<TABLE>
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TABLE OF CONENTS
PAGE
<S>
<C>
ARTICLE 1 PURCHASE
OF STOCK AND PURCHASE PRICE. . . . . . . . . . . . . . 1
1.1
Purchase
and Sale . . . . . . . . . . . . . . . . . . . . . . . .
1
1.2
Purchase
Price. . . . . . . . . . . . . . . . . . . . . . . . . .
1
1.3
Purchase
Price Adjustment Mechanism . . . . . . . . . . . . . . .
3
1.4
Rock Creek
Earn Out . . . . . . . . . . . . . . . . . . . . . . . 5
1.5
Option to
Repurchase. . . . . . . . . . . . . . . . . . . . . . .
7
1.6
Purchaser
Stock Issued to the Sellers . . . . . . . . . . . . . .
7
1.7
Additional
Consideration. . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AND THE CORPORATION . . . . . . . . . . . . . . . . . . . . . .
8
2.1
Corporate
Organization. . . . . . . . . . . . . . . . . . . . . .
8
2.2
Subsidiaries and Affiliates . . . . . . . . . . . . . . . . . . .
8
2.3
Capital
Stock . . . . . . . . . . . . . . . . . . . . . . . . . .
8
2.4
Corporate
Records . . . . . . . . . . . . . . . . . . . . . . . .
8
2.5
Authorization . . . . . . . . . . . . . . . . . . . . . . . . . .
8
2.6
No
Violation. . . . . . . . . . . . . . . . . . . . . . . . . . .
9
2.7
Financial
Statements. . . . . . . . . . . . . . . . . . . . . . .
9
2.8
Employees
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
2.9
Absence of
Certain Changes. . . . . . . . . . . . . . . . . . . . 10
2.10
Contracts . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 10
2.11
Brokerage . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 11
2.12
Title and
Related Matters . . . . . . . . . . . . . . . . . . . .
12
2.13
Litigation. . .
. . . . . . . . . . . . . . . . . . . . . . . . . 12
2.14
Tax Matters . .
. . . . . . . . . . . . . . . . . . . . . . . . . 12
2.15
Compliance with
Law and Applicable Government Regulations . . . . 14
2.16
ERISA and
Related Matters . . . . . . . . . . . . . . . . . . . .
14
2.17
Banks, Brokers
and Proxies. . . . . . . . . . . . . . . . . . . . 14
2.18
Intellectual
Property . . . . . . . . . . . . . . . . . . . . . . 15
2.19
Dealings with
Affiliates. . . . . . . . . . . . . . . . . . . . . 15
2.20
Insurance . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 15
2.21
Disclosure. . .
. . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 3 ADDITIONAL
REPRESENTATIONS OF THE SELLER. . . . . . . . . . . . 16
3.1
Shares
Held For Own Account . . . . . . . . . . . . . . . . . . .
16
<PAGE>
TABLE OF CONENTS
(CONTINUED)
PAGE
3.2
No
Registration . . . . . . . . . . . . . . . . . . . . . . . . .
16
3.3
Investment
Knowledge. . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . .
16
4.1
Corporate
Organization. . . . . . . . . . . . . . . . . . . . . .
16
4.2
Capital
Stock . . . . . . . . . . . . . . . . . . . . . . . . . .
16
4.3
Authorization . . . . . . . . . . . . . . . . . . . . . . . . . .
17
4.4
No
Violation. . . . . . . . . . . . . . . . . . . . . . . . . . .
17
4.5
Financial
Statements. . . . . . . . . . . . . . . . . . . . . . .
17
4.6
Brokerage
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
4.7
Investment
Intent . . . . . . . . . . . . . . . . . . . . . . . . 18
4.8
Acquired
Shares . . . . . . . . . . . . . . . . . . . . . . . . .
18
4.9
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF RAY . . . . . . . . . . . . .
18
5.1
Ownership
of Stock. . . . . . . . . . . . . . . . . . . . . . . .
18
5.2
Authorization . . . . . . . . . . . . . . . . . . . . . . . . . .
19
5.3
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
ARTICLE 6 COVENANTS
OF THE SELLER AND THE CORPORATION . . . . . . . . . . 19
6.1
Regular
Course of Business. . . . . . . . . . . . . . . . . . . .
19
6.2
Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
6.3
Capital
Changes; Pledges. . . . . . . . . . . . . . . . . . . . .
19
6.4
Dividends
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
6.5
Capital
and Other Expenditures. . . . . . . . . . . . . . . . . .
20
6.6
Borrowing
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
20
6.7
Other
Commitments . . . . . . . . . . . . . . . . . . . . . . . .
20
6.8
Interim
Financial Information and Audit . . . . . . . . . . . . .
20
6.9
Full
Access and Disclosure. . . . . . . . . . . . . . . . . . . .
20
6.10
Consents. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 20
6.11
Breach of
Agreement . . . . . . . . . . . . . . . . . . . . . . .
21
6.12
Confidentiality
. . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 7 COVENANTS
OF THE PURCHASER. . . . . . . . . . . . . . . . . . . 21
7.1
Consents.
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
7.2
Breach of
Agreement . . . . . . . . . . . . . . . . . . . . . . .
21
<PAGE>
TABLE OF CONENTS
(CONTINUED)
PAGE
7.3
Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . .
21
ARTICLE 8 OTHER
AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . .
21
8.1
Tax
Periods Beginning Before and Ending after the Closing Date. .
21
8.2
Audits. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
8.3
Employment, Non-Competition and Incentive Compensation Agreements
22
8.4
Further
Assurances. . . . . . . . . . . . . . . . . . . . . . . .
22
8.5
No
Solicitation or Negotiation. . . . . . . . . . . . . . . . . .
22
8.6
Indemnification and Release from Agreements of Personal Guaranty.
22
ARTICLE 9 CONDITIONS
TO THE OBLIGATIONS OF THE PURCHASER. . . . . . . . . 23
9.1
Representations and Warranties; Performance . . . . . . . . . . .
23
9.2
Consents
and Approvals. . . . . . . . . . . . . . . . . . . . . .
23
9.3
Opinion of
the Sellers' Counsel . . . . . . . . . . . . . . . . . 23
9.4
No
Material Adverse Change. . . . . . . . . . . . . . . . . . . .
23
9.5
No
Proceeding or Litigation . . . . . . . . . . . . . . . . . . .
23
9.6
Proceedings and Documents . . . . . . . . . . . . . . . . . . . .
23
9.7
Secretary's Certificate . . . . . . . . . . . . . . . . . . . . .
24
9.8
Certificates of Good Standing . . . . . . . . . . . . . . . . . .
24
9.9
Employment
Agreements . . . . . . . . . . . . . . . . . . . . . . 24
9.10
Voting Agreement
and Escrow Agreement . . . . . . . . . . . . . . 24
9.11
Other Documents
. . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 10 CONDITIONS TO
THE OBLIGATIONS OF THE SELLERS AND
THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . .
24
10.1
Representations
and Warranties; Performance . . . . . . . . . . . 24
10.2
Consents and
Approvals. . . . . . . . . . . . . . . . . . . . . . 24
10.3
Opinion of the
Purchaser's Counsel. . . . . . . . . . . . . . . . 25
10.4
No Proceeding or
Litigation . . . . . . . . . . . . . . . . . . . 25
10.5
Proceedings and
Documents . . . . . . . . . . . . . . . . . . . . 25
10.6
Secretary's
Certificate . . . . . . . . . . . . . . . . . . . . . 25
10.7
Certificate of
Good Standing. . . . . . . . . . . . . . . . . . . 25
10.8
Employment
Agreements . . . . . . . . . . . . . . . . . . . . . . 25
10.9
Indemnification
Agreement . . . . . . . . . . . . . . . . . . . . 25
10.10
Registration Rights
Agreement . . . . . . . . . . . . . . . . . . 25
<PAGE>
TABLE OF CONENTS
(CONTINUED)
PAGE
10.11
Voting Agreement and
Escrow Agreement . . . . . . . . . . . . . . 25
10.12
Secured Note and Stock
Pledge Agreement . . . . . . . . . . . . . 25
10.13
Other Documents . . .
. . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 11 CLOSING . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 26
11.1
Closing . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 26
11.2
Intervening
Litigation. . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 12 TERMINATION
PRIOR TO CLOSING. . . . . . . . . . . . . . . . . . 26
12.1
Methods of
Termination. . . . . . . . . . . . . . . . . . . . . . 26
12.2
Termination of
Obligations. . . . . . . . . . . . . . . . . . . . 27
ARTICLE 13 INDEMNIFICATION
. . . . . . . . . . . . . . . . . . . . . . . . 27
13.1
The Sellers'
Agreement to Indemnify . . . . . . . . . . . . . . . 27
13.2
The Purchaser's
Agreement to Indemnify. . . . . . . . . . . . . . 27
13.3
Limitations on
Indemnification. . . . . . . . . . . . . . . . . . 28
13.4
Third Party
Indemnification . . . . . . . . . . . . . . . . . . . 28
13.5
Survival; Time
to Assert Claims . . . . . . . . . . . . . . . . . 29
13.6
Indemnification;
Sole Remedy. . . . . . . . . . . . . . . . . . . 30
ARTICLE 14 MISCELLANEOUS
PROVISIONS. . . . . . . . . . . . . . . . . . . . 30
14.1
Amendment and
Modification. . . . . . . . . . . . . . . . . . . . 30
14.2
Entire
Agreement. . . . . . . . . . . . . . . . . . . . . . . . .
30
14.3
Certain
Definitions . . . . . . . . . . . . . . . . . . . . . . .
30
14.4
Notices . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 33
14.5
Assignment. . .
. . . . . . . . . . . . . . . . . . . . . . . . . 34
14.6
Governing Law .
. . . . . . . . . . . . . . . . . . . . . . . . . 34
14.7
Dispute
Resolution. . . . . . . . . . . . . . . . . . . . . . . .
34
14.8
Counterparts. .
. . . . . . . . . . . . . . . . . . . . . . . . . 35
14.9
Headings. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 35
14.10
Binding Effect. . . .
. . . . . . . . . . . . . . . . . . . . . . 35
14.11
Delays or Omissions .
. . . . . . . . . . . . . . . . . . . . . . 35
14.12
Severability. . . . .
. . . . . . . . . . . . . . . . . . . . . . 35
14.13
Expenses. . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT BY AND AMONG
CHARYS HOLDING COMPANY, INC.,
ROCK CREEK EQUITY HOLDINGS, LLC, J. ALAN SHAW
METHOD IQ, INC.,
AND
BILLY V. RAY, JR.
REGARDING ALL OF THE ISSUED AND OUTSTANDING STOCK OF
METHOD IQ, INC.
<PAGE>
THIS
STOCK PURCHASE AGREEMENT (the
"AGREEMENT"), dated as of December __,
2005, to be effective as of November 1, 2005, by and among CHARYS
HOLDING
COMPANY, INC., a Delaware corporation located at 1117
Perimeter Center West,
Suite N-415, Atlanta Georgia 30338 (the "PURCHASER"), ROCK CREEK EQUITY
HOLDINGS, LLC, a Georgia limited liability company located at 1750
Founders
Parkway, Suite 180, Alpharetta, Georgia 30004 ("ROCK
CREEK"), J. ALAN SHAW, a
South Carolina resident ("SHAW" and together with Rock Creek, hereinafter
sometimes referred to individually as a "SELLER" and collectively as, the
"SELLERS"), METHOD IQ, INC., a Georgia corporation located at
1750 Founders
Parkway, Suite 180, Alpharetta, Georgia
30004 (the "CORPORATION"), and BILLY V.
RAY, JR., a Georgia resident ("RAY"), (the Sellers, the Purchaser, the
Corporation, and Ray collectively referred to herein as the "PARTIES").
RECITALS
WHEREAS,
the Sellers own all of
the issued and outstanding common stock of
the Corporation;
WHEREAS,
the Sellers desires to sell all of their interests in the
Corporation to the Purchaser and the Purchaser to desires to
purchase all of
such interests from the Sellers;
WHEREAS,
Ray owns 100% of the Series A Preferred
Stock of the Purchaser;
WHEREAS,
to induce each other to enter into this
Agreement, the Parties
have agreed to execute, deliver and perform certain obligations under
this
Agreement and the other related agreements to which they are parties;
NOW THEREFORE, in consideration of the foregoing
recitals and the mutual
representations, warranties, covenants and agreements contained
herein and for
other good and valuable consideration, the receipt and
adequacy of which are
hereby acknowledged, the Parties agree as follows:
ARTICLE 1
PURCHASE OF STOCK AND PURCHASE PRICE
1.1 PURCHASE
AND SALE. Subject to the terms and conditions of
this
Agreement, the Sellers agree to sell to the
Purchaser, and the Purchaser agrees
to purchase from the Sellers, all of the issued and outstanding shares
of
capital stock of the Corporation (the "SHARES").
1.2 PURCHASE
PRICE.
1.2.1 The Purchaser agrees to pay to the Sellers aggregate
consideration of $10,500,000 (the "PURCHASE PRICE") by delivery of (i)
$5,250,000 by a secured promissory note (the
"SECURED NOTE") at the Closing (as
defined in Article 11.1 below), the form
of which is attached hereto as EXHIBIT
O, which note will be secured by the Shares
and will be payable immediately upon
an equity or debt investment in Purchaser of not
less than $5,250,000, or on
demand after February 1, 2005, and (ii)
$5,250,000 in value of shares of Common
Stock to the Sellers for the balance thereof ("STOCK CONSIDERATION") as
described below in Section 1.2.2 of
1
<PAGE>
this Agreement. The aggregate consideration is subject
to adjustment pursuant
to Section 1.3 of this Agreement.
The Sellers
agree, for purposes hereof, that
principal and interest on the Secured Note, and any
collateral in connection
therewith, will be allocated pro rata based on their equity
ownership in the
Corporation immediately prior to Closing.
1.2.2 The Stock Consideration shall be issued to the Sellers
as
follows:
(a)
At the time that the Secured Note is due and payable, the
Purchaser shall issue to the Sellers an aggregate of 525,000 shares of
its
Common Stock (the "INITIAL STOCK TRANCHE"),
reflecting forty percent (40%) of
the total Stock Consideration to be paid to
the Sellers based upon a share price
of Four Dollars ($4.00) per share.
(b)
180 days after the Effective Date, the Purchaser
shall
issue to the Sellers additional shares of its
Common Stock (the "SECOND STOCK
TRANCHE") equal to thirty percent (30%) of the total aggregate Stock
Consideration to be paid to the Sellers based upon
a share price valued at the
Market Price per share for the Common Stock as of
the close of trading on the
last Trading Day before such issuance.
Notwithstanding, the
foregoing, in the
event that the Market Price used for
determining the number of shares of Common
Stock to be issued in connection with the
Second Stock Tranche is less than Four
Dollars ($4.00) per share, the Purchaser shall have the option,
but not the
obligation, to (i) pay the Sellers an aggregate of
$1,575,000 in cash by wire
transfer of immediately available funds in
lieu of the issuance of such shares
or (ii) pay the Sellers a combination of cash and shares.
(c)
365 days after the Effective Date, the Purchaser
shall
issue to the Sellers additional shares of its Common
Stock (the "THIRD STOCK
TRANCHE") equal to thirty percent (30%) of the total aggregate Stock
Consideration to be paid to the Sellers based upon
a share price valued at the
Market Price per share for the Common Stock as of
the close of trading on the
last Trading Day before such issuance.
Notwithstanding, the
foregoing, in the
event that the Market Price used for
determining the number of shares of Common
Stock to be issued in connection with
the Third Stock Tranche is less than Four
Dollars ($4.00) per share, the Purchaser shall have the option,
but not the
obligation, to (i) pay the Sellers an aggregate of
$1,575,000 in cash by wire
transfer of immediately available funds in
lieu of the issuance of such shares
or (ii) pay the Sellers a combination of cash and shares.
(d)
The number
of shares of Common Stock issued in the
Initial Stock Tranche will be adjusted at
the time of the issuance of the Third
Stock Tranche, as follows:
If the Purchaser's Common Stock does not reach an
average
Market Price of at least Four Dollars and Fifty
Cents ($4.50) per share for at
least three (3) consecutive Trading Days
prior to or including the date which is
six (6) months from the Effective Date,
then, at the Purchaser's option, either:
(i)
The Purchaser
shall issue the Sellers additional
shares of Common Stock, the number of
which shall be determined pursuant to the
following formula:
AS = IST - ISP/AVG
Where:
2
<PAGE>
AS = the number of additional shares of Common
Stock to be issue.
AVG = the lesser
of (x) (MP1+MP2)/2 or (y) 4.
ISP = $2,100,000
(which is forty percent (40%) of
the fifty percent (50%) of the Estimated
Purchase Price to be
paid in Common Stock).
IST = the number of shares of Common Stock issued
in the Initial Stock Tranche.
MP1 = the average
Market Price for the Common
Stock over the
twenty-five (25) trading day
period beginning
on the SEC prescribed
due
date for filing the Purchaser's quarterly
report on Form
10-Q or annual report on Form
10K with the SEC, as the case may be, for
the Purchaser's
second full fiscal
quarter
after Closing.
MP2 = the average
Market Price for the Common
Stock over
the twenty-five (25)
day period
ending on the Make Whole Determination Date.
; or
(ii)
The Purchaser shall pay the Sellers an amount equal
to AS multiplied by AVG, in cash by wire transfer of
immediately available
funds; and in either case, such issuance or
payment shall occur on the date on
which the Third Stock Tranche is issued (or that
cash is paid in lieu of such
Third Stock Tranche pursuant to Section 1.2.2(c) above).
1.3 PURCHASE
PRICE ADJUSTMENT MECHANISM.
1.3.1 The aggregate consideration to be paid by the
Purchaser to
the Sellers is subject to a one-time adjustment based
upon the Corporation's
financial performance during the year following the
Closing Date, as described
below.
1.3.2 As soon as
practicable, but in no event more than sixty (60)
days after the Determination Date, the
Purchaser shall cause the Corporation to
prepare and deliver to the Seller, special
purpose financial statements prepared
in accordance with Closing GAAP, applied on a consistent
basis in accordance
with the Corporations historical accounting policies and as described on
Schedule 1.3.2, showing results of operation of the Corporation and any
Subsidiaries as of the close of business for the one year period (the
"DETERMINATION PERIOD") commencing on the Closing Date and ending on the
Determination Date (the "DETERMINATION DATE FINANCIAL STATEMENTS"), which
Determination Date Financial Statements shall be prepared
3
<PAGE>
at the expense of the Purchaser, by the
accounting firm of Agee Fisher, LLC (the
"AUDITOR"). In addition, the Purchaser shall bear the expense of having an
opening date balance sheet as of the
Effective Date, prepared by the Auditor in
accordance with Closing GAAP, applied on a
consistent basis in accordance with
the Corporation's historical
accounting policies.
The parties acknowledge that
the Determination Date Financial Statements are for the sole purpose of
determining adjustments to the Purchase Price and may not reflect
the actual
financials of the Corporation used in preparing the Purchaser's
consolidated
financial statements.
1.3.3 The Sellers shall have thirty (30) days from the
date the
Determination Date Financial Statements are delivered
by the Purchaser and the
Corporation to review the Determination Date Financial
Statements and propose
any adjustments for the purpose of determining adjustments to the
Purchase
Price. If after discussion of any such proposed adjustments, either
party
disputes such adjustments, then the Purchaser and the Sellers
shall engage a
nationally recognized accounting firm (the "ALTERNATE AUDITOR") to
review the
disputed items. The Alternate Auditor's determination of the disputed
items
with respect to the determination of the Purchase Price shall be final
and
binding upon the Parties, without adjustment. All invoices submitted by the
Alternate Auditor shall be paid by the Purchaser and the Sellers
equally.
1.3.4 The "ADJUSTED PURCHASE PRICE" for the Shares shall be
the
greater of (x) 7.5 times the Corporation's consolidated EBIDTA for the
-------
Determination Period, as calculated from the Determination Date Financial
Statements or (y) $5,250,000.
(a)
In the event that the Adjusted Purchase Price is equal to
or greater than $5,250,000 and less than $10,500,000 pursuant to
clause (x)
above, then no later than 5 days following the
date on which the Determination
Date Financial Statements is finalized pursuant to Section
1.3.3, the Sellers
shall transfer to the Purchaser, on a pro-rata
basis, the number of shares of
Common Stock issued as Stock Consideration
to the Sellers equal in Base Value to
the amount determined by taking the
difference between the $10,500,000 and the
Adjusted Purchase Price, and dividing such
number by the Average Issue Price Per
Share (the "SHORTAGE AMOUNT"), regardless of the actual value of
such Common
Stock. If the Base Value of all of the shares of Common Stock
owned by Sellers
is less than the Shortage Amount,
then Sellers shall transfer all of the shares
of Common Stock owned by them, to Purchaser,
and such transfer shall be deemed
payment in full of the Shortage Amount, regardless of the actual amount.
(b)
In the event that the
Adjusted Purchase Price is greater
than $10,500,000 pursuant to clause (x) above, then no later than 5 days
following the date on which the Determination Date Financial
Statements is
finalized pursuant to Section 1.3.3, if the Purchase
Price is greater than the
Estimated Purchase Price, then the Purchaser shall pay to the Sellers, the
difference between the Adjusted Purchase Price and
$10,500,000 (the "PURCHASE
PRICE BALANCE"), as follows:
(i)
Fifty percent
(50%) of the Purchase
Price Balance,
shall be paid in cash by wire transfer of immediately
available funds; and
(ii)
Fifty percent (50%) of
the Purchase Price Balance,
shall, at the option of the Purchaser, be
paid in (i) cash by wire transfer of
immediately available funds or
4
<PAGE>
(ii) shares of Common Stock (using the
Market Price for such Common Stock as of
the Determination Date to calculate the number of shares to be issued).
(c)
The Sellers hereby agree that it shall deliver any shares
of Common Stock required to pay the Shortage
Amount, if any, free and clear of
all Liens.
1.4 ROCK CREEK EARN
OUT. In addition to
the Purchase Price, Rock Creek
shall, for a period of eighteen (18) months following the
Closing Date (the
"EARN OUT TERM"), be entitled to earn an
aggregate of 800,000 equity interests
directly or indirectly in the Purchaser
consisting of a maximum of (a) 500,000
shares of additional Common Stock, plus (b) options or other convertible
securities representing the right to acquire
up to an additional 250,000 shares
of Common Stock (the "PLAN STOCK")
pursuant to an Executive Stock Purchase Plan
(the "STOCK PLAN") currently being
developed by the Purchaser (and, if no Stock
Plan exists, then Rock Creek shall be entitled to earn an
additional 250,000
shares of Common Stock), plus (c) the Ray Stock
(the Common Stock, Plan Stock
and Ray Stock shall collectively be referred to herein as the "EARN OUT
EQUITY").
1.4.1 During
the Earn Out Term, the
Corporation shall provide the
Purchaser with a list of Target Subsidiaries and
Target Revenues for potential
acquisition by the Purchaser. Upon closing of the acquisition of
each Target
Subsidiary, Rock Creek shall be vested in a percentage of Earn Out
Equity
determined by taking the Target Revenue of each
Target Subsidiary and dividing
it by $20,000,000 (the "VESTED PERCENTAGE").
1.4.2 Earn
Out Equity will be issued to Rock Creek in any
combination chosen by Rock Creek, in its sole
discretion. After the
closing of
the acquisition of a Target Subsidiary, Rock Creek
shall notify the Purchaser
and Escrow Agent in writing of the allocation
of the Earn Out Equity it wishes
to receive (based on the Vested Percentage), which Earn Out
Equity shall be
issued within ten (10) days after such notification is
received (and payment
made therefore, if applicable). For example, if following an
acquisition of a
Target Subsidiary, Rock Creek has vested
in fifty percent (50%) of the Earn Out
Equity, it may choose to (a) be issued all of the Ray Stock;
(b) be issued
150,000 shares of Common Stock; and (c) purchase
200,000 shares of Plan Stock
from, or any other combination (whether
Ray Stock or issued or purchased Common
Stock) totaling 400,000 shares of the Earn Out Equity.
1.4.3 For purposes hereof, a Target Subsidiary shall be
deemed
closed within the Earn Out Term, if, at the
end of the Earn Out Term, Seller has
a signed term sheet with Target Subsidiary
and the closing of such acquisition
takes place within the three (3) months
following the last day of Earn Out Term.
1.4.4 If less than one hundred percent (100%) of the Earn Out
Equity is earned and issued pursuant to
Section 1.4.1, above, then, on the later
to occur of thirty (30) days (a) from
the end of the Earn Out Term; or (b) from
the date of the closing of the last acquisition of a
Target Subsidiary, the
Corporation will provide the Purchaser with
twelve-month EBIDTA projections for
the Corporation and all Target Subsidiaries for
the period commencing with the
day following the last day of the Earn Out
Term (the "EBIDTA PROJECTIONS"). If,
at the end of the twelve (12) months set
forth in the EBIDTA Projections, the
combined EBIDTA of the Corporation and all
Target Subsidiaries meets or exceeds
one hundred fifty percent (150%) of
5
<PAGE>
such EBIDTA Projections, the remaining Common Stock and Ray Stock shall be
issued to Rock Creek and Rock Creek, if it
desires, may purchase the remaining
Plan Stock. If the combined EBIDTA of the Corporation and all Target
Subsidiaries is less than one hundred fifty percent (150%) of such EBIDTA
Projections, no additional Earn Out Equity shall be issued to the
Rock Creek
hereunder.
1.4.5 Until
Rock Creek's right to earn Earn Out
Equity hereunder
has terminated:
(a) At the Closing, Ray shall deliver
stock powers, executed
in blank, to McKenna Long &
Aldridge LLP ("MLA") representing the Ray Stock, to
---
be held by MLA until such time as the Escrow
Agreement (as defined below), is
delivered to SunTrust Bank, as escrow agent
(the "ESCROW AGENT").
In addition,
at the time the Ray Stock is released from the
Ray Stock Liens (as defined in
Section 5.1) Ray will deliver the
certificates representing such shares to MLA,
who will deliver such stock certificates, along with the stock powers
(collectively the "Escrow Items"), to the Escrow
Agent. Such Escrow Items will
------ -----
be held and distributed by the Escrow Agent pursuant to the terms of
that
certain Escrow Agreement entered into by Ray, Rock Creek,
Buyer and SunTrust,
the form of which is attached hereto as
EXHIBIT M (the "ESCROW AGREEMENT"). The
Escrow Agreement will be dated in blank at
Closing and held, dated and delivered
to Escrow Agent by MLA, to countersign at the time the Escrow Items are
delivered. The Buyer will be responsible for all fees
and expenses payable to
Escrow Agent in connection with the Escrow Agreement.
(b)
Other than
the Ray Stock Liens,
Ray shall not otherwise
sell, transfer, assign or otherwise encumber the Ray Stock;
(c)
Should any
change be made to the
Ray Stock by reason of
any stock split, dividend, recapitalization, combination, exchange or other
change affecting the outstanding Series A Preferred Stock as a class,
appropriate adjustments shall be made to the maximum number of
shares of Ray
Stock assignable under this Agreement in order to prevent the dilution of
benefits hereunder, and the Purchaser shall transfer any additional shares
issuable to Ray in connection therewith to the Escrow Agent at the time
of
delivery of the other Escrow Items, to be held pursuant to the
terms of the
Escrow Agreement.
1.4.6 With
regard to voting rights for the Ray Stock:
(a)
For so long as the Ray Stock is being
held in escrow by
the Escrow Agent, Ray will retain all voting rights for the Ray Stock.
(b)
In addition,
simultaneously
upon the execution of
this
Agreement, Rock Creek and Ray will enter into a Voting
Agreement, the form of
which is attached hereto as EXHIBIT N,
pursuant to which Rock Creek shall grant
Ray the right to vote any shares of Ray
Stock transferred to Rock Creek pursuant
to this Agreement, as more specifically set forth therein.
6
<PAGE>
1.5 OPTION
TO REPURCHASE.
1.5.1 If the average Market Price for the Common Stock is
less
than Four Dollars ($4.00) per share for the fifteen (15)
consecutive Trading
Days ending on the Determination Date, then
the Sellers shall have the option,
but not the obligation, to repurchase
all, but not less than all, of the Shares
from the Purchaser. The Sellers shall have thirty (30) days from the
Determination Date to notify the Purchaser of its intent to exercise its
purchase option. In the event that the Sellers
exercise their option to acquire
the Shares, then the Sellers shall be obligated to
purchase the Shares at an
aggregate purchase price determined pursuant to the formula
which is attached
hereto as EXHIBIT A.
1.5.2 Notwithstanding
the foregoing, the Sellers shall not have an
option to repurchase the Shares pursuant to Section
1.5.1 of the Agreement in
the event that any of the following has occurred: (a)
projected, pro forma,
combined, consolidated revenue run rate for the Purchaser for the
twelve (12)
month period ending on the Determination Date exceeds
$150,000,000; (b) the
Market Price for the Common Stock is equal to or greater than Six
Dollars
($6.00) per share (on an adjusted basis taking into
consideration any capital
reorganization, reclassification, or otherwise) for three (3) consecutive
trading days occurring between the Closing
Date and the Determination Date; (c)
consolidated net income before taking into account federal and any state
or
local income taxes for the Purchaser for
the twelve (12) month period ending on
the Determination Date exceeds
$3,000,000; (d) as of the Determination Date the
Common Stock is listed for trading on the National
Association of Securities
Dealers' Automated Quotation Small Cap Market; (e)
the Corporation's EBIDTA is
less than $800,000 for the twelve (12)
month period ending on the Determination
Date or (f) the Corporation's revenue is less
than $12,000,000 for the twelve
(12) month period ending on the Determination Date.
1.6 PURCHASER
STOCK ISSUED TO THE SELLERS.
1.6.1 No fractional shares of Common Stock
shall be issued to the
Sellers hereunder, and the number of shares of Common
Stock to be issued shall
be rounded down to the nearest whole share. If a fractional share interest
arises pursuant to any calculation in Section 1.3 or elsewhere herein,
the
Purchaser shall eliminate such fractional share interest by
paying the Seller
the amount computed by multiplying the fractional
interest by the price of a
full share (with such price being the same price
used to determine the shares
then being issued).
1.6.2 The Sellers shall be granted registration rights, with
respect to all shares of Common Stock issued
to the Sellers hereunder, as more
specifically set forth in that certain Registration Rights Agreement (the
"REGISTRATION RIGHTS AGREEMENT") in the form attached hereto as EXHIBIT B.
1.6.3 Shares
of Common Stock and Ray Stock, when issued and
delivered to the Seller in accordance with the terms hereof, will be duly
authorized, validly issued, fully-paid and non-assessable.
1.6.4 The stock
certificates evidencing the Shares of Common Stock
and Ray Stock issued to Sellers hereunder will bear the following
legend:
7
<PAGE>
THIS SHARES OF STOCK EVIDENCED BY THIS STOCK CERTIFICATE NOT
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND
APPLICABLE STATE
SECURITIES
LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION
FROM THE REGISTRATION
REQUIREMENTS OF
SUCH ACT AND SUCH LAWS.
1.7 ADDITIONAL
CONSIDERATION.
As additional consideration for the
transaction, Purchaser shall transfer no less than $500,000 in cash to the
Corporation at Closing, by wire transfer of immediately available funds.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE
CORPORATION
The Sellers and the Corporation hereby represent and warrant to the
Purchaser as of the date hereof and as of
the Closing Date that, to the best of
their knowledge:
2.1 CORPORATE
ORGANIZATION.
The Corporation is a corporation duly
------------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate
power and authority to carry
on its business as it is now being
conducted and proposed to be conducted, and
to own, operate and lease its properties and
assets. The
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, which jurisdictions are listed on SCHEDULE 2.1 hereto.
2.2 SUBSIDIARIES
AND AFFILIATES. Other than as set forth on
SCHEDULE
-----------------------------
2.2, the Corporation has no Subsidiaries or Affiliates.
2.3 CAPITAL
STOCK. The entire authorized capital stock of the
--------------
Corporation consists of ten million
(10,000,000) shares of common stock with no
par value per share, of which two million one hundred thousand
(2,100,000)
shares are issued and outstanding, and all of which
are owned by the Sellers.
All issued and outstanding shares
having been validly issued and are fully paid
and non-assessable, with no personal
liability or preemptive rights attaching to
the ownership thereof. Except as set forth on SCHEDULE
2.3, no instruments or
securities of any kind exist which are
convertible into additional shares of the
capital stock of the Corporation, nor do any outstanding options,
warrants,
rights, calls, commitments, plans, or other arrangements or
agreements of any
character exist providing for the purchase
or issuance of any additional shares
of the Corporation.
8
<PAGE>
2.4 CORPORATE
RECORDS. The minutes of the directors and
shareholders
------------------
of the Corporation made available to
the Purchaser are complete and correct and
contain all of the proceedings of the shareholders and directors of the
Corporation.
2.5 AUTHORIZATION.
The Sellers have full power and
authority to enter
--------------
into this Agreement and the agreements contemplated
hereby and to deliver the
Shares and the certificates evidencing
such Shares to the 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 directors and shareholders
of the Corporation and no other
corporate proceedings on its part are necessary
to authorize this Agreement and the transactions contemplated
hereby. This
Agreement and all other agreements
contemplated hereby to be entered into by the
Sellers constitute a legal, valid and binding obligation of the Sellers
enforceable against the Sellers in accordance with their respective terms.
2.6 NO VIOLATION. Other than as set forth in SCHEDULE 2.6, the
-------------
execution and delivery by the Sellers and
the 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 Sellers and the 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 the
Corporation or the Sellers is a party; (b)
or result in the creation of any Lien
upon any of the Sellers' assets or the
Corporation's capital stock or assets;
(c) give any third party the right to
accelerate any obligations of either the
Sellers or the 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 pursuant to, the charter or bylaws
of the Corporation, the
organizational documents of Rock Creek, or any
Regulation, Order or Contract to
which the Sellers, the Corporation or their
respective properties are subject.
The Sellers will comply with all applicable
Regulations and Orders in connection
with the execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
2.7 FINANCIAL
STATEMENTS.
---------------------
2.7.1 Unaudited
year-end balance sheets and statements of
operations, stockholders equity and cash flow
of the Corporation as of December
31, 2004 and unaudited balance sheets
for the period commencing January 1, 2005
and ending September 30, 2005 (the "FINANCIAL STATEMENT
DATE") and unaudited
statements of operations, stockholders equity and cash flow for the nine
(9)
month period then ended (collectively, the "FINANCIAL
STATEMENTS") have been
delivered to the Purchaser, and are attached to
SCHEDULE 2.7.1. Such
balance
sheets and the notes thereto fairly present the financial position of the
Corporation as at the respective dates thereof, and
such Financial Statements
(a) fairly present the results of operations for the
periods therein referred
to, all in accordance with GAAP (except as stated therein or in the
notes
thereto) applied on a consistent basis; (b) fairly present the financial
condition of the Corporation at the respective date of, and for the
period
covered by such statements; and (c) 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.
Since the Financial
Statement
Date, no change has occurred in the
condition of the Corporation as shown in the
Financial Statements which has or could reasonably be expected to have a
Material Adverse Effect.
9
<PAGE>
2.7.2 Except
as set forth in SCHEDULE 2.7.2 hereto, the
Corporation does not have any Indebtedness, obligation or
liability (whether
accrued, absolute, contingent, unliquidated
or otherwise, known to the Seller or
the Corporation, whether due or to become due) arising out of
transactions
entered into or Occurrences 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).
2.8 EMPLOYEES.
SCHEDULE 2.8 lists all employees of the Corporation
---------
whose annual base salary exceeds $75,000
per year. The
Corporation has been for
the past four (4) years, and currently is, in material
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, the
Corporation
will have no obligation to make any payment
to any of past or present employees,
officers or directors or independent
contractors except as to those individuals
described in SCHEDULE 2.8, other than
compensation paid in the ordinary course
of business.
2.9 ABSENCE
OF CERTAIN CHANGES. Since the Financial Statement
Date,
-----------------------------
there has not been (a) any Material
Adverse Change; (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 the
Corporation; (d) any material increase in
the compensation payable to or to become payable by the 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 the 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 the Corporation in accounting methods or principles.
2.10
CONTRACTS.
---------
2.10.1 Except
as expressly contemplated by this Agreement or
as
set forth on Schedules 2.10(a)-(n) hereto, as of the Closing Date, the
Corporation is not a party to any written or oral:
(a)
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;
(b)
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;
10
<PAGE>
(c)
Contract relating
to the borrowing of money or the
mortgaging, pledging or otherwise placing a Lien on any asset owned by the
Corporation;
(d)
Guarantee of
any obligation;
(e)
Contract under
which the Corporation has advanced or
loaned any Person money;
(f)
Contract under
which the Corporation is lessee of or
holds or operates any property, real or personal, owned by any
other party,
other than equipment leases entered into in the ordinary
course of business;
(g)
Contract under
which the Corporation is lessor of or
permits any third party to hold or operate
any property, real or personal, owned
or controlled by the Corporation;
(h)
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 $50,000 in the aggregate;
(i)
assignment, license,
indemnification
or Contract with
respect to any intangible property (including, without limitation, any
Proprietary Rights), other than software licenses in the ordinary course
of
business;
(j)
Contract under
which it has granted any Person any
registration rights (including piggyback
rights) with respect to any securities;
(k)
Contract prohibiting
it from freely engaging in any
business or competing anywhere in the world;
(l)
Contract for
the purchase, acquisition or supply of
property and assets, whether for resale or otherwise, other
than value-added
reseller agreements entered into in the ordinary course of business;
(m)
Contracts providing
for "take or pay" or similar
unconditional purchase or payment obligations;
(n)
any other contract which is material to its
operations
and business prospects or involves a consideration in excess of $50,000
annually, excluding any purchase orders in the ordinary course of
business.
2.10.2 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
11
<PAGE>
performing all of its contractual obligations; and the Corporation has no
knowledge of any breach or anticipated breach by the other parties to any
Contract to which it is a party.
2.10.3 SCHEDULE
2.10.3 contains a list of each of the
Corporation's Contracts with any Person who sells products or services to
Corporation in excess of $25,000 in the aggregate per annum, or who has
a
Contract to resell any product or service provided by the Corporation.
2.11
BROKERAGE. No
broker, agent or finder has rendered services
to
---------
the Sellers or the Corporation in
connection with the transactions contemplated
under this Agreement.
2.12
TITLE AND RELATED MATTERS.
----------------------------
2.12.1 Except
as set forth in SCHEDULE 2.12.1 hereto, the
Corporation has good and marketable title to all of the
properties and assets
reflected in the Financial Statements (except for properties
and assets sold
since the Financial Statement Date in the
ordinary course of business), free and
clear of all Liens, except (a) statutory Liens not yet
delinquent; (b) 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; or (c) Liens reflected in the
Financial Statements or the notes thereto.
2.12.2 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.
2.13
LITIGATION. There
is no Claim pending or threatened
against the
----------
Corporation which, if adversely determined, would have a Material Adverse
Effect, nor is there any Order outstanding
against the Corporation which has, or
could reasonably be expected to have, a Material Adverse Effect.
2.14
TAX
MATTERS.
------------
2.14.1 The Corporation has filed all federal, tax reports,
returns, information returns and other documents required to be
filed and has
filed state and local tax reports, returns, information returns in the
jurisdictions listed on SCHEDULE 2.14.1 (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 2.14.1
hereto. All
Taxes which are
12
<PAGE>
required to be withheld or collected by the
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. The
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 the Corporation is
substantially correct and in
compliance with the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "CODE").
2.14.2 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 the Corporation on the Tax Returns
filed by or on behalf of the 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 the
Corporation and such information was derived from
the books and records of the
Corporation.
2.14.3 The 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. The Corporation is not a party to any
tax
sharing agreement.
2.14.4 The Corporation is not a "consenting corporation"
within
the meaning of Section 341(f)(1) of the Code, or
comparable provisions of any
state statutes, and none of the assets of the Corporation is
subject to an
election under Section 341(f) of the Code
or comparable provisions of any state
statutes.
2.14.5 The 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.
2.14.6 None
of the assets of the 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 the
Corporation are
subject to a lease, safe harbor lease or
other arrangement as a result of which
the Corporation is not treated as the owner for federal
income tax purposes.
2.14.7 The 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).
2.14.8 Tax Sharing Agreements. The Corporation is not a party
to
-----------------------
any Tax Sharing Agreement.
13
<PAGE>
2.14.9
Returns and
Reports. The 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.
2.14.10 Tax
Books and Records. The Purchaser and the Sellers
------------------------
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.
2.15
COMPLIANCE WITH
LAW AND APPLICABLE GOVERNMENT
REGULATIONS. The
------------------------------------------------------------
Corporation is presently in material compliance in respect
of its operations,
practices, real property, plants, structures,
and other property, and all other
aspects of its business, with all
applicable Regulations and Orders, including,
but not limited to, all Regulations relating to
the safe conduct of business,
environmental protection, quality and labeling, antitrust, Taxes, consumer
protection, equal opportunity,
discrimination, health, sanitation, fire, zoning,
building and occupational safety where such failure or failures would
individually or in the aggregate have a Material
Adverse Effect. There
are no
Claims pending or threatened against the
Corporation, nor has the Corporation
received any written notice, regarding any violations of any
Regulations and
Orders enforced by any Authority claiming jurisdiction over the
Corporation
including any requirement of OSHA or any pollution and
environmental control
agency (including air and water).
2.16
ERISA AND RELATED MATTERS. The Corporation is not a party to
or
---------------------------
participates in or have any liability or
contingent liability with respect to:
2.16.1 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"));
2.16.2 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
2.16.3 any employment agreement not terminable on thirty (30)
days' or less written notice, without further liability.
2.17
BANKS, BROKERS
AND PROXIES.
SCHEDULE 2.17 hereto
sets forth (a)
----------------------------
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; (b) the name of
each person authorized by the Corporation to
draw thereon or to have access to
any such safe deposit box or vault; (c) the
purpose of each such account, safe
deposit
14
<PAGE>
box or vault; and (d) 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. The account statements previously provided to the
Purchaser are
true and complete in all respects.
2.18
INTELLECTUAL
PROPERTY.
----------------------
2.18.1 The Corporation has no trade name, service mark,
patent,
copyright or trademark related to its
business, except those which are set forth
in SCHEDULE 2.18.1, which are all those necessary for the operation
of its
business as currently conducted.
2.18.2 The Corporation
has the right to use each Proprietary Right
listed on SCHEDULE 2.18.2. There are no Claims pending, or
threatened, against
the Corporation that its use of any of the
Proprietary Rights listed on SCHEDULE
2.18.2 infringes the rights of any Person.
2.18.3
The
Corporation
is not a party in any capacity to any
franchise, license or royalty agreement respecting any Proprietary Right.
2.19
DEALINGS WITH
AFFILIATES.
SCHEDULE 2.19 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, 2004 to the Closing Date, and
to which any one or more
Affiliates is also a party.
2.20
INSURANCE. The
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 business of the
Corporation. SCHEDULE
2.20 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 2.20 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 respect, its
obligations under any of the Policies or
the Liability Policies nor have the Sellers 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.
The Corporation has never
been refused any insurance with respect to the Corporation's assets or
operations, nor has coverage ever been
limited by any insurance carrier to which
the Corporation has applied for any Policy, or with
which the Corporation has
carried a Policy.
15
<PAGE>
2.21
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 Sellers 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 Sellers or the Corporation have not disclosed to
the Purchaser in
writing and of which the Sellers 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.
ARTICLE 3
ADDITIONAL REPRESENTATIONS OF THE SELLER
Each
Seller hereby
represents and warrants to the Purchaser, severally but
not jointly, as of the date hereof and
as of the Closing Date that, to the best
of their knowledge:
3.1 SHARES
HELD FOR OWN ACCOUNT. Any shares of Common Stock
acquired
-----------------------------
by the Seller hereunder (the "ACQUIRED SHARES") are being acquired for
the
Seller's own account; not as a nominee or agent, and not with a
view to the
direct or indirect sale or distribution
of any part thereof, and the Seller has
no present intention of selling, granting any
participation in, or otherwise
distributing the same, except in compliance
with the Securities Act of 1933, as
amended (the "SECURITIES ACT").
3.2 NO REGISTRATION. The Seller understands and
acknowledges that the
----------------
Acquired Shares have not been registered under the
Securities Act or any state
securities laws, are being sold in reliance
upon an exemption or exemptions from
the registration and prospectus
delivery requirements of the Securities Act and
applicable state securities laws, and must be held by the
Seller indefinitely
unless a subsequent disposition thereof is
registered under the Securities Act
and applicable state securities laws or is exempt therefrom.
3.3 INVESTMENT
KNOWLEDGE.
The officers and
managers of Rock Creek and
---------------------
Shaw each have the knowledge, skill and
experience in financial, business and
investment matters relating to an investment of this type and are
capable of
evaluating the merits and risks of such investment and protecting
the their
respective interests in connection
therewith. To the
extent deemed necessary by
the Seller, such Seller has retained, at the
Seller's own expense, appropriate
professional advice regarding the investment, tax and legal merits and
consequences of acquiring and owning the Acquired Shares.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser
represents and warrants to the Sellers and the Corporation as
follows as of the date hereof and as of the Closing
Date, to the best of its
knowledge:
4.1 CORPORATE
ORGANIZATION.
The Purchaser is a corporation duly
-----------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full
16
<PAGE>
corporate power and authority to carry on its business as it is now
being
conducted and to own, operate and lease its properties and assets.
4.2 CAPITAL
STOCK. As of July 31, 2005, the entire
authorized capital
--------------
stock of the Purchaser consists of three
hundred million (300,000,000) shares of
Common Stock with $0.001 par value per
share, of which eight million two hundred
eight thousand six hundred forty nine (8,208,649) shares were issued and
outstanding, five million (5,000,000) shares of Series A Preferred Stock of
which one million (1,000,000) are issued
and outstanding, four hundred thousand
(400,000) shares of Series B Preferred Stock all of which are issued and
outstanding and five hundred thousand (500,000) shares of
Series C Preferred
Stock, all of which are issued and outstanding.
Since July 31, 2005 no Common
Stock, Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred
Stock has been issued other than Common
Stock trading on the OTC Bulletin Board.
All issued and outstanding shares of Common
Stock, Series A
Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock
have been validly issued
and are fully paid and non-assessable,
with no personal liability or preemptive
rights attaching to the ownership thereof.
Except as set forth on
SCHEDULE 4.2,
no instruments or securities of any kind exist which are convertible
into
additional shares of the capital stock of the Corporation, nor do any
outstanding options, warrants, rights, calls, commitments, plans or other
arrangements or agreements of any character
exist providing for the purchase or
issuance of any additional shares of the Corporation.
4.3 AUTHORIZATION.
The Purchaser has full corporate power and
-------------
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The directors of the Purchaser have 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.
4.4 NO VIOLATION. Other than as set forth in SCHEDULE 4.4, the
-------------
execution and delivery by the Purchaser of this Agreement, and all other
agreements contemplated hereby, and the fulfillment of and
compliance with the
respective terms hereof and thereof by the Purchaser 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 the Purchaser is
a party; b) result in the
creation of any Lien upon any of the Purchaser's
capital stock or assets; c)
give any third party the right to
accelerate any obligations of the Purchaser;
or d) result in a violation of or
require any authorization, consent, approval,
exemption or other action by or notice to any court
or Authority pursuant to,
the charter or bylaws of the
Purchaser, or any Regulation, Order or Contract to
which the Purchaser or its properties are subject.
The Purchaser will
comply
with all applicable Regulations and Orders in connection with the
execution,
delivery and performance of this Agreement and the
transactions contemplated
hereby
4.5 FINANCIAL
STATEMENTS.
---------------------
4.5.1 Audited
year-end balance sheets and statements of
operations, stockholders equity and cash flow of the
Purchaser as of April 30,
2005 and unaudited balance
17
<PAGE>
sheets for the period commencing May 1,
2005 and ending September 30, 2005 (the
"PURCHASER FINANCIAL STATEMENT DATE") and unaudited statements of
operations,
stockholders equity and cash flow for the five (5) month period then
ended
(collectively, the "PURCHASER FINANCIAL
STATEMENTS") have been delivered to the
Sellers. Such balance sheets and the notes
thereto fairly present the financial
position of the Purchaser as at the respective dates thereof, and such
statements of operations, stockholders equity and cash flow and the notes
thereto (a) fairly present the results of operations for the
periods therein
referred to, all in accordance with GAAP (except as
stated therein or in the
notes thereto) applied on a consistent basis; (b)
fairly present the financial
condition of the Purchaser at the
respective date of, and for the period covered
by such statements, other than as set
forth in that certain Form 8-K filed with
the United States Securities and Exchange
Commission on November 4, 2005 and (c)
except as disclosed in SCHEDULE 4.5.1, 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 Delaware.
Since the Purchaser
Financial
Statement Date, no change has occurred in the condition of the
Purchaser as
shown in the Purchaser Financial Statements which has or
could reasonably be
expected to have a Material Adverse Effect.
4.5.2 Except
as set forth in
SCHEDULE 4.5.2 hereto, the Purchaser
does not have any Indebtedness, obligation or liability (whether accrued,
absolute, contingent, unliquidated or
otherwise, known to the Purchaser, whether
due or to become due) arising out of
transactions entered into or Occurrences
that occurred at or prior to the Closing Date,
other than: (a) liabilities set
forth in the Purchaser Financial
Statements; and (b) liabilities and obligations
which have arisen after the Purchaser
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).
4.6 BROKERAGE.
No broker, agent or
finder has rendered services to the
---------
Purchaser in connection with the
transactions contemplated under this Agreement.
4.7 INVESTMENT
INTENT. The Purchaser is acquiring the Shares
for its
------------------
own account and not with a view to their distribution
within the meaning of
Section 2(11) of the Securities Act.
4.8 ACQUIRED
SHARES. The Acquired Shares issuable to the Sellers
by
----------------
the Purchaser hereunder will, upon issuance, (a) be fully paid and
nonassessable; and (b) be free and clear of any and all Liens.
4.9 DISCLOSURE.
Neither this Agreement nor any of the exhibits,
----------
attachments, written statements, documents,
certificates or other items prepared
for or supplied to the Sellers or the Corporation by or on behalf of
the
Purchaser 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 Purchaser has not disclosed to the Seller and the Corporation
in
writing and of which the Purchaser or its officers, directors or
executive
employees is aware and which could
reasonably be anticipated to have a Material
Adverse Effect.
18
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF RAY
Ray represents and warrants to the Rock Creek and the Corporation as
follows as of the date hereof and as of the Closing Date:
5.1 OWNERSHIP
OF STOCK. Ray owns, beneficially and of record, all
--------------------
right, title and interest in and to the Ray
Stock, which shares are fully paid
and non-assessable, free and clear of any security interests,
claims, liens,
pledges, options, encumbrances, charges, agreements, voting trusts,
proxies,
restrictions on transfer or other arrangements,
restrictions or limitations of
any kind, other than as set forth on
SCHEDULE 5.1 (the "RAY STOCK LIENS"). The
Ray Stock shall be free and clear of all of
the Ray Stock Liens, and any other
liens or other encumbrances, at the time such Ray Stock is
delivered to Rock
Creek, and the delivery to Rock Creek of
the stock certificate(s) evidencing the
Ray Stock, along with corresponding stock
powers, if applicable, will transfer
good and valid title to the Ray Stock to Rock Creek.
5.2 AUTHORIZATION.
Ray has the full right, power, authority, and
--------------
capacity to enter into and perform his
obligations hereunder, and this Agreement
constitutes a valid and binding obligation of Ray
enforceable against him in
accordance with its terms.
5.3 DISCLOSURE.
Neither this Agreement nor any of the exhibits,
----------
attachments, written statements, documents,
certificates or other items prepared
for or supplied to Rock Creek or the Corporation by
or on behalf of Ray 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
Ray has not
disclosed to Rock Creek and the Corporation
in writing and of which Ray is aware
and which could reasonably be anticipated to have a Material
Adverse Effect.
ARTICLE 6
COVENANTS OF THE SELLER AND THE CORPORATION
Until the
Closing Date, except as otherwise consented to or approved by
the
Purchaser in writing, Rock Creek and the Corporation covenant
and agree that
they shall act, and shall cause the
Corporation so to act or refrain from acting
where required hereinafter, to comply with the following:
6.1 REGULAR
COURSE OF BUSINESS. The Corporation shall operate its
-----------------------------
business diligently and in good faith, consistent with past management
practices; shall maintain its 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 materially comply with the provisions of all Regulations and Orders
applicable to the Corporation and the
conduct of its business; shall not cancel,
release, waive or compromise any debt, Claim or right in its favor
having a
value in excess of $50,000; shall not alter
the rate or basis of compensation of
any of its officers, directors or employees, other than annual salary
19
<PAGE>
increases for employees already budgeted; shall maintain insurance and
reinsurance coverage up to the Closing Date
with at least the coverage currently
maintained.
6.2 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 without the prior written consent of the Purchaser,
which consent
shall not be unreasonably withheld.
6.3 CAPITAL
CHANGES; PLEDGES.
the 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 the Corporation shall not pledge or
otherwise encumber any shares of its capital stock.
6.4 DIVIDENDS.
The 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.
6.5 CAPITAL AND
OTHER EXPENDITURES.
The Corporation shall not make any
------------------------------
capital expenditures, or commitments with respect thereto,
except as provided
herein. The 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.
6.6 BORROWING.
The 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.
6.7 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, the Corporation shall not enter into any transaction or make
any
commitment or incur any obligation (including entering
into any real property
leases).
6.8 INTERIM
FINANCIAL INFORMATION AND AUDIT. The Corporation shall
-------------------------------------------
supply the Purchaser with unaudited monthly
operating statements within thirty
(30) days after the end of each month
(the "INTERIM FINANCIALS") ending between
the date hereof and the Closing Date. The Corporation hereby represents
that
such Interim Financials will be
prepared in accordance with procedures employed
by the Corporation in preparing prior
monthly operating statements and that such
financial statements will be prepared in accordance
with GAAP and will include
all adjustments (all of which were normal recurring
adjustments) necessary to
fairly present, in all material respects,
the Corporation's financial position,
results of operations and changes in
financial position at and for such period.
6.9 FULL
ACCESS AND DISCLOSURE.
-----------------------------
6.9.1 The Sellers and the Corporation shall afford to the
Purchaser and its counsel, accountants and other authorized
representatives
reasonable access during business hours to
each of the Corporation's facilities,
properties, books and records in order that the
20
<PAGE>
Purchaser may have full opportunity to make
such reasonable investigations as it
shall desire to make of the affairs of the Corporation;
and the Seller shall
cause the Corporation's 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
Corporation's independent auditors in connection with any audit of the
Corporation.
6.9.2 From
time to time prior to the Closing Date, the
Sellers
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.
6.10
CONSENTS. The
Sellers and the 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.
6.11
BREACH OF AGREEMENT. The Corporation and the Sellers 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.
6.12
CONFIDENTIALITY. The
Sellers and the Corporation shall, and shall
---------------
cause their respective principals, officers
and other personnel and authorized
representatives to, hold in confidence, and not disclose to any other
party
without the Purchaser'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 7
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Sellers that:
7.1 CONSENTS.
The Purchaser shall
use its best efforts to obtain on or
--------
prior to the Closing Date, all consents necessary to
the consummation of the
transactions contemplated hereby.
7.2 BREACH
OF AGREEMENT. The Purchaser shall not take any action
---------------------
which, if taken prior to the Closing Date, would
constitute a breach of this
Agreement.
7.3 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 Majority Holder's
prior consent, all information received
by it from Shaw or from Rock Creek'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.
21
<PAGE>
7.4 TRANSFER OR PLEDGE OFSHARES. Other than pursuant to the Stock
------------------------------
Pledge Agreement, Purchaser shall not sell, transfer, assign, pledge or
otherwise encumber any of the Shares until the ability of the Sellers to
repurchase the Shares pursuant to the provisions of Section 1.5 of this
Agreement have expired, without the prior written consent of the Sellers.
ARTICLE 8
OTHER AGREEMENTS
As a condition to the Parties' obligation to
consummate the transactions
contemplated hereby:
8.1 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING
DATE.
------------------------------------------------------------------
The Purchaser shall prepare or cause to be prepared and file or
cause to be
filed any Tax Returns of the Corporation
for tax periods which begin before the
Closing Date and end after the Closing Date.
8.2 AUDITS.
At all times prior to the Determination Date, the
------
Purchaser will allow the Corporation and its counsel to participate in
any
audits of the Purchaser consolidated federal
income Tax Returns to the extent
that such returns relate to the
Corporation. The
Purchaser will not settle any
such audit in a manner which would adversely
affect the Corporation after the
Closing Date without the prior written
consent of Majority Holder, which consent
shall not unreasonably be withheld.
8.3 EMPLOYMENT,
NON-COMPETITION AND
INCENTIVE COMPENSATION AGREEMENTS.
------------------------------------------------------------------
Jerry J. Harrison and Gregory A. Buchholz
(collectively, the "MANAGERS") shall
at the Closing, execute and deliver the Employment, Non-Competition and
Incentive Compensation Agreements in the forms of EXHIBIT C and EXHIBIT D
hereto, respectively (each an "EMPLOYMENT AGREEMENT").
8.4 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.
8.5 NO SOLICITATION
OR NEGOTIATION. Unless
and until this Agreement is
------------------------------
terminated, the Sellers 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
22
<PAGE>
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.
8.6 INDEMNIFICATION
AND RELEASE FROM AGREEMENTS OF
PERSONAL GUARANTY.
------------------------------------------------------------------
At Closing, the Purchaser shall execute an
Indemnification Agreement in the form
of EXHIBIT E, pursuant to which the
Purchaser shall indemnify Managers from all
liability in the event any beneficiaries
exercise their rights under the Manager
Guaranties. The Purchaser shall also use its reasonable
efforts to obtain the
termination of the Manager Guaranties from their respective
beneficiaries.
ARTICLE 9
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each
and every obligation of the Purchaser under
this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each
of the
following conditions unless waived in writing by the Purchaser:
9.1 REPRESENTATIONS
AND WARRANTIES; PERFORMANCE.
The
representations
---------------------------------------------
and warranties of the Sellers and the 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
Sellers or the Corporation,
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 Sellers 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. A manager of Rock Creek and Shaw, and an
officer 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 EXHIBITS F and G hereto, respectively (each an
"OFFICER'S
CERTIFICATE"), certifying to the foregoing.
9.2 CONSENTS AND
APPROVALS. The Sellers
and the 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 and the consummation of the transactions
contemplated hereby, including, without limitation, any
consents required from
Carolina First Bank.
9.3 OPINION OF THE
SELLERS' COUNSEL. The
Purchaser shall have received
-------------------------------
an opinion of the Sellers' outside counsel
addressed to the Purchaser, dated the
Closing Date, in the form set forth on SCHEDULE 9.3.
23
<PAGE>
9.4 NO MATERIAL ADVERSE CHANGE. There shall have been no Material
-----------------------------
Adverse Change since the date of this Agreement,
which representation shall be
attested to in the Corporation's Officer's Certificate.
9.5 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.
9.6 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 Sellers
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.
9.7 SECRETARY'S
CERTIFICATE.
The Purchaser shall have received a
------------------------
certificate, substantially in the form of
EXHIBIT H hereto, of the secretary of
the Corporation, 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.
9.8 CERTIFICATES
OF GOOD STANDING. At the Closing, the Corporation
--------------------------------
shall have delivered to the Purchaser a certificate issued by the
Georgia
Secretary of State evidencing the good standing of
the Corporation, and a tax
clearance certificate from the Georgia
Department of Revenue, both as of a date
not more than thirty (30) days prior to the Closing.
9.9 EMPLOYMENT
AGREEMENTS. The
Managers and the Corporation shall have
---------------------
executed and delivered the Employment Agreements.
9.10 VOTING AGREEMENT
AND ESCROW AGREEMENT.
RC shall have executed the
-------------------------------------
Voting Agreement and Escrow Agreement.
9.11
OTHER DOCUMENTS.
The Sellers and the 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 10
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS AND THE
CORPORATION
Each
and every obligation of the Sellers and the Corporation
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 a majority of
the Sellers and/or the Corporation, as applicable:
24
<PAGE>
10.1
REPRESENTATIONS
AND WARRANTIES;
PERFORMANCE. The
representations
--------------------------------------------
and warranties of the Purchaser and Ray 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 and Ray 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 it prior to the
Closing Date. An officer of the Purchaser and Ray,
individually, shall have
delivered to the Sellers a certificate, dated
the Closing Date, in the form of
EXHIBITS I and J hereto, certifying to the foregoing.
10.2
CONSENTS AND APPROVALS. The Purchaser 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 Purchaser or binding on
its properties and assets, with respect
to the execution, delivery and performance
of the Agreement and the consummation
of the transactions contemplated hereby.
10.3
OPINION OF THE
PURCHASER'S COUNSEL.
The Sellers, the Corporation
-----------------------------------
and the Managers shall have received an opinion of the Purchaser's
outside
counsel addressed to the Sellers, the Corporation and
the Managers, dated the
Closing Date, in the form set forth on SCHEDULE 10.3.
10.4
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.
10.5
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 Sellers and the
Corporation and their counsel, and the
Purchaser shall have made available to the Sellers and the Corporation
for
examination the originals or true, complete and correct
copies of all records
and documents relating to the business and affairs of the
Purchaser which the
Sellers and the Corporation may reasonably request in connection with
said
transaction.
10.6
SECRETARY'S
CERTIFICATE. The
Sellers and the Corporation shall
------------------------
have received a certificate, substantially in
the form of EXHIBIT K hereto, of
the secretary of the Purchaser, as to the
charter and bylaws of the Purchaser,
the resolutions adopted by the directors and stockholders
of the Purchaser in
connection with this Agreement and the incumbency
of the Purchaser's officers.
10.7
CERTIFICATE OF GOOD STANDING. At the Closing, the Purchaser
shall
----------------------------
have delivered to the Sellers and the Corporation a certificate issued
by
Delaware Secretary of State evidencing the good
standing, with respect to both
the conduct of business and the payment of
all franchise taxes, of the Purchaser
as of a date not more than thirty (30) days prior to the Closing Date
25
<PAGE>
10.8
EMPLOYMENT AGREEMENTS.
The Managers and Purchaser shall have
----------------------
executed and delivered the Employment Agreements.
10.9
INDEMNIFICATION
AGREEMENT. The
Purchaser shall have executed and
--------------------------
delivered the Indemnification Agreement.
10.10
REGISTRATION RIGHTS AGREEMENT. The Purchaser shall have
executed
-----------------------------
and delivered the Registration Rights Agreement.
10.11
VOTING AGREEMENT
AND ESCROW AGREEMENT.
Ray shall have
executed
---------------------------------------
the Voting Agreement and Escrow Agreement.
10.12
SECURED NOTE
AND STOCK PLEDGE AGREEMENT.
The Purchasers
shall
------------------------------------------
have executed the Secured Note and the
Stock Pledge Agreement attached hereto as
EXHIBIT P, and shall have delivered the original
stock certificate evidencing
the Shares to Sellers, along with a stock power for such
Shares, endorsed in
blank.
10.13
OTHER DOCUMENTS. The
Purchaser and Ray shall furnish the Sellers
---------------
and the Corporation with such other and further documents and
certificates
including certificates of the Purchaser's
officers and Ray and others as Sellers
and the Corporation shall reasonably request to evidence
compliance with the
conditions set forth in this Agreement.
ARTICLE 11
CLOSING
11.1
CLOSING. Unless
this Agreement shall have been terminated or
-------
abandoned pursuant to the provisions of ARTICLE 12, a closing of the
transactions contemplated by this Agreement
(the "CLOSING") shall be held on the
2nd day of December, 2005, or on such other mutually agreed to date
(the
"CLOSING DATE").
11.2
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 (15) days or longer, the Closing shall
be adjourned at the
option of either party for a period of
thirty (30) 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 12
TERMINATION PRIOR TO CLOSING
12.1
METHODS OF
TERMINATION. This
Agreement may be terminated and the
-----------------------
transactions herein contemplated may be abandoned at any time:
12.1.1 By mutual consent of the Purchaser and Majority
Holder;
26
<PAGE>
12.1.2 By the Majority Holder in writing, without
liability, if
the Purchaser shall (a) fail to perform in any
material respect its agreements
contained herein required to be performed
by it on or prior to the Closing Date;
or (b) materially breach any of its representations,
warranties or covenants
contained herein, which failure or breach is not cured within ten
(10) days
after the Majority Holder has notified
the Purchaser of its intent to terminate
this Agreement pursuant to this Section 12.1.2;
12.1.3 By the Purchaser in writing, without
liability, if either
the Corporation or the Sellers shall (a)
fail to perform in any material respect
their agreements contained herein required to be
performed by them on or prior
to the Closing Date; or (b) materially breach any of their
representations,
warranties or covenants contained herein, which
failure or breach is not cured
within ten (10) days after the Purchaser
has notified the Majority Holder of its
intent to terminate this Agreement pursuant to this Section 12.1.3;
12.1.4 By either Majority Holder or the Purchaser in writing,
without liability, if there shall be any order, writ,
injunction or decree of
any court or governmental or regulatory agency binding on
the Purchaser, the
Sellers or the Corporation, which prohibits or restrains the
Purchaser, the
Sellers or the Corporation from consummating the transactions contemplated
hereby, provided that the Purchaser, the
Sellers and the Corporation shall have
used their reasonable, good faith efforts to have any such order, writ,
injunction or decree lifted and the same shall not have been lifted
within
(thirty) 30 days after entry, by any such court or
governmental or regulatory
agency; or
12.1.5 By either Majority Holder or the Purchaser, in writing,
without liability, if for any reason the Closing has not
occurred by December
15, 2005 other than as a result of the breach of this
Agreement by the party
attempting to terminate the Agreement.
12.2
TERMINATION OF
OBLIGATIONS.
Termination
of this Agreement
----------------------------
pursuant to this ARTICLE 12 shall terminate all obligations of the
Parties
hereunder, except for the obligations under
Sections 1.2.3, 6.12, 7.3, 12.2, and
14.13 hereof; provided, however, that
termination pursuant to Sections 12.1.2,
-------- -------
12.1.3 or 12.1.5 hereof shall not relieve a
defaulting or breaching party from
any liability to the other party hereto.
ARTICLE 13
INDEMNIFICATION
13.1
THE
SELLERS' AGREEMENT TO INDEMNIFY. Subject to the terms and
---------------------------------------
conditions set forth herein, from and after the Closing, the Sellers
shall
indemnify and hold harmless the Purchaser, the
Corporation, their Affiliates,
any of their respective successors or assigns
and their respective directors,
officers or employees (each a "PURCHASER INDEMNIFIED
PARTY") from and against
all liability, assessments, losses, charges, costs and expenses (including,
without limitation, interest, court costs, reasonable attorneys' fees and
expenses) (collectively "PURCHASER
DAMAGES") incurred by a Purchaser Indemnified
Party as a result of or arising out of (a) a breach
of any representation or
warranty contained in ARTICLE 2 or ARTICLE 3 of this Agreement; or
(b) any
breach of or noncompliance by the Sellers with any covenant or agreement
contained in this Agreement.
27
<PAGE>
13.2
THE
PURCHASER'S AGREEMENT
TO INDEMNIFY. Subject
to the terms and
---------------------------------------
conditions set forth herein, from and after the
Closing, the Purchaser and Ray
shall indemnify and hold harmless the Sellers and
their respective Affiliates,
any of their respective successors or assigns
and their respective directors,
officers or employees (each a "SELLER
INDEMNIFIED PARTY") from and against all
liability, assessments, losses, charges,
costs and expenses (including, without
limitation, interest, court costs, reasonable attorneys' fees and expenses)
(collectively "SELLER DAMAGES") incurred by a Seller Indemnified Party as
a
result of or arising out of (a) a breach of any representation
or warranty
contained in ARTICLE 4 and ARTICLE 5 of this Agreement;
(b) any breach of or
noncompliance by the Purchaser or Ray with any
covenant or agreement contained
in this Agreement; and (c) any liability of the
Corporation. (The
Purchaser
Indemnified Parties and Seller Indemnified Parties are sometimes
referred to
collectively herein as the "INDEMNIFIED PARTIES." "PURCHASER DAMAGES" and
"SELLER DAMAGES" are sometimes referred to
collectively herein as "DAMAGES.").
13.3
LIMITATIONS ON
INDEMNIFICATION.
The Sellers' obligation to
--------------------------------
indemnify Purchaser Indemnified Parties
pursuant to Section 13.1 hereof and the
obligations of the Purchaser and Ray to indemnify Seller
Indemnified Parties
pursuant to Section 13.2 are subject to the following
limitations, as well as
the other limitations set forth in this ARTICLE 13:
13.3.1 No claim for indemnification shall be made against the
Sellers unless the aggregate amount of Purchaser
Damages exceeds $100,000 and,
in such event, indemnification shall be
made by the Sellers only to the extent
that the aggregate amount of Purchaser Damages exceeds $100,000.
13.3.2 In no event (a) shall the Sellers'
aggregate obligation to
indemnify Purchaser Indemnified Parties exceed $2,000,000, (b) shall Ray's
aggregate obligation to indemnify the Seller Indemnified Parties exceed
$2,000,000 and (c) shall the Purchaser's
aggregate obligation to indemnify the
Seller Indemnified Parties exceed $7,000,000 .
13.3.3 The amount of any Purchaser Damages or Seller
Damages, as
the case may be, shall be reduced by (a) any amount
actually received by the
Indemnified Parties with respect thereto under any
insurance coverage or from
any other party responsible therefor; and (b) the amount of any Tax
benefit
actually received by the Indemnified
Parties relating thereto. The Indemnified
Parties shall use all reasonable efforts
to collect any amounts available under
such insurance coverage and from such other party alleged to have
responsibility. If the Indemnified Parties receive an amount under
insurance
coverage or from such other party with respect to
Purchaser Damages or Seller
Damages, as the case may be, at any time subsequent to any
indemnification
provided pursuant to this ARTICLE 13, then
the Indemnified Party shall promptly
reimburse the Indemnifying Party for any
payment made or expense incurred by the
Indemnifying Party in connection with providing
such indemnification up to such
amount received by the Indemnified Party.
13.3.4 No party shall be entitled to seek
indemnification to the
extent it was aware of the matter giving rise to
such claim prior to Closing.
13.3.5 The Sellers may,
at their option, pay any Purchaser Damages
in cash or by transfer of Common Stock having an
aggregate fair market value
equal to such Purchaser
28
<PAGE>
Damages. For purposes of this Section 13.3.5,
the "fair market value" shall be
the Market Price for such shares on the
date of any final judgment is entered or
settlement is reached setting forth the total
amount of the Purchaser Damages.
13.3.6 Any indemnification obligations of
Sellers hereunder shall
be allocated on a pro-rata basis, based on
their respective percentage ownership
of the common stock of the
Corporation immediately prior to the Closing, and no
Seller shall be liable for the obligations of any other Seller hereunder.
13.4
THIRD PARTY
INDEMNIFICATION. The
obligations of the Sellers, the
----------------------------
Purchaser or Ray (as applicable, the "INDEMNIFYING PARTY") to indemnify
Indemnified Parties under Section 13.1 or Section 13.2 hereof,
respectively,
with respect to Damages resulting from the assertion of liability by
third
parties (each, as the case may be, a
"CLAIM"), shall be subject to the following
terms and conditions:
13.4.1 Promptly after
receipt by an Indemnified Party of notice by
a third party of any complaint or the
commencement of any action or proceeding
with respect to which such Indemnified
Party may be entitled to receive payment
from the other party for Damages, such
Indemnified Party shall, within ten (10)
days, notify the Sellers, the Purchaser or Ray
as the appropriate Indemnifying
Party, of such complaint or of the commencement
of such action or proceeding;
provided, however, that the failure to so notify the
Indemnifying Party shall
relieve the Indemnifying Party from
liability under this Agreement with respect
to such claim only if, and only to the
extent that, such failure to notify the
Indemnifying Party results in the forfeiture by the Indemnifying Party of
material rights and defenses otherwise
available to the Indemnifying Party with
respect to such claim. In addition, the Indemnified Party
shall provide to the
Indemnifying Party as promptly as practicable thereafter
such information and
documentation as may be reasonably requested by the Indemnifying Party to
support and verify the claim asserted, so long as such
disclosure would not
violate the attorney-client privilege of the Indemnified Party. The
Indemnifying Party may at its option undertake the defense thereof by
representatives of its own choosing; provided, that
any Indemnified Party may,
in any event, at its own expense, monitor
and participate in, but not control,
the defense of such claim. If the Indemnifying Party within
thirty (30) days
after notice of any such Claim fails to assume the
defense of such Claim, the
Indemnified Parties will (upon further notice to the
Indemnifying Party) have
the right to undertake the defense, compromise
or settlement of such claim on
behalf of and for the account and risk,
and at the expense, of the Indemnifying
Party; provided, however, that as long as the
Indemnifying Party is reasonably
contesting any claim in good faith, the Indemnified
Parties shall not pay or
settle any such claim.
13.4.2 Anything
in this Section 13.4 to the contrary
notwithstanding, the Indemnifying Party shall not enter
into any settlement or
compromise of any action, suit or proceeding or consent to the
entry of any
judgment (a) which does not include as an
unconditional term hereof the delivery
by the claimant or plaintiff to the Indemnified
Parties of a written release
from all liability in respect of such action, suit or
proceeding; or (b) for
other than monetary damages without the prior written consent of the
Indemnifying Party, which consent shall not
be unreasonably withheld or delayed.
13.5
SURVIVAL; TIME
TO ASSERT CLAIMS.
-----------------------------------
29
<PAGE>
13.5.1 The representations, warranties, covenants and
agreements
contained herein, except for covenants and agreements to be
performed by the
Parties prior to the Closing, will not be
extinguished by the Closing but will
survive the Closing, subject to the limitations set forth in
Section 13.5.2
below with respect to the time periods
within which claims for indemnity must be
asserted. The covenants and agreements to be
performed by the parties prior to
the Closing shall expire at the Closing.
13.5.2 All claims for indemnification under
this ARTICLE 13 which
are not extinguished by the Closing in accordance with
Section 13.5.1 must be
asserted no later than one (1) year after the
Closing Date; provided, however,
that claims with respect to losses arising out
of or related in any way to the
matters described in Sections 2.3, 13.1(i), 13.2(ii) or
13.2(iii) may be made
without limitation, except as limited by law.
13.6
INDEMNIFICATION; SOLE REMEDY. The indemnification provisions
----------------------------
set forth herein shall constitute the sole remedy for any breach of this
Agreement.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1
AMENDMENT AND
MODIFICATION.
Subject to applicable law, this
----------------------------
Agreement may be amended, modified and
supplemented only by written agreement of
the parties hereto.
14.2
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,
including,
without limitation, the letter of intent
executed by the parties, dated July 12,
2004. 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.
14.3
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
30
<PAGE>
regulatory
agency, arbitrator authority, whether
international, national,
federal,
state or local.
"Average Issue
Price Per Share" means
the average price per share at
-------------------------------
which
all Common Stock was issued to the Sellers hereunder.
"Base Value"
means, with respect to Common Stock issued to the
-----------
Sellers,
the value of such stock determined by
taking the price per share
at which such
stock was issued to the Sellers and multiplying by the number
of shares issued.
"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.
"Closing
GAAP" means GAAP in effect as of the Closing Date.
-------------
"Common Stock" means
the common stock, $0.001 par value per share, of
-------------
the Purchaser.
"Contract" means
any agreement, contract, commitment,
instrument or
--------
other
binding arrangement or understanding, whether written or oral.
"Determination Date"
means the date which is 365 days from the
-------------------
Effective
Date.
"EBIDTA" means
earnings before interest, depreciation, taxes and
------
amortization,
as determined in accordance with GAAP.
"Effective Date" means
the 1st day of the month following the Closing
---------------
Date
(or the Closing Date
is such occurs on the 1st day of a month), or as
otherwise
agreed between the
Majority Holder and the Purchaser in writing.
"GAAP" means
United States
generally accepted accounting principles.
----
"Guarantee" means
any guarantee or other
contingent liability (other
---------
than
any endorsement for collection or deposit in the
ordinary course of
business),
direct or indirect with respect to any
obligations of another
Person,
through an agreement or otherwise,
including, without limitation,
(a) any endorsement or discount with
recourse or undertaking substantially
equivalent
to or having economic effect similar
to a guarantee in respect
of any such obligations; and (b) any Contract (i) to purchase, or
to
advance
or supply funds for the payment or purchase of, any such
obligations;
(ii) to purchase, sell
or lease property, products, materials
or supplies, or transportation or services, in respect of
enabling such
other
Person to pay any such obligation or to assure the
owner thereof
against
loss regardless of the delivery or nondelivery of the
property,
products,
materials or supplies
or transportation or services; or (iii) to
make
any loan, advance or capital
contribution to or other investment in,
or to otherwise provide funds to or for, such
other Person in respect of
enabling
such Person to satisfy an obligation (including any
liability
31
<PAGE>
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,
