EXHIBIT 10(a)
SECURITIES PURCHASE AGREEMENT
BETWEEN
XXXXXXXXXX.XXX, INC.
AND
INTERNET SPORTS NETWORK, INC.
DECEMBER 21, 1999
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TABLE OF CONTENTS
PAGE
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ARTICLE I - ISSUANCE AND SALE OF THE SECURITIES. . . . . . . . . . . . . . . 1
1.1 Securities Purchase . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing Transactions. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . 2
2.1 Conditions To SPLN's Obligation . . . . . . . . . . . . . . . . . 2
2.2 Conditions To The Company's Obligations . . . . . . . . . . . . . 3
ARTICLE III - COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Affirmative Covenants Of The Company. . . . . . . . . . . . . . . 4
3.2 Negative Covenants Of The Company . . . . . . . . . . . . . . . . 5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . 8
4.1 Organization And Corporate Power. . . . . . . . . . . . . . . . . 8
4.2 Authorization Of Transactions . . . . . . . . . . . . . . . . . . 8
4.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Absence Of Conflicts. . . . . . . . . . . . . . . . . . . . . . .10
4.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . . .10
4.6 Absence Of Undisclosed Liabilities. . . . . . . . . . . . . . . .10
4.7 Absence Of Material Adverse Change. . . . . . . . . . . . . . . .11
4.8 Absence Of Certain Developments . . . . . . . . . . . . . . . . .11
4.9 Title To Properties . . . . . . . . . . . . . . . . . . . . . . .12
4.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.11 Litigation; Proceedings . . . . . . . . . . . . . . . . . . . . .13
4.12 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.13 Governmental Licenses And Permits . . . . . . . . . . . . . . . .13
4.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.15 Affiliate Transactions. . . . . . . . . . . . . . . . . . . . . .14
4.16 Compliance With Laws. . . . . . . . . . . . . . . . . . . . . . .14
4.17 Governmental Consent, Etc.. . . . . . . . . . . . . . . . . . . .15
4.18 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.19 Exemption From Registration; Restrictions On Offer And Sale Of
Same Or Similar Securities. . . . . . . . . . . . . . . . . . . .15
4.20 Authority Relative To This Agreement. . . . . . . . . . . . . . .15
4.21 Intangible Rights . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF SPLN . . . . . . . . . . . . .16
5.1 Organization And Power. . . . . . . . . . . . . . . . . . . . . .16
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . .16
5.3 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . .16
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5.4 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
5.5 Investment Representations. . . . . . . . . . . . . . . . . . . .16
ARTICLE VI - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE VII - VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . .20
7.1 Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE VIII - REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . .21
8.1 Demand Registrations. . . . . . . . . . . . . . . . . . . . . . .21
8.2 Piggyback Registration. . . . . . . . . . . . . . . . . . . . . .24
8.3 Registration Procedures . . . . . . . . . . . . . . . . . . . . .24
8.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
8.5 Indemnification And Contribution. . . . . . . . . . . . . . . . .26
8.6 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
ARTICLE IX - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . .28
9.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
9.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . .28
9.3 Indemnification Procedure . . . . . . . . . . . . . . . . . . . .29
9.4 Press Releases And Announcements. . . . . . . . . . . . . . . . .30
9.5 Further Transfers . . . . . . . . . . . . . . . . . . . . . . . .30
9.6 Specific Performance. . . . . . . . . . . . . . . . . . . . . . .30
9.7 Transfer Of Securities. . . . . . . . . . . . . . . . . . . . . .31
ARTICLE X - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . .32
10.1 Amendment And Waiver. . . . . . . . . . . . . . . . . . . . . . .32
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
10.3 Binding Agreement; Assignment . . . . . . . . . . . . . . . . . .33
10.4 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . .33
10.5 No Strict Construction. . . . . . . . . . . . . . . . . . . . . .33
10.6 Headings; Interpretation. . . . . . . . . . . . . . . . . . . . .33
10.7 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . .34
10.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . .34
10.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .34
10.10 Parties In Interest . . . . . . . . . . . . . . . . . . . . . . .34
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EXHIBITS
Exhibit A - Form of Convertible Note
Exhibit B - Form of Warrant
Exhibit C - Financial Disclosure
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LIST OF SCHEDULES
Schedule 4.1 - Subsidiaries
Schedule 4.3(a) - Company Capitalization Schedule
Schedule 4.7 - Material Adverse Change
Schedule 4.8 - Certain Developments
Schedule 4.9 - Security Interests
Schedule 4.11 - Litigation; Proceedings
Schedule 4.14 - D&O Insurance
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is made as of December
21, 1999 by and between XxxxxxXxxx.xxx, Inc., a Delaware corporation ("SPLN"),
and Internet Sports Network, a Florida corporation (the "COMPANY"). Except as
otherwise indicated herein, capitalized terms used herein are defined in Article
VI hereof.
Subject to the terms and conditions set forth herein, SPLN desires to
purchase from the Company, and the Company desires to issue to SPLN, (a) a
Convertible Promissory Note in the principal amount of $5,000,000 (the "NOTE"),
convertible at any time after the date of issuance into shares of the Company's
common stock, par value $0.001 per share (the "COMMON STOCK"), under
circumstances as described herein; and (b) a warrant (the "WARRANT") to
purchase at any time after the Closing Date shares of Common Stock under the
circumstances as described herein. The Note, Underlying Common Stock, and the
Warrant are sometimes referred to herein as the "Securities."
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the parties hereto agree
as follows:
ARTICLE I
ISSUANCE AND SALE OF THE SECURITIES
1.1 SECURITIES PURCHASE. On the terms and subject to the conditions of
this Agreement, at the Closing:
(a) The Company shall authorize the issuance and sale to SPLN of
the Note having the rights and preferences set forth in Exhibit A attached
hereto, which will initially be convertible into an aggregate of 1,722,160
shares of Common Stock. The total purchase price of the Note will be
$5,000,000.
(b) In consideration of $10.00 and in order to induce the
transactions contemplated hereby, the Company shall authorize the issuance and
sale to SPLN of the Warrant, having the rights and preferences set forth in
Exhibit B attached hereto, initially exercisable to purchase up to an aggregate
of 1,033,296 shares of Common Stock at an initial exercise price per share equal
to $2.90.
1.2 CLOSING TRANSACTIONS. The closing of the transactions contemplated
by this Agreement (the "CLOSING") will take place at the offices of Xxxxxxxxx
Xxxxxxx, P.A., 0000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx 00000
immediately after the execution of this Agreement. The Company shall issue and
deliver to SPLN, (i) the Note duly registered in the name of SPLN, against
payment by SPLN of $5,000,000 and (ii) the Warrant duly registered in the name
of SPLN (each of the foregoing are collectively referred to herein as the
"CLOSING TRANSACTIONS").
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ARTICLE II
CONDITIONS TO CLOSING
2.1 CONDITIONS TO SPLN'S OBLIGATION. The obligation of SPLN to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions:
(a) the representations and warranties set forth in Article IV
hereof and in any writing delivered pursuant hereto are true and correct;
(b) except as set forth on Schedule 4.7, since September 30, 1999,
there has been no change, circumstance or event which, individually or
collectively with each other such change, circumstance or event, has had or
which could be expected to have a Material Adverse Effect;
(c) all consents and waivers by third parties that are required
for the consummation of the transactions contemplated hereby including, without
limitation, any consents required pursuant to any leases or subleases and any
consents or waivers that are required in order that the transactions
contemplated hereby do not constitute a breach of or a default under or a
termination or modification any material agreement to which the Company or any
of its Subsidiaries is a party or to which any material property of the Company
or any of its Subsidiaries is subject, have been obtained on terms reasonably
satisfactory to SPLN;
(d) all governmental filings, authorizations and approvals that
are required for the consummation of the transactions contemplated hereby, if
any, have been duly made and obtained and all waiting periods have expired on
terms reasonably satisfactory to SPLN other than those filings, authorizations
or approvals the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect;
(e) the Company's board of directors (the "BOARD OF DIRECTORS")
has taken all such action as is necessary and sufficient to ensure that,
effective as of the Closing, the Board of Directors shall be comprised of seven
members, including Xxxxxx X. XxXxxxxxxxx, Xxx Xxxxx, Xxxxx Xxxx, Xxxxx Xxxxxxx,
two individuals designated by SPLN and one vacancy to be filled in accordance
with Section 3.2(g) hereof;
(f) SPLN has received an opinion, dated the date hereof, of
counsel to the Company, which counsel is experienced in transactions of the type
contemplated hereby and is reasonably satisfactory to SPLN, in form and
substance reasonably satisfactory to SPLN and their counsel;
(g) The Company has delivered to SPLN all of the following:
(i) an Officer's Certificate of the Company, dated the date
hereof, stating that the conditions specified in Sections 2.1(a)-(f)
above, inclusive, have been satisfied;
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(ii) certified copies of the resolutions of the Board of
Directors approving the transactions contemplated by this Agreement;
(iii) certified copies of the articles of incorporation (the
"Articles of Incorporation") and bylaws (the "Bylaws") of the Company as
in effect as of the date hereof;
(iv) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of the
transactions contemplated herein;
(v) such other documents or instruments as SPLN may
reasonably request to effect the transactions contemplated hereby;
(h) all proceedings to be taken by the Company in connection with
the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents, including customary representations, warranties, covenants,
conditions and remedies for breach, required to be delivered by the Company to
effect the transactions contemplated hereby are reasonably satisfactory in form
and substance to SPLN.
Any condition to the obligations of SPLN specified in this Section 2.1 may
be waived by SPLN in its sole discretion.
2.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligation of the
Company to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following conditions on or before the date hereof:
(a) the representations and warranties set forth in Article V
hereof and in any writing delivered pursuant hereto are true and correct;
(b) all consents and waivers by third parties that are required
for the consummation of the transactions contemplated hereby including, without
limitation, any consents required pursuant to any leases or subleases or that
are required in order that the transactions contemplated hereby do not
constitute a breach of or a default under or a termination or modification of
any material agreement to which the Company or any of its Subsidiaries is a
party or to which any material property of the Company or any of its
Subsidiaries is subject, have been obtained on terms reasonably satisfactory to
the Company; and
(c) all governmental filings, authorizations and approvals that
are required for the consummation of the transactions contemplated hereby, if
any, have been duly made and obtained and all waiting periods have expired on
terms reasonably satisfactory to the Company other than those filings,
authorizations or approvals the absence of which would not, individually or in
the aggregate, have a Material Adverse Effect.
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The conditions specified in this Section 2.2 may be waived by the Company,
in its sole discretion.
ARTICLE III
COVENANTS
3.1 AFFIRMATIVE COVENANTS OF THE COMPANY. From the date hereof and
thereafter (unless otherwise indicated), the Company covenants and agrees that
it will and will cause each of its Subsidiaries to:
(a) cause all properties owned by the Company or any of its
Subsidiaries or used or held for use in the conduct of its business or the
business of any of its Subsidiaries to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied with
all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Board of Directors may be necessary so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times; provided, however, that the foregoing shall not prevent the Company from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of the Board of Directors, desirable in the conduct of its
business or the business of any of its Subsidiaries and is not disadvantageous
in any material respect to the Company's shareholders;
(b) preserve and keep in full force and effect the corporate
existence, rights (charter and statutory), licenses and franchises of the
Company and each of its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Subsidiaries as a whole
and that the loss thereof is not disadvantageous in any material respect to the
Company's shareholders; and provided, further, that the foregoing shall not
prohibit a sale, transfer or conveyance of a Subsidiary of the Company or any of
its assets which is not otherwise prohibited by the terms of this Agreement and
is in accordance with the Company's Charter;
(c) maintain the books, accounts and records of the Company and
its Subsidiaries in accordance with past custom and practice as used in the
preparation of the Financial Statements (as defined in Section 4.5) except to
the extent permitted or required by GAAP;
(d) keep all of its and its Subsidiaries' properties which are of
an insurable nature insured with insurers, believed by the Company in good faith
to be financially sound and responsible, against loss or damage to the extent
that property of similar character is usually so insured by corporations
similarly situated and owning like properties (which may include self-insurance,
if reasonable and in comparable form to that maintained by companies similarly
situated);
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(e) comply with all material legal requirements and material
contractual obligations applicable to the operations and business of the Company
and its Subsidiaries and pay all applicable Taxes as they become due and
payable;
(f) permit representatives of SPLN and its agents (including its
counsel, accountants and consultants) to have reasonable access during business
hours to the Company's books, records, facilities, key personnel, officers,
directors, customers, independent accountants and legal counsel;
(g) assert and enforce all, and shall not (except with Super
Majority Board Vote) amend or waive any of the Company's rights under, all
agreements between the Company and any of its directors, executive officers and
other Affiliates, and shall pursue all remedies available to it with diligence
and in good faith in connection with the enforcement of any such rights;
(h) at all times file all reports (including annual reports,
quarterly reports and the information, documentation and other reports) required
to be filed by the Company under the Exchange Act and the rules and regulations
adopted by the SEC thereunder, and the Company shall use its best efforts to
file each of such reports on a timely basis, and take such further action as any
holder or holders of Securities may reasonably request, all to the extent
required to enable such holders to sell Securities pursuant to Rule 144 adopted
by the SEC under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the SEC and to
enable the Company to register securities with the SEC;
(i) permit SPLN, to elect two directors to the Board of Directors
and to designate one of such directors as an observer to attend each meeting of
any committees of the Board of Directors, including each telephonic meeting
thereof to the extent that one of such directors is not a member of any such
committee;
(j) if the Company ceases to be a reporting Company under the
Exchange Act or to comply with its reporting obligations thereunder, make
available, upon request, to any holder of the Securities, so long as the
Securities remain outstanding, the information set forth on Exhibit C attached
hereto; and
(k) prior to effecting any offering of securities, coverage for
liabilities in respect of which offering is not included under the Company's
director and officer liability insurance policies, the Company shall purchase an
endorsement or an additional policy of insurance reasonably satisfactory to
SPLN, providing for such coverage in respect of such offering.
3.2 NEGATIVE COVENANTS OF THE COMPANY. From the date hereof and
thereafter (unless otherwise indicated), the Company agrees that it will not,
and will cause each of its Subsidiaries not to:
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(a) (A) except for a sale of Common Stock pursuant to an
underwritten public offering registered pursuant to the Securities Act, issue or
sell or otherwise transfer for consideration (an "ISSUANCE") Stock of the
Company unless, at least 30 days and not more than 60 days prior to such
Issuance, the Company notifies SPLN in writing of the Issuance (including the
price, the purchaser(s) thereof and the other terms thereof) and grants to SPLN
the right (the "RIGHT") to subscribe for and purchase such additional shares or
other securities so issued at the same price and on the same terms (except as
set forth in paragraph (B) below) as issued in the Issuance such that, after
giving effect to the Issuance and exercise of the Right, the Securities owned by
SPLN (after giving effect to the conversion or exercise thereof) shall represent
the same percentage of the outstanding Common Stock (including, for purposes of
this calculation, all Common Stock and assuming the issuance of Common Stock
upon conversion, exchange or exercise of any security so convertible,
exchangeable or exercisable issued in the Issuance or subject to the Right) as
was owned by SPLN prior to the Issuance, or such lesser amount designated by
SPLN. The Right may be exercised by SPLN at any time by written notice to the
Company received by the Company within 20 days after receipt of notice by SPLN
from the Company of the Issuance. The closing of the purchase and sale pursuant
to the exercise of the Right shall occur at least 5 days after the Company
receives notice of the exercise of the Right and concurrently with the closing
of the Issuance. Notwithstanding the foregoing, the Right shall not apply to
(i) issuances of Common Stock (or securities convertible into or exchangeable
for, or options to purchase, Common Stock), pro rata to all holders of Common
Stock, as a dividend on, subdivision of, or other distribution in respect of,
the Common Stock, (ii) issuances of Common Stock upon exercise or conversion of
options, warrants and other rights to acquire Common Stock outstanding on the
date hereof, in each case issued in accordance with the terms thereof as in
effect on the date hereof, and (iii) issuances of Common Stock pursuant to the
terms approved by a Super Majority Board Vote in connection with the acquisition
of interests in another company or business as contemplated by paragraph (d) or
(h) below (irrespective of whether such paragraph (h) would require a Super
Majority Board Vote).
(B) Notwithstanding the foregoing, if an Issuance is in connection
with an Acquisition (as defined in paragraph (h) below), SPLN shall pay cash to
the Company in payment for the additional shares or securities to be purchased
by SPLN upon exercise of its Right and price of the shares or securities so
purchased shall be the lesser of (i) the value therefor indicated in such
Acquisition and (ii) the Fair Market Value of such shares or securities;
(b) without a Super Majority Board Vote, enter into any
transaction or series of transactions with any stockholder, director, officer,
employee or Affiliate which would require disclosure pursuant to Rule 404 of
Regulation S-K under the Securities Act;
(c) except as expressly contemplated by this Agreement, authorize,
issue or enter into any agreement providing for the issuance (contingent or
otherwise) of, (i) any notes or debt securities containing equity features or
issued with capital stock (including, without limitation, any notes or debt
securities convertible into or exchangeable for capital stock or other equity
securities, issued in connection with the issuance of capital stock or other
equity securities or containing profit participation features), (ii) any capital
stock or other equity securities (or any
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securities convertible into or exchangeable for any capital stock or other
equity securities) or issue any Stock which votes generally in the election
of the Company's directors, or (iii) stock appreciation rights or phantom
stock rights;
(d) without a Super Majority Board Vote, merge or consolidate with
any Person or, except as permitted by subparagraph (h) below, permit any
Subsidiary to merge or consolidate with any Person (other than a wholly-owned
Subsidiary);
(e) without a Super Majority Board Vote, sell, lease or otherwise
dispose of, or permit any Subsidiary to sell, lease or otherwise dispose of,
assets of the Company and its Subsidiaries, in one transaction or series of
related transactions involving aggregate value (computed on the basis of book
value, determined in accordance with GAAP consistently applied, or fair market
value, determined by the Board of Directors in its reasonable good faith
judgment) or consideration in excess of $2,000,000 in any transaction or series
of related transactions (other than sales of inventory in the ordinary course of
business);
(f) without a Super Majority Board Vote, liquidate, dissolve or
effect a recapitalization or reorganization of the Company in any form of
transaction (including, without limitation, any reorganization into a limited
liability company, a partnership or any other non-corporate entity which is
treated as a partnership for federal income tax purposes);
(g) without a Super Majority Board Vote, create or fill any
vacancy on the Board of Directors; provided that, upon the resignation of Xxxxx
Xxxx and Xxxxx Xxxxxxx, this section 3.2(g) shall not apply to the appointment
of Xxxxx Xxxxx, Xxxx Xxxxxxx and Xxxx X'Xxxx to fill the current vacancy and the
vacancies caused by such resignations on the Board of Directors;
(h) without a Super Majority Board Vote, acquire, or permit any
Subsidiary to acquire, any interest in any company or business (whether by a
purchase of assets, purchase of stock, merger or otherwise), or enter into any
joint venture (collectively, an "Acquisition"), involving an aggregate
consideration (including, without limitation, the assumption of liabilities
whether direct or indirect and valuing any Common Stock issued as consideration
at the Fair Market Value thereof determined on the date of issuance thereof)
exceeding $2,500,000 in any one transaction or series of related transactions or
exceeding $5,000,000 in any twelve-month period;
(i) effect, permit or suffer to occur or take any steps to cause a
Fundamental Change. For purposes hereof "Fundamental Change" means (i) any sale
or transfer of more than 40% of the assets of the Company and its Subsidiaries
on a consolidated basis (measured either by book value in accordance with GAAP
consistently applied or by fair market value determined in the reasonable good
faith judgment of the Board of Directors) in any transaction or series of
transactions (other than sales in the ordinary course of business) and (ii) any
merger or consolidation to which the Company is a party; or
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(j) without a Super Majority Board Vote, amend the Company's
Articles of Incorporation or Bylaws in any manner which (i) adversely affects
the exculpation or indemnification of directors of the Company, or (ii) affects
the number, qualifications, election or removal, of directors of the Company.
For purposes hereof, a "SUPER MAJORITY BOARD VOTE" means approval at a
meeting of the Board of Directors by a vote of at least 85% of each of the
directors then serving on the Board of Directors excluding for purposes of
subparagraph (b) a director interested in the subject matter of such approval.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to SPLN to enter into this Agreement, the Company
hereby represents and warrants to SPLN that:
4.1 ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and is qualified to do business in every jurisdiction in which the
ownership of its property or conduct of its business requires such qualification
except where the failure to be qualified, individually or in the aggregate,
would not have a Material Adverse Effect. The Company has full corporate power
and authority and has all licenses, permits and authorizations necessary to own
and operate its properties and to carry on its business as now conducted and
presently proposed to be conducted, except where the failure to have such
licenses, permits and authorizations would not, individually or collectively,
have a Material Adverse Effect. The copies of the Articles of Incorporation and
Bylaws furnished to SPLN pursuant to Section 2.1(g)(iii) reflect all amendments
made thereto at any time prior to the date of this Agreement and are correct and
complete. To the Company's knowledge, the minute books containing the records
of meetings of the stockholders and board of directors, the stock certificate
books and the stock record books of the Company are correct and complete. The
Company is not in default under or in violation of any provision of its articles
of incorporation or bylaws. Schedule 4.1 sets forth the names of all
Subsidiaries and the jurisdictions where they are incorporated and such
Subsidiaries are the only Subsidiaries of the Company and are the only entities
in which the Company or any of its Subsidiaries has an equity investment. The
Company owns no stock or equity interest in any other entity. Each Subsidiary
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, has full corporate power and
authority necessary to own its properties and to carry on its businesses as now
being conducted and as presently proposed to be conducted and is qualified to do
business in every jurisdiction in which its ownership of property or the conduct
of business requires such qualification except where the failure to be so
qualified, individually or collectively, would not have a Material Adverse
Effect.
4.2 AUTHORIZATION OF TRANSACTIONS. The Company has full corporate power
and authority to execute and deliver this Agreement, the agreements and
documents attached hereto as Exhibits and the other agreements and documents
contemplated hereby. The Board of
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Directors has duly approved this Agreement and has duly authorized the
execution and delivery of this Agreement, the agreements and documents
attached hereto as Exhibits and the other agreements and documents
contemplated hereby and the consummation of the transactions contemplated
hereby and thereby. No other corporate proceedings on the part of the
Company are necessary to approve and authorize the execution and delivery of
this Agreement, the agreements and documents attached hereto as Exhibits and
the other agreements and documents contemplated hereby and the consummation
of the transactions contemplated hereby and thereby. This Agreement, the
agreements and documents attached hereto as Exhibits and the other agreements
and documents contemplated hereby have been duly executed and delivered by
the Company and constitute valid and binding agreements of the Company,
enforceable against the Company in accordance with their terms, except (i) as
limited by the effect of bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect of relating to or affecting
the rights and remedies of creditors, and (ii) as limited by the effect of
general principles of equity, whether enforcement is considered in a
proceeding in equity or at law.
4.3 CAPITALIZATION.
(a) The authorized, issued and outstanding capital stock of the
Company is as set forth on Schedule 4.3(a) attached hereto. All of the issued
and outstanding shares of capital stock of the Company have been duly
authorized, are validly issued, fully paid and nonassessable, are not subject
to, nor were they issued in violation of, any preemptive rights. Other than as
contemplated by this Agreement, and as set forth on Schedule 4.3(a) attached
hereto, there are no outstanding or authorized securities with profit
participating features or profit interests, or options, warrants, rights or
other agreements or commitments to which the Company is a party or which are
binding upon the Company providing for the issuance, disposition or acquisition
of any of its capital stock or any such securities or interests (collectively
"OPTIONS") and Schedule 4.3(a) accurately sets forth the number of shares,
exercise prices and expiration date of each Option. Other than as set forth in
Schedule 4.3(a) attached hereto, there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company.
There are no voting trusts, proxies or any other agreements or understandings
with respect to the voting of the capital stock of the Company. The Company is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any Options.
Other than piggyback registration rights with regard to 5,683,468 shares of
Common Stock, there are no other registration rights to register the securities
of the Company.
(b) The authorized, issued and outstanding capital stock of each
Subsidiary is as set forth on Schedule 4.1. All of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued, fully paid and
nonassessable and are not subject to, nor were they issued in violation of, any
preemptive rights. Other than as set forth on Schedule 4.1, there are no
Options to which any Subsidiary is a party or which are binding upon any
Subsidiary providing for the issuance, disposition or acquisition of any of its
capital stock. Other than as set forth on Schedule 4.1, there are no
outstanding or authorized stock appreciation, phantom stock
9
or similar rights with respect to any of the Subsidiaries. Other than as set
forth on Schedule 4.1, there are no voting trusts, proxies or any other
agreements or understandings with respect to the voting of the capital stock
of any of the Subsidiaries. Other as set forth on Schedule 4.1, no
Subsidiary is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its Stock. Other than,
there are no registration rights to register the securities of any of the
Subsidiaries.
4.4 ABSENCE OF CONFLICTS. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not (a) conflict with or result in a breach of any of the
provisions of, (b) constitute a default under, (c) result in a violation of, (d)
give any third party the right to terminate or to accelerate any obligation
under, (e) result in the creation of any lien, security interest, charge or
encumbrance upon the Common Stock or (f) require any authorization, consent,
approval, exemption or other action by or notice to any court or other
governmental body, under the provisions of the articles of incorporation or
bylaws of the Company or any of the Subsidiaries or any material indenture,
mortgage, lease, license, loan agreement or other agreement or instrument to
which the Company or any of the Subsidiaries is bound or affected, or any law,
statute, rule or regulation or any judgment, order or decree to which the
Company or any of the Subsidiaries is subject except for those with which the
failure to comply, individually or collectively, would not have a Material
Adverse Effect.
4.5 FINANCIAL STATEMENTS. The Company has furnished SPLN with copies of
its (a) unaudited consolidated balance sheet as of September 30, 1999 (the
"LATEST BALANCE SHEET") and the related consolidated statements of income and
cash flow for the 6-month period ended September 30, 1999 and (b) audited
balance sheets and statements of income and cash flow for the periods ended
April 30, 1998 and March 31, 1999. Each of the foregoing financial statements
(including in all cases the notes thereto, if any) (the "FINANCIAL STATEMENTS")
is accurate and complete in all material respects, is consistent with the
Company's books and records (which, in turn, are accurate and complete in all
material respects), presents fairly the Company's consolidated financial
condition, consolidated results of operations and consolidated cash flows as of
the dates and for the periods referred to therein, and has been prepared in
accordance with GAAP consistently applied, subject in the case of unaudited
financial statements to changes, which are immaterial in the aggregate,
resulting from normal year-end adjustments and to the absence of footnote
disclosure.
(a) The audited consolidated financial statements and related
schedules and notes included in the SEC Documents comply in all material
respects with requirements of the Exchange Act and the Securities Act and the
rules and regulations of the SEC thereunder. The Financial Statements which are
not audited comply in all material respects with the requirements of the
Exchange Act and the Securities Act and the rules and regulations of the SEC
thereunder (assuming for such purposes that such requirements are applicable
thereto).
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any of
its Subsidiaries have any obligations or liabilities (whether accrued, absolute,
contingent,
10
unliquidated or otherwise, whether or not known, whether due or to become due
and regardless of when asserted) except (a) obligations under contracts and
commitments, (b) liabilities reflected on the Latest Balance Sheet and (c)
liabilities which have arisen after the date of the Latest Balance Sheet in
the ordinary course of business (which liabilities in the aggregate could not
reasonably be expected to have a Material Adverse Effect).
4.7 ABSENCE OF MATERIAL ADVERSE CHANGE. Except as set forth on Schedule
4.7, since March 31, 1999, there has been no change or event resulting in or
which could reasonably be expected to have a Material Adverse Effect, whether
individually or collectively with any other change or event since such date.
4.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on Schedule
4.8, since September 30, 1999, neither the Company nor any of the Subsidiaries
has:
(a) issued, sold or transferred any notes, bonds or other debt
securities or any equity securities, securities convertible, exchangeable or
exercisable into equity securities, or warrants, options or other rights to
acquire equity securities, of the Company or any of the Subsidiaries;
(b) borrowed any amount or incurred or become subject to any
liabilities, except liabilities incurred in the ordinary course of business;
(c) discharged or satisfied any lien or encumbrance or paid any
obligation or liability, other than liabilities paid in the ordinary course of
business, or prepaid any amount of indebtedness for borrowed money;
(d) mortgaged, pledged or subjected to any lien, charge or any
other encumbrance, any portion of its properties or assets other than in the
ordinary course of business;
(e) sold, leased, assigned or transferred any portion of its
tangible assets or cancelled any debts or claims owing to or held by it in any
such case without fair consideration;
(f) sold, assigned or transferred any Proprietary Rights or
disclosed any proprietary confidential information to any Person, or granted any
license or sublicense of any rights under or with respect to any Proprietary
Rights;
(g) suffered any extraordinary losses or waived any single right
of value which has a value in excess of $50,000 or any rights of value which
have an aggregate value of $100,000 whether or not in the ordinary course of
business or consistent with past custom and practice;
(h) suffered any theft, taking by power of eminent domain, damage,
destruction or casualty loss in excess of $50,000 to its tangible assets,
whether or not covered by insurance or suffered any substantial destruction of
the Company's books and records;
11
(i) other than in the ordinary course of business, entered into,
amended or terminated any material lease, license, contract, agreement or
commitment, or taken any other action or entered into any other transaction, or
changed any material business practice or manner of dealing with any customer,
supplier, subcontractor, insider, sales representative, or other person or
entity with whom the Company or any of the Subsidiaries engage in any business
activity, or entered into any other transaction;
(j) entered into any employment contract or collective bargaining
agreement, written or oral, or changed in any other material respect employment
terms for, or made or granted any bonus or any wage, salary or compensation
increase to any director or executive officer or, except in the ordinary course
of business, to any other employee, agent or sales representative, group of
employees or consultant or made or granted any increase in any employee benefit
plan or arrangement, or amended or terminated any existing employee benefit plan
or arrangement or adopted any new employee benefit plan or arrangement;
(k) incurred intercompany charges or conducted its cash management
customs and practices (including the collection of receivables, inventory
control and payment of payables) other than in the usual and ordinary course of
business in accordance with past custom and practice;
(l) made any capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(m) made any loans or advances to, or guarantees for the benefit
of, any Person that aggregate in excess of $100,000;
(n) delayed or postponed (beyond its normal custom and practice)
the payment of accounts payable and other liabilities;
(o) made any charitable contributions or pledges in excess of
$25,000; or
(p) changed or authorized any change in its articles of
incorporation or bylaws.
4.9 TITLE TO PROPERTIES. The buildings, machinery, equipment, vehicles
and other tangible assets of the Company and the Subsidiaries are in good
operating condition and repair and are usable in the ordinary course of
business, reasonable wear and tear excepted. The Company and the Subsidiaries
own or lease under valid leases all buildings, machinery, equipment and other
tangible assets necessary for the conduct of their business or used in the
conduct of their business. Except as set forth on Schedule 4.9, none of the
assets of the Company or any of its Subsidiaries, including, without limitation,
any assets constituting Intangible Rights (as defined below), are subject to any
mortgage, lien, pledge, hypothecation or other security interest or
encumbrance.
12
4.10 TAX MATTERS. Each of the Company and its Subsidiaries has filed
all Tax Returns that it was required to file on or before the date hereof
other than those returns which if not filed would not, individually or in the
aggregate, have a Material Adverse Effect. All such Tax Returns were correct
and complete in all material respects. As of the time of filing, all Taxes
owed by any of the Company and its Subsidiaries (whether or not shown on any
Tax Return), with respect to the taxable periods ending on or before the
Closing Date, have been paid, except where the failure to withhold, pay or
deposit (individually or collectively) would not have a Material Adverse
Effect and except with respect to taxes which are being contested in good
faith and by appropriate proceedings and with respect to which adequate
reserves have been established on the Company's books and which disputes have
been disclosed to SPLN in writing. None of the Company and its Subsidiaries
currently is the beneficiary of any extension of time within which to file
any Tax Return. No claim in writing has been received by the Company from an
authority in a jurisdiction where any of the Company and its Subsidiaries
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of the
Company or any of the Subsidiaries that arose, other than for current taxes
not yet due and payable in connection with any failure (or alleged failure)
to pay any Tax. Each of the Company and its Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor or
other third party.
4.11 LITIGATION; PROCEEDINGS. Except as set forth on Schedule 4.11,
there are no actions, suits, proceedings, orders or investigations pending or,
to the Company's knowledge, threatened against the Company or the Subsidiaries
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign which, individually or collectively, if determined adversely
to the Company and its Subsidiaries would have a Material Adverse Effect, and
there is no basis for any of the foregoing.
4.12 BROKERAGE. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of the
Company or the Subsidiaries.
4.13 GOVERNMENTAL LICENSES AND PERMITS.
(a) The Company and its Subsidiaries hold all permits, licenses,
certificates of occupancy, franchises, certificates, approvals and other
authorizations of foreign, federal, state and local governments or other similar
rights (collectively, the "LICENSES") necessary in and for the conduct of their
respective businesses, and such Licenses are in full force and effect except
where the failure to hold such License or for such License to be valid and in
full force and effect, would not have a Material Adverse Effect and would not
adversely effect any contracts or arrangements of the Company. The Company has
duly performed in all respects all of its obligations under, and is in full
compliance with, the Licenses, except for the failure of which would not have a
Material Adverse Effect and would not adversely effect any contracts or
arrangements of the Company. There is not now pending or, to the Company's
knowledge,
13
threatened any litigation, proceeding or investigation which reasonably might
result in a termination of any of the Licenses except for litigation,
proceedings or investigations which would not individually or in the
aggregate have a Material Adverse Effect and would not adversely effect any
contracts or arrangements of the Company.
(b) No event has occurred and no agreement has been entered into
by the Company, which now, or after notice or lapse of time or both, might
reasonably be expected to cause or permit cancellation, revocation or
termination of the Licenses, or would result in any actions, which individually
or in the aggregate could reasonably be expected to have a Material Adverse
Effect, and there is no pending or threatened action or matters that would
suggest that any of the Licenses could reasonably be expected not to be renewed
in the ordinary course.
(c) There is not pending any application, petition, objection or
other pleading which questions the validity of or contests any of the Licenses
except for those that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(d) The consummation of the transactions contemplated by this
Agreement will not cause any forfeiture or impairment of the Licenses except for
those that could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
4.14 INSURANCE. The insurance coverage of the Company and the
Subsidiaries is adequate and is customary for corporations of similar size
engaged in similar lines of business. Attached hereto as Schedule 4.14 are
directors' and officers' liability insurance polices which policies are in full
force and effect and the premiums of which have been fully paid. There are no
claims currently pending against such policies nor is the Company aware of any
facts which would give rise to any such claim. The Company has not received any
notice of cancellation of such polices nor does the Company have any reason to
believe that such policies will be the subject of a refusal to renew by the
carriers under such policies.
4.15 AFFILIATE TRANSACTIONS. Except as disclosed in any SEC Document,
the Company and its Subsidiaries have not entered into any transaction or series
of transactions with any stockholder, director, officer, employee or Affiliate
of the Company which would require disclosure pursuant to Rule 404 of Regulation
S-K under the Securities Act.
4.16 COMPLIANCE WITH LAWS. The Company, the Subsidiaries and their
officers, directors, agents and employees have complied with all applicable laws
and regulations of foreign, federal, state and local governments and all
agencies thereof (including, without limitation, the Securities Act and the
Exchange Act) which affect the business, business practices (including, but not
limited to, any of the Company's and the Subsidiaries' marketing, sales and
distribution of its products and services), the business operations or any
leased properties of any of the Company and the Subsidiaries and to which the
Company and the Subsidiaries may be subject, and, to the Company's knowledge, no
claims have been filed against any of the Company and its Subsidiaries alleging
a violation of any such laws or regulations except for those the failure to
comply with would not, individually or in the aggregate, have a Material Adverse
Effect.
14
4.17 GOVERNMENTAL CONSENT, ETC. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental or
regulatory authority or any other party or person is required to be obtained by
the Company in connection with its execution, delivery and performance of this
Agreement, other agreements or the consummation of any other transactions
contemplated hereby except for those which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.18 DISCLOSURE. As of its filing date, each SEC Document filed, and
each SEC Document that was filed by the Company pursuant to the Securities Act
and/or the Exchange Act (i) complied in all material respects with the
applicable requirements of the Securities Act and/or Exchange Act and (ii) did
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each
final registration statement filed with the SEC by the Company pursuant to the
Securities Act, as of the date such statement or amendment became effective (i)
complied in all material respects with the applicable requirements of the
Securities Act and (ii) did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading (in the case of any prospectus, in
light of the circumstances under which they were made).
4.19 EXEMPTION FROM REGISTRATION; RESTRICTIONS ON OFFER AND SALE OF SAME
OR SIMILAR SECURITIES. Assuming the representations and warranties of SPLN set
forth in Article V hereof are true and correct in all material respects, the
offer and sale of the Securities made pursuant to this Agreement will be exempt
from the registration requirements of the Securities Act. Neither the Company
nor any Person acting on its behalf has, in connection with the offering of the
Securities, engaged in (A) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 502(c) under the
Securities Act), (B) any action involving a public offering within the meaning
of Section 4(2) of the Securities Act, or (C) any action that would require the
registration under the Securities Act of the offering and sale of the Securities
pursuant to this Agreement or that would violate applicable state securities or
"blue sky" laws. The Company has not made and will not prior to the Closing
make, directly or indirectly, any offer or sale of the Securities or of
securities of the same or a similar class as the Securities if as a result the
offer and sale of the Securities contemplated hereby could fail to be entitled
to exemption from the registration requirements of the Securities Act. As used
herein, the terms "offer" and "sale" have the meanings specified in Section 2(c)
of the Securities Act.
4.20 AUTHORITY RELATIVE TO THIS AGREEMENT. The Board of Directors of the
Company has approved this Agreement and the transactions contemplated thereby,
and such approval is sufficient to render inapplicable to this Agreement and the
transactions contemplated thereby the provisions of Sections 607.0901 and
607.0902 of the Florida Business Corporation Act.
4.21 INTANGIBLE RIGHTS. The Company owns or has the valid right to use
any and all Proprietary Rights that are necessary or customarily used by the
Company for the ownership, management or operation of its business as presently
conducted or as presently contemplated to
15
be conducted ("Intangible Rights"). There have been no claims made against
the Company and the Company has not received any notices asserting the
invalidity, abuse, misuse, or unenforceability of any of the Intangible
Rights and no grounds for any such claims exist.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SPLN
As a material inducement to the Company to enter into this Agreement, SPLN
hereby represents and warrants to the Company that:
5.1 ORGANIZATION AND POWER. SPLN is a corporation, duly organized,
validly existing and in good standing under the laws of the state of Delaware,
with full corporate power and authority to enter into this Agreement and perform
its obligations hereunder.
5.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement by SPLN and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all requisite corporate action on the
part of SPLN, and no other corporate proceedings on its part are necessary to
authorize the execution, delivery or performance of this Agreement. This
Agreement constitutes a valid and binding obligation of SPLN, enforceable
against SPLN in accordance with its terms.
5.3 NO VIOLATION. SPLN is not subject to or obligated under its
certificate of incorporation, its bylaws, any applicable law, or rule or
regulation of any governmental authority, or any agreement or instrument, or any
license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
performance of this Agreement.
5.4 BROKERAGE. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by SPLN.
5.5 INVESTMENT REPRESENTATIONS. SPLN represents that it is an
"Accredited Investor" within the meaning of the Securities Act. SPLN understands
that the Securities constitute "RESTRICTED SECURITIES" within the meaning of
Rule 144 under the Securities Act. SPLN hereby represents that it is acquiring
the restricted securities purchased hereunder or acquired pursuant hereto for
its own account with the present intention of holding such securities for
purposes of investment, and that it has no intention of selling such securities
in a public distribution in violation of the federal securities laws or any
applicable state securities Laws; PROVIDED that nothing contained herein shall
prevent SPLN and subsequent holders of restricted securities from transferring
such securities in compliance with the provisions of Section 9.7. SPLN
understands that the restricted securities are being offered and sold in
reliance on exemptions from the registration requirements of federal and state
securities laws and that the Company is relying upon the truth and accuracy of
SPLN's representations, warranties, agreements, acknowledgments and
understandings set forth herein to determine its suitability to acquire the
16
restricted securities. Each instrument or certificate for restricted securities
shall be imprinted with a legend in substantially the following form:
ARTICLE VI
DEFINITIONS
"AFFILIATE" means with respect to any Person, any other Person (i)
directly or indirectly controlling or controlled by or under direct or indirect
control with such specified Person, (ii) related by blood or marriage to any
such specified Person or any Affiliate of such specified Person, (iii)
controlled by any Person described in clause (ii) foregoing or (iv) in the case
of any limited liability company, each member.
"AFFILIATED GROUP" shall mean an affiliated group as defined in Section
1504 of the Code (or any analogous combined, consolidated or unitary group
defined under state, local or foreign Tax law) of which any of the Company or
the Subsidiaries is or has been a member.
"AUDIT" means any audit, assessment of Taxes, or other examination by any
taxing authority, proceedings, or appeal of such proceedings relating to Taxes.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed or as reported on the NASDAQ National Market,
or, if there has been no sales on any such exchange or reported on the NASDAQ
National Market on any day, the average of the highest bid and lowest asked
prices on all such exchanges or reported at the end of such day, or, if on any
day such security is not so listed or included in the NASDAQ National Market,
the average of the representative bid and asked prices quoted in the NASDAQ
Stock Market as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ Stock Market, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which "Fair Market Value" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ National Market, the
NASDAQ Stock Market or the over-the-counter market, the "Fair Market Value"
shall be determined in good faith by the Board of Directors of the Company and
such determination shall be delivered in writing to SPLN. In the event that
SPLN disputes such determination of Fair Market Value, SPLN shall so inform the
Company in writing within 10 days after receipt of the Company's determination
and the Company and SPLN shall negotiate in good faith to determine a mutually
acceptable Fair Market Value. If such parties are unable to reach agreement
within 30 days after SPLN has given the Company written notice of its dispute,
the Fair Market Value of such security shall be determined by an independent
appraiser
17
experienced in valuing securities jointly selected by the Company and
SPLN. The determination of such appraiser shall be final and binding upon the
parties, and the fees and expenses of such appraiser shall be borne by the
Company.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse change in the
assets, earnings, financial condition, operating results, customer, supplier,
employee or sales representative relations or business prospects of the Company
and the Subsidiaries taken as a whole, (ii) material casualty loss, destruction
or damage to the assets or properties of the Company and the Subsidiaries taken
as a whole, whether or not covered by insurance or (iii) any action or
proceeding before any court or government body wherein an unfavorable judgment,
decree, injunction or order would prevent the carrying out of this Agreement or
any of the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded, or
might adversely affect the right of the Purchasers to purchase, own or control
the Securities.
"OFFICER'S CERTIFICATE" of any Person means a certificate signed by the
chief executive officer, vice president, secretary or Chief Financial Officer of
such Person stating that (i) the officer signing such certificate has made or
has caused to be made such investigations as are necessary in order to permit
such person to verify the accuracy of the information set forth in such
certificate, and (ii) to the best of such officer's knowledge, such certificate
does not misstate any material fact and does not omit to state any fact
necessary to make the certificate not misleading.
"PERSON" means an individual, a partnership (including a limited
partnership), a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"PROPRIETARY RIGHTS" means all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); all trademarks, service marks, trade dress, trade names and
corporate names; all registered and unregistered statutory and common law
copyrights; all registrations, applications and renewals for any of the
foregoing; all trade secrets, confidential information, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
improvements, proposals, technical and computer data, documentation and
software, financial business and marketing plans, customer and supplier lists
and related information and all other proprietary rights.
"REGISTRABLE SECURITIES" means (i) the Shares (ii) the Underlying Common
Stock and (iii) any shares of capital stock of the Company issued or issuable
with respect to the securities referred to in clause (i) or (ii) by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
18
particular Registrable Securities, such securities shall cease to be Registrable
Securities when they have been (x) distributed to the public pursuant to an
offering registration under the Securities Act or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act unless such securities are held at such time by a holder of other
Registrable Securities or (y) repurchased by the Company or any Subsidiary. For
purposes of this Agreement, a Person will be deemed to be a holder of
Registrable Securities whenever such Person has the right to acquire directly or
indirectly such Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
"SEC" means the United States Securities and Exchange Commission and any
successor to the functions thereof.
"SEC DOCUMENTS" means all documents (including any annual reports) filed
by the Company with the SEC (including all exhibits and schedules thereto and
documents incorporated by reference therein) but shall not include any portion
of any document which is not deemed to be filed under applicable SEC rules and
regulations.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the 4,098,742 shares of Common Stock issued to SPLN
pursuant to the Promotion Agreement of even date herewith between the Company
and SPLN.
"STOCK" of any Person means any shares, equity or profits interests,
participations or other equivalents (however designated) of capital stock,
whether voting or nonvoting, including any securities with profit participation
features, and any rights, warrants, options or other securities convertible into
or exercisable or exchangeable for any such shares, equity or profits interests,
participations or other equivalents, or such other securities, directly or
indirectly (or any equivalent ownership interests, in the case of a Person which
is not a corporation).
"SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
19
"TAX" or "TAXES" shall mean any federal, state, local or foreign income,
estimated, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including without
limitation taxes under Section 59A of the Code), customs duties, capital stock,
franchise, employees' income withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum or other tax,
of any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing.
"TAX RETURNS" shall mean returns, declarations, reports, claims for refund
and information returns or statements relating to Taxes, including any schedules
or attachments thereto.
"UNDERLYING COMMON STOCK" means (i) the Common Stock issued or issuable
upon conversion of the Note or exercise of the Warrant, and (ii) any Common
Stock issued or issuable with respect to the securities referred to above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. Any Person who
holds the Note or Warrant shall be deemed to be the holder of the Underlying
Common Stock obtainable upon exercise of such Note or Warrant. As to any
particular shares of Underlying Common Stock, such shares shall cease to be
Underlying Common Stock when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force).
ARTICLE VII
VOTING RIGHTS
7.1 VOTING. From and after the Closing and until the provisions of this
Article VII cease to be effective, the Company shall take all necessary or
desirable actions within its control (including, without limitation, calling
special board and stockholder meetings), so that, subject to the remainder of
this Article VII:
(a) the authorized number of directors on the Board of Directors
of the Company shall be established at seven directors;
(b) two representatives will be designated by SPLN (the "Investor
Directors"), who shall initially be Xxxx Xxxxxxx and Xxxxxx Xxxxxxx; The
Company will include in each proxy statement pursuant to which the members of
the Board of Directors are to be elected such designees and recommend to the
shareholders the election of such designees. In the event that the shareholders
of the Company fail to elect or reelect an Investor Director, the Company shall
create, to the extent necessary, a vacancy on the Board of Directors and elect
such Investor Director to fill such vacancy;
20
(c) subject to clause (d) below, the composition of the board of
directors of each of the Company's Subsidiaries (a "Sub Board") shall be the
same as that of the Board;
(d) any committees of the Board or a Sub Board shall be created
and the composition thereof determined only upon a Super Majority Board Vote;
(e) the removal from the Board or a Sub Board (with or without
cause) of any representative designated by SPLN shall be at the written request
of SPLN, but only upon such written request and under no other circumstances and
the Company shall take no actions to cause or encourage the removal of an
Investor Director, whether by shareholder vote or otherwise; and
(f) in the event that any representative designated by SPLN ceases
to serve as a member of the Board or a Sub Board during his or her term of
office, the resulting vacancy on the Board or the Sub Board shall be filled by a
representative designated by SPLN as provided hereunder.
(g) The Company shall pay the reasonable out-of-pocket expenses
incurred by each Investor Director in connection with attending the meetings
of the Board, any Sub Board and any committee thereof. Each Investor
Director shall be paid the same compensation paid to other non-employee
directors. So long as any Investor Director serves on the Board and for
three years thereafter, the Company shall obtain and maintain directors and
officers indemnity insurance in an amount and scope of coverage not less than
that in effect on the date hereof and the Company's articles of incorporation
and bylaws shall provide for indemnification and exculpation of directors to
the fullest extent permitted under applicable law. The Company shall give
SPLN prompt notice of the Company's receipt of any notice of cancellation,
termination, non-renewal or modification of any such policy, nor shall the
Company agree to any modification of any such policy unless SPLN shall
consent.
ARTICLE VIII
REGISTRATION RIGHTS
8.1 DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. Subject to Sections 8.1(b) and (c)
below, (i) at any time and from time to time, SPLN may request registration,
whether underwritten or otherwise, under the Securities Act of all or any
portion of the Registrable Securities which SPLN requests to be so registered on
Form S-1 or any similar long-form registration ("LONG-FORM REGISTRATIONS") or on
Form S-2 or S-3 or any similar short-form registration ("SHORT-FORM
REGISTRATIONS") if available to the Company which Short Form Registrations may
be for continuous offerings pursuant to Rule 415 under the Securities Act. Each
request for a Long-Form Registration or Short-Form Registration shall specify
the approximate number of Registrable Securities requested to be registered and
the anticipated per share price range for such offering. Within 10 days after
receipt of any such request for a Long-Form Registration or Short-Form
Registration, the Company will give written notice of such requested
registration to
21
all other holders of Registrable Securities and will include (subject to the
provisions of this Agreement) in such registration, all Registrable
Securities with respect to which the Company has received written requests
for inclusion therein within 20 days after the receipt of the Company's
notice. All registrations requested pursuant to in this Section 8.1(a) are
referred to herein as "DEMAND REGISTRATIONS".
(b) LONG-FORM REGISTRATIONS. SPLN will be entitled to request up
to two (2) Long-Form Registrations. A registration will not count as the second
and final Long-Form Registration until it has become effective and unless SPLN
is able to register and sell at least 90% of the Registrable Securities
requested to be included in such registration within a price range reasonably
acceptable to SPLN.
(c) SHORT-FORM REGISTRATIONS. SPLN will be entitled to request up
to one (1) Short-Form Registration per year. Demand Registrations will be
Short-Form Registrations whenever the Company is permitted to use any applicable
short form.
In addition, SPLN will be entitled to an unlimited number of Long-Form
Registration and Short-Form Registrations at the expense of SPLN; provided,
however, that the Company shall in no event be requested to effect more than two
registrations pursuant to this agreement in any 12 month period.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company will not
include in any Long-Form Registration or Short-Form Registration any securities
which are not Registrable Securities without the prior written consent of the
holders of a majority of the Registrable Securities included in such
registration, except that shares of Common Stock may be included as required
pursuant to Existing Registration Rights (as defined below) so long as the
number of such securities so included, when combined with the number of
Registrable Securities proposed to be included therein, does not exceed the
number which, in the reasonable judgment of the managing underwriter thereof,
can be sold at the price and on the terms substantially as proposed by the
holders of a majority of the Registrable Securities requested to be included
therein. For purposes hereof, "EXISTING REGISTRATION RIGHTS" means rights in
effect on the Closing Date, set forth in the agreements listed on Schedule
4.3(a) or 4.3(b) attached hereto and held on the Closing Date (x) by
stockholders of the Company, to cause the Company to register shares of Common
Stock held by such holders on the Closing Date, and (y) by other Persons, to
cause the Company to register shares of Common Stock issuable to such Persons
under, and subject to the then existing terms of, options, warrants or other
rights held by such Persons on the Closing Date. If a Long-Form Registration or
a Short-Form Registration is an underwritten offering and the managing
underwriter(s) advise the Company in writing that in their opinion the number of
Registrable Securities and, if permitted hereunder, other securities requested
to be included in such offering, exceeds the number of Registrable Securities
and other securities, if any, which can be sold therein without adversely
affecting the marketability of the offering then, subject to the first sentence
of this paragraph, the Company will include in such registration (i) first, the
number of Registrable Securities requested to be included in such registration
pro rata, if necessary, among the holders of Registrable Securities based on the
number of shares of
22
Registrable Securities owned by each such holder and (ii) second, other
securities of the Company requested to be included in such registration
pursuant to Existing Registration Rights pro rata, if necessary, on the basis
of the number of shares of such other securities owned by each such holder.
(e) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company will not be
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration. The Company may postpone for
no more than 90 days in each 360-day period, the filing or the effectiveness of
a registration statement for a Demand Registration if the Board of Directors of
the Company, acting in good faith, determines that such Demand Registration
might reasonably be expected to have a material and adverse effect on any
proposal or plan to engage in any acquisition or disposal of stock or assets or
any merger, consolidation, tender offer or similar transaction; provided, that
in such event, the holders of Registrable Securities requesting such Demand
Registration will be entitled to withdraw such request and, if such request is
withdrawn, such Demand Registration will not count as a Demand Registration.
(f) SELECTION OF UNDERWRITERS. In the case of a Demand
Registration for an underwritten offering, SPLN and the Company shall mutually
select the investment banker(s) and manager(s) to administer the offering.
(g) 415 REGISTRATIONS.
(i) After the Company receives a written notice of a request
for a Short Form Registration pursuant to Rule 415 under the Securities
Act (a "415 Registration"), the Company shall file with the SEC a
registration statement under the Securities Act for the 415 Registration.
The Company shall use its best efforts to cause the 415 Registration to be
declared effective under the Securities Act as soon as practicable after
filing and, once effective, the Company shall (subject to the provisions
of clause (ii) below) cause such 415 Registration to remain effective for
such time period as is specified in such request, but for no time period
longer than the period ending on the earlier of (x) the third anniversary
of the date of filing of the 415 Registration or (y) the date on which all
Registrable Securities have been sold pursuant to the 415 Registration or
(iii) the date as of which there are no longer any Registrable Securities
in existence.
(ii) If SPLN notifies the Company in writing that it
intends to effect the sale of all or substantially all of the
Registrable Securities held by it pursuant to a single integrated
offering pursuant to a then effective registration statement for a 415
Registration (a "TAKEDOWN"), the Company and SPLN shall not effect any
public sale or distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for its equity
securities, during the 90-day period beginning on the date such notice
of a Takedown is received.
23
(iii) SPLN shall have the right to retain and select an
investment banker and manager to administer the 415 Registration and any
Takedown pursuant thereto, subject to the Company's approval which will
not be unreasonably withheld.
8.2 PIGGYBACK REGISTRATION. If, after the date of this Agreement, the
Company determines to register any Registrable Securities under the Securities
Act for sale to the public, whether for its own account or for the account of
any security holder or both (except with respect to registration statements on
Form S-8 or its then equivalent, or in connection with a Rule 145 transaction on
Form S-4 or its equivalent, or another form not available for registering the
Registrable Securities for sale to the public), each such time it will give
prompt written notice to SPLN of its intention so to do and of the proposed
method of distribution of such securities. Upon the written request of SPLN,
received by the Company within twenty (20) days after the giving of any such
notice by the Company, to include in the registration any Registrable
Securities, the Company will use commercially reasonable efforts to cause the
Registrable Securities as to which registration shall have been so requested to
be included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent and under the conditions
such registration is permitted under the Securities Act. In the event that any
registration pursuant to this Section 8.2 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of shares of
Registrable Securities to be included in such an underwriting may be reduced
(pro rata among the requesting holders based upon the number of shares of
Registrable Securities owned by such holders) if and to the extent that the
managing underwriter shall be of the opinion that the inclusion of some or all
of the Registrable Securities would adversely affect the marketing of the
securities to be sold by the Company therein. Any such limitation shall be
imposed in such manner so as to avoid any diminution in the number of shares the
Company may register for sale by giving first priority for the shares to be
registered for issuance and sale by the Company, by giving second priority for
the shares to be registered for issuance and sale by SPLN, and by giving third
priority for the shares to be registered for sale by any other holder of
Registrable Securities (and other securities with PARI PASSU registration
rights). Notwithstanding the foregoing provisions, the Company may, in its sole
discretion, terminate or withdraw any registration statement referred to in this
Section 8.2 without thereby incurring any liability to SPLN.
8.3 REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Section 8.1 or 8.2 to effect the registration of any
Registrable Securities under the Securities Act, the Company will, at its cost
and expense (including without limitation, payment of the costs and expenses
described in Section 8.4), as expeditiously as reasonably practicable:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become and remain effective for the period
of the distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file as expeditiously as reasonably practicable
and in any event within ninety (90) days with the Commission such amendments and
supplements to such
24
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective for the period
specified in Section 8.3(a) above and comply with the provisions of the
Securities Act with respect to the disposition the Registrable Securities
covered by such registration statement in accordance with the sellers'
intended method of disposition set forth in such registration statement for
such period;
(c) furnish to SPLN such number of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus) as SPLN may request in order to facilitate the public sale or other
disposition of the Registrable Securities covered by such registration
statement;
(d) use all reasonable efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as SPLN shall request;
(e) use all reasonable efforts to list the Registrable Securities
covered by such registration statement with NASDAQ or any securities exchange on
which the Common Stock of the Company is then listed;
(f) immediately notify SPLN at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing; and
(g) notify SPLN under such registration statement of (i) the
effectiveness of such registration statement, (ii) the filing of any
post-effective amendments to such registration statement, or (iii) the filing
of a supplement to such registration statement.
(h) cause to be furnished to SPLN an opinion of counsel reasonably
acceptable to SPLN covering such matters as are customarily covered in opinions
of counsel to underwriters with respect to comparable issuers and a "cold
comfort" letter of the Company's independent auditors with respect to the
Company's financial statements included in such registration statement and other
financial data set forth therein.
For purposes of Section 8.3(a) and 8.3(b), the period of distribution in a
firm commitment underwritten public offering shall be deemed to extend until
each underwriter has completed the distribution of all securities purchased by
it, and the period of distribution in any other registration shall be deemed to
extend until the earlier of the sale of all securities covered thereby and one
hundred eighty (180) days after the effective date thereof, with reasonable
extensions to be granted for suspensions thereof.
In connection with and as a condition to each registration hereunder, SPLN
shall (a) provide such information and execute such documents as may reasonably
be required in
25
connection with such registration, (b) agree to sell securities on the basis
provided in any underwriting arrangements, and (c) complete and execute all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required or requested under the terms of such
underwriting arrangements.
In connection with each registration pursuant to Section 8.1 or 8.2,
covering an underwritten public offering, the Company and SPLN agree to enter
into a written agreement with the managing underwriter selected in the manner
herein provided in such form and containing such provisions as are customary in
the securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
8.4 EXPENSES. All expenses incurred by the Company in complying with
Sections 8.1 or 8.2, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
transfer taxes, fees of transfer agents and registrars, and the fees and
disbursements counsel for the Company will be paid by the Company. In addition,
the Company shall pay the fees and expenses of counsel to SPLN in connection
with any registration and sale hereunder.
8.5 INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 8.1 or 8.2, the Company
will indemnify and hold SPLN harmless from and against any losses, claims,
damages or liabilities, to which SPLN may become subject under the Securities
Act or under any other statute or at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which securities
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or any violations of applicable law relating to such
registration, and will pay the legal fees and other expenses of SPLN in
connection with investigating or defending any action whether or not resulting
in any liability insofar as such loss, claim, damage, liability or action
results from the foregoing.
(b) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 8.1 or 8.2, SPLN will
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of the Securities Act, each officer of the Company
who signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer, director, underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions
26
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement under which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided, however, that SPLN will be liable hereunder in any such
case if and only to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information furnished in writing to the Company by SPLN
specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of SPLN hereunder shall be
limited to the amount of net proceeds received by SPLN in connection with
such registration.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability that it may have
to such indemnified party under this Section 8.5 except and only to the extent
the indemnifying party is prejudiced by such omission. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 8.5 for
any legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof; provided, however, that, if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded (based on the advice of
counsel) that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred, it being understood,
however, that the indemnifying party xxxx not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel as required by the local rules of such
jurisdiction) at any time for all such indemnified parties.
(d) No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an
27
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding.
8.6 DAMAGES. The Company recognizes and agrees that SPLN will suffer
irreparable harm and will not have an adequate remedy at law if the Company
fails to comply with any provision of this Article VIII, and the Company
expressly agrees that, in the event of such failure, SPLN shall be entitled to
seek specific performance of any and all provisions hereof and may seek to
enjoin the Company from continuing to commit any further breach of this Article
VIII.
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1 SURVIVAL. Notwithstanding any examination made for or on behalf of
SPLN, the knowledge of any of its officers, directors, stockholders, employees
or agents, or the acceptance of any certificate or opinion, all representations
and warranties, set forth in this Agreement or in any writing delivered in
connection with this Agreement shall survive the Closing for a period of two
years after the date hereof and, shall be fully effective and enforceable during
such period.
9.2 INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless SPLN,
including each of its Affiliates, directors, officers, agents and employees
thereof (SPLN and each such other Person, a "SPLN INDEMNIFIED PARTY") from and
against any losses, claims, damages, judgments, assessments, costs and other
liabilities (collectively "LIABILITIES"), and will reimburse each SPLN
Indemnified Party for all fees and expenses (including the reasonable fees and
expenses of counsel) (collectively, "EXPENSES") as they are incurred in
investigating, preparing or defending any claim, action, proceeding or
investigation, whether or not in connection with pending or threatened
litigation or arbitration and whether or not any SPLN Indemnified Party is a
party thereto (collectively, "ACTIONS"), arising out of (i) any breach of any of
the representations or warranties made by the Company in this Agreement or any
of the agreements or certificates, documents or other writings delivered
pursuant hereto, (ii) any breach or violation of or failure to fully perform any
covenant, agreement or obligation of the Company in this Agreement or any of the
agreements delivered pursuant hereto, or (iii) any Action by any third party
arising out of or in connection with a breach or violation described in clauses
(i) and (ii) above. If multiple claims are brought against an Indemnified Party
(including in an arbitration), with respect to at least one of which
indemnification is permitted under applicable law and provided for under this
Agreement, the Company agrees that any award shall be conclusively deemed to be
based on claims as to which indemnification is permitted and provided for.
(b) SPLN agrees to indemnify and hold harmless the Company,
including each of its Affiliates, directors, officers, agents and employees
thereof (the Company and each such other Person, a "COMPANY INDEMNIFIED PARTY")
from and against any Liabilities, and will reimburse each Company Indemnified
Party for all Expenses as they are incurred in investigating, preparing, or
defending any Actions and whether or not any Company Indemnified
28
Party is a party thereto, arising out of (i) any breach of any of the
representations or warranties made by SPLN in this Agreement or any of the
agreements or certificates, documents or other writings delivered pursuant
hereto, (ii) any breach or violation of or failure to fully perform any
covenant, agreement or obligation of SPLN in this Agreement or any of the
agreements delivered pursuant hereto, or (iii) any Action by any third party
arising out of or in connection with a breach or violation described in
clauses (i) and (ii) above. If multiple claims are brought against a Company
Indemnified Party (including in an arbitration), with respect to at least one
of which indemnification is permitted under applicable law and provided for
under this Agreement, SPLN agrees that any award shall be conclusively deemed
to be based on claims as to which indemnification is permitted and provided
for.
(c) The liability of each of the Company and SPLN under this
Section 9.2 shall in no event exceed $10,000,000 and neither party shall have
any liability for indemnification until the cumulative and aggregate amount of
the damages suffered by the party seeking indemnification exceeds fifty thousand
dollars ($50,000) (the "Indemnification Threshold"), and then only for the
amount by which such damages exceed the Indemnification Threshold.
9.3 INDEMNIFICATION PROCEDURE. If an Indemnified Party seeks
indemnification pursuant to Section 9.2, such party shall give prompt written
notice to the party from whom indemnification is sought (the "INDEMNIFYING
PARTY") of the facts and circumstances giving rise to the claim. Any
Indemnified Party asserting a right of indemnification provided for under this
Agreement in respect of, arising out of or involving a claim or demand made by
any person, firm, governmental authority or corporation against the Indemnified
Party (a "THIRD PARTY CLAIM") shall notify the Indemnifying Party in writing of
the Third Party Claim. As part of such notice, the Indemnified Party shall
furnish the Indemnifying Party with copies of any pleadings, correspondence or
other documents relating thereto that are in the Indemnified Party's possession.
The Indemnified Party's failure to notify the Indemnifying Party of any such
claim shall not release the Indemnifying Party, in whole or in part, from its
obligations under Section 9.2 except to the extent that the Indemnified Party's
ability to defend against such claim is actually materially prejudiced thereby.
The Indemnifying Party shall have the right to elect to assume and control the
defense of any such Third party Claims so long as (i) the counsel employed by
the Indemnifying Party is reasonably satisfactory to the Indemnified Party, (ii)
before undertaking such defense the Indemnifying Party acknowledges in writing
that the Indemnifying Party will be solely responsible for all Liabilities and
Expenses arising from such Third Party Claim, and (iii) the Indemnified Party is
reasonably satisfied that the Indemnifying Party will have financial resources,
or valid insurance, available to satisfy such Liabilities. If the Indemnifying
Party elects to assume and control the defense of the Third Party Claim, the
Indemnified Party shall have the right to employ counsel separate from counsel
employed by such Indemnifying Party in any such action and to participate in the
defense thereof. The fees and expenses of such counsel employed by the
Indemnified Party shall be at the expense of the Indemnified Party unless (i)
the employment thereof has been specifically authorized by such Indemnifying
Party in writing, (ii) the Indemnifying Party has failed to promptly assume the
defense and employ counsel or the Indemnifying Party or its counsel has failed
to provide an
29
adequate defense to such claim in a timely manner or (iii) the Indemnifying
Party is a party to such claim and the Indemnified Party has been advised by
counsel that there are additional or separate defenses, or there is otherwise
a conflict of interest, between the Indemnified Party and the Indemnifying
Party. In any such case the fees and expenses of the Indemnified Party's
counsel shall be paid by the Indemnifying Party, provided that the
Indemnifying Party shall not in such event be responsible hereunder for the
fees and expenses of more than one firm or separate counsel in connection
with any such action in the same jurisdiction, in addition to any local
counsel. The Indemnifying Party shall not be liable for any settlement of
any claims effected without its written consent (which shall not be
unreasonably withheld). In addition, the Indemnifying Party will not,
without prior written consent of SPLN, settle, compromise or consent to the
entry of any judgment or otherwise seek to terminate any pending or
threatened claims in respect of which indemnification or contribution may be
sought hereunder (whether or not any Indemnified Party is a party thereto)
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Party from all liabilities arising
out of such claim.
9.4 PRESS RELEASES AND ANNOUNCEMENTS. Except as may be required by law,
the Company will not disclose the transactions contemplated hereby, including by
making any press release related to this Agreement or the transactions
contemplated herein, or other announcement to the employees, customers or
suppliers of the Company and the Subsidiaries, without the prior written
approval of SPLN. In any event, the Company shall make a good faith effort to
consult with SPLN prior to making any such disclosure.
9.5 FURTHER TRANSFERS. The Company (at its own expense) will execute
and deliver such further instruments of conveyance and transfer and take such
additional action as SPLN may request to effect, consummate, confirm or evidence
the transfer to SPLN of the Securities and any other transactions contemplated
hereby. The Company will execute such documents as may be necessary to assist
SPLN in preserving or perfecting its rights in the Securities and will also do
such acts as are necessary to perform its representations, warranties and
agreements herein, including by, after the Closing, making all registrations,
filings and applications, giving all notices and obtaining all governmental
(including, without limitation, FCC), third party or other consents, transfers,
approvals, orders, qualifications and waivers desirable for the consummation of
the transactions contemplated hereby which, for any reason, had not been made,
given or obtained prior to the Closing.
9.6 SPECIFIC PERFORMANCE. The Company acknowledges that the business of
the Company and the Subsidiaries and the Securities are unique and recognize and
affirm that in the event of a breach of this Agreement by the Company, money
damages may be inadequate and SPLN may have no adequate remedy at law.
Accordingly, the Company agrees that SPLN shall have the right, in addition to
any other rights and remedies existing in its favor at law or in equity, to
enforce its rights and the Company's obligations hereunder not only by an action
or actions for damages but also by an action or actions for specific
performance, injunctive and/or other equitable relief (without posting of bond
or other security).
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9.7 TRANSFER OF SECURITIES.
(a) GENERAL PROVISIONS. The Securities are transferable only
pursuant to (i) public offerings registered under the Securities Act, (ii) Rule
144 or Rule 144A of the Securities Act (or any similar rule or rules then in
force) if such rule is available or (iii) subject to the conditions specified in
Section 9.8 below, any other legally available means of transfer.
(b) OPINION DELIVERY. In connection with the transfer of any
Securities (other than a transfer described in subsection 9.7(a)(i) or (ii)
above and other than a transfer to an Affiliate of SPLN), SPLN shall deliver
written notice to the Company describing in reasonable detail the transfer or
proposed transfer, together with an opinion, in form and substance reasonably
satisfactory to the Company and its counsel to the effect that such transfer of
Securities may be effected without registration of such Securities under the
Securities Act. In addition, if SPLN delivers to the Company an opinion of
counsel that, in form and substance reasonably satisfactory to the Company and
its counsel, no subsequent transfer of such Securities shall require
registration under the Securities Act, the Company shall promptly upon such
contemplated transfer deliver new certificates for such Securities which do not
bear the Securities Act legend set forth in Section 9.8. If the Company is not
required to deliver new certificates for such Securities not bearing such
legend, SPLN shall not transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the conditions
contained in this Section and Section 9.8.
(c) RULE 144A. Upon the request of SPLN, the Company shall
promptly supply to SPLN or its prospective transferees all information regarding
the Company required to be delivered in connection with a transfer pursuant to
Rule 144A of the Securities Act.
(d) REMOVAL OF LEGEND. If any Securities are eligible for sale
pursuant to Rule 144(k), the Company shall, upon the request of the holder of
such Securities, remove the legend set forth in Section 9.8 from the
certificates for such Securities.
9.8 LEGEND. All certificates representing the Securities shall have
conspicuously endorsed thereon a legend substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON DECEMBER 21, 1999, AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED
IN THE SECURITIES PURCHASE AGREEMENT, DATED AS OF
DECEMBER 21, 1999, BETWEEN THE ISSUER (THE "COMPANY")
AND XXXXXXXXXX.XXX, INC., AND THE COMPANY RESERVES THE
RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL
SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT
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TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE
FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST AND WITHOUT CHARGE."
ARTICLE X
MISCELLANEOUS
10.1 AMENDMENT AND WAIVER. This Agreement may be amended and any
provision of this Agreement may be waived, provided that, subject to the last
sentence of Section 2.1 and the last sentence of Section 2.2, any such amendment
or waiver will be binding upon a party only if such amendment or waiver is set
forth in a writing executed by each of the Company and SPLN. No course of
dealing between or among any persons having any interest in this Agreement will
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any party under or by reason of this Agreement.
10.2 NOTICES. All notices, demands and other communications given or
delivered under this Agreement will be in writing and will be deemed to have
been given when personally delivered, three days after being mailed by first
class mail, return receipt requested, or delivered by express courier service or
telecopied (subject to receipt of written confirmation). Notices, demands and
communications to the Company and SPLN will, unless another address is specified
in writing, be sent to the address indicated below:
Notices To The Company:
Internet Sports Network, Inc.
000 Xxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx, Xxxxxx X0X0X0
Attention: President
Telephone (000) 000-0000
Telecopy: (000) 000-0000
With a Copy to:
Stikeman, Elliot
000 Xxx Xxxxxx
Xxxxx 0000, Xxxxxxxx Court West
Toronto, Ontario, Canada M5L 1B9
Attention: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
32
Notices to SPLN:
XxxxxxXxxx.xxx, Inc.
0000 XX 0xx Xxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a Copy to:
Xxxxxxxxx Traurig, P.A.
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
10.3 BINDING AGREEMENT; ASSIGNMENT. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto, but neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by either party provided that SPLN may
freely assign this Agreement to an Affiliate or, the benefits of Article VIII to
any other transferee of Registrable Securities.
10.4 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.
10.5 NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any Person.
10.6 HEADINGS; INTERPRETATION. The headings used in this Agreement are
for convenience of reference only and do not constitute a part of this Agreement
and will not be deemed to limit, characterize or in any way affect any provision
of this Agreement, and all provisions of this Agreement will be enforced and
construed as if no caption had been used in this Agreement. Whenever the term
"including" is used in this Agreement (whether or not that term is followed by
the phrase "but not limited to" or "without limitation" or words of similar
effect) in connection with a listing of one or more items or matters, that
listing will be interpreted to be illustrative only and will not be interpreted
as a limitation on, or an exclusive listing of, such items or matters.
33
10.7 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein contain the entire agreement between the parties and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
10.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which taken
together will constitute one and the same instrument.
10.9 GOVERNING LAW. This agreement and the exhibits and schedules hereto
shall be governed by the internal law of the state of Florida, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
state of Florida or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the state of Florida.
10.10 PARTIES IN INTEREST. Nothing in this Agreement, express or implied,
is intended to confer on any person other than the parties and their respective
successors and assigns any rights or remedies under or by virtue of this
Agreement.
* * * * *
34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
INTERNET SPORTS NETWORK, INC.
By: /s/ Xxxxxx XxXxxxxxxxx
-------------------------------
Name: Xxxxxx XxXxxxxxxxx
Title: Chairman and CEO
XXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxxx Xxxx
-------------------------------
Name: Xxxxxxx Xxxx
Title: President
35
