SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Definitive Proxy Statement
[ ] Definitive Additional Materials [ ] Soliciting Materials Pursuant
[ ] Confidential, for use of the Commission to Section 240.14a-11(c) or
Only (as permitted by Rule 14a-6(e)(2)) Section 240.14a-12
PALADYNE CORP.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement
if other than Registrant)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a(6)(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:_____________________
2) Aggregate number of securities to which transaction applies:
_____________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth amount
on which the filing fee is calculated and state how it was
determined):____________________
4) Proposed maximum aggregate value of
transaction:____________________________ 5) Total fee
paid:__________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and date of its filing.
1) Amount Previously Paid:_______________________
2) Form, Schedule or Registration Statement No.:_______________________
3) Filing Party:____________________
4) Date Filed:_____________________
Letter from the CEO
Dear Stockholders:
You are asked to participate in a momentous change for Paladyne Corp. as
described in detail in the enclosed Proxy Statement. Subject to stockholder
approval, Management proposes to accept an offer to sell a controlling interest
in the Company. We believe this action will result in a positive financial
situation, increased value for shareholders, and increased business for the
company.
We have struggled for additional financing over the past year in a difficult
environment for investment. While we succeeded to some degree through a private
placement, we achieved less then the required amount of financing needed to
sustain the business. The proposal includes actions needed for the Company to
realize its potential. I have agreed to vote my shares in support of the
proposals, and ask that you do the same.
Sincerely,
Terrence J. Leifheit
President and CEO
PRELIMINARY COPIES
PALADYNE CORP.
NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD __, 2003
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of PALADYNE CORP., a Delaware corporation (the "Company"), will be
held at the Company's offices at 1650A Gum Branch Road, Jacksonville, North
Carolina, on ____________, 2003 at [TIME] A.M., local time, for the following
purposes:
1. To authorize a one-for-ten reverse stock split of the outstanding
Common Stock.
2. To approve the Stock Purchase Agreement dated December __, 2002,
among the Company and WAG Holdings, LLC, Glen H. Hammer and A.
Randall Barkowitz (the "Buyers"), and the transactions
contemplated thereby, including, without limitation, the sale to
the Buyers of a number of shares of Common Stock equal to 70% of
the post-reverse split, fully diluted shares outstanding of the
Company.
3. To approve an amendment to the Company's Certificate of
Incorporation to change the name of the Company to "Market
Central, Inc."
4. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
A Proxy Statement describing the matters to be considered at this
Meeting is attached to this Notice.
Only stockholders of record of the Company's Common Stock, Series A
Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock at the
close of business on December __, 2002, which has been fixed as the record date
for the Meeting, shall be entitled to notice of, and to vote at, the Meeting and
any adjournments thereof.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER
OR NOT YOU EXPECT TO ATTEND, YOU ARE RESPECTFULLY REQUESTED BY THE BOARD OF
DIRECTORS TO SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO EXECUTE PROXIES RETAIN THE RIGHT TO
REVOKE THEM AT ANY TIME PRIOR TO THE VOTING THEREOF.
By Order of the Board of Directors,
James Rapp, Secretary
Jacksonville, North Carolina
December __, 2002
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WISH YOUR SHARES
OF COMMON STOCK OR PREFERRED STOCK TO BE VOTED, YOU ARE REQUIRED TO SIGN AND
MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
PRELIMINARY COPIES
PALADYNE CORP.
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
__________ __, 2003
This Proxy Statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors of
PALADYNE CORP., a Delaware corporation (the "Company"), to be voted at a Special
Meeting of Stockholders of the Company (the "Meeting") to be held on __________
__, 2003, or at such other time to which the Meeting may be adjourned, for the
purposes set forth in the accompanying Notice of Special Meeting of
Stockholders.
This Proxy Statement, Notice and accompanying Proxy are first being
sent or given to the Company's stockholders on or about December __, 2002.
A copy of the Company's Annual Report on Form 10-KSB for the fiscal
year ended August 31, 2002 accompanies this Proxy Statement.
VOTING SECURITIES AND VOTE REQUIRED
Record Date
Only stockholders of record at the close of business on December __,
2002 (the "Record Date") of the common stock, $.001 par value (the "Common
Stock"), the Series A Convertible Preferred Stock, $.001 par value, the Series C
Convertible Preferred Stock, $.001 par value, and the Series D Convertible
Preferred Stock, $.001 par value, of the Company are entitled to notice of, and
to vote the shares held by them on such date at the Meeting and any adjournments
thereof.
Voting Securities
On the Record Date, the Company had issued and outstanding 16,709,351
shares of Common Stock, 137,143 shares of Series A Preferred Stock, 1,000,101
shares of Series C Preferred Stock and 1,000,000 shares of Series D Preferred
Stock. There was no other class of voting securities outstanding at that date.
The Series A Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock are sometimes collectively referred to in this Proxy Statement as the
"Preferred Stock," and the Common Stock and Preferred Stock are sometimes
collectively referred to as the "Voting Securities."
Each share of Common Stock and Series A Preferred Stock held by a
stockholder entitles such holder to one vote upon each matter that is voted upon
at the Meeting. Each share of Series C Preferred Stock and Series D Preferred
Stock held by a stockholder entitles such holder to ten votes upon each matter
that is voted upon at the Meeting. All of the Voting Securities will vote
together as a single class on the matters coming before the Meeting specified in
this Proxy Statement.
At the Meeting, when the Series C Preferred Stock and the Series D
Preferred stock vote together with the Common Stock and Series A Preferred Stock
as one class, all such shares would represent an aggregate of 36,847,504 votes.
As of the Record Date, Terrence J. Leifheit, the Company's Chairman,
President, Chief Executive Officer and Chief Operating Officer, had the right to
vote 8,200,000 shares of Common Stock, 14,819 shares of Series C Preferred Stock
and 1,000,000 shares of Series D Preferred Stock, representing an aggregate of
18,348,188 votes, giving him the right to vote 49.8% of the Voting Securities at
the Meeting. Pursuant to a Voting Agreement described under "Proposal 2
- -Agreements with the Buyers - Voting Agreement," Mr. Leifheit has agreed to vote
all Voting Securities owned by him in favor of the three Proposals described
below, thereby virtually assuring their approval. There is no separate
requirement that these Proposals also have to be approved by a majority of the
Voting Securities held by the unaffiliated stockholders.
Quorum
The presence, in person or by proxy, of stockholders entitled to cast a
majority of the votes entitled to be cast by holders of all Voting Securities,
voting as one class, is necessary to constitute a quorum at the Meeting. Broker
"non-votes" and the shares as to which a stockholder abstains from voting are
included for purposes of determining whether a quorum of shares is present at
the Meeting, but as unvoted for purposes of determining the approval of any
matter submitted to the stockholders at the Meeting. A broker "non-vote" occurs
when a nominee holding shares for a beneficial owner does not have discretionary
voting power with respect to that item and has not received voting instructions
from the beneficial owner.
Voting
The affirmative vote by holders of a majority of the votes cast at the
Meeting is required to approve the Stock Purchase Agreement described in
Proposal 2 (the "Stock Purchase Agreement") and the transactions contemplated
thereby. The affirmative vote by holders of a majority of the outstanding Voting
Securities is required to approve the reverse stock split and the name change. A
broker "non-vote" would have the effect of a vote AGAINST each of these two
latter proposals.
If you are the beneficial owner, but not the registered holder of
Voting Securities, you cannot vote directly those Securities at the Meeting. You
must provide voting instructions to your nominee holder, such as your brokerage
firm or bank. Alternatively, if you wish to vote at the Meeting, you must obtain
from the entity that is the record holder of your shares a proxy issued in your
name.
At the Meeting, ballots will be distributed with respect to each
proposal to persons who have not previously delivered a proxy and to persons who
had delivered proxies but who want to change their votes. The ballots will be
tallied, the votes being in three categories: FOR, AGAINST or ABSTAIN.
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Proxies
Proxies are solicited to give all stockholders who are entitled to vote
on the matters that come before the Meeting the opportunity to do so whether or
not they choose to attend the Meeting in person.
If the enclosed proxy is properly executed and returned to the Company
and not revoked, it will be voted in accordance with the instructions therein.
Unless contrary instructions are given, the persons designated as proxy holders
in the accompanying Proxy will vote FOR the reverse stock split, FOR the
approval of the Stock Purchase Agreement and FOR the change of corporate name
and as recommended by the Board of Directors with regard to any other matter
which properly comes before the Meeting or, if no such recommendation is given,
in their own discretion.
If you execute and return a Proxy you may revoke it at any time
thereafter by writing to the Secretary of the Company prior to the Meeting, or
by execution and delivery of a subsequent Proxy or by attending the Meeting and
voting in person, except as to any matter or matters upon which, prior to such
revocation, a vote shall have been cast pursuant to the authority conferred by
your Proxy.
The Company is paying the cost of soliciting the Proxies, consisting of
the printing, handling and mailing of the Proxy and related materials, and the
actual expense incurred by brokerage houses, custodians, nominees and
fiduciaries in forwarding proxy material to the beneficial owners of Voting
Securities.
In order to ensure that there is a quorum and a sufficient vote on the
Proposals, it may be necessary for certain officers, directors, regular
employees and other representatives of the Company to solicit Proxies by
telephone or mail. These persons will receive no extra compensation for their
services. Your cooperation in promptly signing and returning the enclosed proxy
card will help to avoid additional expense.
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BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table sets forth information, to the best of the
Company's knowledge, as of the Record Date, with respect to the beneficial
ownership of the Company's Voting Securities by (i) each person known by the
Company to own beneficially more than 5% of the outstanding Voting Securities,
(ii) each present director and executive officer of the Company and (iii) all
directors and executive officers as a group:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
PERCENT OF
NAME AND ADDRESS SERIES C SERIES D COMMON VOTING
OF BENEFICIAL OWNER+ PREFERRED STOCK PREFERRED STOCK STOCK SECURITIES(2)
- -------------------- --------------- --------------- ----- -------------
Terrence J. Leifheit* (3) 14,819 1,000,000 8,543,987 50.2%
Gibralter Publishing, Inc. (4) -0- 1,000,000 -0- 27.1%
Ronald L. Weindruch (5) 6,000 -0- 1,805,451 5.0%
William Hadel* (6) -0- -0- 584,229 1.6%
William P. O'Reilly* (7) 30,000 -0- 149,669 1.2%
Kenneth H. Horn* (8) 6,000 -0- 215,417 0.7%
James L. McGovern* (9) 6,000 -0- 130,833 0.5%
Clifford A. Clark* (10) 6,000 -0- 78,053 0.4%
William E. Willis, Jr.* (11) 15,000 -0- 66,670 0.6%
All directors and executive
officers as a group (7 persons in
group) (12) 77,819 1,000,000 9,768,858 54.4%
<FN>
- -------------------------
* Director and/or Executive Officer
+ Unless otherwise indicated the address of the holder is c/o Paladyne
Corp., 1650A Gum Branch Road, Jacksonville, NC 28540.
(1) Unless otherwise indicated in the notes below, the Company has been
advised that each person above has sole voting and investment power over
the shares indicated above. Ownership is calculated separately for each
person on the basis of the actual number of outstanding shares as of the
Record Date and assumes the exercise of any stock options and warrants
held by such person (but not by anyone else) exercisable within sixty
days of the Record Date. None of the persons listed above beneficially
owns any shares of Series A Preferred Stock.
4
- -----------------------
(Footnotes Continued)
(2) Based upon one vote for each outstanding share of Common Stock and Series
A Preferred Stock, and ten votes for each outstanding share of Series C
Preferred Stock and Series D Preferred Stock.
(3) Includes: (i) 6,821,690 shares of Common Stock owned directly, (ii)
1,378,310 shares of Common Stock held in a Voting Trust for which Mr.
Leifheit is the sole voting trustee, (iii) 1,000,000 shares of Series D
Preferred Stock held by Gibralter Publishing, Inc., a corporation
controlled by Mr. Leifheit and (iv) 343,987 shares that may be acquired
by Mr. Leifheit pursuant to the exercise of stock purchase options and
warrants exercisable within sixty days. Does not include (i) 3,743,610
shares of Common Stock underlying warrants owned directly or (ii) 311,514
shares of Common Stock underlying warrants held in trust for the benefit
of Mr. Leifheit's minor children and which warrants are not presently
exercisable
(4) Gibralter Publishing is a corporation controlled by Mr. Leifheit. Does
not include 10,000,000 shares of Common Stock underlying warrants which
are not presently exercisable.
(5) Includes 100,000 shares of stock held in the names of Mr. Weindruch's
children, and 1,500,000 held in trusts for which Mr. Weindruch acts as
trustee. Includes 205,451 shares that may be acquired by Mr. Weindruch
pursuant to the exercise of stock purchase options and warrants
exercisable within sixty days.
(6) Includes 29,229 shares that may be acquired by Mr. Hadel pursuant to the
exercise of stock purchase options and warrants exercisable within sixty
days.
(7) Includes 149,669 shares that may be acquired by Mr. O'Reilly pursuant to
the exercise of stock purchase options and warrants exercisable within
sixty days.
(8) Includes (i) 123,000 shares underlying stock options exercisable within
sixty days of the Record Date and (ii) 92,418 shares held by a
corporation controlled by Mr. Horn.
(9) Includes 145,833 shares underlying stock options exercisable within sixty
days of the Record Date.
(10) Includes 78,053 shares underlying stock options exercisable within sixty
days of the Record Date.
(11) Includes 66,670 shares underlying stock options exercisable within sixty
days of the Record Date.
(12) See Notes (3), (6), (7), (8), (9), (10) and (11).
</FN>
In addition to their current holdings, following the closing of the
Stock Purchase, each Board member listed in the table above, as well as any new
Board members that are appointed upon the closing of the transactions
contemplated in this Proxy Statement, will receive options to purchase 10,000
shares of Common Stock on a post-reverse split basis. For further information
about the appointment of new directors, see "Proposal 2 - Composition of the
Board of Directors," below.
5
PROPOSAL 1
AUTHORIZE A ONE-FOR-TEN REVERSE SPLIT OF THE COMPANY'S
OUTSTANDING COMMON STOCK
BACKGROUND
The Board of Directors considered and unanimously authorized, subject
to stockholder approval, an amendment to the Company's Certificate of
Incorporation to effect a one-for-ten reverse split of the Company's outstanding
Common Stock (the "Reverse Split"). The primary reasons for the Reverse Split
are to reduce the number of outstanding shares of Common Stock in an effort to
improve the future marketability and liquidity of the Common Stock and also to
fulfill a condition to the sale of Common Stock to the Buyers pursuant to the
Stock Purchase Agreement. Approval of the Stock Purchase Agreement is Proposal 2
in this Proxy Statement.
If stockholders approve this proposal and also the proposal to approve
the Stock Purchase Agreement, the Reverse Split would become effective
immediately prior to the closing of the Stock Purchase Agreement, assuming the
conditions precedent to that closing have been satisfied. One of the conditions
precedent to the Buyers' obligation to consummate the Stock Purchase is the
Reverse Split having been effected. The text of the form of amendment to the
Company's Certificate of Incorporation to effect the Reverse Split is set forth
in Exhibit A to this Proxy Statement.
There are presently 75,000,000 shares of Common Stock authorized, of
which 16,709,351 shares were issued and outstanding on the Record Date. In
addition, the Company has reserved a total of 28,370,160 additional shares of
Common Stock for issuance, as follows: (i) 92,381 shares upon the conversion of
the outstanding Series A Preferred Stock, (ii) 10,001,010 shares upon the
conversion of the Series C Preferred Stock, (iii) 10,000,000 shares upon the
conversion of the Series D Preferred Stock, (iv) 7,476,773 shares to be issued
upon exercise of outstanding warrants and options; and (v) 800,000 shares
reserved for issuance to holders of the Series C Preferred Stock as an
inducement to convert their shares into Common Stock (see "Proposal 2 - Issuance
of Common Stock to Induce Conversion of Series C Preferred Stock"). This leaves
a total of 29,920,489 shares of authorized and unreserved Common Stock, which is
less than the number of shares that would be required to complete the sale of
Common Stock to the Buyers under the Stock Purchase Agreement, absent the
Reverse Split.
The Company also desires to have additional authorized shares for
future capital raising, possible acquisitions and underlying options which may
be granted to employees and other persons, although the Company has no current
plans for any such issuances other than described above and pursuant to the
Stock Purchase Agreement.
Instead of increasing the number of authorized shares of Common Stock,
the Reverse Split will reduce the number of outstanding shares to permit the
issuance of the shares of Common Stock and certain warrants to the Buyers under
the Stock Purchase Agreement and to holders of the outstanding options and
warrants upon their exercise.
6
In the event this Proposal is not adopted, the Company would not be
able to complete the proposed sale of Common Stock to the Buyers, which could
subject the Company to payment of a termination fee and other consequences
described further in Proposal 2. In the event this Proposal is adopted but the
Stock Purchase Agreement is not approved, the Board of Directors may determine
not to effect the Reverse Split.
PURPOSES AND EFFECTS OF THE REVERSE SPLIT
Consummation of the Reverse Split will not alter the number of
authorized shares of Common Stock, which will remain 75,000,000 shares, $.001
par value, although the aggregate par value of the issued and outstanding Common
Stock would be reduced. Consummation of the Reverse Split will not have any
federal tax consequences to stockholders. Consummation of the Reverse Split will
not affect the Company's registration under the Securities Exchange Act of 1934.
The Company's Common Stock is quoted on the OTC Bulletin Board under
the symbol PLDY. On the Record Date, the reported closing price of the Common
Stock on the OTC Bulletin Board was $[_____] per share.
The Company's Board of Directors believes that the current per share
price of the Common Stock limits the effective marketability of the Common Stock
because of the reluctance of many brokerage firms and institutional investors to
recommend lower-priced stocks to their clients or to hold them in their own
portfolios. Certain policies and practices of the securities industry may tend
to discourage individual brokers within those firms from dealing in lower-priced
stocks. Some of those policies and practices involve time-consuming procedures
that make the handling of lower-priced stocks economically unattractive. The
brokerage commission on a sale of lower-priced stock may also represent a higher
percentage of the sale price than the brokerage commission on a higher-priced
issue. Any reduction in brokerage commissions resulting from the Reverse Split
may be offset, however, in whole or in part, by increased brokerage commissions
required to be paid by stockholders selling "odd lots" created by such Reverse
Split.
As previously stated, another reason for the Reverse Split is to
fulfill a closing condition required by the Buyers under the Stock Purchase
Agreement. The Reverse Split would subject the present stockholders to further
dilution upon the issuance of the Common Stock to the Buyers, and also would
reduce the "public float" of the Common Stock. Although the issuance of the
Common Stock upon closing of the Stock Purchase Agreement will increase the
number of outstanding shares, it will not immediately increase the "public
float" as the Common Stock to be issued to the Buyers would be restricted on
resale absent an effective registration statement under the Securities Act of
1933. The Stock Purchase Agreement contains a covenant requiring the Company to
file a registration statement upon the request of the Buyers to cover the resale
of those shares.
An increase in the trading price of the Common Stock would generally be
expected immediately upon effectiveness of the Reverse Split. However, given the
numerous factors and contingencies that could affect the trading price of the
Common Stock, including the issuance of the large block of shares to the Buyers,
there can be no assurance that after the Reverse Split the Common Stock would
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trade at such higher price for a sustained period of time. In particular, there
can be no assurance that the price for shares of the Company's Common Stock
after the Reverse Stock Split, or for any sustained period of time thereafter,
would be ten times the price for shares of the Common Stock immediately prior to
the Reverse Stock Split.
The Reverse Split would have the following effects upon the number of
shares of Common Stock outstanding and the number of authorized and unissued
shares of Common Stock (assuming that no additional shares of Common Stock are
issued by the Company after the Record Date).
Unissued and
Common Authorized Common
Stock Outstanding1 Reserved Shares2 Stock3
----------------- --------------- -----------------
Currently 36,802,738 [ ] [ ]
Following Reverse Split 3,680,274 [ ] [ ]
Following Sale of Common
Stock to the Buyers 12,561,015 [ ] [ ]
<FN>
- ---------------------
1 Assumes the conversion of all outstanding shares of Preferred Stock
into Common Stock
2 Represents shares underlying presently exercisable options and warrants
and shares reserved for issuance to holders of Series C Preferred Stock
as an inducement to convert their shares. See "Proposal 2 - Issuance of
Common Stock to Induce Conversion of Series C Preferred Stock."
3 Based upon 75,000,000 shares as presently authorized.
</FN>
At the effective date of the Reverse Split, each share of the Common
Stock issued and outstanding immediately prior thereto (the "Old Common Stock"),
will be reclassified as and changed into one-tenth (1/10) of a share of the
Company's Common Stock (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Shortly after the effective date,
the Company will send transmittal forms to the holders of the Old Common Stock
to be used in forwarding their certificates formerly representing shares of Old
Common Stock for surrender and exchange for certificates representing whole
shares of New Common Stock. No certificates or scrip representing fractional
share interests in the New Common Stock will be issued. Instead, any fractional
share interest will be adjusted either upward or downward to the nearest whole
share, although each stockholder will receive at least one whole share. No cash
will be paid for fractional shares.
At the effective date, all options and warrants then outstanding will
be automatically adjusted into economically equivalent options or warrants by
decreasing the number of underlying shares of Common Stock by a factor of ten
and, if applicable, increasing the exercise price by a factor of ten.
DESCRIPTION OF CAPITAL STOCK
The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders, subject to any
special voting provisions to holders of the Preferred Stock. In the event of
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liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining which are available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. Holders of Common Stock, as such, have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
Common Stock.
Holders of shares of the Common Stock are entitled to receive dividends
when, as and if declared by the Board of Directors from funds legally available
therefore, subject to any preferred or contemporaneous dividend on the
outstanding series of Preferred Stock. Under the Delaware General Corporation
Law, cash dividends may only be paid (i) out of "surplus", which consists of the
excess of the net assets of the Company over its capital; or (ii) if there is no
surplus, out of the net profits for the fiscal year in which the dividend is
declared, net profits for the immediately preceding fiscal year, or net profits
for both of such years. Any dividend on the Common Stock is subject to
declaration of dividends on the Series C Preferred Stock and Series D Preferred
Stock, and the prior payment of accrued dividends on the Series A Preferred
Stock. Management does not intend to declare cash dividends on the Common Stock
in the foreseeable future.
Of the 10,000,000 shares of Preferred Stock authorized, 137,143 shares
have been designated as Series A Convertible Preferred Stock, all of which are
outstanding, 1,800,000 shares have been designated as Series C Preferred Stock,
of which 1,000,101 shares are outstanding, and 1,050,000 shares have been
designated as Series D Preferred Stock, of which 1,000,000 shares are
outstanding. In addition, 5,000,000 shares were designated as Series B Preferred
Stock, of which 4,100,000 were previously issued and subsequently converted to
shares of Common Stock. One condition to the Buyers' obligation to complete the
purchase of Common Stock described under "Proposal 2" is the conversion of at
least 95% of the outstanding Series A Preferred Stock and Series C Preferred
Stock and all of the outstanding Series D Preferred Stock into Common Stock. As
an inducement to the holders of Series C Preferred Stock to convert their shares
to Common Stock, the Company will offer such holders an additional 0.8 shares
(on a pre-Reverse Split basis) of Common Stock for each share of Series C
Preferred Stock converted prior to the closing of the Stock Purchase Agreement.
See "Proposal 2 - Issuance of Common Stock to Induce Conversion of Series C
Preferred Stock."
The 2,012,857 shares of Preferred Stock not previously designated may
be issued having such preferences and rights as the Board of Directors of the
Company, without further stockholder approval, may designate at the time of
issuance, including having anti-takeover provisions.
Although the Reverse Split has been proposed for the reasons listed
above and not for anti-takeover purposes, stockholders nevertheless should be
aware that the Reverse Split would increase the number of shares of Common Stock
available for issuance, which could facilitate future efforts to frustrate
persons seeking to effect a takeover or otherwise gain control of the Company.
The Board of Directors has no present intention to issue any shares of
Common Stock or Preferred Stock except to the extent previously mentioned in
this Proxy Statement.
9
RECOMMENDATION
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE REVERSE SPLIT IS
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE REVERSE SPLIT.
PROPOSAL 2
APPROVE THE STOCK PURCHASE AGREEMENT
BACKGROUND
Pursuant to a Stock Purchase Agreement dated December __, 2002, among
WAG Holdings, LLC, Glen H. Hammer, and A. Randall Barkowitz (collectively, the
"Buyers") and the Company, the Buyers will purchase, for a total purchase price
of $750,000, a number of post-Reverse Split shares of the Company's Common
Stock, which, after the purchase, will give the Buyers ownership of 70% of the
outstanding shares of Common Stock on a fully diluted basis (excluding shares
underlying outstanding options or warrants exercisable at more than $0.55 per
share). Based on the Voting Securities, options and warrants outstanding as of
the Record Date, and after giving effect to the Reverse Split, and assuming the
conversion of 100% of the Company's convertible securities, the Buyers would
purchase a total of 8,880,740 shares of Common Stock (the "Shares"), which would
result in a purchase price of approximately $0.084 per share of Common Stock.
The Company's Board of Directors, after considering the Company's
resources and future direction, and strategy, as well the Company's need for
additional working capital and its inability to raise capital in the current
financial markets, coupled with the business opportunities proposed by the
Buyers, have determined that the sale of the Shares to the Buyers is the most
effective mechanism to preserve stockholder capital and to provide a possible
platform for future growth. Based on current estimates of cash flow, the Company
does not believe it will have sufficient cash resources to make required debt
payments and to meet its other operational cash requirements. The Company is in
default under the loan agreement with its principal lender and that lender has
sued the Company to recoup amounts owed. The Board of Directors believes that
the proposed transaction will add sufficient capital to help relieve the
Company's short-term cash flow crisis and that the Buyers will be able to locate
sufficient additional funding to address the Company's longer-term financial
needs, although there can be no assurance that such funding will be obtained.
Although stockholder approval is not required to approve the Stock
Purchase Agreement, because the transaction involves a change in control of the
Company, both the Company's Board of Directors and the Buyers felt it would be
prudent to obtain approval of the Stock Purchase Agreement by the Company's
stockholders.
THE BUYERS
Biographical information with respect to each of the Buyers follows:
10
WAG HOLDINGS, LLC, is a Georgia limited liability company which was
formed by William A. Goldstein for the sole purpose of investing in the Company.
Mr. Goldstein, age 39, is the founder and Chairman and Chief Executive Officer
of J&C Nationwide, Inc., a leading medical staffing company based in Atlanta,
Georgia. Mr. Goldstein is also founder and Chairman of nPorta, Inc., a software
development company, and its subsidiary TravelASP, which provides software with
specific application to the travel industry. Mr. Goldstein is also owner of
Goldstar Travel, a licensed travel agency in Atlanta, Georgia.
GLEN H. HAMMER, age 54, has served as the President and Chief Executive
Officer of Warranty Corporation of America ("WCA") since 1984. WCA is an
international extended service and warranty provider based in Atlanta, Georgia;
Montreal and Quebec, Canada; Dallas Texas; and Panama City, Panama, S.A., with
branch offices in New York, New York; Miami, Florida; New Orleans, Louisiana;
and Los Angeles, California.
A. RANDALL BARKOWITZ, age ____, is the Chief Financial Officer of WCA.
Following consummation of the Share Purchase, Glen H. Hammer and
William A. Goldstein will be appointed to the Company's Board of Directors. See
"-Composition of the Board of Directors" for more information.
The following table sets forth the number of shares of Common Stock to
be issued to each of the Buyers based on the capitalization of the Company on
the Record Date:
SHARES OF
NAME COMMON STOCK
---- ------------
WAG Holdings, LLC 4,265,370
Glen H. Hammer 4,090,370
A. Randall Barkowitz 350,000
---------
8,880,740
AGREEMENTS WITH THE BUYERS
Loan and Security Agreement
Pursuant to the Loan and Security Agreement, a copy of which was
attached by the Company as Exhibit 10.3 to its Form 8-K filed on October 24,
2002 (with exhibits, the "October 8-K"), as subsequently amended, Market
Holdings, Inc., a company controlled by Messrs. Hammer and Goldstein, agreed to
loan the Company and e-com, from time to time, at the Company's request, up to
$370,000. Such loan (the "Investor Loan") has subsequently been assigned by
Market Holdings to Mr. Hammer and WAG Holdings, LLC jointly. The loan bears
simple interest at a rate per annum equal to the most recently announced prime
rate published in the "Money Rates" section of the Wall Street Journal, from
time to time, plus four percentage points, and is secured by a lien on all
assets of the Company and e-com. At December __, 2002, the outstanding principal
amount of the Investor Loan was $370,000, excluding accrued interest of
$-----------.
11
Stock Purchase Agreement
The following is a summary of certain provisions of the Stock Purchase
Agreement. This summary is not intended to be complete and is qualified in its
entirety by reference to the Stock Purchase Agreement, a copy of which is
included as Exhibit B to this Proxy Statement. In addition to the provisions
described below, the Stock Purchase Agreement contains certain customary
representations, warranties and covenants that can be found by reviewing the
Stock Purchase Agreement in its entirety.
The Share Purchase
Under the Stock Purchase Agreement, the Buyers would purchase (the
"Share Purchase"), on a private placement basis, a number of shares of newly
issued Common Stock (the "Shares") such that, immediately following the
consummation of the Share Purchase, the Buyers would own seventy percent (70%)
of the outstanding shares of Common Stock of the Company, determined on a fully
diluted basis (excluding the exercise of any outstanding options and warrants to
acquire Common Stock at a price equal to or greater than $.55 per share), giving
effect to the conversion of all outstanding securities of the Company
convertible into Common Stock except where such conversion would require the
payment to the Company of not less than $0.55 per share. Based upon the Voting
Securities, options and warrants outstanding on the Record Date, and assuming
the conversion of 100% of the Company's outstanding convertible securities, the
Buyers would purchase 8,880,740 shares of Common Stock on a post-Reverse Split
basis. The purchase price for the Shares is $750,000, payable to the Company, at
the discretion of the Buyers, in a combination of (i) cash, (ii) the
cancellation of all or a portion of any obligations of the Company or any of its
subsidiaries currently due to third party obligees that are purchased by the
Buyers from such third party obligees prior to the closing (with credit toward
the purchase price being given to the Buyers for the face value of such
obligations); and/or (iii) the cancellation of the indebtedness outstanding
under the Investor Loan (the amount of such indebtedness as of December __, 2002
was $370,000, plus accrued interest.
Certain Covenants
In addition to certain customary covenants, the Stock Purchase
Agreement contains the following agreements:
Fees and Expenses
The Company has agreed to pay the fees and expenses incurred by Market
Holdings, the Buyers, and their respective legal counsel, investment bankers,
brokers or other representatives or consultants, in connection with the
negotiation and consummation of the transactions contemplated by the Stock
Purchase Agreement.
No Solicitation
Until February 28, 2003, (the "Exclusivity Period"), neither the
Company nor any of its representatives, directors, officers, stockholders,
agents or affiliates will (i) entertain or discuss a possible sale, merger,
recapitalization or other disposition of the Company, any capital stock or
assets of the Company or any interest therein with any other party or provide
any information to any other party in connection therewith, or (ii) disclose to
12
any other party the contents of the Stock Purchase Agreement or the details of
the transactions contemplated therein, except for such disclosure required by
law, subject to the Company's Board of Directors having the right to consider a
Superior Proposal (as defined), or an acquisition proposal that is reasonably
likely to lead to a Superior Proposal, in fulfillment of their fiduciary
obligation to the stockholders of the Company. In addition, the Company has
agreed that it will inform the Buyers of, and provide the Buyers with
information regarding, any other offers or expressions of interest for the
Company.
Break-Up Fees
Upon the first occurrence of any Adverse Event (as defined below), the
Company shall pay the Buyers a total of $100,000 in cash, plus all transaction
costs and expenses actually incurred by the Buyers in connection with the
negotiation and attempted consummation of the transactions contemplated by the
Stock Purchase Agreement. The term "Adverse Event" means any of the following:
(A) the occurrence of any breach of the provisions of the No Solicitation
provision described above; (B) the election of the Buyers to terminate the Stock
Purchase Agreement because the Buyers determine, in their reasonable judgment,
that (1) the Company does not own or have licenses to use all of the
Intellectual Property necessary to conduct its business as it has been
conducted, (2) there has occurred any material adverse change in the business or
assets of the Company since May 31, 2002 that was not disclosed to the Buyers in
writing prior to the date of the Stock Purchase Agreement, or (C) any material
adverse change in the business or assets of the Company has occurred since the
date of the Stock Purchase Agreement.
Upon the first occurrence of any Triggering Event (as defined below),
the Company shall pay the Buyers a break-up fee in cash in the amount of
$100,000, plus all transaction costs and expenses actually incurred by the
Buyers in connection with the negotiation and attempted consummation of the
transactions contemplated by the Stock Purchase Agreement. The term "Triggering
Event" means (i) the failure of the Company's Board of Directors to recommend to
the stockholders of the Company, within fifteen days following the date of the
Stock Purchase Agreement, that the stockholders of the Company approve the
consummation of the transactions contemplated by the Stock Purchase Agreement,
(ii) the withdrawal by the Company's Board of Directors of any such
recommendation, (iii) the recommendation by the Company's Board of Directors
that the stockholders of the Company approve any Acquisition Proposal (as
defined in the Stock Purchase Agreement); (iv) the execution by the Company of
any agreement relating to an Acquisition Proposal; or (v) the termination of the
Stock Purchase Agreement by the Buyers following the breach by the Company of
any of the Company's representations, warranties or covenants set forth therein.
Lock-Up Option
The Company has granted the Buyers an option (the "Option") to acquire
a number of shares of Common Stock equal to 19.9% of the number of issued and
outstanding shares of the Company's Common Stock, determined on a fully-diluted
basis (assuming the conversion of all securities convertible into Common Stock
and the exercise of all options and warrants to purchase Common Stock)
immediately prior to the exercise of the Option, at an exercise price of $0.07
13
per share, to be paid in cash (which price and number of shares shall be
automatically adjusted in accordance with the Reverse Split as described in
Proposal 1, if the Reverse Split is effected). The Option shall be exercisable
in the event that the Buyers become entitled to a break-up fee or other payment
as described above, and shall expire upon the earlier to occur of (i) August 29,
2004, or (ii) the closing of the Stock Purchase Agreement. The Buyers may assign
the option to any person or entity in their sole discretion.
Post-Closing Covenants
The Buyers have agreed that, after the closing of the Stock Purchase
Agreement, they will use commercially reasonable efforts to assist the Company
in generating new outbound telemarketing and/or mail opportunities for the
Company in an amount not less than $350,000 during the first twelve months after
the closing.
The Buyers have also agreed that, after the closing, they will cause
the Company to adopt a new Stock Option Plan pursuant to which employees of the
Company will be given new options to purchase Common Stock.
The Company has agreed that, at the request of the Buyers, the Company
will register for resale the shares of Common Stock sold to the Buyers and the
shares of Common Stock subject to the warrants to be received by the Buyers,
which registration would allow the Buyers to sell such shares without being
subject to securities laws restrictions that would otherwise limit their ability
to make such sales.
Conditions to Closing
The obligations of the Company to consummate the transactions
contemplated by the Stock Purchase Agreement are subject to the fulfillment of
certain customary conditions, which may be waived by the Company in its sole
discretion.
The obligations of the Buyers to consummate the transactions
contemplated by the Stock Purchase Agreement are subject to the fulfillment of
certain conditions (which may be waived by the Buyers in their sole discretion),
more fully described in the Stock Purchase Agreement. Certain of these
conditions are as follows:
(a) the stockholders of the Company shall have approved the
transactions contemplated by the Stock Purchase Agreement, and also approved the
Reverse Split proposal and the name change proposal;
(b) the Company shall have effected the Reverse Split and the Name
Change;
(c) prior to the effectiveness of the Reverse Split, holders of at
least 95% of the Company's outstanding Series A and Series C Preferred Stock,
determined on the basis of the number of shares of Common Stock into which such
securities may be converted immediately prior to the closing, shall have been
cancelled or converted to Common Stock in accordance with the terms of such
securities;
14
(d) Gibralter Publishing, Inc, the holder of all outstanding shares of
Series D Preferred Stock, shall have converted all such shares to Common Stock;
(e) the Company shall have issued to Mr. Hammer and WAG Holdings, LLC
the Ancillary Warrants described below under the heading "-Ancillary Warrants."
(f) each of the former stockholders of e-commerce support centers,
inc. ("ecom"), a wholly owned subsidiary of the Company, shall have executed and
delivered to the Company a written waiver of any rights such person may have
under the 2001 Agreement and Plan of Merger between the Company and e-com,
whereby the Company had acquired e-com, to receive additional shares of Common
Stock by reason of the Stock Purchase Agreement;
(g) The aggregate fully diluted number of shares of Common Stock
outstanding shall not exceed 54.5 million shares (without giving effect to the
Reverse Split or the Share Purchase);
(h) the Company shall have (i) terminated each employment agreement or
consulting agreement pursuant to which it is required to employ or obtain
services from any person otherwise than on an "at-will" basis for any period of
time, and (ii) entered into a new employment agreement with each such person;
(i) the Company shall have entered into a fee agreement with Atkisson,
Carter & Company relating to services provided by Atkisson in connection with
the transactions contemplated by the Stock Purchase Agreement calling for a fee
to Atkisson of ___________; and
(j) there shall have been no material adverse change in the financial
condition, results of operations or business prospects of the Company and its
subsidiaries.
Gibralter Agreements
In December 2002, Gibralter Publishing, Inc. ("Gibralter") exchanged
the entire indebtedness owed to it by the Company (inclusive of interest) for
1,000,000 shares of Series D Preferred Stock, and warrants to purchase
10,000,000 shares of Common Stock (1,000,000 shares on a post-Reverse Split
basis) (the "Gibralter Warrant"). The exercise price per share of the Gibralter
Warrant will be equal to the average closing price of one share of Common Stock
on the OTC Bulletin Board over the five trading days commencing on the first
trading day following the effectiveness of the Reverse Split. This exchange is
part of a series of transactions originally negotiated in connection with the
Company's February 2001 acquisition of e-com. As part of that acquisition, the
Company issued two promissory notes to Gibralter, one for $1,500,000 and the
other one for $3,500,000. At the time of the exchange, the Company was in
default under these notes.
In addition, the Company is to enter into an agreement with Gibralter
for a term of not less than five years providing for the continued provision of
services to Gibralter by the Company, at current market terms (including,
without limitation, as to allocation of overhead and costs). These services will
include ___________. If the parties cannot agree on an acceptable contract, they
shall select an arbitrator to determine current market terms for the Gibralter
agreement. Gibralter is the Company's major customer, accounting for ___% and
___% of the Company's revenues in fiscal 2001 and 2002, respectively, and also
15
subleases to the Company the premises occupied by the Company. Mr. Leifheit is
one of the principals of Gibralter.
Ancillary Warrants
In order to ensure that the Buyers' 70% interest in the Company is
preserved in light of the existence of the Gibralter Warrant, the Company has
agreed to issue at closing to Mr. Hammer and to WAG Holdings, LLC warrants to
purchase an aggregate of 2,333,333 shares (the "Ancillary Warrants"). The
Ancillary Warrants will have the same terms and conditions as the Gibralter
Warrant and shall be exercisable only upon the exercise of the Gibralter
Warrant.
Indemnification
The Company agreed to indemnify and hold harmless the Buyers and all of
their affiliates (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith, and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Stock Purchase Agreement and other transaction documents or any
other certificate, instrument or document contemplated thereby, (b) any breach
of any covenant, agreement or obligation of the Company contained such
agreements and documents, or (c) any cause of action, suit or claim brought or
made against such Indemnitee and arising out of or resulting from the execution,
delivery, performance or enforcement of such agreements and documents. There is
a $50,000 threshold for indemnification claims and the aggregate indemnification
liability cannot exceed $1.5 million. Should for any reason the Company not be
legally permitted to effect the indemnification, it shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
Termination
The Stock Purchase Agreement may be terminated and the transactions
contemplated thereby may be abandoned at any time prior to the closing, upon any
of the following:
(a) by mutual written agreement of the Company and the Buyers; or
(b) by the Buyers or the Company if the party seeking termination is
not then in material breach of the Stock Purchase Agreement and if the closing
has not occurred on or before February 28, 2003;
(c) by the Company, if the Company's Board of Directors determines
that the Company has received a Superior Proposal (as defined in the Stock
Purchase Agreement) for the acquisition of control of the Company; or
(d) by either party, if it is not then in material breach of the Stock
Purchase Agreement and the other party is then in material breach of the Stock
Purchase Agreement, and such breach remains uncured for ten days after receipt
of written notice thereof from the non-breaching party.
16
If the Stock Purchase Agreement is terminated, all further obligations
of the parties thereunder shall immediately terminate without further liability
of either party to the other; provided, however, that (i) nothing shall relieve
the liability or obligations of any party (the "Defaulting Party") to the other
party or parties (each, a "Non-Defaulting Party") on account of a breach by the
Defaulting Party of any covenant, agreement, representation or warranty of the
Defaulting Party contained therein, including, without limitation, any liability
pursuant to the Break-Up covenant, and (ii) if the Company is the Defaulting
Party, the Lock-Up Option granted by the Company to the Buyers shall survive
termination.
In addition, if the Stock Purchase Agreement is terminated, Mr. Hammer
and WAG Holdings, LLC could seek to obtain repayment of the Investor Loan.
Should the Company not be able to make payment, the holders of the Investor Loan
could seek to enforce the security of the Loan and proceed against the assets of
the Company and e-com.
Voting Agreement
Mr. Hammer and WAG Holdings, LLC, two of the Buyers, and Terrence J.
Leifheit, the Chairman, Chief Executive Officer, Chief Operating Officer and
President of the Company, have entered into a Voting Agreement, dated December
__, 2002, pursuant to which Mr. Leifheit agreed to vote all Voting Securities
owned by him in favor of the Stock Purchase Agreement, the Reverse Split and the
name change, and against any proposal for any competing transaction. In the
event that Mr. Leifheit fails to comply with his voting obligation, Messrs.
Hammer and Goldstein will have an irrevocable proxy with respect to his Voting
Securities.
Mr. Leifheit owns or controls 8,200,000 shares of Common Stock, 14,819
shares of Series C Preferred Stock and 1,000,000 shares of Series D Preferred
Stock, which means that, given that each share of Series C Preferred Stock and
Series D Preferred Stock is entitled to vote on a 10-for-1 basis at the Meeting,
Mr. Leifheit controls 49.8% the votes to be cast at the Meeting.
There is no separate requirement, either in the Company's corporate
documents, under the Delaware General Corporation Law, or in the Stock Purchase
Agreement, that approval of the three proposals also would require a majority of
the votes cast by the stockholders, excluding Mr. Leifheit. Accordingly, the
fact that Mr. Leifheit has agreed, pursuant to the Voting Agreement, to vote for
all of the Proposals herein, means that these Proposals are virtually guaranteed
to be approved at the Meeting regardless of the vote of the other stockholders.
COMPOSITION OF THE BOARD OF DIRECTORS
Currently, the Board of Directors of the Company consists of the
following individuals: Mr. Leifheit, Kenneth H. Horn, Clifford A. Clark, James
L. McGovern, William P. O'Reilly and William E. Willis, Jr. After the closing of
the Stock Purchase Agreement, Messrs. Horn and Willis will resign from the Board
and Messrs. Hammer and Goldstein will be elected to fill those vacancies. These
individuals will serve as Class [I] and Class [III] Directors and their terms
will extend until [2003] and [2002], respectively.
17
ISSUANCE OF COMMON STOCK TO INDUCE CONVERSION OF SERIES C PREFERRED STOCK
As described above, it is a condition to the Buyers' obligation to
consummate the transactions contemplated by the Stock Purchase Agreement that
the holders of 95% of the Series C Preferred Stock shall have converted their
shares to Common Stock. As an incentive for the holders of the Series C
Preferred Stock to convert their shares, the Company has offered to issue to
each holder who converts his or her shares prior to the Reverse Split an
additional 0.8 shares of Common Stock for each share of Series C Preferred Stock
converted. If all of the holders of Series C Preferred Stock were to convert
their shares into Common Stock, there would be an additional 80,000 shares of
Common Stock outstanding immediately after the Reverse Split.
RECOMMENDATION
THE COMPANY'S BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE STOCK
PURCHASE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREIN IS IN THE BEST
INTEREST OF THE COMPANY AND OF ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THIS PROPOSAL.
PROPOSAL 3
CHANGE THE NAME OF THE COMPANY
TO MARKET CENTRAL, INC.
One condition to the Buyers' obligation to complete the purchase of
Common Stock under the Stock Purchase Agreement is that the Company change its
name to "Market Central, Inc." The Buyers believe such name would give the
Company a greater identity going forward as the Company has ceased the historic
business that was conducted under the "Paladyne" name. Accordingly, the Company
is seeking approval of an amendment to its Certificate of Incorporation to
change its name to "Market Central, Inc." This name change will become effective
only if the sale of Common Stock to the Buyers is to be completed.
Notwithstanding an affirmative vote on this Proposal, in the event that
Proposal 2 is not approved, the change of the Company name will not be
implemented and the Company will continue to be legally named "Paladyne Corp."
THE COMPANY'S BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE NAME
CHANGE IS IN THE BEST INTEREST OF THE COMPANY AND OF ITS STOCKHOLDERS, AND
UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any matters to be brought before the Meeting other than
as set forth in this Proxy Statement. However, if any other matters not
mentioned in the Proxy Statement are properly brought before the Meeting or any
adjournments thereof, the persons named in the enclosed Proxy or their
substitutes will have discretionary authority to vote proxies given in said
form, or otherwise act, in respect of such matters in accordance with their best
judgment.
18
By Order of the Board of Directors,
Terrence J. Leifheit,
Chairman, President and CEO
December __, 2002
19
EXHIBIT A
FORM OF
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF PALADYNE CORP.
(PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION LAW OF DELAWARE)
PALADYNE CORP., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, at a duly held
meeting, duly adopted resolutions setting forth a proposed amendment (the
"Amendment") to the Certificate of Incorporation of the Corporation, declaring
the Amendment to be advisable and calling for the submission of the Amendment to
the stockholders of the Corporation at a special meeting of stockholders held
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware, and stating that the Amendment will be effective only after
adoption thereof by the affirmative vote of a majority of the issued and
outstanding shares of Voting Common Stock, Series A Preferred Stock, Series C
Preferred Stock [and Series D Preferred Stock] of the Corporation.
SECOND: The Certificate of Incorporation of the Corporation be amended
by deleting Article FIRST in its entirety and substituting in lieu thereof the
following new Article FIRST which shall read as follows:
"FIRST: NAME. The name of the corporation is Market Central,
Inc. (the "Corporation")."
THIRD: The Certificate of Incorporation of the Corporation be amended
by deleting Section A of the present Article FOURTH in its entirety and
substituting in lieu thereof the following new Section A of Article FOURTH which
shall read as follows:
"FOURTH: Capital Stock.
A. AUTHORIZED. The total number of shares of all
classes of stock which the Corporation shall have the authority
to issue is Eighty-five Million (85,000,000), of which
Seventy-five Million (75,000,000) shares shall be common stock,
$.001 par value per share (the "Common Stock"), and Ten Million
(10,000,000) shares shall be preferred stock, $.001 per value per
share (the "Preferred Stock").
(i) Upon the filing of this Certificate of Amendment
to the Certificate of Incorporation of the Corporation with the
Secretary of State of Delaware, each ten (10) shares of the
issued and outstanding Common Stock of the Corporation shall be
reverse split into one (1) share of Common Stock of the
Corporation. This reverse split shall affect all shares of Common
Stock of the Corporation issued and outstanding or held in the
treasury of the Corporation (but not authorized and unissued
shares) or then reserved for issuance to holders of then
outstanding options or warrants of the Corporation or then
reserved for issuance upon conversion of convertible Preferred
Stock into Common Stock of the Corporation. The total number of
shares of Common Stock authorized shall be as set forth in this
Article FOURTH.
(ii) Each holder of Common Stock shall be entitled to
one vote for each share of Common Stock on all matters as to
which holders of Common Stock shall be entitled to vote."
FOURTH: The Amendments were duly adopted in accordance with the
applicable provisions of Sections 242 of the General Corporation Law of the
state of Delaware.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
signed by Terrence J. Leifheit, its Chairman, President, Chief Executive Officer
and Chief Operating Officer, this ____ day of _______, 2003.
PALADYNE CORP.
By:
------------------------------------
Terrence J. Leifheit
Chairman, President, Chief Executive
Officer and Chief Operating Officer
2
EXHIBIT B
FORM OF STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of _________________,
2002, by and among PALADYNE CORP., a Delaware corporation (together with each of
its predecessor corporations, the "Company"); GLEN H. HAMMER, an individual
resident of the State of Georgia ("Hammer"); A. RANDALL BARKOWITZ, an individual
resident of the State of Georgia ("Barkowitz"); WAG HOLDINGS, LLC, a Georgia
limited liability company ("WAG Holdings" and collectively with Hammer and
Barkowitz, the "Buyers"). Capitalized terms used herein and not otherwise
defined herein are defined in Section 10 hereof.
W I T N E S S E T H:
--------------------
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company wishes to sell to the Buyers, and the Buyers wish to buy from the
Company, a number of newly issued shares (the "Purchased Shares") of the
Company's common stock, par value $0.001 per share (the "Common Stock"), such
that, immediately following the issuance of such shares, the Buyers shall own
seventy percent (70%) of the outstanding shares of Common Stock, determined on a
fully-diluted basis giving effect to the issuance, if any, of shares to Terrence
J. Leifheit or the other former shareholders of e-commerce support centers, inc.
("ecom") pursuant to the terms of that certain Agreement and Plan of Merger,
dated December 21, 2000, among the Company, ecom and the former shareholders of
ecom, as amended (excluding the exercise of any outstanding options and warrants
to acquire Common Stock at a price equal to or greater than $.55 per share) and
the conversion of all other outstanding securities of the Company convertible
into Common Stock (except where such conversion requires the payment to the
Company of at least $.55 per share of Common Stock); and
WHEREAS, in connection with the sale of the Purchased Shares, and in order
to enable WAG Holdings and Hammer to prevent dilution of their respective
ownership interests in the Company upon the potential exercise of certain
warrants issued to Gibralter Publishing, Inc. ("Gibralter") in exchange for the
cancellation of debt as more fully described in Section 3(k) hereof, the Company
and the Buyers have agreed that WAG Holdings and Hammer will each receive
warrants to purchase 1,166,666 shares of Common Stock (on a post-Reverse Split
basis), at a price per share equal to the average closing price of one share of
Common Stock on the Principal Market over the five trading days commencing on
the first trading day following the effectiveness of the Reverse Split, which
warrants shall be in the form of Exhibit A (the "Ancillary Warrants" and
collectively with the Purchased Shares, the "Acquired Securities");
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:
1. PURCHASE OF COMMON STOCK.
(a) Agreement to Sell and to Purchase Common Stock. At the Closing (as
hereinafter defined), and on the terms and subject to the conditions set forth
in this Agreement, the Company shall issue and sell to each Buyer a portion of
the Purchased Shares determined for such Buyer in accordance with the allocation
methodology set forth on Schedule 1(a), and such Buyer shall purchase and accept
such portion of the Purchased Shares from the Company.
(b) Purchase Price and Payment. The aggregate purchase price for the
Purchased Shares (the "Purchase Price") shall be $750,000. At the Closing, the
Purchase Price shall be paid to the Company as follows:
(i) Barkowitz shall pay to the Company an amount equal to his
pro-rata share of the Purchase Price, based upon the number of Purchased
Shares to be purchased by him as a fractional portion of the total number
of Purchased Shares to be purchased by all of the Buyers ("Pro-Rata
Share"), in immediately available funds by wire transfer to a Company bank
account to be designated by the Company (such designation to occur no later
than the third Business Day prior to the Closing Date) (the "Company
Account");
(ii) WAG Holdings and Hammer shall pay to the Company the balance
of the Purchase Price as follows:
(1) First, by cancellation of all indebtedness (principal
and accrued but unpaid interest) owed by the Company or ecom to WAG
Holdings and Hammer, pursuant to that certain Loan and Security
Agreement, dated as of August 29, 2002 (the "Loan Agreement"), by and
among the Company, ecom and Market Holdings, Inc., a Delaware
corporation (f/k/a Market Central, Inc, hereinafter "Market
Holdings"), as amended, which indebtedness has been assigned to WAG
Holdings and Hammer as co-lenders, with each of WAG Holdings and
Hammer receiving credit for fifty percent (50%) of such cancelled
indebtedness;
(2) Second, by the cancellation of all or a portion of any
obligations of the Company or any of its subsidiaries currently due to
third party obligees that are purchased by WAG Holdings, Hammer or
their respective affiliates from such third party obligees prior to
the Closing (with credit toward the Purchase Price being given to WAG
Holdings or Hammer, as the case may be, for the face value of such
obligations);
(3) Third, WAG Holdings shall pay to the Company an amount,
which when aggregated with the credits to which it is entitled
pursuant to clauses (1) and (2) above, equals its Pro-Rata Share of
the Purchase Price, in immediately available funds by wire transfer to
the Company Account; and
(4) Fourth, Hammer shall pay to the Company an amount, which
when aggregated with the credits to which he is entitled pursuant to
clauses (1) and (2) above, equals his Pro-Rata Share of the Purchase
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Price, in immediately available funds by wire transfer to the Company
Account.
(c) Closing and Closing Date. The consummation of the purchase and
sale of the Purchased Shares (the "Closing") shall take place at the offices of
Smith, Gambrell & Russell, LLP, 1230 Peachtree Street, Suite 3100, Atlanta,
Georgia, at a time to be designated by Buyer, which time shall be within two
Business Days following the conclusion of the Special Meeting (as defined in
Section 4(a) below), or at such other place and time as the parties may agree
(the actual date on which the Closing occurs is hereinafter referred to as the
"Closing Date").
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants to the Company that as of the date
hereof and as of the Closing Date:
(a) Organization. If such Buyer is a limited liability company, it is
duly organized and validly existing in good standing under the laws of the
jurisdiction in which it is organized, and has the requisite entity power and
authority to own its properties and to carry on its business as now being
conducted.
(b) Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable against such Buyer in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(c) Investment Purpose. Such Buyer is entering into this Agreement and
acquiring the Acquired Securities being acquired by such Buyer hereunder for his
or its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof; provided
however, by making the representations herein, none of the Buyers agrees to hold
any of the Acquired Securities for any minimum or other specific term.
(d) Accredited Investor Status. Such Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D promulgated under the
1933 Act.
(e) Reliance on Exemptions. Such Buyer understands that the Acquired
Securities being acquired by such Buyer hereunder are being offered and, in the
case of the Purchased Shares, sold to such Buyer in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire such Acquired Securities.
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(f) Information. Such Buyer has been furnished with the SEC Documents
(as defined in Section 3(f) hereof). Such Buyer understands that its investment
in the Acquired Securities being acquired by such Buyer hereunder involves a
high degree of risk. Such Buyer (i) is able to bear the economic risk of an
investment in such Acquired Securities including a total loss, (ii) has such
knowledge and experience in financial and business matters that such Buyer is
capable of evaluating the merits and risks of the proposed investment in such
Acquired Securities and (iii) has had an opportunity to ask questions of and
receive answers from the officers of the Company concerning the financial
condition and business of the Company and other matters related to an investment
in such Acquired Securities. Neither such inquiries nor any other due diligence
investigations conducted by any Buyer or the Buyers' respective representatives
shall modify, amend or affect any Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. Such Buyer has
sought such accounting, legal and tax advice as such Buyer has considered
necessary to make an informed investment decision with respect to such Buyer's
acquisition of the Acquired Securities being acquired by such Buyer hereunder.
(g) No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Acquired
Securities or the fairness or suitability of the investment in the Acquired
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Acquired Securities.
(h) Transfer or Resale. Such Buyer understands that except as provided
herein: (i) the Acquired Securities have not been and are not being registered
under the 1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless (A) subsequently registered
thereunder or (B) an exemption exists permitting such Acquired Securities to be
sold, assigned or transferred without such registration; and (ii) any sale of
the Acquired Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Acquired Securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
As a material inducement to the Buyers to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company represents and
warrants to the Buyers that as of the date hereof and as of the Closing Date:
(a) Organization and Qualification. The Company and each of its
Subsidiaries is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction in which it is incorporated, and has
the requisite corporate power and authority to own its properties and to carry
on its business as now being conducted. Each of the Company and its Subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted by it makes such qualification necessary, except to
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the extent that the failure to be so qualified or be in good standing could not
reasonably be expected to have a Material Adverse Effect. Schedule 3(a) sets
forth the name and jurisdiction of incorporation of each Subsidiary and the
jurisdictions in which each such Subsidiary is qualified to do business. Except
for each Subsidiary and except as set forth on Schedule 3(a), the Company does
not own, directly or indirectly, any capital stock or other equity or similar
interest in, or any interest convertible into or exchangeable or exercisable for
any equity or similar interest in, any corporation or have any direct or
indirect equity or ownership interest in any business. Except as set forth on
Schedule 3(a), all the outstanding capital stock or other equity interests of
each Subsidiary is owned directly or indirectly by the Company, free and clear
of all liens, encumbrances or other interests of third parties, and is validly
issued, fully paid and non-assessable, and there are no outstanding options,
rights or agreements of any kind relating to the issuance, sale or transfer of
any capital stock or other equity securities of any such Subsidiary to any
person except the Company.
(b) Authorization; Enforcement; Validity. (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and each of the other agreements entered into
by the parties on the Closing Date and attached hereto as exhibits to this
Agreement (collectively, the "Transaction Documents"), and, subject to
stockholder approval of the Reverse Split, to issue the Acquired Securities in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation, the
reservation for issuance and the issuance of the Purchased Shares issuable under
this Agreement and the shares of Common Stock issuable upon exercise of the
Ancillary Warrant, have been duly authorized by the Company's Board of Directors
subject to and effective upon stockholder approval of the Reverse Split (iii)
this Agreement has been, and each other Transaction Document shall be on the
Closing Date, duly executed and delivered by the Company and (iv) this Agreement
constitutes, and each other Transaction Document upon its execution on behalf of
the Company, shall constitute, the valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
(c) Capitalization. The authorized capital stock of the Company
consists of (i) 75,000,000 shares of Common Stock, of which 16,709,351 shares
are issued and outstanding, none are held as treasury shares, 5,000,000 shares
are reserved for issuance pursuant to the Company's stock option plans of which
only _________ shares remain available and _________ shares are issuable and
reserved for issuance pursuant to securities (other than stock options issued
pursuant to the Company's stock option plans) exercisable or exchangeable for,
or convertible into, shares of Common Stock and (ii) 10,000,000 shares of
Preferred Stock, par value, $.001 per share, of which (A) 137,143 shares have
been designated as Series A Convertible Preferred Stock, all of which are
currently outstanding, (B) 1,800,000 shares have been designated as 8%
Cumulative Convertible Series C Preferred Stock, 1,000,101 of which are
currently outstanding, (C) 1,050,000 shares have been designated as 8%
Cumulative Convertible Series D Preferred Stock ("Series D Preferred Stock"),
1,000,000 of which are currently outstanding and held in the name of Gibralter
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Publishing, Inc. ("Gibralter"), and (D) 7,012,857 shares are available for
designation and issuance by the Board of Directors. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding debt securities, (iii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act, (v) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Acquired Securities as described in this Agreement and (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable and are not subject to any
preemptive rights. The Company has furnished to the Buyers true and correct
copies of the Company's Certificate of Incorporation, as amended and as
currently in effect (the "Certificate of Incorporation"), and the Company's
By-laws, as amended and as currently in effect (the "By-laws"), and copies of
any documents containing the material rights of the holders of the Company's
outstanding debt and equity securities.
(d) Issuance of Purchased Shares and Shares Subject to Ancillary
Warrants. Upon issuance and payment therefor in accordance with the terms and
conditions of this Agreement, the Purchased Shares shall be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders thereof being entitled to all
rights accorded to a holder of Common Stock. Upon issuance and payment therefor
in accordance with the terms and conditions of the Ancillary Warrants, the
shares of Common Stock issuable under the Ancillary Warrants shall be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, with the holders thereof being entitled to
all rights accorded to a holder of Common Stock.
(e) No Conflicts. Except as disclosed in Schedule 3(e), the execution,
delivery and performance of the Transaction Documents by the Company and,
subject to stockholder approval of the Reverse Split, the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the Reverse Split and the subsequent reservation for issuance and
issuance of the Acquired Securities and the shares of Common Stock subject to
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the Ancillary Warrants) will not (i) result in a violation of the Certificate of
Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations applicable to the Company or any of its Subsidiaries) or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected. Except as disclosed in Schedule 3(e), neither the Company nor
its Subsidiaries is in violation of any term of or in default under its
respective organizational charter or by-laws. Except as disclosed in Schedule
3(e), neither the Company nor any of its Subsidiaries is in violation of any
term of or is in default under any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
or applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with the terms hereof or
thereof. Except as disclosed in Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence shall be obtained or effected on or prior to
the Closing Date.
(f) SEC Documents; Financial Statements. Except as disclosed in
Schedule 3(f), since September 1, 2000, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") applicable to it (all of the foregoing and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). As of their respective dates (except as they have been
correctly amended), the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC (except as they may have
been properly amended), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates (except as they
have been properly amended), the financial statements of the Company and any
consolidated Subsidiaries included in the SEC Documents complied in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company and its consolidated
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Subsidiaries as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as listed in Schedule 3(f), the
Company has received no notices or correspondence from the SEC since September
1, 2000. The SEC has not commenced any enforcement proceedings against the
Company or any of its subsidiaries.
(g) Absence of Certain Changes. Except as disclosed in Schedule 3(g),
since May 31, 2002, there has been no material adverse change in the business,
properties, operations, financial condition or results of operations of the
Company or its Subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
Bankruptcy Law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy or insolvency proceedings.
(h) Absence of Liabilities. Except as disclosed in Schedule 3(h), at
the date of the most recent audited financial statements of the Company and its
consolidated Subsidiaries included in the SEC Documents, neither the Company nor
any of its Subsidiaries had, and since such date neither the Company nor any of
its Subsidiaries has incurred, any liabilities or obligations of any nature
(whether accrued, absolute, contingent, determinable or otherwise, and whether
or not required to be reflected or reserved against in a consolidated balance
sheet of the Company prepared in accordance with United States generally
accepted accounting principles) except liabilities incurred in the ordinary and
usual course of business and consistent with past practice, liabilities
expressly incurred in connection with the Transactions (as defined below) and
liabilities that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(i) Proxy Statement. At the time the Proxy Statement (as defined
below) is mailed, the Proxy Statement will comply as to form in all material
respects with the 1934 Act and the regulations thereunder. The Proxy Statement
shall not, at the time it is mailed, at the time of the Special Meeting (as
defined below) or at the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, that, no
representation is made by the Company with respect to the information furnished
by the Buyers for inclusion therein. The letter to stockholders, notice of
meeting, proxy statement and form of proxy, or the information statement, as the
case may be, to be distributed to stockholders of the Company in connection with
the Special Meeting and the matters to be submitted for the approval of
stockholders of the Company at the Special Meeting, and the Schedule 14A and any
other schedule required to be filed with the SEC in connection therewith,
together with any amendments or supplements thereto, are collectively referred
to herein as the "Proxy Statement."
(j) Absence of Litigation. Except as set forth on Schedule 3(j), there
is no action, suit or proceeding, or to the knowledge of the Company or any
Subsidiary, any inquiry or investigation, before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any Subsidiary, threatened against or affecting the
Company, the Common Stock, any other class or series of the Company's capital
-8-
stock, or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such. A
description of each action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body which, as of the date of this Agreement, is pending or threatened against
or affecting the Company, the Common Stock or any of the Company's Subsidiaries
or any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, is set forth in Schedule 3(j).
(k) Cancellation of Existing Gibralter Debt. Prior to the date hereof,
Gibralter and ecom entered into an agreement pursuant to which the Existing
Gibralter Debt (as defined below) was cancelled in exchange for (i) 1,000,000
shares of Series D Preferred Stock, and (ii) a warrant to purchase 10,000,000
shares of Common Stock (equivalent to 1,000,000 shares upon the effectiveness of
the Reverse Split), a true and correct copy of which is attached hereto as
Schedule 3(k). As used herein, the term "Existing Gibralter Debt" means all
indebtedness (inclusive of both principal and accrued but unpaid interest) owed
to Gibralter by the Company or its Subsidiaries, including without limitation,
all such indebtedness owed pursuant to the terms of (i) that certain Promissory
Note A dated February 1, 2001, made by ecom in favor of Gibralter in the
original principal amount of $1,500,000, as amended, and (ii) that certain
Promissory Note B dated February 1, 2001, made by ecom in favor Gibralter in the
original principal amount of $3,500,000, as amended.
(l) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Acquired Securities.
(m) Intellectual Property Rights. Set forth on Schedule 3(m) is a list
and brief description of all domestic and foreign patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names, and copyrights, and all applications for such which
are in the process of being prepared, owned by, or registered in the name of the
Company. The Company and each of its Subsidiaries owns or possesses adequate
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names,
copyrights, inventions, invention disclosures, drawings, designs, manufacturing
processes, formulae, trade secrets, customer lists, computer software, software
programs (including source code and object code) and know-how (collectively,
"Intellectual Property") used in or required for its respective business as
currently conducted, and no claim is pending or, to the best knowledge of the
Company or any Subsidiary, threatened, to the effect that the operations of the
Company or any Subsidiary infringe upon or conflict with the asserted rights of
any other person under any Intellectual Property. No claim is pending or, to the
best knowledge of the Company or any Subsidiary, threatened, to the effect that
any such Intellectual Property owned or licensed by the Company or any
Subsidiary, or which the Company or any Subsidiary otherwise has the right to
use, is invalid or unenforceable by the Company or such Subsidiary. Neither the
Company nor any Subsidiary has any knowledge of any basis for an infringement
claim with respect to its Intellectual Property. None of the Intellectual
Property is owned by any current or former stockholder or employee of the
Company or any Subsidiary or was developed by any Person outside the scope of
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his or her employment with the Company or a Subsidiary or, to the knowledge of
the Company or any of its Subsidiaries, in violation of any noncompetition or
nonsolicitation obligation with any prior employer.
(n) Compliance with Laws. To the knowledge of the Company or any
Subsidiary, the Company and the Subsidiaries (including each and all of its and
their operations, practices, properties, real or personal, owned or leased, and
assets) are in compliance with all applicable federal, state, local and foreign
laws, ordinances, orders, rules and regulations (collectively, "Laws"),
including without limitation, those applicable to registration for the offer or
sale of securities, discrimination in employment, the Americans with
Disabilities Act, occupational safety and health, trade practices, competition
and pricing, product warranties, zoning, building and sanitation, employment,
unemployment, retirement and labor relations and product advertising, except
where the failure to so comply has not had, and cannot reasonably be expected to
have, a Material Adverse Effect. Without limiting the generality of the
foregoing, neither the Company, nor any of its Subsidiaries, nor any director,
officer, or employee of the Company or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, the Company or any of its
Subsidiaries, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee. Since September 1, 2000,
all reports and returns required to be filed by the Company or any Subsidiary
with any governmental authority have been filed and were accurate and complete
in all material respects when filed, except where the failure to file has not
had, and cannot reasonably be expected to have, a Material Adverse Effect.
(o) Personal Property. The Company and its Subsidiaries have good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in Schedule 3(o).
All personal property and assets owned or utilized by the Company and the
Subsidiaries are in normal operating condition and repair (ordinary wear and
tear excepted), free from any defects (except such minor defects as do not
interfere with the use thereof in the conduct of normal operations), have been
maintained in a manner consistent with the standards generally followed in the
Company's industry and are sufficient to carry on the business of the Company
and its Subsidiaries as currently conducted.
(p) Real Property. Neither the Company nor any Subsidiary owns, or has
ever owned, any real property. Schedule 3(p) annexed hereto contains a complete
and accurate list of any real property lease binding the Company or any of the
Subsidiaries or to which the Company or any of the Subsidiaries is a party
(collectively, the "Leases") and all termination dates, renewal options and
dates by which notice of renewal or cancellation, as applicable, must be given
with respect to such Leases. Each such Lease is in full force and effect, and
the Company or the Subsidiary party to such Lease has fully performed, in all
respects material thereto, all of its obligations to be performed to date under
such Lease. Except as disclosed on Schedule 3(p), the Company or the Subsidiary
party to each such Lease is current with respect to the payment of all rents and
-10-
other charges due thereunder and their use and occupancy of the premises which
are the subject matter of such Lease do not violate any of the terms of such
Lease, is not in violation of the conditions of any policy of insurance held by
the Company or any Subsidiary, and to the knowledge of Terrence J. Leifheit
(without special inquiry), is in conformity with all applicable building,
zoning, health, fire, safety and other laws, ordinances, codes and regulations.
To the knowledge of the Company or any of its Subsidiaries, all of the
buildings, structures and appurtenances situated on any premises that is subject
to any of the Leases are, and as of the Closing Date, will be, in good operating
condition and state of maintenance and repair and will be adequate and suitable
for the purposes for which they are presently being or are intended to be used,
and the Company or the Subsidiary party to such Lease has adequate rights of
ingress and egress and utility services for the operation of its business in the
ordinary course. To the knowledge of the Company or any of its Subsidiaries, no
lessor or landlord under any Lease is in default in the performance of its
obligations thereunder and neither the Company nor any Subsidiary has received
notice from any such lessor or landlord of its intention to exercise any option
thereunder which would adversely affect or terminate the use or occupancy of the
demised premises under such Lease by the Company or such Subsidiary. Except as
specifically disclosed in Schedule 3(e), all of the Leases permit the
consummation of the Transactions contemplated hereby without modification of the
terms thereof and without the consent of the applicable lessor or landlord.
(q) Insurance. Schedule 3(q) attached hereto contains a complete and
accurate list and brief description (specifying the insurer, the policy number
or covering note number with respect to binders and the amount of any
deductible, describing each pending claim thereunder of more than $10,000.00,
setting forth the aggregate amounts paid out under each such policy through the
date hereof and the aggregate limit, if any, of the insurer's liability
thereunder) of all policies or binders of fire, liability, product liability,
worker's compensation, automobile, unemployment and other insurance held by or
on behalf of the Company and/or any Subsidiary. The Company or a Subsidiary has
paid all premiums due on such policies, and neither the Company nor any
Subsidiary is in default with respect to any provision contained in any such
policy or binder. Except for claims set forth on Schedule 3(q), there are no
outstanding unpaid claims under any such policy or binder. Neither the Company
nor any Subsidiary has received any written notice of cancellation or
non-renewal of any such policy or binder. Except as disclosed on Schedule 3(q),
none of the policies listed on Schedule 3(q) provides that premiums paid in
respect of the periods prior to the Closing Date may be adjusted or recomputed
based on claims-paying experience of such policies or otherwise. Neither the
Company nor any Subsidiary has received any written notice from any of their
insurance carriers that any insurance coverage listed on Schedule 3(q) will not
be available in the future on the same terms as now in effect or that any
premium with respect thereto will be increased in the future. To the best
knowledge of the Company or any of its Subsidiaries, no notice to such effect
has been received by the Company or any of its Subsidiaries in verbal or other
non-written form.
(r) Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess any such certificate,
authorization or permit has not had, and cannot reasonably be expected to have,
-11-
a Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any written notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit. To the best
knowledge of the Company or any of its Subsidiaries, no notice of such
proceedings has been received by the Company or any such Subsidiary in verbal or
other non-written form.
(s) Absence of Changes in Benefit Plans. Except as disclosed in the
SEC Documents, as required by applicable law, as contemplated by this Agreement,
or as set forth Schedule 3(s), since May 31, 2002, there has not been any
adoption or material amendment by the Company or any Subsidiary of any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or other plan,
arrangement or understanding providing benefits to any current or former
employee, officer or director of the Company or any Subsidiary. Except as
disclosed in the SEC Documents, as required by applicable law or as set forth on
Schedule 3(s), there exist no severance, bonus, incentive award, termination or
indemnification agreements, arrangements or understandings between the Company
or any Subsidiary and any of its current or former officers or directors or
employees.
(t) ERISA Compliance.
(i) Schedule 3(t) sets forth a complete list of all "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all employment
contracts, bonus programs, and pension, profit sharing, deferred
compensation, incentive compensation, excess benefit, stock, stock option,
severance, termination pay, change in control or other employee benefit
plans, programs or arrangements, whether written or unwritten, qualified or
unqualified, funded or unfunded, foreign or domestic, currently maintained,
or contributed to, or required to be maintained or contributed to, by the
Company or any other person or entity that, together with the Company, is
treated as a single employer under Section 414 of the Internal Revenue Code
of 1986, as amended (the "Code") (each an "ERISA Affiliate") for the
benefit of any current or former employees, officers or directors of the
Company or any Subsidiary or with respect to which the Company or its
Subsidiary has any liability (collectively, the "Benefit Plans"). As
applicable with respect to each Benefit Plan, the Company has delivered or
made available to the Buyers, true and complete copies of (A) each Benefit
Plan, including all amendments thereto, and in the case of an unwritten
Benefit Plan, a written description thereof, (B) all trust documents,
investment management contracts, custodial agreements and insurance
contracts relating thereto, (C) the current summary plan description and
each summary of material modifications thereto, (D) the most recent annual
reports (Form 5500 and all schedules thereto) filed with the Internal
Revenue Service ("IRS"), (E) the most recent IRS determination letter and
each currently pending application to the IRS for a determination letter,
(F) the most recent financial statements and trustee reports, (G) all
records, notices and filings concerning IRS or Department of Labor audits
or investigations, "prohibited transactions" within the meaning of Section
406 of ERISA or Section 4975 of the Code and "reportable events" within the
meaning of Section 4043 of ERISA, (H) all personnel, payroll, and
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employment manuals and policies; (I) all collective bargaining agreements
pursuant to which contributions have been made or obligations incurred
(including both pension and welfare benefits) by the Company and the ERISA
Affiliates, and all collective bargaining agreements pursuant to which
contributions are being made or obligations are owed by such entities; (J)
all registration statements filed with respect to any Company Plan; (K) all
insurance policies purchased by or to provide benefits under any Company
Plan; (L) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that
relate to any Benefit Plan; (M) the most recent reports submitted by third
party administrators, actuaries, investment managers, consultants, or other
independent contractors with respect to any Benefit Plan; (N) all notices
that were given by the Company or any ERISA Affiliate or any Benefit Plan
to the IRS, the Pension Benefit Guaranty Corporation ("PBGC"), or any
participant or beneficiary, pursuant to statute, within the four years
preceding the date of this Agreement; and (O) with respect to Benefit Plans
subject to Title IV of ERISA, the Form PBGC-1 filed for the most recent
plan year.
(ii) No event has occurred and, to the knowledge of the Company,
there exists no condition or set of circumstances in connection with which
the Company or any ERISA Affiliate is or would reasonably be expected to be
subject to any material liability under the terms of any Benefit Plan,
under ERISA, or, with respect to any Benefit Plan, under the Code or any
other applicable law, rule or regulation, domestic or foreign. Neither the
Company nor any ERISA Affiliate has incurred or would reasonably be
expected to incur any material liability in respect of any employee benefit
plan maintained by an ERISA Affiliate but not included within the term
"Benefit Plan" or by any person other than the Company or any ERISA
Affiliate. No statement, either written or oral, has been made by the
Company or an ERISA Affiliate to any person with regard to any Benefit Plan
that was not in accordance with the terms of the Benefit Plan and that
would have a Material Adverse Effect on the Company or an ERISA Affiliate.
All filings required by ERISA and the Code as to each Benefit Plan have
been timely, completely and accurately filed, and all notices and
disclosures to participants required by either ERISA or the Code have been
timely, completely and accurately provided. All contributions and payments
made or accrued with respect to all Benefit Plans are deductible under
Section 162 or 404 of the Code. No amount, or any asset of any Benefit Plan
is subject to tax as unrelated business taxable income. The Company has no
material liability to the IRS with respect to any Benefit Plan, including
any liability imposed by Chapter 43 of the Code.
(iii) Neither the Company nor any ERISA Affiliate has, at any
time, (A) maintained or contributed to any "employ pension benefit plan"
with the meaning of ERISA Section 3(2), (B) maintained or contributed to
any employee pension benefit plan subject to Title IV of ERISA or Code
Section 412, or (C) been required to contribute to, or incurred any
withdrawal liability within the meaning of ERISA Section 4201 to, any
multiemployer plan as defined in ERISA Section 3(37).
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(iv) Except as set forth on Schedule 3(t) or as contemplated by
this Agreement, the execution and delivery of this Agreement do not, and
the consummation of the Transactions will not (A) require the Company or
any ERISA Affiliate to pay greater compensation or make a larger
contribution to, or pay greater benefits or accelerate payment or vesting
of a benefit under, any Benefit Plan or (B) create or give rise to any
additional vested rights or service credits under any Benefit Plan.
(v) Except for requirements under applicable law, as set forth on
Schedule 3(t) or as contemplated by this Agreement, neither the Company nor
any ERISA Affiliate is a party to or is bound by any severance agreement,
program or policy.
(vi) Except as set forth on Schedule 3(t), no Benefit Plan
provides benefits, including without limitation, death or medical benefits,
beyond termination of employment or retirement other than (A) coverage
mandated by law or (B) death or retirement benefits under a Benefit Plan
qualified under Section 401(a) of the Code. Neither the Company nor any
ERISA Affiliate is contractually obligated to provide any person with life,
medical, dental or disability benefits for any period of time beyond
retirement or termination of employment, other than as required by the
provisions of Sections 601 through 608 of ERISA and Section 4980B of the
Code.
(vii) With respect to any Benefit Plan that is an employee
welfare benefit plan (as defined in Section 3(1) of ERISA), (A) no such
Benefit Plan is funded through a "welfare benefit fund", as such term is
defined in Section 419(e) of the Code, (B) each such Benefit Plan that is a
"group health plan", as such term is defined in Section 5000(b)(l) of the
Code, complies in all respects with the applicable requirements of Sections
601 through 608 of ERISA and Section 4980B(f) of the Code, and (iii) each
such Benefit Plan (including any such Plan covering retirees or other
former employees), as in effect on the date hereof, may be amended or
terminated as to future benefit accruals without material liability to the
Company or any ERISA Affiliate on or at any time after the Closing Date.
(viii) Except as disclosed on Schedule 3(t), and except for the
transactions contemplated by this Agreement, there is no contract,
agreement, Benefit Plan or other arrangement covering any employee or
former employee of the Company or any of its Subsidiaries that would give
rise to the payment of any amount that would not be deductible under
Section 280G of the Code.
(ix) To the knowledge of the Company, no event has occurred or
circumstance exists that would result in a material increase in premium
costs of any Benefit Plan that is insured, or a material increase in
benefit costs of such Plan that is self-insured.
(x) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any Benefit
Plan is pending or, to the knowledge of the Company, is threatened which,
if adversely determined, would individually or in the aggregate have a
Material Adverse Effect.
-14-
(xi) Each current or former employee of the Company who has taken
a leave of absence under the Family and Medical Leave Act of 1994, as
amended, was, upon his or her return to employment with the Company, placed
in the same position with respect to all eligibility requirements and
benefits of any Benefit Plan as had been applicable to such employee
immediately before the leave commenced, except where the failure to so
comply would not have a Material Adverse Effect.
(u) Tax Matters. Except as disclosed on Schedule 3(u), the Company and
each Subsidiary has filed all Tax Returns that the Company or such Subsidiary
has been required to file. All such Tax Returns were correct and complete when
filed, and the Company does not know of any facts or circumstances that would
require an amendment to be filed with respect to any such Tax Returns. Except as
disclosed on Schedule 3(u), all material Taxes owed by the Company or any
Subsidiary (whether or not shown on any Tax Return) have been paid. Neither the
Company nor any Subsidiary is currently the beneficiary of any extension of time
within which to file any Tax Return. Except as disclosed on Schedule 3(u), no
claim has ever been made by an authority in a jurisdiction where the Company or
any Subsidiary does not file Tax Returns that the Company or such Subsidiary is
or may be subject to taxation by that jurisdiction. Except as disclosed on
Schedule 3(u), there are no liens on any of the assets of the Company or any
Subsidiary that arose in connection with any failure (or alleged failure) to pay
any Tax. The Company and each Subsidiary has withheld and paid all Taxes
required to have been withheld and paid by it in connection with amounts paid or
owing to any employee.
(v) Contracts. Schedule 3(v) sets forth a list (sorted by reference to
the clauses of this subsection) of all contracts, agreements, arrangements,
guarantees, licenses, leases and executory commitments, other than Benefit Plans
and any contracts heretofore filed as an exhibit to any SEC Document, that exist
as of the date hereof to which the Company or any of its Subsidiaries is a party
or by which it is bound and which fall within any of the following categories
(each a "Contract"): (a) Contracts not entered into in the ordinary course of
the Company's or any of its Subsidiaries' respective businesses; (b) joint
venture, partnership or franchising agreements, (c) Contracts containing
covenants purporting to limit the freedom of the Company or any of its
Subsidiaries to compete in any line of business in any geographic area or to
hire any individual or group of individuals, (d) Contracts which after the
consummation of any of the Transactions would have the effect of limiting the
freedom of the Company or any Subsidiary to compete in any line of business in
any geographic area or to hire any individual or group of individuals, (e)
Contracts relating to any outstanding commitment for capital expenditures in
excess of $25,000, (f) indentures, mortgages, promissory notes, loan agreements
or guarantees of borrowed money, letters of credit or other agreements or
instruments of the Company or any Subsidiary evidencing indebtedness for
borrowed money or providing for the creation of any charge, security interest,
encumbrance or lien upon any of the assets of the Company or any of its
Subsidiaries, (g) License Agreements, (h) Contracts with respect to which a
change in the ownership (whether directly or indirectly) of the shares of
Company Common Stock or the composition of the Board of Directors of the Company
or any of its Subsidiaries or any of the other Transactions may result in a
violation of or default under, or give rise to a right of termination,
modification, cancellation or acceleration of any obligation or loss of benefits
under, such Contract, (i) any other agreement of a type required to be filed
under Item 601(b)(10) of Regulation S-K promulgated by the SEC; or (j) Contracts
(including employment agreements and consulting agreements) pursuant to which
-15-
the Company or any Subsidiary is required to employ or obtain services from any
Person otherwise than on an "at-will" basis for any period of time. All
Contracts to which the Company or any of its Subsidiaries is a party or by which
it is bound are valid and binding obligations of the Company or its Subsidiary
(as applicable) and, to the knowledge of the Company, the valid and binding
obligation of each other party thereto. Neither the Company or its Subsidiary
(as applicable) nor, to the knowledge of the Company, any other party thereto is
in violation of or in default in respect of, nor has there occurred an event or
condition which with the passage of time or giving of notice (or both) would
constitute a default by the Company or its Subsidiary (as applicable) (or to its
knowledge a default by any other party thereto) under or permit the termination
of, any such Contract, except for such instances of default thereunder or
terminations thereof that would not individually or in the aggregate result in a
Material Adverse Effect. The Company has, prior to the date hereof, delivered or
made available true, complete and correct copies of the Contracts to the Buyers.
(w) Transactions With Affiliates. Except as set forth on Schedule 3(w)
and other than the grant or exercise of stock options disclosed on Schedule
3(c), none of the officers or directors of the Company is presently a party to
any transaction with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement (whether written or oral) providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer or
director or any corporation, partnership, trust or other entity in which any
officer or director has an interest or is an officer, director, trustee or
partner.
(x) Application of Takeover Protections. The Company and its Board of
Directors have taken or will take prior to the Closing Date all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to any of the Buyers as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Acquired Securities, the exercise of the Ancillary Warrants and
the ownership by any Buyer of any of the Acquired Securities or any shares of
Common Stock issuable under the Ancillary Warrants.
4. COVENANTS.
(a) Special Meeting. As soon as practicable following the date of this
Agreement, the Company shall (i) call a special meeting of the stockholders of
the Company to be held no later than February 28, 2003 (the "Special Meeting")
for the purpose of obtaining the approval of the Company's stockholders with
respect to: (A) a reverse stock split of the Common Stock (the "Reverse Split"),
pursuant to which the issued and outstanding Common Stock shall be converted
into one-tenth (1/10) of the number of shares of Common Stock outstanding
immediately prior to the effectiveness of the Reverse Split, (B) the
transactions to be consummated pursuant hereto, including, without limitation,
the issuance and sale of the Purchased Shares and the issuance of the Ancillary
Warrants (collectively, the "Transactions"), and (C) a change in the name of the
Company to "Market Central, Inc." (the "Company Name Change" and collectively
with the Reverse Split and the Transactions, the "Approval Matters"); and shall
-16-
(ii) recommend that the Company's stockholders vote to approve each of the
Approval Matters, shall use its reasonable best efforts to solicit from
stockholders of the Company proxies in favor of approving each of the Approval
Matters, and shall take all other action necessary and appropriate to secure the
vote of stockholders approving each of the Approval Matters.
(b) Proxy Statement. The Company and the Buyers shall furnish to each
other all information concerning such Person or such Person's business that is
required for the Proxy Statement. The Company shall, as soon as practicable
after the date hereof, prepare and file (after providing the Buyers with a
reasonable opportunity to review and comment thereon) the Proxy Statement with
the SEC and shall use its reasonable best efforts to respond to any comments of
the SEC (after providing the Buyers with a reasonable opportunity to review and
comment thereon); provided, however, that in no event shall the Company file the
preliminary Proxy Statement with the SEC any later than twenty (20) days
following the date of this Agreement (unless the Buyers shall have failed to
cooperate with the preparation thereof as contemplated by this Section 4(b)).
The Company shall cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable, but in any event no later than five (5)
Business Days after responding to all such comments to the satisfaction of the
staff of the SEC. The Company shall notify the Buyers promptly of the receipt of
any comments from the SEC and of any request by the SEC for amendments or
supplements to the Proxy Statement or for additional information and shall
supply the Buyers with copies of all correspondence between the Company or any
of its representatives, on the one hand, and the SEC, on the other hand, with
respect to the Proxy Statement or any Approval Matter. The Company will cause
the Proxy Statement to comply in all material respects with the applicable
provisions of the 1934 Act and the rules and regulations thereunder applicable
to the Proxy Statement and the solicitation of proxies for the Special Meeting
(including any requirement to amend or supplement the Proxy Statement). The
Buyers shall cooperate with the Company in the preparation of the Proxy
Statement, and without limiting the generality of the foregoing, the Company and
the Buyers shall promptly furnish to the other such information relating to it
and its affiliates and the Approval Matters and such further and supplemental
information as may be reasonably requested by the other party and shall promptly
notify the other party of any change in such information. If at any time prior
to the Special Meeting there shall occur any event that should be set forth in
an amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its stockholders such an amendment or supplement; provided,
however, that no such amendment or supplement to the Proxy Statement will be
made by the Company without providing the Buyers the reasonable opportunity to
review and comment thereon and without the approval of the Buyers, which
approval shall not be unreasonably withheld. The Company and its counsel shall
use reasonable efforts to permit the Buyers and its counsel to participate in
all communications with the SEC and its staff, including all meetings and
telephone conferences, relating to the Proxy Statement, this Agreement or the
Approval Matters; provided, however, that in the event that such participation
by the Buyers does not take place, the Company shall promptly inform the Buyers
of the content of all such communications and the participants involved therein
that specifically relate to the Proxy Statement, this Agreement or the Approval
Matters. The Company agrees to include in the Proxy Statement the recommendation
of the Company's Board of Directors.
-17-
(c) Voting Agreement. The parties acknowledge that simultaneously with
the execution and delivery of this Agreement, and as a condition to Buyers'
willingness to enter into this Agreement, Terrence Leifheit has (i) executed and
delivered to Hammer and WAG Holdings a Voting Agreement, pursuant to which he
has agreed to vote all shares of the Company's capital stock owned by him or
otherwise within his power to vote in favor of the approval of each of the
Approval Matters and against any transaction competing with the Transactions,
and (ii) granted to Hammer and WAG Holdings a proxy (with the power of
substitution) with respect to such shares of the Company's capital stock.
(d) Satisfaction of Closing Conditions. From the date hereof until the
Closing, the Company shall use its best efforts to satisfy, or cause the
satisfaction of, each of the conditions set forth in Section 7 below as soon as
practicable following the date hereof.
(e) Compliance with Regulation D and Blue Sky. The Company shall, on
or before the Closing Date, take such action, if any, as is necessary in order
to obtain an exemption for or to qualify the Acquired Securities for sale to the
Buyers pursuant to this Agreement under Regulation D promulgated under the 1933
Act and any applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall, prior to the Closing Date, make
all filings and reports relating to the offer and sale of the Acquired
Securities that are necessary under Regulation D promulgated under the 1933 Act
and any applicable securities or "Blue Sky" laws of the states of the United
States, as the applicable, to perfect such exemptions or qualifications.
(f) Due Diligence. Prior to the Closing Date, the Buyers shall be
entitled, through their respective employees and representatives, including,
without limitation, their legal counsel and accountants, to make such
investigation of the assets, properties, business and operations of the Company
and each Subsidiary, and such examination of the books, records and financial
condition of the Company and each Subsidiary as the Buyers wish. Any such
investigation and examination shall be conducted at reasonable times and under
reasonable circumstances, and the Company shall cooperate, and cause each
Subsidiary to cooperate, fully therein. No investigation by the Buyers (or
failure to conduct such an investigation) shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Company under this
Agreement, or the Buyers' respective rights under Section 8 below. In order that
the Buyers may have full opportunity to make such business, accounting and legal
review, examination or investigation as it may wish of the business and affairs
of the Company and each Subsidiary, the Company shall furnish, and shall cause
each Subsidiary to furnish, the representatives of the Buyers during such period
with all such information and copies of such documents concerning the affairs of
the Company and each Subsidiary as such representatives may reasonably request
and cause its officers, employees, consultants, agents, accountants and
attorneys to cooperate fully with such representatives in connection with such
review and examination. If this Agreement terminates, the Buyers, and their
respective employees and representatives shall keep confidential any information
or documents obtained from the Company concerning its assets, properties,
business and operations, unless readily ascertainable from public or published
information, or trade sources, or subsequently developed by the Buyers or any of
them independent of any investigation of the Company, or received from a third
-18-
party not under an obligation to the Company to keep such information
confidential. If this Agreement terminates, any documents obtained by the Buyers
from the Company shall be returned.
(g) Notice of Events; Settlement of Debts. The Company shall promptly
notify the Buyers of (i) any event, condition or circumstance occurring from the
date hereof through the Closing Date that would constitute a violation or breach
of this Agreement, (ii) any event, occurrence, transaction or other item which
would have been required to have been disclosed on any Schedule or statement
delivered hereunder, had such event, occurrence, transaction or item existed on
the date hereof, other than items arising in the ordinary course of business
which would not render any representation or warranty of the Company inaccurate
or misleading, (iii) any lawsuits, claims, proceedings or investigations which
after the date hereof are, to the knowledge of the Company or any Subsidiary,
threatened or commenced against the Company or any of its officers, directors or
employees with respect to the affairs of the Company, and (iv) any event,
occurrence, transaction or other item that could reasonably be deemed to require
a filing by the Company with the SEC of a Current Report on Form 8-K. The
Company shall not settle, and shall cause each of its Subsidiaries not to
settle, any debts owed by the Company or any of its Subsidiaries to their
respective creditors and suppliers (except for cash payments of debts that have
become due in the ordinary course pursuant to their original terms), unless the
Company shall have obtained the Buyers' prior written approval of such
settlement.
(h) Fees and Expenses. In addition to its own fees and expenses, the
Company shall pay the fees and expenses (including the fees and expenses of
legal counsel, investment bankers, brokers or other representatives or
consultants) incurred by the Buyers in connection with the negotiation and
consummation of the transactions contemplated hereby. Such fees and expenses
shall be paid by the Company promptly upon submission of invoices therefor by
the Buyers and regardless of whether or not the Transactions are consummated.
(i) No Solicitation. The Company agrees that, for a period commencing
on the date hereof and ending on February 28, 2003 (the "Exclusivity Period"),
neither the Company nor any of its representatives, directors, officers,
stockholders, agents or affiliates (collectively, "Company Representatives")
will (i) entertain or discuss any Acquisition Proposal with any other party or
provide any information to any other party in connection therewith, or (ii)
disclose to any other party the contents of this Agreement or the details of the
transactions contemplated herein, except for such disclosure required by law or
contained in the Proxy Statement; provided, however, that nothing contained in
this Agreement shall prohibit the Board of Directors of the Company or Company
Representatives from furnishing information to or entering into discussions or
negotiations with any person or group that makes an unsolicited written, bona
fide Acquisition Proposal, if, and only to the extent that (i) the Board of
Directors of the Company determines in good faith by a majority vote, after
consultation with a nationally reputed financial advisor and with independent
legal counsel that such proposal is, or is reasonably likely to lead to, a
Superior Proposal, (ii) the Board of Directors of the Company determines in good
faith by a majority vote after consultation with its outside legal counsel that
the failure to negotiate, or otherwise engage in discussions, with such third
party would be inconsistent with the Board's fiduciary duties under applicable
law, and (iii) such person or group, prior to the disclosure of any non-public
information, enters into a confidentiality agreement with the Company that is
not, in any material respect, less restrictive as to such person or group than
the confidentiality restrictions imposed on the Buyers pursuant to Section 4(f),
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that contains a standstill restriction prohibiting such third party and its
affiliates from acquiring more than five percent (5%) of the Company's
outstanding Common Stock, and that does not contain exclusivity provisions which
would prevent the Company from complying with its obligations hereunder. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in this Section 4(i) by any Company Representative, whether or not
such person is purporting to act on behalf of the Company or its directors or
otherwise, shall be deemed to be a breach of this Section 4(i) by the Company.
Except as expressly permitted by this Section 4(i), the Board of Directors of
the Company (or any other committee thereof) shall not (i) approve or recommend,
or propose to approve or recommend, any Acquisition Proposal, or (ii) cause the
Company to accept such Acquisition Proposal and/or enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
(each, an "Acquisition Agreement") related to any Acquisition Proposal;
provided, however, that the Board of Directors of the Company may take such
actions if, and only to the extent that (A) such Acquisition Proposal is a
Superior Proposal, (B) the Board of Directors of the Company determines in good
faith by a majority vote, after consultation with its outside legal counsel,
that the failure to do so would be inconsistent with the fiduciary duty of the
Board of Directors of the Company under applicable law, (C) the Company is not
in breach of this Section 4(i), and (D) in the case of clause (ii) above, (I)
the Company shall, prior to or simultaneously with the taking of such action,
have paid or pay to the Buyers or their designee the break-up fee (including
payment of Buyers' transaction costs and expenses) set forth in Section 4(j)(ii)
below, (II) the Company shall, prior to or simultaneously with the taking of
such action, have repaid or repay to Hammer and WAG Holdings the aggregate
outstanding principal balance of all loans made to the Company or ecom pursuant
to the Loan Agreement, together with any accrued but unpaid interest thereon,
and (III) the Company shall have complied with its obligations under Section
9(e). In addition, the Company agrees that it will inform the Buyers of, and
provide the Buyers with information regarding, any Acquisition Proposal or other
offers or expressions of interest for the Company.
(j) Break-Up Fees.
(i) Upon the first occurrence of any Adverse Event (as defined
below), the Company shall pay the Buyers an aggregate amount of $100,000 in
cash (allocated among the Buyers in proportion to the number of Purchased
Shares to be purchased by each of the respectively hereunder unless
otherwise agreed among the Buyers), plus all transaction costs and expenses
actually incurred by the Buyers in connection with the negotiation and
attempted consummation of the transactions contemplated by this Agreement.
As used herein, the term "Adverse Event" means any of the following: (A)
the occurrence of any breach of the provisions of Section 4(i) above; or
(B) the Buyers elects to terminate this Agreement because the Buyers
determine, in their reasonable judgment, that (1) the Company does not own
or have licenses to use all of the Intellectual Property necessary to
conduct its business as it has been conducted, (2) there has occurred any
material adverse change in the business or assets of the Company since May
31, 2002 that was not disclosed to the Buyers in writing prior to the date
hereof, or (C) any material adverse change in the business or assets of the
Company has occurred since the date hereof.
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(ii) Upon the first occurrence of any Triggering Event (as
defined below), the Company shall pay the Buyers a break-up fee in cash in
the amount of $100,000 (allocated among the Buyers in proportion to the
number of Purchased Shares to be purchased by each of the respectively
hereunder unless otherwise agreed among the Buyers), plus all transaction
costs and expenses actually incurred by the Buyers in connection with the
negotiation and attempted consummation of the transactions contemplated by
this Agreement. As used herein, the term "Triggering Event" means (i) the
failure of the Company's Board of Directors to recommend to the
stockholders of the Company, within fifteen (15) days following the date of
this Agreement, that the stockholders of the Company approve the
consummation of the transactions contemplated by this Agreement, (ii) the
withdrawal by the Company's Board of Directors of any such recommendation,
(iii) the recommendation by the Company's Board of Directors that the
stockholders of the Company approve any Acquisition Proposal, (iv) the
execution by the Company of any Acquisition Agreement, or (v) the
termination of this Agreement by Buyer following a material breach by the
Company of any of the Company's representations, warranties or covenants
set forth herein, provided such breach has not been cured within twenty
(20) days after the Company receives written notice specifying such breach.
(k) Lock-Up Option. The Company hereby grants the Buyers an option
(the "Option") to acquire a number of shares of the Common Stock of the Company
equal to 19.9% of the number of issued and outstanding shares of the Company's
Common Stock, determined on a fully-diluted basis (assuming the conversion of
all securities convertible into Common Stock and the exercise of all options and
warrants to purchase Common Stock) immediately prior to the exercise of the
Option, at an exercise price of $0.07 per share, to be paid in cash (which price
shall be automatically adjusted in accordance with the Reverse Split in the
event the Reverse Split is effected). The Option shall be exercisable in the
event that the Buyers become entitled to a break-up fee or other payment
pursuant Section 4(j)(i) or (ii) above, and shall expire upon the first to occur
of (i) August 29, 2004, (ii) the date on which the Closing occurs, or (iii) a
material breach by the Buyers of their obligations under this Agreement, which
breach shall not have been cured by the Buyers within thirty (30) days following
the Buyers receipt from the Company of a written notice describing such material
breach, provided, that the Option shall be suspended until such breach is cured.
Unless otherwise agreed among the Buyers, the right to purchase shares of Common
Stock pursuant to the Option shall be allocated among the Buyers in proportion
to the number of Purchased Shares that would have been purchased by each of the
respectively hereunder had the transactions contemplated by this Agreement been
consummated on the date the Option is first exercisable. Each Buyer may assign
its rights under the Option to any person or entity in its sole discretion.
(l) Post-Closing Covenants.
(i) Following the Closing, the Buyers agree to use commercially
reasonable efforts to assist the Company in generating new outbound
telemarketing and/or mail opportunities for the Company in an amount not
less than $350,000 during the first twelve months after the Closing.
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(ii) Following the Closing, the Buyers agree to cause the Company
to adopt a new Stock Option Plan, pursuant to which employees of the
Company will be given new options to purchase Common Stock.
(iii) Following the Closing, the Company shall, at the request of
the Buyers, register the Purchased Shares and the shares of Common Stock
issuable under the Ancillary Warrants, pursuant the 1933 Act for resale by
the Buyers or their assigns.
5. TRANSFER AGENT INSTRUCTIONS.
On the Closing Date, the Company shall issue irrevocable instructions to
the Transfer Agent, in a form reasonably satisfactory to the Buyers, to issue a
certificate in the name of each Buyer for the Purchased Shares being purchased
by such Buyer hereunder (the "Irrevocable Transfer Agent Instructions"). The
Company warrants to the Buyers that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, will be given by the
Company to the Transfer Agent with respect to the Purchased Shares (other than
stop transfer orders enforcing the restrictions on transfer set forth in the
restrictive legend set forth below) and that the Purchased Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement. The certificates issued in the names
of the Buyers representing the Purchased Shares shall not bear any restrictive
legend except for the following:
THE SECURITIES EVIDENCED HEREBY WERE ISSUED AND SOLD WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE
"FEDERAL ACT"), OR THE SECURITIES LAWS OF ANY STATE, IN RELIANCE UPON
CERTAIN EXEMPTIVE PROVISIONS OF SAID ACTS, PARTICULARLY INCLUDING
SECTION 10-5-9(13) OF THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED.
SAID SECURITIES CANNOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR
TRANSFER IS MADE: (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE FEDERAL ACT OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION; AND (2) IN A TRANSACTION WHICH IS EXEMPT UNDER
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH LAWS, OR IN A TRANSACTION WHICH IS
OTHERWISE IN COMPLIANCE WITH SUCH LAWS.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The obligation of the Company hereunder to sell the Purchased Shares is
subject to the satisfaction of each of the following conditions on or before the
Closing Date; provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
the Buyers with prior written notice thereof:
(a) The Buyers shall have executed each of the Transaction Documents
and delivered the same to the Company.
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(b) The representations and warranties of each Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and each Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION.
The obligation of the Buyers to purchase Purchased Shares under this
Agreement is subject to the satisfaction of each of the following conditions on
or before the Closing Date; provided that these conditions are for the Buyers'
benefit only and may be waived by the Buyers at any time in their absolute
discretion by providing the Company with prior written notice thereof:
(a) Trading in the Common Stock shall not have been suspended by the
SEC or the Principal Market.
(b) The stockholders of the Company shall have approved the
transactions contemplated by this Agreement, including without limitation, the
sale of the Purchased Shares pursuant to Section 1 above, the issuance of the
Ancillary Warrants, the Reverse Split and the Company Name Change.
(c) The Company shall have executed each of the Transaction Documents
and delivered the same to the Buyers.
(d) Prior to the effectiveness of the Reverse Split, ninety five
percent (95%) or more of the Company's convertible securities (excluding the
Series D Preferred Stock), determined on the basis of the number of shares of
Common Stock into which such convertible securities may be converted immediately
prior to Closing, shall have been cancelled or converted to Common Stock in
accordance with the terms thereof.
(e) Prior to the effectiveness of the Reverse Split, Gibralter shall
have converted all 1,000,000 shares of the Series D Preferred Stock currently
owned by it into 10,000,000 shares of Common Stock (equivalent to 1,000,000
shares upon the effectiveness of the Reverse Split).
(f) The Company shall have effected the Reverse Split and the Company
Name Change by filing a Certificate of Amendment to the Certificate of
Incorporation, in form and substance reasonably satisfactory to the Buyers.
(g) Each of the former shareholders of ecom shall have executed and
delivered to the Company a written waiver of any rights such Person may have
under that certain Agreement and Plan of Merger, dated as of December 21, 2000
(as amended, the "ecom Merger Agreement"), or otherwise, to receive additional
shares of Common Stock upon the consummation of Company's sale of the Purchased
Shares pursuant to Section 1 hereof.
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(h) The sum of the number of shares of Common Stock outstanding and
the number of shares of Common Stock issuable upon the conversion of all
securities convertible into, or exercisable for, shares of Common Stock shall
not exceed 54.5 million (ignoring the effect of the Reverse Split).
(i) The Company shall have entered into an agreement with Gibralter,
which shall be for a term of not less than five (5) years, providing for the
continued provision of services to Gibralter by the Company, such agreement to
be at current market terms and in form and substance satisfactory to the Buyers
in their absolute discretion (including, without limitation, as to allocation of
overhead and costs). To the extent the parties cannot agree on an acceptable
contract, the parties shall select an arbitrator to determine current market
terms for said agreement.
(j) The Company shall have (i) terminated each employment agreement or
consulting agreement listed under item (j) on Schedule 3(v), and (ii) entered
into a new agreement with each Person employed or engaged under such agreements
upon the terms and conditions set forth with respect to such Person on Schedule
7(j) or upon terms and conditions otherwise satisfactory to the Buyers.
(k) The Company shall have entered into a fee agreement with Atkisson,
Carter & Company ("Atkisson"), upon the terms described on Schedule 7(k), and
otherwise in form and substance satisfactory to the Buyers in their absolute
discretion, relating to services provided by Atkisson in connection with the
transactions contemplated by this Agreement.
(l) [Intentionally omitted]
(m) The Buyers shall be satisfied, in their absolute discretion, with
the results of their due diligence investigation of the Company and its
Subsidiaries.
(n) There shall have been no material adverse change in the financial
condition, results of operations or business prospects of the Company and its
Subsidiaries, since May 31, 2002.
(o) The Buyers shall have received a legal opinion letter of the
Company's legal counsel, dated as of the Closing Date, in the form of Schedule
7(o).
(p) The Company shall have executed and delivered to the Transfer
Agent the Irrevocable Transfer Agent Instructions, and the same shall have been
acknowledged in writing by the Company's Transfer Agent. The Company shall have
executed and delivered to Hammer and WAG Holdings the Ancillary Warrants.
(q) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
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performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyers shall have
received a certificate, executed by the President of the Company, dated as of
the Closing Date, to the foregoing effect, in form and substance satisfactory to
the Buyers.
(r) All permits and approvals from any governmental or regulatory body
required for the lawful consummation of the transactions contemplated herein and
the continued operation of the business of the Company and the Subsidiaries
shall have been obtained.
(s) All consents, permits, waivers and approvals from parties to
material contracts or other agreements with the Company that may be required in
connection with the performance by the Company of its obligations under this
Agreement or the continuance of such contracts or other agreements with the
Company without material modification after the consummation of the transactions
contemplated herein shall have been obtained (with satisfactory written evidence
thereof, in recordable form where necessary, to be furnished to the Buyers at
the Closing).
(t) No action, suit or proceeding shall have been instituted before
any court or governmental or regulatory body, or instituted or threatened by any
governmental or regulatory body, to restrain, modify or prevent the carrying out
of the transactions contemplated by this Agreement or to seek damages or a
discovery order in connection with such transactions, or that has or could
reasonably be expected to have a materially adverse effect on the assets,
properties, business, operations or financial condition of the Company or any
Subsidiary.
(u) The Company shall have delivered to the Buyers a certificate
evidencing the incorporation and good standing of the Company in the State of
Delaware issued by the Secretary of State of the State of Delaware as of a date
within ten (10) Business Days of the Closing Date.
(v) The Company shall have delivered to the Buyers a certified copy of
the Certificate of Incorporation as certified by the Secretary of State of the
State of Delaware within ten (10) Business Days of the Closing Date.
(w) The Company shall have delivered to the Buyers a secretary's
certificate executed by the Secretary of the Company, dated as of the Closing
Date, in form and substance satisfactory to the Buyers.
(x) The Company shall have obtained a policy of directors and officers
liability insurance issued by an insurer acceptable to Buyer and having terms
and coverage limits acceptable to the Buyers.
8. INDEMNIFICATION.
(a) In consideration of the Buyers' execution and delivery of the
Transaction Documents and their acquisition of the Purchased Shares hereunder
and in addition to all of the Company's other obligations under the Transaction
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Documents, subject to the limits set forth in subsection (b) below, the Company
shall defend, protect, indemnify and hold harmless each Buyer, each Buyer's
respective affiliates, officers, directors, managers and employees, and any of
the foregoing persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(ii) any breach of any covenant, agreement or obligation of the Company
contained in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, or (iii) any cause of action, suit or
claim brought or made against such Indemnitee and arising out of or resulting
from the execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
(b) The Company shall not be liable under subsection (a) above unless
the aggregate amount of Indemnified Liabilities subject to indemnification
pursuant to such section exceeds $50,000 (the "Threshold Amount"). After the
aggregate amount of such Indemnified Liabilities exceeds the Threshold Amount,
the Company shall be obligated to indemnify the Indemnitees for all such
Indemnified Liabilities, including those considered in determining that the
Threshold Amount has been exceeded. In no event shall the aggregate liability of
the Company under subsection (a) above exceed $1,500,000.
9. TERMINATION.
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned at any time prior to the Closing Date, as follows:
(a) by mutual written agreement of the Company and the Buyers; or
(b) by the Buyers or the Company if such party seeking termination is
not then in material breach of this Agreement and if the Closing has not
occurred on or before February 28, 2003 (the "Termination Date"); or
(c) by the Buyers, if the Buyers are not then in material breach of
this Agreement and the Company is then in material breach of this Agreement, and
such breach remains uncured for ten (10) days after the Company's receipt of
written notice thereof from Buyer; or
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(d) by the Company, if the Company is not then in material breach of
this Agreement and the Buyers are then in material breach of this Agreement, and
such breach remains uncured for ten (10) days after the Buyers' receipt of
written notice thereof from the Company; or
(e) by the Company at any time prior to the Special Meeting, by action
of the Board of Directors of the Company, if the Company shall have received
after the date hereof an Acquisition Proposal from a third party that was not
initiated, solicited or encouraged by the Company in violation of this Agreement
and that does not materially violate or breach any confidentiality or standstill
agreement executed by such party with respect to the Company and (i) the Board
of Directors of the Company determines in good faith by a majority vote after
consultation with its financial and legal advisors that such Acquisition
Proposal is a Superior Proposal, (ii) the Board of Directors of the Company
determines in good faith by a majority vote after consultation with its outside
legal counsel that the failure to approve such agreement would be inconsistent
with the fiduciary duties of the Board of Directors under applicable law, (iii)
the Board of Directors of the Company has received a written opinion, a copy of
which has been delivered to the Buyers, from a nationally reputed financial
advisor that the Acquisition Proposal is fair from a financial point of view to
the stockholders of the Company (other than any stockholders participating in
the buying group in such transaction); provided, however, that any such
termination shall not be effective unless: (I) the Board of Directors of the
Company has provided the Buyers with written notice that it intends to terminate
this Agreement pursuant to this Section 9(e), identifying the Alternative
Transaction (and the parties thereto) then determined to be more favorable and
delivering to the Buyers a copy of the written agreement for such Alternative
Transaction in the form to be entered into (it being understood that if such
form changes prior to termination of this Agreement, the Board of Directors of
the Company will notify the Buyers thereof), (II) at least two (2) full Business
Days after the Board of Directors of the Company has provided the initial notice
required by clause (I) above, the Board of Directors of the Company delivers to
the Buyers a written notice of termination of this Agreement pursuant to this
Section 9(e), and (III) upon delivery of the termination notice referred to in
clause (II) above, (A) the Company has delivered to the Buyers checks or wire
transfers of same day funds in the aggregate amount of the break-up fee and the
expense and cost reimbursement required under Section 4(j)(ii) above and a
written acknowledgement from the Company that the Company has irrevocably waived
any right to contest or object to such payment, and (B) the Company has repaid
to Hammer and WAG Holdings the aggregate outstanding principal balance of all
loans made pursuant to the Loan Agreement, together with any accrued but unpaid
interest thereon.
If this Agreement is terminated pursuant to the foregoing, then except as
otherwise provided herein, all further obligations of the parties under or
pursuant to this Agreement shall immediately terminate without further liability
of any party to the other; provided, however, that (i) nothing in this Section 9
shall relieve the liability or obligations hereunder of any party (the
"Defaulting Party") to the other party or parties (each, a "Non-Defaulting
Party") on account of a breach by the Defaulting Party of any covenant,
agreement, representation or warranty of the Defaulting Party contained herein,
including, without limitation, any liability of the Company pursuant to Section
4(j) above; (ii) the option granted by the Company to the Buyers in Section 4(k)
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above shall survive any such termination; and (iii) the Buyers' obligations of
confidentiality set forth in Section 4(f) shall survive any such termination.
10. CERTAIN DEFINED TERMS.
For purposes of this Agreement, the following terms shall have the
following meanings:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "Acquisition Proposal" means an inquiry, offer or proposal
regarding any of the following (other than the Transactions contemplated by this
Agreement) involving the Company: (i) any merger, consolidation, share exchange,
recapitalization, liquidation, dissolution, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of 15% or more of the assets of the Company in a single
transaction or series of related transactions; (iii) any tender offer (including
a self tender offer) or exchange offer that, if consummated, would result in any
person or group beneficially owning more than 15% of the outstanding shares of
any class of equity securities of the Company (or in the case of a person or
group which beneficially owns more than 15% of the outstanding shares of any
class of equity securities of the Company as of the date hereof, would result in
such person or group increasing the percentage or number of shares of such class
beneficially owned by such person or group) or the filing of a registration
statement under the 1933 Act in connection therewith; (iv) any acquisition of
15% or more of the outstanding shares of capital stock of the Company or the
filing of a registration statement under the 1933 Act in connection therewith or
any other acquisition or disposition the consummation of which would prevent or
materially diminish the benefits to the Buyers of the Transactions; or (v) any
public announcement by the Company or any third party of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
(c) "Alternative Transaction" means any of the transactions
contemplated in the definition of Acquisition Proposal.
(d) "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.
(e) "Business Day" means any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of
Georgia or the State of North Carolina.
(f) "License Agreements" means any and all agreements (whether oral or
written) to which Company or any of its Subsidiaries is a party or otherwise
bound, (i) granting or obtaining any right to use or practice any rights under
any Intellectual Property, or (ii) restricting the Company's (or such
Subsidiary's) rights to use any Intellectual Property, including license
agreements, development agreements, distribution agreements, settlement
agreements, consent to use agreements, and covenants not to sue.
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(g) "Material Adverse Effect" means any material adverse effect on any
of: (i) the business, properties, assets, operations, results of operations or
financial condition of the Company and its Subsidiaries, taken as a whole, or
(ii) the authority or ability of the Company to perform its obligations under
the Transaction Documents.
(h) "Person" means an individual or entity including any limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(i) "Principal Market" means the OTC Bulletin Board.
(j) "SEC" means the United States Securities and Exchange Commission.
(k) "Subsidiary" or "Subsidiaries" means each entity in which the
Company, directly or indirectly, owns 50% or more of the voting stock or capital
stock or other similar equity interests).
(l) "Superior Proposal" means any proposal made by a third party to
acquire, directly or indirectly, including pursuant to a tender offer, exchange
offer, merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or other similar transaction, not
less than 51% of the shares of Company Common Stock then outstanding or all or
substantially all of the assets of the Company which the Board of Directors of
the Company determines in good faith (A) is more favorable to the stockholders
of the Company from a financial point of view than the transactions contemplated
by this Agreement (including any adjustment to the terms and conditions proposed
in writing by the Buyers in response to such Acquisition Proposal), (B) is not
subject to any material contingency, to which the other party thereto has not
reasonably demonstrated in its written offer its ability to overcome or address,
including the receipt of government consents or approvals, and (C) is reasonably
likely to be consummated and is in the best interests of the stockholders of the
Company.
(m) "Tax" or "Taxes" means all federal, state, local and foreign
income, gross receipts, profits, windfall profits, capital gains, franchise,
sales, use, license, occupation, property, property transfer, capital stock,
premium, excise, ad valorem, employment, payroll, withholding, estimated,
severance, stamp, environmental, fuel, customs duties, social security,
unemployment, disability, registration, value added, alternative or add-on
minimum and other taxes, assessments or governmental charges of any nature, kind
or character, and including any interest, additions to tax and penalties
thereon.
(n) "Tax Returns" means all returns, declarations, reports and forms,
claims for refunds, or information returns and reports relating to Taxes,
including any schedule or attachment thereto, and including any amendments
thereof.
(o) "Transaction Documents" has the meaning set forth in Section 3(b)
above.
(p) "Transfer Agent" means the transfer agent of the Company as set
forth in Section 11(f) hereof or such other person who is then serving as the
transfer agent for the Company in respect of the Common Stock.
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11. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement and
the other Transaction Documents shall be governed by the internal laws of the
State of Delaware, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Delaware. Each party hereby irrevocably submits to the jurisdiction of
the state and federal courts sitting in the City of Atlanta, Georgia, for the
adjudication of any dispute hereunder or under the other Transaction Documents
or in connection herewith or therewith, or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement, the other Transaction Documents and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyers
make any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended other than by an
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instrument in writing signed by the Company and the Buyers, and no provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to WAG Holdings to:
WAG Holdings, LLC
1150 Hammond Drive
Suite A1200
Atlanta, Georgia 30328
Telephone: 770-522-1890
Facsimile: 770-730-2870
Attention: William A. Goldstein
With a copy to:
Smith, Gambrell & Russell, LLP
1230 Peachtree Street, N.E., Suite 3100
Atlanta, Georgia 30309-3592
Telephone: 404-815-3632
Facsimile: 404-685-6932
Attention: A. Jay Schwartz
If to Hammer to:
Glen H. Hammer
c/o Warranty Corporation of America, Inc.
3110 Crossing Park Road
Norcross, GA 30071-1323
Telephone: 770-416-9222
Facsimile: 770-840-2071
With a copy to:
Smith, Gambrell & Russell, LLP
1230 Peachtree Street, N.E., Suite 3100
Atlanta, Georgia 30309-3592
Telephone: 404-815-3632
Facsimile: 404-685-6932
Attention: A. Jay Schwartz
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If to Barkowitz to:
A. Randall Barkowitz
c/o Warranty Corporation of America, Inc.
3110 Crossing Park Road
Norcross, GA 30071-1323
Telephone: 770-416-9222
Facsimile: 770-840-2073
If to the Company to:
Paladyne Corp.
1650A Gum Branch Road
Jacksonville, NC 28540
Telephone: 888-773-3501 ext. 6006
Facsimile: 910-455-1937
Attention: Terrence Leifheit
With a copy to:
Thelen Reid & Priest LLP
875 Third Avenue
New York, NY 10022
Telephone: 212-603-6780
Facsimile: 212-603-2001
Attention: Bruce A. Rich
If to the Transfer Agent to:
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Telephone: 212-936-5100
Facsimile: 212-921-8326
Attention: Karen Lazar
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Business Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, and recipient facsimile number or (C) provided by a nationally recognized
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overnight delivery service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Buyers, including by merger
or consolidation. The Buyers may not assign their respective rights or
obligations under this Agreement.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Publicity. The Buyers shall have the right to approve before
issuance any press releases or any other public disclosure (including any
filings with the SEC) with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Buyers, to make any press release or other public disclosure
(including any filings with the SEC) with respect to such transactions as is
required by applicable law and regulations (although the Buyers shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
(j) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) No Financial Advisor, Placement Agent, Broker or Finder. The
Company represents and warrants to the Buyers that except for Atkisson it has
not engaged any financial advisor, placement agent, broker or finder in
connection with the transactions contemplated hereby. Each Buyer represents and
warrants to the Company that such Buyer has not engaged any financial advisor,
placement agent, broker or finder in connection with the transactions
contemplated hereby. The Company shall be responsible for the payment of any
fees or commissions, if any, of any financial advisor, placement agent, broker
or finder relating to or arising out of the transactions contemplated hereby.
The Company shall pay, and hold the Buyers harmless against, any liability, loss
or expense (including, without limitation, attorneys' fees and out of pocket
expenses) arising in connection with any such claim.
(l) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
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(m) Remedies. The Buyers' remedies provided in this Agreement shall be
cumulative and in addition to all other remedies available to the Buyers under
this Agreement, at law or in equity (including a decree of specific performance
and/or other injunctive relief), no remedy of the Buyers contained herein shall
be deemed a waiver of compliance with the provisions giving rise to such remedy
and nothing herein shall limit the any Buyer's right to pursue actual damages
for any failure by the Company to comply with the terms of this Agreement.
(n) Changes to the Terms of this Agreement. This Agreement and any
provision hereof may only be amended by an instrument in writing signed by the
Company and the Buyers. The term "Agreement" and all references thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented.
(o) Enforcement Costs. If: (i) this Agreement is placed by any Buyer
in the hands of an attorney for enforcement or is enforced by any Buyer through
any legal proceeding; or (ii) an attorney is retained to represent any Buyer in
any bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent any Buyer in any other proceedings whatsoever
in connection with this Agreement, then the Company shall pay to such Buyer, as
incurred by such Buyer, all reasonable costs and expenses, including attorneys'
fees, incurred in connection therewith, in addition to all other amounts due
hereunder; provided, that in the case of payments pursuant to clause (ii) above,
the court in which the applicable proceedings are pending shall have approved
such payments. In each instance, the Company shall use its reasonable best
efforts to obtain such approval from such court.
(p) Failure or Indulgence Not Waiver. No failure or delay in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
* * * * *
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IN WITNESS WHEREOF, the Buyers and the Company have caused this Stock
Purchase Agreement to be duly executed as of the date first written above.
THE COMPANY:
------------
PALADYNE CORP.
By:
---------------------------
Name: Terrence Leifheit
Title: President
BUYERS:
-------
------------------------------
A. RANDALL BARKOWITZ
WAG HOLDINGS, LLC
By:
---------------------------
Name: William A. Goldstein
Title: Manager
[Signatures Continue on Following Page]
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[Signature Page to Stock Purchase Agreement]
------------------------------
GLEN H. HAMMER
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SCHEDULES AND EXHIBITS
- ----------------------
Exhibit A Form of Ancillary Warrants
Schedule 1(a) Allocation of Purchased Shares Among Buyers
Schedule 3(a) Subsidiaries
Schedule 3(c) Capitalization
Schedule 3(e) Conflicts
Schedule 3(f) 1934 Act Filings
Schedule 3(g) Material Changes
Schedule 3(h) Absence of Liabilities
Schedule 3(j) Litigation
Schedule 3(k) Terms of Gibralter Warrants
Schedule 3(m) Intellectual Property
Schedule 3(o) Liens
Schedule 3(p) Real Property Leases
Schedule 3(q) Insurance
Schedule 3(s) Changes in Benefit Plans
Schedule 3(t) ERISA
Schedule 3(u) Taxes
Schedule 3(v) Contracts
Schedule 3(w) Affiliate Transactions
Schedule 7(j) Terms of Employment and Consulting Agreements
Schedule 7(k) Fee Agreement With Atkisson (Description of Terms)
Schedule 7(o) Form of Opinion of Company Counsel
Schedule 1(a)
-------------
Allocation of Purchased Shares Among The Buyers
The Purchased Shares shall be purchased by the Buyers in accordance with the
following allocation:
1. The first 350,000 shares shall be allocated to Barkowitz.
2. Purchased Shares shall then be allocated to Hammer until the aggregate
number of shares allocated to Barkowitz and Hammer equals 50% of the total
number of Purchased Shares to be purchased hereunder by the Buyers.
3. The remaining 50% of the total number of Purchased Shares shall be
allocated to WAG Holdings.
PRELIMINARY COPIES
PALADYNE CORP. SPECIAL MEETING
TO BE HELD ON __________________, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of PALADYNE CORP., a Delaware corporation
(the "Company"), acknowledges receipt of the Notice of Special Meeting of
Stockholders and Proxy Statement, dated December ___, 2002, and hereby
constitutes and appoints Terrence J. Leifheit and James A. Rapp, or either of
them acting singly in the absence of the other, with the power of substitution
in either of them, the proxies of the undersigned to vote with the same force
and effect as the undersigned all shares of Common Stock, Series A Preferred
Stock, Series C Preferred Stock and/or Series D Preferred Stock of the Company
held by the undersigned at the Special Meeting of Stockholders of the Company to
be held on ____________, 2003, and at any adjournment or adjournments thereof,
hereby revoking any proxy or proxies heretofore given and ratifying and
confirming all that said proxies may do or cause to be done by virtue thereof
with respect to the following matters:
The undersigned hereby instructs said proxies or their substitutes:
1. Authorization of a one-for-ten reverse stock split of the
outstanding common stock of the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Approval of the Stock Purchase Agreement, dated December __,
2002, among the Company and WAG Holdings, LLC, Glen H. Hammer and
A. Randall Barkowitz (the "Buyers"), and the transactions
contemplated thereby, including, without limitation, the sale to
the Buyers of a number of shares of Common Stock equal to 70% of
the post-reverse split, fully diluted shares outstanding of the
Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Amendment to the Certificate of Incorporation to change the name
of the Company to "Market Central, Inc."
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Upon such other matters as may properly come before the Meeting
or any adjournment or adjournments thereof.
This Proxy when properly executed will be voted as directed. If no
direction is indicated, this Proxy will be voted FOR the three proposals.
PLEASE SIGN, DATE AND MAIL THIS PROXY
IMMEDIATELY IN THE ENCLOSED ENVELOPE.
Name __________________________
Name (if joint) _______________
Date..................., 200[3]
Please sign your name exactly as it appears
hereon. When signing as attorney, executor,
administrator, trustee or guardian, please
give your full title as it appears hereon.
When signing as joint tenants, all parties
in the joint tenancy must sign. When a
proxy is given by a corporation, it should
be signed by an authorized officer and the
corporate seal affixed. No postage is
required if returned in the enclosed
envelope.
2