Exhibit 1
STOCK PURCHASE AGREEMENT
AMONG
BYSYNERGY LLC
PARTNERAXIS, INC.,
AND
EBIZ ENTERPRISES, INC.
APRIL 13, 2001
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 SALE AND PURCHASE OF SHARES................................... 1
1.1 Sale and Purchase of Shares..................................... 1
1.2 Payment for Shares.............................................. 2
ARTICLE 2 CLOSING....................................................... 2
2.1 Closing......................................................... 2
2.2 Deliveries by Seller and the Company............................ 2
2.3 Deliveries by Buyer............................................. 3
2.5 Termination in Absence of Closing............................... 3
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY...... 4
3.1 Corporate Existence and Qualification........................... 4
3.2 Authority, Approval and Enforceability.......................... 5
3.3 Capitalization and Corporate Records............................ 5
3.4 No Seller Defaults or Consents.................................. 6
3.5 No Company Defaults or Consents................................. 6
3.6 No Proceedings.................................................. 6
3.7 Employees....................................................... 6
3.8 Financial Statements; Liabilities; and Liens.................... 7
3.9 Absence of Certain Changes...................................... 7
3.10 Compliance with Laws............................................ 7
3.11 Litigation...................................................... 8
3.12 Real Property................................................... 8
3.13 Commitments..................................................... 9
3.14 Insurance....................................................... 10
3.15 Intangible Rights............................................... 10
3.16 Permits......................................................... 11
3.17 Banks........................................................... 12
3.18 Transactions With Affiliates.................................... 12
3.19 Other Information............................................... 12
-i-
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER....................... 12
4.1 Corporate Existence and Qualification........................... 12
4.2 Authority, Approval and Enforceability.......................... 13
4.3 No Default or Consents.......................................... 13
4.4 No Proceedings.................................................. 13
4.5 Investment...................................................... 13
ARTICLE 5 OBLIGATIONS PRIOR TO CLOSING.................................. 14
5.1 Buyer's Access to Information and Properties.................... 14
5.2 Company's Conduct of Business and Operations.................... 14
5.3 General Restrictions............................................ 15
5.4 Notice Regarding Changes........................................ 15
5.5 Preferential Purchase Rights.................................... 16
5.6 Ensure Conditions Met........................................... 16
5.7 No Shop......................................................... 16
ARTICLE 6 CONDITIONS TO SELLER'S AND BUYER'S OBLIGATIONS................ 16
6.1 Conditions to Obligations of Seller............................. 16
6.2 Conditions to Obligations of Buyer.............................. 17
ARTICLE 7 POST-CLOSING OBLIGATIONS...................................... 18
7.1 Further Assurances.............................................. 18
7.2 Publicity....................................................... 18
7.3 Post-Closing Indemnification.................................... 18
7.4 Non-Competition, Non-Solicitation and Non-Disclosure............ 19
ARTICLE 8 MISCELLANEOUS................................................. 20
8.1 Limitation on Liability......................................... 20
8.2 Confidentiality................................................. 21
8.3 Brokers......................................................... 22
8.4 Costs and Expenses.............................................. 22
8.5 Notices......................................................... 22
8.6 Governing Law................................................... 23
8.7 Representations and Warranties.................................. 24
8.8 Entire Agreement; Amendments and Waivers........................ 24
8.9 Binding Effect and Assignment................................... 24
-ii-
8.10 Remedies........................................................ 24
8.11 Exhibits and Schedules.......................................... 24
8.12 Multiple Counterparts........................................... 24
8.13 References and Construction..................................... 25
8.14 Survival........................................................ 25
8.15 Attorneys' Fees................................................. 25
8.16 Risk of Loss.................................................... 25
ARTICLE 9 DEFINITIONS................................................... 25
9.1 Affiliate....................................................... 25
9.2 Collateral Agreements........................................... 26
9.3 Confidential Information........................................ 26
9.4 Contracts....................................................... 26
9.5 Damages......................................................... 26
9.6 Financial Statements............................................ 26
9.7 Governmental Authorities........................................ 26
9.8 Knowledge of the Company........................................ 26
9.9 Legal Requirements.............................................. 27
9.10 Permits......................................................... 27
9.11 Person.......................................................... 27
9.12 Properties...................................................... 27
9.13 Real Property................................................... 27
9.14 Regulations..................................................... 27
9.15 Subsidiary...................................................... 27
9.16 Trade Secrets................................................... 27
9.17 Used............................................................ 27
-iii-
LIST OF SCHEDULES
Schedule 3.7........................................Employee Arrangements
Schedule 3.8(a).....................................Financial Statements
Schedule 3.8(b).....................................Liabilities
Schedule 3.8(c).....................................Liens
Schedule 3.9........................................Absence of Certain Changes
Schedule 3.12(a)....................................Real Property
Schedule 3.12(b)....................................Leases
Schedule 3.13.......................................Contracts
Schedule 3.14.......................................Insurance
Schedule 3.15.......................................Intangible Rights
Schedule 3.16.......................................Permits
Schedule 3.18.......................................Transactions with Affiliates
-iv-
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 13th day of April, 2001, by and among BYSYNERGY LLC, a Delaware
limited liability company ("Buyer"), PARTNERAXIS, INC., a Nevada corporation
("Company"), and EBIZ ENTERPRISES, INC., a Nevada corporation ("Seller").
RECITALS
A. Seller owns of record and beneficially all of the outstanding capital
stock of the Company (the "Shares").
B. Buyer desires to purchase the Shares, and Seller desires to sell such
Shares, upon the terms and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree as follows:
ARTICLE 1
SALE AND PURCHASE OF SHARES
1.1 SALE AND PURCHASE OF SHARES.
(a) On the terms and subject to the conditions of this Agreement,
at the Closing referred to in Section 2.1 hereof, Seller shall sell, convey,
assign, transfer and deliver to Buyer, and Buyer shall purchase, acquire and
accept delivery of, the Shares, free and clear of any and all liens, mortgages,
adverse claims, charges, security interests, encumbrances or other restrictions
or limitations whatsoever. In addition, Seller and the Company hereby delegate
to Buyer only the following duties and obligations of Seller set forth in the
Use Restriction Agreement, dated September 15, 2000, by and between Seller and
Caldera Systems, Inc. ("Caldera") as modified by that Term Sheet dated January
2, 2001, between Seller and Caldera and the formal contract documents
contemplated therein, including the Modification Agreement and the Technology
License Agreement (the "Caldera Documents"), (i) providing a minimum of $1.1
million in financing for the Company no later than June 30, 2001 and continuing
to develop, fund and operate the Company until December 31, 2001, as set forth
in Section 3 of the Term Sheet; (ii) paying to Caldera a 5% royalty on the total
gross revenue earned by Seller, the Company, their successors and assigns with
respect to the Business (as defined in Section 7.4), as set forth in Section 5
of the Term Sheet, and (iii) granting to Caldera, for its internal business
purposes only, a perpetual fully paid up, royalty-free license to use all of the
intellectual property, technology, software, the computer programs, Trade
Secrets, data, designs, proprietary works, and processes now-existing or as it
may be developed in the future that is used in, related to, or as it may be
developed in the future that is used in or related to or associated with the
Business, as set forth in Section 6 of the Term Sheet (the "Obligations").
Notwithstanding the foregoing, if the terms of the final executed versions of
the Caldera Documents differ from those in the Term Sheet or the current drafts
of the Caldera Documents, the Obligations shall be modified to reflect the terms
and conditions of the final, executed Caldera Documents.
(b) To effect the transfer contemplated by Section 1.1(a), at the
Closing, Seller shall deliver or cause to be delivered to Buyer, against payment
therefore in accordance with Section 1.2 hereof, stock certificates representing
the Shares, accompanied by stock powers duly executed in form acceptable to
Buyer for transfer on the books of the Company.
1.2 PAYMENT FOR SHARES. As payment in full for the Shares being
acquired by Buyer hereunder, Buyer shall pay the sum of Ten Dollars ($10.00)
(the "Purchase Price"), payable by certified check or wire transfer to an
account specified by Seller in writing. In addition, Buyer expressly assumes the
Obligations and agrees to fully perform all of the Obligations as contemplated
in the agreements setting forth the Obligations.
ARTICLE 2
CLOSING
2.1 CLOSING. Subject to the conditions stated in Article VI of this
Agreement, the closing of the transactions contemplated hereby (the "Closing")
shall be held at 9:00 a.m., Phoenix local time, on April 13, 2001, or, if the
conditions set forth in Section 6.2 have not been satisfied or waived on such
date, on the fifth (5th) business day after all such conditions shall have been
satisfied or waived, at the offices of Seller located at 15695 N. 83rd Way,
Scottsdale, Arizona 85260. The date upon which the Closing occurs is hereinafter
referred to as the "Closing Date." The Closing shall be deemed completed as of
12:01 a.m. Phoenix local time on the morning of the Closing Date.
2.2 DELIVERIES BY SELLER AND THE COMPANY. At or prior to the Closing,
Seller shall deliver to Buyer:
(a) certificates representing the Shares, duly endorsed in blank
for transfer, or with appropriate stock powers in blank attached;
(b) the Schedules referenced in this Agreement;
(c) the resignations of all the officers and directors of the
Company;
(d) the stock book, stock ledger, minute books and corporate seal
of the Company;
(e) a certificate executed by Seller to the effect that the
conditions set forth in Section 6.2 have been satisfied;
(f) possession of all originals and copies of agreements,
instruments, documents, deeds, books, records, files and other data and
information within the possession of Seller or any Affiliate of Seller
pertaining to the Company (collectively, the "Records"); provided, however, that
-2-
Seller may retain (1) copies of any tax returns and copies of Records relating
thereto; (2) copies of any Records that Seller is reasonably likely to need for
complying with requirements of law; and (3) copies of any Records that in the
reasonable opinion of Seller will be required in connection with the performance
of its obligations under Article VIII hereof; and
(g) evidence satisfactory to Buyer that Buyer's designees shall
be the only authorized signatories with respect to the Company's various
accounts, credit lines, safe deposit boxes or vaults set forth or required to be
set forth in Schedule 3.17.
(h) evidence satisfactory to Buyer that Seller has (i) validly
transferred to the Company all assets relating to the Business and (ii) released
all Liens (as defined in Section 3.8(c)).
2.3 DELIVERIES BY BUYER. At or prior to the Closing, Buyer shall
deliver to Seller:
(a) the amount and form of Purchase Price required to be paid at
Closing pursuant to Section 1.2 hereof;
(b) a certificate executed by an authorized officer of Buyer, on
behalf of Buyer, to the effect that the conditions set forth in Section 6.1 have
been satisfied; and
(c) evidence satisfactory to Seller that Buyer's manager and
members have taken all necessary actions to approve the transactions
contemplated by this Agreement.
(d) evidence, in a form mutually agreed upon by Buyer and Seller
prior to the execution of this Agreement and reasonably satisfactory to Dean
Taylor, Executive Vice-President of the Company, as the authorized
representative of the Company, that Buyer has the financial resources to assume
and perform the Obligations.
2.4 DELIVERY BY THE COMPANY. At or prior to Closing, the Company shall
deliver to Seller a certification from Taylor on behalf of the Company that the
Company has received such evidence from Buyer as described in Section 2.3(d).
2.5 TERMINATION IN ABSENCE OF CLOSING.
(a) Subject to the provisions of Section 2.5(b), if by the close
of business on April 20, 2001, the Closing has not occurred, then any party
hereto may thereafter terminate this Agreement by written notice to such effect,
to the other parties hereto, without liability of or to any party to this
Agreement or any shareholder, director, officer, employee or representative of
such party unless the reason for Closing having not occurred is (i) such party's
willful breach of the provisions of this Agreement, or (ii) if all of the
conditions to such party's obligations set forth in Article VI have been
satisfied or waived in writing by the date scheduled for the Closing pursuant to
Section 2.1, the failure of such party to perform its obligations under this
Article II on such date; provided, however, that the provisions of Sections 8.2
through 8.6 shall survive any such termination; and provided further, however,
that any termination pursuant to this Section 2.5 shall not relieve any party
-3-
hereto who was responsible for Closing having not occurred as described in
clauses (i) or (ii) above of any liability for (x) such party's willful breach
of the provisions of this Agreement, or (y) if all of the conditions to such
party's obligations set forth in Article VI have been satisfied or waived in
writing by the date scheduled for the Closing pursuant to Section 2.1, the
failure of such party to perform its obligations under this Article II on such
date.
(b) Notwithstanding the approval of the Board of Directors of
Buyer, this Agreement and the transactions contemplated herein may be terminated
and abandoned at any time on or prior to the Closing Date by Buyer if:
(i) any representation or warranty made herein for the
benefit of Buyer, or any certificate, schedule or document furnished to Buyer
pursuant to this Agreement is untrue in any material respect; or
(ii) The Company or Seller shall have defaulted in any
material respect in the performance of any material obligation under this
Agreement.
(c) Notwithstanding the approval of the Board of Directors of
Seller and the Company, this Agreement and the transactions contemplated herein
may be terminated and abandoned at any time on or prior to the Closing Date by
Seller or the Company if:
(i) any representation or warranty made herein for the
benefit of Seller or the Company, or any certificate, schedule or document
furnished to Seller or the Company pursuant to this Agreement is untrue in any
material respect; or
(ii) Buyer shall have defaulted in any material respect in
the performance of any material obligation under this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE COMPANY
Each of Seller and the Company hereby jointly and severally represents
and warrants to Buyer that:
3.1 CORPORATE EXISTENCE AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada; the Company has the corporate power to own, manage,
lease and hold its Properties and to carry on its business as and where such
Properties are presently located and such business is presently conducted; and
is duly qualified to do business and is in good standing as a foreign
corporation in each of the jurisdictions where the character of its Properties
or the nature of its business requires it to be so qualified.
3.2 AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by the Company and Seller, and each of Seller and
the Company has all requisite power and legal capacity to execute and deliver
-4-
this Agreement and all Collateral Agreements executed and delivered or to be
executed and delivered in connection with the transactions provided for hereby,
to consummate the transactions contemplated hereby and by the Collateral
Agreements, and to perform their respective obligations hereunder and under the
Collateral Agreements. This Agreement and each Collateral Agreement to which
Seller and/or the Company is a party constitutes, or upon execution and delivery
will constitute, the legal, valid and binding obligation of such party,
enforceable in accordance with its terms, except as such enforcement may be
limited by general equitable principles or by applicable bankruptcy, insolvency,
moratorium, or similar laws and judicial decisions from time to time in effect
which affect creditors' rights generally.
3.3 CAPITALIZATION AND CORPORATE RECORDS.
(a) The Company's authorized capital stock consists solely of 70
million shares of common stock, par value $.001 per share and 5 million shares
of preferred stock, par value $.001 per share, of which only 100 shares of
common stock are issued and outstanding. All issued and outstanding shares of
the Company's capital stock are owned beneficially and of record by Seller, free
and clear of any and all liens, mortgages, adverse claims, charges, security
interests, encumbrances or other restrictions or limitations whatsoever, and no
shares of capital stock are held in the Company's treasury. All of the
outstanding shares of the Company are duly authorized, validly issued, fully
paid and non-assessable and were not issued in violation of (i) any preemptive
or other rights of any Person to acquire securities of the Company, or (ii) any
applicable federal or state securities laws, and the rules and regulations
promulgated thereunder (collectively, the "Securities Laws"). There are no
outstanding subscriptions, options, convertible securities, rights (preemptive
or otherwise), warrants, calls or agreements relating to any shares of capital
stock of the Company. Upon delivery to Buyer at the Closing of certificates
representing the Shares, accompanied by stock powers duly endorsed, good and
valid title to the Shares will pass to Buyer, free and clear of all Liens of any
kind, other than those arising from acts of Buyer.
(b) The copies of the Articles of Incorporation and Bylaws of the
Company provided to Buyer are true, accurate, and complete and reflect all
amendments made through the date of this Agreement. The Company's stock and
minute books made available to Buyer for review were correct and complete as of
the date of such review, no further entries have been made through the date of
this Agreement, and such minute books contain an accurate record of all
stockholder and corporate actions of the stockholders and directors (and any
committees thereof) of the Company taken by written consent or at a meeting. All
corporate actions taken by the Company have been duly authorized or ratified.
All accounts, books, ledgers and official and other records of the Company
fairly and accurately reflect all of the Company's transactions, properties,
assets and liabilities.
(c) The Company does not own, directly or indirectly, any
outstanding voting securities of or other interests in any other corporation,
partnership, joint venture or other business entity.
3.4 NO SELLER DEFAULTS OR CONSENTS. The execution and delivery of this
Agreement and the Collateral Agreements by Seller and the performance by Seller
of its obligations hereunder and thereunder will not violate any provision of
-5-
law or any judgment, award or decree or any indenture, agreement or other
instrument to which Seller is a party, or by which the properties or assets of
Seller is bound or affected, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under, any such
indenture, agreement or other instrument, in each case except to the extent that
such violation, default or breach could not reasonably be expected to delay or
otherwise significantly impair the ability of the parties to consummate the
transactions contemplated hereby.
3.5 NO COMPANY DEFAULTS OR CONSENTS. Neither the execution and
delivery of this Agreement nor the carrying out of any of the transactions
contemplated hereby will:
(a) violate or conflict with any of the terms, conditions or
provisions of the charter or bylaws of the Company;
(b) violate any Legal Requirements applicable to the Company;
(c) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or give
any other party the right to terminate, any Contract or Permit binding upon or
applicable to the Company;
(d) result in the creation of any lien, charge or other
encumbrance on any Properties of the Company; or
(e) require either of Seller or the Company to obtain or make any
waiver, consent, action, approval or authorization of, or registration,
declaration, notice or filing with, any private non-governmental third party or
any Governmental Authority.
3.6 NO PROCEEDINGS. No suit, action or other proceeding is pending or,
to the Knowledge of the Company and Seller, threatened before any Governmental
Authority seeking to restrain the Company or Seller or prohibit their entry into
this Agreement or prohibit the Closing, or seeking damages against the Company
or its Properties as a result of the consummation of this Agreement.
3.7 EMPLOYEES.
(a) Schedule 3.7 sets forth the name, employment classification,
gross salary (including bonuses) of each employee employed by the Company as of
the date of this Agreement, and, except as set forth therein, none of said
employees are subject to union or collective bargaining agreements with the
Company. Except as set forth on Schedule 3.7, the Company has no obligation to
provide health, vacation or other benefits to such employees.
(b) Neither Buyer nor any of its Affiliates shall have any
liability or obligations under or with respect to the Workers Adjustment
Retraining Notification Act in connection with any of the transactions
contemplated in connection herewith.
-6-
3.8 FINANCIAL STATEMENTS; LIABILITIES; AND LIENS.
(a) The Company has delivered to Buyer true and complete copies
of financial statements with respect to the Company and its business as of and
for the periods indicated on such financial statements (the "Financial
Statements"), and such Financial Statements are attached hereto as Schedule
3.8(a). All of such Financial Statements present fairly the financial condition
and results of operations of the Company for the dates or periods indicated
thereon.
(b) Except as set forth on the Financial Statements and as set
forth on Schedule 3.8(b), as of April 13, 2001 (the "Balance Sheet Date"), the
Company does not have any liabilities or obligations (whether accrued, absolute,
contingent, known, unknown or otherwise, and whether or not of a nature required
to be reflected or reserved against in a balance sheet in accordance with GAAP),
and such liabilities in the aggregate do not exceed $200,000.
(c) Except as provided under the provisions of the agreements
described in Schedule 3.8(c), the Company has and will have as of the Closing
Date legal and beneficial ownership of its Properties, free and clear of any and
all liens, mortgages, pledges, adverse claims, encumbrances or other
restrictions or limitations whatsoever ("Liens").
3.9 ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth in
Schedule 3.9 attached hereto, since the Balance Sheet Date, there has not been:
(a) the incurrence of any liabilities other than those set forth
on Schedule 3.8(b).
(b) any event, circumstance or change that had or might have a
material adverse effect on the business, operations, prospects, Properties,
financial condition or working capital of the Company;
(c) any damage, destruction or loss (whether or not covered by
insurance) that had or might have a material adverse effect on the business,
operations, prospects, Properties or financial condition of the Company; or
(d) any material adverse change in the Company's sales patterns,
pricing policies, accounts receivable or accounts payable; or
(e) any event or action taken outside the ordinary course of the
Company's business.
3.10 COMPLIANCE WITH LAWS. The Company is and has been in compliance
in all respects with any and all Legal Requirements applicable to the Company,
other than failures to so comply that would not have an adverse effect on the
business, operations, prospects, Properties or financial condition of the
Company. The Company (x) has not received or entered into any citations,
complaints, consent orders, compliance schedules, or other similar enforcement
orders or received any written notice from any Governmental Authority or any
other written notice that would indicate that there is not currently compliance
with all such Legal Requirements, except for failures to so comply that would
not have an adverse effect on the business, operations, prospects, Properties or
financial condition of the Company, and (y) is not in default under, and no
-7-
condition exists (whether covered by insurance or not) that with or without
notice or lapse of time or both would constitute a default under, or breach or
violation of, any Legal Requirement or Permit applicable to the Company.
3.11 LITIGATION. There are no claims, actions, suits, investigations
or proceedings against the Company pending or, to the Knowledge of the Seller or
the Company, threatened in any court or before or by any Governmental Authority,
or before any arbitrator, that might have an adverse effect (whether covered by
insurance or not) on the business, operations, prospects, Properties or
financial condition of the Company and there is no basis for any such claim,
action, suit, investigation or proceeding.
3.12 REAL PROPERTY.
(a) Schedule 3.12(a) sets forth a list of all real property or
any interest therein (including without limitation any option or other right or
obligation to purchase any real property or any interest therein) currently
owned, or ever owned, by the Company, in each case setting forth the street
address and legal description of each property covered thereby (the "Owned
Premises").
(b) Schedule 3.12(b) sets forth a list of all leases, subleases,
licenses or similar agreements relating to the Company's use or occupancy of
real estate owned by a third party ("Leases"), true and correct copies of which
have previously been furnished to Buyer, in each case setting forth (i) the
lessor and lessee thereof and the commencement date, term and renewal rights
under each of the Leases, and (ii) the street address and legal description of
each property covered thereby (the "Leased Premises"). The Leases and all
guaranties with respect thereto, are in full force and effect and have not been
amended in writing or otherwise, and no party thereto is in default or breach
under any such Lease. No event has occurred which, with the passage of time or
the giving of notice or both, would cause a material breach of or default under
any of such Leases. Neither the Company nor its agents or employees have
received written notice of any claimed abatements, offsets, defenses or other
bases for relief or adjustment.
(c) With respect to each Owned Premises and Leased Premises, as
applicable: (i) the Company has good, marketable and insurable fee simple
interest in the Owned Premises and a valid leasehold interest in the Leased
Premises, free and clear of any Liens, encumbrances, covenants and easements or
title defects that have had or could have an adverse effect on the Company's use
and occupancy of the Owned Premises and the Leased Premises; (ii) the portions
of the buildings located on the Owned Premises and the Leased Premises that are
used in the business of the Company are each in good repair and condition,
normal wear and tear excepted, and are in the aggregate sufficient to satisfy
the Company's current and reasonably anticipated normal business activities as
conducted thereon and, to the Knowledge of the Company, there is no latent
material defect in the improvements on any Owned Premises, structural elements
thereof, the mechanical systems (including, without limitation, all heating,
ventilating, air conditioning, plumbing, electrical, utility and sprinkler
systems) therein, the utility system servicing each Owned Premises and the roofs
which have not been disclosed to Buyer in writing prior to the date of this
Agreement; (iii) each of the Owned Premises and the Leased Premises (a) has
direct access to public roads or access to public roads by means of a perpetual
-8-
access easement, such access being sufficient to satisfy the current
transportation requirements of the business presently conducted at such parcel;
and (b) is served by all utilities in such quantity and quality as are necessary
and sufficient to satisfy the current normal business activities conducted at
such parcel; and (iv) the Company has not received notice of (a) any
condemnation, eminent domain or similar proceeding affecting any portion of the
Owned Premises or the Leased Premises or any access thereto, and, to the
Knowledge of the Company or Seller, no such proceedings are contemplated, (b)
any special assessment or pending improvement liens to be made by any
governmental authority which may affect any of the Owned Premises or the Leased
Premises, or (c) any violations of building codes and/or zoning ordinances or
other governmental regulations with respect to the Owned Premises or the Leased
Premises.
3.13 COMMITMENTS.
(a) Except as otherwise set forth in Schedule 3.13, the Company
is not a party to or bound by any of the following, whether written or oral:
(i) any Contract that cannot by its terms be terminated by
the Company with 30 days' or less notice without penalty or whose term continues
beyond one year after the date of this Agreement;
(ii) Contract or commitment for capital expenditures by the
Company in excess of $5,000 per calendar quarter in the aggregate;
(iii) lease or license with respect to any Properties, real
or personal, whether as landlord, tenant, licensor or licensee;
(iv) agreement, contract, indenture or other instrument
relating to the borrowing of money or the guarantee of any obligation or the
deferred payment of the purchase price of any Properties;
(v) partnership agreement;
(vi) Contract with any Affiliate of the Company (including
Seller) relating to the provision of goods or services by or to the Company;
(vii) agreement for the sale of any assets that in the
aggregate have a net book value on the Company's books of greater than $5,000;
(viii) agreement that purports to limit the Company's
freedom to compete freely in any line of business or in any geographic area;
(ix) preferential purchase right, right of first refusal, or
similar agreement; or
(x) other Contract that is material to the business of the
Company.
-9-
(b) All of the Contracts listed or required to be listed in
Schedule 3.13 are valid, binding and in full force and effect, and the Company
has not been notified or advised by any party thereto of such party's intention
or desire to terminate or modify any such Contract in any respect, except as
disclosed in Schedule 3.13. Neither the Company nor, to the Knowledge of the
Company or Seller, any other party is in breach of any of the terms or covenants
of any Contract listed or required to be listed in Schedule 3.13. Following the
Closing, the Company will continue to be entitled to all of the benefits
currently held by the Company under each Contract listed or required to be
listed in Schedule 3.13.
(c) Except as otherwise set forth in Schedule 3.13, the Company
is not a party to or bound by any Contract or Contracts the terms of which were
arrived at by or otherwise reflect less-than-arm's-length negotiations or
bargaining.
3.14 INSURANCE. Schedule 3.14 hereto is a complete and correct list of
all insurance policies (including, without limitation, fire, liability, product
liability, workers' compensation and vehicular) presently in effect that relate
to the Company or its Properties, including the amounts of such insurance and
annual premiums with respect thereto, all of which have been in full force and
effect from and after the date(s) set forth on Schedule 3.14. Such policies are
sufficient for compliance by the Company with all applicable Legal Requirements
and all material Contracts. None of the insurance carriers has indicated to the
Company an intention to cancel any such policy or to materially increase any
insurance premiums (including, without limitation, workers' compensation
premiums), or that any insurance required to be listed on Schedule 3.14 will not
be available in the future on substantially the same terms as currently in
effect. The Company has no claim pending or anticipated against any of its
insurance carriers under any of such policies and, to the Knowledge of the
Company or Seller, there has been no actual or alleged occurrence of any kind
which could reasonably be expected to give rise to any such claim. During the
prior three years, all notices required to have been given by the Company or
Seller to any insurance company have been timely and duly given, and no
insurance company has asserted that any claim is not covered by the applicable
policy relating to such claim.
3.15 INTANGIBLE RIGHTS. Set forth on Schedule 3.15 is a list and
description of all material foreign and domestic patents, patent rights,
trademarks, service marks, trade names, software, brands and copyrights (whether
or not registered and, if applicable, including pending applications for
registration) owned, Used, licensed or controlled by the Company and all
goodwill associated therewith. The Company owns or has the right to use and
shall as of the Closing Date own or have the right to use any and all
information, know-how, trade secrets, patents, copyrights, trademarks, trade
names, formulae, methods, processes and other intangible properties that are
necessary or customarily Used by the Company for the ownership, management or
operation of its Properties ("Intangible Rights") including, but not limited to,
Intangible Rights listed on Schedule 3.15 with respect to the Business. Except
as set forth on Schedule 3.15, (i) the Company is the sole and exclusive owner
of all right, title and interest in and to all of the Intangible Rights, and has
the exclusive right to use and license the same, free and clear of any claim or
conflict with the Intangible Rights of others; (ii) no royalties, honorariums or
fees are payable by the Company to any person by reason of the ownership or use
of any of the Intangible Rights; (iii) there have been no claims made against
the Company asserting the invalidity, abuse, misuse, or unenforceability of any
-10-
of the Intangible Rights and no grounds for any such claims exist; (iv) the
Company has not made any claim of any violation or infringement by others of any
of its Intangible Rights or interests therein and, to the Knowledge of the
Company or Seller, no grounds for any such claims exist; (v) each of the Company
and Seller has not received any notice that it is in conflict with or infringing
upon the asserted intellectual property rights of others in connection with the
Intangible Rights, and neither the use of the Intangible Rights nor the
operation of the Company's businesses is infringing or has infringed upon any
intellectual property rights of others; (vi) the Intangible Rights are
sufficient and include all intellectual property rights necessary for the
Company to lawfully conduct its business as presently being conducted; (vii) no
interest in any of the Company's Intangible Rights has been assigned,
transferred, licensed or sublicensed by the Company to any person other than
Buyer pursuant to this Agreement; (viii) to the extent that any item
constituting part of the Intangible Rights has been registered with, filed in or
issued by, any Governmental Authority, such registrations, filings or issuances
are listed on Schedule 3.15 and were duly made and remain in full force and
effect; (ix) to the Knowledge of the Company or Seller, there has not been any
act or failure to act by the Company or any of its directors, officers,
employees, attorneys or agents during the prosecution or registration of, or any
other proceeding relating to, any of the Intangible Rights or of any other fact
which could render invalid or unenforceable, or negate the right to issuance of
any of the Intangible Rights; (x) to the extent any of the Intangible Rights
constitutes proprietary or confidential information, the Company has adequately
safeguarded such information from disclosure; (xi) all of the Company's current
Intangible Rights will remain in full force and effect following the Closing
without alteration or impairment.
Schedule 3.15 also sets forth the names of all employees, contractors,
and consultants who have participated in any way in the development of any
material portion of the Intangible Rights and/or Properties. Except as set forth
on Schedule 3.15, each of such parties has executed a confidentiality,
non-disclosure and invention assignment agreement or similar agreement in favor
of the Company. The Company has taken all reasonable and customary steps in the
industry to protect and preserve the confidential and proprietary nature of all
of the Company's Properties and Intangible Rights.
3.16 PERMITS. The Company has all Permits necessary for the Company to
own, operate, use and/or maintain its Properties and to conduct its business and
operations as presently conducted and as expected to be conducted in the future.
All such Permits are in effect, no proceeding is pending or, to the Knowledge of
the Company or Seller, threatened to modify, suspend or revoke, withdraw,
terminate, or otherwise limit any such Permits, and no administrative or
governmental actions have been taken or, to the Knowledge of the Company or
Seller, threatened in connection with the expiration or renewal of such Permits
which could adversely affect the ability of the Company to own, operate, use or
maintain any of its Properties or to conduct its business and operations as
presently conducted and as expected to be conducted in the future. Except as
otherwise set forth in Schedule 3.16, (i) no violations have occurred that
remain uncured, unwaived, or otherwise unresolved, or are occurring in respect
of any such Permits, other than inconsequential violations, and (ii) no
circumstances exist that would prevent or delay the obtaining of any requisite
consent, approval, waiver or other authorization of the transactions
contemplated hereby with respect to such Permits that by their terms or under
applicable law may be obtained only after Closing.
-11-
3.17 BANKS. Schedule 3.17 sets forth (i) the name of each bank, trust
company or other financial institution and stock or other broker with which the
Company has an account, credit line or safe deposit box or vault, (ii) the names
of all persons authorized to draw thereon or to have access to any safe deposit
box or vault, (iii) the purpose of each such account, safe deposit box or vault,
and (iv) the names of all persons authorized by proxies, powers of attorney or
other like instrument to act on behalf of the Company in matters concerning any
of its business or affairs. Except as otherwise set forth in Schedule 3.17, no
such proxies, powers of attorney or other like instruments are irrevocable.
3.18 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
3.18 and except for normal advances to employees consistent with past practices,
payment of compensation for employment to employees consistent with past
practices, the Company has not purchased, acquired or leased any property or
services from, or sold, transferred or leased any property or services to, or
loaned or advanced any money to, or borrowed any money from, or entered into or
been subject to any management, consulting or similar agreement with, or engaged
in any other significant transaction with Seller or any other officer, director
or shareholder of the Company or any of their respective Affiliates. Except as
set forth on Schedule 3.18, neither Seller nor any other Affiliate of the
Company is indebted to the Company for money borrowed or other loans or
advances, and the Company is not indebted to any such Affiliate.
3.19 OTHER INFORMATION. The information furnished by Seller and the
Company to Buyer pursuant to this Agreement (including, without limitation,
information contained in the exhibits hereto, the Schedules identified herein,
the instruments referred to in such Schedules and the certificates and other
documents to be executed or delivered pursuant hereto by Seller and/or the
Company at or prior to the Closing) is not, nor at the Closing will be, false or
misleading in any material respect, or contains, or at the Closing will contain,
any misstatement of material fact, or omits, or at the Closing will omit, to
state any material fact required to be stated in order to make the statements
therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and to Company that:
4.1 CORPORATE EXISTENCE AND QUALIFICATION. Buyer is a limited
liability company duly organized and validly existing under the laws of the
State of Arizona; has the corporate power to own, manage, lease and hold its
properties and to carry on its business as and where such properties are
presently located and such business is presently conducted; and is duly
qualified to do business and is in good standing as a foreign entity in each of
the jurisdictions where the character of its properties or the nature of its
business requires it to be so qualified.
4.2 AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by Buyer and Buyer has all requisite corporate power
and legal capacity to execute and deliver this Agreement and all Collateral
Agreements executed and delivered or to be executed and delivered by Buyer in
connection with the transactions provided for hereby, to consummate the
-12-
transactions contemplated hereby and by the Collateral Agreements, to assume and
perform the Obligations, and to perform its obligations hereunder and under the
Collateral Agreements. The execution and delivery of this Agreement and the
Collateral Agreements and the performance of the transactions contemplated
hereby and thereby will be duly and validly authorized and approved by all
corporate action necessary on behalf of Buyer. This Agreement and each
Collateral Agreement to which Buyer is a party constitutes, or upon execution
and delivery will constitute, the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms, except as such enforcement may be
limited by general equitable principles or by applicable bankruptcy, insolvency,
moratorium, or similar laws and judicial decisions from time to time in effect
which affect creditors' rights generally.
4.3 NO DEFAULT OR CONSENTS. Neither the execution and delivery of this
Agreement nor the carrying out of the transactions contemplated hereby will:
(a) violate or conflict with any of the terms, conditions or
provisions of Buyer's organizational documents;
(b) violate any Legal Requirements applicable to Buyer;
(c) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or give
any other party the right to terminate, any contract or Permit applicable to
Buyer;
(d) result in the creation of any lien, charge or other
encumbrance on any property of Buyer; or
(e) require Buyer to obtain or make any waiver, consent, action,
approval or authorization of, or registration, declaration, notice or filing
with, any private non-governmental third party or any Governmental Authority.
4.4 NO PROCEEDINGS. No suit, action or other proceeding is pending or,
to Buyer's knowledge, threatened before any Governmental Authority seeking to
restrain Buyer or prohibit its entry into this Agreement or prohibit the
Closing, or seeking Damages against Buyer or its properties as a result of the
consummation of this Agreement.
4.5 INVESTMENT. Buyer has such knowledge and experience in financial
and business matters that Buyer is capable of evaluating the merits and risks of
the purchase of the Shares pursuant to this Agreement and of protecting Buyer's
interests in connection therewith. Buyer is acquiring the Shares for investment
for its own account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof, and Buyer has no present
intention of selling, granting any participation in, or otherwise distributing
the same. Buyer understands that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Act") or any state securities laws, in
reliance upon certain exemptions from registration. Buyer understands and agrees
that the Shares, or any interest therein, will not be resold or otherwise
disposed of by Buyer unless the Shares are subsequently registered under the Act
and under appropriate state securities laws or unless an appropriate exemption
-13-
from registration is available. Without limiting the effect of any
representation or warranty made by Seller and/or the Company, Buyer and/or its
agents have met with representatives of Seller and thereby have had the
opportunity to ask questions of, and receive answers satisfactory to Buyer
concerning Seller, the Shares and the terms and conditions of this transaction,
as well as to obtain any information requested by Buyer, and Buyer further
confirms that all documents requested by it have been and remain available for
inspection or copying and that Buyer has been supplied with all of the
additional information concerning this investment that has been requested.
ARTICLE 5
OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
5.1 BUYER'S ACCESS TO INFORMATION AND PROPERTIES. The Company shall
permit Buyer and its authorized employees, agents, accountants, legal counsel
and other representatives to have access to the books, records, employees,
counsel, accountants, engineers and other representatives of the Company at all
times reasonably requested by Buyer for the purpose of conducting an
investigation of the Company's financial condition, corporate status,
operations, prospects, business and Properties. Seller and the Company shall
make available to Buyer for examination and reproduction all documents and data
of every kind and character relating to the Company in possession or control of,
or subject to reasonable access by, the Company and/or Seller, including,
without limitation, all files, records, data and information relating to the
Properties (whether stored in paper, magnetic or other storage media) and all
agreements, instruments, contracts, assignments, certificates, orders, and
amendments thereto. Also, Seller and the Company shall allow Buyer access to,
and the right to inspect, the Properties.
5.2 COMPANY'S CONDUCT OF BUSINESS AND OPERATIONS. The Company and
Seller shall keep Buyer advised as to all material operations and proposed
material operations relating to the Company. The Company shall (a) conduct its
business in the ordinary course, (b) keep available the services of present
employees, (c) maintain and operate its Properties in a good and workmanlike
manner, (d) pay or cause to be paid all costs and expenses (including but not
limited to insurance premiums) incurred in connection therewith in a timely
manner, (e) use reasonable efforts to keep all Contracts listed or required to
be listed on Schedule 3.13 in full force and effect, (f) comply with all of the
covenants contained in all such material Contracts, (g) maintain in force until
the Closing Date insurance policies equivalent to those in effect on the date
hereof, and (h) comply in all material respects with all applicable Legal
Requirements. Except as otherwise contemplated in this Agreement, the Company
will use its best efforts to preserve the present relationships of the Company
with persons and entities having significant business relations therewith.
5.3 GENERAL RESTRICTIONS. Except as otherwise expressly permitted in
this Agreement, without the prior written consent of Buyer:
(a) engage in any one or more activities or transactions outside
the ordinary course of business;
-14-
(b) enter into any transaction or make any commitment which could
result in any of the representations, warranties or covenants of the Company
and/or Seller contained in this Agreement not being true and correct after the
occurrence of such transaction or event; or
(c) make a declaration setting aside or payment of dividends or
any other distribution with respect to the capital stock of the Company.
(d) make any capital expenditures in excess of Five Thousand
Dollars ($5,000.00);
(e) allow the Company to incur indebtedness;
(f) engage in any activity which results in destruction of,
damage to, or loss of, any of the Properties (whether or not covered by
insurance);
(g) increase the compensation paid to any employee, consultant,
contractor, or subcontractor;
(h) sell, lease, transfer or otherwise dispose of any of the
Properties, except in the ordinary course of business;
(i) amend or terminate any contract, agreement or license to
which the Company is a party;
(j) make any loan to any person or entity;
(k) mortgage, pledge or otherwise encumber any of the Properties;
(l) waive or release any right or claim of the Company; and
(m) commit to do any of the foregoing.
5.4 NOTICE REGARDING CHANGES. The Company and Seller shall promptly
inform Buyer in writing of any change in facts and circumstances that could
render any of the representations and warranties made herein by the Company
and/or Seller inaccurate or misleading if such representations and warranties
had been made upon the occurrence of the fact or circumstance in question. Buyer
shall promptly inform Seller in writing of any change in facts and circumstances
that could render any of the representations and warranties made herein by it
inaccurate or misleading if such representations and warranties had been made
upon the occurrence of the fact or circumstance in question.
5.5 PREFERENTIAL PURCHASE RIGHTS. To the extent there are any parties
entitled or who may become entitled to exercise preferential purchase or consent
rights with respect to the transactions contemplated hereby, the Company and
Seller shall promptly use their best efforts to obtain the agreement in writing
of such parties to waive or not exercise such rights, which request shall be in
form reasonably satisfactory to and approved by Buyer.
-15-
5.6 ENSURE CONDITIONS MET. Subject to the terms and conditions of this
Agreement, each party hereto shall use all reasonable commercial efforts to take
or cause to be taken all actions and do or cause to be done all things required
under applicable Legal Requirements in order to consummate the transactions
contemplated hereby, including, without limitation, (i) obtaining all Permits,
authorizations, consents and approvals of any Governmental Authority or other
person which are required for or in connection with the consummation of the
transactions contemplated hereby and by the Collateral Agreements, (ii) taking
any and all reasonable actions necessary to satisfy all of the conditions to
each party's obligations hereunder as set forth in Article VI, and (iii)
executing and delivering all agreements and documents required by the terms
hereof to be executed and delivered by such party on or prior to the Closing.
5.7 NO SHOP. From the date of this Agreement until the earlier of (i)
the Closing Date, or (ii) the termination of this Agreement, each of Seller and
the Company shall not, and the Company shall cause the Company's shareholders,
officers, directors, employees and other agents not to, directly or indirectly,
take any action to solicit, initiate or encourage any offer or proposal or
indication of interest in a merger, consolidation or other business combination
involving any equity interest in, or a substantial portion of the assets of the
Company, other than in connection with the transactions contemplated by this
Agreement. Each of Seller and the Company shall immediately advise Buyer of the
terms of any offer, proposal or indication of interest that it receives or
otherwise becomes aware of.
ARTICLE 6
CONDITIONS TO SELLER'S AND BUYER'S OBLIGATIONS
6.1 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
sell the Shares are subject, at the option of Seller, to the satisfaction or
waiver of the following conditions:
(a) Buyer shall have furnished Seller with a certified copy of
all necessary corporate action on its behalf approving its execution, delivery
and performance of this Agreement.
(b) All representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing, and Buyer shall have performed and satisfied in all material respects
all covenants and agreements required by this Agreement to be performed and
satisfied by Buyer at or prior to the Closing.
(c) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by or on behalf of the Company or Seller)
shall be pending or threatened before any Governmental Authority seeking to
restrain the Company or prohibit the Closing or seeking Damages against the
Company as a result of the consummation of this Agreement.
-16-
6.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
purchase the Shares are subject, at the option of Buyer, to the satisfaction, or
waiver by Buyer, of the following conditions:
(a) All representations and warranties of the Company and Seller
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing, and the Company and Seller shall have performed and
satisfied in all material respects all agreements and covenants required by this
Agreement to be performed and satisfied by them at or prior to the Closing.
(b) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by or on behalf of Buyer) shall be pending
or threatened before any court or governmental agency seeking to restrain Buyer
or prohibit the Closing or seeking Damages against Buyer or the Company or its
Properties as a result of the consummation of this Agreement.
(c) Except for matters disclosed in Schedule 3.8(a) or 3.8(b)
attached hereto, since the Balance Sheet Date and up to and including the
Closing, there shall not have been any event, circumstance, change or effect
that, individually or in the aggregate, had or might have a material adverse
effect on the Company's business, operations, prospects, Properties or financial
condition.
(d) The Company shall have furnished Buyer with a certified copy
of all necessary corporate action on its behalf approving the Company's
execution, delivery and performance of this Agreement.
(e) All agreements, commitments and understandings between the
Company and any Affiliate thereof shall have been terminated in all respects on
terms satisfactory to Buyer, and all obligations, claims or entitlements
thereunder shall be unconditionally waived and released by such Affiliates and
written evidence thereof satisfactory in form and substance to Buyer shall have
been delivered to Buyer.
(f) Buyer shall have completed its due diligence investigation,
and the results thereof shall not have revealed that any of the representations
of the Company or Seller set forth herein are untrue or incorrect in any respect
or otherwise be unsatisfactory to Buyer.
(g) All proceedings to be taken by the Company in connection with
the transactions contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to Buyer and its counsel, and Buyer and said
counsel shall have received all such counterpart originals or certified or other
copies of such documents as it or they may reasonably request.
(h) Buyer shall have received written evidence, in form and
substance satisfactory to Buyer the consent to the transactions contemplated by
this Agreement of all governmental, quasi-governmental and private third parties
(including, without limitation, persons or other entities leasing real or
personal property to the Company) where the absence of any such consent would
-17-
result in a violation of law or a breach or default under any agreement to which
the Company is subject.
(i) No proceeding in which Seller or the Company shall be a
debtor, defendant or party seeking an order for its own relief or reorganization
shall have been brought or be pending by or against such person under any United
States or state bankruptcy or insolvency law.
ARTICLE 7
POST-CLOSING OBLIGATIONS
7.1 FURTHER ASSURANCES. Following the Closing, the Company, Seller and
Buyer shall execute and deliver such documents, and take such other action, as
shall be reasonably requested by any other party hereto to carry out the
transactions contemplated by this Agreement.
7.2 PUBLICITY. None of the parties hereto shall issue or make, or
cause to have issued or made, any public release or announcement concerning this
Agreement or the transactions contemplated hereby, without the advance approval
in writing of the form and substance thereof by each of the other parties,
except as required by law (in which case, so far as possible, there shall be
consultation among the parties prior to such announcement), and the parties
shall endeavor jointly to agree on the text of any announcement or circular so
approved or required.
7.3 POST-CLOSING INDEMNIFICATION.
(a) Subject to the provisions of Section 8.1, from and after the
Closing, Seller shall indemnify and hold harmless Buyer and its Affiliates,
directors, officers and employees for, from and against any and all Damages
arising out of, resulting from or in any way related to (i) a breach of, or the
failure to perform or satisfy any of, the representations, warranties, covenants
and agreements made by Seller and/or the Company in this Agreement or in any
document or certificate delivered by Seller and/or the Company at the Closing
pursuant hereto, (ii) the occurrence of any event on or prior to the date of
Closing that is (or would be, but for any deductible thereunder) covered by
individual policies of insurance, blanket insurance policies or self insurance
programs maintained by the Company, and/or (iii) the existence of any
liabilities or obligations of the Company (whether accrued, absolute,
contingent, known or unknown, or otherwise) arising prior to the Closing Date
other than those contemplated by Section 3.8(b) hereof or listed on Schedule
3.8(b).
(b) Subject to the provisions of Section 8.1, from and after the
Closing, Buyer shall indemnify and hold harmless Seller, the Company and their
respective Affiliates, directors, officers and employees for, from and against
any and all Damages arising out of, resulting from or in any way related to a
breach of, or the failure to perform or satisfy any of, the representations,
warranties, covenants and agreements and the Obligations made by Buyer in this
Agreement or in any document or certificate delivered by Buyer at the Closing
pursuant thereto.
-18-
7.4 NON-COMPETITION, NON-SOLICITATION AND NON-DISCLOSURE.
(a) General. In consideration of the payment of the Purchase
Price, and in order to induce Buyer to enter into this Agreement, to assume and
perform the Obligations, and to consummate the transactions contemplated hereby,
Seller hereby covenants and agrees as follows:
(i) Without the prior written consent of Buyer, Seller shall
not for a period of three (3) years from and after the Closing Date (A) directly
or indirectly acquire or own in any manner any interest in any person, firm,
partnership, corporation, association or other entity which engages or plans to
engage in the Business (as hereinafter defined), anywhere in the world (the
"Territory"), (B) serve as an agent or as a consultant to, any person, firm,
partnership, corporation, association or other entity which engages or plans to
engage in the Business within the Territory, or (C) utilize its special
knowledge of the Business and its relationships with customers, suppliers and
others to compete with the Company and/or any of its Affiliates; provided,
however, that nothing herein shall be deemed to prevent Seller from acquiring
through market purchases and owning, solely as an investment, less than three
percent in the aggregate of the equity securities of any class of any issuer
whose shares are registered under ss.12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, and are listed or admitted for trading on any United
States national securities exchange or are quoted on the National Association of
Securities Dealers Automated Quotation System, or any similar system of
automated dissemination of quotations of securities prices in common use. For
purposes of this Article 7, the term "Business" shall mean channel consulting,
development, marketing and managed business services to help persons and
businesses distribute their Linux solutions through channel parties. Seller
acknowledges and agrees that the covenants provided for in this Section 7.4(a)
are reasonable and necessary in terms of time, area and line of business to
protect the Company's Trade Secrets. Seller further acknowledges and agrees that
such covenants are reasonable and necessary in terms of time, area and line of
business to protect the Company's legitimate business interests, which include
its interests in protecting the Company's (i) valuable confidential business
information, (ii) substantial relationships with customers throughout the United
States, and (iii) customer goodwill associated with the ongoing business of the
Company. Seller expressly authorizes the enforcement of the covenants provided
for in this Section 7.4(a) by (A) the Buyer, the Company and their respective
subsidiaries, (B) the Company's permitted assigns, and (C) any successors to the
Company's business. To the extent that the covenants provided for in this
Section 7.4(a) may later be deemed by a court to be too broad to be enforced
with respect to its duration or with respect to any particular activity or
geographic area, the court making such determination shall have the power to
reduce the duration or scope of the provision, and to add or delete specific
words or phrases to or from the provision. The provision as modified shall then
be enforced.
(ii) Without the prior consent of Buyer, Seller shall not
for a period of three (3) years from the Closing Date, directly or indirectly,
for itself or for any other person, firm, corporation, partnership, association
or other entity, (i) attempt to employ or enter into any contractual arrangement
with any employee or former employee of the Company, unless such employee or
former employee has not been employed by the Company for a period in excess of
nine months, and/or (ii) call on or solicit any of the actual or targeted
-19-
prospective customers or clients of the Company or Buyer with respect to the
provision of services or products relating to the Business, nor shall Seller
make known the names and addresses of such customers or any information relating
in any manner to the Company's or Buyer's trade or business relationships with
such customers.
(iii) Seller shall not at any time divulge, communicate, use
to the detriment of the Company or for the benefit of any other person or
persons, or misuse in any way, any confidential information pertaining to the
Company. Any confidential information or data now known or hereafter acquired by
Seller with respect to the Company shall be deemed a valuable, special and
unique asset of the Company that is received by Seller in confidence and as a
fiduciary, and Seller shall remain a fiduciary to the Company with respect to
all of such information.
(b) Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach or violation by Seller of any or all of the
covenants and agreements contained in this Section 7.4 may cause irreparable
harm and damage to Buyer in a monetary amount which may be virtually impossible
to ascertain. As a result, Seller recognizes and hereby acknowledges that Buyer
or the Company shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any breach or violation of any or all of
the covenants and agreements contained in this Section 7.4 by Seller and/or its
associates, Affiliates, partners or agents, either directly or indirectly, and
that such right to injunction shall be cumulative and in addition to whatever
other rights or remedies Buyer may possess hereunder, at law or in equity.
Nothing contained in this Section 7.4 shall be construed to prevent Buyer from
seeking and recovering from Seller damages sustained by it as a result of any
breach or violation by Seller of any of the covenants or agreements contained
herein.
ARTICLE 8
MISCELLANEOUS
8.1 LIMITATION ON LIABILITY.
(a) The representations, warranties, agreements, and indemnities
of Buyer, the Company and Seller set forth in this Agreement or in connection
with the transactions contemplated hereby shall survive the Closing except as
expressly provided in Section 8.1(b).
(b) No party shall have any liability under this Agreement to
indemnify (collectively the "Business Indemnities"), in each case unless the
indemnifying party receives notice in writing from the other of such claim under
said indemnity on or before the second-year anniversary of the Closing Date. The
foregoing limitations shall not apply to claims brought or arising under
Sections 3.3, 3.8 or 3.15 and such representations, warranties and
indemnification claims shall survive the Closing and shall expire upon the date
of the expiration of the applicable statute of limitations. The foregoing
limitations shall not apply to any breaches of or obligations to comply with any
of the other provisions of this Agreement, regardless of whether such breach or
obligation also constitutes a breach or obligation under any of the provisions
specifically listed in this Section 8.1(b).
-20-
(c) For purposes of this Section 8.1(c), a party making a claim
for indemnity under Section 7.3 is hereinafter referred to as an "Indemnified
Party" and the party against whom such claim is asserted is hereinafter referred
to as the "Indemnifying Party." All claims by any Indemnified Party under
Section 7.3 hereof shall be asserted and resolved in accordance with the
following provisions. If any claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party is asserted against or sought to be
collected from such Indemnified Party by such third party, said Indemnified
Party shall with reasonable promptness notify in writing the Indemnifying Party
of such claim or demand stating with reasonable specificity the circumstances of
the Indemnified Party's claim for indemnification; provided, however, that any
failure to give such notice will not waive any rights of the Indemnified Party
except to the extent the rights of the Indemnifying Party are actually
prejudiced or to the extent that any applicable period set forth in Section
8.1(b) has expired without such notice being given. After receipt by the
Indemnifying Party of such notice, then upon reasonable notice from the
Indemnifying Party to the Indemnified Party, or upon the request of the
Indemnified Party, the Indemnifying Party shall defend, manage and conduct any
proceedings, negotiations or communications involving any claimant whose claim
is the subject of the Indemnified Party's notice to the Indemnifying Party as
set forth above, and shall take all actions necessary, including but not limited
to the posting of such bond or other security as may be required by any
Governmental Authority, so as to enable the claim to be defended against or
resolved without expense or other action by the Indemnified Party. Upon request
of the Indemnifying Party, the Indemnified Party shall, to the extent it may
legally do so and to the extent that it is compensated in advance by the
Indemnifying Party for any costs and expenses thereby incurred,
(i) take such action as the Indemnifying Party may
reasonably request in connection with such action,
(ii) allow the Indemnifying Party to dispute such action in
the name of the Indemnified Party and to conduct a defense to such action on
behalf of the Indemnified Party, and
(iii) render to the Indemnifying Party all such assistance
as the Indemnifying Party may reasonably request in connection with such dispute
and defense.
8.2 CONFIDENTIALITY.
(a) Prior to the Closing, Buyer shall, and shall cause its
Affiliates and their respective employees, agents, accountants, legal counsel
and other representatives and advisers to, hold in strict confidence all, and
not divulge or disclose any, information of any kind concerning the Company and
its business; provided, however, that the foregoing obligation of confidence
shall not apply to (i) information that is or becomes generally available to the
public other than as a result of a disclosure by Buyer or its Affiliates or any
of their respective employees, agents, accountants, legal counsel or other
representatives or advisers, (ii) information that is or becomes available to
Buyer or its Affiliates or any of their respective employees, agents,
accountants, legal counsel or other representatives or advisers on a
nonconfidential basis prior to its disclosure by Buyer or its Affiliates or any
of their respective employees, agents, accountants, legal counsel or other
representatives or advisers and (iii) information that is required to be
-21-
disclosed by Buyer or its Affiliates or any of their respective employees,
agents, accountants, legal counsel or other representatives or advisers as a
result of any applicable law, rule or regulation of any Governmental Authority;
and provided further that Buyer promptly shall notify the Company of any
disclosure pursuant to clause (iii) of this Section 8.2(a); and, provided,
further, that the foregoing obligation of confidence shall not apply to the
furnishing of information by Buyer in bona fide discussions or negotiations with
prospective lenders.
(b) The Company and Seller shall, and shall cause their
respective Affiliates and their respective employees, agents, accountants, legal
counsel and other representatives and advisers to, hold in strict confidence
all, and not divulge or disclose any, information of any kind concerning the
transactions contemplated by this Agreement, the Company, Buyer or their
respective businesses; provided, however, that the foregoing obligation of
confidence shall not apply to (i) information that is or becomes generally
available to the public other than as a result of a disclosure by the Company,
Seller or their respective Affiliates, employees, agents, accountants, legal
counsel or other representatives or advisers, (ii) information that is or
becomes available to the Company, Seller or their respective Affiliates,
employees, agents, accountants, legal counsel or other representatives or
advisers after the Closing on a nonconfidential basis prior to its disclosure by
the Company, Seller or their respective Affiliates, employees, agents,
accountants, legal counsel or other representatives or advisers and (iii)
information that is required to be disclosed by the Company, Seller or their
respective Affiliates, employees, agents, accountants, legal counsel or other
representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Authority; and provided further that the Company
shall promptly notify Buyer of any disclosure pursuant to clause (iii) of this
Section 8.2(b).
8.3 BROKERS. Regardless of whether the Closing shall occur, (i) Seller
shall indemnify and hold harmless Buyer for, from and against any and all
liability for any brokers or finders' fees arising with respect to brokers or
finders retained or engaged by the Company or Seller in respect of the
transactions contemplated by this Agreement, and (ii) Buyer shall indemnify and
hold harmless Seller for, from and against any and all liability for any
brokers' or finders' fees arising with respect to brokers or finders retained or
engaged by Buyer in respect of the transactions contemplated by this Agreement.
8.4 COSTS AND EXPENSES. Each of the parties to this Agreement shall
bear its own expenses incurred in connection with the negotiation, preparation,
execution and closing of this Agreement and the transactions contemplated hereby
(the "Transaction Expenses"); provided, however, that Seller shall be
responsible for and shall discharge all Transaction Expenses incurred by or on
behalf of Seller and/or the Company (it being the parties' agreement that the
Company shall not bear or otherwise be liable for any such expenses).
8.5 NOTICES. Any notice, request, instruction, correspondence or other
document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed by registered or certified mail, postage prepaid and return receipt
requested, or by facsimile, as follows:
-22-
IF TO BUYER: BySynergy LLC
2155 Shelby Drive, Suite A
Sedona, Arizona 86336
Attn: Michael Zito
Facsimile No. (520) 204-9425
With a copy to:
Squire, Sanders & Dempsey L.L.P.,
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Attention: Norman C. Storey
Facsimile No. (602) 253-8129
IF TO SELLER: Ebiz Enterprises, Inc.
15695 N. 83rd Way
Scottsdale, Arizona 85260
Attention: CEO and General Counsel
Facsimile No. (480) 778-1001
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to the
contrary contained herein notwithstanding, notices to any party hereto shall not
be deemed effective with respect to such party until such Notice would, but for
this sentence, be effective both as to such party and as to all other persons to
whom copies are provided above to be given.
8.6 GOVERNING LAW. The provisions of this Agreement and the documents
delivered pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Arizona (excluding any conflict of law rule or
principle that would refer to the laws of another jurisdiction). Each party
hereto irrevocably submits to the jurisdiction of the Courts of the State of
Arizona, Maricopa County, in any action or proceeding arising out of or relating
to this Agreement or any of the Collateral Agreements, and each party hereby
irrevocably agrees that all claims in respect of any such action or proceeding
must be brought and/or defended in such court; provided, however, that matters
which are under the exclusive jurisdiction of the Federal courts shall be
brought in the Federal District Court for the District of Arizona. Each party
hereto consents to service of process by any means authorized by the applicable
law of the forum in any action brought under or arising out of this Agreement or
any of the Collateral Agreements, and each party irrevocably waives, to the
fullest extent each may effectively do so, the defense of an inconvenient forum
to the maintenance of such action or proceeding in any such court. EACH PARTY
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT
MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR
PROCEEDING ARISING HEREUNDER.
-23-
8.7 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of each of the parties to this Agreement shall be deemed to have been
made, and the certificates delivered pursuant to clause (e) of Section 2.2 and
clause (b) of Section 2.3 by a party are agreed to and shall be deemed to
constitute the making of such representations and warranties, again at and as of
the Closing by and on behalf of the party on behalf of whom such certificates
are delivered.
8.8 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, together
with all exhibits and schedules attached hereto, constitutes the entire
agreement between and among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as set forth specifically
herein or contemplated hereby. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (regardless of whether
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
8.9 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by any party hereto without the prior written consent of the other
party, provided, however, that nothing herein shall prohibit the assignment of
Buyer's rights and obligations to any direct or indirect subsidiary or prohibit
the assignment of Buyer's rights (but not obligations) to any lender. Nothing in
this Agreement, express or implied, is intended to confer upon any person or
entity other than the parties hereto and their respective permitted successors
and assigns, any rights, benefits or obligations hereunder.
8.10 REMEDIES. The rights and remedies provided by this Agreement are
cumulative, and the use of any one right or remedy by any party hereto shall not
preclude or constitute a waiver of its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights and remedies
a party may have by law, statute or otherwise.
8.11 EXHIBITS AND SCHEDULES. The exhibits and Schedules referred to
herein are attached hereto and incorporated herein by this reference. Disclosure
of a specific item in any one Schedule shall be deemed restricted only to the
Section to which such disclosure specifically relates except where there is an
explicit cross-reference to another Schedule.
8.12 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-24-
8.13 REFERENCES AND CONSTRUCTION.
(a) Whenever required by the context, and is used in this
Agreement, the singular number shall include the plural and pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural, as the identification the person may require. References to
monetary amounts, specific named statutes and generally accepted accounting
principles are intended to be and shall be construed as references to United
States dollars, statutes of the United States of the stated name and United
States generally accepted accounting principles, respectively, unless the
context otherwise requires.
(b) The provisions of this Agreement shall be construed according
to their fair meaning and neither for nor against any party hereto irrespective
of which party caused such provisions to be drafted. Each of the parties
acknowledges that it has been represented by an attorney in connection with the
preparation and execution of this Agreement.
8.14 SURVIVAL. Any provision of this Agreement which contemplates
performance or the existence of obligations after the Closing Date, and any and
all representations and warranties set forth in this Agreement, shall not be
deemed to be merged into or waived by the execution and delivery of the
instruments executed at the Closing, but shall expressly survive Closing and
shall be binding upon the party or parties obligated thereby in accordance with
the terms of this Agreement, subject to any limitations expressly set forth in
this Agreement.
8.15 ATTORNEYS' FEES. In the event any suit or other legal proceeding
is brought for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be entitled to
recover from the other party or parties upon final judgment on the merits
reasonable attorneys' fees (and sales taxes thereon, if any), including
attorneys' fees for any appeal, and costs incurred in bringing such suit or
proceeding.
8.16 RISK OF LOSS. Prior to the Closing, the risk of loss of damage
to, or destruction of, any and all of the Company's assets, including without
limitation the Properties, shall remain with Seller and the Company, and the
legal doctrine known as the "Doctrine of Equitable Conversion" shall not be
applicable to this Agreement or to any of the transactions contemplated hereby.
ARTICLE 9
DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Article IX or elsewhere in this Agreement.
9.1 AFFILIATE. The term "Affiliate" shall mean, with respect to any
person, any other person controlling, controlled by or under common control with
such person. The term "Control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly, more
than 50% of the voting rights attributable to the shares of the controlled
corporation and, with respect to any person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person.
-25-
9.2 COLLATERAL AGREEMENTS. The term "Collateral Agreements" shall mean
any or all of the exhibits to this Agreement and any and all other agreements,
instruments or documents required or expressly provided under this Agreement to
be executed and delivered in connection with the transactions contemplated by
this Agreement.
9.3 CONFIDENTIAL INFORMATION. The term "Confidential Information"
shall mean confidential data and confidential information relating to the
business of the Company (which does not rise to the status of a Trade Secret
under applicable law) which is or has been disclosed to Seller or of which
Seller became aware as a consequence of or through its relationship with the
Company and which has value to the Company and is not generally known to the
competitors of the Company. Confidential Information shall not include any data
or information that (i) has been voluntarily disclosed to the general public by
the Company or its Affiliates, (ii) has been independently developed and
disclosed to the general public by others, or (iii) otherwise enters the public
domain through lawful means.
9.4 CONTRACTS. The term "Contracts," when described as being those of
or applicable to any person, shall mean any and all contracts, agreements,
franchises, understandings, arrangements, leases, licenses, registrations,
authorizations, easements, servitudes, rights of way, mortgages, bonds, notes,
guaranties, liens, indebtedness, approvals or other instruments or undertakings
to which such person is a party or to which or by which such person or the
property of such person is subject or bound, excluding any Permits.
9.5 DAMAGES. The term "Damages" shall mean any and all damages,
liabilities, obligations, penalties, fines, judgments, claims, deficiencies,
losses, costs, expenses and assessments (including without limitation income and
other taxes, interest, penalties and attorneys' and accountants' fees and
disbursements).
9.6 FINANCIAL STATEMENTS. The term "Financial Statements" shall mean
any or all of the financial statements, including balance sheets and related
statements of income and statements of changes in financial position and the
accompanying notes thereto, of the Company's business.
9.7 GOVERNMENTAL AUTHORITIES. The term "Governmental Authorities"
shall mean any nation or country (including but not limited to the United
States) and any commonwealth, territory or possession thereof and any political
subdivision of any of the foregoing, including but not limited to courts,
departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
9.8 KNOWLEDGE OF THE COMPANY. The term "Knowledge of the Company"
shall mean the actual knowledge of any of the directors, officers or managerial
personnel of the Company with respect to the matter in question, and such
knowledge as any of the directors, officers or managerial personnel of the
Company reasonably should have obtained upon diligent investigation and inquiry
into the matter in question.
9.9 LEGAL REQUIREMENTS. The term "Legal Requirements," when described
as being applicable to any person, shall mean any and all laws (statutory,
judicial or otherwise), ordinances, regulations, judgments, orders, directives,
injunctions, writs, decrees or awards of, and any Contracts with, any
-26-
Governmental Authority, in each case as and to the extent applicable to such
person or such person's business, operations or properties.
9.10 PERMITS. The term "Permits" shall mean any and all permits,
rights, approvals, licenses, authorizations, legal status, orders or Contracts
under any Legal Requirement or otherwise granted by any Governmental Authority.
9.11 PERSON. The term "Person" shall mean any individual, partnership,
joint venture, firm, corporation, association, limited liability company, trust
or other enterprise or any governmental or political subdivision or any agency,
department or instrumentality thereof.
9.12 PROPERTIES. The term "Properties" shall mean any and all
properties and assets (real, personal or mixed, tangible or intangible) owned or
Used by the Company.
9.13 REAL PROPERTY. The term "Real Property" shall mean the real
property Used by the Company in the conduct of its business.
9.14 REGULATIONS. The term "Regulations" shall mean any and all
regulations promulgated by the Department of the Treasury pursuant to the
Internal Revenue Code.
9.15 SUBSIDIARY. The term "Subsidiary" shall mean any Person of which
a majority of the outstanding voting securities or other voting equity interests
are owned, directly or indirectly, by the Company.
9.16 TRADE SECRETS. The term "Trade Secrets" shall mean information of
the Company including, but not limited to, technical or nontechnical data,
formulas, patterns, compilations, programs, financial data, financial plans,
product or service plans or lists of actual or potential customers or suppliers
which (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use, and (ii) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy.
9.17 USED. The term "Used" shall mean, with respect to the Properties,
Contracts or Permits of the Company, those owned, leased, licensed or otherwise
held by the Company which were acquired for use or held for use by the Company
in connection with the Company's business and operations, whether or not
reflected on the Company's books of account.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
EXECUTED as of the date first written above.
BUYER:
BYSYNERGY LLC
By: M.A. Zito & Company, L.L.C.
Its: Manager
M.A. ZITO & COMPANY, L.L.C.
By: /s/ Michael A. Zito
-----------------------------
Name: Michael A. Zito
Title: Manager
COMPANY:
PARTNERAXIS, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
SELLER:
EBIZ ENTERPRISES, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------