STOCK PURCHASE AGREEMENT
by and between
Media and Xxxxxxxxxxxxx.xxx, Inc.,
a Nevada corporation (the "Company"),
and
Winsonic Holdings Ltd.,
a California corporation (the "Purchaser"),
dated as of
July 18, 2003
Table of Contents
Item Page
---- ----
1. Sale and Purchase of Purchased Securities......................................................................1
1.1. Agreement to Sell and Purchase Purchased Securities...................................................1
1.2. Purchase Price........................................................................................1
1.3. Closing...............................................................................................1
1.4. Closing Conditions....................................................................................1
1.5. Escrow................................................................................................3
2. Representations and Warranties of the Company..................................................................4
2.1. Organization and Authority............................................................................4
2.2. Corporate Power; Binding Effect.......................................................................4
2.3. Foreign Qualification.................................................................................5
2.4. Subsidiaries..........................................................................................5
2.5. Capitalization........................................................................................5
2.6. Lawful Issuance.......................................................................................6
2.7. SEC Documents.........................................................................................6
2.8. Absence of Certain Changes............................................................................6
2.9. Properties, Leases, Etc...............................................................................8
2.10. Indebtedness..........................................................................................9
2.11. Absence of Undisclosed Liabilities....................................................................9
2.12. Tax Matters...........................................................................................9
2.13. Litigation, Etc......................................................................................10
2.14. Safety, Zoning, and Environmental Matters............................................................10
2.15. Labor Relations......................................................................................11
2.16. Material Contracts...................................................................................11
2.17. Employee Benefit Plans...............................................................................13
2.18. Potential Conflicts of Interest......................................................................14
2.19. Proprietary Information..............................................................................14
2.20. Insurance............................................................................................16
2.21. Governmental and Other Third-Party Consents..........................................................16
2.22. Employment of Officers, Employees....................................................................16
2.23. Brokers..............................................................................................16
2.24. Compliance with Other Instruments, Laws, Etc.........................................................16
2.25. Compliance with Securities Laws......................................................................17
2.26. Foreign Corrupt Practices Act........................................................................17
2.27. Disclosure...........................................................................................17
3. Representations and Warranties of the Purchaser...............................................................17
3.1. Investment Representations...........................................................................17
3.2. Organization and Authority...........................................................................18
3.3. Corporate Power; Binding Effect......................................................................18
3.4. Listed Contracts.....................................................................................18
3.5. Litigation, Etc......................................................................................19
3.6. Potential Conflicts of Interest......................................................................19
3.7. Brokers..............................................................................................19
3.8. Compliance with Other Instruments, Laws, Etc.........................................................19
3.9. Foreign Corrupt Practices Act........................................................................20
3.10. Disclosure...........................................................................................20
4. Covenants.....................................................................................................20
4.1. Voting Agreement.....................................................................................20
4.2. Non-competition......................................................................................21
5. Restrictions on Transfer......................................................................................22
5.1. General Restriction..................................................................................22
5.2. Notice of Transfer...................................................................................22
5.3. Restrictive Legends..................................................................................22
5.4. Termination of Restrictions..........................................................................22
6. Expenses; Indemnification.....................................................................................22
7. Definitions...................................................................................................23
7.1. Certain Defined Terms................................................................................23
7.2. Terms Defined Elsewhere..............................................................................26
8. Miscellaneous Provisions......................................................................................27
8.1. Amendments, Consents, Waivers, Etc...................................................................27
8.2. Notices..............................................................................................27
8.3. Counterparts.........................................................................................28
8.4. Captions.............................................................................................28
8.5. Binding Effect and Benefits..........................................................................28
8.6. Assignment...........................................................................................28
8.7. Construction.........................................................................................29
8.8. Further Assurances...................................................................................29
8.9. Severability.........................................................................................29
8.10. Equitable Relief.....................................................................................29
8.11. Entire Agreement.....................................................................................29
8.12. Governing Law........................................................................................29
SIGNATURES........................................................................................................1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of July 18,
2003, is by and between (i) Media and Xxxxxxxxxxxxx.xxx, Inc., a Nevada
corporation (the "Company"), and (ii) Winsonic Holdings Ltd., a California
corporation (the "Purchaser").
Capitalized terms used and not otherwise defined upon first usage
herein are defined in Section 7.1 hereof.
1. Sale and Purchase of Purchased Securities.
1.1. Agreement to Sell and Purchase Purchased Securities. The
Company hereby agrees to issue and sell to Purchaser, and Purchaser agrees to
purchase, subject to all of the terms and conditions hereof and in reliance on
the representations and warranties set forth or referred to herein, thirty
million (30,000,000) shares of the Company's Common Stock, such number being
equal to a fully-diluted 60% of the total number of shares issued and
outstanding after giving effect to such issuance and to the potential exercise
of all outstanding options and warrants to acquire shares of the Company's
Common Stock, and the potential conversion of all outstanding shares of the
Company's Preferred Stock (the "Purchased Securities").
1.2. Purchase Price.
The purchase price (the "Purchase Price") for the Purchased Securities
will be payable by transfer and assignment of the certain contracts, to be
mutually agreed upon by the Company and Purchaser, as described upon Exhibit A
annexed hereto (the "Listed Contracts"). The deemed purchase price shall be $.10
per share, which is approximately equal in amount to one hundred fifty (150%)
percent of the fair market value of Seller's common stock of seven cents ($0.07)
per share, on or about the date, June __, 2003, negotiation of this Agreement
commenced. The aggregate purchase price of $3 million shall be equal to $.10 per
share multiplied by the 30 million shares of common stock issued to the
Purchaser at the Closing (as defined in Section 1.3).
1.3. Closing.
The closing of the purchase and sale of the Purchased Securities (the
"Closing") will take place on or before July 31, 2003 at the offices of Snow
Xxxxxx Xxxxxx P.C., 605 Third Avenue, 25th Floor, New York, New York, or at such
other time, date, and place as the Company and the Purchaser may agree following
the satisfaction of the last to occur of the conditions precedent to Closing set
forth in Section 1.4 below (the date on which the Closing actually occurs, the
"Closing Date").
1.4. Closing Conditions. The obligation of the Purchaser to
purchase the Purchased Securities at Closing and of the Company to sell the
Purchased Securities at Closing, is subject to the fulfillment, or the waiver by
the applicable party, of each of the following conditions on or before the
Closing:
(a) The Company will deliver to Purchaser one or more
stock certificates representing the Purchased
Securities to be sold to and purchased by the
Purchaser pursuant to this Agreement, free and clear
of all Liens, which shall be registered in such
Purchaser's name in the Company's records.
(b) Purchaser will pay for the Purchased Securities
delivering to the Company a Xxxx of Assignment, in
substantially the form annexed hereto as Exhibit B,
transferring and assigning the Listed Contracts to
the Company. Purchaser will deliver to the Company
copies of each of the Listed Contracts on or before
the Closing.
(c) The Company will deliver to the Purchaser each of the
following documents:
(i) The Registration Rights Agreement, in
substantially the form annexed hereto as
Exhibit C, duly executed by the Company and
the Purchaser and any of its assignees who
is to have any registration rights with
respect to the Company's securities.
(ii) With respect to the Company, (A) a copy of
its charter documents, certified as of a
date not more than five business days before
the Closing Date, by the Secretary of State
of the State of Nevada, (B) a certificate of
the Secretary of State of the State of
Nevada, dated as of a date not more than
five business days before the Closing Date,
with respect to the legal existence, charter
documents on file with the Secretary of
State, and good standing of the Company in
the State of Nevada, and (C) a certificate
of the Secretary of State or equivalent
official of each other jurisdiction in which
the Company's activities or ownership or
leasing of property require it to qualify to
do business as a foreign corporation, other
than jurisdictions in which the failure to
so qualify or be in good standing would not,
either in any case or in the aggregate, have
a Material Adverse Effect, dated not more
than five business days before the Closing
Date, with respect to such qualification and
the good standing of the Company in such
jurisdiction.
(iii) With respect to each of the Company's
Subsidiaries which is a limited liability
company, (A) a certificate of the Secretary
of State of such Subsidiary's state of
formation, dated as of a date not more than
fifteen business days before the Closing
Date, with respect to the legal existence,
charter documents on file with the Secretary
of State, and good standing of such
Subsidiary in such state, and (B) a
certificate of the Secretary of State or
equivalent official of each other
jurisdiction in which such Subsidiary's
activities or ownership or leasing of
property require it to qualify to do
business as a foreign limited liability
company, other than jurisdictions in which
the failure to so qualify or be in good
standing would not, either in any case or in
the aggregate, have a Material Adverse
Effect, dated not more than five business
days before the Closing Date, with respect
to such qualification and the good standing
of the Company in such jurisdiction.
(iv) With respect to the Company, a certificate
of its secretary, dated the Closing Date,
certifying (A) the absence of any amendments
to its charter documents (or proceedings
therefor) since the date of the certificate
referred to in Section 1.4(c)(ii)(A) above,
(B) the attached copy of its by-laws (the
"By-laws") are complete and correct, (C) the
attached resolutions of its board of
directors with respect to the transactions
hereby contemplated or otherwise to be
effected at the Closing, and (D) the
incumbency of its officers and directors.
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(v) With respect to each of the Company's
Subsidiaries which is a limited liability
company, a certificate of its managing
member, dated the Closing Date, certifying
(A) the absence of any amendments to its
certificate of organization or formation (or
proceedings therefor) since the date of the
certificate referred to in Section
1.4(c)(iii)(A) above, and (B) the attached
copy of its operating agreement is complete
and correct.
(vi) Evidence satisfactory to the Purchaser that
(i) each member of the Company's senior
management and any other key employee, as
determined by the Purchaser, has executed
and delivered to the Company a general
release from employment agreement and/or a
non-solicitation agreement, in form and
substance satisfactory to the Purchasers;
(ii) Xxxx Xxxxxx, and each other executive
officer whom the Purchaser agrees to hire,
has executed and delivered to the Company a
new employment or consulting agreement, in
form and substance satisfactory to the
Purchasers; and (iii) each member of the
Company's senior management and Xxxxx Xxxxxx
has executed and delivered to the Company a
lockup agreement in substantially the form
amount hereto as Exhibit E.
(vii) Evidence that, upon consummation of the
transactions contemplated by this Agreement,
the Company's Board of Directors will be
constituted in accordance with the
Agreement.
(viii) Copies of each of the material Contracts
referred to in Section 2.16 of this
Agreement and/or referred to in the Company
Disclosure Schedule.
(d) The Purchaser shall provide evidence reasonably
satisfactory to the Company that immediately
subsequent to the Closing the Purchaser shall provide
to the Company supporting financial and/or other
support personnel as may be required to allow Xx.
Xxxxxx the discretion to make operating decisions
normally made by the president of a public company,
subject to the approval of the Company's Board of
Directors, when required.
(e) The Company and the Purchaser have executed and
delivered a Services Agreement. Under the Services
Agreement, the Company will purchase and license from
the Purchaser various products and services. The
compensation to be paid by the Company for these
products and services is 2 million shares of Common
Stock of the Company. Upon the Closing, 2 million
Shares shall be credited to the number of shares
constituting the Purchased Securities, however, such
2 million shares are non-cancelable and are not part
of the escrow agreement set forth below.
1.5. Escrow.
Concurrently with the execution and delivery of this
Agreement, the Company shall deliver or cause its transfer agent to
deliver to UBS Financial Services, Inc. as Escrow Agent, the Purchased
Securities together with duly executed blank stock powers. The
Purchased Securities shall be held by the Escrow Agent under an Escrow
Agreement, in substantially the form annexed hereto as Exhibit D,
entered into between the Company, the Purchaser and the Escrow Agent on
this date. All of the Purchased Securities shall be released to the
Purchaser if the Company's independent auditors have reviewed and/or
audited the Company's financial statements which
3
reflect the recognition of an amount of revenues equal to at least
fifty percent (50%) of the Purchase Price which have been derived from
the Listed Contracts.
In the event that an amount equal to less that 50% of the
Purchase Price, however, greater than 25% of the Purchase Price is
recorded by the Company on its financial statements as having been
derived from the Listed Contracts, then the Purchased Securities shall
be released from escrow on a pro rata basis in the same percentage as
the fraction of the Purchase Price earned (e.g., 25%) divided by 50%.
Any and each such pro rata release from escrow of a portion of the
Purchased Securities shall take place as soon as practicable following
the filing with the Securities and Exchange Commission of the Company's
periodic report for the quarterly or annual period, as the case may be,
for each period during which the date on which the milestone for such
pro rata release was achieved. Notwithstanding the escrow of the
Purchased Securities, the Purchaser shall be entitled to vote the
Purchased Securities to the same extent as if the Purchaser retained
physical possession of the Purchased Securities. The terms and
conditions of the Escrow Agreement are incorporated by reference
herein, and should there be any conflict between this Agreement and the
Escrow Agreement, the latter shall control.
2. Representations and Warranties of the Company.
In order to induce the Purchaser to enter into this Agreement and to
purchase the Purchased Securities, the Company hereby represents and warrants to
the Purchaser as follows, subject in each case to such exceptions as are set
forth in the attached Company Disclosure Schedule in the section thereof
numbered and captioned to correspond to the specific representation or warranty
to which such exception relates.
2.1. Organization and Authority.
The Company and each of its Subsidiaries is a corporation or limited
liability company, as the case may be, duly organized, validly existing, and in
good standing under the laws of its state of incorporation, formation or
organization, as the case may be. The Company and each of its Subsidiaries has
all requisite power and authority to own or lease and operate its properties and
to carry on its business as now conducted and as proposed to be conducted. The
minute books of the Company and each of its Subsidiaries have been made
available to the Purchaser for inspection and accurately record therein all
corporate actions taken by the Board of Directors and stockholders of the
Company and each of its Subsidiaries which is a corporation.
2.2. Corporate Power; Binding Effect.
The Company has all requisite power and full legal right to execute and
deliver this Agreement and the Ancillary Agreements, and to perform all of its
obligations hereunder and thereunder in accordance with the respective terms
hereof and thereof. This Agreement and the Ancillary Agreements and the
transactions contemplated hereby and thereby have been duly approved and
authorized by all requisite corporate action on the part of the Company, and
this Agreement has been duly executed and delivered by the Company and
constitutes, and each of the Ancillary Agreements, when executed and delivered
by the Company at the Closing, will constitute, a legal, valid, and binding
obligation of the Company, enforceable against it in accordance with its
respective terms. The execution, delivery, and performance by the Company of
this Agreement and the Ancillary Agreements in accordance with their respective
terms, and the consummation by the Company of the transactions contemplated
hereby or thereby, will not result (with or without the giving of notice or the
lapse of time or both) in any conflict, violation, breach, or default, or the
creation of any Lien, or the termination, acceleration, vesting, or modification
of any right or obligation, under or in respect of (x) the charter documents or
by-laws of the
4
Company or any of its Subsidiaries which is a corporation, or the certificate of
formation or organization and operating agreement of any of its Subsidiaries
which is a limited liability company, (y) any judgment, decree, order, statute,
rule, or regulation binding on or applicable to the Company or any of its
Subsidiaries, or (z) any agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which it or any of its Subsidiaries' assets is
or are bound.
2.3. Foreign Qualification.
The Company and each of its Subsidiaries is duly qualified to do
business and in good standing as a foreign corporation or foreign limited
liability company, as the case may be, in each jurisdiction in which the
character of the properties owned or leased by it or the nature of its
activities makes such qualification necessary, other than any jurisdictions in
which the failure so to qualify or be in good standing would not, either in any
case or in the aggregate, have a Material Adverse Effect.
2.4. Subsidiaries.
Each of the Corporation's Subsidiaries is listed in Section 2.4 of the
Company Disclosure Schedule. Except as otherwise noted on the Company Disclosure
Schedule, the Company owns fifty percent (50%) of the outstanding capital stock,
membership interests or other equity interests of each Subsidiary free and clear
of all liens, claims and encumbrances, and all right, title or interest of
others.
2.5. Capitalization.
(a) Immediately after the Closing, giving effect to the
sale and purchase of the Purchased Securities
provided for in this Agreement, the authorized and
the outstanding capital stock and securities of the
Company will be as set forth in Section 2.5(a) of the
Company Disclosure Schedule, and all such outstanding
shares of capital stock and securities will be owned
(of record and beneficially) by the persons and in
the amounts there indicated. All such outstanding
shares of capital stock and securities will be duly
authorized, validly issued, fully paid, and
nonassessable, and free and clear of Liens.
(b) Other than with respect to the Purchased Securities,
and except as set forth in Section 2.5(b) of the
Company Disclosure Schedule, neither the Company, nor
any of its Subsidiaries, is bound by, or has any
obligation to grant or enter into, any (i)
outstanding subscriptions, options, warrants, calls,
commitments, or agreements of any character calling
for it to issue, deliver, or sell, or cause to be
issued, delivered, or sold, any shares of its capital
stock, any membership interests or any other equity
security, or any securities described in the
following clause, or (ii) securities convertible
into, exchangeable for, or representing the right to
subscribe for, purchase, or otherwise acquire any
shares of its capital stock, any membership interests
or any other equity security.
(c) Other than with respect to the Purchased Securities,
this Agreement and the Ancillary Agreements, and
except as set forth in Section 2.5(c) of the Company
Disclosure Schedule, neither the Company, nor any of
its Subsidiaries (i) has any outstanding obligations,
contractual or otherwise, to repurchase, redeem, or
otherwise acquire any shares of capital stock,
membership interests or other equity securities of
the Company, (ii) is a party to or bound by, or has
knowledge of, any agreement or instrument relating to
the voting of any of its securities, or (iii) is a
party to or bound by any agreement or instrument
under which any
5
person has the right to require it to effect, or to
include any securities held by such person in, any
registration under the Securities Act.
2.6. Lawful Issuance.
All of the outstanding shares of capital stock, membership interests,
and other securities of the Company and each of its Subsidiaries were offered,
issued, and sold, and the Purchased Securities have been offered and at the
Closing will be issued and sold, in compliance with (i) all applicable
preemptive or similar rights of all persons, and (ii) assuming the truthfulness
and accuracy of the representations made by the Purchaser in Section 3 hereof,
all applicable provisions of the Securities Act and the rules and regulations
thereunder, and all applicable state securities laws and the rules and
regulations thereunder. No person has any valid right to rescind any purchase of
any shares of capital stock or other securities of the Company or any of its
Subsidiaries.
2.7. SEC Documents.
The Company has filed each report, schedule, registration statement and
definitive proxy statement required to be filed by the Company, with the
Commission (the "Company SEC Documents"). As of its filing date (and, with
respect to any registration statement, the date on which it was declared
effective), each Company SEC Document was in compliance, in all material
respects, with the requirements of its form and contained no untrue statement of
a material fact and did not omit any statement of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents complied, at the
time of filing with the Commission (and, with respect to any registration
statement, at the time it was declared effective), as to form, in all material
respects, with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
and fairly present, in all material respects (subject, in the case of the
unaudited statements, to normal, recurring year-end audit adjustments), the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
changes in financial position for the periods then ended. Since December 31,
2002, there have been no changes in the Company's method of accounting for tax
purposes or any other purpose. The consolidated financial statements of the
Company and its consolidated Subsidiaries as of December 31, 2002, included in
the Company SEC Documents disclose all liabilities of the Company and its
consolidated Subsidiaries required to be disclosed therein and contain adequate
reserves for taxes and all other material accrued liabilities.
2.8. Absence of Certain Changes.
Since December 31, 2002, there has not been:
(a) any (i) acquisition (by purchase, lease as lessee,
license as licensee, or otherwise) or disposition (by
sale, lease as lessor, license as licensor, or
otherwise) by the Company, or any of its
Subsidiaries, of any material properties or assets,
or (ii) other transaction by, or any agreement or
commitment on the part of, the Company, or any of its
Subsidiaries, other than in the ordinary course of
business, that have not caused and will not cause,
either in any case or in the aggregate, a Material
Adverse Effect;
6
(b) any material change in the condition (financial or
otherwise), properties, assets, liabilities,
investments, revenues, expenses, income, operations,
business, or prospects of the Company, or any of its
Subsidiaries, or in any of their respective
relationships with any suppliers, customers, or other
third parties with whom any of them has financial,
commercial, or other business relationships, other
than changes in the ordinary course of business that
have not caused and cannot reasonably be expected to
cause, either in any case or in the aggregate, a
Material Adverse Effect;
(c) any transaction or change in compensation by the
Company, or any of its Subsidiaries, with any of
their respective stockholders, members, directors,
officers, or key employees, other than the payment of
compensation and reimbursement of reasonable employee
travel and other business expenses in accordance with
existing employment arrangements and usual past
practices;
(d) any damage, destruction, or loss, whether or not
covered by insurance, that, either in any case or in
the aggregate, has caused, or could reasonably be
expected to cause, a Material Adverse Effect;
(e) any declaration, setting aside, or payment of any
dividend or any other distribution (in cash, stock,
and/or property or otherwise) in respect of any
shares of the capital stock, membership interests, or
other securities of the Company or any of its
Subsidiaries;
(f) any issuance of any shares of the capital stock,
membership interests or other securities of the
Company or any of its Subsidiaries, or any direct or
indirect redemption, purchase, or other acquisition
by the Company or any of its Subsidiaries of any
shares of their respective capital stock, membership
interests or other securities;
(g) any change in the officers, directors, key employees,
or material independent contractors of the Company or
any of its Subsidiaries;
(h) any labor trouble or claim of unfair labor practices
involving the Company or any of its Subsidiaries, any
increase in the compensation or other benefits
payable or to become payable by the Company or any of
its Subsidiaries to any of their respective
Affiliates, or to any of its officers, employees, or
independent contractors, or any bonus payments or
arrangements made to or with any of such officers,
employees, or independent contractors;
(i) any forgiveness or cancellation of any debt or claim
by the Company or any of its Subsidiaries or any
waiver by the Company or any of its Subsidiaries of
any right of material value, other than compromises
of accounts receivable in the ordinary course of
business;
(j) any incurrence or any payment, discharge, or
satisfaction by the Company or any of its
Subsidiaries of any material Indebtedness or any
material obligations or material liabilities, whether
absolute, accrued, contingent, or otherwise
(including without limitation liabilities, as
guarantor or otherwise, with respect to obligations
of others), other than in the ordinary course of
business that have not caused and cannot reasonably
be expected to cause, either in any case or in the
aggregate, a Material Adverse Effect.
7
(k) any incurrence, discharge, or satisfaction of any
Lien (i) by the Company or any of its Subsidiaries,
or (ii) on any of the capital stock, membership
interests, other securities, properties, or assets
owned or leased by the Company or any of its
Subsidiaries;
(l) any change in the financial or tax accounting
principles, practices, or methods of the Company or
any of its Subsidiaries; or
(m) any agreement, understanding, or commitment by or on
behalf of the Company or any of its Subsidiaries,
whether in writing or otherwise, to do or permit any
of the things referred to in this Section 2.8.
2.9. Properties, Leases, Etc.
(a) Title to Properties; Condition of Personal
Properties. The Company and each of its Subsidiaries
has (i) good and marketable title to all of the
assets and properties owned by it, including without
limitation all assets and properties reflected in the
Company SEC Documents (in each case excluding any
assets and properties sold or otherwise disposed of
to persons other than non-Subsidiary Affiliates in
the ordinary course of business since December 31,
2002) free and clear of all Liens, (ii) valid title
to the lessee interest in all assets and properties
leased by them as lessee, free and clear of all
Liens, and (iii) full right to hold and use all of
its assets and properties used in or necessary to its
businesses and operations, in each case all free and
clear of all Liens, and in each case subject to
applicable laws and the terms of any lease under
which the Company and each of its Subsidiaries leases
such assets or properties as lessee. All such assets
and properties are in good condition and repair,
reasonable wear and tear excepted, and collectively
are adequate and sufficient to carry on the
businesses of the Company and each of its
Subsidiaries as presently conducted and as proposed
to be conducted.
(b) No Owned Real Properties. Neither the Company, nor
any of its Subsidiaries, owns any real property or
any interest (other than a leasehold interest) in any
real property.
(c) Leased Properties. Section 2.9(c) of the Company
Disclosure Schedule sets forth a complete and correct
description of all leases of real or personal
property under which the Company or any of its
Subsidiaries is lessor or lessee. Complete and
correct copies of all such leases and all amendments,
supplements, and modifications thereto, other than
any personal property lease with an annual rent of
less than $10,000 and total remaining rental payments
of less than $20,000, have been delivered to the
Purchaser. Each such lease is valid and subsisting
and, to the Company's knowledge, no event or
condition exists that constitutes, or after notice or
lapse of time or both would constitute, a default
thereunder by the Company or any of its Subsidiaries,
as the case may be, or, to the Company's knowledge,
any other party thereto. The Company's and each of
its Subsidiaries' leasehold interests are subject to
no Lien, and the Company and each of its Subsidiaries
is in quiet possession of the properties covered by
their respective leases. The Company has established
adequate reserves which are reflected in the Company
SEC Documents, for the anticipated costs of any
property renovation
8
and repairs to the Company's, or its Subsidiaries',
leased premises required to be performed or paid for
by it upon termination of any of its leases of real
property.
2.10. Indebtedness.
Except as described in Section 2.10 of the Company Disclosure Schedule
or disclosed in the Company SEC Documents, immediately after the Closing,
neither the Company, nor any of its Subsidiaries, will have any Indebtedness
outstanding. Neither the Company, nor any of its Subsidiaries, is in default
with respect to any outstanding Indebtedness or any instrument or agreement
relating thereto, and no such Indebtedness or any instrument or agreement
relating thereto purports to limit the issuance of any securities by the Company
or the operation of its business or the business of its Subsidiaries. Complete
and correct copies of all instruments and agreements (including all amendments,
supplements, waivers, and consents) relating to any Indebtedness of the Company
and its Subsidiaries have been furnished to the Purchaser.
2.11. Absence of Undisclosed Liabilities.
Except to the extent reflected or reserved in the Company SEC
Documents, or incurred in the ordinary course of business since December 31,
2002 (other than in connection with any transactions with non-Subsidiary
Affiliates), neither the Company, nor any of its Subsidiaries, has any material
liabilities or obligations of any nature, whether accrued, absolute, contingent,
or otherwise (including, without limitation, liabilities as guarantor or
otherwise with respect to obligations of others) and whether due or to become
due.
2.12. Tax Matters.
(a) Filing of Tax Returns and Payment of Taxes. Except as
described in Section 2.12 of the Company Disclosure
Schedule, the Company and each of its Subsidiaries
has timely filed all Tax Returns required to be filed
by it, each such Tax Return has been prepared in
compliance with all applicable laws and regulations,
and all such Tax Returns are true and accurate in all
respects. All Taxes due and payable by the Company
and each of its Subsidiaries have been paid, and the
Company will not be liable for any additional Taxes
in respect of any taxable period ending on or before
the Closing Date in an amount that exceeds the
corresponding reserve therefor, if any, reflected in
the accounting records of the Company as of the
Closing Date. No claim has ever been made by a taxing
authority in a jurisdiction where the Company or any
of its Subsidiaries does not pay Tax or file Tax
Returns that the Company or any of its Subsidiaries
is or may be subject to Taxes assessed by such
jurisdiction. There are no Liens for Taxes (other
than current Taxes not yet due and payable) on the
assets of the Company or any of its Subsidiaries.
(b) Audit History, Extensions, Etc. There is no action,
suit, taxing authority proceeding, or audit with
respect to any Tax now in progress, pending, or to
the best of the Company's knowledge, threatened,
against or with respect to the Company or any of its
Subsidiaries. No deficiency or proposed adjustment in
respect of Taxes that has not been settled or
otherwise resolved has been asserted or assessed by
any taxing authority against the Company or any of
its Subsidiaries. Neither the Company, nor any of its
Subsidiaries, has consented to extend the time in
which any Tax may be assessed or collected by any
taxing authority. Neither the Company, nor any of its
Subsidiaries, has requested or
9
been granted an extension of the time for filing any
Tax Return to a date on or after the Closing Date.
(c) Membership in Affiliated Groups, Etc. Neither the
Company, nor any of its Subsidiaries, has ever been a
member of any Affiliated Group, or filed or been
included in a combined, consolidated, or unitary Tax
Return other than a consolidated tax return with
respect to the Company and its Subsidiaries only.
Neither the Company, nor any of its Subsidiaries, is
a party to or bound by any tax sharing or allocation
agreement or has any current or potential contractual
obligation to indemnify any other person with respect
to Taxes.
(d) Withholding Taxes. The Company and each of its
Subsidiaries has withheld and paid all Taxes required
to have been withheld and paid by it in connection
with amounts paid or owing to any employee, creditor,
independent contractor, or other Person.
2.13. Litigation, Etc.
No litigation, arbitration, action, suit, claim, demand, proceeding or
investigation (whether conducted by or before any judicial or regulatory body,
arbitrator, commission or other person) is pending or, to the Company's
knowledge, threatened, against the Company or its Subsidiaries, nor is there any
basis therefor known to the Company.
2.14. Safety, Zoning, and Environmental Matters.
(a) Neither the Company, nor any of its Subsidiaries, is
or has been in violation of any applicable statute,
law, or regulation relating to occupational health or
safety, other than those the violation of which would
not, either in any case or in the aggregate, have a
Material Adverse Effect, and no charge, complaint,
action, suit, proceeding, hearing, investigation,
claim, demand , or notice has been filed or commenced
against or received by the Company or any of its
Subsidiaries alleging any failure by the Company or
any of its Subsidiaries to comply with any such
statute, law, or regulation, nor is there any basis
therefor known to the Company.
(b) To the best of the Company's knowledge, none of the
real properties presently owned, leased, or operated
by the Company or any of its Subsidiaries, nor any
leasehold improvements thereto, nor any business
conducted by the Company or any of its Subsidiaries
thereon, is in violation of any applicable land use
or zoning requirements, including without limitation
any building line or use or occupancy restriction,
any public utility or other easement, any limitation,
condition, or covenant of record, or any zoning or
building law, code, or ordinance.
(c) Neither the Company, nor any of its Subsidiaries, is
presently, or has been, in violation of any judgment,
decree, order, statute, law, permit, license, rule,
or regulation pertaining to environmental matters,
including without limitation those arising under any
Environmental Laws, other than those the violation of
which would not, either in any case or in the
aggregate, have a Material Adverse Effect, nor has
the Company or any of its Subsidiaries received any
written notice alleging any such violation.
10
(d) Neither the Company, nor any of its Subsidiaries, has
received any notice or request for information from
any third party, including without limitation any
federal, state, or local governmental authority, (i)
that the Company or any of its Subsidiaries has been
identified by the EPA or any state environmental
regulatory authority as a potentially responsible
party under CERCLA with respect to a site listed on
the National Priorities List, 40 C.F.R. Part 300
Appendix B, or under any equivalent state law; (ii)
that any Hazardous Substances that the Company or any
of its Subsidiaries has generated, transported, or
disposed of have been found at any site at which a
federal, state, or local agency or other third party
has conducted or has ordered it to conduct a remedial
investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that the
Company or any of its Subsidiaries is or will or may
be a named party to any claim, action, cause of
action, complaint, or legal or administrative
proceeding arising out of any third party's
incurrence of Damages in connection with the release
(within the meaning of CERCLA) of any Hazardous
Substances or any other environmental matters. No
circumstances exist that could reasonably be expected
to give rise to any such notice or request for
information or to any Damages.
2.15. Labor Relations.
The Company and each of its Subsidiaries is in compliance with all
applicable federal and state laws respecting employment and employment
practices, terms and conditions of employment, wages and hours, and
nondiscrimination in employment, other than those the violation of which would
not, either in any case or in the aggregate, have a Material Adverse Effect, and
neither the Company, nor any of its Subsidiaries, is engaged in any unfair labor
practice. There is no charge pending or, to the best of the Company's knowledge,
threatened, against or with respect to the Company or any of its Subsidiaries
before any court or agency and alleging unlawful discrimination in employment
practices, and there is no charge of or proceeding with regard to any unfair
labor practice against the Company or any of its Subsidiaries pending before the
National Labor Relations Board. There is no labor strike, dispute, slow-down, or
work stoppage pending or, to the Company's knowledge, threatened against or
involving the Company or any of its Subsidiaries. None of the employees of the
Company or any of its Subsidiaries is covered by any collective bargaining
agreement, and no such collective bargaining agreement is currently being
negotiated. No one has petitioned and, to the Company's knowledge, no one is now
petitioning, for union representation of any employees of the Company. Neither
the Company, nor any of its Subsidiaries, has experienced any work stoppage or
other material labor difficulty.
2.16. Material Contracts.
Except for the contracts, agreements and other arrangements set forth
in Section 2.16 of the Company Disclosure Schedule and contracts, agreements, or
other arrangements that have been fully performed and with respect to which
neither the Company, nor any of its Subsidiaries, has any further obligations or
liabilities, neither the Company, nor any of its Subsidiaries, is a party to or
otherwise bound by (i) any agreement, instrument, or commitment that may affect
the Company's ability to consummate the transactions contemplated hereby or by
the Ancillary Agreements, or (ii) any other material agreement, instrument, or
commitment, including without limitation any:
(a) agreement for the purchase, sale, lease, or license
by or from it of services, products, or assets,
requiring total payments by or to it in excess of
$100,000 in any instance, or entered into other than
in the ordinary course of business;
11
(b) agreement requiring it to purchase all or
substantially all of its requirements for a
particular product or service from a particular
supplier or suppliers, or requiring it to supply all
of a particular customer's or customers' requirements
for a certain service or product;
(c) agreement or other commitment pursuant to which it
has agreed to indemnify or hold harmless any other
person, other than agreements with respect to the
purchase, sale, lease or license from it of services,
products or assets in the ordinary course of
business;
(d) (i) employment agreement providing for annual
payments equal to or in excess of $100,000 per annum
and/or with a term greater than one (1) year, (ii)
consulting agreement providing for annual payments
equal to or in excess of $100,000 per annum and/or
with a term greater than one (1) year, or (iii)
agreement providing for severance payments or other
additional rights or benefits (whether or not
optional) in the event of the sale or other change in
control of it;
(e) agreement with any current or former Affiliate,
stockholder, member, officer, director, employee, or
consultant or with any person in which any such
Affiliate has an interest;
(f) joint venture, partnership or teaming agreement;
(g) agreement with any domestic or foreign government or
agency or executive office thereof or any subcontract
between it and any third party relating to a contract
between such third party and any domestic or foreign
government or agency or executive office thereof;
(h) agreement imposing non-competition or exclusive
dealing obligations on it;
(i) agreement with respect to the confidentiality of the
Company's or any of its Subsidiaries' Proprietary
Information (as described in Section 2.19 hereof),
and the assignment to the Company or any of its
Subsidiaries of any and all rights employees of the
Company or any of its Subsidiaries, respectively,
might have to acquire with respect to technology,
inventions, developments, etc., developed in
connection with this employment with the Company, or
any of its Subsidiaries, respectively; and
(j) agreement the performance of which is reasonably
likely to result in a loss to it.
The Company has delivered or caused to be delivered to the Purchaser
correct and complete copies (or written summaries of the material terms of oral
agreements or understandings) of each agreement, instrument, and commitment
listed in the Company Disclosure Schedule, each as amended to date. Each such
agreement, instrument, and commitment is a valid, binding and enforceable
obligation of the Company, or the Company's Subsidiary which is a party thereto,
and, to the Company's knowledge, of the other party or parties thereto, and is
in full force and effect. Neither the Company, nor any of its Subsidiaries, is
nor, to the Company's knowledge, is any other party thereto, (nor is the Company
considered by any other party thereto to be) in breach of or noncompliance with
any term of any such agreement, instrument, or commitment (nor is there any
basis for any of the foregoing), except for any breaches or noncompliances that
singly or in the aggregate would not have a Material Adverse Effect. Other than
in the ordinary course of business, no claim, change order, request for
equitable adjustment, or
12
request for contract price or schedule adjustment, between the Company or any of
its Subsidiaries and any supplier, customer or any other person, relating to any
agreement, instrument, or commitment listed in the Company Disclosure Schedule
is pending or, to the Company's knowledge, threatened, nor is there any basis
for any of the foregoing. No agreement, instrument, or commitment listed in the
Company Disclosure Schedule, (i) includes or incorporates any provision, the
effect of which may be to enlarge or accelerate any of the obligations of the
Company or any of its Subsidiaries or to give additional rights to any other
party thereto, (ii) will terminate, lapse, or (iii) in any other way be
affected, by reason of the transactions contemplated by this Agreement, the
effect of which would have a Material Adverse Effect on the Company or any of
its Subsidiaries, either individually or in the aggregate.
2.17. Employee Benefit Plans.
(a) Identification of Plans. Except for the arrangements
set forth in Section 2.17 of the Company Disclosure
Schedule, neither the Company, nor any of its
Subsidiaries, maintains or contributes to any
pension, profit-sharing, deferred compensation,
bonus, stock option, share appreciation right,
severance, group or individual health, dental,
medical, life insurance, survivor benefit, or similar
plan, policy or arrangement, whether formal or
informal, for the benefit of any director, member,
officer, consultant, or employee of any of them,
whether active or terminated; nor have any of them
ever maintained or contributed to any such plan,
policy, or arrangement that was subject to ERISA.
Each of the arrangements set forth in Section 2.17 of
the Company Disclosure Schedule is herein referred to
as an "Employee Benefit Plan."
(b) Compliance with Terms and Law. Each Employee Benefit
Plan is and has been maintained and operated in
compliance in all material respects with the terms of
such plan and with the requirements prescribed
(whether as a matter of substantive law or as
necessary to secure favorable tax treatment) by any
and all statutes, governmental, or court orders, or
governmental rules or regulations in effect from time
to time, including but not limited to ERISA and the
Code, and applicable to such plan. Each Employee
Benefit Plan that is intended to qualify under
Section 401(a) of the Code is so qualified.
(c) Absence of Certain Events and Arrangements.
(i) There is no pending or, to the Company's
knowledge, threatened, legal action,
proceeding, or investigation, other than
routine claims for benefits, concerning any
Employee Benefit Plan, or any fiduciary or
service provider thereof and there is no
basis for any such legal action or
proceeding.
(ii) No Employee Benefit Plan, nor any party in
interest in respect thereof has engaged in a
prohibited transaction that could subject
the Company or any of its Subsidiaries,
directly or indirectly, to liability under
Section 409 or 502(i) of ERISA or Section
4975 of the Code.
(iii) No communication, report, or disclosure has
been made that, at the time made, did not
accurately reflect the terms and operations
of any Employee Benefit Plan.
13
(iv) No Employee Benefit Plan provides welfare
benefits subsequent to termination of
employment to employees or their
beneficiaries (except to the extent required
by applicable state insurance laws and Title
I, Part 6 of ERISA).
(v) Neither the Company, nor any of its
Subsidiaries, has undertaken to maintain any
Employee Benefit Plan for any specific
period of time and each such plan is
terminable at the sole discretion of the
Company or its Subsidiary, as the case may
be, subject only to such constraints as may
be imposed by applicable law.
(vi) No Employee Benefit Plan is maintained
pursuant to a collective bargaining
agreement or is or has been subject to the
minimum funding requirements of Section 302
of ERISA or Section 412 of the Code.
(d) Funding of Certain Plans. With respect to each
Employee Benefit Plan for which a separate fund of
assets is or is required to be maintained, full
payment has been made of all amounts that, under the
terms of each such plan, it is required to have paid
as contributions to that plan as of the end of such
plan's most recently ended year, and through the
Closing hereof.
2.18. Potential Conflicts of Interest.
Neither the Company, nor any of its Subsidiaries, nor any of their
respective officers, members, directors, shareholders, or employees, (i) owns,
directly or indirectly, any interest (excepting passive holdings for investment
purposes of not more than 2% of the securities of any publicly held and traded
company) in, or is an officer, director, member, employee, or consultant of, any
person that is a competitor, lessor, lessee, customer, or supplier of the
Company or any of its Subsidiaries; (ii) owns, directly or indirectly, any
interest in any tangible or intangible property used in or necessary to the
business of the Company or any of its Subsidiaries; (iii) to the Company's
knowledge, has any cause of action or other claim whatsoever against the Company
or any of its Subsidiaries, except for claims in the ordinary course of
business, such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements; or (iv) owes any amount to
the Company or any of its Subsidiaries other than loans between the Company and
any of its Subsidiaries.
2.19. Proprietary Information.
(a) Section 2.19 of the Company Disclosure Schedule lists
all patents, patent applications, trademarks, trade
names, service marks, logos, copyrights, and licenses
used in or necessary to the Company's or any of its
Subsidiaries' business (other than for software
programs that have not been customized for its use),
as now being conducted or as proposed to be conducted
(collectively, and together with any technology,
know-how, trade secrets, processes, formulas, and
techniques used in or necessary to the Company's or
any of its Subsidiaries' business, "Proprietary
Information"). The Company and/or its Subsidiaries
own, or are licensed or otherwise have the full and
unrestricted exclusive right to use, without the
payment of royalties or other further consideration,
all Proprietary Information, and no other
intellectual property rights, privileges, licenses,
contracts, or other agreements, instruments, or
evidences of interests are necessary to or used in
the conduct of their respective businesses.
14
(b) Each instance where the Company's or any of its Subsidiaries'
rights to Proprietary Information arise under a license or
similar agreements (other than for software programs that have
not been customized for its use) is indicated in Section 2.19
of the Company Disclosure Schedule and such rights are
licensed exclusively to such entity except as indicated in
Section 2.19 of the Company Disclosure Schedule. No other
person has an interest in, other than the licensor with
respect to licensed Proprietary Information, or right or
license to use, other than the licensor after the expiration
of the license with respect to licensed Proprietary
Information, any of the Proprietary Information. To the best
of the Company's knowledge, none of the Proprietary
Information is being infringed by others, or is subject to any
outstanding order, decree, judgment, or stipulation. No
litigation (or other proceedings in or before any court or
other governmental, adjudicatory, arbitral, or administrative
body) relating to the Proprietary Information is pending
(other than litigation against the licensor of any Proprietary
Information licensed to the Company with respect to which the
Company has no knowledge) or, to the Company's knowledge,
threatened, nor, to the best of the Company's knowledge, is
there any basis for any such litigation or proceeding. The
Company and each of its Subsidiaries maintains adequate and
sufficient security measures for the preservation of the
secrecy and proprietary nature of the Proprietary Information
consistent with the practice in its industry.
(c) To the best of the Company's knowledge: (i) neither the
Company, nor any of its Subsidiaries, nor any of their
respective employees has infringed or made unlawful use of, or
is, to the Company's knowledge, infringing or making unlawful
use of, any proprietary or confidential information of any
Person, including without limitation any former employer of
any past or present employee or consultant of the Company or
any of its Subsidiaries; and (ii) the activities of the
Company's and each of its Subsidiaries respective employees in
connection with their employment do not violate any agreements
or arrangements that any such employees or consultants have
with any former employer or any other Person. No litigation
(or other proceedings in or before any court or other
governmental, adjudicatory, arbitral, or administrative body)
charging the Company or any of its Subsidiaries with
infringement or unlawful use of any patent, trademark,
copyright, or other proprietary right is pending or, to the
Company's knowledge, threatened; nor is there any basis for
any such litigation or proceeding.
(d) To the best of the Company's knowledge, no officer, director,
member, employee, or consultant of the Company or any of its
Subsidiaries is presently obligated under or bound by any
agreement or instrument, or any judgment, decree, or order of
any court of administrative agency, that (i) conflicts or may
conflict with his or her agreements and obligations to use his
or her best efforts to promote the interests of the Company or
any of its Subsidiaries, (ii) conflicts or may conflict with
the business or operations of the Company or any of its
Subsidiaries as presently conducted or as proposed to be
conducted, or (iii) restricts or may restrict the use or
disclosure of any information that may be useful to the
Company or any of its Subsidiaries.
15
2.20. Insurance.
Section 2.20 of the Company Disclosure Schedule lists the policies of
theft, fire, liability, worker's compensation, life, property and casualty,
directors' and officers', medical malpractice, and other insurance owned or held
by the Company and each of its Subsidiaries and the basis on which such policies
provide coverage (i.e., an incurrence or claims-made basis). All such policies
are, and at all times since the respective dates set forth in Section 2.20 of
the Company Disclosure Schedule, have been, in full force and effect, are
sufficient for compliance in all respects by the Company and each of its
Subsidiaries with all requirements of law and of all agreements to which it is a
party, and provide that they will remain in full force and effect through the
respective dates set forth in Section 2.20 of the Company Disclosure Schedule,
and will not terminate or lapse or otherwise be affected in any way by reason of
the transactions contemplated hereby.
2.21. Governmental and Other Third-Party Consents.
No consent, approval, or authorization of, or registration,
designation, declaration, or filing with, any governmental authority, federal or
other, or any other person is required on the part of the Company or any of its
Subsidiaries in connection with the Company's execution, delivery, or
performance of this Agreement or the Ancillary Agreements or the Company's
consummation of the transactions contemplated hereby or thereby, or the
continued conduct of the present business of the Company and each of its
Subsidiaries after the Closing Date.
2.22. Employment of Officers, Employees.
The Company SEC Documents set forth those persons who served as chief
executive officer during the Company's 2002 fiscal year and each of the
Company's other executive officers who earned (or accrued) compensation in
excess of $100,000 during the year ended December 31, 2002.
2.23. Brokers.
No finder, broker, agent, or other intermediary has acted for or on
behalf of the Company or any of its Subsidiaries in connection with the
negotiation or consummation of the transactions contemplated hereby, and no fee
will be payable by the Company or any of its Subsidiaries to any such person in
connection with such transactions.
2.24. Compliance with Other Instruments, Laws, Etc.
The Company and each of its Subsidiaries has complied with, and is in
compliance with, (i) all laws, statutes, governmental regulations, judicial or
administrative tribunal orders, judgments, writs, injunctions, decrees, and
similar commands applicable to it and its business, and all unwaived terms and
provisions of all agreements, instruments, and commitments to which it is a
party or to which it or any of its assets or properties is subject, except for
any non-compliances that, both individually and in the aggregate, have not had
and could not reasonably be expected to have a Material Adverse Effect, and (ii)
its charter documents and by-laws, or certificate of formation or organization
and operating agreement, as the case may be, each as amended to date. Neither
the Company, nor any of its Subsidiaries, has committed, been charged with, or,
to the Company's knowledge, been under investigation with respect to, nor does
there exist, any violation by the Company or any of its Subsidiaries of any
provision of any federal, state, or local law or administrative regulation,
except for any violations that, both singly or in the aggregate, have not had
and could not reasonably be expected to have a Material Adverse Effect. The
Company and each of its Subsidiaries has and maintains, and Section 2.24 of the
Company Disclosure Schedule sets forth a complete and correct list of, all such
licenses, permits,
16
and other authorizations from all such governmental authorities as are legally
required for the conduct of its business or in connection with the ownership or
use of its properties, except for any such licenses, permits, and other
authorizations, the failure to obtain or maintain which in effect, both singly
or in the aggregate, has not had and could not reasonably be expected to have a
Material Adverse Effect, and all of which (except as specifically described in
Section 2.24 of the Company Disclosure Schedule) are in full force and effect in
all material respects, and true and complete copies of all of which have been
delivered to the Purchaser.
2.25. Compliance with Securities Laws.
Assuming the accuracy of the representations of each Purchaser
contained in Section 3 hereof, the offer, issuance, and delivery of the
Purchased Securities as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act, and are exempt from
registration or qualification under applicable states' securities laws. Neither
the Company, nor any of its Subsidiaries nor anyone acting on its behalf will
hereafter offer to sell, solicit offers to buy, or sell any securities of the
Company or any of its Subsidiaries so as to subject the offer, issuance, and
sale of the Purchased Securities to the registration requirements of the
Securities Act.
2.26. Foreign Corrupt Practices Act.
Neither the Company, nor any of its Subsidiaries, has taken any action
which would cause it to be in violation of the Foreign Corrupt Practices Act of
1977, as amended, or any rules or regulations thereunder. To the Company's
knowledge, there is not now, and there has never been, any employment by the
Company or any of its Subsidiaries of, or beneficial ownership in the Company or
any of its Subsidiaries by, any governmental or political official in any
country in the world.
2.27. Disclosure.
No representation or warranty by the Company in this Agreement, in the
Company Disclosure Schedule, or in the Ancillary Agreements, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated herein or therein or necessary to make the
statements contained herein or therein not false or misleading. There is no fact
or circumstance relating specifically to the business or condition of the
Company or any of its Subsidiaries, other than such facts and circumstances as
are generally understood to affect the Company's industry, that could reasonably
be expected to result in a Material Adverse Effect that is not disclosed in the
Company Disclosure Schedule.
3. Representations and Warranties of the Purchaser.
In order to induce the Company to enter into this Agreement and to sell
the Purchased Securities, the Purchaser hereby represents and warrants to the
Company as follows, subject in each case to such exceptions as are set forth in
the attached Purchaser Disclosure Schedule in the section thereof numbered and
captioned to correspond to the specific representation or warranty to which such
exception relates.
3.1. Investment Representations.
Purchaser is an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act, was not organized for the specific purpose
of acquiring the securities offered hereby, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the transactions contemplated under this Agreement.
Purchaser's financial condition is such that it is able to bear all economic
risks of investment in the Purchased Securities, including a complete loss of
17
its investment therein. The Company has provided Purchaser with adequate access
to financial and other information concerning the Company as requested and
Purchaser has had the opportunity to ask questions of and receive answers from
the Company concerning the transactions contemplated by this Agreement and to
obtain therefrom any additional information necessary to make an informed
decision regarding an investment in the Company. Purchaser is acquiring the
Purchased Securities solely for investment purposes, with no present intention
of distributing or reselling any of the Purchased Securities or any interest
therein. Purchaser is aware that the Purchased Securities will not be registered
under the Securities Act, and that neither the Purchased Securities nor any
interest therein may be sold, pledged, or otherwise transferred unless the
Purchased Securities are registered under the Securities Act or qualify for an
exemption under the Securities Act.
3.2. Organization and Authority.
The Purchaser is a corporation duly organized, validly existing, and in
good standing under the laws of its state of incorporation. The Purchaser has
all requisite power and authority to own or lease and operate its properties and
to carry on its business as now conducted and as proposed to be conducted.
3.3. Corporate Power; Binding Effect.
The Purchaser has all requisite power and full legal right to execute
and deliver this Agreement and the Ancillary Agreements, and to perform all of
its obligations hereunder and thereunder in accordance with the respective terms
hereof and thereof. This Agreement and the Ancillary Agreements and the
transactions contemplated hereby and thereby have been duly approved and
authorized by all requisite corporate action on the part of the Purchaser, and
this Agreement has been duly executed and delivered by the Purchaser and
constitutes, and each of the Ancillary Agreements, when executed and delivered
by the Purchaser at the Closing, will constitute, a legal, valid, and binding
obligation of the Purchaser, enforceable against it in accordance with its
respective terms. The execution, delivery, and performance by the Purchaser of
this Agreement and the Ancillary Agreements in accordance with their respective
terms, and the consummation by the Purchaser of the transactions contemplated
hereby or thereby, will not result (with or without the giving of notice or the
lapse of time or both) in any conflict, violation, breach, or default, or the
creation of any Lien, or the termination, acceleration, vesting, or modification
of any right or obligation, under or in respect of (x) the charter documents or
by-laws of the Purchaser, (y) any judgment, decree, order, statute, rule, or
regulation binding on or applicable to the Purchaser, or (z) any agreement or
instrument to which the Purchaser is a party or by which any of its assets is or
are bound.
3.4. Listed Contracts.
The Purchaser has delivered or caused to be delivered to the Company
correct and complete copies (or written summaries of the material terms of oral
agreements or understandings) of each agreement, instrument, and commitment
which comprise the Listed Contracts, listed on Exhibit A, each as amended to
date. Each Listed Contract is a valid, binding and enforceable obligation of the
Purchaser, and, to the Purchaser's knowledge, of the other party or parties
thereto, and is in full force and effect. Neither the Purchaser is nor, to the
Purchaser's knowledge, is any other party thereto, (nor is the Purchaser
considered by any other party thereto to be) in breach of or noncompliance with
any term of any Listed Contract (nor is there any basis for any of the
foregoing), except for any breaches or noncompliances that singly or in the
aggregate would not have a Material Adverse Effect. Other than in the ordinary
course of business, no claim, change order, request for equitable adjustment, or
request for contract price or schedule adjustment, between the Purchaser and any
supplier, customer or any other person, relating to any Listed Contract is
pending or, to the Purchaser's knowledge, threatened, nor is
18
there any basis for any of the foregoing. Each Listed Contract is assignable by
the Purchaser to the Company without the consent of any other person.
3.5. Litigation, Etc.
No litigation, arbitration, action, suit, claim, demand, proceeding or
investigation (whether conducted by or before any judicial or regulatory body,
arbitrator, commission or other person) is pending or, to the Purchaser's
knowledge, threatened, against the Purchaser, nor is there any basis therefor
known to the Purchaser.
3.6. Potential Conflicts of Interest.
Neither the Purchaser nor any of its officers, directors, shareholders,
or employees (i) owns, directly or indirectly, any interest (excepting passive
holdings for investment purposes of not more than 2% of the securities of any
publicly held and traded company) in, or is an officer, director, member,
employee, or consultant of, any person that is a competitor, lessor, lessee,
customer, or supplier of the Company or any of its Subsidiaries; (ii) owns,
directly or indirectly, any interest in any tangible or intangible property used
in or necessary to the business of the Company or any of its Subsidiaries; (iii)
to the Company's knowledge, has any cause of action or other claim whatsoever
against the Company or any of its Subsidiaries, except for claims in the
ordinary course of business, such as for accrued vacation pay, accrued benefits
under employee benefit plans, and similar matters and agreements; or (iv) owes
any amount to the Company or any of its Subsidiaries.
3.7. Brokers.
No finder, broker, agent, or other intermediary has acted for or on
behalf of the Purchaser in connection with the negotiation or consummation of
the transactions contemplated hereby, and no fee will be payable by the Company
or any of its Subsidiaries to any such person in connection with such
transactions.
3.8. Compliance with Other Instruments, Laws, Etc.
The Purchaser has complied with, and is in compliance with, (i) all
laws, statutes, governmental regulations, judicial or administrative tribunal
orders, judgments, writs, injunctions, decrees, and similar commands applicable
to it and its business, and all unwaived terms and provisions of all agreements,
instruments, and commitments to which it is a party or to which it or any of its
assets or properties is subject, except for any non-compliances that, both
individually and in the aggregate, have not had and could not reasonably be
expected to have a Material Adverse Effect, and (ii) its charter documents and
by-laws, each as amended to date. The Purchaser has not committed, been charged
with, or, to the Purchaser's knowledge, been under investigation with respect
to, nor does there exist, any violation by the Purchaser of any provision of any
federal, state, or local law or administrative regulation, except for any
violations that, both singly or in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect. The Purchaser has and
maintains, and Section 3.8 of the Purchaser Disclosure Schedule sets forth a
complete and correct list of, all such licenses, permits, and other
authorizations from all such governmental authorities as are legally required
for the conduct of its business or in connection with the ownership or use of
its properties, except for any such licenses, permits, and other authorizations,
the failure to obtain or maintain which in effect, both singly or in the
aggregate, has not had and could not reasonably be expected to have a Material
Adverse Effect, and all of which (except as specifically described in Section
3.8 of the Purchaser Disclosure Schedule) are in full force and effect in all
material respects, and true and complete copies of all of which have been
delivered to the Company.
19
3.9. Foreign Corrupt Practices Act.
The Purchaser has taken no action which would cause it to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended, or any rules
or regulations thereunder. To the Purchaser's knowledge, there is not now, and
there has never been, any employment by the Purchaser of, or beneficial
ownership in the Purchaser by, any governmental or political official in any
country in the world.
3.10. Disclosure.
No representation or warranty by the Purchaser in this Agreement, in
the Purchaser Disclosure Schedule, or in the Ancillary Agreements, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated herein or therein or necessary to
make the statements contained herein or therein not false or misleading. There
is no fact or circumstance relating specifically to the business or condition of
the Purchaser, other than such facts and circumstances as are generally
understood to affect the Purchaser's industry, that could reasonably be expected
to result in a Material Adverse Effect that is not disclosed in the Purchaser
Disclosure Schedule.
4. Covenants.
The Purchaser covenants that until the second anniversary of the date
of this Agreement, the Purchaser will comply with each of the following
covenants. Notwithstanding the foregoing, in the event that the Purchased
Securities are released from escrow as set forth in Section 1.5 above, the terms
and conditions of this Section 4 shall be terminated and null and void.
4.1. Voting Agreement.
(a) Agreement with Respect to Voting.
(i) Purchaser shall vote any and all shares of
the Company's capital stock held by it from
time to time, and shall use its best efforts
to cause the several members of the
Company's Board of Directors whom it has
nominated to vote to maintain the membership
of the Board of Directors in accordance with
the terms and conditions of this Agreement,
as set forth in Section 4.1(b), and to cause
the Company to act or abstain from acting,
in accordance with all of the provisions of
this Agreement.
(ii) If the Purchaser fails or refuses to vote
its shares of the Company's capital stock as
required by, or votes its shares of the
Company's capital stock in contravention of,
this Agreement, then Xxxx Xxxxxx and Xxx X.
Xxxxxxxx, and each of them, shall have an
irrevocable proxy and power of attorney,
coupled with an interest, to vote such
shares of shares of the Company's capital
stock in accordance with this Agreement, and
the Purchaser hereby grants to each of Xxxx
Xxxxxx and Xxx X. Xxxxxxxx an irrevocable
proxy.
(b) Board of Directors. The Board of Directors shall be
comprised of five (5) directors, designated as
follows:
(i) One of the directors shall be Xxxx Xxxxxx
for so long as he shall remain the President
of the Company.
20
(ii) One of the directors shall be one of the
following individuals: Xxxxxxxx X. Xxxxxx,
Xxxxx Xxxxxx or Xxx X. Xxxxxxxx.
(iii) Three of the directors shall be designated
by the Purchaser.
4.2. Non-competition.
(a) Other than as the Purchaser has already disclosed to
the Company concerning the Purchaser's current
activities and operations and as expanded in the
future in businesses competitive with the Company's,
all of which are expressly excluded from the terms of
this Section 4.2, the Purchaser will not, directly or
indirectly, own any interest in, participate or
engage in, assist, render any services (including
advisory services) to, become associated with, work
for, or otherwise become in any way or manner
connected with the ownership, management, operation,
or control of, any person that engages in, or assists
others in engaging in or conducting any business,
which deals, directly or indirectly, in products or
services competitive with the Company's, or any of
its Subsidiaries', product line or services, anywhere
in the world; provided, however, that the above shall
not be deemed to prohibit the Purchaser from owning
or acquiring securities issued by any corporation
whose securities are listed with a national
securities exchange or are traded in the
over-the-counter market, provided that the Purchaser
at no time owns, directly or indirectly, beneficially
or otherwise, two (2%) percent or more of any class
of any such corporation's outstanding capital stock.
(b) Except as specifically provided in this subsection
(b), notwithstanding anything contained in subsection
(a) above, the Purchaser will not knowingly provide
or solicit to provide to any person any goods or
services which are competitive with those provided by
the Company or any of its Subsidiaries, or which
would be competitive with the goods or services that
the Company or any of its Subsidiaries has planned to
provide to any customer of the Company or any of its
Subsidiaries.
(c) The Purchaser agrees that it shall not divulge to
others, nor shall he use to the detriment of the
Company or any of its Subsidiaries, or in any
business or process of manufacture competitive with
or similar to any technology, business or process of
manufacture engaged in by the Company or any of its
Subsidiaries, any confidential or trade secret
information relating to technology, sales, salesmen,
sales volume or strategy, customers, formulas,
processes, methods, machines, manufactures,
compositions, ideas, improvements or inventions
belonging to or relating to the business of the
Company or its Subsidiaries.
(d) The Purchaser will neither solicit, hire or seek to
solicit or hire any of the Company's or any of its
Subsidiaries' personnel in any capacity whatsoever
nor shall the Purchaser induce or attempt to induce
any of the Company's or any of its Subsidiaries'
personnel to leave the employ of the Company to work
for the Purchaser or otherwise.
21
5. Restrictions on Transfer.
5.1. General Restriction.
The Purchased Securities and all securities issued in exchange therefor
(for purposes of this Section 5, the "Restricted Securities"), will be
transferable only upon the satisfaction of the conditions set forth in this
Section 5. Any transfer or purported transfer in violation of this Section 5
will be void.
5.2. Notice of Transfer.
Subject to Section 8.6, prior to any transfer of any Restricted
Securities, the holder thereof will give written notice to the Company
describing in reasonable detail the manner and terms of the proposed transfer
and the identity of the proposed transferee, accompanied by the written
agreement of the proposed transferee to be bound by all of the provisions hereof
and of the Ancillary Agreements applicable to holders of such Restricted
Securities hereunder or thereunder.
5.3. Restrictive Legends.
For so long as the Purchased Securities remain subject to the
restrictions on transfer set forth in this Section 5, the certificates
representing such Purchased Securities will bear restrictive legends in
substantially the following forms:
The securities represented by this certificate have
not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and may be transferred only
pursuant to an effective registration statement under the
Securities Act or in accordance with an applicable exemption
from the registration requirements of the Securities Act.
The securities represented by this certificate are
subject to certain restrictions on transfer set forth in a
Stock Purchase Agreement dated as of July 18, 2003, by and
between the issuer of such securities and the registered
holder of this certificate (or such holder's
predecessor-in-interest). A copy of such agreement is on file
and may be inspected by the registered holder of this
certificate at the principal executive office of the issuer.
5.4. Termination of Restrictions.
The restrictions imposed by this Section 5 upon the transferability of
Restricted Securities will terminate as to any particular Restricted Securities
when such Restricted Securities have been sold pursuant to an effective
registration statement under the Securities Act, or pursuant to Rule 144 under
the Securities Act or any other exemption from the registration requirements of
the Securities Act pursuant to which the transferee receives securities that are
not "restricted securities" within the meaning of that term as defined in Rule
144(a)(3). Whenever any of such restrictions terminates as to any Restricted
Securities, the holder thereof will be entitled to receive from the Company, at
the Company's expense, new certificates representing such Purchased Securities,
without the applicable restrictive legends.
6. Expenses; Indemnification.
(a) The Company hereby agrees to pay on demand all
reasonable out-of-pocket expenses (including without
limitation the reasonable fees and charges for
disbursements of one counsel to the Purchaser)
incurred by the Purchaser or any
22
holder of any of the Purchased Securities issued
hereunder in connection with the enforcement of any
rights hereunder, or with respect to any of the
Purchased Securities, including without limitation,
(a) the cost and expenses of preparing and
duplicating this Agreement and the Purchased
Securities; (b) the cost of delivering to each
Purchaser's principal office, insured to such
Purchaser's satisfaction, the Purchased Securities
sold to such Purchaser hereunder and any Purchased
Securities delivered to such Purchaser in exchange
therefor or upon any exchange, or substitution
thereof; and (c) recording fees and filing fees and
documentary stamp and similar taxes at any time
payable in respect of this Agreement or the issuance
of any of the Purchased Securities.
(b) All covenants, agreements, representations, and
warranties made herein or in the Ancillary Agreements
or any other document referred to herein or delivered
to the Purchaser pursuant hereto will be deemed to
have been relied on by the Purchaser, notwithstanding
any investigation made by or on behalf of the
Purchaser, and will survive the Closing. The Company
will indemnify, defend, and hold harmless each
Purchaser, and each of Purchaser's partners,
stockholders, officers, directors, employees, agents,
and representatives, from and against any and all
Damages incurred by any of them in any capacity and
resulting from or relating to the material breach by
the Company of any of its representations,
warranties, covenants, or agreements contained in
this Agreement or in the Ancillary Agreements or any
other document referred to herein or delivered to the
Purchaser pursuant hereto.
(c) The obligations of the Company under this Section 6
will survive transfer of the Purchased Securities and
the termination of this Agreement.
7. Definitions.
7.1. Certain Defined Terms.
For all purposes of this Agreement the following terms will have the
meanings set forth or cross-referenced in this Section 7:
"Affiliate" means any other person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company (or
other referenced person) and includes without limitation, (a) any person who is
an officer, director, or direct or indirect beneficial holder of at least 5% of
the then outstanding capital stock of the Company (or other referenced person),
and any of the Family Members of any such person, (b) any person of which the
Company (or other referenced person) and/or its Affiliates (as defined in clause
(a) above), directly or indirectly, either beneficially own(s) at least 5% of
the then outstanding equity securities or constitute(s) at least a 5% equity
participant, (c) in the case of a specified person who is an individual, Family
Members of such person, and (d) in the case of the Purchaser, any entities for
which a Purchaser or any of its Affiliates serve as general partner and/or
investment adviser or in a similar capacity, and all mutual funds or other
pooled investment vehicles or entities under the control or management of such
Purchaser or the general partner or investment adviser thereof, or any Affiliate
of any of them, or any Affiliates of any of the foregoing.
"Affiliated Group" has the meaning given to it in Section 1504 of the
Code, and in addition includes any analogous combined, consolidated, or unitary
group, as defined under any applicable state, local, or foreign income Tax law.
23
"Ancillary Agreements" means the Registration Rights Agreement and any
other agreement or document delivered or executed in connection with this
Agreement.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company as the same may be amended from time to time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, $0.001 par value per share, of
the Company.
"Damages" means all damages, losses, claims, demands, actions, causes
of action, suits, litigations, arbitrations, liabilities, costs, and expenses,
including without limitation court costs and the fees and expenses of counsel
and experts.
"Derivative Securities" means (i) all shares of stock and other
securities that are convertible into or exchangeable for shares of Common Stock,
and (ii) all options, warrants, and other rights to acquire shares of Common
Stock or securities convertible into or exchangeable for shares of Common Stock.
"Environmental Laws" means, collectively, the Resource Conservation and
Recovery Act, CERCLA, the Superfund Amendments and Reauthorization Act of 1986,
the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, and any and all state or local statutes, regulations, ordinances,
orders, and decrees relating to health, safety, or the environment, each, as the
case may be, as amended.
"EPA" means the United States Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Family Members" means, as applied to any individual, any parent,
spouse, child, spouse of a child, brother or sister of the individual, and each
trust created for the benefit of one or more of such persons and each custodian
of a property of one or more such persons and the estate of any such persons.
"GAAP" means generally accepted accounting principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, (ii) applied on a basis
consistent with prior periods, and (iii) such that, insofar as the use of
accounting principles is pertinent, a certified public accountant could deliver
an unqualified opinion with respect to financial statements in which such
principles have been properly applied.
"Hazardous Substances" means, collectively, any hazardous waste, as
defined by 42 U.S.C. ss. 6903(5), any hazardous substances as defined by 42
U.S.C. ss. 9601(14), any pollutant or contaminant as defined by 42 U.S.C. ss.
9601(33), or any toxic substance, methane gas, oil, or hazardous materials or
other chemicals or substances regulated by any Environmental Laws.
"Holder" means, as of the relevant time of reference, a holder of
Purchased Securities.
"Indebtedness" means (a) all indebtedness for borrowed money, whether
current or long-term, or secured or unsecured, (b) all indebtedness for the
deferred purchase price of property or services represented by a note or
security agreement, (c) all indebtedness created or arising under any
conditional
24
sale or other title retention agreement (even though the rights and remedies of
the seller or lender under such agreement in the event of default may be limited
to repossession or sale of such property), (d) all indebtedness secured by a
purchase money mortgage or other lien to secure all or part of the purchase
price of property subject to such mortgage or lien, (e) all obligations under
leases that have been or must be, in accordance with GAAP, recorded as capital
leases in respect of which it is liable as lessee, (f) any liability in respect
of banker's acceptances or letters of credit, and (g) all indebtedness of any
person that is directly or indirectly guaranteed by the Company or that it has
agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which it has otherwise assured a creditor against loss.
"Liens" means any and all liens, claims, mortgages, security interests,
charges, encumbrances, and restrictions on transfer of any kind, except: (i) in
the case of references to securities, any of the same arising under applicable
securities laws solely by reason of the fact that such securities were issued
pursuant to exemptions from registration under such securities laws, (ii) real
estate taxes not yet due and payable, (iii) any lien in favor of any landlord
for unpaid rent, additional rent, or other charges, which lien is created by
statute or under any lease under which the Company or any of its Subsidiaries is
lessee, and (iv) liens relating to accounts payable incurred in the ordinary
course of business.
"Majority Holders" means, as of the relevant time of reference, the
record holders of at least seventy-five percent (75%) of the shares of Common
Stock sold and purchased pursuant to this Agreement.
"Material Adverse Effect" means, with reference to the Company or any
of its Subsidiaries, a material adverse effect on the condition (financial or
otherwise), operations, business, assets, or prospects of the Company or any of
its Subsidiaries, or on the Company's ability to consummate the transactions
hereby contemplated.
"Person" or "person" (regardless of whether capitalized) means any
natural person, entity, or association, including without limitation any
corporation, partnership, limited liability company, government (or agency or
subdivision thereof), trust, joint venture, or proprietorship.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, among the Company and the Purchaser in
the form of the attached Exhibit C.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same are in effect at the relevant
time of reference.
"Subsidiary" means, with respect to any person, any corporation or
limited liability company a majority (by number of votes) of the outstanding
shares of any class or classes or membership interests, as the case may be, of
which are at the time owned by such person or by a Subsidiary of such person, if
the holders of the shares of such class or classes or membership interests, as
the case may be, (a) are ordinarily, in the absence of contingencies, entitled
to vote for the election of a majority of the directors (or persons performing
similar functions) of the issuer thereof, even though the right so to vote has
been suspended by the happening of such a contingency, or (b) are at the time
entitled, as such holders, to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof,
whether or not the right so to vote exists by reason of the happening of a
contingency.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, severance, stamp,
occupation, premium, windfall profit, customs, duties, real property, personal
property, capital stock, intangibles, social security, unemployment, disability,
payroll, license, employee, or other
25
tax or levy, of any kind whatsoever, including any interest, penalties, or
additions to tax in respect of the foregoing.
"Tax Return" means any return, declaration, report, claim for refund,
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
7.2. Terms Defined Elsewhere.
The following terms are defined herein in the sections identified
below:
Term Section Term Section
---- ------- ---- -------
Agreement Preamble Proprietary Information 2.19
Closing 1.3 Purchased Securities 1.1
Closing Date 1.3 Purchaser Preamble
Company Preamble Restricted Securities 5.1
Employee Benefit Plan 2.17(a)
8. Status of Schedules and Exhibits as of Signature Date.
(a) The parties each acknowledge and agree that as of the
date this Agreement is executed and delivered, none
of the Schedules or Exhibits to this Agreement have
been prepared, delivered, reviewed or approved by the
parties or their respective counsel. In addition to
and without in any way limiting any other express or
implied condition precedent to the obligations of any
party under this Agreement, the obligations of the
parties under this Agreement are hereby made subject
to and contingent upon the following:
(i) The preparation, delivery and approval by
the parties of all of the Schedules
described in this Agreement;
(ii) The preparation, delivery and approval by
the parties of all of the Exhibits to this
Agreement; and (iii) All other express and
implied conditions precedent to the
obligations of the parties under this
Agreement shall have been satisfied or
waived at or prior to the Closing.
(b) In addition, notwithstanding any other term,
condition, covenant or provision of this Agreement or
of any other agreement, the parties have not made,
and shall not be deemed to have made by their
execution and delivery of this Agreement, any
representation or warranty with respect to any:
(iv) Schedule described in this Agreement;
(v) Exhibit to this Agreement;
26
(vi) Document or state of facts pertaining to any
Schedule or Exhibit to this Agreement; or
(vii) The intended contents to any document or
state of facts pertaining to any Schedule or
Exhibit to this Agreement.
Any representations or warranties with respect to those matters or
items shall be made (unless waived or amended) only as of the Closing Date, and
only with respect to the Schedules and Exhibits attached to this Agreement as of
the Closing Date.
9. Miscellaneous Provisions.
9.1. Amendments, Consents, Waivers, Etc.
(a) This Agreement or any provision hereof may be amended
or terminated by the agreement of the Company and the
Purchaser, and the observance of any provision of
this Agreement that is for the benefit of the
Purchaser may be waived (either generally or in a
particular instance, and either retroactively or
prospectively), and any consent, approval, or other
action to be given or taken by the Purchaser pursuant
to this Agreement may be given or taken by the
consent of the Purchaser.
(b) No course of dealing between the Company and the
Purchaser will operate as a waiver of any of the
Company's or the Purchaser's rights under this
Agreement. No waiver of any breach or default
hereunder will be valid unless in a writing signed by
the waiving party. No failure or other delay by any
person in exercising any right, power, or privilege
hereunder will be or operate as a waiver thereof, nor
will any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise
of any other right, power, or privilege.
9.2. Notices.
All notices, requests, payments, instructions or other documents to be
given hereunder will be in writing or by written telecommunication, and will be
deemed to have been duly given if (i) delivered personally (effective upon
delivery), (ii) mailed by certified mail, return receipt requested, postage
prepaid (effective five business days after dispatch), (iii) sent by a
reputable, established courier service that guarantees overnight delivery
(effective the next business day) or (iv) dispatched by facsimile (if the
facsimile is in complete, readable form, effective upon dispatch), addressed as
follows (or to such other address as the recipient party may have furnished to
the sending party for the purpose pursuant to this Section 8.2):
(a) If to the Company:
Media and Xxxxxxxxxxxxx.xxx, Inc.
00000 X. Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
27
with copies sent at the same time and by the same means to:
Xxxxxx X. Xxxxxxx, Esq.
Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Facsimile No. (000) 000-0000
(b) If to the Purchaser:
Winsonic Holdings, Ltd.
One Wilshire Building
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy sent at the same time and by the same means to:
Xxxxxxx X. Xxxxxxx, Esq.
Wasserman, Comden, Xxxxxxxxx & Xxxxxxx L.L.P.
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
9.3. Counterparts.
This Agreement may be executed by the parties in separate counterparts,
each of which when so executed and delivered will be an original, but all of
which together will constitute one and the same instrument. In pleading or
proving this Agreement, it will not be necessary to produce or account for more
than one such counterpart.
9.4. Captions.
The captions of sections or subsections of this Agreement are for
reference only and will not affect the interpretation or construction of this
Agreement.
9.5. Binding Effect and Benefits.
This Agreement will bind and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as otherwise
provided in this Agreement, the provisions of this Agreement that are for the
Purchaser's benefit will inure to the benefit of all permitted transferees of
Purchased Securities, and the applicable provisions of this Agreement that bind
the Purchaser will bind all transferees of Purchased Securities. Nothing in this
Agreement is intended to or will confer any rights or remedies on any person
other than the parties hereto and their respective successors and permitted
assigns.
9.6. Assignment.
This Agreement and the rights and obligations hereunder may not be
assigned by the Company without the written consent of the Purchaser. Subject to
the terms of Section 5 of this Agreement, this
28
Agreement and the rights and obligations hereunder and the Purchased Securities
may be transferred by each of the Purchaser in its sole discretion at any time,
without the consent of the Company.
9.7. Construction.
The language used in this Agreement is the language chosen by the
parties to express their mutual intent, and no rule of strict construction will
be applied against either party.
9.8. Further Assurances.
From time to time on and after the Closing Date, the Company and the
Purchaser will promptly execute and deliver all such further instruments and
assurances, and will promptly take all such further actions, as the other party
may reasonably request in order more effectively to effect or confirm the
transactions contemplated by this Agreement and/or any of the Ancillary
Agreements and to carry out the purposes hereof and thereof.
9.9. Severability.
No invalidity or unenforceability of any section of this Agreement or
any portion thereof will affect the validity or enforceability of any other
section or the remainder of such section.
9.10. Equitable Relief.
Each of the parties acknowledges that any breach by such party of his,
her, or its obligations under this Agreement would cause substantial and
irreparable damage to one or more of the other parties and that money damages
would be an inadequate remedy therefor. Accordingly, each party agrees that the
other parties or any of them will be entitled to an injunction, specific
performance, and/or other equitable relief to prevent the breach of such
obligations.
9.11. Entire Agreement.
This Agreement, together with the exhibits and schedules hereto and the
Ancillary Agreements, contains the entire understanding and agreement among the
parties, or between or among any of them, and supersedes any prior
understandings or agreements between or among any of them, with respect to the
subject matter hereof. Notwithstanding the foregoing or any other provision of
this Agreement or the Ancillary Agreements, nothing herein or therein will be
deemed to terminate or supersede any other agreements not specifically
terminated or superseded herein or therein.
9.12. Governing Law.
This Agreement will be governed by and interpreted and construed in
accordance with the internal laws of the State of Delaware, as applied to
agreements under seal made, and entirely to be performed, within Delaware.
[The rest of this page is intentionally left blank.]
29
SIGNATURES
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as an agreement under seal on and as of the date first above written.
MEDIA AND XXXXXXXXXXXXX.XXX, INC. WINSONIC HOLDINGS, LTD.
By: /s/ By: /s/
----------------------------- -----------------------
Name: Xxx Xxxxxxxx Name: Xxxxxxx Xxxxxxx
---------------------------- ---------------------
Title: Exec. V.P. Title: President
----------------------------- ---------------------
Exhibit C
Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of _______,
__, 2003, by and among Media and Xxxxxxxxxxxxx.xxx, Inc., a Nevada corporation
(the "Company"), and the persons listed on Schedule A annexed hereto.
Preliminary Statement
(viii) On July 18, 2003, the Company entered into a Stock
Purchase Agreement ("SPA") with Winsonics Holdings,
Ltd., a Delaware corporation ("Winsonics"). Pursuant
to the SPA, Winsonics has received shares of Company
Common Stock equal to 60% of the total number of
shares of the Company issued and outstanding after
giving effect to such issuance (the "Winsonics
Shares"). Pursuant to Section 1.4 (c)(i) of the SPA,
the Company has agreed to register the shares of
common stock of the Company owned, or that may be
acquired by, the persons listed on Schedule A annexed
hereto, for resale under the Securities Act of 1933
(the "Securities Act") and applicable state
securities laws, on the terms and subject to the
conditions set forth in the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
persons listed on Schedule A annexed hereto hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "Holder" means the persons listed on Schedule A annexed hereto,
and any transferee or assignee to whom they assign rights under this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 9.
b. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof.
c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
d. "Registrable Securities" means (i) the shares of common stock
of the Company set opposite the names of the persons listed on Schedule A
annexed hereto, and (ii) any shares of capital stock issued or issuable with
respect to the Shares as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to any
limitation.
e. "Registration Statement" means a registration statement or
registration statements of the Company filed under the Securities Act on Form
S-1 or SB-2 (or any other appropriate form prescribed by the SEC) for the resale
of the Registrable Securities.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, as soon
as practicable, but in no event later than 180 days after the Closing Date of
the SPA (the "Scheduled Filing Date"), file with the SEC a Registration
Statement for the resale of all of the Registrable Securities.
2
b. Demand Registration. If the Company fails to file the
Registration Statement referred to in Section 2(a) by the Scheduled Filing Date,
following its receipt of a written request for the registration of Registrable
Securities by the holders of a Majority (as hereinafter defined) of the
Registrable Securities the Company will promptly file a Registration Statement
for the resale of the Registrable Securities of the Holders specified in such
written request. Holders of Registrable Securities may request registration of
their Registrable Securities under this Section 2(b) on only two (2) occasions,
once at the expense of the Company and once at the expense of the Holders whose
Registrable Securities are included in the Registration Statement. As used
herein, the term "Majority" in reference to the holders of the Registrable
Securities shall mean Holder's who in the aggregate own, or have the right to
acquire, in excess of 50% of the shares of common stock set opposite the names
on Schedule A annexed hereto.
c. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company
proposes to file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
securities (other than a Registration Statement on Form S-4 or Form S-8 (or
their equivalents at such time) relating to securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans) the
Company shall promptly send to each Holder written notice of the Company's
intention to file a Registration Statement and of such Holder's rights under
this Section 2(c) and, if within ten (10) days after receipt of such notice,
such Holder shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such Holder
requests to be registered, subject to the priorities set forth in this Section
2(c) below. No right to registration of Registrable Securities under this
Section 2(c) shall be construed to limit any registration required under
Sections 2(a) or (b). The obligations of the Company under this Section 2(c) may
be waived by Holders holding a majority of the Registrable Securities. If an
offering in connection with which a Holder is entitled to registration under
this Section 2(c) is an underwritten offering, then each Holder whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed to by the Company, offer and sell such Registrable Securities
in an underwritten offering using the same underwriter or underwriters and,
subject to the provisions of this Agreement, on the same terms and conditions as
other shares of Common Stock included in such underwritten offering. If a
registration pursuant to this Section 2(c) is to be an underwritten public
offering and the managing underwriter(s) advise the Company in writing that, in
their reasonable good faith opinion, marketing or other factors dictate that a
limitation on the number of shares of Common Stock which may be included in the
Registration Statement is necessary to facilitate and not adversely affect the
proposed offering, then the Company shall include in such registration: (1)
first, all securities the Company proposes to sell for its own account, (2)
second, up to the full number of securities proposed to be registered for the
account of the holders of securities entitled to inclusion of their securities
in the Registration Statement by reason of demand registration rights, and (3)
third, the securities requested to be registered by the Holders and other
holders of securities entitled to participate in the registration, as of the
date hereof, drawn from them pro rata based on the number each has requested to
be included in such registration.
3
d. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Holders based on the number of Registrable Securities held by
each Holder at the time the Registration Statement covering such initial number
of Registrable Securities or increase thereof is declared effective by the SEC.
In the event that a Holder sells or otherwise transfers any of such Holder's
Registrable Securities, each transferee shall be allocated a pro rata portion of
the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities shall be allocated to the remaining
Holders, pro rata based on the number of Registrable Securities then held by
such Holders.
3. RELATED OBLIGATIONS.
The Company will use its best efforts to effect the registration of the
Registrable Securities contemplated by Section 2 in accordance with the intended
method of disposition thereof and, pursuant thereto, the Company shall have the
following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the Scheduled Filing Date) for the registration of Registrable Securities
pursuant to Section 2 and use its best efforts to cause such Registration
Statements relating to the Registrable Securities to become effective as soon as
possible after such filing. The Company shall not file any other Registration
Statement with respect to any of its securities between the date hereof and the
filing date of such Registration Statement (other than a Registration Statement
on Form S-8 (or its equivalent at such time)). The Company shall keep the
Registration Statement required to be filed hereunder effective pursuant to Rule
415 at all times until the earlier of (i) the date as of which the Holders may
sell all of the Registrable Securities covered by such Registration Statement
without restriction pursuant to Rule 144(k) promulgated under the Securities Act
(or successor thereto) or (ii) the date on which the Holders shall have sold all
the Registrable Securities covered by such Registration Statement (the
"Registration Period"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. The term "best efforts"
shall mean, among other things, that the Company shall submit to the SEC, within
five business days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on the Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement to a
time and date not later than 48 hours after the submission of such request.
4
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the Securities Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
that are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-KSB, Form
10-QSB or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Company shall file such amendments or
supplements with the SEC on the same day or as soon as practicably thereafter on
which the Exchange Act report is filed that created the requirement for the
Company to amend or supplement the Registration Statement.
c. The Company shall furnish to each Holder whose Registrable
Securities are included in any Registration Statement, without charge, upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Holder may reasonably request)
and such other documents, including copies of any preliminary or final
prospectus, as such Holder may reasonably request from time to time in order to
facilitate the disposition of the Registrable Securities owned by such Holder.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as any Holder reasonably requests, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
each Holder who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.
5
e. As promptly as practicable after becoming aware of such event,
the Company shall notify each Holder in writing of the happening of any event as
a result of which the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission, and deliver ten (10)
copies of such supplement or amendment to each Holder (or such other number of
copies as such Holder may reasonably request). The Company shall also promptly
notify each Holder in writing (i) when a prospectus or any prospectus supplement
or post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Holder by facsimile on the same day of
such effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
f. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction and, if such an order or suspension is
issued, to obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify each Holder who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall hold in confidence and not make any
disclosure of information concerning an Holder provided to the Company unless
(i) disclosure of such information is necessary to comply with Federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Holder and allow such Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
h. The Company shall use its best efforts to (i) cause all the
Registrable Securities covered by a Registration Statement to be listed on each
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing
6
of such Registrable Securities is then permitted under the rules of such
exchange, or, if not, (ii) secure the designation and quotation of all the
Registrable Securities covered by the Registration Statement on the Nasdaq
National Market or the Nasdaq SmallCap Market if the Company then satisfies the
applicable eligibility criteria of the Nasdaq Stock Market. The Company shall
pay all fees and expenses in connection with satisfying its obligation under
this Section 3(h).
i. The Company shall provide a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
j. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
k. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
l. Within three (3) business days after a Registration Statement
that covers applicable Registrable Securities is ordered effective by the SEC,
the Company shall deliver to the transfer agent for such Registrable Securities
(with copies to the Holders whose Registrable Securities are included in such
Registration Statement) confirmation that such Registration Statement has been
declared effective by the SEC.
m. The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Holders of Registrable Securities
pursuant to a Registration Statement.
n. Notwithstanding anything to the contrary in Section 3(e), at
any time after the Registration Statement has been declared effective, the
Company may delay the disclosure of material, non-public information concerning
the Company the disclosure of which at the time is not, in the good faith
opinion of the Board of Directors of the Company and its counsel, in the best
interest of the Company and, in the opinion of counsel to the Company, otherwise
required (a "Grace Period"); provided, that the Company shall promptly (i)
notify the Holders in writing of the existence of material, non-public
information giving rise to a Grace Period and the date on which the Grace Period
will begin, and (ii) notify the Holders in writing of the date on which the
Grace Period ends; and, provided further, that during any consecutive 365-day
period, there shall
7
be only one Grace Period, such Grace Period not to exceed 45 days in the
aggregate (an "Allowable Grace Period"). For purposes of determining the length
of a Grace Period above, the Grace Period shall begin on and include the date
the Holders receive the notice referred to in clause (i) above and shall end on
and include the date the Holders receive the notice referred to in clause (ii)
above. Upon expiration of the Allowable Grace Period, the Company shall again be
bound by the first sentence of Section 3(e) with respect to the information
giving rise thereto.
4. OBLIGATIONS OF THE HOLDERS.
a. At least five (5) business days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each Holder in
writing of the information the Company requires from each such Holder if such
Holder elects to have any of such Holder's Registrable Securities included in
such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Holder that
such Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
b. Each Holder by such Holder's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Holder has notified the Company in writing of
such Holder's election to exclude all of such Holder's Registrable Securities
from such Registration Statement.
c. Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
the first sentence of Section 3(h), such Holder will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(e) or the
first sentence of Section 3(f).
d. Each Holder agrees not to take any action to cause such Holder
to become a registered broker-dealer, as defined under the Exchange Act.
8
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company, shall be paid by the Company;
provided, however, that Holders whose Registrable Securities are included in the
second Registration Statement filed under Section 2(b) shall bear all of the
foregoing expenses.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Holder who holds such
Registrable Securities, the directors, officers, partners, and each Person, if
any, who controls, any Holder within the meaning of the Securities Act or the
Exchange Act, and any underwriter (as defined in the Securities Act) for the
Holders, and the directors and officers of, and each Person, if any, who
controls, any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, attorneys'
fees, amounts paid in settlement or expenses, joint or several (collectively,
"Claims"), incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency
or body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified Damages"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of
the Securities Act, the
9
Exchange Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement or (iv) any material
violation of this Agreement (the matters in the foregoing clauses (i) through
(iv) being, collectively, "Violations"). The Company shall reimburse the Holders
and each such underwriter or controlling person, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a Violation that
occurs in reliance upon and in conformity with information furnished in writing
to the Company by such Indemnified Person or underwriter for such Indemnified
Person expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c);
(ii) with respect to any preliminary prospectus, shall not inure to the benefit
of any such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3(c), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a violation and such Indemnified Person, notwithstanding such advice,
used it; (iii) shall not be available to the extent such Claim is based on a
failure of the Holder to deliver or to cause to be delivered the prospectus made
available by the Company, if such prospectus was timely made available by the
Company pursuant to Section 3(c); and (iv) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Holders pursuant to Section 9.
b. In connection with any Registration Statement in which a Holder
is participating, each such Holder agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors and
officers, each Person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim or Indemnified
Damages to which any of them may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise
out of or are based upon any Violation, in each case to the extent, and only to
the extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly for use in
connection with such Registration Statement; and, subject to Section 6(d), such
Holder will reimburse any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) and the agreement
with respect to contribution contained in Section 7 shall not apply to amounts
paid in settlement of any Claim if
10
such settlement is effected without the prior written consent of such Holder,
which consent shall not be unreasonably withheld; provided, further, however,
that the Holder shall be liable under this Section 6(b) for only that amount of
a Claim or Indemnified Damages as does not exceed the net proceeds to such
Holder as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Holders
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus
and such prospectus was provided to Holders as required, as then amended or
supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Holders, and
such legal counsel shall be selected by the Holders holding a majority of the
issued or issuable Registrable Securities included in the Registration Statement
to which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person that relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No
11
indemnifying party shall, without the consent of the Indemnified Party or
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
12
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Holders the benefits of
Rule 144 promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Holders to sell securities
of the Company to the public without registration ("Rule 144") during the
Registration Period, the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
so long as the Company remains subject to such requirements and the filing of
such reports and other documents as required for the applicable provisions of
Rule 144; and
c. furnish to each Holder so long as such Holder owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested to permit the
Holders to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable
by the Holders to any transferee of all or any portion of Registrable Securities
if: (i) the Holder agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act and applicable state securities laws; (iv) at or before the time
the Company receives the written notice contemplated by clause (ii) of this
sentence the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein; and (v) such transfer shall
have been made in accordance with the applicable requirements of the Merger
Agreement.
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10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company and
Holders who then hold or have the right to acquire sixty-six and two-thirds
(66%) of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Holder and the
Company. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Registrable Securities. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
14
If to the Company: Media and Xxxxxxxxxxxxx.xxx, Inc.
00000 X. Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
If to a Holder, to his or its address and facsimile number on Schedule 1 hereto,
or to such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party five days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and an
image of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, transmission by
facsimile or overnight or courier delivery in accordance with clause (A), (B) or
(C) above, respectively.
c. Except as otherwise provided in this Agreement, the failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of Nevada, without giving effect to any choice of law
or conflict of law provision or rule (whether of the State of Nevada or any
other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Nevada. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the Federal District Court of
Nevada or the State courts of the State of Nevada in the City of Las Vegas,
Nevada for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY
15
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
e. This Agreement and the Merger Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Merger Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the heirs, legal
representatives, permitted successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the
Holders pursuant to this Agreement shall be made, unless otherwise specified in
this Agreement, by Holders holding a majority of the Registrable Securities.
k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
16
l. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
Media and Xxxxxxxxxxxxx.xxx, Inc. Holders:
By: /s/ /s/
---------------------------------- ---------------------------
Name: Xxx Xxxxxxxx
Title: Exec. V.P.
/s/
---------------------------
/s/
---------------------------
/s/
---------------------------
/s/
---------------------------
17
Schedule A
Name and Number of
Address Shares
------- ------
[Letterhead of
Media and Xxxxxxxxxxxxx.xxx, Inc.]
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name of Holder]
[Address of Holder]
Attn:______________
______________, 2003
Ladies and Gentlemen:
Please be advised that on __________, 2003 we filed a Registration
Statement on Form SB-2 (File No. 333-__________________) (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") for the
resale of shares of our common stock (the "Shares") by the selling stockholders
named therein in accordance with the Registration Rights Agreement dated as of
July __, 2003.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the Securities Act of 1933
at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no
knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the Shares
are available for resale under the Securities Act of 1933 pursuant to the
Registration Statement.
Very truly yours,
MEDIA AND XXXXXXXXXXXXX.XXX, INC.
By:
----------------------------------------
Name:
Title:
2
Exhibit D
Escrow Agreement
AGREEMENT made as of this __th day of July 2003, between Media and
Xxxxxxxxxxxxxx.xxx, Inc.("the Company") a Nevada corporation, with offices at
00000 X. Xxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000, Winsonic Holdings,
Ltd. ("Winsonic"), a California corporation with offices at One Wilshire
Building, 000 X. Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, XX 00000 and UBS
Financial Services, Inc. with offices at 0000 Xxxxxxx Xxxx X, Xxxxx 0000, Xxx
Xxxxxxx, XX 00000-0000 ("Escrow Agent").
W I T N E S S E T H
WHEREAS, the Company and Winsonic have entered into a Stock Purchase
Agreement dated as of July 18, 2003 (the "SPA") and all defined terms in this
Agreement shall have the same meaning as defined in the SPA;
WHEREAS, the Company and Winsonic wish to establish an escrow fund (the
"Escrow Fund") and wish to transfer all shares issued to Winsonic under the SPA
to the Escrow Agent; and
WHEREAS, the Escrow Agent has agreed to act as escrow agent and shall
deposit said shares in an escrow account.
NOW, THEREFORE, it is agreed as follows:
1. Deposit of Escrow Shares - Establishment of Escrow.
Concurrently with the execution and delivery of this
Agreement, the Company is delivering or causing to be delivered to the Escrow
Agent all but 2 million of the Purchased Securities under the SPA, or 28 million
shares of Common Stock, $.001 per share, of the Company registered in the name
of Winsonic and/or its permitted assignees (hereafter referred to as the
"Holders"). The 2 million shares issued under the Services Agreement executed
simultaneously with the SPA are a non-cancelable advance on the Purchased
Securities. The 28 million shares so deposited are referred to herein as the
"Escrow Shares."
2. Release of Escrow Shares.
Upon receipt by the Escrow Agent of appropriate written
instructions from the Company and Winsonic, the Escrow Agent shall then transfer
the Escrow Shares in the Escrow Fund, held in the Holders' names, within three
business days of such instructions, as follows:
(A) All of the Purchased Securities shall be released
to Winsonic if the Company's independent auditors (the "Accountants")
have reviewed and/or audited the Company's financial statements which
reflect the recognition of an amount of revenues
which have been derived from the Listed Contracts (as defined in the
SPA) equal to at least $1,500,000, which is fifty percent (50%) of the
$3 million Purchase Price.
(B) In the event that an amount equal to less than 50%
of the Purchase Price, however, greater than 25% of the Purchase Price,
is confirmed by the Company's auditors as having been derived from the
Listed Contacts, then the Purchased Securities shall be released from
escrow on a pro rata basis, from time to time, in the same percentage
as the fraction of the Purchase Price earned multiplied by two (2).
Thus, for purposes of example, in the event the Company earns 35% of
the Purchase Price from the Listed Contracts, then 70% of the Purchased
Securities shall be released from escrow (35% x 2 = 70%); thereafter,
if the percentage earned should increase to, e.g., 40%, then an
additional 10% of the Purchased Securities shall be released to the
Purchaser. Any and each such pro rata release from escrow of a portion
of the Purchased Securities shall take place as soon as practicable
following confirmation by the Company's accountants that the Company
derived part of the Purchase Price from the Listed Contracts.
Notwithstanding the escrow of the Purchased Securities, the purchaser
shall be entitled to vote the Purchased Securities to the same extent
as if the Purchaser retained physical possession of the Purchased
Securities. The terms and conditions of the Escrow Agreement are
incorporated by reference herein, and should there be any conflict
between this Agreement and the Escrow Agreement, the latter shall
control.
(C) To effect release, any Holder may submit to the
Escrow Agent and to the Company, a copy of the Company's audited
financial statements for any fiscal quarter and/or year together with
a request to release a specified number of Escrow Shares from escrow.
The financial statements shall be accompanied by a letter from the
Accountants which will set forth the amount of revenues derived from
the Listed Contracts as calculated in the report and will state that
the computations are in accordance with this Agreement. The
Accountant's reports and their letter delivered hereunder shall be
referred to hereinafter as the "Report." Promptly thereafter, the
Escrow Agent shall release the releasable Escrow Shares to the
Holders.
(D) In the event of any disputes as to any Report,
the final determination contained in a report shall be made by a firm
of independent certified public accountants, other than the Company's
Accountants, selected by the Accountants and the Company and such
determination shall be final and binding on the parties.
Notwithstanding any to the contrary contained in this Section 2, in
the event of any such dispute, the Escrow Agent shall continue to hold
the Escrow Shares until such dispute has been determined in the manner
provided in this Section.
(E) If 50% of the Purchase Price is not achieved by
July 31, 2005, the Escrow Shares not releasable from escrow shall be
returned to the Company for cancellation as a contribution to capital
and this Agreement shall terminate.
3. Adjustments to the Number of Escrow Shares.
2
During the term of this Escrow Agreement, if the
Company shall effect any stock split, distribution, recapitalization,
subdivision, reclassification or other similar event, the Escrow Shares
shall be subject to pro rata adjustment so immediately thereafter the
Escrow Shares held in escrow shall be correspondingly increased to
reflect an increase in the outstanding Common Stock or decreased to
reflect a decrease in the outstanding Common Stock.
4. Rights Regarding Escrow Shares.
For so long as the Escrow Shares are in Escrow, the Holders
shall retain full voting rights and full dividend rights with respect to the
Escrow Shares, but shall possess no right to tender or otherwise transfer the
Escrow Shares and, if instructions on tender or other transfer thereof are
received by the Escrow Agent, as escrow agent or in any other capacity, the
Escrow Agent shall promptly notify the Company in writing thereof, but shall not
take any other action with respect thereto except as provided in this Escrow
Agreement. During the term of this Escrow Agreement, all of the Escrow Shares
shall be held in the name of Winsonic and/or the Holders and each certificate
shall be appropriately legended.
5. Term.
This Escrow Agreement shall continue in effect until receipt
by the Escrow Agent of written notice of termination signed by the Company and
Winsonic directing the disposition of the Escrow Shares, and the disposition
thereof by the Escrow Agent pursuant to such direction.
6. Obligations of the Escrow Agent.
The Escrow Agent shall not have any liability under, or duty
to inquire into, the terms and provisions of any agreement, other than this
Agreement. The Escrow Agent shall hold the Escrow Shares without compensation as
a stakeholder only. The Escrow Agent is not and shall not be deemed to be a
trustee for any party for any purpose and is merely acting as a depository with
the limited duties herein described. Its duties are ministerial in nature, and
the Escrow Agent shall not incur any liability whatsoever so long at it has
acted in good faith, except for willful misconduct or gross negligence. The
Escrow Agent shall not have any duties or responsibilities hereunder except as
expressly set forth herein; shall have no investment responsibility with respect
to the Escrow Shares or other property held hereunder; and shall have no
responsibility for ascertaining or taking any action with respect to calls,
conversions, exchanges, maturities, tenders, or other matters relating to any
property held by it hereunder, whether or not the Escrow Agent has or is deemed
to have knowledge or notice of such matters, or taking any steps to preserve
rights against any parties with respect to any property held by it hereunder.
The Escrow Agent may consult with counsel of its choice,
including in-house counsel, and shall not be liable for any action taken,
suffered or omitted by it in accordance with the advice of such counsel. The
Escrow Agent shall not be bound by any modification,
3
amendment, termination, cancellation, rescission or supersession of this
Agreement unless the same shall be in writing and signed by the Company,
Winsonic and the Escrow Agent, if its duties as Escrow Agent hereunder are
affected thereby, unless it shall have given its prior written consent thereto.
In the event that the Escrow Agent shall be uncertain as to
its duties or rights hereunder or shall receive instructions, claims or demands
from the Company or Winsonic which, in its opinion, conflict with any of the
provisions of this Agreement, it shall be entitled to refrain from taking any
action and its sole obligation shall be to keep safely all property held in
escrow until it shall be directed otherwise in writing by the Company and
Winsonic or by a final order or judgment of a court of competent jurisdiction.
Alternatively, the Escrow Agent may, in its sole discretion, deposit with the
Clerk of any court of competent jurisdiction, any and all funds, securities and
other property held by it pursuant thereto and thereupon and, shall stand fully
relieved and discharged of any further duties hereunder.
The Escrow Agent shall not incur any liability for following
the instructions herein contained or expressly provided for, or written
instructions given by the Company or Winsonic. The Escrow Agent shall be
entitled to rely upon any notice, certificate, affidavit, letter, document, or
other communication which is, upon reasonable verification, believed by the
Escrow Agent to be genuine and to have been signed or sent by the proper party
or parties, and may rely on statements contained therein without further inquiry
or investigation. Release by the Escrow Agent of the Escrow Shares shall not
constitute a distribution by Escrow Agent, or a legal opinion of Escrow Agent
that said release is lawful, or that said release does not violate any
Securities laws, or other agreements.
The Escrow Agent shall not have any responsibility for the
genuineness or validity of any document or other item deposited with it and any
liability for action in accordance with any written instructions or certificates
given to it hereunder and believed by it to be signed by the proper parties.
The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to initiate or defend any
legal proceedings or enforcement/investigatory actions of any kind which may be
instituted against it in respect of the subject matter of these instructions. If
it does elect to act it will do so only if it is indemnified to its satisfaction
against the cost and expense of such defense or initiation.
The Escrow Agent shall have no obligation to anyone to invest
any of the deposited shares. Any cash dividends shall be payable to the Holder.
Any stock dividends shall be deposited in escrow hereunder. The Escrow Agent
shall not be responsible in any manner whatsoever for any failure or inability
of the Holders to deliver shares to the Escrow Agent or otherwise to honor any
of the provisions of this Agreement.
7. Release of Escrow Agent.
The Escrow Agent may at any time resign hereunder by giving
written notice of its resignation to the Company and Winsonic at their addresses
set forth in this Agreement, at least 30 days prior to the date specified for
such resignation to take effect, and upon the effective
4
date of such resignation, all property then held by the Escrow Agent hereunder
shall be delivered by it to such person as may be designated by the Company and
Winsonic in writing, whereupon all the Escrow Agent's obligations hereunder
shall cease and terminate. If no such person shall have been designated by such
date, all obligations of the Escrow Agent hereunder shall nevertheless cease and
terminate. The Escrow Agent's sole responsibility thereafter shall be to keep
safely all property then held by it and to deliver the same to a person
designated by Surge or in accordance with the directions of a final order or
judgment of a court of competent jurisdiction.
8. Indemnity of Escrow Agent.
The parties hereto jointly and severally agree to indemnify,
defend and hold the Escrow Agent harmless from and against any and all loss,
damage, tax, liability and expense that may be incurred by the Escrow Agent
arising out of or in connection with its acceptance of appointment as Escrow
Agent hereunder, except as caused by its gross negligence or willful misconduct,
including the legal costs and expenses of defending itself against any claim or
liability in connection with its performance hereunder.
9. Construction of the Instruments by Escrow Agent.
In accepting the terms hereof, it is agreed and understood
between the parties hereto that the Escrow Agent will not be called upon to
construe any contract or instrument in connection herewith and shall be required
to act in respect of the deposits herein made only as directed herein.
10. Notice.
Any notice, permitted or required to be given pursuant to this
Agreement shall be sufficiently given if sent in writing by registered or
certified mail to all other parties at the addresses first above noted or to
such other address as a party may designate by notice to the other parties.
Notice shall be deemed given when mailed.
11. Governing Law; Venue; Consent to Jurisdiction.
This Agreement shall be governed by and construed in
accordance with the laws of the State of California and any action brought
hereunder shall be brought in the courts of the State of California, sitting in
Los Angeles County. Each party hereto consents to the jurisdiction of such
courts.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
5
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the day and year first above written.
WINSONIC HOLDINGS LTD.
By: /s/
---------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
MEDIA AND XXXXXXXXXXXXX.XXX, INC.
By: /s/
---------------------------------------
Name: Xxx Xxxxxxxx
Title: Exec V.P.
UBS FINANCIAL SERVICES, INC.
By: /s/
---------------------------------------
Name:
Title:
