THIS NOTE PURCHASE AGREEMENT (THE "AGREEMENT") is made as of December
10, 1999, by and among Cascade INVESTMENT LLC, A WASHINGTON LIMITED LIABILITY
COMPANY ("BUYER"), and Xxxxx Interactive Corporation, a Delaware CORPORATION
("SELLER")
INTRODUCTION
1. Seller desires to sell to Buyer and Buyer and Buyer desires to
purchase from Seller the CONVERTIBLE PROMISSORY NOTE (THE "NOTE") in the form
attached as Exhibit A.
2. Buyer will, simultaneous upon entering into this Agreement, enter
into an Option to Sell AGREEMENT (THE "OPTION") WITH XXXXX X. XXXXXXX
("GABELLI") providing for the sale, at Buyer's option, of the Note to Gabelli.
The Option is secured by an irrevocable standby letter of credit.
NOW, THEREFORE, in consideration of the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. PURCHASE AND SALE.
1.1 PURCHASE AND SALE. At the Closing, as defined in Section 1.3 below,
Buyer shall purchase from Seller and Seller shall issue to Buyer the Note. Buyer
and Seller shall enter into a Registration Rights AGREEMENT IN THE FORM OF
EXHIBIT B (THE "REGISTRATION RIGHTS AGREEMENT"). The Note is convertible into
the NUMBER OF SHARES OF COMMON STOCK OF THE SELLER (THE "CONVERSION SHARES") and
on the terms as provided in this Agreement.
1.2 PURCHASE PRICE. In consideration for the sale of the Note, Buyer
shall pay to Seller, by wire transfer in immediately available funds, Twenty
Five Million U.S. Dollars (U.S. $25,000,000) (the "Consideration").
1.3 CLOSING. THE CLOSING OF THE PURCHASE AND SALE OF THE NOTE
HEREUNDER (THE "CLOSING") shall be held by telephone among the parties and their
respective legal counsel. The Closing shall be effective upon the receipt by all
parties of facsimile signatures of the other parties to such agreements and the
receipt of the Consideration; provided, that each party covenants to submit to
the other party promptly by overnight delivery execution originals of
counterpart signature pages. The Closing will be held at 10:00 A.M. on December
10, 1999, or at such other time and place upon which Seller and Buyer shall
agree.
2. REPRESENTATIONS AND WARRANTIES.
2.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Except as disclosed to
Buyer in writing prior to the date hereof, Seller represents and warrants to
Buyer as follows:
2.1.1 ORGANIZATION; STANDING AND POWER. The Seller is a
corporation duly organized and validly existing under the laws of the State of
Delaware, has all requisite power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which it
is required to be so qualified by applicable laws.
2.1.2 CAPITAL STRUCTURE; OWNERSHIP OF SHARES. The authorized
capital stock of the Seller CONSISTS OF TEN MILLION (10,000,000) SHARES OF
COMMON STOCK (THE "SHARES"), of which 1,412,383 Shares are issued and
outstanding. All of the Shares have been duly authorized and validly issued, are
fully paid and nonassessable, and were issued in compliance with applicable
federal and state securities laws. Other than as DISCLOSED IN SELLER'S SEC
REPORTS (as defined below), there are not any options, warrants, calls,
conversion rights, commitments, agreements, contracts, understandings,
restrictions, arrangements, or rights of any character to which the Seller is a
party or by which the Seller may be bound obligating the Seller to issue,
deliver, or sell, or cause to be issued, delivered, or sold, additional shares
of the capital stock of the Seller, or obligating the Seller to grant, extend,
or enter into any such option, warrant, call, conversion right, commitment,
agreement, restriction, or right. Delivery of the Shares to Buyer upon
conversion of the Note will vest valid title thereto in Buyer, free and clear of
all liens, encumbrances, claims, and limitations of every kind.
2.1.3 AUTHORITY. Seller has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by Seller of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate actions on the part of Seller. This
Agreement has been duly executed and delivered by Seller and constitutes a valid
and binding obligation of Seller enforceable in accordance with its terms,
except that such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization, or other similar laws relating to enforcement of creditors'
rights generally, and (ii) general equitable principles.
2.1.4 NO CONFLICT. The execution and delivery of the Agreement
and the performance of the transactions contemplated hereunder will not violate,
conflict with, constitute a default or breach under, any material agreement,
contract, or instrument to which Seller may be bound or of any judgment, order,
decree to which Seller may be bound, nor will the execution, delivery and
performance of this Agreement result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon the Shares.
2.1.5 LITIGATION. Except as disclosed in the SEC Reports,
there is no pending or, to the best of Seller's knowledge, threatened lawsuit,
administrative proceeding, arbitration, labor dispute or GOVERNMENTAL
INVESTIGATION ("LITIGATION") to which the Seller is a party or by which any
material portion of its assets, taken as a whole, may be bound, which
Litigation, if adversely determined, would have a material adverse effect on the
Seller.
2.1.6 ACCURACY OF REPORTS; FINANCIAL STATEMENTS. All reports
required to be filed with the SEC by the Seller during the twelve month period
preceding the date of this Agreement under the Securities EXCHANGE ACT OF 1934,
AS AMENDED (THE "EXCHANGE ACT"), copies of which have been made available to the
Buyer (the "SEC REPORTS"), have been duly and timely filed, were in substantial
compliance with the requirements of their respective forms when filed, were
complete and correct in all material respects as of the dates at which the
information was furnished, and contained (as of such dates) no untrue statement
of a material fact nor omitted to state material fact necessary in order to make
the statements made therein in light of the circumstances in which MADE NOT
MISLEADING. THE FINANCIAL STATEMENTS OF THE SELLER INCLUDED IN THE SEC REPORTS
(THE "FINANCIAL STATEMENTS") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied and fairly present the consolidated financial position of the Seller and
any subsidiaries at the dates thereof and the consolidated results of operations
and consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring adjustments). Except as set forth in
the SEC Reports, the Seller does not have any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP to
be set forth on a balance sheet of the Seller or in the notes thereto which
could reasonably be expected to have a material adverse effect on the Seller.
2.1.7 SOLVENCY; NO DEFAULT. The Seller has sufficient funds,
assets and cash flow to pay its debts and other liabilities as they become due,
and the Seller is not in default with respect to any material debt or liability.
2.1.8 DISCLOSURE. No representation or warranty of the Seller
contained in this Agreement or the exhibits attached hereto (when read together
and taken as a whole), contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein in light of the circumstances under which they were made not
misleading.
2.2 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer makes the following
representations and warranties.
2.2.1 INVESTMENT PURPOSE. The Buyer is purchasing the Note for
its own account as principal for investment only and not with a present view
towards the public sale or distribution thereof, except pursuant TO SALES
REGISTERED OR EXEMPTED FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT") .
2.2.2 ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D and has such
business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the Note.
2.2.3 RELIANCE ON EXEMPTIONS. The Buyer understands that the
Note is being offered and sold to it in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Seller is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, covenants,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Note.
2.2.4 INFORMATION. The Buyer has been furnished with all
materials relating to the business, finances and operations of the Seller and
materials relating to the offer and sale of the Note which have been requested
by the Buyer. Buyer has been afforded the opportunity to ask questions of the
Seller and has received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by the Buyer or any of its advisors or representatives
shall modify, amend or affect the Buyer's right to rely on the Seller's
representations and warranties contained in Section 2.1 above. The Buyer
understands that its investment in the Note involves a significant degree of
risk.
2.2.5 GOVERNMENTAL REVIEW. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the Note.
2.2.6 TRANSFER OR RESALE. The Buyer understands that (i) no
public market now exists for the Note and that the Seller has made no assurances
that a public market will ever exist for the Note, (ii) except as provided in
the Registration Rights Agreement, the Note has not been and are not being
registered under the 1933 Act or any applicable state securities laws, and may
not be transferred unless (a) subsequently included in an effective registration
statement thereunder, (b) the Buyer shall have delivered to the Seller an
opinion of counsel (which opinion shall be reasonably satisfactory to the
Seller) to the effect that the Note to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (c) sold pursuant
to Rule 144 promulgated under the 1933 Act (or a successor rule) ("Rule 144"))
or (d) except in connection with the exercise of the Option, (iii) any sale of
such Note made in reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further, if Rule 144 is not applicable, any resale of
such Note under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 0000 Xxx) may require compliance with some other exemption under the 1933
Act or the rules and regulations thereunder, and (iv) neither the Seller nor any
other person is under any obligation to register such Note under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement).
2.2.7 LEGENDS. The Buyer understands that the Note, and, until
such time as the Conversion Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the Conversion Shares, may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Note):
(i) The following legend under the 1933 Act:
"THE NOTE REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND EXCEPT FOR
ANY TRANSFERS SPECIFICALLY AUTHORIZED UNER THE TERMS OF THE NOTE, MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED"; and
(ii) Any other legend required by the laws of any
state in which the Note will be
issued.
The legend set forth above shall be removed and the Seller
shall issue a certificate without such legend to the holder of any Security upon
which it is stamped, if, unless otherwise required by applicable state
securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act, or (b) such holder provides the
Seller with an opinion of counsel, satisfactory to the Seller, to the effect
that a public sale or transfer of such Security may be made without registration
under the 1933 Act and such sale or transfer is effected or (c) such holder
provides the Seller with reasonable assurances that such Security can be sold
pursuant to Rule 144 under the 1933 Act (or successor rule thereto) without
restriction as to the number of Note acquired as of a particular date that can
then be immediately sold. The Buyer agrees to sell all Conversion Shares,
including those represented by a certificate(s) from which the legend has been
removed, in compliance with applicable prospectus delivery requirements, if any.
2.2.8 AUTHORIZATION; ENFORCEMENT. The Buyer represents and
warrants to the Seller that (i) the Buyer has all requisite legal and corporate
or other power and capacity and has taken all requisite corporate or other
action to execute and deliver this Agreement, to purchase the Note to be
purchased by it and to carry out and perform all of its obligations under this
Agreement, and (ii) this Agreement constitutes the legal, valid and binding
obligation of the Buyer, enforceable in accordance with its terms, except (1) as
limited by applicable bankruptcy, insolvency, reorganization, or similar laws
relating to or affecting the enforcement of creditors' rights generally and (2)
as limited by equitable principles generally and (iii) to the extent that
indemnification provisions in the Registration Rights Agreement may be limited
by applicable federal or state securities laws.
3. DELIVERIES AT CLOSING.
3.1 DELIVERIES BY BUYER. Buyer shall deliver the following items to
Seller:
3.1.1 The Consideration, by wire transfer in immediately
available funds .
3.1.2 An executed copy of this Agreement;
3.1.3 An executed copy of the Registration Rights Agreement.
3.2 DELIVERIES BY SELLER. Seller shall deliver the following
items:
3.2.1 The executed Note;
3.2.2 An executed copy of this Agreement;
3.2.3 An executed copy of the Registration Rights Agreement
; and
3.2.4 An opinion of Seller's legal counsel, dated as of the
Closing Date, in substantially the form as Exhibit C attached hereto
4. COVENANTS.
4.1 RESERVATION OF SHARES. Seller shall at all times have authorized
and reserved for the purpose of issuance that number of shares of Common Stock
equal to the Conversion Shares (as such number may be adjusted from time to time
pursuant to the terms of the Note). If at any time the number of shares of
Common Stock authorized and reserved for issuance is for any reason below the
number of Conversion Shares, the Seller will promptly take all corporate action
necessary to authorize and reserve a sufficient number of shares, including
without limitation calling a special meeting of shareholders to authorize
additional shares to meet the Seller's obligations hereunder, and using its
reasonable best efforts to obtain shareholder approval of an increase in such
authorized number of shares.
4.2 AMEX LISTING. Seller shall promptly secure the listing of the
Conversion Stock authorized to be issued upon conversion of the Note upon the
American Stock Exchange or such other national securities exchange or
over-the-counter market upon which shares of Common Stock are then listed, and
shall maintain, so long as any other shares of Common Stock shall be so listed,
such listing of such shares of Common Stock.
5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations, warranties
and covenants contained in this Agreement shall survive the Closing; provided,
however, that a claim for a breach of a representation or warranty (but not for
a breach of a covenant or agreement) must be brought within one (1) year of the
execution of this Agreement. In the event Investor brings a claim within the one
(1) year period, such representations and warranties shall continue to survive
solely with regard to such claim until such claim has been finally resolved and
all indemnification rights with respect thereto have been satisfied.
6.. MISCELLANEOUS.
6.1 ENTIRE AGREEMENT. This Agreement and the documents listed in
Section 3.2 (other than the opinion of Seller's legal counsel) represents the
entire agreement among the parties with respect to the transactions contemplated
herein and supersedes all prior agreements, written or oral, with respect
thereto. This Agreement may be amended only by an instrument that is executed
and authorized by all parties hereto.
6.2 EXPENSES. Buyer and Seller will pay their own respective expenses,
including attorneys' fees, in connection with the negotiation of this Agreement,
the performance of its obligations hereunder, and the consummation of the
transactions contemplated by this Agreement.
6.3 SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, however, that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by either party without the prior written consent of the other
party.
6.4 GOVERNING LAW; CONSENT TO JURISDICTION. Except as stated below,
this Agreement shall be governed by the laws of the State of Washington. The
parties hereby irrevocably and unconditionally submit in any legal action or
proceeding relating to this Agreement to the non-exclusive general jurisdiction
of the courts of the United States located in the Western District of Washington
and, in any such action or proceeding, consent to jurisdiction in such courts
and waive any objection to the venue in any such court. In the event that the
federal court selected by Cascade shall not have jurisdiction, Xxxxx agrees to
submit to the jurisdiction of the courts of the State of Washington located in
King County. In the event Investor transfers or assigns the Note to a person not
an affiliate, then this Note shall be governed by and construed in accordance
with the laws of the State of New York and the consent to jurisdiction in the
State of Washington stated above is hereby revoked.
6.5 NONWAIVER. The failure of either party to insist upon strict
adherence to any one or more of the covenants and restrictions in this
Agreement, on one or more occasion, shall not be construed as a waiver, nor
deprive either party of the right to require strict compliance thereafter with
the same.
6.6 ATTORNEYS' FEES AND EXPENSES. In any suit or action brought to
enforce this Agreement, or to obtain an adjudication, declaratory or otherwise,
of rights hereunder, the losing party shall pay to the prevailing party
reasonable attorneys' fees and all other costs and expenses that may be incurred
by the prevailing party in such action.
6.7 PUBLICITY. Seller shall not issue any public statement (such as
press releases, letters to shareholders, speeches and similar statements)
concerning the beneficial owner of Buyer without the prior written consent of
the Buyer; provided, however, that such disclosure may be made if such approval
has been requested and not received and the Seller concludes (after consulting
with counsel) that it is required by law or stock exchange regulation to make
such disclosure in a press release or other public statement. With respect to
any press release issued by Seller, Seller shall use reasonable efforts to
provide copies to Buyer prior to public dissemination thereof and shall
incorporate Buyer's comments to such press release, if any, in good faith.
6.8 NOTICES. Any notice required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective for five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications shall be:
If to the Seller:
Xxxxx Interactive Corporation
401Theodore Fremd Avenue
Rye, NY 10580
Attn: Xxxxxx Xxxxx
With copy to:
Xxxxx X. Xxxxxxx
One Corporate Center at Rye
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, XX 00000
If to Buyer:
Cascade Investment LLC
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxx, Business Manager
With copy to:
Xxxx X. Xxxxxx
Xxxxxxx Xxxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Each party shall provide notice to the other of any changes in address.
(THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK)
SIGNATURE PAGE - NOTE PURCHASE AGREEMENT
NOTICE: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first mentioned above.
SELLER BUYER
XXXXX INTERACTIVE CORPORATION CASCADE INVESTMENT LLC
By ________________________________ By ____________________________
Xxxxxx Xxxxx, Chief Financial Officer Xxxxxxx Xxxxxx, Business Manager
