AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This Agreement For Purchase and Sale of Assets (this "Agreement") is
made as of December 3, 1999, by and among Promotions Acquisition, Inc., a
Delaware corporation ("Purchaser"), XxxxxxXxxxxx.xxx, Inc., a Delaware
corporation ("Seller"), and Net Value Holdings, Inc., a Delaware corporation
("Holdings"), with reference to the following facts:
A. Seller is engaged in the business of providing Internet-based
promotional products and services. Holdings is the majority owner of Seller.
Purchaser has been formed by the former management of Seller (with the express
approval of Holdings and Seller) for the purpose of acquiring and succeeding to
the business of Seller.
B. Purchaser desires to purchase from Seller and Seller desires to sell
to Purchaser, on the terms and subject to the conditions of this Agreement, all
right, title and interest in and to substantially all of the assets of Seller,
subject to certain liabilities;
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties hereinafter contained, the parties hereto agree
as follows:
1. TRANSFER OF ASSETS. Subject to the terms and conditions set forth in this
Agreement, Seller agrees to sell, convey, transfer, assign, and deliver to
Purchaser, and Purchaser agrees to purchase from Seller, all right, title and
interest of Seller in and to all of the assets, properties, and business of
Seller of every kind, character, and description, whether tangible, intangible,
real, personal, or mixed, and wherever located, described in this Section 1,
free and clear of any liens, security interests or encumbrances, all of which
assets, properties and business are sometimes collectively referred to in this
Agreement as the "Assets."
1.1 Included Assets. The Assets shall include, but not be limited to,
all right, title and interest of Seller in and to all of the following assets,
wherever located, owned by Seller, whether tangible or intangible, used or held
for use in connection with Seller's business, whether or not such assets are in
the possession or control of Seller (the parties acknowledge that the following
list is intended to cover the different types of assets generally applicable to
Seller's type of business and inclusion of any particular item on such list does
not imply that Seller owns such type of asset):
(a) Products. All computer software, program products and
components (including hardware) thereof and all interests therein owned by
Seller, as well as any and all predecessor versions of the foregoing and all
computer software and program products under development (whether or not
actually marketed) and all related source and object code (collectively, the
"Products").
(b) Documentation. All specifications and documents
necessary for the use and maintenance of the Products to assure performance of
the functions they were designed to perform, including, but not limited to, all
user guides, narrative descriptions, file layouts, logic flow
diagrams, source and load modules, output reports, test or other data, test
programs and other relevant information (collectively, the "Documentation").
(c) Customer and Sales Data. All of Seller's customer
lists, advertising and marketing materials, sales tools and advertising and
other data on its customers and potential customers related to the Products
including, without limitation, all samples, catalogs, brochures, manuals, sales
materials and other related items previously or currently used, or proposed for
use in or incident to the sale, design, manufacture, distribution of the
Products (collectively, "Customer Data").
(d) Intellectual Property. Any and all trade or service
marks, logos, domain names or names used by Seller in connection with its
business or operations, and all trade or service xxxx registrations (and any
applications therefor) associated therewith, the Customer Data, all marketing
rights, copyrights, copyright registrations, copyright applications, patent
rights (including, without limitation, issued patents, applications, divisions,
continuations and continuations-in-part, reissues, patents of addition, utility
models and inventors' certificates), drawings and designs and vendor lists, and
the goodwill associated with any of the foregoing (collectively, "Intellectual
Property"); provided, however, that the filed trademarks "NetValue" and
"NetValue Design" and the domain name "xxxxxxxxxxx.xxx" shall not be included in
the Assets.
(e) Assigned Agreements. (i) All existing license and
maintenance agreements with Seller's customers worldwide that relate to the
Products, (ii) all dealer/distributor and supplier agreements relating to the
Products, (iii) all existing non-competitive or confidentiality contracts or
agreements (including, but not limited to, contracts or agreements with direct
sales personnel, product support personnel, engineering personnel and officers
and directors of Seller), (iv) all existing insurance policies, and (v) all
contracts and rights under joint venture agreements or similar arrangements and
(vi) all existing other contracts or agreements inuring to Seller's benefit in
connection with its business (collectively, the "Assigned Agreements"), other
than those agreements or contracts which are designated as "Non-Assigned
Agreements" on Exhibit B hereto.
(f) Receivables. Any and all receivables of any kind
whatsoever owned by Seller, including, without limitation, all license and
maintenance fee receivables arising from the Assigned Agreements or otherwise
derived from the Products or any receivables associated with advances to
employees or consultants (collectively, "Receivables").
(g) Inventories and Supplies. All inventories of raw
materials, finished product (both software and hardware) components, third party
software development or production tools, completed parts, subassemblies,
parts-in-process, finished goods, maintenance supplies, office supplies,
production supplies and engineering supplies applicable to the business or
operations of Seller (collectively, "Inventories").
(h) Fixed Assets. All machinery and equipment (including
computer equipment), hardware, furniture and fixtures, engineering equipment,
tools, and vehicles of all types,
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whether or not such items are fully depreciated or written off for book
purposes, that are used in the design, manufacture or operations of Seller's
business or in the maintenance or operations of its properties or facilities
(collectively, "Fixed Assets").
(i) Leases and Purchase Options. All leases of all types
and all options to purchase equipment, facilities, automobiles or other property
used, or held for use in, the operation of Seller's business.
(j) Corporate Name. The use of Seller's corporate name
and any derivations or combinations thereof, including the name "BrightStreet."
(k) Warranties and Guarantees. Any and all transferable
warranties and guarantees arising from or relating to the acquisition or
purchase of any assets or services by or for Seller. In the event any such
warranties or guarantees are not transferable, Seller will use its best efforts
to obtain for Purchaser, and to cooperate with Purchaser in obtaining, the
benefit of any such warranties and guarantees not transferred.
(l) Open Orders. All rights under uncompleted sales
contracts, agreements or orders including the right to the income to be received
by Seller for the manufacture and/or sale of any item and the right to all
orders to be received from any proposals or bids prepared by or for Seller for
the manufacture, design or sale of any item (collectively, "Orders").
(m) Books and Records. All books, records, correspondence
and other files pertaining to the business or operation of Seller, excluding
corporate minute books of Seller, all personnel records, books of account, and
company-wide tax records (collectively, "Excluded Records"); provided, however,
that Purchaser shall be entitled to access to and the right to make copies of
such excluded items as pertain to the business of Seller before or after the
Closing; provided further that Seller shall furnish to Purchaser copies of
personnel records of all persons currently employed by Seller. After the
Closing, Seller shall be entitled to access to and to make copies of such items
delivered to Purchaser to the extent necessary or useful in preparing its tax
returns and financial reports and for other proper corporate purposes.
(n) Cash and Cash Equivalents. All cash on hand, bank
account deposits, certificates of deposits, or other cash equivalents, as well
as all prepaid expenses and deposits (collectively, "Deposits").
(o) Goodwill. All goodwill of Seller's business.
(p) State Unemployment Contract Balances. All contract
balances of or inuring to Seller under any state unemployment compensation plan
or fund.
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(q) Other. All favorable business relationships, causes
of action, judgments, claims and demands of whatever nature; all obligations of
the present and former officers and employees of Seller and of non-affiliated
individuals to Seller.
1.2 Excluded Assets. The previously described Assets shall
not include:
(a) the consideration to be delivered to Seller pursuant
to this Agreement;
(b) Seller's Certificate of Incorporation, corporate
seals, minute books, stock books, Excluded Records and other corporate records
having exclusively to do with the corporate organization and capitalization of
Seller;
(c) Shares of the capital stock of Seller, including
shares held by Seller as treasury shares.
1.3 Non-Assignment of Certain Agreements. Notwithstanding anything to
the contrary in this Agreement, to the extent that assignment hereunder of any
of the Assets shall require the consent of any other party, or in the event that
any of the same are nonassignable as designated as a "Nonassignable Agreement"
in Exhibit B ("Nonassignable Agreements"), neither this Agreement nor any action
taken pursuant to its provisions shall constitute an assignment or agreement to
assign if such assignment or attempted assignment would constitute a breach
thereof or result in the loss or diminution thereof; provided, however, that in
each such case, Seller shall notify Holdings in writing in advance of the
Closing (as such term is defined below) of the existence of any agreements with
respect to which it has not obtained any necessary consent to assignment and
Seller and Holdings shall use their best efforts to obtain the consent of such
other party to an assignment to Purchaser. If any such consent is not obtained
prior to the Closing, Purchaser may elect not to proceed with the Closing in its
discretion, without any further liability to Seller. In the event that Purchaser
elects to proceed with the Closing, Seller and Holdings shall cooperate with
Purchaser (without any additional expense to Purchaser) in any reasonable
arrangement designed to provide for Purchaser the benefits under any such
agreement, lease, contract, contractual right, claim, cause of action or the
like, as the case may be, with respect to any such asset or property including,
without limitation, entering into such instruments as may be necessary to
effect, to the extent permitted by law, an equitable assignment by Seller to
Purchaser of all of Seller's rights, benefits, title and interest in and to any
such Nonassignable Agreement, and where necessary or appropriate, to designate
Purchaser as the agent of Seller for the purpose or completing, fulfilling and
discharging all of Seller's rights and liabilities under any such Nonassignable
Agreement. Nothing contained herein shall require Purchaser to consummate the
transaction contemplated herein in the event all necessary consents have not
been obtained.
1.4 Closing. The purchase and sale of the Assets contemplated
hereunder shall take place at the offices of Xxxx & Xxxxxxx, LLP, 0000 X.
Xxxxxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx, at 2:00 p.m. on December __, 1999, or at
such other time and place as the Seller and Purchaser shall mutually agree,
either orally or in writing (which time and place are designated as the
"Closing").
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2. CONSIDERATION FOR TRANSFER. The consideration for the transfer of the
Assets (the "Purchase Price") shall be as follows:
(i) $2.0 million in cash paid at the Closing via certified
or cashier's check or wire transfer;
(ii) Two Million, Nine Hundred Fifty Eight Thousand, Eight
Hundred Nineteen (2,958,819) shares of Purchaser's Common
Stock (hereinafter referred to as the "Shares"), which is
equal to 12% of the outstanding capital stock of Purchaser
(calculated on a fully-diluted, as converted to Common Stock
basis (i.e., taking into account all outstanding options,
warrants, restricted stock grants, convertible securities,
and options reserved for issuance under the 1999 Stock
Option Plan)) assuming the sale of $17,000,000 of
Purchaser's Series A Preferred Stock (the "Series A Round");
such Shares to be delivered to Seller at Closing; provided,
however, that in the event that less than $17,000,000 of
Purchaser's Series A Preferred Stock is sold at the Closing
referred to in Section 9.7, Seller shall receive at closing
only that number of Shares equal to 12% of the outstanding
capital stock of Purchaser (calculated in the manner
described above) based on the number of shares of Series A
Preferred Stock actually issued, with additional Shares to
be issued under Section 12.6; and
(iii) the assumption by Purchaser of those liabilities
listed on Exhibit C (the "Assumed Liabilities"). Purchaser
shall provide, at the Closing, an undertaking ("Instrument
of Assumption") pursuant to which Purchaser shall assume and
agree to pay or discharge the Assumed Liabilities (which
undertaking shall be in a form reasonably satisfactory to
Seller and Seller's counsel).
Except for the Assumed Liabilities, Purchaser shall not assume any other
obligations or liabilities of Seller, including without limitation (i) any
obligations or liabilities under any Non-Assigned Agreement, (ii) any claims or
pending litigation or proceedings relating to the business and operations of
Seller prior to the Closing, (iii) any obligations or liabilities of Seller
under any pension, retirement, profit-sharing, deferred compensation, vacation,
severance, bonus, incentive, medical, vision, dental, disability, life insurance
or any other employee benefit plan as defined in Section 3(3) of ERISA (as
defined herein), (iv) any obligations or liabilities of Seller under any
collective bargaining agreements, (v) any credit or loan agreements, note
purchase agreements, indentures, capital leases, or other financing
arrangements, (vi) any agreements entered into or after the date hereof by
Seller in violation of the terms of this Agreement, or (vii) any other
obligations and liabilities that are not set forth on Exhibit C as Assumed
Liabilities, and all such obligations and liabilities shall remain and be the
obligations and liabilities solely of Seller.
3. ALLOCATION AND TAXES.
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3.1 Allocation of Purchase Price. The Purchase Price of the Assets
shall be allocated among the Assets as set forth on Exhibit D. The portion of
the price consisting of the assumption of liabilities shall be allocated among
the Assets in the same proportions as the cash portion of the consideration is
allocated as set forth above. Each of the parties agrees to report this
transaction for state and federal tax purposes in accordance with this
allocation of the purchase price.
3.2 Excise and Property Taxes. Purchaser shall pay all sales and use
taxes (if any) arising out of the transfer of the Assets. State and local
personal property taxes on the Assets for tax periods including the date of
Closing shall be pro rated between Seller and Purchaser as of the Closing, with
any net difference paid by the appropriate party at Closing or within thirty
(30) days following the determination of such net difference. Purchaser shall
not be responsible for any business, occupation, withholding, property or
similar tax, or any taxes of any kind related to any period before the Closing.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND HOLDINGS. As used
in this Section, the expression "to the best of its knowledge" or similar
phrases mean as to matters of fact that, (i) with respect to Seller, following
due investigation, Seller finds no reason to believe that the representation
made is factually incorrect or misleading in any manner and (ii) with respect to
Holdings, based on the actual knowledge of Holdings officers and directors,
Holdings finds no reason to believe that the representation made is factually
incorrect or misleading in any manner; but beyond that Holdings has made no
independent factual investigation; provided that the knowledge of R.Xxxxx Xxxxx,
Xxxx Xxxxxxx and any other employee or consultant hired or engaged by Xxxxx
Xxxxx or any other employee of the Seller with hiring authority after December
31, 1998, shall not be imputed by implication to Seller or Holdings. Except as
specifically disclosed on Exhibit E, Seller and Holdings, jointly and severally,
represent and warrant that:
4.1 Organization, Good Standing and Qualification. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware, has all necessary corporate powers to own its properties and to
carry on its business as now owned and operated by it, and is duly qualified to
do intrastate business and is in good standing in all jurisdictions in which the
nature of Seller's business or of its properties makes such qualification
necessary and in which the failure to be so qualified would have a material
adverse effect on Seller's financial conditions or operations.
4.2 Subsidiaries. Seller does not own, directly or indirectly, any
interest or investment (whether equity or debt) in any corporation, partnership,
limited liability company, business, trust, or other entity.
4.3 Financial Statements. Exhibit A to this Agreement includes the
balance sheet of Seller as of December 31, 1998, and its statement of operations
and statement of cash flows for the year ended December 31, 1998, as well as the
unaudited balance sheet of Seller as of June 30, 1999, and its statement of
operations and statement of cash flows for the six month period ended June 30,
1999 (collectively, the "Financial Statements"). To the best of Holdings' and
Seller's knowledge,
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the Financial Statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, and fairly present the
financial position of Seller as of the date and for the period thereof. To the
best of Seller's and Holdings' knowledge all material liabilities of Seller
which existed as of June 30, 1999 are set forth in Seller's balance sheet dated
as of June 30, 1999 and no other liability normally disclosed on a balance sheet
and in excess of $1,000 existed on June 30, 1999. Holdings, on its own behalf
and on behalf of its officers and directors, represents that, except for
liabilities of a non-material nature previously disclosed to Xxxxx Xxxxx, it has
not incurred any liabilities for the account of BrightStreet, and that it has
not incurred any material liabilities on behalf of BrightStreet which are not
reflected in the Financial Statements.
4.4 Absence of Specified Changes. To the best of Holdings' and
Seller's knowledge, and except as contemplated by this Agreement, since June 30,
1999 there has not been any:
(a) Transaction by Seller except in the ordinary course of
business as conducted on that date;
(b) Material adverse change in the financial condition,
liabilities, assets, business, or prospects of Seller;
(c) Labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(d) Declaration, setting aside, or payment of a dividend
or other distribution in respect to the shares of Seller, or any direct or
indirect redemption, purchase, or other acquisition by Seller of any of its
shares;
(e) Increase in the salary or other compensation payable
or to become payable by Seller to any of its officers, directors, or employees,
or the declaration, payment, or commitment or obligation of any kind for the
payment by Seller, of a bonus or other additional salary or compensation to any
such person;
(f) Sale or transfer of any asset of Seller except in the
ordinary course of business;
(g) Amendment or termination of any contract, agreement,
or license to which Seller is a party, except in the ordinary course of
business;
(h) Loan by Seller to any person or entity, or guaranty by
Seller of any loan;
(i) Waiver or release of any material right or material
claim of Seller, except in the ordinary course of business;
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(j) Commencement or notice or threat of commencement of
any governmental proceeding against or investigation of Seller or its affairs;
(l) Other event or condition of any character that has or
might reasonably have a material and adverse effect on the financial condition,
business, assets or prospects of Seller;
(m) Issuance or sale by Seller of any of its shares of
common stock or of any other of its securities; or
(n) Agreement by Seller to do any of the things described
in the preceding clauses (a) through (m).
4.5 Taxes. The following representations, warranties and
agreements are made with respect to tax matters (such representations are made
without qualification with respect to all taxing authorities other than those
authorities located within the State of California; such representations are
made to the best of Holdings' and Seller's knowledge with respect to tax
obligations to any taxing authorities located within the State of California):
Filing of Tax Returns. Seller has timely completed
and filed with the appropriate taxing authorities all returns in respect of any
and all taxes ("Taxes") required to be filed through the date hereof and will
timely file any such returns required to be filed on or prior to the Closing.
Such returns and other information filed in respect of any Taxes are complete
and accurate in all material respects. Seller has not requested or been granted
any extension of time within which to file any such returns (including, without
limitation, information returns) in respect of Taxes which have not been filed.
Payment of Taxes. As of the Closing Date, all
amounts required to be paid by Seller to taxing authorities or others, whether
or not shown on any return, on or before the date hereof, have been timely paid,
or will be timely paid, or an adequate reserve has been established therefor,
and Seller has no material liability for Taxes in excess of the amounts so paid
or reserves so established. Seller has complied with all applicable laws, rules
and regulations relating to the payment and withholding of Taxes, including
timely payment of amounts owed to and timely amounts withheld from employees,
independent contractors, creditors, stockholders and other third parties.
Audits, Investigations or Claims. No audits,
investigations, issues, disputes or claims have been raised (and are currently
pending) by any taxing authority in connection with any returns in respect of
Taxes of Seller. No extension of time with respect to any assessment of Taxes or
deficiency or waiver of a statute of limitations relating to any return in
respect of Taxes has been given by or requested from Seller. All deficiencies
asserted or assessments made as a result of any examinations have been fully
paid, or are fully reflected as a liability in the Seller's Financial
Statements, or are being contested and an adequate reserve therefore has been
established and is
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reflected fully as a liability in the Seller's Financial Statements. Seller has
not entered into any transaction already recharacterized or which could be
recharacterized for tax purposes on the grounds of tax avoidance, bad faith or
tax fraud.
Liens. There are no liens for Taxes (other than for
current Taxes not yet due and payable) on any assets of Seller.
4.6 Real Property. Seller owns no interest in real property other
than its leasehold interest in and to that certain real property leased by
Seller under that certain Lease dated November, 1997 between Seller and the
Xxxxxxx Road Group, and that certain Lease dated July 20, 1999 between Seller
and Xxxx Xxxxxx Associates.
4.7 Tangible Personal Property. To the best of Holdings' and Seller's
knowledge, Exhibit F to this Agreement is a complete and accurate schedule
describing and specifying the location of all trucks, automobiles, machinery,
equipment (including computer equipment), hardware, furniture, supplies, tools,
drawings and all other tangible personal property owned by, in the possession
of, or used by Seller in connection with its businesses. To the best of
Holdings' and Seller's knowledge, the property listed in Exhibit F constitutes
all such tangible personal property necessary for the conduct by Seller of its
business as now conducted. To the best of Holdings' and Seller's knowledge,
except as indicated in Exhibit F, no personal property used by Seller in
connection with its business is held under any lease, security agreement,
conditional sales contract, or other title retention or security arrangement, or
is located other than in the possession of Seller or its employees. To the best
of Holdings' and Seller's knowledge, each of the items of personal property
described in Exhibit F is in good operating condition and repair (normal wear
and tear excepted), and there exists no condition which interferes with its
economic value or use. To the best of Holdings' and Seller's knowledge, each
lease or other agreement related to such personal property in full force and
effect.
4.8 Computer Software and Data Bases. To the best of Holdings' and
Seller's knowledge, Exhibit G to this Agreement contains a list of all of
Seller's computer software and data bases and related documentation and
materials which are owned by Seller or used by Seller in the operation of its
business. To the best of Holdings' and Seller's knowledge, except as set forth
in Exhibit G, Seller is the sole owner and original developer of all such
software programs and materials, such programs and materials either are or may
be protected by copyright registration and the actual and contemplated use
thereof does not conflict with or infringe upon or otherwise violate any rights
of others. To the best of Holdings' and Seller's knowledge, the information
utilized by Seller in the construction of Seller's data bases was lawfully
obtained and Seller has the lawful right to use the information.
4.9 Intellectual Property.
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(a) Intellectual Property. Exhibit H lists all of the
registered or applied for registration Intellectual Property owned or licensed
by Seller, listing for each jurisdiction in which Seller has registered, or
filed an application or registration with respect to, such Intellectual Property
with the applicable governmental authority and indicating whether such
Intellectual Property is owned or licensed by Seller. Except for routine
licenses to customers and as otherwise set forth on Exhibit H Seller is the sole
and exclusive owner (legally and beneficially) of, and has the sole and
exclusive right to use, all of its Intellectual Property. Seller's Intellectual
Property does not contain any derivative works or other matter in which a third
party could claim superior, prior or joint ownership, and is not otherwise
subject to any licenses, liens, mortgages, pledges, encumbrances, claims,
restrictions or charges of any kind. Such Intellectual Property includes all the
rights in intellectual property, including without limitation copyright, patent,
trademark or trade name (but excluding any rights in commercially available
software used by Seller in the operation of its business and not resold or
relicensed to other parties or incorporated into any software products developed
by Seller) that have been used in connection with, or are required for, the
current operation of Seller's business.
(b) Royalties and Licenses. Seller has no obligation to
compensate any person for the use of any such Intellectual Property nor has
Seller granted to any person any license, warrant or other rights to use in any
manner any of its Intellectual Property, whether requiring the payment of
royalties or not. Exhibit H sets forth the amount of any royalty or license fees
payable by Seller for use of any Intellectual Property that are licensed in
whole or in part by Seller.
(c) Use and Protection of Intellectual Property. The
Intellectual Property will not cease to be valid rights of Seller prior to and
after the consummation of this Agreement by reason of the execution, delivery
and performance of this Agreement or the transfer and sale of the Assets to
Purchaser. Neither Seller nor any present or former employee nor consultant of
Seller owns or has any proprietary, financial or other interest, direct or
indirect, in any of the Intellectual Property. To the best of Seller's
knowledge, the use by Seller of the Intellectual Property does not and will not
conflict with, infringe upon or otherwise violate the rights of any third party
in or to such Intellectual Property. There are not, and it is expected that
after the Closing there will not be, any restrictions on the right of Seller to
sell, license, sublicense, use, lease or rent the Intellectual Property, other
than ordinary restrictions with respect to Intellectual Property licensed by
Seller.
(d) Domain Names. Set forth on Exhibit I hereto is a
complete and accurate list of all domain names owned by Seller (the "Domain
Names"). Seller has and will transfer to Purchaser at the Closing, good and
marketable title to the Domain Names, free and clear of all encumbrances;
provided, however, that the domain name "xxxxxxxxxxx.xxx" shall be retained by
Seller. The Domain Names, and their current use, sale, disclosure, or display,
do not infringe or misappropriate any trademark, trade secret, or other
intellectual property right of any third party.
(e) Seller has in force all license or other agreements
necessary for the performance of Seller's services and the manufacture,
protection, distribution and license and sale of all of Seller's products and
services; and
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(f) All right, title and interest in and to any and all of
the writings, programs, documentation, trademarks, trade names, trade secrets,
copyrights and copyright applications being used by Seller are owned or licensed
by Seller, and Seller has taken all steps reasonably necessary to protect its
interests therein.
4.10 Trade Secret Protection. To the best of Holdings' and Seller's
knowledge, Seller has taken all reasonable security measures to protect the
secrecy, confidentiality, and value of its trade secrets; any of Seller's
employees and any other persons who either alone or in concert with others,
developed, invented, discovered, derived, programmed, or designed these trade
secrets, or who have knowledge of or access to information relating to them,
have been put on notice and have entered, or will prior to the Closing enter,
into agreements that these trade secrets are proprietary to Seller and not to be
divulged or misused. To the best of Holdings' and Seller's knowledge, all these
trade secrets are presently valid and protectible, and are not part of the
public knowledge or literature, nor to Seller or Holdings' knowledge have they
been used, divulged, or appropriated for the benefit of any past or present
employees or other persons, or to the detriment of Seller. To the best of
Holdings' and Seller's knowledge, Seller is not making use of any confidential
information or trade secret of any former employer of any officer or director or
any present or past employee of Seller.
4.11 Title to Assets. Seller has good and marketable title to all the
Assets, which constitute all the assets and interests in assets that are used in
the business of Seller. All the Assets are free and clear of mortgages, liens,
pledges, charges, encumbrances, equities, claims, easements, rights of way,
covenants, conditions, or restrictions, except for (i) any liens related to
current taxes not yet due and payable; and (ii) possible minor matters that, in
the aggregate, are not substantial in amount and do not materially detract from
or interfere with the value or the present or intended use of any of these
assets, nor materially impair business operations. To the best of Holdings' and
Seller's knowledge, all tangible personal property of Seller is in good
operating condition and repair, ordinary wear and tear excepted. To the best of
Holdings' and Seller's knowledge, no officer, director, or employee of Seller
owns, or has any interest, directly or indirectly, in any of the property owned
by or used by Seller or any copyrights, patents, trademarks, trade names or
trade secrets used by Seller.
4.12 Existing Employment Contracts. To the best of Holdings' and
Seller's knowledge, Exhibit J to this Agreement contains a list of all
employment contracts and collective bargaining agreements, and all pension,
bonus, profit-sharing, stock option, or other agreements or arrangements
providing for employee remuneration or benefits to which Seller is a party or is
bound. To the best of Holdings' and Seller's knowledge, all these contracts and
arrangements are in full force and effect, and neither Seller, nor any other
party is in default under them. To the best of Holdings' and Seller's knowledge,
there have been no claims of defaults and there are no facts or conditions which
if continued, or on notice, will result in a default under these contracts or
arrangements. To the best of Holdings' and Seller's knowledge, Seller does not
maintain or contribute to any employee pension or profit-sharing plans for any
of its employees.
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4.13 Labor Relations; Employees. To the best of Holdings' and
Seller's knowledge, except as set forth in Exhibit J, (1) Seller has paid in
full to, or accrued on behalf of, all employees all wages, salaries,
commissions, bonuses and other direct compensation for all services performed by
them to the date hereof and all amounts required to be reimbursed to such
employees; (2) upon termination of the employment of any employee, Seller will
not, by reason of anything done prior to the Closing, be liable to any employee
for "severance pay" or any other payments except for accrued vacation pay; (3)
Seller is in substantial compliance with all federal, state, local and foreign
laws and regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours; (4) there is no unfair labor
practice complaint pending against Seller before the National Labor Relations
Board or any comparable state, local or foreign agency; (5) there is no labor
strike, dispute, slowdown or stoppage actually pending or threatened against or
involving Seller; (6) no labor representation question is pending respecting the
employees of Seller; (7) no grievance which might have an adverse effect on
Seller or the conduct of its business nor any arbitration proceeding arising out
of or under collective bargaining agreements is pending and no claim therefor
has been asserted; and (8) no collective bargaining agreement is currently being
negotiated by Seller.
4.14 Other Contracts. To the best of Holdings' and Seller's
knowledge, Seller is not a party to, nor is any of its property bound by, any
distributor's or manufacturer's representative or agency agreement, any output
or requirements agreement, any agreement not entered into in the ordinary course
of business, any indenture, mortgage, deed of trust, lease, or any agreement
requiring the performance by Seller of any obligation for a period of time
extending beyond one year from the Closing or calling for consideration of more
than $10,000, except the agreements listed in Exhibit K, copies of which have
been furnished or made available to Purchaser. To the best of Seller's
knowledge, there is no default or event which, with the lapse of time or the
giving of notice or both, would constitute a material default by any party to
any of these agreements. To the best or Holdings' and Seller's knowledge, Seller
has not received notice that any party to any of these agreements intends (i) to
cancel or terminate any of these agreements or (ii) to exercise or not exercise
any options under any of these agreements in such a manner as to have a
materially adverse effect upon the business, properties or financial condition
of Seller. Notwithstanding the knowledge qualifiers contained in this
representation, the foregoing representations are made by Seller and Holdings
without any qualification or limitation as to knowledge with respect to any
credit or loan agreements, note purchase agreements, indentures, capital leases,
mortgages, debt, equity or other financing arrangements of Seller.
4.15 Compliance with Laws. To the best of Holdings' and Seller's
knowledge, the business of Seller has not violated, and as presently conducted
does not violate, any federal, state, local or foreign laws, regulations or
orders, the violation of which would have a material adverse effect upon Seller
nor has Seller received notice of any violation which remains uncorrected.
4.16 Litigation. There is no suit, action, arbitration, or legal,
administrative, or other proceeding or governmental investigation pending or, to
the best knowledge of Seller, threatened against or affecting Seller or any of
its business, assets or financial condition. Seller is not in default
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with respect to any order, writ, injunction, or decree of any federal, state,
local, or foreign court, department, agency, or instrumentality issued with
respect to Seller. Seller is not presently engaged in any legal action to
recover moneys due to it or damages sustained by it.
4.17 Agreement Will Not Cause Breach or Violation. To the best of
Holdings' and Seller's knowledge, the execution and delivery of this Agreement
and consummation of the transactions contemplated hereby will not result in or
constitute any of the following: (i) a breach of any term or provision of this
Agreement; (ii) a default or an event which, with the lapse of time or the
giving of notice or both, would be a default, breach, or violation of the
certificate of incorporation or bylaws of Seller or of any lease, license,
promissory note, conditional sales contract, commitment, indenture, mortgage,
deed of trust, or other agreement, instrument, or arrangement to which Seller is
a party or by which Seller or the Assets are bound; (iii) an event that would
permit any party to terminate any agreement or to accelerate the maturity of any
indebtedness or other obligation of Seller; (iv) the creation or imposition of
any lien, charge or encumbrance on any of the properties, whether tangible or
intangible, of Seller; or (v) the violation of any law, judgment, order or
decree affecting the business of Seller. Notwithstanding the knowledge
qualifiers contained in this representation, the foregoing representations are
made by Seller and Holdings without any qualification or limitation as to
knowledge with respect to the certificate of incorporation or bylaws of Seller
or any credit or loan agreements, note purchase agreements, indentures, capital
leases, mortgages, debt, equity or other financing arrangements of Seller.
4.18 Authority and Consents. Seller has the right, power, legal
capacity and authority to enter into, and perform its obligations under this
Agreement and, to the best of Holdings' and Seller's knowledge, no approvals or
consents of or assignments by any persons (including, without limitation, any
federal, state or local governmental or administrative authorities) are
necessary in connection with it. Notwithstanding the knowledge qualifiers
contained in this representation, the foregoing representations are made by
Seller and Holdings without any qualification or limitation as to knowledge with
respect to any approvals, consents or assignments required from any federal,
state or local governmental or administrative authorities or any parties to any
credit or loan agreements, note purchase agreements, indentures, capital leases,
mortgages, debt, equity or other financing arrangements of Seller The execution
and delivery of this Agreement by Seller has been duly authorized by its Board
of Directors.
4.19 Authority. To the best of Holdings' and Seller's knowledge,
Exhibit L to this Agreement lists (i) the names and addresses of all persons
holding a power of attorney on behalf of Seller; and (ii) the names and
addresses of all banks or other financial institutions in which Seller has an
account, deposit or safe-deposit box, with the names of all persons authorized
to draw on these accounts or deposits or to have access to these boxes.
4.20 Insurance. To the best of Holdings' and Seller's knowledge, all
insurance coverage applicable to Seller, its business and assets is in full
force and effect, insures Seller in reasonably sufficient amounts against all
risks usually insured against by persons operating similar businesses or
properties of similar size
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in the localities where such businesses or properties are located, provides
coverage as may be required by applicable law or regulations and by any and all
contracts or agreements to which Seller is a party and has been issued by
insurers of recognized responsibility. To the best of Holdings' and Seller's
knowledge, there is no default under any such coverage nor has there been any
failure to give notice or present any claim under any such coverage in a due and
timely fashion. To the best of Holdings' and Seller's knowledge, there are no
outstanding unpaid premiums except in the ordinary course of business and no
notice of cancellation or non-renewal of any such coverage has been received. To
the best of Holdings' and Seller's knowledge, there are no provisions in such
insurance policies for retroactive or retrospective premium adjustments. To the
best of Holdings' and Seller's knowledge, all products liability, general
liability and workers' compensation insurance policies maintained by Seller have
been occurrence policies and not claims made policies. To the best of Holdings'
and Seller's knowledge, there are no outstanding performance bonds covering or
issued for the benefit of Seller. To the best of Holdings' and Seller's
knowledge, there are no facts upon which an insurer might be justified in
reducing coverage or increasing premiums on existing policies or binders. To the
best of Holdings' and Seller's knowledge, Seller has no insurance claims filed
(i) since June 30, 1999 or (ii) prior to such date but not yet indemnified, and
Seller has entered into no insurance agreements and is not covered by any
insurance which shall or may be terminated due to the transfer of the Seller
Assets. To the best of Holdings' and Seller's knowledge, nothing has been done
or omitted to be done which would make any insurance policy void or voidable. To
the best of Holdings' and Seller's knowledge, Seller has properly declared to
each appropriate insurance company any event that could justify an insurance
claim
4.21 Year 2000. To the best of Holdings' and Seller's knowledge, any
software or hardware or equipment currently in use by Seller, and being assigned
to the Purchaser will satisfy all of the following:
(a) When properly used in accordance with associated documentation,
will correctly recognize and process dates of December 31, 1999 and beyond (the
"Millennial Dates"), without ambiguity, interruption, abnormalities or invalid
or incorrect results, and with full recognition of leap year dates; and
(b) The occurrence in or use by such software, hardware or equipment of
Millennial Dates will not adversely affect the performance or functioning
thereof (including with respect to date-dependent data, computations, input,
output and calculating, comparing and sequencing functions).
4.22 Environmental Matters.
(a) To the best of Holdings' and Seller's knowledge,
during the period that Seller has leased or owned its properties, there have
been no disposals, releases or threatened releases of Hazardous Materials (as
defined below) on, from or under such properties. Seller has no knowledge or any
presence, disposals, releases or threatened releases of Hazardous Materials on,
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from or under any of such properties, which may have occurred prior to Seller
having taken possession of any of such properties. For purposes of this
Agreement, the terms "disposal," "release," and "threatened release" shall have
the definitions assigned thereto by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA"). For the purposes of this Section "Hazardous Materials" shall mean
any hazardous or toxic substance, material or waste which is or becomes prior to
the Closing regulated under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous material," "toxic substance," or
"hazardous chemical" under (1) CERCLA; (2) the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; (3) the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq.; (4) the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq.; (5) the Occupational Safety and
Health Act of 1970, 29 U.S.C. Section 651 et seq.; (6) regulations promulgated
under any of the above statutes; or (7) any applicable state or local statute,
ordinance, rule, or regulation that has a scope or purpose similar to those
identified above.
(b) To the best of Holdings' and Seller's knowledge,
neither Seller nor any of Seller's properties is in violation of any federal,
state, or local law, ordinance, regulation, or order relating to industrial
hygiene or to the environmental conditions on, under or about such properties,
including, but not limited to, soil and ground water condition. To the best of
Holdings' and Seller's knowledge, during the time that Seller has owned or
leased its properties, neither Seller nor, to Seller's knowledge, any third
party, has used, generated, manufactured or stored on, under or about such
properties or transported to or from such properties any Hazardous Materials.
(c) To the best of Holdings' and Seller's knowledge,
during the time that Seller has owned or leased its properties, there has been
no litigation brought or threatened against Seller, or any settlement reached by
Seller with, any party or parties alleging the presence, disposal, release or
threatened release of any Hazardous Materials on, from or under any of such
properties.
4.23 Full Disclosure. Neither Seller, Holdings, nor any of Seller's
officers, directors, employees or agents has withheld from Purchaser any
material facts relating to Seller's assets, liabilities, business, operations,
financial condition or prospects. None of the representations, warranties or
statements made by or on behalf of Seller or Holdings or made in any document,
certificate, memorandum or exhibit furnished or to be furnished by Seller or
Holdings, or on their behalf, pursuant to this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit any
material fact the omission of which would be misleading.
4.24 Brokers, Finders. The transactions contemplated hereby were not
submitted to Seller or Holdings by any broker, finder or other person entitled
to a commission, fee or like payment thereon and were not, with the consent of
Seller or Holdings, submitted to Purchaser by any broker, finder or other
person, and the actions of Seller have not, to the best of Seller's knowledge,
given rise to any claim by any person against Seller for a commission, fee or
like payment.
4.25 Investment-Related Representations and Warranties.
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(a) Seller is experienced in evaluating start-up companies
such as Purchaser, is able to fend for itself in transactions such as the one
contemplated by this Agreement, has such knowledge and experience in financial
and business matters that Seller is capable of evaluating the merits and risks
of its prospective investment in the Shares, and has the ability to bear the
economic risks of the investment.
(b) Seller is acquiring the Shares for investment for
Seller's own account and not with the view to, or for resale in connection with,
any distribution thereof. Seller understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent as expressed herein. Seller does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to any third person with respect to any of the Shares. Seller
understands and acknowledges that the offering of the Shares pursuant to this
Agreement will not be registered under the Securities Act on the ground that the
sale provided for in this Agreement and the issuance of securities hereunder is
exempt from the registration requirements of the Securities Act.
(c) Seller acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Seller is aware of the provisions
of Rule 144 promulgated pursuant to the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions. Seller covenants that, in the absence of an effective
registration statement covering the stock in question, such persons will sell,
transfer, or otherwise dispose of the Shares only in a manner consistent with
Seller's representations and covenants set forth in this Section.
(d) Seller understands that no public market now exists
for any of the securities issued by Purchaser, and that no public offering is
currently contemplated.
(e) Seller has received and reviewed such information
about Purchaser and have had an opportunity to discuss Purchaser's business,
management and financial affairs with its management and to review the
Purchaser's facilities, and to conduct such investigation into the business and
prospects of Purchaser as Seller deems relevant. Seller accepts the
responsibility for conducting such an investigation. To the extent Seller has
not sought information regarding any particular matter, such parties hereby
represent that they had no interest in doing so and that such matters are not
material to them in connection with this investment.
(f) Seller and Holdings acknowledge that the transactions
contemplated herein may have significant federal, state or other tax
consequences upon such persons, and that no advice as to what such tax
consequences may be has been given by Purchaser. Seller and Holdings have been
advised to consult with their own tax advisors concerning their own particular
tax consequences of the transactions contemplated herein.
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5. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser represents and
warrants that:
5.1 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of Delaware, has
all necessary corporate powers to own its properties and to carry on its
business as now owned and operated by it, and is duly qualified to do intrastate
business and is in good standing in all jurisdictions in which the nature of
Purchaser's business or of its properties makes such qualification necessary and
in which the failure to be so qualified would have a material adverse effect on
Purchaser's financial condition or operations.
5.2 Authority and Authorization of Purchaser. Purchaser has the
corporate power and authority to execute this Agreement and perform its
obligations hereunder and consummate the transactions contemplated hereby, and
the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the compliance by Purchaser with the terms
of this Agreement will not conflict with or result in a breach of any terms of,
or constitute a default under, Purchaser's certificate of incorporation or
bylaws, or any agreement, obligation or instrument to which Purchaser is a party
or by which it is bound. All necessary and appropriate corporate action has been
taken by Purchaser with respect to the execution and delivery of this Agreement,
and this Agreement constitutes a valid and binding obligation of Purchaser
enforceable in accordance with its terms except as limited by bankruptcy,
insolvency, moratorium, reorganization and other laws affecting the rights and
remedies of creditors and by general equity principles.
5.3 Litigation. There is no claim, litigation, investigation,
inquiry, action, suit or proceeding, administrative or judicial, pending or, to
the knowledge of Purchaser, threatened against Purchaser, at law or in equity,
before any federal, state or local court or regulatory agency, or other
governmental authority, which might have an adverse effect on its ability to
perform any of its obligations under this Agreement or upon the consummation of
the transactions contemplated by this Agreement.
5.4 Brokers, Finders. The transactions contemplated hereby were not
submitted to Purchaser by any broker, finder or other person entitled to a
commission, fee or like payment thereon and were not, with the consent of
Purchaser, submitted to Seller by any broker, finder or other person, and the
actions of Purchaser have not, to the best of Purchaser's knowledge, given rise
to any claim by any person against Seller for a commission, fee or like payment.
5.5 Consents. No approvals or consents of or assignments by any
persons (including, without limitation, any federal, state or local governmental
or administrative authorities) are necessary in connection with the consummation
of transaction contemplated hereunder by Purchaser.
5.6 Capitalization. As of the date hereof, the authorized capital
stock of Purchaser consists of Fifty-five Million (55,000,000) shares of capital
stock: Thirty-five Million
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(35,000,000) shares of Common Stock, $0.001 par value ("Common Stock"), of which
5,707,000 shares are outstanding; Twenty Million (20,000,000) shares of
Preferred Stock, $0.001 par value, Twelve Million, Six Hundred Thousand
(12,600,000) of which shares are designated as Series A Preferred Stock ("Series
A Preferred Stock"), all of which are issued and will be outstanding, assuming
the sale of $17,000,000 of Purchaser's Series A Preferred Stock. All such issued
and outstanding securities have been duly authorized and validly issued, are
fully paid and nonassessable, and were issued in compliance with all applicable
state and federal laws concerning the issuance of securities. The rights,
privileges and preferences of the Series A Preferred Stock are as set forth in
the Certificate of Incorporation previously delivered to Seller, and no
amendment thereto has been approved by Purchaser's Board of Directors. Except
for the Stockholders Agreement and the Registration Rights Agreement, there is
no other agreement which grants any additional rights to the Series A Preferred
Stock. Purchaser has reserved and authorized the issuance of Three Million,
Three Hundred Seventy One Thousand (3,371,000) shares of Common Stock for
issuance to officers, directors, employees and consultants pursuant to a stock
option and/or purchase plan or other arrangements approved by Purchaser's Board
of Directors. Except for (i) the conversion privileges of the Series A Preferred
Stock (the "Preferred Stock"), (ii) rights of first refusal granted to the
purchasers of the Preferred Stock, (iii) options granted pursuant to the
above-described stock option plan, there are no preemptive rights or outstanding
rights, options, warrants, conversion rights or agreements for the purchase or
acquisition from Purchaser of any shares of its capital stock or any securities
convertible into or ultimately exchangeable or exercisable for any shares of
Purchaser's capital stock. Schedule 1 hereto sets forth a true, correct and
complete listing of all current holders of Purchaser's equity securities,
options or warrants. There are no contracts, agreements, arrangement or
understandings, oral or written, which grant or permit the Management Team (as
defined in Section 12.6) to purchase in excess of the Management Interest (as
defined in Section 12.6) upon consummation of the Series A Round.
6. "MARKET STAND-OFF" AGREEMENT. Seller and Holdings agree in connection with
any registration of Purchaser's Common Stock that, upon the request of the
underwriters managing any public offering of Purchaser's Common Stock, Seller
and Holdings will not sell or otherwise dispose of any Shares without the prior
written consent of such underwriters for a period of not more than 180 days
after the effective date of such registration and subject to all restrictions as
the underwriters may specify; provided, that all holders of 2% of more of
Purchaser's Common Stock, and Series A Preferred Stock on an as-converted basis,
enter into the same agreement.
7. SELLER'S OBLIGATIONS BEFORE CLOSING. Seller covenants that from the date
of this Agreement until the Closing:
7.1 Purchaser's Access to Premises and Information. Purchaser and its
counsel, accountants, and other representatives shall have full access during
normal business hours to all properties, books, accounts, records, contracts and
documents of or relating to Seller. Seller shall furnish or cause to be
furnished to Purchaser and its representatives all data and information
concerning the business, finances, and properties of Seller that may reasonably
be requested.
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7.2 Conduct of Business in Normal Course. Seller will carry on its
business and activities diligently and in substantially the same manner as they
previously have been carried out, and shall not make or institute any unusual or
novel methods of manufacture, purchase, sale, lease, management, accounting, or
operation that will vary materially from those methods used by Seller as of the
date of this Agreement without the written consent of Purchaser; provided,
however, that Holdings is under no obligation to provide additional funding to
finance the future operations of Seller.
7.3 Preservation of Business and Relationships. Seller will use
reasonable best efforts, without making any commitments on behalf of Purchaser,
to preserve its business organization intact, to keep available to Seller its
present officers and employees, and to preserve its present relationships with
suppliers, customers, and others having business relationships with Seller.
7.4 Maintenance and Insurance. Seller will continue to carry its
existing insurance, subject to variations in amounts required by the ordinary
operations of its business.
7.5 Employees and Compensation. Seller shall not do, or agree to do,
any of the following acts without Purchaser's written consent: (i) grant any
increase in salaries payable or to become payable to any officer, employee,
consultant, sales agent or representative of Seller, (ii) increase benefits
payable to any officer, employee, consultant, sales agent or representative of
Seller under any bonus or pension plan or other contract or commitment, or (iii)
modify any collective bargaining agreement to which Seller is a party or by
which Seller may be bound.
7.6 New Transactions. Seller shall not, without Purchaser's written
consent, do or agree to do any of the following acts:
(a) Enter into any contract, commitment or transaction not
in the usual and ordinary course of its business; or
(b) Enter into any contract, commitment or transaction in
the usual and ordinary course of business involving an amount exceeding $10,000,
individually, or $50,000 in the aggregate; or
(c) Make any capital expenditures in excess of $5,000 for
any single item or $10,000 in the aggregate, or enter into any leases of capital
equipment or property under which the annual lease charge is in excess of
$5,000; or
(d) Sell or dispose of any capital assets with a net book
value in excess of $5,000, individually, or $10,000 in the aggregate.
7.7 Payment of Liabilities and Waiver of Claims. Seller shall not
do, or agree to do, any of the following acts: (i) pay any obligation or
liability, fixed or contingent, other than current
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liabilities; (ii) waive or compromise any material right or material claim; or
(iii) cancel without full payment, any note, loan or other material obligation
owing to Seller.
7.8 Existing Agreements. Without Purchaser's written consent, Seller
shall not modify, amend, cancel or terminate any of its existing contracts or
agreements, or agree to do any of these acts.
7.9 Consent of Others. As soon as reasonably practical after the
execution and delivery of this Agreement, and in any event on or before the
Closing, Seller will obtain the written consents of or assignments by the
persons described in Exhibit M to this Agreement and will furnish to Purchaser
executed copies of those consents and assignments.
7.10 Confidentiality Agreements. As soon as reasonably practical
after the execution and delivery of this Agreement, and in any event on or
before the Closing, Seller will obtain confidentiality agreements in form and
substance reasonably satisfactory to Purchaser from each officer, director and
employee of Seller and will furnish to Purchaser executed copies of such
agreements.
7.11 Shareholder Approvals. Holdings hereby represents and warrants
that it owns a majority of the outstanding Common Stock of Seller, that it has
formally approved and authorized the sale of substantially all the property and
assets of Seller to Purchaser on the terms and conditions provided in this
Agreement, and that no other shareholder action of Seller or Holdings is
required in connection therewith.
8. CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE. The obligations of
Purchaser to purchase the Assets under this Agreement are subject to the
satisfaction, at or before the Closing, of all the conditions set out below in
this Section. Purchaser may waive any or all of these conditions in whole or in
part without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by Purchaser of any of its other rights or remedies,
at law or in equity, if Seller shall be in default of any of its
representations, warranties, or covenants under this Agreement.
8.1 Accuracies of Seller's Representations and Warranties. All
representations and warranties by Seller or Holdings in this Agreement or in any
written statement that shall be delivered to Purchaser by Seller or Holdings
under this Agreement shall be true on and as of the Closing as though made at
that time.
8.2 Performance by Seller. Seller shall have performed, satisfied,
and complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it on or before the Closing.
8.3 Certification by Seller. Purchaser shall have received a
certificate, dated the Closing Date, executed by Seller's president and
Holding's president certifying, in such detail as
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Purchaser and its counsel may reasonably request, that the conditions specified
in paragraph 8.1 and 8.2 have been fulfilled.
8.4 Opinion of Seller's Counsel. Purchaser shall have received from
Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx, counsel for Seller and Holdings, an
opinion dated the Closing Date, in form and substance satisfactory to Purchaser
and its counsel, that:
(a) Seller and Holdings are each a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware, and Seller has all necessary corporate power to own its properties
as now owned and operate its business as now operated and is duly qualified or
licensed to do business as a foreign corporation in each jurisdiction where the
nature of its business or assets makes such qualification or license necessary
or advisable except where the failure to be so qualified or licensed will not
have a material adverse effect on Seller;
(b) All corporate proceedings required by law or by the
provisions of this Agreement to be taken by Seller and Holdings on or before the
Closing, in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement, have been duly
and validly taken;
(c) Seller and Holdings each have the corporate power and
authority to enter into the Agreement and perform their respective obligations
thereunder;
(d) Every consent, approval, authorization, or order of
any court or government agency or body that is required for the consummation by
Seller and Holdings of the transactions contemplated by this Agreement has been
obtained and will be in effect on the Closing;
(e) This Agreement has been duly and validly authorized,
executed and delivered by Seller and Holdings, and is valid and binding upon
Seller and Holdings and enforceable in accordance with its terms, except as
limited by bankruptcy and insolvency laws and by other laws affecting the rights
of creditors generally;
(f) To the best of such counsel's knowledge, the Company's
representation and warranty in Section 4.16 hereof is materially true and
correct;
(g) Neither the execution nor delivery of this Agreement
nor the performance of Seller's obligations hereunder will constitute (i) a
default or an event that, with notice or lapse of time or both, would constitute
a default under or violation or breach of Seller's or Holdings certificate of
incorporation or bylaws, or, to the best of such counsel's knowledge, under any
material indenture, license, lease, franchise, mortgage, instrument or other
agreement to which Seller or Holdings is a party, or by which it or the
properties of Seller or Holdings may be bound and which has been identified to
such counsel as a material agreement as detailed in Exhibit N ("Material
Agreements") or (ii) to the best of such counsel's knowledge, any event that
would permit any party to any Material Agreement or instrument to terminate it
or to accelerate the maturity of any
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indebtedness or other obligation of Seller or Holdings, or (iii) to the best of
such counsel's knowledge, an event that would result in the creation or
imposition of any lien, charge, or encumbrance on any asset of Seller; and
(h) In rendering its opinion, counsel for Seller may rely,
as to factual matters, on certificates of governmental agencies and others of
Purchaser.
8.5 Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted on or before the Closing.
8.6 Corporate Approval. The execution and delivery of this Agreement
by Seller and Holdings, and the performance of its covenants and obligations
hereunder, shall have been duly authorized by all necessary corporate action,
and Purchaser shall have received copies of all resolutions pertaining to that
authorization, certified by the secretary of Seller and Holdings.
8.7 Good Standing Certificate. Purchaser shall have received a good
standing certificates, as of a date not more than 3 days before the Closing, of
the Delaware Secretary of State for Seller.
8.8 Consents. Seller shall have obtained and delivered to Purchaser
all necessary agreements and consents of any parties to the consummation of the
transaction contemplated by this Agreement, or otherwise pertaining to the
matters covered by it that Purchaser, in its sole discretion, deems necessary to
consummate the transaction.
8.9 Approval of Documentation. The form and substance of all
certificates, instruments, opinions, and other documents delivered to Purchaser
under this Agreement shall be satisfactory in all reasonable respects to
Purchaser and its counsel.
8.10 Government Approvals. Every consent, approval, authorization, or
order of any court or government agency or body that is required for the
consummation by Seller of the transactions contemplated by this Agreement (other
than such consents, approvals, authorizations or orders which are required to be
obtained by Purchaser hereunder) has been obtained and will be in effect on the
Closing.
8.11 Noncompete. Seller and Holdings shall have entered into a
Noncompetition Agreement in the form attached as Exhibit O hereto (the
"Noncompetition Agreement").
8.12 Termination of Employment Agreements and Stock Options. On or
before the Closing Date, all existing consulting and employment agreements and
arrangements between Seller and its employees and consultants, and any related
guarantee or such agreements and arrangements, shall have been terminated. In
addition, all stock options or other interests in Seller or Holdings owned by
Seller employees or consultants shall have been canceled pursuant to a release
agreement
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signed by such employee or consultant, and such employees and consultants shall
have surrendered and relinquished all such stock options or interests for
cancellation.
9. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE. The obligations of Seller to
sell and transfer the assets under this Agreement are subject to the
satisfaction, at or before the closing, of all the following conditions. Seller
may waive any or all of these conditions in whole or in part without prior
notice.
9.1 Accuracy of Purchaser's Representations and Warranties. All
representations and warranties by Purchaser contained in this Agreement or in
any written statement delivered by Purchaser under this Agreement shall be true
on and as of the Closing as though such representations and warranties were made
on and as of that date.
9.2 Purchaser's Performance. Purchaser shall have performed and
complied with all covenants and agreements, and satisfied all conditions that it
is required by this Agreement to perform, comply with or satisfy, before or at
the Closing.
9.3 Certification By Purchaser. Seller shall have received a
certificate, dated the Closing, executed by Purchaser's president certifying in
such detail as Seller and its counsel may reasonably request, that the
conditions specified in paragraphs 9.1 and 9.2 have been fulfilled.
9.4 Opinion of Purchaser's Counsel. Purchaser shall have furnished
Seller with an opinion, dated the Closing, of Xxxx & Xxxxxxx LLP, counsel for
Purchaser, in form and substance satisfactory to Seller and its counsel, to the
effect that:
(a) Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do intrastate business and is in
good standing in all jurisdictions in which the nature of Purchaser's business
or of its properties makes such qualification necessary and in which the failure
to be so qualified would have a material adverse effect on Purchaser's financial
conditions or operations;
(b) All corporate proceedings required by law or by the
provisions of this Agreement to be taken by Purchaser on or before the Closing,
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement, have been duly
and validly taken;
(c) Purchaser has the corporate power and authority to
enter into this Agreement, perform its obligations hereunder and acquire the
Assets for the consideration set forth herein;
(d) Every consent, approval, authorization, or order of
any court or government agency or body that is required for the consummation by
Purchaser of the transactions
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contemplated by this Agreement (other than such consents, approvals,
authorizations or orders which are required to be obtained by Seller or Holdings
hereunder) has been obtained and will be in effect on the Closing;
(e) This Agreement has been duly and validly authorized,
executed and delivered by Purchaser, and is valid and binding upon Purchaser and
enforceable in accordance with its terms, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally;
(f) The consummation of the transactions contemplated by
this Agreement does not violate or contravene any of the provisions of any
charter, bylaw or resolution of Purchaser or, to the best of counsel's
knowledge, of any indenture, agreement, judgment, or order to which Purchaser is
a party or by which Purchaser is bound.
(g) As of the date hereof, the authorized capital stock of
Purchaser consists of Fifty-five Million (55,000,000) shares of capital stock:
Thirty-five Million (35,000,000) shares of Common Stock, $0.001 par value
("Common Stock"), of which 5,707,000 shares are outstanding; Twenty Million
(20,000,000) shares of Preferred Stock, $0.001 par value, Twelve Million, Six
Hundred Thousand (12,600,000) of which shares are designated as Series A
Preferred Stock ("Series A Preferred Stock"), all of which are issued and will
be outstanding, assuming the sale of $17,000,000 of Purchaser's Series A
Preferred Stock. All such issued and outstanding securities have been duly
authorized and validly issued, are fully paid and nonassessable, and were issued
in compliance with all applicable state and federal laws concerning the issuance
of securities. The rights, privileges and preferences of the Series A Preferred
Stock are as set forth in the Certificate of Incorporation previously delivered
to Seller, and no amendment thereto has been approved by Purchaser's Board of
Directors. Except for the Stockholders Agreement and the Registration Rights
Agreement, there is no other agreement which grants any additional rights to the
Series A Preferred Stock. Purchaser has reserved and authorized the issuance of
Three Million, Three Hundred Seventy One Thousand (3,371,000) shares of Common
Stock for issuance to officers, directors, employees and consultants pursuant to
a stock option and/or purchase plan or other arrangements approved by
Purchaser's Board of Directors. Except for (i) the conversion privileges of the
Series A Preferred Stock (the "Preferred Stock"), (ii) rights of first refusal
granted to the purchasers of the Preferred Stock, (iii) options granted pursuant
to the above-described stock option plan, there are no preemptive rights or
outstanding rights, options, warrants, conversion rights or agreements for the
purchase or acquisition from Purchaser of any shares of its capital stock or any
securities convertible into or ultimately exchangeable or exercisable for any
shares of Purchaser's capital stock.
(h) Neither the execution nor delivery of this Agreement
nor the performance of Purchaser's obligations hereunder will constitute (i) a
default or an event that, with notice or lapse of time or both, would constitute
a default under or violation or breach of Purchaser's certificate of
incorporation or bylaws, or, to the best of such counsel's knowledge, under any
material indenture, license, lease, franchise, mortgage, instrument or other
agreement to which Purchaser is a party immediately prior to the execution and
delivery of this Agreement, or by which it or the properties
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of Purchaser at such time may be bound and which has been identified to such
counsel as a material agreement ("Material Agreement"), or (ii) to the best of
such counsel's knowledge, any event that would permit any party to any Material
Agreement or instrument to terminate it or to accelerate the maturity of any
indebtedness or other obligation of Purchaser, or (iii) to the best of such
counsel's knowledge, an event that would result in the creation or imposition of
any lien, charge, or encumbrance on any asset owned by Purchaser immediately
prior to the execution and delivery of this Agreement; and
In rendering its opinion, counsel for Purchaser may rely, as to factual matters,
on certificates of governmental authorities and officers of Purchaser.
9.5 Termination of Employment Agreements and Stock Options. On or
before the Closing Date, all existing consulting and employment agreements and
arrangements between Seller and its employees and consultants, and any related
guarantee or such agreements and arrangements, shall have been terminated. In
addition, all stock options or other interests in Seller or Holdings owned by
Seller employees or consultants initially hired or engaged by Seller after June
1, 1998, shall have been canceled pursuant to a release agreement signed by such
employee or consultant, and such employees and consultants shall have
surrendered and relinquished all such stock options or interests for
cancellation.
9.6 Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation (other than any action,
suit or proceeding instituted by any present or former officer, director,
employee, shareholder or creditor of Seller), shall have been instituted or
threatened on or before the Closing.
9.7 Series A Closing. The closing of the issuance of Series A
Preferred Stock for an aggregate gross purchase price of not less than
$12,000,000 shall be occurring concurrently with the closing of this Agreement.
10 SELLER'S OBLIGATIONS AT CLOSING.
10.1 Seller's Deliveries At Closing. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser:
(a) Instruments of assignment and transfer of all of the
Assets of Seller to be transferred hereunder including, without limitation, (i)
general bills of sale, vesting in Purchaser good and marketable title to all the
assets, properties, goodwill and business referred to in paragraph 1; (ii)
appropriate endorsements and assignments of the accounts receivable, contracts,
leases, licenses, agreements (including confidentiality and similar agreements),
permits, plans, commitments and other binding arrangements included in the
Assets; and (iii) specific bills of sale, endorsements and assignments
transferring to Purchaser the patents, trademarks, copyrights, software
licenses, licenses and other rights of Seller; and
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(b) All software and databases included in the Assets,
either transmitted electronically or delivered by common carrier to a location
outside the State of California designated by the Purchaser prior to the
Closing, in which event Purchaser will duplicate such software and databases
from the materials delivered by the Seller and Purchaser will not return the
original copies to or use them in California; and
(c) The opinion of Seller's counsel, dated the Closing, as
provided for in paragraph 8.4; and
(d) The Noncompetition Agreement, as provided for in
paragraph 8.11.
(e) The certificate of Seller's president, dated the
Closing, as provided for in paragraph 8.3.
Simultaneously with the consummation of the transfer, Seller, through
its officers, agents and employees, will put Purchaser into full possession and
enjoyment of all properties and assets to be conveyed and transferred by this
Agreement.
10.2 Further Assurances. Seller, at any time before or after the
Closing, will execute, acknowledge and deliver any further deeds, assignments,
conveyances and other assurances, documents and instruments of transfer
reasonably requested by Purchaser and will take any other action consistent with
the terms of this Agreement that may reasonably be requested by Purchaser for
the purpose of assigning, transferring, granting conveying and confirming to
Purchaser, or reducing to possession, any or all property and assets to be
conveyed and transferred by this Agreement. If requested by Purchaser, Seller
further agrees to prosecute or otherwise enforce in its own name for the benefit
of Purchaser any claims, rights or benefits that are transferred to Purchaser by
this Agreement and that require prosecution or enforcement in Seller's name. Any
prosecution or enforcement of claims, rights or benefits under this paragraph
shall be solely at Purchaser's expense, unless the prosecution or enforcement is
made necessary by a breach of this agreement by Seller.
11. PURCHASER'S OBLIGATIONS AT CLOSING. At the Closing, Purchaser shall
deliver to Seller the following instruments and documents against delivery of
the items specified in paragraph 10.1:
(a) A cashier's or certified check in the amount of $2,000,000 or, in
the alternative, Purchaser shall cause such amount to be wire transferred to
Seller in accordance with Seller's written instructions;
(b) The Instrument of Assumption;
(c) The opinion of Purchaser's counsel, dated the Closing, as
provided for in paragraph 9.4; and
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(d) The certificate of Purchaser's president, dated the Closing, as
provided for in paragraph 9.3.
12. OBLIGATIONS AFTER CLOSING.
12.1 Seller's and Holdings' Indemnities.
(a) Seller and Holdings shall jointly and severally indemnify,
defend, and hold harmless Purchaser against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries, and deficiencies, including interest, penalties, and reasonable
attorneys' fees which arise, result from, or relate to (i) any liabilities of
Seller other than the Assumed Liabilities or (ii) any failure by Seller or
Holdings to perform any of their representations, warranties, covenants, or
agreements in this Agreement or in any schedule, certificate, exhibit, or other
instrument furnished or to be furnished by Seller under this Agreement
("Purchaser Losses"). Notwithstanding any other provision of this Agreement,
Seller and Holdings shall not be liable to Purchaser with respect to Purchaser
Losses unless, and then only to the extent that, Purchaser Losses exceed $50,000
in the aggregate. Seller and Holdings agree to pay all Purchaser Losses which
result from the failure of Seller or Holdings to pay liabilities of Seller other
than the Assumed Liabilities without regard to the $50,000 requirement.
(b) Seller and Holdings shall be obligated to indemnify Purchaser
with respect to a claim made under Section 12.1(a)(ii) only for Purchaser Losses
as to which the Purchaser has made a written claim hereunder against Seller or
Holdings within one (1) year after the Closing. The limitation set forth in this
Section 12.1(b) shall not apply to claims for Purchaser Losses based on (i) a
breach of the representations and warranties contained in Section 4.11, which
claims shall survive without limitation of time; or (ii) with respect to
Sections 4.5 and 4.21, which claims shall survive for thirty days after the
statute of limitations period applicable to the particular matter with respect
to which a claim is made.
(c) Seller and Holdings shall not be liable for any Purchaser Losses
described in Section 12.1(a)(ii) to the extent that the aggregate liability of
Seller and Holdings with respect to such Purchaser Losses would exceed the sum
of (i) $2,000,000, plus (ii) the product of $1.35 multiplied by the number of
shares of Common Stock of Purchaser to be issued to Seller pursuant to Section
2(ii) hereof; provided, however, that the foregoing limitation shall not apply
to any Purchaser Losses described in Section 12.1(a)(i).
(d) The first $2,000,000, in the aggregate, recovered by Purchaser
from Seller and/or Holdings for claims made by the Purchaser under Section
12.1(a)(ii) for Purchaser Losses shall be paid by Seller and/or Holdings in
cash. To the extent that Purchaser recovers from Seller and/or Holdings for
claims made under Section 12.1(a)(ii) for Purchaser Losses that, individually or
in the aggregate, exceed $2,000,000, such amount in excess of $2,000,000 shall
be paid by Seller and/or Holdings, as appropriate, in shares of Common Stock of
the Purchaser issued to Seller pursuant to Section 2(ii) hereof, which shares
shall be valued at $1.35 per share for all purposes of determining the number of
shares of Common Stock that are to be delivered by Seller and/or Holdings in
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satisfaction of Purchaser's claims hereunder; provided, however, if, and only to
the extent that, Seller and/or Holdings has transferred shares of Common Stock
of the Purchaser to unaffiliated third parties for fair value such that Seller
and/or Holdings do not then hold sufficient shares of Common Stock of the
Purchaser to pay for such claims raised by Purchaser in excess of $2,000,000,
Seller and/or Holdings shall pay in cash the portion of such excess which is not
discharged through the delivery of shares of Common Stock; provided further,
however, that if Seller and/or Holdings receive notice from Purchaser of claims
for Purchaser Losses in excess of $2,000,000, Seller and/or Holdings shall not
transfer any additional shares of Common Stock if such transfer would result in
Seller and/or Holdings holding Common Stock having a value, in the aggregate, as
determined in accordance with this Section 12.1(d), less than the amount of
Purchaser Losses claimed by Purchaser in good faith that are in excess of
$2,000,000.
12.2 Purchaser's Indemnities.
(a) Purchaser shall indemnify, defend, and hold harmless Seller
against and in respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries, and deficiencies, including
interest, penalties, and reasonable attorneys' fees which arise from, result
from or relate to any failure of Purchaser to satisfy an Assumed Liability or
any breach of, or failure by Purchaser to perform any of its representations,
warranties, covenants, or agreements in this Agreement or in any schedule,
certificate, exhibit, or other instrument furnished or to be furnished by Seller
under this Agreement ("Seller Losses"). Notwithstanding any other provision of
this Agreement, Purchaser shall not be liable to Seller with respect to Seller
Losses other than for failure to satisfy Assumed Liabilities unless, and then
only to the extent that such Seller Losses exceed $50,000 in the aggregate.
(b) Purchaser shall be obligated to indemnify Seller and Holdings
with respect to a claim made under Section 12.2(a)(ii) only for Seller Losses as
to which the Seller or Holdings has made a written claim hereunder against
Purchaser within one (1) year after the Closing. The limitation set forth in
this Section 12.1(b) shall not apply to claims for Seller Losses based on a
failure to satisfy Assumed Liabilities, which claims shall survive for thirty
days after the statute of limitations period applicable to the particular matter
with respect to which a claim is made.
12.3 Exclusive Remedy, Limitation on Damages. The parties agree that
the remedies set forth in Sections 12.1 and 12.2 shall be the parties' exclusive
remedies for any claims covered by those Sections. In no event shall any party
be liable for loss of profit or other indirect, special or consequential
damages.
12.4 Change of Seller's Name. Seller and Holdings agrees that after
the Closing it shall not use or employ in any manner directly or indirectly
"XxxxxxXxxxxx.xxx, Inc." or other business name or style involving the word
"BrightStreet", and that it will take and cause to be taken all necessary action
by its Board of Directors, shareholders and any other persons in order to make
this change in Seller's name within 60 days of the Closing, it being agreed that
Seller and Holdings shall
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not use the name "BrightStreet" in connection with the sale of any products
after the date of the Closing.
12.5 Sales and Use Tax on Prior Sales. Seller agrees to use its best
efforts to furnish to Purchaser within 90 days following the Closing a clearance
certificate from the California Board of Equalization and any related
certificates that Purchaser may reasonably request as evidence that all sales
and use tax liabilities of Seller accruing before the Closing have been fully
satisfied or provided for. Within 120 days after the Closing, if Purchaser
receives a notice from the California Board of Equalization of an amount that
must be paid as a condition of the issuance of such certificate, Seller shall
immediately, upon written notice, pay such amount to Purchaser.
12.6 Securities-Related Covenants. In the event that Purchaser raises
less than $17 million in gross proceeds at the Series A Round Closing described
in Section 9.7, then at each subsequent Series A Round closing up to an
aggregate of $17 million, Purchaser shall issue subsequent Shares to Sellers to
maintain Seller's 12% interest calculated as described in Section 2(ii) above.
In the event that Purchaser raises less than $17 million in gross proceeds in
the Series A Round, then in all subsequent rounds of financings which Purchaser
completes until it raises an aggregate total of $17 million in gross proceeds,
Seller's interest in Purchaser (on a fully-diluted, as converted to Common Stock
basis, taking into account all options, warrants, restricted stock grants and
convertible securities outstanding as of the Closing Date) shall not be reduced
below 12% of the outstanding capital stock of Purchaser. Purchaser further
covenants that if the number of shares of outstanding common stock, options,
warrants, restricted stock grants and convertible securities issued or granted
to or reserved for future issuance (including pursuant to any employee benefit
plan or similar arrangement) for officers, directors, consultants, employees and
agents of Purchaser as of October 31, 1999 (the "Management Team") represent
more than 27.07% of the outstanding capital stock of Purchaser upon consummation
of the Series A Round (calculated on a fully-diluted, as converted to Common
Stock basis, assuming the sale of $17 million in the Series A Round) (the
"Management Interest"), then Purchaser shall issue to Seller, in addition to the
Shares, that number of shares of Purchaser Common Stock equal to 3% of the
outstanding capital stock of Purchaser (calculated following the Series A Round
on a fully-diluted, as converted to Common Stock basis). In addition, with
respect to all shares of Purchaser Common Stock issued to Seller as contemplated
in this Agreement, Seller shall be granted such additional registration,
pre-emptive and similar rights pursuant to an Investor's Rights Agreement or
similar agreement(s) that are afforded the purchasers of securities in the
Series A Round. Purchaser hereby represents and warrants that there are no
contracts, agreements, arrangements or understandings, oral or written, which
grant or permit the Management Team to purchase securities of the Company upon
consummation of the Series A Round except as disclosed in Schedule 1 hereto.
13. EXPENSES. Each of the parties shall pay all costs and expenses incurred
or to be incurred by it in negotiating and preparing this Agreement and in
closing and carrying out the transactions contemplated by this Agreement.
Notwithstanding the foregoing, in the event the transaction contemplated by this
Agreement is not consummated as a result of a breach or default of any
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representation, warranty or obligation hereunder, the breaching or defaulting
party shall bear all expenses of the other party associated with the execution
and delivery of this Agreement.
14. FORM OF AGREEMENT.
14.1 Effect of Headings. The subject headings of the paragraphs and
subparagraphs of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
14.2 Entire Agreement; Modification; Waiver. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
all the parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provisions, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
14.3 Counterparts. This Agreement may be executed contemporaneously
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
15. PARTIES.
15.1 Parties in Interest. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right or
subrogation or action over against any party to this Agreement.
15.2 Assignment. This Agreement and each and every covenant, term and
condition herein is binding upon and inures to the benefit of the parties hereto
and their respective successors (including, any succeeding owners of the
Shares), but neither this Agreement nor any rights or obligations hereunder may
be assigned, directly, indirectly, voluntarily or by operation of law, by Seller
or Holdings without the prior written consent of Purchaser.
16. REMEDIES.
16.1 Recovery of Litigation Costs. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and
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other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.
16.2 Conditions Permitting Termination. Either party may on the
Closing terminate this Agreement, without liability to the other:
(a) if any bona fide action or proceeding shall be pending
against the other party on the Closing that is reasonably likely to result in an
unfavorable judgment, decree or order that would prevent or make unlawful the
carrying out of this Agreement;
(b) if the conditions to such party's obligations
hereunder have not been satisfied by the Closing (including any postponement or
extension thereof);
(c) the Closing has not occurred prior to January 3, 2000;
provided that the terminating party is not in breach of any of its obligations
hereunder and is otherwise ready, willing and able to perform its obligations in
connection with consummate the sale of assets contemplated herein.
16.3 Defaults Permitting Termination. If either Purchaser or Seller
materially defaults in the due and timely performance of any of its warranties,
covenants, or agreements under this Agreement, the nondefaulting party or
parties may on the Closing Date give notice of termination of this Agreement, in
the manner provided in Section 18. The notice shall specify with particularity
the default or defaults on which the notice is based. The termination shall be
effective five days after the Closing, unless the specified default or defaults
have been cured on or before this effective date for termination.
16.4 Specific Performance. In addition to any and all remedies
hereunder or under applicable law, all of which shall be cumulative and
exercisable concurrently, any party hereto shall be entitled to seek injunctive
relief and/or an award compelling specific performance from a court of competent
jurisdiction or for the purpose of enforcing another party's obligations
hereunder stopping or preventing any existing or anticipated breach of the terms
of this Agreement, which rights shall not preclude the additional right of
Purchaser recovering damages for any breach.
17. NATURE AND SURVIVAL OF REPRESENTATIVES AND WARRANTIES. All
representations, warranties, covenants, and agreements of the parties contained
in this Agreement, or in any instrument, certificate, opinion or other writing
provided for in it, shall survive the Closing.
18. NOTICES. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service or delivery if served personally on or delivered to the
party to whom notice is to be given via service or nationally recognized
overnight courier or confirmed facsimile transmission, or on the third day after
mailing if mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid, and properly addressed as
follows:
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To Seller or Holdings: Net Value Holdings, Inc.
0 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxx
with a copy to: Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx LLP
000 X. Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
To Purchaser: Promotions Acquisition, Inc.
000 Xxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: R. Xxxxx Xxxxx
with a copy to: Xxxxx X. Xxxx, Esq.
Xxxx & Xxxxxxx, LLP
0000 Xxxx Xxxxxxxx Xxxx, Xxxxxx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
Any party may change its address for purposes of this paragraph by giving the
other parties written notice of the new address in the manner set forth above.
19. GOVERNING LAW. This Agreement shall be construed in accordance with, and
governed by, the laws of the State of Delaware, excluding the body of law know
as conflicts of law.
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IN WITNESS WHEREOF, the parties to this Agreement have duly executed it
on the day and year first above written.
PROMOTIONS ACQUISITION, INC., XXXXXXXXXXXX.XXX, INC.,
a Delaware corporation a Delaware corporation
By:/s/ R. Xxxxx Xxxxx By:/s/ Xxxxxx X. Xxxxx
------------------------- ----------------------
R. Xxxxx Xxxxx, President Xxxxxx X. Xxxxx, Chief Executive Officer
NET VALUE HOLDINGS, INC.,
a Delaware corporation
By:/s/ Xxxxxx X. Xxxxx
----------------------
Xxxxxx X. Xxxxx, President
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SCHEDULE OF EXHIBITS & SCHEDULES
EXHIBIT A - Financial Statement
EXHIBIT B - Non-Assigned and Nonassignable Agreements
EXHIBIT C - Assumed Liabilities
EXHIBIT D - Allocation of Purchase Price
EXHIBIT E - Exceptions to Representations and Warranties
EXHIBIT F - Description of Owned and Leased Tangible
Personal Property
EXHIBIT G - Data Bases and Computer Software
EXHIBIT H - Intellectual Property
EXHIBIT I - Domain Names
EXHIBIT J - Employees and Employment Compensation,
Employment Contracts, Collective Bargaining
Agreements and Other Documents Conferring
Employee Benefits
EXHIBIT K - Material Contracts
EXHIBIT L - Powers of Attorney, Bank Accounts and Safe
Deposit Boxes
EXHIBIT M - Necessary Consents
EXHIBIT N - Material Agreements
EXHIBIT O - Noncompetition Agreement
SCHEDULE 1 - List of Purchaser Securityholders
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Schedule 1
List of Purchaser Securityholders
Common Stock: No. of Shares
R. Xxxxx Xxxxx 3,496,000
Xxxx Xxxxxxx 1,621,000
Xxxxx Xxxxxxx 220,000
Xxxx XxXxxxx 220,000
Xxxx Xxxx 48,000
Xxxxx Xxxx 60,000
Xxxx Xxxx 40,000
Xxxxxxx Xxxxx 2,000
Subtotal: 5,707,000
Options/Warrants:
Xxx Xxxxxxx 60,000
XX Xxxxxxx 40,000
Marc Paris 30,000
Xxxxx Xxxxxx 20,000
Xxxxx Xxxxxxx 20,000
Xxxxxx Xxxxx 20,000
Xxx Xxxxxxxx 20,000
Xxxxxxx Xxxx 16,000
Xxxxx Xxxxxxx 2,000
Xxxxxxxx Xxxxxxxx 14,000 starts 11/15
Xxxxxxx Xxxxxx 40,000 starts 11/17
Xxxx Xxxxxxxx 20,000 starts 11/22
Subtotal: 302,000
Series A Preferred Stock:
Xxx Target Media, Inc. 7,411,764
Central Newspapers, Inc. 741,393
The McClatchy Company 1,112,089
Sandler Capital Partners IV, L.P. 1,183,704
Sandler Capital Partners IV FTE, L.P 482,963
Sandler Internet Partners, L.P. 1,668,087
Subtotal: 12,600,000
TOTAL: 18,609,000
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