EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
DATED AS OF
JULY 18, 2001
AMONG
DREAMLIFE, INC.,
DISCOVERY TOYS, INC.,
AND
THE STOCKHOLDERS OF DISCOVERY TOYS, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I AGREEMENT TO PURCHASE AND SELL STOCKHOLDER SHARES..............................1
1.1 Agreement to Purchase and Sell Stockholder Shares..................................1
1.2 Consideration......................................................................1
(a) Procedure for Exchange....................................................2
(b) Fractional Shares.........................................................2
(c) No Further Ownership Rights in Company Stock..............................2
(d) Lost, Stolen or Destroyed Company Certificates............................2
1.3 Treasury Stock; Options and Rights to Purchase Company Common Stock................2
1.4 Tax-Free Transaction...............................................................3
1.5 Closing............................................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES.................................................3
2.1 Representations and Warranties of the Company......................................3
(a) Organization; Good Standing; Qualification and Power......................3
(b) Equity Investments........................................................4
(c) Capital Stock; Securities.................................................4
(d) Authority; No Consents....................................................6
(e) Financial Information.....................................................7
(f) Absence of Undisclosed Liabilities........................................7
(g) Absence of Changes........................................................7
(h) Tax Matters...............................................................9
(i) Title to Assets, Properties and Rights and Related Matters...............10
(j) Real Property-Owned or Leased............................................11
(k) Intellectual Property....................................................11
(l) Agreements, Etc..........................................................12
(m) No Defaults..............................................................14
(n) Litigation, Etc..........................................................14
(o) Accounts and Notes Receivable............................................14
(p) Accounts and Notes Payable...............................................15
(q) Compliance; Governmental Authorizations..................................15
(r) Environmental Matters....................................................15
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(s) Labor Relations; Employees...............................................16
(t) Employee Benefit Plans and Contracts.....................................16
(u) Certain Agreements.......................................................19
(v) Insurance................................................................19
(w) Bank Accounts; Powers of Attorney........................................19
(x) Brokers..................................................................19
(y) Related Transactions.....................................................19
(z) Customers................................................................20
(aa) Inventory................................................................20
(bb) Orders...................................................................20
(cc) Disclosure...............................................................21
(dd) Available Cash...........................................................21
(ee) Knowledge Definition.....................................................21
2.2 Several Representations and Warranties of the Stockholders........................21
(a) Title; Absence of Certain Agreements.....................................21
(b) Organization, Good Standing and Power....................................21
(c) Authority - General......................................................22
(d) Investment Representations...............................................22
(e) Ownership................................................................24
(f) Brokers..................................................................24
(g) Representation by Legal Counsel..........................................24
2.3 Representations and Warranties of Purchaser.......................................24
(a) Organization; Good Standing; Qualification and Power.....................24
(b) Equity Investments.......................................................25
(c) Capital Stock............................................................25
(d) Authority; No Consents...................................................26
(e) SEC Documents............................................................27
(f) Absence of Undisclosed Liabilities.......................................28
(g) Absence of Changes.......................................................28
(h) Tax Matters..............................................................28
(i) Title to Assets, Properties and Rights and Related Matters...............29
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(j) Real Property-Owned or Leased............................................30
(k) Intellectual Property....................................................30
(l) Agreements, Etc..........................................................31
(m) No Defaults..............................................................33
(n) Litigation, Etc..........................................................33
(o) Accounts and Notes Receivable............................................33
(p) Accounts and Notes Payable...............................................34
(q) Compliance; Governmental Authorizations..................................34
(r) Environmental Matters....................................................34
(s) Labor Relations; Employees...............................................34
(t) Employee Benefit Plans and Contracts.....................................35
(u) Certain Agreements.......................................................38
(v) Insurance................................................................38
(w) Bank Accounts; Powers of Attorney........................................38
(x) Brokers..................................................................38
(y) Related Transactions.....................................................39
(z) Customers................................................................39
(aa) Inventory................................................................39
(bb) Orders...................................................................40
(cc) Available Cash...........................................................40
(dd) Disclosure...............................................................40
(ee) Knowledge Definition.....................................................40
ARTICLE III RELATED AGREEMENTS............................................................40
3.1 Related Agreements................................................................40
(a) Registration Rights Agreement............................................41
(b) Agreement with Xxxxxxx Xxxxxxx...........................................41
(c) Release and Waiver.......................................................41
(d) Note Exchange Agreement..................................................41
(e) Customer Releases and Waivers............................................41
(f) Xxxxx Xxxx Agreement.....................................................41
(g) Wit Capital Agreement....................................................41
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ARTICLE IV CONDITIONS PRECEDENT..........................................................41
4.1 Conditions to Obligations of the Purchaser, the Stockholders and the Company......41
(a) Approvals................................................................42
(b) Legal Action.............................................................42
4.2 Conditions to Obligations of Purchaser............................................42
(a) Representations and Warranties of the Stockholders.......................42
(b) Options and Rights to Purchase Company Common Stock......................42
(c) Performance of Several Obligations of the Company and the Stockholders...42
(d) Certificate of Secretary of Company and Stockholders; Etc................42
(e) Authorization of Acquisition.............................................43
(f) Government Consents, Authorizations, Etc.................................43
(g) Related Agreements.......................................................43
(h) Acquisition of Shares....................................................43
(i) Third Party Consents.....................................................43
(j) Payment of Costs and Expenses............................................43
(k) Accountant Consent.......................................................43
(l) FIRPTA Certificate.......................................................43
(m) Acceptance by Counsel to Purchaser.......................................44
4.3 Conditions to Obligations of the Company and the Stockholders.....................44
(a) Representations and Warranties of Purchaser..............................44
(b) Performance of Obligations of Purchaser..................................44
(c) Certificate of Secretary of Purchaser....................................44
(d) Authorization of Acquisition.............................................44
(e) Government Consents, Authorizations, Etc.................................44
(f) Board of Directors.......................................................44
(g) Resignation of Directors.................................................45
(h) Purchaser Third Party Consents...........................................45
(i) Termination of Stockholder Agreement.....................................45
(j) Acceptance by Counsel to the Company and the Stockholders................45
(k) Closing of Equity Financing..............................................45
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(l) Related Agreements.......................................................45
(m) Repayment of Chase.......................................................45
ARTICLE V ADDITIONAL AGREEMENTS.........................................................46
5.1 Payment of Fees and Expenses......................................................46
5.2 Restrictions on Transfer..........................................................46
5.3 Stockholder Assurance.............................................................48
5.4 Confidential Information..........................................................48
5.5 SEC Filings.......................................................................48
5.6 Election of Directors of Purchaser and Company....................................48
(a) Company Directors........................................................49
(b) Company Issuance of Capital Stock........................................49
ARTICLE VI MISCELLANEOUS.................................................................49
6.1 Entire Agreement..................................................................49
6.2 Survival..........................................................................49
6.3 Descriptive Headings..............................................................49
6.4 Notices...........................................................................49
6.5 Counterparts......................................................................50
6.6 Governing Law; Submission to Jurisdiction.........................................50
6.7 Benefits of Agreement.............................................................51
6.8 Pronouns..........................................................................51
6.9 Amendment, Modification and Waiver................................................51
6.10 California Securities Law.........................................................51
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SCHEDULES
Schedule I Stockholders
EXHIBITS
Exhibit A Company Disclosure Schedule
Exhibit B Form of Registration Rights Agreement
Exhibit C Purchaser Disclosure Schedule
Exhibit D Form of Agreement with Xxxxxxx Xxxxxxx
Exhibit E Form of Release and Waiver
Exhibit F Note Exchange Agreement
Exhibit G Customer Release Agreement
Exhibit H Customer Release Agreement
Exhibit I Xxxxx Xxxx Employment Agreement
Exhibit J Wit Agreement
STOCK PURCHASE AGREEMENT dated as of July 18, 2001, among
DREAMLIFE, INC., a Delaware corporation ("PURCHASER"), DISCOVERY TOYS, INC., a
California corporation (the "COMPANY") and all of the holders of all of the
issued and outstanding capital stock of the Company (collectively, the
"STOCKHOLDERS").
WHEREAS, the Boards of Directors of Purchaser and the Company
and each Stockholder (individually or by its governing body) have each duly
approved and/or adopted this
Stock Purchase Agreement (this "AGREEMENT") and the
proposed acquisition of all of the issued and outstanding shares of capital
stock of the Company by Purchaser in accordance with this Agreement, upon the
terms and subject to the conditions set forth in this Agreement (the
"ACQUISITION").
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement, the representations, warranties, covenants,
agreements, conditions and promises contained herein and therein, the parties
hereby agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL STOCKHOLDER SHARES
1.1 AGREEMENT TO PURCHASE AND SELL STOCKHOLDER SHARES. Upon the terms
and subject to the conditions hereinafter set forth, at the Closing (as defined
herein), each Stockholder shall sell and deliver to Purchaser, and Purchaser
shall purchase from each Stockholder, for the consideration provided in Section
1.2 hereof, that number and class of shares of capital stock of the Company set
forth opposite the name of such Stockholder on SCHEDULE I attached hereto (the
"STOCKHOLDER SHARES") (representing, as to each Stockholder, all shares of
capital stock of the Company to be owned, of record and/or beneficially,
immediately prior to the Closing by each such Stockholder after giving effect to
the exercise, exchange, conversion and/or termination, in full, of all
outstanding rights, options, warrants and any other securities of the Company
owned, of record and/or beneficially, by each such Stockholder that are,
directly or indirectly, exercisable or exchangeable for, or convertible into,
Company Stock (as defined herein) which such exercise, exchange, conversion
and/or termination shall be a condition precedent to the Closing) and any and
all rights and benefits incident to the ownership thereof, free and clear of all
Encumbrances (as defined herein).
1.2 CONSIDERATION. The Purchaser shall, against delivery of all of the
Stockholder Shares, purchase from the Stockholders, in the aggregate, all
outstanding shares of capital stock of the Company (collectively, the "COMPANY
STOCK") in exchange for unregistered shares of common stock, par value $0.01 per
share, of the Purchaser (the "PURCHASER COMMON STOCK"). The aggregate purchase
price (the "AGGREGATE PURCHASE PRICE") to be paid for all Stockholder Shares to
be purchased hereunder is an aggregate of thirty three million seven hundred
seventy two thousand one hundred forty three (33,772,143) shares of Purchaser
Common Stock (the "ACQUISITION SHARES") at an exchange ratio of 79.6058452487
shares of Purchaser Common Stock for each outstanding Stockholder Share.
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(a) PROCEDURE FOR EXCHANGE. At the Closing, Purchaser shall
deliver to each Stockholder a stock certificate (a "PURCHASER CERTIFICATE"),
registered in the name of such Stockholder, representing that number of
unregistered Acquisition Shares set forth opposite the name of such Stockholder
on SCHEDULE I attached hereto under the column entitled "DREAMLIFE SHARES." Each
Stockholder shall deliver to the Purchaser stock certificates, duly endorsed in
blank and in proper form for transfer to the Purchaser, representing all of such
Stockholder's Stockholder Shares (each, a "COMPANY CERTIFICATE") for transfer
and assignment to the Purchaser, together with such other documents as may be
reasonably required by Purchaser to effectuate the issuance of a Purchaser
Certificate with respect to such Stockholder. In the event of a transfer of
ownership of the Stockholder Shares that is not registered on the transfer
records of the Company, a Purchaser Certificate representing the proper number
of Acquisition Shares may be issued to a transferee if the Company Certificate
representing such Stockholder Shares is presented to Purchaser, accompanied by
all documents required to evidence and effect such transfer.
(b) FRACTIONAL SHARES. No fractional Acquisition Shares shall
be issued in connection with the Acquisition, but in lieu thereof each holder of
Stockholder Shares who would otherwise be entitled to receive a fraction of an
Acquisition Share will receive from Purchaser, at such time as such holder shall
receive a certificate representing Acquisition Shares as contemplated by Section
1.2(a), a check representing an amount of cash (without interest), rounded to
the nearest cent, equal to (i) the average of the closing bid and ask prices for
the ten (10) trading days prior to the Closing (the "AVERAGE PRICE") MULTIPLIED
BY (ii) the fraction of an Acquisition Share otherwise issuable to such holder.
The fractional interests of each Stockholder of the Company will be aggregated
so that no Stockholder of the Company will receive cash in an amount equal to or
greater than the Average Price.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. All
Acquisition Shares issued in exchange for and upon surrender of Stockholder
Shares in accordance with the terms of this Article I shall be deemed to have
been issued in full satisfaction of any and all rights pertaining to, or
liabilities or obligations of the Company in respect of, such Stockholder Shares
(including, by way of example and not in limitation thereof, the right to
receive any accrued and unpaid dividends or distributions thereon).
(d) LOST, STOLEN OR DESTROYED COMPANY CERTIFICATES. In the
event any Company Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit to that effect by the person claiming such Company
Certificate to be lost, stolen or destroyed and the agreement of such person to
indemnify the Company and the Purchaser from and against any claim that may be
made against it with respect to such Company Certificate (with respect to which
indemnity Purchaser may in its discretion require the posting of a bond by such
person to secure such indemnity), Purchaser will issue in exchange for such
lost, stolen or destroyed Company Certificate the consideration otherwise
payable in respect of the Stockholder Shares represented thereby in accordance
with the provisions of this Section 1.2.
1.3 TREASURY STOCK; OPTIONS AND RIGHTS TO PURCHASE COMPANY COMMON
STOCK. At or prior to the Closing, all shares of capital stock held or owned by
the Company as treasury stock shall be cancelled. Prior to the Closing, each
Stockholder having direct or indirect
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beneficial ownership of any security (including, but not limited to any rights,
options or warrants) of the Company which such Stockholder may exercise,
exchange and/or convert, directly or indirectly, into shares of common stock,
without par value, of the Company ("COMPANY COMMON STOCK") shall have exercised,
exchanged and/or converted such securities into or for Company Common Stock or
otherwise canceled or terminated such securities, such that as of the Closing
there shall be no security of the Company outstanding other than the Company
Common Stock. Furthermore, all rights, whether granted by agreement or
otherwise, to purchase or subscribe for shares of Company Stock shall have been
terminated prior to the Closing.
1.4 TAX-FREE TRANSACTION. For Federal income tax purposes, the parties
intend that the Acquisition be treated as a tax-free reorganization within the
meaning of Section 368(a) of the Code (as defined herein).
1.5 CLOSING. The closing hereunder with respect to the transactions
contemplated by Article 1 hereof (the "CLOSING") is taking place on the date
hereof at the offices of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP ("ORRICK"), 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other date and/or places as
the parties hereto shall agree (such date of Closing sometimes being referred to
herein as the "CLOSING DATE").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Purchaser that, except as disclosed in the disclosure
schedule attached hereto as EXHIBIT A (which disclosure schedule shall contain
specific references to the representations and warranties to which the
disclosures contained therein relate) (the "COMPANY DISCLOSURE SCHEDULE"):
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
(i) The Company (a) is a corporation duly organized,
validly existing and in good standing in the State of
California, (b) has all requisite corporate power and
authority to own, lease and operate its properties and assets
and to carry on its business as now being conducted, to enter
into this Agreement and the Related Agreements (as defined
herein), to perform its obligations hereunder and thereunder,
and to consummate the transactions contemplated hereby and
thereby and (c) is duly qualified and in good standing to do
business in those jurisdictions listed in Section 2.1(a)(i) of
the Company Disclosure Schedule and in all other jurisdictions
in which the failure to be so qualified and in good standing
could reasonably be expected to have a Company Material
Adverse Effect (as defined herein). The Company has delivered
to Purchaser true and complete copies of the Charter (as
defined herein) and by-laws of the Company, in each case as
amended to the date hereof. As used herein, "CHARTER" shall
mean, with respect to any corporation, those instruments that
at the time constitute its corporate charter as filed or
recorded under the general corporation law of the jurisdiction
of its incorporation, including the articles or certificate of
incorporation or organization, and any amendments
3
thereto, as the same may have been restated, and any
amendments thereto (including any articles or certificates of
merger or consolidation, certificate of correction or
certificates of designation or similar instruments which
effect any such amendment) which became effective after the
most recent such restatement. As used herein, "COMPANY
MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, condition (financial or otherwise), assets,
properties, operations, results of operations, prospects,
affairs or Liabilities (as defined herein) of the Company and
its Subsidiaries (as defined herein) taken as a whole.
(ii) Each Subsidiary of the Company is a corporation
duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and is
qualified to transact business as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a
Company Material Adverse Effect, and has the corporate power
and authority to own its property and assets and to carry on
its business as presently conducted and as proposed to be
conducted. The term "SUBSIDIARY" (which shall include all
forms of such word, including, but not limited to,
"SUBSIDIARIES") shall hereinafter mean each of those entities
identified in Section 2.1(a)(ii) of the Company Disclosure
Schedule.
(iii) The following information for the Subsidiaries
is set forth in Section 2.1(a)(iii) of the Company Disclosure
Schedule: (i) its name and jurisdiction of incorporation or
organization, (ii) the type of and percentage interest held by
the Company in such Subsidiary and the names of and percentage
interest held by the other interest holders, if any, in such
Subsidiary, and (iii) any loans from the Company to, or
priority payments due to the Company from, such Subsidiary and
the rate of return thereon.
(b) EQUITY INVESTMENTS. Except as set forth in the Company
Disclosure Schedule, neither the Company nor any Subsidiary has any subsidiaries
(other than, in the case of the Company, the Subsidiaries), nor does it
currently own, any capital stock or other proprietary interest, directly or
indirectly, in any corporation, association, trust, partnership, joint venture
or other entity nor are there any options, warrants, rights, calls, commitments
or agreements of any character to which the Company or any Subsidiary is a
party, or by which the Company or any Subsidiary is bound, calling for the
issuance to the Company or any Subsidiary of shares of capital stock or other
equity interests of a third party or any securities convertible into or
exercisable or exchangeable for, or representing the right to purchase or
otherwise receive, any such capital stock, or other arrangement to acquire, at
any time or under any circumstance, capital stock of any third party or any such
other securities.
(c) CAPITAL STOCK; SECURITIES.
(i) The authorized capital stock of the Company
consists of 491,000 shares of common stock, without par value.
As of the date hereof, 424,242 shares of common stock are
validly issued and outstanding, fully paid and non-assessable
and are not subject to any preemptive rights. Section
2.1(c)(i) of the Company Disclosure Schedule sets forth a true
and complete list of the holders of shares of Company Stock
and the number of such shares owned of record and beneficially
by each such holder.
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Except as set forth in Section 2.1(c)(i) of the Company
Disclosure Schedule there are no voting trusts, voting
agreements, proxies, first refusal rights, first offer rights,
co-sale rights, options, transfer restrictions or other
agreements, instruments or understandings (whether written or
oral, formal or informal) with respect to the voting, transfer
or disposition of Company Stock to which the Company is a
party or by which it is bound, or, to the knowledge of the
Company, among or between any persons other than the Company.
There are no options, warrants, rights, calls, commitments or
agreements of any character to which the Company is a party,
or by which the Company is bound, calling for the issuance of
shares of capital stock or other equity securities of the
Company or any securities convertible into or exercisable or
exchangeable for, or representing the right to purchase or
otherwise receive, any such capital stock or other equity
securities, or other arrangement to acquire, at any time or
under any circumstance, capital stock of the Company or any
such other securities. All prior issuances of securities were
made in compliance with and not in violation of all applicable
Federal, state, local and foreign securities laws and no
shares of capital stock were issued in violation of any
preemptive rights.
(ii) For the purposes of this Agreement, the number
of shares of Company Stock outstanding, at any time, on a
"FULLY DILUTED BASIS" shall be all outstanding shares of
capital stock of the Company (assuming the exercise, exchange
or conversion of all options, warrants, rights, calls,
commitments or agreements of any character to which the
Company is a party, or by which the Company is bound, calling
for the issuance of shares of capital stock or other equity
securities of the Company or any securities convertible into
or exercisable or exchangeable for, or representing the right
to purchase or otherwise receive, any such capital stock or
other equity securities, or other arrangement to acquire, at
any time or under any circumstance, capital stock of the
Company or any such other securities).
(iii) The Stockholder Shares constitute one hundred
percent (100%) of the outstanding securities of the Company on
a Fully Diluted Basis.
(iv) All of the outstanding shares of capital stock
of, or other securities of, each Subsidiary are duly
authorized, validly issued, fully paid and nonassessable, and
are owned, directly or indirectly, by the Company free and
clear of all Encumbrances (as defined herein). There are no
outstanding warrants, options, agreements, convertible
securities or other commitments pursuant to which any
Subsidiary is or may become obligated to issue any shares of
the capital stock or other securities of such Subsidiary.
There are, and immediately upon consummation of the Closing of
the transactions contemplated hereby, there will be, no
preemptive or similar rights to purchase or otherwise acquire
shares of the capital stock or other securities of any
Subsidiary pursuant to any provision of law of the United
States, any state thereof or of any other country, the Charter
(or similar documents) or any agreement to which such
Subsidiary is a party; and there is, and immediately upon the
consummation of the Closing of the transactions contemplated
hereby, there will be, no agreement, restriction or
encumbrance (such as a right of first refusal, right of first
offer, proxy, voting trust, voting agreement, etc.) with
respect to the sale or voting of any shares of capital stock
or other securities of any Subsidiary (whether outstanding or
issuable upon conversion or
5
exercise of outstanding securities). All shares of the capital
stock and other securities issued by each Subsidiary at or
prior to the Closing have been or are being issued in
transactions exempt from registration under the Securities
Act, all applicable state securities or "blue sky" laws. No
Subsidiary has violated the Securities Act, any applicable
state securities or "blue sky" laws in connection with the
issuance of any shares of capital stock or other securities at
or prior to the Closing.
(d) AUTHORITY; NO CONSENTS. The execution, delivery and
performance by the Company of this Agreement and the Related Agreements to which
it is a party and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Company; and this Agreement and each of the Related
Agreements to which the Company is a party have been, and when executed and
delivered by the Company will be, duly and validly executed and delivered by the
Company, and this Agreement and the Related Agreements to which the Company is a
party are the valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regardless of whether
such enforceability is considered a proceeding in law or equity. Except as set
forth in Schedule 2.1(d), neither the execution, delivery and performance of
this Agreement or the Related Agreements to which the Company is a party nor the
consummation by the Company of the transactions contemplated hereby or thereby
nor compliance by the Company with any provision hereof or thereof will (A)
conflict with, (B) result in any violations of, (C) cause a default under (with
or without due notice, lapse of time or both), (D) give rise to any right of
termination, amendment, cancellation or acceleration of any obligation contained
in or the loss of any material benefit under or (E) result in the creation of
any Encumbrance on or against any assets, rights or property of the Company or
any Subsidiary under any term, condition or provision of (x) any instrument or
agreement to which the Company or any Subsidiary is a party, or by which the
Company or any Subsidiary or any of their properties, assets or rights may be
bound, (y) any law, statute, rule, regulation, order, writ, injunction, decree,
permit, concession, license or franchise of any Governmental Authority (as
defined herein) applicable to the Company or any of their properties, assets or
rights or (z) the Company's or any Subsidiary's Charter or by-laws, as amended
through the date hereof, respectively. Except as set forth in Section 2.1(d) of
the Company Disclosure Schedule, no permit, authorization, consent or approval
of or by, or any notification of or filing with, any Governmental Authority or
other person is required in connection with the execution, delivery and
performance by the Company or the Stockholders of this Agreement or the Related
Agreements or the consummation by the Company or the Stockholders of the
transactions contemplated hereby or thereby. "GOVERNMENTAL AUTHORITY" shall mean
any Federal, state, municipal, foreign or other governmental court, department,
commission, board, bureau, agency or instrumentality.
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(e) FINANCIAL INFORMATION.
(i) Attached hereto as Section 2.1(e) of the Company
Disclosure Schedule are the following financial statements of
the Company (collectively, the "COMPANY FINANCIAL
STATEMENTS"): the consolidated audited balance sheets,
statement of income and statement of cash flows as of and for
the year ended December 31, 2000 (the "2000 FINANCIAL
STATEMENTS") and the unaudited consolidated balance sheets,
statement of income and statement of cash flows for the three
(3) month period ended March 31, 2001 (collectively, the
"INTERIM FINANCIAL STATEMENTS").
(ii) The Company Financial Statements (A) are in
accordance with the books and records of the Company, (B)
fairly present the financial condition of the Company and all
of its Subsidiaries as at the respective dates indicated and
the results of operations of the Company and all of its
Subsidiaries for the respective periods indicated and (C) have
been prepared in accordance with GAAP, except as indicated
therein.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company
nor any Subsidiary has any liabilities or obligations of any nature (whether
known or unknown, matured or unmatured, fixed or contingent, secured or
unsecured, accrued, absolute or otherwise ("LIABILITY")) and there is no
existing fact, condition or circumstance which could reasonably be expected to
result in such Liabilities, except Liabilities (i) disclosed on Section 2.1(f)
of the Company Disclosure Schedule, (ii) set forth on the balance sheet included
in the Interim Financial Statements, (iii) not required to be disclosed in the
Interim Financial Statements in order for such Interim Financial Statements to
fairly present the financial condition of the Company as at March 31, 2001 in
accordance with GAAP, or (iv) incurred in the ordinary course of business since
March 31, 2001. There were no material loss contingencies (as such term is used
in Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March, 1975 ("FAS NO. 5")) which were not
adequately provided for on the Company balance sheet included in the 2000
Financial Statements and the Company balance sheet included in the Interim
Financial Statements, respectively, as required by FAS No. 5.
(g) ABSENCE OF CHANGES. Except as set forth in Schedule 2.1(g)
of the Company Disclosure Schedule, since March 31, 2001, the Company and each
Subsidiary has been operated in the ordinary course, consistent with past
practice, and there has not been:
(i) any material adverse change in the businesses,
conditions (financial or otherwise), assets, properties,
operations, results of operations, prospects, affairs or
Liabilities (a "COMPANY MATERIAL ADVERSE CHANGE") of the
Company or any Subsidiary;
(ii) any damage, destruction or loss, whether or not
covered by insurance, having or which could be reasonably
likely to have a Company Material Adverse Effect;
(iii) any Liability, in excess of $10,000
individually or $25,000 in the aggregate, created, assumed,
guaranteed or incurred, or any material transaction, contract
or commitment entered into, by the Company or any Subsidiary,
other than the license,
7
sale or transfer of the Company's products to customers in the
ordinary course of business;
(iv) any payment, discharge or satisfaction of any
Encumbrance or Liability by the Company or any Subsidiary or
any cancellation by the Company or any Subsidiary of any
material debts or claims or any amendment, termination or
waiver of any rights of material value to the Company or any
Subsidiary;
(v) any declaration, setting aside or payment of any
dividend or other distribution of any assets of any kind
whatsoever with respect to any shares of the capital stock of
the Company or any Subsidiary, or any direct or indirect
redemption, purchase or other acquisition of any such shares
of the capital stock of the Company or any Subsidiary;
(vi) any stock split, reverse stock split,
combination, reclassification or recapitalization of any
Company Stock or capital stock of any Subsidiary, or any
issuance of any other security in respect of or in exchange
for, any shares of Company Stock or capital stock of any
Subsidiary;
(vii) any issuance by the Company or any Subsidiary
of any shares of its capital stock or any debt security or
securities, rights, options or warrants convertible into or
exercisable or exchangeable for any shares of such entity's
capital stock or debt security;
(viii) any license, sale, transfer, pledge, mortgage
or other disposition of any material tangible or intangible
asset of the Company or any Subsidiary, other than in the
ordinary course of business;
(ix) any termination of, or written indication of an
intention to terminate or not renew, any material contract,
license, commitment or other agreement between the Company and
any other person or any Subsidiary and any other person;
(x) any material write-down or write-up of the value
of any asset of the Company or any Subsidiary, or any material
write-off of any accounts receivable or notes receivable of
the Company or any Subsidiary or any portion thereof;
(xi) any increase in or modification of compensation
payable or to become payable to (A) any director or officer of
the Company or any Subsidiary or (B) any employee of the
Company or any Subsidiary other than in the ordinary course of
business, or the entering into of any employment contract with
any officer or employee;
(xii) any material increase in or modification or
acceleration of any benefits payable or to become payable
under any bonus, pension, severance, insurance or other
benefit plan, payment or arrangement (including, but not
limited to, the granting of stock options, restricted stock
awards or stock appreciation rights) made to, for or with any
director, officer, employee, consultant or agent of the
Company or any Subsidiary;
8
(xiii) the making of any loan, advance or capital
contribution to or investment in any person or entity or the
engagement in any transaction with any employee, officer,
director or securityholder of the Company (or similar
transactions involving any such persons of any Subsidiary),
other than (A) advances to employees in the ordinary course of
business for travel and similar business expenses or (B) other
loans and advances in an aggregate amount which did not exceed
$25,000 outstanding at any one time;
(xiv) any change in the accounting methods or
practices followed by the Company or any Subsidiary or any
change in depreciation or amortization policies or rates
theretofore adopted;
(xv) any change in the manner in which the Company or
any Subsidiary extends discounts or credit to customers or
otherwise deals with customers;
(xvi) any termination of employment of any officer or
key employee of the Company or any Subsidiary or any
expression of intention by any officer or key employee of the
Company or any Subsidiary to resign from such office or
employment with such entity;
(xvii) any amendments or changes in the Company's
Charter or by-laws or the Charter or by-laws of any
Subsidiary; or
(xviii) any agreement, understanding, authorization
or proposal, whether in writing or otherwise, for the Company
or any Subsidiary to take any of the actions specified in
items (i) through (xvii) above.
(h) TAX MATTERS.
(i) Except as set forth in Section 2.1(h) of the
Company Disclosure Schedule, the Company and each Subsidiary
have (a) not requested an extension of time in connection
with, and have timely filed, all Tax Returns required to be
filed by it relating to any Taxes with respect to any income,
properties or operations of the Company and each Subsidiary,
respectively; (b) all such Tax Returns were complete and
correct and the Company and each Subsidiary have paid all
Taxes due; (c) the Company and each Subsidiary are not
delinquent in the payment of any Taxes; (d) there are no
pending tax audits of any Tax Return of the Company or any
Subsidiary; (e) no deficiency or addition to Taxes, interest
or penalties for any Taxes with respect to any income,
properties or operations of the Company or any Subsidiary has
been proposed, asserted or assessed against the Company or any
Subsidiary; (f) no taxing authority in a jurisdiction where
the Company does not file Tax Returns has made a claim,
assertion or threat to the Company that the Company is or may
be subject to taxation by such jurisdiction, and no taxing
authority in any jurisdiction where a Subsidiary does not file
Tax Returns has made a claim, assertion or threat to such
Subsidiary that such Subsidiary is or may be subject to
taxation in such jurisdiction; (g) the Company and each
Subsidiary have not granted any extension of the statute of
limitations applicable to any Tax Return or other Tax claim
with respect to any income, properties or operations of the
Company or any Subsidiary; (h) there are no tax liens on any
of the assets of the Company and its Subsidiaries that arose
from any failure
9
or alleged failure to pay any tax; and (i) the Company and
each Subsidiary have not made any election under Section
341(f) of the Code.
(ii) Neither the Company nor any Subsidiary has made
any payment or payments, is obligated to make any payment or
payments, and is not a party to any agreements that could
obligate the Company or any Subsidiary to make any payment or
payments that would constitute an "excess parachute payment,"
as defined in Section 280G of the Code (or any similar
provision of state, local or foreign law).
(iii) Neither the Company nor any Subsidiary is a
party to any Tax allocation or sharing agreement. Neither the
Company nor any Subsidiary has any liability for Taxes of any
person under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a
transferee or successor by contract or otherwise.
(iv) Neither the Company nor any Subsidiary has
incurred liability for taxes as a result of a transaction
described in Section 355 (d) or (e) of the Code.
As used in this Section 2.1(h), the term "SUBSIDIARY" shall mean any
corporation with respect to which a specified person (or a Subsidiary thereof)
owns a majority of the common stock or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors.
As used in this Agreement, the term "TAX RETURN" shall mean any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
As used in this Agreement, the term "TAX" shall mean any of the Taxes
and the term "TAXES" shall mean, with respect to any person or entity, (i) all
income taxes (including any tax on or based upon net income, or gross income, or
income as specially defined, or earnings, or profits, or selected items of
income, earnings or profits) and all gross receipts, sales, use, ad valorem,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) on such person or entity and (ii) any liability
for the payment of any amount of the type described in the immediately preceding
clause (i) as a result of being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable law) of another person or entity or a
member of an affiliated or combined group.
(i) TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED
MATTERS. Each of the Company and each Subsidiary has good and marketable title
to all assets, properties and interests in properties, real, personal or mixed,
reflected, respectively, on the balance sheet included in the Interim Financial
Statements or acquired after March 31, 2001 (except inventory or other property
sold or otherwise disposed of since March 31, 2001, in the ordinary course of
business and accounts receivable and notes receivable paid in full subsequent to
March 31, 2001, or not so reflected in such balance sheet but used or useful in
the conduct or operation of the Company's and each Subsidiary's business, free
and clear of all Encumbrances, of any kind or
10
character, except for (i) those Encumbrances set forth in Section 2.1(i) of the
Company Disclosure Schedule, (ii) liens for current taxes not yet due and
payable and (iii) statutory mechanics and materialmen's liens. The assets,
properties and interests in properties of the Company and each Subsidiary are in
good operating condition and repair in all material respects (ordinary wear and
tear excepted). As used herein, the term "ENCUMBRANCES" shall mean and include
security interests, mortgages, liens, pledges, guarantees, charges, easements,
reservations, restrictions, clouds, equities, rights of way, options, rights of
first refusal and all other Encumbrances, whether or not relating to the
extension of credit or the borrowing of money.
(j) REAL PROPERTY-OWNED OR LEASED. Neither the Company nor any
Subsidiary currently owns, nor have any of them or, to their knowledge, any of
their predecessors ever owned, any real property. Section 2.1(j) of the Company
Disclosure Schedule contains a list of (i) all real property leased by the
Company and each Subsidiary (the "LEASED REAL PROPERTY"), and (ii) with respect
to each lease covering the Leased Real Property (collectively, the "LEASES"),
any requirement of consent of the lessor to a change in the majority ownership
of the outstanding voting capital stock of the Company. The Company and each
Subsidiary is, respectively, the owner and holder of all the leasehold estates
purported to be granted by each Lease and all Leases are in full force and
effect and constitute valid and binding obligations of the Company and each
Subsidiary.
(k) INTELLECTUAL PROPERTY.
(i) The Company and each Subsidiary owns or possesses
sufficient legal rights to all Intellectual Property (as
defined herein) necessary for its business without any known
conflict with the rights of others. Neither the Company nor
any Subsidiary has received any written communications
alleging that the Company or any Subsidiary has violated or is
infringing, by conducting its business, or would violate or
infringe any of the patents, trademarks, service marks,
tradenames, copyrights (or in each case, any applications
therefor), software licenses, trade secrets or other
proprietary rights or processes of any other person or entity.
Neither the Company nor any Subsidiary is aware that any of
their 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 such employee's best efforts to promote the interest of
the Company or any Subsidiary or that would conflict with the
Company's business or such Subsidiary's business. Neither the
execution or delivery of this Agreement or any Related
Agreement, nor the carrying on of the Company's business or a
Subsidiary's business by the employees of the Company or the
employees of each Subsidiary, nor the conduct of the Company's
business or a Subsidiary's business as currently conducted,
will, to the Company's knowledge, 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 such employee is now obligated. The
Company does not believe it is or will be necessary to use any
inventions of any of its employees or any of the Subsidiaries'
employees (or persons it or a Subsidiary currently intends to
hire) made prior to their employment by the Company or a
Subsidiary.
11
(ii) Section 2.1(k) of the Company Disclosure
Schedule sets forth (A) the patents, patent applications,
trademarks, trademark applications, trade names, service
marks, service xxxx applications, copyrights and copyright
registrations and applications of each of the Company and each
Subsidiary and (B) Internet domain names and applications
therefor and other filings and formal actions made or taken
pursuant to federal, state or local and foreign laws by the
Company and each Subsidiary to protect or perfect its
interests therein.
(iii) "INTELLECTUAL PROPERTY" means all patents,
patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service xxxx
applications, copyrights, copyright applications, franchises,
licenses, databases, "URL's" and Internet domain names and
applications therefor (and all interest therein), computer
programs and other computer software, user interfaces,
know-how, trade secrets, customer lists, proprietary
technology, processes and formulae, source code, object code,
algorithms, architecture, structure, display screens, layouts,
development tools, instructions, templates, marketing
materials, inventions, mask works, trade dress, logos and
designs, skills, experience, expertise and all documentation
and media constituting, describing or relating to the
foregoing.
(l) AGREEMENTS, ETC. Section 2.1(l) of the Company Disclosure
Schedule sets forth a true and complete list of all material written or oral
contracts, agreements and other instruments not made in the ordinary course of
business to which the Company or any Subsidiary is a party, or made in the
ordinary course of business and referred to in clauses (i) through (xvi) of this
Section 2.1(l). Except as set forth on Schedule 2.1(l) to the Company Disclosure
Schedule, neither the Company nor any Subsidiary is a party to any agreement,
arrangement or understanding, whether written or oral, formal or informal,
relating to the following:
(i) any material distributorship, dealer, sales,
advertising, agency, manufacturer's representative, franchise
or similar contract or relationship or any other contract
relating to the payment of a commission or other fee
calculated as or by reference to a percentage of the profits
or revenues of the Company or any Subsidiary or of any
business segment of the Company or any Subsidiary;
(ii) any joint venture, partnership or other
agreement or arrangement for the sharing of profits;
(iii) any collective bargaining contract or other
contract with or commitment to any labor union;
(iv) the future purchase, sale or license of
products, material, supplies, equipment or services requiring
payments to or from the Company or any Subsidiary in an amount
in excess of $25,000 per annum, which agreement, arrangement
or understanding is not terminable on 30 days' notice without
cost or other Liability at or at any time after the Closing
Date, and any agreement in which the Company or any Subsidiary
has granted or received manufacturing rights, most favored
nations pricing provisions or exclusive marketing or other
rights relating to any product, group of products, services,
technology, assets or territory;
12
(v) any license (whether as licensor or licensee), or
sublicense, royalty, permit, or franchise agreement,
including, without limitation, any agreement pursuant to which
the Company or any Subsidiary licenses any intellectual
property or other products and services to any third party;
(vi) the employment by the Company or any Subsidiary
of any officer, employee, consultant or agent or any other
type of contract, commitment or understanding with any
officer, employee, consultant or agent which (except as
otherwise generally provided by applicable law) is not
immediately terminable without cost or other Liability at or
at any time after the Closing Date;
(vii) any profit-sharing, bonus, stock option, stock
appreciation right, pension, retirement, disability, stock
purchase, hospitalization, insurance or similar plan or
agreement, formal or informal, providing benefits to any
current or former director, officer, employee, agent or
consultant;
(viii) any indenture, mortgage, promissory note, loan
agreement, guarantee or other agreement or commitment for the
borrowing of money, for a line of credit or for a leasing
transaction of a type required to be capitalized in accordance
with Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board;
(ix) any material agreement, instrument or other
arrangement granting or permitting any Encumbrance on any of
the properties, assets or rights of the Company or any
Subsidiary;
(x) any lease for real property (whether as lessor or
lessee) or any other lease or agreement under which the
Company or any Subsidiary is lessee of or holds or operates
any items of tangible personal property owned by any third
party;
(xi) any contract or commitment for charitable
contributions;
(xii) any contract or commitment for capital
expenditures individually in excess of $10,000;
(xiii) any agreement or contract with a "disqualified
individual" (as defined in Section 280G(c) of the Code), which
could result in a disallowance of the deduction for any
"excess parachute payment" (as defined in Section 280G(b)(i)
of the Code) under Section 280G of the Code as a result of the
transactions contemplated hereby;
(xiv) any agreement or arrangement for the sale of
any assets, properties or rights having a value in excess of
$10,000;
(xv) any agreement which restricts the Company or any
Subsidiary from engaging in any aspect of its business or
competing in any line of business in any geographic area; or
13
(xvi) any other agreement, contract or commitment
which is material to the Company and its Subsidiaries, taken
as a whole.
For purposes of this Section 2.1(l) and Section 2.1(m) hereof, the term
"material" shall mean and refer to those agreements, contracts, instruments or
arrangements (as applicable) that involve payments or expenditures by or to the
Company or Subsidiary, as applicable, or otherwise have a value, of at least
$25,000. The Company has furnished to Purchaser true and complete copies of all
such agreements listed in Schedule 2.1(l) of the Company Disclosure Schedule and
(x) each such agreement (A) is the legal, valid and binding obligation of the
Company and, to the knowledge of the Company or Subsidiary, as applicable, the
legal, valid and binding obligation of each other party thereto, in each case
enforceable in accordance with its terms, (B) is in full force and effect and
(y) to the knowledge of the Company, except as set forth in Section 2.1(l) of
the Company Disclosure Schedule, the other party or parties thereto is or are
not in material default thereunder.
(m) NO DEFAULTS. The Company and each Subsidiary has in all
material respects performed all the obligations required to be performed by it
to date and is not in default or alleged to be in default under (i) its Charter
or by-laws or (ii) any material agreement, lease, contract, commitment,
instrument or obligation to which the Company or any Subsidiary is a party or by
which any of their properties, assets or rights are or may be bound or affected,
and there exists no event, condition or occurrence which, with or without due
notice or lapse of time, or both, would constitute such a default by the Company
or any Subsidiary under any of the foregoing.
(n) LITIGATION, ETC. Except as set forth in Schedule 2.1(n) of
the Company Disclosure Schedule, there are no (i) actions, suits, claims,
investigations or legal or administrative or arbitration proceedings
(collectively, "ACTIONS") pending, or to the knowledge of the Company,
threatened against the Company or any Subsidiary, nor is there any basis
therefor, whether at law or in equity, or before or by any Governmental
Authority, (ii) judgments, decrees, injunctions or orders of any Governmental
Authority or arbitrator against the Company or any Subsidiary or (iii) disputes
with customers, vendors, consultants, salespersons or distributors or the
Company or any Subsidiary which involve a disputed amount in excess of $25,000.
There are no Actions pending or, to the knowledge of the Company, threatened,
nor is there any basis therefor, with respect to (A) the current employment by,
or association with, the Company or any Subsidiary, of any of the present
officers or employees of or consultants to the Company or any Subsidiary
(collectively, the "DESIGNATED PERSONS") or (B) the use, in connection with any
business presently conducted or proposed to be conducted by the Company or any
Subsidiary, of any information, techniques or processes presently utilized or
proposed to be utilized by the Company or any Subsidiary or any of the
Designated Persons, that the Company or any Subsidiary or any of the Designated
Persons are or would be prohibited from using as the result of a violation or
breach of, or conflict with any agreements or arrangements between any
Designated Person and any other person, or any legal considerations applicable
to unfair competition, trade secrets or confidential or proprietary information.
(o) ACCOUNTS AND NOTES RECEIVABLE. Except as set forth on
Section 2.1(o) of the Company Disclosure Schedule, and except as has not or
would not reasonably be likely to have individually or in the aggregate a
Company Material Adverse Effect all the accounts
14
receivable and notes receivable owing to the Company and each Subsidiary as of
the date hereof constitute, and as of the Closing Date will constitute, valid
and enforceable claims arising from bona fide transactions in the ordinary
course of business, and there are no known or asserted claims, refusals to pay
or other rights of set-off against any thereof. Except as set forth on Section
2.1(o) of the Company Disclosure Schedule, there is (a) no account debtor or
note debtor delinquent in its payment by more than ninety (90) days, (b) no
account debtor or note debtor that has refused (or, to the knowledge of the
Company, threatened to refuse) to pay its obligations for any reason, (c) to the
knowledge of the Company, no account debtor or note debtor that is insolvent or
bankrupt and (d) no account receivable or note receivable which is pledged to
any third party by the Company or any Subsidiary. Except to the extent of a
reserve which the Company and each Subsidiary has established specifically for
doubtful accounts receivable and notes receivable (which reserve is set forth on
the Company balance sheet included in the 2000 Financial Statements, is
reasonable under the circumstances and is consistent with past practice), the
Company reasonably expects that each account receivable of the Company and each
Subsidiary existing on the Closing Date shall be paid in full by not later than
the ninetieth (90th) day after the date each such respective account receivable
was created and all of the notes receivable shall be paid in accordance with the
terms thereof.
(p) ACCOUNTS AND NOTES PAYABLE. Except as set forth in Section
2.1(p) of the Company Disclosure Schedule, neither the Company nor any
Subsidiary is delinquent in its payment of their accounts payable or notes
payable, in excess of $25,000 in the aggregate of all such accounts and notes
payable, except those contested in good faith and already disclosed in Section
2.1(p) of the Company Disclosure Schedule.
(q) COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. The Company and
each Subsidiary has complied and is presently in compliance in all material
respects with all Federal, state, local or foreign laws, ordinances, regulations
and orders applicable to it or its business (including, without limitation,
laws, ordinances, regulations and orders applicable to labor, employment and
employment practices, terms and conditions of employment and wages and hours).
The Company and each Subsidiary has all Federal, state, local and foreign
governmental authorizations, consents, approvals, licenses and permits necessary
in the conduct of its business as presently conducted or as proposed to be
conducted, such authorizations, consents, approvals, licenses and permits are in
full force and effect, no violations are or have been recorded in respect of any
thereof and no proceeding is pending or, to the knowledge of the Company,
threatened to revoke or limit any thereof. Section 2.1(q) of the Company
Disclosure Schedule contains a true and complete list of all such governmental
licenses, authorizations, consents, approvals, permits, orders, decrees and
other compliance agreements under which the Company and each Subsidiary is
operating or bound, and neither the Company nor any Subsidiary is in default or,
to its knowledge, alleged to be in default under any thereof. None of such
authorizations, consents, approvals, licenses and permits shall be affected in
any material respect by the transactions contemplated hereby.
(r) ENVIRONMENTAL MATTERS. The Company and each Subsidiary
currently is and at all times has been in material compliance with all Federal,
state and local laws, ordinances, regulations and orders relating to the
protection of the environment applicable to its properties, facilities or
operations, including, without limitation, the Leased Real Property.
15
(s) LABOR RELATIONS; EMPLOYEES. The Company and each
Subsidiary, collectively, employs a total of eighty four (84) employees in the
United States and one in Canada as of the date hereof. Except as set forth in
Section 2.1(s) of the Company Disclosure Schedule, (A) neither the Company nor
any Subsidiary is delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to date or amounts required to be reimbursed to such
employees, (B) upon termination of the employment of any such employees, neither
the Company, any Subsidiary, nor the Purchaser will by reason of anything done
prior to the Closing be liable to any of such employees for so-called "severance
pay" or any other payments, (C) the Company and each Subsidiary is in compliance
in all material respects with all Federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices, terms and
conditions of employment and wages and hours, (D) there is no unfair labor
practice complaint against the Company or any Subsidiary pending before the
National Labor Relations Board or any comparable Governmental Authority, (E)
there is no labor strike, dispute, slowdown or stoppage actually pending or, to
the knowledge of the Company, threatened against or involving the Company or any
Subsidiary, (F) no labor union has taken any action with respect to organizing
the employees of the Company or any Subsidiary, (G) neither any grievance which
could reasonably be expected to have a Company Material Adverse Effect on the
conduct of the business of the Company and each Subsidiary, taken as a whole,
nor any arbitration proceeding arising out of or under collective bargaining
agreements is pending and no claim therefor has been asserted against the
Company or any Subsidiary and (H) no employee has informed any officer of the
Company or any Subsidiary that such employee will terminate his or her
employment or engagement with the Company or any Subsidiary and the Company has
no reason to believe that the key employees will not remain employees of the
Company or any Subsidiary after the Closing. To the Company's knowledge, no
employee of the Company or any Subsidiary is in violation of any term of any
employment contract, non-disclosure agreement or any other contract or agreement
relating to the relationship of such employee with the Company or any Subsidiary
or any other party because of the nature of the business conducted or proposed
to be conducted by the Company or any Subsidiary.
(t) EMPLOYEE BENEFIT PLANS AND CONTRACTS.
(i) Section 2.1 (t) of the Company Disclosure
Schedule identifies each "employee benefit plan," as defined
in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and all other written or formal
plans or agreements involving direct or indirect compensation
(including any employment agreements entered into between the
Company, any Subsidiary and any Employee (as defined herein),
but excluding workers' compensation, unemployment
compensation, other government-mandated programs and the
Company's and each Subsidiary's salary and wage arrangements)
currently or previously maintained, contributed to or entered
into by the Company, any Subsidiary, or any ERISA Affiliate
thereof (the "EMPLOYEE PLANS"). The Company has made available
to the Purchaser true and complete copies of all Employee
Plans (and, if applicable, related trust agreements), all
amendments thereto, and summary plan description for all
Employee Plans and written interpretations of all of the
foregoing. For purposes of the preceding sentence, "ERISA
AFFILIATE" shall mean any entity which is a member of (A) a
"controlled group of corporations", as defined in Section
414(b) of the Code, (B) a group of entities under
16
"common control", as defined in Section 414(c) of the Code,
(C) an "affiliated service group", as defined in Section
414(m) of the Code or treasury regulations promulgated under
Section 414(o) of the Code, any of which includes the Company
or (D) any Subsidiary. Any Employee Plans that individually or
collectively would constitute an "employee pension benefit
plan", as defined in Section 3(2) of ERISA, but which are not
multiemployer plans (as defined in Section
2.1(t)(iii))(collectively, the "PENSION PLANS"), are
identified as such in the Company Disclosure Schedule. For
purposes of this Section 2.1(t), "EMPLOYEE" means any common
law employee, consultant or director of the Company or any
Subsidiary.
(ii) Each Employee Plan that is intended to be
qualified under Section 401(a) of the Code is so qualified and
has been so qualified during the period from its adoption to
the date hereof, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. The
Company has provided the Purchaser with copies of the most
recent Internal Revenue Service determination letters, IRS
Forms 5500 (including schedules and attachments), and
consolidated statement of assets and liabilities prepared in
accordance with GAAP with respect to any Employee Plans. Each
Employee Plan has been maintained in material compliance with
its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including, without
limitation, ERISA and the Code, which are applicable to such
Employee Plans. All filings required to be filed as of the
date hereof with respect to each Employee Plan, including,
without limitation, filings of IRS Form 5500, have been made
timely, accurately and with the appropriate government agency.
(iii) No Employee Plan is a "multiemployer plan" as
defined in Section 4001(a)(13) of ERISA, a "multiple employer
plan" as defined in Section 413(c) of the Code, a "defined
benefit plan" as defined in Section 3(35) of ERISA, or is
otherwise subject to Title IV of ERISA or Section 412 of the
Code, and neither the Company nor any ERISA Affiliate has ever
maintained, sponsored, participated in or contributed to any
such plan, or has incurred any Liability with respect to
Section 412 of the Code or Title IV of ERISA, including
Sections 4062, 4063 or 4201 of ERISA.
(iv) Section 2.1(t) of the Company Disclosure
Schedule lists each employment, severance or other similar
contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including
any self-insured arrangements), vacation benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or
benefits which (A) is not an Employee Plan, (B) is entered
into, maintained or contributed to, as the case may be, by the
Company or any Subsidiary on behalf of any Employee, (C)
covers any Employee or former Employee, and (D) under which
the Company or any ERISA Affiliate has any present or future
obligation or Liability (excluding workers' compensation,
unemployment compensation or other government-mandated
programs and the Company's or any Subsidiary's salary and wage
arrangements). Such contracts, plans and arrangements as are
described above, are hereinafter referred to collectively as
the "BENEFIT ARRANGEMENTS". Each Benefit Arrangement has been
maintained in material compliance with its terms and with the
requirements prescribed by any and all material
17
laws, statutes, rules, regulations, orders and judgments which
are applicable to such Benefit Arrangements.
(v) Each Employee Plan which is a "group health plan"
(as defined in Section 5000 of the Code) (A) has been
maintained in compliance with Section 4980B of the Code and
Title I, Subtitle B, Part 6 of ERISA, and no tax payable on
account of Section 4980B of the Code has been or is expected
to be incurred with respect to any current or former Employees
of the Company or any Subsidiary, and (B) has been maintained
in compliance with the Health Insurance Portability and
Accountability Act of 1996, as amended. No such plan has
reserves, assets or prepaid premiums.
(vi) All contributions due and payable on or before
the Closing Date in respect of any Employee Plan or Benefit
Arrangement have been made in full and proper form, or
adequate accruals have been provided for in the Company
Financial Statements for all other contributions or amounts in
respect of the Employee Plans or Benefit Arrangements for
periods ending on the Closing Date for which payment is due
after the Closing Date.
(vii) No Employee Plan or Benefit Arrangement
currently or previously maintained by the Company or its ERISA
Affiliates provides any post-retirement health or life
insurance benefits, and neither the Company nor its ERISA
Affiliates maintains any obligations to provide any
post-retirement benefits in the future.
(viii) The consummation of the transactions
contemplated by this Agreement will not (A) entitle any
individual to severance or separation pay, or (B) except as
set forth in the Section 2.1(t)(viii) of the Company
Disclosure Schedule, accelerate the time of payment or
vesting, or increase the amount, of compensation due to any
individual. No payment made or contemplated under any Employee
Plan or Benefit Arrangement constitutes an "excess parachute
payment" within the meaning of Section 280G of the Code.
(ix) Except as set forth in Section 2.1(t)(ix) of the
Company Disclosure Schedule, with respect to each Employee
Plan and Benefit Arrangement: (A) to the knowledge of the
Company no breach of fiduciary duty has occurred with respect
to which the Company or any Subsidiary or any such plan or
arrangement or any fiduciary duty thereof may be liable or
otherwise materially damaged; (B) no disputes, claims (other
than routine claims for benefits), actions or investigations
are pending or, to the knowledge of the Company, threatened;
(C) to the knowledge of the Company, no prohibited transaction
has occurred with respect to which the Company, any
Subsidiary, or any such plan or arrangement or any fiduciary
thereof could reasonably be liable or otherwise materially
damaged; (D) the Company and each Subsidiary has expressly
reserved in itself the right to amend, modify or terminate any
such written plan or arrangement, or any portion of it; and
(E) the Company and each Subsidiary has satisfied any bond
coverage requirement of ERISA.
(x) No event has occurred or condition exists, with
respect to any Employee Plan, that has subjected or could
reasonably subject the Company or any
18
ERISA Affiliate, or the Purchaser, or any Employee Plan to any
material tax, fine, penalty or other Liability.
(xi) The Company and each Subsidiary is, to the
extent applicable, in material compliance with all laws
similar to ERISA of non-United States jurisdictions.
(u) CERTAIN AGREEMENTS. Except as set forth in Section 2.1(u)
of the Company Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of the Company or any Subsidiary from the Company or any Subsidiary,
under any Employee Plan, Benefit Arrangement or otherwise, (ii) with respect to
any current or former director, officer or key employee of the Company or any
Subsidiary materially increase any benefits otherwise payable under any Employee
Plan or the Benefit Arrangement or (iii) result in the acceleration of the time
of payment or vesting of any such benefits.
(v) INSURANCE. Section 2.1(v) of the Company Disclosure
Schedule contains a list of all policies of Liability, theft, fidelity, fire,
product Liability, errors and omissions, workmen's compensation, indemnification
of directors and officers and other similar forms of insurance held by the
Company and each Subsidiary (specifying the insurer, the amount of coverage, the
type of insurance, the policy number and any pending claims thereunder) and a
history of all claims made by the Company and each Subsidiary thereunder and the
status thereof; PROVIDED, that such list need not include claims made more then
three years prior to the date hereof and which are no longer pending. All such
policies of insurance are in full force and effect and all premiums with respect
thereto are currently paid and, to the knowledge of the Company, no basis exists
for termination of any thereof on the part of the insurer. The Company believes
that the amounts of coverage under such policies of insurance are adequate for
the business and operations of each of the Company and each Subsidiary. Neither
the Company nor any Subsidiary has, during the last three fiscal years, been
denied or had revoked or rescinded any policy of insurance.
(w) BANK ACCOUNTS; POWERS OF ATTORNEY. Section 2.1(w) of the
Company Disclosure Schedule sets forth a true and complete list of (i) all bank
accounts and safe deposit boxes of the Company and each Subsidiary and all
persons who are signatories thereunder or who have access thereto and (ii) the
names of all persons, firms, associations, corporations or business
organizations holding general or special powers of attorney from the Company and
each Subsidiary and a summary of the terms thereof.
(x) BROKERS. Neither the Company, any Subsidiary, nor any of
the officers, directors, securityholders, employees or agents of the Company or
any Subsidiary, employed any broker or finder or incurred any Liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
(y) RELATED TRANSACTIONS. Except as set forth in Section
2.1(y) of the Company Disclosure Schedule, no current or former director,
officer or securityholder of the Company or any Subsidiary that is an affiliate
of the Company, a Subsidiary or any associate (as
19
defined in the rules promulgated under the Exchange Act (as defined herein))
thereof, is now, or has been at any time since December 31, 1997, (i) a party to
any transaction with the Company or any Subsidiary (including, but not limited
to, any contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or borrowing money
from, or otherwise requiring payments to, any such director, officer or
affiliated stockholder of the Company or associate thereof), or (ii) the direct
or indirect owner of an interest in any corporation, firm, association or
business organization which is a present or potential competitor, supplier or
customer of the Company or a Subsidiary (other than non-affiliated holdings in
publicly-held companies), nor does any such person receive income from any
source other than the Company or a Subsidiary which relates to the business of,
or should properly accrue to, the Company or a Subsidiary.
(z) CUSTOMERS. Section 2.1(z) of the Company Disclosure
Schedule sets forth a true and complete list of the customers of the Company and
its Subsidiaries which during the last fiscal year ended accounted for five
percent (5%) or more of the Company's consolidated revenues during such period,
which list specifies the products and/or services supplied to each of such
customers. Except as set forth in Section 2.1(z) of the Company Disclosure
Schedule, the Company and each Subsidiary has a good, ongoing relationship with
each of such customers and none of such customers has reduced, or expressed any
intention of reducing, the dollar amount of its business with the Company or any
Subsidiary or terminated, or expressed to the Company or any Subsidiary any
intention of terminating, its business relationship with the Company or any
Subsidiary.
(aa) INVENTORY. All items in the inventory reflected in the
Company balance sheet included in the Interim Financial Statements or as
currently owned by the Company and its Subsidiaries for use in the operation of
the business (i) have been valued at cost or at market, whichever is lower, on a
first-in, first-out (FIFO) basis in accordance with GAAP consistently applied
and (ii) are of a quality and quantity usable and salable in the ordinary course
of business.
(i) The Company's and its Subsidiaries' inventories
of finished products, raw materials, intermediates, work in
process, supplies, parts and packaging and labeling materials
as of March 31, 2001, the approximate quantities thereof, and
their location are set forth in Section 2.1(aa) to the Company
Disclosure Schedule.
(ii) Neither the Company nor any Subsidiary is aware
of any adverse condition affecting the quality or supply of
raw materials, intermediates, supplies, parts and other
materials available to the Company and its Subsidiary that are
necessary to manufacture, package or label the products or are
otherwise used in the business.
(bb) ORDERS. Section 2.1(bb) to the Company Disclosure
Schedule contains an accurate summary as of March 31, 2001 of the Company's and
its Subsidiaries' total backlog (including all accepted and unfulfilled service
contracts and research agreements) and the aggregate of all outstanding purchase
orders issued by the Company and each Subsidiary (which aggregates include all
material contracts or commitments for the purchase by the Company and each
Subsidiary of materials or other supplies). All such sale and purchase
commitments were
20
made in the ordinary course of business. Section 2.1(bb) to the Company
Disclosure Schedule sets forth the Company's and its Subsidiaries' current
policies with respect to returns of products in the course of the Company's and
its Subsidiaries' conduct of the business. Except as set forth in Section
2.1(bb) to the Company Disclosure Schedule, neither the Company nor any
Subsidiary has made any express warranties in connection with the sale of its
products and services. Claims against the Company and its Subsidiaries for
warranty costs (individually or in the aggregate) with respect to products and
services during each of the last three fiscal years did not exceed $20,000, and
there are no outstanding or threatened claims for any such warranty costs that
would exceed $20,000 (individually or in the aggregate). As used above, the term
"warranty cost" shall mean costs and expenses associated with correcting,
returning or replacing defective or allegedly defective products or services,
whether such costs and expenses arise out of claims sounding in warranty,
contract, tort or otherwise.
(cc) DISCLOSURE. The representations and warranties in this
Section 2.1 (including the Company Disclosure Schedule) do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements or facts contained herein and therein not
misleading in light of the circumstances under which they were made. All
information and documentation requested by the Purchaser of the Company or its
Subsidiaries in connection with the Purchaser's due diligence investigation of
the Company and the Subsidiaries has been furnished or made available to the
Purchaser.
(dd) AVAILABLE CASH. As of June 30, 2001, the Company
maintained in all of its operating accounts cash balances in the aggregate
amount of approximately $0.00.
(ee) KNOWLEDGE DEFINITION. As used in this Section 2.1, the
term "knowledge" and like phrases shall mean and include (i) actual knowledge
and (ii) that knowledge which a prudent business person could have obtained in
the management of his or her business affairs after making due inquiry and
exercising due diligence with respect thereto. In connection therewith, the
knowledge of the current directors or senior executive officers of the Company
shall be imputed to be the knowledge of the Company.
2.2 SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder severally (and not jointly) represents and warrants to Purchaser
with respect to herself, himself or itself on and as of the date hereof as
follows:
(a) TITLE; ABSENCE OF CERTAIN AGREEMENTS. Such Stockholder is
the lawful and record and beneficial owner of, and has good and marketable title
to the shares of Company Stock all of which, on the date hereof, is Company
Common Stock, set forth opposite the name of such Stockholder on SCHEDULE I
attached hereto, with the full power and authority to vote such Company Stock
and transfer and otherwise dispose of such Stockholder's Company Stock and any
and all rights and benefits incident to the ownership thereof free and clear of
all Encumbrances, and there are no agreements or understandings between such
Stockholder and any other stockholder of the Company or any other person with
respect to the voting, sale or other disposition of Company Stock.
(b) ORGANIZATION, GOOD STANDING AND POWER. In the case of any
Stockholder that is not a natural person, such Stockholder is duly organized or
formed and
21
validly existing under the laws of the jurisdiction of its incorporation or
formation and has the corporate or other organizational power and authority
under such laws to enter into this Agreement and the Related Agreements to which
such Stockholder is a party, to perform its obligations hereunder and to
consummate the transactions contemplated hereby or thereby.
(c) AUTHORITY - GENERAL. Such Stockholder has full and
absolute power and authority to enter into this Agreement and, if applicable,
each Related Agreement being executed and delivered by such Stockholder
simultaneously herewith and this Agreement and each Related Agreement to which
such Stockholder is a party, in the case of a Stockholder that is not a natural
person, has been duly authorized by all requisite action on the part of such
Stockholder; and this Agreement and each Related Agreement to which such
Stockholder is a party has been duly executed and delivered by such Stockholder,
and is the valid and binding obligation of such Stockholder, enforceable against
such Stockholder in accordance with its terms. Neither the execution, delivery
and performance of this Agreement and each Related Agreement to which such
Stockholder is a party, nor the consummation of the transactions contemplated
hereby or thereby nor compliance by such Stockholder with any of the provisions
hereof or thereof will (i) (A) conflict with, (B) result in any violations of,
(C) cause a default under (with or without due notice, lapse of time or both),
(D) give rise to any right of termination, amendment, cancellation or
acceleration of any obligation contained in or the loss of any material benefit
under or (E) result in the creation of any Encumbrance upon or against any
assets, rights or property of the Company (or against any Company Stock or
Purchaser capital stock), under any term, condition or provision of (x) any
agreement or instrument to which such Stockholder is a party, or by which such
Stockholder or any of his, her or its properties, assets or rights may be bound,
(y) any law, statute, rule, regulation, order, writ, injunction, decree, permit,
concession, license or franchise of any Governmental Authority applicable to
such Stockholder or any of his, her or its properties, assets or rights or (z)
in the case of any Stockholder that is not a natural person, such Stockholder's
Charter or by-laws or similar instruments of organization, as amended and/or
restated through the date hereof, which conflict, breach, default or violation
or other event would prevent the consummation of the transactions contemplated
by this Agreement or any Related Agreement to which such Stockholder is a party.
No permit, authorization, consent or approval of or by, or any notification of
or filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by such Stockholder of
this Agreement, each Related Agreement to which such Stockholder is a party or
the consummation by such Stockholder of the transactions contemplated hereby or
thereby.
(d) INVESTMENT REPRESENTATIONS.
(i) Such Stockholder:
(A) is acquiring the Acquisition Shares being issued to such
Stockholder for investment and for such Stockholder's own account and
not as a nominee or agent for any other person and with no present
intention of distributing or reselling such shares or any part thereof
in any transactions that would be in violation of the Securities Act of
1933, as amended (the "SECURITIES ACT") or any state securities or
"blue-sky" laws;
(B) understands (A) that the Acquisition Shares to be issued
to him, her or it have not been registered for sale under the
Securities Act or any state securities or "blue-
22
sky" laws in reliance upon exemptions therefrom, which exemptions
depend upon, among other things, the bona fide nature of the investment
intent of such Stockholder as expressed herein, (B) that such
Acquisition Shares must be held indefinitely and not sold until such
shares are registered under the Securities Act and any applicable state
securities or "blue-sky" laws, unless an exemption from such
registration is available, (C) that, except as provided in the
Registration Rights Agreement (attached as EXHIBIT B hereto), Purchaser
is under no obligation to so register such Acquisition Shares and (D)
that the certificates evidencing such Acquisition Shares will be
imprinted with a legend in the form set forth in Section 5.2(b) that
prohibits the transfer of such shares, except as provided in Section
5.2;
(C) has read and reviewed, the Purchaser SEC Documents (as
defined herein), which are available online at xxx.xxx.xxx, to such
Stockholder;
(D) has had an opportunity to ask questions of and has
received satisfactory answers from the officers of Purchaser or persons
acting on Purchaser's behalf concerning Purchaser and the terms and
conditions of an investment in the Acquisition Shares;
(E) is aware of Purchaser's business affairs and financial
condition and has acquired sufficient information about Purchaser to
reach an informed and knowledgeable decision to acquire the Acquisition
Shares to be issued to him or it;
(F) can afford to suffer a complete loss of his, her or its
investment in such Acquisition Shares;
(G) is familiar with the provisions of Rule 144 promulgated
under the Securities Act which, in substance, permits limited public
resale of "restricted securities" acquired, directly or indirectly,
from the issuer thereof, in a non-public offering subject to the
satisfaction of certain circumstances which require among other things:
(A) the availability of certain public information about the issuer,
(B) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities less than two years, the
amount of securities being sold during any three month period not
exceeding the specified limitations stated therein, if applicable and
(C) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as
defined under the Exchange Act);
(H) understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the
fact that Rule 144 is not exclusive, the Staff of the SEC has expressed
its opinion that persons proposing to sell private placement securities
other than in a registered offering and otherwise than pursuant to Rule
144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and
23
that such persons and their respective brokers who participate in such
transactions do so at their own risk; and
(I) is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act; PROVIDED that Xxxxx Xxxxx and Xxxxxxx
Xxxxxx do not make this representation and warranty. Such individuals
listed in the foregoing sentence shall, at the Closing, provide to
counsel to the Purchaser a completed and executed investor
representation letter, in form and substance reasonably satisfactory to
counsel to the Purchaser; such letter shall be a condition to the
issuance of the Acquisition Shares to such individual.
(e) OWNERSHIP. Except as disclosed in a schedule hereto, prior
to the Closing, no Stockholder and none of such Stockholder's affiliates (as
such term is defined by Rule 12b-2 of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")) is the beneficial owner (as such term is defined
in Rule 13d-3 of the Exchange Act) or is a member of a group having beneficial
ownership (as such term is defined in Rule 13d-3 of the Exchange Act) of any
shares of capital stock of the Purchaser or any Purchaser Voting Securities
Equivalents (as defined herein).
(f) BROKERS. No Stockholder has employed any broker or finder
or incurred any Liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby.
(g) REPRESENTATION BY LEGAL COUNSEL. Such Stockholder has been
advised by the Company to seek, and has sought, legal counsel in connection with
the negotiation and execution of this Agreement and the Related Agreements.
2.3 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to the Company and each of the Stockholders that, except as
disclosed in the disclosure schedule attached hereto as EXHIBIT C (which
disclosure schedule shall contain specific references to the representations and
warranties to which the disclosures contained therein relate) (the "PURCHASER
DISCLOSURE SCHEDULE"):
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
(i) Purchaser (a) is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware, (b) has all requisite corporate power and
authority to own, lease and operate its properties and assets
and to carry on its business as now being conducted, to enter
into this Agreement and each of the Related Agreements to
which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated
hereby and thereby and (c) is duly qualified and in good
standing to do business in those jurisdictions listed in
Section 2.3(a)(i) and in all other jurisdictions in which the
failure to be so qualified and in good standing could
reasonably be expected to have a Purchaser Material Adverse
Effect. Purchaser has delivered to the Company true and
complete copies of the Charter and by-laws of the Purchaser,
in each case as amended to the date hereof. "PURCHASER
MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, condition (financial
24
or otherwise), assets, properties, operations, results of
operations, prospects, affairs or Liabilities of Purchaser and
the Purchaser Subsidiaries (as defined herein) taken as a
whole.
(ii) Each Purchaser Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and is qualified
to transact business as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a
Purchaser Material Adverse Effect, and has the corporate power
and authority to own its property and assets and to carry on
its business as presently conducted and as proposed to be
conducted. The term "PURCHASER SUBSIDIARY" (which shall
include all forms of such word, including, but not limited to,
"Purchaser Subsidiaries") shall hereinafter mean each of those
entities identified in Section 2.3(a)(ii) of the Purchaser
Disclosure Schedule.
(iii) The following information for the Purchaser
Subsidiaries is set forth in Section 2.3(a)(iii) of the
Company Disclosure Schedule: (i) its name and jurisdiction of
incorporation or organization, (ii) the type of and percentage
interest held by the Purchaser in such Purchaser Subsidiary
and the names of and percentage interest held by the other
interest holders, if any, in such Purchaser Subsidiary, and
(iii) any loans from the Purchaser to, or priority payments
due to the Purchaser from, such Purchaser Subsidiary and the
rate of return thereon.
(b) EQUITY INVESTMENTS. Except as set forth in Section 2.3(b)
of the Purchaser Disclosure Schedule, neither the Purchaser nor any Purchaser
Subsidiary currently has, any subsidiaries (other than, in the case of the
Purchaser, the Purchaser Subsidiaries), nor does it currently own, any capital
stock or other proprietary interest, directly or indirectly, in any corporation,
association, trust, partnership, joint venture or other entity nor are there any
options, warrants, rights, calls, commitments or agreements of any character to
which the Purchaser or any Purchaser Subsidiary is a party, or by which the
Purchaser or any Purchaser Subsidiary is bound, calling for the issuance to the
Purchaser or any Purchaser Subsidiary of shares of capital stock or other equity
interests of a third party or any securities convertible into or exercisable or
exchangeable for, or representing the right to purchase or otherwise receive,
any such capital stock, or other arrangement to acquire, at any time or under
any circumstance, capital stock of any third party or any such other securities.
(c) CAPITAL STOCK.
(i) As of the date hereof, the authorized capital
stock of the Purchaser consists of 100,000,000 shares of
common stock, $0.01 par value per share, and 1,000,000 shares
of preferred stock, $0.01 par value per share. As of the date
hereof, without giving effect to the Acquisition, there are
19,959,955 shares of Purchaser Common Stock outstanding and no
shares of preferred stock outstanding. All outstanding shares
of Purchaser Common Stock are validly issued, fully paid and
non-assessable and not subject to preemptive rights. Except as
set forth in Section 2.3(c) of the Purchase Disclosure
Schedule there are no voting trusts, voting agreements,
proxies, first refusal rights, first offer rights, co-sale
rights, options, transfer restrictions or other agreements,
instruments or understandings (whether written or oral, formal
or informal)
25
with respect to the voting, transfer or disposition of
Purchaser Common Stock to which the Purchaser is a party or by
which it is bound, or, to the knowledge of the Purchaser,
among or between any persons other than the Purchaser.
Purchaser has duly authorized and reserved for issuance the
Acquisition Shares, and, when issued in accordance with the
terms of Article I, the Acquisition Shares will be validly
issued, fully paid and nonassessable and free of preemptive
rights. As of the date hereof, without giving effect to the
Acquisition and other than as contemplated by this Agreement,
Section 2.3(c)(i) of the Purchaser Disclosure Schedule
contains a list of outstanding warrants and options for an
aggregate of 5,271,798 shares of Purchaser Common Stock.
Except as contemplated by this Agreement or disclosed in the
Purchaser SEC Documents (as defined herein), there are no
other agreements, convertible securities or other commitments
pursuant to which the Purchaser is or may become obligated to
issue any shares of the capital stock or other securities of
the Purchaser. All prior issuances of securities were made in
compliance with and not in violation of all applicable
Federal, state, local and foreign securities laws and no
shares of capital stock were issued in violation of any
preemptive rights.
(ii) The Acquisition Shares constitute, as of the
date they are issued and sold, not less than fifty-five
percent (55%) of the outstanding capital stock of the
Purchaser on a Fully Diluted Basis. For the purpose of this
Section 2.3(c)(ii), "Fully Diluted Basis" shall have the
meaning set forth in Section 2.1(c)(ii), except that the word
"Company" shall be replaced by the word "Purchaser."
(iii) All of the outstanding shares of capital stock
of, or other securities of, each Purchaser Subsidiary are duly
authorized, validly issued, fully paid and nonassessable, and
are owned, directly or indirectly, by the Purchaser free and
clear of all Encumbrances (as defined herein). There are no
outstanding warrants, options, agreements, convertible
securities or other commitments pursuant to which such
Purchaser Subsidiary is or may become obligated to issue any
shares of the capital stock or other securities of such
Purchaser Subsidiary. There are, and immediately upon
consummation of the Closing of the transactions contemplated
hereby, there will be, no preemptive or similar rights to
purchase or otherwise acquire shares of the capital stock or
other securities of any Purchaser Subsidiary pursuant to any
provision of law of the United States, any state thereof or of
any other country, the Charter (or similar documents) or any
agreement to which such Purchaser Subsidiary is a party; and
there is, and immediately upon the consummation of the Closing
of the transactions contemplated hereby, there will be, no
agreement, restriction or encumbrance (such as a right of
first refusal, right of first offer, proxy, voting trust,
voting agreement, etc.) with respect to the sale or voting of
any shares of capital stock or other securities of any
Purchaser Subsidiary (whether outstanding or issuable upon
conversion or exercise of outstanding securities). All shares
of the capital stock and other securities issued by each
Purchaser Subsidiary at or prior to the Closing have been or
are being issued in transactions exempt from registration
under the Securities Act, all applicable state securities or
"blue sky" laws. No Purchaser Subsidiary has violated the
Securities Act, any applicable state securities or "blue sky"
laws in connection with the issuance of any shares of capital
stock or other securities at or prior to the Closing.
26
(d) AUTHORITY; NO CONSENTS. The execution, delivery and
performance by Purchaser of this Agreement and each of the Related Agreements to
which the Purchaser is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Purchaser; and this Agreement and each of the
Related Agreements to which the Purchaser is a party have been duly and validly
executed and delivered by Purchaser, and this Agreement and the Related
Agreements to which the Purchaser is a party are valid and binding obligations
of Purchaser, enforceable against Purchaser in accordance with their respective
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by principles of
equity regardless of whether such enforceability is considered a proceeding in
law or equity. Except as set forth in Schedule 2.3(d) to the Purchaser
Disclosure Schedule, neither the execution, delivery and performance by
Purchaser of this Agreement and the Related Agreements to which Purchaser is a
party, nor the consummation of the transactions contemplated hereby or thereby,
will (A) conflict with, (B) result in any violations of, (C) cause a default
under (with or without due notice, lapse of time or both), (D) give rise to any
right of termination, amendment, cancellation or acceleration of any obligation
contained in or the loss of any material benefit under, (E) result in the
creation of any Encumbrance on or against any assets, rights or property of
Purchaser or any Purchaser Subsidiary under any term, condition or provision of
(x) any instrument (including any outstanding securities of Purchaser) or
agreement to which Purchaser or any Purchaser Subsidiary is a party, or by which
Purchaser or any Purchaser Subsidiary or any of their properties, assets or
rights may be bound, (y) any law, statute, rule, regulation, order, writ,
injunction, decree, permit, concession, license or franchise of any Governmental
Authority applicable to Purchaser or Purchaser Subsidiary or any of their
properties, assets or rights or (z) Purchaser's or Purchaser Subsidiary's
Charter or by-laws, as amended through the date hereof, respectively, which
conflict, breach, default, violation or other event would prevent or materially
adversely affect the consummation of the transactions contemplated by this
Agreement or any Related Agreement to which Purchaser is a party. Except as
contemplated by this Agreement, no permit, authorization, consent or approval of
or by, or any notification of or filing with, any Governmental Authority or
other person is required in connection with the execution, delivery and
performance by Purchaser of this Agreement or the Related Agreements to which it
is a party or the consummation of the transactions contemplated hereby or
thereby, other than (i) the filing with the SEC of such reports and information
under the Exchange Act, and the rules and regulations promulgated by the SEC
thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby, (ii) the filing of such documents with, and
the obtaining of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions contemplated
hereby and (iii) such other consents, waivers, authorizations, filings,
approvals and registrations which if not obtained or made would not have a
Purchaser Material Adverse Effect or materially impair the ability of Purchaser
to consummate the transactions contemplated by this Agreement, including,
without limitation, the Acquisition.
(e) SEC DOCUMENTS.
(i) Purchaser has furnished or made available to the
Company and the Stockholders a correct and complete copy of
each report, schedule, registration statement and definitive
proxy statement filed by Purchaser with the SEC on or after
the date of filing with the SEC of Purchaser's Annual Report
on Form 10-K for the fiscal
27
year ended December 31, 2000 (the "2000 10-K") through the
date hereof (collectively, the "PURCHASER SEC DOCUMENTS"). As
of their respective filing dates, or in the case of
registration statements, their respective effective dates,
none of the Purchaser SEC Documents (including all exhibits
and schedules thereto and documents incorporated by reference
therein) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not
misleading, and the Purchaser SEC Documents complied when
filed, or in the case of registration statements, as of their
respective effective dates, in all material respects with the
then applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and
regulations promulgated by the SEC thereunder.
(ii) The financial statements of Purchaser included
in the 2000 10-K and Purchaser's Form 10-Q filed with the SEC
with respect to the fiscal quarter ended March 31, 2001 (the
"2001 10-Q") (subject, in the case of the 2001 10-Q, to
year-end audit adjustments), complied as to form in all
material respects with the then applicable accounting
requirements and the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with
GAAP during the periods involved (except as may have been
indicated in the notes thereto) and fairly present the
financial position of Purchaser as at the dates thereof and
the results of their operations, stockholders' equity and cash
flows for the periods then ended.
(iii) The Purchaser has filed all reports to be filed
by it pursuant to Section 13 and Section 15(d) of the
Securities Exchange Act of 1934, as amended, during the
preceding twelve (12) months.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Purchaser
nor any Purchaser Subsidiary has any Liabilities and there is no existing fact,
condition or circumstance which could reasonably be expected to result in such
Liabilities, except Liabilities (i) disclosed on Section 2.3(f) of the Purchaser
Disclosure Schedule, (ii) set forth in the 2001 10-Q, (iii) not required to be
disclosed in the 2001 10-Q in order for such 2001 10-Q to meet the requirements
as set forth in Regulation S-X promulgated under the Securities Act, or (iv)
incurred in the ordinary course of business since the 2001 10-Q. There were no
material loss contingencies (as such term is used in FAS No. 5) which were not
adequately provided for in the 2001 10-Q, as required by Regulation S-X
promulgated under the Securities Act.
(g) ABSENCE OF CHANGES. Since March 31, 2001, the Purchaser
has been operated in the ordinary course, consistent with past practice, and
there has not been any material adverse change as to the Purchaser or any
Purchaser Subsidiary except as set forth in any Purchaser SEC Documents.
(h) TAX MATTERS.
(i) Except as set forth in Section 2.3(h) of the
Purchaser Disclosure Schedule, the Purchaser and each
Purchaser Subsidiary have (a) not requested an extension of
time in connection with, and have timely filed, all Tax
Returns required to be filed by it relating to any Taxes with
respect to any income, properties or operations
28
of the Purchaser and each Purchaser Subsidiary, respectively;
(b) all such Tax Returns were complete and correct and the
Purchaser and each Purchaser Subsidiary have paid all Taxes
due; (c) the Purchaser and each Purchaser Subsidiary are not
delinquent in the payment of any Taxes; (d) there are no
pending tax audits of any Tax Return of the Purchaser or any
Purchaser Subsidiary; (e) no deficiency or addition to Taxes,
interest or penalties for any Taxes with respect to any
income, properties or operations of the Purchaser or any
Purchaser Subsidiary has been proposed, asserted or assessed
against the Purchaser or any Purchaser Subsidiary; (f) no
taxing authority in a jurisdiction where the Purchaser does
not file Tax Returns has made a claim, assertion or threat to
the Purchaser that the Purchaser is or may be subject to
taxation by such jurisdiction, and no taxing authority in any
jurisdiction where a Purchaser Subsidiary does not file Tax
Returns has made a claim, assertion or threat to such
Purchaser Subsidiary that such Purchaser Subsidiary is or may
be subject to taxation in such jurisdiction; (g) the Purchaser
and each Purchaser Subsidiary have not granted any extension
of the statute of limitations applicable to any Tax Return or
other Tax claim with respect to any income, properties or
operations of the Purchaser or any Purchaser Subsidiary; (h)
there are no tax liens on any of the assets of the Purchaser
and its Purchaser Subsidiaries that arose from any failure or
alleged failure to pay any tax; and (i) the Purchaser and each
Purchaser Subsidiary have not made any election under Section
341(f) of the Code.
(ii) Neither the Purchaser nor any Purchaser
Subsidiary has made any payment or payments, is obligated to
make any payment or payments, and is not a party to any
agreements that could obligate the Purchaser or any Purchaser
Subsidiary to make any payment or payments that would
constitute an "excess parachute payment," as defined in
Section 280G of the Code (or any similar provision of state,
local or foreign law).
(iii) Neither the Purchaser nor any Purchaser
Subsidiary is a party to any Tax allocation or sharing
agreement. Neither the Purchaser nor any Purchaser Subsidiary
has any liability for Taxes of any person under Treasury
Regulations Section 1.1502-6 (or any similar provision of
state, local or foreign law) as a transferee or successor by
contract or otherwise.
(iv) Neither the Purchaser nor any Purchaser
Subsidiary has incurred liability for taxes as a result of a
transaction described in Section 355 (d) or (e) of the Code.
As used in this Section 2.3(h), the term "PURCHASER SUBSIDIARY" shall
mean any corporation with respect to which a specified person (or a Purchaser
Subsidiary thereof) owns a majority of the common stock or has the power to vote
or direct the voting of sufficient securities to elect a majority of the
directors.
(i) TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED
MATTERS. Each of the Purchaser and each Purchaser Subsidiary has good and
marketable title to all assets, properties and interests in properties, real,
personal or mixed, reflected, respectively, in the financial statements included
in the 2000 10-Q or acquired after March 31, 2001 (except inventory or other
property sold or otherwise disposed of since March 31, 2001 in the ordinary
29
course of business and accounts receivable and notes receivable paid in full
subsequent to March 31, 2001), or not so reflected therein but used or useful in
the conduct or operation of the Purchaser's and each Purchaser Subsidiary's
business, free and clear of all Encumbrances, of any kind or character, except
for (i) those Encumbrances set forth in Section 2.3(i) of the Purchaser
Disclosure Schedule, (ii) liens for current taxes not yet due and payable and
(iii) statutory mechanics and materialmen's liens. The assets, properties and
interests in properties of the Purchaser and each Purchaser Subsidiary are in
good operating condition and repair in all material respects (ordinary wear and
tear excepted).
(j) REAL PROPERTY-OWNED OR LEASED. Neither the Purchaser nor
any Purchaser Subsidiary currently owns, nor have any of them or, to their
knowledge, any of their predecessors ever owned, any real property. Section
2.3(j) of the Purchaser Disclosure Schedule contains a list of (i) all real
property leased by the Purchaser and each Purchaser Subsidiary (the "PURCHASER
LEASED REAL PROPERTY"), and (ii) with respect to each lease covering the
Purchaser Leased Real Property (collectively, the "PURCHASER LEASES"), any
requirement of consent of the lessor to a change in the majority ownership of
the outstanding voting capital stock of the Purchaser. The Purchaser and each
Purchaser Subsidiary, respectively, is the owner and holder of all the leasehold
estates purported to be granted by each Purchaser Lease and all Purchaser Leases
are in full force and effect and constitute valid and binding obligations of the
Purchaser and each Purchaser Subsidiary.
(k) INTELLECTUAL PROPERTY.
(i) The Purchaser and each Purchaser Subsidiary owns
or possesses sufficient legal rights to all Intellectual
Property necessary for its business without any known conflict
with the rights of others. Neither the Purchaser nor any
Purchaser Subsidiary has received any written communications
alleging that the Purchaser has violated or is infringing, by
conducting its business, would violate or infringe any of the
patents, trademarks, service marks, tradenames, copyrights (or
in each case, any applications therefor), software licenses,
trade secrets or other proprietary rights or processes of any
other person or entity. Neither the Purchaser nor any Purchase
Subsidiary is aware that any of their 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 such employee's
best efforts to promote the interest of the Purchaser or any
Purchase Subsidiary or that would conflict with the
Purchaser's business or a Subsidiary's business. Neither the
execution or delivery of this Agreement or any Related
Agreement, nor the carrying on of the Purchaser's business or
a Subsidiary's business by the employees of the Purchaser or
the employees of any Purchaser Subsidiary, nor the conduct of
the Purchaser's business as currently conducted, will, to the
Purchaser's knowledge, 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 such employee is now obligated. The Purchaser does
not believe it is or will be necessary to use any inventions
of any of its employees or any of the Purchaser Subsidiary's
employees (or persons it currently intends to hire) made prior
to their employment by the Purchaser or any Purchaser
Subsidiary.
30
(ii) Section 2.3(k) of the Purchaser Disclosure
Schedule sets forth (A) the patents, patent applications,
trademarks, trademark applications, trade names, service
marks, service xxxx applications, copyrights and copyright
registrations and applications of each of the Purchaser and
each Purchaser Subsidiary and (B) Internet domain names and
applications therefor and other filings and formal actions
made or taken pursuant to federal, state or local and foreign
laws by the Purchaser and Purchaser Subsidiary to protect or
perfect its interests therein.
(l) AGREEMENTS, ETC. Section 2.3(l) of the Purchaser
Disclosure Schedule sets forth a true and complete list of all material written
or oral contracts, agreements and other instruments not made in the ordinary
course of business since March 31, 2001 to which the Purchaser or any Purchaser
Subsidiary is a party, or made in the ordinary course of business since March
31, 2001 and referred to in clauses (i) through (xvi) of this Section 2.3(l).
Except as set forth on Schedule 2.3(l) to the Purchaser Disclosure Schedule,
neither the Purchaser nor any Purchaser Subsidiary is a party to any agreement,
arrangement or understanding, whether written or oral, formal or informal,
relating to the following:
(i) any material distributorship, dealer, sales,
advertising, agency, manufacturer's representative, franchise
or similar contract or relationship or any other contract
relating to the payment of a commission or other fee
calculated as or by reference to a percentage of the profits
or revenues of the Purchaser or any Purchaser Subsidiary or of
any business segment of the Company or any Purchaser
Subsidiary;
(ii) any joint venture, partnership or other
agreement or arrangement for the sharing of profits;
(iii) any collective bargaining contract or other
contract with or commitment to any labor union;
(iv) the future purchase, sale or license of
products, material, supplies, equipment or services requiring
payments to or from the Purchaser or any Purchaser Subsidiary
in an amount in excess of $25,000 per annum, which agreement,
arrangement or understanding is not terminable on 30 days'
notice without cost or other Liability at or at any time after
the Closing Date, and any agreement in which the Purchaser or
any Purchaser Subsidiary has granted or received manufacturing
rights, most favored nations pricing provisions or exclusive
marketing or other rights relating to any product, group of
products, services, technology, assets or territory;
(v) any license (whether as licensor or licensee), or
sublicense, royalty, permit, or franchise agreement,
including, without limitation, any agreement pursuant to which
the Purchaser or any Purchaser Subsidiary licenses any
intellectual property or other products and services to any
third party;
(vi) the employment by the Purchaser or any Purchaser
Subsidiary of any officer, employee, consultant or agent or
any other type of contract, commitment or understanding with
any officer, employee, consultant or agent which (except as
31
otherwise generally provided by applicable law) is not
immediately terminable without cost or other Liability at or
at any time after the Closing Date;
(vii) any profit-sharing, bonus, stock option, stock
appreciation right, pension, retirement, disability, stock
purchase, hospitalization, insurance or similar plan or
agreement, formal or informal, providing benefits to any
current or former director, officer, employee, agent or
consultant;
(viii) any indenture, mortgage, promissory note, loan
agreement, guarantee or other agreement or commitment for the
borrowing of money, for a line of credit or for a leasing
transaction of a type required to be capitalized in accordance
with Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board;
(ix) any material agreement, instrument or other
arrangement granting or permitting any Encumbrance on any of
the properties, assets or rights of the Purchaser or any
Purchaser Subsidiary;
(x) any lease for real property (whether as lessor or
lessee) or any other lease or agreement under which the
Purchaser or any Purchaser Subsidiary is lessee of or holds or
operates any items of tangible personal property owned by any
third party;
(xi) any contract or commitment for charitable
contributions;
(xii) any contract or commitment for capital
expenditures individually in excess of $10,000;
(xiii) any agreement or contract with a "disqualified
individual" (as defined in Section 280G(c) of the Code), which
could result in a disallowance of the deduction for any
"excess parachute payment" (as defined in Section 280G(b)(i)
of the Code) under Section 280G of the Code as a result of the
transactions contemplated hereby;
(xiv) any agreement or arrangement for the sale of
any assets, properties or rights having a value in excess of
$10,000;
(xv) any agreement which restricts the Purchaser or
any Purchaser Subsidiary from engaging in any aspect of its
business or competing in any line of business in any
geographic area; or
(xvi) any other agreement, contract or commitment
which is material to the Purchaser and its Purchaser
Subsidiaries, taken as a whole.
For purposes of this Section 2.3(l) and Section 2.3(m) hereof, the term
"material" shall mean and refer to those agreements, contracts, instruments or
arrangements (as applicable) that involve payments or expenditures by or to the
Purchaser or Purchaser Subsidiary, as applicable, or otherwise have a value, of
at least $25,000. The Purchaser has furnished to the Company true and complete
copies of all such agreements listed in Schedule 2.3(l) of the Purchaser
Disclosure
32
Schedule and (x) each such agreement (A) is the legal, valid and binding
obligation of the Purchaser or Purchaser Subsidiary, as applicable, and, to the
knowledge of the Purchaser , the legal, valid and binding obligation of each
other party thereto, in each case enforceable in accordance with its terms, (B)
is in full force and effect and (y) to the knowledge of the Purchaser , except
as set forth in Section 2.3(l) of the Purchaser Disclosure Schedule, the other
party or parties thereto is or are not in material default thereunder.
(m) NO DEFAULTS. Except as set forth in Section 2.3(m) of the
Purchaser Disclosure Schedule, the Purchaser and each Purchaser Subsidiary has
in all material respects performed all the obligations required to be performed
by it to date and is not in default or alleged to be in default under (i) its
Charter or by-laws or (ii) any material agreement, lease, contract, commitment,
instrument or obligation to which the Purchaser or any Purchaser Subsidiary is a
party or by which any of their properties, assets or rights are or may be bound
or affected, and there exists no event, condition or occurrence which, with or
without due notice or lapse of time, or both, would constitute such a default by
the Purchaser or any Purchaser Subsidiary under any of the foregoing.
(n) LITIGATION, ETC. Except as set forth in Schedule 2.3(n) of
the Purchaser Disclosure Schedule, there are no (i) Actions pending, or to the
knowledge of the Purchaser, threatened against the Purchaser or any Purchaser
Subsidiary, nor is there any basis therefor, whether at law or in equity, or
before or by any Governmental Authority, (ii) judgments, decrees, injunctions or
orders of any Governmental Authority or arbitrator against the Purchaser or any
Purchaser Subsidiary (iii) disputes with customers or vendors which involve a
disputed amount in excess of $25,000 or (iv) actions commenced by shareholders
of the Purchaser against the Purchaser. There are no Actions pending or, to the
knowledge of the Purchaser, threatened, nor is there any basis therefor, with
respect to (A) the current employment by, or association with, the Purchaser or
any Purchaser Subsidiary, of any of the present officers or employees of or
consultants to the Purchaser or any Purchaser Subsidiary (collectively, the
"PURCHASER DESIGNATED PERSONS") or (B) the use, in connection with any business
presently conducted or proposed to be conducted by the Purchaser or any
Purchaser Subsidiary, of any information, techniques or processes presently
utilized or proposed to be utilized by the Purchaser or any Purchaser Subsidiary
or any of the Purchaser Designated Persons, that the Purchaser or Purchaser
Subsidiary or any of the Purchaser Designated Persons are or would be prohibited
from using as the result of a violation or breach of, or conflict with any
agreements or arrangements between any Purchaser Designated Person and any other
person, or any legal considerations applicable to unfair competition, trade
secrets or confidential or proprietary information.
(o) ACCOUNTS AND NOTES RECEIVABLE. Except as set forth on
Section 2.3(o) of the Purchaser Disclosure Schedule, and except as has not or
would not reasonably be likely to have individually or in the aggregate a
Purchaser Material Adverse Effect all the accounts receivable and notes
receivable owing to the Purchaser and each Purchaser Subsidiary as of the date
hereof constitute, and as of the Closing Date will constitute, valid and
enforceable claims arising from bona fide transactions in the ordinary course of
business, and there are no known or asserted claims, refusals to pay or other
rights of set-off against any thereof. Except as set forth on Section 2.3(o) of
the Purchaser Disclosure Schedule, there is (a) no account debtor or note debtor
delinquent in its payment by more than ninety (90) days, (b) no account debtor
or note
33
debtor that has refused (or, to the knowledge of the Purchaser, threatened to
refuse) to pay its obligations for any reason, (c) to the knowledge of the
Purchaser, no account debtor or note debtor that is insolvent or bankrupt and
(d) no account receivable or note receivable which is pledged to any third party
by the Purchaser or any Purchaser Subsidiary. Except to the extent of a reserve
which the Purchaser and each Purchaser Subsidiary has established specifically
for doubtful accounts receivable and notes receivable (which reserve is set
forth on the Purchaser balance sheet included in the 2001 10-Q, is reasonable
under the circumstances and is consistent with past practice), the Purchaser
reasonably expects that each account receivable of the Purchaser and each
Purchaser Subsidiary existing on the Closing Date shall be paid in full by not
later than the ninetieth (90th) day after the date each such respective account
receivable was created and all of the notes receivable shall be paid in
accordance with the terms thereof.
(p) ACCOUNTS AND NOTES PAYABLE. Except as set forth in Section
2.3(p) of the Purchaser Disclosure Schedule neither the Purchaser nor any
Purchaser Subsidiary is delinquent in its payment of their accounts payable or
notes payable, in excess of $25,000 in the aggregate of all such accounts and
notes payable, except those contested in good faith and already disclosed in
Section 2.3(p) of the Purchaser Disclosure Schedule.
(q) COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. The Purchaser and
each Purchaser Subsidiary has complied and is presently in compliance in all
material respects with all Federal, state, local or foreign laws, ordinances,
regulations and orders applicable to it or its business (including, without
limitation, laws, ordinances, regulations and orders applicable to labor,
employment and employment practices, terms and conditions of employment and
wages and hours). The Purchaser and each Purchaser Subsidiary has all Federal,
state, local and foreign governmental authorizations, consents, approvals,
licenses and permits necessary in the conduct of its business as presently
conducted or as proposed to be conducted, such authorizations, consents,
approvals, licenses and permits are in full force and effect, no violations are
or have been recorded in respect of any thereof and no proceeding is pending or,
to the knowledge of the Purchaser, threatened to revoke or limit any thereof.
Section 2.3(q) of the Purchaser Disclosure Schedule contains a true and complete
list of all such governmental licenses, authorizations, consents, approvals,
permits, orders, decrees and other compliance agreements under which the
Purchaser and each Purchaser Subsidiary is operating or bound, and neither the
Purchaser nor any Purchaser Subsidiary is in default or, to its knowledge,
alleged to be in default under any thereof. None of such authorizations,
consents, approvals, licenses and permits shall be affected in any material
respect by the transactions contemplated hereby.
(r) ENVIRONMENTAL MATTERS. The Purchaser and each Purchaser
Subsidiary currently is and at all times has been in material compliance with
all Federal, state and local laws, ordinances, regulations and orders relating
to the protection of the environment applicable to its properties, facilities or
operations, including, without limitation, the Leased Real Property.
(s) LABOR RELATIONS; EMPLOYEES. The Purchaser and each
Purchaser Subsidiary, collectively, employs a total of five (5) employees as of
the date hereof. Except as set forth in Section 2.3(s) of the Purchaser
Disclosure Schedule, (A) neither the Purchaser nor any Purchaser Subsidiary is
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them to date or amounts required to be reimbursed to such employees, (B) upon
termination of the
34
employment of any such employees, neither the Purchaser, and Purchaser
Subsidiary, nor the Company will by reason of anything done prior to the Closing
be liable to any of such employees for so-called "severance pay" or any other
payments, (C) the Purchaser and each Purchaser Subsidiary is in compliance in
all material respects with all Federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices, terms and
conditions of employment and wages and hours, (D) there is no unfair labor
practice complaint against the Purchaser or any Purchaser Subsidiary pending
before the National Labor Relations Board or any comparable Governmental
Authority, (E) there is no labor strike, dispute, slowdown or stoppage actually
pending or, to the knowledge of the Purchaser, threatened against or involving
the Purchaser or any Purchaser Subsidiary, (F) no labor union has taken any
action with respect to organizing the employees of the Purchaser or any
Purchaser Subsidiary, (G) neither any grievance which could reasonably be
expected to have a Purchaser Material Adverse Effect on the conduct of the
business of the Purchaser and each Purchaser Subsidiary, taken as a whole, nor
any arbitration proceeding arising out of or under collective bargaining
agreements is pending and no claim therefor has been asserted against the
Purchaser or any Purchaser Subsidiary and (H) no employee has informed any
officer of the Purchaser or any Purchaser Subsidiary that such employee will
terminate his or her employment or engagement with the Purchaser or any
Purchaser Subsidiary and the Purchaser has no reason to believe that the key
employees will not remain employees of the Purchaser or any Purchaser Subsidiary
after the Closing. To the Purchaser's knowledge, no employee of the Purchaser or
any Purchaser Subsidiary is in violation of any term of any employment contract,
non-disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Purchaser or any Purchaser Subsidiary or
any other party because of the nature of the business conducted or proposed to
be conducted by the Purchaser or any Purchaser Subsidiary.
(t) EMPLOYEE BENEFIT PLANS AND CONTRACTS.
(i) Section 2.3(t) of the Purchaser Disclosure
Schedule identifies each "employee benefit plan," as defined
in Section 3(3) of ERISA, and all other written or formal
plans or agreements involving direct or indirect compensation
(including any employment agreements entered into between the
Purchaser, any Purchaser Subsidiary and any Purchaser Employee
(as defined herein), but excluding workers' compensation,
unemployment compensation, other government-mandated programs
and the Purchaser's and each Purchaser Subsidiary's salary and
wage arrangements) currently or previously maintained,
contributed to or entered into by the Purchaser or any
Purchaser Subsidiary or any ERISA Affiliate thereof (the
"PURCHASER EMPLOYEE PLANS"). The Purchaser and each Purchaser
Subsidiary has made available to the Company true and complete
copies of all Purchaser Employee Plans (and, if applicable,
related trust agreements), all amendments thereto, and summary
plan descriptions for all Employee Plans and written
interpretations of all of the foregoing. For purposes of the
preceding sentence, "ERISA AFFILIATE" shall mean any entity
which is a member of (A) a "controlled group of corporations",
as defined in Section 414(b) of the Code, (B) a group of
entities under "common control", as defined in Section 414(c)
of the Code or (C) an "affiliated service group", as defined
in Section 414(m) of the Code or treasury regulations
promulgated under Section 414(o) of the Code, any of which
includes the Purchaser or (D) any Purchaser Subsidiary. Any
Employee Plans that individually or collectively would
constitute an "employee pension benefit plan", as defined in
Section 3(2) of ERISA, but
35
which are not multiemployer plans (as defined in Section
2.3(t)(iii)) (collectively, the "PURCHASER PENSION PLANS"),
are identified as such in the Purchaser Disclosure Schedule.
For purposes of this Section 2.3(t), "PURCHASER EMPLOYEE"
means any common law employee, consultant or director of the
Purchaser or any Purchaser Subsidiary.
(ii) Each Purchaser Employee Plan that is intended to
be qualified under Section 401(a) of the Code is so qualified
and has been so qualified during the period from its adoption
to the date hereof, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. The
Purchaser has provided the Company with copies of the most
recent Internal Revenue Service determination letters, IRS
Forms 5500 (including schedules and attachments), and
consolidated statements of assets and liabilities prepared in
accordance with GAAP, with respect to any Purchaser Employee
Plans. Each Purchaser Employee Plan has been maintained in
material compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and
regulations, including, without limitation, ERISA and the
Code, which are applicable to such Purchaser Employee Plans.
All filings required to be filed as of the date hereof with
respect to each Purchaser Employee Plan, including, without
limitation, filings of IRS Form 5500, have been made timely,
accurately and with the appropriate government agency.
(iii) No Purchaser Employee Plan is a "multiemployer
plan" as defined in Section 4001(a)(13) of ERISA, a "multiple
employer plan" as defined in Section 413(c) of the Code, a
"defined benefit plan" as defined in Section 3(35) of ERISA,
or is otherwise subject to Title IV of ERISA or Section 412 of
the Code, and neither the Purchaser nor any ERISA Affiliate
has ever maintained, sponsored, participated in or contributed
to any such plan, or has incurred any Liability with respect
to Section 412 of the Code or Title IV of ERISA, including
Sections 4062, 4063 or 4201 of ERISA.
(iv) Section 2.3(t) of the Purchaser Disclosure
Schedule lists each employment, severance or other similar
contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including
any self-insured arrangements), vacation benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or
benefits which (A) is not an Purchaser Employee Plan, (B) is
entered into, maintained or contributed to, as the case may
be, by the Purchaser or any Purchaser Subsidiary on behalf of
any Purchaser Employee, (C) covers any Purchaser Employee or
former Purchaser Employee, and (D) under which the Purchaser
or any ERISA Affiliate has any present or future obligation or
Liability (excluding workers' compensation, unemployment
compensation or other government-mandated programs and the
Purchaser's or any Purchaser Subsidiary's salary and wage
arrangements). Such contracts, plans and arrangements as are
described above, are hereinafter referred to collectively as
the "PURCHASER BENEFIT ARRANGEMENTS". Each Purchaser Benefit
Arrangement has been maintained in material compliance with
its terms and with the requirements prescribed by any and all
material laws, statutes, rules,
36
regulations, orders and judgments which are applicable to such
Purchaser Benefit Arrangements.
(v) Each Purchaser Employee Plan which is a "group
health plan" (as defined in Section 5000 of the Code) (A) has
been maintained in compliance with Section 4980B of the Code
and Title I, Subtitle B, Part 6 of ERISA, and no tax payable
on account of Section 4980B of the Code has been or is
expected to be incurred with respect to any current or former
Purchaser Employees of the Purchaser or any Purchaser
Subsidiary, and (B) has been maintained in compliance with the
Health Insurance Portability and Accountability Act of 1996,
as amended. No such plan has reserves, assets or prepaid
premiums.
(vi) All contributions due and payable on or before
the Closing Date in respect of any Purchaser Employee Plan or
Purchaser Benefit Arrangement have been made in full and
proper form, or adequate accruals have been provided for in
the Purchaser Financial Statements for all other contributions
or amounts in respect of the Purchaser Employee Plans or
Benefit Arrangements for periods ending on the Closing Date,
for which payment is due after the Closing Date.
(vii) No Purchaser Employee Plan or Purchaser Benefit
Arrangement currently or previously maintained by the
Purchaser or its ERISA Affiliates provides any post-retirement
health or life insurance benefits, and neither the Purchaser
nor its ERISA Affiliates maintains any obligations to provide
any post-retirement benefits in the future.
(viii) The consummation of the transactions
contemplated by this Agreement will not (A) entitle any
individual to severance or separation pay, or (B) except as
set forth in the Section 2.3(t)(viii) of the Purchaser
Disclosure Schedule, accelerate the time of payment or
vesting, or increase the amount, of compensation due to any
individual. No payment made or contemplated under any
Purchaser Employee Plan or Benefit Arrangement constitutes an
"excess parachute payment" within the meaning of Section 280G
of the Code.
(ix) Except as set forth in Section 2.3(t)(ix) of the
Purchaser Disclosure Schedule, with respect to each Purchaser
Employee Plan and Benefit Arrangement: (A) to the knowledge of
the Purchaser, no breach of fiduciary duty has occurred with
respect to which the Purchaser or any Purchaser Subsidiary or
any such plan or arrangement or any fiduciary thereof may be
liable or otherwise materially damaged; (B) no disputes,
claims (other than routine claims for benefits), actions or
investigations are pending or, to the knowledge of the
Purchaser, threatened; (C) to the knowledge of the Purchaser,
no prohibited transaction has occurred with respect to which
the Purchaser, any Purchaser Subsidiary or any such plan or
arrangement or any fiduciary thereof could reasonably be
liable or otherwise materially damaged; (D) the Purchaser and
each Purchaser Subsidiary has expressly reserved in itself the
right to amend, modify or terminate any such written plan or
arrangement, or any portion of it; and (E) the Purchaser and
each Purchaser Subsidiary has satisfied any bond coverage
requirement of ERISA.
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(x) No event has occurred or condition exists, with
respect to any Purchaser Employee Plan, that has subjected or
could reasonably subject the Purchaser or any ERISA Affiliate
(by virtue of the transactions contemplated hereby), the
Company, or any Purchaser Employee Plan to any material tax,
fine, penalty or other Liability.
(xi) The Purchaser and each Purchaser Subsidiary is,
to the extent applicable, in material compliance with all laws
similar to ERISA of non-United States jurisdictions.
(y) CERTAIN AGREEMENTS. Except as set forth in Section 2.3(u)
of the Purchaser Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of the Purchaser or any Purchaser Subsidiary from the Purchaser or
any Purchaser Subsidiary, under any Purchaser Employee Plan, Benefit Arrangement
or otherwise, (ii) with respect to any current or former director, officer or
key employee of the Purchaser or any Purchaser Subsidiary materially increase
any benefits otherwise payable under any Purchaser Employee Plan or the Benefit
Arrangement or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
(v) INSURANCE. Section 2.3(v) of the Purchaser Disclosure
Schedule contains a list of all policies of Liability, theft, fidelity, fire,
product Liability, errors and omissions, workmen's compensation, indemnification
of directors and officers and other similar forms of insurance held by the
Purchaser and each Purchaser Subsidiary (specifying the insurer, the amount of
coverage, the type of insurance, the policy number and any pending claims
thereunder) and a history of all claims made by the Purchaser and each Purchaser
Subsidiary thereunder and the status thereof; PROVIDED, that such list need not
include claims made more than three years prior to the date hereof and which are
no longer pending. All such policies of insurance are in full force and effect
and all premiums with respect thereto are currently paid and, to the knowledge
of the Purchaser, no basis exists for termination of any thereof on the part of
the insurer. The Purchaser believes that the amounts of coverage under such
policies of insurance are adequate for its business and operations of each of
the Purchaser and each Purchaser Subsidiary. Neither the Purchaser nor any
Purchaser Subsidiary has, during the last three fiscal years, been denied or had
revoked or rescinded any policy of insurance.
(w) BANK ACCOUNTS; POWERS OF ATTORNEY. Section 2.3(w) of the
Purchaser Disclosure Schedule sets forth a true and complete list of (i) all
bank accounts and safe deposit boxes of the Purchaser and each Purchaser
Subsidiary and all persons who are signatories thereunder or who have access
thereto and (ii) the names of all persons, firms, associations, corporations or
business organizations holding general or special powers of attorney from the
Purchaser and each Purchaser Subsidiary and a summary of the terms thereof.
(x) BROKERS. Except as set forth in Section 2.3(x) of the
Purchaser Disclosure Schedule, neither the Purchaser, any Purchaser Subsidiary,
nor any of the officers, directors, securityholders, employees or agents of the
Purchaser or any Purchaser Subsidiary, employed any broker or finder or incurred
any Liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
38
(y) RELATED TRANSACTIONS. Except as set forth in Section
2.3(v) of the Purchaser Disclosure Schedule or set forth in the Purchaser SEC
Documents, no current or former director, officer or securityholder of the
Purchaser or any Purchaser Subsidiary that is an affiliate of the Purchaser, a
Purchaser Subsidiary or any associate (as defined in the rules promulgated under
the Exchange Act) thereof, is now (i) a party to any transaction with the
Purchaser or any Purchaser Subsidiary (including, but not limited to, any
contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or borrowing money
from, or otherwise requiring payments to, any such director, officer or
affiliated stockholder of the Purchaser or associate thereof), or (ii) the
direct or indirect owner of an interest in any corporation, firm, association or
business organization which is a present or potential competitor, supplier or
customer of the Purchaser or any Purchaser Subsidiary (other than non-affiliated
holdings in publicly-held companies), nor does any such person receive income
from any source other than the Purchaser or any Purchaser Subsidiary which
relates to the business of, or should properly accrue to, the Purchaser or any
Purchaser Subsidiary.
(z) CUSTOMERS. Section 2.3(z) of the Purchaser Disclosure
Schedule sets forth a true and complete list of the customers of the Purchaser
and the Purchaser Subsidiaries which during the last fiscal year ended accounted
for five percent (5%) or more of the Purchaser's consolidated revenues during
such period, which list specifies the products and/or services supplied to each
of such customers. Except as set forth in Section 2.3(z) of the Purchaser
Disclosure Schedule, the Purchaser and each Purchaser Subsidiary has a good,
ongoing relationship with each of such customers and none of such customers has
reduced, or expressed any intention of reducing, the dollar amount of its
business with the Purchaser or any Purchaser Subsidiary or terminated, or
expressed to the Purchaser or any Purchaser Subsidiary any intention of
terminating, its business relationship with the Purchaser or any Purchaser
Subsidiary.
(aa) INVENTORY. All items in the inventory reflected in the
balance sheet included in the 2000 10-Q or as currently owned by the Purchaser
and the Purchaser Subsidiaries for use in the operation of the business (i) have
been valued at cost or at market, whichever is lower, on a first-in, first-out
(FIFO) basis in accordance with GAAP consistently applied and (ii) are of a
quality and quantity usable and salable in the ordinary course of business.
(i) The Purchaser's and the Purchaser Subsidiaries'
inventories of finished products, raw materials,
intermediates, work in process, supplies, parts and packaging
and labeling materials as of March 31, 2001, the approximate
quantities thereof, and their location are set forth in
Section 2.3(aa) to the Purchaser Disclosure Schedule.
(ii) Neither the Purchaser nor any Purchaser
Subsidiary is aware of any adverse condition affecting the
quality or supply of raw materials, intermediates, supplies,
parts and other materials available to the Purchaser and its
Purchaser Subsidiary that are necessary to manufacture,
package or label the products or are otherwise used in the
business.
39
(bb) ORDERS. Section 2.3(bb) to the Purchaser Disclosure
Schedule contains an accurate summary as of March 31, 2001 of the Purchaser's
and the Purchaser Subsidiaries' total backlog (including all accepted and
unfulfilled service contracts and research agreements) and the aggregate of all
outstanding purchase orders issued by the Purchaser and each Purchaser
Subsidiary (which aggregates include all material contracts or commitments for
the purchase by the Purchaser and each Purchaser Subsidiary of materials or
other supplies). All such sale and purchase commitments were made in the
ordinary course of business. Section 2.3(bb) to the Purchaser Disclosure
Schedule sets forth the Purchaser's and the Purchaser Subsidiaries' current
policies with respect to returns of products in the course of the Purchaser's
and the Purchaser Subsidiaries' conduct of the business. Neither the Purchaser
nor any Purchaser Subsidiary has made any express warranties in connection with
the sale of its products and services. Claims against the Purchaser and the
Purchaser Subsidiaries for warranty costs (individually or in the aggregate)
with respect to products and services during each of the last three fiscal years
did not exceed $20,000, and there are no outstanding or threatened claims for
any such warranty costs that would exceed $20,000 (individually or in the
aggregate). As used above, the term "warranty cost" shall mean costs and
expenses associated with correcting, returning or replacing defective or
allegedly defective products or services, whether such costs and expenses arise
out of claims sounding in warranty, contract, tort or otherwise.
(cc) AVAILABLE CASH. As of June 30, 2001, the Purchaser
maintained in all of its operating accounts cash balances in the aggregate
amount of approximately $1,759,670.86.
(dd) DISCLOSURE. The representations and warranties in this
Section 2.3 (including the Purchaser Disclosure Schedule) do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements or facts contained herein and therein not
misleading in light of the circumstances under which they were made. All
information and documentation requested by the Company of the Purchaser or its
Purchaser Subsidiaries in connection with the Company's due diligence
investigation of the Purchaser and the Purchaser Subsidiaries has been furnished
or made available to the Company.
(ee) KNOWLEDGE DEFINITION. As used in this Section 2.3, the
term "knowledge" and like phrases shall mean and include (i) actual knowledge
and (ii) that knowledge which a prudent business person could have obtained in
the management of his or her business affairs after making due inquiry and
exercising due diligence with respect thereto. In connection therewith, the
knowledge of the current directors or senior executive officers of the Purchaser
shall be imputed to be the knowledge of the Purchaser.
ARTICLE III
RELATED AGREEMENTS
3.1 RELATED AGREEMENTS. Simultaneously with or prior to the execution
and delivery of this Agreement, the following agreements (such agreements being
herein collectively referred to as the "RELATED AGREEMENTS") are being executed
and delivered by the respective parties thereto:
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(a) REGISTRATION RIGHTS AGREEMENT. The Purchaser and the
Stockholders are entering into the Registration Rights Agreement, effective as
of the Closing Date, in the form of EXHIBIT B attached hereto, providing for
certain registration rights with respect to the Acquisition Shares.
(b) AGREEMENT WITH XXXXXXX XXXXXXX. The parties to the Content
Provider Agreement and License dated as of April 23, 1999 among Change Your
Xxxx.xxx, LLC, Xxxxxxx X. Xxxxxxx and Xxxxxxx Research International Inc., along
with the Purchaser are entering into an amendment to such agreement, in the form
of EXHIBIT D attached hereto, pursuant to which, among other things, Xx. Xxxxxxx
is committing to attend at least two (2) promotional events for the Company
within the one-year period following the Closing Date.
(c) RELEASE AND WAIVER. Each Stockholder is executing and
delivering to the Purchaser a release and waiver agreement effective as of the
Closing Date in the form of EXHIBIT E attached hereto.
(d) NOTE EXCHANGE AGREEMENT. CYL Development Holdings, L.L.C.
which has, prior to the date hereof, purchased from The Chase Manhattan Bank,
the promissory note issued to The Chase Manhattan Bank by the Purchaser in the
aggregate principal amount of $2,400,000, will enter into an agreement with the
Purchaser, in the form of EXHIBIT F attached hereto, pursuant to which the
Purchaser will convert such promissory note into shares of Purchaser Common
Stock.
(e) CUSTOMER RELEASES AND WAIVERS. The Purchaser shall have
received from each of Yahoo! Inc. and America Online, Inc. a release and waiver
agreement effective prior to the Closing Date in the form of EXHIBIT G and
EXHIBIT H, respectively, attached hereto.
(f) XXXXX XXXX AGREEMENT. Xxxxx Xxxx shall have entered into
an employment agreement in the form of EXHIBIT I attached hereto, which shall
amend the terms of his employment in effect immediately prior to the execution
and delivery of such employment agreement.
(g) WIT CAPITAL AGREEMENT. Wit SoundView Corporation will have
entered into an agreement, in the form of EXHIBIT J attached hereto, with
Purchaser which shall provide that in full satisfaction of any amounts which may
be owed to Wit Soundview Corporation (or any affiliate thereof, collectively
referred to as "WIT") shall be paid in full upon the payment to Wit of
$250,000.00 ($50,000.00 of which have previously been paid to Wit by the
Purchaser).
ARTICLE IV
CONDITIONS PRECEDENT
4.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASER, THE STOCKHOLDERS AND
THE COMPANY. The obligations of each party to perform this Agreement and to
effect the Acquisition are subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by all
parties hereto:
41
(a) APPROVALS. All authorizations, consents, orders or
approvals of, or declarations or filings with or expiration of waiting periods
imposed by any Governmental Authority necessary for the consummation of the
transactions contemplated hereby shall have been obtained or made or shall have
occurred.
(b) LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Acquisition shall have been issued by any Federal or state court or other
Governmental Authority and remain in effect.
4.2 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to purchase and pay for the Stockholder Shares pursuant to this
Agreement are subject to the satisfaction of the following conditions unless
waived (to the extent such conditions can be waived) by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. The
representations and warranties of the Company and each of the Stockholders set
forth in Sections 2.1 and 2.2 hereof shall be true and correct in all material
respects (except for any representation or warranty that by its terms is
qualified by materiality, in which case it shall be true and correct in all
respects) as of the date of this Agreement and as of the Closing Date as though
made on and as of such date.
(b) OPTIONS AND RIGHTS TO PURCHASE COMPANY COMMON STOCK. All
shares of capital stock of the Company held in the treasury shall be cancelled.
Each holder having direct or indirect beneficial ownership of any security
(including, but not limited to any rights, options or warrants) of the Company
which such holder may exercise, exchange and/or convert, directly or indirectly,
into Company Common Stock shall have exercised, exchanged and/or converted such
securities into or for Company Common Stock or otherwise canceled or terminated
such securities, such that as of the Closing there shall be no security of the
Company outstanding other than the Company Common Stock. Furthermore, all
rights, whether granted by agreement or otherwise, to purchase or subscribe for
shares of Company Common Stock shall have been terminated prior to the Closing.
(c) PERFORMANCE OF SEVERAL OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS. Each of the Company and the Stockholders shall have performed the
obligations required to be performed by it or them under this Agreement prior to
or as of the Closing Date.
(d) CERTIFICATE OF SECRETARY OF COMPANY AND STOCKHOLDERS; ETC.
The Purchaser shall have been provided with a certificate executed by the
Secretary of the Company certifying as to (i) the resolutions (which shall be
attached to such certificate) duly adopted by the Board of Directors of the
Company authorizing the execution of this Agreement and the execution,
performance and delivery of all Related Agreements, documents and transactions
contemplated hereby, (ii) the Charter and by-laws of the Company (each of which
shall be attached to such certificate), as in effect immediately prior to the
Closing, and (iii) the incumbency of the officers of the Company executing this
Agreement and all Related Agreements and documents contemplated hereby. As to
each Stockholder which is not a natural person, such Stockholder shall provide a
certificate signed by the Secretary or equivalent officer or member of such
Stockholder which shall contain such information regarding such Stockholder
42
as set forth in the foregoing sentence. In addition, such other closing
documents (including, by way of example but not in limitation thereof, good
standing and franchise tax certificates from the secretary of state of all
relevant jurisdictions) customary in transactions of this type shall have been
provided to the Purchaser.
(e) AUTHORIZATION OF ACQUISITION. All action necessary to
authorize the execution, delivery and performance of this Agreement and the
Related Agreements by the Company and the Stockholders and the consummation of
the transactions contemplated hereby and thereby shall have been duly and
validly taken by the Board of Directors of the Company and by such similar body
of any Stockholder which is other than a natural person, and the Company and the
Stockholders shall have full power and right to effect the Acquisition on the
terms provided herein and therein.
(f) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority which are required for or in connection with the
execution and delivery by the Company of this Agreement and the Related
Agreements and the consummation by the Company and the Stockholders of the
transactions contemplated hereby and thereby shall have been obtained or made.
(g) RELATED AGREEMENTS. Each of the Related Agreements
executed and delivered by the Company and/or the Stockholders prior to the
Closing shall be in full force and effect as of the Closing and become effective
in accordance with the respective terms thereof and the actions required to be
taken thereunder by the parties thereto immediately prior to the Closing shall
have been taken.
(h) ACQUISITION OF SHARES. Effective immediately upon Closing,
Purchaser shall have acquired 100% of the outstanding capital stock of the
Company measured on a Fully Diluted Basis.
(i) THIRD PARTY CONSENTS. Duly executed copies of all third
party consents and approvals contemplated by this Agreement or the Company
Disclosure Schedule, in form and substances satisfactory to the Purchaser shall
have been delivered to the Purchaser.
(j) PAYMENT OF COSTS AND EXPENSES. The Company shall have
tendered payment of all costs and expenses pursuant to Section 5.1 hereof to the
reasonable satisfaction of the Company and the Purchaser.
(k) ACCOUNTANT CONSENT. The Company shall have delivered a
signed, written consent, in customary form, of the Company's Accountants
pursuant to which the Company Accountants shall have given their consent to the
use of any audited or unaudited financial statements of the Company prepared by
the Company Accountants in any public filings which the Purchaser shall be
required to make under the Securities Act or the Exchange Act.
(l) FIRPTA CERTIFICATE. The Company shall, prior to the
Closing Date, provide Purchaser with a properly executed FIRPTA Notification
Letter and a form of notice to the Internal Revenue Service in accordance with
the requirements of Treasury Regulation
43
Section 1.897-2(h)(2) along with written authorization for purchaser to deliver
such notice form to the Internal Revenue Service on behalf of the Company upon
the Closing.
(m) ACCEPTANCE BY COUNSEL TO PURCHASER. The form and substance
of all legal matters contemplated hereby and of all papers delivered hereunder
shall be reasonably acceptable to Orrick, counsel to Purchaser.
4.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS. The
several obligation of each Stockholder to sell his or its Stockholder Shares
pursuant to this Agreement and the acceptance of the obligations of the Company
pursuant to this Agreement are subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by such
Stockholder or the Company:
(a) REPRESENTATIONS AND WARRANTIES OF PURCHASER. The
representations and warranties of Purchaser set forth in Section 2.3 hereof
shall be true and correct in all material respects (except for any
representation or warranty that by its terms is qualified by materiality, in
which case it shall be true and correct in all respects) as of the date of this
Agreement and as of the Closing Date as though made at and as of such date.
(b) PERFORMANCE OF OBLIGATIONS OF PURCHASER. Purchaser shall
have performed in all material respects its obligations required to be performed
by it under this Agreement prior to or as of the Closing Date.
(c) CERTIFICATE OF SECRETARY OF PURCHASER. The Company shall
have been provided with a certificate executed by the Secretary of the Purchaser
certifying as to (i) the resolutions (which shall be attached to such
certificate) duly adopted by the Board of Directors of the Purchaser authorizing
the execution of this Agreement and the execution, performance and delivery of
all Related Agreements, documents and transactions contemplated hereby, (ii) the
Charter and by-laws of the Purchaser (each of which shall be attached to such
certificate), as in effect immediately prior to the Closing, and (iii) the
incumbency of the officers of the Purchaser executing this Agreement and all
Related Agreements and documents contemplated hereby. In addition, such other
closing documents (including, by way of example but not in limitation thereof,
good standing and franchise tax certificates from the secretary of state of all
relevant jurisdictions) customary in transactions of this type shall have been
provided to the Company.
(d) AUTHORIZATION OF ACQUISITION. All action necessary to
authorize the execution, delivery and performance of this Agreement and the
Related Agreements by Purchaser and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by Board of Directors
of the Purchaser.
(e) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority which are required for or in connection with the
execution and delivery by Purchaser of this Agreement and the Related Agreements
and the consummation by Purchaser of the transactions contemplated hereby or
thereby shall have been obtained or made.
(f) BOARD OF DIRECTORS. The Purchaser shall have taken all
necessary and advisable actions (including, but not limited to amending the
Charter and/or by-laws of the
44
Purchaser) (i) to provide that effective upon Closing the number of members of
the Board of Directors of the Purchaser shall be fixed at nine (9) members and
(ii) to elect or appoint to the Board of Directors of the Purchaser, in
accordance with the Purchaser's Charter and by-laws, Xxxxx Xxxx as the Chairman
of the Board of Directors of the Purchaser and each of Xxxxxxx Xxxxxxx and
Xxxxxx Xxxxxxxxx shall be Vice Chairmen of the Board of Directors and four (4)
persons (including Xxxxxx Xxxxxxxxx) designated by the Company and four (4)
persons (including Xxxxx Xxxx and Xxxxxxx Xxxxxxx) designated by the Purchaser
(all of which such persons shall be designated by the Company and the Purchaser,
respectively, prior to the Closing). Each party hereto agrees and acknowledges
that immediately after the Closing there shall be one vacancy on the Board of
Directors of the Purchaser. The vacancy on the Board of Directors of the
Purchaser shall subsequently be filled by the Board of Directors, upon the
recommendation of the directors designated by the Company subject to the
approval of the directors designated by the Purchaser.
(g) RESIGNATION OF DIRECTORS. Duly executed copies of letters
of resignation from the Board of Directors of the Purchaser of H. Xxxxx Xxxxx.
(h) PURCHASER THIRD PARTY CONSENTS. Duly executed copies of
all third party consents and approvals contemplated by this Agreement or the
Purchaser Disclosure Schedule, in form and substances satisfactory to the
Company shall have been delivered to the Company.
(i) TERMINATION OF STOCKHOLDER AGREEMENT. A duly executed copy
of an agreement or other document pursuant to which that certain stockholder
agreement, dated May 27, 1999, among GHS, Inc., Xxxxxxx X. Xxxxxxx, Xxxxxxx
Research International Inc. and CYL Development Holdings, LLC, shall have been
terminated.
(j) ACCEPTANCE BY COUNSEL TO THE COMPANY AND THE STOCKHOLDERS.
The form and substance of all legal matters contemplated herein and of all
papers delivered hereunder shall be reasonably acceptable to Xxxxxxx, counsel to
the Company and the Stockholders.
(k) CLOSING OF EQUITY FINANCING. The Purchaser shall, prior to
the Closing Date, consummated the sale and issuance of not less than
$2,000,000.00 of Purchaser Common Stock, at a purchase price per share of $1.00.
(l) RELATED AGREEMENTS. Each of the Related Agreements
executed and delivered by the Purchaser and any third party (other than the
Company or a Stockholder) prior to the Closing shall be in full force and effect
as of the Closing and become effective in accordance with the respective terms
thereof and the actions required to be taken thereunder by the parties thereto
immediately prior to the Closing shall have been taken.
(m) REPAYMENT OF CHASE. CYL Development Holdings, L.L.C. shall
have acquired from The Chase Manhattan Bank ("CHASE") all of the right, title
and interest of Chase in and to indebtedness due from the Purchaser to Chase and
such indebtedness shall have been extinguished by the conversion of the same
into shares of Purchaser Common Stock pursuant to the Note Exchange Agreement
described in Section 3.1(d) hereof.
45
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PAYMENT OF FEES AND EXPENSES. Each party hereto shall be
responsible for the payment of its own costs and expenses, including without
limitation, investment banking fees and attorneys' fees and expenses, in
connection with the negotiation and execution of this Agreement, all Related
Agreements and the transactions contemplated herein and therein; PROVIDED that
if the Acquisition is consummated (i) the Company shall pay, upon presentation
of detailed statements or invoices, the reasonable fees and expenses of Xxxxxxx
and the independent accountants of the Company in connection with the execution
of this Agreement and the Related Agreements and the transactions contemplated
herein and therein and (ii) the Stockholders shall pay all other costs and
expenses of the Company and all Stockholders in connection with the negotiation
and execution of this Agreement, all Related Agreements and the transactions
contemplated herein and therein.
5.2 RESTRICTIONS ON TRANSFER.
(a) The Acquisition Shares to be issued to each Stockholder
pursuant to this Agreement (collectively, the "RESTRICTED SECURITIES") shall not
be sold, transferred, assigned, pledged, encumbered or otherwise disposed of
(each, a "TRANSFER") except upon the conditions specified in this Section 5.2,
which conditions are intended solely to insure compliance with the provisions of
the Securities Act. Each Stockholder shall observe and comply with the
Securities Act and the rules and regulations promulgated by the SEC thereunder
as now in effect or hereafter enacted or promulgated, and as from time to time
amended, in connection with any Transfer of Restricted Securities beneficially
owned by such Stockholder.
(b) Each certificate representing Restricted Securities issued
to a Stockholder and each certificate for such securities issued to subsequent
transferees of any such certificate shall (unless otherwise permitted by the
provisions of Sections 5.2(c) and 5.2(e) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE U.S. STATE SECURITIES OR "BLUE-SKY" LAWS. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN SECTION 5.2 OF THE
STOCK PURCHASE AGREEMENT DATED AS OF
JULY 17, 2001, AMONG DREAMLIFE, INC. AND DISCOVERY TOYS, INC. AND ALL THE
STOCKHOLDERS OF DISCOVERY TOYS, INC. AND NO TRANSFER OF THESE SECURITIES SHALL
BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UPON THE
FULFILLMENT OF CERTAIN OF SUCH CONDITIONS, DREAMLIFE, INC. HAS AGREED TO DELIVER
TO THE HOLDER HEREOF A DREAMLIFE, INC. CERTIFICATE, NOT BEARING THIS LEGEND, FOR
THE SECURITIES
46
REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF DREAMLIFE, INC."
(c) Each Stockholder agrees, prior to any Transfer of
Restricted Securities to give written notice to Purchaser of such Stockholder's
intention to effect such Transfer and to comply in all other respects with the
provisions of this Section 5.2. Each such notice shall describe the manner and
circumstances of the proposed Transfer and shall be accompanied by the written
opinion, addressed to Purchaser, of counsel for the holder of such Restricted
Securities, stating that in the opinion of such counsel (which opinion and
counsel shall be reasonably satisfactory to Purchaser) such proposed transfer
does not involve a transaction requiring registration or qualification of such
Restricted Securities under the Securities Act or the securities or "blue-sky"
laws of any relevant state of the United States or is otherwise exempted from
the application of United States securities laws. The holder thereof shall
thereupon be entitled to Transfer such Restricted Securities in accordance with
the terms of the notice delivered by it to Purchaser. Each certificate or other
instrument evidencing the securities issued upon the Transfer of any such
Restricted Securities (and each certificate or other instrument evidencing any
untransferred balance of such Restricted Securities) shall bear the legend set
forth in Section 5.2(b) unless (x) in such opinion of counsel of Purchaser
registration of any future Transfer is not required by the applicable provisions
of the Securities Act or (y) Purchaser shall have waived the requirement of such
legends. No Stockholder shall Transfer any Restricted Securities until such
opinion of counsel has been given (unless waived by Purchaser or unless such
opinion is not required in accordance with the provisions of this Section
5.2(c)).
(d) Notwithstanding the foregoing provisions of this Section
5.2, the restrictions imposed by this Section 5.2 upon the transferability of
Restricted Securities shall cease and terminate when (i) any such shares are
sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act or as otherwise contemplated by Section 5.2(c) and,
pursuant to Section 5.2(c), the securities so transferred are not required to
bear the legend set forth in Section 5.2(b) or (ii) the holder of such
Restricted Securities has met the requirements for Transfer of such Restricted
Securities pursuant to subparagraph (k) of Rule 144. Whenever the restrictions
imposed by this Section 5.2 shall terminate, as herein provided, the holder of
Restricted Securities as to which such restrictions have terminated shall be
entitled to receive from Purchaser, without expense, a new certificate not
bearing the restrictive legend set forth in Section 5.2(b) and not containing
any other reference to the restrictions imposed by this Section 5.2 and such
securities shall thereupon cease to be Restricted Securities. Nothing contained
herein shall be construed to limit the right of any Stockholder from availing
itself or himself of any other provision of Rule 144 otherwise permitting the
sale of its or his Restricted Securities in accordance with such provision(s).
(e) Each Stockholder understands and agrees that when a
transfer is prohibited by law or by this Section 5.2, Purchaser may cause stop
transfer orders to be placed with its transfer agent with respect to
certificates for Restricted Securities owned by such Stockholder but not as to
certificates for such shares of Purchaser Common Stock as to which the legend
set forth in paragraph (b) of this Section 5.2 is no longer required because one
or more of the conditions set forth in Section 5.2(d) shall have been satisfied.
47
5.3 STOCKHOLDER ASSURANCE. Each Stockholder hereby agrees not to take
any action that would be inconsistent with the obligations and undertakings of
the Purchaser and such Stockholder under this Agreement and the Related
Agreements.
5.4 CONFIDENTIAL INFORMATION.
(a) Each Stockholder agrees that from and after the Closing
Date it or he shall not directly or indirectly use or disclose any confidential
or proprietary information of or relating to the Purchaser or any subsidiary to
any person, firm, corporation, association or other entity, nor shall any
Stockholders make use of any such confidential or proprietary information for
its or his own purpose or for the benefit of any person, firm, corporate or
other entity except the Purchaser or any subsidiary or affiliate thereof, the
Stockholders hereby acknowledging that the Company and Purchaser would be
irreparably damaged if such confidential knowledge of the Company or Purchaser
was disclosed to or utilized on behalf of others in competition in any respect
with the Company or Purchaser. For the purpose of this Section, the term
"confidential or proprietary information" shall mean all information which is
known to any Stockholder or their respective affiliates or to their employees,
former employees, consultants or others in a confidential relationship with the
Company or Purchaser and relates to matters such as trade secrets, research and
development activities, books and records, customer lists, suppliers,
distribution channels, pricing information, private processes, formulae,
functional specifications, blueprints, know-how, data, improvements,
discoveries, designs, inventions, techniques, marketing plans, strategies,
forecasts, new products, business plans, budgets and financial statements, and
all intellectual property of the Company or Purchaser.
(b) It is the desire and intent of Purchaser that the
foregoing provisions of this Section 5.4 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Section shall be adjudicated to be invalid or unenforceable, such provision
shall be deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable, such deletion to apply only with respect to the
operation of such provision of this Section 5.4 in the particular jurisdiction
in which such adjudication is made. In addition, in the event of a breach or
threatened breach by any Stockholder or any of the Stockholders of the
provisions of this Section 5.4, the Company and Purchaser shall be entitled to
an injunction restraining them or him, as the case may be, from such breach.
Nothing herein contained shall be construed as prohibiting the Company and
Purchaser from pursuing any other remedies available for such breach or
threatened breach.
5.5 SEC FILINGS. Each party hereto agrees and covenants that he, she or
it shall use his, her or its best efforts, from the date hereof, to make all
filings with the SEC as it shall be required to make pursuant to the Securities
Act, the Exchange Act and all rules and regulations promulgated under each act
(including, without limitation, filing all Forms 3, 4 and 5, and Schedule 13's),
for so long as each party shall be legally required by the Securities Act or the
Exchange Act.
5.6 ELECTION OF DIRECTORS OF PURCHASER AND COMPANY.
48
(a) COMPANY DIRECTORS. If the Purchaser owns 100% of the
issued and outstanding capital stock of the Company, the Purchaser agrees and
covenants that it shall vote all of the Company Stock it holds, at any time, in
favor of those individuals properly nominated by the Company's then existing
Board of Directors for membership on the board of directors of the Company (or
execute a written consent in lieu of a meeting in accordance herewith).
(b) COMPANY ISSUANCE OF CAPITAL STOCK. Each of the Company and
each member of the board of directors of the Company who is a party hereto,
hereby agrees and covenants that after the Closing it shall not (i) issue any
shares of its capital stock or (ii) authorize an amendment to its Articles of
Incorporation (as in existence on the date hereof) to increase its authorized
capital stock (as the same shall exist as of the date hereof) or designate any
other class or series of capital stock without the prior consent of all of the
stockholders of the Company. The consent of the Purchaser, as a stockholder of
the Company shall be deemed to mean the affirmative vote of at least eighty
percent (80%) of the then serving members of the board of directors of the
Purchaser.
ARTICLE VI
MISCELLANEOUS
6.1 ENTIRE AGREEMENT. This Agreement (including the Purchaser
Disclosure Schedule, the Company Disclosure Schedule and the Exhibits attached
hereto), the Related Agreements and the other writings referred to herein
contain the entire agreement among the parties hereto with respect to the
transactions contemplated hereby and supersede all prior agreements or
understandings, written or oral, among the parties with respect thereto.
6.2 SURVIVAL. The representations and warranties contained in Article
II of this Agreement shall terminate and be of no further force or effect upon
the Closing.
6.3 DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
6.4 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by internationally-recognized overnight courier or by registered or
certified mail, postage prepaid, return receipt requested or by telecopier with
confirmation and followed by a hard copy, with confirmation as provided above
addressed as follows:
(a) if to Purchaser, to:
dreamlife, inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx
Telecopier: (000) 000-0000;
with copies to (which copy shall not constitute a notice
pursuant to this Agreement):
49
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Telecopier: (000) 000-0000;
(b) if to the Purchaser, to:
Discovery Toys, Inc.
c/o Institutional Financing Services, Inc.
0000 Xxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx, Chief Executive Officer
Telecopier: (000) 000-0000
with a copy to (which copy shall not constitute a notice
pursuant to this Agreement):
Xxxxxxx, Del Deo, Dolan, Griffinger & Xxxxxxxxx, a
Professional Corporation
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000;
(c) if to the Stockholders, at their respective addresses set
forth on SCHEDULE I attached hereto;
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be delivered and received (a) in the case
of personal delivery or telecopy, on the next business day after the date of
such delivery, (b) in the case of internationally-recognized overnight courier,
on three business days after the date when sent and (c) in the case of mailing,
on the tenth business day following the date on which the piece of mail
containing such communication was posted. As used in this Section 6.3, "business
day" shall mean any day other than a day on which banking institutions in the
City of
New York to which delivery was made are legally closed for business.
6.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts by original or facsimile signature, each such counterpart shall be
an original instrument, and all such counterparts together shall constitute one
and the same agreement.
6.6 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of
New York
applicable to contracts made and to be performed wholly therein (without
reference to any principles of conflicts of laws). The parties hereto hereby
agree that any suit, action or proceeding instituted with respect to this
Agreement shall be brought in a Federal court or state court located in the City
of
New York, State of
New York and no party shall institute or maintain any such
suit,
50
action or proceeding in any court of any other jurisdiction, and such parties
hereby irrevocably waive any objection they may have or hereafter acquire to, or
any right of immunity on the ground of, venue, the convenience of the forum of
jurisdiction of such court or the execution of judgments resulting therefrom,
and the parties irrevocably accept and submit to the jurisdiction of the
aforesaid courts in any such suit, action or proceeding.
6.7 BENEFITS OF AGREEMENT. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, permitted assigns, legal representatives, heirs
and estate, as the case may be. This Agreement shall not be assignable by any
party hereto without the consent of the other parties hereto; PROVIDED, HOWEVER,
that anything contained herein to the contrary notwithstanding, Purchaser may
assign and delegate any or all of its rights and obligations hereunder to any
affiliate (other than the obligation to issue Acquisition Shares) so long as
such affiliate remains such.
6.8 PRONOUNS. As used herein, all pronouns shall include the masculine,
feminine, neuter, singular and plural thereof whenever the context and facts
require such construction.
6.9 AMENDMENT, MODIFICATION AND WAIVER. This Agreement shall not be
altered or otherwise amended except pursuant to an instrument in writing signed
by each party hereto; PROVIDED, HOWEVER, that any party to this Agreement may
waive in writing any obligation owed to it by any other party under this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
6.10 CALIFORNIA SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25101 OR 25105 OF THE CALIFORNIA CORPORATION S
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Stock Purchase Agreement to be executed on its behalf as of the day and year
first above written.
DREAMLIFE, INC.
By: /s/ XXXXX X. XXXX
------------------------------
Name: Xxxxx X. Xxxx
Title: Chief Executive Officer
51
DISCOVERY TOYS, INC.
By: /s/ X.X. XXXXXXX
-----------------------------
Name: X.X. Xxxxxxx
Title: Chief Executive Officer
[COUNTERPART SIGNATURE PAGES
OF STOCKHOLDERS ARE
ATTACHED HERETO]
52
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 18, 2001 (THE "AGREEMENT"), AMONG
dreamlife, inc., DISCOVERY TOYS, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of dreamlife, inc., Discovery Toys, Inc. and the other
parties to the Agreement shall constitute counterpart copies of the Agreement in
accordance with the terms of the Agreement.
NAME OF SIGNATORY
--------------------------------------------
Print Name of Entity (if applicable)
/s/ XXXX X. XXXX
--------------------------------------------
Signature
XXXX X. XXXX
--------------------------------------------
Print Name
--------------------------------------------
Print Title (if applicable)
/s/ XXXXX XXXX
--------------------------------------------
Signature of spouse (if applicable)
XXXXX XXXX
--------------------------------------------
Print Name
53
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 18, 2001 (THE "AGREEMENT"), AMONG
dreamlife, inc., DISCOVERY TOYS, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of dreamlife, inc., Discovery Toys, Inc. and the other
parties to the Agreement shall constitute counterpart copies of the Agreement in
accordance with the terms of the Agreement.
NAME OF SIGNATORY
--------------------------------------------
Print Name of Entity (if applicable)
/s/ XXXXXX X. XXXXXX
--------------------------------------------
Signature
XXXXXX X. XXXXXX
--------------------------------------------
Print Name
PRESIDENT AND CHIEF OPERATING OFFICER
--------------------------------------------
Print Title (if applicable)
/s/ XXXXXX XXXXXX
--------------------------------------------
Signature of spouse (if applicable)
XXXXXX XXXXXX
--------------------------------------------
Print Name
54
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 18, 2001 (THE "AGREEMENT"), AMONG
dreamlife, inc., DISCOVERY TOYS, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of dreamlife, inc., Discovery Toys, Inc. and the other
parties to the Agreement shall constitute counterpart copies of the Agreement in
accordance with the terms of the Agreement.
NAME OF SIGNATORY
--------------------------------------------
Print Name of Entity (if applicable)
/s/ XXXXXXX X. XXXXX
--------------------------------------------
Signature
XXXXXXX X. XXXXX
--------------------------------------------
Print Name
--------------------------------------------
Print Title (if applicable)
--------------------------------------------
Signature of spouse (if applicable)
--------------------------------------------
Print Name
55
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 18, 2001 (THE "AGREEMENT"), AMONG
dreamlife, inc., DISCOVERY TOYS, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of dreamlife, inc., Discovery Toys, Inc. and the other
parties to the Agreement shall constitute counterpart copies of the Agreement in
accordance with the terms of the Agreement.
NAME OF SIGNATORY
--------------------------------------------
Print Name of Entity (if applicable)
/s/ XXXXX XXXXXXXXX
--------------------------------------------
Signature
XXXXX XXXXXXXXX
--------------------------------------------
Print Name
--------------------------------------------
Print Title (if applicable)
/s/ XXXXX X. XXXXXXX
--------------------------------------------
Signature of spouse (if applicable)
XXXXX X. XXXXXXX
--------------------------------------------
Print Name
56
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 18, 2001 (THE "AGREEMENT"), AMONG
dreamlife, inc., DISCOVERY TOYS, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of dreamlife, inc., Discovery Toys, Inc. and the other
parties to the Agreement shall constitute counterpart copies of the Agreement in
accordance with the terms of the Agreement.
NAME OF SIGNATORY
--------------------------------------------
Print Name of Entity (if applicable)
/s/ X.X. XXXXXXX
--------------------------------------------
Signature
X.X. XXXXXXX
--------------------------------------------
Print Name
CHIEF EXECUTIVE OFFICER
--------------------------------------------
Print Title (if applicable)
--------------------------------------------
Signature of spouse (if applicable)
--------------------------------------------
Print Name
57
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 18, 2001 (THE "AGREEMENT"), AMONG
dreamlife, inc., DISCOVERY TOYS, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of dreamlife, inc., Discovery Toys, Inc. and the other
parties to the Agreement shall constitute counterpart copies of the Agreement in
accordance with the terms of the Agreement.
NAME OF SIGNATORY
--------------------------------------------
Print Name of Entity (if applicable)
/s/ XXXXXXX X. XXXXXX
--------------------------------------------
Signature
XXXXXXX X. XXXXXX
--------------------------------------------
Print Name
VICE PRESIDENT OF OPERATIONS
--------------------------------------------
Print Title (if applicable)
/s/ XXXXXXXXX X. XXXXXX
--------------------------------------------
Signature of spouse (if applicable)
XXXXXXXXX X. XXXXXX
--------------------------------------------
Print Name
58
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 18, 2001 (THE "AGREEMENT"), AMONG
dreamlife, inc., DISCOVERY TOYS, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of dreamlife, inc., Discovery Toys, Inc. and the other
parties to the Agreement shall constitute counterpart copies of the Agreement in
accordance with the terms of the Agreement.
NAME OF SIGNATORY
--------------------------------------------
Print Name of Entity (if applicable)
/s/ XXXX XXXXXX
--------------------------------------------
Signature
XXXX XXXXXX
--------------------------------------------
Print Name
--------------------------------------------
Print Title (if applicable)
/s/ XXXXX X. XXXXXX
--------------------------------------------
Signature of spouse (if applicable)
XXXXX X. XXXXXX
--------------------------------------------
Print Name
59
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 18, 2001 (THE "AGREEMENT"), AMONG
dreamlife, inc., DISCOVERY TOYS, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of dreamlife, inc., Discovery Toys, Inc. and the other
parties to the Agreement shall constitute counterpart copies of the Agreement in
accordance with the terms of the Agreement.
NAME OF SIGNATORY
--------------------------------------------
Print Name of Entity (if applicable)
/s/ XXXXXXXXX XXXXX
--------------------------------------------
Signature
XXXXXXXXX XXXXX
--------------------------------------------
Print Name
--------------------------------------------
Print Title (if applicable)
/s/ XXXX XXXXX
--------------------------------------------
Signature of spouse (if applicable)
XXXX XXXXX
--------------------------------------------
Print Name
60
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 18, 2001 (THE "AGREEMENT"), AMONG
dreamlife, inc., DISCOVERY TOYS, INC. AND
THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of dreamlife, inc., Discovery Toys, Inc. and the other
parties to the Agreement shall constitute counterpart copies of the Agreement in
accordance with the terms of the Agreement.
NAME OF SIGNATORY
DISCOVERY TOYS LLC
--------------------------------------------
Print Name of Entity (if applicable)
/s/ XXXXXXX X. XXXXXXXX
--------------------------------------------
Signature
XXXXXXX X. XXXXXXXX
--------------------------------------------
Print Name
MANAGER
--------------------------------------------
Print Title (if applicable)
--------------------------------------------
Signature of spouse (if applicable)
--------------------------------------------
Print Name
61
SCHEDULE I
STOCKHOLDERS
--------------------------------------------------------------------------------
STOCKHOLDER DREAMLIFE
NAME AND ADDRESS SHARES SHARES
--------------------------------------------------------------------------------
Discovery Toys, L.L.C 216,216 17,212,058
c/o McGuggan, L.L.C
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn.: Xxxxxxx Xxxxxxxx
--------------------------------------------------------------------------------
Xxxx Xxxxxx 73,710 5,867,747
c/o Discovery Toys, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx 24,570 1,955,916
c/o Discovery Toys, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxx 9,828 782,366
c/o Discovery Toys, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx 24,570 1,955,916
c/o Institutional Financing Services, Inc.
0000 Xxxx Xxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx X. Xxxx 14,742 1,173,549
c/o Institutional Financing Services, Inc.
0000 Xxxx Xxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxx 1,638 130,394
0000 Xxxxx xx xx Xxxx
Xxxxxxxxxx XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxxx 4,914 391,183
--------------------------------------------------------------------------------
62
--------------------------------------------------------------------------------
c/o Institutional Financing Services, Inc.
0000 Xxxx Xxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 54,054 4,303,014
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
63
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT dated
as of July 17, 2001 (the "AGREEMENT"), among
DREAMLIFE, INC., a Delaware corporation (the
"COMPANY") and those persons listed on
SCHEDULE I attached hereto who or which are
or become signatories hereto (the
"STOCKHOLDERS").
Reference is made to the Stock Purchase Agreement (the
"PURCHASE AGREEMENT") dated as of July 17, 2001, among the Company, Discovery
Toys, Inc. a California corporation ("DISCOVERY TOYS"), and the Stockholders,
providing for, among other things, the purchase by the Company of all of the
outstanding capital stock of Discovery Toys pursuant to which the Stockholders
are receiving shares of common stock, $0.01 par value, of the Company ("COMMON
STOCK") in consideration of all of the capital stock purchased by the Company.
All capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Purchase Agreement.
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
day on which banks are permitted to close in the City and State of
New York. (b)
"COMMISSION" shall mean the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
(c) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
(d) "NASD" shall mean the National Association of Securities Dealers,
Inc.
(e) "OTHER SHARES" shall mean at any time those Shares that do not
constitute Primary Shares or Registrable Shares.
(f) "PRIMARY SHARES" shall mean at any time all authorized but unissued
Shares.
(g) "PUBLIC OFFERING" shall mean a public offering of shares of Common
Stock of the Company registered pursuant to the Securities Act.
(h) "REGISTRABLE SHARES" shall mean the Shares received by the
Stockholders pursuant to the Purchase Agreement, and any securities of the
Company that may be issued or distributed with respect to, or in exchange or
substitution for, or conversion of, such Shares and such other securities issued
or issuable with respect to such securities pursuant to a stock dividend, stock
split or other distribution, merger, consolidation, recapitalization or
reclassification or otherwise.
(i) "RULE 144" shall mean Rule 144 promulgated under the Securities Act
or any successor or complementary rule thereto.
64
(j) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any successor Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
(k) "STOCKHOLDERS" shall mean any person or entity (i) that is
receiving Shares pursuant to the Purchase Agreement, and (ii) who or which
executes and delivers a counterpart signature page to this Agreement.
(l) "SHARES" shall mean shares of the Company's Common Stock.
2. REGISTRATION.
(a) Subject to the terms and conditions set forth in this Agreement,
the Company shall use its reasonable commercial efforts to file a Registration
Statement on Form S-1 (or on such other form as may be available to the Company)
(the "REGISTRATION STATEMENT") with the Commission for the public sale of the
Shares within ninety (90) days of the date hereof. With respect to the
registration pursuant to this Section 2, the Company may include in such
registration any Primary Shares or Other Shares.
3. RIGHT OF SUSPENSION. Notwithstanding any other provision of this
Agreement, the Purchase Agreement or any Related Agreement (other than this
Agreement) the Company shall have the right at any time to prohibit or suspend
offers and sales of Registrable Shares covered by a Registration Statement
contemplated by this Agreement whenever, and for so long as, in the sole
reasonable judgment of the Company (i) there exists a material development or a
potential material development with respect to or involving the Company that the
Company would be obligated to disclose in the prospectus or offering circular
used in connection with the Registration Statement, which disclosure would in
the judgment of the Company be premature or otherwise inadvisable at such time,
or (ii) an event has occurred that makes any statement made in the Registration
Statement or related prospectus or offering circular or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or which requires the making of any changes in the Registration
Statement, prospectus or offering circular so that it will not contain any
untrue statement of a material fact required to be stated therein or necessary
to make the statements therein not misleading or omit to state any material fact
required to be stated therein or necessary to make the statement therein, in the
light of the circumstances under which they were made, not misleading. In the
event that the Company shall determine to so prohibit or suspend offers and
sales, the Company shall, in addition to performing those acts required to be
performed by the Securities Act and/or the Exchange Act, or as may be deemed
advisable by the Company, deliver a certificate in writing to each of the
Stockholders signed by the Chief Financial Officer or Chief Executive Officer of
the Company and, upon receipt of such certificate, the use of the Registration
Statement and prospectus or offering circular, as the case may be, will be
deferred or suspended and will not recommence until, in addition to those acts
required to be performed by the Securities Act and/or the Exchange Act, or as
may be deemed advisable by the Company, (x) such Stockholders' receipt from the
Company of copies of the supplemented or amended prospectus or offering circular
or (y) the Stockholders are advised in writing by the Company that the
prospectus or offering circular may be used. The Company will exercise
reasonable commercial efforts to ensure that the use of the Registration
Statement and prospectus or offering circular may be resumed as quickly as
practicable, and will provide prompt notice to the Stockholders when such use
may be resumed.
65
4. FILING OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Shares effected pursuant to Section 2 the
Company shall:
(a) prepare and file with the Commission the Registration Statement and
such amendments (including post effective amendments) and supplements to the
Registration Statement and the prospectus or offering circular used in
connection therewith as may be necessary to keep the Registration Statement
current and effective at all times until the earlier of (i) the date as of which
the Stockholders may sell or transfer all of the Registrable Shares covered by
the Registration Statement in a three-month period under Rule 144 or (ii) the
date on which the Stockholders shall have sold all the Registrable Securities
covered by the Registration Statement (the "Registration Period"), and to comply
with the provisions of the Securities Act and the rules and regulations
thereunder with respect to the disposition of all the Registrable Shares covered
by the Registration Statement for the period required to effect the distribution
thereof, to use reasonable commercial efforts to make any corrections or updates
to the Registration Statement or prospectus as promptly as practicable and to
exercise best efforts to cause the Commission to declare the Registration
Statement effective once filed;
(b) furnish to the Stockholders such number of copies of any prospectus
or offering circular, including a preliminary prospectus, and of a full
Registration Statement and exhibits in conformity with the requirements of the
Securities Act and rules and regulations thereunder, as each Stockholder may
reasonably request in order to facilitate the disposition of the Registrable
Shares;
(c) use its best efforts to register or qualify the Registrable Shares
covered by the Registration Statement under the securities or blue sky laws of
such state jurisdictions of the United States as the Stockholders may reasonably
request, and accomplish any and all other acts and things which may be necessary
or advisable to permit sales in such jurisdictions of such Registrable Shares
and to keep such registration or qualification in effect for so long as the
Registration Statement remains in effect; PROVIDED, HOWEVER, that the Company
shall not be required to consent to general service of process for all purposes,
or to qualify as a foreign corporation, in any jurisdiction where it is not then
qualified or to register or qualify the Registrable Shares covered by the
Registration Statement in any jurisdiction which would require the Company to
amend its certificate of incorporation or by-laws or covenant or undertake to do
any other act or make any other change regarding its capitalization or share
ownership prior to the effectiveness of such registration or qualification;
(d) if such registration is an underwritten public offering, to enter
into an underwriting agreement in form and substance customary under the
circumstances; and
(e) notify each holder of Registrable Shares promptly upon the issuance
by the Commission of any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose.
5. CONDITIONS TO REGISTRATION OBLIGATIONS.
(a) The Company shall not be obligated to effect the registration of
the Registrable Shares pursuant to Section 2 unless the holders of Registrable
Shares being included in the Registration Statement consent to customary
conditions of a reasonable nature that are imposed by the Company, including,
but not limited to, the following:
(i) conditions prohibiting the sale of Registrable Shares by
each Stockholder until the registration shall have been declared effective by
the Commission;
(ii) conditions requiring each Stockholder to comply with all
applicable provisions of the Securities Act and the Exchange Act including, but
not limited to, the prospectus delivery requirements of the Securities Act; and
66
(iii) if such registration is an underwritten public offering,
conditions requiring each Stockholder to enter into an underwriting agreement in
form and substance customary under the circumstances.
(b) The Company shall not be obligated to effect the registration of
the Registrable Shares pursuant to Section 2 until the earlier of (i) the
Securities and Exchange Commission's confirmation that the Company may omit from
the applicable registration statement audited financial statements for Discovery
Toys, Inc. for the year ended December 31, 1998 which would otherwise be
required pursuant to applicable rules and (ii) the date on which audited
financial statements are available for each of the Company and Discovery Toys,
Inc. for the ear ended December 31, 2001.
6. INFORMATION PROVIDED BY THE STOCKHOLDERS. Whenever under this
Agreement Registrable Shares are being registered, each Stockholder, as a
condition to the inclusion of Registrable Shares held by such Stockholder in
such registration, shall provide the Company on a timely basis with such
information and materials as the Company may reasonably request in order to
effect the registration of the Registrable Shares and the Company shall not be
obligated to register such Stockholder's Registrable Shares if such Stockholder
fails within twenty (20) Business Days after written request to provide such
information and materials to the Company.
7. RULE 144. With a view to making available to the Stockholders the
benefits of Rule 144 under the Securities Act, the Company agrees to use
commercially reasonable efforts to make available adequate current public
information with respect to it within the meaning of, and as required pursuant
to, Rule 144(c).
8. TERMS AND CONDITIONS OF REGISTRATION. In connection with the
registration pursuant to this Agreement, and subject to the other terms and
conditions of this Agreement, the Company shall in its sole discretion determine
the terms and conditions of such registration, including, without limitation,
the timing thereof; the scope of the offering contemplated thereby (i.e.,
whether the offering shall be a combined primary offering and a secondary
offering or limited only to a secondary offering); the manner of distribution of
Registrable Shares consistent with the plan of distribution agreed upon by the
Company and the Stockholders; the period of effectiveness of registration for
permissible sales of Registrable Securities thereunder subject to the provisions
of Section 4(a) hereof; and all other material aspects of the registration and
the registration process to the extent consistent herewith. In connection
therewith, the Company may require that any such registration be underwritten,
in which event (i) the managing underwriter shall be selected by the Company and
(ii) the inclusion of Registrable Shares in such registration shall be
conditioned upon each holder thereof entering into an underwriting agreement in
customary form with such underwriters participating in such registration.
9. EXPENSES. All expenses incurred by the Company in effecting a
registration under this Agreement, including, without limitation, all
registration and filing fees (including all expenses incident to any filing with
any exchange or quotation system), fees and expenses of complying with
securities and "blue-sky" laws, printing expenses, the fees and expenses of the
Company's counsel and accountants, shall be paid by the Company; PROVIDED,
HOWEVER, that all underwriting discounts and selling commissions applicable to
the Registrable Shares and the fees and expenses of any counsel to the
Stockholder or Stockholders, shall be borne by the Stockholders, in proportion
to the number of Registrable Shares sold by such Stockholder or Stockholders.
67
10. INDEMNIFICATION.
(a) In connection with the registration of any Registrable Shares under
the Securities Act pursuant to this Agreement, the Company shall indemnify and
hold harmless the Stockholders and in the case of a Stockholder that is not a
natural person, such Stockholder's directors and officers, each underwriter,
broker or other person acting on behalf of the Stockholders and each person that
controls any of the foregoing (the "STOCKHOLDER INDEMNIFIED PERSONS") against
any losses, claims, damages or liabilities, joint or several (or actions in
respect thereof), to which the Stockholder Indemnified Persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Registrable Shares, 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,
with respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made not misleading; PROVIDED,
HOWEVER, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in said Registration Statement, preliminary prospectus, final
prospectus, amendment, supplement or document incident to registration or
qualification of any Registrable Shares in reliance upon and in strict
conformity with information furnished in writing to the Company by any such
Stockholder with respect to information regarding any such Stockholder expressly
for inclusion therein; PROVIDED, FURTHER, that the Company shall not be liable
in any such case if the Stockholder failed to deliver an amendment or supplement
to a prospective purchaser, if such amendment or supplement was provided to the
Stockholder in sufficient time to deliver to the prospective purchaser and it
corrected the untrue statement or alleged untrue statement or omission or
alleged omission.
(b) In connection with the registration of Registrable Shares under the
Securities Act pursuant to this Agreement, each Stockholder shall severally and
not jointly indemnify and hold harmless the Company, each director of the
Company, each officer of the Company, each underwriter, broker or other person
acting on behalf of the Company and each person who controls any of the
foregoing persons within the meaning of the Securities Act against any losses,
claims, damages or liabilities joint or several (or actions in respect thereof),
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, 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, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, to the extent, but only to the extent, such statement or omission
was made in reliance upon and in strict conformity with information furnished to
the Company or such underwriter, in writing, by such Stockholder for use in
connection with the Registration Statement, preliminary prospectus, final
prospectus, amendment, supplement or document, PROVIDED that the maximum
liability of such Stockholder under this
68
Section 10(b) shall be limited to an amount equal to the gross proceeds received
by such Stockholder upon the sale of Registrable Shares by such Stockholder
pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 10, such indemnified party will, if a claim in
respect thereof is made against an indemnifying party, give written notice to
the latter of the commencement of such action; PROVIDED, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Agreement unless the
indemnifying party is materially prejudiced thereby. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be responsible for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; PROVIDED, HOWEVER, that an indemnified
party shall have the right to retain its own counsel, with the reasonable fees
and expenses to be paid by the indemnifying party, if such indemnified party
upon advice of legal counsel shall have reasonably concluded that representation
of such indemnified party or parties by the counsel retained by the indemnifying
party or parties would be inappropriate due to actual or potential differing
interests between such indemnified party or parties and any other party
represented by such counsel in such proceeding (provided that the indemnifying
party shall not be responsible for the fees and expenses of more than one
additional counsel for all indemnified parties). No indemnifying party, in the
defense of any such claim or litigation shall, except with the consent of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation. Each indemnified party shall furnish
such information regarding itself or the claim in question as an indemnifying
party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 10 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage,
liability or action as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
11. TERMINATION. The registration rights granted pursuant to this
Agreement shall terminate on the earlier of (i) the date as of which the
Stockholders may sell or transfer all of the Registrable Shares covered by the
Registration Statement in a three-month period under Rule 144, (ii) the date on
which the Stockholders have sold or transferred all of the Registrable Shares
69
covered by the Registration Statement or (iii) the three year anniversary of
this Agreement; PROVIDED, that the provisions of Section 10 shall survive
termination.
12. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the Company, the Stockholders and, subject to Section 14, the
respective successors, permitted assigns, heirs and legal representatives (as
the case may be) of the Company and each Stockholder.
13. CONFIDENTIALITY. Each Stockholder hereby agrees to and shall keep
strictly confidential and will not disclose or divulge any confidential,
proprietary or secret information which such Stockholder may obtain from the
Company in connection with this Agreement, unless required to be disclosed by
law or pursuant to any judgment, order, subpoena or decree of any court having
competent jurisdiction, or unless such information is or becomes publicly known
(other than as a result of this Section 13), or unless the Company gives its
written consent to the release by such Stockholder of such information, except
that no such written consent shall be required (and such Stockholder shall be
free to release such information) if such information is to be provided to the
lawyer or accountant of such Stockholder who are instructed to comply with this
provision. Each Stockholder shall be responsible for making sure its lawyer and
accountant comply with this Section 13. In the event the Stockholder becomes
legally compelled to disclose any confidential information pursuant to a
subpoena, summons, order or other judicial or governmental process, the
Stockholder shall provide the Company with prompt notice thereof so that the
Company may seek a protective order or another appropriate remedy, or waive
compliance with the relevant provisions of this agreement. In the event such a
protective order or other remedy is not obtained, or that such a waiver is
granted, the Stockholder shall furnish only that portion of such confidential
information that is legally required.
14. ASSIGNMENT. A Stockholder may not assign its rights under this
Agreement to any purchaser or transferee of Registrable Shares without the prior
written consent of the Company.
15. ENTIRE AGREEMENT. This Agreement and the Purchase Agreement and the
other writings referred to herein and therein contain the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
and contemporaneous arrangements or understandings with respect to the subject
matter hereof.
16. NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by nationally-recognized overnight courier or by registered or certified
mail, postage prepaid, return receipt requested or by telecopier, with
confirmation as provided above addressed as follows:
(a) If to the Company to:
dreamlife, inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx
Telecopier: (000) 000-0000;
70
with a copy (which shall not constitute notice) to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.; and
(b) If to the Stockholders, to the addresses set forth on Schedule
I attached hereto;
with a copy (which shall not constitute notice) to:
Xxxxxxx, Del Deo, Dolan, Griffinger & Xxxxxxxxx, a
Professional Corporation Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000;
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith. All
such notices or communications shall be deemed to be received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of facsimile transmission or telecopier upon
confirmed receipt and (d) in the case of mailing, on the third Business Day
following the date on which the piece of mail containing such communication was
posted.
17. MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and provisions of
this Agreement may only be amended or waived either (a) with the written consent
of the Company and the holders of a majority of the Registrable Shares, or (b)
in a writing by the party or parties against whom such amendment or waiver is
sought to be enforced.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
19. HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of
New York (without reference to its
conflicts of laws principles).
21. CONSENT TO JURISDICTION. EACH OF THE PARTIES HERETO HEREBY
ABSOLUTELY AND IRREVOCABLY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE
COURTS IN THE STATE OF NEW
71
YORK AND OF ANY FEDERAL COURT LOCATED IN THE CITY AND COUNTY OF
NEW YORK IN
CONNECTION WITH ANY ACTIONS OR PROCEEDINGS BROUGHT AGAINST THEM BY ANY OF THE
OTHER PARTIES HERETO. IN ANY SUCH ACTION OR PROCEEDING, THE PARTIES HERETO EACH
HEREBY ABSOLUTELY AND IRREVOCABLY (I) WAIVES ANY OBJECTION TO JURISDICTION OR
VENUE, (II) WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT, DECLARATION OR
OTHER PROCESS, AND (III) AGREES THAT THE SERVICE THEREOF MAY BE MADE BY
CERTIFIED OR REGISTERED FIRST-CLASS MAIL DIRECTED TO SUCH PARTY, AS THE CASE MAY
BE, AT THEIR RESPECTIVE ADDRESSES AS SET FORTH IN SECTION 16 HEREOF.
[Remainder of this Page Intentionally Left Blank]
72
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed and delivered as of the date first above
written.
DREAMLIFE, INC.
By:
-----------------------------------
Name:
Title:
[COUNTERPART SIGNATURE PAGE FOLLOWS]
[COUNTERPART SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
STOCKHOLDER:
IF AN INDIVIDUAL STOCKHOLDER:
-------------------------------------
(signature)
-------------------------------------
(print name)
IF AN ENTITY STOCKHOLDER:
-------------------------------------
(print name of entity)
By:
--------------------------------
(signature)
-------------------------------------
(print name)
-------------------------------------
(print title)
NUMBER OF REGISTRABLE SHARES OWNED
BY STOCKHOLDER:
------------------------------
SCHEDULE I
--------------------------------------------------------------------------------
STOCKHOLDER NAME AND ADDRESS NUMBER OF REGISTRABLE
SHARES
--------------------------------------------------------------------------------
Discovery Toys, L.L.C 17,212,058
c/o McGuggan, L.L.C
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn.: Xxxxxxx Xxxxxxxx
--------------------------------------------------------------------------------
Xxxx Xxxxxx 5,867,747
c/o Discovery Toys, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx 1,955,916
c/o Discovery Toys, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxx 782,366
c/o Discovery Toys, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx 1,955,916
c/o Institutional Financing Services, Inc.
0000 Xxxx Xxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx X. Xxxx 1,173,549
c/o Institutional Financing Services, Inc.
0000 Xxxx Xxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxx 130,394
0000 Xxxxx xx xx Xxxx
Xxxxxxxxxx XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxxx 391,183
c/o Institutional Financing Services, Inc.
--------------------------------------------------------------------------------
0000 Xxxx Xxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 4,303,014
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
EXHIBIT D
TERMINATION AGREEMENT
Termination Agreement, dated July ___, 2001 (the "AGREEMENT"), by and
among DREAMLIFE, INC. (successor in interest to GHS, Inc.) (the "COMPANY"),
Xxxxxxx X. Xxxxxxx ("XXXXXXX"), Xxxxxxx Research International Inc. ("XXXXXXX
RESEARCH") and CYL Development Holdings LLC ("CYL").
WHEREAS, the parties to this Agreement are all of the parties to the
Stockholders Agreement, dated May 27, 1999 (the "STOCKHOLDERS AGREEMENT");
WHEREAS, each of the parties hereto desire to terminate the
Stockholders Agreement;
NOW, THEREFORE, in consideration of the mutual promises made herein and
other good an valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agrees as follows:
1. The parties hereto hereby agree to terminate in its entirety the
Stockholders Agreement and upon the execution and delivery of this
Agreement the Stockholders Agreement shall be of no further force or
effect.
2. This Agreement shall be construed and enforced in accordance with the
laws of the State of
New York without regard to principles of conflicts
of laws thereof.
3. This Agreement may be signed in two or more counterparts, each
counterpart of which shall be deemed to be an original, all of which
together shall be deemed to be one and the same instrument.
[Remainder of page intentionally left blank.]
In witness whereof the parties or their duly authorized officers have
executed this Termination Agreement as of the date first written above.
DREAMLIFE, INC. (as successor in interest to GHS, Inc.)
By:
--------------------------------------------
Name:
Title:
-----------------------------------------------------
Xxxxxxx X. Xxxxxxx
XXXXXXX RESEARCH INTERNATIONAL INC.
By:
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title:
CYL DEVELOPMENT HOLDINGS, LLC
By:
--------------------------------------------
Name:
Title:
EXHIBIT E
RELEASE AND WAIVER
June ___, 2001
The undersigned (the "RELEASOR") has been informed that
pursuant to the Stock Purchase Agreement dated as of June ___, 2001(the
"PURCHASE AGREEMENT") among dreamlife, inc., a Delaware corporation
("PURCHASER"), Discovery Toys, Inc., a California corporation (the "COMPANY"),
and the Company's stockholders (collectively, the "STOCKHOLDERS"), the Purchaser
has purchased all of the outstanding shares of capital stock of the Company
owned by the Stockholders, and that as a result, the Purchaser owns all of the
issued and outstanding shares of capital stock of the Company (the
"ACQUISITION").
Effective as of the closing of the Acquisition and for good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the undersigned on his, her or
its behalf and on behalf of his, her or its (i) heirs, executors,
administrators, agents, successors and assigns or (ii) predecessors,
subsidiaries, affiliates and other related entities, as well as any current or
former benefit plan administrators and trustees, officers, directors,
shareholders or members (whether their ownership interests are held directly or
indirectly), partners, agents, attorneys, employees, successors and assigns (the
"RELEASOR PERSONS"), as applicable, hereby releases, waives and discharges the
Company and the Purchaser, and their respective officers, directors,
stockholders, agents, successors and assigns, as applicable (collectively, the
"RELEASED PARTIES"), from any and all actions, causes of action, suits, debts,
sums of money, covenants, contracts, controversies, agreements, promises,
damages, judgments, executions, claims and demands whatsoever, whether known or
unknown, liquidated or contingent, matured or unmatured, including, but not
limited to, claims for breach of contract (including, without limitation, claims
arising out of any employment agreement, offer letter, nonqualified employee
benefit plan, existing stock option rights or severance agreement); tort; fraud
or misrepresentation; violation of the Age Discrimination in Employment Act,
Title VII of the Civil Rights Act of 1964, AS AMENDED, Americans With
Disabilities Act or other federal, state, or local civil rights laws based on
any protected class status; defamation; intentional or negligent infliction of
emotional distress; breach of the covenant of good faith and fair dealing;
promissory estoppel; negligence; wrongful termination of employment; and any
other claims for unlawful employment practices, in law or equity (other than (x)
rights of indemnification of the undersigned in his, her or its capacity as an
officer and/or director under the Company's Articles of Incorporation or by-laws
or under applicable provisions of the California Corporations Code, (y) rights
to accrued and unpaid base salary and vacation benefits and (z) rights under the
Company's 401(k) plan) (each a "CLAIM" and collectively, the "CLAIMS") arising
from the Releasor's relationship with the Company prior to and including the
date of the closing of the Acquisition or the Releasor's status as a director,
officer or employee of the Company prior to and including the date of the
closing of the Acquisition. The undersigned agrees and promises
that he, she or it will not file any lawsuit asserting any such Claims. The
undersigned shall not aid or assist any other person in connection with the
pursuit of any claim that could not be brought by the undersigned hereunder,
except in the case of a court order or validly issued subpoena.
The undersigned hereby represents and warrants that in his,
her or its capacity as a stockholder, director, officer or employee of the
Company, he, she or it has no knowledge of any claims that the undersigned may
have as a shareholder, director, officer or employee of the Company against the
Released Parties.
Effective as of the closing of the Acquisition, and for good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the Releasor (if the Releasor
is an officer or director of the Company), on his or her behalf and on behalf of
the Releasor Persons, hereby agrees that he or she will not make any claim for
indemnification against any of the Company or Purchaser and their respective
subsidiaries solely by reason of the fact that he or she was a director,
officer, employee, or agent of any such entity or was serving at the request of
any such entity as a partner, trustee, director, officer, employee, or agent of
another entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim or
demand brought by Purchaser or the Company or their respective affiliates,
successors and assigns and the respective officers and directors of each of the
foregoing, or by any stockholder of the Company against such Releasor or
Releasor Persons in connection with the Purchase Agreement or any agreements
entered into in connection therewith or the transactions contemplated thereby or
the representations made therein.
The undersigned hereby expressly waives and relinquishes any
and all rights and benefits conferred upon the undersigned by Section 1542 of
the Civil Code of the State of California, and does so understanding and
acknowledging the significance and consequences of such specific waiver of
Section 1542. Section 1542 of the Civil Code of the State of California provides
as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have
materially affected his settlement with the debtor."
The undersigned expressly agrees and understands that this Release and Waiver
applies to all unknown, unsuspected and unanticipated claims, liabilities and
causes of action which he, she or it may have against the Released Parties.
The invalidity or unenforceability of any provision of this
Release and Waiver shall not affect or limit the validity or enforceability of
any other provision hereof and if any particular provision of this Release and
Waiver shall be adjudicated to be invalid or unenforceable, such provision shall
be deemed amended to delete therefrom the portion thus adjudicated to be invalid
or unenforceable, such deletion to apply only with respect to the
operation of such provision in the particular jurisdiction in which such
adjudication is made.
This Release and Waiver may not be changed except in a writing
signed by the person(s) against whose interest such change shall operate.
IN WITNESS WHEREOF, the undersigned has duly executed this
Release and Waiver as of the date first written above.
-------------------------------
(print or type name)
By:
-------------------------------
Name:
Title (if applicable):
EXHIBIT F
NOTE EXCHANGE AGREEMENT
BETWEEN
DREAMLIFE, INC.
AND
CYL DEVELOPMENT HOLDINGS, L.L.C.
DREAMLIFE, INC.
000 XXXX 00XX XXXXXX
XXXXX 0X
XXX XXXX, XX 00000
CYL Development Holdings, L.L.C.
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
NOTE EXCHANGE AGREEMENT
Dear Ladies and Gentlemen:
The undersigned, DREAMLIFE, INC., a Delaware corporation (the
"Corporation"), presently intends to issue common stock, $0.01 par value, of the
Corporation (the "Common Stock") to CYL Development Holdings, L.L.C. (the
"Investor") in accordance with this Agreement.
ACCORDINGLY, the Corporation hereby agrees with you as follows:
SECTION 1. ISSUANCE OF COMMON STOCK; CLOSING. Simultaneously with the
execution and delivery of this Agreement, the Corporation is issuing to the
Investor, and the Investor is acquiring from the Corporation, upon the terms and
subject to the conditions hereinafter set forth, 2,400,000 shares of Common
Stock, of the Corporation (collectively, the "Common Shares") at a price per
share of $1.00, in exchange for the transfer and delivery to the Corporation,
for cancellation, of the Corporation's note or notes issued in the aggregate
amount of $2,400,000 to The Chase Manhattan Bank (the "Note") and now having an
outstanding principal amount of $2,400,000 and now owned by the Investor.
Simultaneously herewith (the "Closing"), the Corporation is issuing and
delivering to the Investor a certificate representing the Common Shares being
acquired by the Investor hereunder, registered in the name of the Investor,
against delivery by the Investor of the Note, duly endorsed for transfer to the
Corporation. It is a condition of the Closing that simultaneously with the
Closing, the Corporation shall have completed the acquisition of 100% of
Discovery Toys, Inc.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation hereby represents and warrants to the Investor as follows:
2.1. ORGANIZATION. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Corporation has all requisite corporate power
and authority to own and operate its properties and to enter into this
Agreement and perform its obligations hereunder.
2.2. CAPITAL STOCK. The Corporation's Form 10-Q filed with the
SEC with
respect to the fiscal quarter ended March 31, 2001 (the "Form 10-Q")
sets forth a true and complete description of the authorized and
outstanding shares of capital stock of the Corporation as of such date.
All outstanding shares of Common Stock are and, when issued, all Common
Shares to be issued hereunder will be, validly issued, fully paid and
non-assessable and not subject to preemptive rights.
2.3. AUTHORITY. The execution, delivery and performance by the
Corporation 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 Corporation. This Agreement is a
valid and binding obligation of the Corporation, enforceable against
the Corporation in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and by principles of equity regardless
of whether such enforceability is considered a proceeding in law or
equity.
2.4. NO CONFLICTS. Neither the execution, delivery and
performance by the Corporation of this Agreement, nor the consummation
of the transactions contemplated hereby, will (A) conflict with, (B)
result in any violations of, (C) cause a default under (with or without
due notice, lapse of time or both), (D) give rise to any right of
termination, amendment, cancellation or acceleration of any obligation
contained in or the loss of any benefit under, or (E) result in the
creation of any Encumbrance (as defined below) on or against any
assets, rights or property of the Corporation under any term, condition
or provision of (x) any instrument or agreement to which the
Corporation is a party, or by which the Corporation or any of its
properties, assets or rights may be bound, (y) any law, statute, rule,
regulation, order, writ, injunction, decree, permit, concession,
license or franchise of any Governmental Authority (as defined below)
applicable to the Corporation or any of its properties, assets or
rights or (z) the Corporation's Certificate of Incorporation or
by-laws, as amended through the date hereof, respectively, which
conflict, breach, default or violation or other event will have a
material adverse effect on the Company's business, operations,
properties, financial position or operating result or on its ability to
consummate the transactions contemplated by this Agreement.
"Encumbrances" shall mean and include security interests, mortgages,
liens, pledges, guarantees, charges, easements, reservations,
restrictions, clouds, equities, rights of way, options, rights of first
refusal and all other encumbrances, whether or not relating to the
extension of credit or the borrowing of money. "Governmental Authority"
shall mean any Federal, state, municipal, foreign or other governmental
court, department, commission, board, bureau, agency or
instrumentality.
2.5. CONSENTS. Subject to the representations and warranties
of the Investor contained herein, no permit, authorization, consent or
approval of or by, or any notification of or filing with, any
Governmental Authority or other person is required in connection with
the execution, delivery and performance by the Corporation of this
Agreement or the consummation of the transactions contemplated hereby,
other than (i) the filing with the SEC of such reports and information
under the Securities Act of 1933, as amended, (the "Securities Act")
and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated by the Securities and
Exchange Commission ("SEC") thereunder, as may be required in
connection with this Agreement and the transactions contemplated
hereby, or (ii) the filing of such documents with, and the obtaining of
such orders from, various state securities and blue-sky authorities as
are required in connection with the transactions contemplated hereby.
2.6. SEC DOCUMENTS.
(i) The Corporation has furnished or made available to the
Investor a correct and complete copy of the Corporation's Annual Report
on Form 10-K filed with the SEC with respect to the fiscal year ended
December 31, 2000 (the "Form 10-K") and the Form 10-Q and each other
report, schedule, and information statement filed by the Corporation
with the SEC on or after the date of filing with the SEC the Form 10-Q,
which are all the documents (other than preliminary material) that the
Corporation was required to file (or otherwise did file) with the SEC
in accordance with Sections 13, 14 and 15(d) of the Exchange Act on or
after the date of filing with the SEC of the Form 10-Q (collectively,
the "SEC Documents"). As of their respective filing dates, none of the
SEC Documents (including all exhibits and schedules thereto and
documents incorporated by reference therein) contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and the SEC Documents complied when filed as of
their respective effective dates, in all material respects, with the
then applicable requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations promulgated by the
SEC thereunder.
(ii) The financial statements (including the notes thereto) of
the Corporation included in the Form 10-K for the fiscal year ended
December 31, 2000 and in the Forms 10-Q for the applicable fiscal
quarter complied as to form in all material respects with the then
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in
accordance with GAAP during the periods involved (except as may have
been indicated in the notes thereto) and fairly present the financial
position of the Corporation as at the dates thereof and the results of
its operations, stockholders' equity and cash flows for the periods
then ended.
2.7. BROKERS. Neither the Corporation nor any of its officers,
directors or employees have employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
2.8. NO MATERIAL ADVERSE CHANGE. Since the date of the Form
10-Q, no event which had or is likely to have a material adverse effect
on the business, operations, properties, financial condition or
operating results of the Corporation (a "Material Adverse Effect") has
occurred or exists with respect to the Corporation, except as otherwise
disclosed or reflect in press releases or other SEC Documents prepared
through or as of a date subsequent to the date of the Form 10-Q. The
Corporation has continued to incur losses from the date of the Form
10-Q through the date hereof.
2.9. NO GENERAL SOLICITATION. Neither the Corporation nor, to
the Corporation's knowledge, any person acting on its behalf has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D promulgated under the Securities
Act) in connection with the offer or sale of the Common Shares.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
hereby severally represents and warrants to the Corporation as follows:
3.1. AUTHORITY. The Investor has full power and authority to
execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby; and this Agreement constitutes the
valid and binding obligations of the Investor, enforceable in
accordance with its terms, except (i) as limited by (A) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws relating to or affecting the rights and
remedies of creditors and debtors and (B) equitable principles
generally, regardless of whether such principles are considered in a
proceeding at equity or at law.
3.2. ACCREDITED INVESTOR. The Investor is either an
"accredited investor" (as such term is defined in Rule 501 of
Regulation D promulgated under the Securities Act) or has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of acquiring Common Shares
under this Agreement.
3.3. INVESTOR INTENT. The Investor is acquiring the Common
Shares for its own account, for investment and not with a view to, or
for resale in connection with, any distribution thereof, nor with any
present intention of distributing or reselling the same or any part
thereof in any transactions that would be in violation of the
Securities Act or any state securities or "blue-sky" laws. It is
expressly understood that the Investor may grant the options
contemplated by Section 4.2(a) hereof and perform its obligations under
such options.
3.4. RESTRICTED SECURITIES. The Investor understands (i) that
the Common Shares will not be registered under the Securities Act or
any state securities or "blue-sky" laws by reason of their issuance in
a transaction exempt from the registration requirements of the
Securities Act or any state securities or "blue-sky" laws, (ii) that
the Common Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or any state
securities or "blue-sky" laws or is exempt from such registration,
(iii) that the Corporation is under no obligation to so register any
shares of Common Stock and (iv) that the certificate(s) evidencing the
shares of the Common Stock will be imprinted with a legend
substantially as set forth in Section 4.2(b) hereof.
3.5. RULE 144. The Investor understands that the exemption
from registration afforded by Rule 144 promulgated under the Securities
Act ("Rule 144") depends on the satisfaction of various conditions and
that, if applicable, Rule 144 may only afford the basis for sales under
certain circumstances only in limited amounts.
3.6. ACCESS TO INFORMATION; EXPERIENCE. The Investor has had
access during the course of this transaction and prior to sale of the
Common Shares to all information necessary to enable the Investor to
evaluate the merits and risks of a prospective investment in the
Corporation and the Investor has had an opportunity to discuss with
representatives of the Corporation the business and financial affairs
of the Corporation and the terms and conditions of the offering and to
obtain such additional information, to the extent that the Corporation
possesses such information or could acquire it without unreasonable
effort or expense, necessary to verify the accuracy of the information
to which the Investor has had access and all questions raised by the
Investor have been answered to the full satisfaction of the Investor.
The Investor has conducted its own investigation and analysis of the
business and its investment in the Common Shares and is not relying on
the Corporation's business plan or executive summary (if any) or any
other written material or any information or opinions that may be
contained therein in making its decision to purchase the Common Shares.
The Investor has substantial experience in evaluating and investing in
private placement transactions of securities in companies similar to
the Corporation so that it is capable of evaluating the merits and the
risks of its investment in the Corporation and has the capacity to
protect its own interests in making its investment in the Corporation.
The Investor can afford to suffer a complete loss of its investment in
the Common Shares.
3.7. SPECULATIVE INVESTMENT. The Investor understands that the
Corporation has a limited financial and operating history, that the
Common Shares are a speculative investment which involve a high degree
of financial risk, and that there is no assurance of any economic,
income or tax benefit from such investment. The Investor is aware of
the ongoing losses incurred by the Company since March 31, 2001.
3.8. REVIEW OF AGREEMENT. The Investor has carefully read and
reviewed this Agreement and, to the extent it believed necessary, the
Investor has discussed with its legal, accounting and other
professional advisors the representations, warranties and agreements
which the Investor is making herein and the terms and conditions of the
investment contemplated hereby.
SECTION 4. AFFIRMATIVE COVENANTS.
4.1. CONFIDENTIALITY. The Investor hereby agrees to and shall
keep strictly confidential and will not disclose or divulge any
confidential, proprietary or secret information which the Investor may
obtain from the Corporation, including, by way of example and not in
limitation thereof, financial statements, reports and other materials
submitted by the Corporation as required hereunder, unless required to
be disclosed by law or pursuant to any judgment, order, subpoena or
decree of any court having competent jurisdiction, or unless such
information is or becomes publicly known (other than as a result of
this Section 4.1), or unless the Corporation gives its written consent
to the Investor's release of such information, except that no such
written consent shall be required (and the Investor shall be free to
release such information) if such information is to be provided to the
Investor's lawyer or accountant who are instructed to comply with this
provision. The Investor shall be responsible for making sure its lawyer
and accountant comply.
4.2. TRANSFER OF SECURITIES.
(a) RESTRICTIONS ON TRANSFER. The Investor
acknowledges that the Common Shares purchased hereunder have
not been registered under the Securities Act, that such shares
are being or will be issued pursuant to an exemption from
registration under the Securities Act and that such shares
constitute "restricted securities" under Rule 144.
Accordingly, the Common Shares held by the Investor shall not
be sold, transferred, assigned, pledged, encumbered or
otherwise disposed of (each, a "Transfer") except upon the
conditions specified in this Section 4.2, Section 4.4 or
section 4.5 (which provides for certain additional
restrictions on transfer), which conditions are intended to
ensure compliance with the provisions of the Securities Act
and this Agreement. Notwithstanding the foregoing, the
Investor shall be permitted to grant an option to purchase all
or any part of the Common Shares to any of Xxxxx Xxxx or
Xxxxxxxx Xxxxxxxx, upon such terms and conditions as shall be
agreed among the parties thereto and to perform its
obligations under such options.
(b) RESTRICTIVE LEGEND. Each certificate for Common
Shares held by the Investor and each certificate for any such
securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the
provisions of Sections 4.2(c) and 4.2(d)) be stamped or
otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY RELEVANT STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS. COPIES
OF THE RELEVANT TRANSFER RESTRICTIONS CONTAINED IN A NOTE EXCHANGE
AGREEMENT BETWEEN DREAMLIFE, INC. AND THE OTHER PARTY THERETO MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF DREAMLIFE, INC."
(c) NOTICE OF TRANSFER. The Investor agrees, prior to
any Transfer of Common Shares to give written notice to the
Corporation of the Investor's intention to effect such
Transfer and to comply in all other respects with the
provisions of this Section 4.2. Each such notice shall
describe the manner and circumstances of the proposed Transfer
and, except in the case of a Transfer upon exercise of an
option referred to in Section 4.2(a), shall be accompanied by
the written opinion, addressed to the Corporation, of counsel
for the holder of such shares, stating that in the opinion of
such counsel (which opinion and counsel shall be reasonably
satisfactory to the Corporation), such proposed Transfer does
not involve any transaction requiring registration or
qualification of such shares under the Securities Act or the
securities blue sky laws of any relevant state of the United
States. Upon giving of such notice and, if
required, opinion, the Investor shall thereupon be entitled to
Transfer such shares in accordance with the terms of the
notice delivered by it to the Corporation; provided, that
unless the restrictions imposed by this Section 4.2 have
terminated, the transferee agrees in writing to be subject to
the provisions of this Section 4.2. Each certificate or other
instrument evidencing the securities issued upon the Transfer
of any such shares (and each certificate or other instrument
evidencing any untransferred balance of such shares) shall
bear the legend set forth in Section 4.2(b) unless (a)
registration of any future Transfer is not required by the
applicable provisions of the Securities Act and applicable
state securities laws or (b) the Corporation shall have waived
the requirement of such legends. The Investor shall not
Transfer any Common Shares until such opinion of counsel has
been given (unless waived by the Corporation or unless such
opinion is not required in accordance with the provisions of
this Section 4.2).
(d) REMOVAL OF LEGENDS, ETC. Notwithstanding the
foregoing provisions of this Section 4.2, the restrictions
imposed by this Section 4.2 upon the transferability of any
shares of the capital stock of the Corporation held by the
Investor shall cease and terminate when (a) any such shares
are sold or otherwise disposed of pursuant to an effective
registration statement under the Securities Act or as
otherwise contemplated by Section 4.2(c) and, pursuant to
Section 4.2(c), the securities so transferred are not required
to bear the legend set forth in Section 4.2(b) or (b) the
holder of such shares has received an opinion of counsel
stating that such holder has met the requirements for Transfer
of such shares pursuant to subparagraph (k) of Rule 144.
Whenever the restrictions imposed by this Section 4.2 shall
terminate, as herein provided, the Investor holding shares as
to which such restrictions have terminated shall be entitled
to receive from the Corporation, without expense, a new
certificate not bearing the restrictive legend set forth in
Section 4.2(b) and not containing any other reference to the
restrictions imposed by this Section 4.2.
SECTION 5. MISCELLANEOUS.
5.1 NOTICES. All notices, advices and communications to be
given or otherwise made to any party to this Agreement shall be deemed
to be sufficient if contained in a written instrument delivered in
person or by telecopier or duly sent by first class registered or
certified mail, return receipt requested, postage prepaid, or by
overnight courier, addressed to such party at the address set forth
below or at such other address as may hereafter be designated in
writing by the addressee to the addressor listing all parties:
(i) if to the Corporation, to:
000 Xxxx 00xx Xxxxxx
Xxxxx 0X
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxxx
(ii) if to the Investor, to the Investor's address set forth
on the first page hereto.
or to such other address as the party to whom notice is to be given may have
furnished to the
other parties hereto in writing in accordance herewith. Any such notice or
communication shall be deemed to have been delivered and received (i) in the
case of personal delivery or delivery by telecopier, on the date of such
delivery, (ii) in the case of nationally-recognized overnight courier, on the
next business day after the date when sent and (iii) in the case of mailing, on
the third business day following that on which the piece of mail containing such
communication is posted. As used in this Section 5, "business day" shall mean
any day other than a day on which banking institutions in the State of
New York
are legally closed for business.
5.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, this Agreement shall bind and inure to the benefit of
the parties hereto and the respective successors and assigns of the
parties hereto, PROVIDED, HOWEVER, that the rights and obligations of
the Corporation shall not be assignable without the prior written
consent of the Investor.
5.3 SURVIVAL. All representations and warranties contained in
this Agreement shall survive the Closing.
5.4 AMENDMENTS. The terms and provisions of this Agreement may
only be amended with the written consent of the Corporation and the
Investor.
5.5 ENTIRE AGREEMENT. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part
hereof contain the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior and contemporaneous
arrangements or understandings with respect thereto.
5.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall
constitute but one agreement.
5.7 HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Agreement.
5.8 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAWS PROVISION OR
RULE (WHETHER OF THE STATE OF NEW YORK, OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW
YORK TO BE APPLIED, EXCEPT TO THE EXTENT THAT THIS AGREEMENT RELATES TO
THE INTERNAL AFFAIRS OF THE CORPORATION, WHICH SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAWS PROVISION OR
RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
DELAWARE TO BE APPLIED TO SUCH MATTERS. IN FURTHERANCE OF THE
FOREGOING, THE INTERNAL LAW OF THE STATE OF NEW YORK OR THE STATE OF
DELAWARE, AS THE CASE MAY BE, WILL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS
AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT
OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD
ORDINARILY APPLY.
IN WITNESS WHEREOF, the undersigned have caused this Note
Exchange Agreement to be executed as of the date written below.
DREAMLIFE, INC.
Dated: By:
-------------- ------------------------
Name:
Title:
CYL DEVELOPMENT HOLDINGS, L.L.C.
Dated: By:
-------------- ------------------------
Name:
Title:
EXHIBIT G
June 20, 2001
VIA EMAIL AND FACSIMILE
Xx. Xxxxxxxx Xxxxxxxx
Chief Financial Officer
dreamlife, inc.
000 Xxxx 00xx Xxxxxx
Xxxxx #0
Xxx Xxxx, XX 00000
Dear Xx. Xxxxxxxx:
This letter agreement memorializes the agreement between dreamlife, inc.
("dreamlife") and Yahoo!, Inc. ("Yahoo"), regarding the payment schedules set
forth in Insertion Order No. 59520 dated December 6th 1999 and in the Yahoo!
Inc./GHS Content License Agreement dated December 6th 1999, each by and between
Yahoo and dreamlife (collectively, the "Agreements").
The parties hereto hereby acknowledge and agree that dreamlife is currently in
arrears on the payments due Yahoo! in the amount of $104,167 for the payment due
December 1, 2000 under the Yahoo! Inc./GHS Content License Agreement, and
$125,000 for payments due as of December 1, 2000 under Insertion Order No.
59520. The parties have agreed to terminate the Agreements and enter into this
letter agreement to resolve the outstanding payments owed by dreamlife. Upon
receipt by Yahoo of the Settlement Amount (defined below) from dreamlife,
dreamlife will be released of its payment obligations and responsibilities under
the Agreements. For clarity, this release is effective only with respect to
dreamlife's payment obligations under the Agreements. Any and all other
obligations under the Agreement including, without limitation, any and all
indemnity and confidentiality obligations, shall remain in full force and
affect.
Dreamlife agrees to execute and deliver this letter agreement and wire, to the
account set forth on Annex A to this letter agreement, the sum of Fifty Thousand
Dollars ($50,000) (the "Settlement Amount"), in immediately available funds.
Upon Yahoo's receipt of such amount, Yahoo agrees that the Settlement Amount
will be in full settlement of all claims for payments set forth in the Agreement
that Yahoo may have had, now has or may have in the future against dreamlife
based on facts, transactions or occurrences that have taken place as of the date
of this letter agreement with respect to the Agreements. Yahoo acknowledges that
as of the date of this Agreement, no other payments or benefits have been
promised or are otherwise due in the future to Yahoo by or from dreamlife.
In consideration of the Settlement Amount, Yahoo and each and all of its
officers,
directors, employees, assigns, and parent, subsidiaries and affiliated
corporations and entities knowingly and voluntarily forever release and
discharge dreamlife, and its respective officers, directors, present and former
shareholders, employees, assigns, agents and parent, subsidiaries, divisions,
affiliated, predecessor, successor corporations and entities, from any and all
claims, demands, debts, liabilities, accounts, accounts reckoning, obligations,
sums of money, and remedies of any nature whatsoever, known or unknown from the
beginning of the world to the day of the date of this letter agreement relating
to dreamlife's payment obligations under the Agreements.
Yahoo hereby represents and warrants that it shall not hereafter assert any
claims, causes of action or other right to relief against dreamlife, or any
person or entity released and discharged herein for acts or omissions occurring
from the beginning of time through the date of this letter agreement relating to
dreamlife's payment obligations under the Agreement.
Dreamlife hereby acknowledges that Yahoo has performed all of its obligations
for the delivery of advertising units, integration of content or similar
services. Dreamlife and each and all of its officers, directors, employees,
assigns, and parent, subsidiaries and affiliated corporations and entities
knowingly and voluntarily forever release and discharge Yahoo, and its
respective officers, directors, present and former shareholders, employees,
assigns, agents and parent, subsidiaries, divisions, affiliated, predecessor,
successor corporations and entities, from any and all claims, demands, debts,
liabilities, accounts, accounts reckoning, obligations, sums of money, and
remedies of any nature whatsoever, known or unknown from the beginning of the
world to the day of the date of this letter agreement relating to Yahoo's
obligations for the delivery of advertising units, integration of content, or
similar services under the Agreements, other than the release with respect to
its payment obligations contained herein. Further, dreamlife represents and
warrants that it shall not hereafter assert any claims, causes of action or
other right to relief against Yahoo, or any person or entity related thereto,
for acts of omissions occurring from the beginning of time through the date of
this letter agreement relating to Yahoo's obligations for the delivery of
advertising units, integration of content, or similar services under the
Agreements.
This release and discharge is knowingly and voluntarily made by the parties with
the specific intention that, to the maximum extent allowed by law, all claims
against the other relating to the matters set forth herein, based on facts,
transactions or occurrences that have taken place in respect of the Agreements
as of the date of this letter agreement, shall be forever waived, released and
discharged.
The parties warrant and represent that each is the only entity of any kind
having any interest in any of the claims that are described or referred to
herein and that each has the full power and authority to release, discharge,
waive and compromise said claims. The parties further warrant and represent that
none of said claims, nor any part thereof, have been assigned, granted or
transferred to any other person, firm or entity.
The parties acknowledge that this letter agreement has been made in confidence
and agree, as a material condition hereof, that neither they nor their counsel
shall disclose
privately or publicly, or cause or allow to be disclosed, privately or publicly,
the fact of this settlement or any of the terms and provisions of this letter
agreement to any person or entity, except to their counsel, accountants or as
required by law. Any disclosure permitted hereunder shall be limited to the
information required to or otherwise necessary under the circumstances to
achieve the legitimate purpose of the disclosure, and shall include no other
information. Notwithstanding anything to the contrary contained herein, if asked
about the matter, the parties are entitled to respond and shall state that "the
matter has been resolved amicably," or words of substantially identical import.
The parties agree that they have read and understand this letter agreement, and
mutually warrant and represent that this letter agreement is entered into
voluntarily and without duress or undue influence on the part of or on behalf of
either party hereto.
This letter agreement contains the sole and entire agreement and understanding
of the parties with respect to the subject matter hereof, and any and all prior
discussions, negotiations, commitments and understandings related hereto are
merged herein. No representations, oral or otherwise, expressed or implied,
other than those set forth herein have been made by any party to this letter
agreement. No other agreements, oral or otherwise, not specifically set forth
herein, shall be deemed to exist or to bind any of the parties hereto.
No provision of this letter agreement may be modified, amended, altered or
waived except by a written instrument duly executed by both of the parties
hereto. A waiver of any one provision of this letter agreement shall not be
deemed a waiver of any other provision of the letter agreement.
In the event that either party commences an action or proceeding to enforce any
provision hereof, or for damages by reason of any alleged breach of any
provision of this letter agreement, or for a declaration of such party's rights
or obligations hereunder, or for any other judicial remedy, the prevailing party
in such action or proceeding shall be entitled to recover from the losing party
all costs and expenses incurred thereby, including but not limited to any trial
and appellate costs incurred in ascertaining or enforcing such party's right
under this letter agreement, and any additional relief to which such party may
be entitled.
This letter agreement is entered into pursuant to the laws of the State of
California and shall be governed by, construed and interpreted in accordance
therewith, without regard to the choice-of-law principles thereof.
This letter agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall constitute together one
and the same instrument.
Please sign this letter as provided below to confirm our agreement and return
your signature to me via facsimile with the original to follow by overnight
service.
Sincerely,
YAHOO, INC.
By
------------------------------
Title
---------------------------
ACKNOWLEDGED AND AGREED
THIS __DAY OF JUNE, 2001.
DREAMLIFE, INC.
By
-------------------------------
Title
----------------------------
ANNEX A
Yahoo's wire instructions are as follows:
IMPERIAL BANK
0000 Xxxxxxxxx Xxxxx Xxxx.
Xxxxxxx Xxxxx, XX 00000
Attn: Central California Regional Office
Routing #: 000000000
Beneficiary Account Name: Yahoo! Inc
Beneficiary Account Number: 0000-000-000
EXHIBIT H
TERMINATION, SETTLEMENT AND RELEASE AGREEMENT
This Termination and Settlement Agreement (the "Termination and
Settlement Agreement"), dated as of June 25, 2001 (the "Settlement Effective
Date"), is made and entered into by and between America Online, Inc. ("AOL"),
with offices located at 00000 XXX Xxx, Xxxxxx, Xxxxxxxx 00000 and Deamlife, Inc.
("Interactive Content Provider" or "ICP") with offices located at 000 Xxxx 00xx
Xxxxxx, Xxxxx 0X, Xxx Xxxx, Xxx Xxxx 00000 (each a "Party" and collectively the
"Parties").
INTRODUCTION
AOL and ICP are Parties to that certain Interactive Services Agreement
dated July 17, 2000 (the "Agreement").
WHEREAS, AOL notified ICP by letter dated January 8, 2001, that ICP was
in material breach of the Agreement as a result of its failure to comply with
its payment obligations under Section 1.5 of the Agreement; and
WHEREAS, the Parties wish to provide for the early termination and
settlement of the Agreement.
TERMS
It is therefore agreed as follows:
21. PAYMENT. ICP hereby agrees to pay the single sum of fifty thousand dollars
($50,000.00), payable by ICP to AOL upon the full execution of this Termination
and Settlement Agreement, which sum shall constitute full and final settlement
of any and all claims or bases which were asserted or could have been asserted,
all claims for restitution, refund of payment, attorneys' fees, cost of court,
punitive damages, and pre- or post-judgment interest arising out of ICP's
failure to pay the amounts due as set forth in Section 1.5 of the Agreement.
22. TERMINATION. Subject to ICP's full and complete payment, as set forth in
Section 1 herein, the Agreement shall terminate on the Settlement Effective
Date, provided that those provisions of the Agreement which by their terms
survive termination of the Agreement, including without limitation all
provisions relating to confidentiality and non-disclosure, shall survive
termination, as expressly provided therein.
23. PLACEMENTS: IMPRESSIONS. The Parties hereby agree that, as of the Settlement
Effective Date, AOL shall have no further obligations to ICP to provide
carriage, Placements or Impressions pursuant to Sections 1.1, 1.6 and Exhibit
A-1 of the Agreement.
24. RELEASE. AOL and ICP each releases and forever discharges the other and all
if its stockholders, employees, agents, successors, assigns, legal
representatives, affiliates, directors and officers from and against any and all
actions, claims, suits, demands or other obligations or
liabilities of any nature whatsoever, whether know or unknown, which the
releasing Party or its stockholders, employees, agents, successors, assigns,
legal representatives, affiliates, directors or officers have had, now have or
may in the future have arising out of or in connection with the Agreement, which
exists as of this Settlement Effective Date, except in connection with those
provisions which survive termination of the Agreement and this Termination and
Settlement Agreement after the Settlement Effective Date.
25. ENTIRE AGREEMENT. This Agreement is the entire agreement between the Parties
regarding its subject matter. It supersedes, and its terms govern, all prior
proposals, agreements, or other communications between the Parties, oral or
written, regarding such subject matter. This Agreement shall not be modified
unless done so in a writing signed by authorized representative officers of both
Parties.
26. APPLICABLE LAW: JURISDICTION. This Agreement shall be interpreted, construed
and enforced in all respects in accordance with the laws of the Commonwealth of
Virginia, except for its conflicts of laws principles.
27. COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
AMERICA ONLINE, INC. DREAMLIFE, INC.
By: By:
------------------------ ------------------------
Print Name: Print Name:
--------------- ---------------
Title: Title:
-------------------- --------------------
Date: Date:
--------------------- ---------------------
EXHIBIT I
MODIFICATION TO XXXXX XXXX OFFER LETTER
DEFERRED BONUS
Paragraph C ("Deferred Bonus") of the July 24, 2000 Offer Letter is deleted and
replaced with the following:
The three million dollar ($3,000,000) bonus called for in the Offer
Letter is fully vested and will be paid as follows:
1. If Dreamlife is successful in raising $8 million in
new capital (including, without limitation,
convertible debt), the $3 million bonus payment will
be made in three equal payments of $1 million each in
July 2003, 2004 and 2005.
2. If Dreamlife is not successful in raising $8 million
of new capital, the $3 million bonus payment will be
made in 5 equal payments of $600,000 each in July
2003, 2004, 2005, 2006 and 2007; provided, however,
that if Dreamlife is successful in raising $8 million
of new capital after payments have begun to be made
to you pursuant to this paragraph 2, payments will be
accelerated to coincide with the schedule provided
for in paragraph 1.
3. The unpaid portion of the Deferred Bonus will be paid
within three months of your termination if you are
terminated by the company other than for cause (as
such term is defined in the Plan) prior to having
received payments totaling $3 million.
DREAMLIFE, INC.
By:
---------------------------
Xxxxx X. Xxxx
Chief Executive Officer
Agreed to and accepted by:
----------------------- ----------
Xxxxx X. Xxxx date
Chief Executive Officer
Dreamlife, Inc.
Acknowledged and accepted by:
----------------------- ----------
Xxxxxx Xxxxxxxxx date
Chairman of the Board
Discovery Toys, Inc.
EXHIBIT J
DREAMLIFE, INC.
000 XXXX 00XX XXXXXX
XXXXX 0X
XXX XXXX, XX 00000
July ___, 2001
Wit SoundView Corporation
c/o Wit Capital Corporation
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxx
Dear Xxxx:
dreamlife, inc. (the "COMPANY") and Wit SoundView Corporation ("WIT")
hereby agree as follows:
For and in consideration of the Company's payment to Wit of $200,000
(the "TERMINATION PAYMENT") in cash, by wire transfer of immediately available
funds to an account designated by Wit, as well as for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, both
Wit and the Company hereby agree that the letter agreement between the Company
and Wit, dated April 1, 2000 (the "LETTER AGREEMENT"), excluding the
Indemnification Agreement, executed by the parties on April 1, 2001 and attached
as Annex A to the Letter Agreement, is terminated immediately. The Termination
Payment shall satisfy in full any and all amounts due and payable to Wit by the
Company pursuant to the Letter Agreement (exclusive of the Indemnification
Agreement which shall continue to be in effect).
For and in consideration of the Termination Payment and as a material
inducement to the Company to enter into this Agreement, Wit knowingly and
voluntarily releases, acquits and forever discharges the Company, the Company's
present and former stockholders, predecessors, successors, assigns, agents,
directors, officers, employees, representatives, subsidiaries, affiliates, and
all persons acting by, thorough, under or in concert with any of them
(hereinafter collectively referred to as the "RELEASEES"), from any and all
claims of any nature whatsoever, known or unknown, which exist, have existed or
may arise from any matter arising out of or in any way related to the Letter
Agreement (collectively, "CLAIMS"), that Wit or its successors and assigns ever
had, now have or at any time hereafter may have, own or hold against each of or
any of the Releasees; PROVIDED, HOWEVER, that the provisions of this paragraph
shall not be applicable in the case of any Claim made by Wit pursuant to the
terms of the Indemnification Agreement.
For and in consideration of Wit's agreements hereunder, as well as for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and as a
material inducement to you to enter into this Agreement, the Company knowingly
and voluntarily releases, acquits and forever discharges Wit, all of its present
and former stockholders, predecessors, successors, assigns, agents, directors,
officers, employees, representatives, subsidiaries, affiliates, and all persons
acting by, thorough, under or in concert with any of them (the "WIT RELEASEES")
from any and all Claims that the Company ever had, now has or at any time
hereafter may have, own or hold against each of or any of the Wit Releasees
pursuant to the Letter Agreement.
By signing and returning this Agreement, each party represents and
acknowledges that:
(i) It has carefully read this Agreement in its entirety and fully
understands the terms hereof.
(ii) It has had an opportunity to be advised by competent counsel
of its own selection as to the meaning and significance of
this Agreement, the general release contained herein, and all
of the terms of this Agreement.
(iii) It is giving the release of claims effectuated herein in
return for consideration to which it otherwise would not have
been entitled.
(iv) It understands that it shall be a breach of this Agreement to
institute any action or to recover any damages, which would be
in conflict with, or contrary to this acknowledgement.
It is the desire and intent of the parties that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
by a court of competent jurisdiction to be invalid or unenforceable, such
provision shall be deemed amended to delete therefrom or modify the portion thus
adjudicated to be invalid or unenforceable, such deletion or modification to
apply only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made and to be made only to the
extent necessary to cause the provision as amended to be valid and enforceable.
by any court of law, the remaining provisions shall be severable and enforceable
in accordance with their terms.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without giving effect to any choice or
conflict of law provision or rule. No waiver, amendment or modification of any
provision of this Agreement shall be effective unless in writing and signed by
each party hereto. No failure or delay by any party in exercising any right,
power or remedy under this Agreement shall operate as a waiver thereof or of any
other right, power or remedy. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach. All notices, requests, consents and other communications
under this Agreement shall be delivered to (i) if to the Company, to the address
set forth on the first page of this Agreement, facsimile: (000) 000-0000,
Attention: Chief Financial Officer, and (ii) if to Wit, to the contact
information set forth on the first page of this Agreement. All such notices,
requests, consents and other communications shall be deemed to have been
delivered (x) in the case of personal delivery or delivery by facsimile, on the
date of such
delivery; (y) in the case of dispatch by nationally-recognized overnight
courier, on the next business day following such dispatch; and (z) in the case
of mailing, on the third business day after the posting thereof.
This Agreement and the other writings referred to herein or delivered
pursuant hereto contain the entire agreement among the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements and understandings with respect thereto. This Agreement shall bind
and inure to the benefit of the parties and their respective successors and
assigns; PROVIDED, HOWEVER, that neither party may assign this Agreement or any
of its rights or interest herein, in whole or in part, to any other person or
entity without the prior written consent of the other party. This Agreement may
be executed in any number of counterparts, and each such counterpart hereof
shall be deemed to be an original instrument, and all such counterparts together
shall constitute but one agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
[SIGNATURE PAGE TO LETTER DATED AS OF JULY ___, 2001]
Very truly yours,
DREAMLIFE, INC.
By:
-----------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED
TO AS OF THE DATE FIRST
WRITTEN ABOVE:
WIT SOUNDVIEW CORPORATION
By:
--------------------------------------------
Xxxx Xxxxxxx
Managing Director
