deliveries After Closing . . . . . . . . . . . . . . . . . . . . . .20
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ARTICLE VII
7.1 Representations and Warranties; Performance . . . . . . . . . . . .21
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7.2 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . .21
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7.3 Opinion of Seller's Counsel . . . . . . . . . . . . . . . . . . . .21
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7.4 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . .21
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7.5 No Proceeding or Litigation . . . . . . . . . . . . . . . . . . . .21
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7.6 Accounting Certificates . . . . . . . . . . . . . . . . . . . . . . .21
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7.7 Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . .21
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7.8 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . .22
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7.9 Certificates of Good Standing . . . . . . . . . . . . . . . . . . .22
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7.10 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . .22
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ARTICLE VIII
8.1 Representations and Warranties; Performance. . . . . . . . . . . . 22
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8.2 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . 22
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8.3 No Proceeding or Litigation. . . . . . . . . . . . . . . . . . . . 22
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ARTICLE IX
9.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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9.2 Intervening Litigation . . . . . . . . . . . . . . . . . . . . . . . 23
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ARTICLE X
10.1 Methods of Termination . . . . . . . . . . . . . . . . . . . . . . .23
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10.2 Procedure Upon Termination . . . . . . . . . . . . . . . . . . . . .23
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ARTICLE XI
11.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
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11.2 Indemnification by Seller. . . . . . . . . . . . . . . . . . . . . .24
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11.3 Indemnification by the Purchaser. . . . . . . . . . . . . . . . . .24
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11.4 Third-Party Claims. . . . . . . . . . . . . . . . . . . . . . . . . .25
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ARTICLE XII
12.1 Amendment and Modification . . . . . . . . . . . . . . . . . . . . .26
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12.2 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .26
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12.3 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . .26
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12.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
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12.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
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12.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
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12.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
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12.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
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12.9 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . .28
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12.10 Injunctive Relief. . . . . . . . . . . . . . . . . . . . . . . . . . 28
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12.11 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . 28
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12.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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12.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
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STOCK PURCHASE AGREEMENT (the "Agreement"), dated the 8th of August,
2004, by and between CHARYS HOLDING COMPANY, INC., a Delaware corporation
located at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X-000, Xxxxxxx Xxxxxxx 00000 (the
"Purchaser"), and XXXXX X. XXX, XX. who resides at 0000 Xxxx Xxxx Xxxx, Xxxxxxx,
Xxxxxxx 00000(xxx "Seller"), the holder of all of the outstanding shares of
capital stock of PERSONNEL RESOURCES OF GEORGIA INC., a Georgia corporation
located at 000 Xxxxx Xxxxxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx (the
"Corporation") and the Corporation.
ARTICLE I PURCHASE OF STOCK AND PURCHASE PRICE
1.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, the Seller agrees to sell, and the Purchaser agrees to purchase from
the Seller, all of the issued and outstanding shares of capital stock of the
Corporation (the "Shares"). The number of Shares which are the subject of this
Agreement and the form of stock certificates evidencing the Shares are described
in Schedule 1.1 hereto.
1.2 PRICE. In reliance on the representations and warranties of the Seller
contained herein, and in consideration of the sale, conveyance, transfer and
delivery of the Shares and the consummation of the other agreements and
transactions referred to in this Agreement, the Purchaser agrees to pay to the
Seller the aggregate consideration calculated in accordance with the provisions
of Section 1.3 hereto (the "Purchase Price") on the Closing Date (as defined in
Section 9.1 hereof), payable as hereinafter set forth.
1.3 PURCHASE PRICE DETERMINATION.
(a) As soon as practicable after the one year anniversary of the Effective
Date, the Purchaser shall prepare and deliver to the Seller special purpose
financial statements of the Corporation as of the close of business for the one
year period ending on the one year anniversary of the Effective Date (the
"Effective Date Financial Statements"), which shall be prepared by the Purchaser
in accordance with generally accepted accounting principles ("GAAP"), applied on
a consistent basis. The Effective Date Financial Statements shall be reviewed by
the Purchaser's accountants.
(b) The Seller shall have until thirty (30) days after the delivery of the
Effective Date Financial Statements to review and propose any adjustments
thereto. All adjustments proposed by the Seller shall be set forth in detail in
a written statement delivered to the Purchaser (the "Adjustment Statement") and
upon the Purchaser's acceptance thereof, the accepted adjustments shall be
incorporated. If the Seller objects in writing to any such proposed adjustment
the parties shall have fifteen (15) days within which to resolve such dispute.
If a final resolution thereof is not obtained within such fifteen (15) days, the
auditors of Buyer shall be retained to resolve any remaining disputes concerning
the purchase price adjustments. The fees of the Independent Accountant shall be
borne equally by the Purchaser and the Seller.
(c) The "Purchase Price" shall be equal to the sum of [a] earnings of the
Corporation before interest, taxes and depreciation ("EBITDA") as shown on the
Effective Date Financial Statements multiplied by five (5), up to a maximum of
One Million Two Hundred and Fifty Thousand Dollars ($1,250,000.00) and a minimum
of Two Hundred and Fifty Thousand Dollars ($250,000.00), as adjusted by Section
1.3(b) and shall be paid and or adjusted as follows:
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(d) The Purchase Price is to be paid at Closing in the form of a corporate
note of Buyer which shall set forth that the principal amount thereof is to
determined in accordance with this Agreement in an not to exceed One Million Two
Hundred and Fifty Thousand Dollars ($1,250,000.00) and not to be less than Two
Hundred and Fifty Thousand Dollars ($250,000.00), secured by an amount of Common
Stock of Buyer bearing interest at the rate of six percent (6%) per annum,
payable in cash or Common Stock of Buyer as determined by Buyer in its sole
discretion, interest only commencing on one year from Closing with principal and
any accrued but unpaid interest due in full on the second anniversary of Closing
(the "Note Balance"). All adjustments to the Purchase Price as provided in
Section 1.3(b) and 1.3(c) shall be reflected in the principal balance of the
note. The number of shares constituting the Note Balance shall be based upon
$4.00 per share adjusted as follows.
(e) If the average weighted sale price for the Buyer's Common Stock for any
three (3) trading days for the period commencing upon the Closing and ending
tweleve (12) months thereafter (the "Determination Period") is equal to or
greater than $4.50 per share, then the Note Balance shall not be adjusted and
the Note Balance and the Purchase Price shall be deemed to have been paid in
full. If the average weighed sale price for the foregoing period is not equal to
or greater than $4.50 per share then the calculation in Section 1.3 (f) shall
apply.
(f) If the average weighted sale price for the Buyer's Common Stock is not
equal to or greater than $4.50 per share for the Determination Period , then the
average price for the Buyer's Common Stock over the twenty-five (25) trading
days after the filing of the Buyer's Form 10-Q for the second full reporting
quarter after the Closing (the "First Determination Period"), and the average
price for the Buyer's Common Stock over the twenty-five (25) days prior to the
end of the second fiscal quarter of Buyer (the "Second Determination Period"),
will be equally weighted, and the average daily weighted average trading price
of the First Determination Period and the Second Determination Period will be
the amount used for the make whole calculation (the end of the foregoing period
is the "Determination Date" and the difference between the amount so determined
and $4.00 per share, if any, multiplied by the number of shares initially issued
in the Note Balance is the "Make Whole Amount"). [For example if Buyer's second
Form l0-Q is filed on August 15th, take the average price of the twenty-five
(25) days prior to the filing and the twenty-five (25) days prior to July 1st
and average the two. Example $3.30 per share and $4.10 per share = $7.40 per
share/2 = $3.70 per share and the Make Whole Amount would pay either $0.30 per
share in cash (or note) or stock at the company's option.]
(g) Buyer shall pay the Make Whole Amount either by [a] issuance to Seller
such number of shares of Common Stock of Buyer determined by dividing the Make
Whole Amount by the Market Price on the expiration of the Determination Period
or [b] adding the Make Whole Amount to the Note Balance or [c] payment in cash,
at Buyer's sole discretion.
(h) "Market Price" shall be determined on the basis of the weighted average
sale price of the Buyer's Common Stock on the principal stock exchange, or the
National Association of Securities Dealers' Automated Quotation National Market
System ("NASDAQ/NMS"), as the case may be, on which such Common Stock is then
listed or admitted to trading, (ii) if the Common Stock is not then listed or
admitted to trading on any stock exchange or the NASDAQ/NMS, as the case may be,
the average of the last reported closing bid and asked prices on such day in the
over-the-counter market, as furnished by the NASDAQ system or the National
Quotation Bureau, Inc., (iii) if neither NASDAQ, or the National Quotation
Bureau is at the time engaged in the business of reporting such prices, then as
furnished by any similar firm then engaged in such business, or (iv) if there is
no such firm, as furnished by any member of the National Association of
Securities Dealers ("NASD") selected by the Buyer, with the consent of the Buyer
(which consent shall not be unreasonably refused or delayed), and which is not
an Affiliate of the Buyer.
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1.4 Piggyback Registration Rights and Anti Dilution. At Closing, the
Parties to the employment contracts referred to in Section 6.2 shall enter into
a Registration Rights Agreement in the form attached as Schedule 1.4.
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AND CORPORTATON
Seller and Corporation hereby represent and warrant to Purchaser as of
the date hereof and as of the Closing Date that to the best of their knowledge:
2.1 Corporate Organization, etc. Corporation is a corporation duly
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organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and proposed to be conducted, and
to own, operate and lease its properties and assets. Corporation is duly
qualified or licensed to do business in good standing in every jurisdiction in
which the conduct of its business, the ownership or lease of its properties, the
proposed conduct of its business or ownership or lease of its properties, or the
transactions contemplated by this Agreement, require it to be so qualified or
licensed and the failure to be so qualified or licensed would have a Material
Adverse Effect (as defined in Section 12.3). Such jurisdictions are set forth in
Schedule 2.1 (a) hereto. True, complete and correct copies of Corporation's
charter and bylaws as presently in effect are set forth in Schedule 2.1(b)
hereto.
2.2 Subsidiaries and Affiliates. Corporation has no subsidiaries or
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affiliates.
2.3 Capital Stock. The stock record book of Corporation has been
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delivered to the Purchaser for inspection prior to the date hereof and are
complete and correct, and all requisite Federal and State documentary stamps
have been affixed thereon and cancelled. The authorized, issued and outstanding
shares of capital stock of Corporation is as set forth in Schedule 2.3 hereto.
2.4 Corporate Record Books. The corporate minute books of Corporation
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has been made available to the Purchaser, is complete and correct and contains
all of the proceedings of the shareholders and directors of the Corporation.
2.5 Title to Stock. All of the outstanding shares of the capital
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stock of Corporation is owned by Seller, is duly authorized, validly issued and
fully paid and non-assessable, and are free of all Liens (as defined in Section
12.3). Upon payment of the Purchase Price to the Seller at closing, Seller will
convey good and marketable title to the Shares free and clear of all Liens or
contractual restrictions or limitations whatsoever.
2.6 Options and Rights. There are no outstanding subscriptions,
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options, warrants, rights, securities, contracts, commitments, understandings,
or arrangements by which Corporation is bound to issue any additional shares of
its capital stock or rights to purchase shares of its capital stock. There are
no existing agreements between Seller and Corporation or between the Seller or
the Corporation, on the one hand, and any other Person (as defined in Section
12.3), on the other hand, regarding the Shares.
2.7 Authorization, etc. The Seller has full power and authority to
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enter into this Agreement and the agreements contemplated hereby and to deliver
the Shares and the certificates evidencing such Shares to Purchaser as provided
for herein, free and clear of all Liens. The execution, delivery and performance
of this agreement and all other agreements and transactions contemplated hereby
have been duly authorized by the Board of Directors and Shareholders of the
Corporation and no other corporate proceedings on its part are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement and all other agreements contemplated hereby to be entered into
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by Seller constitute a legal, valid and binding obligation of Seller enforceable
against the Seller in accordance with its terms.
2.8 No Violation. Except as set forth in Schedule 2.8 hereto, the
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execution and delivery by Seller and Corporation of this Agreement, and all
other agreements contemplated hereby, and the fulfillment of and compliance with
the respective terms hereof and thereof by the Seller and Corporation do not and
will not (a) conflict with or result in a breach of the terms, conditions or
provisions of or constitute a default or event of default under (with due
notice, lapse of time or both) of any contract to which either Corporation or
Seller is a party; b) or result in the creation of any Lien upon any of the
Seller's assets or the Corporation's capital stock or assets; c) give any third
party the right to accelerate any obligations of either Seller or Corporation;
d) result in a violation of or require any authorization, consent, approval,
exemption or other action by or notice to any court or Authority (as defined in
Section 12.3) pursuant to, the charter or bylaws of Seller or Corporation or any
Regulation (as defined in Section 12.3), Order (as defined in Section 12.3) or
Contract (as defined in Section 12.3) to which the Seller or a Corporation or
their respective properties are subject. The Seller will comply with all
applicable Regulations and Orders in connection with the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
2.9 Financial Statements.
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(a) Attached as Schedule 2.9(a)(l) hereto are audited year-end balance
sheets and statements of operations, stockholders equity and cash flow of
Corporation as of December 31, 2003 and un-audited balance sheets for the period
commencing January 1, 2004 and ending June 30, 2004 and un-audited statements of
operations, stockholders equity and cash flow for the Six (6) month period then
ended. Such balance sheets and the notes thereto fairly present the financial
position of Corporation as at the respective dates thereof, and such statements
of operations, stockholders equity and cash flow and the notes thereto (i)
fairly present the results of operations for the periods therein referred to,
all in accordance with GAAP (as defined in Section 12.3) (except as stated
therein or in the notes thereto) applied on a consistent basis and (ii) fairly
present the financial condition of Corporation at the respective date of, and
for the period covered by such statements and (iii) except as disclosed in
Schedule 2.9(a)(2) hereto, are in accordance with the required or permitted
statutory accounting requirements or practices applied on a consistent basis
under the laws of the State of Georgia. Corporation has no liability, whether
accrued, absolute or contingent, of a type required to be reflected on a balance
sheet or described in the notes thereto in accordance with GAAP, other than (i)
liabilities which have been reflected or reserved against in the Financial
Statements, (ii) liabilities incurred since the Financial Statement Date (as
hereinafter defined) in the ordinary course of business, (iii) liabilities
covered by insurance or reinsurance, and (iv) liabilities disclosed in Schedule
2.9(a)(2) hereto. The balance sheet, the statement of income and the statement
of changes in financial position as of June 30, 2004, and the notes thereto are
herein collectively referred to as the "Financial Statements" and June 30, 2004,
is referred to herein as the "Financial Statement Date".
(b) Except as set forth in Schedule 2.9(b) hereto, Corporation does not
have any Indebtedness (as defined in Section 12.3), obligation or liability
(whether accrued, absolute, contingent, un-liquidated or otherwise, known or
unknown to Seller or Corporation, whether due or to become due) arising out of
transactions entered into or Occurrences (as defined in Section 12.3) that
occurred at or prior to the Closing Date, other than: (a) liabilities set forth
in the Financial Statements and (b) liabilities and obligations which have
arisen after the Financial Statement Date in the ordinary course of business
(none of which is a liability resulting from breach of Contract, breach of
warranty, tort, infringement, Claim or lawsuit.
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(c) The balance sheet of Corporation as of the Closing Date is set forth
as Schedule 2.9(c) hereto which is true and complete in all material respects.
2.10 Employees. Schedule 2.10 lists all employees or independent
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contractors providing services to Corporation. Corporation has been for the past
four years, and currently is, in compliance with all Federal, State and local
Regulations or Orders affecting employment and employment practices of such
Corporation (including those Regulations promulgated by the Equal Employment
Opportunity Commission), including terms and conditions of employment and wages
and hours. At the Closing Corporation will have no liability to any of past or
present employees, officers or directors or independent contractors except as to
those individuals described in Section 6.2.
2.11 Absence of Certain Changes. Since the Financial Statement Date,
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to the best knowledge of the Seller and Corporation there has not been (a) any
Material Adverse Change (as defined in Section 12.3) in the business, prospects,
financial condition or in the operations of the Corporation's businesses; (b)
any damage, destruction or loss, whether covered by insurance or not, having a
Material Adverse Effect, with regard to the Corporation's properties and
businesses; (c) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) in respect of the
Corporation's capital stock, or any redemption or other acquisition of such
stock by Corporation; (d) any increase in the compensation payable to or to
become payable by Corporation to its officers or employees or any adoption of or
increase in any bonus, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any such officers or employees or
any Affiliate of Corporation; (e) any entry into any material Contract not in
the ordinary course of business, including without limitation any borrowing or
capital expenditure; or (f) any change by either of the Corporation in
accounting methods or principles.
2.12 Contracts.
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(a) Except as expressly contemplated by this Agreement or as set forth on
Schedule 2.12(a) hereto, as of the Closing Date, Corporation is not a party to
any written or oral:
(i) pension, profit sharing, stock options, employee stock purchase or
other plan providing for deferred or other compensation to employees or any
other employee benefit plan, or any Contract with any labor union;
(ii) Contract for the employment of any officer, individual employee or
other person on a full-time, part-time, consulting or other basis or Contract
relating to loans to officers, directors or Affiliates;
(iii) Contract relating to the borrowing of money or the mortgaging,
pledging or otherwise placing a Lien on any asset of Corporation;
(iv) Guarantee (as defined in Section 12.3) of any obligation;
(v) Contract under which the Corporation has advanced or loaned any
Person amounts;
(vi) Contract under which the Corporation is lessee of or holds or operates
any property, real or personal, owned by any other party, except for any lease
of real or personal property described in Schedule 2.12 (vi);
(vii) Contract under which Corporation is lessor of or permits any third
party to hold or operate any property, real or personal, owned or controlled by
the Corporation;
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(viii) Contract or group of related Contracts with the same party or group
of affiliated parties the performance of which involves a consideration in
excess of $2,000;
(ix) assignment, license, indemnification or Contract with respect to any
intangible property (including, without limitation, any Proprietary Rights (as
defined in Section 12.3);
(x) warranty Contract with respect to its services rendered or its
products sold or leased;
(xi) Contract under which it has granted any Person any registration rights
(including piggyback rights) with respect to any securities;
(xii) Contract prohibiting it from freely engaging in any business or
competing anywhere in the world;
(xiii) Contract for the purchase, acquisition or supply of property and
assets, whether for resale or otherwise;
(xiv) Contracts with independent agents or brokers;
(xv) employment, consulting, sales, commissions or marketing contracts;
(xvi) Contracts providing for "take or pay" or similar unconditional
purchase or payment obligations;
(xvii) Contracts with Persons with which, directly or indirectly, the
Seller also has a Contract; or
(xviii) any other contract which is material to its operations and business
prospects or involves a consideration in excess of $10,000 annually excluding
any purchase orders in the ordinary course of business.
(b) The Corporation has performed in all material respects all obligations
required to be performed by it and is not in default in any material respect
under or in breach of nor in receipt of any claim of default or breach under any
Contract to which the Corporation is subject; no event has occurred which with
the passage of time or the giving of notice or both would result in a default,
breach or event of noncompliance under any Contract to which the Corporation is
subject; the Corporation has no present expectation or intention of not fully
performing all such obligations; the corporation has no knowledge of any breach
or anticipated breach by the other parties to any Contract to which it is a
party; and the Corporation is not a party to any materially adverse Contract.
(c) Attached hereto as Schedule 2.12(c) is a true and complete copy of each
of the Corporation's Contracts with any Person who sells products or services to
Corporation or who has a Contract to resell any product or service provided by
Corporation.
2.13 True and Complete Copies. Copies of Contracts and documents
--------------------------
delivered and to be delivered hereunder by the Seller or Corporation are and
will be true and complete copies of such agreements, contracts and documents.
2.14 Title and Related Matters.
----------------------------
9
(a) Except as set forth in Schedule 2.14(a) hereto, Corporation
has good and marketable title to all of the properties and assets reflected in
the Financial Statements or acquired after the date thereof and for properties
sold or otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all Liens, except (i) statutory Liens not yet
delinquent, (ii) such imperfections or irregularities of title, Liens,
easements, charges or encumbrances as do not detract from or interfere with the
present use of the properties or assets subject thereto or affected thereby,
otherwise impair present business operations at such properties; or do not
detract from the value of such properties and assets, taken as a whole, (iii) as
reflected in the Financial Statements or the notes thereto.
(b) The Corporation owns, and will on the Closing Date, own good
and marketable title to all the personal property and assets, tangible or
intangible, used in their respective businesses except as to those assets leased
as set forth in Schedule 2.14(b) hereto, all of which leases are in good
standing and no party is in default thereunder. Except as set forth in Schedule
2.14(b) hereto, none of the assets belonging to or held by the Corporation is or
will be on the Closing date subject to any (i) Contracts of sale or lease, or
(ii) Liens.
(c) There has not been since the Financial Statement date and
will not be prior to the Closing Date, any sale, lease, or any other disposition
or distribution by the Corporation of any of its assets or properties and any
other assets now or hereafter owned by it, except transactions in the ordinary
and regular course of business or as otherwise consented to by the Purchaser.
After the Closing, the Purchaser will own, or have the unrestricted right to
use, all properties and assets that are currently used in connection with the
businesses of the Corporation.
2.15 Litigation. There is no Claim (as defined in Section 12.3) pending
----------
or, to the best knowledge of the Seller or the Corporation threatened against
the Seller or the Corporation which, if adversely determined, would have a
Material Adverse Effect on the Seller or the Corporation. Nor is there any Order
outstanding against the Seller or the Corporation having, or which, insofar as
can be reasonably foreseen, in the future may have, a Material Adverse Effect on
the Corporation.
2.16 Tax Matters.
------------
(a) Corporation has filed all federal, state, and local tax
reports, returns, information returns and other documents (collectively the "Tax
Returns") required to be filed and has duly paid or accrued on the Financial
Statements all relevant taxes, including without limitation income, premium,
gross receipts, net proceeds, alternative or add-on minimum, ad valorem, value
added, turnover, sales, use, property, personal property (tangible and
intangible), stamp, leasing, lease, user, excise, duty, franchise, transfer,
license, withholding, payroll, employment, fuel, excess profits, occupational
and interest equalization, windfall profits, severance, and other charges
(including interest and penalties) (collectively, the "Taxes") due claimed to be
due or may be due by federal, state, or local authorities (collectively, the
"Taxing Authorities"). All Taxes required or anticipated to be paid for all
periods prior to and including the Closing Date have been paid or fully reserved
against in accordance with GAAP, except as provided in Schedule 2.16 hereto. All
Taxes which are required to be withheld or collected by Corporation have been
duly withheld or collected and, to the extent required, have been paid to the
proper Taxing Authority or properly segregated or deposited as required by
applicable laws. There are no Liens for Taxes upon any property or assets of the
Corporation except for liens for Taxes not yet due and payable. Corporation has
not executed a waiver of the statute of limitations on the right of the Internal
Revenue Service or any other Taxing Authority to assess additional Taxes or to
contest the income or loss with respect to any Tax Return. The basis of any
depreciable assets, and the methods used in determining allowable depreciation
(including cost recovery), of Corporation is substantially correct and
incompliance with the Internal Revenue Code of 1986, as amended and the
regulations there under (the "Code").
10
(b) No issues have been raised that are currently pending by any
Taxing Authority in connection with any Tax Returns. No material issues have
been raised in any examination by any Taxing Authority with respect to the
Corporation which, by application of similar principles, reasonably could be
expected to result in a proposed deficiency for any other period not so
examined. There are no unresolved issues or unpaid deficiencies relating to such
examinations. The items relating to the business, properties or operations of
Corporation on the Tax Returns filed by or on behalf of Corporation for all
taxable years (including the supporting schedules filed therewith), available
copies of which have been supplied to the Purchaser, state accurately, in all
material respects the information requested with respect to Corporation and such
information was derived from the books and records of Corporation.
(c) Corporation is not subject to any joint venture, partnership, or other
arrangement or Contract which is treated as a partnership for federal income tax
purposes. Corporation is not a party to any tax sharing agreement.
(d) Corporation is not a "consenting corporation", within the meaning of
Section 341(f)(l) of the Code, or comparable provisions of any state statutes,
and none of the assets of the Corporation is subject to an election under
Section 341(f) of the Code or comparable provisions of any state statutes.
(e) The most recent review of the Tax Returns of Corporation by the
Internal Revenue Service was as set forth in Schedule 2.16 hereto.
(f) Corporation is not and will not be required to recognize after the
Closing Date any taxable income in respect of accounting method adjustments
required to be made under the Tax Reform Act of 1986 or the Revenue Act of 1987.
(g) None of the assets of Corporation constitutes tax-exempt bond financed
property or tax exempt use property within the meaning of Section 168 of the
Code, and none of the assets of Corporation are subject to a lease, safe harbor
lease, or other arrangement as a result of which Corporation are not treated as
the owner for federal income tax purposes.
(h) Corporation has not made or become obligated to make, and will as a
result of any event connected with the Closing become obligated to make, any
"excess parachute payment" as defined in Section 280G of the Code (without
regard to subsection (b)(4) thereof).
(i) Tax Sharing Agreements. Corporation is not a party to any Tax
------------------------
Sharing Agreement.
(j) Returns and Reports. Corporation shall file all Tax Returns and reports
-------------------
with respect to Taxes which are required to be filed for Tax periods ending on
or before the Closing Date (a "Pre-Closing Tax Return") and shall pay all
amounts shown to be due on such Pre-Closing Tax Returns to the appropriate
taxing authority.
(k) Tax Books and Records. The Purchaser and the Seller shall furnish or
-----------------------
cause to be furnished to each other, upon request, as promptly as practicable,
such information (including access of books and records) and assistance relating
to the Corporation as is reasonably necessary for the filing of any return or
report, for the preparation for any audit, and for the prosecution or defense of
any claim relating to any proposed adjustment or refund Claim.
2.17 Compliance with Law and Applicable Government Regulations. Corporation
---------------------------------------------------------
is presently complying in respect of its operations, practices, real property,
plants, structures, and other property, and all other aspects of its business,
with all applicable Regulations and Orders, including, but not limited to,
11
all Regulations relating to the safe conduct of business, environmental
protection, quality and labeling, antitrust, Taxes, consumer protection, equal
opportunity, discrimination, health, sanitation, fire, zoning, building and
occupational safety where such failure or failures would individually or in the
aggregate have a Material Adverse Effect. There are no Claims pending, nor to
the best knowledge of the Seller or the Corporation are there any Claims
threatened, nor has the Seller or the Corporation received any written notice,
regarding any violations of any Regulations and Orders enforced by any Authority
claiming jurisdiction over the Seller or the Corporation including any
requirement of OSHA or any pollution and environmental control agency (including
air and water).
2.18 ERISA and Related Matters.
-----------------------------
(a) Benefit Plans: Obligations to Employees. Corporation is not a party to or
-----------------------------------------
participates in or have any liability or contingent liability with respect to:
(i) any "employee welfare benefit plan", "employee pension benefit plan" or
"multiemployer plan" (as those terms are respectively defined in Sections 3(1),
3(2) and 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"));
(ii) any retirement or deferred compensation plan, incentive compensation
plan, stock plan, unemployment compensation plan, vacation pay, severance pay,
bonus or benefit arrangement, insurance or hospitalization program or any other
fringe benefit arrangements (referred to collectively hereinafter as "fringe
benefit arrangements") for any employee, director, consultant or agent, whether
pursuant to contract, arrangement, custom or informal understanding, which does
not constitute an "employee benefit plan" (as defined in Section 3(3) of ERISA);
or
(iii) any employment agreement not terminable on 30 days' or less written
notice, without further liability.
2.19 Banks, Brokers and Proxies. Schedule 2.19 hereto sets forth (i)
----------------------------
the name of each bank, trust company, securities or other broker or other
financial institution with which the Corporation has an account, credit line or
safe deposit box or vault, or otherwise maintains relations; (ii) the name of
each person authorized by the Corporation to draw thereon or to have access to
any such safe deposit box or vault; (iii) the purpose of each such account, safe
deposit box or vault; and (iv) the names of all persons authorized by proxies,
powers of attorney or other instruments to act on behalf of the Corporation in
matters concerning its business or affairs. All such accounts, credit lines,
safe deposit boxes and vaults are maintained by the Corporation for normal
business purposes, and no such proxies, powers of attorney or other like
instruments are irrevocable. At the Closing, the Seller shall cause each such
bank, trust company, broker or financial institution to prepare an account
summary for each account owned by the Corporation which shall be of a date not
less than two business days prior to the Closing Date, and shall be attached
hereto as Schedule 2.19. The account statements attached hereto as Schedule 2.19
are true and complete in all respects.
2.20 Intellectual Property.
----------------------
(a) Corporation has no trade name, service xxxx, patent, copyright or
trademark related to its business, except those which are set forth in Schedule
2.20, which are all those necessary for the operation of their respective
businesses.
(b) Corporation has the right to use each Proprietary Right listed in
Schedule 2.20, and except as otherwise set forth therein, each of such
Proprietary Rights is, and will be on the Closing Date, free and clear of all
royalty obligations and Liens. There are no Claims pending, or to the best
knowledge
12
of the Seller and the Corporation, threatened, against Corporation that its use
of any of the Proprietary Rights listed on Schedule 2.20 infringes the rights of
any Person. The Seller and Corporation have no knowledge of any conflicting use
of any of such Proprietary Rights.
(c) Corporation is not a party in any capacity to any franchise, license or
royalty agreement respecting any Proprietary Right and there is no conflict with
the rights of others in respect to any Proprietary Right now used in the conduct
of its business.
2.21 Dealings with Affiliates. Schedule 2.21 hereto sets forth a
--------------------------
complete list, including the parties, of all oral or written agreements and
arrangements to which the Corporation is, will be or has been a party, at any
time from December 31, 2003 to the Closing Date, and to which any one or more
Affiliates is also a party.
2.22 Insurance. Corporation currently has, and through the Closing
---------
Date will have, insurance contracts or policies (the "Policies") in full force
and effect which provide for coverages that are usual and customary as to amount
and scope in the businesses of the Corporation. Schedule 2.22 hereto sets forth
a summary of all insurance contracts or policies that relate to liability or
excess liability insurance (collectively, the "Liability Policies") and all
other Policies, including the name of the insurer, the types, dates and amounts
of coverages, and any material coverage exclusions. Except as set forth in
Schedule 2.22 hereto all of the Policies and Liability Policies remain in full
force and effect. The Corporation has not breached or otherwise failed to
perform in any material respects their obligations under any of the Policies or
the Liability Policies nor has the Seller or the Corporation received any
adverse notice or communication from any of the insurers party to the Policies
or the Liability Policies with respect to any such alleged breach or failure in
connection with any of the Policies or the Liability Policies. All Policies are
sufficient for compliance with all Regulations, Orders and all Contracts to
which either Corporation is subject; are valid, outstanding, collectible and
enforceable policies; and will not in any way be affected by, or terminate or
lapse by reason of, the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. Neither the Seller nor the
Corporation has ever been refused any insurance with respect to the Corporation
assets or operations, nor has coverage ever been limited by any insurance
carrier to which the Corporation have applied for any Policy or with which
either Corporation has carried a Policy.
2.23. Securities Law Representations and Warranties.
2.24 The Seller is an Accredited Investor as defined in Regulation D promulgated
under the Securities Act of 1933, as amended (the "Securities Act).
2.25 The Seller has received information from books and records of the
Purchaser, has carefully reviewed and relied on the disclosures contained
therein, and information otherwise provided to him in writing by the
Purchaser. The Seller understands that all documents, records and books
pertaining to this investment have been made available for inspection by
his attorney and/or his accountant and him. The Seller and/or his advisers
have had a reasonable opportunity to ask questions of and receive answers
from the Purchaser, or a person or persons acting on its behalf, concerning
the Common Stock of the Purchaser, and all such questions have been
answered to the full satisfaction of the Seller. No oral representations
have been made or oral information furnished to the Seller or his advisers
in connection with Common Stock of the Purchaser were in any way
inconsistent with the information furnished.
2.26 The Seller (i) has adequate means of providing for his current needs and
possible personal contingencies, (ii) has no need for liquidity in this
investment, (iii) is able to bear the substantial
13
economic risks of an investment in the Common Stock of the Purchaser for an
indefinite period, and (iv) at the present time, could afford a complete
loss of such investment.
2.27 The Seller recognizes that the Purchaser has a limited financial and
operating history and no history of profitable operations, and that the
Common Stock of the Purchaser as an investment involves special risks,
including those disclosed to the Seller by the Purchaser.
2.28 The Seller understands that the Common Stock of the Purchaser has not been
nor will be registered under the Securities Act or the securities laws of
any state, in reliance upon an exemption therefrom for non-public
offerings. The Seller understands that the Common Stock of the Purchaser
must be held indefinitely unless it is subsequently registered, or an
exemption from such registration is available. The Seller further
understands that the Purchaser has not agreed to file and the Purchaser
does not anticipate the filing of a registration statement under the
Securities Act to allow a public resale of the Common Stock of the
Purchaser. However, pursuant to that certain Registration Rights Agreement
described in Exhibit 1 attached hereto, the Purchaser has agreed to
----------
registration rights under certain conditions with respect to the resale of
the common stock underlying the Common Stock of the Purchaser.
2.29 The Common Stock of the Purchaser is being purchased solely for his own
account for investment and not for the account of any other person and not
for distribution, assignment, or resale to others and no other person has a
direct or indirect beneficial interest in the Common Stock of the
Purchaser. The Seller or his advisers have such knowledge and experience in
financial, tax, and business matters to enable him to utilize the
information, made available to him in connection with Common Stock of the
Purchaser to evaluate the merits and risks of the prospective investment
and to make an informed investment decision with respect thereto.
2.30 The Seller realizes that he may not be able to sell or dispose of his
Common Stock of the Purchaser as there will be no public market. In
addition, the Seller understands that his right to transfer the Common
Stock of the Purchaser will be subject to restrictions against transfer
unless the transfer is not in violation of the Securities Act, and the
securities laws of any state (including investor suitability standards),
and the Purchaser consents to such transfer. The Seller also acknowledges
that he shall be responsible for compliance with all conditions on transfer
imposed by the Securities Act, or the securities law of any state and for
any expenses incurred in connection with such a proposed transfer.
2.31 All information which the Seller has provided to the Purchaser concerning
himself, his financial position, and his knowledge of financial and
business matters, is correct and complete as of the date set forth at the
end hereof, and if there should be any adverse change in such information
prior to his subscription being accepted, he will immediately provide the
Purchaser with such information.
2.32 Pursuant to Regulation D under the Securities Act, the Seller understands
and agrees that the following restrictions and limitations are applicable
to his purchase, resales, hypothecations or other transfers of the Common
Stock of the Purchaser:
i. The Seller agrees that the Common Stock of the Purchaser shall
not be sold, pledged, hypothecated or otherwise transferred
unless the Common Stock of the Purchaser is registered under the
Securities Act, and the securities laws of any state, or are
exempt therefrom;
ii. A legend in substantially the following form has been or will be
placed on any certificate(s) or other document(s) evidencing the
Common Stock of the Purchaser:
14
THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY
STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT UPON DELIVERY TO
THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO
THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION
OF THE SECURITIES ACT OF 1933, AS AMENDED, THE SECURITIES LAW OF ANY
STATE, OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
iii. Stop transfer instructions to the transfer agent of the Common
Stock of the Purchaser have been or will be placed with respect
to the Common Stock of the Purchaser so as to restrict the
resale, pledge, hypothecation or other transfer thereof, subject
to the further items hereof, including the provisions of the
legend set forth in subparagraph (ii) above;
iv. The legend and stop transfer instructions described in
subparagraphs (ii) and (iii) above will be placed with respect to
any new certificate(s) or other document(s) issued upon
presentment by the Seller of certificate(s) or other document(s)
for transfer.
2.33 The Seller acknowledges that he will be responsible for compliance with all
conditions on transfer imposed by any federal or state securities statute
and securities law administrator and for any expenses incurred by the
Purchaser for legal or accounting services in connection with reviewing
such a proposed transfer and/or issuing opinions in connection therewith.
2.34 The Seller understands that neither the Securities and Exchange Commission
nor the securities commission of any state has made any finding or
determination relating to the fairness for public investment in the Common
Stock of the Purchaser and that the Securities and Exchange Commission as
well as the securities commission of any state will not recommend or
endorse any offering of securities.
2.35 The Seller understands that:
i. No assurances are or have been made regarding any economic advantages
(including tax) which may inure to the benefit of the Seller;
ii. No assurances are or have been made concerning the distribution of
profits to the Purchaser's investors; and
iii. He is aware that this subscription is independent of any other
subscription for the Common Stock of the Purchaser.
2.36 The Seller acknowledges and is aware that it never has been represented,
guaranteed, or warranted to him by the Purchaser, its directors, officers,
agents or employees, or any other person, expressly or by implication, as to any
of the following:
15
i. The approximate or exact length of time that he will be required to
remain as an owner of his Common Stock of the Purchaser;
ii. The percentage of profit and/or amount of or type of consideration,
profit or loss to be realized, if any, as a result of this investment; or
iii. That the limited past performance or experience on the part of the
Purchaser, or any future projections will in any way indicate the predictable
results of the ownership of the Common Stock of the Purchaser or of the overall
financial performance of the Purchaser.
2.37 The Seller acknowledges that the Purchaser has made available to him or his
purchaser representative, if any, or other personal advisers the opportunity to
obtain additional information to verify the accuracy of the information
furnished to him and to evaluate the merits and risks of this investment.
2.38 The Seller confirms that he has consulted with his purchaser
representative, if any, or other personal advisers and that said purchaser
representative or other advisers have analyzed the information furnished to him
and the documents relating thereto on his behalf and have advised him of the
business and financial aspects and consequences of and liabilities associated
with his investment in the Common Stock of the Purchaser. The Seller represents
that he has made other risk capital investments or other investments of a
speculative nature, and by reason of his business and financial experience and
of the business and financial experience of those persons he has retained to
advise him with respect to investments of this nature. In reaching the
conclusion that he desires to acquire the Common Stock of the Purchaser, the
Seller has carefully evaluated his financial resources and investments and
acknowledges that he is able to bear the economic risks of this investment.
2.39 The Seller acknowledges that all information made available to him and/or
his purchaser representative, if any, and/or personal advisers in connection
with his investment in the Common Stock of the Purchaser, including the
information furnished to him is and shall remain confidential in all respects
and may not be reproduced, distributed or used for any other purpose without the
prior written consent of the Purchaser.
2.40 Disclosure. Neither this Agreement nor any of the exhibits, attachments,
----------
written statements, documents, certificates or other items prepared for or
supplied to the Purchaser by or on behalf of the Seller or the Corporation with
respect to the transactions contemplated hereby contains any untrue statement of
a material fact or omits a material fact necessary to make each statement
contained herein or therein not misleading. There is no fact which the Seller or
the Corporation have not disclosed to the Purchaser in writing and of which the
Seller or the Corporation or any of their respective officers, directors or
executive employees is aware and which could reasonably be anticipated to have a
Material Adverse Effect on either of the Corporation or the ability of the
Purchaser to continue the businesses of the Corporation in the same manner as
the Corporation conducted their businesses prior to the Closing Date.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows as of
the date hereof and as of the Closing Date:
3.1 Corporate Organization, etc. The Purchaser is a corporation
-----------------------------
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate
16
power and authority to carry on its business as it is now being conducted and to
own, operate and lease its properties and assets.
3.2 Authorization, etc. The Purchaser has full corporate power and
-------------------
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Board of Directors of Purchaser has duly authorized the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby, and no other corporate proceedings on its part are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement constitutes the legal, valid and binding obligation of the
Purchaser enforceable against it in accordance with its terms.
ARTICLE IV COVENANTS OF THE SELLER AND CORPORATION
Until the Closing Date, except as otherwise consented to or approved
by the Purchaser in writing, the Seller and the Corporation covenant and agree
that they shall act, and shall cause Corporation so to act or refrain from
acting where required hereinafter, to comply with the following:
4.1 Regular Course of Business. The Corporation shall operate its
-----------------------------
respective businesses diligently and in good faith, consistent with past
management practices; shall maintain all of their respective properties in good
order and condition, shall maintain (except for expiration due to lapse of time)
all leases and Contracts described herein in effect without change except as
expressly provided herein; shall comply with the provisions of all Regulations
and Orders applicable to the Corporation and the conduct of their respective
businesses; shall not cancel, release, waive or compromise any debt, Claim or
right in its favor having a value in excess of $1,000; shall not alter the rate
or basis of compensation of any of its officers, directors or employees; shall
maintain insurance and reinsurance coverage up to the Closing Date with at least
the coverage and in the amounts set forth herein.
4.2 Amendments. Except as required for the transactions contemplated
----------
in this Agreement, no change or amendment shall be made in the charter or
by-laws of the Corporation. The Corporation shall not merge into or consolidate
with any other corporation or person, or change the character of their
businesses.
4.3 Capital Changes; Pledges. Corporation shall not issue or sell any
------------------------
shares of its capital stock of any class or issue or sell any securities
convertible into, or options, warrants to purchase or rights to subscribe to,
any shares of its capital stock and Corporation shall not pledge or otherwise
encumber any shares of its capital stock.
4.4 Dividends. Corporation shall not declare, pay or set aside for
---------
payment any dividend or other distribution in respect of its capital stock, nor
shall the Corporation, directly or indirectly, redeem, purchase or otherwise
acquire any shares of its capital stock.
4.5 Capital and Other Expenditures. Corporation shall not make any
---------------------------------
capital expenditures, or commitments with respect thereto, except as provided
herein. Corporation shall not make any loan or advance to any Affiliate and the
Corporation shall collect in full any amounts outstanding now due from any
Affiliate.
4.6 Borrowing. Corporation shall not incur, assume or guarantee any
---------
Indebtedness not reflected on the Financial Statements except in the ordinary
course of business or for purposes of consummation of transactions contemplated
by this Agreement and in any case only after consultation with the Purchaser.
17
4.7 Other Commitments. Except as set forth in this Agreement,
------------------
incurred or transacted in the ordinary course of business, or permitted in
writing by the Purchaser, Corporation shall not enter into any transaction or
make any commitment or incur any obligation (including entering into any real
property leases).
4.8 Interim Financial Information and Audit. Corporation shall supply
---------------------------------------
the Purchaser with unaudited monthly operating statements within thirty (30)
days after the end of each month ending between the date hereof and the Closing
Date, certified by the Corporation' chief financial officer as having been
prepared in accordance with procedures employed by the Corporation in preparing
prior monthly operating statements and certifying that such financial statements
were prepared in accordance with GAAP and include all adjustments (all of which
were normal recurring adjustments) necessary to fairly present, in all material
respects, the Corporation financial position, results of operations and changes
in financial position at and for such period.
4.9 Full Access and Disclosure.
------------------------------
(a) Seller and Corporation shall afford to the Purchaser and its
counsel, accountants and other authorized representatives reasonable access
during business hours to each of the Corporation facilities, properties, books
and records in order that the Purchaser may have full opportunity to make such
reasonable investigations as it shall desire to make of the affairs of the
Corporation; and Seller shall cause Corporation officers, employees and auditors
to furnish such additional financial and operating data and other information as
the Purchaser shall from time to time reasonably request including, without
limitation, any internal control recommendations applicable to the Corporation
made by the Seller's independent auditors in connection with any audit of
Corporation.
(b) From time to time prior to the Closing Date, Seller shall promptly
supplement or amend information previously delivered to the Purchaser with
respect to any matter hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth herein or
disclosed.
4.10 Consents. Seller and Corporation shall use their best efforts to
--------
obtain on or prior to the Closing Date, all consents necessary to the
consummation of the transactions contemplated hereby.
4.11 Breach of Agreement. Corporation shall not take, and the Seller
---------------------
shall not take any action or permit the Corporation to take any action which if
taken prior to the Closing Date would constitute a breach of this Agreement.
4.12 Confidentiality. The Seller and the Corporation shall, and
---------------
shall cause its principals, officers and other personnel and authorized
representatives to, hold in confidence, and not disclose to any other party
without the Buyer's prior consent, all information received by it from the
Purchaser or its officers, directors, employees, agents, counsel and auditors in
connection with the transactions contemplated hereby except as may be required
by applicable law or as otherwise contemplated herein.
ARTICLE V COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Seller that prior to June 30,
2004:
18
5.1 Confidentiality. The Purchaser shall, and shall cause its
---------------
principals, officers and other personnel and authorized representatives to, hold
in confidence, and not disclose to any other party without the Seller's prior
consent, all information received by it from the Seller's or the Corporation's
officers, directors, employees, agents, counsel and auditors in connection with
the transactions contemplated hereby except as may be required by applicable law
or as otherwise contemplated herein.
ARTICLE VI OTHER AGREEMENTS
As a condition to the parties' obligation to consummate the
transactions contemplated hereby:
6.1 Agreement to Defend. In the event any action, suit, proceeding or
-------------------
investigation of the nature specified in Section 7.5 or Section 8.3 hereof is
commenced, whether before or after the Closing Date, all the parties hereto
agree to cooperate and use their best efforts to defend against and respond
thereto.
6.2 Employment and Non-Competition. Brax Crutchin, Xxx Xxxxxxxxxx and
------------------------------
Xxxxxx Xxxxxxxxxx ("Managers"), at the Closing, execute and deliver the
Employment and Non-Competition Agreements in the form of Exhibit 6.2 hereto (the
"Employment and Non-Competition Agreement"). In addition to such terms and
conditions as are customary in an executive employment agreement as reflected in
the applicable exhibit to this Section, the Employment Agreement for each of the
foregoing Managers shall provide: (a) for a term of two (2) years with automatic
renewals for successive two (2) year periods unless terminated earlier as
provided therein; (b) that it is not terminable while the Note Balance remains
unpaid except for cause which shall be generally defined as (i) an action or
omission which constitutes a willful and material breach of, or a willful and
material failure or refusal (other than by reason of his disability or
incapacity) to perform duties under the Employment Agreement; (ii) fraud,
embezzlement, misappropriation of funds or breach of trust in connection with
his services hereunder, or (iii) a conviction of any crime which involves
dishonesty or a breach of trust; (c) that no material administrative or
corporate support functions, unless requested by the Sellers of the Corporation
shall be integrated with those of the Buyer, unless required by applicable law,
rule or regulation, until the Note Balance is paid in full; (d) 100% of profits
in excess of the historical profit margin of .23 % of gross sales, determined
according to GAAP, shall be eligible for distribution through a bonus
compensation plan administered by the Xxx Xxxxxxxxxx; (e) a grant of 50,000
stock options for Xxx Xxxxxxxxxx and Xxxxxx Xxxxxxxxxx and 150,000 stock options
for Brax Crutchin; (e) 100% of commissions earned by Corporation from sales to
affiliates of Buyer shall be paid to Brax Crutchin and (e) incentives as
follows:
a. Commencing within thirty (30) days after the closing of the Transaction,
a special committee (the "Committee) of the Board of Directors of the Buyer
shall be established to meet with the Managers of the Corporation to
establish guidelines (the "Guidelines") for acquisitions of companies like
or similar to the Corporation. After the Guidelines have been established
and approved by the board of the Buyer, the Managers may from time to time
bring acquisition candidates (the "Targets") to the Committee for review.
If the acquisition terms comply with the Guidelines for the Target the
Buyer will make available a pool of the Buyer's common stock and apportion
cash which may be available from the Buyer for the purchase of the Targets
as subsidiaries of their operation.
b. In the event of the acquisition of any Target Companies, the Committee
would establish reasonable financial goals for the results of operations of
any Target Company acquired, to include target sales, target growth in
sales, target EBITDA, hereinafter collectively the "Target Goals".
19
c. At the end of each full fiscal year of operation for any Target Company,
Buyer shall cause an audit to be performed by the independent auditors that
audits the financial statements of Buyer of the Target acquired (the
"Target Audit").
d. In the event the results of operation of each Target Company, as
determined by the Target Audit, is equal to greater than the Target Goals,
then an amount not less than Twenty Five Percent (25%) of the net income of
any Target Company, as established by the Target Audit, would become
eligible Incentive Compensation to the Managers payable in accordance with
the Employment Agreement at the election of the Corporation, in cash or
shares of common stock of Buyer determined in accordance with the same
formula as agreed herein. The Buyer will prepare a detailed example as part
of the final purchase agreement.
e. Incentive Compensation payable under this Section shall be cumulative
over a three (3)year period.
6.3 Further Assurances. Subject to the terms and conditions of this
-------------------
Agreement, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Regulations to consummate and
make effective the transactions contemplated by this Agreement. If at any time
after the Closing Date the Purchaser shall consider or be advised that any
further deeds, assignments or assurances in law or in any other things are
necessary, desirable or proper to vest, perfect or confirm, of record or
otherwise, in the Purchaser, the title to any property or rights of any of the
Corporation acquired or to be acquired by reason of, or as a result of, the
acquisition, the Seller agrees that the Seller and its proper officers shall
execute and deliver all such proper deeds, assignments and assurances in law and
do all things necessary, desirable or proper to vest, perfect or confirm title
to such property or rights in the Corporation and otherwise to carry out the
purpose of this Agreement, and that the proper officers and directors of the
Seller, and are fully authorized in the name of the Seller or otherwise to take
any and all such action.
6.4 Consents. Without limiting the generality of Section 6.3, each of
--------
the parties hereto shall use its best efforts to obtain all permits,
authorizations, consents and approvals of all persons and governmental
authorities necessary, proper or advisable in connection with the consummation
of the transactions contemplated by this Agreement prior to the Closing Date.
6.5 No Solicitation or Negotiation. Unless and until this Agreement
--------------------------------
is terminated, the Seller and the Corporation shall not, and each shall use its,
best efforts to cause its directors, officers, employees, representatives,
agents, advisors, accountants and attorneys not to, initiate or solicit,
directly or indirectly, any inquiries or the making of any proposal with respect
to, or engage in negotiations concerning, or provide any confidential
information or data to any person with respect to, or have any discussions with
any persons relating to, any acquisition, business combination or purchase of
all or any significant asset of, or any equity interest in, directly or
indirectly, the Corporation, or otherwise facilitate any effort or attempt to do
or seek any of the foregoing, and shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
6.6 Deliveries After Closing. From time to time after the Closing, at
------------------------
the Purchaser's request and without expense to the Seller and without further
consideration from the Purchaser, the Seller shall execute and deliver such
other instruments of conveyance and transfer and take such other action as the
Purchaser reasonably may require to convey, transfer to and vest in the
Purchaser and to put the Purchaser in possession of any rights or property to be
sold, conveyed, transferred and delivered hereunder.
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
20
EXHIBIT 2.8
VIOLATIONS
NONE
EXHIBIT 2.9 (a)
FINANCIAL STATEMENTS
ATTACHED
XXXX XXXXXX
PERSONNEL RESOURCES OF GEORGIA, INC.
-------
FINANCIAL STATEMENTS
(with report of independent auditors)
YEARS ENDED DECEMBER 31, 2003 AND 2002
XXXX XXXXXX
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors and Shareholder
Personnel Resources of Georgia, Inc.
Atlanta, Georgia
We have audited the accompanying balance sheets of Personnel Resources of
Georgia, Inc. (the Company) as of December 31, 2003 and 2002, and the related
statements of operations and accumulated defied and of cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
text basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used, and
significant estimates made, by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Personnel Resources of Georgia,
Inc. as of December 31, 2003 and 2002, and the results of operations and cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Xxxx Xxxxxx, LLC.
February 13, 2004
XXXX XXXXXX, LLC - CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS
000 XXXXXXX XXXXX - XXXXXXXX 00 - XXXXXXX, XXXXXXX 00000
(P) 404.250.4570 (F) 404.847.0511 XXX.XXXXXXXXXX.XXX
PERSONNEL RESOURCES OF GEORGIA, INC.
----------
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
2003 2002
---------- ----------
ASSETS
------
CURRENT ASSETS:
Cash $ 159,611 $ 131,440
Accounts receivable 68,264 102,767
Loans receivable 157,753 192,412
Prepaid expenses 209,196 -0-
---------- ----------
Total current assets 594,824 426,619
NET PROPERTY AND EQUIPMENT 104,948 155,447
DEPOSITS 32,913 99,151
---------- ----------
TOTAL ASSETS $ 732,685 $ 681,217
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 84,415 $. $7,091
Current portion of capital lease obligations 3,411 17,788
Note Payable 33,800 -0-
Accounts payable and accrued expenses 107,087 90,842
Accrued payroll liabilities 247,287 301,840
Unearned revenue 143,097 45,906
---------- ----------
Total current liabilities 619,097 513,467
NONCURRENT LIABILITIES:
Capital lease obligations, net of current portion -0- 3,410
Long-term debt, net of current portion 15,267 40,183
---------- ----------
Total noncurrent liabilities 15,267 43,593
---------- ----------
TOTAL LIABILITIES 634,364 657,060
---------- ----------
SHAREHOLDER'S EQUITY:
Common stock, no par value; 1,000 shares authorized,
issued and outstanding 213,959 213,959
Accumulated deficit (115,638) (89,802)
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 98,321 124,157
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 732,685 $ 681,217
========== ==========
See notes to financial statements.
2
PERSONNEL RESOURCES OF GEORGIA, INC.
----------
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
------------ ------------
REVENUES $33,822,979 $28,880,192
COST OF REVENUES 32,329,613 27,578,575
------------ ------------
GROSS PROFIT 1,493,386 1,301,617
OPERATING EXPENSES 1,433,928 1,265,920
------------ ------------
NET INCOME FROM OPERATIONS 59,438 35,697
OTHER INCOME (EXPENSE):
Interest expense (1,858) (2,635)
Interest Income 18,649 14,746
Other income 1,639 16,624
------------ ------------
NET INCOME 77,868 64,432
DISTRIBUTIONS (103,704) -0-
ACCUMULATED DEFICIT, beginning of year (89,802) (154,234)
------------ ------------
ACCUMULATED DEFICIT, end of year $ (115,638) $ (89,802)
============ ============
See notes to financial statements.
3
PERSONNEL RESOURCES OF GEORGIA, INC.
----------
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 77,868 $ 64,432
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 55,429 20,167
Changes in:
Accounts receivable 34,503 (56,861)
Deposits 66,238 14,253
Prepaid expenses (209,195) -0-
Accounts payable and accrued expenses 16,245 90,842
Accrued payroll liabilities (54,553) 301,840
unearned revenue 97,190 -0-
---------- ----------
Net cash provided by operating activities 83,725 434,673
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (4,929) (5,378)
Change in loans receivable, net 34,358 15,860)
Purchase of existing business -0- (277,399)
---------- ----------
Net cash provided by (used in) investing activities 29,729 (298,637)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations (17,787) (16,312)
Repayment of long-term debt (57,082) (24,065)
Proceeds from long-term debt 59,500 35,000
Increase in note payable, net of payments made 33,800 -0-
Distributions (103,704) -0-
---------- ----------
Net cash used in financing activities (85,283) (5,377)
---------- ----------
NET INCREASE IN CASH 28,171 130,859
CASH, beginning of year 131,440 781
---------- ----------
CASH, end of year $ 159,611 $ 131,440
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
AND NONCASH FINANCING ACTIVITIES:
Cash paid during the year for interest $ 1,858 $ 2,635
========== ==========
Financed purchase of property and equipment $ -0- $ 56,613
========== ==========
See notes to financial statements.
4
PERSONNEL RESOURCES OF GEORGIA INC.
----------
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002
1. Description of Business and Summary of Significant Accounting Policies:
Business Activity
-----------------
Personnel Resources of Georgia, Inc. (the Company), formally Ayin
Developing Company, Inc., was incorporated in January 2001, and is engaged
in the business of employee leasing to various companies throughout the
Southeast U.S., with a concentration in the State of South Carolina.
Property and Equipment
----------------------
Property and equipment are stated at cost. Expenditures for maintenance and
repairs are charged to expense as incurred. Expenditures determined to
represent additions and betterments are capitalized. Cost of assets sold or
retired and the related amounts of accumulated depreciation are eliminated
from the accounts in the year of sate or retirement; any resulting gain or
loss is reflected in the statement of operations. Depredation is provided
by use of accelerated methods over the estimated useful lives of the
various assets.
Estimates
---------
The preparation of financial statements In conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Income Taxes
------------
The Company has elected, under the provisions of the Internal Revenue Code,
to be taxed as an S Corporation. Under these provisions, the Company does
not provide for, or pay, income taxes on its taxable income. The
shareholder is table for Income taxes on the Company's taxable income.
Thus, no provision for income taxes has been recorded.
2. Financial Instruments and Credit Risk:
Financial instruments subject to credit risk are cash end trade accounts
receivable. The Company has cash deposits with large financial institutions
that fluctuate in excess of federally insured limits. If these financial
institutions were not to honor their contractual liability to the Company,
then the Company could incur losses. Management is of the opinion that
there is no risk because of the financial strength of these financial
institutions. The Company extends unsecured credit to its client companies
in the normal course of business. Management seeks to reduce risk of loss
from non-payment by employing credit assessment procedures on prospective
client companies and continual monitoring of receivables. Payment is
generally due in advance of services such as scheduled payrolls, and in the
event of non-payment, the Company will immediately suspend services to
avoid potential loss. The Company utilizes the allowance method for
accounting for bad debts; however, management considers all accounts fully
collectible. Accordingly, no allowance for doubtful accounts is required.
3. Loans Receivable:
The Company has an unsecured net balance due on demand from an employee of
$394,077 at December 31, 2003, interest accrues and is payable annually at
the prime rate (4% at December 31, 2003). The Company has an unsecured
balance due from another employee of $25,668 at December 31, 2003. Interest
accrues at 7%. The recorded values of these loans are reflected at what
management believes to be the collectible balances. Due to the positions of
these employees and ability of the Company to offset future bonuses and
commissions against these loans if necessary, management does not believe
these loans pose a credit risk to the Company.
5
PERSONNEL RESOURCES OF GEORGIA, INC.
----------
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002
4. Property and Equipment:
2003 2002
-------- --------
Software and computer equipment $ 35,676 $ 31,986
Furniture and fixtures 89.791 68,551
Office equipment 5,830 5,830
Vehicles 73,781 73,781
-------- --------
185,078 180,148
Less accumulated depreciation 80,130 24,701
-------- --------
$104,948 $155,447
======== ========
Depreciation expense is $55,429 and $20,167 for the years ended December
31, 2003 and 2002.
5. Capital Lease Obligations:
The Company has entered into various capital lease agreements for property
and equipment For financial reporting purposes, minimum rental payments
have been capitalized. The leases expire at various times over the next
year. The leased property under capital leases as of December 31, 2003 has
a cost of $30,956 and accumulated depreciation of $7,739. Depreciation of
the equipment is included in depreciation expense. The future minimum lease
payments under these capital leases for the year ending December 31, 2004
is $3,648 with $238 representing interest.
6. Pension Plan:
The Company sponsors and participates in a defined contribution pension
plan consisting of fourteen participating companies. The plan covers all
employees who have completed one year of service, consisting of at least
1,000 hours of service, and are age twenty-one or older. The Company may
elect to make matching contributions baaed upon a percentage of the
participant's deferred salary contributions. The Company may also elect to
make additional contributions, the amount and timing of which is at the
discretion of the Board of Directors. Pension plan costs are $2,941 and
$9,444 for the years ended December 31, 2003 and 2002.
7. Commitments:
The Company entered into a non-cancelable operating lease agreement for
office space expiring in 2007. Rental expanse for the years ended December
31, 2003 and 2002 is $44,031 and $33,304. Future minimum rental payments
under the non-cancelable operating lease agreement are as follows:
2004 $ 30,000
2005 30,000
2006 30,000
2007 7,500
-----------
$ 97,500
===========
6
PERSONNEL RESOURCES OF GEORGIA, INC.
----------
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002
8. Long Term Debt:
Note payable to Ford Credit - interest of 0% per
annum; payable $965 per month; maturing
February 2005. Secured by vehicle. $ 13,507
Note payable to GMAC - interest of 0% per
annum; payable $1,111 per month; maturing
December 2005. Secured by vehicle. 26,675
Note payable due to Wachovia - Interest of prime
Rate (4%) +1% per annum; payable $4,539 per month;
maturing on January 26, 2005. 59,500
---------
99,682
Less: Current portion 84,415
---------
Long-term portion $ 15,267
=========
The following are maturities of long-term debt:
2004 $ 84,415
2005 15,267
---------
$ 99,682
=========
9. Note Payable:
Amount is due to an individual at 0% and is due upon demand.
10. Business Acquisition:
In April 2002, the Company purchased certain assets of an existing business
for $20,000 and assumed certain debt and liabilities of $324,736. Total
costs of $344,736 were allocated based on relative estimated fair market
values to loan receivable ($176,552), property and equipment ($54,780), and
deposit assets ($113,404).
11. Contingencies:
The Company had various workers compensation claims against it, all of
which have been forwarded to its insurance company. Management believes
that if any claim is found in favor of a claimant, the only anticipated
financial exposure would be the workers compensation deductible. In the
opinion of management, the outcome of such claims will not have a material
effect on the financial statements.
The Company is involved in certain legal actions which are in various
stages of litigation, the outcomes of which are not determinable at this
time. Management and legal counsel do not anticipate that there will be any
material effect on the financial statements as a result of any action
presently in progress.
12. Reclassifications:
Certain amounts in the 2002 financial statements have been reclassified to
conform with the 2003 presentation.
7
EXHIBIT 2.9 (b)
UNDISCLOSED LIABILITIES
NONE
EXHIBIT 2.9 (c)
CLOSING DATE BALANCE SHEET
ATTACHED
Personnel Resources
Balance Sheet
as of
June 30, 2004
JUN, 04
---------------------------
ASSETS
CURRENT ASSETS
Xxxxx Cash $ 100.00
Master Account 1st Union 327,654.21
Payroll 2 1st Union (6,697.26)
Operating Account 1st Unio (112,151.13)
Payroll 1 1st Union (113,653.61)
Regions Bank-Payroll 2,972.79
Bank One 6,003.61
Money Market Account 3,148.26 107,376
---------------------------
Accounts Receivable-Trade (252,663.47)
Accounts Receivable-Misc 437,549.34
Allow-Dbtful Acct A/R Misc (261,991.61) 77,106.94
---------------------------
Deposits 1,187.67
Prepaid Expenses 1,959.52
Prepaid Insurance 9,907.59 13,054.78
---------------------------
Prepaid Workers Comp 389,005.63
Loan Receivable 23,209.23
-------------
TOTAL CURRENT ASSETS $455,540.77
FIXED ASSETS
Office Equipment $ 5,829.71
Furniture & Fixtures- Ayin $ 63,478.00
Accum Depr - Office Equip (30,935.74)
Furniture & Fixtures $ 6,313.24
Accum Depr - Furn & Fix (2,774.92)
Vehicles 73,78l.00
Accum Depr - Vehicles (39,866.73)
Computer Equipment 19,175.87
Accum Depr - Equipment (11,327.94)
Intangibles (Software) 16,500.00
Accum Depr - Intangibles (12,374.98) (92,280.31)
------------- ------------
TOTAL FIXED ASSETS 87,797.51
OTHER ASSETS
Receivable - Officer Loan $ 68,863.29
-------------
TOTAL OTHER ASSETS 68,863.29
------------
TOTAL ASSETS $612,201.57
============
Personnel Resources
Balance Sheet
as of
June 30, 2004
JUN, 04
--------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 39,121.99
Federal W/H Payable 51,131.36
FICA Payable 61,622.51
State W/H Payable 20,445.25
FUTA Payable 6,424.57
SUTA Payable 90,338.66
SDI Payable 220.01
Accrued Employee Insurance (30,232.88)
Flex Spending Payable 1,436.13
United Way Payable 590.90
Garnishments Payable 1,178.76
401k Contributions Payable 43,367.89
Simple XXX Payable 1,533.22
401(k) Loan Payable 998.90
Xxxx XXX Payable 568.75
-------------
TOTAL CURRENT LIABILITIES 288,746.02
OTHER CURRENT LIABILITIES
Notes Payable-Current 281,755.92
Capitalized Lease-Current 561.00
Accrued Other Expenses 15,329.37
-------------
TOTAL OTHER CURR LIAB 297,646.29
LONG TERM LIABILITIES
Notes Payable-Long Term 15,267.32
-------------
TOTAL LONG TERM LIAB 15,267.32
-----------
TOTAL LIABILITIES $601,659.63
CAPITAL
Common Stock - Ayin $ 213,959.00
Retained Earnings - Ayin (11,933.07)
Dividends (103,704.47)
Net Income (Loss) (87,779.52)
-------------
TOTAL CAPITAL 10,541.94
-----------
TOTAL LIAB & CAPITAL $612,201.57
===========
EXHIBIT 2.12
CONTRACTS
NONE
EXHIBIT 2.14 (a)
TITLE MASTERS
NONE
EXHIBIT 2.14 (b)
LEASES
NONE
EXHIBIT 2.16
TAXES
1. Internal Revenue Service 210,862.16 from 1st Quarter
2. Internal Revenue Service 2nd Quarter 2004 Payroll Tax Liability, Yet
to receive notice from IRS
3. Internal Revenue Service $95,044.00
EXHIBIT 2.19
BANKS
WACHOVIA: XXXX XXXXXXXXXXXX 000-000-0000
Checking
Master Account 2000014791934
Operating Account 2000014791947
Payroll I 2000014791950
Payroll II 2000004070597
Loan 000-15-1076-7
REGIONS BANK: XXXXXXX XXXXXX 000-000-0000
Checking
Payroll 3853052486
BANKONE: XXX XXXXX 000-000-0000
Checking
Payroll 1592250680
GRANDSOUTH BANK: XXXXX XXXX 864-770-1000
Investment
Money Market 2012656
Loan 4323
EXHIBIT 2.20
INTELLECTUAL PROPERTY
NONE
EXHIBIT 2.21
AFFILIATE TRANSACTIONS
NONE
EXHIBIT 2.22
INSURANCE
1. Corporate - see Attached
2. Workers Comp. - see Attached listing
2 Personnel Resources clients & WC coverage
Client
# Client States Carrier Eff date Exp date
0000 Xxxxxxx Xxxxxx SC Accident Fund 3/1/04 3/1/05
1184 Charo/Dakri SC Accident Fund 6/15/04 6/15/05
0000 XXX Xxxxx XX AIG 2/15/04 2/15/05
1174 Spectrum Products SC AIG 1/1/04 1/1/05
1012 Xxxxxxxx Grading SC AIG/Xxxxxxxx 7/1/04 7/1/05
1159 Application Comp NC AIMCO/Xxxxxx 6/1/04 6/1/05
0000 Xxxxx Xxxxxxxx XX AIMCO/XxxxXx 6/1/04 6/1/05
1122 Xxxxxx Comm NC AIMCO/Xxxxxx 6/1/04 6/1/05
1175 RealtiCorp NC AIMCO/Xxxxxx 6/1/04 6/1/05
0000 Xxxxxxxx Xxxxxxxxx XX Auto Owners 2/23/04 2/23/05
1159 Application Comp VA Cincinnati Co 6/4/04 6/4/05
1149 Life Outcomes AL Companion - AL WC 6/3/04 6/3/05
1101 Truck & trailer AL Companion - AL WC 6/1/04 6/1/05
0000 Xxxxx Xxxxxxxx Xxxx Xxxx XX Prime Rate 6/25/04 6/25/05
1146 ABC Logistics SO Premium Assignment 6/1/04 6/1/05
1159 Application Comp SC Premium Assignment 6/1/04 6/1/05
0000 Xxxxxxxx Xxxxxxxx XX Premium Assignment 6/1/04 6/1/05
0000 Xxxxx Xxxxxxxxxxxx XX Premium Assignment 6/1/04 6/1/05
1001 BMC Realty/First Staffing SC Premium Assignment 6/1/04 6/1/05
0000 Xxxx Xxxx Xxxxxxxxx XX Premium Assignment 6/1/04 6/1/05
1166 Carolina Dental SC Premium Assignment 6/1/04 6/1/05
1012 Xxxxxxxx Grading SC Premium Assignment 6/1/04 6/1/05
1107 Control Systems SC Premium Assignment 6/1/04 6/1/05
1029 Xx. Xxxxx Xxxxxxx SC Premium Assignment 6/1/04 6/1/05
1177 Dunk Xxx Heavy Duty Truck SC Premium Assignment 6/1/04 6/1/05
1127 Dunk Xxx trailer Rental SC Premium Assignment 6/1/04 6/1/05
0000 Xxxxx Xxxxxxxx XX Premium Assignment 6/1/04 6/1/05
1199 Xxxxx Concrete SC Premium Assignment 6/1/04 6/1/05
1105 Fast Auto Glass SC Premium Assignment 6/1/04 6/1/05
1087 Genco Pools SC Premium Assignment 6/1/04 6/1/05
0000 Xxxxx'x XX Premium Assignment 6/1/04 6/1/05
1011 Kodiak Mobile Home SC Premium Assignment 6/1/04 6/1/05
1151 XXX, Inc SC Premium Assignment 6/1/04 6/1/05
1149 Life Outcomes SC Premium Assignment 6/1/04 6/1/05
1188 Xxxxxxxxxxx.xxx SC Premium Assignment 6/1/04 6/1/05
0000 Xxxxxx Xxxx XX Premium Assignment 6/1/04 6/1/05
1186 Palmetto Health SC Premium Assignment 6/1/04 6/1/05
1145 Peckover Metals SC Premium Assignment 6/1/04 6/1/05
1004 Personnel Resources SC Premium Assignment 6/1/04 6/1/05
1197 Rainsoft SC Premium Assignment 6/1/04 6/1/05
0000 XXX,XXX XX Premium Assignment 6/1/04 6/1/05
1175 RealtiCorp SC Premium Assignment 6/1/04 6/1/05
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1109 Xxxxxx Assoc SC Premium Assignment 6/1/04 6/1/05
1046 S&J Painting SC Premium Assignment 6/1/04 6/1/05
0000 Xxxxxx Xxxx XX Premium Assignment 6/1/04 6/1/05
1181 SC Plastics SC Premium Assignment 6/1/04 6/1/05
1161 Southern Media SC Premium Assignment 6/1/04 6/1/05
1200 Superior Framing SC Premium Assignment 6/1/04 6/1/05
1196 The Sine Cera Salon SC Premium Assignment 6/1/04 6/1/05
1024 Xxxxxx Maintenance SC Premium Assignment 6/1/04 6/1/05
0000 Xxx Xxxxxx Xxxxxxx & Xxx XX Premium Assignment 6/1/04 6/1/05
1190 Vandivers SC Premium Assignment 6/1/04 6/1/05
1002 BMC Realty/First Staffing NC NC Assigned Risk 6/1/04 6/1/05
1128 Allsmiles Dental Group SC SC Assigned Risk 6/1/04 6/1/05
1022 Xxxxxxxx Concrete SC Premium Assignment 6/1/04 6/1/05
8001 Electric City SC Premium Assignment 6/1/04 6/1/05
1132 A Therm SC SC Assigned Risk 8/5/04 8/5/05
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1191 Ken's Plumbing SC Risk T/Technology 6/1/04 6/1/05
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1004 Personnel Resources GA Southeastern Captive 6/1/04 6/1/05
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1207 Simply Southern GA Southeastern Captive 6/1/04 6/1/0S
1101 Truck & trailer GA Southeastern Captive 6/1/04 6/1/05
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1187 Xxxxxx Homes SC Travelers 9/7/03 9/7/04
1188 Xxxxxxxxxxx.xxx CA
EXHIBIT 6.2
FORM OF EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement ("Agreement") is made as of the__day of __, 2004
by and between PERSONNEL RESOURCES OF GEORGIA INC, a Georgia corporation located
at 000 Xxxxx Xxxxxxxxxxxx Xxxxx, Xxxxxxxxxx Xxxxx Xxxxxxxx _____ (the
"Company"), and ____________________ (hereinafter, the "Executive").
RECITALS
--------
A. The Board of Directors of the Company (the "Board") recognizes the
Executive's potential contribution to the growth and success of the Company, and
desires to assure the Company of the Executive's employment in an executive
capacity and to compensate him therefore, and has approved the provisions of
this Agreement and has authorized the officers of the Company to execute the
Agreement on behalf of the Company.
B. The Executive is willing to make his services available to the
Company and on the terms and conditions hereinafter set forth.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties agree as follows:
1. Employment.
----------
1.1. Employment and Term. The Company hereby agrees to employ the
---------------------
Executive and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein.
1.2. Duties of Executive. During the Term of Employment under this
---------------------
Agreement, the Executive shall serve as the __________________ of the Company.
The Executive shall be accountable only to the__________, and, subject to the
authority of the _________, shall have supervision and control over, and
responsibility for the overall operations of the Company. He also shall have
such other powers and duties as may from time to time be prescribed by the___,
provided that such duties are consistent with the Executive's position as
__________of a company the size and type of the Company. The Executive shall
devote his full time and attention to the business and affairs of the Company,
render such services to the best of his ability, and use his reasonable best
efforts to promote the interests of the Company.
2. Term.
-----
2.1. Term. The term of employment under this Agreement (the "Term of
----
Employment") shall commence as of the__day of____2004 (the "Commencement Date")
and shall continue for a period ending Two (2) years from any date as of which
the Term of Employment is being determined, subject to earlier termination
pursuant to Section 5 hereof.
The date on which the Term of Employment shall expire is sometimes referred to
in this Agreement as the "Expiration Date".
3. Compensation.
------------
3.1. Base Salary. The Executive shall receive a base salary at the
------------
annual rate of "see attachment A" (the "Base Salary") during the Term of
Employment, with such Base Salary payable in installments consistent with the
Company's normal payroll schedule, subject to applicable withholding and other
taxes. The Base Salary shall be reviewed, at least annually, for merit increases
and may, by action and in the discretion of the Board, be increased at any time
or from time to time. The Executive's Base Salary at any point in time shall not
be decreased for any reason.
3.2. Bonuses. In addition to Base Salary the Executive shall be
-------
eligible to receive a bonus (the "Annual Bonus") payable in such amount and at
such times as may be recommended by the Compensation Committee of the Board of
Directors in its sole discretion.
4. Expense Reimbursement and Other Benefits.
--------------------------------------------
4.1. Reimbursement of Expenses. Upon the submission of proper
---------------------------
substantiation by the Executive, and subject to such rules and guidelines
as the Company may from time to time adopt with respect to the reimbursement of
expenses of executive personnel, the Company shall reimburse the Executive for
all reasonable expenses actually paid or incurred by the Executive during the
Term of Employment in the course of and pursuant to the business of the Company.
The Executive shall account to the Company in writing for all expenses for which
reimbursement is sought and shall supply to the Company copies of all relevant
invoices, receipts or other evidence reasonably requested by the Company.
4.2. Compensation/Benefit Programs. During the Term of Employment, the
-----------------------------
Executive shall be entitled to participate in all medical, dental,
hospitalization, accidental death and dismemberment, disability, travel and life
insurance plans and all other plans as are presently and hereinafter offered by
the Company to its executive personnel, including savings, pension,
profit-sharing and deferred compensation plans.
4.3. Working Facilities. During the Term of Employment, the Company
-------------------
shall furnish the Executive with an office, secretarial help and such other
facilities and services suitable to his position and adequate for the
performance of his duties hereunder.
4.4 Stock Options.
--------------
a. Initial Grant. As of the Commencement Date, Charys Holding
--------------
Company Inc. ("Charys") shall grant to the Executive, an option to purchase
______________ shares of common stock of the Charys (the "Initial Options") at
the closing price on the Commencement Date. Thirty Three and One Third Percent
of this option shall be exercisable on the one year anniversary of the
Commencement Date, Thirty Three and One Third Percent of this option shall be
exercisable on the two year anniversary of the Commencement Date; and Thirty
Three and One Third Percent of this option shall be exercisable on the three
year anniversary of
-2-
the Commencement Date. The parties intend that the Initial Options be granted
pursuant to the Charys stock option plan (the "Stock Option Plan") and shall be
incentive stock options to the extent allowable under the Stock Option Plan and
applicable laws; provided, however, in the event that the Initial Options may
not be granted under the Stock Option Plan due to the failure of the Company to
obtain shareholder approval of an increase in the number of shares available for
grant thereunder, the Initial Options shall be granted to the Executive outside
of the Stock Option Plan.
b. Future Grants. In addition, during the Term of Employment, the
-------------
Executive shall be eligible to be granted options (the "Stock Options") to
purchase common stock (the "Common Stock") of the Company under (and therefore
subject to all terms and conditions of) the Charys Stock Option Plan, and any
successor plan thereto (the "Stock Option Plan"). The number of Stock Options
and terms and conditions of the Stock Options shall be determined by the
committee of the Board appointed pursuant to the Stock Option Plan, or by the
Board of Directors of Charys, in its discretion and pursuant to the Stock Option
Plan.
4.5. Other Benefits. The Executive shall be entitled to___(_) weeks of
--------------
paid vacation each calendar year during the Term of Employment, to be taken at
such times as the Executive and the Company shall mutually determine and
provided that no vacation time shall significantly interfere with the duties
required to be rendered by the Executive hereunder. Any vacation time not taken
by Executive during any calendar year may be carried forward into any succeeding
calendar year. The Executive shall receive such additional benefits, if any, as
the Board of the Company shall from time to time determine.
5. Termination.
-----------
5.1. Termination for Cause. The Company shall at all times have the
-----------------------
right, upon written notice to the Executive, to terminate the Term of
Employment, for Cause as defined below. For purposes of this Agreement, the term
"Cause" shall mean (i) an action or omission of the Executive which constitutes
a willful and material breach of, or a willful and material failure or refusal
(other than by reason of his disability or incapacity) to perform his duties
under, this Agreement which is not cured within fifteen (15) days (or if the
Executive is acting diligently to effect a cure, such longer time as shall be
reasonably necessary to effect the cure) after receipt by the Executive of
written notice of same, (ii) fraud, embezzlement, misappropriation of funds or
breach of trust in connection with his services hereunder, or (iii) a conviction
of any crime which involves dishonesty or a breach of trust. Any termination for
Cause shall be made in writing by notice to the Executive, which notice shall
set forth in reasonable detail all acts or omissions upon which the Company is
relying for such termination. The Executive (and his legal representative) shall
have the right to address the Board regarding the acts set forth in the notice
of termination. Upon any termination pursuant to this Section 5.1, the Company
shall (i) pay to the Executive any unpaid Base Salary through the date of
termination and (ii) pay to the Executive accrued but unpaid Incentive
Compensation, if any, for any Bonus Period ending on or before the date of the
termination of Executive's employment with the Company. Upon any termination
effected and compensated pursuant to this Section 5.1, the Company shall have no
further liability hereunder (other than for (x) reimbursement for reasonable
business expenses incurred prior to the date of termination, subject, however,
to the provisions of Section 4.1, and
-3-
(y) payment of compensation for unused vacation days that have accumulated
during the calendar year in which such termination occurs).
5.2. Disability. The Company shall at all times have the right,
----------
upon written notice to the Executive, to terminate the Term of Employment, if
the Executive shall as the result of mental or physical incapacity, illness or
disability, become unable to perform his obligations hereunder for a period of
180 days in any 12-month period. The determination of whether the Executive is
or continues to be disabled shall be made in writing by a physician selected by
the Board and reasonably acceptable to the Executive. Upon any termination
pursuant to this Section 5.2, the Company shall (i) pay to the Executive any
unpaid Base Salary through the effective date of termination specified in such
notice, (ii) pay to the Executive accrued but unpaid Incentive Compensation, if
any, for any Bonus Period ending on or before the date of termination of the
Executive's employment with the Company, (iii) pay to the Executive his
Termination Year Bonus, if any, at the time provided in Section 3.2f hereof, and
(iv) pay to the Executive any then unpaid Additional Bonuses at the time
provided in Section 3.2(c). Upon any termination effected and compensated
pursuant to this Section 5.2, the Company shall have no further liability
hereunder (other than for (x) reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation days that have
accumulated during the calendar year in which such termination occurs).
5.3. Death. Upon the death of the Executive during the Term of
-----
Employment, the Company shall (i) pay to the estate of the deceased Executive
any unpaid Base Salary through the Executive's date of death, (ii) pay to the
estate of the deceased Executive accrued but unpaid Incentive Compensation, if
any, for any Bonus Period ending on or before the Executive's date of death,
(iii) pay to the estate of the deceased Executive, the Executive's Termination
Year Bonus, if any, at the time provided in Section 3.2f hereof, and (iv) pay to
the Executive's estate any then unpaid Additional Bonuses at the time provided
in Section 3.2(c). Upon any termination effected and compensated pursuant to
this Section 5.3, the Company shall have no further liability hereunder (other
than for (x) reimbursement for reasonable business expenses incurred prior to
the date of the Executive's death, subject, however to the provisions of Section
4.1, and (y) payment of compensation for unused vacation days that have
accumulated during the calendar year in which such termination occurs).
5.4. Termination Without Cause. The Company shall have the right
-------------------------
to terminate the Term of Employment by written notice not less than thirty (30)
days prior to the termination date, to the Executive. Upon any termination
pursuant to this Section 5.4 (that is not a termination under any of Sections
5.1, 5.2, 5.3 or 5.5, the Company shall (i) pay to the Executive on the
termination date unpaid Base Salary, if any, through the date of termination
specified in such notice, (ii) pay to the Executive the accrued but
unpaid Incentive Compensation, if any, for any Bonus Period ending on or before
the date of the termination of the Executive's employment with the Company, at
the time provided in Section 3.2a, (iii) pay to the Executive on the termination
date a lump sum payment equal to the sum of (x) his Base Salary, if any as of
the date of his termination and (y) the accrued but unpaid Bonus for the year in
which such termination occurs, (iv) continue to provide the Executive with the
benefits under Sections 4.2 hereof (the "Benefits") for a period of two (2)
years immediately following the date of his
- 4 -
termination in the manner and at such times as the Benefits otherwise would have
been provided to the Executive; (v) pay to the Executive as a single lump sum
payment, within 30 days of the date of termination, a lump sum benefit equal to
the value of the portion of his benefits under any savings, pension, profit
sharing or deferred compensation plans that are forfeited under such plans but
that would not have been forfeited if the Executive's employment had contained
for an additional two (2) years. In the event that the Company is unable to
provide the Executive with any Benefits required hereunder by reason of the
termination of the Executive's employment pursuant to this Section 5.4, then the
Company shall promptly reimburse the Executive for amounts paid by the Executive
to acquire comparable coverage. Upon any termination effected and compensated
pursuant to this Section 5.4, the Company shall have no further liability
hereunder (other than for (x) reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1, and (y) payment of compensation for unused vacation days that
have accumulated during the calendar year in which such termination occurs).
5.5. Termination by Executive.
--------------------------
a. The Executive shall at all times have the right, by
written notice not less than (30) days prior to the termination date, to
terminate the Term of Employment.
b. Upon termination of the Term of Employment pursuant to
this Section 5.5 by the Executive without Good Reason (as defined below), the
Company shall (i) pay to the Executive upon the termination date any unpaid Base
Salary through the effective date of termination specified in such notice or
otherwise mutually agreed and (ii) pay to the Executive any accrued but unpaid
Incentive Compensation, if any, for any Bonus Period ending on or before the
termination of Executive's employment with the Company, at the time provided in
Section 3.2. Upon any termination effected and compensated pursuant to this
Section 5.5(b), the Company shall have no further liability hereunder (other
than for (x) reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of Section 4.1, and
(y) payment of compensation for unused vacation days that have accumulated
during the calendar year in which such termination occurs).
c. Upon termination of the Term of Employment pursuant to
this Section 5.5 by the Executive for Good Reason, the Company shall pay to the
Executive the same amounts, and shall continue or compensate for Benefits in the
same amounts, that would have been payable or provided by the Company to the
Executive under Section 5.4 of this Agreement if the Term of Employment had been
terminated by the Company without Cause. In addition, if the termination of the
Term of Employment occurs after a Change in Control, and as a result of the
Change in Control, the Executive would be entitled to a reduction in the option
price for any options granted to the Executive, or any cash payments from the
Company, (other than those provided under this Agreement) in addition to those
specified in Section 5.4, under any plan or program maintained by the Company
(the "Additional Benefits"), then the Company shall provide the Executive with
those Additional Benefits, if and only to the extent that such Additional
Benefits, when added to the amounts payable and the Benefits provided by the
Company to the Executive hereunder, will not constitute excess parachute
payments with the meaning of Section 280G of the Code. Upon any termination
effected and compensated pursuant
- 5 -
to this Section 5.5(c), the Company shall have no further liability hereunder
(other than for (x) reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to the provisions of Section
4.1, and (y) payment of compensation for unused vacation days that have
accumulated during the calendar year in which such termination occurs.)
d. For purposes of this Agreement, "Good Reason" shall
mean (i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 1.2 of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive; (ii) any failure by the Company to
comply with any of the provisions of Article 3 of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Executive; (iii) the Company's requiring the Executive to be based at any
office or location, that is not within __ miles of ______ except for travel
reasonably required in the performance of the Executive's responsibilities; (iv)
any purported termination by the Company of the Executive's employment other
than for Cause pursuant to Section 5.1, or because of the Executive's disability
pursuant to Section 5.2 of this Agreement; or (v) the occurrence of a Change in
Control. For purposes of this Section 5.5(d), the Executive acknowledges that
the Company's holding company functions are headquartered and centralized at the
location of the Company indicated in the preamble to this Agreement. For
purposes of this Section 5.5(d), any good faith determination of "Good Reason"
made by the Executive shall be conclusive; provided that the Executive shall not
exercise his right to terminate his employment for Good Reason without first
giving sixty (60) days written notice to the Company of the factual basis
constituting Good Reason. The Company shall have the right to cure the
problem(s) noted by the Executive, before the Executive may terminate his
employment for Good Reason.
e. For purposes of this Agreement, the term "Change in
Control" shall mean:
(i) Approval by the shareholders of the Company of
(x) a reorganization, merger, consolidation or other form of corporate
transaction or series of transactions, in each case, with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, in substantially the
same proportions as their ownership immediately prior to such reorganization,
merger, consolidation or other transaction, or (y) a liquidation or dissolution
of the Company or (z) the sale of all or substantially all of the assets of the
Company (unless such reorganization, merger, consolidation or other corporate
transaction, liquidation, dissolution or sale is subsequently abandoned);
(ii) A new Board member is elected without the
approval of at least two of the persons who, as of the Commencement Date of this
Agreement, constitute the
- 6 -
Board (the "Incumbent Board"); or
(iii) the acquisition (other than from the Company) by
any person, entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act, of beneficial ownership within the
meaning of Rule 13-d promulgated under the Securities Exchange Act of more than
50% of either the then outstanding shares of the Company's Common Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors (hereinafter referred to
as the ownership of a "Controlling Interest") excluding, for this purpose, any
acquisitions by (1) the Company or its Subsidiaries, (2) any person, entity or
"group" that as of the Commencement Date of this Agreement owns beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act) of a Controlling Interest or (3) any employee benefit plan of the
Company or its Subsidiaries;
(iv) provided that, with respect to this Section
5.5(e), a Change in Control shall not be deemed to have occurred should any of
the contingencies referred to in this Section involve any of those companies,
persons or other legal entities with whom the Company is negotiating on or
before the Commencement Date and which are communicated, in writing, by the
---
Company to the Executive upon execution of this Agreement.
5.6. Resignation. Upon any termination of employment pursuant
-----------
to this Article 5, the Executive shall be deemed to have resigned as an officer,
and if he or she was then serving as a director of the Company, as a director,
and if required by the Board, the Executive hereby agrees to immediately execute
a resignation letter to the Board.
5.7. Survival. The provisions of this Article 5 shall survive the
--------
termination of this Agreement, as applicable.
6. Restrictive Covenants.
----------------------
6.1. Non-competition. In order to fully protect the Company's
---------------
Proprietary Information, at all times during the Restricted Period, the
Executive shall not, directly or indirectly, perform or provide managerial or
executive services on behalf of any person, entity or enterprise which is
engaged in, or plans to engage in, any business in the United States that
directly or indirectly competes with the Company's Business (for this purpose,
the "Company's Business" is the business of providing employee leasing and other
outsourced human resource services.) During the Executive's employment with the
Company, the Executive shall not, directly or indirectly, have any interest in
any business (other than the Company) that competes with the Company's Business,
provided that this provision shall not apply to the Executive's ownership or
acquisition, solely as an investment, of securities of any issuer that is
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934,
as amended, and that are listed or admitted for trading on any United States
national securities exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar system or
automated dissemination of quotations of securities prices in common use, so
long as the Executive does not control, acquire a controlling interest in or
become a member of a group which exercises direct or indirect control of, more
than five percent of any class of capital stock
- 7 -
of such corporation. For purposes of this Agreement the "Restricted Period"
shall be the period during which the Executive is employed by the Company and,
if the Executive's employment with the Company is either terminated by the
Company without Cause pursuant to Section 5.4, or by the Executive for Good
Reason pursuant to Section 5.5c, and the Company has paid to the Executive all
of amounts then payable to the Executive pursuant to Sections 5.4 or 5.5c, as
applicable, the one (1) year period immediately following the termination of the
Executive's employment with the Company.
6.2. Confidential Information. The Executive recognizes and
-------------------------
acknowledges that the Trade Secrets (as defined below) and Confidential
Information (as defined below), of the Company and all physical embodiments
thereof, as they may exist from time-to-time, collectively, the "Proprietary
Information" are valuable, special and unique assets of the Company's business.
In order to obtain and/or maintain access to such Proprietary Information, which
employee acknowledges is essential to the performance of his duties under this
Agreement, the Executive agrees that, except with respect to those duties
assigned to him by the Company, the Executive shall hold in confidence all
Proprietary Information and the Executive will not reproduce, use, distribute,
disclose, or otherwise misappropriate any Proprietary Information, in whole or
in part, and will take no action causing, or fail to take any action necessary
to prevent causing, any Proprietary Information to lose its character as
Proprietary Information, nor will the Executive make use of any such Information
for the Executive's own purposes or for the benefit of any person, business or
legal entity (except the Company) under any circumstances, except that the
Executive may disclose such Proprietary Information to the extent required by
law, provided that, prior to any such disclosure, the Company be provided an
opportunity to contest such disclosure.
For purposes of this Agreement, the term "Trade Secrets" means
information belonging to or licensed to the Company, regardless of form,
including, but not limited to, any technical or non-technical data, formula,
pattern, compilation, program, device, method, technique, drawing, financial,
marketing or other business plan, lists of actual or potential customers or
suppliers, or any other information similar to any of the foregoing, which
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
derive economic value from its disclosure or use. The term "Confidential
Information" means any information belonging to or licensed to the Company,
regardless of form, other than Trade Secrets, which is valuable to the Company
and not generally known to competitors of the Company.
The provisions of this Section 6.2 will apply to Trade Secrets for as
long as such information remains a Trade Secret and to Confidential Information
during the Executive's employment with the Company and for a period of two (2)
years following the termination of the Executive's employment with the Company
for whatever reason.
6.3. Non-solicitation of Employees and Customers. At all times
----------------------------------------------
during the Restricted Period, as defined in Section 6.1 hereof, the Executive
shall not, directly or indirectly, for himself or for any other person, firm,
corporation, partnership, association or other entity (a) employ, solicit,
recruit or attempt to employ, solicit, or recruit any employee of the Company to
leave the Company's employment, or (b) solicit or attempt to solicit any of the
actual or
- 8 -
targeted prospective customers or clients of the Company with whom the Executive
had material contact or about whom the Executive learned Confidential
Information on behalf of any person or entity in connection with any business
that competes with the Company's Business.
6.4. Ownership of Developments. All copyrights, patents, trade
--------------------------
secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed or
created by Executive during the course of performing work for the Company or its
clients (collectively, the "Work Product") shall belong exclusively to the
Company and shall, to the extent possible, be considered a work made by the
Executive for hire for the Company within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for the Company, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of the Company, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.
6.5. Books and Records. All books, records, and accounts relating
-----------------
in any manner to the customers or clients of the Company, whether prepared by
the Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of the Executive's employment hereunder or on the
Company's request at any time.
6.6. Definition of Company. Solely for purposes of this Article
---------------------
6, the term "Company" also shall include any existing or future subsidiaries of
the Company that are operating during the time periods described herein and any
other entities that directly or indirectly, through one or more intermediaries,
control, are controlled by or are under common control with the Company during
the periods described herein.
6.7. Acknowledgment by Executive. The Executive acknowledges and
---------------------------
confirms that (a) the restrictive covenants contained in this Article 6 are
reasonably necessary to protect the legitimate business interests of the
Company, and (b) the restrictions contained in this Article 6 (including without
limitation the length of the term of the provisions of this Article 6) are not
overbroad, overlong, or unfair and are not the result of overreaching, duress or
coercion of any kind. The Executive further acknowledges and confirms that his
full, uninhibited and faithful observance of each of the covenants contained in
this Article 6 will not cause him any undue hardship, financial or otherwise,
and that enforcement of each of the covenants contained herein will not impair
his ability to obtain employment commensurate with his abilities and on terms
fully acceptable to him or otherwise to obtain income required for the
comfortable support of him and his family and the satisfaction of the needs of
his creditors. The Executive acknowledges and confirms that his special
knowledge of the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge to the
benefit of a competitor or were to compete with the Company in violation of the
terms of this Article 6. The Executive further acknowledges that the
restrictions contained in this Article 6 are intended to be, and shall be, for
the benefit of and shall be enforceable by, the Company's successors and
assigns.
- 9 -
6.8. Reformation by Court. In the event that a court of
----------------------
competent jurisdiction shall determine that any provision of this Article 6 is
invalid or more restrictive than permitted under the governing law of such
jurisdiction, then only as to enforcement of this Article 6 within the
jurisdiction of such court, such provision shall be interpreted and enforced as
if it provided for the maximum restriction permitted under such governing law.
6.9. Extension of Time. If the Executive shall be in violation of
-----------------
any provision of this Article 6, then each time limitation set forth in this
Article 6 shall be extended for a period of time equal to the period of time
during which such violation or violations occur. If the Company seeks
injunctive relief from such violation in any court, then the covenants set forth
in this Article 6 shall be extended for a period of time equal to the pendency
of such proceeding including all appeals by the Executive.
6.10. Survival. The provisions of this Article 6 shall survive the
--------
termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the parties
----------
hereto that a breach by the Executive of any of the covenants contained in
Article 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Article 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. Attorney's Fees. Nothing contained herein shall be construed to
----------------
prevent the Company or the Executive from seeking and recovering from the other
damages sustained by either or both of them as a result of its or his breach of
any term or provision of this Agreement. In the event that either party hereto
brings suit for the collection of any damages resulting from, or the injunction
of any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
9. Assignment. Neither party shall have the right to assign or delegate
----------
his rights or obligations hereunder, or any portion thereof, to any other
person.
10. Governing Law and Venue This Agreement shall be governed by and
--------------------------
construed and enforced in accordance with the internal laws of the State of
Georgia. The venue for any action to enforce this Agreement shall be the state
or federal courts located within Xxxxxx County, Georgia.
11. Entire Agreement. This Agreement constitutes the entire agreement
-----------------
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company (or
any of its affiliates) with respect to such subject matter. This
- 10 -
Agreement may not be modified in any way unless by a written instrument signed
by both the Company and the Executive.
12. Notices: All notices required or permitted to be given hereunder
-------
shall be in writing and shall be personally delivered by courier, sent by
registered or certified mail, return receipt requested or sent by confirmed
facsimile transmission addressed as set forth herein. Notices personally
delivered, sent by facsimile or sent by overnight courier shall be deemed given
on the date of delivery and notices mailed in accordance with the foregoing
shall be deemed given upon the earlier of receipt by the addressee, as evidenced
by the return receipt thereof, or three (3) days after deposit in the U.S. mail.
Notice shall be sent (i) if to the Company, addressed to the address of the
Company in the preamble to this Agreement, Attention: Chairman of the Board, and
(ii) if to the Executive, to his address as reflected on the payroll records of
the Company, or to such other in accordance with this provision.
13. Benefits; Binding Effect. This Agreement shall be for the benefit of
--------------------------
and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where permitted and
applicable, assigns, including, without limitation, any successor to the
Company, whether by merger, consolidation, sale of stock, sale of assets or
otherwise.
14. Severability. The invalidity of any one or more of the words, phrases,
------------
sentences, clauses, provisions, sections or articles contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part thereof, all of which are inserted conditionally on their being
valid in law, and, in the event that any one or more of the words, phrases,
sentences, clauses, provisions, sections or articles contained in this Agreement
shall be declared invalid, this Agreement shall be construed as if such invalid
word or words, phrase or phrases, sentence or sentences, clause or clauses,
provisions or provisions, section or sections or article or articles had not
been inserted. If such invalidity is caused by length of time or size of area,
or both, the otherwise invalid provision will be considered to be reduced to a
period or area which would cure such invalidity.
15. Waivers. The waiver by either party hereto of a breach or violation of
-------
any term or provision of this Agreement shall not operate nor be construed as a
waiver of any subsequent breach or violation.
16. Damages. Nothing contained herein shall be construed to prevent the
-------
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
17. Section Headings. The article, section and paragraph headings contained
----------------
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
- 11 -
18. No Third Party Beneficiary. Nothing expressed or implied in this
-----------------------------
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
19. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument and agreement.
20. Indemnification.
---------------
a. Subject to limitations imposed by law, the Company shall
indemnify and hold harmless the Executive to the fullest extent permitted by law
from and against any and all claims, damages, expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and all other liabilities
incurred or paid by him in connection with the investigation, defense,
prosecution, settlement or appeal of any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and to which the Executive was or is a party or is threatened to
be made a party by reason of the fact that the Executive is or was an officer,
employee or agent of the Company, or by reason of anything done or not done by
the Executive in any such capacity or capacities, provided that the Executive
acted in good faith, in a manner that was not grossly negligent or constituted
willful misconduct and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The Company also shall pay any and all expenses (including attorney's
fees) incurred by the Executive as a result of the Executive being called as a
witness in connection with any matter involving the Company and/or any of its
officers or directors.
b. The Company shall pay any expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and other liabilities incurred
by the Executive in investigating, defending, settling or appealing any action,
suit or proceeding described in this Section 20 in advance of the final
disposition of such action, suit or proceeding. The Company shall promptly pay
the amount of such expenses to the Executive, but in no event later than 10 days
following the Executive's delivery to the Company of a written request for an
advance pursuant to this Section 20, together with a reasonable accounting of
such expenses.
c. The Executive hereby undertakes and agrees to repay to the
Company any advances made pursuant to this Section 20 if and to the extent that
it shall ultimately be found that the Executive is not entitled to be
indemnified by the Company for such amounts.
d. The Company shall make the advances contemplated by this
Section 20 regardless of the Executive's financial ability to make repayment,
and regardless whether indemnification of the Indemnitee by the Company will
ultimately be required. Any advances and undertakings to repay pursuant to
this Section 20 shall be unsecured and interest-free.
- 12 -
e. The provisions of this Section 20 shall survive the
termination of this Agreement.
[The remainder of this page has been intentionally left blank}
- 13 -
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
PERSONNEL RESOURCES OF GEORGIA
INC:
By:______________________________________
Name:
Title:
EXECUTIVE:
_________________________________________
- 14 -
Appendix A
----------
Salary
------
- 15 -
EXHIBIT 7.3
OPINION OF COUNSEL
EXHIBIT 7.4
CHANGE CERTIFICATE
NONE
EXHIBIT 7.6
ACCOUNTING CERTIFICATES
This Certificate is delivered pursuant to the requirements of Section 7.6
of that certain Stock Purchase Agreement (the "Agreement") dated as of 8th day
of August, 2004, by and between CHARY'S HOLDING COMPANY, INC., a Delaware
corporation located at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X-000, Xxxxxxx Xxxxxxx
00000 (the "Purchaser"), XXXXX X. XXX, XX. who resides at 0000 Xxxx Xxxx Xxxx,
Xxxxxxx, Xxxxxxx 00000 (the "Seller"), and PERSONAL RESOURCES OF GEORGIA INC., a
Georgia corporations (the "Corporation").
The undersigned is the President of the Corporation and I hereby certify
that i) all of the Corporation's financial statements delivered to Purchaser
pursuant to the Agreement, copies of which are attached hereto, were prepared
under my supervision and are area true and correct in all material respects to
the best on my knowledge; and ii) attached is a statement by the Corporation's
independent auditors that each such year-end financial statement was
incorporated, without change, into the respective year-end audited financial
statements of the Corporation.
/s/ Xxxxx X. Xxx, Xx.
---------------------
Xxxxx X. Xxx, Xx.
Date: August 8, 2004
EXHIBIT 7.8
SECRETARY CERTIFICATE
This Certificate is delivered pursuant to the requirements of Section 7.8
of that certain Stock Purchase Agreement (the "Agreement") dated as of the
8th day of August, 2004, by and between CHARYS HOLDING COMPANY, INC., a Delaware
corporation located at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X-000, Xxxxxxx Xxxxxxx
00000 (the "Purchaser"), Xxxxx X. Xxx, Xx. who resides at 0000 Xxxx Xxxx Xxxx,
Xxxxxxx, Xxxxxxx 00000 (the "Seller"), and PERSONNEL RESOURCES OF GEORGIA INC.,
a Georgia corporation (the "Corporation").
The undersigned is the Asst. Secretary of the Corporation and I hereby
certify that i) the charter and bylaws of the Corporation; and ii) the
resolutions adopted by the directors and stockholders of the Corporation in
connection with the Agreement, copies of which are attached were prepared under
my supervision and are area true and correct; and ii) the following are the
officers and directors of the Corporation:
PRESIDENT Xxxxx X. Xxx, Xx.
VICE PRESIDENT Xxx Xxxxxxxxxx
VICE PRESIDENT Xxxxxxx Xxxxxxx
TREASURER Xxxxx X. Xxx, Xx.
SECRETARY Xxxxxxx Xxxxxxx
ASST SECRETARY Xxx Xxxxxxxxxx
DIRECTOR Xxxxx X. Xxx, Xx.
/s/ Xxx Xxxxxxxxxx
------------------
XXX XXXXXXXXXX
ASST. SECRETARY
Date: 8/12/04
-------------
EXHIBIT 8.1
OFFICER CERTIFICATE
This Certificate is delivered pursuant to the requirements of Section 8.1
of that certain Stock Purchase Agreement (the "Agreement") dated as of the 8th
day of August 2004, by and between CHARYS HOLDING COMPANY, INC., a Delaware
corporation located at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X-000, Xxxxxxx Xxxxxxx
00000 (the "Purchaser"), XXXXX X. XXX, XX. who resides at 0000 Xxxx Xxxx Xxxx,
Xxxxxxx, Xxxxxxx 00000 (the "Seller"), and PERSONNEL RESOURCES OF GEORGIA INC.,
a Georgia corporation (the "Corporation").
The undersigned is the Vice President the Purchaser and I hereby
certify that the representations and warranties of the Purchaser contained in
this Agreement and all information contained in any exhibit, schedule or
attachment thereto is true and correct in all material respects when made and
shall be true and correct in all material respects on the Closing Date as though
then made, except as expressly provided therein. The Purchaser shall has
performed and complied in all material respects with all agreements, covenants
and conditions required by the Agreement to be performed and complied with by
them prior to the Closing Date.
/s/ Xxx Xxxxxxx
----------------
Xxx Xxxxxxx
Date: August 8, 2004
[Copy of PROMISSORY NOTE]
PROMISSORY NOTE
$250,000.00 AUGUST 8, 2004
After date, without grace, for value received, Charys Holding Company Inc.,
(the "Maker") hereby promises to pay to the order of Seller as defined in that
certain Stock Purchase Agreement ("SPA") between Maker and Seller of even date
(the "Payee") the original principal amount of TWO HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($250,000.00). Except as may be otherwise provided herein, the
unpaid principal of this Note shall bear interest at the rate of six (6%) per
annum. All payments of principal and interest hereunder are payable in lawful
money of the United States of America at the address of Seller in the SPA, or
such other place as the Payee may designate in writing to the Maker.
The principal of this Note, as adjusted pursuant to Section 1.3(b) and (c)
of the SPA, and a reduction for salaries, bonuses or other distributions to
Seller, as well as for extraordinary expenses such as penalties on tax deposits
and other matters that are outside the ordinary course of business or are
inconsistent with the business plan developed by Buyer for the Corporation (the
"Adjusted Principal Balance"), shall be due and payable as follows:
1. Interest on the Adjusted Principal Balance of this Note shall be due and
payable monthly, payable in stock or cash as provided in Section 1.3 (d) of the
SPA, commencing one year from the Closing and the Principal Balance plus all
accrued but unpaid interest shall be due and payable, in stock or cash as
provided in Section 1.3 (d) of the SPA, on or before 30 days after the second
anniversary of the Closing. The SPA is expressly incorporated herein by
reference for all purposes and all terms defined therein shall have the same
meaning in this Note.
2. All payments hereunder shall be first applied to expenses and other
charges then to any accrued interest, and the balance, if any to principal.
Any interest on this Note shall be computed for the actual number of days
elapsed and on the basis of a year consisting of 360 days, unless the maximum
legal interest rate would thereby be exceeded, in which event, to the extent
necessary to avoid exceeding such maximum rate, interest shall be computed on
the basis of the actual number of days elapsed in the applicable calendar year
in which it accrued. It is the intention of the Maker and the Payee to conform
strictly to applicable usury laws. It is therefore agreed that (i) the aggregate
of all interest and other charges constituting interest under applicable law and
contracted for, chargeable or receivable under this Note or otherwise in
connection with this loan transaction, shall never exceed the maximum amount of
interest, nor produce a rate in excess of the maximum contract rate of interest
the Payee may charge the Maker under applicable law and in regard to which the
Maker may not successfully assert the claim or defense of usury, and (ii) if any
excess interest is provided for, it shall be deemed a mistake and the same shall
be refunded to the Maker or credited on the unpaid principal balance hereof and
this Note shall be automatically deemed reformed so as to permit only the
collection of the maximum legal contract rate and amount of interest.
If, for any reason whatever, the interest paid on this Note shall exceed
the maximum non-usurious amount permitted by law, the Payee shall refund to the
Maker such portion of said interest as may be necessary to cause the interest
paid on this Note to equal the maximum non-usurious amount permitted by law, and
no more. All sums paid or agreed to be paid to the Payee for the use,
forbearance or detention of the indebtedness evidenced hereby shall to the
extent permitted by applicable law be amortized, prorated, allocated and spread
throughout the full term of this Note until payment in full.
This Note may be prepaid in whole or in part at any time without premium or
penalty by the Maker. Prepayments shall be applied to installments of principal
in the inverse order of maturity so that they will pay the last maturing
principal installments first, and these payments will not reduce the amount or
time of payment of the remaining installments. Any interest on any prepaid
installment of principal shall immediately cease to accrue.
Except as provided herein, the Maker and each surety, endorser, and
guarantor waives all demands for payment, presentations for payment, notices of
intention to accelerate maturity, notices of acceleration of maturity,
1
protests, notices of protest, grace, and diligence in the collection of this
Note, and in filing suit hereon, and agrees that its liability for the payment
hereof shall not be affected or impaired by any release or change in the
security or by any extension or extensions of time of payment.
Any check, draft, money order or other instrument given in payment of all
or any portion of this Note may be accepted by the Payee or any other holder
hereof and handled in collection in the customary manner, but the same shall not
constitute payment hereunder or diminish any rights of the Payee or any other
holder hereof, except to the extent that actual cash proceeds of such instrument
are unconditionally received by the Payee or any other holder hereof and applied
to the indebtedness as herein provided.
In the event of default in the payment of this Note or under any instrument
executed in connection with this Note, the Maker agrees to pay on demand all
costs incurred by the Payee (i) in the collection of any sums, including, but
not limited to, principal, interest, expenses, and reimbursements due and
payable on this Note, and (ii) in the enforcement of the other terms and
provisions of this Note or any instrument securing payment of this Note, whether
such collection or enforcement be accomplished by suit or otherwise, including
the Payee's reasonable attorney's fees.
It is agreed that time is of the essence of this Note, and upon the failure
of the Maker to cure an event of default in the payment of any fixed monthly
payment when due hereunder within 30 days after receipt of notice from the Payee
or other holder of such failure, or upon the failure of the Maker to cure any
event of default within 30 days after receipt of notice from the Payee or other
holder of such failure, the Payee may declare the whole sum of the principal of
this Note remaining at the time unpaid, together with the accrued interest,
charges, and, to the extent permitted under applicable law, costs and reasonable
attorney's fees incurred by the Payee in collecting or enforcing the payment
thereof, immediately due and payable without further notice, and failure to
exercise said option shall not constitute a waiver on the part of the Payee of
the right to exercise the same at any other time.
If this Note is not paid at maturity, however maturity may be brought
about, all principal and interest due on the date of such maturity shall bear
interest from the date of such maturity at the maximum contract rate of interest
which the Payee may charge the Maker under applicable law.
Except as otherwise provided for herein, each maker, surety, guarantor and
endorser of this Note expressly waives all notices, including, but not limited
to, all demands for payment, presentations for payment, notice of opportunity to
cure default, notice of intention to accelerate the maturity, notice of protest
and notice of acceleration of the maturity, notice of protest and notice of
acceleration of the maturity of this Note, and consents that this Note and the
security interest securing its payment may be renewed and the time of payment
extended without notice and without releasing any of the parties.
This Note is secured by that certain Stock Pledge Agreement dated the 8 day
of August, 2004 executed by the Maker, as the Debtor, in favor of the Payee, as
the Secured Party (the "Stock Pledge Agreement").
Any check, draft, money order or other instrument given in payment of all
or any portion of this Note may be accepted by the Payee or any other holder
hereof and handled in collection in the customary manner, but the same shall not
constitute payment hereunder or diminish any rights of the Payee or any other
holder hereof, except to the extent that actual cash proceeds of such instrument
are unconditionally received by the Payee or any other holder hereof and applied
to the indebtedness as herein provided.
This Note shall be governed by and construed in accordance with the laws of
the State of California and applicable federal law.
CHARYS HOLDING COMPANY, INC.
/s/ Xxx Xxxxxxx
----------------------------------------
Xxx Xxxxxxx, President and COO
2
[Copy of STOCK PLEDGE AGREEMENT]
STOCK PLEDGE AGREEMENT
THIS AGREEMENT is made this 8th day of August, 2004, by and between Seller
as defined in that certain Stock Purchase Agreement between the parties hereto
of even Date ("SPA") (collectively, the "Secured Party") and Charys Holding
Company Inc. (the "Debtor").
WHEREAS, the Secured Party, pursuant to the SPA has agreed to sell to the
Debtor ___ shares of the issued and outstanding common stock of the Corporation
as defined in the SPA (the "Company Common Stock"); and
WHEREAS, pursuant to the SPA, the Debtor has executed and delivered to the
Secured Party that one certain promissory note of even date herewith in the
original principal amount of $250,000, to be adjusted as provided therein,
payable to the order of the Secured Party (the "Note"); and
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties hereto do hereby agree as follows:
1. Security Interest. The Debtor hereby grants to the Secured Party a
------------------
security interest and agrees and acknowledges that the Secured Party has and
shall continue to have a security interest in the Company Common Stock. All
property of all kinds in which the Secured Party is herein granted a security
interest, including, but not limited to, the Company Common Stock, shall
hereinafter be referred to as the "Collateral."
The Debtor agrees to execute such stock powers, endorse such instruments,
or execute such additional pledge agreements or other documents as may be
required by the Secured Party in order to effectively grant to the Secured Party
the security interest in the Collateral. The security interest granted hereby is
to secure the payment of the Note and all costs incurred by the Secured Party to
enforce this Agreement or any of the above described agreements and instruments,
including but not limited to attorney's fees and expenses (all of such
obligations, indebtedness and liabilities being hereinafter collectively
referred to as the "Obligations").
2. Warranties and Covenants of the Debtor. The Debtor, for so long as
------------------------------------------
it has any duty with respect to the Obligations, hereby warrants and covenants
as follows:
(a) The security interest granted hereby will attach to the Collateral
on the date hereof.
(b) Except for the security interest granted hereby and for taxes
not yet due, the Debtor will defend the Collateral against all claims and
demands of all persons at any time claiming the same or any interest therein.
(c) The Debtor authorizes the Secured Party to file a financing
statement, if desired by the Secured Party in any applicable jurisdiction,
signed only by the Secured Party covering the Collateral, and at the request of
the Secured Party, the Debtor will join the Secured Party in executing one or
more financing statements pursuant to the Uniform Commercial Code in effect in
any such jurisdiction on the date hereof in a form satisfactory to the Secured
Party, and the Secured Party will pay the cost of filing the same, or filing or
recording the financing statements in all public offices wherever filing or
recording is deemed by the Secured Party to be necessary or desirable. It being
further stipulated in this regard that the Secured Party may also at any time or
times sign a counterpart of this Agreement signed by the Debtor and file same as
a financing statement if the Secured Party shall elect to do so.
(d) The Debtor will not sell or offer to sell or otherwise transfer or
encumber the Collateral or any interest therein.
(e) Subject to the SPA, the Debtor will keep the Collateral free from
any adverse lien, security interest, or encumbrance, except the security
interest granted hereby and for taxes not yet due.
1
(f) The Debtor will pay to the Secured Party all costs and expenses,
including reasonable attorney's fees, incurred or paid by the Secured Party in
exercising or protecting its interests, rights and remedies under this Agreement
in the event of default by the Debtor hereunder or the Note.
The Debtor will immediately notify the Secured Party of any change in the
Debtor's name, address, or location, change in any matter warranted or
represented in this Agreement, change that may affect this security interest,
and any Event of Default.
3. Events of Default. The Debtor shall be in default under this
-------------------
Agreement upon the happening of any of the following events or conditions
(hereinafter severally referred to as an "Event of Default" and collectively
referred to as the "Events of Default"):
(a) Default by the Debtor with respect to any of the Obligations.
(b) The levy of any attachment, execution or other process against the
Debtor, the Company, or any of the Collateral that is not stayed or dismissed
within 30 days.
(c) Dissolution, termination of existence, insolvency or business
failure of the Debtor, the Company, or any endorser, guarantor or surety of the
Obligations, or commission of the act of bankruptcy by, or the appointment of a
receiver or other legal representative for any part of the property of,
assignment for the benefit of creditors by, or commencement of any proceedings
under any bankruptcy or insolvency law by or against, the Debtor, the Company or
any endorser, guarantor, or surety for the Obligations that are not stayed or
dismissed within 30 days of filing.
(d) Default in the performance of any covenant or agreement of the
Debtor to the Secured Party, whether under this Agreement, or the Note.
(e) If any lien attaches to any of the Collateral.
4. Remedies. Upon the failure of the Debtor or the Company to cure an
--------
Event of Default within 30 days after receipt of notice from the Secured Party
of such Event of Default and at any time thereafter, at the option of the holder
thereof the Secured Party shall have and may exercise with reference to the
Collateral any and all of the rights and remedies of a secured party under the
Uniform Commercial Code as adopted in the State of Georgia, and as otherwise
granted herein or under any other agreement executed by the Debtor, including,
without limitation, the right and power to sell at public or private sale or
sales, or otherwise dispose of or utilize the Collateral and any part or parts
thereof in any manner authorized or permitted under this Agreement or under the
Uniform Commercial Code as adopted in the State of Georgia after default by the
Debtor or the Company and to apply the proceeds thereof toward the payment of
any costs and expenses and attorney's fees thereby incurred by the Secured Party
and toward payment of the Obligations, in such order or manner as the Secured
Party may elect, including, without limiting the foregoing:
(a) The Secured Party is hereby granted the right, at its option, upon
the occurrence of an Event of Default hereunder, to transfer at any time to
itself or to its nominee securities or other property hereby pledged, or any
part thereof, and to thereafter exercise all voting rights with respect to such
security so transferred and to receive the proceeds, payments, monies, income or
benefits attributable or accruing thereto and to hold the same as security for
the Obligations hereby secured or at the Secured Party's election, to apply such
amounts to the Obligations, whether or not then due, in such order as the
Secured Party may elect, or, the Secured Party may, at its option, without
transferring such securities or properties to its nominee, exercise all voting
rights with respect to the securities pledged hereunder and vote all or any part
of such securities at any regular or special meeting of the stockholders of the
Company, and the Debtor does hereby name, constitute and appoint as a proxy of
the Debtor the Secured Party, in the Debtor's name, place and stead to vote any
and all such securities, as said proxy may elect for and in the name, place and
stead of the Debtor, such proxy to be irrevocable and deemed coupled with an
interest.
5. Voting Rights. So long as no Event of Default has occurred and
--------------
remains uncured for the applicable grace period under the Note or hereunder, the
Debtor shall have the right to vote all of the shares of the
2
Company Common Stock, and the Secured Party shall on demand execute and deliver
an effective proxy or proxies in favor of the Debtor, whenever demand is made
upon the Secured Party for such proxy or proxies by the Debtor.
6. Payment of the Note. Simultaneously with the payment in full of the
---------------------
Note, the Secured Party shall execute and file at its own expense any and all
instruments necessary to terminate the security interest in the ________ shares
of the Company Common Stock created by this Agreement and also execute any and
all other instruments deemed reasonably necessary by the Debtor to vest in the
Debtor title in the ________ shares of the Company Common Stock, free from any
claim by the Secured Party.
7. Satisfaction of the Other Obligations. Simultaneously with the
-----------------------------------------
satisfaction of all of the Obligations, and after the payment in full of the
Note the Secured Party shall execute and file at its own expense any and all
instruments necessary to terminate the security interest created by this
Agreement.
8. No Usury. It is the intention of the parties hereto to comply with
---------
the usury laws of the State of Georgia. Accordingly, it is agreed that
notwithstanding any provision to the contrary in this Agreement or in any of the
documents evidencing the Obligations or otherwise relating thereto, no such
provision shall require the payment or permit the collection of interest in
excess of the maximum permitted by law. If any excess of interest in such
respect is provided for, or shall be adjudicated to be so provided for, in this
Agreement, or any of the documents evidencing the Obligations or otherwise
relating thereto, then in such event:
(a) The provisions of this paragraph shall govern and control;
(b) Neither the Debtor, the Company nor their successors or assigns,
or any other party liable for the payment of the Obligations, shall be obligated
to pay the amount of such interest to the extent that it is in excess of the
maximum amount permitted by law;
(c) Any such excess interest which may have been collected shall be,
at the option of the holder of the instrument evidencing the Obligations, either
applied as a credit against the unpaid principal amount thereof or refunded to
the maker thereof; and
(d) The effective rate of interest shall be automatically subject to
reduction to the maximum lawful contract rate allowed under the usury laws of
the State of Georgia as now or hereafter construed by any court of competent
jurisdiction.
9. Attorney's Fees. In the event that it should become necessary for
----------------
any party entitled hereunder to bring suit against the other party to this
Agreement for enforcement of the covenants herein contained, the parties hereby
covenant and agree that the party who is found to be in violation of said
covenants shall also be liable for all reasonable attorney's fees and costs of
court incurred by the other party hereto.
10. Benefit. All the terms and provisions of this Agreement shall be
-------
binding upon and inure to the benefit of and be enforceable by the parties
hereto, and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
11. Notices. All notices, requests, demands, and other communications
-------
hereunder shall be in writing and delivered personally or sent by registered or
certified United States mail, return receipt requested with postage prepaid, by
facsimile, or by e-mail, as provided in the SPA.
12. Construction. Words of any gender used in this Agreement shall be held
------------
and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise. In addition, the pronouns used in this Agreement shall be understood
and construed to apply whether the party referred to is an individual,
partnership, joint venture, corporation or an individual or individuals doing
business under a firm or trade name, and the masculine, feminine and neuter
pronouns shall each include the other and may be used interchangeably with the
same meaning.
3
13. Waiver. No course of dealing on the part of any party hereto or its
------
agents, or any failure or delay by any such party with respect to exercising any
right, power or privilege of such party under this Agreement or any instrument
referred to herein shall operate as a waiver thereof, and any single or partial
exercise of any such right, power or privilege shall not preclude any later
exercise thereof or any exercise of any other right, power or privilege
hereunder or thereunder.
14. Cumulative Rights. The rights and remedies of any party under
------------------
this Agreement and the instruments executed or to be executed in connection
herewith, or any of them, shall be cumulative and the exercise or partial
exercise of any such right or remedy shall not preclude the exercise of any
other right or remedy.
15. Invalidity. In the event any one or more of the provisions contained
----------
in this Agreement or in any instrument referred to herein or executed in
connection herewith shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect the other provisions of this Agreement or any such other
instrument.
16. Time of the Essence. Time is of the essence of this Agreement.
----------------------
17. Headings. The headings used in this Agreement are for convenience
--------
and reference only and in no way define, limit, simplify or describe the scope
or intent of this Agreement, and in no way effect or constitute a part of this
Agreement.
18. Excusable Delay. None of the parties hereto shall be obligated to
----------------
perform and none shall be deemed to be in default hereunder, if the performance
of a non-monetary obligation is prevented by the occurrence of any of the
following, other than as the result of the financial inability of the party
obligated to perform: acts of God, strikes, lock-outs, other industrial
disturbances, acts of a public enemy, terrorists, wars or war-like action
(whether actual, impending or expected and whether de jure or de facto), arrest
or other restraint of governmental (civil or military) blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes, storms,
floods, washouts, sink holes, civil disturbances, explosions, breakage or
accident to equipment or machinery, confiscation or seizure by any government of
public authority, nuclear reaction or radiation, radioactive contamination or
other causes, whether of the kind herein enumerated, or otherwise, that are not
reasonably within the control of the party claiming the right to delay
performance on account of such occurrence.
19. Incorporation by Reference. The Stock Purchase Agreement, the Note,
----------------------------
the Escrow Agreement, and the Consulting Agreements or any of the Attachments
referred to therein, constitute integral parts to this Agreement and are
incorporated into this Agreement by this reference.
20. Multiple Counterparts. This Agreement may be executed in one or
----------------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
21. Controlling Agreement. In the event of any conflict between the
----------------------
terms of this Agreement, the Stock Purchase Agreement, the Note, the Escrow
Agreement, and the Consulting Agreements or any of the Attachments referred to
therein, the terms of the Stock Purchase Agreement shall control.
22. Law Governing. This Agreement shall be construed and governed by
--------------
the laws of the State of Georgia, and all obligations hereunder shall be deemed
performable in San Diego County, Georgia.
23. Perfection of Title. The parties hereto shall do all other acts
---------------------
and things that may be reasonably necessary or proper, fully or more fully, to
evidence, complete or perfect this Agreement, and to carry out the intent of
this Agreement.
24. Entire Agreement. This instrument contains the entire Agreement of
-----------------
the parties with respect to the subject matter hereof, and may not be changed
orally, but only by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification, extension, or discharge is
sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
4
THE SECURED PARTY:
/s/ Xxxxx X. Xxx Xx.
-----------------------------------
-----------------------------------
THE DEBTOR:
/s/ Xxx Xxxxxxx
-----------------------------------
5
EXHIBIT 2.1 (a)
JURISDICTIONS OF QUALIFICATION
Florida - License is inactive, as we have no clients in Florida
North Carolina - Registered - no license required as of this date
South Carolina - Active - License
Texas - Admitted - No clients
Virginia - Admitted - No clients
EXHIBIT 2.1 (b)
SELLER'S AND THE CORPORATION'S CHARTER AND BYLAWS S
ATTACHED
SECRETARY OF STATE CONTROL NUMBER : 0104816
CORPORATIONS DIVISION EFFECTIVE DATE : 01/29/2001
315 WEST TOWER JURISDICTION : GEORGIA
#2 XXXXXX XXXXXX XXXX, XX. DR. REFERENCE : 0093
XXXXXXX, XXXXXXX 00000-0000 PRINT DATE : 01/29/2001
FORM NUMBER : 000
X. XXXXXXX XXXXXXX
0000 XXXXXXXXXX XXX, #0
XXXXXXXX, XX 00000
CERTIFICATE OF INCORPORATION
I, Xxxxx Xxx, the Secretary of State and the Corporations Commissioner of the
State of Georgia, do hereby certify under the seal of my office that
AYIN DEVELOPING COMPANY
A DOMESTIC PROFIT
has been duly incorporated under the laws of the State of Georgia on the
effective date stated above by the filing of articles of incorporation in the
Office of the Secretary of State and by the paying of fees as provided by Title
14 of the Official Code of Georgia Annotated.
WITNESS my hand and official seal in the City of Atlanta and the State of
Georgia on the date set forth above.
[GRAPHIC OMITED]
[SEAL OMITED] /s/ Xxxxx Xxx
STATE OF GEORGIA Xxxxx Xxx
0000 Xxxxxxxxx xx Xxxxx
ARTICLES OF INCORPORATION
OF
AYIN DEVELOPING COMPANY
ARTICLE I
The name of the Corporation is;
AYIN Developing Company
ARTICLE II
The Corporation shall have authority to issue 1,000 shares of stock
ARTICLE III
The initial registered office of the Corporation shall be at:
0000 Xxxxxxxxxx Xxx, Xxxxx 0
Xxxxxxxx, Xxxxxxx 00000
in Gwinnett County. The initial registered agent of the Corporation at such
address shall be:
W. Xxxxxxx XxXxxxx
ARTICLE IV
The name and address of the incorporator is:
W. Xxxxxxx XxXxxxx
0000 Xxxxxxxxxx Xxx, Xxxxx 0
Xxxxxxxx, Xxxxxxx 00000
ARTICLE V
The mailing address of the initial principal office of the Corporation is:
0000 Xxxxxxxxxx Xxx, Xxxxx 0
Xxxxxxxx, Xxxxxxx 00000
ARTICLE VI
No director shall have any personal liability to the Corporation or to its
shareholders for monetary damages for breach of duty of care or other duty as a
director,
by reason of any act or omission occurring subsequent to the date when this
provision becomes effective, except that this provision shall not eliminate or
limit the liability of a director for (a) any appropriation, in violation of his
duties, of any business opportunity of the Corporation; (b) acts or omissions
which involve intentional misconduct or a knowing violation of law; (c)
liabilities of a director imposed by Sec. 14-2-831 of the Georgia Business
Corporation Code; or (d) any transaction from which the director derived an
Improper personal benefit.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation.
/s/ W. Xxxxxxx XxXxxxx
------------------------------
W. Xxxxxxx XxXxxxx
Incorporator
SECRETARY OF STATE
01 JAN 29 PM 1:12
CORPORATIONS DIVISION
SECRETARY OF STATE DOCKET NUMBER : 020771156
CORPORATIONS DIVISION CONTROL NUMBER : 0104816
315 WEST TOWER EFFECTIVE DATE : 03/07/2002
#2 XXXXXX XXXXXX XXXX, XX. DR. REFERENCE : 0070
XXXXXXX, XXXXXXX 00000-0000 PRINT DATE : 04/01/2002
FORM NUMBER : 611
XXXXXXX X. XXXXXXXXX
STE 6, 0000 XXXXXXXXXX XXX
XXXXXXXX, XX 00000
CERTIFICATE OF NAME CHANGE AMENDMENT
I, Xxxxx Xxx, the Secretary of State and the Corporations Commissioner of the
State of Georgia, do hereby certify under the seal of my office that
AYIN DEVELOPING COMPANY
A DOMESTIC PROFIT CORPORATION
has filed articles of amendment in the Office of the Secretary of State changing
its name to
PERSONNEL RESOURCES OF GEORGIA, INC.
and has paid the required fees as provided by Title 14 of the Official Code of
Georgia Annotated. Attached hereto is a true and correct copy of said articles
of amendment.
WITNESS my hand and official seal in the City of Atlanta and the State of
Georgia on the date set forth above.
[GRAPHIC OMITED] [GRAPHIC OMITED]
[SEAL OMITED] /s/ Xxxxx Xxx
Xxxxx Xxx
Secretary of State
ARTICLES OF AMENDMENT
OF
AYIN DEVELOPING COMPANY
ARTICLE I
The current name of the Corporation is:
AYIN Developing Company
ARTICLE II
Upon delivery of these Articles of Amendment to the Secretary of State and
the date set forth below, the name of the Corporation shall be:
Personnel Resources of Georgia, Inc.
ARTICLE III
The effective date of these articles of Amendment shall be March 15,2002.
ARTICLE IV
The corporation shall have perpetual duration,
ARTICLE V
The corporation is a corporation for profit and is organized to engage in
any lawful business or activities related thereto; and to engage in any lawful
act or activity for which corporations may be organized under the Georgia
Corporation Code.
ARTICLE VI
No shareholder action was required to adopt these Articles of Amendment.
ARTICLE VII
These Articles of Amendment are adopted by the incorporator pursuant to
O.C.G.A Sec. 14-2-1005(a).
ARTICLE VIII
All other Articles of Incorporation not specifically addressed in these
Articles of Amendment and not inconsistent with Georgia Law are adopted by the
incorporator pursuant to O.C.G.A. Sec. 14-2-1005(a).
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation.
/s/ W. Xxxxxxx XxXxxxx
------------------------------
W. Xxxxxxx XxXxxxx
Incorporator
SECRETARY OF STATE
2002 APR - 1 A 9:11
CORPORATIONS DIVISION
BY-LAWS OF
AYIN DEVELOPING COMPANY, INC.
Incorporated under the Laws of the State of Georgia
Registered agent: W. Xxxxxxx XxXxxxx
Registered office address: 0000 Xxxxxxxxxx Xxx, Xxxxx 0
Xxxxxxxx, Xxxxxxx 00000
Annual meeting time: Month January Day 01 Hour 1200
Fiscal year begins: Month January Day 1
ARTICLE I - REGISTERED AGENT AND REGISTERED OFFICE
--------------------------------------------------
The name and address of the registered agent, which is the same address as
the registered office, is stated at the beginning of these by-laws. The
corporation may have other offices or branches as determined by the board of
directors.
ARTICLE II - FISCAL YEAR
-------------------------
The date on which the fiscal year of the corporation begins each year is
stated at the beginning of these by-laws.
ARTICLE III - MEETINGS OF SHAREHOLDERS
--------------------------------------
1. PLACE
Shareholders' meetings shall be held at the registered office of the
corporation or at another location determined by the board of directors and
stated in the notice of the meeting.
2. TIME
The time of the annual meeting of shareholders is stated at the beginning
of these by-laws. If this date falls on a legal holiday then the annual meeting
shall be held on the next business day.
3. PURPOSE
The purpose of the annual meeting shall be to elect a board of directors
and transact other business as may come before the meeting. Matters required by
statute to be stated in the notice of the meeting which are not so stated, may
not be transacted.
4. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the president by any
two directors or by the holders of at least 25% of the shares entitled to vote
at a meeting. A special meeting may be called anytime for any business purpose,
unless otherwise prohibited by statute. They shall be held at the registered
office of the corporation.
5. NOTICE
Written notice stating the place, day and time of the meeting and, in case
of a special meeting, the purpose or purposes for which the meeting is called
shall be delivered not less than 10, nor more than 60 days before the date of
the meeting, If mailed, such notice shall be considered to be delivered when
deposited in the United States Postal Service, addressed to the shareholder at
his/her address as it appears on the stock transfer books of the corporation,
with the correct amount of first class postage on it.
6. FIXING RECORD DATE
For the purpose of determining the shareholders entitled to notice of or to
vote at any meeting of shareholders or for the purpose of any other action, the
board of directors shall fix in advance a date as a record date. The date shall
not be more than 60 nor less than 10 days before the meeting, or more than 60
days prior to any other action.
7. QUORUM
At any meeting of shareholders, a majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum. The shareholders present in person or by proxy at such
meeting may continue to do business until adjournment even if this means the
withdrawal of enough shareholders to leave less than a quorum. If a quorum is
not present the shareholders present in person or by proxy may adjourn to a date
they agree upon.
8. PROXIES
At all meetings of shareholders, a shareholder may vote by proxy executed
in writing by the shareholder of his/her duly authorized attorney in fact. A
proxy is not valid after the expiration of 11 months from its date unless
otherwise provided in the proxy. A proxy is not invalidated by the death or
incompetency of the shareholder, unless. before the authority is exercised,
written notice of such adjudication is received by the corporate office
responsible for maintaining the list of shareholders.
9. VOTING
Each outstanding share is entitled to 1 vote on each matter submitted to a
vote. A vote may be cast either orally or in writing in person or by proxy. All
elections for directors shall be decided by plurality vote; all other matters
shall be decided by majority vote.
10. WAIVER OF NOTICE
Notice of meeting need not be given to any shareholder who signs a waiver
of notice, in
person or by proxy, whether before or after the meeting. The attendance of any
shareholder at a meeting, in person or by proxy, without protesting prior to the
conclusion of the meeting the lack of notice of such meeting, shall constitute a
waiver of notice by the shareholder.
11. WRITTEN CONSENT OF SHAREHOLDERS
Any action may be taken without a meeting, without prior notice and without
a vote if consent in writing, setting forth the action taken, is signed by the
holders of all the outstanding shares entitled to vote on the matter.
12. PARTICIPATION BY TELECOMMUNICATIONS
Participation in a shareholders' meeting may be by means of conference
telephone, or similar communications equipment. All persons participating in the
meeting must be able to hear each other, be advised of the use of such
equipment, and be provided with the names of individuals using such equipment.
13. ORDER OF BUSINESS
The order of business at all meetings if the shareholders, shall be as
follows:
a. Roll call.
b. Proof of notice of meeting or waiver of notice.
c. Reading of minutes of the preceding meeting.
d. Reports of officers.
e. Reports of committees.
f. Election of directors.
g. Unfinished business.
h. New business.
ARTICLE IV - DIRECTORS
----------------------
1. GENERAL POWERS
The corporation shall be managed by the board of directors.
2. NUMBER AND TENURE OF DIRECTORS
The number of directors of the corporation shall be at least one (1). Each
director shall hold office until the next annual meeting of shareholders and
until his/her successor shall have been elected and qualified.
3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES
A vacancy occurring on the board of directors may be filled by the
affirmative vote of a majority of the board of directors even if there is less
than a quorum of the board of directors. The board of directors so chosen shall
hold office until the next annual election of the board of directors by the
shareholders.
4. REGULAR AND SPECIAL MEETINGS
a. Regular meetings may be held without notice as determined by the board
of directors and must be held at least annually.
b. Special meetings may be called by the president or at least 2 directors
at any time, on 2 day's notice by mall or 24 hours notice by a
telecommunications device. A brief indication of the nature of the business to
be transacted shall be made part of the notice. If mailed, the notice shall be
considered delivered when deposited in the United States mail. The notice must
be properly addressed and have the correct amount of postage on it if the notice
is by telecommunications device, it shall be considered delivered when delivered
to the Telecommunications Company.
c Participation in a regular or special meeting may be by means of
conference telephone, or similar telecommunications equipment. All persons
participating in the meeting must be able to hear each other, be advised of the
use of such equipment, and be provided with the names of individuals using the
equipment.
5. QUORUM
A quorum shall consist of a majority of the board of directors.
6. ACTION BY BOARD WITHOUT A MEETING
Any action required or permitted to be taken pursuant to authorization
voted at a meeting of the board of directors or a committee of the board, may be
taken without a meeting if before or after the action all members of the board
of directors or committee consent to it in writing. The written consents shall
be filed with the minutes of the proceedings of the board of directors or
committee.
7. WAIVER OF NOTICE
Attendance of a director at a meeting constitutes a waiver of notice of the
meeting except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
8. REMOVAL
Any director may be removed with or without cause by a majority vote of the
shareholders.
9. EXECUTIVE AND OTHER COMMITTEES
The board of directors, by resolution, may designate from among its
members, to the extent allowable by statute, an executive committee and other
committees, each consisting of one or more directors. Each committee shall serve
at the pleasure of the board of directors.
ARTICLE V - OFFICERS
--------------------
1. NUMBER
The offices of the corporation shall be a president and other officers as
shall from time to time be elected or appointed by the board of directors.
2. SALARIES
The salaries of the officers shall be established by the board of
directors.
3. REMOVAL
a. Any officer of agent elected or appointed by the board of directors may
be removed by the board whenever in its judgment the best interests of the
corporation will be served.
b. An officer or agent elected by the shareholders may be removed only by
vote of the shareholders, unless the shareholders shall have authorized the
board to remove such officer of agent, but the authority of such officer or
agent to act for the corporation may be suspended by the board for cause.
4. PRESIDENT
The president shall be the chief executive of the corporation and subject
to the control of the board of directors, supervise and control all of the
business of the corporation. The president shall when president, preside at all
meetings of the shareholders and of the board of directors. The president shall
have authority to institute or defend legal proceedings when thee directors are
deadlocked.
5. VICE-PRESIDENT
In the absence of the president or in the event of the president's death,
inability, or refusal to act, the vice-president, shall have all the powers and
functions of the president and shall perform such other duties as the board of
directors shall determine. If there is more than one vice-president, then the
executive vice-president in the event of the above listed disabilities shall
have all the powers and functions of the president and shall perform such other
duties as the board of directors shall determine.
6. SECRETARY
The secretary shall:
(a) Attend all meetings of the board of directors and of the
shareholders.
(b) Record all votes and minutes of all proceedings in a book to be
kept for that purpose.
(c) Give notice of all meetings of shareholders and of special
meetings of the board of directors.
(d) Keep in safe custody the seal of the corporation and affix it to
any instrument when authorized by the board of directors.
(e) When required, prepare and make available at each meeting
shareholders a certified list in alphabetical order of the names
of shareholders entitled to vote, indicating the number of shares
of each respective class held by each.
(f) Keep all the documents and records of the corporation as required
by law or otherwise in a proper and safe manner.
(g) Perform such other duties as may be assigned by the president.
7. TREASURER
The treasurer shall:
(a) Have the custody of the corporate funds and securities.
(b) Keep full and accurate accounts of receipts and disbursements in
the corporate books.
(c) Deposit all money and other valuables in the name and to the
credit of the corporation in such depositories as may be
designated by the board of directors.
(d) Disburse the funds of the corporation as may be ordered or
authorized by the board of directors and keep vouchers for such
disbursements.
(e) Give to the president and board of directors at the regular
meetings of the board of directors, or whenever they require it,
an account of all his/her transactions as treasurer and of the
financial condition of the corporation.
(f) Give a full financial report at the annual meeting of the
shareholders, if so requested.
(g) Perform other duties assigned by the board or president.
(h) If required by the board of directors, give a bond for the
faithful discharge of his/her duties in an amount and with such
surety or surities as the board of directors shall determine.
ARTICLE VI - CERTIFICATES OF SHARES
-----------------------------------
1. CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be in the form
determined by the board of directors. Such certificates shall be signed by the
president and by the secretary or by such other officers authorized by law and
by the board of directors. All certificates for shares and date of issue shall
be entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares is surrendered and canceled, except that in the case of a lost, destroyed
or mutilated certificate a new one may be issued upon such terms and indemnity
to the corporation as the board of directors may determine.
2. TRANSFER OF SHARES
a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person
entitled to it, and cancel the old certificate; every transfer
shall be entered on the transfer books of ht corporation which
shall be kept at its principal office.
b) The corporation shall be entitled to treat the holder of record
of any share as the holder in fact of it, shall not be bound to
recognize any equitable or other claim to or interest in such
share on the part of any other person whether or not it shall
have express or other notice thereof, except as expressly
provided by the laws of this slate.
ARTICLE VII - INDEMNIFICATION
-----------------------------
The corporation shall indemnify to the extent allowed by the corporation
statues of this state any person who was or is a party or is threatened to be
made a party to an threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that the person is or was a director, officer, employee or agent of the
corporation or served any other enterprise at the request of the corporation.
The person to be indemnified must have acted in good faith and in a manner
he/she reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his/her conduct was unlawful.
ARTICLE VIII - DIVIDENDS
------------------------
The board of directors may declare and pay dividend or make other
distributions in cash, its bonds or its property, including the shares or bonds
of other corporations, on its outstanding shares.
ARTICLE IX - AMENDMENTS
-----------------------
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by a vote of the shareholders representing a two-thirds (66.67%)
majority of all the shares issued and outstanding at an annual shareholders'
meeting or at any special shareholders' meeting when the proposed amendment has
been stated in the notice of such meeting.
CONSENT OF DIRECTORS IN LIEU OF
FIRST MEETING OF THE BOARD
OF AYIN HOLDING COMPANY, INC.
On September __, 200l, at _____ __.M., the undersigned, pursuant to Section
14-2-821 of the Georgia Business Code, the Undersigned, being President of AYIN
DEVELOPING COMPANY, INC., hereby:
a) unanimously consent to and adopt the following Resolutions as of the date
set forth, above, which resolutions shall have the same force and effect as
if adopted by unanimous affirmative cote at a meeting of the Board of
Directors of the Corporation duly called and held, and
b) direct that this written Consent be filed with the minutes of the
proceedings of the Corporation:
RESOLVED, That ________ shall be and hereby is, elected Chairman of this
meeting of the Board of Directors and _________ shall be and hereby is elected
Secretary of this meeting of the board of Directors; and,
RESOLVED FURTHER, That this corporation shall maintain a minute book
containing the minutes of this organizational resolution, and of all the
subsequent meetings of the Board of Directors of this corporation and such other
documents as the Corporation, the Board of Directors, or the Shareholders
thereof shall from time to time direct; and,
RESOLVED FURTHER, That these Directors, by their signatures hereby affixed
to the minutes of this organization meeting, and by this Resolution, do waive
notice of the time and place of the passing of this resolution; and,
RESOLVED FURTHER, That the following persons be and the same are hereby
elected as officers of this Corporation to the offices set forth opposite their
respective names:
Name Office
---- ------
_________________ President
_________________ Vice-President
_________________ Secretary
AND,
RESOLVED FURTHER, That this corporation hereby adopts the certain form of
share certificate presented to this meeting by the attorney for the corporation
as the form of certificate that will
be used to evidence ownership of shares of the corporation, and the Secretary is
directed to attach a copy of such certificate to the minutes of this meeting and
xxxx such certificate as Exhibit "A"; and,
------------
RESOLVED FURTHER, That a record of all such certificates issued,
Transferred, or canceled shall be kept by the Secretary in a separate section of
this corporation's minute book or in a separate corporate book to be known as
the share register of the corporation, and the Secretary is instructed to
procure such a section or book; and,
RESOLVED FURTHER, that the By-Laws attached hereto as Exhibit "B" be
----------
adopted as and for the By-Laws of the Corporation; and,
RESOLVED FURTHER, that the seal, an impression of which is made below, be
adopted as the corporate seal of the Corporation; and that the secretary of the
Corporation be authorized and directed to procure and maintain the proper
corporate books and stock records.
(SEAL)
and,
RESOLVED FURTHER, That this organization establish in its name one or more
deposit accounts with the Suntrust Bank on such terms and conditions as may be
agreed on with said bank and that the President and Treasurer of this
organization be, and they are hereby, authorized to establish such and account;
and,
RESOLVED FURTHER, That the President, or Secretary, or Treasurer, of this
organization be, and they are hereby, authorized to draw checks on said account
of this organization, signed as provided herein with signatures duly certified
to said bank by the Secretary of this organization and said bank is hereby
authorized to honor and pay any and all checks so signed; and,
RESOLVED FURTHER, that in compliance with Georgia law and the Articles of
Incorporation of the Corporation, the registered office of the Corporation in
Georgia be established and maintained at 0000 Xxxxxxxxxx Xxx, Xxxxx 0, Xxxxxxxx,
Xxxxxxx 00000 and the registered agent be W. Xxxxxxx XxXxxxx; and,
RESOLVED FURTHER, that all actions taken and contracts entered into
heretofore by any persons acting for the Corporation, either as promoter,
officer or director, as well as all actions taken and contracts entered into by
said persons as individuals, acting by and for the Corporation, are hereby
adopted, approved and ratified by the Corporation, and all such contracts shall
constitute binding obligations of the Corporation in the same manner as though
said persons had at the time of such contracting full power and authority to act
for and on behalf of the Corporation; and,
RESOLVED FURTHER, that the fiscal year of the Corporation shall end on
December 31; and,
RESOLVED FURTHER, that the Corporation make an election to be treated as an
"S" Corporation for purposed of the Internal Revenue Code of 1986, as amended,
and that the officers of the Corporation be authorized to take any and all
actions necessary and appropriate to make such an election; and,
RESOLVED FURTHER, that the officers of the corporation, are authorized and
directed to file a corporate tax statement with the Internal Revenue Service;
RESOLVED FURTHER, that the President and Chairman be authorized to pay all
fees and expenses incident to, and necessary for the Organization of the
Corporation.
There being no further business to come before the Board of Directors the
resolution was duly passed.
Dated: September _____, 2001,
-------------------------
-------------------------
ATTEST:
---------------------------
W. Xxxxxxx XxXxxxx,
Incorporator
EXHIBIT 2.3
CAPITAL STOCK
Each and every obligation of the Purchaser under this Agreement
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions unless waived in writing by the Purchaser:
7.1 Representations and Warranties; Performance. The
----------------------------------------------
representations and warranties of Seller and Corporation contained in this
Agreement and all information contained in any exhibit, schedule or attachment
hereto or in any writing delivered by, or on behalf of, the Seller or the
Corporation, the Purchaser, shall be true and correct in all material respects
when made and shall be true and correct in all material respects on the Closing
Date as though then made, except as expressly provided herein. Seller and the
Corporation shall have performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement to be performed
and complied with by them prior to the Closing Date. The Seller, and the
President of each of the Corporation, shall each have delivered to the Purchaser
a certificate (which shall be addressed to the Purchaser), dated the Closing
Date, in the form of Exhibit 7.1 hereto, certifying to the foregoing.
7.2 Consents and Approvals. Purchaser, Seller and Corporation
------------------------
shall have obtained any and all material consents, approvals, orders,
qualifications, licenses, permits or other authorizations, required by all
applicable Regulations, Orders and Contracts of the Corporation or binding on
their respective properties and assets, with respect to the execution, delivery
and performance of the Agreement, the consummation of the transactions
contemplated hereby and the conduct by the Purchaser of the business of
Corporation in the same manner after the Closing Date as before the Closing
Date.
7.3 Opinion of Seller's Counsel. The Purchaser shall have
------------------------------
received an opinion of the Seller's outside counsel (which will be addressed to
the Purchaser), dated the Closing Date, in the form of as shall be reasonably
acceptable to Purchaser.
7.4 No Material Adverse Change. There shall have been no
-----------------------------
Material Adverse Change since the date of this Agreement. The Purchaser shall
have received certificates (which shall be addressed to the Purchaser), dated
the Closing Date, of the president and chief financial officer of each of the
Seller and the Corporation, in the form designated Exhibit 7.4 hereto,
certifying to the foregoing.
7.5 No Proceeding or Litigation. No preliminary or permanent
------------------------------
injunction or other Order, decree or ruling issued by any Authority, or any
Regulation promulgated or enacted by any Authority shall be in effect, which
would prevent the consummation of the transactions contemplated hereby.
7.6 Accounting Certificates. The Purchaser shall have received a
-----------------------
certificate, dated the Closing Date, of the Corporation's chief financial
officer in the form of Exhibit 7.6 hereto as to the accuracy of all of the
Corporation financial statements delivered hereunder, which certificate shall
contain a statement by the Corporation's independent auditors that each such
year-end financial statement was incorporated, without change, into the
respective year-end audited financial statements of the Corporation.
7.7 Proceedings and Documents. All corporate and other
---------------------------
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchaser and the Purchaser's counsel,
and the Seller and the Corporation shall have made available to the Purchaser
for examination the originals or true, complete and correct copies of all
records and documents relating to the business and affairs of the Corporation
which the Purchaser may reasonably request in connection with said transaction.
21
7.8 Secretary's Certificate. The Purchaser shall have received
------------------------
a certificate, substantially in the form of Exhibit 7.8 hereto, by the
respective secretary of the Corporataion, as to the charter and bylaws of the
Corporation, the resolutions adopted by the directors and stockholders of the
Corporation in connection with this Agreement and the incumbency of the
Corporation's officers.
7.9 Certificates of Good Standing. At the Closing the Corporation
-----------------------------
shall have delivered to the Purchaser certificates issued by the appropriate
governmental authorities evidencing the good standing, with respect to both the
conduct of business and the payment of all franchise taxes, of the Corporation
as of a date not more than fifteen (15) days prior to the Closing Date as a
corporation organized under the laws of the states and as a foreign corporation
authorized to do business under the laws of the jurisdictions listed in the
Schedules hereto.
7.10 Other Documents. The Seller and Corporation shall furnish
----------------
the Purchaser with such other and further documents and certificates including
certificates of the Corporation officers and others as the Purchaser shall
reasonably request to evidence compliance with the conditions set forth in this
Agreement.
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF THE SELLER
Each and every obligation of the Seller under this Agreement
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions unless waived in writing by the Seller:
8.1 Representations and Warranties; Performance. The
----------------------------------------------
representations and warranties of the Purchaser contained in this Agreement and
all information contained in any exhibit, schedule or attachment hereto shall be
true and correct in all material respects when made and shall be true and
correct in all material respects on the Closing Date as though then made, except
as expressly provided herein. The Purchaser shall have performed and complied in
all material respects with all agreements, covenants and conditions required by
this Agreement to be performed and complied with by them prior to the Closing
Date. The president of the Purchaser shall have delivered to the Seller a
certificate, dated the Closing Date, in the form of Exhibit 8.1 hereto,
certifying to the foregoing.
8.2 Consents and Approvals. Purchaser, Seller and Corporation
------------------------
shall have obtained any and all material consents, approvals, orders,
qualifications, licenses, permits or other authorizations, required by all
applicable Regulations, Orders or Contracts of the Corporation or binding on
their properties and assets, with respect to the execution, delivery and
performance of the Agreement, the financing consummation of the transactions
contemplated herein and the conduct by the Purchaser of the business of the
Corporation in the same manner after the Closing Date as before the Closing
Date.
8.3 No Proceeding or Litigation. No preliminary or permanent
------------------------------
injunction or other Order, decree or ruling issued by any Authority, or any
Regulation promulgated or enacted by any Authority shall be in effect, which
would prevent the consummation of the transactions contemplated hereby.
ARTICLE IX CLOSING
9.1 Closing. Unless this Agreement shall have been terminated or
-------
abandoned pursuant to the provisions of Article X hereof, a closing of the
transactions contemplated by this Agreement (the "Closing") shall be held on
June 30, 2004, or on such other mutually agreed to date (the "Closing Date").
22
9.2 Intervening Litigation. If prior to the Closing Date any
-----------------------
preliminary or permanent injunction or other Order issued by a court of
competent jurisdiction or by any other Authority shall restrain or prohibit this
Agreement or the consummation of the transactions contemplated herein for a
period of fifteen days or longer, the Closing shall be adjourned at the option
of either party for a period of thirty days. If at the end of such thirty day
period such injunction or Order shall not have been favorably resolved, either
party may, by written notice thereof to the other, terminate this Agreement,
without liability or further obligation hereunder.
ARTICLE X_TERMINATION AND ABANDONMENT
10.1 Methods of Termination. This Agreement may be terminated and
----------------------
the transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of the Purchaser and the Seller;
(b) by the Purchaser or the Seller if this Agreement is not
consummated on or before _____; provided that if any party has breached or
defaulted with respect to its respective obligations under this Agreement on or
before such date, such party may not terminate this Agreement pursuant to this
Section 10.1(b), and each other party to this Agreement shall at its option
enforce its rights against such breaching or defaulting party and seek any
remedies against such party, in either case as provided hereunder and by
applicable law;
(c) by the Purchaser if as of the Closing Date any of the conditions
specified in Article VI hereof have not been satisfied in any material respect
or if the Seller or any of the Corporation are otherwise in default in any
material respect under this Agreement; or
(d) by the Purchaser or the Seller, if they do not accept or are not
deemed to have accepted the Schedules.
10.2 Procedure Upon Termination. In the event of termination and
---------------------------
abandonment pursuant to Section 10.1 hereof, and subject to the proviso
contained in Section 10.1(b) this Agreement shall terminate and shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) each party shall redeliver all documents and other material of
any other party relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing the same;
(b) all information received by any party hereto with respect to the
business of any other party or the Corporation (other than information which is
a matter of public knowledge or which has heretofore been or is hereafter
published in any publication for public distribution or filed as public
information with any governmental authority) shall not at any time be used for
the advantage of, or disclosed to third parties by, such party to the detriment
of the party furnishing such information; and
(c) no party hereto shall have any liability or further obligation to
any other party to this Agreement.
ARTICLE X SURVIVAL OF TERMS; INDEMNIFICATION
11.1 Survival. All of the terms and conditions of this Agreement,
--------
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or
23
to be delivered pursuant to this Agreement, shall survive the execution of this
Agreement and the Closing notwithstanding any investigation heretofore or
hereafter made by or on behalf of any party hereto; provided, however, that (a)
the agreements and covenants (other than the indemnification provisions set
forth in this Article XI, which shall survive as provided below) set forth in
this Agreement shall survive and continue until all obligations set forth
therein shall have been performed and satisfied; and (b) all representations and
warranties, and the agreements of the Seller, the Corporation and the Purchaser
to indemnify each other set forth in this Article XI, shall survive and continue
for, and all Claims with respect thereto shall be made prior to the end of the
applicable statute of limitations, and (ii) representations, warranties and
indemnities for which an indemnification Claim shall be pending as of the end of
the applicable period referred to above, in which event such indemnities shall
survive with respect to such Claim until the final disposition thereof.
11.2 Indemnification by Seller. Subject to this Article XI, the
---------------------------
Purchaser and its officers, directors, employees, shareholders, representatives
and agents shall be indemnified and held harmless by the Seller and the
Corporation at all times after the date of this Agreement, against and in
respect of any and all damage, loss, deficiency, liability, obligation,
commitment, cost or expense (including the fees and expenses of counsel)
resulting from, or in respect of, any of the following:
(a) Any misrepresentation, breach of warranty, or non-fulfillment of
any obligation on the part of the Seller or the Corporation under this
Agreement, any document relating thereto or contained in any schedule or exhibit
to this Agreement or from any misrepresentation in or omission from any
certificate, schedule, other agreement or instrument by the Seller or the
Corporation hereunder;
(b) Any and all liabilities of any of the Corporation of any nature
whether accrued, absolute, contingent or otherwise, and whether known or
unknown, existing at the Closing Date to the extent not reflected and reserved
against in the Financial Statements or not otherwise adequately disclosed in
this Agreement or the schedules or exhibits thereto, including, without
limitation:
(i) All Tax liabilities of the Seller and the Corporation, including
federal, state and local Tax liability, together with any interest or penalties
thereon or related thereto, through the Closing Date but excluding any Taxes for
which there is an adequate accrual and reserve on the Financial Statements and
any Tax liability of the Seller arising in connection with the transactions
contemplated hereby. Any Taxes, penalties or interest attributable to the
operations of the Seller or any of the Corporation payable as a result of an
audit of any tax return shall be deemed to have accrued in the period to which
such Taxes, penalties or interest are attributable;
(ii) Liabilities that arise from Claims, of whatever nature, (A)
relating to contracts underlying the Commutation Agreement or (B) which arose
from an Occurrence that took place prior to the Closing Date and was not accrued
for in the full amount of such Claim on the Financial Statements.
(c) All demands, assessments, judgments, costs and reasonable legal
and other expenses arising from, or in connection with any Claim incident to any
of the foregoing.
11.3 Indemnification by the Purchaser. Subject to this Article XI, the
--------------------------------
Purchaser agrees to, and shall, indemnify the Seller and the Corporation and its
respective officers, directors, employees, shareholders, representatives and
agents and hold each of them harmless at all times after the date of this
Agreement, against and in respect of any and all damage, loss, deficiency,
liability, obligation, commitment, cost or expense (including the fees and
expenses of counsel) resulting from, or in respect of, any of the following:
24
(a) Any misrepresentation, breach of warranty, or non-fulfillment of
any obligation of the part of the Purchaser under this Agreement, any document
relating hereto or thereto or contained in any schedule or exhibit to this
Agreement or from any misrepresentation in or omission from any certificate,
other agreement or instrument by the Purchaser hereunder.
(b) All demands, assessments, judgments, costs and reasonable legal
and other expenses arising from, or in connection with, any action, suit,
proceeding or claim incident to any of the foregoing.
11.4 Third-Party Claims. Except as otherwise provided in this
-------------------
Agreement, the following procedures shall be applicable with respect to
indemnification for third-party Claims. Promptly after receipt by the party
seeking indemnification hereunder (hereinafter referred to as the "indemnitee")
of notice of the commencement of any (a) Tax audit or proceeding for the
assessment of Tax by any taxing authority or any other proceeding likely to
result in the imposition of a Tax liability or obligation or (b) any action or
the assertion of any Claim, liability or obligation by a third-party (whether by
legal process or otherwise), against which Claim, liability or obligation the
other party to this Agreement (hereinafter the "indemnitor") is, or may be,
required under this Agreement to indemnify such indemnitee, the indemnitee will,
if a Claim thereon is to be, or may be, made against the indemnitor, notify the
indemnitor in writing of the commencement or assertion thereof and give the
indemnitor a copy of such Claim, process and all legal pleadings. The indemnitor
shall have the right to participate in the defense of such action with counsel
of reputable standing. The indemnitor shall have the right to assume the defense
of such action unless such action (i) may result in injunctions or other
equitable remedies in respect of the indemnitee or its business; (ii) may result
in liabilities which, taken with other then existing Claims under this Article
XI, would not be fully indemnified hereunder; or (iii) may have an adverse
impact on the business or financial condition of the indemnitee after the
Closing Date (including an effect on the tax liabilities, earnings or ongoing
business relationships of the indemnitee). The indemnitor and the indemnitee
shall cooperate in the defense of such Claims. In the case that the indemnitor
shall assume or participate in the defense of such audit, assessment or other
proceeding as provided herein, the indemnitee shall make available to the
indemnitor all relevant records and take such other action and sign such
documents as are necessary to defend such audit, assessment or other proceeding
in a timely manner. If the indemnitee shall be required by judgment or a
settlement agreement to pay any amount in respect of any obligation or liability
against which the indemnitor has agreed to indemnify the indemnitee under this
Agreement, the indemnitor shall promptly reimburse the indemnitee in any amount
equal to the amount of such payment plus all reasonable expenses (including
legal fees and expenses) incurred by such indemnitee in connection with such
obligation or liability subject to this Article XI.
Prior to paying or settling any Claim against which an indemnitor
is, or may be, obligated under this Agreement to indemnify an indemnitee, the
indemnitee must first supply the indemnitor with a copy of a final court
judgment or decree holding the indemnitee liable on such claim or failing such
judgment or decree, must first receive the written approval of the terms and
conditions of such settlement from the indemnitor. An indemnitor shall have the
right to settle any Claim against it, subject to the prior written approval of
the other, which approval shall not be unreasonably withheld.
An indemnitee shall have the right to employ its own counsel in
any case, but the fees and expenses of such counsel shall be at the expense of
the indemnitee unless (a) the employment of such counsel shall have been
authorized in writing by the indemnitor in connection with the defense of such
action or Claim, (b) the indemnitor shall not have employed counsel in the
defense of such action or Claim, or (c) such indemnitee shall have reasonably
concluded that there may be defenses available to it which are contrary to, or
inconsistent with, those available to the indemnitor, in any of which events
such fees and expenses of not more than one additional counsel for the
indemnified parties shall be borne by the indemnitor. Any and all Claims made by
the Purchaser against the Seller for indemnification under this Article XI may
be, but are not required to be, settled by payment from the Escrow Account.
25
ARTICLE XII MISCELLANEOUS PROVISIONS
12.1 Amendment and Modification. Subject to applicable law, this Agreement
--------------------------
may be amended, modified and supplemented only by written agreement of the
parties hereto.
12.2 Entire Agreement. This Agreement, including the schedules and exhibits
----------------
hereto and the documents, certificates and instruments referred to herein,
embodies the entire agreement and understanding of the parties hereto in respect
of the transactions contemplated by this Agreement and supersedes all prior
agreements, representations, warranties, promises, covenants, arrangements,
communications and understandings, oral or written, express or implied, between
the parties with respect to such transactions. There are no agreements,
representations, warranties, promises, covenants, arrangements or understandings
between the parties with respect to such transactions, other than those
expressly set forth or referred to herein.
12.3 Certain Definitions.
--------------------
"Affiliate" means, with regard to any Person (a) any Person, directly or
---------
indirectly, controlled by, under common control of, or controlling such Person,
(b) any Person, directly or indirectly, in which such Person holds, of record or
beneficially, five percent or more of the equity or voting securities, (c) any
Person that holds, of record or beneficially, five percent or more of the equity
or voting securities of such Person, (d) any Person that, through Contract,
relationship or otherwise, exerts a substantial influence on the management of
such person's affairs, (e) any Person that, through Contract, relationship or
otherwise, is influenced substantially in the management of their affairs by
such Person, or (f) any director, officer, partner or individual holding a
similar position in respect of such Person.
"Authority" means any governmental, regulatory or administrative body,
---------
agency, arbitrator or authority, any court or judicial authority, any public,
private or industry regulatory agency, arbitrator authority, whether
international, national, federal, state or local.
"Claim" means any action, claim, obligation, liability, expense, lawsuit,
-----
demand, suit, inquiry, hearing, investigation, notice of a violation,
litigation, proceeding, arbitration, or other dispute, whether civil, criminal,
administrative or otherwise, whether pursuant to contractual obligations or
otherwise.
"Contract" means any agreement, contract, commitment, instrument or other
--------
binding arrangement or understanding, whether written or oral.
"Effective Date" means July 1, 2004 or such other date that the parties
---------------
shall agree.
"GAAP" means generally accepted accounting principles, applied on a
----
consistent basis with the Financial Statements, as in existence at the date
hereof.
"Guarantee" means any guarantee or other contingent liability (other than
---------
any endorsement for collection or deposit in the ordinary course of business),
direct or indirect with respect to any obligations of another Person, through an
agreement or otherwise, including, without limitation, (a) any endorsement or
discount with recourse or undertaking substantially equivalent to or having
economic effect similar to a guarantee in respect of any such obligations and
(b) any Contract (i) to purchase, or to advance or supply funds for the payment
or purchase of, any such obligations, (ii) to purchase, sell or lease property,
products, materials or supplies, or transportation or services, in respect of
enabling such other Person to pay any such obligation or to assure the owner
thereof against loss regardless of the delivery or nondelivery of the property,
products, materials or supplies or transportation or services or (iii) to make
any loan, advance or capital contribution to or other investment in, or to
otherwise provide funds to or for,
26
such other Person in respect of enabling such Person to satisfy an obligation
(including any liability for a dividend, stock liquidation payment or expense)
or to assure a minimum equity, working capital or other balance sheet condition
in respect of any such obligation.
"Indebtedness" with respect to any Person means any obligation of such
------------
Person for borrowed money, but in any event shall include (a) any obligation
incurred for all or any part of the purchase price of property or other assets
or for the cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current liabilities and
incurred in respect of property purchased in the ordinary course of business,
(b) the face amount of all letters of credit issued for the account of such
Person and all drafts drawn thereunder, (c) obligations (whether or not such
Person has assumed or become liable for the payment of such obligation) secured
by Liens, (d) capitalized lease obligations, and (e) all Guarantees of such
Person.
"Lien" means any security interest, lien, mortgage, pledge, hypothecation,
----
encumbrance, Claim, easement, restriction or interest of another Person of any
kind or nature.
"Material Adverse Change" means any developments or changes which would
-------------------------
have a material adverse effect.
"Material Adverse Effect" means any circumstances, state of facts or
-------------------------
matters which might reasonably be expected to have a material adverse effect in
respect of a Corporation's business, operations, properties, assets, condition
(financial or otherwise), results, plans, strategies or prospects.
"Occurrence" means any accident, happening or event which occurs or has
----------
occurred at any time prior to the Closing Date, which results in or could result
in a claim against a Corporation or creates or could create a liability or loss
for a Corporation.
"Order" means any decree, judgment, award, order, injunction, rule, consent
-----
of or by an Authority.
"Person" means any corporation, partnership, joint venture, organization,
------
entity, Authority or natural person.
"Proprietary Rights" means any patent, patent application, copyright,
-------------------
trademark, trade name, service xxxx, service name, trade secret, know-how,
confidential information or other intellectual property or proprietary rights.
"Regulation" means any law, statute, rule, regulation, ordinance,
----------
requirement, announcement or other binding action of or by an Authority.
12.4 Notices. All notices, requests, demands and other communications
-------
required when delivered by hand or mailed, first class certified mail with
postage paid or by overnight receipted courier service: (a) If to the Seller or
the Corporation to Xxxxx X. Xxx Xx. 0000 Xxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxx 00000
with a copy to Personnel Resources of Georgia Inc., 000 X. Xxxxxxxxxxxx Xxxxx
Xxx 0-X. Xxxxxxxxxx XX ,Attn: President and or to such other person or address
as Seller shall furnish by notice to the Purchaser in writing; (b)If to the
Purchaser to Xxxxx X. Xxx at the address of the Purchaser indicated in the
preamble to this Agreement or to such other person or address as the Purchaser
shall furnish by notice to Seller in writing.
12.5 Assignment. This Agreement and all of the provisions hereof shall
----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither
27
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent of
the other parties, except that the Purchaser may assign its rights, interests
and obligations hereunder to any Affiliate, and may grant Liens or security
interests in respect of its rights and interests hereunder without the prior
approval of the Seller or the Corporation.
12.6 Governing Law, Attorneys Fees and Venue. The Agreement shall be
---------------------------------------
governed by the internal laws of the State of Georgia as to all matters,
including but not limited to matters of validity, construction, effect and
performance. Any action brought to enforce any of the terms hereof shall be
brought exclusively in the state or federal courts of the State of Georgia,
County of Xxxxxx and the prevailing party in any such action shall be entitled
to an award of reasonable attorney fees and court costs.
12.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.8 Headings. The article and section headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.9 Binding Effect. This Agreement shall not be construed so as to
---------------
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
12.10 Injunctive Relief. The parties hereto agree that in the event of
-----------------
a breach of any provision of this Agreement, the aggrieved party or parties may
be without an adequate remedy at law. The parties therefore agree that in the
event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
12.11 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the party of any party hereto of any breach or default under this Agreement, or
any waiver on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
12.12 Severability. Unless otherwise provided herein, if any provision
------------
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
effected or impaired thereby.
12.13 Expenses. Except as provided in Section 1.3(b), the Purchaser
--------
shall bear its own expenses, including without limitation, legal fees and
expenses, with respect to this Agreement and the transactions contemplated
hereby. The Seller shall bear its own and the Corporation' expenses, including
without limitation, legal fees and expenses, with respect to this Agreement and
the transactions contemplated hereby.
28
12.14 Limitation of Liability. NEITHER PURCHASER NOR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, OR AGENTS AND OR ATTORNEYS OR PROFESSIONAL ADVISORS
REPERESENTING ANY OF THEM IN THIS TRANSACTION, (THE "SECTION 11 PARTIES') SHALL
HAVE ANY LIABILITY TO SELLER WITH RESPECT TO ANY OBLIGATIONS UNDER THIS
AGREEMENT, OR THE OTHER AGREEMENTS AS HEREIN DEFINED, OR OTHERWISE, FOR
CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES EVEN IF ANY OF
THEM HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN ANY EVENT, THE
JOINT AND SEVERAL LIABILITY OF THE SECTION 11 PARTIES EXCEPT FOR ATTORNEYS,
CONSULTANTS OR PROFESSIONAL ADVISORS TO SELLER OR TO THE CORPORATION OR ANY
OTHER PARTY FOR ANY REASON AND UPON ANY CAUSE OF ACTION SHALL BE LIMITED TO THE
AGGREGATE AMOUNT OF $100,000.00. THE JOINT AND SEVERAL LIABILITY OF THE SECTION
11 PARTIES WHO ARE ATTORNEYS, CONSULTANTS OR PROFESSIONAL ADVISORS TO SELLER OR
TO THE CORPORATION OR ANY OTHER PARTY FOR ANY REASON AND UPON ANY CAUSE OF
ACTION SHALL BE LIMITED TO THE AGGREGATE AMOUNT OF ONE THOUSAND DOLLARS $1000.
THIS LIMITATION APPLIES TO ALL CAUSES OF ACTION IN THE AGGREGATE, INCLUDING
WITHOUT LIMITATION TO BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT
LIABILITY, MISREPRESENTATIONS, AND OTHER TORTS. IN THE EVENT THE TERMS OF THIS
SECTION CONFLICT WITH ANY OF THE OTHER TERMS OF THIS AGREEMENT OR WITH THE TERMS
OF ANY OF THE OTHER AGREEMENTS, AS THAT TERM IS DEFINED HEREIN, THE TERMS OF
THIS SECTION SHALL CONTROL AND THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE
CLOSING FOR FIVE YEARS.
IN WITNESS WHEREOF, the parties hereto have made and entered into
this Agreement the date first hereinabove set forth.
Attest: Charys Holding Company, Inc.
Signature not readable /s/ Xxx Xxxxxxx
---------------------------------- ----------------------------------
Xxx Xxxxxxx, President and COO
Attest: PERSONNEL RESOURCES OF GEORGIA, INC.
/s/ XXXXX X. XXX
---------------------------------- ----------------------------------
XXXXX X. XXX, XX., President
XXXXX X. XXX, XX.
/s/ XXXXX X. XXX, XX.
---------------------------------- ----------------------------------
XXXXX X. XXX, XX.
29
SCHEDULES AND EXHIBITS
1.1 Shares of the Corporation and form of Certificate of the Shares
1.4 Form of Registration Rights Agreement
2.1(a) Jurisdictions of Qualification
2.l(b) Seller's and the Corporation's Charter and Bylaws
2.3 Capital Stock
2.8 Violations
2.9(a) Financial Statements
2.9(b) Undisclosed Liabilities
2.9(c) Closing Date Balance Sheet
2.12 Contracts
2.14(a) Title Matters
2.14(b) Leases
2.16 Taxes
2.19 Banks
2.20 Intellectual Property
2.21 Affiliate Transactions
2.22 Insurance
6.2 Form of Employment Agreement
7.3 Opinion of Counsel
7.4 Change Certificate
7.6 Accounting Certificate
7.8 Secretary's Certificate
8.1 Officer's Certificate
30
EXHIBIT 1.1
SHARES OF THE CORPORATION AND FORM OF CERTIFICATE OF THE
SHARES
EXHIBIT 1.4
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is entered into as of_____, 2004, by and between CHARYS
HOLDING COMPANY, INC., a Delaware corporation (the "Company"), and Brax Crutchin
(the "Holder").
WHEREAS, on even date herewith the Company executed and delivered to the
Holder that certain Consulting Agreement (the "Consulting Agreement") whereby
the Company has agreed to issue to the Holder 1,000,000 shares of the Company's
common stock, no par value per share (the "Company Common Stock"), in payment
for services as described in the Consulting Agreement; and
WHEREAS, 333,333 shares of the Company Common Stock to be issued to the
Holder under the Consulting Agreement (the "Registrable Securities") will be
restricted in their resale under Rule 144 ("Rule 144") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), but possessing
piggyback registration rights as hereinafter provided; and
WHEREAS, the Registrable Securities include any other securities issued or
issuable at any time or from time to time in respect of the Registrable
Securities as a result of a merger, consolidation, reorganization, stock split,
stock dividend, recapitalization or other similar event involving the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Piggyback Registration Rights Available. Provided that the Registrable
----------------------------------------
Securities have not been registered, if at any time after the date hereof but
before the third anniversary of the date hereof, the Company proposes to
register any of its securities under the Securities Act, other than by a
registration in connection with an acquisition in a manner which would not
permit registration of the Registrable Securities for sale to the public, on
Form S-8, or any successor form thereto, on Form S-4, or any successor form
thereto on an underwritten basis (either "best-efforts" or "firm-commitment"),
then, the Company will each such time give prompt written notice to the Holder
of its intention to do so and of the Holder's rights under this Agreement. Upon
the written request of the Holder made within 10 days after the receipt of any
such notice (which request shall specify the Registrable Securities intended to
be disposed of by the Holder and the intended method of disposition thereof),
the Company will, subject to the terms of this Agreement, use its commercially
reasonable best efforts to effect the registration under the Securities Act of
the Registrable Securities, to the extent requisite to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of the
Registrable Securities so to be registered, by inclusion of the Registrable
Securities in a registration statement filed by the Company on Form S-l, SB-2,
or S-3, or some other similar form pursuant to the Securities Act to register
the securities which the Company proposes to register (the "Registration
Statement"), provided that if, at any time after written notice of its intention
to register any securities and prior to the effective date of the Registration
Statement filed in connection with such registration, the Company shall
determine for any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to the Holder and, thereupon:
(a) In the case of a determination not to register, shall be
relieved of this obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses in connection therewith); and
(b) In the case of a determination to delay registering, shall
be permitted to delay registering any Registrable Securities, for the same
period as the delay in registering such other securities.
2. Payment of Registration Expenses. The Company will pay all
-----------------------------------
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Agreement. The right provided the Holder
pursuant to this Agreement shall be exercisable at its sole discretion.
3. Priority in Incidental Registrations. If the managing underwriter
-------------------------------------
of the underwritten offering contemplated by this Agreement shall inform the
Company and the Holder by letter of its belief that the number of
1
securities requested to be included in such registration exceeds the number
which can be sold in such offering, then the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering:
(a) First, securities proposed by the Company to be sold for its
own account; and
(b) Second, Registrable Securities and securities of other
selling security holders requested to be included in such registration pro rata
on the basis of the number of shares of such securities so proposed to be sold
and so requested to be included; provided, however, the Holder shall have pro
rata rights of registration with all shares sought to be included by officers
and directors of the Company as well as holders of 10 percent or more of the
Company Common Stock.
4. Registration Procedures. If and whenever the Company is required to
------------------------
affect the registration of any Registrable Securities under the Securities Act
as provided in herein, the Company shall, as expeditiously as possible:
(a) Prepare and file with the Securities and Exchange Commission
(the "SEC") the Registration Statement, or amendments thereto, to effect such
registration (including such audited financial statements as may be required by
the Securities Act or the rules and regulations promulgated thereunder) and
thereafter use its commercially reasonable best efforts to cause the
Registration Statement to be declared effective by the SEC, as soon as
practicable; provided, however, that before filing the Registration Statement or
any amendments thereto, the Company will furnish to the counsel selected by the
Holder, copies of all such documents proposed to be filed;
(b) Furnish to the Holder such number of conformed copies of the
Registration Statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in the Registration Statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as the Holder and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by the Holder;
(c) Use its commercially reasonable best efforts to register or
qualify all Registrable Securities and other securities covered by the
Registration Statement under such other securities laws or blue sky laws as the
Holder shall reasonably request, to keep such registrations or qualifications in
effect for so long as the Registration Statement remains in effect, and take any
other action which may be reasonably necessary to enable the Holder to
consummate the disposition in such jurisdictions of the securities owned by the
Holder, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subparagraph be obligated
to be so qualified or to consent to general service of process in any such
jurisdiction;
(d) Use its commercially reasonable best efforts to cause all
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the Holder to consummate the disposition of such Registrable
Securities;
(e) Furnish to the Holder a signed counterpart, addressed to the
Holder, and the underwriters, if any, of an opinion of counsel for the Company,
dated the effective date of the Registration Statement (or, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), reasonably satisfactory in form and
substance to the Holder including that the prospectus and any prospectus
supplement forming a part of the Registration Statement does not contain an
untrue statement of a material fact or omits a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(f) Notify the Holder and its counsel promptly and confirm such
advice in writing promptly after the Company has knowledge thereof:
2
(i) When the Registration Statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
Registration Statement has been filed, and, with respect to the Registration
Statement or any post-effective amendment thereto, when the same has become
effective;
(ii) Of any request by the SEC for amendments or supplements to
the Registration Statement or the prospectus or for additional information;
(iii) Of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
by any Person for that purpose; and
(iv) Of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable Securities for
sale under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose;
(g) Notify each holder of the Registrable Securities covered by the
Registration Statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material facts required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of the Holder promptly prepare
and furnish to the Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(h) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(i) Otherwise use its commercially reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first full calendar month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 1l(a) of the Securities Act and Rule 158 thereunder;
(j) Enter into such agreements and take such other actions as the
Holder shall reasonably request in writing (at the expense of the requesting or
benefiting Holder) in order to expedite or facilitate the disposition of the
Registrable Securities; and
(k) Use its commercially reasonable best efforts to list all of the
Registrable Securities covered by the Registration Statement on any securities
exchange on which any of the Registrable Securities are then listed.
5. Information to be Furnished by the Holder. The Company may require the
------------------------------------------
Holder of the Registrable Securities as to which any registration is being
affected to furnish the Company such information regarding the Holder and the
distribution of such securities as the Company may from time to time reasonably
request in writing.
6. Discontinuance of Disposition of the Registrable Securities. The
-----------------------------------------------------------------
Holder agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in Paragraph 4(g) hereof, the
Holder will forthwith discontinue the Holder's disposition of the Registrable
Securities pursuant to the Registration Statement relating to such Registrable
Securities until the Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Paragraph 4(g) and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in the Holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
3
7. Incidental Underwritten Offerings. If the Company at any time proposes
----------------------------------
to register any of its securities under the Securities Act as contemplated by
this Agreement and such securities are to be distributed by or through one or
more underwriters, the Company will, if requested by the Holder, use its
commercially reasonable best efforts to arrange for such underwriters to include
all the Registrable Securities to be offered and sold by the Holder among the
securities to be distributed by such underwriters.
8. Holdback Agreements. Subject to such other reasonable requirements
--------------------
as may be imposed by the underwriter as a condition of inclusion of the
Registrable Securities in the Registration Statement, the Holder agrees by
acquisition of the Registrable Securities, if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of,
except as part of such underwritten registration, any equity securities of the
Company, during such reasonable period of time requested by the underwriter;
provided however:
(a) The secondary offering is intended to raise a minimum of
$8,000,000 on behalf of the Company and
(b) Such period shall not exceed the 90 day period commencing with
the completion of an underwritten offering.
The Company agrees and acknowledges that during any holdback period, the
Holder may sell, in the holdback period, Registrable Securities in the amount of
up to one percent per week of the shares of the Company Common Stock held by the
Holder as long as this Agreement remains effective.
9. Participation in Underwritten Offerings. The Holder may not participate
---------------------------------------
in any underwritten offering under this Agreement unless the Holder:
(a) Agrees to sell its securities on the basis provided in any
underwriting arrangements approved, subject to the terms and conditions hereof,
by the Holder; and
(b) Completes and executes all questionnaires, indemnities,
underwriting agreements and other documents (other than powers of attorney)
required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other
agreement in connection with such offering) shall require the Holder to make a
representation or warranty to or agreements with the Company or the underwriters
other than representations and warranties contained in a writing furnished by
the Holder expressly for use in the related Registration Statement or
representations, warranties or agreements regarding the Holder, the Holder and
the Holder's intended method of distribution and any other representation
required by law.
10. Preparation; Reasonable Investigation. In connection with the
---------------------------------------
preparation and filing of each Registration Statement under the Securities Act
pursuant to this Agreement, the Company will give the Holder and its counsel and
accountants, the opportunity to participate in the preparation of the
Registration Statement, each prospectus included therein or filed with the SEC,
and each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
reasonable opinion of the Holder's and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
11. Indemnification by the Company. In the event of any registration
---------------------------------
of any securities of the Company under the Securities Act, the Company will, and
hereby does agree to indemnify and hold harmless the Holder, its directors and
officers, each other Person ("Person" means an individual, partnership, firm,
limited liability company, trust, joint venture, association, corporation, or
any other legal entity) who participates as an underwriter in the offering or
sale of such securities and each other Person, if any, who controls the Holder
or any such underwriter within the meaning of the Securities Act against any
losses, claims, damages or liabilities, joint or several, to which the Holder or
any such director or officer or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or
4
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse the Holder and each such
director, officer, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding, provided that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability, (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by the Holder or underwriter stating that it is for use
in the preparation thereof and, provided further that the Company shall not be
liable to any Person who participates as an underwriter in the offering or sale
of the Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
within the time required by the Securities Act to the Person asserting the
existence of an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of the
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus or an amendment or supplement thereto. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Holder or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by the
Holder.
12. Indemnification by the Holder. The Company may require, as a condition
-----------------------------
to including any of the Registrable Securities in any Registration Statement
filed pursuant to this Agreement, that the Company shall have received an
undertaking satisfactory to it from the Holder, to indemnify and hold harmless
(in the same manner and to the same extent as set forth in Paragraph 11 hereof)
the Company, each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from the Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by the Holder specifically stating that it is for use in the preparation of the
Registration Statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by the Holder.
13. Notices of Claims. Etc. Promptly after receipt by an indemnified
-------------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in Paragraph 11 and Paragraph 12 hereof, such indemnified
party will, if claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under
Paragraph 11 and Paragraph 12 hereof, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that the
indemnifying party may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such action which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability, or a covenant not to
xxx, in respect to such claim or litigation. No indemnified party shall consent
5
to entry of any judgment or enter into any settlement of any such action the
defense of which has been assumed by an indemnifying party without the consent
of such indemnifying party.
14. Other Indemnification. Indemnification similar to that specified in
----------------------
Paragraph 11 and Paragraph 12 hereof (with appropriate modifications) shall be
given by the Company and the Holder (but only if and to the extent required
pursuant to the terms hereof) with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority, other than the Securities Act.
15. Indemnification Payments. The indemnification required by Paragraph 11
------------------------
and Paragraph 12 hereof shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
16. Contribution. If the indemnification provided for in Paragraph 11
------------
and Paragraph 12 hereof is unavailable to an indemnified party in respect of any
expense, loss, claim, damage or liability referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such expense, loss, claim, damage or liability:
(a) In such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Holder or underwriter,
as the case may be, on the other from the distribution of the Registrable
Securities; or
(b) If the allocation provided by clause (a) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (a) above but also the relative fault of
the Company on the one hand and of the Holder or underwriter, as the case may
be, on the other in connection with the statements or omissions which resulted
in such expense, loss, damage or liability, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the
Holder or underwriter, as the case may be, on the other in connection with the
distribution of the Registrable Securities shall be deemed to be in the same
proportion as the total net proceeds received by the Company from the initial
sale of the Registrable Securities by the Company to the purchasers bear to the
gain, if any, realized by all selling holders participating in such offering or
the underwriting discounts and commissions received by the underwriter, as the
case may be. The relative fault of the Company on the one hand and of the Holder
or underwriter, as the case may be, on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission to state a material fact relates to information
supplied by the Company, by the Holder or by the underwriter and the parties'
relative intent, knowledge, access to information supplied by the Company, by
the Holder or by the underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, provided that the foregoing contribution agreement shall not inure to
the benefit of any indemnified party if indemnification would be unavailable to
such indemnified party by reason of the provisions contained hereof, and in no
event shall the obligation of any indemnifying party to contribute under this
Paragraph 16 exceed the amount that such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided for
hereunder had been available under the circumstances.
The Company and the Holder agree that it would not be just and equitable if
contribution pursuant to this Paragraph 16 were determined by pro rata
allocation (even if the Holder and any underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
herein, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
17. Limitation on Contributions. Notwithstanding the provisions of
-----------------------------
Paragraph 16, the Holder and an underwriter shall not be required to contribute
any amount in excess of the amount by which (a) in the case of the Holder, the
net proceeds received by the Holder from the sale of Registrable Securities, or
(b) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that the Holder or
underwriter has
6
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
18. Rule 144. The Company shall timely file the reports required to be
---------
filed by it under the Securities Act and the Securities Exchange Act of 1934, as
amended (including but not limited to the reports under Sections 13 and 15(d) of
the Securities Exchange Act of 1934 referred to in subparagraph (c) of Rule 144)
and the rules and regulations adopted by the SEC thereunder (or, if the Company
is not required to file such reports, will, upon the request of the Holder, make
publicly available other information) and will take such further action as the
Holder may reasonably request, all to the extent required from time to time to
enable the Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144,
as Rule 144 may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of the Holder, the
Company will deliver to the Holder a written statement as to whether it has
complied with the requirements of this Paragraph.
19. Amendments and Waivers. This Agreement may be amended and the
------------------------
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51 percent or more of the shares of (a) the
Registrable Securities issued at such time, plus (b) the Registrable Securities
issuable upon exercise or conversion of the securities of the Company then
constituting derivative securities (if such securities were not fully exchanged
or converted in full as of the date such consent if sought). Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Paragraph, whether or not such Registrable
Securities shall have been marked to indicate such consent.
20. Nominees for Beneficial Owners. In the event that any of the
---------------------------------
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election, be treated as the holder of
such Registrable Securities for purposes of any request or other action by any
holder or holders of the Registrable Securities pursuant to this Agreement or
any determination of any number of percentage of shares of the Registrable
Securities held by a holder or holders of the Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership or such Registrable Securities.
21. Conflict. Notwithstanding anything herein contained to the contrary, in
--------
the event of any conflict between the terms of the Consulting Agreement or this
Agreement, the terms of this Agreement shall control.
22. Notices. All notices, requests, demands, and other communications
-------
hereunder shall be in writing and delivered personally or sent by registered or
certified United States mail, return receipt requested with postage prepaid, by
facsimile, or by e-mail, if to the Company, addressed to Xx. Xxxxx Xxx at 000
Xxxxx Xxxxx Xxxxx, Xxxxxxx, Xxxxxxx 00000, and if to the Holder, addressed to
Xx. Xxx Xxxxxxxxxxx at 0000 Xxx Xxx Xxxxx Xxxxx, Xxxxxx Xxxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000, telecopier (000) 000-0000, and e-mail xxx@xxxxxx.xxx. Any
party may change its address for purposes of receiving notices pursuant to this
Agreement upon 10 days written notice.
23. Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
of the Registrable Securities.
24. Descriptive Headings. The descriptive headings of the several sections
--------------------
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
25. Governing law; Jurisdiction. This Agreement shall be governed by
-----------------------------
and construed in accordance with the laws of the State of California without
regard to any conflicts of laws provisions thereof. Each party hereby
irrevocably submits to the personal jurisdiction of the United States District
Court located in San Diego, California, as well as of the Superior Courts of the
State of California in San Diego County, California over any suit, action or
proceeding arising out of or relating to this Agreement. Each party hereby
irrevocably waives, to the fullest extent
7
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such mediation, arbitration, suit, action or proceeding
brought in any such county and any claim that any such mediation, arbitration,
suit, action or proceeding brought in such county has been brought in an
inconvenient forum.
26. Severability. If any provision of this Agreement, or the application of
------------
such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
27. Binding Effect. All the terms and provisions of this Agreement whether
--------------
so expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective administrators, executors, legal
representatives, heirs, successors and assignees.
28. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
----------------------------------------------------------
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty, covenant or agreement herein, nor
shall nay single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
29. Counterparts. This Agreement may be executed in one or more
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counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto.
30. Entire Agreement. This Agreement embodies the entire agreement and
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understanding between the Company and each other party hereto relating to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
CHARYS HOLDING COMPANY, INC.
By
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Xxxxx Xxx, President
By
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BRAX CRUTCHIN
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