EXHIBIT 10.16
STOCK PURCHASE AGREEMENT
BY AND AMONG
MULTIMEDIA KID - INTELLIGENCE IN EDUCATION LTD.,
AN ISRAELI CORPORATION
("MKID"),
AND
THE SHAREHOLDERS (THE "SHAREHOLDERS")
OF MKID,
AND
SCOOP, INC.,
A DELAWARE CORPORATION
("SCOOP")
TABLE OF CONTENTS
PAGE
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ARTICLE I. THE TRANSACTION....................................................... 1
SECTION 1.1. THE TRANSACTION...................................................... 1
SECTION 1.2. TAX CONSEQUENCES..................................................... 1
SECTION 1.3. [OMITTED]............................................................ 2
SECTION 1.4. BOARD OF DIRECTORS................................................... 2
SECTION 1.5. PAYMENT TO PMD....................................................... 2
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF MKID............................... 2
SECTION 2.1. CORPORATE ORGANIZATION............................................... 2
SECTION 2.2. CAPITALIZATION....................................................... 2
SECTION 2.3. AUTHORITY; NO VIOLATION.............................................. 3
SECTION 2.4. CONSENTS AND APPROVALS............................................... 3
SECTION 2.5. [OMITTED]............................................................ 4
SECTION 2.6. REGULATORY DOCUMENTS................................................. 4
SECTION 2.7. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES........................ 4
SECTION 2.8. BROKER'S FEES........................................................ 4
SECTION 2.9. ABSENCE OF CERTAIN CHANGES OR EVENTS................................. 4
SECTION 2.10. LEGAL PROCEEDINGS................................................... 5
SECTION 2.11. TAXES AND TAX RETURNS............................................... 5
SECTION 2.12. EMPLOYEES........................................................... 6
SECTION 2.13. COMPLIANCE WITH APPLICABLE LAW...................................... 6
SECTION 2.14. CERTAIN CONTRACTS................................................... 6
SECTION 2.15. ENVIRONMENTAL LIABILITY............................................. 7
SECTION 2.16. TITLE TO PROPERTIES; CONDITION OF PROPERTIES........................ 7
SECTION 2.17. REAL PROPERTY....................................................... 7
SECTION 2.18. TERMINATION OF BUSINESS RELATIONSHIPS............................... 7
SECTION 2.19. CONDITION OF BUILDINGS AND PERSONAL PROPERTY........................ 8
SECTION 2.20. INSURANCE........................................................... 8
SECTION 2.21. ALL BUSINESS CONDUCTED BY MKID...................................... 8
SECTION 2.22. TRADE SECRETS, PATENTS, COPYRIGHTS, TRADEMARKS,
SERVICE MARKS, TRADE NAMES, KNOW-HOW................................ 8
SECTION 2.23. GRANTS, INCENTIVES AND SUBSIDIES.................................... 8
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.................. 9
SECTION 3.1. STOCK OWNERSHIP; RESIDENCE........................................... 9
SECTION 3.2. AUTHORIZATION........................................................ 9
SECTION 3.3. SECURITIES ACT REPRESENTATIONS....................................... 9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SCOOP.............................. 10
SECTION 4.1. CORPORATE ORGANIZATION............................................... 10
SECTION 4.2. CAPITALIZATION....................................................... 10
SECTION 4.3. AUTHORITY; NO VIOLATION.............................................. 11
SECTION 4.4. CONSENTS AND APPROVALS............................................... 11
SECTION 4.5. VOTE REQUIRED........................................................ 11
SECTION 4.6. SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES......... 12
SECTION 4.7. BROKER'S FEES........................................................ 12
SECTION 4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS................................. 12
SECTION 4.9. LEGAL PROCEEDINGS.................................................... 13
SECTION 4.10. TAXES AND TAX RETURNS............................................... 14
SECTION 4.11. EMPLOYEES........................................................... 14
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SECTION 4.12. COMPLIANCE WITH APPLICABLE LAW...................................... 15
SECTION 4.13. CERTAIN CONTRACTS................................................... 15
SECTION 4.14. ENVIRONMENTAL LIABILITY............................................. 15
SECTION 4.15. TERMINATION OF BUSINESS RELATIONSHIPS............................... 16
SECTION 4.16. CONDITION OF BUILDINGS AND PERSONAL PROPERTY........................ 16
SECTION 4.17. INSURANCE........................................................... 16
SECTION 4.18. ALL BUSINESS CONDUCTED BY SCOOP..................................... 16
SECTION 4.19. TRADE SECRETS, PATENTS, COPYRIGHTS, TRADEMARKS, SERVICE MARKS,
TRADE NAMES, KNOW-HOW............................................... 16
ARTICLE V. COVENANTS RELATING TO CONDUCT OF BUSINESS............................. 17
SECTION 5.1. CONDUCT OF BUSINESSES PRIOR TO THE CLOSING........................... 17
SECTION 5.2. FORBEARANCES......................................................... 17
SECTION 5.3. DISPOSITION OF SCOOP BUSINESSES...................................... 18
SECTION 5.4. DISPOSITIONS BY MKID................................................. 18
SECTION 5.5. NO SOLICITATION OF TRANSACTIONS...................................... 19
ARTICLE VI. ADDITIONAL AGREEMENTS................................................ 19
SECTION 6.1. REGULATORY MATTERS................................................... 19
SECTION 6.2. ACCESS TO INFORMATION................................................ 20
SECTION 6.3. STOCKHOLDERS' APPROVALS.............................................. 20
SECTION 6.4. LEGAL CONDITIONS TO TRANSACTION...................................... 21
SECTION 6.5. [OMITTED]............................................................ 21
SECTION 6.6. STOCK EXCHANGE LISTING............................................... 21
SECTION 6.7. [OMITTED]............................................................ 21
SECTION 6.8. DIRECTORS' AND OFFICERS' INSURANCE................................... 21
SECTION 6.9. ADDITIONAL AGREEMENTS................................................ 22
SECTION 6.10. ADVICE OF CHANGES................................................... 22
SECTION 6.11. TAX TREATMENT....................................................... 22
ARTICLE VII. CONDITIONS PRECEDENT................................................ 22
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE TRANSACTION...... 22
SECTION 7.2. CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS............................ 23
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF SCOOP................................... 25
ARTICLE VIII. TERMINATION AND AMENDMENT.......................................... 25
SECTION 8.1. TERMINATION.......................................................... 25
SECTION 8.2. EFFECT OF TERMINATION................................................ 26
SECTION 8.3. AMENDMENT............................................................ 26
SECTION 8.4. EXTENSION; WAIVER.................................................... 26
ARTICLE IX. GENERAL PROVISIONS................................................... 26
SECTION 9.1. CLOSING.............................................................. 27
SECTION 9.2. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS;
AGREEMENTS OF SHAREHOLDERS ARE SEVERAL AND NOT JOINT, ETC............ 27
SECTION 9.3. EXPENSES............................................................. 27
SECTION 9.4. NOTICES.............................................................. 27
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SECTION 9.5. INTERPRETATION....................................................... 28
SECTION 9.6. COUNTERPARTS AND FACSIMILE........................................... 28
SECTION 9.7. ENTIRE AGREEMENT..................................................... 28
SECTION 9.8. GOVERNING LAW........................................................ 29
SECTION 9.9. SEVERABILITY......................................................... 29
SECTION 9.10. PUBLICITY........................................................... 29
SECTION 9.11. ASSIGNMENT; THIRD PARTY BENEFICIARIES............................... 29
SECTION 9.12. [OMITTED]........................................................... 29
SECTION 9.13. ENFORCEMENT OF THE AGREEMENT........................................ 29
EXHIBIT A: CERTIFICATE OF DESIGNATIONS
SCHEDULES: MKID DISCLOSURE SCHEDULE
SCOOP DISCLOSURE SCHEDULE
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of May 7, 1998,
by and among MULTIMEDIA KID - INTELLIGENCE IN EDUCATION LTD., an Israeli
corporation ("MKID"), the SHAREHOLDERS of MKID which are listed at the foot of
this Agreement (the "Shareholders"), and SCOOP, Inc., a Delaware corporation
("Scoop").
RECITALS
WHEREAS, the Shareholders own 2,000 ordinary shares of stock of MKID,
and such shares (the "MKID Shares") constitute all of the outstanding capital
stock of MKID;
WHEREAS, the Shareholders and the Board of Directors of Scoop have
each determined that it is in the best interests of the Shareholders and of
Scoop and its shareholders for Scoop to acquire the MKID Shares by way of the
terms and conditions set forth herein (the "Transaction"), with the
shareholders of MKID receiving securities of Scoop in exchange for their MKID
Shares and with MKID thereby becoming a wholly owned subsidiary of Scoop; and
WHEREAS, the parties hereto have each determined that the Transaction
should be conditioned upon the completion of an equity or debt offering by
Scoop from which Scoop will receive a minimum of $5.0 million in net proceeds;
and
WHEREAS, for federal income tax purposes it is intended that the
Transaction qualify as a reorganization within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"), and
for financial accounting purposes it is intended that the Transaction be
accounted for as a purchase; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Transaction and also to
prescribe certain conditions to the Transaction.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to
be legally bound hereby, the parties agree as follows:
ARTICLE I
THE TRANSACTION
Section 1.1. THE TRANSACTION. At the Closing (as defined herein),
the Shareholders shall deliver to Scoop certificates representing all of the
MKID Shares, properly endorsed to effectuate the transfer thereof to Scoop.
In exchange for such Shareholder's MKID Shares, Scoop shall issue (i) to each
Shareholder 1,066.6665 shares of Common Stock of Scoop, par value $.001 per
share (each a "Common Share"), for each MKID Share owned by such Shareholder
(for an aggregate of 2,133,333 shares for all 2,000 MKID Shares), and one
share of Series A Preferred Stock of Scoop, par value $.001 per share (each a
"Preferred Share"), for each MKID Share owned by such Shareholder (for an
aggregate of 2,000 shares for all 2,000 MKID Shares) and (ii) to the persons
designated by the Shareholders, 3,000,000 Common Shares. The Certificate of
Designations for the Preferred Shares shall be in the form of Exhibit A.
Section 1.2. TAX CONSEQUENCES. It is intended that the Transaction
shall constitute a reorganization within the meaning of Section 368(a)(1)(B)
of the Code, and that this Agreement shall constitute a "plan of
reorganization" for purposes of the Code.
Section 1.3 [Omitted].
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Section 1.4. BOARD OF DIRECTORS. At the Closing, the Board of
Directors of Scoop shall be restructured to consist of Xxxxx Xxxxxx, Xxxx
Xxxxxxxxxxx, Xxxxxx Xxxxxxxxxx, two representatives to be designated prior to
the Closing by the Shareholders other than Messrs. Xxxxxx and Xxxxxxxxxx, and
two independent directors who are mutually acceptable to both Scoop and the
Shareholders.
Section 1.5 PAYMENT TO PMD. At the Closing and as a condition to
the Closing, Scoop will, by way of the payments referred to in the next
sentence, pay to PMD Education Technologies Systems (1992) Ltd. ("PMD")
$1,443,000 to discharge an obligation by MKID to PMD under the agreements
between MKID and PMD dated January 1996 and April 1998 which are referred to
in the MKID Disclosure Schedule. PMD is a third party beneficiary of this
Section 1.5 and is entitled to enforce it notwithstanding anything to the
contrary in this Agreement; provided, however, that if the Closing does not
occur, Scoop is under no obligation whatsoever to make any payments to PMD.
The $1,443,000 amount will prior to the Closing be deposited into escrow with
Shareholders' counsel out of the proceeds of the financing referred to in
Section 7.1(b), and shall at the Closing be paid by such escrow agent
directly to PMD.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF MKID
MKID hereby represents and warrants to Scoop as follows:
Section 2.1 CORPORATE ORGANIZATION.
(a) MKID is a corporation duly organized, validly
existing and in good standing under the laws of Israel. MKID has the
corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature
of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified would not have or reasonably be expected to have a Material Adverse
Effect (as defined below) on MKID. As used in this Agreement, the term
"Material Adverse Effect" means, with respect to MKID or Scoop, as the case
may be, a material adverse effect on the business, results of operations or
financial condition of such party or a material adverse effect on such
party's ability to consummate the transactions contemplated hereby; provided,
however, that in determining whether a Material Adverse Effect has occurred
there shall be excluded any effect on the referenced party the cause of which
is (i) any change in generally accepted accounting principles or (ii) any
action or omission of MKID or Scoop taken with the prior written consent of
Scoop or MKID, as applicable, in contemplation of the Transaction. As used
in this Agreement, the word "Subsidiary" when used with respect to any party
means any corporation, partnership, limited liability company or other
organization, whether incorporated or unincorporated, any equity interests of
which are owned by such party, or which is consolidated with such party for
financial reporting purposes. The copies of the organizational documents of
MKID which have previously been made available to Scoop are true, complete
and correct copies of such documents as in effect as of the date of this
Agreement.
(b) MKID has no Subsidiaries.
Section 2.2. CAPITALIZATION.
(a) The authorized capital stock of MKID consists of
23,000 ordinary shares. At the close of business on March 31, 1998, there
were 2,000 ordinary shares of MKID outstanding, no shares of MKID Preferred
Stock outstanding and no shares of MKID held in MKID's treasury and, except
for such shares, there were no other shares of MKID capital stock
outstanding. All of the issued and outstanding ordinary shares of MKID have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof. As of the date of this Agreement, except (i) as set forth
in Section 2.2 of the disclosure schedule of MKID delivered to Scoop
concurrently herewith (the "MKID Disclosure
2
Schedule") and (ii) as set forth elsewhere in this Section 2.2(a), MKID does
not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any ordinary shares or any other equity securities of
MKID or any securities representing the right to purchase or otherwise
receive any ordinary shares of MKID or any other equity securities of MKID,
or requiring MKID to repurchase, redeem or otherwise acquire any shares of
its capital stock. There are no bonds, debentures, notes or other
indebtedness of MKID having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on
which stockholders of MKID may vote. Except as set forth in Section 2.2 of
the MKID Disclosure Schedule, MKID has not issued any shares of its capital
stock.
(b) [Omitted].
Section 2.3. AUTHORITY; NO VIOLATION.
(a) MKID has full corporate power and authority to
execute and deliver this Agreement and the other documents contemplated to be
executed and delivered by MKID in connection with the transactions
contemplated hereby (this Agreement together with such other documents,
collectively, the "MKID Documents"), and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of each of the
MKID Documents and the consummation of the transactions contemplated hereby
and thereby have been duly and validly approved by the Board of Directors of
MKID. The Transaction has been approved by the Board of Directors of MKID
and the Shareholders, and no other corporate proceedings on the part of MKID
are necessary to approve MKID Documents and to consummate the transactions
contemplated hereby and thereby. Each of MKID Documents has been duly and
validly executed and delivered by MKID and (assuming due authorization,
execution and delivery by Scoop) this Agreement constitutes a valid and
binding obligation of MKID, enforceable against MKID in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies
generally.
(b) Except as set forth in Section 2.3 of the MKID
Disclosure Schedule, neither the execution and delivery of MKID Documents by
MKID nor the consummation by MKID of the transactions contemplated hereby and
thereby, nor compliance by MKID with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the charter documents of MKID or
(ii) assuming that the consents and approvals referred to in Section 2.4 are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to MKID or any of its
properties or assets, or (y) violate, conflict with, result in a breach of
any provision of or the loss of any benefit under, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, or result in the
creation of any Lien upon any of the respective properties or assets of MKID
under, any of the terms, conditions or provisions of any MKID Contract (as
defined in Section 2.14) or any loan or credit agreement, note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which MKID is a party, or by which it or any of
its properties or assets may be bound or affected, except (in the case of
clause (ii) above) for such violations, conflicts, breaches or defaults
which, either individually or in the aggregate, will not have and would not
reasonably be expected to have a Material Adverse Effect on MKID.
Section 2.4. CONSENTS AND APPROVALS. Except for (i) the consents
and approvals set forth in Section 2.4 of the MKID Disclosure Schedule, and
(ii) the consents and approvals of third parties which are not Governmental
Entities (as defined below), the failure of which to obtain will not have and
would not be reasonably expected to have a Material Adverse Effect on MKID,
no consents or approvals of, or filings or registrations with, any court,
administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with (A) the execution and delivery by MKID of MKID
Documents and (B) the consummation by MKID of the Transaction and the other
transactions contemplated hereby and thereby.
Section 2.5 [OMITTED].
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Section 2.6. REGULATORY DOCUMENTS. MKID has timely filed all
required reports, schedules, forms, statements and other documents with the
Office of Chief Scientist of the Israeli Ministry of Trade and Industry and
the Israel Investment Center. None of such filings at the time of filing
contained any untrue statement of a material fact or omitted to state any
material 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, except to the extent such statements have been modified or
superseded by later filings with such entities.
Section 2.7 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. MKID
has previously delivered to Scoop copies of (a) the audited consolidated
balance sheets of MKID as of and for the fiscal years ended December 31, 1996
and 1997 (collectively, the "MKID Balance Sheets") and the related audited
statements of income, changes in shareholders' equity and cash flows, in each
case accompanied by the audit report of Coopers & Xxxxxxx LLP independent
public accountants with respect to MKID. Each of the balance sheets referred
to in the previous sentence (including the related notes, where applicable)
present fairly, in all material respects, the financial position of MKID as
of the dates thereof, and the other financial statements referred to in the
preceding sentence present fairly the results of MKID's operations and its
cash flows for the respective periods therein set forth. Each of such
financial statements (including the related notes, where applicable) has been
conformed to be in accordance with United States generally accepted
accounting principles ("GAAP") consistently applied during the periods
involved and are consistent with MKID's books and records. Except for those
liabilities that are fully reflected or reserved against on the consolidated
balance sheet of MKID for the fiscal year ended December 31, 1997 included in
the MKID Balance Sheets, and for liabilities incurred in the ordinary course
of business consistent with past practice since December 31, 1997, MKID has
not incurred any liability of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether due or to become due) that,
either alone or when combined with all similar liabilities, has had, or would
reasonably be expected to have, a Material Adverse Effect on MKID.
Section 2.8 BROKER'S FEES. The fees of any brokers or finders
engaged by, or claiming right to payment through, MKID or the Shareholders
shall be paid and discharged by the Shareholders.
Section 2.9. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as set forth in Section 2.9 of the MKID
Disclosure Schedule , since December 31, 1997, no event (including, without
limitation, any act of God) has occurred which has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on MKID.
(b) Except as set forth in Section 2.9 of the MKID
Disclosure Schedule, since December 31, 1997, MKID has carried on its
business in all material respects in the ordinary course of business, and
MKID has not: (i) except for normal increases in the ordinary course of
business consistent with past practice and except as required by applicable
law, increased the wages, salaries, compensation, pension or other fringe
benefits or perquisites payable to any officer, director, employee or other
person receiving compensation of any nature from MKID other than persons
newly hired for such position, from the amount thereof in effect as of
December 31, 1997, or granted any severance or termination pay, entered into
any contract to make or grant any severance or termination pay, or paid any
bonus, in each case to any such officer, director, employee or other person,
other than pursuant to preexisting agreements or arrangements, (ii) made any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of
MKID, (iii) effectuated any split, combination or reclassification of any of
MKID's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for, or
giving the right to acquire by exchange or exercise, shares of its capital
stock, (iv) made any change in its accounting methods, principles or
practices, except insofar as may have been required to conform with GAAP; (v)
suffered any strike, work stoppage, slow-down or other labor disturbance;
(vi) incurred, assumed, or guaranteed any indebtedness or liability for or in
respect of borrowed money; (vii) sold, leased, transferred or assigned any
asset (tangible or intangible) of MKID except for a fair consideration and in
the ordinary course of business; (viii) canceled, settled or compromised any
claim or debt due to or owing to MKID, otherwise than in the ordinary course
of business; (ix) waived or released any of its rights; (x) negotiated or
executed any arrangement, agreement or understanding to which it is a party
which cannot be terminated by it on notice of 30 days or less without cost or
penalty; (xi)
4
incurred any capital expenditure other than in the ordinary course of its
business in an aggregate amount that exceeds $100,000; (xii) acquired or
agreed to acquire in any manner, including by way of merger, consolidation,
purchase of an equity interest or assets, any business or any corporation,
partnership, association or other business organization or division thereof;
or (xiii) entered into any other material transaction, contract or commitment
other than in the ordinary course of business.
Section 2.10. LEGAL PROCEEDINGS.
(a) Except as set forth in Section 2.10 of the MKID
Disclosure Schedule, MKID is not a party to any, and there are no pending or,
to the best of MKID's knowledge after due inquiry, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against MKID or
challenging the validity or propriety of the transactions contemplated by the
MKID Documents as to which there is a reasonable probability of an adverse
determination and which, if adversely determined, would, individually or in
the aggregate, have or reasonably be expected to have a Material Adverse
Effect on MKID.
(b) There is no injunction, order, judgment, decree or
regulatory restriction imposed upon MKID or the assets of MKID which has had,
or would reasonably be expected to have, a Material Adverse Effect on MKID.
Section 2.11. TAXES AND TAX RETURNS.
(a) MKID has timely filed or caused to be filed, and
has heretofore furnished to MKID true and complete copies of, any returns,
declarations, reports, estimates, information returns and statements required
to be filed under federal, state, local or any foreign tax laws ("Tax
Returns") with respect to MKID, except where the failure to file timely such
Tax Returns would not have and would not reasonably be expected to have a
Material Adverse Effect on MKID. All Taxes due, whether or not shown to be
due on such Tax Returns, have been paid or adequate reserves have been
established for the payment of such Taxes, except where the failure to pay or
establish adequate reserves would not have and would not reasonably be
expected to have a Material Adverse Effect on MKID. Except as set forth in
Section 2.11 of the MKID Disclosure Schedule, no material (i) audit or
examination of any Tax Return with respect to MKID is currently in progress
or has been conducted and MKID has not received notice of any proposed audit
or examination, (ii) deficiencies for any taxes have been proposed, asserted
or assessed or (iii) refund litigation with respect to any Tax Return is
pending. All material Tax Returns filed by MKID are complete and accurate in
all material respects. Since the date of the financial statements furnished
to Scoop pursuant to Section 2.7 hereof, MKID has not incurred any liability
for taxes other than in the ordinary course of business. Except as set forth
in Section 4.3 of the MKID Disclosure Schedule, to the best knowledge of MKID
after due inquiry, no event has occurred, and no condition or circumstance
exists, which presents a material risk that any material tax described in the
preceding sentence will be imposed upon MKID. To the best knowledge of MKID
after due inquiry, no deficiencies for any taxes have been proposed, asserted
or assessed against MKID, and no requests for waivers of the time to assess
any such taxes are pending.
(b) [Omitted].
(c) For purposes of this Agreement, "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, goods and services, capital, transfer, franchise, profits, license,
withholding, payroll, employment, employer health, excise, estimated,
severance, stamp, occupation, property or other taxes, customs duties, 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.
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Section 2.12. EMPLOYEES.
(a) Section 2.12 of the MKID Disclosure Schedule sets
forth a true and complete list of each employee benefit plan, arrangement or
agreement that is maintained as of the date of this Agreement (the "Plans")
by MKID. Since December 31, 1997, the date of MKID's most recent audited
financial statements, there has not been any adoption or amendment in any
material respect of any of the Plans.
(b) Except as set forth in Section 2.12 of the MKID
Disclosure Schedule, the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Plan or
any policy or arrangement or any employment, severance or other agreement or
any trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any employee, officer or director. The only severance
agreements or severance policies applicable to MKID are the agreements and
policies specifically referred to in Section 2.12 of the MKID Disclosure
Schedule, and there are no other employment or severance contracts or other
agreements requiring payments to be made on a change of control or otherwise
as a result of the consummation of any of the transactions hereunder.
Section 2.13. COMPLIANCE WITH APPLICABLE LAW. Except as disclosed
in Section 2.13 of the MKID Disclosure Schedule, MKID holds, and has at all
times held, all material licenses, franchises, permits and authorizations
necessary for the lawful conduct of its business under and pursuant to all,
and has complied with and is not in default in any material respect under
any, applicable law, statute, order, rule, regulation, policy and/or
guideline of any Governmental Entity relating to MKID, except where the
failure to hold such license, franchise, permit or authorization or such
noncompliance or default would not, individually or in the aggregate, have or
reasonably be executed to have a Material Adverse Effect on MKID, and MKID
does not know of, and has not received notice of, any violations of any of
the above which, individually or in the aggregate, would have or would
reasonably be expected to have a Material Adverse Effect on MKID.
Section 2.14. CERTAIN CONTRACTS.
(a) Except as set forth in Section 2.14 of the MKID
Disclosure Schedule, MKID is not a party to and is not bound by any contract,
arrangement, commitment or understanding (whether written or oral) (i) which
is a material contract (as defined in Item 601(b)(10) of Regulation S-K of
the SEC) to be performed after the date of this Agreement, (ii) which
materially restricts the conduct of any line of business by MKID, (iii)
evidencing or concerning any loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments pursuant to which
any indebtedness of MKID is evidenced or (iv) with or to a labor union or
guild (including any collective bargaining agreement). MKID has made
available to MKID true and correct copies of all employment, consulting and
deferred compensation agreements to which MKID is a party. Each contract,
arrangement, commitment or understanding of the type described in this
Section 2.14, other than MKID Documents, whether or not set forth in Section
2.14 of the MKID Disclosure Schedule, is referred to herein as a "MKID
Contract," and MKID does not know of, and has not received notice of, any
violation of the above by any of the other parties thereto which,
individually or in the aggregate, would have or would reasonably be expected
to have a Material Adverse Effect on MKID.
(b) (i) Each MKID Contract is valid and binding and in
full force and effect, (ii) MKID has in all material respects performed all
obligations required to be performed by it to date under each MKID Contract,
(iii) no event or condition exists which constitutes or, after notice or
lapse of time or both, would constitute a default on the part of MKID under
any such MKID Contract, except, in each case, where such invalidity, failure
to be binding, failure to so perform or default, individually or in the
aggregate, would not have or reasonably be expected to have a Material
Adverse Effect on MKID and (iv) except as disclosed in Section 2.14 of the
MKID Disclosure Schedule, MKID has received all payments due MKID under the
MKID Contracts.
6
Section 2.15. ENVIRONMENTAL LIABILITY. Except as set forth in
Section 2.15 of the MKID Disclosure Schedule, there are no legal,
administrative, arbitral or other proceedings, claims, actions, causes of
action, private environmental investigations or remediation activities or
governmental investigations of any nature seeking to impose, or that
reasonably could be expected to result in the imposition, on MKID of any
liability or obligation arising under common law standards relating to
environmental protection, human health or safety, or under any local, state
or federal environmental statute, regulation or ordinance, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (collectively, the "Environmental Laws"),
pending or, to the best knowledge of MKID after due inquiry, threatened,
against MKID, which liability or obligation would have or would reasonably be
expected to have a Material Adverse Effect on MKID. To the best knowledge of
MKID after due inquiry, there is no reasonable basis for any such proceeding,
claim, action or governmental investigation that would impose any liability
or obligation that would have or would reasonably be expected to have a
Material Adverse Effect on MKID. To the best knowledge of MKID after due
inquiry, during or prior to the period of (i) its ownership or operation of
any of its current properties, (ii) its participation in the management of
any property, or (iii) its holding of a security interest or other interest
in any property, there were no releases or threatened releases of hazardous,
toxic, radioactive or dangerous materials or other materials regulated under
Environmental Laws in, on, under or affecting any such property. MKID is not
subject to any agreement, order, judgment, decree, letter or memorandum by or
with any court, governmental authority, regulatory agency or third party
imposing any material liability or obligation pursuant to or under any
Environmental Law that would have or would reasonably be expected to have a
Material Adverse Effect on MKID.
Section 2.16. TITLE TO PROPERTIES; CONDITION OF PROPERTIES.
Section 2.16 of the MKID Disclosure Schedule lists and reasonably describes
all real property used in MKID's business. Except as set forth on the MKID
Disclosure Schedule: MKID has good, valid and marketable title (in fee
simple absolute in the case of real property) to all properties and assets
used in its business, except for leased properties and assets; none of those
owned properties is subject to any mortgage, deed of trust, pledge, lien,
claim, charge, equity, covenant, condition, restriction, easement,
right-of-way or encumbrance, except (i) liens, claims, charges and
encumbrances disclosed, or reserved against, in the MKID Balance Sheets, (ii)
liens for current taxes not yet due and payable, and (iii) minor
imperfections of title not material (individually or in the aggregate) and
not materially detracting from the value, or the use MKID make, of the
property in question.
Section 2.17. REAL PROPERTY. [Omitted].
Section 2.18. TERMINATION OF BUSINESS RELATIONSHIPS. No supplier
of MKID, and no person presently a customer, agent, employee or independent
contractor, licensor or licensee of MKID, has evidenced to MKID any intention
to cancel or otherwise terminate its business relationship with MKID. No
employee of MKID has notified it of his or her intent or desire to terminate
employment.
Section 2.19. CONDITION OF BUILDINGS AND PERSONAL PROPERTY. All
of the buildings, fixtures, machinery and equipment owned or used by MKID are
in good operating condition and repair, and comply in all material respects
with applicable zoning, building and fire codes. Each building and each such
item of personal property is covered by one of the insurance policies
referred to in Section 2.20.
Section 2.20. INSURANCE. MKID has valid, outstanding and
enforceable policies of insurance issued by reputable insurers covering its
properties, assets and business against risks of the nature normally insured
against by persons in the same or similar lines of business, in coverage
amounts normally carried by such persons and in any event sufficient to avoid
MKID being liable as co-insurer. MKID has had general third-party liability
coverage continuously in effect for at least three years. Section 2.20 of
the MKID Disclosure Schedule generally describes the insurance policies under
which MKID is the named insured. All such policies will remain in effect at
least through the Closing.
Section 2.21. ALL BUSINESS CONDUCTED BY MKID. The business and
operations of MKID are conducted exclusively by it, and not by any other
business entity whether or not affiliated with MKID.
7
Section 2.22. TRADE SECRETS, PATENTS, COPYRIGHTS, TRADEMARKS,
SERVICE MARKS, TRADE NAMES, KNOW-HOW. Section 2.22 of the MKID Disclosure
Schedule contains information (including where applicable the federal
registration number and the date of registration or application for
registration and the name in which registration was applied for) concerning:
(i) trade secrets, patents, copyrights, trademarks, trade names and service
marks, and all currently pending applications for any thereof (collectively
"Proprietary Matter"), held by MKID or any person affiliated with MKID; (ii)
any licenses granted by MKID to others under any Proprietary Matter; and
(iii) any licenses granted to MKID relating to any Proprietary Matter owned
by others. None of MKID's Proprietary Matter is, to its knowledge, being
infringed upon by any other person or entity and no proceedings have been
instituted or threatened (or, to the best of MKID's knowledge after due
inquiry, are pending) that challenge the validity of the ownership or use of
any Proprietary Matter by MKID. MKID owns (or possesses adequate and
enforceable licenses or other rights to use) all Proprietary Matter now used
or proposed to be used in its business and MKID has not received any notice
of conflict with the asserted rights of others with respect to any
Proprietary Matter. To the best of its knowledge, MKID's Proprietary Matter
is, and has at all times been, maintained on a confidential "need-to-know"
basis. None of MKID's confidential information has been misappropriated from
others. Subject to payment therefor at the Closing, MKID has obtained from
PMD complete right, title and interest to all intellectual property
referenced in that certain agreement dated January 21, 1996 between Scoop and
PMD.
Section 2.23. GRANTS, INCENTIVES AND SUBSIDIES.
(a) Section 2.23 of the MKID Disclosure Schedule
provides a complete list of all grants, incentives and subsidies ("Grants")
from the government of the State of Israel or any agency thereof to MKID,
including, without limitation, (i) Approved Enterprise Status and (ii) grants
from the officer of the Chief Scientist. Correct copies of all applications
submitted by MKID to the Investment Center for receipt of Approved Enterprise
Status in accordance with the Encouragement of Capital Investments Law--1959
("Investment Center") and of all letters of approval, and supplements
thereto, granted to MKID by the Investment Center will be made available to
Scoop upon request.
(b) Section 2.23 of the MKID Disclosure Schedule lists
each tax incentive to which MKID is entitled under the laws of the State of
Israel, the period for which such tax incentive applies, and the nature of
such tax incentive.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Section 3.1. STOCK OWNERSHIP; RESIDENCE.
(a) Each Shareholder is and will be immediately prior
to the Closing the lawful owner, of record and beneficially, of the entire
right, title and interest in and to the number of MKID Shares set forth in
Section 2.2 of the MKID Disclosure Schedule, free and clear of all
encumbrances and other restrictions of every character, except such
restrictions as may arise under applicable federal and state securities laws
and regulations.
(b) The MKID Shares are legally and validly authorized
and issued, fully paid and nonassessable, and none of such shares were issued
in violation of the preemptive rights of any person.
(c) Delivery of the MKID Shares at the Closing will
vest title to the MKID Shares in Scoop, free and clear of any encumbrances
and restrictions or rights of third parties of every character.
(d) Each of the Shareholders' principal residence has
previously been provided to Scoop.
8
Section 3.2. AUTHORIZATION. Each Shareholder has necessary power
(corporate or otherwise) power and authority to enter into this Agreement and
has taken all action necessary to consummate the transactions contemplated
hereby and to perform its obligations hereunder. This Agreement has been
duly executed and delivered by each of the Shareholders and is a valid and
binding obligation of each of the Shareholders, enforceable against each of
them in accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
Section 3.3. Securities Act Representations.
(a) Each Shareholder represents that he or it
understands that the Common Stock and Preferred Stock (collectively, the
"Scoop Stock") to be issued and delivered to him at Closing pursuant to this
Agreement will not have been registered pursuant to the registration
requirements of the Securities Act and that the resale of all shares of Scoop
Stock is subject to Rule 145 of the rules and regulations thereunder. Each
Shareholder represents that he or it is acquiring the Scoop Stock for its own
account, not as a nominee or agent, and not with a view to the distribution
thereof in violation of applicable securities laws. Each Shareholder has
been advised that as of the date hereof he may be deemed to be an "affiliate"
of Scoop, as that term is defined for purposes of paragraphs (c) and (d) of
Rule 144 and 145 and each Shareholder represents that he or it has been
advised that, as a result, the Scoop Stock must be held indefinitely unless a
sale of the Scoop Stock is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Securities and Exchange Commission
(the "Commission") under the Securities Act. Each Shareholder further
represents that he or it has been advised that since the Scoop Stock has not
been registered under the Securities Act, the Scoop Stock must be held
indefinitely unless (i) the distribution of the Scoop Stock has been
registered under the Securities Act, (ii) a sale of the Scoop Stock is made
in conformity with the holding period, volume and other limitations of Rule
144 promulgated by the Commission under the Securities Act, or (iii) in the
opinion of counsel reasonably acceptable to Scoop, some other exemption from
registration is available with respect to any proposed sale, transfer or
other disposition of the Scoop Stock.
(b) Each Shareholder represents that he or it has been
advised and understands that stop transfer instructions will be given to
Scoop's transfer agents with respect to the Scoop Stock and that a legend
setting forth the applicable restrictions on transfer, if any, will be placed
on the certificates for the Scoop Stock issuable under Section 1.1, or any
substitutions therefor.
(c) Each Shareholder represents that he or it is an
"accredited investor" as such term is defined under Regulation D promulgated
under the Securities Act and that he or it has such knowledge and experience
in financial and business affairs that he or it is capable of evaluating,
alone, the merits and risks of an investment in Scoop. Each Shareholder
represents that he or it has received and reviewed copies of the most recent
annual report on Form 10-KSB filed by Scoop under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Each Shareholder represents that
he or it has had an opportunity to ask questions and receive answers
concerning the terms of this Agreement and the foregoing information provided
by Scoop and to obtain any other information from Scoop such Shareholder
deems necessary or appropriate in connection with evaluating the merits of an
investment in Scoop.
9
(d) Each Shareholder represents that he has carefully
read this Section 3.3 and discussed its requirements and other applicable
limitations upon his ability to sell, transfer or otherwise dispose of the
Scoop Stock to the extent he felt necessary with his counsel and will not
make any sale, transfer or other disposition of the Scoop Stock in violation
of the Securities Act or the rules and regulations thereunder.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SCOOP
Scoop hereby represents and warrants to MKID and the Shareholders as
follows:
Section 4.1. CORPORATE ORGANIZATION. Scoop is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Scoop has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where the failure to
be so licensed or qualified would not have or reasonably be expected to have
a Material Adverse Effect on Scoop. The copies of the Certificate of
Incorporation and Bylaws of Scoop, which have previously been made available
to MKID, are true, complete and correct copies of such documents as in effect
as of the date of this Agreement.
Section 4.2. CAPITALIZATION. The authorized capital stock of
Scoop consists of 20,000,000 shares of common stock, par value $.001 per
share ("Scoop Common Stock") and 5,000,000 shares of preferred stock ("Scoop
Preferred Stock"). At the close of business on March 31, 1998, there were
5,501,214 shares of Scoop Common Stock outstanding, no shares of Scoop
Preferred Stock designated, and no shares of Scoop Common Stock held in
Scoop's treasury and, except for such shares, there were no other shares of
Scoop capital stock outstanding. On March 31, 1998, 1,475,000 shares of
Scoop Common Stock were available for issuance under the 1996 Stock Incentive
Plan of Scoop, Inc. (the "Scoop Stock Option Plan"), and no shares of Scoop
capital stock were reserved for any other purpose, except for shares reserved
with respect to the options and warrants set forth in Section 4.2 of the
disclosure schedule of Scoop delivered to MKID concurrently herewith (the
"Scoop Disclosure Schedule"). All of the issued and outstanding shares of
the Scoop Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. As of the date of this
Agreement, except (i) as set forth in Section 4.2 of the Scoop Disclosure
Schedule or as set forth elsewhere in this Section 4.2, Scoop does not have
and is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of Scoop Common Stock or Scoop Preferred Stock or any
other equity securities of Scoop or any securities representing the right to
purchase or otherwise receive any shares of Scoop Common Stock or Scoop
Preferred Stock or any other equity securities of Scoop. There are no bonds,
debentures, notes or other indebtedness of Scoop having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote)
on any matters on which shareholders of Scoop may vote. Except as set forth
in Section 4.2 of the Scoop Disclosure Schedule, since December 31, 1997,
Scoop has not issued any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock, other
than pursuant to the exercise of employee stock options granted prior to such
date and as disclosed in Section 4.2 of the Scoop Disclosure Schedule. The
shares of Scoop Common Stock to be issued pursuant to the Transaction will be
duly authorized and validly issued and, at the Closing, all such shares will
be fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
Section 4.3. AUTHORITY; NO VIOLATION.
(a) Scoop has full corporate power and authority to
execute and deliver this Agreement and the other documents contemplated to be
executed and delivered by Scoop in connection with the transactions
contemplated hereby (this Agreement, together with such other documents,
collectively, the "Scoop Documents") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
10
each of Scoop Documents and the consummation of the transactions contemplated
hereby and thereby have been duly and validly approved by the Board of
Directors of Scoop and no other corporate proceedings on the part of Scoop
are necessary to approve Scoop Documents and to consummate the transactions
contemplated hereby and thereby except for obtaining the approval of Scoop's
shareholders. Each of Scoop Documents has been duly and validly executed and
delivered by Scoop and (assuming due authorization, execution and delivery by
Scoop) this Agreement constitutes a valid and binding obligation of Scoop,
enforceable against Scoop in accordance with its terms, except as enforcement
may be limited by general principles of equity whether applied in a court of
law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of Scoop
Documents by Scoop nor the consummation by Scoop of the transactions
contemplated hereby and thereby, nor compliance by Scoop with any of the
terms or provisions hereof or thereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of Scoop, (ii) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Scoop or any of its properties or assets, or (iii)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any Lien upon any
of the properties or assets of Scoop under, any of the terms, conditions or
provisions of any loan or credit agreement, note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which Scoop is a party, or by which Scoop or any of its properties or assets
may be bound or affected, except (in the case of clause (ii) and (iii) above)
for such violations, conflicts, breaches or defaults which either
individually or in the aggregate will not have and would not reasonably be
expected to have a Material Adverse Effect on Scoop, or which are disclosed
in Section 4.3(b) of the Scoop Disclosure Schedule.
Section 4.4. CONSENTS AND APPROVALS. No consents or approvals
of, or filings or registrations with, any Governmental Entity or any third
party are necessary in connection with (A) the execution and delivery by
Scoop of Scoop Documents and (B) the consummation by Scoop of the Transaction
and the other transactions contemplated hereby and thereby, except for such
filings and approvals as may be required by Scoop or the Shareholders under
Delaware law, with the SEC (proxy statement) or with Nasdaq (list additional
shares) in respect of the Transaction or which are disclosed in Section 4.4
of the Scoop Disclosure Schedule.
Section 4.5. VOTE REQUIRED. The affirmative vote of at least a
majority of the outstanding shares of Scoop Common Stock is the only vote of
the holders of any class or series of Scoop's capital stock necessary (under
applicable law or otherwise) to approve the Scoop Vote Matters (as defined in
the next sentence). The "Scoop Vote Matters" shall mean (i) a proposal to
approve this Agreement and the transactions contemplated hereby, (ii) a
proposal to approve an amendment to Scoop's Certificate of Incorporation to
increase the number of authorized shares of Scoop Common Stock to at least
40,000,000 and to effect a reverse split (at least 1 for 4) of Scoop Common
Stock and (iii) a proposal to approve the issuance of securities of the
Company in connection with the offering by the Company referred to in Section
7.1(b) hereof.
Section 4.6. SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED
LIABILITIES. Scoop has timely filed all required reports, schedules, forms,
statements and other documents with the SEC since April 9, 1997 (the "Scoop
SEC Documents"). All of the Scoop SEC Documents (other than preliminary
material), as of their respective filing dates, complied in all material
respects with all applicable requirements of the Securities Act and the
Exchange Act and, in each case, the rules and regulations promulgated
thereunder applicable to such Scoop SEC Documents. None of the Scoop SEC
Documents at the time of filing contained any untrue statement of a material
fact or omitted to state any 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, except to the
extent such statements have been modified or superseded by later filed Scoop
SEC Documents. The consolidated financial statements of Scoop included in
the Scoop SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-QSB of
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated in the notes
11
thereto) and fairly presented, in accordance with the applicable requirements
of GAAP, the consolidated financial position of Scoop as of the dates thereof
and the consolidated results of operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except for those liabilities that (i) are fully
reflected or reserved against on the consolidated balance sheet of Scoop
included in the Scoop Form 10-KSB for the year ended December 31, 1997, (ii)
were incurred in the ordinary course of business consistent with past
practice since December 31, 1997 or (iii) are disclosed in Section 4.6 of the
Scoop Disclosure Schedule, Scoop has not incurred any liability of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether
due or to become due) that, either alone or when combined with all similar
liabilities, has had, or would reasonably be expected to have, a Material
Adverse Effect on Scoop. The books and records of Scoop have been, and are
being, maintained in all material respects in accordance with GAAP and any
other applicable legal and accounting requirements and reflect only actual
transactions.
Section 4.7. BROKER'S FEES. Except as disclosed in Section 4.7
of the Scoop Disclosure Schedule, neither Scoop nor any of its officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by the Scoop Documents. The fees payable to the
brokers and/or finders set forth in Section 4.7 of the Scoop Disclosure
Schedule shall be paid by the Shareholders.
Section 4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as publicly disclosed in Scoop SEC Documents
filed prior to the date hereof, since December 31, 1997, no event (including,
without limitation, any act of God) has occurred which has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Scoop.
(b) Except as set forth in Section 4.8 of the Scoop
Disclosure Schedule or as publicly disclosed in Scoop SEC Documents filed
prior to the date hereof, since December 31, 1997, Scoop has carried on its
business in all material respects in the ordinary course of business, and
Scoop has not (i) except for normal increases in the ordinary course of
business consistent with past practice and except as required by applicable
law, increased the wages, salaries, compensation, pension or other fringe
benefits or perquisites payable to any named executive officer (within the
meaning of Regulation S-K of the SEC) or director, other than persons newly
hired for such positions, from the amount thereof in effect as of December
31, 1997, or granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or paid any
bonus, in each case to any such named executive officer or director, other
than pursuant to preexisting agreements or arrangements; (ii) made any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Scoop's capital
stock; (iii) effectuated any split, combination or reclassification of any of
Scoop's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for, or
giving the right to acquire by exchange or exercise, shares of its capital
stock; (iv) made any change in accounting methods, principles or practices by
Scoop, except insofar as may have been disclosed in the Scoop SEC Documents
or required by a change in GAAP; or (v) suffered any strike, work stoppage,
slow-down or other labor disturbance. As of the date of this Agreement, Xxxx
Xxxxxxxxxxx is the only employee of Scoop who receives annual compensation in
an amount exceeding $100,000. The terms of Xx. Xxxxxxxxxxx'x employment
arrangement are set forth in Section 4.8 of the Scoop Disclosure Schedule.
Section 4.9. LEGAL PROCEEDINGS.
(a) Except as set forth in Section 4.9(a) of the Scoop
Disclosure Schedule or as publicly disclosed in Scoop SEC Documents filed prior
to the date hereof, Scoop is not a party to any, and there are no pending or,
to the best of Scoop's knowledge after due inquiry, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against Scoop or challenging the
validity or propriety of the transactions contemplated by the Scoop Documents
as to which there is a reasonable probability of an adverse determination and
which, if adversely determined, would, individually or in the aggregate, have
or reasonably be expected to have a Material Adverse Effect on Scoop.
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(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Scoop or the assets of Scoop which has
had, or would reasonably be expected to have, a Material Adverse Effect on
Scoop.
Section 4.10. TAXES AND TAX RETURNS.
(a) Scoop has timely filed or caused to be filed (or
has timely filed for an extension for the filing of) all Tax Returns with
respect to Scoop, except where the failure to file timely such Tax Returns
would not have and would not reasonably be expected to have a Material
Adverse Effect on Scoop. All Taxes due, whether or not shown to be due on
such Tax Returns, have been paid or adequate reserves have been established
for the payment of such Taxes, except where the failure to pay or establish
adequate reserves would not have and would not reasonably be expected to have
a Material Adverse Effect on Scoop. No material (i) audit or examination,
(ii) deficiencies for any taxes have been proposed, asserted or assessed or
(iii) refund litigation with respect to any Tax Return is pending. All
material Tax Returns filed by Scoop are complete and accurate in all material
respects. Since the date of the financial statements most recently filed
in Scoop SEC Documents, Scoop has not incurred any liability for taxes other
than in the ordinary course of business. To the best knowledge of Scoop after
due inquiry, no event has occurred, and no condition or circumstance exists,
which presents a material risk that any material tax described in the
preceding sentence will be imposed upon Scoop. To the best knowledge of Scoop
after due inquiry, no deficiencies for any taxes have been proposed, asserted
or assessed against Scoop, and no requests for waivers of the time to assess
any such taxes are pending.
Section 4.11. EMPLOYEES.
(a) Section 4.11(a) of the Scoop Disclosure Schedule
sets forth a true and complete list of each employee benefit plan,
arrangement or agreement that is maintained as of the date of this Agreement
(the "Scoop Plans") by Scoop or by any trade or business, whether or not
incorporated (a "Scoop ERISA Affiliate"), all of which together with Scoop
would be deemed a "single employer" within the meaning of Section 4001 of
ERISA.
(b) Scoop shall make available to MKID true and
complete copies of each of the Scoop Plans and all related documents,
including but not limited to (i) the actuarial report for such Scoop Plan (if
applicable) for each of the last two years, and (ii) the most recent
determination letter from the Internal Revenue Service (if applicable) for
such Scoop Plan.
(c) Except as set forth in Section 4.11(c) of the Scoop
Disclosure Schedule, (i) each of the Scoop Plans has been operated and
administered in accordance with applicable laws, including but not limited to
ERISA and the Code, (ii) each of the Scoop Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified, (iii) with
respect to each Scoop Plan which is subject to Title IV of ERISA, the present
value of accrued benefits under such Scoop Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Scoop Plan's actuary with respect to such Scoop Plan, did
not, as of its latest valuation date, exceed the then current value of the
assets of such Scoop Plan allocable to such accrued benefits, (iv) no Scoop
Plan provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former
employees of Scoop or any Scoop ERISA Affiliate beyond their retirement or
other termination of service, other than (w) coverage mandated by applicable
law, (x) death benefits or retirement benefits under any "employee pension
plan," as that term is defined in Section 3(2) of ERISA, (y) deferred
compensation benefits accrued as liabilities on the books of Scoop or the
Scoop ERISA Affiliates or (z) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), (v) no liability under Title
IV of ERISA has been incurred by Scoop or any Scoop ERISA Affiliate that has
not been satisfied in full, and no condition exists that presents a material
risk to Scoop or any Scoop ERISA Affiliate of incurring a material liability
thereunder, (vi) no Scoop Plan is a multiemployer pension plan," as such term
is defined in Section 3(37) of ERISA, (vii) all contributions or other
amounts payable by Scoop as of the Closing with respect to each Scoop Plan in
respect of current or prior plan years have been paid or accrued in
accordance with generally accepted accounting practices and Section 412 of
the Code, (viii) since October 1, 1997 neither Scoop nor
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any Scoop ERISA Affiliate has engaged in a transaction in connection with
which Scoop or any Scoop ERISA Affiliate could be subject to either a
material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or
a material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix)
to the best knowledge of Scoop after due inquiry there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by,
on behalf of or against any of the Scoop Plans or any trusts related thereto
which would, individually or in the aggregate, have or be reasonably expected
to have a Material Adverse Effect on Scoop.
(d) Except as set forth in Section 4.11(d) of the Scoop
Disclosure Schedule, the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Plan or
any policy or arrangement, any employment, severance or other agreement or
any trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any employee, officer or director. The only severance
agreements or severance policies applicable to Scoop are the agreements and
policies specifically referred to in Section 4.11(d) of the Scoop Disclosure
Schedule, and there are no other employment or severance contracts or other
agreements requiring payments to be made on a change of control or otherwise
as a result of the consummation of any of the transactions hereunder.
Section 4.12. COMPLIANCE WITH APPLICABLE LAW. Except as
disclosed in Section 4.12 of the Scoop Disclosure Schedule, Scoop holds, and
has at all times held, all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business under and
pursuant to all, and have complied with and are not in default in any
material respect under any, applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to Scoop, except
where the failure to hold such license, franchise, permit or authorization or
such noncompliance or default would not, individually or in the aggregate,
have or reasonably be expected to have a Material Adverse Effect on Scoop,
and Scoop does not know of, or has not received notice of, any material
violations of any of the above which, individually or in the aggregate, would
have or reasonably be expected to have a Material Adverse Effect on Scoop.
Section 4.13. CERTAIN CONTRACTS.
(a) Except as set forth in Section 4.13(a) of the Scoop
Disclosure Schedule, Scoop is not a party to or is bound by any contract,
arrangement, commitment or understanding (whether written or oral) (i) which
is a material contract (as defined in Item 601(b)(10) of Regulation S-K of
the SEC) to be performed after the date of this Agreement, (ii) which
materially restricts the conduct of any line of business by Scoop, (iii)
evidencing or concerning any loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments pursuant to which
any indebtedness of Scoop is evidenced or (iv) with or to a labor union or
guild (including any collective bargaining agreement). Scoop has made
available to MKID true and correct copies of all employment, consulting and
deferred compensation agreements to which Scoop is a party. Each contract,
arrangement, commitment or understanding of the type described in this
Section 4.13(a), other than Scoop Documents, whether or not set forth in
Section 4.13(a) of the Scoop Disclosure Schedule, is referred to herein as a
"Scoop Contract," and Scoop does not know of, or has not received notice of,
any violation of the above by any of the other parties thereto which,
individually or in the aggregate, would have or would reasonably be expected
to have a Material Adverse Effect on Scoop.
(b) Except as set forth in Section 4.13(b) of the Scoop
Disclosure Schedule, (i) each Scoop Contract is valid and binding and in full
force and effect, (ii) Scoop has in all material respects performed all
obligations required to be performed by it to date under each Scoop Contract,
and (iii) no event or condition exists which constitutes or, after notice or
lapse of time or both, would constitute, a material default on the part of
Scoop under any such Scoop Contract, except, in each case, where any such
invalidity, failure to be binding, failure to so perform or default,
individually or in the aggregate, would not have or reasonably be expected to
have a Material Adverse Effect on Scoop.
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Section 4.14. ENVIRONMENTAL LIABILITY. There are no legal,
administrative, arbitral or other proceedings, claims, actions, causes of
action, private environmental investigations or remediation activities or
governmental investigations of any nature seeking to impose, or that
reasonably would be expected to result in the imposition, on Scoop of any
liability or obligation arising under any Environmental Law, pending or, to
the best knowledge of Scoop after due inquiry, threatened, against Scoop,
which liability or obligation would reasonably be expected to have a Material
Adverse Effect on Scoop. To the best knowledge of Scoop after due inquiry,
there is no reasonable basis for any such proceeding, claim, action or
governmental investigation that would impose any liability or obligation that
would reasonably be expected to have a Material Adverse Effect on Scoop. To
the best knowledge of Scoop after due inquiry, during or prior to the period
of (i) its ownership or operation of any of their respective current
properties, (ii) its participation in the management of any property, or
(iii) its holding of a security interest or other interest in a property,
there were no releases or threatened releases of hazardous, toxic,
radioactive or dangerous materials or other materials regulated under
Environmental Laws in, on, under or affecting any such property. Scoop is
not subject to any agreement, order, judgment, decree, letter or memorandum
by or with any court, governmental authority, regulatory agency or third
party imposing any material liability or obligation pursuant to or under any
Environmental Law that would reasonably be expected to have a Material
Adverse Effect on Scoop.
Section 4.15. TERMINATION OF BUSINESS RELATIONSHIPS. Except as
set forth in Section 4.15 of the Scoop Disclosure Schedule, no supplier of
Scoop, and no person presently a customer, agent, employee or independent
contractor, licensor or licensee of Scoop, has evidenced to Scoop any
intention to cancel or otherwise terminate its business relationship with
Scoop.
Section 4.16. CONDITION OF BUILDINGS AND PERSONAL PROPERTY. All
of the buildings, fixtures, machinery and equipment owned or used by Scoop
are in good operating condition and repair, and comply in all material
respects with applicable zoning, building and fire codes.
Section 4.17. INSURANCE. Scoop has valid, outstanding and
enforceable policies of insurance issued by reputable insurers covering its
properties, assets and business against risks of the nature normally insured
against by persons in the same or similar lines of business, in coverage
amounts normally carried by such persons and in any event sufficient to avoid
Scoop being liable as co-insurer. Scoop has had general third-party
liability coverage continuously in effect for at least one year. All such
policies will remain in effect at least through June 28, 1998.
Section 4.18. ALL BUSINESS CONDUCTED BY SCOOP. The business and
operations of Scoop are conducted exclusively by it, and not by any other
business entity whether or not affiliated with Scoop.
Section 4.19. TRADE SECRETS, PATENTS, COPYRIGHTS, TRADEMARKS,
SERVICE MARKS, TRADE NAMES, KNOW-HOW. Section 4.19 of the Scoop Disclosure
Schedule contains detailed information (including where applicable the
federal registration number and the date of registration or application for
registration and the name in which registration was applied for) concerning:
(i) any Proprietary Matter held by Scoop or any person affiliated with Scoop;
and (ii) any licenses granted by Scoop to others under any Proprietary
Matter. To the best of Scoop's knowledge, none of Scoop's Proprietary Matter
is being infringed upon by any other person or entity and no proceedings have
been instituted or threatened (or, to the best of Scoop's knowledge after due
inquiry, are pending) that challenge the validity of the ownership or use of
any Proprietary Matter by Scoop. Scoop owns (or possesses adequate and
enforceable licenses or other rights to use) all Proprietary Matter now used
or proposed to be used in their respective businesses and Scoop has not
received any notice of conflict with the asserted rights of others with
respect to any Proprietary Matter. None of Scoop's confidential information
has been misappropriated from others.
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ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1. CONDUCT OF BUSINESSES PRIOR TO THE CLOSING. Except
as set forth in the MKID Disclosure Schedule or the Scoop Disclosure
Schedule, as the case may be, during the period from the date of this
Agreement to the Closing, except as expressly contemplated or permitted by
this Agreement or as required by applicable law, each of MKID and Scoop shall
(i) conduct its business in the usual, regular and ordinary course consistent
with past practice, (ii) use reasonable best efforts to maintain and preserve
intact its business organization, employees and advantageous business
relationships and retain the services of its officers and key employees and
(iii) take no action which would reasonably be expected to adversely affect
or delay the ability of either MKID or Scoop to obtain any approvals of any
Governmental Entity required to consummate the transactions contemplated
hereby or to perform its covenants and agreements under MKID Documents or the
Scoop Documents, as the case may be.
Section 5.2. FORBEARANCES. Except as set forth in Section 5.2 of
the MKID Disclosure Schedule or Section 5.2 of the Scoop Disclosure Schedule,
as the case may be, during the period from the date of this Agreement to the
Closing and, except as expressly contemplated or permitted by this Agreement
or as required by applicable law, rule or regulation, neither MKID nor Scoop
shall, without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed (except with respect to clause (e)):
(a) adjust, split, combine or reclassify any capital
stock; make, declare or pay any dividend or make any other distribution on,
or directly or indirectly redeem, purchase or otherwise acquire, any shares
of its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, voting securities or other
ownership interests, or grant any stock appreciation rights or grant any
individual, corporation or other entity any right or option to acquire any
shares of its capital stock, voting securities or other ownership interests;
or repurchase, redeem or otherwise acquire any shares of its capital stock or
any capital stock, voting securities or ownership interests in any
subsidiary; or issue any additional shares of capital stock, voting
securities or other ownership interests except pursuant to (A) an offering or
private placement of Scoop securities as contemplated by this Agreement, (B)
the exercise of stock options outstanding as of the date hereof or (C)
acquisitions and investments permitted by paragraph (b) hereof;
(b) except for (i) transactions in the ordinary course
of business consistent with past practice, or (ii) acquisitions of an entity
or business having assets not exceeding 10% of the consolidated assets of
MKID or Scoop, as applicable, on a pro forma basis giving effect to such
transaction, make any material acquisition or investment either by purchase
of stock or securities, merger or consolidation, contributions to capital,
property transfers, or purchases of any property or assets of any other
individual, corporation or other entity other than a wholly owned subsidiary
thereof;
(c) except for transactions in the ordinary course of
business consistent with past practice, enter into or terminate any contract
or agreement, or make any change in any of its leases or contracts, in each
case that is material to such party, other than renewals of contracts and
leases without materially adverse changes of terms thereof;
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(d) incur any liability for indebtedness, guarantee the
obligations of others, indemnify others or, except in the ordinary course of
business, incur any other liability;
(e) increase the compensation or fringe benefits of any
of its employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees other than in the
ordinary course of business consistent with past practice but in no event in
an aggregate amount exceeding $50,000, or become a party to, amend or commit
itself to any material pension, retirement, profit-sharing or welfare benefit
plan or agreement or employment agreement with or for the benefit of any
employee or accelerate the vesting of any stock options or other stock-based
compensation;
(f) [Omitted];
(g) take any action that would prevent or impede the
Transaction from qualifying (i) for the purchase method of accounting or (ii)
as a reorganization within the meaning of Section 368(a)(1)(B) of the Code;
(h) amend its certificate of incorporation, bylaws or
similar governing documents in any case in a manner that would materially and
adversely affect any party's ability to consummate the Transaction or the
economic benefits of the Transaction to either party;
(i) take any action that is intended or may reasonably
be expected to result in any of its representations and warranties set forth
in this Agreement being or becoming untrue in any material respect at any
time prior to the Closing, or in any of the conditions to the Transaction set
forth in Article VII not being satisfied or in a violation of any provision
of this Agreement, except, in every case, as may be required by applicable
law;
(j) make any capital expenditures in excess of $50,000
individually or $100,000 in the aggregate;
(k) make any change in accounting methods, principles
or practices, except as required by a change in GAAP; or
(l) agree to, or make any commitment to, take any of
the actions prohibited by this Section 5.2.
Section 5.3. DISPOSITION OF SCOOP BUSINESSES. Scoop shall use
reasonable efforts to sell its on-line information services division to a
third party purchaser and shall be permitted to sell, transfer or otherwise
dispose of such division and any of its other assets or businesses, including
its reprint business, without the consent of MKID; provided, however, that
Scoop may not (i) sell its on-line business for an aggregate of less than
$400,000 or (ii) sell its reprint business for an aggregate of less than
$750,000, without the consent of MKID.
Section 5.4. DISPOSITIONS BY MKID. MKID shall not, and shall not
permit any of its subsidiaries, if any, to, without the prior written consent
of Scoop, sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity other
than a direct or indirect wholly owned subsidiary, or cancel, release or
assign any indebtedness to any such person or any claims held by any such
person, in each case that is material to such party.
Section 5.5. NO SOLICITATION OF TRANSACTIONS. Neither MKID nor
Scoop shall authorize or permit any of its officers, directors, employees or
agents to directly or indirectly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, a Transaction
Proposal (as defined below), or recommend or endorse any Transaction
Proposal, or participate in any discussions or negotiations, or provide third
parties with any nonpublic information, relating to any such inquiry or
proposal or otherwise facilitate any effort or attempt to make or implement a
Transaction Proposal; provided, however, that in response to a bona fide,
written
17
Transaction Proposal submitted to the Board of Directors of Scoop, Scoop may,
and may authorize and permit its officers, directors, employees or agents to,
provide third parties with nonpublic information, otherwise facilitate any
effort or attempt by any third party to make or implement such Transaction
Proposal, recommend or endorse any such Transaction Proposal with or by any
third party, and participate in discussions and negotiations with any third
party relating to any such Transaction Proposal, if (i) the Board of
Directors of Scoop, after having consulted with and considered the advice of
outside counsel, has reasonably determined in good faith that the failure to
do so would cause the members of such Board of Directors to breach their
fiduciary duties under applicable law and (ii) if the third party has entered
a confidentiality agreement with Scoop. MKID and Scoop shall each
immediately, and in any event no more than 24 hours after the receipt
thereof, advise the other orally and in writing following the receipt by it
of any offer, proposal, inquiry regarding a Transaction Proposal and the
details thereof including material terms and the identity of the party making
it, and advise the other of any developments, including, in the case of any
Transaction Proposal received by Scoop, the status and content of any
negotiations conducted by Scoop pursuant to the provision of the preceding
sentence, with respect to such Transaction Proposal immediately upon the
occurrence thereof. MKID and Scoop will immediately cease and cause to be
terminated any activities, discussions or negotiations conducted prior to the
date of this Agreement with any parties other than MKID and Scoop with
respect to any of the foregoing. As used in this Agreement, "Transaction
Proposal" shall mean, with respect to any person, any tender or exchange
offer, proposal for a merger, consolidation or other business combination
involving such person or any proposal or offer to acquire in any manner a
substantial equity interest in, or all or a substantial portion of the assets
of, such person, any proposal or offer with respect to any recapitalization
or restructuring with respect to such person or any proposal or offer with
respect to any transaction similar to the foregoing with respect to such
person, other than the transactions contemplated or permitted by this
Agreement.
ARTICLE VI.
ADDITIONAL AGREEMENTS
Section 6.1. REGULATORY MATTERS.
(a) Scoop shall at its expense promptly prepare and
file with the SEC a preliminary version of a proxy statement to be
distributed to Scoop stockholders relating to the Scoop Voting Matters (the
"Proxy Statement"). Scoop shall also use all reasonable efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required
to carry out the transactions contemplated by this Agreement, and MKID shall
furnish all information concerning MKID and the holders of MKID Common Stock
as may be reasonably requested in connection with any action contemplated by
this Section 6.1.
(b) The parties hereto shall cooperate with each other
and use reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Transaction), to comply with the
terms and conditions of all such permits, consents, approvals and
authorizations of all such Governmental Entities, and to defend any lawsuits
or other legal proceedings challenging this Agreement and the transactions
contemplated by this Agreement. MKID and Scoop shall have the right to
review in advance, and to the extent practicable each will consult the other
on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to Scoop or MKID, as the case may
be, which appear in any filing made with, or written materials submitted to,
any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein. In connection with and
without limiting the foregoing, Scoop and MKID and their respective Boards of
Directors shall (i) take all reasonable action necessary so that no "fair
price," "moratorium," "control share acquisition" or any other anti-takeover
statute or similar statute enacted under
18
state or federal laws of the United States or similar statue or regulation is
or becomes applicable to the transactions contemplated under this Agreement
and (ii) if any such statute becomes applicable to the transactions
contemplated under this Agreement, take all action necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated by such agreements, and otherwise minimize the effect of such
statutes on such transactions.
(c) MKID and Scoop shall, upon request, furnish each
other with all information concerning themselves, directors, officers and
stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Proxy Statement or any other statement,
filing, notice or application made by or on behalf of Scoop or MKID to any
Governmental Entity in connection with the Transaction and the other
transactions contemplated by this Agreement.
(d) MKID and Scoop shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (as defined herein) will not
be obtained or that the receipt of any such approval will be materially
delayed.
Section 6.2. ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable
laws relating to the exchange of information, each of MKID and Scoop shall
afford to the officers, employees, accountants, counsel and other
representatives of the other property access, during normal business hours
during the period prior to the Closing, to all its properties, books,
contracts, commitments and records, and to its officers, employees,
accountants, counsel and other representatives and, during such period, each
of MKID and Scoop shall make available to the other party (i) a copy of each
report, schedule, registration statement and other document filed or received
by it during such period pursuant to the requirements of federal securities
laws (other than reports or documents which MKID or Scoop, as the case may
be, is not permitted to disclose under applicable law) and (ii) all other
information concerning its business, properties and personnel as such other
party may reasonable request. Neither MKID nor Scoop shall be required to
provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of its customers, jeopardize the
attorney-client privilege of the institution in possession or control of such
information or contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the date of this
Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) Each of MKID and Scoop shall hold all information
furnished by the other party or any of such party's representatives pursuant
to Section 6.2(a) in confidence.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein.
Section 6.3. STOCKHOLDERS' APPROVALS. Scoop shall duly call,
give notice of, convene and hold a meeting of its shareholders to be held as
soon as practicable following the date hereof for the purpose of obtaining
the approval of its shareholders in connection with the Scoop Vote Matters.
Subject to the provisions of the next sentence, Scoop shall, through its
Board of Directors, recommend to its shareholders approval of such matters.
The Board of Directors of Scoop may fail to make such recommendation, or
withdraw, modify or change any such recommendation in a manner adverse to
MKID and the Shareholders, if such Board of Directors, after having consulted
with and considered the advice of outside counsel, has reasonably determined
in good faith that the making of such recommendation, or the failure to
withdraw, modify or change its recommendation, would constitute a breach of
the fiduciary duties of the members of such Board of Directors under
applicable law.
Section 6.4. LEGAL CONDITIONS TO TRANSACTION.
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(a) Subject to the terms and conditions of this
Agreement, each party shall use its reasonable best efforts, (i) to take, or
cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party with
respect to the Transaction and, subject to the conditions set forth in
Article VII hereof, to consummate the transactions contemplated by this
Agreement and (ii) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity and any other third party which is required to be
obtained by such party in connection with the Transaction and the other
transactions contemplated by this Agreement.
(b) Subject to the terms and conditions of this
Agreement, each party agrees to use reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated
hereby, including, without limitation, using reasonable efforts to lift or
rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated hereby and using reasonable efforts to defend any litigation
seeking to enjoin, prevent or delay the consummation of the transactions
contemplated hereby or seeking material damages.
Section 6.5. [Omitted].
Section 6.6. STOCK EXCHANGE LISTING. Scoop shall use its best
efforts to cause the Common Shares and the shares of Scoop Common Stock which
will be issuable upon conversion of the Preferred Shares to be approved for
listing on the NASDAQ SmallCap Market, subject to official notice of
issuance, prior to the Closing.
Section 6.7. [Omitted]
Section 6.8. DIRECTORS' AND OFFICERS' INSURANCE.
(a) For a period of six years from the Effective Time,
Scoop shall use its best efforts to provide that portion of directors' and
officers' liability insurance that serves to reimburse the present and former
officers and directors of Scoop (determined as of the Effective Time) with
respect to claims against such officers and directors arising from facts or
events which occurred before the Effective Time, which insurance shall
contain at least the same coverage and amounts, and contain terms and
conditions no less advantageous, as that coverage currently provided by Scoop
provided, however, that the annual premiums for such coverage will not exceed
125% of the annual premiums currently paid by Scoop for such coverage;
provided, further, that officers and directors of Scoop may be required to
make application and provide customary representations and warranties to
Scoop's insurance carrier for the purpose of obtaining such insurance; and
provided, further, that such coverage will have a single aggregate for such
six-year period in an amount not less than the annual aggregate of such
coverage currently provided by Scoop.
(b) The provisions of this Section 6.8 are intended to
be for the benefit of, and shall be enforceable by, each present and former
officer and director of Scoop (determined as of the Effective Time) and his
or her heirs and representatives.
Section 6.9. ADDITIONAL AGREEMENTS. In case at any time after
the Closing any further action is necessary or desirable to carry out the
purposes of this Agreement, the parties and their proper officers shall take
all such necessary action.
Section 6.10. ADVICE OF CHANGES. The parties shall promptly
advise each other of any change or event which, individually or in the
aggregate with other such changes or events, has a Material Adverse Effect on
it or which it believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein.
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Section 6.11. TAX TREATMENT. The parties shall use their
commercially reasonable best efforts to cause the Transaction to qualify as a
reorganization under the provisions of Sections 368(a)(1)(B) of the Code.
The Shareholders acknowledge and agree, however, that they are relying solely
on the tax opinion referred to in Section 7.2(c) regarding the
characterization of the Transaction for income tax purposes, and none of them
is relying on any representation, warranty or advice of Scoop or any of its
representatives regarding the characterization or treatment of the
Transaction for tax purposes.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
TRANSACTION. The respective obligations of each party to effect the
Transaction shall be subject to the satisfaction at or prior to the Closing
of the following conditions:
(a) STOCKHOLDER APPROVAL. The Scoop Vote Matters shall
have been approved by the requisite affirmative vote of the holders of Scoop
Common Stock entitled to vote thereon.
(b) COMPLETION OF SCOOP OFFERING. Scoop shall have
successfully completed a private or public offering of equity or debt
securities of Scoop from which it shall have received net proceeds of no less
than $5.0 million.
(c) FAIRNESS OPINION. Scoop shall have received an
opinion from an independent investment bank to the effect that the
consideration to be paid by Scoop for MKID Shares is fair, from a financial
point of view, to the shareholders of Scoop.
(d) [Omitted].
(e) [Omitted].
(f) [Omitted]
(g) OTHER APPROVALS. All regulatory approvals required
to consummate the transactions contemplated hereby, including the approval of
the Office of the Chief Scientist of the Israeli Ministry of Trade and
Industry and of the Israel Investment Center, shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired or been terminated (all such approvals and
the expiration of all such waiting periods being referred to herein as the
"Requisite Regulatory Approvals") and no such approval shall contain any
conditions or restrictions which the Board of Directors of Scoop or counsel
to the Shareholder reasonably determines will have or can reasonably be
expected to have a Material Adverse Effect on Scoop.
(h) INVESTOR REPRESENTATIONS. Each person, other than
the Shareholders, who receives securities of Scoop in connection with the
Transaction shall furnish Scoop with an executed certificate certifying,
among other things, that such party is an "accredited investor" as defined in
Rule 501 under the Securities Act of 1933, as amended, and is acquiring the
shares without a view to redistribution.
(i) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Transaction or any of the other transactions contemplated
by this Agreement shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or enforced
by any Governmental Entity which prohibits, restricts or makes illegal the
consummation of the Transaction.
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(j) CONSENTS. All consents and waivers from third
parties necessary in connection with the consummation of the transactions
contemplated by this Agreement shall have been obtained, other than such
consents and waivers from third parties which, if not obtained, would not
result in a Material Adverse Effect on Scoop.
(k) [Omitted].
(l) NO MATERIAL ADVERSE CHANGE. After the date of this
Agreement, there shall not have been any change, circumstance or event which
has or would reasonably be expected to have a Material Adverse Effect on Scoop
or MKID; provided, however, that for purposes of this paragraph 7.1(l), a sale
of all or any portion of the assets of Scoop shall not be considered to have a
Material Adverse Effect on Scoop.
Section 7.2 CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS. The
obligation of Shareholders to effect the Transaction is also subject to the
satisfaction or, except with respect to subparagraph (d) hereof, waiver by
the Shareholders at or prior to the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. (i) The
representations and warranties of Scoop set forth in Sections 4.2, 4.3(a) and
4.8(a) of this Agreement shall be true and correct in all material respects
as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date and (ii) the
representations and warranties of Scoop set forth in this Agreement other
than those specifically enumerated in clause (i) hereof shall be true and
correct in all respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of determining the satisfaction of the condition
contained in this clause (ii), no effect shall be given to any exception in
such representations and warranties relating to materiality or a Material
Adverse Effect, and provided, further, however, that, for purposes of this
clause (ii), such representations and warranties shall be deemed to be true
and correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct, individually or in
the aggregate, results or would reasonably be expected to result in a
Material Adverse Effect on Scoop. Shareholders shall have received a
certificate signed on behalf of Scoop by the Chief Executive Officer of Scoop
to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF SCOOP. Scoop shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Shareholders shall have received a certificate signed on behalf of Scoop by
the Chief Executive Officer of Scoop to such effect.
(c) FEDERAL TAX OPINION. Shareholders shall have
received an opinion of Xxxxxxxxxxx & Xxxxxxx, special tax counsel to
Shareholders, in form and substance reasonably satisfactory to MKID, dated as
of the Closing, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Closing, the Transaction
will be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a)(1)(B) of the Code and that accordingly:
(1) No gain or loss will be recognized by
Shareholders or Scoop as a result of the Transaction;
(2) [Omitted]; and
(3) The tax basis of the Scoop PS received by
Shareholders in the Transaction will be the same as the tax basis of MKID
Shares surrendered in exchange therefor (reduced by any amount allocable
to a fractional share interest for which cash is received).
22
In rendering such opinion, Xxxxxxxxxxx & Xxxxxxx may require and rely
upon representations and covenants including those contained in certificates of
officers of Shareholders, Scoop and others.
(d) OPINION OF SCOOP'S COUNSEL. Shareholders shall have
received an opinion from Xxxxxx & Xxxxxxx or, in the case of paragraph (5)
below, Xxxxxx X. Xxxxxxxxxx, Esq. to the effect that:
(1) this Agreement has been duly authorized,
executed and delivered by Scoop;
(2) the definitive certificates representing the
Preferred Shares have been duly authorized by the Board of Directors of
Scoop and, when signed by Scoop and duly countersigned by the Company's
transfer agent and registrar and delivered to the Shareholders against
payment of the agreed consideration therefor in accordance with this
Agreement, the Preferred Shares represented thereby will be validly issued,
fully paid and nonassessable.
(3) the Common Shares to be issued and sold by
Scoop pursuant to this Agreement have been duly authorized and, when
issued to and paid for by the Shareholders in accordance with this
Agreement, will be validly issued, fully paid and nonassessable.
(4) the shares of Common Stock issuable upon the
conversion of the Preferred Shares in accordance with the Certificate of
Designation have been duly authorized and reserved for issuance by the
Board of Directors of Scoop, and when issued upon conversion of the
Preferred Shares in accordance with the terms of the Certificate of
Designation, will be validly issued, fully paid and nonassessable.
(5) the execution and delivery of this Agreement
by the Company does not (i) result in the violation by the Company of its
Certificate of Incorporation or Bylaws or (ii) result in a breach of or
default under any of the material agreements that are listed in
Section 4.13(a) of the Scoop Disclosure Schedule.
(e) EMPLOYMENT AGREEMENT WITH XXXX XXXXXXXXXXX. Scoop
and Xxxx Xxxxxxxxxxx shall have entered into a mutually acceptable employment
agreement which supersedes, as of the Closing, Xx. Xxxxxxxxxxx'x current
employment and options arrangement, including, without limitation, all
provisions relating to salary, term of employment, severance and stock
options.
(f) PAYMENT TO PMD. Scoop shall have made the payment
to PMD which is referred to in Section 1.5.
(g) MAXIMUM NUMBER OF SHARES UNDERLYING OPTIONS AND
WARRANTS. As of the Closing Date, the total number of Common Shares underlying
outstanding options and warrants issued by Scoop shall not exceed 500,000 and
they exercise price of such options and warrants shall not be less than $1.37.
Section 7.3 CONDITIONS TO OBLIGATIONS OF SCOOP. The obligation of
Scoop to effect the Transaction is also subject to the satisfaction or waiver
by Scoop at or prior to the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. (i) The
representations and warranties of MKID set forth in Sections 2.2, 2.3(a) and
2.9(a) of this Agreement shall be true and correct in all material respects
as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the
23
Closing Date and (ii) the representations and warranties of Shareholders
and MKID set forth in this Agreement other than those specifically enumerated
in clause (i) hereof shall be true and correct in all respects as of the date
of this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date; provided, however, that for purposes of determining the
satisfaction of the condition contained in this clause (ii), no effect shall be
given to any exception in such representations and warranties relating to
materiality or a Material Adverse Effect, and provided, further, however, that,
for purposes of this clause (ii), such representations and warranties shall be
deemed to be true and correct in all respects unless the failure or failures of
such representations and warranties to be so true and correct, individually or
in the aggregate, results or would reasonably be expected to result in a
Material Adverse Effect on MKID. Scoop shall have received a certificate
signed on behalf of MKID to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF SHAREHOLDERS. MKID
and the Shareholders shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and Scoop shall have received a certificate signed on
behalf of MKID to such effect.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1. TERMINATION. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual consent of the parties in a written
instrument;
(b) [Omitted].
(c) by either the Shareholders or the Board of
Directors of Scoop if (i) any Governmental Entity which must grant a
Requisite Regulatory Approval has denied approval of the Transaction and such
denial has become final and nonappealable or (ii) an Governmental Entity of
competent jurisdiction shall have issued a final nonappealable order
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(d) by either the Shareholders or the Board of
Directors of Scoop if the Transaction shall not have been consummated on or
before July 31, 1998, unless the failure of the Closing to occur by such date
shall be due to the failure of the party seeking to terminate this Agreement
to perform or observe the covenants and agreements of such party set forth
herein;
(e) by either the Shareholders or the Board of
Directors of Scoop (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein) if the other party shall have breached (i) any of the
covenants or agreements made by such other party herein or (ii) any of the
representations or warranties made by such other party herein, and in either
case, such breach (x) is not cured within thirty days following written
notice to the party committing such breach, or which breach, by its nature,
cannot be cured prior to the Closing and (y) would entitle the non-breaching
party not to consummate the transactions contemplated hereby under Article
VII hereof;
(f) by either the Shareholders or the Board of
Directors of Scoop if any approval of the stockholders of Scoop contemplated
by this Agreement shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or at any
adjournment or postponement thereof;
(g) by the Board of Directors of Scoop, if there exists
at such time a Transaction Proposal for Scoop and the Board of Directors of
Scoop, after having consulted with and considered the advice of outside legal
counsel, reasonably determines in good faith that such action is necessary in
the exercise of its fiduciary duties under applicable laws; provided,
however, that prior to terminating this Agreement pursuant to this paragraph
(g) Scoop shall have given the Shareholders at least 48 hours advance actual
notice of any such proposed termination; or
24
(h) by either the Shareholders or the Board of
Directors of Scoop, if the Board of directors of Scoop shall have withdrawn,
modified or changed in a manner adverse to the Shareholders its approval or
recommendation of the Scoop Vote Matters.
Section 8.2. EFFECT OF TERMINATION. In the event of termination
of this Agreement by either MKID or Scoop as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, and none of the
parties or any of their officers or directors shall have any liability of any
nature whatsoever hereunder, or in connection with the transactions
contemplated hereby, except Sections 6.2(b), 8.2, and 9.3 shall survive any
termination of this Agreement.
Section 8.3. AMENDMENT. Subject to compliance with applicable
law, this Agreement may be amended by an instrument in writing signed on
behalf of each of the parties hereto at any time.
Section 8.4. EXTENSION; WAIVER. At any time prior to the
Closing, the parties hereto may, to the extent legally allowed, (a) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party, but such extension or waiver or failure to insist on
strict compliance with an obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
ARTICLE IX.
GENERAL PROVISIONS
Section 9.1. CLOSING. Upon the terms and subject to the
conditions of this Agreement, the closing of the Transaction (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by the parties,
which unless otherwise agreed by the parties shall be no later than two
business days after the satisfaction or waiver (subject to applicable law) of
the latest to occur of the conditions set forth in Article VII hereof (the
"Closing Date").
Section 9.2. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS; AGREEMENTS OF SHAREHOLDERS ARE SEVERAL AND NOT JOINT, ETC. None
of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing, except for those covenants and agreements contained
herein and therein which by their terms apply in whole or in part after the
Closing. All of the representations and warranties of Shareholders are made
by each Shareholder only as to himself or herself. No Shareholder shall be
liable for any misrepresentation or breach of any covenant by any other
Shareholder or by MKID.
Section 9.3. EXPENSES. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense, except that Scoop shall at the
Closing pay the legal fees of each of (i) Xxxxxx & Presenti (not to exceed
$20,000) and (ii) Xxxxx X. Xxxxxx, as counsel to MKID, including legal fees
accrued prior to the preparation and negotiation of this Agreement.
Section 9.4. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed driven if delivered
personally, telecopied (with confirmation), mailed by registered or certified
mail (return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
25
If to Scoop, to:
Scoop, Inc.
0000 Xxx Xxxx Xxxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxxx
Fax No.: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
If to MKID, or to the Shareholders, to:
Multimedia K.I.D., Inc.
23 Haluzat Hapardesanut
Petah-Tikvah, Israel
Attention: Xxxxxx Xxxxxxxxxx
Fax No.:
with a copy to:
Xxxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
Section 9.5. INTERPRETATION. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." No provision of this
Agreement shall be construed to require MKID or Scoop or their respective
Affiliates to take any action which would violate or conflict with any
applicable law (whether statutory or common), rule or regulation.
Section 9.6. COUNTERPARTS AND FACSIMILE. This Agreement may be
executed in counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart. This Agreement may be
executed by facsimile.
Section 9.7. ENTIRE AGREEMENT. This Agreement (together with the
documents and the instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and understandings, both
written an oral, among the parties with respect to the subject matter hereof,
other than the MKID Documents, and the Scoop Documents.
26
Section 9.8 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of California, without
regard to any applicable conflicts of law. This Agreement was negotiated in
substantial part in Orange County, California, and the federal and state
courts in Orange County, California shall have exclusive jurisdiction over
all matters relating to this Agreement.
Section 9.9. SEVERABILITY. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 9.10. PUBLICITY. Except as otherwise required by
applicable law or the rules of the Nasdaq SmallCap Market, neither party
shall issue or cause the publication of any press release or other public
announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be unreasonably withheld.
Section 9.11. ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this
Agreement nor any of the rights, interests or obligations of any party
hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise specifically provided
in Section 6.8 hereof, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 9.12. [Omitted].
Section 9.13. ENFORCEMENT OF THE AGREEMENT. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof
in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
27
IN WITNESS WHEREOF, MKID, the Shareholders and Scoop have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
SCOOP, INC. ("Scoop"),
a Delaware corporation
By: /s/ XXXX XXXXXXXXXXX
------------------------------------------
Name: Xxxx Xxxxxxxxxxx
Title: Chief Executive Officer
MULTIMEDIA KID - INTELLIGENCE IN EDUCATION LTD.
("MKID")
By: /s/ XXXXXX XXXXXXXXXX
------------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Chief Executive Officer
SHAREHOLDERS:
/s/ XXXXXX XXXXXXXXXX
----------------------------------------------
Xxxxxx Xxxxxxxxxx
/s/ XXXXXX XXXXXX
----------------------------------------------
Xxxxxx Xxxxxx
/s/ XXXXX XXXXXX
----------------------------------------------
Xxxxx Xxxxxx
/s/ XXXXX XXXXXXXXX
----------------------------------------------
Xxxxx Xxxxxxxxx
28
EXHIBIT A
There is hereby created a series of the Preferred Stock of this corporation to
consist of 2,000 shares of Series A Preferred Stock (the "Series A Preferred
Stock"), $.001 par value per share, which this corporation now has authority
to issue.
1. Designation.
(a) The distinctive designation of the "Series A Preferred Stock" shall
be the "Series A Preferred Stock." The number of shares of Series A
Preferred Stock shall be 2,000.
(b) The Series A Preferred Stock is hereinafter sometimes referred to as
the "Preferred Stock."
2. Preference on Liquidation.
(a) For purposes of this Certificate of Designation and the Company's
Certificate of Incorporation, (i) any series of preferred stock of
the Company entitled to dividends and liquidation preference on a
parity with the Series A Preferred Stock shall be referred to as
"Parity Preferred Stock," (ii) any series of preferred stock ranking
senior to the Series A and Parity Preferred Stock with respect to
dividends and liquidation preference shall be referred to as "Senior
Stock," and (iii) the common stock and any series of preferred stock
ranking junior to the Series A and Parity Preferred Stock with
respect to dividends and liquidation preference shall be referred to
as "Junior Stock." As of the date of this Certificate of Designation
there is not outstanding any Parity Preferred Stock.
(b) In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, after setting apart or
paying in full the preferential amounts due to holders of Senior
Stock, the holders of the Series A Preferred Stock and Parity
Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets or surplus funds of the
Company to the holders of Junior Stock or common stock by reason of
their ownership thereof, an amount equal to their full liquidation
preference, which in the case of shares of the Series A Preferred
Stock shall be $250 per share, plus accrued and unpaid dividends. If,
upon such liquidation, dissolution or winding-up of the Company, the
assets of the Company available for distribution to the holders of
its stock shall be insufficient to permit the distribution in full of
the amounts receivable as aforesaid by the holders of the Series A
Preferred Stock and Parity Preferred Stock, then all such assets of
the Company shall be distributed ratably among the holders of Series
A Preferred Stock and Parity Preferred Stock in proportion to the
amounts which each would have been entitled to receive if such assets
were sufficient to permit distribution in full as aforesaid.
(c) Neither the consolidation nor merger of the Company nor the sale,
lease or transfer by the Company of all or any part of its assets
shall be deemed to be a liquidation, dissolution or winding-up of the
Company for the purposes of this paragraph.
3. Dividends. Upon the payment of any dividend in respect of the common
stock (a "Common Dividend"), there shall be paid in respect of each share of
Preferred Stock a dividend equal to the amount of the Common Dividend which
shall be payable in respect of the number of shares of common stock into
which such share of Preferred Stock shall then be convertible.
1
4. Conversion.
(a) The holder shall have the right at any time in its sole discretion,
to convert each share of the Series A Preferred Stock, in whole or in
part, into a number of shares of common stock equal to 975 [aggregate
of 1,950,000] or, if greater, the greatest of the following amounts:
(i) 9,933.3335 [aggregate of 19,866,667] times an amount (not
greater than one) equal to the Company's consolidated 1998
revenues divided by $3 million, less 630 for each $1 million
by which such revenues are less than $3 million (pro rated
for shortfalls of less than $1 million);
(ii) 9,933.3335 times an amount (not greater than one) equal to
the Company's consolidated 1998 and 1999 total consolidated
revenues divided by $5 million, less 630 for each $1 million
by which such revenues are less than $5 million (pro rated
for shortfalls of less than $1 million);
(iii) 9,933.3335 times an amount (not greater than one) equal to
the Company's consolidated 1998, 1999 and 2000 total
consolidated revenues divided by $7.5 million, less 630 for
each $1 million by which such revenues are less than $7.5
million (pro rated for shortfalls of less than $1 million).
(b) Fractional shares of common stock shall be rounded down to the
nearest whole number of shares.
(c) The Preferred Stock shall automatically convert into common stock on
March 31, 2004 at the then applicable conversion ratio as aforesaid.
(d) In the event that the holder elects to exercise its conversion rights
hereunder, it shall give to the Company written notice (by fax or
overnight courier service or personal delivery) of such election and
shall surrender his Preferred Stock to the Company for cancellation.
Conversion shall be effective upon the giving of such notice provided
that the certificate for the converted Preferred is received by the
Company within three days thereafter. The Company shall, within three
business days after receipt by the Company of notice of conversion
and the Preferred being converted, deliver irrevocable instructions
to its transfer agent (with a copy to Holder) to issue on an
expedited basis the shares of Common Stock issuable on such
conversion.
(e) If any capital reorganization or reclassification of the common
stock, or consolidation, or merger of the Company with or into
another corporation, or the sale or conveyance of all or
substantially all of its assets to another corporation shall be
effected, then, as a condition precedent of such reorganization or
sale, the following provision shall be made: The Holder of the
Preferred Stock shall from and after the date of such reorganization
or sale have the right to receive (in lieu of the shares of common
stock of the Company immediately theretofore receivable with respect
to the Preferred, upon the exercise of conversion rights), such
shares of stock, securities or assets as would have been issued or
payable with respect to or in exchange for the number of outstanding
shares of such common stock immediately theretofore receivable with
respect to the Preferred (assuming the Preferred were then
convertible). In any such case, appropriate provision shall be made
with respect to the rights and interests of the Holders to the end
that such conversion rights (including, without limitation,
provisions for appropriate adjustments) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares
of stock, securities or assets thereafter deliverable upon the
exercise thereof.
5. Voting Rights. Each share of Series A Preferred Stock shall be entitled to
70% of one vote for each share of common stock into which it is then
convertible, and shall vote as one class with the holders of common stock,
except as may otherwise be required by law.
2
6. Except as otherwise provided herein, the Series A Preferred Stock and the
common stock shall have the same rights and preferences on a share for share
basis.
[formal Delaware law provisions - to come]
3
