Exhibit 10.2
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement ("Agreement") is entered into as of
August 1, 2000, by Copyright Control Services, Inc., a Delaware corporation
("CCS"), the shareholders of CCS listed on the attached SCHEDULE A
(individually, a "CCS Shareholder" and collectively, the "CCS Shareholders") and
Xxxxxxx.xxx Corporation, a Washington corporation ("Sunhawk").
RECITALS
A. Sunhawk wishes to acquire from the CCS Shareholders, on the terms
and conditions set forth in this Agreement, all of the issued and outstanding
shares of CCS.
B. Together, the CCS Shareholders are the owners of 8,616,366 shares of
common stock and 1,252,884 shares of preferred stock of CCS as shown on SCHEDULE
A (the "CCS Shares"), which CCS Shares represent all issued and outstanding
capital stock of CCS.
C. The CCS Shareholders desire to exchange the CCS Shares for a total
of 1,950,938 shares of the common stock of Sunhawk (the "Sunhawk Shares") so as
to accomplish and effect a share exchange under the Business Corporation Act of
the State of Washington.
D. It is the intent of the parties that the share exchange qualify as a
corporate reorganization under Section 368(a)(1)(B) of the Internal Revenue Code
of 1986, as amended (the "Code") and applicable British law.
Accordingly, the parties agree as follows:
1. SHARE EXCHANGE; ESCROW.
1.1 EXCHANGE OF CCS SHARES. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined below), the CCS Shares owned by
each CCS Shareholder shown on SCHEDULE A shall automatically be exchanged for
the right to receive that number of the Sunhawk Shares determined by application
of the Exchange Ratio described in Section 1.3 (the "Share Exchange"). At the
Effective Time and upon the effectiveness of the Share Exchange, Sunhawk shall
be deemed to the holder of record of all the CCS Shares, and CCS shall continue
to be governed by the laws of the State of Delaware.
1.2 ARTICLES OF SHARE EXCHANGE. The Share Exchange shall be effectuated
at the Effective Time pursuant to Articles of Share Exchange ("Articles of Share
Exchange") filed in accordance with applicable provisions of the Washington
Business Corporation Act. The Articles of Share Exchange shall be filed with the
Washington Secretary of State together with any other filings or recordings
required by Washington law in connection with the Share Exchange as soon as
practicable after the Closing (as defined below). The term "Effective Time" as
used in this Agreement means the time at which the Share Exchange becomes
effective under the laws of the State of Washington.
1.3 EXCHANGE RATIO. At the Effective Time, each of the CCS Shares
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Share Exchange and without any action on the part of the CCS
Shareholders, automatically be exchanged for that number of Sunhawk Shares
determined by mutual agreement of the CCS Shareholders prior to Closing (the
"Exchange Ratio"). Each certificate evidencing ownership of the CCS Shares
outstanding immediately prior to the Effective Time shall, immediately after the
Effective Time, be exchanged for a certificate or certificates evidencing
ownership of the applicable number of the Sunhawk Shares. At the Closing,
825,000 shares of the common stock of Sunhawk (the "Closing Shares") identical
to the currently issued and outstanding shares of Sunhawk common stock (the
"Common Stock") shall be delivered to the CCS Shareholders. The balance of
1,125,938 Sunhawk Shares shall be Class A Common Stock (the "Class A Common
Shares" or the "Escrowed Shares"), which shall be identical to the Common Stock
except that (i) the voting rights associated with the Class A Common Shares
shall equal 0.05 votes per share, (ii) upon liquidation the Class A Common
Shares shall equal 0.05 shares of Common Stock, and (iii) the Class A Common
Shares shall be convertible into shares of the Common Stock, on a share for
share basis, upon their release from escrow in accordance with the terms and
conditions of the contingent share escrow agreements in the forms attached as
SCHEDULES 1.3.1 and 1.3.2 (the "Contingent Share Escrow Agreements").
1.4 OPTIONS AND WARRANTS. At its option, exercised in writing prior to
the Closing, Sunhawk may elect to adopt and assume the CCS 1999 Stock Option
Plan and any of the outstanding options to purchase the common stock of CCS
shown on SCHEDULE 4.3 (the "CCS Options"), converted at the Exchange Ratio into
options to purchase shares of Common Stock, in which event such options shall
continue in effect after the Closing in accordance with their original vesting
schedules. In the event such option is not exercised by Sunhawk as to any or all
of the CCS Options, any CCS Options not so assumed and converted, and all
warrants listed on SCHEDULE
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4.3, shall vest immediately prior to Closing as set forth in the applicable
option and warrant agreements.
1.5 HOLDBACK. Sunhawk shall retain 100,000 of the Closing Shares (the
"Holdback Shares") until the earlier of 120 days from the Closing Date or
completion of a CCS audit (either, the "Disposal Date") performed by Ernst and
Young (the "Post-Closing Audit"). On the Disposal Date, Holdback Shares with an
aggregate fair market value, as of the Disposal Date, equal to any Excess
Liabilities identified in the Post-Closing Audit shall be released to Sunhawk.
"Excess Liabilities" shall mean the amount by which the liabilities identified
in the Post-Closing Audit exceeds the liabilities identified in the attached
SCHEDULE 1.5, which schedule shall be updated by CCS as of the Closing and
delivered to Sunhawk at Closing. The Warranting Shareholders shall be jointly
and severally liable for any Excess Liabilities remaining after release of all
of the Holdback Shares to Sunhawk. Any of the Holdback Shares remaining after
the Disposal Date shall be retained by Sunhawk for an additional 60 days. To the
extent that Sunhawk identifies a breach of the representations and warranties
set forth in Section 4 during the period beginning on the Closing Date and
ending 180 days thereafter (the "Holdback Period"), Sunhawk shall provide
written notice of such breach to the CCS Shareholders, which notice shall
include a description of the breach and the dollar amount of damages sustained
by Sunhawk as a result of such breach (a "Breach Notice"). If the CCS
Shareholders do not dispute a Breach Notice in a writing delivered to Sunhawk
within 30 days after their receipt of a Breach Notice, Holdback Shares with an
aggregate fair market value, as of the date of the Breach Notice, equal to the
amount of damages claimed in the Breach Notice shall be released to Sunhawk. If
any CCS Shareholder disputes a Breach Notice, the dispute shall be submitted to
arbitration in accordance with Section 9.14 of this Agreement. Any Holdback
Shares remaining upon expiration of the Holdback Period shall be released to the
CCS Shareholders in proportion to their interests in the Sunhawk Shares, except
for that number of Holdback Shares sufficient to satisfy claims made in any
Breach Notice delivered to the CCS Shareholders prior to the expiration of the
Holdback Period.
2. CLOSING AND CLOSING DOCUMENTS.
2.1 DATE, TIME AND PLACE OF CLOSING. The Share Exchange contemplated by
this Agreement shall take place at a closing (the "Closing") to be held at the
offices of The Xxxx Law Group, PLLC, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxxxx 00000, on a date and at a time convenient to the parties. The date on
which the Closing occurs is referred to in this Agreement as the "Closing Date."
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2.2 CCS SHAREHOLDERS CLOSING DOCUMENTS. At the Closing, the CCS
Shareholders shall deliver or cause to be delivered to or at the direction of
Sunhawk the following documents (collectively, the "CCS Shareholders Closing
Documents"):
2.2.1 CCS SHARE CERTIFICATES. Certificates, executed in blank
by the CCS Shareholders, or accompanied by assignments separate from certificate
executed by the CCS Shareholders, representing all of the CCS Shares;
2.2.2 ESCROW STOCK POWERS. Stock powers in favor of
Sunhawk executed by the CCS Shareholders and representing all of the Escrowed
Shares;
2.2.3 CONTINGENT SHARE ESCROW AGREEMENTS. The Contingent
Share Escrow Agreements, executed by (a) all of the CCS Shareholders except
@Visory, LLC, and (b) @Visory, LLC;
2.2.4 REGISTRATION RIGHTS AGREEMENT. A Registration Rights
Agreement giving the CCS Shareholders "piggyback" registration rights with
regard to their Sunhawk Shares in the form attached as SCHEDULE 2.2.4 (the
"Registration Rights Agreement"), executed by all CCS Shareholders except the
CCS Management Holders described in Section 5.9;
2.2.5 SERVICES AGREEMENT. A Services Agreement in a form
mutually acceptable to Sunhawk and @Visory LLC (the "Services Agreement"),
executed by @Visory, LLC;
2.2.6 EMPLOYMENT AGREEMENTS. Employment Agreements in a form
mutually acceptable to Sunhawk and each of Xxxxx Xxxxxx and Xxxxxx Xxxxxx and
executed by Xxxxx Xxxxxx and Xxxxxx Xxxxxx, respectively (the "Employment
Agreements");
2.2.7 TERMINATION OF EXISTING AGREEMENTS. Terminations of the
existing employment and consulting agreements listed on SCHEDULE 2.2.7, executed
by Xxxxx Xxxxxx, Xxxxxx Xxxxxx, @Visory LLC and CCS;
2.2.8 GOOD STANDING CERTIFICATES. (a) A certificate issued by
the Delaware Secretary of State indicating that CCS is qualified and in good
standing within such jurisdiction and (b) a certificate issued by the Companies
House Registries indicating that Chinerose (identified in Section 4.4) is in
good standing within such jurisdiction; and
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2.2.9 OTHER DOCUMENTS AND INSTRUMENTS. Such other documents
and instruments as Sunhawk's counsel may deem to be necessary or advisable to
effect the transactions contemplated by this Agreement.
2.3 SUNHAWK CLOSING DOCUMENTS. At the Closing, Sunhawk shall deliver or
cause to be delivered to the CCS Shareholders the following documents
(collectively, the "Sunhawk Closing Documents"):
2.3.1 ARTICLES OF SHARE EXCHANGE. The Articles of Share
Exchange, executed by Sunhawk;
2.3.2 SUNHAWK SHARE CERTIFICATES. One or more stock
certificates in the name of each of the CCS Shareholders representing such CCS
Shareholder's ownership of the Sunhawk Shares;
2.3.3 CONTINGENT SHARE ESCROW AGREEMENTS. The Contingent Share
Escrow Agreements, executed by Sunhawk;
2.3.4 REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement, executed by Sunhawk;
2.3.5 SERVICES AGREEMENT. The Services Agreement, executed by
Sunhawk;
2.3.6 EMPLOYMENT AGREEMENTS. The Employment Agreements,
executed by Sunhawk;
2.3.7 GOOD STANDING CERTIFICATE. A certificate issued by the
Washington Secretary of State indicating that Sunhawk is qualified and in good
standing within such jurisdiction;
2.3.8 SUNHAWK OFFICER'S CERTIFICATE. A certificate dated as of
the Closing Date executed by a duly authorized officer of Sunhawk certifying
that all necessary actions have been taken by Sunhawk's shareholders and
directors to authorize the transactions contemplated by this Agreement and that
all representations and warranties made by Sunhawk in this Agreement are
complete and correct in all material respects as of the Closing Date as if made
on the Closing Date; and
2.3.9 OTHER DOCUMENTS AND INSTRUMENTS. Such other documents
and instruments as CCS's counsel may deem to be necessary or advisable to effect
the transactions contemplated by this Agreement.
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3. REPRESENTATIONS AND WARRANTIES OF SUNHAWK.
Sunhawk represents and warrants to each of the CCS Shareholders that
the statements contained in this Section 3 are correct and complete as of the
date of this Agreement.
3.1 ORGANIZATION OF SUNHAWK. Sunhawk is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Washington. Sunhawk has all the requisite power and authority to own, lease and
operate all of its properties and assets and to carry on its business as
currently conducted and as proposed to be conducted. Sunhawk is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the nature of the business conducted by it makes such licensing or qualification
necessary and where the failure to be so qualified would, individually or in the
aggregate, have a Material Adverse Effect upon it. As used in this Agreement,
the term "Material Adverse Effect" with respect to any party, shall mean any
change or effect that is reasonably likely to be materially adverse to the
business, operations, properties, condition (financial or otherwise), assets or
liabilities of such party and such party's subsidiaries taken as a whole.
3.2 AUTHORIZATION. Subject to the approval of its shareholders, Sunhawk
has full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and the Sunhawk Closing Documents and to
perform its obligations hereunder and thereunder. This Agreement constitutes,
and the Sunhawk Closing Documents will constitute, valid and legally binding
obligations of Sunhawk, enforceable in accordance with their respective terms
and conditions.
3.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Sunhawk Closing Documents, nor the consummation of the
transactions contemplated hereby or thereby by Sunhawk, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Sunhawk is subject or any provision of its articles of
incorporation or bylaws, or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which Sunhawk is a party or by which it is bound or to which any of its
assets is subject. Sunhawk does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the parties to consummate the transactions
contemplated by this Agreement.
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3.4 LIMITED REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties of the Warranting Shareholders expressly set
forth in Section 4, below, Sunhawk has not relied upon any representation and
warranty made by CCS or the CCS Shareholders in making its determination to
enter into this Agreement and consummate the transactions contemplated by this
Agreement.
3.5 DISCLOSURE. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
3.6 CAPITALIZATION. The authorized capital stock of Sunhawk consists of
30,000,000 shares of no par value common stock, of which 3,010,865 shares are
issued and outstanding, and 10,000,000 shares of no par value preferred stock,
none of which is issued and outstanding. All issued and outstanding shares have
been duly authorized and validly issued, and are fully paid and nonassessable.
All of the outstanding shares of Common Stock (and options to purchase Common
Stock) and other outstanding securities of Sunhawk have been, and the Sunhawk
Shares will be, duly and validly issued in compliance with federal and state
securities laws. Except for this Agreement and as contemplated by this Agreement
and as shown on SCHEDULE 3.6, there are no outstanding or authorized
subscriptions, options, warrants, plans or, other agreements or rights of any
kind to purchase or otherwise receive or be issued, or securities or obligations
of any kind convertible into, any shares of capital stock or other securities of
Sunhawk, and there are no dividends which have accrued or been declared but are
unpaid on the capital stock of Sunhawk. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to Sunhawk.
Sunhawk does not own, directly or indirectly, any capital stock or other equity
interest in any corporation, partnership or other entity. The Closing Shares are
duly authorized and, when issued in accordance with the terms and conditions of
this Agreement, shall be validly issued, fully paid and nonassessable. Prior to
the Closing, the Escrowed Shares will be duly authorized and, when issued in
accordance with this Agreement, shall be validly issued, fully paid and
nonassessable. Except as contemplated by this Agreement and the Contingent Share
Escrow Agreements, the Sunhawk Shares are not subject to any preemptive rights
or other similar restrictions.
3.7 SEC REPORTS AND FINANCIAL STATEMENTS. Sunhawk has filed with the
SEC, and has heretofore made available to the CCS Shareholders, complete and
correct copies of all forms, reports, schedules, statements and other documents
required to be filed by Sunhawk under the Securities Act of 1933, as amended
(the "Securities Act"), and the Exchange Act (as such documents have been
amended or supplemented since the time of their filing, collectively, the "SEC
Reports"). As of
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their respective dates, the SEC Reports (including without limitation, any
financial statements or schedules included therein) (a) did not contain any
untrue statement of a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading, and (b) complied in all material
respects with the applicable requirements of the Securities Act and Exchange Act
(as the case may be) and all applicable rules and regulations of the SEC
promulgated thereunder. Each of the financial statements included in the SEC
Reports has been prepared from, and is in accordance with, the books and records
of Sunhawk, complies with all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, has been prepared in accordance with U.S. generally accepted
accounting principles ("U.S. GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presents in all material respects the consolidated results of operations and
cash flows (and changes in financial position, if any) of Sunhawk, as at the
date(s) thereof or for the period(s) presented therein.
3.8 NO UNDISCLOSED LIABILITIES. Except as described in the SEC Reports,
Sunhawk has no debts, liabilities or obligations of any kind, whether accrued,
absolute, contingent or other, whether due or to become due, except as incurred
in the ordinary course of business, that could have a Material Adverse Effect on
Sunhawk.
3.9 LEGAL PROCEEDINGS, CLAIMS, ETC. There is no legal, administrative,
arbitration or other action or proceeding pending against Sunhawk or any of its
directors, officers, or employees. Sunhawk has not been informed of any
violation or default under any laws, ordinances, regulations, judgments,
injunctions, orders or decrees of any governmental authority. Except as set
forth in the SEC Reports, Sunhawk is not subject to any judgment, order,
injunction or decree of any court, arbitral authority or governmental authority
that could have a Material Adverse Effect on Sunhawk.
3.10 TAX TREATMENT. As of the date of this Agreement, Sunhawk has no
reason to believe that the Share Exchange will not qualify as a "reorganization"
within the meaning of Section 368(a) of the Code.
4. REPRESENTATIONS AND WARRANTIES OF WARRANTING SHAREHOLDERS.
Xxxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxxxxx X. Xxxxx (each a "Warranting
Shareholder" and together the "Warranting Shareholders"), jointly and severally
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represent and warrant to Sunhawk that the statements contained in this Section 4
are correct and complete as of the date of this Agreement.
4.1 ORGANIZATION.
4.1.1 CCS is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware. CCS has all the
requisite power and authority to own, lease and operate all of its properties
and assets and to carry on its business as currently conducted and as proposed
to be conducted. CCS is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it makes such licensing or qualification necessary and where the failure to be
so qualified would, individually or in the aggregate, have a Material Adverse
Effect upon it.
4.1.2 Chinerose (identified in Section 4.4) is a corporation
duly organized, validly existing, and in good standing under the laws of the
United Kingdom. Chinerose has all the requisite power and authority to own,
lease and operate all of its properties and assets and to carry on its business
as currently conducted and as proposed to be conducted. Chinerose is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it makes such
licensing or qualification necessary and where the failure to be so qualified
would, individually or in the aggregate, have a Material Adverse Effect upon it.
4.2 AUTHORIZATION OF TRANSACTION. All CCS Shareholders have full power
and authority to execute and deliver this Agreement and the CCS Shareholders
Closing Documents to which any CCS Shareholder is a party and to perform the CCS
Shareholders' obligations hereunder and thereunder. This Agreement constitutes,
and the CCS Shareholders Closing Documents will constitute, the valid and
legally binding obligation of the CCS Shareholders, enforceable in accordance
with their respective terms and conditions. Each CCS Shareholder severally makes
the representations and warranties set forth in this Section 4.2 to Sunhawk.
4.3 CAPITALIZATION. The authorized capital stock of CCS consists of
14,000,000 shares of common stock, of which 8,616,366 shares are issued and
outstanding, and 1,300,000 shares of preferred stock, of which 1,252,884 shares
are issued and outstanding. All issued and outstanding shares of CCS stock have
been duly authorized and validly issued, and are fully paid and nonassessable.
All of the outstanding shares of common stock (and options to purchase common
stock) and other outstanding securities of CCS have been duly and validly issued
in compliance with federal and state securities laws. Except as set forth in
SCHEDULE 4.3, there are no
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outstanding or authorized subscriptions, options, warrants, plans or, except for
this Agreement and as contemplated by this Agreement, other agreements or rights
of any kind to purchase or otherwise receive or be issued, or securities or
obligations of any kind convertible into, any shares of capital stock or other
securities of CCS, and there are no dividends which have accrued or been
declared but are unpaid on the capital stock of CCS. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
CCS. The CCS Shares are duly authorized and validly issued, fully paid and
nonassessable. The CCS Shares are not subject to any preemptive rights or other
similar restrictions.
4.4 SUBSIDIARIES. Except for its wholly owned subsidiary, Chinerose,
Ltd., a United Kingdom corporation ("Chinerose") and for the joint venture
described on SCHEDULE 4.4, CCS does not own, directly or indirectly, any capital
stock or other equity interest in any corporation, partnership or other entity.
4.5 OWNERSHIP OF CCS SHARES. Each of the CCS Shareholders owns and
holds of record that number of CCS Shares shown on SCHEDULE A. Each CCS
Shareholder has good title to such CCS Shareholder's CCS Shares, free and clear
of all claims, charges, liens and other encumbrances. Except as set forth on
SCHEDULE 4.5, each CCS Shareholder has full power over such CCS Shareholder's
CCS Shares, subject to no proxy, shareholders' or voting agreement.
4.6 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the CCS Shareholders Closing Documents, nor the consummation of the
transactions contemplated hereby or thereby, by CCS or such CCS Shareholder will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which CCS or such CCS Shareholder is subject,
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which CCS or such CCS Shareholder
is a party or by which CCS or such CCS Shareholder is bound or to which CCS or
any of such CCS Shareholder's assets is subject. Neither CCS nor such CCS
Shareholder needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the parties to consummate the transactions contemplated by this
Agreement.
4.7 FINANCIAL STATEMENTS AND FINANCIAL CONDITION. Attached as SCHEDULE
4.7 are the following financial statements: (a) for CCS (i) its unaudited
consolidated balance sheet as of July 24, 2000, and the related unaudited
consolidated statements of
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income and retained earnings and of cash flows, and (ii) its unaudited
consolidated balance sheet as of December 31, 1999 and the related unaudited
consolidated statements of income and retained earnings and of cash flows for
the period ended December 31, 1999, and (b) for Chinerose the audited financial
statements of Chinerose for the period ended August 31, 1999 (collectively, the
"Financial Statements"). The Financial Statements, including any related notes
and schedules, have been prepared in accordance with U.S. GAAP consistently
applied, are based on the books, records and work papers of CCS or Chinerose, as
the case may be, and present fairly the financial position of CCS and Chinerose
as of the dates of such statements and the results of operations for the periods
covered by such statements, subject to normal year-end adjustments and the
absence of footnotes.
4.8 ABSENCE OF MATERIAL CHANGE. Since July 24, 2000, there has been no
change in the business, operations, financial condition or liabilities of CCS or
Chinerose that would result in a Material Adverse Effect on CCS or Chinerose.
4.9 LITIGATION. There are no actions, suits, claims, inquiries,
proceedings or investigations before any court, tribunal, commission, bureau,
regulatory, administrative or governmental agency, arbitrator, body or authority
pending or, to the knowledge of such Warranting Shareholder, threatened against
CCS or Chinerose which would reasonably be expected to result in any
liabilities, including defense costs, in excess of $50,000 U.S. in the
aggregate. Neither CCS or Chinerose is the named subject of any order, judgment
or decree and is not in default with respect to any such order, judgment or
decree.
4.10 TAXES AND TAX RETURNS. Except as shown on SCHEDULE 4.10, CCS and
Chinerose have timely and correctly filed tax returns and reports (collectively,
"Returns") required by applicable law to be filed (including, without
limitation, estimated tax returns, income tax returns, excise tax returns, sales
tax returns, use tax returns, property tax returns, franchise tax returns,
information returns and withholding, employment and payroll tax returns) and all
such returns were (at the time they were filed) correct in all material
respects, and have paid all taxes, levies, license and registration fees,
charges or withholdings of any nature whatsoever reflected on such Returns to be
owed and which have become due and payable except for any that is being
contested in good faith. The unpaid U.S. Federal income taxes, interest and
penalties of CCS do not exceed $50,000 U.S. in the aggregate.
4.11 EMPLOYEES. SCHEDULE 4.11 is a list of all salaried persons
employed by CCS and Chinerose and a description of their salaries and deferred
compensation.
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4.11.1 Except as set forth on SCHEDULE 4.11, no officer or
employee of CCS or Chinerose is receiving aggregate remuneration (bonus, salary,
deferred compensation and commissions) at a rate, which if annualized, would
exceed $75,000 U.S. in the year 2000.
4.11.2 Except as set forth on SCHEDULE 4.11.2, neither CCS nor
Chinerose is a party to, or bound by, any contract, arrangement or understanding
(whether written or oral) with respect to the employment or compensation of any
officers, employees or consultants and except as provided in this Agreement,
consummation of the transactions contemplated by this Agreement will not result
in any payment (whether of severance pay or otherwise) becoming due from CCS or
Chinerose to any officer or employee thereof. CCS has previously delivered or
made available to Sunhawk true and complete copies of all written employment,
consulting and deferred compensation agreements to which CCS or Chinerose is a
party.
4.11.3 There are not, and have not been at any time in the
past three years, any actions, suits, claims or proceedings before any court
tribunal, commission, bureau, regulatory, administrative or governmental agency,
arbitrator, body or authority pending or, to such Warranting Shareholder's
knowledge, threatened, by any employees, former employees or other persons
relating to the employment practices or activities of CCS or Chinerose (except
for actions which have subsequently been resolved). Neither CCS nor Chinerose is
a party to any collective bargaining agreement, and no union organization
efforts with respect to CCS or Chinerose are pending or, to such Warranting
Shareholder's knowledge, threatened nor have any occurred during the last three
years.
4.11.4 CCS has made available to Sunhawk true and complete
copies of all personnel codes, practices, procedures, policies, manuals,
affirmative action programs and similar materials of CCS and Chinerose.
4.12 COMPLIANCE WITH APPLICABLE LAW.
4.12.1 CCS and Chinerose hold all licenses, certificates,
franchises, permits and other governmental authorizations ("Permits") necessary
for the lawful conduct of their businesses and such Permits are in full force
and effect, and CCS and Chinerose are in all material respects complying
therewith, except where the failure to possess or comply with such Permits would
not have, in the aggregate, a Material Adverse Effect on CCS or Chinerose.
4.12.2 CCS and Chinerose are and for the past three years have
been in compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules,
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regulations and orders applicable to the operation, conduct or ownership of
their businesses or properties except for any noncompliance which is not
reasonably likely to have, in the aggregate, a Material Adverse Effect on CCS or
Chinerose.
4.13 CONTRACTS AND AGREEMENTS. Except as disclosed on SCHEDULE 4.13,
(i) neither CCS nor Chinerose is a party to or bound by any commitment,
contract, agreement or other instrument which involves or could involve
aggregate future payments by CCS or Chinerose of more than $25,000 U.S., (ii)
neither CCS or Chinerose is a party to or bound by any commitment, contract,
agreement or other instrument which is material to the business, operations,
properties, assets or financial condition of CCS or Chinerose, and (iii) no
commitment, contract, agreement or other instrument, other than charter
documents, to which CCS or Chinerose is a party or by which CCS or Chinerose is
bound, limits the freedom of CCS or Chinerose to compete in any line of business
or with any person. The commitments, contracts, agreements or other instruments
listed on SCHEDULE 4.13 (the "Material Contracts") are valid and binding
obligations and neither CCS nor Chinerose is in default therewith, except as
listed on SCHEDULE 4.13 and except where any such defaults are not reasonably
likely to have in the aggregate a Material Adverse Effect on CCS or Chinerose.
4.14 AFFILIATE TRANSACTIONS.
4.14.1 Except as disclosed on SCHEDULE 4.14, and except as
specifically contemplated by this Agreement, neither CCS nor Chinerose has
engaged in, and is not currently obligated to engage in (whether in writing or
orally), any transaction with any Affiliated Person (as defined below) involving
aggregate payments by or to CCS or Chinerose of $25,000 U.S. or more.
4.14.2 For purposes of this Section 4.14, "Affiliated Person"
means:
(a) a director, executive officer or Controlling
Person (as defined below) of CCS or Chinerose;
(b) a spouse of a director, executive officer or
Controlling Person of CCS or Chinerose;
(c) a member of the immediate family of a director,
executive officer, or Controlling Person of CCS or Chinerose who has the same
home as such person;
(d) any corporation or organization (other than CCS
or Chinerose) of which a director, executive officer or Controlling Person of
CCS or
13
Chinerose is a chief executive officer, chief financial officer, or a person
performing similar functions or is a Controlling Person of such other
corporation or organization;
(e) any trust or estate in which a director,
executive officer, or Controlling Person of CCS or Chinerose or the spouse of
such person has a substantial beneficial interest or as to which such person or
his spouse serves as trustee or in a similar fiduciary capacity; and
(f) for purposes of this Section 4.14, "Controlling
Person" means any person or entity which, either directly or indirectly, or
acting in concert with one or more other persons or entities owns, controls or
holds with power to vote, or holds proxies representing ten percent or more of
the outstanding common stock or equity securities.
4.15 LIMITED REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties of the Sunhawk expressly set forth in Section 3,
neither CCS nor the CCS Shareholders has relied upon any representation and
warranty made by or on behalf of Sunhawk in making its determination to enter
into this Agreement and consummate the transactions contemplated by this
Agreement.
4.16 DISCLOSURE. No representation or warranty made by a CCS
Shareholder contained in this Agreement, and no statement contained in the
Schedules delivered by CCS and the CCS Shareholders hereunder, contains any
untrue statement of a material fact or omits any material fact necessary in
order to make a statement herein or therein, in light of the circumstances under
which it is made, not misleading.
4.17 TITLE TO PROPERTY.
4.17.1 REAL PROPERTY. SCHEDULE 4.17.1 is a true and complete
description of all interests in real property (other than real property security
interests received in the ordinary course of business), whether owned, leased or
otherwise claimed, including a list of all leases of real property, in which CCS
or Chinerose has or claims an interest and any guarantees of any such leases by
CCS or Chinerose. True and complete copies of such leases have previously been
delivered or made available to Sunhawk, together with all amendments,
modifications, agreements or other writings related thereto. Each such lease is
legal, valid and binding as between CCS or Chinerose and the other party or
parties thereto, and the occupant is a tenant or possessor in good standing
thereunder, free of any default or breach whatsoever and quietly enjoys the
premises provided for therein. CCS or Chinerose has good, valid and marketable
title to all real property owned by it, free and clear of all mortgages, liens,
pledges, charges or encumbrances of any nature whatsoever, except liens for
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current taxes not yet due and payable, and such encumbrances and imperfections
of title, if any, as do not materially detract from the value of the properties
and do not materially interfere with the present or proposed use of such
properties or otherwise materially impair such operations. All real property and
fixtures material to the business, operations or financial condition of CCS and
Chinerose are in substantially good condition and repair.
4.17.2 ENVIRONMENTAL MATTERS. The real property owned or
leased by CCS or Chinerose is not in a condition that may give rise to financial
liability under any environmental laws applicable to CCS, Chinerose or such
property.
4.18 PERSONAL PROPERTY. SCHEDULE 4.18 is a true and complete list of
(i) each item of machinery, equipment, or furniture, including without
limitation computers and vehicles, of CCS and Chinerose and (ii) each lease or
other agreement under which any such item of personal property is leased,
rented, held or operated where the current fair market value of such item is
more than $1,000 U.S. CCS and Chinerose have good, valid and marketable title to
all personal property owned by them, free and clear of all liens, pledges,
charges or encumbrances o any nature whatsoever.
4.19 INTELLECTUAL PROPERTY. SCHEDULE 4.19 is a true and complete list
of:
4.19.1 All patents, patent applications, trademarks, trademark
registrations, applications for trademark registration, trade names, service
marks, registered Internet domain names, and other intangible property currently
used, owned, or registered for use by CCS or Chinerose where the current fair
market value of such item is more than $1,000 U.S.; and
4.19.2 All license and other agreements with respect to any of
the foregoing as to which CCS or Chinerose is licensor or licensee.
4.19.3 There are no pending or, to such Warranting
Shareholder's knowledge, threatened, claims against CCS or Chinerose by any
person as to any of the items, or their use, listed in SCHEDULE 4.19 or claims
of infringement by CCS or Chinerose on the rights of any person and no valid
basis exists for any such claims.
4.20 INSURANCE. SCHEDULE 4.20 is a true and complete list and a brief
description (including name of insurer, agent, coverage and expiration date) of
all insurance policies in force with respect to the business and assets of CCS
and Chinerose. CCS and Chinerose are in compliance with all of the material
provisions of their insurance policies and are not in default under any of the
terms thereof. Each such policy is outstanding and in full force and effect and
CCS or Chinerose is the
15
sole beneficiary of such policies. All premiums and other payments due under any
such policy have been paid or arrangements for payment are being made. CCS has
previously delivered to, or made available for inspection by Sunhawk, each
insurance policy to which CCS or Chinerose is a party (other than insurance
policies under which CCS or Chinerose is named as a loss payee or additional
insured as a result of its position as a secured lender).
4.21 POWERS OF ATTORNEY. Neither CCS nor Chinerose has any powers of
attorney outstanding other than those in the ordinary course of business with
respect to routine matters.
4.22 BANK ACCOUNTS. SCHEDULE 4.22 is a true and complete list of all
bank accounts, safe deposit boxes and lock boxes of CCS and Chinerose,
including, with respect to each such account and lock box: (a) identification of
all authorized signatories; (b) identification of the business purpose of such
account or lock box, including identification of any accounts or lock boxes
representing escrow funds or otherwise subject to restriction; and (c)
identification of the amount on deposit on the date indicated.
4.23 CUSTOMERS/SUPPLIERS. SCHEDULE 4.23 is a true and complete list of:
4.23.1 Chinerose's ten largest customers in terms of sales
during 1998 and 1999, showing the approximate total sales by Chinerose to each
such customer during each of such years; and
4.23.2 The ten largest suppliers of Chinerose in terms of
purchases during 1998 and 1999, showing the approximate total purchase by
Chinerose from each such supplier during each of such years.
4.24 PRODUCT CLAIMS. No product or service liability claim is pending
against CCS or Chinerose or against any other party with respect to the products
or services of CCS or Chinerose.
5. COVENANTS OF THE PARTIES.
5.1 CONDUCT OF THE BUSINESS OF CCS AND CHINEROSE. During the period
from the date of this Agreement to the Closing Date, CCS will conduct, and will
cause Chinerose to conduct, its business and engage in transactions only in the
ordinary course consistent with past practice. During such period, CCS will use
and will cause Chinerose to use its best efforts to (a) preserve its business
organization intact, (b) keep available the present services of its employees,
and (c) preserve the goodwill of its customers and others with whom business
relationships exist. In addition,
16
without limiting the generality of the foregoing, CCS agrees that from the date
of this Agreement to the Closing Date, except as otherwise consented to or
approved by Sunhawk in writing (which consent or approval shall not be
unreasonably withheld, delayed or conditioned) or as permitted or required by
this Agreement or as required by law, CCS will not and will cause Chinerose not
to:
5.1.1 grant any severance or termination pay to or enter into
or amend any employment agreement with, or increase the amount of payments or
fees to, any of its employees, officers or directors other than salary increases
to employees consistent with past increases;
5.1.2 make any capital expenditures in excess of (i) $10,000
U.S. (per project or related series of projects) or (ii) $75,000 U.S. in the
aggregate, other than pursuant to binding commitments existing on the date of
this Agreement and expenditures necessary to maintain existing assets in good
repair;
5.1.3 change in any material manner pricing policies or any
other material business or customer policies;
5.1.4 guarantee the obligations of any other person except in
the ordinary course of business consistent with past practice;
5.1.5 acquire assets other than those necessary in the conduct
of its business in the ordinary course;
5.1.6 sell, transfer, assign, encumber or otherwise dispose of
assets with a value in excess of $50,000 U.S.;
5.1.7 enter into or amend or terminate any long term (one year
or more) contract (including real property leases) except in the ordinary course
of business consistent with past practice;
5.1.8 enter into or amend any contract that calls for the
payment by CCS or Chinerose of $75,000 U.S. or more after the date of this
Agreement or for a term exceeding two years that cannot be terminated on not
more than 30 days' notice without cause and without payment or loss of any
material amount as a penalty, bonus, premium or other compensation for
termination;
5.1.9 engage or participate in any material transaction or
incur or sustain any material obligation otherwise than in the ordinary course
of business consistent with past practice, except the Amendment to the
Consulting Agreement with @Visory LLC described on Schedule 4.13;
17
5.1.10 contribute to any benefit plans except in such amounts
and at such times as consistent with past practice;
5.1.11 increase the number of full-time equivalent employees
other than in the ordinary course of business consistent with past practice;
5.1.12 acquire any real property except after having followed
reasonable procedures with respect to the investigation of potential
environmental problems, which procedures have been approved in writing by
Sunhawk (which approval shall not be unreasonably withheld, delayed or
conditioned); or
5.1.13 agree to do any of the foregoing.
5.2 NO SOLICITATION AND LIQUIDATED DAMAGES. During the period beginning
on the date of this Agreement and ending on the Closing Date, neither CCS nor
any of its directors, officers, shareholders, representatives, agents or other
persons controlled by any of them, shall, directly or indirectly encourage or
solicit, or hold discussions or negotiations with, or provide any information
to, any persons, entity or group other than Sunhawk concerning any merger, sale
of substantial assets not in the ordinary course of business, sale of shares of
capital stock or similar transactions involving CCS. CCS will promptly
communicate to Sunhawk the identity of any interested or inquiring party, all
relevant information surrounding the interest or inquiry, as well as the terms
of any proposal that it may receive in respect of any such transaction. If this
Agreement is terminated by Sunhawk due to uncured breach of this Section 5.2,
then Sunhawk shall be entitled to $2,500,000 U.S. from CCS as liquidated
damages. Such liquidated damages shall constitute full payment and the exclusive
remedy for any damages suffered by Sunhawk by reason of such breach and the
terms of this Agreement. Sunhawk, CCS and the CCS Shareholders agree that actual
damages would be difficult to ascertain and that $2,500,000 U.S. is a fair and
equitable amount to reimburse Sunhawk for such damages and the termination of
this Agreement.
5.3 ACCESS TO PROPERTIES AND RECORDS; CONFIDENTIALITY.
5.3.1 CCS shall permit Sunhawk and its representatives
reasonable access to its properties and shall disclose and make available to
Sunhawk all books, papers and records relating to the assets, stock, ownership,
properties, obligations, operations and liabilities of CCS and Chinerose,
including but not limited to, all books of account (including the general
ledger), tax records, minute books of directors and stockholders meetings,
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, accountants work papers, litigation files, plans
affecting employees, and any other business activities or prospects in
18
which Sunhawk may have a reasonable interest, in each case during normal
business hours and upon reasonable notice. CCS shall not be required to provide
access to or disclose information where such access or disclosure would
jeopardize the attorney-client privilege or would contravene any law, rule,
regulation, order, judgment, decree or binding agreement entered into prior to
the date of this Agreement. The parties will use all reasonable efforts to make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
5.3.2 All information furnished by CCS to Sunhawk or the
representatives or affiliates of Sunhawk pursuant to, or in any negotiation in
connection with, this Agreement shall be treated as the sole property of CCS
until consummation of the Share Exchange and if the Share Exchange shall not
occur Sunhawk and its affiliates, agents and advisors shall upon written request
return to CCS all documents or other materials containing, reflecting, referring
to such information, and shall keep confidential all such information and shall
not disclose or use such information for competitive purposes. The obligation to
keep such information confidential shall not apply to (i) any information which
(w) Sunhawk can establish by evidence was already in its possession (subject to
no obligation of confidentiality) prior to the disclosure thereof by CCS; (x)
was then generally known to the public; (y) becomes known to the public other
than as a result of actions by Sunhawk or by the directors, officers, employees,
agents or representatives of Sunhawk; or (z) was disclosed to Sunhawk, or to the
directors, officers, employees or representatives of Sunhawk, solely by a third
party not bound by any obligation of confidentiality; or (ii) disclosure in
accordance with the federal securities laws, a federal banking laws, or pursuant
to an order of a court or agency of competent jurisdiction.
5.4 REGULATORY MATTERS.
5.4.1 The parties will cooperate with each other and use all
reasonable efforts to prepare all necessary documentation, to effect all
necessary filings and to obtain all necessary permits, consents, approvals, and
authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement including, without
limitation, those that may be required from the SEC, other regulatory
authorities, or Sunhawk's shareholders. CCS and Sunhawk shall each have the
right to review reasonably in advance all information relating to CCS or
Sunhawk, as the case may be, and any of their respective subsidiaries, together
with any other information reasonably requested, which appears in any filing
made with or written material submitted to any governmental body in connection
with the transactions contemplated by this Agreement. Sunhawk shall bear all
expenses associated with SEC filings.
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5.4.2 CCS and Sunhawk will promptly furnish each other with
copies of written communications received by CCS or Sunhawk or any of their
respective subsidiaries from, or delivered by any of the foregoing to, any
governmental body in respect of the transactions contemplated by this Agreement.
5.5 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
5.6 PUBLIC ANNOUNCEMENTS. No party will issue or distribute any
information to its shareholders or employees, any news releases or any other
public information disclosures with respect to this Agreement or any of the
transactions contemplated by this Agreement without the consent of the other
parties or their designated representative, except as may be otherwise required
by law.
5.7 POST-CLOSING APPOINTMENTS. As soon as reasonable after the Closing,
the Sunhawk Board of Directors shall take all actions necessary to nominate,
vote, appoint or elect Xxxx Xxxxxxxxxx, Xxxxx Xxxxxx and a nominee of the CCS
Shareholders acceptable to Sunhawk to the Board of Directors of Sunhawk; and
Xxxx Xxxxxxxxxx shall be appointed or elected to serve as Vice Chairman of the
Board of Directors of Sunhawk.
5.8 RESTRICTIONS ON TRANSFER. Xxxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxxxxx
X. Xxxxx shall each hold their respective shares of the Closing Shares and any
Escrowed Shares released to them under an Escrow Agreement personally and shall
not transfer such Sunhawk Shares for a period equal to the earlier of (i) 12
months after Closing, or (ii) the date on which Xxxxxx Xxxxx transfers any of
his Sunhawk stock. Notwithstanding the foregoing, Xxxxx Xxxxxx and Xxxxxx Xxxxxx
may transfer any of their Sunhawk Shares free of the restrictions set forth in
this Section 5.9 in order to comply with their guaranty obligations to the
holders of CCS' Series A Preferred Stock.
5.9 REGISTRATION, TRANSFER AND SALE RESTRICTIONS. All necessary actions
practicable shall be timely taken to freely register and transfer the Common
Stock, and issuable Common Stock held by Sunhawk management, including, Xxxxxx
Xxxxx and Xxxxx Xxxxx, and the CCS Management Holders. Until such time as any
registration, transfer, or sale rights are received by Xxxxxx Xxxxx, the
registration, transfer and sale rights of the CCS Management Holders as to their
Sunhawk Shares shall be the same as those of Xxxxxx Xxxxx. CCS Management
Holders acknowledge that the receipt of
20
any such registration, transfer, and sale rights does not exempt them from the
applicable regulations of Rule 144. As used in this Section 5.9, "CCS Management
Holders" shall mean @Visory LLC and its affiliates, including Xxxx Xxxxxxxxxx
and Xxxxxx Xxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxxxxx X. Xxxxx.
6. CONDITIONS PRECEDENT TO CCS SHAREHOLDERS' OBLIGATIONS.
The obligations of the CCS Shareholders to consummate the transactions
contemplated by this Agreement are subject to satisfaction of the following
conditions at or before the Closing Date and may be waived only in writing by
the CCS Shareholders:
6.1 SUNHAWK COVENANTS, REPRESENTATIONS AND WARRANTIES. All the
covenants, terms and conditions of this Agreement to be complied with or
performed by Sunhawk at or before the Closing Date shall have been complied with
and performed in all respects. The representations and warranties made by
Sunhawk in this Agreement shall be complete and correct at and as of the Closing
Date with the same force and effect as though such representations and
warranties had been made at and as of the Closing Date.
6.2 SUNHAWK'S DELIVERY OF DOCUMENTS. Sunhawk shall have duly executed
and delivered, or caused to be executed and delivered, to or at the direction of
the CCS Shareholders, this Agreement and the Sunhawk Closing Documents.
6.3 SUNHAWK SHAREHOLDER APPROVAL. This Agreement shall have been
approved and adopted by the affirmative votes of the holders of at least two
thirds of each class of Sunhawk's outstanding capital stock.
6.4 OTHER APPROVALS. All authorizations, consents, orders or approvals
of any United Kingdom or United States federal or state governmental agency
necessary for the consummation of the Share Exchange or the transactions
contemplated by this Agreement (other than such actions, approvals or filings
which, pursuant to the terms of this Agreement, are to take place on or after
the Closing) shall have been filed, occurred or been obtained.
6.5 NO LITIGATION. No administrative investigation, action, suit or
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement shall be pending or threatened.
6.6 EVALUATION OF JOINT VENTURE AGREEMENT. Prior to the Closing, CCS
and Sunhawk will review and evaluate the agreement described in item 2 of
SCHEDULE 4.13
21
(the "Joint Venture Agreement") and will reach a mutually agreeable decision to
continue or terminate the Joint Venture Agreement.
6.7 CREATION OF CLASS A COMMON SHARES. Sunhawk shall have taken all
action necessary to authorize and issue the Class A Common Shares.
7. CONDITIONS PRECEDENT TO SUNHAWK'S OBLIGATIONS.
The obligations of Sunhawk to consummate the transactions contemplated
by this Agreement are subject to satisfaction of the following conditions at or
before the Closing Date and may be waived only in writing by Sunhawk:
7.1 CCS SHAREHOLDERS' COVENANTS, REPRESENTATIONS AND WARRANTIES. All
the covenants, terms and conditions of this Agreement to be complied with or
performed by CCS or the CCS Shareholders on or before the Closing Date shall
have been complied with and performed in all respects. The representations and
warranties made by the Warranting Shareholders in this Agreement shall be
complete and correct at and as of the Closing Date with the same force and
effect as though such representations and warranties had been made at and as of
the Closing Date.
7.2 CCS SHAREHOLDERS' DELIVERY OF DOCUMENTS. The CCS Shareholders shall
have duly executed and delivered, or caused to be executed and delivered, to
Sunhawk or at its direction this Agreement and the CCS Shareholders Closing
Documents.
7.3 OTHER APPROVALS. All authorizations, consents, orders or approvals
of any United Kingdom or United States federal or state governmental agency
necessary for the consummation of the Share Exchange or the transactions
contemplated by this Agreement (other than such actions, approvals or filings
which, pursuant to the terms of this Agreement, are to take place on or after
the Closing) shall have been filed, occurred or been obtained.
7.4 SUNHAWK SHAREHOLDER APPROVAL. This Agreement shall have been
approved and adopted by the affirmative votes of the holders of at least two
thirds of each class of Sunhawk's outstanding capital stock.
7.5 NO LITIGATION. No administrative investigation, action, suit or
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement shall be pending or threatened.
22
7.6 EXECUTION OF AGREEMENT. Each CCS Shareholder that owns Series A
Preferred Stock shall have executed this Agreement.
7.7 EVALUATION OF JOINT VENTURE AGREEMENT. Prior to the Closing, CCS
and Sunhawk will review and evaluate the Joint Venture Agreement and will reach
a mutually agreeable decision to continue or terminate the Joint Venture
Agreement.
7.8 CUSTOMER CONTRACTS. All the other parties to the contracts listed
at Item 7 on SCHEDULE 4.13 shall have agreed not to exercise their options to
terminate such contracts following the consummation of the Share Exchange.
8. TERMINATION.
8.1 TERMINATION OF AGREEMENT. This Agreement shall terminate as
follows:
(a) at any time prior to the Effective Time by the mutual
written agreement of all parties;
(b) by Sunhawk in the event the closing price of the Common
Stock on the NASDAQ Small Capitalization Market equals or exceeds $26.00 U.S.
per share at any time prior to the Closing Date;
(c) by CCS on behalf of itself and the CCS Shareholders in the
event the closing price of the Common Stock on the NASDAQ Small Capitalization
Market equals or is less than $6.50 U.S. per share at any time prior to the
Closing Date;
(d) by (i) the CCS Shareholders if the conditions set forth in
Section 6 have not been satisfied or waived by the Upset Date (defined below);
or (ii) Sunhawk if the conditions set forth in Section 7 have not been satisfied
or waived by the Upset Date (defined below);
(e) by Sunhawk, in the event of a breach of any of the
representations or warranties made by the Warranting Shareholders, or covenants
made by the CCS Shareholders, in this Agreement that has not been cured within
30 days after notice of such breach as delivered to CCS and the CCS Shareholders
by Sunhawk;
(f) by CCS and the CCS Shareholders in the event of any of the
representations or warranties made by Sunhawk in this Agreement that has not
been cured within 30 days after notice of such breach as delivered to Sunhawk by
CCS and/or the CCS Shareholders; or
23
(g) by either the CCS Shareholders or Sunhawk if the Closing
shall have not occurred by September 30, 2000 (the "Upset Date") provided,
however, that the right to terminate this Agreement pursuant to this clause
shall not be available to any party whose failure to fulfill any obligation of
this Agreement has been the cause of, or resulted in, the failure of the closing
to have been effected on or prior to such date.
9. MISCELLANEOUS.
9.1 TAX TREATMENT BY THE PARTIES. Unless otherwise required by law, the
parties shall treat the Share Exchange as a reorganization under Section 368 of
the Code and applicable British law for all tax reporting purposes; furthermore,
the parties shall not take, and have not taken, any action that is inconsistent
with reorganization treatment under Section 368 of the Code or applicable
British law.
9.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person or entity other than the parties and their
respective successors and assigns.
9.3 SUCCESSORS AND ASSIGNS. No party may assign either this Agreement
or any of its rights, interests, or obligations under this Agreement without the
prior written consent of all other parties. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective permitted successors and assigns.
9.4 NOTICES. All notices, requests, demands, claims, consents and other
communications required or permitted under this Agreement shall be in writing.
Any notice, request, demand, claim , communication or consent under this
Agreement shall be deemed duly given if (and shall be effective two business
days after) it is sent by certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to Sunhawk: Xxxxxxx.xxx Corporation
000 Xxxxxx Xxxxxx X.
Xxxxx 000
Xxxxxxx, XX 00000-0000
With a copy (which shall not The Xxxx Law Group
constitute notice) to: 000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
24
Attention: Xxxxx X. Xxxx
If to CCS: Copyright Control Services, Inc.
0 Xxxxxxx Xxxx Xxxxxxxx Xxxx
000-000 Xxxx Xxxxxx
Xxxxxxx Xxxx, XX00 0XX
Great Britain
With a copy (which shall not Xxxxxxx Coie
constitute notice) to: 0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx XxXxxx
Xxxx X. Xxxxxxxxx
If to the CCS Shareholders: as set forth on SCHEDULE A
9.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Washington without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Washington or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Washington.
9.6 AMENDMENTS AND WAIVERS.
9.6.1 Subject to subsection 9.5.2, this Agreement may be
amended or waived only in writing signed by the party against which enforcement
of the amendment or waiver is sought.
9.6.2 For the purposes of this Section 9.5, each of the CCS
Shareholders appoints Xxxxx Xxxxxx and Xxxx Xxxxxxx, or either of them acting
alone, as such CCS Shareholder's attorney for the purpose of executing
amendments of or waivers related to this Agreement on behalf of such CCS
Shareholder, including any consents under Section 9.3.
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Sections 3 and 4 of this Agreement shall survive the
Closing and continue in full force and effect for a period of two years after
the Closing.
9.8 SEVERABILITY. Any term or provision of this Agreement that is found
to be invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of its remaining terms and provisions or
the validity or
25
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
9.9 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.10 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
9.11 INCORPORATION OF SCHEDULES. The Schedules referred to in and/or
attached to this Agreement are incorporated in this Agreement by this reference.
9.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same document. This Agreement may be
executed by facsimile.
9.13 ENTIRE AGREEMENT. This Agreement (including the Schedules referred
to in and/or attached to this Agreement) constitutes the entire agreement among
the parties and supersedes any prior understandings, agreements, or
representations by or among the parties, written or oral (including but not
limited to that certain letter of intent dated April 14, 2000, amended by
Amendment #1 dated June 13, 2000) to the extent they relate in any way to the
subject matter of this Agreement.
9.14 ARBITRATION. Any controversies or claims arising out of or
relating to this Agreement shall be fully and finally settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA Rules"), conducted by a single arbitrator either mutually
agreed upon by Sunhawk and the CCS Shareholders disputing the Breach Notice or
chosen in accordance with the AAA Rules, except that the parties shall have any
right to discovery as would be permitted by the Federal Rules of Civil Procedure
for a period of 90 days following the commencement of such arbitration, and the
arbitrator shall resolve any dispute which arises in connection with such
discovery. The prevailing party or parties shall be entitled to costs, expenses
and attorneys' fees from the non-prevailing party or
26
parties, and judgment upon the award rendered by the arbitrator may be entered
in any court of competent jurisdiction.
CCS:
COPYRIGHT CONTROL SERVICES, INC.
By: /s/ Xxxxx Xxxxxx
--------------------------------------
Name: Xxxxx Xxxxxx
Title: CEO
CCS SHAREHOLDERS:
/s/ Xxxxx Xxxxxx
------------------------------------------
XXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
------------------------------------------
XXXXXX XXXXXX
/s/ Xxxxxxx X. Xxxxx
------------------------------------------
XXXXXXX X. XXXXX
ACTIVE RIGHTS MANAGEMENT
By: /s/ Xxxx Xxxxxxx
--------------------------------------
Its:
-------------------------------------
/s/ Xxxx Xxxxxxx
------------------------------------------
XXXX XXXXXXX
27
TWB INVESTMENT/PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Its: General Partner
-------------------------------------
@VISORY LLC
By: /s/ Xxxx Xxxxxxxxxx
--------------------------------------
Its: Manager
-------------------------------------
COPYRIGHT VENTURES, LLC
Except for GRG, LLC, its manager
Section 9.6.2 By: /s/ unclear
--------------------------------------
Its: Attorney-in-fact
-------------------------------------
SRS VENTURES LLC
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Its: Member Manager
-------------------------------------
INTERACTIVE HOLDINGS, LLC
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Its: Member Manager
-------------------------------------
28
CHELSEA VENTURES LLC
By: /s/ Xxxxxxx Xxxxxx
--------------------------------------
Its:
-------------------------------------
------------------------------------------
XXXXXXX XXXXXX
SUNHAWK:
XXXXXXX.XXX CORPORATION
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
29
