1
EXHIBIT 10.11
INTEREST PURCHASE AGREEMENT
AMONG
INTELLIPOST CORPORATION
DIRECT MARKETING TECHNOLOGY, INC.
AND
BRIGAR COMPUTER SERVICES, INC.
DATED AS OF NOVEMBER 30, 1998
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INDEX OF EXHIBITS AND ANNEXES
EXHIBIT DESCRIPTION
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Exhibit A Amended and Restated Investor Rights Agreement
Exhibit B Amended and Restated Co-Sale Agreement
Exhibit C Amended and Restated Voting Agreement
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INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
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2.2 MNET Capital Structure
2.4 MNET Financials
2.5 Brokers' and Finders' Fees; Third Party Expenses
2.13 Sale of MNET Interests
Buyers' Schedule
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TABLE OF CONTENTS
PAGE
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ARTICLE I - PURCHASE AND SALE OF INTERESTS.....................................................-2-
1.1 Sale of Interests......................................................................-2-
1.2 Closing.........................................................................-2-
1.3 Purchase Price and Payment......................................................-2-
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLERS.........................................-2-
2.1 Organization of MNET............................................................-2-
2.2 MNET Capital Structure..........................................................-3-
2.3 Authority.......................................................................-3-
2.4 MNET Financial Statements.......................................................-3-
2.5 Brokers' and Finders' Fees; Third Party Expenses................................-4-
2.6 Experience......................................................................-4-
2.7 Investment......................................................................-4-
2.8 Rule 144........................................................................-4-
2.9 Rule 144A......................................................................-4-
2.10 No Public Market................................................................-5-
2.11 Access to Data..................................................................-5-
2.12 Legends.........................................................................-5-
2.13 Sale of MNET Interests..........................................................-5-
2.14 Representations Complete........................................................-5-
2.15 Schedules Cumulative............................................................-6-
2.16 Knowledge of Sellers Defined....................................................-6-
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF BUYER..........................................-6-
3.1 Organization and Standing; Certificate and Bylaws...............................-6-
3.2 Corporate Power.................................................................-6-
3.3 Capitalization..................................................................-6-
3.4 Subsidiaries....................................................................-7-
3.5 Authorization...................................................................-7-
3.6 Changes.........................................................................-7-
3.7 Liabilities.....................................................................-8-
3.8 Title to Properties and Assets..................................................-8-
3.9 Patents, Trademarks.............................................................-8-
3.10 Compliance with Other Instruments, None Burdensome..............................-9-
3.11 Litigation.....................................................................-10-
3.12 Employees. ...................................................................-10-
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TABLE OF CONTENTS
(CONTINUED)
3.13 Registration Rights............................................................-10-
3.14 Governmental Consents..........................................................-10-
3.15 Securities Law Exemption.......................................................-10-
3.16 Agreements: Action.............................................................-11-
3.17 Brokers or Finders; Other Offers...............................................-12-
3.18 Indemnification of Officers and Directors......................................-12-
3.19 Qualified Small Business.......................................................-12-
3.20 Compliance with Laws; Permits..................................................-12-
3.21 Tax Returns, Payments and Elections............................................-13-
3.22 Title to Property and Assets...................................................-13-
3.23 Obligations of Management......................................................-13-
3.24 Minute Books...................................................................-13-
3.25 Environmental and Safety Laws..................................................-13-
3.26 Section 83(b) Elections........................................................-13-
3.27 Real Property Holding Corporation..............................................-14-
3.28 Investment Company Act.........................................................-14-
3.29 Employee Benefit Plan..........................................................-14-
3.30 Prohibited Payments............................................................-14-
3.31 Manufacturing and Marketing Rights.............................................-14-
3.32 Insurance......................................................................-14-
3.33 Disclosure.....................................................................-14-
ARTICLE IV - CONDUCT PRIOR TO THE CLOSING.....................................................-14-
4.1 No Solicitation................................................................-14-
4.2 No Encumbrance.................................................................-15-
4.3 Conduct of Buyer...............................................................-15-
ARTICLE V - ADDITIONAL AGREEMENTS.............................................................-16-
5.1 Access to Information..........................................................-16-
5.2 Expenses.......................................................................-16-
5.3 Notification of Certain Matters................................................-16-
5.4 Board of Directors.............................................................-16-
5.5 Standstill.....................................................................-16-
5.6 Non-Competition................................................................-17-
5.7 Additional Documents and Further Assurances....................................-17-
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TABLE OF CONTENTS
(CONTINUED)
ARTICLE VI - CONDITIONS TO THE CLOSING........................................................-17-
6.1 Conditions to Obligations of Sellers...........................................-17-
6.2 Conditions to the Obligations of Buyer.........................................-18-
ARTICLE VII - SURVIVAL; INDEMNIFICATION; ESCROW...............................................-19-
7.1 Survival and Limitations of Claims.............................................-19-
7.2 Indemnification................................................................-19-
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER..............................................-20-
8.1 Termination....................................................................-20-
8.2 Effect of Termination..........................................................-21-
8.3 Amendment......................................................................-21-
8.4 Extension; Waiver..............................................................-21-
ARTICLE IX - GENERAL PROVISIONS...............................................................-22-
9.1 Notices........................................................................-22-
9.2 Interpretation.................................................................-23-
9.3 Counterparts...................................................................-23-
9.4 Entire Agreement; Assignment...................................................-23-
9.5 Severability...................................................................-23-
9.6 Other Remedies.................................................................-23-
9.7 Governing Law..................................................................-24-
9.8 Rules of Construction..........................................................-24-
9.9 Specific Performance...........................................................-24-
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INTEREST PURCHASE AGREEMENT
This INTEREST PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of November 30, 1998 by and between Intellipost Corporation, a Delaware
corporation ("BUYER") and Direct Marketing Technology, Inc., an Illinois
corporation ("DMT") and Brigar Computer Services, Inc., a New York corporation
("BCS") (collectively the "SELLERS").
RECITALS
A. The Boards of Directors of each of Buyer and Sellers believe it is in
the best interests of each company and their respective stockholders or
shareholders that Buyer acquire MNET through the acquisition of all of the
issued and outstanding interests of MNET together with all outstanding options
and other rights to acquire or receive any interests of MNET (together, the
"MNET INTERESTS") in furtherance thereof, have approved the transactions
contemplated hereby.
X. Xxxxxxx are the owner of and have good and valid title to all
outstanding interests of MNET, free and clear of any legal or equitable
encumbrances.
C. Subject to the terms and conditions of this Agreement, Buyer will
purchase and Sellers will sell all of the MNET Interests all in consideration
for shares of the Series D Preferred Stock to purchase Series D Preferred Stock
and Common Stock of Buyer ("BUYER STOCK").
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Buyer's willingness to enter into this Agreement, Sellers
shall enter into a Amended and Restated Investor Rights Agreement, Amended and
Restated Co-Sale Agreement and Amended and Restated Voting Agreement in
substantially the form attached hereto as Exhibit A, Exhibit B and Exhibit C
(the "INVESTOR AGREEMENTS").
E. Buyer and Sellers desire to make certain representations and
warranties and other agreements in connection with the purchase and sale of the
MNET Interests.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
and intending to be legally bound hereby, the parties agree as follows:
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ARTICLE I
PURCHASE AND SALE OF INTERESTS
1.1 Sale of Interests. At the Closing (as defined in Section 1.2 hereof)
and subject to and upon the terms and conditions of this Agreement, DMT will
sell, transfer, convey and deliver to Buyer and Buyer will purchase and acquire
from DMT, good and valid title to 66% of the MNET Interests, free and clear of
any liens, claims, charges, pledges, security interests, options, or other legal
or equitable encumbrances. At the Closing, BCS will sell, transfer, convey and
deliver to Buyer all right, title and interest in and to the remaining 34% of
the MNET Interests assigned to BCS by Enhanced Response Technologies, Inc.
("ERT") At the Closing, Sellers will deliver to Buyer duly executed instruments
of transfer and assignment of the MNET Interests sufficient to vest in Buyer the
interests in the MNET Interests in accordance with the terms of this Agreement,
and MNET will become a wholly-owned subsidiary of Buyer. At the Closing, Buyer
shall deliver to DMT the Stock Consideration together with all certificates,
instruments of transfer and documents sufficient to transfer all right title and
interest to the Stock Consideration to DMT.
1.2 Closing. Unless this Agreement is earlier terminated pursuant to
Section 8.1 hereof, the closing of the purchase and sale of the MNET Interests
(the "CLOSING") will take place as promptly as practicable, but no later than
two (2) business days, following satisfaction or waiver of the conditions set
forth in Article VI hereof, at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx, unless another place or time is
agreed to by Buyer and Sellers. The date upon which the Closing actually occurs
is herein referred to as the "CLOSING DATE."
1.3 Purchase Price and Payment.
(a) The aggregate purchase price to be paid by Buyer to Sellers
for the MNET Interests will be a number of shares of Buyer Stock (the "STOCK
CONSIDERATION") equal to 1,213,592 shares of Buyer Series D Preferred Stock and
2,164,535 shares of Buyer Common Stock. At the Closing, Buyer will deliver to
Sellers certificates representing the Stock Consideration.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant to Buyer (unless such
representation and warranty is expressly given as to one of the Sellers or
another), subject to such exceptions (referencing the appropriate section
number) as are specifically disclosed in the disclosure letter, dated as of the
date hereof, supplied by Sellers to Buyer (the "SELLERS SCHEDULES") and such
other disclosures that are made pursuant to Section 2.26 therein, as follows:
2.1 Organization of MNET. MNET is a limited liability company duly
organized, validly existing and in good standing under the laws of California.
MNET has the corporate power
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to own its properties and to carry on its business as now being conducted.
California is the only jurisdiction that Sellers are aware of in which MNET is
qualified to do business. Seller has delivered to Buyer a true and correct copy
of the Operating Agreement or comparable organizational documents of MNET, each
as amended to date, which Operating Agreement is attached to Schedule 2.1.
2.2 MNET Capital Structure.
(a) The authorized membership interest of MNET consists solely
of 100% Percentage Interest, of which 100% interests are issued and outstanding.
Except as provided in Schedule 2.2, DMT represents that it has good and valid
title to 66% of MNET's Interest, free and clear of any liens, claims, charges,
pledges, security interests, options, or other legal or equitable encumbrances.
Except as provided in Schedule 2.2, BCS represents that it has been assigned
ERT's 34% MNET Interest. All outstanding interests of MNET are duly authorized,
validly issued, fully paid and non-assessable and, as to DMT's 66% Interest not
subject to preemptive rights in favor of third parties created by statute, the
Operating Agreement or any agreement to which either MNET or DMT is a party or
by which it is bound. Except as provided in Schedule 2.2, there are no options,
warrants, calls, rights, commitments or agreements of any character, written or
oral, to which is a party or by which it is bound obligating DMT to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any of its interests of MNET, or obligating DMT to
grant, issue or enter into any such option, warrant, call, right, commitment or
agreement. Except as provided in Schedule 2.2, as a result of the purchase and
sale of the MNET Interests as contemplated hereby, Buyer will be the sole
beneficial owner of all DMT's outstanding interests of MNET and all rights to
acquire or receive such interests of MNET and will be the sole beneficial owner
of all MNET Interests transferred to BCS by ERT.
2.3 Authority. Sellers have all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Sellers. The Boards of Directors of Sellers
have approved this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Sellers and constitutes
the valid and binding obligation of each Seller, enforceable in accordance with
its terms. Except as set forth on Schedule 2.3, to Sellers' knowledge the
execution and delivery of this Agreement by the Sellers does not, and, as of the
Closing Date, the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (any
such event, a "CONFLICT") any provision of the Articles of Organization,
Operating Agreement or Bylaws (or comparable organizational document) of the
Sellers or MNET.
2.4 MNET Financial Statements.
(a) Schedule 2.4 sets forth MNET's unaudited balance sheet as of
October 31, 1998 (the "BALANCE SHEET") and the related unaudited statement of
income (collectively, the "MNET
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FINANCIALS"). Except as provided in Schedule 2.4, DMT represents that the MNET
Financials are accurate and correct in all material respects based on the books
and records provided by MNET to DMT and have been prepared on a basis consistent
throughout the periods indicated and consistent with each other. Except as
provided in Schedule 2.4, DMT represents that the MNET Financials present fairly
the financial condition and operating results of MNET as of the dates and during
the periods indicated therein based on the books and records provided by MNET.
Except as provided in Schedule 2.4, DMT represents that the MNET Financials have
been prepared in good faith in accordance with the books and records of MNET and
consistent with the accounting policies and procedures employed by MNET in prior
periods.
2.5 Brokers' and Finders' Fees; Third Party Expenses. Except as set
forth on Schedule 2.5, to Sellers' knowledge MNET has not incurred, nor will
MNET incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
2.6 Experience. DMT has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Buyer so that it is capable of evaluating the merits and risks of its
investment in the Buyer and has the capacity to protect its own interests.
2.7 Investment. DMT is acquiring the Stock Consideration for investment
for its own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof. Sellers understand that
Stock Consideration has not been, and will not be, registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
such Sellers' representations as expressed herein.
2.8 Rule 144. DMT acknowledge that the Stock Consideration must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from such registration is available. The Sellers are aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, the existence of a public
market for the Shares, the availability of certain current public information
about the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" and
the number of shares being sold during any three-month period not exceeding
specified limitations.
2.9 Rule 144A. The Sellers acknowledge that they are familiar with the
provisions of Rule 144A promulgated under the Securities Act, which permits
resales of securities acquired in a non-public offering to certain qualified
institutional buyers, subject to the satisfaction of certain conditions. The
Sellers understand that the conditions under Rule 144A include, among other
things, the right of the Sellers and subsequent transferees of the Sellers to
obtain from the Buyer certain
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information about the Buyer, if the Buyer has not been required to file periodic
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
2.10 No Public Market. The Sellers understand that no public market now
exists for any of the securities issued by the Buyer and that the Buyer has made
no assurances that a public market will ever exist for the Buyer's securities.
2.11 Access to Data. The Sellers have had an opportunity to discuss the
Buyer's business, management and financial affairs with the Buyer's management
and has also had an opportunity to ask questions of the Buyer's officers, which
questions were answered to its satisfaction. The foregoing does not limit or
modify the representations and warranties of Buyer made in Article III hereof or
the right of Seller to rely thereon.
2.12 Legends.
It is understood that the certificates evidencing the Stock
Consideration issued to the Sellers may bear one or all of the following
legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933."
(b) Any legend required by the laws of the State of Delaware or
the State of California, including any legend required by the California
Department of Corporations.
2.13 Sale of MNET Interests. Except as provided on Schedule 2.13, DMT is
the beneficial owner of 66% of the MNET Interests free and clear of all liens,
claims, charges, pledges, security interests, options, or other legal and
equitable encumbrances, and are subject to no restrictions with respect to
transferability, except for such governmental approvals as are set forth in the
Seller Schedules. DMT has not offered the MNET Interests for sale to any person
other than Buyer. The sale and delivery of DMT's MNET Interests to Buyer
pursuant to the terms hereof will vest in Buyer legal and valid title to its
MNET Interests free and clear of all liens, encumbrances or other defects of
title other than those created by Buyer. BCS is the beneficial owner of the 34%
Interest in MNET assigned to it by ERT. The sale and delivery of BCS's MNET
Interests will vest in Buyer all right, title and interest in and to the MNET
Interests that were assigned to BCS by ERT. BCS has not offered the MNET
Interests assigned to it to any person other than Buyer.
2.14 Representations Complete. DMT represents that none of the
representations or warranties made by DMT, nor any statement made in any
Schedule or certificate furnished by DMT pursuant to this Agreement contains or
will contain at the Closing Date, any untrue statement of a material fact, or
omits or will omit at the Closing Date to state any material fact necessary in
order to
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make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
2.15 Schedules Cumulative. Any item contained on any schedule shall be
deemed disclosed on any other schedule where applicable.
2.16 Knowledge of Sellers Defined. Where Sellers have given a
representation or warranty based on the knowledge of the Sellers, such knowledge
shall be limited to the actual knowledge of either Xxxxxx Xxxxxxx or Xxxxx
Xxxxxx as of the date of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth on the Buyer's Schedule, Buyer represents and
warrants to Seller as follows:
3.1 Organization and Standing; Certificate and Bylaws. The Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. The Buyer has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Buyer is
qualified to do business as a foreign corporation in the State of California.
The Buyer is not qualified to do business as a foreign corporation in any other
jurisdiction and the failure to be so qualified will not have a material adverse
effect on the Buyer's business as now conducted or as proposed to be conducted.
3.2 Corporate Power. The Buyer has all requisite legal and corporate
power to execute and deliver this Agreement, to sell and issue the Stock
Consideration hereunder and to carry out and perform its obligations under the
terms of this Agreement, the Investor Agreements.
3.3 Capitalization. The authorized capital stock of the Buyer consists
of 40,000,000 shares of Common Stock, $0.001 par value, and 13,000,000 shares of
Preferred Stock, $0.001 par value, of which 4,000,000 shares have been
designated Series A Preferred Stock, 1,000,000 shares have been designated
Series B Preferred Stock, 3,000,000 shares have been designated Series C
Preferred Stock and 5,000,000 have been designated as Series D Preferred Stock.
2,596,666 shares of Common Stock, 3,000,000 shares of Series A Preferred Stock,
500,000 shares of Series B Preferred Stock, 2,926,666 shares of Series C
Preferred Stock, warrants to purchase 10,000 shares of Series C Preferred Stock,
1,228,642 shares of Series D Preferred Stock and warrants to purchase 614,321
shares of Series D Stock shall be issued and outstanding prior to the Closing
Date. All issued and outstanding shares of the Buyer's capital stock shall have
been duly authorized and validly issued, shall be fully paid and nonassessable,
and shall be issued in compliance with applicable federal and state securities
laws. Except for (i) the conversion privileges of the Series D Preferred Stock
to be issued under this Agreement, (ii) 2,000,000 shares of Common Stock
reserved for
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issuance to the Buyer's employees, directors or consultants and (iii) the rights
provided in Section 2 of the Amended and Restated Investor Rights Agreement
dated hereof, a form of which is attached hereto as Exhibit A, there are no
other outstanding shares of capital stock or outstanding rights of first
refusal, preemptive rights or other rights, options, warrants, conversion
rights, or other agreements either directly or indirectly for the purchase or
acquisition from the Buyer of any shares of its capital stock.
3.4 Subsidiaries. The Buyer has no subsidiaries or affiliated companies
and does not otherwise own or control, directly or indirectly, any equity
interest in any corporation, association or business entity.
3.5 Authorization. All corporate action on the part of the Buyer, its
officers, directors and stockholders necessary for the authorization, execution,
delivery and performance by the Buyer of this Agreement and the Investor
Agreements, the authorization, issuance, sale and delivery of the Stock
Consideration and the performance of all of the Buyer's obligations hereunder
and thereunder has been taken or will be taken prior to the Closing. This
Agreement, and the Investor Agreements, when executed and delivered by the
Buyer, each shall constitute a valid and legally binding obligation of the Buyer
enforceable in accordance with its respective terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies. The Stock Consideration, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and the Preferred Shares will have the rights, preferences and
privileges described in the Buyer's Certificate of Incorporation; and the Stock
Consideration will be free of any liens or encumbrances, other than any liens or
encumbrances created by or imposed upon the holders; provided, however, that the
Stock Consideration may be subject to restrictions on transfer under applicable
securities laws as set forth herein.
3.6 Changes. Since August 31, 1998, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of the Buyer, other than changes in the ordinary course of
business, or any other event or condition of any character, any of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition or operations of
the Buyer;
(b) Any resignation or termination of any key officers of the
Buyer; and the Buyer, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any change in the contingent obligations of the Buyer except
by way of guaranty or endorsement for collection in ordinary course of business
indemnity;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Buyer;
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(e) Any direct or indirect loans made by the Buyer to or any
material change in any compensation arrangement or agreement with, any
stockholder, employee, officer or director of the Buyer, other than advances
made in the ordinary course of business;
(f) Any declaration or payment of any dividend or other
distribution of the assets of the Buyer;
(g) Any debt, obligation or liability incurred, assumed or
guaranteed by the Buyer, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business; or any waiver by the
Buyer of a valuable right or of a material debt owed to it;
(h) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(i) Any change in any material agreement to which the Buyer is a
party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Buyer, including compensation agreements with the Buyer's employees; or
(j) Any labor organization activity.
3.7 Liabilities. The Buyer has no liabilities and, to the best of its
knowledge, knows of no contingent liabilities, except current liabilities
incurred in the ordinary course of business subsequent to August 31, 1998 which
have not been, either in any individual case or in the aggregate, materially
adverse.
3.8 Title to Properties and Assets. The Buyer has good and marketable
title to its properties and assets, and has good title to all its leasehold
interests, in each case subject to no mortgage, pledge, lien, lease, loan,
encumbrance or charge, except (i) the lien of current taxes not yet due and
payable, and (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the Buyer's operations, and which have not arisen otherwise than in the
ordinary course of business. With respect to property it leases, the Buyer is in
compliance with such leases in all material respects.
3.9 Patents, Trademarks. Set forth in the Buyer's Schedule is a list and
brief description of all patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service xxxx applications,
trade names and copyrights, and all applications for such which are in the
process of being prepared, owned by or registered in the name of the Buyer, or
of which the Buyer is a licensor or licensee or in which the Buyer has any
right, and in each case a brief description of the nature of such rights. The
Buyer, to the best of its knowledge after reasonable investigation, represents
and warrants as follows:
(a) The Buyer has sufficient title and ownership of all patents,
patent applications, licenses, trademarks, service marks, trade names,
inventions, franchises, copyrights,
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trade secrets, information and other proprietary rights necessary for the
operation of its business as now conducted and as proposed to be conducted with
no known infringement of the rights of others.
(b) There are no outstanding options, licenses, or agreements of
any kind related to the foregoing, nor is the Buyer bound by or a party to any
options, licenses or agreements with respect to the patents, patent
applications, licenses, trade marks, service marks, trade names, inventions,
franchises, copyrights, trade secrets, information, proprietary rights and
processes of any other person or entity.
(c) The Buyer has not received any written or oral communication
alleging that the Buyer has violated, or by conducting its business as proposed,
would violate any of the patents, trademarks, service marks, trade names,
copyrights, trade secrets or other proprietary rights of any other person or
entity.
(d) The Buyer is not aware that any of the Buyer's employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of the
employee's best efforts to promote the interests of the Buyer or that would
conflict with the Buyer's business as proposed to be conducted.
(e) Neither the execution nor delivery of this Agreement, nor
the operation of the Buyer's business by the employees of the Buyer, nor the
conduct of the Buyer's business as proposed, will conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default under,
any contract, covenant or instrument under which any of such employees is now
obligated.
(f) The Buyer does not and will not, to the best of the Buyer's
knowledge, need to utilize inventions, trade secrets or proprietary information
of any of its employees made prior to their employment by the Buyer, except for
inventions, trade secrets or proprietary information that have been assigned to
the Buyer.
3.10 Compliance with Other Instruments, None Burdensome. The Buyer is
not in violation of any term of its Certificate of Incorporation or Bylaws, any
material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree, order or, to the best of its knowledge, any statute, rule or
regulation applicable to the Buyer. The execution, delivery, and performance of
and compliance with this Agreement and the Investor Agreements and the
consummation of the transactions contemplated hereby and thereby, have not
resulted and will not result in any such violation, or be in conflict with or
constitute a default under any such term, or result in the creation of any lien,
mortgage, pledge, encumbrance or charge upon any of the properties or assets of
the Buyer or the suspension, revocation, impairment, forfeiture or nonrenewal of
any permit license, authorization or approval applicable to the Buyer, its
business, its operations or any of its assets or properties; and there is no
such violation or default which materially or adversely affects the Buyer's
business or any of its properties or assets.
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3.11 Litigation.
(a) There are no actions, suits, proceedings or investigations
pending against the Buyer or any of its properties before any court or
governmental agency (nor, to the best of the Buyer's knowledge, is there any
reasonable basis therefor or threat thereof). The Buyer is not a party or
subject to the provisions of any order, writ, injunction, judgment, or decree of
any court or governmental agency or instrumentality. There is no action, suit,
proceeding, or investigation by the Buyer currently pending or that the Buyer
intends to initiate.
(b) The Buyer has not admitted in writing its inability to pay
its debts generally as they become due, filed or consented to the filing against
it of a petition in bankruptcy or a petition to take advantage of any insolvency
act, made any assignment for the benefit of creditors, consented to the
appointment of a receiver for itself or for any part of its property, or had a
petition in bankruptcy filed against it, been adjudicated a bankrupt, or filed a
petition or answer seeking reorganization or arrangement under the federal
bankruptcy laws or any other law or statute of the United States of America or
any other jurisdiction.
3.12 Employees. The Buyer does not have any employment contracts,
deferred compensation agreements or bonus, incentive or profit sharing plans,
either currently in effect or proposed, except an incentive stock plan adopted
by the Buyer's Board of Directors covering the sale of up to 2,000,000 shares of
Common Stock to employees, consultants and directors. The Buyer has no
collective bargaining agreements with any of its employees and there is no labor
union organizing activity pending or threatened with respect to the Buyer. Each
former and current employee, officer and consultant of the Buyer has executed a
Proprietary Information Agreement and no person has listed a "Prior Invention"
on Exhibit A thereto.
3.13 Registration Rights. Except as provided in this Agreement or the
Amended and Restated Investor Rights Agreement, the Buyer is not under any
contractual obligation to register any of its presently outstanding securities
or any of its securities which may hereafter be issued.
3.14 Governmental Consents. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority on the part
of the Buyer is required in connection with the valid execution and delivery of
this Agreement or the Investment Agreements, or the offer, sale or issuance of
the Stock Consideration, or the consummation of any other transaction
contemplated hereby, except qualification (or taking such action as may be
necessary to secure an exemption from qualification, if available) of the offer
and sale of the Stock Consideration under the California Corporate Securities
Law of 1968, as amended and other applicable Blue Sky laws, which filings and
qualifications, if required, will be accomplished in a timely manner.
3.15 Securities Law Exemption. Subject to the accuracy of the Investors'
representations in Section 2 of this Agreement, the offer, sale and issuance of
the Stock Consideration constitute transactions exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"1933 Act" or the "Act"), and have been registered or qualified (or are
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exempt from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
3.16 Agreements: Action. Set forth in the Buyer's Schedule is a list of
all material agreements entered into by the Buyer.
(1) Except for agreements explicitly contemplated hereby, there
are no agreements, understandings or proposed transactions between the Buyer and
any of its officers, directors, affiliates, or any affiliate thereof.
(a) Except as set forth in the Buyer's Schedule, the
Buyer and, to the Buyer's knowledge after having made due inquiry, its officers,
directors or stockholders of the Buyer or any members of their immediate
families (the "Managing Employees") have no interest (other than as holders of
securities of a publicly-traded company), either directly or indirectly, in any
entity, including without limitation thereto, any corporation, partnership,
joint venture, proprietorship, firm, licensee, business or association (whether
as an employee, officer, director, stockholder, agent, independent contractor,
security holder, creditor, consultant or otherwise) that presently (i) provides
any services or designs, produces and/or sells any products or product lines, or
engages in any activity which is the same, similar to or competitive with any
activity or business in which it is now engaged; (ii) is a supplier, customer,
creditor, or has an existing contractual relationship with any of its Managing
Employees; (iii) has any direct or indirect interest in any asset or property,
real or personal, tangible, or intangible, of the Buyer or any property, real or
personal, tangible or intangible, that is necessary or desirable for the conduct
of its business.
(b) No Managing Employees are, directly or indirectly,
interested in any material contract with the Buyer (other than such contracts as
relate to any such person's ownership of capital stock or other securities of
the Buyer). The Buyer is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation.
(c) There are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Buyer is a party or to its knowledge by which it is bound
which may involve (i) obligations (contingent or otherwise) of, or payments to,
the Buyer in excess of $50,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Buyer (other than
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) provisions restricting or affecting the development,
manufacture or distribution of the Buyer's products or services, or (iv)
indemnification by the Buyer with respect to infringements of proprietary rights
(other than indemnification obligations arising from purchase or sale agreements
entered into in the ordinary course of business).
(d) The Buyer has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities individually in excess of $50,000 or, in the
case of indebtedness and/or liabilities individually less than $50,000, in
excess of $100,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel
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expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or
rights other than the sale of its inventory in the ordinary course of business.
(e) For the purposes of subsections (c) and (d) above,
all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Buyer has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.
(f) The Buyer has not engaged in the past three (3)
months in any discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Buyer with or into any
such corporation or corporations, (ii) with any corporation, partnership,
association or other business entity or any individual regarding the sale,
conveyance or disposition of all or substantially all of the assets of the Buyer
or a transaction or series of related transactions in which more than fifty
percent (50%) of the voting power of the Buyer is disposed of, or (iii)
regarding any other form of acquisition, liquidation, dissolution or winding up
of the Buyer.
3.17 Brokers or Finders; Other Offers. The Buyer has not incurred, and
will not incur, directly or indirectly, as a result of any action taken by or on
behalf of the Buyer, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or the
transactions contemplated hereby.
3.18 Indemnification of Officers and Directors. The Buyer has provisions
in its Certificate or its Bylaws for the indemnification of its officers and
directors to the full extent permitted by law.
3.19 Qualified Small Business. The Buyer qualifies as a "Qualified Small
Business" as defined in Section 1202(d) of the Internal Revenue Code of 1986, as
amended (the "Code").
3.20 Compliance with Laws; Permits. To its knowledge, the Buyer is not
in violation of any applicable statute, rule, regulation, order or restriction
of any domestic or foreign government or any instrumentality or agency thereof
in respect of the conduct of its business or the ownership of its properties
which violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Buyer. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement or the
Investor Agreements and the issuance of the Shares or the Conversion Shares,
except such as has been duly and validly obtained or filed, or with respect to
any filings that must be made after the Closing, as will be filed in a timely
manner. The Buyer has all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects or financial condition of the Buyer and believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted.
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3.21 Tax Returns, Payments and Elections. The Buyer has filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. The Buyer has paid all taxes and other
assessments due, except those contested by it in good faith which are listed in
the Buyer's Schedule. The provision for taxes of the Buyer as shown in the
Balance Sheet is adequate for taxes due or accrued as of the date thereof. The
Buyer has not elected pursuant to the Internal Revenue Code of 1986, as amended
(the "Code"), to be treated as a Subchapter S corporation or a collapsible
corporation pursuant to Section 341(f) or Section 1362(a) of the Code, nor has
it made any other elections pursuant to the Code (other than elections which
relate solely to methods of accounting, depreciation or amortization) which
would have a material effect on the Buyer, its financial condition, its business
as presently conducted or proposed to be conducted or any of its properties or
material assets. The Buyer has properly withheld or collected from each payment
made to each of its employees, the amount of all taxes, including, but not
limited to, Federal income taxes, Federal Insurance Contribution Act taxes and
federal Unemployment Tax Act taxes required to be withheld or collected
therefrom and has paid the same to the proper tax receiving officers or
authorized depositories. There is no tax lien imposed by any governmental body
outstanding against the assets, properties or business of the Buyer.
3.22 Title to Property and Assets. The Buyer owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Buyer's ownership or use of such property or
assets. With respect to the property and assets it leases, the Buyer is in
compliance with such leases and, to its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
3.23 Obligations of Management. Each officer of the Buyer is currently
devoting his full-time to the conduct of the business of the Buyer. The Buyer is
not aware of any officer or key employee or the Buyer planning to work less than
full-time at the Buyer in the future.
3.24 Minute Books. The minute books of the Buyer provided to the
Investor's counsel contain a complete summary of all meetings of directors and
stockholders since the time of incorporation.
3.25 Environmental and Safety Laws. To its knowledge, the Buyer is not
in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
3.26 Section 83(b) Elections. To the Buyer's knowledge, all elections
and notices permitted by Section 83(b) of the Internal Revenue Code and
analogous provisions of applicable state tax laws have been timely filed by all
employees who have purchased shares of the Buyer's common stock under agreements
that provide for the vesting of such shares.
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3.27 Real Property Holding Corporation. The Buyer is not a real property
holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
3.28 Investment Company Act. The Buyer is not an "investment company",
or a company "controlled" by an "investment", within the meaning of the
Investment Company Act of 1940, as amended.
3.29 Employee Benefit Plan. The Buyer does not have or otherwise
contributes to or participates in any employee benefit or other plan which is
covered by or subject to ERISA.
3.30 Prohibited Payments. Neither the Buyer nor any of its officers,
directors, employees or agents has made any payment of funds of the Buyer
prohibited by law and no funds of the Buyer have been set aside to be used for
any payment prohibited by law.
3.31 Manufacturing and Marketing Rights. The Buyer has not granted
rights to manufacture, produce, assemble, license, market or sell its products
to any other person and is not bound by any agreement that affects the Buyer's
exclusive right to develop, manufacture, assemble, distribute or market or sell
its products.
3.32 Insurance. The Buyer has fire and casualty insurance policies with
coverage customary for companies similarly situated to the Buyer.
3.33 Disclosure. None of the representations or warranties made by the
Buyer in this Agreement or the Investor Agreements and no information in the
Exhibits hereto or otherwise furnished to the Investors contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading. There
is no fact known to the Buyer which materially adversely affects or in the
future may (so far as the Buyer can now reasonably foresee) have a material
adverse effect or impair the ability of the Buyer to perform its obligations
under this Agreement and the Investor Agreements which has not been set forth or
reflected in this Agreement, the Investor Agreements or in the other documents,
certificates and instruments referred to herein and delivered to the Investors
by or on behalf of the Buyer on or prior to the date hereof in connection with
the transactions contemplated by this Agreement or the Investor Agreements.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING
4.1 No Solicitation. Until the earlier of the Closing Date or the date
of termination of this Agreement, Sellers will not (nor will the Sellers permit
(to the extent they are legally able to do so) MNET or any of the Sellers' or
MNET's respective officers, directors, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than Buyer
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and its designees: (a) solicit, conduct discussions with or engage in
negotiations with any person, relating to the possible acquisition of MNET
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), or any portion of the capital stock or assets of MNET (other than
sales of inventory or products in the ordinary course of business or the
transfer of Assets to DMT), (b) provide information with respect to MNET to any
person, other than Buyer, relating to the possible acquisition of MNET (whether
by way of merger, purchase of capital stock, purchase of assets or otherwise),
or any portion of the capital stock or assets of MNET (other than sales of
inventory or products in the ordinary course of business), (c) enter into an
agreement with any person, other than Buyer, providing for the acquisition of
MNET (whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), or any portion of the capital stock or assets of MNET (other than
sales of inventory or products in the ordinary course of business or the
transfer of Assets to DMT) or (d) make or authorize any statement,
recommendation or solicitation in support of any possible acquisition of MNET
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), or any portion of the capital stock or assets of MNET (other than
sales of inventory or products in the ordinary course of business), by any
person, other than by Buyer. In addition to the foregoing, if the Seller or MNET
receives prior to the Closing Date or the termination of this Agreement any
offer or proposal relating to any of the above, the Seller will immediately
notify Buyer thereof, including information as to the identity of the offeror or
the party making any such offer or proposal and the specific terms of such offer
or proposal, as the case may be, and such other information related thereto as
Buyer may reasonably request.
4.2 No Encumbrance. Until the earlier of the Closing Date or the date of
termination of this Agreement, the Sellers will not (nor will the Sellers permit
(to the extent they are legally able to do so) MNET or any of the Sellers' or
MNET's respective officers, directors, agents, representatives or affiliates to)
directly or indirectly, take any action which could in any way and at any time
impair Sellers' good and valid title to all shares of the MNET Interests being
transferred hereunder or could cause or lead to the creation of any lien, claim,
charge, pledge, security interest, option, or other legal or equitable
encumbrance with regard to any share or shares of the MNET Interests.
4.3 Conduct of Buyer. Until the earlier of the Closing Date or the date
of termination of this Agreement, Buyer will not issue shares of its capital
stock for below fair value (other than pursuant to employee stock plans, and
other than contracts and arrangements that exist as of the date of this
Agreement. In addition, Buyer agrees to conduct its business in compliance with
prudent business practices.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information.
(a) Sellers will cause MNET to afford Buyer and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Closing Date to (a) all of MNET's
properties, books, contracts, commitments and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of MNET as may reasonably be requested.
(b) Buyer will afford Seller and its accountants, counsel and
other representatives, reasonable access during normal business hours during the
period prior to the Closing Date to (a) all of its properties, books, contracts,
commitments and records, and (b) all other information concerning the business,
properties and personnel (subject to restrictions imposed by applicable law) of
it as may reasonably be requested. No information or knowledge obtained in any
investigation pursuant to this Section 5.1 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the transactions contemplated hereby.
5.2 Expenses. Whether or not the purchase and sale of the MNET Interests
contemplated hereby are consummated, all fees and expenses incurred in
connection hereby including, without limitation, all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
incurred by a party in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby,
will be the obligation of the respective party incurring such fees and expenses.
5.3 Notification of Certain Matters. Seller will give prompt notice to
Buyer, and Buyer will give prompt notice to Seller, of (i) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any representation or warranty of Seller or Buyer, respectively,
contained in this Agreement to be untrue or inaccurate at or prior to the
Closing Date and (ii) any failure of the Seller, MNET or Buyer, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.4 will not limit or otherwise affect
any remedies available to the party receiving such notice.
5.4 Board of Directors. Following the Closing, Buyer will increase the
size of its Board of Directors to a total of seven seats and will appoint a
representative designated by Sellers to fill one of the newly created seats.
5.5 Standstill. Except as provided in this Agreement or the Investor
Agreements, DMT will not, without the prior consent of Buyer, purchase, offer or
contract to purchase, acquire any option to purchase, or otherwise acquire
"beneficial ownership" (as defined in Rule 13d-3 under the
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Xxxxxxxx Xxx) of any shares of Buyer Stock if immediately following such
purchase or other acquisition Seller would be the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of 25% or more of the then-outstanding
Common Stock of Buyer.
5.6 Non-Competition. As a material inducement to Buyer to consummate the
transactions contemplated hereby, DMT agrees that, for two years following the
Closing Date, it will not directly participate or engage in any business that
directly competes with the business conducted by Buyer as of the Closing Date (a
"COMPETITIVE BUSINESS") in any country in which Buyer operates or sells its
products or services, nor will it hire any employee or former employee MNET. The
operation of any incentive based program by DMT or its affiliates in connection
with their businesses or the acquisition of, or consolidation, merger or joint
venture with, any third party that competes with Buyer, shall not be deemed a
"Competitive Business" hereunder. If any restriction set forth in this Section
5.8 is held to be unreasonable or unenforceable, then Seller agrees and hereby
submits to the reduction and limitation of such restriction to such area or
period as shall be deemed reasonable and enforceable. Seller agrees that the
covenants provided for above, including the term and the geographical area
encompassed therein, are necessary and reasonable in order to protect Buyer in
the conduct of the business of MNET and the utilization of their respective
assets, tangible and intangible, including goodwill. It is expressly agreed
between Buyer and Seller that monetary damages may not be adequate to compensate
Buyer for any breach by Seller of the covenants and agreements set forth above.
Accordingly, Seller agrees and acknowledges that any such violation or
threatened violation may cause irreparable injury to Buyer and that, in addition
to any other remedies which may be available, Buyer shall be entitled to seek
injunctive relief against the threatened breach of these covenants or the
continuation of any such breach by Seller.
5.7 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, will execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby. In addition, after the Closing, to the extent
that Seller has business relationships with suppliers and/or customers of MNET,
following the Closing, Seller will timely satisfy all obligations to such
parties and otherwise carry on its relationships with such parties in a
businesslike and commercially reasonable manner.
ARTICLE VI
CONDITIONS TO THE CLOSING
6.1 Conditions to Obligations of Sellers. The obligations of Sellers to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction at or prior to the Closing of each of the following conditions,
any of which (except Section 6.1(e)) may be waived by Seller:
(a) Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement will be true and correct in all
material respects on and as of the Closing, except for changes contemplated by
this Agreement and except for those representations
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and warranties which address matters only as of a particular date (which will
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date; and the Seller will have received a
certificate to such effect signed on behalf of Buyer by a duly authorized
officer of Buyer;
(b) Agreements and Covenants. Buyer will have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date, and Seller will have received a certificate to such effect signed
by a duly authorized officer of Buyer;
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the purchase and sale of the MNET
Interests contemplated hereby will be in effect.
(d) Material Adverse Change. There will not have occurred any
material adverse change in the business, assets (including intangible assets)
financial condition, results of operations or prospects of Buyer since the date
of this Agreement.
(e) Stock Consideration to Comprise 19.9%. The Stock
Consideration to be issued to Seller pursuant the terms of this Agreement shall
comprise at least 19.9% of the shares of fully diluted Buyer Capital Stock
issued and outstanding as of the date hereof (including (i) all vested and
unvested options previously granted to employees, consultants and directors;
(ii) all stock and warrants previously issued or to be issued in connection with
a $2,500,000 equity financing identified in Section 6.1(f) below and (iii) not
including stock and warrants issued or to be issued in connection with the
equity financing for amounts invested in excess of $2,500,000).
(f) Investment in Buyer. The Buyer shall have raised a minimum
of $2,500,000 through the sale of its equity securities and shall have deposited
the proceeds of such sale of securities in a veritable account or shall
otherwise provide proof of receipt of such funds.
6.2 Conditions to the Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived , in writing, exclusively by Buyer:
(a) Representations and Warranties. The representations and
warranties of the Seller contained in this Agreement will be true and correct in
all material respects on and as of the Closing Date, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which will remain
true and correct as of such date), with the same force and effect as if made on
and as of the Closing Date; and Buyer will have received a certificate to such
effect signed on behalf of the Seller by a duly authorized officer of the
Seller;
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(b) Agreements and Covenants. Seller will have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, and Buyer will have received a certificate to such effect signed by a duly
authorized officer of Seller;
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the purchase and sale of the MNET
Interests contemplated hereby will be in effect.
(d) Material Adverse Change. There will not have occurred any
material adverse change in the business, assets (including intangible assets)
financial condition, results of operations or prospects of MNET since the date
of this Agreement.
ARTICLE VII
SURVIVAL; INDEMNIFICATION; ESCROW
7.1 Survival and Limitations of Claims. The representations and
warranties of the parties contained herein will survive the Closing until the
first anniversary of the Closing Date. Notwithstanding the first sentence of
this Section 7.1, and without limiting the generality thereof, any
representation or warranty, covenant or agreement in respect of which indemnity
may be sought under any section of this Agreement will survive the time at which
it would otherwise terminate pursuant to this Agreement, if notice of the breach
of the representation or warranty, covenant or agreement giving rise to such
indemnity shall have been given to the party against whom such indemnity may be
sought, prior to such time. In the event that Seller is obligated to indemnify
Buyer pursuant to Section 7.2 hereof, Buyer shall not be entitled to claim
indemnity from Seller unless the amount of Losses (as defined below in Section
7.2(a)) is in excess of $50,000, in which case, Buyer shall be entitled to claim
against Seller the entire amount of the Losses; in no event shall Seller's
indemnification obligation hereunder exceed the value of 66% of the Stock
Consideration as of the Closing Date, which indemnification obligation may be
satisfied with the Stock Consideration or any portion thereof. In the event that
Buyer breaches any representation or warranty causing damage or loss to Seller,
Seller shall not be entitled to claim the amount of any such damage or loss from
Buyer unless the amount of Losses (as defined below in section 7.2(b)) in excess
of $50,000, in which case, Seller shall be entitled to claim against Buyer the
entire amount of Losses.
7.2 Indemnification.
(a) Seller Indemnity. DMT will indemnify Buyer against and agree
to hold harmless from any and all damage, loss, liability, claim, obligation of
any nature whatsoever and expense (including without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and expenses) ("LOSS")
incurred by Buyer arising out of any
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breach of any representation or warranty, covenant or other agreement of DMT
contained or incorporated by reference herein.
(b) Buyer Indemnity: Buyer will indemnify Seller against and
agree to hold harmless from any and all damage, loss, liability, claim,
obligation of any nature whatsoever and expense (including without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and
expenses) ("LOSS") incurred by Seller arising out of any breach of any
representation or warranty, covenant or other agreement of Buyer contained or
incorporated by reference herein.
(c) If seeking indemnification pursuant to Section 7.2, the
indemnified party will give prompt notice to the indemnifying party of the
assertion of any claim, or the commencement of any action or proceeding, in
respect of which indemnity may be sought hereunder. The indemnified party will
have the right in its sole discretion to control the defense of and settle any
such claim; provided, however, that except with the consent of the indemnifying
party, no settlement of any such claim will alone be determinative of the amount
of any indemnity hereunder. In the event that the indemnifying party has
consented to any such settlement, the indemnifying party will have no power or
authority to object under any provision of this Article VII to the amount (but
not the right to indemnification in the first place) of any indemnification
claim by Buyer with respect to such settlement. The indemnifying party will be
entitled, at its expense, to participate in such defense. No investigation by
the indemnified party at or prior to the Closing will relieve the indemnifying
party of any liability hereunder.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the transactions contemplated hereby abandoned at any time
prior to the Closing Date:
(a) by mutual consent of Buyer and Seller;
(b) by Buyer or Seller if: (i) the Closing Date has not occurred
by December 31, 1998 (provided that the right to terminate this Agreement under
this clause 8.1(b)(i) will not be available to any party whose willful failure
to fulfill any obligation hereunder has been the cause of, or resulted in, the
failure of the Closing Date to occur on or before such date); (ii) there shall
be an order of a federal or state court in effect preventing consummation of the
purchase and sale of the MNET Interests contemplated hereby; or (iii) there
shall be any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the purchase and sale of the MNET Interests contemplated
hereby by any Governmental Entity that would make consummation of the purchase
and sale of the MNET Interests contemplated hereby illegal;
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(c) by Buyer if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the transactions contemplated hereby by any Governmental Entity, which would:
(i) prohibit Buyer's or MNET's ownership or operation of all or a portion of the
business of MNET or (ii) compel Buyer or MNET to dispose of or hold separate all
or a portion of the business or assets of Buyer or MNET as a result of the
transactions contemplated hereby;
(d) by Buyer if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Seller and (i) such breach has not been cured within five (5) business days
after written notice to Seller (provided that, no cure period will be required
for a breach which by its nature cannot be cured), and (ii) as a result of such
breach the conditions set forth in Section 6.2(a) or 6.2(b), as the case may be,
would not then be satisfied;
(e) by Seller if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the transactions contemplated hereby by any Governmental Entity,
which would: (i) prohibit Seller's ownership or operation of all or a portion of
its business or (ii) compel Seller to dispose of or hold separate all or a
portion of its business or assets as a result of the transactions contemplated
hereby;
(f) by Seller if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of Buyer
and (i) such breach has not been cured within five (5) business days after
written notice to Buyer (provided that, no cure period will be required for a
breach which by its nature cannot be cured), and (ii) as a result of such breach
the conditions set forth in Section 6.1(a) or 6.1(b), as the case may be, would
not then be satisfied.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement will forthwith become void and there
will be no liability or obligation on the part of Buyer, Seller or MNET, or
their respective officers, directors or stockholders or shareholders, provided
that each party will remain liable for any breaches of this Agreement prior to
its termination; and provided further that, the provisions of Sections 5.2 and
5.3 of this Agreement will remain in full force and effect and survive any
termination of this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto at
any time, but any such amendment shall be valid only by execution of an
instrument in writing signed on behalf of Buyer and Seller.
8.4 Extension; Waiver. At any time prior to the Closing Date, Buyer, on
the one hand, and Seller on the other, on the other, may, to the extent legally
allowed, (i) extend the time for the
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performance of any of the obligations of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver will be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder will be in
writing and will be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Buyer, to:
Intellipost Corporation
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX
Attention: Chief Financial Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) if to Sellers, to:
Direct Marketing Technology, Inc.
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx
Attn: President
Telecopy:
and
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Brigar Computer Services, Inc.
c/o Direct Marketing Technology, Inc.
see above
with a copy to:
Experian Information Solutions, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Telecopy: (000) 000-0000
9.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided.
9.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
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9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process. Each party hereto hereby
submits to the exclusive jurisdiction of the federal and state courts of the
State of California in respect of any legal action or proceeding arising out of
or relating to this Agreement.
9.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.9 Specific Performance. The parties hereto agree that irreparable
damage could occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties will be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof, including, but not limited to
Sections 5.8, 5.9 and 5.10 hereof, in any court of the United States or any
state having jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity.
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IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
signed by their duly authorized respective officers, all as of the date first
written above.
INTELLIPOST CORPORATION
By /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title:
DIRECT MARKETING TECHNOLOGY, INC.
By /s/ Xxxxxx Xxxxxxx
---------------------------------
Name:
Title:
BRIGAR COMPUTER SERVICES, INC.
By /s/ Xxxxxx Xxxxxxx
---------------------------------
Name:
Title:
INTEREST PURCHASE AGREEMENT
