-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H/uyC1G2vnlfjhF/YaYpaKcsIrrH1XQnAnevM0KxFVwnUVOYiV8OVz7V5TuQ3ELW IxN4jQy/rrd5TUSujTdWzg== 0001005477-99-004528.txt : 20000211 0001005477-99-004528.hdr.sgml : 20000211 ACCESSION NUMBER: 0001005477-99-004528 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990531 FILED AS OF DATE: 19990929 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELITE TECHNOLOGIES INC /TX/ CENTRAL INDEX KEY: 0000835909 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 760252296 STATE OF INCORPORATION: TX FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-17597 FILM NUMBER: 99719476 BUSINESS ADDRESS: STREET 1: 3700 CRESTWOOD PARKWAY STREET 2: SUITE 1000 CITY: DULUTH STATE: GA ZIP: 30096 BUSINESS PHONE: 7703818089 MAIL ADDRESS: STREET 1: 700 CRESTWOOD PARKWAY STREET 2: SUITE 1000 CITY: DULUTH STATE: GA ZIP: 30096 FORMER COMPANY: FORMER CONFORMED NAME: CONCAP INC DATE OF NAME CHANGE: 19990826 FORMER COMPANY: FORMER CONFORMED NAME: ELITE TECHNOLOGIES INC/TX DATE OF NAME CHANGE: 19990825 FORMER COMPANY: FORMER CONFORMED NAME: CONTINENTAL CAPITAL RESOURCES INC DATE OF NAME CHANGE: 19920703 10-K/A 1 AMENDMENT TO FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 31, 1999 Commission File Number: 0-17597 ELITE TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) NOT APPLICABLE (Former name of registrant if changed since last report) Texas 76-0252296 (State or other Jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3700 Crestwood Parkway, Suite 1000 Duluth, GA 30096 (Address of principal executive offices, including zip code) (770) 381-8089 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant computed as of July 15, 1999 is $65,287,510. The number of issued and outstanding shares of the issuer's class of capital stock as of September 8, 1999, the latest practicable date, is as follows: 16,987,670(1) shares of Common Stock $.001 par value. ================================================================================ - ---------- (1) Excludes 1,250,000 shares issued to Randy Troxtel in connection with the acquisition of Temporary Help Connection. These shares are being held in escrow pending disposition of the Company's attempt to reverse the acquisition. (See Legal Proceedings.) Elite Technologies, Inc. (the "Company") a Texas corporation, is filing this Amendment No. 1 on Form 10-K/A (this "Amendment") to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1999 (the "Original Report") in order to provide the information required by Part III of the Form 10-K (Items 10, except for Executive Officers which is included in Part I of the Original Report, 11, 12 and 13), which information was omitted from the Original Report as provided in General Instruction G(3) of the instructions to Form 10-K and certain information required by Part IV of the Form 10-K. This Amendment to the Original Report speaks as of the original date of filing of the Original Report. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. TABLE OF DIRECTORS AND EXECUTIVE OFFICERS The following table provides a summary of the Company's directors and executive officers as of May 31, 1999 Name Age Position Held Scott Schuster 35 (1),(2) Director, Chairman of the Board and CEO David Aksoy 35 (1),(2) Director, Senior Vice President and CFO Lee Davis 32 Director, Senior Vice President of Acquisitions Jason Kiszonak 27 Senior Vice President of Public Relations (1) Member of Compensation Committee (2) Member of Audit Committee There is no arrangement or understanding between any director or executive officer and any other person pursuant to which he was selected as a director or an officer. Directors hold office until the next annual meeting of shareholders and until their successors have been elected and qualified. The executive officers of the Company are elected at the annual meeting of the Board of Directors and hold office until their successors have been elected and qualified. No family relationship currently exists among any of the executive officers and directors of the Company. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended, requires officers and directors of the Registrant and holders of more than 10% of the Registrant's common stock (collectively, "Reporting Persons") to file reports of ownership and changes in ownership of such common stock with the Securities and Exchange Commission ("SEC") and to furnish the Registrant with copies of all such reports. Based solely on its review of the copies of such reports furnished to the Registrant by such Reporting Persons or on the written representations of such Reporting Persons with respect to whether any reports on Form 3 or Form 5 were required, the Registrant believes that during the year ended May 31, 1999, Scott Schuster has not filed a Form 3 upon his election as a director and officer of the Company, or upon becoming a ten percent beneficial owner. Mr. Schuster has not filed a Form 4 reporting a change in beneficial ownership for one transaction. David Aksoy has not filed a Form 3 upon his election as a director and officer of the Company, or upon becoming a ten percent owner. Mr. Aksoy has not filed a Form 4 reporting a change in beneficial ownership for one transaction. Neither Jason Kiszonak nor Lee Davis have filed Form 3's reporting their election as directors and officers of the Company. ITEM 11. EXECUTIVE COMPENSATION. Summary Compensation Table The following table sets forth certain information regarding compensation awarded or paid to, or earned by, each of the following persons during each of the last three fiscal years: (i) the person who served as the Registrant's Chief Executive Officer during the fiscal year ended May 31, 1999 ("Fiscal 1999") and (ii) the Registrant's Senior Vice President of Public Relations (collectively, the "Named Officers"). SUMMARY COMPENSATION TABLE Long Term Compensation Annual Compensation Name and Principal Position Year Salary ($) -------- ---- ---------- Scott Schuster 1999 $250,000 (Chairman of the Board and CEO) Jason Kiszonak 1999 $125,000 (Senior Vice President of Public Relations) No other officer or director received compensation in excess of $100,000 for the fiscal year ended May 31, 1999. No officer or director received compensation in excess of $100,000 for the fiscal year ended May 31, 1998 or for the fiscal year end May 31, 1997, nor was the Company obligated to pay any officer or director compensation in excess of $100,000 per year. No member of the Board of Directors has received or is entitled to receive compensation for attendance at Board of Directors meetings nor has any officer received any compensation in such capacity since inception. Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options/SARs Options/SARs at FY-End at FY-End ($) Shares Acquired on Exercisable/ Exercisable/ Name Exercise (#) Value Realized ($) Unexercisable Unexercisable ---- ------------ ------------------ ------------- ------------- Scott Schuster --- --- 0/2,000,000 0/10,760,000 Jason Kiszonak --- --- 0/250,000 0/1,345,000
Description of Employment Agreements Scott Schuster and Jason Kiszonak perform their duties according to a standard Employment Agreement (the "Agreement"). The Agreement provides for a fixed three year term renewable or terminable according to evaluation by the Employment Committee of the Board of Directors. A base compensation is paid on a weekly or bi-weekly basis plus bonuses not to exceed three percent of the adjusted net profit, which is paid after the Company's fiscal year-end, at May 31. In addition, stock options are offered as an incentive and are available at $0.10 per share and fully vest and become exercisable during the second year of employment, on the 31st of August, or on the 12- month anniversary of such officer or directors start date, whichever is later. Depending on the position held by the officer or director, low interest loans and automobile allowances are also made available. Standard employment provisions of insurance, sick leave, vacation time and deferred retirement compensation are described in the Agreement. All compensation and benefits made available to the officer are subject to his or her continuous satisfactory performance of job duties and responsibilities. Directors' Fees The Company's non-employee directors currently receive no compensation for service on the Company's Board of Directors or any committee thereof. Compensation Committee Interlocks and Insider Participation No interlocking relationship exists between the Company's Board of Directors or Compensation Committee and the Board of Directors of compensation committee of any other company, nor has such interlocking relationship existed in the past. The Compensation Committee currently consists of Scott Schuster and David Aksoy. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of May 31, 1999, the number of shares of Common Stock owned of record or beneficially by (i) each director of the Company, (ii) by each executive officer of the Company listed in the Summary Compensation Table above, (iii) by all such executive officers and directors of the Company as a group, which amount includes the number of shares which each such person may have the right to acquire within sixty days after such date upon exercise of stock options, and (iv) by each holder of 5% or greater of the Company's common stock. The footnotes reflect the ownership by such persons of each class of equity securities of certain entities some or all of which may be deemed to be "subsidiaries" of the Registrant within the meaning of the federal securities laws. NAME OF NUMBER OF SHARES PERCENT OF BENEFICIAL OWNER OF COMMON STOCK CLASS (1) ---------------------------------- ---------------- ------------- Scott Schuster 2,353,750 13.86% 3700 Crestwood Pkwy Suite 1000 Duluth, GA 30096 David Aksoy 2,681,250 15.78% 3700 Crestwood Pkwy Suite 1000 Duluth, GA 30096 Lee Davis 450,000 2.65% Jason Kiszonak 350,000 2.06% All directors and executive officers 5,835,000 34.35% as a group (4 persons) (1) Based on 16,987,670 shares of Common Stock issued and outstanding on September 8, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. (a) Notes Receivable from Officers The Company has made loans to Scott Schuster in the total amount of $215,583. These loans are evidenced by a promissory note payable in not more than 60 monthly principal and interest installments starting with the first day of the month following the month in which the loan is made, with interest at the rate of 3% per year on the unpaid balance of the loan outstanding. In the event of default of any installment of principal and interest when due, the entire balance of principal and accrued interest becomes payable on demand. As of May 31, 1999, no repayments have been made on these loans and, accordingly, notes receivable from officers were classified as current assets. (b) Advances As of May 31, 1998, Scott Schuster had advanced $22,073 to the Company to fund operations. These advances were repaid during the year ended May 31, 1999 without interest. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 3. Exhibits Exhibit Number Description - ------- ----------- 2.4 Agreement dated November 5, 1998 by and between Scott Schuster and Scanlan Music, Inc. 2.4.1 Assignment Agreement dated November 9, 1998 by and between Scott Schuster and CONCAP, Inc. 2.5 Agreement dated April 1, 1999 by and between CONCAP, Inc. and Virtual Enterprise, Inc. 10.1 Employment Agreement dated July 15, 1998 by and between CONCAP, Inc. and Scott Schuster 10.2 Employment Agreement dated March 15, 1999 by and between CONCAP, Inc. and Jason Kiszonak SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed on its behalf by the undersigned, thereunto duly authorized. ELITE TECHNOLOGIES, INC. (Registrant) /s/ Scott Schuster -------------------------- Scott Schuster Chief Executive Officer Date: September 28, 1999 EX-2.4 2 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT MADE AS OF NOVEMBER 5, 1998, BETWEEN SCOTT A. SCHUSTER, BUYER, AND SCANLAN MUSIC, INC. SELLER TABLE OF CONTENTS Page ---- 1. DEFINITIONS. 1 1.1. "APPLICABLE CONTRACT" 1 1.2. "BEST EFFORTS" 1 1.3. "BREACH" 1 1.4. "BUYER" 1 1.5. "CLOSING" 1 1.6. "CLOSING DATE" 1 1.7. "CONSENT" 2 1.8. "CONTEMPLATED TRANSACTIONS" 2 1.9. "CONTRACT" 2 1.10. "DAMAGES" 2 1.11. "DISCLOSURE SCHEDULE" 2 1.12. "ENCUMBRANCE" 2 1.13. "ENVIRONMENTAL REQUIREMENTS" 2 1.14. "ERISA" 2 1.15. "FACILITIES" 3 1.16. "GAAP" 3 1.17. "GOVERNMENTAL AUTHORIZATION" 3 1.18. "GOVERNMENTAL BODY" 3 1.19. "IRC" 3 1.20. "IRS" 3 1.21. "KNOWLEDGE" 3 1.22. "LEGAL REQUIREMENT" 4 1.23. "OPERATING INCOME" 4 1.24. "ORDER" 4 1.25. "ORDINARY COURSE OF BUSINESS" 4 1.26. "ORGANIZATIONAL DOCUMENTS" 4 1.27. "PERSON" 5 1.28. "PLAN" 5 1.29. "PROCEEDING" 5 1.30. "RELATED PERSON" 5 1.31. "REPRESENTATIVE" 6 1.32. "SECURITIES ACT" 6 1.33. "SELLER" 6 1.34. "SHARES" 6 1.35. "SUBSIDIARY" 6 1.36. "TAX RETURN" 6 1.37. "THREATENED" 6 2. TRANSFER OF SHARES; REIMBURSEMENT AMOUNT; CLOSING. 6 2.1. SHARES. 6 2.2. CLOSING. 6 2.3. CLOSING OBLIGATIONS. 7 3. REPRESENTATIONS AND WARRANTIES OF SELLER. 7 -i- 3.1. ORGANIZATION AND GOOD STANDING. 7 3.2. AUTHORITY; NO CONFLICT. 8 3.3. CAPITALIZATION. 9 3.4. FINANCIAL STATEMENTS. 9 3.5. BOOKS AND RECORDS. 9 3.6. TITLE TO PROPERTIES; ENCUMBRANCES. 10 3.7. NO UNDISCLOSED LIABILITIES. 10 3.8. TAXES. 10 3.9. NO MATERIAL ADVERSE CHANGE. 11 3.10. EMPLOYEE BENEFITS MATTERS. 11 3.11. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS. 12 3.12. LEGAL PROCEEDINGS; ORDERS. 13 3.13. ABSENCE OF CERTAIN CHANGES AND EVENTS. 14 3.14. CONTRACTS; NO DEFAULTS. 15 3.15. INSURANCE. 16 3.16. ENVIRONMENTAL MATTERS. 17 3.17. EMPLOYEE MATTERS. 17 3.18. INTELLECTUAL PROPERTY RIGHTS OF SELLER. 18 3.19. CERTAIN PAYMENTS. 18 3.20. DISCLOSURE. 18 3.21. BROKERS OR FINDERS. 18 3.22. FAIRNESS OPINION. 19 4. REPRESENTATIONS AND WARRANTIES OF BUYER. 19 4.1. ORGANIZATION AND GOOD STANDING. 19 4.2. AUTHORITY. 19 4.3. INVESTMENT INTENT. 19 4.4. CERTAIN PROCEEDINGS. 19 4.5. BROKERS OR FINDERS. 19 5. COVENANTS OF SELLER PRIOR TO CLOSING DATE. 19 5.1. ACCESS AND INVESTIGATION. 19 5.2. OPERATION OF THE BUSINESS OF SELLER. 20 5.3. NEGATIVE COVENANT. 20 5.4. REQUIRED APPROVALS. 20 5.5. NOTIFICATION. 20 5.6. NO NEGOTIATION. 21 5.7. CLOSING OF BANK ACCOUNTS. 21 6. COVENANTS OF BUYER PRIOR TO CLOSING DATE. 21 6.1. APPROVALS OF GOVERNMENTAL BODIES/THIRD PARTY CONSENTS. 21 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. 21 7.1. ACCURACY OF REPRESENTATIONS. 21 7.2. SELLER'S PERFORMANCE. 22 7.3. CONSENTS. 22 7.4. ADDITIONAL DOCUMENTS. 22 -ii- 7.5. NO PROCEEDINGS. 22 7.6. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. 22 7.7. NO PROHIBITION. 22 7.8. EMPLOYMENT AGREEMENT. 23 8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. 23 8.1. ACCURACY OF REPRESENTATIONS. 23 8.2. BUYER'S PERFORMANCE. 23 8.3. CONSENTS. 23 8.4. ADDITIONAL DOCUMENTS. 23 8.5. NO INJUNCTION. 23 9. TERMINATION. 23 9.1. TERMINATION EVENTS. 23 9.2. EFFECT OF TERMINATION. 24 10. INDEMNIFICATION; REMEDIES. 24 10.1. AGREEMENT BY SELLER TO INDEMNIFY. 24 10.2. AGREEMENTS BY BUYER TO INDEMNIFY. 25 10.3. MATTERS INVOLVING THIRD PARTIES. 26 11. POST-CLOSING AGREEMENTS. 27 11.1. CONSISTENCY IN REPORTING. 27 12. GENERAL PROVISIONS. 27 12.1. EXPENSES. 27 12.2. PUBLIC ANNOUNCEMENTS. 28 12.3. CONFIDENTIALITY. 28 12.4. NOTICES. 28 12.5. JURISDICTION; SERVICE OF PROCESS. 29 12.6. FURTHER ASSURANCES. 29 12.7. WAIVER. 29 12.8. ENTIRE AGREEMENT AND MODIFICATION. 30 12.9. DISCLOSURE SCHEDULE. 30 12.10. ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS. 30 12.11. SEVERABILITY. 30 12.12. SECTION HEADINGS; CONSTRUCTION. 31 12.13. TIME OF ESSENCE. 31 12.14. GOVERNING LAW. 31 12.15. COUNTERPARTS. 31 -iii- STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of November 5, 1998, by Scott Schuster, an individual, ("Buyer"), and Scanlan Music, Inc., a Michigan company ("Seller"). RECITALS: Seller desire to sell, and Buyer desires to purchase, all of the issued and outstanding shares (the "Shares") of capital stock of Seller, for the consideration and on the terms set forth in this Agreement. AGREEMENT The parties, intending to be legally bound, agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1.: 1.1. "Applicable Contract" - any Contract (i) under which Seller has or may acquire any rights; (ii) under which Seller has or may become subject to any obligation or liability or (iii) by which Seller or any of the assets owned or used by it is or may become bound. 1.2. "Best Efforts" - the efforts that a prudent Person desirous of achieving a result would reasonably use in similar circumstances to ensure that such result is achieved as expeditiously as possible; provided, however, that an obligation to use Best Efforts under this Agreement does not require the Person subject to that obligation to take actions that would result in a materially adverse change in the benefits to such Person of this Agreement and the Contemplated Transactions. 1.3. "Breach" - a "Breach" of a representation, warranty, covenant, obligation, or other provision of this Agreement or any instrument delivered pursuant to this Agreement will be deemed to have occurred if there is or has been (i) any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation, or other provision or (ii) any claim (by any Person) or other occurrence or circumstance that is or was inconsistent with such representation, warranty, covenant, obligation, or other provision, and the term "Breach" means any such inaccuracy, breach, failure, claim, occurrence or circumstance. 1.4. "Buyer" - as defined in the first paragraph of this Agreement. 1.5. "Closing" - as defined in Section 2.4. 1.6. "Closing Date" - the date and time as of which the Closing actually takes place. 1.7. "Consent" - any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization). 1.8. "Contemplated Transactions" - all of the transactions contemplated by this Agreement, including: A. The transfer of the Shares by Seller to Buyer; B. The execution, delivery, and performance of the Closing Obligations set forth in Section 2.5; C. The performance by Buyer and Seller of their respective covenants and obligations under this Agreement; D. Buyer's acquisition and ownership of the Shares and exercise of control over the Seller; and E. The transfer of Buyer's Stock to Seller; and F. Payment by Buyer to Seller of the Reimbursement Amount. 1.9. "Contract" - any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding. 1.10. "Damages" - any loss, liability, claim, damages (including, without limitation, incidental and consequential damages), expense (including, without limitation, costs of investigation and defense and reasonable attorneys' fees) or diminution of value, whether or not involving a third party. 1.11. "Disclosure Schedule" - the disclosure schedule delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement. 1.12. "Encumbrance" - any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership. 1.13. "Environmental Requirements" - means federal, state and local laws relating to pollution or protection of the environment, including laws or provisions relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, or hazardous or toxic materials, substances, or wastes into air, surface water, groundwater, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or hazardous or toxic materials, substances, or wastes. 1.14. "ERISA" - the Employee Retirement Income Security Act of 1974 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. -2- 1.15. "Facilities" - any real property, leaseholds, or other interests currently or formerly owned or operated by Seller and any buildings, plants, structures, or equipment (including motor vehicles) currently or formerly owned or operated by Seller. 1.16. "GAAP" - generally accepted United States accounting principles, applied on a basis consistent with the basis on which the financial statements referred to in Section 3.4. were prepared. 1.17. "Governmental Authorization" - any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement. 1.18. "Governmental Body" - any: A. Nation, state, county, city, town, village, district, or other jurisdiction of any nature; B. Federal, state, local, municipal, foreign, or other government; C. Governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); D. Multi-national organization or body; or E. Body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature. 1.19. "IRC" - the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law. 1.20. "IRS" - the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury. 1.21. "Knowledge" - an individual will be deemed to have "Knowledge" of a particular fact or other matter if: A. Such individual is actually aware of such fact or other matter; or B. A prudent individual given his position with Seller could be expected to discover or otherwise become aware of such fact or other matter. C. A Person (other than an individual) will be deemed to have "Knowledge" of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer within the last five (5) years, partner, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or other matter. -3- 1.22. "Legal Requirement" - any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty. 1.23. "Operating Income" - means the net income of Seller determined in accordance with GAAP before income taxes and after all other charges except: A. Unless otherwise approved by Buyer, any general and administrative expense (i.e., allocation of Seller's general corporate overhead) attributable to the Seller and all subsidiaries of Seller that is not directly related to the operation of Seller in the Ordinary Course of Business; provided, however, Operating Income shall include reimbursement by Seller of expenses at a fair market price mutually agreed to by Buyer and Seller for expenses previously incurred by Seller, but that have for administrative convenience or efficiency reasons been centralized with Buyer; and B. Any amortization of goodwill of Seller and all Subsidiaries of Seller. C. In the event that certain expenses incurred by the Seller are for the principal or partial benefit of Seller or other subsidiaries of Seller, then the parties hereto shall endeavor to track and determine in a fair and equitable manner that portion of such expenses that should fairly and reasonably be allocated to Seller or such other subsidiaries of Seller, and therefore not included in arriving at Operating Income for purposes of this Agreement. 1.24. "Order" - any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator. 1.25. "Ordinary Course of Business" - an action taken by a Person will be deemed to have been taken in the "Ordinary Course of Business" only if: A. Such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; B. Such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority); and C. Such action is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any Person or group of Persons exercising similar authority), in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person. 1.26. "Organizational Documents" - (i) the Articles or Certificate of Incorporation and the Bylaws of a corporation; (ii) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person and (iii) any amendment to any of the foregoing. -4- 1.27. "Person" - any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body. 1.28. "Plan" - as defined in Section 3.10.1. 1.29. "Proceeding" - any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator. 1.30. "Related Person" - with respect to a particular individual: A. Each other member of such individual's Family; B. Any Person that is directly or indirectly controlled by such individual or one (1) or more members of such individual's Family; C. Any Person in which such individual or members of such individual's Family hold (individually or in the aggregate) a Material Interest; and D. Any Person with respect to which such individual or one (1) or more members of such individual's Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity). With respect to a specified Person other than an individual: A. Any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; B. Any Person that holds a Material Interest in such specified Person; C. Each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity); D. Any Person in which such specified Person holds a Material Interest; E. Any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and Any Related Person of any individual described in clause B. or C. For purposes of this definition, (i) the "Family" of an individual includes (1) the individual; (2) the individual's spouse and former spouses; (3) any other natural person who is related to the individual or the individual's spouse within the second degree and (4) any other natural person who resides with such individual and (2) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least [five percent (5%)] of the -5- outstanding voting power of a Person or equity securities or other equity interests representing at least [five percent (5%)] of the outstanding equity securities or equity interests in a Person. 1.31. "Representative" - with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors. 1.32. "Securities Act" - the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. 1.33. "Seller" - as defined in the first paragraph of this Agreement. 1.34. "Shares" - as defined in the Recitals of this Agreement. 1.35. "Subsidiary" - with respect to any Person (the "Owner"), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one (1) or more of its Subsidiaries; [when used without reference to a particular Person, "Subsidiary" means a Subsidiary of Seller]. 1.36. "Tax Return" - any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax. 1.37. "Threatened" - a claim, Proceeding, dispute, action, or other matter will be deemed to have been "Threatened" if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future. 2. TRANSFER OF SHARES; REIMBURSEMENT AMOUNT; CLOSING. 2.1. Shares. In exchange for the execution of a Promissory Note, as set forth in Section 2.2, and subject to the terms and conditions of this Agreement, at the Closing, Seller will transfer the Shares of Seller to Buyer. 2.2. Closing. The purchase and sale (the "Closing") provided for in this Agreement will take place at the offices of Morris, Manning & Martin, L.L.P., at 1600 Atlanta Financial Center, 3343 Peachtree Road, N.E., Atlanta, Georgia 30326, at 10:00 a.m. (local time) on November 15, 1998, or at such other time and place as the parties may agree. Except as otherwise provided in Section 9., failure to consummate the purchase and sale provided for in -6- this Agreement on the date and time and at the place determined pursuant to this Section 2.3. will not result in the termination of this Agreement and will not relieve any party of any obligation under this Agreement. 2.3. Closing Obligations. At the Closing: A. Seller will deliver to Buyer: (i) Certificates. Certificates representing the Shares, duly endorsed (or accompanied by duly executed stock powers) for transfer to Buyer; (ii) Good Standing Certificate. Seller shall have delivered to Buyer a certificate evidencing the good standing of Seller as of a recent practicable date; (iii) Certificate. A certificate substantially in the form of Exhibit B hereto, executed by Seller representing and warranting to Buyer that each of Seller's representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date (giving full effect to any supplements to the Disclosure Schedule that were delivered by Seller to Buyer prior to the Closing Date in accordance with Section 5.5.); and (v) Mutual Release. Seller shall have delivered to Buyer a mutual release, executed by Seller, substantially in the form of Exhibit C B. Buyer will deliver to Seller: (i) Note. A Promissory Note in an amount equal to thirty five thousand dollars ($35,000.00), due on the first date each month. The monthly payment of said note shall be in the amount of Two Thousand Nine Hundred Sixteen & 66/100 Dollars ($2,916.66). (ii) Certificate. A certificate in the form of Exhibit D hereto executed by Buyer to the effect that, except as otherwise stated in such certificate, each of Buyer's representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date; and (iii) Mutual Release. Buyer shall have delivered to Seller a Mutual Release, executed by Buyer, substantially in the form of Exhibit C. 3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to Buyer as follows: 3.1. Organization and Good Standing. -7- A. Schedule 3.1 of the Disclosure Schedule contains a complete and accurate list of Seller's name, its jurisdiction of incorporation, other jurisdictions in which it is authorized to do business, and its capitalization (including the identity of each stockholder and the number of shares held by each). Seller is a corporation duly organized, validly existing, and in good standing under the laws of Michigan, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under Applicable Contracts. B. Seller has delivered to Buyer copies of the Organizational Documents of Seller, as currently in effect. 3.2. Authority; No Conflict. A. This Agreement constitutes the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms. Upon the execution and delivery by Seller of the closing documents set forth in Section 2.4A (collectively, the "Seller's Closing Documents"), the Seller's Closing Documents will constitute the legal, valid, and binding obligations of Seller, enforceable against Seller in accordance with their respective terms. Seller has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the Seller's Closing Documents and to perform his obligations under this Agreement and the Seller's Closing Documents. B. Except as set forth in Schedule 3.2 of the Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time): (i) Contravene, conflict with, or result in a violation of (1) any provision of the Organizational Documents of Seller or (2) any resolution adopted by the board of directors or the stockholders of Seller; (ii) Contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which Seller or Seller, or any of the assets owned or used by Seller, may be subject; (iii) Contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by Seller or that otherwise relates to the business of, or any of the assets owned or used by, Seller; (iv) Cause Buyer or Seller to become subject to, or to become liable for the payment of, any Tax; -8- (v) Cause any of the assets owned by Seller to be reassessed or revalued by any taxing authority or other Governmental Body; (vi) Contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; or (vii) Result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by Seller. Except as set forth in Schedule 3.2 of the Disclosure Schedule, Seller nor Seller is or will be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 3.3. Capitalization. The authorized equity securities of Seller consist of 50,000 shares of common stock, $1.00 par value per share, of which 50,000 shares are issued and outstanding and constitute the Shares. Seller is and will be on the Closing Date the record and beneficial owners and holders of the Shares, free and clear of all Encumbrances. With the exception of the Shares (which are owned by Seller), all of the outstanding equity securities and other securities of Seller are owned of record and beneficially by Seller, free and clear of all Encumbrances. No legend or other reference to any purported Encumbrance appears upon any certificate representing equity securities of Seller. All of the outstanding equity securities of Seller have been duly authorized and validly issued and are fully paid and nonassessable. There are no Contracts relating to the issuance, sale, or transfer of any equity securities or other securities of Seller, including, but not limited to, stock options, warrants, convertible securities, redemption rights, registration rights and the like. None of the outstanding equity securities or other securities of Seller was issued in violation of the Securities Act or any other Legal Requirement. Seller does not own, nor does it have any Contract to acquire, any equity securities or other securities of any Person (other than Seller) or any direct or indirect equity or ownership interest in any other business. 3.4. Financial Statements. Seller has delivered to Buyer, as set forth on Schedule 3.4: A. In lieu of finanical statements of the Seller, Buyer shall accept tax returns for fiscal year end June 30, 1998. 3.5. Books and Records. The books of account, minute books, stock record books, and other records of Seller, all of which have been made available to Buyer, are complete and correct and have been maintained in accordance with sound business practices. -9- The minute books of Seller contain accurate and complete records of all meetings held of, and corporate action taken by, the stockholders, the Boards of Directors, and committees of the Boards of Directors of Seller, and no meeting of any such stockholders, Board of Directors, or committee has been held for and no material action has been taken at any meeting for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of Seller. 3.6. Title to Properties; Encumbrances. Seller owns (with good and marketable title in the case of real property, subject only to the Encumbrances permitted by this Section) all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) that they purport to own located in the facilities owned or operated by Seller or reflected as owned in the books and records of Seller, including all of the properties and assets reflected in the Closing Date Financial Statements (except for assets held under capitalized leases disclosed or not required to be disclosed in Schedule 3.6 of the Disclosure Schedule). A. Mortgage is current and not in default B. Liens for current taxes not yet due; and C. With respect to real property: (i) Minor imperfections of title, if any, none of which is substantial in amount, materially detracts from the value or impairs the use of the property subject thereto, or impairs the operations of Seller; and (ii) Zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto. All property and assets of the Seller shall be in the possession and control of Seller at Closing, including but not limited to, all Facilities owned and not leased. 3.7. No Undisclosed Liabilities. Except as set forth in Schedule 3.7 of the Disclosure Schedule, Seller has no liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent, or otherwise) except for liabilities or obligations reflected or reserved against in the Closing Date Financial Statements and current liabilities incurred in the Ordinary Course of Business since the respective dates thereof. 3.8. Taxes. Except as set forth on Schedule 3.8 to the Disclosure Schedule, Seller has timely filed all tax returns and reports required to be filed by it, including, without limitation, all federal, state and local tax returns, and has paid in full or made adequate provision by the establishment of reserves for all taxes and other charges which have become due or which are attributable to the conduct of Seller's business prior to Closing. Seller will continue to make adequate provision for all such taxes and other charges for all periods through the Closing Date. Except as set forth on Schedule 3.8 to the Disclosure Schedule, Seller have no Knowledge of any tax deficiency proposed or threatened against Seller. There are no tax liens upon any property or assets of Seller. -10- Except as set forth on Schedule 3.8 to the Disclosure Schedule, Seller has made all payments of estimated taxes when due in amounts sufficient to avoid the imposition of any penalty. Except as set forth on Schedule 3.8 to the Disclosure Schedule, all taxes and other assessments and levies which Seller was required by law to withhold or to collect have been duly withheld and collected, and have been paid over to the proper governmental entity. Except as set forth in Schedule 3.8 to the Disclosure Schedule, the federal and state income tax returns and local returns, if any, of Seller have never been audited by the income tax authorities, nor are any such audits in process. Except as set forth in Schedule 3.8, to the Disclosure Schedule there are no outstanding agreements or waivers extending the statute of limitations applicable to any federal or state income tax returns of Seller for any period. 3.9. No Material Adverse Change. Since December 27, 1993, there has not been any material adverse change in the business, operations, properties, prospects, assets, or condition of Seller, and no event has occurred or circumstance exists that may result in such a material adverse change. 3.10. Employee Benefits Matters. 3.10.1 Schedule 3.10.1 lists all plans, programs, and similar agreements, commitments or arrangements, whether oral or written, maintained by or on behalf of Seller or any other party that provide benefits or compensation to, or for the benefit of, current or former employees of Seller ("Plan" or "Plans"). Except as set forth on Schedule 3.10.1 to the Disclosure Schedule only current and former employees of Seller participate in the Plans. Copies of all Plans and, to the extent applicable, all related trust agreements, actuarial reports, and valuations for the most recent year, all summary plan descriptions, prospectuses, Annual Report Form 5500s or similar forms (and attachments thereto) for the most recent year, all Internal Revenue Service determination letters, and any related documents requested by Buyer, including all amendments, modifications and supplements thereto, have been delivered to Buyer, and all of the same are or will be true, correct and complete. 3.10.2 With respect to each Plan to the extent applicable: A. No litigation or administrative or other proceeding is pending or threatened involving such Plan; B. To the Knowledge of Seller, such Plan has been administered and operated in substantial compliance with, and has been amended to comply with all applicable laws, rules, and regulations, including, without limitation, ERISA, the Internal Revenue Code, and the regulations issued under ERISA and the Internal Revenue Code; C. Seller and its predecessors, if any, have made and as of the Closing Date will have made or accrued, all payments and contributions required, or reasonably expected to be required, to be made under the provisions of such Plan or required to be made under -11- applicable laws, rules and regulations, with respect to any period following, such amounts to be determined using the ongoing actuarial and funding assumptions of the Plan; D. Such Plan is fully funded in an amount sufficient to pay all liabilities accrued (including liabilities and obligations for health care, life insurance and other benefits after termination of employment) and claims incurred to the date hereof; E. On the Closing Date such Plan will be fully funded in an amount sufficient to pay all liabilities accrued (including liabilities and obligations for health care, life insurance and other benefits after termination of employment) and claims incurred to the Closing Date, or adequate reserves will be set up on Seller's books and records, or paid-up insurance will be provided, therefor; and F. Such Plan has been administrated and operated only in the ordinary and usual course and in accordance with its terms, and there has not been in the year prior hereto any increase in the liabilities of such Plan beyond increases typically experienced by employers similar to Seller. 3.11. Compliance With Legal Requirements; Governmental Authorizations. A. Except as set forth in Schedule 3.11 of the Disclosure Schedule: (i) Seller is, and at all times since December 27, 1993, has been, in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets; (ii) No event has occurred or circumstance exists that (with or without notice or lapse of time) (1) may constitute or result in a violation by Seller of, or a failure on the part of Seller to comply with, any Legal Requirement or (2) may give rise to any obligation on the part of Seller to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and (iii) Seller has not received, at any time since December 27, 1993, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (1) any actual, alleged, possible, or potential violation of, or failure to comply with, any Legal Requirement or (2) any actual, alleged, possible, or potential obligation on the part of Seller to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. B. Schedule 3.11 Except as set forth in Schedule 3.11 of the Disclosure Schedule: (i) Seller is, and at all times since December 27, 1993, has been, in full compliance with all of the terms and requirements of any applicable Governmental Authorization; -12- (ii) No event has occurred or circumstance exists that may (with or without notice or lapse of time) (1) constitute or result directly or indirectly in a violation of or a failure to comply with any tern or requirement of any applicable Governmental Authorization or (2) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any applicable Governmental Authorization; (iii) Seller has not received, at any time since December 27, 1993, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (1) any actual, alleged, possible, or potential violation of or failure to comply with any term or requirement of any Governmental Authorization or (2) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any Governmental Authorization; and (iv) All applications required to have been filed for the renewal of the Governmental Authorizations have been duly filed on a timely basis with the appropriate Governmental Bodies, and all other filings required to have been made with respect to such Governmental Authorizations have been duly made on a timely basis with the appropriate Governmental Bodies. The Seller has obtained any Governmental Authorizations necessary to permit Seller to lawfully conduct and operate their businesses in the manner they currently conduct and operate such businesses and to permit Seller to own and use their assets in the manner in which they currently own and use such assets. 3.12. Legal Proceedings; Orders. A. Except as set forth in Schedule 3.12 of the Disclosure Schedule, there is no pending Proceeding: (i) That has been commenced by or against Seller or that otherwise relates to or may affect the business of, or any of the assets owned or used by, Seller; or (ii) That challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To the Knowledge of Seller, (i) no such Proceeding has been Threatened and (ii) no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding. Seller have delivered to Buyer copies of all pleadings, correspondence, and other documents relating to each Proceeding listed in Schedule 3.12 of the Disclosure Schedule. The Proceedings listed in Schedule 3.12 of the Disclosure Schedule will not have a material adverse effect on the business, operations, assets, condition, or prospects of Seller. B. Except as set forth in Schedule 3.12 of the Disclosure Schedule: (i) There is no Order to which any of Seller, or any of the assets owned or used by Seller, is subject; -13- (ii) Seller is not subject to any Order that relates to the business of, or any of the assets owned or used by, Seller; and (iii) No officer, director, agent, or employee of Seller is subject to any Order that prohibits such officer, director, agent, or employee from engaging in or continuing any conduct, activity, or practice relating to the business of Seller. C. Except as set forth in Schedule 3.12 of the Disclosure Schedule: (i) Seller is, and at all times since December 27, 1993, has been, in full compliance with all of the terms and requirements of each Order to which it, or any of the assets owned or used by it, is or has been subject; (ii) No event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which Seller, or any of the assets owned or used by Seller, is subject; and (iii) Seller has not received, at any time since December 27, 1993, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Order to which Seller, or any of the assets owned or used by Seller, is or has been subject. 3.13. Absence of Certain Changes and Events. Except as set forth in Schedule 3.13 of the Disclosure Schedule, since December 27, 1993, Seller has conducted its business only in the Ordinary Course of Business and there has not been any: A. Change in Seller's authorized or issued capital stock; grant of any stock option or right to purchase shares of capital stock of Seller; issuance of any security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement, or other acquisition by Seller of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of capital stock; B. Amendment to the Organizational Documents of Seller; C. Payment or increase by Seller of any bonuses, salaries, or other compensation to any stockholder, director, officer, or (except in the Ordinary Course of Business) employee or entry into any employment, severance, or similar Contract with any director, officer, or employee; D. Adoption of, or increase in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of Seller; -14- E. Damage to or destruction or loss of any asset or property of Seller, whether or not covered by insurance, materially and adversely affecting the properties, assets, business, financial condition, or prospects of Seller, taken as a whole; F. Entry into, termination of, or receipt of notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit, or similar agreement or (ii) any Contract or transaction involving a total remaining commitment by or to Seller of at least Five Thousand and No/l00 Dollars ($5,000.00); G. Sale (other than sales of inventory in the Ordinary Course of Business), lease, or other disposition of any asset or property of Seller or mortgage, pledge, or imposition of any lien or other encumbrance on any material asset or property of Seller, including the sale, lease, or other disposition of any of the Software and Intangibles; H. Cancellation or waiver of any claims or rights with a value to Seller in excess of Five Thousand and No/100 Dollars ($5,000.00); I. Material change in the accounting methods used by Seller; or J. Agreement, whether oral or written, by Seller to do any of the foregoing. 3.14. Contracts; No Defaults. A. Except as set forth in Schedule 3.17(A) of the Disclosure Schedule: (i) Seller (and no Related Person of Seller) has not or may not acquire any rights under, and Seller has not or may not become subject to any obligation or liability under, any Contract that relates to the business of, or any of the assets owned or used by, Seller; and (ii) To the Knowledge of Seller, no officer, director, agent, employee, consultant, or contractor of Seller is bound by any Contract that purports to limit the ability of such officer, director, agent, employee, consultant, or contractor to (1) engage in or continue any conduct, activity, or practice relating to the business of Seller or (2) assign to Seller or to any other Person any rights to any invention, improvement, or discovery. B. Except as set forth in Schedule 3.17(B) of the Disclosure Schedule, each material Contract is in full force and effect and is valid and enforceable in accordance with its terms. C. Except as set forth in Schedule 3.17(C) of the Disclosure Schedule: (i) Seller is, and at all times since December 27, 1993, has been, in full compliance with all applicable terms and requirements of each Contract under which such Seller has or had any obligation or liability or by which such Seller or any of the assets owned or used by such Seller is or was bound; -15- (ii) Each other Person that has or had any obligation or liability under any Contract under which Seller has or had any rights is, and at all times since December 27, 1993, has been, in full compliance with all applicable terms and requirements of such Contract; (iii) No event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a violation or breach of, or give Seller or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; and (iv) Seller has not given to or received from any other Person, at any time since December 27, 1993, any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract. F. There are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to Seller under current or completed Contracts with any Person and no such Person has made written demand for such renegotiation. G. The Contracts relating to the sale, design, manufacture, or provision of products or services by Seller have been entered into in the Ordinary Course of Business and have been entered into without the commission of any act alone or in concert with any other Person, or any consideration having been paid or promised, that is or would be in violation of any Legal Requirement. 3.15. Insurance. A. Seller have delivered to Buyer: (i) True and complete copies of all policies of insurance to which Seller is a party or under which Seller, or any director of Seller, is or has been covered at any time within the two (2) years preceding the date of this Agreement; (ii) True and complete copies of all pending applications for policies of insurance; and (iii) Any statement by the auditor of Seller's financial statements with regard to the adequacy of such entity's coverage or of the reserves for claims. B. Except as set forth on Schedule 3.15(B) of the Disclosure Schedule: (i) All policies to which Seller is a party or that provide coverage to Seller, Seller, or any director or officer of an Seller: (1) Are valid, outstanding, and enforceable; -16- (2) Taken together in the reasonable judgment of Seller, provide adequate insurance coverage for the assets and the operations of Seller for all risks to which Seller are normally exposed; (3) Are sufficient for compliance with all Legal Requirements and Contracts to which Seller is a party or by which it is bound; (4) Will continue in full force and effect following the consummation of the Contemplated Transactions; and (5) Do not provide for any retrospective premium adjustment or other experienced-based liability on the part of Seller. (ii) Neither Seller nor Seller has received (1) any refusal of coverage or any notice that a defense will be afforded with reservation of rights or (2) any notice of cancellation or any other indication that any insurance policy is no longer in full force or effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder. (iii) Seller has paid all premiums due, and have otherwise performed all of their respective obligations, under each policy to which Seller is a party or that provides coverage to Seller or director thereof. (iv) Seller has given notice to the insurer of all claims that may be insured thereby. 3.16. Environmental Matters. Except as set forth in Schedule 3.16 of the Disclosure Schedule, at all times since December 27, 1993, Seller has obtained and is in compliance with all permits, licenses and other authorizations required to do business by Environmental Requirements. To each Seller's Knowledge, there are no conditions, circumstances, activities, practices, incidents, or actions (collectively, "Conditions") resulting from the conduct of its business which Conditions may reasonably form the basis of any claim or suit against Seller based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling by Seller, or the emission, discharge, release or threatened release by Seller into the environment, of any pollutant, contaminant, or hazardous or toxic materials, substances or wastes. 3.17. Employee Matters. Except as set forth on Schedule 3.17, at all times since December 27, 1993, Seller has complied in all respects with all Legal Requirements relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health and plant closing. Except as set forth on Schedule 3.17, Seller is not liable for the payment of any compensation, Damages, taxes, fines, penalties. or other amounts, however, designated, for failure to comply with any of the foregoing Legal Requirements. -17- 3.18. Intellectual Property Rights of Seller. A. Seller does not hold any trademarks, patents, copyrights or other intellectual property. B. Ownership and Right to License. (i) Seller warrants that the name Scanlan Music, Inc., was purchased from Jim Victor in December, 1993, and Seller further warrants that no encomerbrances or disputes exist with regard to the rights of ownership, use, or right to license said name. 3.19. Certain Payments. Since December 27, 1993,, neither Seller nor any director, officer, agent, or employee of Seller, nor to Seller's Knowledge any other Person associated with or acting for or on behalf of Seller, has directly or indirectly: A. Made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property, or services (i) to obtain favorable treatment in securing business; (ii) to pay for favorable treatment for business secured; (iii) to obtain special concessions or for special concessions already obtained, for or in respect of Seller or any affiliate of Seller or (iv) in violation of any Legal Requirement. B. Established or maintained any fund or asset that has not been recorded in the books and records of Seller. 3.20. Disclosure, A. No representation or warranty of Seller in this Agreement and no statement in the Disclosure Schedule omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. B. No notice given pursuant to Section 5.5. will contain any untrue statement or omit to state a material fact necessary to make the statements therein or in this Agreement, in light of the circumstances in which they were made, not misleading. C. There is no fact known to Seller that has specific application to Seller or Seller (other than general economic or industry conditions) and that materially adversely affects or, as far as Seller can reasonably foresee, materially threatens, the assets, business, prospects, financial condition, or results of operations of Seller (on a consolidated basis) that has not been set forth in this Agreement or the Disclosure Schedule. 3.21. Brokers or Finders. Seller and its agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. -18- 3.22. Fairness Opinion. Buyer waives the request for a fairness opinion from Seller's counsel. 4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Seller as follows: 4.1. Organization and Good Standing. Buyer is an individual. 4.2. Authority. This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Upon the execution and delivery by Buyer of the closing documents set forth in Section 2.5.B (collectively, the "Buyer's Closing Documents"), the Buyer's Closing Documents will constitute the legal, valid, and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms. Buyer has the absolute and unrestricted right, power, and authority to execute and deliver this Agreement and the Buyer's Closing Documents and to perform its obligations under this Agreement and the Buyer's Closing Documents. 4.3. Investment Intent. Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act. 4.4. Certain Proceedings. There is no pending Proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been Threatened. 4.5. Brokers or Finders. Buyer and its agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement and will indemnify and hold Seller harmless from any such payment alleged to be due by or through Buyer as a result of the action of Buyer or its officers or agents. 5. COVENANTS OF SELLER PRIOR TO CLOSING DATE. 5.1. Access and Investigation. Between the date of this Agreement and the Closing Date, Seller will, and will cause Seller and its Representatives to: A. Afford Buyer and its Representatives and prospective lenders and their Representatives (collectively, "Buyer's Advisors") full and free access to Seller's personnel, properties (including subsurface testing), contracts, books and records, and other documents and data; B. Furnish Buyer and Buyer's Advisors with copies of all such contracts, books and records, and other existing documents and data as Buyer may reasonably request; and C. Furnish Buyer and Buyer's Advisors with such additional financial, operating, and other data and information as Buyer may reasonably request. -19- 5.2. Operation of the Business of Seller. Between the date of this Agreement and the Closing Date, Seller will: A. Conduct the business of Seller only in the Ordinary Course of Business; B. Use its Best Efforts to preserve intact the current business organization of Seller, keep available the services of the current officers, employees, and agents of Seller, and maintain the relations and good will with suppliers, customers, landlords, creditors, employees, agents, and others having business relationships with Seller; C. Confer with Buyer concerning operational matters of a material nature; and D. Otherwise report periodically to Buyer concerning the status of the business, operations, and finances of Seller. 5.3. Negative Covenant. Except as otherwise expressly permitted by this Agreement, between the date of this Agreement and the Closing Date, Seller will not without the prior consent of Buyer, take any affirmative action, or fail to take any reasonable action within their or its control, as a result of which any of the changes or events listed in Section 3.13. is likely to occur. 5.4. Required Approvals. As promptly as practicable after the date of this Agreement, Seller will, and will cause Seller to, make all filings required by Legal Requirements to be made by them in order to consummate the Contemplated Transactions. Between the date of this Agreement and the Closing Date, Seller will, and will cause Seller to: A. Cooperate with Buyer with respect to all filings that Buyer reasonably elects to make or is required by Legal Requirements to make in connection with the Contemplated Transactions; and B. Cooperate with Buyer in obtaining all required Consents. 5.5. Notification. Between the date of this Agreement and the Closing Date, Seller will promptly notify Buyer in writing if Seller becomes aware of any fact or condition that causes or constitutes a Breach of any of Seller's representations and warranties as of the date of this Agreement, or if Seller becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a Breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact or condition require any change in the Disclosure Schedule if the Disclosure Schedule were dated the date of the occurrence or discovery of any such fact or condition, Seller will promptly deliver to Buyer a supplement to the Disclosure Schedule specifying such change. During the same period, each Seller will promptly notify Buyer of the occurrence of any Breach of any covenant of Seller in this Section 5. or of the occurrence of any event that may make the satisfaction of the conditions in Section 7. impossible or unlikely. -20- 5.6. No Negotiation. Until such time, if any, as this Agreement is terminated pursuant to Section 9., Seller will not, and will cause its Representatives not to, directly or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to, or consider the merits of any unsolicited inquiries or proposals from, any Person (other than Buyer) relating to any transaction involving the sale of the business or assets (other than in the Ordinary Course of Business) of Seller, or any of the capital stock of Seller, or any merger, consolidation, business combination, or similar transaction involving Seller. 5.7. Closing of Bank Accounts. Seller shall cause the removal of Seller from the banks of Seller, without causing the closing of said accounts. Seller shall cause the closing of savings accounts of Seller 6. COVENANTS OF BUYER PRIOR TO CLOSING DATE. 6.1. Approvals of Governmental Bodies/Third Party Consents. As promptly as practicable after the date of this Agreement, Buyer will, and will cause each of its Related Persons to, make all filings required by Legal Requirements to be made by them to consummate the Contemplated Transactions. Between the date of this Agreement and the Closing Date, Buyer will, and will cause each Related Person to: A. Cooperate with Seller with respect to all filings that Seller is required by Legal Requirements to make in connection with the Contemplated Transactions; and B. Cooperate with Seller in obtaining all consents identified in Schedule 3.2 of the Disclosure Schedule; provided that this Agreement will not require Buyer to dispose of or make any change in any portion of its business or to incur any other burden to obtain a Governmental Authorization. 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to purchase the Shares and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part): 7.1. Accuracy of Representations, A. All of Seller's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this Agreement, and must be accurate in all material respects as of the Closing Date as if made on the Closing Date, without giving effect to any supplement to the Disclosure Schedule. B. Each of Seller's representations and warranties in Article 3. must have been accurate in all respects as of the date of this Agreement, and must be accurate in all respects -21- as of the Closing Date as if made on the Closing Date, without giving effect to any supplement to the Disclosure Schedule. 7.2. Seller's Performance. A. All of the covenants and obligations that Seller is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been duly performed and complied with in all material respects. B. Each document required to be delivered pursuant to Section 2.4. must have been delivered, and each of the other covenants and obligations in Section 5. must have been performed and complied with in all respects. C. The results of any investigation performed by Buyer in connection with Section 5.1. shall be satisfactory to Buyer in its sole discretion. 7.3. Consents. Each of the Consents identified in Schedule 3.2 of the Disclosure Schedule must have been obtained and must be in full force and effect. 7.4. Additional Documents. Seller shall deliver such other documents as Buyer may reasonably request for the purpose of (i) evidencing the accuracy of any of Seller's representations and warranties; (ii) evidencing the performance by Seller of, or the compliance by Seller with, any covenant or obligation required to be performed or complied with by such Seller; (iii) evidencing the satisfaction of any condition referred to in this Section 7. or (iv) otherwise facilitating the consummation or performance of any of the Contemplated Transactions. 7.5. No Proceedings. Since the date of this Agreement, there must not have been commenced or Threatened against Buyer, or against any Person affiliated with Buyer, any Proceeding (i) involving any challenge to, or seeking Damages or other relief in connection with, any of the Contemplated Transactions or (ii) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the Contemplated Transactions. 7.6. No Claim Regarding Stock Ownership or Sale Proceeds. There must not have been made or Threatened by any Person any claim asserting that such Person (i) is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any stock of, or any other voting, equity, or ownership interest in, any of Seller or (ii) is entitled to all or any portion of the Purchase Price payable for the Shares. 7.7. No Prohibition. Neither the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), materially contravene, or conflict with, or result in a material violation of, or cause Buyer or any Person affiliated with Buyer to suffer any material adverse consequence under, (i) any applicable Legal Requirement or Order or (ii) any Legal Requirement or Order that has been published, introduced, or otherwise proposed by or before any Governmental Body. -22- 7.8. Employment Agreement. On or before the Closing Date, Richard Criag shall have entered into an employment agreement with Seller. 8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller's obligation to sell the Shares and to take the other actions required to be taken by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Seller, in whole or in part): 8.1. Accuracy of Representations. All of Buyer's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this Agreement and must be accurate in all material respects as of the Closing Date as if made on the Closing Date. 8.2. Buyer's Performance. A. All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been performed and complied with in all material respects. B. Buyer must have delivered each of the documents required to be delivered by Buyer pursuant to Section 2.5. 8.3. Consents. Each of the Consents identified in Schedule 3.2 of the Disclosure Schedule must have been obtained and must be in full force and effect. 8.4. Additional Documents, Buyer must have caused the following documents to be delivered to Seller such other documents as Seller may reasonably request for the purpose of (i) enabling their counsel to provide the opinion referred to in Section 2.5.A.(iii); (ii) evidencing the accuracy of any representation or warranty of Buyer; (iii) evidencing the performance by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer; (iv) evidencing the satisfaction of any condition referred to in this Section 8. or (v) otherwise facilitating the consummation of any of the Contemplated Transactions. 8.5. No Injunction. There must not be in effect any Legal Requirement or any injunction or other Order that (i) prohibits the sale of the Shares by Seller to Buyer and (ii) has been adopted or issued, or has otherwise become effective, since the date of this Agreement. 9. TERMINATION. 9.1. Termination Events. This Agreement may, by notice given prior to or at the Closing, be terminated: -23- A. By either Buyer or Seller if a material Breach of any provision of this Agreement has been committed by the other party and such Breach has not been waived; B. (i) By Buyer if any of the conditions in Section 7. have not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Buyer to comply with its obligations under this Agreement) and Buyer has not waived such condition on or before the Closing Date; (ii) By Seller, if any of the conditions in Section 8. have not been satisfied of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Seller to comply with their obligations under this Agreement) and Seller has not waived such condition on or before the Closing Date; or C. By mutual consent of Buyer and Seller; or D. By either Buyer or Seller if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before November 15, 1998, or such later date as the parties may agree upon. 9.2. Effect of Termination. Each party's right of termination under Section 9.1. is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 9.1., all further obligations of the parties under this Agreement will terminate, except that the obligations in Sections 12.1. and 12.3. will survive; provided, however, that if this Agreement is terminated by a party because of the Breach of the Agreement by the other party or because one (1) or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of the other party's failure to comply with its obligations under this Agreement, the terminating party's right to pursue all legal remedies will survive such termination unimpaired. 10. INDEMNIFICATION; REMEDIES. 10.1. Agreement by Seller to Indemnify. Seller (the "Seller Indemnifying Party"), agrees that they will indemnify and hold Buyer harmless in respect of the aggregate of all indemnifiable Damages of Buyer. For this purpose, "indemnifiable Damages" of Buyer means the aggregate of all Damages incurred or suffered by Buyer resulting from: A. Any inaccurate representation or warranty made by Seller in or pursuant to this Agreement; B. Any default in the performance of any of the covenants or agreements made by Seller in this Agreement; or -24- C. The failure of any Seller to pay, discharge or perform any liability or obligation of Seller or of Seller resulting from the operation of Seller's business prior to the Closing Date. Without limiting the generality of the foregoing, with respect to the measurement of "indemnifiable Damages". Buyer shall have the right to be put in the same financial position as it would have been had each of the representations and warranties of Seller been true and correct and had each of the covenants of Seller been performed in full. The amount of any indemnifiable Damages otherwise payable to Buyer hereunder shall be reduced if the indemnifiable Damages incurred by Buyer will provide Buyer with income tax deductions or credits. The amount of the reduction shall be the amount of the actual cash tax savings realized by Buyer as a result of such deductions or credits, discounted to its present value as of the date of the payment of the indemnifiable Damages from the date such indemnifiable Damages were incurred by Buyer at the rate of interest charged on such date by the Internal Revenue Service on underpayment of taxes. The foregoing obligation of Seller Indemnifying Party to indemnify Buyer shall be subject to each of the following principles or qualifications: 1. Each of the representations and warranties made by Seller in this Agreement or pursuant hereto, shall survive for a period of one (1) year after the Closing; provided, however, that the representations and warranties made by Seller to the extent they relate to Seller's title to the Shares shall survive forever and that the representations and warranties made by Seller and Shareholder in Section 3.8. hereof ("Taxes") shall in each case survive until the first (1st) anniversary of the later of: A. The date on which applicable period of limitation on assessment or refund of tax has expired; or B. The date on which the applicable taxable year (or portion thereof) has been closed. No claim for the recovery of indemnifiable Damages may be asserted by Buyer against Seller Indemnifying Party or their successors in interest after such representations and warranties shall be thus extinguished; provided, however, that claims first asserted in writing within the applicable period shall not thereafter be barred. 10.2. Agreements by Buyer to Indemnify. Buyer (the "Buyer Indemnifying Party"), agrees to indemnify and hold Seller (the "Seller Indemnified Party") harmless in respect of the aggregate of all indemnifiable Damages of any of Seller Indemnified Parties. For this purpose, "indemnifiable Damages" of the of Seller Indemnified Party means the aggregate of all Damages incurred or suffered by the Seller Indemnified Party resulting from: A. Any inaccurate representation or warranty made by Buyer or pursuant to this Agreement; or -25- B. Any default in the performance of any of the covenants or agreements made by Buyer in this Agreement. Without limiting the generality of the foregoing, with respect to the measurement of "indemnifiable Damages", the Seller Indemnified Party shall have the right to be put in the same financial position as they would have been had each of the representations and warranties of Buyer Indemnifying Party been true and correct and had each of the covenants of Buyer Indemnifying Party been performed in full. The amount of any indemnifiable Damages otherwise payable to any Seller Indemnified Party hereunder shall be reduced if the indemnifiable Damages incurred by Seller Indemnified Party will provide such Party with income tax deductions or credits. The amount of the reduction shall be the amount of the actual cash tax savings realized by Seller Indemnified Party as a result of such deductions or credits discounted to its present value as of the date of the payment of the indemnifiable Damages from the date such indemnifiable Damages were incurred by Seller Indemnified Party at the rate of interest charged on such date by the Internal Revenue Service on underpayment of taxes. The foregoing obligation of Buyer Indemnifying Party to indemnify Seller Indemnified Party shall be subject to each of the following principles or qualifications: 10.2.1 Each of the representations and warranties made by Buyer in Article 4 of this Agreement shall survive for a period of one (1) year after the Closing Date, and thereafter all such representations and warranties shall be extinguished. No claim for the recovery of indemnifiable Damages pursuant to clause (i) of Section 10.2. may be asserted by Seller Indemnified Party against Buyer Indemnifying Party or its successors in interest after such representations and warranties shall be thus extinguished; provided, however, that claims first asserted in writing within the applicable period shall not thereafter be barred. 10.3. Matters Involving Third Parties. If any third party shall notify Buyer or Seller (the "Indemnified Party") with respect to any matter which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this Section 10., then the Indemnified Party shall notify each Indemnifying Party thereof promptly; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any liability or obligation hereunder unless (and then solely to the extent that) the Indemnifying Party thereby is Damaged. If any Indemnifying Party notifies the Indemnified Party within fifteen (15) days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, then: A. The Indemnifying Party will defend the Indemnified Party against the matter with counsel of its choice satisfactory to the Indemnified Party; -26- B. The Indemnified Party may retain separate co-counsel at its sole cost and expense (except that the Indemnifying Party will be responsible for the fees and expenses of the separate co-counsel to the extent the Indemnified Party concludes that the counsel the Indemnifying Party has selected has a conflict of interest); C. The Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the matter without the written consent of the Indemnifying Party (not to be withheld or delayed unreasonably); and D. The Indemnifying Party will not consent to the entry of any judgment with respect to the matter, or enter into any settlement which does not include a provision whereby the plaintiff or claimant in the matter releases the Indemnified Party from all liability with respect thereto, without the written consent of the Indemnified Party (not to be withheld or delayed unreasonably). If no Indemnifying Party notifies the Indemnified Party within fifteen (15) days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, then the Indemnified Party may defend against, or enter into any settlement with respect to, the matter in any manner it may deem appropriate. 11. POST-CLOSING AGREEMENTS. 11.1. Consistency in Reporting. Each party hereto agrees that: (i) the transaction is intended to qualify as a tax-free transaction under the I.R.C.; (ii) the transaction shall be reported for Federal income tax purposes as a tax-free transaction; (iii) for purposes of all financial statements, tax returns and reports, and communications with third parties, the transactions contemplated in this agreement and ancillary or collateral transactions will be treated as a tax-free transaction; and (iv) if the characterization of any transaction contemplated in this agreement or any ancillary or collateral transaction is challenged, each party hereto will testify, affirm and ratify that the characterization contemplated in such agreement was with the characterization intended by the party; provided, however, that nothing herein shall be construed as giving rise to any obligation if the reporting position is determined to be incorrect by final decision of a court of competent jurisdiction. 12. GENERAL PROVISIONS. 12.1. Expenses. Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, counsel, and accountants. Seller will cause Seller not to incur any out-of-pocket expenses in connection with the Contemplated Transactions. In the event of termination of this Agreement, the obligation of each party to pay its own expenses will be subject to any rights of such party arising from a breach of this Agreement by another party. -27- 12.2. Public Announcements. Any public announcement or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as Buyer determines. Unless consented to by Buyer in advance or required by Legal Requirements, prior to the Closing Seller shall, and shall cause Seller to, keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any Person. Seller and Buyer will consult with each other concerning the means by which Seller's employees, customers, and suppliers and others having dealings with Seller will be informed of the Contemplated Transactions, and Buyer will have the right to be present for any such communication. 12.3. Confidentiality. Between the date of this Agreement and the Closing Date, Buyer and Seller will maintain in confidence, and will cause the directors, officers, employees, agents, and advisors of Buyer and Seller to maintain in confidence, and not use to the detriment of another party or an Seller any written, oral, or other information obtained in confidence from another party or an Seller in connection with this Agreement or the Contemplated Transactions, unless: A. Such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party; B. The use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the Contemplated Transactions; or C. The furnishing or use of such information is required by or necessary or appropriate in connection with legal proceedings. If the Contemplated Transactions are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request. Whether or not the Closing takes place, Seller waives, and will upon Buyer's request cause Seller to waive an cause of action, right, or claim arising out of the access of Buyer or its representatives to any trade secrets or other confidential information of Seller. 12.4. Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt); (ii) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): -28- Seller: Glenda Illes 6821 Boston Hill Lane Canton, MI 48187 With a copy to: Richard Craig 15856 Centralia Redford, MI 48239 Buyer: Scott Schuster 3700 Crestwood Parkway Suite 1000 Duluth, GA 30096 With a copy to: Morris, Manning & Martin, L.L.P. 1600 Atlanta Financial Center 3343 Peachtree Road, N.E. Atlanta, Georgia 30326-1044 Attention; Bryan G. Harrison, Esq. Telecopy No.: (404) 365-9532 12.5. Jurisdiction; Service of Process. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Georgia, County of DeKalb, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Georgia, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world. 12.6. Further Assurances. The parties agree (i) to furnish upon request to each other such further information; (ii) to execute and deliver to each other such other documents and (iii) to do such other acts arid things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. 12.7. Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law: -29- A. No claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one (1) party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; B. No waiver that may be given by a party will be applicable except in the specific instance for which it is given; and C. No notice to or demand on one (1) party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. 12.8. Entire Agreement and Modification. This Agreement supersedes all prior agreements between the parties with respect to its subject matter (including the Letter of Intent between Buyer and Seller dated October 31, 1998) and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. 12.9. Disclosure Schedule. A. The disclosures in the Disclosure Schedule, and those in any Supplement thereto, must relate only to the representations and warranties in the Section of the Agreement to which they expressly relate and not to any other representation or warranty in this Agreement. B. In the event of any inconsistency between the statements in the body of this Agreement and those in the Disclosure Schedule (other than an exception expressly set forth as such in the Disclosure Schedule with respect to a specifically identified representation or warranty), the statements in the body of this Agreement will control. 12.10. Assignments, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties, which will not be unreasonably withheld, except that Buyer may assign any of its rights under this Agreement to any Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 12.11. Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. -30- 12.12. Section Headings; Construction. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 12.13. Time of Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. 12.14. Governing Law. This Agreement will be governed by the laws of the State of Georgia without regard to conflicts of laws principles. 12.15. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. BUYER: SELLER: By: /s/ Scott Schuster /s/ Rick Craig /s/ Glenda Illes ------------------------- ---------------------------------- Title: Title: Pres. Vice President ---------------------- --------------------------- Date: 11/8/98 Date: 11-5-98 ----------------------- ---------------------------- -31- SCHEDULES -32- EXHIBITS Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E Exhibit F -33- We, the undersigned, hereby certify that all representations and warranties as stated in the Stock Purchase Agreement, incorporated hereto, are true and accurate. /s/ Scott Schuster - ----------------------------- Scott Schuster We, the undersigned, hereby certify that all representations and warranties as stated in the Stock Purchase Agreement, incorporated hereto, are true and accurate. /s/ Rick Craig - ----------------------------- Rick Craig, President /s/ Glenda Illes - ----------------------------- Glenda Illes, Vice President We, the undersigned, hereby state the Corporation, Scanlan Music Corporation, Inc., is in good standing with the State of Michigan /s/ Rick Craig - ----------------------------- Rick Craig, President /s/ Glenda Illes - ----------------------------- Glenda Illes, Vice President Amendment of Disclosure Schedule to Stock Purchase Agreement Dated November 5, 1998 3.1 Name: Scanlan Music, Inc. Incorporated in Michigan Capitalization: 3.2 None 3.3 N/A 3.4 N/A 3.5 N/A 3.6 With the exception of inventory, all items are owned outright. 3.7 Back Gross Wages to Nicole Craig totaling Three Thousand Two Hundred Forty Dollars ($3,240.00) 3.8 All Taxes are Current 3.9 N/A 3.10.1 Only health insurance through Health Alliance Plan which is current in payment. 3.17(A) Past due balances to vendors as listed in attached exhibit 3.17 Back Gross wages to Nicole Craig totaling Three Thousand Two Hundred Forty Dollars ($3,240.00) EX-2.4.1 3 AGREEMENT OF ASSIGNMENT Agreement of Assignment Scott A. Schuster hereby assigns for the amount of US $10 (ten dollars) and other good and valuable considerations, all rights, titles and inventory by virtue of the Stock Purchase Agreement between Scott Schuster and Scanlan Music entered into on November 8, 1998 to CONCAP, Inc. Hereby entered into as of this 9th day of November, 1998. Signed: /s/ Scott Schuster ------------------------- EX-2.5 4 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT MADE AS OF APRIL 1, 1999, BETWEEN CONCAP, INC., BUYER, AND VIRTUAL ENTERPRISE, INC. KRIS HUTCHINSON, STEPHEN HYSER, TAMMY HUTCHINSON, AND CLARKSTON & WILLIAMS, LLC, INDIVIDUALLY SELLER(S) TABLE OF CONTENTS Page ---- 1. DEFINITIONS....................................................... 1 1.1. "APPLICABLE CONTRACT"...................................... 1 1.2. "BREACH"................................................... 1 1.3. "BUYER".................................................... 1 1.4. "BUYER'S STOCK"............................................ 1 1.5. "CLOSING".................................................. 1 1.6. "CLOSING DATE"............................................. 1 1.8. "CONSENT".................................................. 2 1.9. "CONTEMPLATED TRANSACTIONS"................................ 2 1.10. "CONTRACT"................................................. 2 1.11. "DAMAGES".................................................. 2 1.12. "DISCLOSURE SCHEDULE"...................................... 2 1.13. "ENCUMBRANCE".............................................. 2 1.14. "ENVIRONMENTAL REQUIREMENTS"............................... 2 1.15. "ERISA".................................................... 2 1.16. "FACILITIES"............................................... 3 1.17. "GAAP"..................................................... 3 1.18. "GOVERNMENTAL AUTHORIZATION"............................... 3 1.19. "GOVERNMENTAL BODY"........................................ 3 1.20. "IRC"...................................................... 3 1.21. "IRS"...................................................... 3 1.22. "KNOWLEDGE"................................................ 3 1.23. "LEGAL REQUIREMENT"........................................ 3 1.24. "OPERATING INCOME"......................................... 3 1.25. "ORDER".................................................... 4 1.26. "ORDINARY COURSE OF BUSINESS".............................. 4 1.27. "ORGANIZATIONAL DOCUMENTS"................................. 4 1.28. "PERSON"................................................... 4 1.29. "PLAN"..................................................... 4 1.30. "PROCEEDING"............................................... 5 1.31. "RELATED PERSON"........................................... 5 1.32. "REPRESENTATIVE"........................................... 5 1.33. "SECURITIES ACT"........................................... 6 1.34. "SELLER" OR "SELLERS"...................................... 6 1.35. "SHARES"................................................... 6 1.36. "SUBSIDIARY"............................................... 6 1.37. "TAX RETURN"............................................... 6 1.38. "THREATENED"............................................... 6 2. TRANSFER OF SHARES; REIMBURSEMENT AMOUNT; CLOSING................. 6 2.1. SHARES..................................................... 6 2.2 BUYER'S STOCK.............................................. 6 2.3 CLOSING.................................................... 6 2.4 CLOSING OBLIGATIONS........................................ 7 3. REPRESENTATIONS AND WARRANTIES OF SELLERS......................... 7 -i- 3.1. ORGANIZATION AND GOOD STANDING............................. 7 3.2. AUTHORITY; NO CONFLICT..................................... 8 3.3. CAPITALIZATION............................................. 9 3.4. FINANCIAL STATEMENTS....................................... 9 3.5. BOOKS AND RECORDS.......................................... 10 3.6. TITLE TO PROPERTIES; ENCUMBRANCES.......................... 10 3.7. NO UNDISCLOSED LIABILITIES................................. 11 3.8. TAXES...................................................... 11 3.9. NO MATERIAL ADVERSE CHANGE................................. 11 3.10 EMPLOYEE BENEFITS MATTERS.................................. 12 3.11 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS. ............................ 13 3.12 LEGAL PROCEEDINGS; ORDERS. ................................ 14 3.13 ABSENCE OF CERTAIN CHANGES AND EVENTS. .................... 15 3.14 CONTRACTS; NO DEFAULTS..................................... 16 3.15 INSURANCE.................................................. 17 3.16 ENVIRONMENTAL MATTERS...................................... 18 3.17 EMPLOYEE MATTERS........................................... 18 3.18 INTELLECTUAL PROPERTY RIGHTS OF SELLER..................... 18 3.19 CERTAIN PAYMENTS........................................... 20 3.20 DISCLOSURE................................................. 21 3.21 BROKERS OR FINDERS......................................... 21 3.22 FAIRNESS OPINION........................................... 21 4. REPRESENTATIONS AND WARRANTIES OF BUYER........................... 21 4.1. ORGANIZATION AND GOOD STANDING............................. 21 4.2. AUTHORITY.................................................. 21 4.3. INVESTMENT INTENT.......................................... 22 4.4. CERTAIN PROCEEDINGS........................................ 22 4.5. BROKERS OR FINDERS......................................... 22 5. COVENANTS OF SELLER PRIOR TO CLOSING DATE......................... 22 5.1. ACCESS AND INVESTIGATION................................... 22 5.2. OPERATION OF THE BUSINESS OF THE COMPANY................... 22 5.3. NEGATIVE COVENANT.......................................... 23 5.4. REQUIRED APPROVALS......................................... 23 5.5. NOTIFICATION............................................... 23 5.6. NO NEGOTIATION............................................. 23 5.7. CLOSING OF BANK ACCOUNTS................................... 23 6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.......................... 24 6.1. APPROVALS OF GOVERNMENTAL BODIES/ THIRD PARTY CONSENTS..................................... 24 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE............... 24 7.1. ACCURACY OF REPRESENTATIONS................................ 24 7.2. SELLERS' PERFORMANCE....................................... 24 7.3. CONSENTS................................................... 25 7.4. ADDITIONAL DOCUMENTS....................................... 25 -ii- 7.5. NO PROCEEDINGS............................................. 25 7.6. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS......................................... 25 7.7. NO PROHIBITION............................................. 25 7.8. EMPLOYMENT AGREEMENT....................................... 25 8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.............. 25 8.1. ACCURACY OF REPRESENTATIONS................................ 25 8.2. BUYER'S PERFORMANCE........................................ 26 8.3. CONSENTS................................................... 26 8.4. ADDITIONAL DOCUMENTS....................................... 26 8.5. NO INJUNCTION.............................................. 26 9. TERMINATION....................................................... 26 9.1. TERMINATION EVENTS......................................... 26 9.2. EFFECT OF TERMINATION...................................... 27 10. INDEMNIFICATION; REMEDIES......................................... 27 10.1. AGREEMENT BY SELLERS TO INDEMNIFY.......................... 27 10.2. AGREEMENTS BY BUYER TO INDEMNIFY........................... 28 10.3. MATTERS INVOLVING THIRD PARTIES............................ 29 11. POST-CLOSING AGREEMENTS........................................... 30 11.1. CONSISTENCY IN REPORTING................................... 30 11.2. PERFORMANCE OF THE COMPANY................................. 30 11.3. REMEDIES FOR BREACH OF AGREEMENT BY SELLERS................ 30 12. GENERAL PROVISIONS................................................ 31 12.1. EXPENSES................................................... 31 12.2. PUBLIC ANNOUNCEMENTS....................................... 31 12.3. CONFIDENTIALITY............................................ 31 12.4. NOTICES.................................................... 32 12.5. JURISDICTION; SERVICE OF PROCESS........................... 33 12.6. FURTHER ASSURANCES......................................... 33 12.7. WAIVER..................................................... 33 12.8. ENTIRE AGREEMENT AND MODIFICATION.......................... 33 12.9. DISCLOSURE SCHEDULE........................................ 33 12.10. ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS.......... 34 12.11. SEVERABILITY............................................... 34 12.12. SECTIONS HEADINGS; CONSTRUCTION............................ 34 12.13. TIME OF ESSENCE............................................ 34 12.14. GOVERNING LAW.............................................. 34 12.15. COUNTERPARTS............................................... 34 -iii- STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of April 1, 1999, by and among CONCAP, Inc., a Texas corporation, ("Buyer"), and Virtual Enterprise, Inc., a Georgia Corporation, Kris Hutchinson, Stephen Hyser, Tammy Hutchinson and Clarkston & Williams, LLC (each individually, a "Seller" and collectively "Sellers") and Virtual Enterprise, Inc. (the "Company") RECITALS: Seller desire to sell, and Buyer desires to purchase, all of the issued and outstanding shares (the "Shares") of capital stock of the Company for the consideration and on the terms set forth in this Agreement. AGREEMENT The parties, intending to be legally bound, agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1.: 1.1. "Applicable Contract" - any Contract (i) under which the Company has or may acquire any rights; (ii) under which the Company has or may become subject to any obligation or liability or (iii) by which the Company or any of the assets owned or used by it is or may become bound. 1.2. "Breach" - a "Breach" of a representation, warranty, covenant, obligation, or other provision of this Agreement or any instrument delivered pursuant to this Agreement will be deemed to have occurred if there is or has been (i) any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation, or other provision or (ii) any claim (by any Person) or other occurrence or circumstance that is or was inconsistent with such representation, warranty, covenant, obligation, or other provision, and the term "Breach" means any such inaccuracy, breach, failure, claim, occurrence or circumstance. 1.3. "Buyer" - as defined in the first paragraph of this Agreement. 1.4. "Buyer's Stock" - 100,000 restricted shares of Buyer's capital stock. 1.5. "Closing" - as defined in Section 2.4. 1.6. "Closing Date" - the date and time as of which the Closing actually takes place. 1.7 "Company" - Virtual Enterprise, Inc. 1.8. "Consent" - any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization). 1.9. "Contemplated Transactions" - all of the transactions contemplated by this Agreement, including: A. The transfer of the Shares by Sellers to Buyer; B. The execution, delivery, and performance of the Closing Obligations set forth in Section 2.5; C. The performance by Buyer and Sellers of their respective covenants and obligations under this Agreement; D. Buyer's acquisition and ownership of the Shares and exercise of control over the Company; and E. The transfer of Buyer's Stock to Sellers; and 1.10. "Contract" - any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding. 1.11. "Damages" - any loss, liability, claim, damages (including, without limitation, incidental and consequential damages), expense (including, without limitation, costs of investigation and defense and reasonable attorneys' fees) or diminution of value, whether or not involving a third party. 1.12. "Disclosure Schedule" - the disclosure schedule delivered by Sellers to Buyer concurrently with the execution and delivery of this Agreement. 1.13. "Encumbrance" - any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership. 1.14. "Environmental Requirements" - means federal, state and local laws relating to pollution or protection of the environment, including laws or provisions relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, or hazardous or toxic materials, substances, or wastes into air, surface water, groundwater, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or hazardous or toxic materials, substances, or wastes. 1.15. "ERISA" - the Employee Retirement Income Security Act of 1974 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. -2- 1.16. "Facilities" - any real property, leaseholds, or other interests currently or formerly owned or operated by the Company and any buildings, plants, structures, or equipment (including motor vehicles) currently or formerly owned or operated by the Company. 1.17. "GAAP" - generally accepted United States accounting principles, applied on a basis consistent with the basis on which the financial statements referred to in Section 3.4. were prepared. 1.18. "Governmental Authorization" - any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement. 1.19. "Governmental Body" - any: A. Nation, state, county, city, town, village, district, or other jurisdiction of any nature; B. Federal, state, local, municipal, foreign, or other government; C. Governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); D. Multi-national organization or body; or E. Body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature. 1.20. "IRC" - the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law. 1.21. "IRS" - the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury. 1.22. "Knowledge" - an individual will be deemed to have "Knowledge" of a particular fact or other matter if: A. Such individual is actually aware of such fact or other matter; or B. A prudent individual given his position with the Company could be reasonably expected to discover or otherwise become aware of such fact or other matter. 1.23. "Legal Requirement" - any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty. 1.24. "Operating Income" - means the net income of the Company determined in accordance with GAAP before income taxes and after all other charges except: -3- A. Unless otherwise approved by Buyer, any general and administrative expense (i.e., allocation of the Company's general corporate overhead) attributable to the Company and all subsidiaries of the Company that is not directly related to the operation of the Company in the Ordinary Course of Business; provided, however, Operating Income shall include reimbursement by the Company of expenses at a fair market price mutually agreed to by Buyer and Sellers for expenses previously incurred by Seller, but that have for administrative convenience or efficiency reasons been centralized with Buyer; and B. Any amortization of goodwill of the Company and all Subsidiaries of the Company. C. In the event that certain expenses incurred by the Company are for the principal or partial benefit of the Company or other subsidiaries of the Company, then the parties hereto shall endeavor to track and determine in a fair and equitable manner that portion of such expenses that should fairly and reasonably be allocated to the Company or such other subsidiaries of the Company, and therefore not included in arriving at Operating Income for purposes of this Agreement. 1.25. "Order" - any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator. 1.26. "Ordinary Course of Business" - an action taken by a Person will be deemed to have been taken in the "Ordinary Course of Business" only if: A. Such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; B. Such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority); and C. Such action is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any Person or group of Persons exercising similar authority), in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person. 1.27. "Organizational Documents" - (i) the Articles or Certificate of Incorporation and the Bylaws of a corporation; (ii) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person and (iii) any amendment to any of the foregoing. 1.28. "Person" - any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body. 1.29. "Plan" - as defined in Section 3.10.1. -4- 1.30. "Proceeding" - any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator. 1.31. "Related Person" - with respect to a particular individual: A. Each other member of such individual's Family; B. Any Person that is directly or indirectly controlled by such individual or one (1) or more members of such individual's Family; C. Any Person in which such individual or members of such individual's Family hold (individually or in the aggregate) a Material Interest; and D. Any Person with respect to which such individual or one (1) or more members of such individual's Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity). With respect to a specified Person other than an individual: A. Any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; B. Any Person that holds a Material Interest in such specified Person; C. Each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity); D. Any Person in which such specified Person holds a Material Interest; E. Any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and Any Related Person of any individual described in clause B. or C. For purposes of this definition, (i) the "Family" of an individual includes (1) the individual; (2) the individual's spouse and former spouses; (3) any other natural person who is related to the individual or the individual's spouse within the second degree and (4) any other natural person who resides with such individual and (2) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least five percent (5%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least five percent (5%) of the outstanding equity securities or equity interests in a Person. 1.32. "Representative" - with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors. -5- 1.33. "Securities Act" - the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. 1.34. "Seller" or "Sellers" - as defined in the first paragraph of this Agreement. 1.35. "Shares" - as defined in the Recitals of this Agreement. 1.36. "Subsidiary" - with respect to any Person (the "Owner"), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one (1) or more of its Subsidiaries; when used without reference to a particular Person, "Subsidiary" means a Subsidiary of the Company. 1.37. "Tax Return" - any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax. 1.38. "Threatened" - a claim, Proceeding, dispute, action, or other matter will be deemed to have been "Threatened" if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future. 2. TRANSFER OF SHARES; REIMBURSEMENT AMOUNT; CLOSING. 2.1. Shares. In exchange for the transfer of Buyer's Stock, as set forth in Section 2.2, and subject to the terms and conditions of this Agreement, at the Closing, Sellers will transfer the Shares to Buyer. 2.2. Buyer's Stock. In exchange for the transfer of Shares as set forth in Section 2.1, and subject to the terms and conditions of this Agreement, at the Closing, Buyer shall transfer to Sellers the Buyer's Stock as mutually agreed by the parties. 2.3. Closing. The purchase and sale (the "Closing") provided for in this Agreement will take place at the offices of Paul, Hastings, Janofsky & Walker, LLP, Suite 2400, 600 Peachtree Street, N.E., Atlanta, Georgia 30308-2222, at 10:00 a.m. (local time) on April 1, 1999, or at such other time and place as the parties may agree. Except as otherwise provided in Section 9., failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this Section 2.3. will not result in the termination of this Agreement and will not relieve any party of any obligation under this Agreement. -6- 2.4. Closing Obligations. At the Closing: A. Seller will deliver to Buyer: (i) Certificates. Certificates representing the Shares, duly endorsed (or accompanied by duly executed stock powers) for transfer to Buyer; (ii) Opinion of Counsel. Buyer shall have received an opinion dated the Closing Date from Clarkston & Williams, LLC, counsel for Sellers, substantially in the form of Exhibit A attached hereto; (iii) Good Standing Certificate. Sellers shall have delivered to Buyer a certificate evidencing the good standing of the Company as of a recent practicable date; (iv) Certificate. A certificate substantially in the form of Exhibit B hereto, executed by each Seller representing and warranting to Buyer that each of Sellers' representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date (giving full effect to any supplements to the Disclosure Schedule that were delivered by Sellers to Buyer prior to the Closing Date in accordance with Section 5.5.); and B. Buyer will deliver to Sellers: (i) Certificates. Certificates representing Buyer's Stock, duly endorsed (or accompanied by duly executed stock powers) for transfer to Sellers; (ii) Certificate. A certificate in the form of Exhibit C hereto executed by Buyer to the effect that, except as otherwise stated in such certificate, each of Buyer's representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date; and 3. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers hereby jointly and severally represent and warrant to Buyer as follows: 3.1. Organization and Good Standing. A. Schedule 3.1 of the Disclosure Schedule contains a complete and accurate list of the Company's name, its jurisdiction of incorporation, other jurisdictions in which it is authorized to do business, and its capitalization (including the identity of each stockholder and the number of shares held by each). The Company is a corporation duly organized, validly existing, and in good standing under the laws of Georgia, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under Applicable Contracts. -7- The Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification. B. Sellers have delivered to Buyer copies of the Organizational Documents of the Company, as currently in effect. 3.2. Authority; No Conflict. A. This Agreement constitutes the legal, valid, and binding obligation of Sellers, enforceable against Sellers in accordance with its terms. Upon the execution and delivery by Sellers of the closing documents set forth in Section 2.4A (collectively, the "Sellers' Closing Documents"), the Sellers' Closing Documents will constitute the legal, valid, and binding obligations of Sellers, enforceable against Sellers in accordance with their respective terms. Sellers have the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the Sellers' Closing Documents and to perform his obligations under this Agreement and the Sellers' Closing Documents. B. Except as set forth in Schedule 3.2 of the Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time): (i) Contravene, conflict with, or result in a violation of (1) any provision of the Organizational Documents of the Company or (2) any resolution adopted by the board of directors or the stockholders of the Company; (ii) Contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which Sellers or the Company, or any of the assets owned or used by the Company, may be subject; (iii) Contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by the Company or that otherwise relates to the business of, or any of the assets owned or used by, the Company; (iv) Cause Buyer or the Company to become subject to, or to become liable for the payment of, any Tax; (v) Cause any of the assets owned by the Company to be reassessed or revalued by any taxing authority or other Governmental Body; -8- (vi) Contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; or (vii) Result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by the Company. Except as set forth in Schedule 3.2 of the Disclosure Schedule, Company nor Seller is or will be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 3.3. Capitalization. The authorized equity securities of Seller consists of 1,000 shares of common stock, $1.00 par value per share, of which 1,000 shares are issued and outstanding and constitute the Shares. Sellers are and will be on the Closing Date the record and beneficial owners and holders of the Shares, free and clear of all Encumbrances. With the exception of the Shares (which are owned by Sellers), all of the outstanding equity securities and other securities of the Company are owned of record and beneficially by Sellers free and clear of all Encumbrances. No legend or other reference to any purported Encumbrance appears upon any certificate representing equity securities of the Company. All of the outstanding equity securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. There are no Contracts relating to the issuance, sale, or transfer of any equity securities or other securities of the Company, including, but not limited to, stock options, warrants, convertible securities, redemption rights, registration rights and the like. None of the outstanding equity securities or other securities of the Company issued in violation of the Securities Act or any other Legal Requirement. The Company does not own, nor does it have any Contract to acquire, any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business. 3.4. Financial Statements. Sellers have delivered to Buyer, as set forth on Schedule 3.4: A. Unaudited balance sheets of the Company as of February 28, 1999, and as of December 31, 1998, together with the related statements of income, changes in stockholder equity and cash flow (collectively, the "Financial Statements") for the periods referred to in such financial statements. B. The Financial Statements were prepared in accordance with this Agreement and with GAAP consistently applied. -9- The Financial Statements and notes, if any, fairly present the financial condition and the results of operations, changes in stockholders' equity, and cash flow of the Company as at the respective dates of and for the periods referred to in such Financial Statements, all in accordance with GAAP, subject, in the case of interim Financial Statements, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse) and the absence of notes. No financial statements of any Person, other than the Company, are required by GAAP to be included in the Financial Statements of the Company. 3.5. Books and Records. - The books of account, minute books, stock record books, and other records of the Company, all of which have been provided to Buyer, are complete and correct and have been maintained in accordance with sound business practices. The minute books of the Company contain accurate and complete records of all meetings held of, and corporate action taken by, the stockholders, the Boards of Directors, and committees of the Boards of Directors of the Company, and no meeting of any such stockholders, Board of Directors, or committee has been held for and no material action has been taken at any meeting for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Company. 3.6. Title to Properties; Encumbrances. The Company owns (with good and marketable title in the case of real property, subject only to the Encumbrances permitted by this Section) all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) that they purport to own located in the facilities owned or operated by the Company or reflected as owned in the books and records of the Company, including all of the properties and assets reflected in the Closing Date Financial Statements (except for assets held under capitalized leases disclosed or not required to be disclosed in Schedule 3.6 of the Disclosure Schedule). All material properties and assets reflected in the Closing Date Financial Statements are free and clear of all Encumbrances and are not, in the case of real property, subject to any rights of way, building use restrictions, exceptions, variances, reservations, or limitations of any nature except, with respect to all such properties and assets: A. Mortgages or security interests shown on the Closing Date Financial Statements as securing specified liabilities or obligations, with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists; B. Liens for current taxes not yet due; and C. With respect to real property: (i) Minor imperfections of title, if any, none of which is substantial in amount, materially detracts from the value or impairs the use of the property subject thereto, or impairs the operations of the Company; and -10- (ii) Zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto. All buildings, plants, and structures owned by the Company lie wholly within the boundaries of the real property owned by the Company and do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person. All property and assets of the Company shall be in the possession and control of the Company at Closing, including but not limited to, all Facilities. 3.7. No Undisclosed Liabilities. Except as set forth in Schedule 3.7 of the Disclosure Schedule, Seller has no liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent, or otherwise) except for liabilities or obligations reflected or reserved against in the Closing Date Financial Statements and current liabilities incurred in the Ordinary Course of Business since the respective dates thereof. 3.8. Taxes. Except as set forth on Schedule 3.8 to the Disclosure Schedule, the Company has timely filed all tax returns and reports required to be filed by it, including, without limitation, all federal, state and local tax returns, and has paid in full or made adequate provision by the establishment of reserves for all taxes and other charges which have become due or which are attributable to the conduct of the Company's business prior to Closing. The Company will continue to make adequate provision for all such taxes and other charges for all periods through the Closing Date. Except as set forth on Schedule 3.8 to the Disclosure Schedule, Sellers have no Knowledge of any tax deficiency proposed or threatened against Seller. There are no tax liens upon any property or assets of the Company. Except as set forth on Schedule 3.8 to the Disclosure Schedule, the Company has made all payments of estimated taxes when due in amounts sufficient to avoid the imposition of any penalty. Except as set forth on Schedule 3.8 to the Disclosure Schedule, all taxes and other assessments and levies which the Company was required by law to withhold or to collect have been duly withheld and collected, and have been paid over to the proper governmental entity. Except as set forth in Schedule 3.8 to the Disclosure Schedule, the federal and state income tax returns and local returns, if any, of the Company have never been audited by the income tax authorities, nor are any such audits in process. Except as set forth in Schedule 3.8, to the Disclosure Schedule there are no outstanding agreements or waivers extending the statute of limitations applicable to any federal or state income tax returns of the Company for any period. 3.9. No Material Adverse Change. Since February 17, 1996, there has not been any material adverse change in the business, operations, properties, prospects, assets, or condition of the Company, and no event has occurred or circumstance exists that may result in such a material adverse change. -11- 3.10. Employee Benefits Matters. 3.10.1 Schedule 3.10.1 lists all plans, programs, and similar agreements, commitments or arrangements, whether oral or written, maintained by or on behalf of the Company or any other party that provide benefits or compensation to, or for the benefit of, current or former employees of the Company ("Plan" or "Plans"). Except as set forth on Schedule 3.10.1 to the Disclosure Schedule only current and former employees of the Company participate in the Plans. Copies of all Plans and, to the extent applicable, all related trust agreements, actuarial reports, and valuations for the most recent year, all summary plan descriptions, prospectuses, Annual Report Form 5500s or similar forms (and attachments thereto) for the most recent year, all Internal Revenue Service determination letters, and any related documents requested by Buyer, including all amendments, modifications and supplements thereto, have been delivered to Buyer, and all of the same are or will be true, correct and complete. 3.10.2 With respect to each Plan to the extent applicable: A. No litigation or administrative or other proceeding is pending or threatened involving such Plan; B. To the Knowledge of Sellers, such Plan has been administered and operated in substantial compliance with, and has been amended to comply with all applicable laws, rules, and regulations, including, without limitation, ERISA, the Internal Revenue Code, and the regulations issued under ERISA and the Internal Revenue Code; C. The Company and its predecessors, if any, have made and as of the Closing Date will have made or accrued, all payments and contributions required, or reasonably expected to be required, to be made under the provisions of such Plan or required to be made under applicable laws, rules and regulations, with respect to any period following, such amounts to be determined using the ongoing actuarial and funding assumptions of the Plan; D. Such Plan is fully funded in an amount sufficient to pay all liabilities accrued (including liabilities and obligations for health care, life insurance and other benefits after termination of employment) and claims incurred to the date hereof; E. On the Closing Date such Plan will be fully funded in an amount sufficient to pay all liabilities accrued (including liabilities and obligations for health care, life insurance and other benefits after termination of employment) and claims incurred to the Closing Date, or adequate reserves will be set up on the Company's books and records, or paid-up insurance will be provided, therefor; and F. Such Plan has been administrated and operated only in the ordinary and usual course and in accordance with its terms, and there has not been in the year prior hereto any increase in the liabilities of such Plan beyond increases typically experienced by employers similar to the Company. -12- (iii) The Company has not received, at any time since February 17, 1996, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Order to which the Company, or any of the assets owned or used by the Company, is or has been subject. 3.13. Absence of Certain Changes and Events. Except as set forth in Schedule 3.13 of the Disclosure Schedule, since February 17, 1996, Seller has conducted its business only in the Ordinary Course of Business and there has not been any: A. Change in the Company's authorized or issued capital stock; grant of any stock option or right to purchase shares of capital stock of the Company; issuance of any security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement, or other acquisition by the Company of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of capital stock; B. Amendment to the Organizational Documents of the Company; C. Payment or increase by the Company of any bonuses, salaries, or other compensation to any stockholder, director, officer, or (except in the Ordinary Course of Business) employee or entry into any employment, severance, or similar Contract with any director, officer, or employee; D. Adoption of, or increase in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of the Company; E. Damage to or destruction or loss of any asset or property of the Company, whether or not covered by insurance, materially and adversely affecting the properties, assets, business, financial condition, or prospects of the Company, taken as a whole; F. Entry into, termination of, or receipt of notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit, or similar agreement or (ii) any Contract or transaction involving a total remaining commitment by or to the Company of at least Five Thousand and No/l00 Dollars ($5,000.00); G. Sale (other than sales of inventory in the Ordinary Course of Business), lease, or other disposition of any asset or property of the Company or mortgage, pledge, or imposition of any lien or other encumbrance on any material asset or property of the Company, including the sale, lease, or other disposition of any of the Software and Intangibles; H. Cancellation or waiver of any claims or rights with a value to Seller in excess of Five Thousand and No/100 Dollars ($5,000.00); I. Material change in the accounting methods used by the Company; or -15- J. Agreement, whether oral or written, by the Company to do any of the foregoing. 3.14. Contracts; No Defaults. A. Except as set forth in Schedule 3.17(A) of the Disclosure Schedule: (i) The Company (and no Related Person of the Company) has not or may not acquire any rights under, and the Company has not or may not become subject to any obligation or liability under, any Contract that relates to the business of, or any of the assets owned or used by, the Company; and (ii) To the Knowledge of Sellers, no officer, director, agent, employee, consultant, or contractor of the Company is bound by any Contract that purports to limit the ability of such officer, director, agent, employee, consultant, or contractor to (1) engage in or continue any conduct, activity, or practice relating to the business of the Company or (2) assign to the Company or to any other Person any rights to any invention, improvement, or discovery. B. Except as set forth in Schedule 3.17(B) of the Disclosure Schedule, each material Contract is in full force and effect and is valid and enforceable in accordance with its terms. C. Except as set forth in Schedule 3.17(C) of the Disclosure Schedule: (i) The Company is, and at all times since February 17, 1996, has been, in full compliance with all applicable terms and requirements of each Contract under which the Company has or had any obligation or liability or by which the Company or any of the assets owned or used by the Company is or was bound; (ii) Each other Person that has or had any obligation or liability under any Contract under which the Company has or had any rights is, and at all times since February 17, 1996, has been, in full compliance with all applicable terms and requirements of such Contract; (iii) No event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a violation or breach of, or give the Company or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; and (iv) Seller has not given to or received from any other Person, at any time since February 17, 1996, any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract. -16- F. There are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to the Company under current or completed Contracts with any Person and no such Person has made written demand for such renegotiation. G. The Contracts relating to the sale, design, manufacture, or provision of products or services by the Company have been entered into in the Ordinary Course of Business and have been entered into without the commission of any act alone or in concert with any other Person, or any consideration having been paid or promised, that is or would be in violation of any Legal Requirement. 3.15. Insurance. A. Sellers have delivered to Buyer: (i) True and complete copies of all policies of insurance to which the Company is a party or under which the Company, or any director of the Company, is or has been covered at any time within the two (2) years preceding the date of this Agreement; (ii) True and complete copies of all pending applications for policies of insurance; and (iii) Any statement by the auditor of the Company's financial statements with regard to the adequacy of such entity's coverage or of the reserves for claims. B. Except as set forth on Schedule 3.15(B) of the Disclosure Schedule: (i) All policies to which the Company is a party or that provide coverage to the Company, Sellers, or any director or officer of the Company: (1) Are valid, outstanding, and enforceable; (2) Taken together in the reasonable judgment of Sellers, provide adequate insurance coverage for the assets and the operations of the Company for all risks to which the Company are normally exposed; (3) Are sufficient for compliance with all Legal Requirements and Contracts to which the Company is a party or by which it is bound; (4) Will continue in full force and effect following the consummation of the Contemplated Transactions; and (5) Do not provide for any retrospective premium adjustment or other experienced-based liability on the part of the Company. (ii) Neither Sellers nor the Company has received (1) any refusal of coverage or any notice that a defense will be afforded with reservation of rights or (2) any notice -17- of cancellation or any other indication that any insurance policy is no longer in full force or effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder. (iii) The Company has paid all premiums due, and have otherwise performed all of their respective obligations, under each policy to which the Company is a party or that provides coverage to the Company or director thereof. (iv) Seller has given notice to the insurer of all claims that may be insured thereby. 3.16. Environmental Matters. Except as set forth in Schedule 3.16 of the Disclosure Schedule, at all times since February 17, 1996, the Company has obtained and is in compliance with all permits, licenses and other authorizations required to do business by Environmental Requirements. To each Sellers' Knowledge, there are no conditions, circumstances, activities, practices, incidents, or actions (collectively, "Conditions") resulting from the conduct of its business which Conditions may reasonably form the basis of any claim or suit against the Company based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling by the Company, or the emission, discharge, release or threatened release by the Company into the environment, of any pollutant, contaminant, or hazardous or toxic materials, substances or wastes. 3.17.Employee Matters. Except as set forth on Schedule 3.17, at all times since February 17, 1996, Seller has complied in all respects with all Legal Requirements relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health and plant closing. Except as set forth on Schedule 3.17, Seller is not liable for the payment of any compensation, Damages, taxes, fines, penalties, or other amounts, however, designated, for failure to comply with any of the foregoing Legal Requirements. 3.18. Intellectual Property Rights of Seller. A. Definitions. As used in this Agreement, and in addition to any other terms defined in this Agreement, the following terms shall have the following meanings. (i) "Software" means any computer program, operating system, applications system, firmware or software of any nature, whether operational, under development or inactive, including all object code, source code, technical manuals, compilation procedures, execution procedures, flow charts, programmers notes, user manuals and other documentation thereof, whether in machine-readable form, programming language or any other language or symbols and whether stored, encoded, recorded or written on disk, tape, film, memory device, paper or other media of any nature. -18- (ii) "Owned Software" means all Software owned by the Company, whether purchased from a third party, developed by or on behalf of the Company, currently under development or otherwise. (iii) "Customer Software" means all Software, other than the Owned Software, that is, directly or through Distributors, either (x) offered or provided to customers of the Company or (y) used by the Company to provide information or services to customers of the Company for a fee. (iv) "Company Software" means the Owned Software and the Customer Software. (v) "Other Software" means all Software, other than the Company Software, that is licensed by the Company from third parties or otherwise used by Seller for any purpose whatsoever. (vi) "Intangible" means: (1) Patents, patent applications, patent disclosures, all re-issues, divisions, continuations, renewals, extensions and continuation-in-parts thereof and improvements thereto; (2) Trademarks, service marks, trade dress, logos, trade names, and corporate names and registrations and applications for Registration thereof and all goodwill associated therewith; (3) Copyrights, Registrations thereof and applications for Registration thereof; (4) Maskworks, Registrations thereof and applications for Registration thereof; (5) Trade secrets and confidential business information (including ideas, formulas, compositions, inventions, whether patentable or unpatentable and whether or not reduced to practice, know-how, manufacturing and production processes and techniques, research and development information, drawings, flow charts, processes, ideas, specifications, designs, plans, proposals, technical data, copyrightable works, financial, marketing, and business data, pricing and cost information, business and marketing plans, and customer and supplier lists and information); (6) Other proprietary rights; (7) All income, royalties, Damages and payments due at Closing or thereafter with respect to the Owned Software, Customer Software, Other Software, other Intangibles and all other rights thereunder including, without limitation, Damages and -19- payments for past, present or future infringements or misappropriations thereof, the right to sue and recover for past, present or future infringements or misappropriations thereof; (8) All rights to use all of the foregoing forever; and (9) All other rights in, to, and under the foregoing in all countries. B. Ownership and Right to License. (i) Except as set forth in Schedule 3.18 of the Disclosure Schedule, to the Knowledge of the Sellers, at all times since February 17, 1996, the Company has good and marketable title to the Owned Software and Intangibles attributable to the Owned Software, and have the full right to use all of the Customer Software and Other Software, and Intangibles attributable thereto, as used or required to operate the Company's businesses as currently conducted and as contemplated in the future in accordance with the Company's written business plans, free and clear of any liens, claims, charges or encumbrances which would affect the use of such Software in connection with the operation of the Company's business as currently conducted and as contemplated in the future in accordance with the Company's written business plans. (ii) To the Knowledge of Sellers, no rights of any third party not previously obtained are necessary to market, license, sell, modify, update, and/or create derivative works for any Software as to which the Company take any such action in its respective business as currently conducted and as contemplated in the future in accordance with the Company's written business plans. (iii) To the Knowledge of Sellers, none of the Software or Intangibles or their respective past or current uses by or through the Company has violated or infringed upon, or is violating or infringing upon, any Software, patent, copyright, trade secret or other Intangible of any Person. To the knowledge of Sellers, the Company has adequately maintained all trade secrets and copyrights with respect to such Software. To the Knowledge of Sellers, the Company has performed all obligations imposed upon them with regard to the Customer Software and Other Software which are required to be performed by them on or prior to the date hereof, and the Company nor, to the Knowledge of Sellers, any other party, is in breach of or default thereunder in any respect, nor to the Sellers' Knowledge is there any event which with notice or lapse of time or both would constitute a default thereunder. 3.19. Certain Payments. Since February 17, 1996, neither the Company nor any director, officer, agent, or employee of the Company, nor to Sellers' Knowledge any other Person associated with or acting for or on behalf of the Company, has directly or indirectly: A. Made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in -20- money, property, or services (i) to obtain favorable treatment in securing business; (ii) to pay for favorable treatment for business secured; (iii) to obtain special concessions or for special concessions already obtained, for or in respect of the Company or any affiliate of the Company or (iv) in violation of any Legal Requirement. B. Established or maintained any fund or asset that has not been recorded in the books and records of the Company. 3.20. Disclosure. A. No representation or warranty of Sellers in this Agreement and no statement in the Disclosure Schedule omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. B. No notice given pursuant to Section 5.5. will contain any untrue statement or omit to state a material fact necessary to make the statements therein or in this Agreement, in light of the circumstances in which they were made, not misleading. C. There is no fact known to Sellers that has specific application to the Company or Sellers (other than general economic or industry conditions) and that materially adversely affects or, as far as Sellers can reasonably foresee, materially threatens, the assets, business, prospects, financial condition, or results of operations of Seller (on a consolidated basis) that has not been set forth in this Agreement or the Disclosure Schedule. 3.21. Brokers or Finders. The Company, Sellers and its agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. 3.22. Fairness Opinion. The Board of Directors of the Company has received the opinion of Clarkston & Williams, LLC, dated as of the Closing Date, to the effect that, as of the date of such opinion, the terms of the Contemplated Transactions are fair, from a financial point of view, to the Company's shareholders. 4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Sellers as follows: 4.1. Organization and Good Standing. Buyer is a Texas corporation. 4.2. Authority. This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Upon the execution and delivery by Buyer of the closing documents set forth in Section 2.5.B (collectively, the "Buyer's Closing Documents"), the Buyer's Closing Documents will constitute the legal, valid, and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms. Buyer has the absolute and unrestricted right, power, and authority to execute and deliver this -21- Agreement and the Buyer's Closing Documents and to perform its obligations under this Agreement and the Buyer's Closing Documents. 4.3. Investment Intent. Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act. 4.4. Certain Proceedings. There is no pending Proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been Threatened. 4.5. Brokers or Finders. Buyer and its agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement and will indemnify and hold Seller harmless from any such payment alleged to be due by or through Buyer as a result of the action of Buyer or its officers or agents. 5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE. 5.1. Access and Investigation. Between the date of this Agreement and the Closing Date, the Company will, and will cause the Company and its Representatives to: A. Afford Buyer and its Representatives and prospective lenders and their Representatives (collectively, "Buyer's Advisors") full and free access to the Company's personnel, properties (including subsurface testing), contracts, books and records, and other documents and data; B. Furnish Buyer and Buyer's Advisors with copies of all such contracts, books and records, and other existing documents and data as Buyer may reasonably request; and C. Furnish Buyer and Buyer's Advisors with such additional financial, operating, and other data and information as Buyer may reasonably request. 5.2. Operation of the Business of the Company. Between the date of this Agreement and the Closing Date, the Company will: A. Conduct the business of the Company only in the Ordinary Course of Business; B. Use its commercially reasonable efforts to preserve intact the current business organization of the Company, keep available the services of the current officers, employees, and agents of the Company, and maintain the relations and good will with suppliers, customers, landlords, creditors, employees, agents, and others having business relationships with the Company; C. Confer with Buyer concerning operational matters of a material nature; and -22- D. Otherwise report periodically to Buyer concerning the status of the business; operations, and finances of the Company. 5.3. Negative Covenant. Except as otherwise expressly permitted by this Agreement, between the date of this Agreement and the Closing Date, the Company will not without the prior consent of Buyer, take any affirmative action, or fail to take any reasonable action within their or its control, as a result of which any of the changes or events listed in Section 3.13. is likely to occur. 5.4. Required Approvals. As promptly as practicable after the date of this Agreement, Sellers will, and will cause the Company to, make all filings required by Legal Requirements to be made by them in order to consummate the Contemplated Transactions. Between the date of this Agreement and the Closing Date, Sellers will, and will cause the Company to: A. Cooperate with Buyer with respect to all filings that Buyer reasonably elects to make or is required by Legal Requirements to make in connection with the Contemplated Transactions; and B. Cooperate with Buyer in obtaining all required Consents. 5.5. Notification. Between the date of this Agreement and the Closing Date, Sellers will promptly notify Buyer in writing if Sellers become aware of any fact or condition that causes or constitutes a Breach of any of Sellers' representations and warranties as of the date of this Agreement, or if Sellers become aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a Breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact or condition require any change in the Disclosure Schedule if the Disclosure Schedule were dated the date of the occurrence or discovery of any such fact or condition, Sellers will promptly deliver to Buyer a supplement to the Disclosure Schedule specifying such change. During the same period, each Seller will promptly notify Buyer of the occurrence of any Breach of any covenant of Sellers in this Section 5. or of the occurrence of any event that may make the satisfaction of the conditions in Section 7. impossible or unlikely. 5.6. No Negotiation. Until such time, if any, as this Agreement is terminated pursuant to Section 9., the Company and Sellers will not, and will cause their Representatives not to, directly or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to, or consider the merits of any unsolicited inquiries or proposals from, any Person (other than Buyer) relating to any transaction involving the sale of the business or assets (other than in the Ordinary Course of Business) of the Company, or any of the capital stock of the Company, or any merger, consolidation, business combination, or similar transaction involving the Company. 5.7. Closing of Bank Accounts. Sellers shall cause the closing of all the Company bank accounts for which Sellers, or its officers and directors, have sole signature authority. -23- 6. COVENANTS OF BUYER PRIOR TO CLOSING DATE. 6.1. Approvals of Governmental Bodies/Third Party Consents. As promptly as practicable after the date of this Agreement, Buyer will, and will cause each of its Related Persons to, make all filings required by Legal Requirements to be made by them to consummate the Contemplated Transactions. Between the date of this Agreement and the Closing Date, Buyer will, and will cause each Related Person to: A. Cooperate with Sellers with respect to all filings that the Company is required by Legal Requirements to make in connection with the Contemplated Transactions; and B. Cooperate with Sellers in obtaining all consents identified in Schedule 3.2 of the Disclosure Schedule; provided that this Agreement will not require Buyer to dispose of or make any change in any portion of its business or to incur any other burden to obtain a Governmental Authorization. 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to purchase the Shares and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part): 7.1. Accuracy of Representations. A. All of Sellers' representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this Agreement, and must be accurate in all material respects as of the Closing Date as if made on the Closing Date, without giving effect to any supplement to the Disclosure Schedule. B. Each of Sellers' representations and warranties in Article 3. must have been accurate in all respects as of the date of this Agreement, and must be accurate in all respects as of the Closing Date as if made on the Closing Date, without giving effect to any supplement to the Disclosure Schedule. 7.2. Sellers' Performance. A. All of the covenants and obligations that Seller or the Company is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been duly performed and complied with in all material respects. B. Each document required to be delivered pursuant to Section 2.4. must have been delivered, and each of the other covenants and obligations in Section 5. must have been performed and complied with in all respects. -24- C. The results of any investigation performed by Buyer in connection with Section 5.1. shall be satisfactory to Buyer in its sole discretion. 7.3. Consents. Each of the Consents identified in Schedule 3.2 of the Disclosure Schedule must have been obtained and must be in full force and effect. 7.4. Additional Documents. Sellers shall deliver such other documents as Buyer may reasonably request for the purpose of (i) evidencing the accuracy of any of Sellers' representations and warranties; (ii) evidencing the performance by Seller or the Company of, or the compliance by Sellers or the Company with, any covenant or obligation required to be performed or complied with by such Sellers or the Company; (iii) evidencing the satisfaction of any condition referred to in this Section 7. or (iv) otherwise facilitating the consummation or performance of any of the Contemplated Transactions. 7.5. No Proceedings. Since the date of this Agreement, there must not have been commenced or Threatened against Buyer, or against any Person affiliated with Buyer, any Proceeding (i) involving any challenge to, or seeking Damages or other relief in connection with, any of the Contemplated Transactions or (ii) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the Contemplated Transactions. 7.6. No Claim Regarding Stock Ownership or Sale Proceeds. There must not have been made or Threatened by any Person any claim asserting that such Person (i) is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any stock of, or any other voting, equity, or ownership interest in, the Company or (ii) is entitled to all or any portion of the Purchase Price payable for the Shares. 7.7. No Prohibition. Neither the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), materially contravene, or conflict with, or result in a material violation of, or cause Buyer or any Person affiliated with Buyer to suffer any material adverse consequence under, (i) any applicable Legal Requirement or Order or (ii) any Legal Requirement or Order that has been published, introduced, or otherwise proposed by or before any Governmental Body. 7.8. Employment Agreement. On or before the Closing Date, Kris Hutchinson, Stephen Hyser and shall have entered into an employment agreement with Seller. 8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE. Sellers' obligation to sell the Shares and to take the other actions required to be taken by Sellers at the Closing are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Sellers, in whole or in part): 8.1. Accuracy of Representations. All of Buyer's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this -25- Agreement and must be accurate in all material respects as of the Closing Date as if made on the Closing Date. 8.2. Buyer's Performance. A. All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been performed and complied with in all material respects. B. Buyer must have delivered each of the documents required to be delivered by Buyer pursuant to Section 2.5. 8.3. Consents. Each of the Consents identified in Schedule 3.2 of the Disclosure Schedule must have been obtained and must be in full force and effect. 8.4. Additional Documents. Buyer must have caused the following documents to be delivered to Sellers such other documents as Sellers may reasonably request for the purpose of (i) enabling their counsel to provide the opinion referred to in Section 2.5.A.(iii); (ii) evidencing the accuracy of any representation or warranty of Buyer; (iii) evidencing the performance by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer; (iv) evidencing the satisfaction of any condition referred to in this Section 8. or (v) otherwise facilitating the consummation of any of the Contemplated Transactions. 8.5. No Injunction. There must not be in effect any Legal Requirement or any injunction or other Order that (i) prohibits the sale of the Shares by Sellers to Buyer and (ii) has been adopted or issued, or has otherwise become effective, since the date of this Agreement. 9. TERMINATION. 9.1. Termination Events. This Agreement may, by notice given prior to or at the Closing, be terminated: A. By either Buyer or Sellers if a material Breach of any provision of this Agreement has been committed by the other party and such Breach has not been waived; B. (i) By Buyer if any of the conditions in Section 7. have not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Buyer to comply with its obligations under this Agreement) and Buyer has not waived such condition on or before the Closing Date; (ii) By Sellers, if any of the conditions in Section 8. have not been satisfied of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Sellers to comply with their obligations under this Agreement) and Sellers have not waived such condition on or before the Closing Date; or -26- C. By mutual consent of Buyer and Sellers; or D. By either Buyer or Sellers if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before April 1, 1999, or such later date as the parties may agree upon. 9.2. Effect of Termination. Each party's right of termination under Section 9.1. is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 9.1., all further obligations of the parties under this Agreement will terminate, except that the obligations in Sections 12.1. and 12.3. will survive; provided, however, that if this Agreement is terminated by a party because of the Breach of the Agreement by the other party or because one (1) or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of the other party's failure to comply with its obligations under this Agreement, the terminating party's right to pursue all legal remedies will survive such termination unimpaired. 10. INDEMNIFICATION; REMEDIES. 10.1. Agreement by Sellers to Indemnify. Sellers (the "Seller Indemnifying Party"), agree that they will jointly and severally indemnify and hold Buyer harmless in respect of the aggregate of all indemnifiable Damages of Buyer. For this purpose, "indemnifiable Damages" of Buyer means the aggregate of all Damages incurred or suffered by Buyer resulting from: A. Any inaccurate representation or warranty made by Sellers in or pursuant to this Agreement; B. Any default in the performance of any of the covenants or agreements made by Sellers or the Company in this Agreement; or C. The failure of any Seller to pay, discharge or perform any liability or obligation of Sellers or of the Company resulting from the operation of the Company's business prior to the Closing Date. Without limiting the generality of the foregoing, with respect to the measurement of "indemnifiable Damages", Buyer shall have the right to be put in the same financial position as it would have been had each of the representations and warranties of Sellers been true and correct and had each of the covenants of Sellers and the Company been performed in full. The amount of any indemnifiable Damages otherwise payable to Buyer hereunder shall be reduced if the indemnifiable Damages incurred by Buyer will provide Buyer with income tax deductions or credits. The amount of the reduction shall be the amount of the actual cash tax savings realized by Buyer as a result of such deductions or credits, discounted to its present value -27- as of the date of the payment of the indemnifiable Damages from the date such indemnifiable Damages were incurred by Buyer at the rate of interest charged on such date by the Internal Revenue Service on underpayment of taxes. The foregoing obligation of Seller Indemnifying Party to indemnity Buyer shall be subject to each of the following principles or qualifications: 1. Each of the representations and warranties made by Sellers in this Agreement or pursuant hereto, shall survive for a period of two (2) years after the Closing; provided, however, that the representations and warranties made by Sellers to the extent they relate to Sellers' title to the Shares shall survive forever and that the representations and warranties made by Sellers in Section 3.8. hereof ("Taxes") shall in each case survive until the second (2nd) anniversary of the later of: A. The date on which applicable period of limitation on assessment or refund of tax has expired; or B. The date on which the applicable taxable year (or portion thereof) has been closed. No claim for the recovery of indemnifiable Damages may be asserted by Buyer against Seller Indemnifying Party or their successors in interest after such representations and warranties shall be thus extinguished; provided, however, that claims first asserted in writing within the applicable period shall not thereafter be barred. 10.2. Agreements by Buyer to Indemnify. Buyer (the "Buyer Indemnifying Party"), agrees to indemnify and hold Sellers (the "Seller Indemnified Party") harmless in respect of the aggregate of all indemnifiable Damages of any of Seller Indemnified Parties. For this purpose, "indemnifiable Damages" of the of Seller Indemnified Party means the aggregate of all Damages incurred or suffered by the Seller Indemnified Party resulting from: A. Any inaccurate representation or warranty made by Buyer or pursuant to his Agreement; or B. Any default in the performance of any of the covenants or agreements made by Buyer in this Agreement. Without limiting the generality of the foregoing, with respect to the measurement of "indemnifiable Damages", the Seller Indemnified Party shall have the right to be put in the same financial position as they would have been had each of the representations and warranties of Buyer Indemnifying Party been true and correct and had each of the covenants of Buyer Indemnifying Party been performed in full. The amount of any indemnifiable Damages otherwise payable to any Seller Indemnified Party hereunder shall be reduced if the indemnifiable Damages incurred by Seller Indemnified -28- Party will provide such Party with income tax deductions or credits. The amount of the reduction shall be the amount of the actual cash tax savings realized by Seller Indemnified Party as a result of such deductions or credits discounted to its present value as of the date of the payment of the indemnifiable Damages from the date such indemnifiable Damages were incurred by Seller Indemnified Party at the rate of interest charged on such date by the Internal Revenue Service on underpayment of taxes. The foregoing obligation of Buyer Indemnifying Party to indemnify Seller Indemnified Party shall be subject to each of the following principles or qualifications: 10.2.1 Each of the representations and warranties made by Buyer in Article 4 of this Agreement shall survive for a period of two (2) years after the Closing Date, and thereafter all such representations and warranties shall be extinguished. No claim for the recovery of indemnifiable Damages pursuant to clause (i) of Section 10.2. may be asserted by Seller indemnified Party against Buyer Indemnifying Party or its successors in interest after such representations and warranties shall be thus extinguished; provided, however, that claims first asserted in writing within the applicable period shall not thereafter be barred. 10.3. Matters Involving Third Parties. If any third party shall notify Buyer or Sellers (the "Indemnified Party") with respect to any matter which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this Section 10., then the Indemnified Party shall notify each Indemnifying Party thereof promptly; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any liability or obligation hereunder unless (and then solely to the extent that) the Indemnifying Party thereby is Damaged. If any Indemnifying Party notifies the Indemnified Party within fifteen (15) days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, then: A. The Indemnifying Party will defend the Indemnified Party against the matter with counsel of its choice satisfactory to the Indemnified Party; B. The Indemnified Party may retain separate co-counsel at its sole cost and expense (except that the Indemnifying Party will be responsible for the fees and expenses of the separate co-counsel to the extent the Indemnified Party concludes that the counsel the Indemnifying Party has selected has a conflict of interest); C. The Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the matter without the written consent of the Indemnifying Party (not to be withheld or delayed unreasonably); and D. The Indemnifying Party will not consent to the entry of any judgment with respect to the matter, or enter into any settlement which does not include a provision whereby the -29- plaintiff or claimant in the matter releases the Indemnified Party from all liability with respect thereto, without the written consent of the Indemnified Party (not to be withheld or delayed unreasonably). If no Indemnifying Party notifies the Indemnified Party within fifteen (15) days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, then the Indemnified Party may defend against, or enter into any settlement with respect to, the matter in any manner it may deem appropriate. 11. POST-CLOSING AGREEMENTS. 11.1. Consistency in Reporting. Each party hereto agrees that: (i) the transaction is intended to qualify as a tax-free transaction under the I.R.C.; (ii) the transaction shall be reported for Federal income tax purposes as a tax-free transaction; (iii) for purposes of all financial statements, tax returns and reports, and communications with third parties, the transactions contemplated in this agreement and ancillary or collateral transactions will be treated as a tax-free transaction; and (iv) if the characterization of any transaction contemplated in this agreement or any ancillary or collateral transaction is challenged, each party hereto will testify, affirm and ratify that the characterization contemplated in such agreement was with the characterization intended by the party; provided, however, that nothing herein shall be construed as giving rise to any obligation if the reporting position is determined to be incorrect by final decision of a court of competent jurisdiction. 11.2. Performance of the Company. Sellers asserts that the "Corporate Twelve (1.2) month Budget" (Exhibit D) is sound and that the projected revenues and profits are reasonable and will be attained. Based on the limited operating history of the Company, monthly performance reviews will be conducted by Buyer and should the Company fall to achieve at least eighty-five percent (85%) of the revenues and profits, cumulative year to date as projected per Exhibit D, notwithstanding that the foregoing would constitute a breach of this agreement, changes and adjustments may be implemented by Buyer to reduce Sellers' funding requirements and Buyer's capital exposure. 11.3. Remedies for Breach of Agreements by Sellers. Should Sellers or the Company [ILLEGIBLE] each any term or condition of this Section, the following shall, at the option of Buyer, occur: A. The Company and the former shareholders of the Company shall execute a stock swap with Buyer, whereby such shareholders shall return all Buyer Stock to Buyer, and shall receive one hundred percent (100%) of the capital stock, voting and nonvoting of the Company. Buyer shall not guarantee that the Company shall be returned to the Shareholders in same or greater net worth determined in accordance with standard accounting principles, as of the date of Buyer's acquisition of the Company. Any outstanding notes or unpaid loans to the Company by Buyer, unless otherwise agreed upon by both parties, will immediately become due payable. B. These remedies shall not be exclusive. -30- 11.4 Authorized Buyer's Stock. On each of the first and second year anniversaries hereof, Buyer shall transfer to each of Stephen Hyser and Kris Hutchinson an aggregate of 75,000 shares of Buyer's Stock provided that the Employment Agreements with each of Stephen Hyser and Kris Hutchinson are still in effect on such dates. If one of such Employment Agreement is not in effect on either of such dates, the non-employed party shall not receive any stock and the employed party shall receive 37,500 shares of Buyer's Stock. If none of such Employment Agreements are not in effect as of such dates, no share of Buyer's Stock shall be transferred to the non-employed parties. B. These remedies shall not be exclusive. 12. GENERAL PROVISIONS. 12.1. Expenses. Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, counsel, and accountants. Sellers will cause the Company not to incur any out-of-pocket expenses in connection with the Contemplated Transactions. In the event of termination of this Agreement, the obligation of each party to pay its own expenses will be subject to any rights of such party arising from a breach of this Agreement by another party. 12.2. Public Announcements. Any public announcement or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as Buyer determines. Unless consented to by Buyer in advance or required by Legal Requirements, prior to the Closing Seller shall, and shall cause the Company to, keep as Agreement strictly confidential and may not make any disclosure of this Agreement to any person. If one of such Employment Agreement is not effective as of such dates the non-employed party shall not receive any stock and the employed party shall receive 37,500 shares of Buyer's Stock. If none of such Employment Agreements are effective as of such dates no shares of Buyer's Stock shall be transferred to the non-employed parties. Sellers and Buyer will consult with each other concerning the means by which the Company's employees, customers, and suppliers and others having dealings with the Company will be informed of the Contemplated Transactions, and Buyer will have the right to be present [ILLEGIBLE] any such communication. 12.3. Confidentiality. Between the date of this Agreement and the Closing Date, Buyer and Sellers will maintain in confidence, and will cause the directors, officers, employees, agents, [ILLEGIBLE] advisors of Buyer, Sellers and Company to maintain in confidence, and not use to the detriment of another party or any written, oral, or other information obtained in confidence from other party or in connection with this Agreement or the Contemplated Transactions, unless: -31- A. Such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party; B. The use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the Contemplated Transactions; or C. The furnishing or use of such information is required by or necessary or appropriate in connection with legal proceedings. If the Contemplated Transactions are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request. Whether or not the Closing takes place, Seller waives, and will upon Buyer's request cause Seller to waive, any cause of action, right, or claim arising out of the access of Buyer or its representatives to any trade secrets or other confidential information of Seller. 12.4. Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt); (ii) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Seller: Virtual Enterprise, Inc. 1526 A Dekalb Avenue Atlanta, Georgia 30307 With a copy to: Clarkston & Williams, LLC 4323 Mundy Mill Road Suite 200 Oakwood, Georgia 30566 Buyer: CONCAP, Inc. 3700 Crestwood Parkway Suite 1000 Duluth, GA 30096 With a copy to: Paul, Hastings, Janofsky & Walker, LLP Suite 2400 600 Peachtree Road, N.E. Atlanta, Georgia 30308-2222 Attention: Michael T. Voytek Telecopy No.: (404) 815-2227 -32- 12.5. Jurisdiction; Service of Process. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Georgia, County of DeKalb, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Georgia, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world. 12.6. Further Assurances. The parties agree (i) to furnish upon request to each other such further information; (ii) to execute and deliver to each other such other documents and (iii) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. 12.7. Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law: A. No claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one (1) party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; B. No waiver that may be given by a party will be applicable except in the specific instance for which it is given; and C. No notice to or demand on one (1) party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. 12.8. Entire Agreement and Modification. This Agreement supersedes all prior agreements between the parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. 12.9. Disclosure Schedule. A. The disclosures in the Disclosure Schedule; and those in any Supplement thereto, must relate only to the representations and warranties in the Section of the Agreement to which they expressly relate and not to any other representation or warranty in this Agreement. -33- B. In the event of any inconsistency between the statements in the body of this Agreement and those in the Disclosure Schedule (other than an exception expressly set forth as such in the Disclosure Schedule with respect to a specifically identified representation or warranty), the statements in the body of this Agreement will control. 12.10. Assignments, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties, which will not be unreasonably withheld, except that Buyer may assign any of its rights under this Agreement to any Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 12.11. Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 12.12. Section Headings; Construction. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 12.13. Time of Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. 12.14. Governing Law. This Agreement will be governed by the laws of the State of Georgia without regard to conflicts of laws principles. 12.15. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. -34- IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. BUYER: SELLERS: CONCAP, INC. By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE] ---------------------- ------------------------------------ Title: MEMBER OF THE BOARD Title: President ------------------- --------------------------------- Individually By: By: /s/ [ILLEGIBLE] ------------------------------------ By: /s/ [ILLEGIBLE] ------------------------------------ By: ------------------------------------ By: ------------------------------------ COMPANY: VIRTUAL ENTERPRISE, INC. By: /s/ Kris Hutchinson ------------------------------------ Name: Kris Hutchinson ------------------------------ Title: President ----------------------------- -35- SCHEDULES -36- Disclosure Schedules to Virtual Enterprise, Inc. Stock Purchase Agreement SELLER: CLARKSON & WILLIAMS, L.L.C. /s/ Jason Williams ---------------------------------------- /s/ Principal/Owner ---------------------------------------- INDIVIDUALLY BY: /s/ Kris Hutchinson ---------------------------------------- KRIS HUTCHINSON /s/ Tammy Hutchinson ---------------------------------------- TAMMY HUTCHINSON /s/ Stephen Hyser ---------------------------------------- STEPHEN HYSER COMPANY: VIRTUAL ENTERPRISES, INC. Kristofer Hutchinson ---------------------------------------- President ---------------------------------------- /s/ Kris Hutchinson AMENDMENT TO STOCK PURCHASE AGREEMENT MADE AS OF MARCH 31, 1999, BETWEEN CONCAP, INC., BUYER, AND VIRTUAL ENTERPRISE, INC. KRIS HUTCHINSON, STEPHEN HYSER, TAMMY HUTCHINSON, AND CLARKSON & WILLIAMS, LLC, INDIVIDUALLY SELLERS THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (the "First Amendment") is made as of March 31, 1999, by among CONCAP, Inc., a Texas corporation (the "Buyer"), and Virtual Enterprises, Inc., a Georgia Corporation, Kris Hutchinson, Stephen Hyser, Tammy Hutchinson and Clarkson & Williams, L.L.C. (each individually, a "Seller" and collectively "Sellers") and Virtual Enterprise, Inc. (the "Company"). WHEREAS, the Buyer, the Sellers and the Company (hereinafter referred to as the "Parties") desire to make certain amendments to the Stock Purchase Agreement (the "Agreement") entered into by the Parties as of March 31, 1999 pursuant to Section 12.8 of the Agreement. NOW THEREFORE, in consideration of the mutual promises and covenants contained herein, the Parties hereby agree as follows: 1. Buyer agrees to forgive the fact that the financial statements submitted in the due diligence package were misstated as outlined in the Financial Amendment. 2. Buyer assumes the following debts in the form of minimum monthly payments: GE Capital Card Services with a balance of $6,780.68; MBNA Platinum Plus card with a balance of $11,121.53; and a Suntrust loan in the amount of $23,000.00. 3. Seller agrees to, within five (5) days of Closing, execute a convertible debenture with shareholders who have outstanding debts to Company. 4. Buyer reserves the right to rescind the Agreement if the gross revenues generated in the Elitetech.com division falls below twenty thousand dollars ($20,000.00) per month. Furthermore, if the transaction is rescinded, Buyer will recoup all monies expended for the payment of the loans listed in item number two of this Amendment. 5. Notwithstanding anything to the contrary contained herein or in the Agreement, Tammy Hutchinson shall have no liability to Buyer whatsoever (including, without limitation, pursuant to Section 10.1 of the Agreement) for any representation or warranty made in the Agreement or this First Amendment. In exchange for Buyer agreeing to release Tammy Hutchinson from any liabilities she might have or may have under the Agreement or this First Amendment, Tammy Hutchinson hereby waives and releases any claims whatsoever that she has or may have against Buyer or Buyer's employees, directors, officers, agents and affiliate companies. IN WITNESS WHEREOF, the parties have executed and delivered this Amendment to Stock Purchase Agreement as of the date first written above. BUYER: SELLER: CONCAP, INC. CLARKSON & WILLIAMS, L.L.C. By: /s/ Jason Kiszonak /s/ Jason Williams ------------------- ---------------------------------------- JASON KISZONAK /s/ Principal/Owner - ----------------------- ---------------------------------------- Sr. VP Public Relations INDIVIDUALLY BY: /s/ Kris Hutchinson ---------------------------------------- KRIS HUTCHINSON /s/ Tammy Hutchinson ---------------------------------------- TAMMY HUTCHINSON /s/ Stephen Hyser ---------------------------------------- STEPHEN HYSER COMPANY: VIRTUAL ENTERPRISES, INC. By: Kris Hutchinson ---------------------------------------- President ---------------------------------------- /s/ Kris Hutchinson Financial Amendment Seller agrees that the financial statements submitted in the due diligence package were misstated due to the inclusion of Hutchworks, Inc., which is not a party to this transaction. BUYER: SELLER: CONCAP, INC. CLARKSON & WILLIAMS, L.L.C. By: /s/ Jason Kiszonak /s/ Jason Williams ------------------- ---------------------------------------- JASON KISZONAK /s/ Principal/Owner - ----------------------- ---------------------------------------- Sr. VP Public Relations INDIVIDUALLY BY: /s/ Kris Hutchinson ---------------------------------------- KRIS HUTCHINSON /s/ Tammy Hutchinson ---------------------------------------- TAMMY HUTCHINSON /s/ Stephen Hyser ---------------------------------------- STEPHEN HYSER COMPANY: VIRTUAL ENTERPRISES, INC. Kris Hutchinson ---------------------------------------- President ---------------------------------------- /s/ Kris Hutchinson CERTIFICATE In compliance with Section 2.4 of the Stock Purchase Agreement dated as of March 31, 1999 (the "Agreement"), by and between CONCAP, INC. (the "Company"), and each of Virtual Enterprises, Inc., Kris Hutchinson, Stephen Hyser, Tammy Hutchinson and Clarkston & Williams, LLC, the undersigned Scott Schuster, President of the Company, does hereby certify on behalf of the Company and not individually, that the representations and warranties contained in Section 4 of the Agreement and in any certificate, instrument, schedule or agreement or other writing delivered by the Company or Sellers in connection with the transactions contemplated by the Agreement are true and correct as of the Closing Date (as defined in the Agreement). IN WITNESS WHEREOF, the undersigned has hereunto executed this Certificate this 29th day of April, 1999. CONCAP, INC. By: /s/ Lee Davis ------------------------------------ Name: Lee Davis Title: Sr. V.P. of Mergers and Acquisition CERTIFICATE In compliance with Section 2.4 of the Stock Purchase Agreement dated as of March 31, 1999 (the "Agreement"), by and between CONCAP, INC. and each of Virtual Enterprises, Inc. (the "Company"), Kris Hutchinson, Stephen Hyser, Tammy Hutchinson and Clarkston & Williams LLC the undersigned do hereby certify that the representations and warranties contained in Section 3 of the Agreement and in any certificate, instrument, schedule or agreement or other writing delivered by the Company or Sellers (as defined in the Agreement) in connection with the transactions contemplated by the Agreement are true and correct as of the Closing Date (as defined in the Agreement). IN WITNESS WHEREOF, the undersigned has hereunto executed this Certificate this 29th day of April, 1999. VIRTUAL ENTERPRISES, INC. By: /s/ Kris Hutchinson ------------------------------------ Name: Kris Hutchinson Title: President /s/ Stephen Hyser (Seal) ---------------------------------------- Stephen Hyser /s/ Kris Hutchinson (Seal) ---------------------------------------- Kris Hutchinson /s/ Tammy Hutchinson ---------------------------------------- Tammy Hutchinson CLARKSTON & WILLIAMS, LLC By: /s/ Jason Williams ------------------------------------ Name: Jason Williams Title: Principal/Owner LEGAL OPINION OF COUNSEL TO VIRTUAL ENTERPRISE, INC. 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and is duly qualified to do business. To our knowledge, the Company has no office and owns no property outside Georgia. 2. The Company has the corporate power and authority to own or lease its property and to carry on its business as it is now being conducted. To our knowledge, the Company has complied in all material respects with all federal, state and local laws, rules and regulations applicable to its properties and the conduct of its business. 3. The authorized capital stock of the Company consists of 10,000 shares of common stock, no par value per share, or which 1000 shares of common stock of the Company are issued and outstanding as of the date hereof. As of the date of this opinion, all of the issued and outstanding shares of capital stock of the Company ore owned by the Shareholders as follows: All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid, and nonassessable. No outstanding shares have been issued in violation of any preemptive rights that have not been waived. The Shareholders have not made any transfer of the outstanding shares of the capital-stock of the Company except for the transfer to the Buyer as provided in the Definitive Agreement (the "Agreement"). Upon the transfer, and assuming the Purchaser is a bona fide purchaser and has complied with all of the requirements of the Agreement, the Purchaser will have good and marketable title to such shares, free from any claims, liens, encumbrances or charges whatsoever. 4. We have no knowledge of any outstanding options, warrants, subscriptions, calls or other rights, commitments, undertakings or understandings by which any person has the right to purchase or otherwise acquire any shares of capital stock of the Company, whether issued or unissued, except for rights in favor of the Purchaser pursuant to the Acquisition Agreement. We have no knowledge that there are any rights, obligations, or undertakings convertible into capital stock of the Company. 5. The Company has the corporate power and authority to enter into the Agreement, any agreements, certificates or documents contemplated thereby or in connection therewith (the "Operative Documents") to which it is party and to perform its obligations provided for therein, all of which have been duly authorized by the necessary and proper action of the directors of the Company. Each of the Shareholders has the power and authority to execute and deliver the Operative Documents to which he or she is a party and to perform his or her obligations thereunder. Kris Hutchinson and Stephen Hyser, as officers of the Company, have the authority to execute and deliver the Operative Documents to which the Company is party on behalf of the Company and to cause the Company to perform its obligations thereunder. We have no knowledge of any agreement (other than the Agreement) that contains restrictions on the voting, sale or transfer or any outstanding shares of capital stock of the Company other than those which shall have been waived by the necessary parties prior to Closing. 6. The Agreement has been duly executed by and constitutes the binding obligation of all of the signatories thereto, enforceable against them in accordance with their terms except as hereinafter provided. Neither the execution and deliver of the Operative Documents by the Company, as applicable, nor the performance of its obligations under the Operative Documents will constitute a violation of, or any breach or default (with or without the giving of notice or the passage of time) under, (i) the articles of incorporation or bylaws of the Company, or (ii) to our knowledge, any judgment, writ, order or decree, specific to the Company, of any federal or state court or other governmental authority or, (iii) to our knowledge, any material provision of any contract or agreement listed in the Disclosure Schedules to the Agreement. 7. To our knowledge, there are no actions, suits, claims, investigations or proceedings pending or threatened against the Company at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality that would, if decided adversely, after consideration of all defenses, have a material adverse effect on the assets or operation of the business of the Company. 8. All proceedings required by law or by the provisions of the Operative Documents to be taken by the Shareholders or the Company in connection with the transactions contemplated therein have been duly and validly taken. This 28th day of April, 1999. Clarkson & Williams, L.L.C. /s/ Jason Williams ---------------------------------------- Jason Williams 4323 Mundy Mill Road Suite 200 Oakwood, GA 30566 (t) 770-297-0000 (f) 770-448-5846 jsw@northgeorgialaw.com EX-10.1 5 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT AGREEMENT made this 15th day of July 1998, between Elite, Inc., a Texas corporation, hereinafter sometimes called the "Employer", having its principal place of business in Duluth, Georgia, and Scott Schuster, hereinafter sometimes called the "Employee". WHEREAS, the Employee and Employer desire to set forth in writing their contract with respect to Employee's employment by Employer; NOW, THEREFORE, in consideration of their mutual promises set forth herein, the parties hereby agree as follows: 1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby accepts such employment, upon the terms and conditions set forth in this Agreement. 2. DUTIES AND AUTHORITY. A. Employee will occupy the position of Chief Executive Officer, (hereinafter referred to as "Position" or "Assignment") with the Employer. Employee will also be appointed as a member of the board. B. In this position, Employee will have the responsibility and authority associated with said position, subject to the control of the Board of Directors, and have general supervision, direction and control, as necessary, over the business and affairs of the Corporation and its Employees. Employee will be primarily responsible for carrying out orders and resolutions of the Board of Directors and such duties as may from time to time be assigned to Employee by the Board of Directors. C. Employee agrees to devote his full time attention and best efforts to the performance of employment hereunder. 3. TERM OF EMPLOYMENT. The term of employment shall begin on the date of this Agreement, and shall extend for a period of three (3) consecutive years or until terminated as provided herein. 4. COMPENSATION. Employee will receive compensation during the term of this Agreement as follows: A. A base annual salary of two hundred fifty thousand dollars per year ($250,000) payable either bi-monthly, weekly, semi-weekly or monthly at the discretion of the Employer. The base salary shall be adjusted at the end of each year of employment as an increase. B. An incentive salary (Bonus) equal to a maximum of three percent (3) of the adjusted net profits (hereinafter defined) of the Employer during each fiscal year beginning or ending during the term of this Agreement. "Adjusted net profit" shall be the net profit before federal and state income taxes, determined in accordance with accepted accounting practices by the independent accounting firm employed by the Employer as auditors and adjusted to exclude: (i) any incentive salary payments paid pursuant to this Agreement; (ii) any contributions to pension and/or profit-sharing plans; (iii) any extraordinary gains or losses (including, but not limited to, gains or losses on disposition of assets); (iv) any refund or deficiency of federal and state income taxes paid in a prior year; and (v) any provision for federal or state income taxes made in prior years which is subsequently determined as unnecessary. The determination of the adjusted net profits made by the independent accounting firm employed by the Employer shall be final and binding upon Employee and the Employer. For the first and last fiscal years ending and beginning, respectively, during the term of this Agreement, the incentive salary shall be computed for the proportion of the fiscal year coextensive with this Agreement. The incentive salary shall be paid within sixty (60) days after the end of each fiscal year. The maximum incentive salary payable for any one year shall not exceed two hundred percent of Employee's base salary unless authorized by the Board of Directors. 5. DEFERRED COMPENSATION. In the event that Employee retires after performing services for the Employer up until Employee reaches the age of 65 or retires at an earlier age with the approval of the Employer, Employee will be entitled to deferred compensation payments after retirement upon the following terms and conditions: A. For a period of twenty (20) years ("Retirement Period") Employee will receive all of the following: (i) Base Payments equal to thirty percent (30%) of the average total salary (base salary plus incentive salary) paid to Employee during the last three (3) full years of employment or based upon his/her total period of employment, should that period be less that three (3) full years, prior to the month of retirement ("Retirement Salary Base"); (ii) Advisor Payments equal to thirty percent (30%) of the Retirement Salary Base, provided that Employee serves as an advisor and consultant to the Employer regarding its business. Employee will hold himself available to perform services at reasonable times at the request of the Board of Directors of the Employer, consistent with any business activities Employee may be engaged in at such time. The Board of Directors of the Employer shall have the right to require the presence of Employee at any Board of Directors meeting, not exceeding more than one meeting per month, to act and serve in the advisory capacity. Attendance at these Board of Directors meetings shall not be required should Employee's health prevent attendance; however, Employer shall have the right to demand a written statement from Employee prepared by a licensed medical examiner evidencing inability of Employee to attend the meeting or meetings. Employee will be reimbursed for all reasonable and necessary travel and incidental expenses incurred by Employee in connection with the performance of advisory services; and (iii) Non competition Payments equal to forty percent (40%) of the Retirement Base Salary provided that Employee will not, directly or indirectly, perform any business, commercial, or consulting services to any person, firm, or organization or become associated as a manager, Employee, director, or owner of any business organization competing directly or indirectly with the Employer, whether or not compensated without the prior written consent of Employer. In the event that Employer and Employee are unable to agree on whether a particular business in which Employee attempts to engage is directly or indirectly in competition with the Employer, the matter will be submitted to arbitration under the provisions of Paragraph 22 of this agreement. B. The deferred compensation payments shall be made in equal monthly installments on the first day of each month, starting in the month following the month of retirement. C. In the Event of the death of Employee prior to the expiration of the "Retirement Period", the Employer will pay all remaining Base Payments specified in subparagraph A(i), and no other deferred compensation payments, to any beneficiary of Employee designated by Employee in a written document filed with the Employer, or in the absence of such designation, the estate of Employee. The Employer may elect to pay these remaining Base Payments in a lump sum or in the equal monthly installments specified in subparagraph B. D. Employee shall not sell, assign, transfer, or pledge, or in any other way dispose of or encumber, voluntarily or involuntarily, by gift, testamentary disposition, inheritance, transfer to any inter-vivos trust, seizure and sale by legal process, operation of law, bankruptcy, winding up of a corporation, or otherwise, the right to receive any deferred compensation pursuant to this Agreement. 6. RELOCATION. In the event Employee is transferred and assigned to a new principal place of work located more than fifty (50) miles from Employee's present residence, Employer will pay for all reasonable relocation expenses including: A. Transportation fares, meals, and lodging for Employee, his spouse, and family from Employee's present residence to any new residence located near the new principal place of work. B. Moving of Employee's household goods and the personal effects of Employee and Employee's family from Employee's present residence to the new residence. C. Lodging and meals for Employee and Employee's family for a period of not more than sixty (60) consecutive days while occupying temporary living quarters located near the new principal place of work. D. Round trip travel, meals and lodging expenses for Employee's family for no more than two (2) house hunting trips to locate a new residence, each trip not to exceed fourteen (14) days; and E. Expenses in connection with the sale of the residence of Employee including Realtor fees, property appraisals, mortgage prepayment penalties, termite inspector fees, title insurance policy and revenue stamps, escrow fees, fees for drawing documents, state or local sales taxes, mortgage discount points (if in lieu of a prepayment penalty), and seller's attorney's fees (not to exceed one percent (1%) of the sales price). At the option of Employee and in lieu of reimbursement for these expenses, Employee may sell the residence of Employee to the Employer at the fair market value of the residence determined by an appraiser chosen by the Employer. The appraisal will be performed within ten (10) days after notice of transfer and notice of appraised value will be submitted by report to Employee. Employee will have the right to sell the residence to the Employer at the appraised price by giving notice of intent to sell within thirty (30) days from the date of the appraisal report. The term "residence" shall mean the property occupied by Employee as the principal residence at the time of transfer and does not include summer homes, multiple-family dwellings, houseboats, boats, or airplanes but does include condominium or cooperative apartment units and duplexes (two family) occupied by Employee. 7. MEDICAL AND GROUP INSURANCE. At the expense of the Employer, Employer agrees to include Employee in the group medical and hospital plan of Employer, when such plan is established. 8. STOCK OPTIONS. Options to acquire common stock of two million (2,000,000) shares of which options to acquire one million (1,000,000) shares of common stock at a price of Ten Cents ($0.10) fully vest and become exercisable on August 31, 2000, options to acquire one million (1,000,000) shares of common stock at a price of Ten Cents ($0.10) fully vest and become exercisable on August 31, 2001. The options described above expire one year after fully vesting and must be exercised on or before that date. Company agrees to provide exemption registration upon written notification of Employee. Employee shall provide Company written notice not less than 60 days prior to the intent to exercise said option. 9. VACATION. Employee shall be entitled to four (4) weeks of paid vacation during each year of employment; for the fourth year and each years thereafter, said vacation time shall increase to five (5) weeks during each year. The time for the vacation shall be mutually agreed upon by Employee and Employer. If vacation is not taken, for the benefit of the Employer, Employee shall be compensated at one and one half (1 1/2) times his base salary rate for time not taken. Employee shall receive 30 days Sick/Personal Leave for each year of employment. Unused Sick/Personal Leave will accrue and be retained by Employee to be used at his discretion. 10. AUTOMOBILE. Employer will provide to Employee, during the term of this agreement, the use of a new luxury automobile of the Employee's choice, said automobile may be leased, rented or purchased by Employer at Employer's discretion. Value of said automobile shall be determined by the following guidelines: for the initial automobile; a vehicle that could normally be purchased with a twenty percent (20%) down payment and total monthly payments not to exceed $3,500.00 for a period of five (5) years. The Employer will procure and maintain in force an automobile liability policy for the automobile with coverage, including Employee, in the minimum amount of One Million Dollars ($1,000,000) combined single limit on bodily injury and property damage. 11. EXPENSE REIMBURSEMENT. Employee shall be entitled to reimbursement for all reasonable expenses, including travel and entertainment, incurred by Employee in the performance of Employee's duties. Employee will maintain records and written receipts as required by federal and state tax authorities to substantiate expenses as an income tax deduction for Employer and shall submit vouchers for expenses for which reimbursement is made 12. LOW INTEREST LOAN. A. From time to time, Employee may borrow sums from Employer up to a maximum aggregate of $500,000 provided the Employer has excess funds available for such purposes. The Board of Directors shall establish the amount of such funds available annually. Each loan shall be evidenced by a Promissory Note payable in not more than sixty (60) monthly principal and interest installment payments starting with the first day of the month following the month in which the loan is made, with interest at the rate of three percent (3%) per year on the unpaid balance of the loan or loans outstanding. B. In the event Employee severs employment with Employer for reasons other than permanent disability, death, or retirement while a loan or loans are outstanding, the unpaid principal amount then outstanding shall be due and payable within thirty (30) days after the date of termination. In the event severance of employment is due to permanent disability, death, or retirement, Employee, or the legal representative of Employee, shall repay any outstanding loan in accordance with the terms of the promissory note. C. Should there be a default in the payment of any installment of principal and interest when due, then the entire sum of principal and interest, at the option of the Employer, shall immediately become due and payable without demand or notice. In case this note shall not be paid when due according to its terms, Employee shall pay all costs of collection and reasonable attorney's fees whether or not suit is filed on the note 13. PERMANENT DISABILITY. A. In the event Employee becomes permanently disabled (hereinafter defined) during employment with Employer, Employer may terminate this agreement by giving thirty (30) days notice to Employee of its intent to terminate, and, unless Employee resumes performance of the duties set forth in Paragraph 2 within five (5) days of the date of notice and continues performance for the remainder of the notice period, this agreement will terminate at the end of the thirty (30) day period. "Permanently disabled" for the purpose of this agreement will mean the inability, due to physical or mental ill health, or any reason beyond the control of Employee to perform Employee's duties for sixty (60) consecutive days or for an aggregate of ninety (90) days during any one employment year irrespective of whether such days are consecutive. B. Upon termination of employment under the provisions of subparagraph (12A) above, Employee will be entitled to any deferred compensation to which the Employee may be entitled under the provisions of Paragraph 5 herein paid to him upon giving notice to the Employer. For the purposes of Paragraph 5, termination under subparagraph (12A) of this agreement shall be considered "retirement"; Employee will be excused from performing advisory services as required under Paragraph 5(B)(ii.) but shall nevertheless be entitled to Advisory Payments except the extent limited by death of Employee as set forth in Paragraph 5(C) herein. C. Employer shall maintain, at its expense, a disability Policy covering Employee for a dollar amount specified by the Board of Directors of Employer. This amount may not exceed one hundred percent (100%) of the base salary. Benefits of this policy shall begin on the date the Employee's Sick/Personal Leave days are exhausted and shall continue until the Employee's deferred compensation as outlined in paragraph 5 of this agreement goes into effect. 14. DEATH. In the event that Employee dies during the term of this agreement, this agreement shall immediately terminate except as provided in paragraph 5C, herein. 15. TERMINATION. A. This agreement may be terminated by Employer by giving ten (10) days notice to Employee if Employee willfully breaches or habitually neglects the duties to be performed under Paragraph 2, habitually engages in the use of illegal substances or the excessive use of alcohol, or engages in any conduct which is illegal or dishonest resulting in damage to the reputation of Employer, or potential damage to reputation of Employer. B. In the event employment is terminated pursuant to subparagraphs (A), Employee will be entitled to only base salary compensation earned prior to the date of termination as provided for in Paragraph 3 of this agreement computed pro rata up to and including the date of termination, plus one twelfth (1/12) of one years base salary. Employee shall not receive the incentive salary payments or the deferred compensation payments provided for in Paragraphs 3(B) and 4, respectively. C. Should Employer wish to terminate the Employee or change the Duties and Authority(as defined in 2A), for any reason, other than those listed in subparagraph 14A of this agreement, Employee shall receive the compensation due for the remainder of the Term of Employment (defined in paragraph three (3) of this agreement) plus one year, said compensation shall be in a lump sum equal to the total amount of the base salary as defined in subparagraph four "A" (4A) of this agreement, in this case "cost of living" increases would not be applicable. Employee would still receive the "Bonus" as defined in paragraph four "B" (4B) and "C"(4C) of this agreement. Upon termination as defined in this paragraph, Employee would, regardless of age, tenure or Employer approval, immediately become eligible to also receive Deferred Compensation as defined in sub-paragraphs five "A" through five "D" (5A-5D) of this agreement. D. In the event Employer is acquired, is a non surviving party in a merger, or transfers substantially all of its assets, this agreement shall not be terminated and Employer agrees to take all actions necessary to ensure that the transferee or surviving company is bound by the provisions of this agreement. 1. NOTICES. Any notice provided for in this Agreement shall be given in writing. Notices shall be effective from the date of service, if served personally on the party to whom notice is to be given, or on the second day after mailing, if mailed by first class mail, postage prepaid. Notices shall be properly addressed to the parties at their respective addresses: Employer: 3700 Crestwood Parkway Suite 1000 Duluth, GA 30096 Employee: ---------------------- ---------------------- ---------------------- or to such other address as either party may later specify by notice to the other. 2. ENTIRE AGREEMENT. This Agreement contains the entire agreement and supersedes all prior agreements and understandings., oral or written, with respect to the subject matter hereof. This Agreement may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment or modification is sought. 3. WAIVER. The waiver by the Employer of a breach of any of the provisions of this Agreement by the Employee shall not be construed as a waiver of any subsequent breach by the Employee. 4. GOVERNING LAW; VENUE. This Agreement shall be construed and enforced in accordance with the laws of the State of Georgia. Gwinnett County, Georgia, shall be the proper venue for any litigation arising out of this Agreement. 5. PARAGRAPH HEADINGS. Paragraph headings are for convenience only and are not intended to expand or restrict the scope or substance of the provisions of this Agreement. 6. ASSIGNABILITY. The rights and obligations of the Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Employer. This Agreement is a personal employment agreement and the rights, obligations and interests of the Employee hereunder may not be sold, assigned, transferred, pledged or hypothecated. 7. SEVERABILITY. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement shall remain in full force and effect and shall in no way be impaired. 8. ARBITRATION. Any controversy or claim arising out of or relating to this contract, or breach thereof, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Hereby entered into and agreed upon this 15th day of July, 1998, by: - -------------------------- -------------------------- Scott A. Schuster Elite Technologies, Inc. EX-10.2 6 EMPLOYMENT AGREEMENTY EMPLOYMENT AGREEMENT AGREEMENT made this 15th day of March 1999, between Elite, Inc., a Texas corporation, hereinafter sometimes called the "Employer", having its principal place of business in Duluth, Georgia, and Jason Kiszonak, hereinafter sometimes called the "Employee". WHEREAS, the Employee and Employer desire to set forth in writing their contract with respect to Employee's employment by Employer; NOW, THEREFORE, in consideration of their mutual promises set forth herein, the parties hereby agree as follows: 1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby accepts such employment, upon the terms and conditions set forth in this Agreement. 2. DUTIES AND AUTHORITY. A. Employee will occupy the position of Vice President, (hereinafter referred to as "Position" or "Assignment") with the Employer. Employee will also be appointed as a member of the board. B. In this position, Employee will have the responsibility and authority associated with said position, subject to the control of the Board of Directors, and have general supervision, direction and control, as necessary, over the business and affairs of the Corporation and its Employees. Employee will be primarily responsible for carrying out orders and resolutions of the Board of Directors and such duties as may from time to time be assigned to Employee by the Board of Directors. C. Employee agrees to devote his full time attention and best efforts to the performance of employment hereunder. 3. TERM OF EMPLOYMENT. The term of employment shall begin on the date of this Agreement, and shall extend for a period of three (3) consecutive years or until terminated as provided herein. 4. COMPENSATION. Employee will receive compensation during the term of this Agreement as follows: A. A base annual salary of one hundred twenty five thousand dollars per year ($125,000) payable either bi-monthly, weekly, semi-weekly or monthly at the discretion of the Employer. The base salary shall be adjusted at the end of each year of employment as an increase. B. An incentive salary (Bonus) equal to a maximum of three percent (3) of the adjusted net profits (hereinafter defined) of the Employer during each fiscal year beginning or ending during the term of this Agreement. "Adjusted net profit" shall be the net profit before federal and state income taxes, determined in accordance with accepted accounting practices by the independent accounting firm employed by the Employer as auditors and adjusted to exclude: (i) any incentive salary payments paid pursuant to this Agreement; (ii) any contributions to pension and/or profit-sharing plans; (iii) any extraordinary gains or losses (including, but not limited to, gains or losses on disposition of assets); (iv) any refund or deficiency of federal and state income taxes paid in a prior year; and (v) any provision for federal or state income taxes made in prior years which is subsequently determined as unnecessary. The determination of the adjusted net profits made by the independent accounting firm employed by the Employer shall be final and binding upon Employee and the Employer. For the first and last fiscal years ending and beginning, respectively, during the term of this Agreement, the incentive salary shall be computed for the proportion of the fiscal year coextensive with this Agreement. The incentive salary shall be paid within sixty (60) days after the end of each fiscal year. The maximum incentive salary payable for any one year shall not exceed two hundred percent of Employee's base salary unless authorized by the Board of Directors. 5. DEFERRED COMPENSATION. In the event that Employee retires after performing services for the Employer up until Employee reaches the age of 65 or retires at an earlier age with the approval of the Employer, Employee will be entitled to deferred compensation payments after retirement upon the following terms and conditions: A. For a period of twenty (20) years ("Retirement Period") Employee will receive all of the following: (i) Base Payments equal to thirty percent (30%) of the average total salary (base salary plus incentive salary) paid to Employee during the last three (3) full years of employment or based upon his/her total period of employment, should that period be less that three (3) full years, prior to the month of retirement ("Retirement Salary Base"); (ii) Advisor Payments equal to thirty percent (30%) of the Retirement Salary Base, provided that Employee serves as an advisor and consultant to the Employer regarding its business. Employee will hold himself available to perform services at reasonable times at the request of the Board of Directors of the Employer, consistent with any business activities Employee may be engaged in at such time. The Board of Directors of the Employer shall have the right to require the presence of Employee at any Board of Directors meeting, not exceeding more than one meeting per month, to act and serve in the advisory capacity. Attendance at these Board of Directors meetings shall not be required should Employee's health prevent attendance; however, Employer shall have the right to demand a written statement from Employee prepared by a licensed medical examiner evidencing inability of Employee to attend the meeting or meetings. Employee will be reimbursed for all reasonable and necessary travel and incidental expenses incurred by Employee in connection with the performance of advisory services; and (iii) Non competition Payments equal to forty percent (40%) of the Retirement Base Salary provided that Employee will not, directly or indirectly, perform any business, commercial, or consulting services to any person, firm, or organization or become associated as a manager, Employee, director, or owner of any business organization competing directly or indirectly with the Employer, whether or not compensated without the prior written consent of Employer. In the event that Employer and Employee are unable to agree on whether a particular business in which Employee attempts to engage is directly or indirectly in competition with the Employer, the matter will be submitted to arbitration under the provisions of Paragraph 22 of this agreement. B. The deferred compensation payments shall be made in equal monthly installments on the first day of each month, starting in the month following the month of retirement. C. In the Event of the death of Employee prior to the expiration of the "Retirement Period", the Employer will pay all remaining Base Payments specified in subparagraph A(i), and no other deferred compensation payments, to any beneficiary of Employee designated by Employee in a written document filed with the Employer, or in the absence of such designation, the estate of Employee. The Employer may elect to pay these remaining Base Payments in a lump sum or in the equal monthly installments specified in subparagraph B. D. Employee shall not sell, assign, transfer, or pledge, or in any other way dispose of or encumber, voluntarily or involuntarily, by gift, testamentary disposition, inheritance, transfer to any inter-vivos trust, seizure and sale by legal process, operation of law, bankruptcy, winding up of a corporation, or otherwise, the right to receive any deferred compensation pursuant to this Agreement. 6. RELOCATION. In the event Employee is transferred and assigned to a new principal place of work located more than fifty (50) miles from Employee's present residence, Employer will pay for all reasonable relocation expenses including: A. Transportation fares, meals, and lodging for Employee, his spouse, and family from Employee's present residence to any new residence located near the new principal place of work. B. Moving of Employee's household goods and the personal effects of Employee and Employee's family from Employee's present residence to the new residence. C. Lodging and meals for Employee and Employee's family for a period of not more than sixty (60) consecutive days while occupying temporary living quarters located near the new principal place of work. D. Round trip travel, meals and lodging expenses for Employee's family for no more than two (2) house hunting trips to locate a new residence, each trip not to exceed fourteen (14) days; and E. Expenses in connection with the sale of the residence of Employee including Realtor fees, property appraisals, mortgage prepayment penalties, termite inspector fees, title insurance policy and revenue stamps, escrow fees, fees for drawing documents, state or local sales taxes, mortgage discount points (if in lieu of a prepayment penalty), and seller's attorney's fees (not to exceed one percent (1%) of the sales price). At the option of Employee and in lieu of reimbursement for these expenses, Employee may sell the residence of Employee to the Employer at the fair market value of the residence determined by an appraiser chosen by the Employer. The appraisal will be performed within ten (10) days after notice of transfer and notice of appraised value will be submitted by report to Employee. Employee will have the right to sell the residence to the Employer at the appraised price by giving notice of intent to sell within thirty (30) days from the date of the appraisal report. The term "residence" shall mean the property occupied by Employee as the principal residence at the time of transfer and does not include summer homes, multiple-family dwellings, houseboats, boats, or airplanes but does include condominium or cooperative apartment units and duplexes (two family) occupied by Employee. 7. MEDICAL AND GROUP INSURANCE. At the expense of the Employer, Employer agrees to include Employee in the group medical and hospital plan of Employer, when such plan is established. 8. STOCK OPTIONS. Options to acquire common stock of two million (2,000,000) shares of which options to acquire one million (1,000,000) shares of common stock at a price of Ten Cents ($0.10) fully vest and become exercisable on August 31, 2000, options to acquire one million (1,000,000) shares of common stock at a price of Ten Cents ($0.10) fully vest and become exercisable on August 31, 2001. The options described above expire one year after fully vesting and must be exercised on or before that date. Company agrees to provide exemption registration upon written notification of Employee. Employee shall provide Company written notice not less than 60 days prior to the intent to exercise said option. 9. VACATION. Employee shall be entitled to four (4) weeks of paid vacation during each year of employment; for the fourth year and each years thereafter, said vacation time shall increase to five (5) weeks during each year. The time for the vacation shall be mutually agreed upon by Employee and Employer. If vacation is not taken, for the benefit of the Employer, Employee shall be compensated at one and one half (1 1/2) times his base salary rate for time not taken. Employee shall receive 30 days Sick/Personal Leave for each year of employment. Unused Sick/Personal Leave will accrue and be retained by Employee to be used at his discretion. 10. AUTOMOBILE. Employer will provide to Employee, during the term of this agreement, the use of a new luxury automobile of the Employee's choice, said automobile may be leased, rented or purchased by Employer at Employer's discretion. Value of said automobile shall be determined by the following guidelines: for the initial automobile; a vehicle that could normally be purchased with a twenty percent (20%) down payment and total monthly payments not to exceed $1,500.00 for a period of five (5) years. The Employer will procure and maintain in force an automobile liability policy for the automobile with coverage, including Employee, in the minimum amount of One Million Dollars ($1,000,000) combined single limit on bodily injury and property damage. 11. EXPENSE REIMBURSEMENT. Employee shall be entitled to reimbursement for all reasonable expenses, including travel and entertainment, incurred by Employee in the performance of Employee's duties. Employee will maintain records and written receipts as required by federal and state tax authorities to substantiate expenses as an income tax deduction for Employer and shall submit vouchers for expenses for which reimbursement is made 12. LOW INTEREST LOAN. A. From time to time, Employee may borrow sums from Employer up to a maximum aggregate of $500,000 provided the Employer has excess funds available for such purposes. The Board of Directors shall establish the amount of such funds available annually. Each loan shall be evidenced by a Promissory Note payable in not more than sixty (60) monthly principal and interest installment payments starting with the first day of the month following the month in which the loan is made, with interest at the rate of three percent (3%) per year on the unpaid balance of the loan or loans outstanding. B. In the event Employee severs employment with Employer for reasons other than permanent disability, death, or retirement while a loan or loans are outstanding, the unpaid principal amount then outstanding shall be due and payable within thirty (30) days after the date of termination. In the event severance of employment is due to permanent disability, death, or retirement, Employee, or the legal representative of Employee, shall repay any outstanding loan in accordance with the terms of the promissory note. C. Should there be a default in the payment of any installment of principal and interest when due, then the entire sum of principal and interest, at the option of the Employer, shall immediately become due and payable without demand or notice. In case this note shall not be paid when due according to its terms, Employee shall pay all costs of collection and reasonable attorney's fees whether or not suit is filed on the note 13. PERMANENT DISABILITY. A. In the event Employee becomes permanently disabled (hereinafter defined) during employment with Employer, Employer may terminate this agreement by giving thirty (30) days notice to Employee of its intent to terminate, and, unless Employee resumes performance of the duties set forth in Paragraph 2 within five (5) days of the date of notice and continues performance for the remainder of the notice period, this agreement will terminate at the end of the thirty (30) day period. "Permanently disabled" for the purpose of this agreement will mean the inability, due to physical or mental ill health, or any reason beyond the control of Employee to perform Employee's duties for sixty (60) consecutive days or for an aggregate of ninety (90) days during any one employment year irrespective of whether such days are consecutive. B. Upon termination of employment under the provisions of subparagraph (12A) above, Employee will be entitled to any deferred compensation to which the Employee may be entitled under the provisions of Paragraph 5 herein paid to him upon giving notice to the Employer. For the purposes of Paragraph 5, termination under subparagraph (12A) of this agreement shall be considered "retirement"; Employee will be excused from performing advisory services as required under Paragraph 5(B)(ii.) but shall nevertheless be entitled to Advisory Payments except the extent limited by death of Employee as set forth in Paragraph 5(C) herein. C. Employer shall maintain, at its expense, a disability Policy covering Employee for a dollar amount specified by the Board of Directors of Employer. This amount may not exceed one hundred percent (100%) of the base salary. Benefits of this policy shall begin on the date the Employee's Sick/Personal Leave days are exhausted and shall continue until the Employee's deferred compensation as outlined in paragraph 5 of this agreement goes into effect. 14. DEATH. In the event that Employee dies during the term of this agreement, this agreement shall immediately terminate except as provided in paragraph 5C, herein. 15. TERMINATION. A. This agreement may be terminated by Employer by giving ten (10) days notice to Employee if Employee willfully breaches or habitually neglects the duties to be performed under Paragraph 2, habitually engages in the use of illegal substances or the excessive use of alcohol, or engages in any conduct which is illegal or dishonest resulting in damage to the reputation of Employer, or potential damage to reputation of Employer. B. In the event employment is terminated pursuant to subparagraphs (A), Employee will be entitled to only base salary compensation earned prior to the date of termination as provided for in Paragraph 3 of this agreement computed pro rata up to and including the date of termination, plus one twelfth (1/12) of one years base salary. Employee shall not receive the incentive salary payments or the deferred compensation payments provided for in Paragraphs 3(B) and 4, respectively. C. Should Employer wish to terminate the Employee or change the Duties and Authority(as defined in 2A), for any reason, other than those listed in subparagraph 14A of this agreement, Employee shall receive the compensation due for the remainder of the Term of Employment (defined in paragraph three (3) of this agreement) plus one year, said compensation shall be in a lump sum equal to the total amount of the base salary as defined in subparagraph four "A" (4A) of this agreement, in this case "cost of living" increases would not be applicable. Employee would still receive the "Bonus" as defined in paragraph four "B" (4B) and "C"(4C) of this agreement. Upon termination as defined in this paragraph, Employee would, regardless of age, tenure or Employer approval, immediately become eligible to also receive Deferred Compensation as defined in sub-paragraphs five "A" through five "D" (5A-5D) of this agreement. D. In the event Employer is acquired, is a non surviving party in a merger, or transfers substantially all of its assets, this agreement shall not be terminated and Employer agrees to take all actions necessary to ensure that the transferee or surviving company is bound by the provisions of this agreement. 1. NOTICES. Any notice provided for in this Agreement shall be given in writing. Notices shall be effective from the date of service, if served personally on the party to whom notice is to be given, or on the second day after mailing, if mailed by first class mail, postage prepaid. Notices shall be properly addressed to the parties at their respective addresses: Employer: 3700 Crestwood Parkway Suite 1000 Duluth, GA 30096 Employee: ---------------------- ---------------------- ---------------------- or to such other address as either party may later specify by notice to the other. 2. ENTIRE AGREEMENT. This Agreement contains the entire agreement and supersedes all prior agreements and understandings., oral or written, with respect to the subject matter hereof. This Agreement may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment or modification is sought. 3. WAIVER. The waiver by the Employer of a breach of any of the provisions of this Agreement by the Employee shall not be construed as a waiver of any subsequent breach by the Employee. 4. GOVERNING LAW; VENUE. This Agreement shall be construed and enforced in accordance with the laws of the State of Georgia. Gwinnett County, Georgia, shall be the proper venue for any litigation arising out of this Agreement. 5. PARAGRAPH HEADINGS. Paragraph headings are for convenience only and are not intended to expand or restrict the scope or substance of the provisions of this Agreement. 6. ASSIGNABILITY. The rights and obligations of the Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Employer. This Agreement is a personal employment agreement and the rights, obligations and interests of the Employee hereunder may not be sold, assigned, transferred, pledged or hypothecated. 7. SEVERABILITY. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement shall remain in full force and effect and shall in no way be impaired. 8. ARBITRATION. Any controversy or claim arising out of or relating to this contract, or breach thereof, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Hereby entered into and agreed upon this 15th day of March, 1999, by: - -------------------------- -------------------------------- Jason Kiszonak Elite Technologies, Inc. -----END PRIVACY-ENHANCED MESSAGE-----