EXHIBIT 10.3
AMENDMENT TO STOCK PURCHASE AGREEMENT
This Amendment to that certain Stock Purchase Agreement (this "Amendment")
is made and entered into among the Parties effective as of the 18th day of July,
2002.
RECITALS
A. On June 25, 2002, PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. a
corporation organized under the laws of the United Mexican States ("PROVO");
Xxxxxxx Xxxxxxxx del Rio Arrangoiz ("ARRANGOIZ"); Xxxxxxx Xxxxxxxx del Rio
Xxxxxxx ("REQUEJO" and together with ARRANGOIZ "SELLERS"); KIBOGA SYSTEMS, INC.,
a Texas corporation, ("KIBOGA"); Xxxx X. Xxxxxx ("XXXXXX") and GREYSTONE
DIGITAL TECHNOLOGY, INC., a Delaware corporation ("GSTN"), entered into that
certain Stock Purchase Agreement (the "Original Agreement").
B. The Parties desire to amend the Original Agreement and provide for and
confirm certain additional matters as set forth in this Amendment. In
particular, the Parties desire to release GSTN and KIBOGA of their respective
obligations to consummate the Merger and to provide for the consideration to be
paid by KIBOGA and XXXXXX under the Original Agreement.
AGREEMENT
Now, therefore, in consideration of the foregoing, and for other good and
valuable consideration, the Parties, intending to be legally bound, hereby agree
and covenant as follows:
SECTION 1. Defined Terms.
Unless otherwise defined in this Amendment, all capitalized terms used in
this Amendment shall have the meanings set forth in the Original Agreement.
SECTION 2. References to Merger and Merger Agreement.
All references, definitions, representations, warranties, covenants and
agreements of the Original Agreement related to the "Merger" or the "Merger
Agreement," are hereby amended by removing them in their entirety. The Parties
ratify their intention to release GSTN and KIBOGA of their respective
obligations to consummate the Merger.
SECTION 3. References to Escrow and Escrowed Shares.
All references, definitions, representations, warranties, covenants and
agreements of the Original Agreement related to the "Escrow" or the "Escrowed
Shares," are hereby amended by removing them in their entirety. The Parties
ratify their intention to release XXXXXX of its obligations to contribute the
Escrowed Shares.
SECTION 4. Amendment to the Recitals.
The ninth whereas of the Original Agreement is hereby by deleting it in its
entirety.
SECTION 5. Amendments to Article 2.
A. Section 2.01(e) of the Original Agreement is hereby amended by deleting
it in its entirety.
B. The Original Agreement is hereby amended by inserting a new Section
2.01A before Section 2.02, as follows:
"2.01A As a material inducement for the SELLERS and PROVO to enter
into this Agreement and in consideration of the sale of PROVO Stock and the
issuance of the Newly Issued Stock to GSTN, KIBOGA (as the controlling
shareholder of GSTN and in accordance with the Original Lease Agreement)
does hereby agree to provide the SELLERS the following:
(a) On the Closing Date, KIBOGA shall issue, assign, convey and
transfer to the SELLERS, or their designee, 500 shares of KIBOGA
common stock (the "KIBOGA Shares"), representing 50% of KIBOGA's
voting equity securities on a fully diluted basis as of the effective
time of the Closing."
Section 5. Amendments to Article 3 and Closing Date.
All references to the words "July 31, 2002" in the Original Agreement shall
be deleting in their entirety and substituted for the words "August 31, 2002."
Section 6. Amendments to Article 7.
A. Section 7.01(b) of the Original Agreement, is hereby amended by deleting
it in its entirety.
B. All references in the Original Agreement to the "KIBOGA Business
Royalty" shall be deleted in their entirety.
C. Section 7.09, is hereby amended by deleting it in its entirety and
replacing such Section with the following:
"7.09 The parties acknowledge that the Royalties payable to the
Royalty Payees, shall be allocated among and be payable as follows:
(i) with respect to the PROVO Business Royalty, 50% for XXXXXX and 50%
for SELLERS (or their respective designees); and (ii) with respect to
the New Business Royalty, 50% for KIBOGA and 50% for SELLERS (or their
respective designees). Each of SELLERS, KIBOGA and XXXXXX, for so long
as he is entitled to receive payment of Royalties hereunder, and each
other person that from time to time may be entitled to receive payment
of Royalties under this Section 7.09, is herein referred to as a
"Royalty Payee."
D. Section 7.11 of the Original Agreement, is hereby amended by
deleting it in its entirety.
Section 7. Amendments to Article 12.
Section 12.01(d) of the Original Agreement is hereby amended by deleting it
in its entirety.
Section 8. Amendments to Article 13.
Section 13.01(b), is hereby amended by deleting it in its entirety and
replacing such Section with the following:
"13.01(b) Prior to the Closing Date, KIBOGA shall have sufficient
shares of K1BOGA common stock authorized to issue and deliver the
KIBOGA Shares to Sellers at the Closing."
Section 9. Amendments to Article 14.
Article 14 of the Original Agreement, is hereby amended by deleting it in
its entirety and replacing such Article with the following:
"14. RESERVED FOR FUTURE USE."
Section 10. Amendment of Exhibit C.
Exhibit C of the Original Agreement, is hereby amended by deleting it in
its entirety.
Section 11. Amendment of Exhibit I.
Exhibit I of the Original Agreement, is hereby amended by deleting it in
its entirety.
Section 12. Miscellaneous.
A. The Original Agreement, as modified by this Amendment, is hereby
ratified and confirmed in all respects, is in full force and effect, and is
binding on and enforceable against the Parties in accordance with its terms.
B. This Amendment may be executed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
C. This Amendment shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, each of the Parties hereto has caused its duly
authorised representative to execute this Amendment on the day and year first
above written.
/s/ Xxxx X. Xxxxxx /s/ Xxxxxxx Xxxxxxxx del Rio Arrangoiz
-------------------------------------- --------------------------------------
KIBOGA SYSTEMS, INC. PROYECCIONES Y VENTAS
By: Xxxx X. Xxxxxx ORGANIZADAS, S.A. DE C.V.
Title: President and CEO By: Xxxxxxx Xxxxxxxx del Rio Arrangoiz
Title: Chairman
/s/ Xxxxxxx Xxxxxxxx del Rio Arrangoiz
-------------------------------------- --------------------------------------
Xxxxxxx Xxxxxxxx del Rio Arrangoiz Xxxxxxx Xxxxxxxx del Rio Xxxxxxx
/s/ Xxx Xxxxxxxx /s/ Xxxx X. Xxxxxx
-------------------------------------- --------------------------------------
GREYSTONE DIGITAL Xxxx X. Xxxxxx
TECHNOLOGY, INC.
By: Xxx Xxxxxxxx
Title: Chairman
SBSF Draft 06/12/02
STOCK PURCHASE AGREEMENT
By and Among
PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE X.X.
XXXXXXX XXXXXXXX DEL RIO ARRANGOIZ
XXXXXXX XXXXXXXX DEL RIO XXXXXXX
KIBOGA SYSTEMS, INC.
XXXX X. XXXXXX
and
GREYSTONE DIGITAL TECHNOLOGY, INC.
June , 2002
---
SBSF Draft 03/12/02
TABLE OF CONTENTS
Page
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1. DEFINITIONS.............................................................2
2. PURCHASE AND SALE TRANSACTION...........................................8
3. FUNDING OF INITIAL BUSINESS PLAN........................................9
4. THE CLOSING.............................................................9
5. CONDITIONS TO CLOSING...................................................9
6. REGULATORY FILINGS.....................................................12
7. ROYALTIES..............................................................12
8. TRANSFER OF FUNDS TECHNOLOGY...........................................14
9. ANTI-DILUTION..........................................................14
10. REPRESENTATIONS AND WARRANTIES.........................................15
11. COVENANTS OF PROVO AND SELLERS.........................................26
12. COVENANTS OF GSTN......................................................27
13. COVENANTS OF KIBOGA AND XXXXXX.........................................29
14. SPIN OFF...............................................................30
15. INDEMNIFICATION........................................................31
16. DEFAULT................................................................33
17. FURTHER ASSURANCES.....................................................34
18. MISCELLANEOUS..........................................................34
Exhibit A...................................................................39
Exhibit B...................................................................40
Exhibit C...................................................................41
Exhibit D...................................................................42
Exhibit E...................................................................43
Exhibit F...................................................................44
Exhibit G...................................................................45
Exhibit H...................................................................46
Exhibit I...................................................................47
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SBSF Draft 03/12/02
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of the day of
--
June 2002, by and among PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. a
corporation organized under the laws of the United Mexican States ("PROVO");
Xxxxxxx Xxxxxxxx del Rio Arrangoiz ("ARRANGOIZ"); Xxxxxxx Xxxxxxxx del Rio
Xxxxxxx ("REQUEJO" and together with ARRANGOIZ "SELLERS"); KIBOGA SYSTEMS,
INC., a Texas corporation, ("KIBOGA"); Xxxx X. Xxxxxx ("XXXXXX") and GREYSTONE
DIGITAL TECHNOLOGY, INC., a Delaware corporation ("GSTN"). Each of PROVO,
ARRANGOIZ, REQUEJO, KIBOGA, XXXXXX and GSTN shall be singularly referred to as a
"Party" and collectively as the "Parties."
W I T N E S S E T H
WHEREAS, SELLERS own beneficially and of record, all of the issued and
outstanding capital stock and other securities of PROVO;
WHEREAS, PROVO is currently acquiring from its Affiliates all of the issued
and outstanding equity securities of FS Provo, S.A. de C.V.; Proyecciones y
Ventas Organizadas del D.F., S.A. de C.V.; Tilgo, S.A. de C.V.; Tarpa, S.A. de
C.V.; and Proyecciones y Ventas Organizadas del Occidente, S.A. de C.V., all
corporations incorporated under the laws of the United Mexican States
(collectively the "Subsidiaries");
WHEREAS, on the Closing Date, PROVO shall own beneficially and of record,
all of the issued and outstanding capital stock and other securities of each of
the Subsidiaries, under the terms and conditions specified in certain
acquisition agreements attached hereto as Exhibit H (the "Subsidiaries
Acquisition Agreements");
WHEREAS, PROVO desires to issue and sell to GSTN, and GSTN desires to
purchase and acquire from PROVO, 308,000 shares of the common stock, par value
$50 Pesos per share, of PROVO, representing 60.4% of PROVO's common stock and
60.4% of PROVO's total equity securities (the "Newly Issued Stock"), upon the
terms and subject to the conditions set forth herein;
WHEREAS, SELLERS desire to sell to GSTN, and GSTN desires to purchase and
acquire from SELLERS, 192,000 shares of the common stock, par value $50 Pesos
per share, of PROVO, representing 39.6% of PROVO's common stock and 39.6% of
PROVO's total equity securities (the "PROVO Stock"), upon the terms and subject
to the conditions set forth herein;
WHEREAS, PROVO is a private company that together with its Subsidiaries is
currently engaged in the business of distributing, marketing and commercializing
all kinds of prepaid calling cards for telephony services in Mexico (the "PROVO
Business");
WHEREAS, PROVO will incorporate PROVO-US, Inc. ("PROVO-US") as a newly
formed wholly-owned Delaware corporation. PROVO-US will be engaged in the
development and
marketing of: (i) domestic and international money-transfer solutions; (ii)
smart card technologies; and (iii) other businesses as directed form time to
time by the Board (the "PROVO-US Business");
WHEREAS, KIBOGA is a private company that is currently engaged in the
business of development and sale of technology products, including its
proprietary software for use by law enforcement and intelligence agencies, which
includes, among others the DILE and COMPILE software programs (the "KIBOGA
Business");
WHEREAS, GSTN is a public company that is currently engaged in the business
of developing and marketing real-time, interactive software and related
applications (the "GSTN Business"), and the GSTN Common Stock is currently
traded on the NASDAQ OTC Bulletin;
WHEREAS, KIBOGA and GSTN are parties to that certain Lease Agreement dated
July 16, 2001 (the "Original Lease Agreement"), whereby KIBOGA leased and
assigned to GSTN all of KIBOGA's revenues derived from the KIBOGA Business in
exchange for approximately 52% of the outstanding GSTN Common Stock;
WHEREAS, concurrently herewith, GSTN and KIBOGA are entering into a merger
agreement (the "Merger Agreement"), whereby KIBOGA shall be merged into a newly
formed subsidiary of GSTN (the "GSTN Subsidiary") and the GSTN Subsidiary shall
be the surviving entity (the "Merger");
WHEREAS, the Parties hereto, are parties to that certain Letter Agreement
dated June 6, 2002 (the "Letter Agreement"); and
WHEREAS, the Parties desire to enter into this Agreement to implement the
Letter Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants,
conditions and promises contained herein, and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, agree as follows:
1. DEFINITIONS
1.01 For all purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, capitalized terms used in this
Agreement, its appendices, schedules and exhibits shall have the following
meanings:
"Accounts Receivable" shall have the meaning ascribed to it in Section
10.01.
"Additional Financing" shall have the meaning ascribed to it in Section 12.
"Affiliate" of a Person shall mean any other Person that, directly or
indirectly, controls or is controlled by that Person, or is under common control
with that Person or any such other Person, or succeeds to all or substantially
all of the business or assets of such Person. The term "control" (including,
with correlative meaning, the terms "controlled by" or "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of
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the power to direct or cause the direction of the management and policies of
such Person through the ownership of voting securities, by contract or
otherwise.
"Arrangoiz Employment Agreement" shall mean that certain Employment
Agreement substantially in the form of Exhibit D to be executed between GSTN and
ARRANGOIZ on the Closing Date.
"Board" means the Board of Directors of GSTN.
"Business Day" means any day other than a Saturday, Sunday or any day which
is a legal holiday in the United States of America or the United Mexican States.
"Closing" shall have the meaning ascribed to it in Section 4.
"Closing Date" shall have the meaning ascribed to it in Section 4.
"Contemplated Transactions" shall mean the transactions contemplated by the
Transaction Documents.
"Diluting Event" shall have the meaning ascribed to it in Section 9.
"Dollar" or "US$" means United States dollars.
"EBITDA" shall mean with respect to any business or company, earnings
before interest, taxes, depreciation and amortization.
"Encumbrance" means any lien, security interest, claim or any other
encumbrance whatsoever.
"Escrow" shall have the meaning ascribed to it in Section 2.01.
"Escrow Agreement" shall mean that certain Escrow Agreement substantially
in the form of Exhibit I to be executed among XXXXXX, SELLERS and the Escrow
Agent on the Closing Date
"Escrow Agent" shall mean a corporation.
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"Escrowed Shares" shall have the meaning ascribed to it in Section 2.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expenses" shall have the meaning ascribed to it in Section 18.09.
"Events of Default" shall have the meaning ascribed to it in Section 15.06.
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"Funding" shall mean GSTN's commitment to make available to PROVO-US funds
to be used by PROVO-US to fund the Initial Business Plan. For these purposes,
Funding may consist of equity, debt or guarantying PROVO-US' obligations, or any
combination thereof.
"GAAP" shall mean generally accepted accounting principles.
"GSTN Books and Records" shall have the meaning ascribed to it in Section
10.05.
"GSTN Business" shall have the meaning ascribed to it in the Recitals
hereto.
"GSTN Common Stock" shall mean shares representing the common stock of
GSTN.
"GSTN Financial Statements" shall have the meaning ascribed to it in
Section 10.05.
"GSTN-PROVO" shall have the meaning ascribed to it in Section 14.
"GSTN-PROVO Shares" shall have the meaning ascribed to it in Section 14.
"GSTN Subsidiary" shall have the meaning ascribed to it in the Recitals
hereto.
"Indemnification Notice" shall have the meaning ascribed to it in Section
15.
"Indemnified Party" shall have the meaning ascribed to it in Section 15.
"Indemnifying Party" shall have the meaning ascribed to it in Section 15.
"Initial Business Plan" shall mean the initial business plan of PROVO-US
substantially in the form of Exhibit G.
"Intellectual Property" means (i) all inventions (patentable or
unpatentable), all improvements thereto, (ii) all trademarks, service marks,
copyrights, trade dress, logos, trade names, and corporate names, including all
goodwill associated therewith, (iii) all trade secrets and confidential business
information (including ideas, research, know-how, techniques, technical data,
designs, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (iv) all computer
software, (v) all other proprietary rights, and (vi) all tangible embodiments
thereof, in each case relating to, used in or resulting from the operation of
the PROVO Business.
"KIBOGA Business" shall have the meaning ascribed to it in the Recitals
hereto.
"KIBOGA Business Royalty" shall have the meaning ascribed to it in Section
7.
"Laws" shall have the meaning ascribed to it in Section 10.01.
"Letter Agreement" shall have the meaning ascribed to it in the
Recitals hereto.
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"Liability" means any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due), including any liability for
taxes.
"Litigation" shall have the meaning ascribed to it in Section 10.01.
"Market Value" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System or the NASDAQ OTC Bulletin Board, as of 4:00 P.M., New York time,
or, if on any day such security is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which "Market Price" is
being determined and the 20 consecutive Business Days prior to such day.
"Merger" shall have the meaning ascribed to it in the Recitals hereto.
"Merger Agreement" shall mean that certain Merger Agreement substantially
in the form of Exhibit C to be executed by GSTN and KIBOGA on or before the
Closing Date.
"Mexican GAAP" shall mean generally accepted accounting principles
applicable in Mexico.
"Xxxxxx Employment Agreement" shall mean that certain Employment
Agreement substantially in the form of Exhibit F to be executed between GSTN and
XXXXXX on the Closing Date.
"New Business" shall mean any newly developed business of GSTN other than
the PROVO Business and the KIBOGA Business, including, without limitation the
PROVO-US Business.
"New Business Royalty" has the meaning ascribed to it in Section 7.
"Newly Issued Stock" has the meaning ascribed to it in the Recitals hereto.
"Person" means an individual, corporation, partnership, joint venture,
trust, association, unincorporated organization or any other entity or
governmental body or subdivision, agency, commission or authority thereof, or
any equivalent entity under applicable law.
"Peso" means Mexican pesos.
"Permitted Encumbrances" shall have the meaning ascribed to it in Section
10.01.
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"Profits" shall mean all of PROVO's income before taxes derived from the
PROVO Business, calculated after payment of all of PROVO's direct business
expenses, including, without limitation, cost of goods sold, general
administrative costs, interest, amortization, depreciation and overhead, in all
cases calculated by PROVO in accordance with GAAP applicable in Mexico,
consistently applied.
"PROVO Books and Records" shall have the meaning ascribed to it in Section
10.01.
"PROVO Business" shall have the meaning ascribed to it in the Recitals
hereto.
"PROVO Business Royalty" shall have the meaning ascribed to it in Section
7.
"PROVO Financial Statements" shall have the meaning ascribed to it in
Section 10.01.
"PROVO Stock" has the meaning ascribed to it in the Recitals hereto.
"PROVO-US" shall have the meaning ascribed to it in the Recitals hereto.
"PROVO-US Business" shall have the meaning ascribed to it in the Recitals
hereto.
"Registration Rights Agreement" means that certain Registration Rights
Agreement substantially in the form attached hereto as Exhibit A to be entered
into by and between GSTN and SELLERS on the Closing Date.
"Requejo Employment Agreement" shall mean that certain Employment Agreement
substantially in the form of Exhibit E to be executed between PROVO and REQUEJO
on the Closing Date.
"Royalties" shall mean collectively: (i) the PROVO Business Royalty; (ii)
the KIBOGA Business Royalty and (iii) the New Business Royalty.
"Royalty Payees" has the meaning ascribed to it in Section 7.
"Royalty Payment Date" has the meaning ascribed to it in Section 7.
"SEC" means the United States Securities and Exchange Commission.
"SEC Filings" shall have the meaning ascribed to it in Section 6.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" shall have the meaning ascribed to it in Section 2.01.
"Spin Off" shall have the meaning ascribed to it in Section 14.
"Subsidiaries" has the meaning ascribed to it in the Recitals hereto.
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"Subsidiaries Acquisition Agreements" shall mean certain Acquisition
Agreements substantially in the form of Exhibit H to be executed among PROVO and
each of the Subsidiaries on or before the Closing Date.
"Subsidiaries Books and Records" shall have the meaning ascribed to it in
Section 10.01.
"Subsidiaries Financial Statements" shall have the meaning ascribed to it
in Section 10.01.
"Subsidiaries Stock" means all of the issued and outstanding capital stock
and other securities of each of the Subsidiaries.
"Supplemental Registration" has the meaning ascribed to it in Section 12.
"Transaction Documents" shall collectively mean this Agreement, the
Registration Rights Agreement, the Voting Proxy, the Merger Agreement, the
Arrangoiz Employment Agreement, the Requejo Employment Agreement, the Xxxxxx
Employment Agreement, the Initial Business Plan, the Subsidiaries Acquisition
Agreements, the Escrow Agreement and any other written agreement signed by the
Parties that is expressly identified as a "Transaction Document" hereunder, and
any exhibits or attachments to any of the foregoing, as the same may be amended
from time to time.
"Transfer of Funds Technology" shall have the meaning ascribed to it in
Section 8.
"Voting Proxy" shall mean that certain irrevocable voting proxy
substantially in the form attached hereto as Exhibit B, to be executed by and
among XXXXXX and SELLERS.
1.02 In this Agreement and the other Transaction Documents and the appendices,
exhibits and schedules hereto or thereto (unless otherwise provided therein):
(a) All references in any Transaction Document to clauses, sections,
appendices, schedules and exhibits are to clauses, sections,
appendices, schedules and exhibits in or to such Transaction Document
unless otherwise specified therein.
(b) The words "hereof," "herein", "hereunder" and words of similar import
when used in a Transaction Document shall refer to such Transaction
Document as a whole and not to any particular provision of such
Transaction Document.
(c) References in any Transaction Document to any Transaction Document or
any other document or agreement shall be deemed to include references
to such Transaction Document or such other document or agreement as
amended, varied, supplemented or replaced from time to time in
accordance with the terms of such Transaction Document.
(d) The table of contents and the headings of the several sections and
subsections of this Agreement or any Transaction Document are intended
for convenience only
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and shall not in any way affect the meaning or construction of any
provision therein.
(e) References to the words "include" or "including" shall be deemed to be
followed by "without limitation" or "but not limited to", whether or
not they are followed by such phrases or words of similar import.
(f) References to a number of days shall refer to calendar days unless
Business Days are otherwise specified.
1.03 The meanings set forth for defined terms herein or in any Transaction
Document shall be equally applicable to both the singular and plural forms of
the terms defined and the masculine, feminine or neuter gender shall include all
genders.
2. PURCHASE AND SALE TRANSACTION
2.01 Subject to the terms and conditions of this Agreement, on the Closing Date:
(a) PROVO shall issue and deliver to GSTN, and GSTN shall purchase and
acquire from PROVO, all of the Newly Issued Stock.
(b) GSTN shall transfer to PROVO US$5,000,000, by wire transfer or other
form of immediately available funds acceptable to PROVO.
(c) SELLERS shall sell and deliver to GSTN, and GSTN shall purchase and
acquire from SELLERS, all of the PROVO Stock.
(d) GSTN shall issue and deliver to SELLERS to SELLERS, or their designee,
shares of GSTN Common Stock (the "Shares"), representing
-----------
18% of GSTN's voting equity securities on a fully diluted basis as of
the effective time of the Closing, and representing 18% of GSTN's
total equity securities on a fully diluted basis as of that time.
(e) XXXXXX shall assign, convey and transfer to the Escrow Agent for the
benefit of SELLERS, or their designee, shares of GSTN
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Common Stock (the "Escrowed Shares"), representing 22% of GSTN's
voting equity securities on a fully diluted basis as of the effective
time of the Closing, and representing 22% of GSTN's total equity
securities on a fully diluted basis as of that time. The Escrowed
Shares shall be held and ultimately distributed by the Escrow Agent
pursuant to the Escrow Agreement. It is the intention of the Parties
that immediately following the Closing and subject to the Escrow
Agreement, SELLERS or their designee control 40% of GSTN's total
equity securities on a fully diluted basis as of the time of the
Closing.
2.02 Starting on the Closing Date and continuing for a period of 99 years
thereafter, GSTN shall pay each of the Royalty Payees the Royalties, subject to
and in accordance with the provisions of Section 7.
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2.03 The Parties acknowledge that all consideration to be received hereunder by
SELLERS, including the Royalties, the Shares and the Escrowed Shares, shall be
allocated among and payable to SELLERS as follows: 75% for ARRANGOIZ and 25% for
REQUEJO (or their respective designees).
3. FUNDING OF INITIAL BUSINESS PLAN
3.01 In order to implement the Initial Business Plan, starting on the Closing
Date, GSTN covenants to make the Funding available to PROVO-US. The Funding
shall be due and payable by GSTN from time to time in accordance with the
Initial Business Plan.
4. THE CLOSING
4.01 Subject to the terms and conditions of this Agreement, the closing of the
transactions contemplated hereby (the "Closing") shall be held at the offices of
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP, 0000 X Xxxxxx XX, Xxxxx 000 Xxxxxxxxxx,
XX 00000-0000, at 10:00 a.m., on the date which is three (3) Business Days from
the date of satisfaction and/or waiver of all conditions listed in Section 5
hereof, and in any event no later than July 31, 2002 (the date on which the
Closing occurs is hereinafter referred to as the "Closing Date").
5. CONDITIONS TO CLOSING
5.01 The obligation of SELLERS and PROVO to consummate the transactions to be
performed by them in connection with the Closing are subject to satisfaction of
the following conditions:
(a) The representations and warranties of GSTN, KIBOGA and XXXXXX set
forth in Sections 10.03, 10.04 and 10.05 shall be true and correct in
all material respects when made and shall be deemed to have been made
again at and as of the Closing Date, and GSTN, KIBOGA and XXXXXX shall
have performed and satisfied all obligations and conditions herein
required to be performed or satisfied by each of them on or prior to
the Closing.
(b) By no later than July 31, 2002, PROVO, its counsel and its advisors
shall have completed such financial, business, and legal "due
diligence" investigations of the properties, assets, financial
condition, operating results, business, business prospects and
business relationships of GSTN and KIBOGA as they in their discretion
shall deem appropriate, and the results of such investigations shall
be satisfactory to PROVO in its sole discretion.
(c) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction which has a likelihood of
resulting in an unfavorable injunction, judgment, order, decree,
ruling or charge that would (i) prevent consummation of any of the
material transactions contemplated by this Agreement, or (ii) cause
any of the material transactions contemplated by this Agreement to be
rescinded following consummation.
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(d) None of GSTN and KIBOGA shall have experienced any material adverse
change to their respective assets, properties, Liabilities, business,
operations, financial conditions or prospects from the date hereof and
until the Closing.
(e) Subject to the terms and conditions of the Merger Agreement, KIBOGA
shall be merged with and into GSTN, in accordance with Delaware Law,
the separate corporate existence of KIBOGA shall cease and GSTN shall
continue as the surviving corporation.
(f) GSTN shall have available funds equal to at least US$5,000,000 in cash
to consummate the transactions hereunder, and SELLERS shall have
received a certificate signed by an executive officer of GSTN, dated
as of the Closing Date, to such effect.
(g) Each of the existing directors of GSTN shall have resigned or be
removed from office without cause and SELLERS shall be entitled to
appoint two (2) Board members, XXXXXX shall be entitled to appoint two
(2) Board members and the remaining Board member shall be an
independent.
(h) Each of the existing officers of GSTN shall have resigned or be
removed from office without cause and ARRANGOIZ and XXXXXX shall have
been appointed as Co-Presidents of GSTN.
(i) GSTN shall have taken all necessary actions to maintain its stock
traded on the OTC Bulletin Board at the effective time of the Closing.
These actions shall include, without limitation, filing with the SEC
all pending financial forms, including, all Form 10-K and Forms !0-Q
required to be filed by GSTN up to the Closing.
(j) GSTN shall have completed all regulatory filings necessary or
convenient for it to consummate the transactions contemplated hereby,
including the SEC Filings.
(k) GSTN, KIBOGA and XXXXXX shall have executed and delivered all of the
Transaction Documents to which they are Parties.
Each of SELLERS and PROVO may waive any condition specified in this Section
5.01, provided that SELLERS and PROVO execute a written waiver thereof,
specifically referenced as such therein, at or prior to the Closing.
5.02 The obligation of GSTN to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
(a) The representations and warranties of KIBOGA, XXXXXX XXXXX and SELLERS
set forth in Sections 10.01, 10.02, 10.03 and 10.04 shall be true and
correct in all material respects when made and shall be deemed to have
been made again at and as of the Closing Date, and KIBOGA, XXXXXX,
PROVO and SELLERS shall have performed and satisfied all obligations
and conditions herein required to be performed or satisfied by each of
them on or prior to the Closing.
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(b) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction which has a likelihood of
resulting in an unfavorable injunction, judgment, order, decree,
ruling or charge that would (i) prevent consummation of any of the
material transactions contemplated by this Agreement, or (ii) cause
any of the material transactions contemplated by this Agreement to be
rescinded following consummation.
(c) PROVO and the Subsidiaries shall not have experienced any material
adverse change to their assets, properties. Liabilities, business,
operations, financial conditions or prospects from the date hereof and
until the Closing.
(d) PROVO-US shall have been incorporated by PROVO.
(e) PROVO, KIBOGA, XXXXXX, and SELLERS shall have executed and delivered
all of the Transaction Documents to which they are Parties.
GSTN may waive any condition specified in this Section 5.02, provided that
GSTN executes a written waiver thereof, specifically referenced as such therein,
at or prior to the Closing.
5.03 The obligation of KIBOGA and XXXXXX to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(a) The representations and warranties of PROVO, SELLERS and GSTN set
forth in Sections 10.01, 10.02 and 10.05 below, shall be true and
correct in all material respects when made and shall be deemed to have
been made again at and as of the Closing Date, and GSTN, SELLERS and
PROVO shall have performed and satisfied all obligations and
conditions herein required to be performed or satisfied by each of
them on or prior to the Closing.
(b) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction which has a likelihood of
resulting in an unfavorable injunction, judgment, order, decree,
ruling or charge that would (i) prevent consummation of any of the
material transactions contemplated by this Agreement, or (ii) cause
any of the material transactions contemplated by this Agreement to be
rescinded following consummation
(c) PROVO-US shall have been incorporated by PROVO.
(d) PROVO, SELLERS and GSTN shall have executed and delivered all of the
Transaction Documents to which they are Parties
KIBOGA may waive any condition specified in this Section 5.03, provided
that KIBOGA and XXXXXX execute a written waiver thereof, specifically referenced
as such therein, at or prior to the Closing.
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6. REGULATORY FILINGS
6.01 GSTN shall promptly prepare and file with the SEC all documents required
pursuant to the Exchange Act, as amended, in connection with the execution,
delivery and performance of this Agreement and the other Transaction Documents,
including without limitation an information statement meeting the requirements
of Section 14(f) of the Exchange Act and the rules and regulations of the SEC
thereunder (the "SEC Filings").
6.02 Each of SELLERS, PROVO, KIBOGA and XXXXXX agrees to provide such
information and assistance to GSTN as may be reasonably necessary to prepare and
file the SEC Filings.
6.03 In addition to the SEC Filings, the Parties will cooperate with each other
in order to make, as soon as appropriate, all governmental and regulatory
filings necessary in connection with the execution, delivery and performance of
this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby.
7. ROYALTIES
7.01 For a period of ninety-nine (99) years after the Closing, GSTN shall pay to
the Royalty Payees the following royalties (the "Royalties"):
(a) A royalty equal to 20% of the Profits generated by PROVO (the "PROVO
Business Royalty").
(b) A royalty equal to 2% of the net sales of products and services of the
KIBOGA Business, including, without limitation, software licenses (the
"KIBOGA Business Royalty").
(c) A royalty equal to 4% of the EBITDA generated by GSTN from the New
Business (the "New Business Royalty").
The Royalties shall be payable in accordance with the provisions of this Section
7.
7.02 GSTN shall pay the Royalties to the Royalty Payees annually in four
quarterly installments, the first three of which each shall be due no later than
ten (10) Business Days after the end of each of the first three fiscal quarters
of GSTN, and the fourth of which shall be due no later than thirty (30) days
after the end of the fiscal year of GSTN (each a "Royalty Payment Date"). GSTN
shall pay the Royalties in Dollars, by wire transfer or other form of
immediately available funds to the account or accounts from time to time
specified in a written notice provided by the respective Royalty Payees to GSTN.
7.03 The amount of the Royalties payable on any Royalty Payment Date shall equal
the lesser of: (i) with respect to the PROVO Business Royalty: (a) 20% of the
Profits generated by PROVO during the preceding calendar quarter or (b) 20% of
the Profits generated by PROVO for the year to date as of the end of the
preceding calendar quarter, as determined in good faith by GSTN and PROVO; (ii)
with respect to the KIBOGA Business Royalty: (a) 2% of the net sales of GSTN of
products and services of the KIBOGA Business during the preceding calendar
quarter or (b) 2%
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of the net sales of GSTN of products or services of the KIBOGA Business for the
year to date as of the end of the preceding calendar quarter, as determined in
good faith by GSTN; and (iii) with respect to the New Business Royalty: (a) 4%
of the EBITDA generated by GSTN from the New Business during the preceding
calendar quarter or (b) 4% of the EBITDA generated by GSTN from the New Business
for the year to date as of the end of the preceding calendar quarter, as
determined in good faith by GSTN.
7.04 Contemporaneous with the payment of each Royalty Payment for each of the
first three quarters of each fiscal year, GSTN shall deliver to the Royalty
Payees financial statements for such quarter and for the year to date, which
shall be prepared in accordance with GAAP applied on a consistent basis (except
for normal year-end adjustments), but which need not be audited. Contemporaneous
with the payment of each Royalty Payment for the fourth quarter of each fiscal
year, GSTN shall deliver to the Royalty Payees financial statements for such
year, which shall be prepared in accordance with GAAP applied on a consistent
basis, and which shall be audited by a firm of internationally recognized
independent auditors reasonably acceptable to a majority in interest of the
Royalty Payees.
7.05 The Royalty Payees shall not have the right to dispute the amount of any
quarterly Royalty Payment except for the Royalty Payment relating to the fourth
fiscal quarter. If the Royalty Payees desire to dispute such Royalty Payment,
they shall send written notice to such effect to PROVO not later than ten (10)
Business Days after the delivery by PROVO to the Royalty Payees of its audited
financial statements for such year pursuant to Section 7.04. If PROVO and the
Royalty Payees are unable to resolve such dispute within thirty (30) days of the
delivery of such notice, then the matter shall be submitted to a firm of
internationally recognized independent auditors selected by GSTN and reasonably
acceptable to the Royalty Payees. The determination of such independent auditors
shall be final and binding on all parties.
7.06 In the event that GSTN's annual audit (as the same may be amended pursuant
to the dispute resolution procedure provided in Section 7.05) establishes that
GSTN has paid Royalties that exceed the amount of Royalties that would otherwise
correspond to the Royalty Payees for such year, the amount of any future
Royalties otherwise payable by GSTN shall be reduced dollar-for-dollar by the
amount of such excess. GSTN shall be entitled to retain subsequent Royalty
payments to the Royalty Payees up and until such overpayment is amortized by
GSTN. Conversely, if GSTN's annual audit (as the same may be amended pursuant to
the dispute resolution procedure provided in Section 7.05) establishes that GSTN
has paid Royalties that are less than the corresponding amount of each of the
Royalties for such year, GSTN shall immediately pay the amount of such shortfall
to the Royalty Payees.
7.07 GSTN agrees to keep accurate records of all sales, revenues and Profits
generated by the each of the PROVO Business, the KIBOGA Business and the New
Business. GSTN further agrees that all accounting records of GSTN and its
subsidiaries shall be open for inspection by the Royalty Payees and their agents
and representatives, during reasonable business hours, and upon delivery of
written notice thereof with at least five (5) Business Days prior to the date of
inspection, at the place where such records are customarily kept.
7.08 Each Royalty Payee shall have the right, exercisable by written notice to
GSTN, to pledge, assign or otherwise transfer, in whole or in part, his
respective ownership rights in GSTN
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and his respective rights to receive Royalties payments hereunder. In the event
that a Royalty Payee shall die without having assigned his right to receive
payments of Royalties hereunder, such right shall accrue to the beneficiaries of
such Royalty Payee as determined by the applicable laws of descent and
distribution.
7.09 The parties acknowledge that the Royalties payable to the Royalty Payees,
shall be allocated among and be payable as follows: 50% for XXXXXX and 50% for
SELLERS (or their respective designees). Each of SELLERS and XXXXXX, for so long
as he is entitled to receive payment of Royalties hereunder, and each other
person that from time to time may be entitled to receive payment of Royalties
under this Section 7.09, is herein referred to as a "Royalty Payee."
7.10 PROVO hereby covenants and agrees to be jointly and severally bound by the
obligations of GSTN under this Section 7, solely with respect to the PROVO
Business Royalty.
7.11 After consummation of the Spin Off, GSTN-PROVO shall be responsible for
paying the PROVO Royalty and the New Business Royalty to the Royalty Payees and
shall assume all of the obligations of GSTN under this Section 7, with respect
to the PROVO Business Royalty and the New Business Royalty.
8. TRANSFER OF FUNDS TECHNOLOGY
8.01 SELLERS hereby represent that SELLERS, together with certain third parties,
are currently engaged in actively developing a technology for the electronic
transfer of funds though point of sale terminals (the "Transfer of Funds
Technology"). SELLERS intend to seek intellectual property protection, including
patent, trademark and copyright prosecution, for the Transfer of Funds
Technology.
8.02 The Parties acknowledge that the Transfer of Funds Technology is, and shall
remain at all times, the exclusive property of SELLERS, and that the Transfer of
Funds Technology is specifically excluded from the PROVO Business and this
Agreement.
8.03 Anything to the contrary in this Section 8 notwithstanding, SELLERS agree
to use their reasonable commercial efforts to negotiate in good faith with GSTN
for GSTN to obtain a license for the use of the Transfer of Funds Technology, on
terms and conditions mutually satisfactory to SELLERS and GSTN.
9. ANTI-DILUTION
9.01 GSTN acknowledges and agrees that in the event GSTN issues any shares of
GSTN Common Stock (whether directly or indirectly, by conversion of other
securities into GSTN Common Stock, by exercise of options or warrants or
otherwise) to anyone other than the SELLERS (which issuance shall constitute a
"Diluting Event"), then GSTN shall issue additional shares of GSTN Common Stock
to SELLERS to avoid dilution of their respective ownership interests in GSTN.
The foregoing anti-dilution protection shall apply only in respect of GSTN
Common Stock directly or indirectly acquired pursuant to this Agreement.
9.02 Immediately upon the occurrence of a Diluting Event, GSTN shall issue to
SELLERS such number of shares of GSTN Common Stock to guarantee that SELLERS
collectively retain a
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40% ownership of GSTN Common Stock on a fully diluted basis. Such issuance
shall be made to the Royalty Payees pro rata in accordance with the amounts of
their respective interests subject to the anti-dilution protection.
10. REPRESENTATIONS AND WARRANTIES
10.01 PROVO represents and warrants to each of the other Parties that:
(a) PROVO is a corporation duly organized and validly existing under the
laws of the United Mexican States and has the corporate power to own
its properties and to carry on its business as now conducted. No
proceeding is pending or threatened involving PROVO.
(b) The Board of Directors of PROVO has approved this Agreement and the
other Transaction Documents and has authorized its Chairman,
ARRANGOIZ, to execute this Agreement for and on behalf of PROVO.
(c) The execution, delivery and performance of this Agreement and the
other Transaction Documents to which PROVO is a Party, and the
consummation of all transactions contemplated hereby or thereby will
not conflict with, or result in any violation of, any provision of
PROVO's corporate documents, including its Estatutos Sociales, or any
law, statute, rule or regulation ("Laws") to which PROVO is subject.
The Transaction Documents to which PROVO is a Party constitute valid
and binding obligations of PROVO, enforceable in accordance with their
respective terms, subject to Laws of general application relating to
bankruptcy, insolvency and the relief of debtors and Laws governing
specific performance, injunctive relief or other equitable remedies.
(d) Each of PROVO and the Subsidiaries owns or has contractual rights in
certain distribution agreements with telecommunications providers in
Mexico, including TELEFONOS DE MEXICO, S.A., as well as having
adequate contract rights in patents, copyrights, licenses, trade
secrets, trademarks, formulas, design rights, and other intangible
assets necessary to conduct the PROVO Business as it is expected to be
conducted by GSTN. Schedule 10.01(d) describes all of PROVO's
Intellectual Property.
(e) Immediately prior to the Closing, the issued and authorized capital
stock of PROVO consists of 192,000 shares of common stock, par value
$50 Pesos, per share. There are no options, warrants, stock-based or
stock-related awards, conversion privileges or other rights to acquire
any shares of capital stock of or other ownership interest in PROVO.
PROVO is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital
stock. The shares representing the PROVO Stock are duly and validly
issued, fully paid and nonassessable.
(f) The Newly Issued Stock to be issued sold and delivered at the Closing
will (i) be duly issued, fully paid, nonassessable and having the
rights, privileges and immunities described in PROVO's Estatutos
Sociales; (ii) be free and clear of any
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restrictions on transfer, taxes, Encumbrances, options, warrants,
purchase rights, contracts, commitments, equities, claims and
demands, other than Encumbrances imposed by or upon GSTN.
(g) On or before the Closing, PROVO shall acquire all of the issued and
outstanding equity securities of each of the Subsidiaries.
(h) The issued and authorized capital stock of each of the Subsidiaries is
described in Schedule 10.01(h). There are no options, warrants,
stock-based or stock-related awards, conversion privileges or other
rights to acquire any shares of capital stock of or other ownership
interest in any of the Subsidiaries. None of the Subsidiaries is
subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock. The
shares representing the capital stock of each of the Subsidiaries are
duly and validly issued, fully paid and nonassessable.
(i) PROVO has made available to the other Parties the audited financial
statements (balance sheet, statement of operations and statement of
changes in stockholders' equity) of PROVO at and for the calendar
years ending December 31, 1999 and December 31, 2000, and the
unaudited financial statements (balance sheet, statement of
operations, and statement of changes in stockholders' equity) for the
calendar year ended December 31, 2001 and for the three months ended
March 31, 2002, (the "PROVO Financial Statements"). The PROVO
Financial Statements are complete and correct in all material
respects, are in accord with the financial, corporate and other books
and records of PROVO (the "PROVO Books and Records"), and have been
prepared in accordance with Mexican GAAP. The PROVO Financial
Statements present fairly the financial condition, operating results
and changes in stockholders' equity of PROVO as of the dates and for
the periods indicated therein. Except as set forth in the PROVO
Financial Statements or in Schedule 10.01(h), PROVO has no Liabilities
or obligations, contingent or otherwise, and whether or not the
subject of any other representation or warranty hereunder which would
have a material adverse effect on PROVO, other than Liabilities
incurred subsequent to March 31, 2002 in the ordinary course of
business consistent (in amount and kind) with past practices (none of
which is a Liability based on, arising out of, or resulting from any
breach of agreement, breach of warranty, tort, infringement or
violation of law or regulatory order). PROVO maintains and will
continue to maintain a system of accounting established and
administered in accordance with Mexican GAAP. The PROVO Books and
Records are in all material respects true and complete, are maintained
in accordance with good business practice and all applicable laws, and
accurately present and reflect in all material respects all of the
transactions that are or should be therein described. For purposes of
this Section 10, the term "materially adverse effect" shall mean
Liabilities of US$100,000 in the aggregate.
(j) PROVO has made available to the other Parties the audited financial
statements (balance sheet, statement of operations and statement of
changes in stockholders' equity) of each of the Subsidiaries at and
for the calendar years ending December
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31, 1999 and December 31, 2000, and the unaudited financial statements
(balance sheet, statement of operations and statement of changes in
stockholders' equity) of each of the Subsidiaries for the calendar
year ended December 31, 2001 and for the three months ended March 31,
2002, (the "Subsidiaries Financial Statements"). The Subsidiaries
Financial Statements are complete and correct in all material
respects, are in accord with the financial, corporate and other books
and records of the Subsidiaries (the "Subsidiaries Books and
Records"), and have been prepared in accordance with Mexican GAAP. The
Subsidiaries Financial Statements present fairly the financial
condition, operating results and changes in stockholders' equity of
each of the Subsidiaries as of the dates and for the periods indicated
therein. Except as set forth in the Subsidiaries Financial Statements
and in Schedule 10.01(j), none of the Subsidiaries has any Liabilities
or obligations, contingent or otherwise, and whether or not the
subject of any other representation or warranty hereunder, which would
have a material adverse effect on any of the Subsidiaries, other than
Liabilities incurred subsequent to March 31, 2002 in the ordinary
course of business consistent (in amount and kind) with past practices
(none of which is a Liability based on, arising out of, or resulting
from any breach of agreement, breach of warranty, tort, infringement
or violation of law or regulatory order). Each of the Subsidiaries
maintains and will continue to maintain a system of accounting
established and administered in accordance with Mexican GAAP. The
Subsidiaries Books and Records are in all material respects true and
complete, are maintained in accordance with good business practice and
all applicable laws, and accurately present and reflect in all
material respects all of the transactions that are or should be
therein described.
(k) Since March 31, 2002, neither PROVO nor any of the Subsidiaries has:
(i) issued any equity securities other than the Newly Issued Stock to
be issued at the Closing;
(ii) issued any bonds or other debt securities;
(iii) except as disclosed in Schedules 10.01(h) and 10.01(j) borrowed
any amount or incurred or become subject to any Liabilities,
except current Liabilities incurred in the ordinary course of
business and Liabilities under agreements entered into in the
ordinary course of business;
(iv) discharged any Encumbrance or paid or discharged any obligation
or Liability, other than current Liabilities paid in the ordinary
course of business;
(v) except as disclosed in Schedule 10.01(l) mortgaged or pledged any
of its assets or subjected them to any other Encumbrance;
(vi) sold, assigned or transferred any of its assets, except in the
ordinary course of business, or cancelled any debts or claims;
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(vii) suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of
business;
(viii) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(ix) suffered any damage, destruction or casualty loss exceeding in
the aggregate $100,000, whether or not covered by insurance; or
(x) entered into any transaction other than in the ordinary course of
business or entered into any other material transaction, whether
or not in the ordinary course of business.
(l) The assets and properties owned or leased by PROVO and each of the
Subsidiaries constitute all of the assets used in or necessary to
conduct the PROVO Business. PROVO and each of the Subsidiaries has
good and marketable title to its owned properties and assets and, with
respect to the property and assets leased by PROVO and each of the
Subsidiaries, holds valid and subsisting leasehold interests therein,
in each case subject to no Encumbrance, except for (i) tax,
materialmen's or like liens for obligations not yet due or payable or
being contested in good faith by appropriate proceedings, as set forth
on Schedule 10.01(l), (ii) Encumbrances which do not individually or
in the aggregate materially impair PROVO or the any of the
Subsidiaries use of the property or asset which is subject to the
Encumbrance or materially detract from the value thereof and which
have arisen in the ordinary course of business and (iii) those listed
on Schedule 10.01(l) (the "Permitted Encumbrances").
(m) True and correct lists of the customers of PROVO and each of the
Subsidiaries and an aging report of their related accounts receivable
(the "Accounts Receivable") as of March 31, 2002 are attached hereto
as Schedule 10.01(m). Neither PROVO nor any of the Subsidiaries makes
any representations or warranties, express or implied, as to the
Accounts Receivable and their ability to collect all or a portion of
the Accounts Receivable.
(n) Other than those described in Schedule l0.01(n), there are no actions,
suits, proceedings, investigations, inquiries or audits ("Litigation")
pending or threatened, or claims asserted (or, to the best of PROVO's
knowledge, any basis therefor or threat thereof), to which PROVO or
any of the Subsidiaries is a party or each of their respective
property is subject or against any officer, director or employee of
PROVO or any of the Subsidiaries in connection with such Person's
relationship with or actions taken on behalf of PROVO or any of the
Subsidiaries that, individually or in the aggregate, are reasonably
likely to have a material adverse effect on PROVO or any of the
Subsidiaries or which question the validity of this Agreement or any
of the other Transaction Documents or any action taken or to be taken
in connection herewith or therewith.
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(o) Other than the Subsidiaries and when incorporated, PROVO-US, PROVO has
no subsidiaries and does not own, hold or control, directly or
indirectly, any rights to acquire any shares of stock or any other
debt or equity interest in any corporation, association or other
entity.
(p) As of the Closing Date, neither PROVO nor any of the Subsidiaries has
any Liability (and, to the knowledge of PROVO or any of the
Subsidiaries, there is no reasonable basis for any present or future
action, suit, proceeding, claim or demand against PROVO or any of the
Subsidiaries giving rise to any Liability), which in the aggregate
could have a materially adverse effect, except for (i) those
Liabilities described in Schedule 10.01(p); and (ii) current
Liabilities incurred in the ordinary course of business.
(q) There is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of PROVO
or any Affiliate of PROVO who might be entitled to any fee or
commission from KIBOGA, XXXXXX, GSTN or any of its respective
Affiliates upon consummation of the Contemplated Transactions.
10.02 Each of SELLERS represents and warrants to each of the other Parties that:
(a) Each SELLER is a Mexican citizen, of legal age, and has the sufficient
capacity to own his properties and to carry on his business as now
conducted.
(b) The execution, delivery and performance by SELLERS of this Agreement
and the other Transaction Documents to which each of SELLERS is a
Party, and the consummation of all transactions contemplated hereby
or thereby will not conflict with, or result in any violation of any
Laws to which each of SELLERS is subject. The Transaction Documents to
which each of SELLERS is a Party constitute valid and binding
obligations of each of SELLERS, enforceable in accordance with their
respective terms, subject to Laws of general application relating to
bankruptcy, insolvency and the relief of debtors and Laws governing
specific performance, injunctive relief or other equitable remedies.
(c) SELLERS hold of record and own beneficially the PROVO Stock, free and
clear of any restrictions on transfer, taxes, Encumbrances, options,
warrants, purchase rights, contracts, commitments, equities, claims
and demands. Upon transfer to GSTN at Closing, the PROVO Stock will be
free and clear of any Encumbrances. None of SELLERS is a party to any
option, warrant, purchase right or other contract or commitment that
could require any of SELLERS to sell or otherwise transfer the PROVO
Stock other than pursuant to this Agreement. None of SELLERS is a
party to any voting trust, proxy or other agreement or understanding
with respect to the voting of the PROVO Stock.
(d) Investment Representations:
(i) Each of SELLERS is acquiring the Shares and the Escrowed Shares
for his own account, not as a nominee or agent, for investment
and not with a
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view to, or for sale in connection with, any distribution
thereof in violation of the Securities Act;
(ii) None of SELLERS has any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant
participations to any Person or to share or grant any rights with
respect to the Shares and the Escrowed Shares; and
(iii) Each of SELLERS is an "accredited investor" within the meaning
of Rule 501 of Regulation D promulgated by the SEC, as presently
in effect. Each of SELLERS has adequate net worth and means of
providing for its current needs and contingencies and is able to
sustain a complete loss of the investment in the Shares and the
Escrowed Shares that it is obtaining at the Closing, and has no
need for liquidity in such investment. Each of SELLERS has
sufficient knowledge and experience in financial and business
matters to be capable of evaluating the merits and risks of an
investment such as an investment in the Shares and the Escrowed
Shares, and each of SELLERS has evaluated the merits and risks of
the investment in the Shares and the Escrowed Shares. Each of
SELLERS understands that the Shares and the Escrowed Shares have
not been registered under the Securities Act or by reason of its
issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to the exemption
provided in Sections 4(1) and 4(2) thereof, respectively, that
the Shares and the Escrowed Shares have not been registered under
applicable state securities laws by reason of such issuance in a
transaction exempt from such registration requirements. Each of
SELLERS further understands that the exemption from registration
afforded by Rule 144 promulgated under the Securities Act is not
presently available with respect to the Shares and the Escrowed
Shares that it is obtaining at the Closing.
(e) There is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of SELLERS
who might be entitled to any fee or commission from PROVO, KIBOGA,
XXXXXX, GSTN or any of its respective Affiliates upon consummation of
the Contemplated Transactions.
10.03 KIBOGA represents and warrants to the each of other Parties that:
(a) KIBOGA is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas and has the corporate
power to own its properties and to carry on its business as now
conducted. No proceeding is pending or threatened involving KIBOGA.
(b) The Board of Directors of KIBOGA has approved this Agreement and the
other Transaction Documents and has authorized its President and CEO,
Xxxx X. Xxxxxx, to execute this Agreement for and on behalf of KIBOGA.
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(c) The execution, delivery and performance of this Agreement and the
other Transaction Documents to which KIBOGA is a Party, and the
consummation of all transactions contemplated hereby or thereby will
not conflict with, or result in any violation of, any provision of
KIBOGA's corporate documents or Laws to which KIBOGA is subject. The
Transaction Documents to which KIBOGA is a Party constitute valid and
binding obligations of KIBOGA, enforceable in accordance with their
respective terms, subject to Laws of general application relating to
bankruptcy, insolvency and the relief of debtors and Laws governing
specific performance, injunctive relief or other equitable remedies.
(d) There is no Litigation pending or threatened, or claims asserted (or,
to the best of KIBOGA's knowledge, any basis therefor or threat
thereof), to which KIBOGA is a party or its property is subject or
against any officer, director or employee of KIBOGA in connection with
such person's relationship with or actions taken on behalf of KIBOGA
or that, individually or in the aggregate, are reasonably likely to
have a material adverse effect on KIBOGA or which question the
validity of this Agreement or any of the other Transaction Documents
or any action taken or to be taken in connection herewith or
therewith.
(e) The officers and advisors of KIBOGA have been given the opportunity to
examine sufficient documents regarding the PROVO Business, to examine
sufficient assets of the PROVO Business, and to ask questions of and
receive answers from the representatives of PROVO concerning the PROVO
Business in order to make a knowledgeable decision in connection with
entering into this Agreement.
(f) There is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of KIBOGA
or any Affiliate of KIBOGA who might be entitled to any fee or
commission from MORRIS, PROVO, SELLERS, GSTN or any of its respective
Affiliates upon consummation of the Contemplated Transactions.
10.04 XXXXXX represents and warrants to each of the other Parties that:
(a) XXXXXX is a U.S. citizen, of legal age, and has the sufficient
capacity to own his properties and to carry on his business as now
conducted.
(b) The execution, delivery and performance by XXXXXX of this Agreement
and the other Transaction Documents to which XXXXXX is a Party, and
the consummation of all transactions contemplated hereby or thereby
will not conflict with, or result in any violation of any Laws to
which XXXXXX is subject. The Transaction Documents to which XXXXXX is
a Party constitute valid and binding obligations of XXXXXX,
enforceable in accordance with their respective terms, subject to Laws
of general application relating to bankruptcy, insolvency and the
relief of debtors and Laws governing specific performance, injunctive
relief or other equitable remedies.
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(c) XXXXXX holds of record and owns beneficially the Escrowed Shares, free
and clear of any restrictions on transfer, taxes, Encumbrances,
options, warrants, purchase rights, contracts, commitments, equities,
claims and demands. Upon transfer to the Escrow Agent at Closing, the
Escrowed Shares will be free and clear of any Encumbrances. XXXXXX is
not a party to any option, warrant, purchase right or other contract
or commitment that could require XXXXXX to sell or otherwise transfer
the Escrowed Shares other than pursuant to this Agreement. XXXXXX is
not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of the Escrowed Shares.
(d) MORIS and his advisors have been given the opportunity to examine
sufficient documents regarding the PROVO Business, to examine
sufficient assets of the PROVO Business, and to ask questions of and
receive answers from the representatives of PROVO concerning the PROVO
Business in order to make a knowledgeable decision in connection with
entering into this Agreement.
(e) There is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of XXXXXX
who might be entitled to any fee or commission from PROVO, KIBOGA,
SELLERS or GSTN or any of its respective Affiliates upon
consummation of the Contemplated Transactions.
10.05 GSTN represents and warrants to each of the other Parties that:
(a) GSTN is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate
power to own its properties and to carry on its business. No
proceeding is pending or threatened involving GSTN.
(b) The Board of Directors of GSTN approved this Agreement and the other
Transaction Documents and has authorized its , ,
---------- ------------
to execute this Agreement for and in behalf of GSTN.
(c) The execution, delivery and performance of this Agreement and the
execution, delivery and performance of this Agreement and the other
Transaction Documents to which GSTN is a Party, and the consummation
of all transactions contemplated hereby or thereby will not conflict
with, or result in any violation of, any provision of GSTN's corporate
documents or Laws to which GSTN is subject. The Transaction Documents
to which GSTN is a Party constitute valid and binding obligations of
GSTN, enforceable in accordance with their respective terms, subject
to Laws of general application relating to bankruptcy, insolvency and
the relief of debtors and Laws governing specific performance,
injunctive relief or other equitable remedies.
(d) GSTN is a public company based in San Diego, California, whose stock
was being traded on NASDAQ (GSTN:NASDAQ:SC) up to and until May 16,
2001, and is currently being traded as a NASDAQ bulletin board
security(GSTN.OB).
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(e) The authorized capital stock of GSTN consists of shares of
----------
GSTN Common Stock and shares of preferred stock, of which
---------
shares of GSTN Common Stock and shares of
----------- -----------
preferred stock are issued and outstanding. Except as set forth on
Schedule 10.05(e), there are no options, warrants, stock-based or
stock-related awards, conversion privileges or other rights to acquire
any shares of capital stock of or other ownership interest in GSTN.
Except as set forth on Schedule 10.05(e) and in the Original Lease
Agreement, GSTN is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of
its capital stock. The shares of the capital stock of GSTN, including
the Shares and the Escrowed Shares, are duly and validly issued, fully
paid and nonassessable, and such shares have been issued in compliance
with the Securities Act and any relevant state securities laws or in
compliance with applicable exemptions therefrom, the registration and
qualification requirements of all applicable securities laws of states
of the United States and all other provisions of any applicable
securities laws.
(f) As of the effective time of the Closing, the Shares and the Escrowed
Shares represent in the aggregate: (i) 40% of GSTN's voting equity
securities on a fully diluted basis and (ii) 40% of all of GSTN's
equity securities on a fully diluted basis.
(g) After the date hereof when any shares of the GSTN Common Stock are
issued because of existing options, warrants, calls, preemptive
rights, or other commitments of GSTN, GSTN will comply with the
anti-dilution provisions of Section 9.
(h) Other than Greystone Technology Inc., a California corporation, GSTN
has no subsidiaries and does not own, hold or control, directly or
indirectly, any rights to acquire any shares of stock or any other
debt or equity interest in any corporation, association or other
entity.
(i) GSTN has (and at the Closing will have) available to it cash,
marketable securities or other investments to enable it to consummate
the Contemplated Transactions on the terms and conditions set forth in
the Transaction Documents, including, without limitation, transferring
US$5,000,000 to PROVO.
(j) GSTN has made available to the other Parties the audited financial
statements (balance sheet, statement of operations, statement of
changes in stockholders' equity and statement of cash flows) of GSTN
at and for the calendar years ending December 31, 1999 and December
31, 2000 and December 31, 2001, and unaudited financial statements for
the three months ended March 31, 2002, (the "GSTN Financial
Statements"). The GSTN Financial Statements are complete and correct
in all material respects, are in accord with the financial, corporate
and other books and records of GSTN (the "GSTN Books and Records"),
and have been prepared in accordance with GAAP consistently applied.
The GSTN Financial Statements present fairly the financial condition,
operating results,
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changes in stockholders' equity and cash flows of GSTN as of the dates
and for the periods indicated therein. Except as set forth in the GSTN
Financial Statements, GSTN has no Liabilities or obligations,
contingent or otherwise, and whether or not the subject of any other
representation or warranty hereunder which would have a material
adverse effect on GSTN, other than Liabilities incurred subsequent to
March 31, 2002 in the ordinary course of business consistent (in
amount and kind) with past practices (none of which is a Liability
based on, arising out of or resulting from any breach of agreement,
breach of warranty, tort, infringement or violation of law or
regulatory order). GSTN maintains and will continue to maintain a
system of accounting established and administered in accordance with
GAAP. The GSTN Books and Records are in all material respects true and
complete, are maintained in accordance with good business practice and
all applicable laws, and accurately present and reflect in all
material respects all of the transactions that are or should be
therein described.
(k) Since March 31, 2002, GSTN has not:
(i) issued any GSTN Common Stock or any other equity securities,
other than the Shares to be issued at the Closing;
(ii) issued any bonds or other debt securities;
(iii) borrowed any amount or incurred or become subject to any
Liabilities, except current Liabilities incurred in the ordinary
course of business and Liabilities under agreements entered into
in the ordinary course of business;
(iv) discharged any Encumbrance or paid or discharged any obligation
or Liability, other than current Liabilities paid in the ordinary
course of business;
(v) mortgaged or pledged any of its assets or subjected them to any
other Encumbrance;
(vi) sold, assigned or transferred any of its assets, except in the
ordinary course of business, or cancelled any debts or claims;
(vii) suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of
business;
(viii) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(ix) suffered any damage, destruction or casualty loss exceeding in
the aggregate $100,000, whether or not covered by insurance; or
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(x) entered into any transaction other than the Merger or in the
ordinary course of business or entered into any other material
transaction, whether or not in the ordinary course of business.
(l) Except as disclosed on Schedule 10.05(1), there is no Litigation
pending or threatened, or claims asserted (or, to the best of GSTN's
knowledge, any basis therefor or threat thereof), to which GSTN is a
party or its property is subject or against any officer, director or
employee of GSTN in connection with such person's relationship with or
actions taken on behalf of GSTN or that, individually or in the
aggregate, are reasonably likely to have a material adverse effect on
GSTN or which question the validity of this Agreement or any of the
other Transaction Documents or any action taken or to be taken in
connection herewith or therewith.
(m) Except as set forth in the Voting Proxy, GSTN has no agreement,
obligation or commitment with respect to the election of any
individual or individuals to the Board, and to the best of GSTN's
knowledge, there is no voting agreement or other arrangement among its
stockholders with respect to the election of any individual or
individuals to the Board.
(n) GSTN will use its reasonable best efforts to insure that the stock
will be listed on NASDAQ or on its electronic bulletin board.
(o) Investment Representations:
(i) GSTN is acquiring the PROVO Stock and the Newly Issued Stock for
its own account, not as a nominee or agent, for investment and
not with a view to, or for sale in connection with, any
distribution thereof in violation of the Securities Act;
(ii) GSTN does not have any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant
participations to any Person or to share or grant any rights with
respect to the PROVO Stock and the Newly Issued Stock; and
(iii) GSTN is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated by the SEC, as presently in effect.
GSTN has adequate net worth and means of providing for its
current needs and contingencies and is able to sustain a complete
loss of the investment in the PROVO Stock and the Newly Issued
Stock that it is obtaining at the Closing, and has no need for
liquidity in such investment. GSTN, itself or through its
officers, employees or agents, has sufficient knowledge and
experience in financial and business matters to be capable of
evaluating the merits and risks of an investment such as an
investment in the PROVO Stock and the Newly Issued Stock, and
GSTN, either alone or through its officers, employees or agents,
has evaluated the merits and risks of the investment in the PROVO
Stock and the Newly Issued Stock. GSTN
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understands that the PROVO Stock and the Newly Issued Stock have
not been registered under the Securities Act, or under Mexican
securities regulation, or by reason of its issuance in a
transaction exempt from the registration requirements of the
Securities Act pursuant to the exemption provided in Sections
4(l) and 4(2) thereof, respectively, that the PROVO Stock and the
Newly Issued Stock have not been registered under applicable
state securities laws by reason of such issuance in a transaction
exempt from such registration requirements. GSTN further
understands that the exemption from registration afforded by Rule
144 promulgated under the Securities Act is not presently
available with respect to the PROVO Stock and the Newly Issued
Stock that it is purchasing at the Closing.
(p) Its officers and advisors have been given the opportunity to examine
sufficient documents regarding the PROVO Business, to examine
sufficient assets of the PROVO Business, and to ask questions of and
receive answers from the representatives of PROVO concerning the PROVO
Business in order to make a knowledgeable decision in connection with
entering into this Agreement.
(q) There is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of GSTN or
any Affiliate of GSTN who might be entitled to any fee or commission
from PROVO, SELLERS, KIBOGA, XXXXXX or any of its respective
Affiliates upon consummation of the Contemplated Transactions.
11. COVENANTS OF PROVO AND SELLERS
11.01 In addition to any other covenants of PROVO and SELLERS stated under this
Agreement, each of PROVO and SELLERS further covenants and agrees as follows:
(a) Prior to the Closing Date, PROVO shall acquire from its Affiliates all
of the issued and outstanding equity securities of each of the
Subsidiaries.
(b) PROVO shall use the proceeds of the purchase of the Newly Issued Stock
to pay current Liabilities of the PROVO Business and for general
working capital of the PROVO Business, including, without limitation,
to purchase cash prepaid telephone calling cards in Mexico.
(c) Prior to the Closing Date, PROVO will use its commercially reasonable
efforts to keep the PROVO Business intact, including its present
operations, physical facilities, working conditions and relationships
with lessors, licensors, suppliers, distributors and customers.
(d) PROVO and each of SELLERS will give prompt written notice to the other
Parties of any material adverse developments causing a breach of any
of its own representations and warranties in Section 10.
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(e) From the date hereof to the Closing Date, PROVO will permit
representatives of GSTN, KIBOGA and XXXXXX to have full access at all
reasonable times, and in a manner so as not to interfere with the
normal business operations of PROVO and its Affiliates, to all
premises, properties, appropriate personnel, books, records (including
tax records), contracts and documents of or pertaining to the PROVO
Business, as well make available its directors, officers, employees,
accountants, attorneys and other agents and representatives.
(f) From the date hereof to the Closing Date, and except as may be
approved in advance by the other Parties, PROVO shall refrain from:
(i) issuing any shares of capital stock or other securities, other tan
pursuant to the exercise of existing stock options or warrants; (ii)
granting any stock options, warrants or other rights to acquire
capital stock or other securities, other than pursuant to existing
employee stock option plans and consistent with past practice; (iii)
entering into, amending or voluntarily terminating any employment
agreement with any new or existing employee; (iv) granting any
increase in the compensation, bonuses, benefits or other remuneration
payable to any employee or consultant; (v) entering into, amending or
voluntarily terminating any license, royalty or distribution
agreement; and (vi) entering into, amending or voluntarily terminating
any lease or rental agreement.
(g) From the date hereof to the Closing Date, and except as may be
approved in advance by the other Parties, SELLERS shall refrain from:
(i) selling or transferring the PROVO Stock; (ii) creating any
Encumbrances over the PROVO Stock; and (iii) taking any action that
may impair the PROVO Stock.
(h) From an after the Closing Date, PROVO shall pay the PROVO Business
Royalty to the Royalty Payees in accordance with Section 7 hereof.
(i) From the Closing Date forward, PROVO will provide the Royalty Payees
with monthly, quarterly and year-end reports of the operations of the
PROVO Business.
(j) From and after the Closing Date, GSTN shall make available the Funding
to PROVO-US from time to time, in accordance with the Initial Business
Plan.
12. COVENANTS OF GSTN
12.01 In addition to any other covenants of GSTN stated under this Agreement,
GSTN further covenants and agrees as follows:
(a) GSTN shall use its best efforts to promptly make the Securities
Filings as soon as reasonably practicable in order for the Closing to
occur expeditiously.
(b) GSTN shall obtain all necessary consents and approvals, including the
consent of its stockholders, if necessary, in order to authorize the
transactions contemplated herein and in the other Transaction
Documents.
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(c) Prior to the Closing, GSTN shall have available funds equal to at
least US$5,000,000 in cash to consummate the Contemplated
Transactions.
(d) Prior to the Closing, GSTN shall use its best efforts to consummate
the Merger.
(e) Prior to the Closing and unless otherwise permitted by the Merger
Agreement, GSTN will use its commercially reasonable efforts to keep
the GSTN Business intact, including its present operations, physical
facilities, working conditions and relationships with lessors,
licensors, suppliers, distributors and customers.
(f) Prior to the Closing, GSTN shall take all necessary actions to
maintain its stock traded on the OTC Bulletin Board at the effective
time of the Closing.
(g) GSTN will give prompt written notice to the other Parties of any
material adverse developments causing a breach of any of its own
representations and warranties in Section 10.
(h) From the date hereof to the Closing Date, GSTN will permit
representatives of PROVO to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business
operations of GSTN and their Affiliates, to all premises, properties,
appropriate personnel, books, records (including tax records),
contracts and documents of or pertaining to the GSTN Business, as well
make available its directors, officers, employees, accountants,
attorneys and other agents and representatives for purposes of PROVO's
due diligence investigation of the assets, properties, Liabilities,
business, operations, financial conditions and prospects of GSTN.
(i) From the date hereof to the Closing Date, and except as may be
permitted by the Merger Agreement or approved in advance by the other
Parties, GSTN shall refrain from: (i) issuing any shares of capital
stock or other securities, other tan pursuant to the exercise of
existing stock options or warrants; (ii) granting any stock options,
warrants or other rights to acquire capital stock or other securities,
other than pursuant to existing employee stock option plans and
consistent with past practice; (iii) entering into, amending or
voluntarily terminating any employment agreement with any new or
existing employee; (iv) granting any increase in the compensation,
bonuses, benefits or other remuneration payable to any employee or
consultant; (v) entering into, amending or voluntarily terminating any
license, royalty or distribution agreement; and (vi) entering into,
amending or voluntarily terminating any lease or rental agreement.
(j) After the Closing Date, GSTN shall use its reasonable commercial
efforts to secure additional financing for up to US$25,000,000, in
order to fund the operations of the PROVO Business, the KIBOGA
Business and the New Business (the "Additional Financing").
(k) From and after the Closing Date, GSTN shall make available the Funding
to PROVO-US from time to time, in accordance with the Initial Business
Plan.
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(l) From the Closing Date forward, GSTN shall maintain separate accounting
for the PROVO Business, the KIBOGA Business and the New Business.
(m) After the Closing Date, use its best efforts to take all actions
necessary to consummate the Spin Off as soon as practicable.
(n) From an after the Closing Date, GSTN shall pay the Royalties to the
Royalty Payees in accordance with Section 7 hereof.
(o) From the Closing Date forward, GSTN will provide the Royalty Payees
with monthly, quarterly and year-end reports of the operations of
GSTN.
(p) In addition to any other covenants of GSTN under the Registration
Rights Agreement, GSTN shall use its best efforts to file with the SEC
a registration
statement covering the Shares (the "Supplemental Registration"). GSTN
shall use its best efforts to complete the Supplemental Registration
no later than 180 days after the Closing Date. The Supplemental
Registration will not be deemed to have been effected unless the
registration statement relating thereto has been declared effective by
the SEC and GSTN has complied in all material respects with its
obligations under this Agreement and any underwriting or other
distribution agreement relating to such distribution, and in the case
of an underwritten offering, all the Shares offered have been
purchased by the underwriters. GSTN shall be responsible for, and
shall reimburse SELLERS for any costs or expenses associated with the
Supplemental Registration.
13. COVENANTS OF KIBOGA AND XXXXXX
13.01 In addition to any other covenants of KIBOGA or XXXXXX stated under this
Agreement, each of KIBOGA and XXXXXX further covenants and agrees as follows:
(a) KIBOGA shall obtain all necessary consents and approvals, including
the consent of its stockholders, if necessary, in order to authorize
the transactions contemplated herein and in the other Transaction
Documents.
(b) Prior to the Closing, KIBOGA shall use its best efforts to consummate
the Merger.
(c) Prior to the Closing and unless otherwise permitted by the Merger
Agreement, KIBOGA will use its commercially reasonable efforts to keep
the KIBOGA Business intact, including its respective present
operations, physical facilities, working conditions and relationships
with lessors, licensors, suppliers, distributors and customers.
(d) KIBOGA will give prompt written notice to the other Parties of any
material adverse developments causing a breach of any of its own
representations and warranties in Section 10.
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(e) From the date hereof to the Closing Date, KIBOGA will permit
representatives of PROVO to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business
operations of KIBOGA and its Affiliates, to all premises, properties,
appropriate personnel, books, records (including tax records),
contracts and documents of or pertaining to the KIBOGA Business, as
well make available its directors, officers, employees, accountants,
attorneys and other agents and representatives for purposes of PROVO's
due diligence investigation of the assets, properties, Liabilities,
business, operations, financial conditions and prospects of KIBOGA.
(f) XXXXXX shall use his reasonable commercial efforts to assist GSTN in
obtaining the Additional Funding.
(g) From and after the Closing Date, in the event XXXXXX receives any
additional shares of GSTN Common Stock for any reason, including
without limitation by conversion of other securities into GSTN Common
Stock, by exercise of options or warrants, or otherwise, XXXXXX shall
immediately grant to SELLERS an irrevocable proxy to vote such
additional shares of GSTN Common Stock as is necessary for SELLERS'
not to loose the voting rights received hereunder.
14. SPIN OFF
14.01 It is the intention of the Parties that, as soon as practicable after the
Closing Date, GSTN separates all of its business activities into two different
public companies (the "Spin Off"). In order to consummate the Spin Off, the
parties shall enter into a series of agreements whereby: (1) GSTN shall retain
the GSTN Business and the KIBOGA Business and all assets and liabilities
associated therewith; (ii) GSTN shall transfer all of the assets and liabilities
of the PROVO Business and the New Business, including the PROVO-US Business into
a newly formed subsidiary of GSTN, which then shall be merged into a publicly
traded shell corporation (hereinafter "GSTN-PROVO"); (iii) the then current
shareholders of GSTN shall receive one share of GSTN-PROVO having the same
rights and privileges for each share of GSTN held by such shareholder, on a
one-to-one basis (the "GSTN-PROVO Shares"); (iv) GSTN-PROVO shall continue
paying the PROVO Royalty and the New Business Royalty to the Royalty Payees; (v)
all of the newly issued GSTN-PROVO Shares corresponding to the Escrowed Shares,
shall be delivered to the Escrow Agent; (vi) GSTN-PROVO shall grant
anti-dilution protection to the SELLERS in terms similar to those granted under
Section 9 hereof; (vii) SELLERS shall be entitled to appoint the majority of the
officers and directors of GSTN-PROVO; (viii) ARRANGOIZ shall be appointed as
Chairman and Chief Executive Officer of GSTN-PROVO; (ix) XXXXXX shall be
entitled to appoint the majority of the officers and directors of GSTN; and (x)
the Escrow Agreement shall terminate forthwith in accordance with its terms.
14.02 The parties covenant and agree to use their best efforts to consummate the
Spin Off as soon as practicable after the Closing, but in no event after 180
days of the Closing Date. It is the parties' intention to consummate the Spin
Off in the most favorable tax manner, in order to minimize tax consequences for
all parties.
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14.03 After consummation of the Spin Off, the Escrow Agent shall distribute the
Escrowed Shares as follows: (i) SELLERS shall receive all of the GSTN-PROVO
Shares held by the Escrow Agent; and (ii) XXXXXX shall receive all of the shares
of GSTN Common Stock held by the Escrow Agent. In addition, concurrently with
the Spin Off, SELLERS and XXXXXX agree to grant each other voting proxies so
that SELLERS may vote all of the GSTN-PROVO Shares held by XXXXXX and XXXXXX may
vote all of the shares of GSTN Common Stock held by SELLERS.
14.04 If the Spin Off is not consummated within 180 days after the Closing Date,
the Escrow Agreement shall terminate unless mutually agreed by XXXXXX and
SELLERS. Upon termination of the Escrow Agreement in accordance with this
paragraph, the Escrow Agent shall distribute the Escrowed Shares as follows: (1)
SELLERS shall receive 50% of the Escrowed Shares and (ii) XXXXXX shall receive
50% of the Escrowed Shares.
15. INDEMNIFICATION
15.01 Subject to the provisions of this Section 15, each Party (each an
"Indemnifying Party") shall indemnify and save harmless each of the other
Parties and their respective officers, directors, employees, agents and
successors and assigns, and each person who controls each of the Parties within
the meaning of the Securities Act or the Exchange Act, from and against any and
all Liabilities, losses, damages, claims (whether or not meritorious),
judgments, fines, settlements and other costs and expenses (including reasonable
attorneys' fees and expenses) based upon, arising out of or resulting from any
breach of any representation or warranty, or any breach of or failure to perform
any covenant or agreement, by such Indemnifying Party set forth in this
Agreement or any of the other Transaction Documents or any Litigation brought by
any third party arising out of the transactions contemplated hereby and thereby.
15.02 In addition to any other indemnification obligations under Section 15.01,
GSTN and XXXXXX shall jointly and severally indemnify and save harmless each of
SELLERS and PROVO and their respective officers, directors, employees, agents
and successors and assigns, from and against any and all Liabilities, losses,
damages, claims (whether or not meritorious), judgments, fines, settlements and
other costs and expenses (including reasonable attorneys' fees and expenses)
based upon, arising out of or resulting from any Liabilities or Litigation
brought by any third party in connection with GSTN Business or the KIBOGA
Business, which occurred, arised or originated prior to the Closing Date. The
indemnification obligations assumed under this Section 15.02, shall survive
indefinitely.
15.03 The Party seeking indemnification under this Section 15 (the "Indemnified
Party") shall, promptly after the receipt of notice of the commencement of any
Litigation against such Indemnified Party in respect of which indemnity may be
sought under this Section 15, notify the Indemnifying Party in writing of the
commencement thereof (the "Indemnification Notice"). The failure of any
Indemnified Party to give the Indemnifying Party an Indemnification Notice shall
not relieve the Indemnifying Party from any Liability which it may have to such
Indemnified Party under this Section 15 except to the extent that such
Indemnifying Party shall have been prejudiced thereby. In case any such
Litigation shall be brought against any Indemnified Party, the Indemnifying
Party shall be entitled to participate therein and, to the extent that it may
wish, to assume the defense thereof, with counsel reasonably satisfactory to
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such Indemnified Party by giving written notice of the Indemnifying Party's
election to assume the defense within thirty (30) days after its receipt of the
Indemnification Notice, and after timely written notice from the Indemnifying
Party to such Indemnified Party of its election so to assume the defense
thereof, such Indemnifying Party will not be liable to such Indemnified Party
under this Section 15 for any legal expense subsequently incurred by such
Indemnified Party in connection with the defense thereof nor for any settlement
thereof entered into by the Indemnified Party without the consent of the
corresponding Indemnifying Party; provided that (i) if an Indemnifying Party
shall elect not to assume (or shall fail within the time period set forth above
to elect to assume) the defense of such Litigation, or shall subsequently fail
to diligently maintain the defense thereof, or (ii) if the Indemnified Party
reasonably determines (x) that there may be a conflict between the positions of
Indemnifying and of the Indemnified Party in defending such Litigation or (y)
that there may be legal defenses available to such Indemnified Party different
from or in addition to those available to such Indemnifying Party, then separate
counsel for the Indemnified Party shall be entitled to participate in and
conduct the defense, in the case of clauses (i) and (ii)(x), or such different
defenses, in the case of clause (ii)(y), and such Indemnifying Party shall be
liable for any reasonable legal expenses incurred by the Indemnified Party in
connection therewith, and, in the case of clause (i), for any settlement of such
Litigation entered into by the Indemnified Party. The corresponding Indemnifying
Party shall not enter into any settlement of any such Litigation without the
consent of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed.
15.04 OTHER THAN THE REPRESENTATIONS AND WARRANTIES MADE BY PROVO AND SELLERS IN
SECTION 10 HEREOF, EACH OF PROVO AND SELLERS DISCLAIMS ANY OTHER WARRANTIES,
EXPRESS OR IMPLIED, WRITTEN OR ORAL, RELATED TO THE PROVO BUSINESS, INCLUDING,
BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE.
15.05 An Indemnifying Party shall not be obligated to indemnify an Indemnified
Party under this Section 15 unless and until all losses with respect to which
the Indemnifying Party has indemnification obligations hereunder exceed $100,000
in the aggregate, following which the Indemnifying Party shall be obligated to
indemnify or hold harmless the Indemnified Party for all such losses in excess
of such amount. In no event shall the indemnification obligations of SELLERS or
PROVO hereunder exceed $500,000 in the aggregate. The limitations set forth in
this Section 15.05, shall not apply to GSTN and XXXXXX' special indemnification
obligations under Section 15.02.
15.06 The representations and warranties of PROVO and SELLERS contained in this
Agreement shall survive until the date that is two years after the Closing Date.
The obligation of an Indemnifying Party to hold harmless an Indemnified Party
shall be extended automatically to include any time necessary to resolve a claim
for indemnification that was made in accordance with the terms hereof before the
expiration of the survival period, but not resolved prior to its expiration and
any such extension shall apply onto as to the specific claims asserted and not
resolved within the survival period. The liability associated with any such item
shall continue until such claim shall have been finally settled, decided or
adjudicated.
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16. DEFAULT
16.01 The following are "Events of Default" under this Agreement:
(a) A Party shall fail to pay in full, as and when due and payable, any
amount due hereunder, including payment of Royalties to the Royalty
Payees, which failure is not cured within fifteen (15) days.
(b) A Party shall fail duly to observe any other covenant, condition or
agreement of this Agreement, which failure shall continue for thirty
(30) days after written notice thereof is received from any of the
other Parties.
(c) Any warranty or representation made in this Agreement shall be
breached by a Party or shall prove to be false or misleading in any
material respect at any time prior or following the Closing.
(d) If a Party is or becomes the subject of a bankruptcy, reorganization,
rearrangement, or insolvency proceeding (voluntarily or involuntarily)
under applicable bankruptcy, insolvency, creditor's rights or similar
laws in effect in the jurisdiction of the Party's organization or any
other jurisdiction in which a Party may seek or be subject to any such
protection or proceedings.
(e) If a Party shall seek, consent to or acquiesce in the appointment of
any trustee, receiver or liquidator of, or if a trustee, receiver or
liquidator is otherwise appointed for it, or all or any material part
of its assets.
(f) If a Party shall make any general assignment for the benefit of
creditors.
(g) In any proceeding a Party shall be alleged to be insolvent or unable
generally to pay its debts as they become due.
(h) A Party commences any one or more of the processes of dissolution,
termination or liquidation.
Notwithstanding the above provisions, any cure periods provided for in this
Section shall not apply with respect to any Event of Default of the same type or
nature which is repeated more than twice in any twelve month period.
16.02 The remedies identified in this Agreement shall be cumulative and not
exclusive and the Parties shall be entitled to all other remedies available
under law or at equity.
16.03 The Parties shall be entitled to enforce their rights under this Agreement
specifically and to recover damages by reason of any Event of Default or any
breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The Parties hereto agree not to oppose any final
judgments of specific performance. The Parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any Party in its sole discretion may apply to any court
of law or equity of
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competent jurisdiction for specific performance or injunctive relief (without
posting a bond or other security) in order to enforce or prevent any violation
of the provisions of this Agreement.
17. FURTHER ASSURANCES
17.01 The Parties agree that all transactions hereunder shall be done in the
most efficient tax manner for PROVO and GSTN, in order to minimize taxes for
both Parties in Mexico and in the United States. To that end, following the
Closing and subject to the opinion of tax advisors in Mexico and the United
States, each of PROVO, GSTN and their respective Affiliates, agree to use their
best efforts to take, execute, acknowledge and deliver all such further acts,
documents and assurances as are reasonably necessary, from time to time, in
order to carry out more effectively the intent and purposes hereof and the other
Transaction Documents.
18. MISCELLANEOUS
18.01 This Agreement shall be binding upon and inure to the benefit of the
Parties named in this Agreement and their respective successors and permitted
assigns. No Party may assign either this Agreement or any of its rights,
interests or obligations hereunder or under any other Transaction Documents
without the prior written approval of each of the other Parties, except that
each of the Royalty Payees shall be entitled to assign or transfer their right
to receive Royalties hereunder to any third parties or to their respective
beneficiaries or as part as an estate planning trust or mechanism, by giving
prior written notice to GSTN.
18.02 Except as otherwise required by law, including, without limitation, GSTN's
reporting obligations under the Exchange Act, no public disclosure of the terms
of the Contemplated Transactions shall be made by either Party, and then only
with the prior written consent of the other Parties, which will not be
unreasonably withheld or delayed. Each Party shall furnish to the other Parties
advance copies of any releases which it proposes to make concerning the
transaction.
18.03 All information obtained by the Parties from each other will be treated as
confidential and the parties agree not to disclose, disseminate, reveal, share,
or release all or any portion of such information to third parties, including
their respective parent, subsidiaries or Affiliates, without the express written
consent of the Party providing the information.
18.04 Any holding that a provision of this Agreement is unenforceable, in whole
or in part, will not affect the validity of the other provisions of this
Agreement.
18.05 This Agreement (including the exhibits, schedules and appendices attached
hereto), including the documents referred to herein, embodies the entire
agreement and, understanding of the Parties hereto and supersedes all prior
agreements and understandings of the Parties hereto relating to the subject
matter herein contained.
18.06 This Agreement shall be construed, interpreted, governed, and enforced by
and under the laws of the State of New York, without giving effect to the
conflicts of law principles thereof.
18.07 All notices under this Agreement, including reports, shall be in writing
in the English language addressed to the appropriate Party at the address set
forth by its name on this
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Agreement, and shall be deemed given when received by the recipient and shall be
delivered directly by hand to authorized personnel or by registered mail, return
receipt requested, telex authenticated facsimile message or electronic mail,
confirmed by registered mail.
All notices shall be addressed:
If to KIBOGA and XXXXXX: KIBOGA SYSTEMS, INC.
0000 Xxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, XX, 00000-0000
xxxxx.xxxxxx@xxx.xxx
Attention: Xxxx X. Xxxxxx
If to PROVO and SELLERS: PROVO, S.A. de X.X.
Xxxxxxxx Xxx Xx. 00
Xxx. Xxxx Xxx
00000 Xxxxxx, D.F.
Fax. (000) 000-0000
Attention: Xxxxxxx Xxxxxxxx del Rio
With a copy which shall not constitute notice
to:
Xxxxxxx Berlin Sheriff Xxxxxxxx, LLP
The Washington Harbour
0000 X Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxx X. Pin
If to GSTN: GREYSTONE DIGITAL
TECHNOLOGY, Inc.
0000 Xxxxxx Xxxxxx Xxxx
Xxx Xxxxx, XX, 00000
Fax: (000) 000-0000
Attention: Chief Executive Officer
18.08 All controversies relating to the interpretation and/or enforcement of
this Agreement and the transactions contemplated herein shall be settled by
binding arbitration in accordance with the International Rules of Arbitration of
the American Arbitration Association in effect on the date the notice for
arbitration is given to the other Party or Parties. In the event of any conflict
between those rules and the provisions of this Section 18.08, the provisions of
this Section 18.08 shall govern. The Parties shall attempt to select a single
arbitrator, but if they are unable to agree within ten days from the date of an
arbitration demand served by any of the Parties, then each of the Parties shall
appoint one arbitrator and the arbitrators so chosen shall in turn choose an
additional arbitrator. If the arbitrators chosen by the Parties cannot agree on
the choice of the final arbitrator within a period of ten days after their
nomination, then the final arbitrator shall be
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appointed by the American Arbitration Association. Any arbitration proceedings
initiated hereunder shall be held in New York, New York or such other place as
the Parties may mutually agree. The arbitration shall take place in the English
language. No decision of the arbitrator(s) shall be subject to appeal, and
judgment on the award or decision rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. To assure predictability, any
arbitrators chosen by the Parties or otherwise pursuant to this section shall be
attorneys-at-law with experience in sophisticated commercial transactions. The
arbitrator(s) shall base the decision solely on the provisions of this
Agreement; provided, however, that to the extent that the subject matter for the
decision is not provided for in such provisions, the decision shall be based on
applicable principles of law and judicial precedent as established in the law of
the jurisdiction provided under Section 18.06, and, upon request of a Party,
will include in the award findings of facts and conclusions of law upon which
the award is based. The arbitrator(s) may grant such legal or equitable relief
as appropriate, including money damages, specific performance and injunctive
relief. Questions of whether the dispute is subject to arbitration shall also be
decided by the arbitrator(s). The final arbitration award shall be issued within
ninety (90) days after the arbitration is initiated. Subject to the award of the
arbitrator(s), each Party to the arbitration shall pay an equal share of the
fees and costs of the arbitration, except the arbitrator(s) shall have the power
to award all expenses (including attorneys fees and costs) to the prevailing
Party, as determined by the arbitrator(s). Each of the Parties waives any
defense of inconvenient forum to the maintenance of an action or proceeding
brought under this Section 18.08 and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Any Party may
make service on any other Party by sending or delivering a copy of the process
to the Party to be served at the address and in the manner provided for the
giving of notices in Section 18.07 above. Nothing in this Section 18.08,
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law. Each Party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law or at equity.
18.09 Except as specifically provided in this Agreement, GSTN and KIBOGA shall
jointly and severally bear and shall pay for each of the Parties' respective
costs and expenses (including reasonable legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby
(collectively "Expenses"). To that end, each of GSTN and KIBOGA hereby jointly
and severally covenants and agrees to reimburse each of the Parties' Expenses
within 5 Business Days from receipt of a notice requesting reimbursement of such
Expenses.
18.10 The Parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement.
18.11 This Agreement may be executed in any number of counterparts and by the
different Parties hereto on separate counterparts, each of which, when executed
and delivered, shall be effective for purposes of binding the Parties hereto,
but all of which shall together constitute one and the same instrument. Any
signature page delivered by a fax machine or telecopy machine shall be binding
to the same extent as an original signature page, with regard to any of the
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Transaction Documents or any amendment thereto. Any Party who delivers such a
signature page agrees to later deliver an original counterpart to any Party
which requests it.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, and for the consideration herein stated, the Parties
have executed this Agreement the day and year first above written.
/s/ Xxxx X. Xxxxxx /s/ Xxxxxxx Xxxxxxxx del Rio Arrangoiz
-------------------------------------- --------------------------------------
KIBOGA SYSTEMS, INC. PROYECCIONES Y VENTAS
By: Xxxx X. Xxxxxx ORGANIZADAS, S.A. DE C.V.
Title: President and CEO By: Xxxxxxx Xxxxxxxx del Rio Arrangoiz
Title: Chairman
/s/ Xxxxxxx Xxxxxxxx del Rio Arrangoiz /s/ Xxxxxxx Xxxxxxxx del Rio Xxxxxxx
-------------------------------------- --------------------------------------
Xxxxxxx Xxxxxxxx del Rio Arrangoiz Xxxxxxx Xxxxxxxx del Rio Xxxxxxx
/s/ Xxx X. Xxxxxxxx /s/ Xxxx X. Xxxxxx
-------------------------------------- --------------------------------------
GREYSTONE DIGITAL Xxxx X. Xxxxxx
TECHNOLOGY, INC.
By: Xxx X. Xxxxxxxx
Title: Chairman
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Exhibit A
FORM OF REGISTRATION RIGHTS AGREEMENT
Exhibit B
FORM OF VOTING PROXY
Exhibit C
FORM OF MERGER AGREEMENT
[BEING PREPARED BY KIBOGA'S COUNSEL]
Exhibit D
FORM OF ARRANGOIZ EMPLOYMENT AGREEMENT
Exhibit E
FORM OF REQUEJO EMPLOYMENT AGREEMENT
Exhibit F
FORM OF XXXXXX EMPLOYMENT AGREEMENT
Exhibit G
FORM OF INITIAL BUSINESS PLAN
Exhibit H
FORM OF SUBSIDIARIES ACQUISITION AGREEMENTS
[BEING PREPARED BY PROVO'S MEXICAN COUNSEL]
Exhibit I
FORM OF ESCROW AGREEMENT
Schedule 10.01(d)
INTELLECTUAL PROPERTY
Schedule 10.01(h)
CAPITALIZATION OF SUBSIDIARIES
Schedule 10.01(h)
PROVO ADDITIONAL LIABILITIES
Schedule 10.01(j)
SUBSIDIARIES ADDITIONAL LIABILITIES
Schedule 10.01(k)
RECENT EVENTS
Schedule 10.01(l)
ENCUMBRANCES
Schedule 10.01(m)
ACCOUNTS RECEIVABLE
Schedule 10.01(n)
PROVO LITIGATION
Schedule 10.01(p)
UNDISCLOSED LIABILITIES
Schedule 10.05(d)
GSTN CAPITALIZATION TABLE
Schedule 10.05(l)
GSTN LITIGATION
SBSF DRAFT 06/10/02
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June ,
--
2002, by and between GREYSTONE DIGITAL TECHNOLOGY, INC., a Delaware corporation
(the "Company"), and Xxxxxxx Xxxxxxxx del Rio Arrangoiz ("Arrangoiz") and
Xxxxxxx Xxxxxxxx del Rio Xxxxxxx ("Requejo" and together with Arrangoiz
"Sellers").
W I T N E S S E T H:
WHEREAS, Sellers, the Company and others have entered into that certain
Stock Purchase Agreement dated , 2002 (the "Purchase Agreement") pursuant
-----
to which, among other things, Sellers are receiving common stock of the Company,
par value $0.01 per share ("Common Stock");
WHEREAS, it is a condition of the Purchase Agreement that the Company grant
to Sellers registration rights with respect to the Common Stock; and
WHEREAS, the Company desires to grant to Sellers registration rights with
respect to the Common Stock.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
conditions contained herein and of other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 Definitions. The following terms shall have the meanings
ascribed to them below.
"Commission" means the United States Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Common Stock" has the meaning set forth in the recitals to this Agreement.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Company" has the meaning set forth in the preamble of this Agreement.
"Damages" has the meaning set forth in Section 4.1 hereof.
"Demand Registration" has the meaning set forth in Section 2.1 (a) hereof.
"Indemnified Party" has the meaning set forth in Section 4.3 hereof.
"Indemnifying Party" has the meaning set forth in Section 4.3 hereof.
"Inspectors" has the meaning set forth in Section 3.1(k) hereof.
"Purchase Agreement" has the meaning set forth in the recitals of this
Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"Notices" has the meaning set forth in Section 6.7 hereof.
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union
or association.
"Piggy-Back Registration" has the meaning set forth in Section 2.2 hereof.
"Registrable Securities" means the shares of Common Stock now owned or
hereafter acquired by Sellers, until (i) a Registration Statement with respect
to the sale of such shares of Common Stock has been declared effective by the
Commission and such shares of Common Stock have been disposed of pursuant to
such effective Registration Statement, or (ii) such shares of Common Stock are
sold under circumstances in which all of the applicable conditions of Rule 144
(or any similar provisions then in force) under the Securities Act are met, or
(iii) such shares of Common Stock have been otherwise transferred and the
Company has delivered a new certificate or other evidence of ownership for such
Common Stock not bearing a restrictive legend and not subject to any stop order
and such Common Stock may be publicly resold by the person receiving such
certificate without complying with the registration requirements of the
Securities Act, or (iv) such shares of Common Stock shall have ceased to he
outstanding.
"Registration Expenses" has the meaning set forth in Section 3.2 hereof.
"Registration Statement" means any registration statement of the Company
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such registration statement.
"Securities Act" means the United States Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal in an underwritten offering and not as part of such
dealer's market-making activities.
2
ARTICLE II.
REGISTRATION RIGHTS
SECTION 2.1 Demand Registration.
(a) Request for Registration by Sellers. At any time and from time to
time after the date hereof, Sellers may make written requests on the Company for
the registration of the offer and sale of all or part of the Registrable
Securities under the Securities Act (a "Demand Registration"). Subject to
Section 2.1(b), the Company shall have no obligation to file more than three (3)
registration statements under the Securities Act with respect to a Demand
Registration; provided, however, if the Registrable Securities may be registered
on Form S-3 (or any successor form with similar "short form" disclosure
requirements), Sellers shall have unlimited rights to request registration of
its Registrable Securities on Form S-3, or such successor form. Any such request
will specify the number of shares of Registrable Securities proposed to be sold
and will also specify the intended method of disposition thereof. The Company
shall use its best efforts to effect the Demand Registration within thirty (30)
days after the giving of such written notice.
(b) Effective Registration. A registration will not be deemed to have
been effected pursuant to Section 2.1(a) unless the Registration Statement
relating thereto has been declared effective by the Commission and the Company
has complied in all material respects with its obligations under this Agreement
and any underwriting or other distribution agreement relating to such
distribution with respect thereto and in the case of an underwritten offering,
all the Registrable Securities offered have been purchased by the underwriters;
provided that if, after the Registration Statement has become effective, the
offering and/or sale of Registrable Securities pursuant to such Registration
Statement is or becomes the subject of any stop order, injunction or other order
or requirement of the Commission or any other governmental or administrative
agency, or if any court or other governmental or quasi-governmental agency
prevents or otherwise limits the offer and/or sale of the Registrable Securities
pursuant to the Registration Statement, such registration will be deemed not to
have been effected.
(c) Selection of Underwriter. If Sellers so elect, the offering of
such Registrable Securities pursuant to such Demand Registration shall be in the
form of an underwritten offering. Sellers shall select one or more nationally
recognized firms of investment bankers reasonably acceptable to the Company to
act as the lead managing Underwriter or Underwriters in connection with such
offering and shall select any additional investment bankers and managers to be
used in connection with the offering.
SECTION 2.2 Piggy-Back Registration.
(a) If at any time the Company proposes to register any of its
securities under the Securities Act and the registration form to be used may be
used for registration of the Registrable Securities, then the Company shall give
prompt written notice of such proposed
3
filing to Sellers as soon as practicable (but in no event less than thirty (30)
days before the anticipated filing date), and such notice shall offer Sellers
the opportunity to register such number of Registrable Securities as Sellers may
request (which request shall specify the Registrable Securities intended to be
disposed of by Sellers and the intended method of distribution thereof) (a
"Piggy-Back Registration"). The Company shall use its best efforts to cause the
managing Underwriter or Underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of the Company or any other security holder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. Sellers shall have
the right to withdraw its request for inclusion of its Registrable Securities in
any Registration Statement pursuant to this Section 2.2 by giving written notice
to the Company of their request to withdraw, provided that, except as otherwise
set forth in Section 2.3(c), in the event of such withdrawal, Sellers shall be
responsible for all fees and expenses (including fees and expenses of counsel)
incurred by Sellers prior to such withdrawal. The Company may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective.
(b) No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve the Company of its
obligation to effect a registration upon the request of Sellers pursuant to
Section 2.1, and no failure to effect a registration under this Section 2.2 and
to complete the sale of Registrable Securities in connection therewith shall
relieve the Company of any other obligation under this Agreement (including,
without limitation, the Company's obligations under Sections 3.2 and 4.1).
SECTION 2.3 Reduction of Offering.
(a) Demand Registration. Subject to Sellers' prior written consent,
the Company may include in a Demand Registration pursuant to Section 2.1
securities of the same class as the Registrable Securities for the account of
the Company and any other Persons who hold securities of the same class as the
Registrable Securities on the same terms and conditions as the Registrable
Securities to be included therein.
(b) Reduction of Offering. In the event that the managing Underwriter
of any underwritten offering described in Section 2.1 or Section 2.2 shall
determine in good faith that a limitation of the total number of shares to be
included in the offering is required or there will be an adverse effect on the
offering price, timing or distribution of the shares to be distributed, then the
number of shares to be included in such registration shall be reduced or limited
to the extent necessary to reduce the total number of shares requested to be
included in such offering to the number of shares, if any, recommended by such
managing Underwriter in the following order of priority:
4
(i) If the offering is a Demand Registration, (A) first, the
number of shares to be offered by all Persons other than Sellers to the extent
necessary to reduce the total number of shares as recommended by such managing
Underwriter, pro rata in proportion to the respective total number of shares
owned by such Persons, (B) second, if further reduction or limitation is
required, the number of shares to be offered by the Company for its own account
shall be reduced or limited, and (C) third, if further reduction or limitation
is required, the number of shares to be offered by Sellers.
(ii) If the offering is a Piggy-Back Registration, (A) first, the
number of shares to be offered by the Persons other than Sellers holding
securities who are using a piggy-back registration right, pro rata in proportion
to the respective total number of shares owned by such Persons; (B) second, if
further reduction or limitation is required, the number of shares to be offered
by Sellers; (C) third, if further reduction or limitation is required, the
number of shares to be offered by the Persons holding securities who demanded
such registration pro rata in proportion to the respective total number of
shares owned by such Persons, and (D) fourth, if further reduction or limitation
is required, the number of shares to be offered by the Company for its own
account shall be reduced or limited.
(c) If, as a result of the proration provisions of this Section 2.3,
Sellers shall not be entitled to include all Registrable Securities in a Demand
Registration or Piggy-Back Registration that Sellers has requested to be
included, Sellers may elect to withdraw its request to include Registrable
Securities in such registration; provided that in the event of such withdrawal,
the Company shall be responsible for all fees and expenses (including fees and
expenses of counsel) incurred by Sellers prior to such withdrawal.
SECTION 2.4 Subsequent Registration Rights. From and after the date of this
Agreement, the Company shall not, without the prior written consent of Sellers,
enter into any other agreement with any holder or prospective holder of any
securities of the Company which would allow such holder or prospective holder to
include such securities in any registration filed under Section 2.1 or 2.2
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of its securities will not reduce the amount of Registrable
Securities of Sellers which are included. [As of the date hereof, except as set
forth in this Agreement, the Company has not entered into any agreement with any
Person with respect to registration rights.]
ARTICLE III.
REGISTRATION PROCEDURES
SECTION 3.1 Filings; Information. Whenever the Company is required to
effect or cause the registration of Registrable Securities pursuant to Section
2.1 or Section 2.2 , the Company will use its best efforts to effect the
registration and the sale of such Registrable
5
Securities in accordance with the intended method of disposition thereof as
quickly as practicable, and in connection with any such request:
(a) The Company promptly will prepare and file with the Commission a
Registration Statement with respect to the offer and sale of such securities and
use its best efforts to cause such Registration Statement to become and remain
effective until the completion of the distribution contemplated thereby;
provided, however, the Company shall not be required to keep such Registration
Statement effective for more than 180 days (or such shorter period which will
terminate when all Registrable Securities covered by such Registration Statement
have been sold, but not prior to the expiration of the applicable period
referred to in Section 4(3) of the Securities Act and Rule 174 thereunder, if
applicable).
(b) The Company promptly will prepare and file with the Commission
such amendments and post-effective amendments to the Registration Statement as
may be necessary to keep such Registration Statement effective for as long as
such registration is required to remain effective pursuant to the terms hereof;
cause the prospectus to be supplemented by any required prospectus supplement,
and, as so supplemented, to be filed pursuant to Rule 424 under the Securities
Act; and comply with the provisions of the Securities Act applicable to it with
respect to the disposition of all Registrable Securities covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition by Sellers set forth in such Registration
Statement or supplement to the prospectus.
(c) The Company, at least ten (10) days prior to filing a Registration
Statement or at least five (5) days prior to filing a prospectus or any
amendment or supplement to such Registration Statement or prospectus, will
furnish to (i) Sellers, (ii) counsel representing Sellers, (iii) each
Underwriter, if any, of the Registrable Securities covered by such Registration
Statement copies of such Registration Statement as proposed to be filed,
together with exhibits thereto, which documents will be subject to review and
approval by each of the foregoing within ten (10) days after delivery (except
that such review and approval of any prospectus or any amendment or supplement
to such Registration Statement or prospectus must be within five (5) days after
delivery), and thereafter, furnish to Sellers, counsel to Sellers and
Underwriters, if any, for their review and comment such number of copies of
such Registration Statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in such Registration Statement (including each
preliminary prospectus) and such other documents or information as Sellers,
counsel to Sellers or the Underwriters may reasonably request in order to
facilitate the disposition of the Registrable Securities; provided, however,
that notwithstanding the foregoing, if the Company intends to file any
prospectus, prospectus supplement or prospectus sticker which does not make any
material changes in the documents already filed (including, without limitation,
any prospectus under Rule 430A or 424(b)), then counsel for Sellers will be
afforded such opportunity to review such documents prior to filing consistent
with the time constraints involved in filing such document, but in any event no
less than three (3) days.
6
(d) The Company shall furnish to Sellers and to each Underwriter, if
any, such number of copies of the Registration Statement (including each
preliminary prospectus) as such Persons may reasonably request in order to
facilitate the intended disposition of the Registrable Securities covered by
such Registration Statement.
(e) If the offering is an underwritten offering, at the request of
Sellers, the Company shall use its reasonable efforts to furnish on the date
that Registrable Securities are delivered to the Underwriters for sale pursuant
to such Registration Statement: (i) an opinion dated such date of counsel
representing the Company for the purposes of such registration, addressed to the
Underwriters and to Sellers, stating that (A) such Registration Statement has
become effective under the Securities Act, (B) to the best knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (C) the Registration Statement complies
as to form in all material respects with the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder, and such
counsel has no reason to believe that the Registration Statement or any
amendment thereto (including any documents incorporated in the prospectus), as
of its respective effective date (or as of its date of filing) contains any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
(except that such counsel need not express any opinion as to financial
statements contained therein) and (D) to such other effects as reasonably may be
requested by counsel for the Underwriters or by Sellers or its counsel,
considering customary comparable underwritten transactions and (ii) on such date
and as of the date of the underwriting agreement, a letter dated such date from
the independent public accountants or chartered accountants retained by the
Company, addressed to the Underwriters and to Sellers, stating that they are
independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the Registration Statement, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five (5) Business
Days prior to the date of such letter) with respect to such registration as such
Underwriters reasonably may request considering customary comparable
underwritten transactions.
(f) The Company promptly will notify Sellers of (and in any event
within twenty-four (24) hours of the receipt of) any stop order issued or
threatened by the Commission and take all reasonable actions required to prevent
the entry of such stop order or to remove it at the earliest possible moment if
entered.
(g) On or prior to the date on which the Registration Statement is
declared effective by the Commission, the Company will use all reasonable
efforts to (i) register or qualify the Registrable Securities under such other
securities or blue sky laws of such other jurisdictions as Sellers reasonably
(in light of Sellers' intended plan of distribution) requests, and
7
(ii) file documents required to register such Registrable Securities with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of the Company and do any and all other
acts and things that may be reasonably necessary or advisable to enable Sellers
to consummate the disposition of the Registrable Securities owned by Sellers;
provided that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (g), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(h) The Company will notify Sellers, counsel to Sellers and any
Underwriter promptly (and in any event within 24 hours) and (if requested by any
such Person) confirm such notice in writing, (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission or any other
federal or state governmental authority for amendments or supplements to a
Registration Statement or prospectus or for additional information to be
included in any Registration Statement or prospectus or otherwise, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of a
Registration Statement or the initiation or threatening of any proceedings for
that purpose, (iv) of the issuance by any state securities commission or other
regulatory authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Securities under state securities or
"blue sky" laws or the initiation of any proceedings for that purpose, and (v)
of the happening of any event which makes any statement made in a Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated by reference therein untrue or which requires the making of any
changes in such Registration Statement, prospectus or documents so that they
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
in the Registration Statement and prospectus not misleading in light of the
circumstances in which they were made; and, as promptly as practicable
thereafter, prepare and file with the Commission and furnish a supplement or
amendment to such prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Securities, such prospectus will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(i) If requested by the managing Underwriter or Underwriters, Sellers
or Sellers' counsel, the Company will, unless otherwise advised by counsel,
promptly incorporate in a prospectus supplement or post-effective amendment such
information as the managing Underwriter or Underwriters requests, or Sellers'
counsel requests, to be included therein, including, without limitation, with
respect to the Registrable Securities being sold by Sellers to such Underwriter
or Underwriters, the purchase price being paid therefor by such Underwriter or
Underwriters and with respect to any other terms of the underwritten offering of
the Registrable
8
Securities to be sold in such offering, and promptly make all required filings
of such prospectus supplement or post-effective amendment.
(j) The Company will enter into customary agreements reasonably
satisfactory to the Company (including, if applicable, an underwriting agreement
in customary form and which is reasonably satisfactory to the Company) and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities (Sellers, at its option may,
require that any or all of the representations, warranties and covenants of the
Company to or for the benefit of such Underwriters also be made to and for the
benefit of Sellers).
(k) The Company will make available to Sellers (and will deliver to
their counsel) and each Underwriter, if any, subject to restrictions imposed by
the United States federal government or any agency or instrumentality thereof,
copies of all correspondence between the Commission and the Company, its counsel
or auditors and will also make available for inspection at reasonable times at
the Company's offices by Sellers, any Underwriter participating in any
disposition pursuant to such Registration Statement and any attorney, accountant
or other professional retained by Sellers or any Underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers
and employees to supply all information reasonably requested by any Inspectors
in connection with such registration statement.
(l) In connection with an underwritten offering, the Company will
participate, to the extent reasonably requested by the managing Underwriter or
Underwriters for the offering or Sellers, in customary efforts to sell the
securities under the offering, including, without limitation, participating in
"road shows"; provided that the Company shall not be obligated to participate in
more than two such selling efforts in any 12-month period.
(m) The Company, during the period when the prospectus is required to
be delivered under the Securities Act, promptly will file all documents required
to be filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act.
(n) The Company will use all reasonable efforts to obtain a cold
comfort letter from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by cold comfort
letters, as Sellers may request.
(o) The Company shall cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(p) The Company shall provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such Registration Statement and a
CUSIP number
9
for all such Registrable Securities, in each case not later than the effective
date of such registration.
(q) The Company shall otherwise comply with all applicable rules and
regulations of the Commission.
(r) The Company may require Sellers to promptly furnish in writing to
the Company such information regarding the distribution of the Registrable
Securities as the Company may from time to time reasonably request and such
other information as may be legally required in connection with such
registration including, without limitation, all such information as may be
requested by the Commission or the National Association of Securities Dealers,
Inc.
(s) Sellers agree that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3.1(h) hereof,
Sellers will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until Sellers' receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.1(h) hereof, and, if so directed by the Company,
Sellers will deliver to the Company all copies, other than permanent file copies
then in Sellers' possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event the
Company shall give such notice, the Company shall extend the period during which
such Registration Statement shall be maintained effective (including the period
referred to in Section 3.1(a) hereof) by the number of days during the period
from and including the date of the giving of notice pursuant to Section 3.1 (h)
hereof to the date when the Company shall make available to Sellers covered by
such Registration Statement a prospectus supplemented or amended to conform with
the requirements of Section 3.1(h) hereof.
SECTION 3.2 Registration Expenses. In connection with the Demand
Registrations pursuant to Section 2.1 hereof and any Piggy-Back Registrations
under Section 2.2 hereof, the Company shall pay the following registration
expenses incurred in connection with the registration thereunder (the
"Registration Expenses"): (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), (iii) processing, duplicating and printing
expenses, (iv) the Company's internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), (v) the fees and expenses incurred in connection with the
listing of the Registrable Securities, (vi) fees and disbursements of counsel
for the Company and fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any comfort
letters or costs associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters requested but not the cost of
any audit other than a year end audit), (vii) the fees and expenses of any
special experts retained by the Company in connection with such registration,
(viii) reasonable fees and
10
expenses of one firm of counsel for Sellers and (ix) any fees and disbursements
of underwriters customarily paid by issuers or sellers of securities. The
Company shall have no obligation to pay any other underwriting fees, discounts
or commissions attributable to the sale of Registrable Securities; such costs
shall be borne by Sellers.
ARTICLE IV.
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1 Indemnification by the Company. The Company shall, to the full
extent permitted by law, indemnify and hold harmless Sellers from and against
any loss, claim, damage, liability, reasonable attorneys' fees, cost or expense
and costs and expenses of investigating and defending any such claim, joint or
several, and any action in respect thereof (collectively, the "Damages") to
which Sellers may become subject under the Securities Act or otherwise, insofar
as such Damages (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or prospectus relating to the Registrable Securities or any amendment
or supplement thereto, or arises out of, or are based upon, any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or any violation by
the Company of any federal or state securities laws or any rule or regulation
thereof, except insofar as the same are based upon information furnished in
writing to the Company by Sellers expressly for use therein, and shall reimburse
Sellers for any legal and other expenses reasonably incurred by Sellers in
investigating or defending or preparing to defend against any such Damages or
proceedings; provided, however, that the Company shall not be liable to Sellers
to the extent that any such Damages (or action or proceeding in respect thereof)
arise out of or are based upon an untrue statement or omission made in any
preliminary prospectus if (i) Sellers failed to send or deliver a copy of the
final prospectus with or prior to the delivery of written confirmation of the
sale by Sellers to the Person asserting the claim from which such Damages arise,
and (ii) the final prospectus would have corrected such untrue statement or such
omission; provided further, that the Company shall not be liable to Sellers in
any such case to the extent that any such Damages arise out of or are based upon
an untrue statement or omission in any prospectus if (x) such untrue statement
or omission is corrected in an amendment or supplement to such prospectus, and
(y) having previously been furnished by or on behalf of the Company with copies
of such prospectus as so amended or supplemented, Sellers thereafter fails to
deliver such prospectus as so amended or supplemented prior to or concurrently
with the sale of a Registrable Security to the Person asserting the claim from
which such Damages arise.
SECTION 4.2 Indemnification by Sellers. Sellers shall, to the full extent
permitted by law, indemnify and hold harmless the Company, its officers,
directors, employees and agents and each Person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, together with the partners, officers, directors, employees and
agents of such controlling Person, to the same extent as the foregoing indemnity
11
from the Company to Sellers, but only with reference to information related to
Sellers, or its plan of distribution, furnished in writing by Sellers expressly
for use in any Registration Statement or prospectus relating to the Registrable
Securities, or any amendment or supplement thereto, or any preliminary
prospectus and the aggregate amount which may be recovered from Sellers pursuant
to the indemnification provided for in this Section 4.2 in connection with any
registration and sale of Registrable Securities shall be limited to the total
proceeds received by Sellers from the sale of such Registrable Securities. In
case any action or proceeding shall be brought against the Company or its
officers, directors, employees or agents or any such controlling Person or its
officers, directors, employees or agents, in respect of which indemnity may be
sought against Sellers, Sellers shall have the rights and duties given to the
Company, and the Company or its officers, directors, employees or agents, or
such controlling Person, or its officers, directors, employees or agents, shall
have the rights and duties given to Sellers, by the preceding paragraph.
SECTION 4.3 Conduct of Indemnification Proceedings. Promptly after receipt
by any person in respect of which indemnity may be sought pursuant to Section
4.1 or 4.2 (an "Indemnified Party") of notice of any claim or the commencement
of any action, the Indemnified Party shall, if a claim in respect thereof is to
be made against the Person against whom such indemnity may be sought (an
"Indemnifying Party"), notify the Indemnifying Party in writing of the claim or
the commencement of such action; provided that the failure to notify the
Indemnifying Party shall not relieve it from any liability which it may have to
an Indemnified Party except to the extent of any actual prejudice resulting
therefrom. If any such claim or action shall be brought against an Indemnified
Party, and it shall notify the Indemnifying Party thereof, the Indemnifying
Party shall be entitled to participate therein, and, to the extent that it
wishes, jointly with any other similarly notified Indemnifying Party, to assume
the defense thereof with counsel reasonably satisfactory to the Indemnified
Party. After notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such claim or action, the Indemnifying Party
shall not be liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation; provided that the
Indemnified Party shall have the right to employ separate counsel to represent
the Indemnified Party and its controlling Persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Indemnified Party against the Indemnifying Party, but the fees and
expenses of such counsel shall be for the account of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
the Company and such Indemnified Party, representation of both parties by the
same counsel would be inappropriate due to actual or potential conflicts of
interest between them, it being understood, however, that the Indemnifying Party
shall not, in connection with any one such claim or action or separate but
substantially similar or related claims or actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all Indemnified Parties, or for fees
and expenses that
12
are not reasonable. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any claim or pending
or threatened proceeding in respect of which the Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such claim or
proceeding. Whether or not the defense of any claim or action is assumed by the
Indemnifying Party, such Indemnifying Party will not be subject to any liability
for any settlement made without its consent, which consent will not be
unreasonably withheld.
SECTION 4.4 Contribution. If the indemnification provided for in this
Article 4 is unavailable to the Indemnified Parties in respect of any Damages
referred to herein, then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages as between the Company on the one
hand and Sellers on the other, in such proportion as is appropriate to reflect
the relative fault of the Company and Sellers in connection with such statements
or omissions, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and Sellers on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
SECTION 4.5 The Company and Sellers agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the Damages
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 4.4, Sellers shall not be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities of
Sellers were offered to the public (less underwriting discounts and commissions)
exceeds the amount of any damages which Sellers has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
13
ARTICLE V.
INFORMATION AND OTHER OBLIGATIONS OF Sellers
SECTION 5.1 Provision of Information. As a condition to exercising the
registration rights provided for herein, Sellers shall furnish to the Company
such information regarding Sellers and the distribution proposed by Sellers as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification, or compliance
referred to in this Agreement.
SECTION 5.2 Underwriters. Sellers, with respect to any Registrable
Securities included in any registration, shall cooperate in good faith with the
Company and the underwriters, if any, in connection with such registration.
SECTION 5.3 Stop Orders. Sellers, with respect to any Registrable
Securities included in any registration, shall make no further sales or other
dispositions, or offers therefor, of such shares under such Registration
Statement if, during the effectiveness of such Registration Statement, an
intervening event should occur which, in the opinion of counsel to the Company,
makes the prospectus included in such Registration Statement no longer comply
with the Securities Act until such time as Sellers has received from the Company
copies of a new, amended or supplemented prospectus complying with the
Securities Act.
ARTICLE VI.
MISCELLANEOUS
SECTION 6.1 Participation in Underwritten Registrations. Sellers shall not
be required to make any representations or warranties to or agreements with the
Company or the Underwriters other than representations, warranties or agreements
regarding Sellers and its ownership of the securities being registered on their
behalf and Sellers' intended method of distribution and any other representation
required by law.
SECTION 6.2 Rule 144 and 144A. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the Securities
Exchange Act of 1934, as amended and that it will take such further action as
Sellers may reasonably request, all to the extent required from time to time to
enable Sellers to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
or Rule 144A under the Securities Act, as such Rules may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the Commission.
Upon the request of Sellers, the Company will deliver to Sellers a written
statement as to whether it has complied with such requirements.
SECTION 6.3 Suspension of Obligation to File. Notwithstanding the
provisions of Section 3.1(a), the Company's obligations to file a Registration
Statement, or cause such Registration Statement to become and remain effective,
shall be suspended for a period not to
14
exceed 90 days if there exists at the time material non-public information
relating to the Company that, in the reasonable opinion of the Company, should
not be disclosed.
SECTION 6.4 Amendment and Modification. This Agreement may be amended,
modified and supplemented, and any of the provisions contained herein may be
waived, only by a written instrument signed by the Company and Sellers. The
failure of any party to enforce any of the provisions of this Agreement shall in
no way be construed as a waiver of such provisions and shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
SECTION 6.5 Binding Effect; Entire Agreement. This Agreement (including the
exhibits, schedules and appendices attached hereto), including the documents
referred to herein, embodies the entire agreement and understanding of the
Parties hereto and supersedes all prior agreements and understandings of the
Parties hereto relating to the subject matter herein contained.
SECTION 6.6 Severability. Any holding that a provision of this Agreement is
unenforceable, in whole or in part, will not affect the validity of the other
provisions of this Agreement.
SECTION 6.7 Notices. All notices under this Agreement, including reports,
shall be in writing in the English language addressed to the appropriate Party
at the address set forth by its name on this Agreement, and shall be deemed
given when received by the recipient and shall be delivered directly by hand to
authorized personnel or by registered mail, return receipt requested, telex
authenticated facsimile message or electronic mail, confirmed by registered
mail.
All notices shall be addressed:
If to Sellers: Arrangoiz and Xxxxxxx.
Xxxxxxxx Xxx Xx. 00
Xxx. Xxxx Xxx
00000 Xxxxxx, D.F.
Fax. (000) 000-0000
If to the Company: GREYSTONE DIGITAL
TECHNOLOGY, Inc.
0000 Xxxxxx Xxxxxx Xxxx
Xxx Xxxxx, XX, 00000
Fax: (000) 000-0000
Attention: Chief Executive Officer
15
SECTION 6.8 GOVERNING LAW. This Agreement shall be construed, interpreted,
governed, and enforced by and under the laws of the State of New York, without
giving effect to the conflicts of law principles thereof.
SECTION 6.9 Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect their meaning, construction or effect.
SECTION 6.10 Counterparts. This Agreement may be executed in any number of
counterparts and by the different Parties hereto on separate counterparts, each
of which, when executed and delivered, shall be effective for purposes of
binding the Parties hereto, but all of which shall together constitute one and
the same instrument. Any signature page delivered by a fax machine or telecopy
machine shall be binding to the same extent as an original signature page. Any
Party who delivers such a signature page agrees to later deliver an original
counterpart to any Party which requests it.
SECTION 6.11 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Parties named in this Agreement and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests or obligations hereunder without the
prior written approval of each of the other parties, except that each of Sellers
shall be entitled to assign or transfer their rights hereunder to their
respective beneficiaries or as part as an estate planning trust or mechanism, by
giving prior written notice to the Company.
SECTION 6.12 Remedies. In the event of a breach or a threatened breach by
any Party to this Agreement of its obligations under this Agreement, any Party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The Parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the Parties that the remedy at law, inducing
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
SECTION 6.13 Interpretation. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
/s/ Xxxxxxx Xxxxxxxx del Rio Arrangoiz /s/ Xxxxxxx Xxxxxxxx del Rio Xxxxxxx
-------------------------------------- ------------------------------------
Xxxxxxx Xxxxxxxx del Rio Arrangoiz Xxxxxxx Xxxxxxxx del Rio Xxxxxxx
/s/ Xxx X. Xxxxxxxx
----------------------------------
GREYSTONE DIGITAL TECHNOLOGY, INC.
Name: Xxx X. Xxxxxxxx
Title: Chairman/CEO
17
