Exhibit 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of April 18, 2000 (this
"Agreement"), by and among Intellect Capital Group, LLC, a Delaware limited
liability company (the "Purchaser"), and XxxxxXxxx.Xxx, Inc., a Nevada
corporation (the "Company").
WITNESSETH:
WHEREAS, the Company desires to issue and sell, and the Purchaser
desires to purchase, 900 shares of Series B Preferred Stock (the "Purchased
Stock"), with such Purchased Stock having the various rights set forth in that
certain Certificate of Designations, Preferences and Rights of Series B
Preferred Stock in the form attached hereto as Exhibit A (the "Certificate of
Designations") convertible into shares of Common Stock of the Company (the
"Common Stock") upon the terms and subject to the conditions set forth in this
Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The capitalized terms used in this Agreement
(including the foregoing preamble and recitals) and not otherwise defined herein
shall have the meaning specified in Appendix 1 attached hereto and made a part
hereof.
ARTICLE II
PURCHASE OF INTERESTS; CLOSING
2.1 PURCHASE OF PURCHASED STOCK. Subject to the terms and conditions
set forth in this Agreement and the Designation, the Purchaser agrees to
purchase from the Company on the Closing Date, and the Company agrees to sell,
assign, transfer and deliver to the Purchaser on the Closing Date, free and
clear of all Encumbrances (other than those arising out of actions of the
Purchaser), the Purchased Stock.
2.2 TERMS OF PURCHASED STOCK. The Parties agree that the Certificate
of Designations shall set forth the terms of and conditions of the Purchased
Shares, including but not limited to the conversion of the Purchased Stock,
which shall be convertible into 50% of the Company's then-outstanding securities
following the conversion, on a fully-diluted basis (i.e., taking into account
all issued and outstanding Common Stock, the conversion of all other securities
convertible into shares of Common Stock, the exercise of all warrants and
options exercisable for shares of Common Stock and any commitments of the
Company to issue or sell any Common Stock or securities convertible into shares
of Common Stock and the exercise of such committed
securities) in accordance with Section 2(b) of the Certificate of Designations
and the immediate and automatic conversion of such Purchased Shares in the event
of the sale of all or substantially all of the assets of the Company or a merger
in which the Company is not the surviving entity or in which shares of Common
Stock of the Company are to be cancelled in exchange for value, or upon the
election of the Purchaser.
2.3 PURCHASE PRICE. In consideration for the sale by the Company of
the Purchased Shares, the Purchaser shall deliver at the Closing to the Company
Nine Thousand Dollars ($9,000) (the "Purchase Price").
2.4 CLOSING. The purchase and sale to the Purchaser referred to in
Section 2.1 (the "Closing") shall take place no later than 10:00 A.M. at the
offices of Manatt, Xxxxxx & Xxxxxxxx, LLP, 00000 Xxxx Xxxxxxx Xxxxxxxxx, Xxx
Xxxxxxx XX 00000, on May 10, 2000, or at such place as the parties may mutually
agree (the "Closing Date"). At the Closing, the Company shall assign and
transfer to the Purchaser good and valid title, and all other rights and
interests, in and to the Purchased Shares.
2.5 PAYMENT METHOD. The Purchase Price payable to the Company at
Closing shall be paid by wire transfer of immediately available funds or cash
pursuant to instructions delivered by the Company to the Purchaser on or before
the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has the requisite power to own and operate its properties
and carry on its business as it does currently. The Company has delivered or
made available to the Purchaser a true and correct copy of its Certificate of
Incorporation and its Bylaws (collectively, the "Company Formation Documents").
3.2 CAPITALIZATION. As of March 31, 2000, the Company had 50,000,000
shares of Common Stock authorized, of which 12,881,875 shares were issued and
outstanding and 500,000 shares of preferred stock, $.001 par value (the
"Preferred Stock") authorized, of which 125 shares had been designated as Series
A Convertible Preferred Stock, of which 106 shares were issued and outstanding.
A true and compete list of all of the numbers of any and all commitments to
issue Common Stock or securities convertible into Common Stock is set forth on
SCHEDULE 3.2(a). All of the issued and outstanding shares of Common Stock of the
Company are validly issued, fully paid and nonassessable, and free of preemptive
rights. All of the issued and outstanding shares of all of the series of
Preferred Stock are validly issued, fully paid and nonassessable, and free of
preemptive rights. The Purchased Stock shall be convertible into such number of
shares of Common Stock reflecting 50% of all of the Company's then-outstanding,
on a fully-diluted basis (i.e., taking into account all issued and outstanding
Common Stock, the conversion of all other securities convertible into shares of
Common Stock, the exercise of all
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warrants and options exercisable for shares of Common Stock and any commitments
of the Company to issue or sell any Common Stock or securities convertible into
shares of Common Stock and the exercise of such committed securities) as set
forth in Section 2(b) of the Certificate of Designations and is free and clear
of all Liens and adverse claims except as provided in SCHEDULE 3.2. There are
not now, and on the Closing Date there will not be, any shares of Common Stock
(or interests or securities substantially equivalent to Common Stock) issued or
outstanding or any subscriptions, options, warrants, calls, rights, convertible
securities or other agreements or commitments of any character obligating the
Company to issue, transfer or sell any of its Common Stock or securities (except
as set forth on SCHEDULE 3.2(a)). The Company has sufficient number of shares of
Common Stock authorized in order to reserve a number of shares to permit the
conversion of the Purchased Shares.
3.3 AUTHORITY AND AUTHORIZATION OF AGREEMENT. The Company has all
necessary power and authority to execute and deliver this Agreement and the
other Closing Documents to which it is a party, to consummate the transactions
contemplated by this Agreement, to perform all the terms and conditions of this
Agreement and the Closing Documents to be performed by it and to issue
additional series of preferred stock that do not have rights in excess of
existing series of preferred stock without shareholder approval. The execution,
delivery and performance by the Company of this Agreement and the other
documents, certificates, and instruments to be executed and delivered by the
Company hereunder, and the consummation of the transactions contemplated hereby,
have been duly and validly authorized and approved by all necessary corporate
action on the part of the Company and no other proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate such
transactions. This Agreement, and the other documents, certificates, and
instruments delivered by the Company hereunder to which it is a party, have been
duly executed and delivered by the Company and, assuming the due execution of
this Agreement by the Purchaser, constitute the legal, valid, and binding
obligations of the Company, enforceable against it in accordance with their
terms, except as may be limited by general principles of equity or principles of
creditors' rights generally.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth on
SCHEDULE 3.4(a), the execution and delivery by the Company of this Agreement and
the other Closing Documents to which it is a party do not, and the consummation
by the Company of the transactions contemplated hereby and compliance by the
Company with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligations or the loss of a benefit under or result in the creation of any
Lien upon or right of first refusal with respect to any of the properties or
assets of the Company under, (i) any provision of the Company Formation
Documents or (ii) any material loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, obligation, instrument, permit, concession,
franchise of license applicable to the Company, other than, in the case of (ii),
any such violations, defaults, rights, losses or Liens that, individually or in
the aggregate, would, so far as the Company may reasonably foresee, not prevent
or result in a delay of the consummation of the transactions contemplated by
this Agreement. No filing or registration with, or authorization, consent or
approval of, any Governmental Authority is required by or with respect to the
Company in connection with the execution and delivery of this Agreement by the
Company or is
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necessary for the consummation of the transaction contemplated by this
Agreement, except such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, so far as the Company may
reasonably foresee, prevent or result in a delay of the consummation of the
transactions contemplated hereby.
3.5 BROKERS. No agent, broker, person or firm acting on behalf of
the Company, is, or will be, entitled to any commission or broker's or finder's
fees from the Company, or from any Person controlling, controlled by or under
common control with the Company, in connection with the purchase of the
Purchased Stock.
3.6 LITIGATION. Except as set forth on SCHEDULE 3.6 hereto, there is
no Action pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Shareholders or their respective Affiliates that
would affect materially the ability of the Company to carry out the transactions
contemplated by this Agreement.
3.7 FINANCIAL STATEMENTS; NO MATERIAL CHANGES.
(a) The Audited Financial Statements of the Company, dated
December 31, 1999, are hereinafter referred to as the
"Financial Statements" and December 31, 1999 is
hereinafter referred to as the "Financial Statement
Date". The Financial Statements are set forth on
SCHEDULE 3.7(a). The Financial Statements fairly present
in all material respects the financial position of the
Company at the date thereof.
(b) Since the Financial Statement Date, there has been no
material adverse change in the business, operations,
assets, liabilities, condition (financial or otherwise)
or results of operations of the Company taken as a whole
(a "Material Adverse Change").
(c) The Company has no commitments to issue Common Stock or
any other securities or debt instruments convertible
into shares of Common Stock, except for those noted on
SCHEDULE 3.2.
3.8 BOOKS AND RECORDS. The minutes of the Company previously made or
to be made available to the Purchaser and its representatives, contain
materially accurate records of all meetings of, and corporate actions taken by
(including action taken by written consent), the Board of Directors and the
Shareholders of the Company.
3.9 COMPLIANCE WITH LAWS. The Company is in compliance with all
applicable laws, regulations, orders, judgments and decrees except where the
failure to so comply does not and would not reasonably be likely to have a
Material Adverse Change.
3.10 MATERIAL AGREEMENTS. SCHEDULE 3.10 sets forth an accurate and
complete list of all Material Agreements. Company has provided or will provide
prior to the Closing Date Purchaser with complete and correct copies of all such
Material Agreements. Except as set forth
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in SCHEDULE 3.10: (i) the Material Agreements have not been modified, amended or
assigned and are in full force and effect; (ii) there are no defaults by Company
or any other party to the Material Agreements as of the Closing Date; (iii)
Company has not received any notice of any default, offset, counterclaim or
defense under the Materials Agreements as of the Closing Date; (iv) no condition
or event has occurred which with the passage of time or the giving of notice or
both would constitute a default or breach by Company of the terms of the
Material Agreements as of the Closing Date; and (v) there does not now, and at
Closing there will not, exist any security interest, lien, encumbrance or claim
on any interest of Seller in the Material Agreements as of the Closing Date.
3.11 PATENTS, TRADEMARKS, ETC. Except as set forth on SCHEDULE 3.11,
the Company has title and ownership of all patents, patent applications,
licenses, trademarks, service marks, trade names, inventions, processes,
formulae, trade secrets, franchises, copyrights and other proprietary rights
relative to intellectual property necessary for the operation of its business as
now conducted and as proposed to be conducted with no infringement of or
conflict with the rights of others. To the best of its knowledge, such ownership
and title are exclusive and not subject to termination without the Company's
consent. Except as set forth on SCHEDULE 3.11, there are no outstanding options,
licenses, or agreements of any kind relating to the foregoing proprietary
rights, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights or processes of any other person or entity. Except as set forth on
SCHEDULE 3.11 and to the best of the Company's knowledge, there is no third
party that is infringing or violating any of the Company's patents, licenses,
trademarks, service marks, trade names, inventions, processes, formulae, trade
secrets, franchises, copyrights or other proprietary rights relative to
intellectual property. Except as set forth on SCHEDULE 3.11, the Company has not
received any communications from any third party alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights relative to intellectual property of any other person
or entity.
3.12 DOMAIN NAMES. Set forth on SCHEDULE 3.12 hereto is every
Internet domain name in which the Company is the registrant (the "Domain
Names"). There are no claims of infringement or misappropriation, pending or, to
the knowledge of the Company, threatened, relative to the Domain Names, and, to
the knowledge of the Company, there is no basis for any such claims. The Company
is the sole and exclusive owner of all right, title and interest in and to the
Domain Names.
3.13 DISCLOSURE. To the Company's knowledge, there is no event, fact,
condition or occurrence that makes any of the representations and warranties
contained in Article III or any certificate, schedule or exhibit prepared and
delivered by or on behalf of the Company pursuant to this Agreement untrue or,
if not disclosed, would make such representations and warranties misleading in
light of the circumstances under which they were furnished.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
4.1 EXISTENCE AND GOOD STANDING; POWER AND AUTHORITY. The Purchaser
is a limited liability company duly created and validly existing and in good
standing under the laws of the State of Delaware. The Purchaser has the
requisite company power and authority to enter into, execute and deliver this
Agreement and perform its obligations hereunder. This Agreement has been duly
authorized and approved by the Purchaser and no other action on the part of the
Purchaser is necessary to authorize the execution, delivery and performance of
this Agreement. This Agreement has been duly executed and delivered by the
Purchaser and, assuming the due execution of this Agreement by the Company is a
valid and binding obligation of the Purchaser enforceable against it in
accordance with its terms, except to the extent that its enforceability may be
subject to applicable bankruptcy, insolvency, organization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
4.2 INVESTMENT REPRESENTATIONS.
(a) Purchaser is acquiring the Purchased Stock for its own
account, not as nominee or agent, for investment and not
with a view to, or for resale in connection with, any
distribution or public offering thereof within the
meaning of the Securities Act of 1933, as from time to
time amended, or any similar Federal statute then in
effect (the "1933 Act").
(b) Purchaser is an investor in securities of companies in
the development stage and acknowledges that it can bear
the economic risk of its investment and has such
knowledge and experience in financial or business
matters that it is capable of evaluating the merits and
risks of the investment in the Purchased Stock.
(c) Purchaser has not been offered the Purchased Stock by
any form of advertisement, article, notice or other
communication published in any newspaper, magazine or
similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited
by such media.
(d) Purchaser was not formed for the specific purpose of
acquiring the Purchased Stock offered hereunder.
(e) Purchaser's principal address is as set forth in Section
10.5 hereof, and it does not reside in any state of the
United States other than the state specified in its
address in Section 10.5 hereof, if at all.
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4.3 CONSENTS AND APPROVALS. Other than the filings and/or notices
set forth in SCHEDULE 4.3, no notices, reports or other filings are required to
be made by Purchaser with, nor are any consents, registrations, approvals,
permits, authorizations or waivers required to be obtained by Purchaser from,
any Person or Governmental Authority, in connection with the execution and
delivery of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby except those that the failure to make or obtain
are not, individually or in the aggregate, reasonably likely to prevent,
materially delay or materially impair the ability of Purchaser to consummate the
transactions contemplated by this Agreement.
4.4 RESTRICTIVE DOCUMENTS. The Purchaser is not subject to any
mortgage, lien, lease, agreement, instrument, order, law, rule, regulation,
judgment or decree, or any other restriction of any kind or character which
would prevent consummation by it of the transactions contemplated by this
Agreement and consummation of the transactions contemplated hereby will not
result in a violation or breach of or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under, any mortgage, lien, lease,
agreement or instrument to which the Purchaser is a party or by which it is
bound and which breach or default would prevent the consummation of the
transactions contemplated by this Agreement.
4.5 BROKERS. No agent, broker, person or firm acting on behalf of
the Purchaser, is, or will be, entitled to any commission or broker's or
finder's fees from the Purchaser, or from any Person controlling, controlled by
or under common control with the Purchaser, in connection with the purchase of
the Purchased Stock.
4.6 NO LITIGATION. There is no judgment or decree outstanding or
litigation or other investigation pending or proceeding pending or, to the
Purchaser's knowledge, threatened which would adversely affect the Purchaser's
power, authority or ability to enter into this Agreement and to carry out the
transactions contemplated herein.
4.7 NO INSOLVENCY. No insolvency proceedings of any nature,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
the Purchaser are pending or threatened, and the Purchaser has not made an
assignment for the benefit of creditors nor taken any action with a view to, or
which would constitute the basis for, the institution of any such insolvency
proceedings.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 EXCLUSIVE DEALING. During the period from the date of this
Agreement to the earlier of (i) the Closing Date or (ii) the termination of this
Agreement in accordance with its terms, none of the Company, its Affiliates or
representatives or any officer or director of the Company shall take any action
to, directly or indirectly, encourage, initiate, solicit or engage in
discussions or negotiations with, or provide any information, including the
existence of this Agreement and the status of the transactions contemplated
hereby, to any Person, other than the Purchaser and its Affiliates and
representatives (including their respective attorneys, accountants
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and financial advisors), concerning any purchase of any Common Stock or any
merger, asset sale or similar transaction involving the Company unless the
disclosure of such information is necessary in making any filings or obtaining
any consents or approvals required under this Agreement or for the consummation
of the transactions contemplated hereby. The Company shall immediately cease and
cause to be terminated any negotiations, discussions or activities, and shall
promptly notify Purchaser in the event any of them receives a written inquiry
from any Person indicating or suggesting an interest, concerning the purchase of
any capital stock of the Company or any merger, asset, sale or similar
transaction involving the Company.
5.2 REVIEW OF THE COMPANY. The Purchaser may, prior to the Closing
Date, directly or through its representatives, review the properties, books and
records of the Company and its financial and legal condition to the extent they
deem necessary or advisable to familiarize itself with such properties and other
matters; provided that such review shall occur during regular business hours of
the Company and shall be conducted in a manner that will not unduly disrupt the
business and operations of the Company. The Company shall permit the Purchaser
and its representatives to have, after the date of execution of this Agreement,
reasonable access to the premises occupied by the Company and to all the books
and records of the Company and to cause the officers of the Company to furnish
the Purchaser with such financial and operating data and other information with
respect to the business and properties of the Company as the Purchaser shall
from time to time reasonably request. The Company shall deliver or cause to be
delivered to the Purchaser such additional instruments, documents, certificates
and opinions as the Purchaser may reasonably request for the purpose of: (a)
verifying the information set forth in this Agreement or on any Schedule
attached hereto and (b) consummating or evidencing the transactions contemplated
by this Agreement.
5.3 REASONABLE EFFORTS. Each of the Company and the Purchaser shall
cooperate and use their respective commercially reasonable efforts to take, or
cause to be taken, all appropriate actions, and to make, or cause to be made,
all filings necessary, proper or advisable under applicable laws and
regulations, and to deliver or cause to be delivered such additional
instruments, documents, certificates and opinions as requested, in each case to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their respective commercially reasonable efforts
to obtain, prior to the Closing Date, all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Authorities
and Persons party to, or delivering consents, waivers or authorizations under,
the Material Agreements (it being understood and agreed that the Company has the
primary obligation to secure consents, waivers or authorizations under the
Material Agreements and the Purchaser has the obligation to use its commercially
reasonable efforts to assist the Company).
ARTICLE VI
POST-CLOSING COVENANTS
6.1 CONFIDENTIALITY. The parties hereto shall hold in confidence the
information contained in this Agreement, and all information related to this
Agreement, which is not otherwise known to the public, shall be held by each
party hereto as confidential and proprietary
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information and shall not be disclosed without the prior written consent of the
other parties. Accordingly, the Company and the Purchaser shall not discuss
with, or provide nonpublic information to, and shall cause their Affiliates to
not discuss with or provide nonpublic information to, any third party (except
for such party's attorneys and consultants) concerning this transaction, except
as required in governmental filings or judicial, administrative or arbitration
proceedings or pursuant to public announcements made with the prior written
approval of the Company and the Purchaser; PROVIDED, HOWEVER, that the Purchaser
may provide non-public information to investors and employee candidates.
6.2 COOPERATION. The parties hereto agree to cooperate as is
necessary to effectuate the terms of this Agreement. The Company agrees to use
its best efforts to provide financial data and other information, including
access to all industry contacts, to Purchaser or potential investors. The
Company agrees to provide the Purchaser any information regarding the Company at
Purchaser's request. The Company agrees that it shall pay reasonable
out-of-pocket expenses of Purchaser associated with its efforts as an active
investor in the Company, provided that the Company shall not be obligated to pay
the Purchaser's legal fees in connection with the execution of this Agreement,
and provided further, that the Purchaser shall seek approval of the Company
prior to any expenditure exceeding $5,000. The Company hereby acknowledges that
any amounts raised through the efforts of the Purchaser will be subject to
standard introduction fees of seven percent.
6.3 ACTIVE INVESTOR. The Purchaser will be an active shareholder in
the Company, and as such will reasonably assist the Company with some or all of
the following for as long as the Purchaser owns the Purchased Shares:
(a) Identifying strategic alternatives for the Company,
including identifying and approaching appropriate
funding sources, arranging capital through
intermediaries and/or investors, initial capitalization
of the Company, divestiture or acquisition of
businesses, the sale of the Company, including using its
best efforts to assist the Company in obtaining
commitments for financing in the amount of $10 million
by June 30, 2000 and using its best efforts to obtain
commitments to obtain the necessary financing during the
first two years following the execution of this
Agreement (which the parties hereto anticipate to total
$15 million, subject to change as may be required by
market conditions, the general business climate and the
Company's needs);
(b) Advisory services, including general business and
financial analysis, transaction feasibility analysis,
and personnel matters, including attracting management
and directors to be employed or retained by the Company;
(c) Providing general advice on corporate financial issues,
including advice with respect to capital markets, merger
and asset acquisition or divestiture activities and
balance sheet management activities;
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(d) As requested, assisting in negotiations and related
strategy with respect to any transactions;
(e) Advising and assisting management of the Company in
making appropriate presentations to investors and other
third parties;
(f) Other financial, advisory and related business services
as may from time to time be agreed upon by the Purchaser
and the Company.
6.4 BOARD DESIGNATIONS. For as long as Purchaser shall own any
Preferred Stock or Common Stock ("Capital Stock") of the Company, Purchaser
shall have the right to designate for nomination in any election of directors to
the Board of Directors such number of individuals as constitutes twenty percent
(20%) of the Board of Directors of the Company, rounded up to the next whole
person ("Purchaser Designees"). As of the date hereof, the Purchaser Designee is
Xxxxxx X. Xxxxxx. For as long as Purchaser shall own any Capital Stock of the
Company, any investors introduced to the Company by Purchaser in connection with
its conduct as an active shareholder who consummate an investment in the Company
shall be granted the right, as a group and in connection with such investment,
to designate for nomination in any election of directors to the Board of
Directors such number of individuals as constitutes twenty percent (20%) of the
Board of Directors of the Company ("Investor Designees"). For as long as
Purchaser shall own any Capital Stock of the Company, management of the Company
shall have the right to designate for nomination in any election of directors to
the Board of Directors such number of individuals as constitutes twenty percent
(20%) of the Board of Directors of the Company ("Company Designees"), provided
that the identity of the Purchaser Designees shall be subject to Purchaser's
approval, not to be unreasonably withheld (which withholding by Purchaser shall
be deemed to be reasonable in the event that the Company submits an individual
or individuals who have professional, business or industry expertise that is
already possessed or represented by another member of the Board of Directors or
believed by Purchaser to be insufficient at the time of such submission). The
Company shall submit the names and qualifications of the proposed Company
Designees to Purchaser in writing, and Purchaser shall approve or disapprove of
such Company Designees in writing within 10 business days. If a Company Designee
is not approved, Company management shall have 30 days to provide the name of a
new Company Designee. The Purchaser shall use its best efforts to assist the
Company in identifying potential Company Designees. The Company shall re-submit
names until such time as Purchaser approves a Company Designees or Company
Designees. In the event the Board of Directors of the Company contains eight,
nine or fourteen individuals, the percentage of the Board designation evidenced
by the Investor Designees and the Company Designees shall be rounded up to the
next whole person. Each of the Purchaser Designees and the Investor Designees
shall be appointed to the Board as soon as possible after the Closing Date.
Xxxxxx X. Xxxxxx shall be named as Chairman of the Board as soon as possible
after the Closing Date.
6.5 MANAGEMENT HIRING/OPERATIONS.
(a) As soon as possible after the Closing Date, the Company
shall hire individuals to serve as President/Chief
Operating Officer and Chief
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Financial Officer, which individuals shall be subject to
the prior approval of the Purchaser in its sole
discretion. Such individuals will be in charge of the
day-to-day operations of the Company.
(b) Within ten days after the Closing Date, the Company
shall enter into employment agreements with each of
Xxxxxx Free and Xxxx Xxxxxxx, on commercially reasonable
terms. The Purchaser shall assist the Company with
respect to such negotiations. Notwithstanding the
foregoing, if the parties mutually agree to hire a
third-party as the Company's Head of Production, then
the requirements of this section will be deemed to be
met by such agreement.
(c) As soon as possible after the Closing Date, the Company
shall effectuate an organization structure whereby an
executive committee is set up, consisting of the Vice
Chairman of the Board of Directors and Chairman of the
Executive Committee, the President/Chief Operating
Officer and the Chief Financial Officer. This committee
shall report to the Board of Directors of the Company.
6.6 INSURANCE. The Company shall maintain insurance as is standard
for a public company covering liabilities of its directors and officers arising
from such directors' and officers acts or omissions.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to purchase the Purchased Shares
contemplated by this Agreement is conditioned upon the satisfaction or waiver,
at or prior to Closing, of the following conditions:
7.1 GOOD STANDING AND OTHER CERTIFICATES. The Purchaser shall have
received (a) copies of the Company Formation Documents, including all amendments
thereto, in each case certified by the Secretary of State of the State of Nevada
(the "Nevada Secretary of State"), (b) a certificate from the Nevada Secretary
of State to the effect that the Company is in good standing and listing all
charter documents of the Company on file, and (c) if applicable, a certificate
as to the tax status of the Company from the appropriate official in the State
of Nevada.
7.2 CLOSING DOCUMENTS. The Closing Documents requiring execution by
the Company shall have been executed and delivered by the Company.
7.3 LEGAL OPINION. Purchaser shall have received an opinion of
Silicon Valley Law Group, LLP, counsel to the Company, in the form attached
hereto as Exhibit B.
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7.4 EMPLOYMENT AGREEMENT. Company shall have entered into an
employment agreement with Xxxx Xxxxxxxx as Vice Chairman and Chairman of the
Executive Committee on commercially reasonable terms. Purchaser shall have the
right to participate in the negotiations with respect to such employment
agreement.
7.5 NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
prior to the Closing, there shall have been no Material Adverse Change.
7.6 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall have been true and
correct as of the date hereof and shall be true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date, and the Company shall have each delivered
to the Purchaser a certificate, dated the Closing Date, to such effect as to the
respective representations and warranties made by it, PROVIDED, HOWEVER, that
such certificate shall represent and warrant as of the Closing Date regarding
the number of shares of Common Stock authorized, the number of shares of Common
Stock issued and outstanding, the number of shares of Preferred Stock authorized
and the number of shares of Preferred Stock issued and outstanding.
7.7 PERFORMANCE OF COVENANTS. All of the covenants of the Company to
be performed prior to the Closing pursuant to Article V hereof shall have been
duly performed in all material respects, and the Company shall have each
delivered to the Purchaser a certificate, dated the Closing Date, to such
effect.
7.8 NO LITIGATION. No action or proceedings shall have been
instituted before a court or other Governmental Authority which has resulted in
a then pending temporary restraining order, preliminary and permanent judgment,
order, or decree restraining or enjoining the consummation of the transactions
contemplated hereby.
7.9 VOTING AGREEMENT. That certain Voting Agreement in the form
attached hereto as Exhibit C shall have been executed by the parties thereto.
7.10 BAY TREE CAPITAL ASSOCIATES, LLC WAIVER. Bay Tree Capital
Associates, LLC ("Bay Tree") shall have provided a written waiver of its right
of first refusal and its registration rights under that certain ___, dated as of
___, between Bay Tree and the Company in form satisfactory to Purchaser in its
sole discretion.
7.11 BOARD RESIGNATION. The resignation of Xxxxx XxXxxx, Director of
the Company, shall have been executed by him.
7.12 TENDER OF PURCHASED STOCK. The Company shall tender the
Purchased Stock to the Purchaser in accordance with the terms of this Agreement.
7.13 INDEMNITY AGREEMENT. Company shall have entered into indemnity
agreements in the form attached hereto as Exhibit D with each director
designated in accordance with Section 6.4 hereof.
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7.14 CHANGE-OF-CONTROL. To the extent applicable, the Company shall
have obtained the necessary waivers and consents in order that the purchase by
Purchaser of the Purchased Shares and the conversion of the Purchased Shares
into Common Stock shall not be deemed to be a "change of control" under any
employment agreement of the Company or any stock option plan of the Company.
ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to sell the Purchased Stock contemplated
by this Agreement is conditioned upon the satisfaction or waiver, at or prior to
Closing, of the following conditions:
8.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
Purchaser shall have delivered to the Company an officer's certificate, dated
the Closing Date, to such effect.
8.2 THIRD-PARTY CONSENTS; GOVERNMENT APPROVALS. All consents,
approvals or waivers, if any, disclosed on SCHEDULE 8.2 attached hereto shall
have been received and delivered to the Company. All of the consents, approvals,
authorizations, exemptions and waivers from Government Authorities that shall be
required in order to permit the consummation of the transactions contemplated
hereby shall have been obtained.
8.3 PERFORMANCE OF AGREEMENTS. All of the covenants of the Purchaser
to be performed prior to the Closing pursuant to Article V hereof shall have
been duly performed in all material respects, and the Purchaser shall have
delivered to the Company a certificate, dated the Closing Date, to such effect.
8.4 NO LITIGATION. No action or proceeding shall be instituted or
threatened before a court or other Governmental Authority which has resulted in
a then pending temporary restraining order, preliminary or permanent judgment,
order a decree restraining or enjoining the consummation of the transactions
contemplated hereby.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS. The respective representations and
warranties of the Company and the Purchaser contained in this Agreement shall
survive the Closing for a period of 18 months, at the end of which period no
claim may be made with respect to any such representation or warranty unless
such claim shall have been asserted in writing to the Indemnifying Party during
such period pursuant to Section 9.3, except for the representations
13
and warranties contained in Sections 3.1, 3.2, 3.3, 3.7, 3.10, 3.11, 3.12 and
4.1, which, in each case, shall survive indefinitely.
9.2 INDEMNIFICATION.
(a) The Company hereby agrees to indemnify and hold the
Purchaser and its officers, directors, affiliates,
representatives, trustees, grantors, beneficiaries and
agents, and any successors thereto (the "Purchaser
Indemnitees"), harmless from any and all damages,
losses, costs or reasonable expenses (including, without
limitation, reasonable fees and expenses of
investigation and reasonable attorneys' and consultants'
fees and expenses in connection with any action suit, or
proceeding) (collectively, "Damages") incurred or
suffered as a result of or arising out of: (i) the
breach of any representation or warranty made by or on
behalf of the Company pursuant to Article III of this
Agreement or any other certificate or document delivered
by the Company pursuant to this Agreement, (ii) the
breach of any covenant or agreement made or to be
performed by the Company pursuant to this Agreement and
(iii) any expenses or Damages resulting or arising from
Purchaser's activities as an active investor pursuant to
Section 6.3, provided that the Company shall not be
obligated to indemnify the Purchaser for any acts of
willful misconduct or recklessness, or knowing
misrepresentations regarding the Company.
(b) The Purchaser hereby agrees to indemnify and hold the
Company and its officers, directors, affiliates,
representatives, trustees, grantors, beneficiaries and
agents, and any successors thereto (the "Company
Indemnitees") harmless from Damages incurred or suffered
as a result of or arising out of (i) the breach of any
representation or warranty made by the Purchaser
pursuant to Article IV of this Agreement or any other
certificate or document delivered by the Purchaser
pursuant to this Agreement; or (ii) the breach of any
covenant or agreement made or to be performed by the
Purchaser pursuant to this Agreement.
(c) Absent fraud, the indemnification provisions under this
Article IX shall be the exclusive remedy for any breach
of the covenants, obligations, representations or
warranties set forth in this Agreement; PROVIDED,
HOWEVER, that the provisions of this Section 9.2(c)
shall not prevent the Company or the Purchaser from
seeking the remedies of specific performance or
injunctive relief in connection with a breach of a
covenant or agreement of any party contained herein.
9.3 INDEMNIFICATION PROCEDURE.
(a) Any party seeking indemnification (the "Indemnified
Party") from any other party (the "Indemnifying Party")
with respect to any claim, demand,
14
action, proceeding or other matter (the "Claim")
pursuant to this Agreement shall promptly notify the
Indemnifying Party in writing of the existence of the
Claim, setting forth in reasonable detail the facts and
circumstances pertaining thereto and the basis for the
Indemnified Party's right to indemnification.
(b) In the event that any third party notifies any
Indemnified Party with respect to any matter which may
give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, then the
Indemnified Party shall promptly notify the Indemnifying
Party of such Claim; provided, however, that no delay on
the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party
from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party is
prejudiced by such failure to give notice. The
Indemnifying Party, upon waiver of its right to contest
the liability for which indemnification is being sought
and demonstration by the Indemnifying Party of its
financial ability to satisfy any resulting judgment to
the reasonable satisfaction of the Indemnified Party,
shall have the right to assume defense of the Claim if
notice is given to the Indemnified Party within ten (10)
days after receipt of notice of such Claim. If the
Indemnifying Party assumes defense of the Claim as
provided in the preceding sentence, then:
(i) the Indemnifying Party will diligently defend
the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to
the Indemnified Party;
(ii) the Indemnified Party may retain separate
co-counsel at its sole cost and expense (except
that the Indemnifying Party will be responsible
for the fees and expenses of the separate
co-counsel (a) to the extent the Indemnified
Party concludes reasonably based upon advice of
counsel that a conflict of interest exists
between the Indemnified Party and Indemnifying
Party or (b) the named parties to any such
action (including any impleaded parties) include
both such Indemnified Party and the Indemnifying
Party and such Indemnified Party shall have been
advised by counsel that there may be one or more
legal defenses available to the Indemnified
Party which are not available to the
Indemnifying Party, or available to the
Indemnifying Party, but the assertion of which
would be adverse to the interest of the
Indemnified Party;
(iii) the Indemnified Party will not consent to the
entry of any judgment or enter into any
settlement with respect to the matter without
the written consent of the Indemnifying Party
(not to be withheld or delayed unreasonably; it
being understood and agreed that failure to
consent to a judgment or settlement that
provides for relief other
15
than monetary damages or does not provide an
unconditional release of the Indemnifying Party
from liability shall not be deemed
unreasonable); and
(iv) The Indemnifying Party will not consent to the
entry of any judgment or enter into any
settlement, without the written consent of the
Indemnified Party (not to be withheld or delayed
unreasonably; it being understood and agreed
that failure to consent to a judgment or
settlement that provides for relief other than
monetary damages or does not provide an
unconditional release of the Indemnified Party
from liability shall not be deemed
unreasonable).
(c) If no Indemnifying Party notifies the Indemnified Party
within ten (10) days after the Indemnified Party has
given notice of the matter that the Indemnifying Party
is assuming the defense thereof, then the Indemnified
Party may defend against, or enter into any settlement
with respect to, the matter in any manner it reasonably
may deem appropriate, without prejudice to any of its
rights hereunder.
(d) The Indemnified Party shall be entitled to reimbursement
of reasonable expenses included in Damages with respect
to any Claim (including, without limitation, the cost of
defense, preparation and investigation relating to such
Claim) as such expenses are incurred by the Indemnified
Party; provided, however, that the Indemnified Party
shall undertake to repay any amounts arising solely from
the fault of such Indemnified Party.
(e) The rights and remedies of the Purchaser Indemnitees
under Article IX shall not be limited or otherwise
affected by or as a result of any information furnished
to, or any investigation made by or knowledge of, any of
the Purchaser Indemnitees or any of their respective
representatives or agents.
ARTICLE X
MISCELLANEOUS
10.1 KNOWLEDGE OF THE COMPANY. Where any representation or warranty
made by the any party contained in this Agreement is expressly qualified by
reference to its knowledge, such knowledge shall be deemed to exist if the
matter is within the actual knowledge of any of the directors, managers and/or
the executive officers of such party, after having made due inquiry of the
directors, managers and executive officers of such party who would be expected
to have knowledge of the matter.
10.2 EXPENSES. Except as set forth in Article VI, each party shall
pay all of its own fees, costs and expenses (including, without limitation,
fees, placement fees, costs and expenses
16
of legal counsel, investment bankers, brokers or other representatives and
consultants) incurred in connection with the negotiation of this Agreement and
the other agreements contemplated hereby, the performance of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby (collectively, the "Transaction Expenses"); PROVIDED,
HOWEVER, that the Company will pay all such costs as may be incurred by the
Company and any Taxes in the nature of sales, use or other transfer Taxes
imposed in connection with the transactions contemplated hereby (except that the
Company shall not be obligated to pay any income tax that may accrue to
Purchaser as a result of its purchase of the Purchased Stock). The Company shall
be responsible for all Transaction Expenses of the Company, which Transaction
Expenses shall be paid by the Company on or before the Closing Date.
10.3 GOVERNING LAW. THE LAW OF THE STATE OF CALIFORNIA (WITHOUT
REGARD TO ITS CONFLICTS OF LAWS PROVISIONS) SHALL GOVERN ALL ISSUES AND
QUESTIONS CONCERNING THIS AGREEMENT.
10.4 PUBLICITY. Except as otherwise required by law, none of the
parties (nor any Affiliates thereof) hereto shall issue, prior to the Closing,
any press release or make any other public statement, in each case relating to,
connected with or arising out of this Agreement or the matters contained herein,
without obtaining the prior approval of the Company, on the one hand, and the
Purchaser, on the other hand, to the contents and the manner of presentation and
publication thereof. Subsequent to the Closing, the Purchaser shall the right to
approve any public releases of information mentioning it or any of its
directors, managers, officers or employees.
10.5 Notices. Any notice or other communication required or permitted
under this Agreement shall be sufficiently given if delivered in person or sent
by telecopy (confirmed telephonically) or by registered or certified mail
(postage prepaid), or by courier (return receipt requested), addressed as
follows: (i) if to the Purchaser, to Intellect Capital Group, LLC 00000 Xxxxx
Xxxxxx xxxx., Xxx. 000, Xxx Xxxxxxx, XX 00000, Attention: Xxxxxx X. Xxxxxx
(Facsimile Number: (000) 000-0000), and a copy to the Purchaser's counsel,
Manatt, Xxxxxx & Xxxxxxxx, LLP, 00000 Xxxx Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, XX
00000 (Facsimile Number: (000) 000-0000), Attention: Xxxxxx Xxxxx, Esq.; (ii) if
to the Company, to XxxxxXxxx.Xxx, Inc., 000 Xxxxxxx Xxxx Xxxxx, Xxx. 000,
Xxxxxxxx, XX 00000, Attention: Xxxx Xxxxxxxx, (Facsimile Number: (000) 000-0000)
and a copy to the Company's counsel, Silicon Valley Law Group, 000 Xxxxx 0xx
Xxxxxx, Xxxxx 000, Xxx Xxxx, XX 00000 (Facsimile Number: (000) 000-0000),
Attention: Xxxxx X. Xxxxxxx, Esq. or such other address or number as shall be
furnished in writing by any such party, and such notice or communication shall
be deemed to have been given as of the date so delivered, sent by facsimile or
mailed.
10.6 PARTIES IN INTEREST. This Agreement may not be transferred,
assigned, pledged or hypothecated by the Company without the prior written
consent of the Purchaser. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. The Purchaser shall have the
right to assign and/or delegate all or any portion of its rights and obligations
under this Agreement and to transfer any of its assets after Closing to any
Affiliate of the Purchaser or
17
any entity majority owned or controlled by employees of the Purchaser, provided
that Purchaser shall give the Company written notice of such assignment or
transfers.
10.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all of which taken together shall constitute only and one and the same
instrument.
10.8 ENTIRE AGREEMENT. This Agreement, including the other documents
referred to herein and therein which form a part hereof and thereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
10.9 AMENDMENTS. This Agreement may not be changed orally, but only
by an agreement in writing signed by the Purchaser and the Company.
10.10 SEVERABILITY. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
10.11 THIRD-PARTY BENEFICIARIES. Except as permitted in Section 10.6,
each party hereto intends that this Agreement shall not benefit or create any
right or cause of action in or on behalf of any Person other than the parties
hereto.
10.12 ATTORNEYS' FEES. Except as provided under Article IX hereof, if
any action or proceeding shall be commenced to enforce this Agreement or any
right arising in connection with this Agreement, the prevailing party in such
action or proceeding shall be entitled to recover from the other party or
parties the reasonable attorneys' fees, costs and expenses incurred by such
prevailing party in connection with such action or proceeding.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its own behalf or by its respective officer thereunto duly
authorized, all as of the day and year first above written.
PURCHASER:
Intellect Capital Group, LLC
By:____________________________________
Name: Xxxxxx X. Xxxxxx
Title: Chairman and CEO
COMPANY:
XxxxxXxxx.Xxx, Inc.
By:____________________________________
Name: Xxxx Xxxxxxxx
Title: Chairman and CEO
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
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APPENDIX 1
DEFINITIONS
"1933 Act" shall have the meaning specified in Section 4.2(a).
"Action" means any claim, demand, filing, investigation, action, suit,
proceeding, including administrative and arbitration proceedings, condemnation,
audit or other legal proceeding by any Person or Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" has the meaning set forth in the Preamble hereof.
"Business Day" shall mean any day other than a Saturday or Sunday or any
legal holiday on which commercial banks are authorized or required by law to be
closed for business in Los Angeles, California.
"Claim" shall have the meaning specified in Section 9.3(a).
"Closing" shall have the meaning specified in Section 2.4.
"Closing Date" shall have the meaning specified in Section 2.4.
"Closing Documents" means this Agreement, the Certificate of
Designations, and the Registration Rights Agreement, and all other documents,
agreements, certificates and instruments delivered by the Parties at Closing.
"Company" shall have the meaning specified in the Preamble.
"Company Formation Documents" shall have the meaning specified in
Section 3.1.
"Company Indemnitees" shall have the meaning specified in Section 9.2(b)
"Common Stock" shall have the meaning specified in the Recitals.
"Certificate of Designations" shall have the meaning specified in the
Recitals.
"Damages" shall have the meaning specified in Section 9.2(a).
"Domain Names" shall have the meaning specified in Section 3.12.
20
"Encumbrance" shall mean any encumbrance, security interest, mortgage,
deed of trust, pledge, lien, charge, lease, easement, encroachment, right of
first refusal, right of first offer, purchase offer or other defect in title or
restrictions of any kind or character.
"Financial Statement" shall have the meaning specified in Section
3.7(a).
"Financial Statement Date" shall have the meaning specified in Section
3.7(a).
"Governmental Authority" means any court, government (or governmental or
political subdivision thereof) or governmental department, commission, agency,
body, instrumentality or authority, whether domestic (federal, state or local)
or foreign.
"Indemnified Party" shall have the meaning specified in Section 9.3(a).
"Indemnifying Party" shall have the meaning specified in Section 9.3(a).
"Lien" means, whether or not filed, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, restriction, security interest,
right of first refusal, right of first offer, purchase offer, easement,
encroachment or encumbrance of any kind.
"Material Adverse Change" shall have the meaning set forth in Section
3.7(b).
"Material Agreements" means those agreements, instruments and other
documents, including, without limitation, Leases, marketing and strategic
alliance agreements, instruments, title coverage and other documents related to
the Real Property identified on SCHEDULE 3.10(a).
"Nevada Secretary of State" shall have the meaning specified in
Section 6.2.
"Party" or "Parties" means the Purchaser and the Company and their
respective successors and assigns.
"Person" means any individual, sole proprietorship, firm, corporation,
partnership, limited liability company, association, joint venture, trust or
other entity or enterprise or any Governmental Authority.
"Preferred Stock shall have the meaning specified in Section 3.2.
"Purchase Price" shall have the meaning specified in Section 2.3.
"Purchased Stock" shall have the meaning specified in the Recitals
"Purchaser" shall have the meaning specified in the Preamble.
"Purchaser Indemnitees" shall have the meaning specified in
Section 9.2(a).
21
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement to be executed as of the Closing Date by the Company and the
Purchaser in the form attached hereto as Exhibit E.
"SEC" shall have the meaning specified in Section 4.2(b).
"Shareholders" shall have the meaning specified in Section 3.2.
"Trademarks" shall have the meaning specified in Section 3.12.
"Transaction Expenses" shall have the meaning specified in Section 10.2.
22
