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MERGER AGREEMENT
BY AND AMONG
EMARKETPLACE, INC.,
FULL MOON INTERACTIVE, INC.,
BAYWEB, INC.
AND
THE PRINCIPAL SELLERS IDENTIFIED HEREIN
Dated as of June 26, 2000
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TABLE OF CONTENTS
Page
ARTICLE I THE TRANSACTIONS AND RELATED MATTERS ..................... 2
1.1 The Merger ............................................... 2
1.2 Conversion of Stock ...................................... 2
1.3 Dissenting Stock ......................................... 3
1.4 Surrender of Certificates ................................ 4
1.5 No Further Rights of Transfers ........................... 5
1.6 Stock Option and Other Plans; Warrants ................... 5
1.7 Certificate of Incorporation of the Surviving Corporation. 6
1.8 By-Laws of the Surviving Corporation ..................... 6
1.9 Directors and Officers of the Surviving Corporation ...... 6
1.10 Tax Consequences ......................................... 6
1.11 Closing .................................................. 6
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF PRINCIPAL SELLERS INDIVIDUALLY ........................ 7
2.1 Authorization ............................................ 7
2.2 Ownership of Stock ....................................... 7
2.3 Consents and Approvals ................................... 7
2.4 Securities Matters ....................................... 7
2.5 Brokerage Fees ........................................... 8
2.6 Disclosure ............................................... 8
ARTICLE III JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS ........................... 9
3.1 Due Organization, Good Standing and Corporate Power ...... 9
3.2 Authorization and Validity of Agreement .................. 9
3.3 Capitalization ........................................... 9
3.4 Consents and Approvals; No Violations ................... 10
3.5 Company Reports and Financial Statements ................ 11
3.6 Absence of Certain Changes .............................. 11
3.7 Minute Books ............................................ 12
3.8 Title to Properties; Encumbrances ....................... 12
3.9 Compliance with Laws .................................... 12
3.10 Litigation .............................................. 12
3.11 Employee Benefit Plans .................................. 13
3.12 Employment Relations and Agreements ..................... 14
3.13 Client Relations ........................................ 15
3.14 Taxes ................................................... 15
3.15 Liabilities ............................................. 15
3.16 Intellectual Properties ................................. 16
3.17 Material Contracts and Relationships .................... 16
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3.18 Absence of Certain Business Practices ................... 18
3.19 Transactions with Related Parties ....................... 18
3.20 Broker's or Finder's Fee ................................ 19
3.21 Accounts Receivable ..................................... 19
3.22 Inventories ............................................. 19
3.23 Insurance ............................................... 19
3.24 No Powers of Attorney or Suretyships .................... 20
3.25 Banking Facilities ...................................... 20
3.26 Environmental Liabilities ............................... 20
3.27 Machinery, Equipment and Other Personal Property, etc. .. 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF EMKT AND FMI ......................................... 21
4.1 Due Organization; Good Standing and Corporate Power ..... 21
4.2 Authorization and Validity of Agreement ................. 22
4.3 Consents and Approvals; No Violations ................... 22
4.4 EMKT Reports and Financial Statements ................... 23
4.5 Absence of Certain Changes .............................. 23
4.6 Compliance with Laws .................................... 23
4.7 Liabilities ............................................. 23
4.8 Litigation .............................................. 23
4.9 Capitalization. ......................................... 24
4.10 Taxes. .................................................. 24
4.11 Intellectual Property ................................... 25
ARTICLE V ACTIONS PRIOR TO CLOSING DATE ........................... 25
5.1 Access to Information Concerning Properties and Records . 25
5.2 Conduct of the Business of the Company Pending the
Closing Date ............................................ 25
5.3 Best Efforts ............................................ 27
5.4 No Solicitation of Other Offers ......................... 27
5.5 Employee Benefits ....................................... 28
5.6 Officers' and Directors' Insurance; Indemnification. .... 28
ARTICLE VI CONDITIONS PRECEDENT TO TRANSACTIONS .................... 28
6.1 Conditions Precedent to Obligations of EMKT, FMI and
the Company and the Sellers ............................. 28
6.2 Conditions Precedent to Obligations of EMKT and FMI ..... 29
6.3 Conditions Precedent to Obligations of the Company
and the Sellers ......................................... 30
ARTICLE VII TERMINATION AND ABANDONMENT ............................. 31
7.1 Termination ............................................. 31
7.2 Effect of Termination ................................... 31
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ARTICLE VIII INDEMNIFICATION ......................................... 31
8.1 Indemnification by Sellers .............................. 31
8.2 Indemnification by Principal Sellers Jointly and
Severally ............................................... 32
8.3 Indemnification by EMKT and FMI ......................... 33
8.4 Indemnification by Sellers for Tax Liabilities .......... 33
8.5 Claims for Indemnification .............................. 33
8.6 Defense Claims .......................................... 34
8.7 Manner of Indemnification ............................... 35
8.8 Limitations on Indemnification .......................... 35
ARTICLE IX MISCELLANEOUS ........................................... 35
9.1 Fees and Expenses ....................................... 35
9.2 Representations and Warranties .......................... 36
9.3 Extension; Waiver ....................................... 36
9.4 Public Announcements .................................... 36
9.5 Notices ................................................. 36
9.6 Entire Agreement ........................................ 37
9.7 Binding Effect; Benefit; Assignment ..................... 38
9.8 Amendment and Modification .............................. 38
9.9 Further Actions ......................................... 38
9.10 Headings ................................................ 38
9.11 Counterparts ............................................ 38
9.12 Applicable Law .......................................... 38
9.13 Severability ............................................ 38
9.14 "Person" Defined ........................................ 38
9.15 Attorneys' Fees ......................................... 38
9.16 Arbitration Period ...................................... 39
Exhibit A - Registration Rights Agreement.
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MERGER AGREEMENT
This MERGER AGREEMENT, dated as of June 26, 2000 (this "Agreement"), is
by and among EMARKETPLACE INC., a Delaware corporation ("EMKT"), FULL MOON
INTERACTIVE, INC., a Delaware corporation ("FMI"), BAYWEB, INC., a California
corporation (the "Company"), and each of the other persons identified under the
heading "Principal Sellers" on the signature pages of this Agreement (together,
the "Principal Sellers"), and is made with reference to the following facts:
A. The Principal Sellers and the other shareholders of the Company
specified on Schedule 1.1 (together, the "Sellers") own all of all of the issued
and outstanding shares of capital stock ("Company Stock") of the Company. The
Company Stock consists of common stock ("Company Common Stock"), Series A-1
Preferred Stock ("Company A-1 Stock"), Series A-2 Preferred Stock ("Company A-2
Stock"), Series B Preferred Stock ("Company B Stock") and Series C Preferred
Stock ("Company C Stock"). The Company A-1 Stock, Company A-2 Stock, Company B
Stock and Company C Stock is referred to collectively as the "Company Preferred
Stock."
B. EMKT has agreed to contribute to FMI 523,243 shares of EMKT common
stock, par value $0.001 per share ("EMKT Stock"), in exchange for shares of
common stock, par value $0.001 per share, of FMI ("FMI Stock").
C. The respective Boards of Directors of EMKT, FMI and the Company have
approved the acquisition of the Company by FMI.
D. To consummate such acquisition, the respective Boards of Directors
of EMKT, FMI and the Company have approved the merger of the Company into FMI
(the "Merger"), pursuant to and subject to the terms and conditions of this
Agreement.
E. The Board of Directors of the Company has unanimously determined
that the Merger is fair to, and in the best interests of, the holders of the
issued and outstanding shares of Company Stock, has approved the Merger and have
recommended the approval and adoption of this Agreement by the shareholders of
the Company.
F. In connection with the Merger, the holders of the Company Stock
shall receive an aggregate of 719,999 shares of FMI Stock and 523,243 shares of
EMKT Stock.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
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ARTICLE I
THE TRANSACTIONS AND RELATED MATTERS
1.1 THE MERGER.
(a) Subject to the terms and conditions of this Agreement, at
the time of the Closing (as defined in Section 1.11), an agreement of merger
(the "Agreement of Merger") shall be duly prepared, executed and acknowledged by
FMI and the Company in accordance with the California General Corporation Law
(the "California GCL") and the Delaware General Corporation Law (the "Delaware
GCL") and shall be filed on the Closing Date (as defined in Section 1.11). The
Merger shall become effective upon the filing of the Agreement of Merger with
the Secretaries of State of the States of California and Delaware in accordance
with the provisions and requirements of Section 252 of the Delaware GCL and
Section 1108 of the California GCL. The date and time when the Merger shall
become effective is hereinafter referred to as the "Effective Time."
(b) At the Effective Time, the Company shall be merged with
and into FMI and the separate corporate existence of the Company shall cease,
and FMI shall continue as the surviving corporation under the laws of the State
of Delaware (the "Surviving Corporation").
(c) From and after the Effective Time, the Merger shall have
the effects set forth in Section 252 of the Delaware GCL and Section 1108 of the
California GCL.
1.2 CONVERSION OF STOCK.
(a) At the Effective Time:
(i) Each share of Company Stock then issued and
outstanding, including shares issued to the Exercising Optionees as contemplated
by Section 1.2(a)(ii) (other than (i) any shares of Common Stock that are held
by any Subsidiary of the Company, or which are held, directly or indirectly, by
FMI or any direct or indirect Subsidiary of FMI, all of which shall be canceled
and none of which shall receive any payment with respect thereto and (ii) shares
of Common Stock held by Dissenting Shareholders, as defined in Section 1.3)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and represent the right to receive the number of
shares of FMI Stock and EMKT Stock set forth in Section 1.2(b), subject to
adjustment as set forth below (the "Merger Consideration");
(ii) On the Closing Date, the Company shall cause 32
percent of all unvested Company Options (as defined in Section 1.6) to become
vested and be immediately exercisable, and will cause to be exercised such newly
vested Company Options, and all other Company Options previously vested and not
exercised. On the Closing Date, the holders of such newly and previously vested
Company Options (the "Exercising Optionees") shall be entitled to receive their
pro rata share of the Merger Consideration.
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(iii) The Company shall cause all outstanding Warrants (as
defined in Section 1.8) to be vested and exercised by the holders thereof
immediately prior to the Closing, whereupon the Company Common Stock issued upon
exercise of such Warrants shall receive the Merger Consideration set forth in
Section 1.2(b); provided, however, that the Company shall cause the Warrants set
forth in Schedule 1.2 (the "Canceled Warrants") to be canceled prior to the
Closing.
(b) The Merger Consideration shall consist of (i) 719,999
shares of FMI Stock and (ii) 523,243 shares of EMKT Stock to be allocated among
the Sellers, the Exercising Optionees and the holders of Warrants as shall be
directed by the Board of Directors of the Company in accordance with the
Company's Fifth Amended and Restated Articles of Incorporation (the "Company
Articles"), as set forth in Schedule 1.2. If prior to the Closing Date the
Company shall undertake a bridge financing for its working capital needs in an
amount not less than $100,000, then the Merger Consideration shall be increased
by an additional 30,000 shares of EMKT Stock. If the Board of Directors of the
Company shall so direct, up to 30,000 EMKT Shares of the Merger Consideration
shall be issued to the provider of such bridge financing.
(c) 71,999 shares of FMI Stock shall be retained by FMI from
the Merger Consideration (the "Indemnification Holdback"), which shall be
applied as set forth in Article VIII.
(d) Three days prior to the Closing Date, the Company shall
deliver to EMKT and FMI its best estimate, as of the Closing Date, of the
Company's net worth, which shall be calculated consistent with the financial
statements subject to the Audit referred to in Section 5.1 (the "Estimated Net
Worth"). If the Estimated Net Worth is less than $0.00, then the Principal
Sellers shall take such action (including contributing cash or assets to the
Company, causing the Company to issue new capital stock or forgiving loans to
the Company), so that the net worth of the Company will be at least $0.00 at the
Closing. EMKT shall as soon as practical after the Closing cause the financial
statements of the Company as of the Closing Date to be audited (the "Closing
Date Audit").
1.3 DISSENTING STOCK. Notwithstanding anything in this Agreement
to the contrary but only to the extent required by Chapter 13 of the California
GCL, shares of Company Stock that are issued and outstanding immediately prior
to the Effective Time and are held by holders of Company Stock who comply with
all the provisions of Chapter 13 of the California GCL concerning the right of
holders of Company Stock to dissent from the Merger ("Dissenting Shareholders")
shall not be converted into the right to receive the Merger Consideration but
shall become the right to receive such consideration as may be determined to be
due such Dissenting Shareholder pursuant to the California GCL; provided,
however, that (i) if any Dissenting Shareholder shall subsequently deliver a
written withdrawal of his or her demand for purchase (with the consent of the
Company or the Surviving Corporation), or (ii) if any Dissenting Shareholder
fails to establish and perfect his or her rights as provided by applicable law,
or (iii) if within 180 days of the Effective Time neither any Dissenting
Shareholder nor the Surviving Corporation has filed a complaint or intervened in
a pending action in accordance with applicable law, then such Dissenting
Shareholder shall forfeit their rights under the California GCL and such shares
shall thereupon be deemed to have been converted into the right to receive, as
of the Effective Time, the Merger Consideration, without interest. The Company
shall give EMKT and FMI: (A) prompt notice of any written demands by Dissenting
Shareholders, withdrawals of such demands and any other related instruments
received by the Company, and (B) the opportunity to direct all negotiations and
proceedings with respect to such demands. The Company will not voluntarily make
any payment with respect to any demands and will not, except with the prior
written consent of EMKT and FMI, settle or offer to settle any demand.
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1.4 SURRENDER OF CERTIFICATES.
(a) As soon as practicable after the Effective Time, the
Surviving Corporation shall mail or make available to each holder of a
certificate theretofore evidencing shares of Company Stock (other than those
which are held by any Subsidiary of the Company or in the treasury of the
Company or which are held directly or indirectly by EMKT, FMI or any direct or
indirect Subsidiary of EMKT or FMI) a notice and letter of transmittal advising
such holder of the effectiveness of the Merger and the procedure for
surrendering to the Surviving Corporation such certificate or certificates that
immediately prior to the Effective Time represented outstanding Company Stock
(the "Certificates") in exchange for the Merger Consideration deliverable in
respect thereof pursuant to this Article I. Upon the surrender for cancellation
to the Surviving Corporation of such Certificates, together with a letter of
transmittal, duly executed and completed in accordance with the instructions
thereon, and any other items specified by the letter of transmittal, the
Surviving Corporation shall promptly deliver to the Person (as defined in
Section 9.14) entitled thereto the Merger Consideration deliverable in respect
thereof. Until so surrendered, each Certificate shall be deemed, for all
corporate purposes, to evidence only the right to receive upon such surrender
the Merger Consideration deliverable in respect thereof to which such Person is
entitled pursuant to this Article I.
(b) If the Merger Consideration (or any portion thereof) is to
be delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to the Surviving Corporation any transfer or
other taxes payable by reason of the foregoing or establish to the satisfaction
of the Surviving Corporation that such taxes have been paid or are not required
to be paid.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such certificate to be lost, stolen or destroyed, the Surviving
Corporation will issue in exchange for such lost, stolen or destroyed
certificate the Merger Consideration deliverable in respect thereof as
determined in accordance with this Article I, provided that the Person to whom
the Merger Consideration is paid shall, as a condition precedent to the payment
thereof, give the Surviving Corporation a bond in such sum as it may direct or
otherwise indemnify the Surviving Corporation in a manner satisfactory to it
against any claim that may be made against the Surviving Corporation with
respect to the Certificate claimed to have been lost, stolen or destroyed.
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1.5 NO FURTHER RIGHTS OF TRANSFERS. At and after the Effective
Time, each holder of a Certificate shall cease to have any rights as a
shareholder of the Company, except for, in the case of a holder of a Certificate
(other than shares to be canceled pursuant to Section 1.1 and other than.5
shares held by Dissenting Shareholders), the right to surrender his or her
Certificate in exchange for payment of the Merger Consideration or, in the case
of a Dissenting Shareholder, to perfect his or her right to receive payment for
his or her shares pursuant to California law if such holder has validly
perfected and not withdrawn his or her right to receive payment for his or her
shares, and no transfer of shares of Company Stock shall be made on the stock
transfer books of the Surviving Corporation. Certificates presented to the
Surviving Corporation after the Effective Time shall be canceled and exchanged
as provided in this Article I. At the close of business on the day of the
Effective Time the stock ledger of the Company with respect to Company Stock
shall be closed.
1.6 STOCK OPTION AND OTHER PLANS; WARRANTS.
(a) Except as provided in Section 1.2 and this Section 1.6,
from the date hereof, the Company will not accelerate the vesting or
exercisability or otherwise modify the terms and conditions applicable to (i)
any employee stock option to purchase Company Stock, whether set forth in any
stock option plan or plans of the Company ("Company Stock Option Plans"), in an
option agreement with the optionee or otherwise or (ii) any other outstanding
option or warrant to purchase Company Stock ("Warrants"). At the Effective Time,
each such option (each, a "Company Option") and Warrant granted by the Company
to purchase shares of Company Stock that is outstanding and unexercised
immediately prior to the Effective Time shall become vested and immediately
exercisable solely to the extent set forth in Section 1.2.
(b) The holders of all Company Options that are outstanding
and unvested at the Effective Time and the vesting of which have not been
accelerated pursuant to Section 1.2, shall receive in the aggregate, in lieu of
such Company Options, options to purchase 410,000 shares of FMI stock (a
"Substituted Option") under FMI's 1999 Stock Option Plan. The exercise price of
the Substituted Option shall be $5.00 per share, and the other terms and
conditions of such Substituted Option shall be determined in a manner that
preserves to the extent possible (i) the aggregate gain (or loss) on the Company
Option immediately prior to the time of substitution, and (ii) the ratio of the
exercised price per share of Company Stock subject to the Company Option to the
fair market value (determined immediately prior to the time of substitution) per
share subject to the Company Option; provided, however, that in the case of any
Company Option that is an "incentive stock option" as defined in Section 422 of
the Internal Revenue Code of 1986 (the "Code"), the adjustment described above
shall be, and is intended to be, effective in a manner that is consistent with
Section 424A of the Code. The duration and other terms of the Substituted Option
to the extent possible shall be the same as the Company Option, except that all
references to the Company shall be deemed to be references to FMI.
(c) Any then outstanding stock appreciation rights or limited
stock appreciation rights shall be canceled immediately prior to the Effective
Time without any payment therefor. As provided herein, the Company Stock Option
Plans and any other plan, program or arrangement providing for the issuance or
grant of any other interest in respect of the capital stock of the Company or
any Subsidiary (collectively with the Company Stock Option Plans, the "Company
Stock Incentive Plans") shall terminate as of the Effective Time. The Company
will take all steps to ensure that neither the Company nor any of its
Subsidiaries is or will be bound by any Options, other options, warrants, rights
or agreements which would entitle any Person, other than EMKT, FMI or either of
their affiliates, to own any capital stock of the Surviving Corporation or any
of its Subsidiaries or to receive any payment in respect thereof. The Company
will use its best efforts to obtain all necessary consents to ensure that after
the Effective Time, the only rights of the holders of Options to purchase shares
of Common Stock in respect of such Options will be to receive the Merger
Consideration in cancellation and settlement thereof.
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1.7 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
Articles of Incorporation of FMI, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation.
1.8 BY-LAWS OF THE SURVIVING CORPORATION. The By-Laws of FMI, as
in effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation.
1.9 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time, the directors of FMI immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Articles of
Incorporation and By-Laws of the Surviving Corporation, until the next annual
shareholders' meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified . At the Effective
Time, the officers of FMI immediately prior to the Effective Time shall, subject
to the applicable provisions of the Articles of Incorporation and By-Laws of the
Surviving Corporation, be the officers of the Surviving Corporation until their
respective successors shall be duly elected or appointed and qualified.
1.10 TAX CONSEQUENCES. It is intended by the parties that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code and that this Agreement shall constitute a "plan of reorganization" for
the purposes of Section 368 of the Code.
1.11 CLOSING. The closing (the "Closing") of the Merger shall take
place at the offices of Xxxx, Scholer, Fierman, Xxxx & Handler, LLP, 1999 Avenue
of the Stars, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, as soon as practicable after
the last of the conditions set forth in Sections 6.1-6.3 are fulfilled or waived
(subject to applicable law) but in no event later than the fifth business day
thereafter, or at such other time and place and on such other date as EMKT, FMI
and the Company shall mutually agree (the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PRINCIPAL SELLERS INDIVIDUALLY
Each Principal Seller, severally and not jointly, hereby represents and
warrants to EMKT and FMI that:
2.1 AUTHORIZATION. Such Principal Seller has full power and
authority to enter into this Agreement and to perform his, her or its
obligations under this Agreement and to consummate the Merger and the other
transactions contemplated hereby (collectively, the "Transactions"). This
Agreement and all agreements or instruments herein contemplated to be executed
by such Principal Seller are the valid and binding agreements of such Principal
Seller, enforceable against such Principal Seller in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights generally and to general
principles of equity.
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2.2 OWNERSHIP OF STOCK. Such Principal Seller is the record owner
of all of the Company Stock set forth below such Principal Seller's name on
Schedule 1.1, free and clear of any liens, encumbrances, pledges, security
interests, restrictions, prior assignments and claims of any kind or nature
whatsoever. Upon consummation of the Merger, FMI shall be the owner,
beneficially and of record, of all of the outstanding shares of capital stock of
the Company, free and clear of any liens, encumbrances, pledges, security
interests, restrictions, prior assignments and claims of any kind or nature
whatsoever, except as otherwise created by EMKT or FMI.
2.3 CONSENTS AND APPROVALS. Neither the execution and delivery of
this Agreement by such Principal Seller nor the consummation of the Merger by
such Principal Seller will violate, result in a breach of any of the terms or
provisions of, constitute a default (or any event that, with the giving of
notice or the passage of time or both, would constitute a default) under, result
in the acceleration of an indebtedness under or result in any right of
termination of, increase any amounts payable under, or conflict with, the trust
agreements, if any, relating to such Principal Seller or any other agreement,
indenture or other instrument to which such Principal Seller is a party or by
which any of its properties are bound, or any judgment, decree, order or award
of any court, governmental body or arbitrator (domestic or foreign) applicable
to such Principal Seller. All consents, approvals and authorizations of, and
declarations, filings and registrations with, and payments of all taxes, fees,
fines, and penalties to, any governmental or regulatory authority (domestic or
foreign) or any other Person (either governmental or private) required in
connection with the execution and delivery by such Principal Seller of this
Agreement or the consummation of the Transactions by such Principal Seller have
been obtained, made and satisfied.
2.4 SECURITIES MATTERS. Such Principal Seller acknowledges that
the shares of EMKT Stock and the shares of FMI Stock that constitute the Merger
Consideration have not been and will not be registered (subject to the
provisions of the Registration Rights Agreement to be delivered pursuant to
Section 6.3(d)) under (i) the Securities Act of 1933, as amended (the
"Securities Act") inasmuch as they are being issued pursuant to an exemption
from registration granted under Section 4(2) of the Securities Act and
Regulation D promulgated thereunder relating to transactions not involving any
public offering, (ii) the California Corporate Securities Laws of 1968 (the
"California Law") or (iii) any other applicable securities laws, and that EMKT
and FMI's reliance on such exemption or related exemptions is predicated in part
on the following representations and agreements made to EMKT and FMI by such
Principal Seller:
(a) Such Principal Seller is acquiring the Merger
Consideration (together, the "Consideration") to be issued to such Principal
Seller hereunder for investment for his or her own account and not with a view
to or for sale in connection with any distribution and resale thereof, with no
intention of distributing or reselling the same; and such Principal Seller is
not aware of any particular occasion, event or circumstance upon the occurrence
or happening of which he or it intends to dispose of such shares (except to the
extent such shares may be registered under the Registration Rights Agreement or
exchanged for shares that are or will be registered);
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(b) Such Principal Seller is (i) either an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act or (ii)
a "qualified purchaser" within the meaning of Section 25102(n)(2) of the
California Law or (iii) has such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks of
the Transactions. Such Principal Seller is aware that the Merger Consideration
constitutes "restricted," "letter" or "investment" securities and such Principal
Seller by reason of his business or financial experience has the capacity to
protect his own interest in connection with the Transactions; and
(c) Such Principal Seller agrees not to sell, transfer,
assign, pledge, hypothecate or otherwise dispose of his or its shares received
in this transaction without registration under the Securities Act and the
California Law, and any other applicable securities laws, or without an opinion
of counsel satisfactory to EMKT and FMI that the transaction by which such
shares are proposed to be disposed of is exempt from the Securities Act, the
California Law and any other applicable securities laws, and acknowledges that
EMKT and FMI will place a legend on the certificates representing such shares
substantially to such effect concerning these restrictions.
2.5 BROKERAGE FEES. No Person is entitled to any brokerage or
finder's fee or other commission from such Principal Seller in respect of this
Agreement or the Transactions.
2.6 DISCLOSURE. The information provided by such Principal Seller
in this Agreement and in any other writing furnished pursuant hereto does not
and will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated herein or therein or necessary to make the
statements and facts contained herein or therein, in light of the circumstances
under which they are made, not false or misleading. Copies of all documents
heretofore or hereafter delivered or made available by such Principal Seller to
EMKT or FMI pursuant hereto were or will be complete and accurate records of
such documents.
2.7 POTENTIAL ACQUISITION. The Principal Sellers acknowledge that
EMKT has entered into discussions with AppliedTheory Corporation ("ATHY")
concerning the possible acquisition of FMI in consideration of the issuance of
shares of ATHY common stock. As of the date of this Agreement, no definitive
agreement has been entered into with ATHY concerning such possible acquisition.
The Principal Sellers shall keep in strict confidence the existance of such
discussions until such time that EMKT or ATHY shall make a public disclosure
thererof.
ARTICLE III
JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS
Except as set forth in the Schedule of Exceptions, the Company and each
of the Principal Sellers hereby, jointly and severally, represents and warrants
to EMKT and FMI as follows:
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3.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. The
Company has no Subsidiaries as of the date of this Agreement. (A "Subsidiary" of
a Person is a corporation, partnership, joint venture, limited liability company
and other entity in which such Person owns all or a majority of the equity
interest or is required to be consolidated on such Person's balance sheet
pursuant to GAAP. For purposes of this Agreement, FMI shall be deemed to be a
Subsidiary of EMKT. References to Subsidiaries of the Company in this Agreement
shall be applicable only to the extent that the Company acquires any Subsidiary
with the consent of EMKT and FMI prior to the Closing Date.) The Company and
each of its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
each such corporation has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company and each of its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in such jurisdictions
where the failure to be so qualified or licensed and in good standing would not
have a material adverse effect on the business, properties, assets, liabilities,
operations, results of operations, condition (financial or otherwise) or
prospects (the "Condition") of the Company and its Subsidiaries taken as a
whole.
3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has full
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution,
delivery and performance of this Agreement by the Company, and the consummation
by it of the Transactions, have been duly authorized and approved by its Board
of Directors and no other corporate action on the part of the Company is
necessary to authorize the execution, delivery and performance of this Agreement
by the Company and the consummation of the Transactions (other than the approval
of this Agreement by the holders of a majority of the outstanding shares of
Company Stock and any other classes of capital stock entitled to vote thereon,
as required by the California GCL). This Agreement has been duly executed and
delivered by the Company and is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
15,000,000 shares of common stock, constituting the Company Common Stock, and
10,000,000 shares of Preferred Stock, of which 250,000 shares are designated
Company A-1 Stock, 1,750,000 shares are designated Company A-2 Stock, 800,000
shares are designated Company B Stock and 1,000,000 shares are designated
Company C Stock. The remaining shares of Preferred Stock have not been
designated. As of the date of this Agreement, (i) 1,137,500 shares of Company
Stock are issued and outstanding, (ii) 2,374,190 shares of Company Common Stock
are reserved for issuance pursuant to outstanding Company Options granted under
the Company Stock Option Plans, (iii) 353,500 shares of Company Common Stock are
reserved for issuance pursuant to outstanding Warrants; and (iv) 250,000 shares
of Company A-1 Stock are issued and outstanding, 1,356,000 shares of Company A-2
Stock are issued and outstanding, 711,333 shares of Company B Stock are issued
and outstanding, and 240,000.10 shares of Company C Stock are issued and
9
outstanding. Except as set forth on Schedule 3.3, all issued and outstanding
shares of Company Stock have been validly issued and are fully paid and
nonassessable, and are not subject to, nor were they issued in violation of, any
preemptive rights. Except as set forth in this Section 3.3 or on Schedule 3.3,
(i) there are no shares of capital stock of the Company authorized, issued or
outstanding and (ii) there are not as of the date hereof, and on the Closing
Date there will not be, any outstanding or authorized options, warrants, rights,
subscriptions, claims of any character, agreements, obligations, convertible or
exchangeable securities, or other commitments, contingent or otherwise, relating
to Company Stock or any other shares of capital stock of the Company, pursuant
to which the Company is or may become obligated to issue shares of Common Stock,
any other shares of its capital stock or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of the
capital stock of the Company.
(b) All of the outstanding shares of capital stock of each of
the Company's Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to, nor were they issued in
violation of, any preemptive rights, and are owned, of record and beneficially,
by the Company, free and clear of all liens, encumbrances, options or claims
whatsoever. No shares of capital stock of any of the Company's Subsidiaries are
reserved for issuance and there are no outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to the capital stock of any Subsidiary of the
Company, pursuant to which such Subsidiary is or may become obligated to issue
any shares of capital stock of such Subsidiary or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
such Subsidiary. There are no restrictions of any kind that prevent the payment
of dividends by any of the Company's Subsidiaries. Except for the Subsidiaries
listed on Schedule 3.1, the Company does not own, directly or indirectly, any
capital stock or other equity interest in any Person or have any direct or
indirect equity or ownership interest in any Person and neither the Company nor
any of its Subsidiaries is subject to any obligation or requirement to provide
funds for or to make any investment (in the form of a loan, capital contribution
or otherwise) to or in any Person.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth in
Schedule 3.4, (a) the execution and delivery of this Agreement by the Principal
Sellers and the Company and the consummation by the Sellers and the Company of
the Transactions will not: (1) violate any provision of the Amended and Restated
of Incorporation, as amended, or By-Laws of the Company or any of its
Subsidiaries; (2) to the best knowledge of the Company and the Principal
Sellers, violate any statute, ordinance, rule, regulation, order or decree of
any court or of any governmental or regulatory body, agency or authority
applicable to any Seller or the Company or any of its Subsidiaries or by which
any of their respective properties or assets may be bound; (3) require any
filing with, or permit, consent or approval of, or the giving of any notice to,
any governmental or regulatory body, agency or authority, except with respect to
the filing of a Form D pursuant to Rule 503 of Regulation D under the Securities
Act and any corresponding state "blue sky filings"; or (4) result in a violation
or breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
payment or acceleration) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, permit,
10
agreement, lease, franchise agreement or other instrument or obligation to which
the Company or any of its Subsidiaries is a party, or by which it or any of
their respective properties or assets may be bound, excluding from the foregoing
clauses (3) and (4) filings, notices, permits, consents and approvals the
absence of which, and violations, breaches, defaults, conflicts and liens which,
in the aggregate, would not have a material adverse effect on the Condition of
the Company and its Subsidiaries taken as a whole.
(b) Neither the Company nor any Subsidiary is in default or in
violation (and no event has occurred which would notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (the Company Articles or the By-Laws of the Company, (ii) any note,
bond, mortgage, indenture, license, agreement, contract, lease, commitment or
other obligation to which the Company or any of its Subsidiaries is a party or
by which they or any of their properties or assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its Subsidiaries, except in the case of clauses (i) and (ii)
above for defaults or evaluations, which would not have a material adverse
effect on the Condition of the Company and the Subsidiaries taken as a whole.
3.5 COMPANY REPORTS AND FINANCIAL STATEMENTS. Each of the
consolidated balance sheet as of the end of the fiscal year ended October 31,
1999, and the consolidated statement of operations, consolidated statement of
shareholders' equity and consolidated statement of cash flow for the fiscal
years ended October 31, 1999, in the form attached as an exhibit to Schedule 3.5
were prepared in accordance with generally accepted accounting principles (as in
effect in the United States from time to time) applied on a consistent basis
("GAAP"), except as may be indicated therein or in the notes or schedules
thereto, and, in the case of such interim statements, subject to normal year-end
adjustments, and as may be indicated in the notes thereto, and fairly present
the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of their operations and
cash flows for the period then ended.
3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule
3.6, since October 31, 1999, (the "Balance Sheet Date") (i) there has not been
any material adverse change in the Condition of the Company and its Subsidiaries
taken as a whole; (ii) the businesses of the Company and each of its
Subsidiaries have been conducted only in the ordinary course; (iii) neither the
Company nor any of its Subsidiaries has incurred any material liabilities
(direct, contingent or otherwise) or engaged in any material transaction or
entered into any material agreement outside the ordinary course of business;
(iv) the Company and its Subsidiaries have not increased the compensation of any
officer or granted any general salary or benefits increase to their employees
other than in the ordinary course of business; and (v) neither the Company nor
any of its Subsidiaries has taken any action referred to in Section 5.2 except
as permitted or required thereby.
3.7 MINUTE BOOKS. The minute books of the Company and its
Subsidiaries, as previously made available to EMKT and its representatives,
contain accurate records of all meetings of and corporate actions or written
consents by the shareholders and Boards of Directors of the Company and its
Subsidiaries since the date of incorporation of the Company.
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3.8 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth on
Schedule 3.8, the Company and each of its Subsidiaries has good, valid and
marketable title, or a valid leasehold interest in, to (i) all its material
tangible properties and assets (real and personal), including, without
limitation, all the properties and assets reflected in the consolidated balance
sheet as of October 31, 1999, delivered pursuant to Section 3.5 (the "Balance
Sheet") except as indicated in the notes thereto and except for properties and
assets reflected in the Balance Sheet that have been sold or otherwise disposed
of in the ordinary course of business, and (ii) all the tangible properties and
assets purchased by the Company and any of its Subsidiaries since the Balance
Sheet Date except for such properties and assets which have been sold or
otherwise disposed of in the ordinary course of business; in each case subject
to no encumbrance, lien, charge or other restriction of any kind or character,
except for (1) liens reflected in the Balance Sheet, (2) liens consisting of
zoning or planning restrictions, easements, permits and other restrictions or
limitations on the use of real property or irregularities in title thereto which
do not materially detract from the value of, or impair the use of, such property
by the Company or any of its Subsidiaries in the operation of its respective
business and (3) liens for current taxes, assessments or governmental charges or
levies on property not yet due and delinquent.
3.9 COMPLIANCE WITH LAWS. To the best knowledge of the Company and
the Principal Sellers, the Company and each of its Subsidiaries are in
compliance with all applicable laws, regulations, orders, judgments and decrees
except where the failure to so comply would not have a material adverse effect
on the Condition of the Company and its Subsidiaries taken as a whole.
3.10 LITIGATION. Except as set forth in Schedule 3.10, there is no
action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the best knowledge of the
Company and the Principal Sellers any investigation by) any governmental or
other instrumentality or agency, pending, or, to the best knowledge of the
Company and the Principal Sellers, threatened, against or affecting the Company
or any of its Subsidiaries, or any of their properties or rights which could
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole. There are no such suits, actions, claims, or
proceedings (or to the best knowledge of the Company and the Principal Sellers,
investigations) pending or, to the best knowledge of the Company and the
Principal Sellers, threatened, seeking to prevent or challenging the
Transactions. Except as disclosed in Schedule 3.10, neither the Company nor any
of its Subsidiaries is subject to any judgment, order or decree entered in any
lawsuit or proceeding which could have a material adverse effect on the
Condition of the Company and its Subsidiaries taken as a whole or on the ability
of the Company or any Subsidiary to conduct its business as presently conducted.
3.11 EMPLOYEE BENEFIT PLANS.
(a) List of Plans. Set forth in Schedule 3.11 is an accurate
and complete list of all employee benefit plans ("Employee Benefit Plans")
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), whether or not any such Employee Benefit
Plans are otherwise exempt from the provisions of ERISA, established, maintained
or contributed to by the Company or any of its Subsidiaries (including, for this
purpose and for the purpose of all of the representations in this Section 3.11,
all employers (whether or not incorporated) which by reason of common control
are treated together with the Company as a single employer within the meaning of
Section 414 of the Code.
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(b) Status of Plans. Neither the Company nor any of its
Subsidiaries maintains or contributes to any Employee Benefit Plan subject to
ERISA that is not in substantial compliance with ERISA or which has incurred any
accumulated funding deficiency within the meaning of Section 412 or 418B of the
Code, or that has applied for or obtained a waiver from the Internal Revenue
Service of any minimum funding requirement under Section 412 of the Code.
Neither the Company nor any of its Subsidiaries has incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of its
Subsidiaries or ceased operations at any facility or withdrawn from any Employee
Benefit Plan in a manner which could subject it to liability under Section 4062,
4063 or 4064 of ERISA, and the Company knows of no facts or circumstances which
might give rise to any liability of the Company or any of its Subsidiaries to
the PBGC under Title IV of ERISA that could reasonably be anticipated to result
in any claims being made against the Company by the PBGC. Neither the Company
nor any of its Subsidiaries has incurred any withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of Sections
4201 and 4204 of ERISA, to any Employee Benefit Plan that is a Multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA), and no event has occurred, and
there exists no condition or set of circumstances, that presents a material risk
of the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which could result in any
liability to a Multiemployer Plan.
(c) Contributions. Full payment has been made of all amounts
which the Company or any of its Subsidiaries is required, under applicable law
or under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any of its Subsidiaries is a party, to have
paid as contributions thereto as of the last day of the most recent fiscal year
of such Employee Benefit Plan ended prior to the date hereof. The Company has
made adequate provision for reserves to meet contributions that have not been
made because they are not yet due under the terms of any Employee Benefit Plan
or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided to EMKT and FMI.
(d) Certain Plans. The Company has no Employee Benefit Plans
which are subject to Title IV of ERISA and which are Multi-Employer Plans (as
defined in Section 4001(a)(3) of ERISA).
(e) Tax Qualification. Except as set forth on Schedule 3.11,
each Employee Benefit Plan intended to be qualified under Section 401(a) of the
Code has been determined to be so qualified by the Internal Revenue Service and
nothing has occurred since the date of the last such determination which
resulted or is likely to result in the revocation of such determination.
(f) Transactions. No Reportable Event (as defined in Section
4043 of ERISA) for which the 30-day notice requirement has not been waived by
the PBGC has occurred with respect to any Employee Benefit Plan and neither the
Company nor any of its Subsidiaries has engaged in any transaction with respect
to the Employee Benefit Plans which would subject it to a tax, penalty or.14
liability for prohibited transactions under ERISA or the Code nor has any of
their respective directors, officers or employees to the extent they or any of
them are fiduciaries with respect to such Plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
or would result in any claim being made under or by or on behalf of any such
Plans by any party with standing to make such claim.
13
(g) Other Plans. Neither the Company nor any of its
Subsidiaries currently maintains any employee or non-employee benefit plans or
any other foreign pension, welfare or retirement benefit plans other than those
listed in Schedule 3.11.
(h) Documents. The Company has delivered or caused to be
delivered to EMKT, FMI and their counsel true and complete copies of (1) all
Employee Benefit Plans as in effect, together with all amendments thereto which
will become effective at a later date, and, except as set forth on Schedule
3.11, the latest Internal Revenue Service determination letter obtained with
respect to any such Employee Benefit Plan qualified under Section 401 or 501 of
the Code and (2) Form 5500 for the most recently completed fiscal year for each
Employee Benefit Plan required to file such form.
3.12 EMPLOYMENT RELATIONS AND AGREEMENTS. To the best knowledge of
the Company and the Principal Sellers, (i) each of the Company and its
Subsidiaries is in substantial compliance with all federal, state or other
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and is not engaged in
any unfair labor practice; (ii) no unfair labor practice complaint against the
Company or any of its Subsidiaries is pending before the National Labor
Relations Board; (iii) there is no labor strike, dispute, slowdown or stoppage
actually pending or against or involving the Company or any of its Subsidiaries;
(iv) no representation question exists respecting the employees of the Company
or any of its Subsidiaries; (v) no grievance which might have a material adverse
effect on the Condition of the Company and its Subsidiaries as a whole or the
conduct of their respective businesses exists, no arbitration proceeding arising
out of or under any collective bargaining agreement is pending and to the best
knowledge of the Company and the Principal Sellers no claim therefor has been
asserted; (vi) no collective bargaining agreement is currently being negotiated
by the Company or any of its Subsidiaries; and (vii) neither the Company nor any
of its Subsidiaries has experienced any material labor difficulty since the date
of incorporation of the Company. There is not now and to the best knowledge of
the Company and the Principal Sellers, there will not be any change in relations
with employees of the Company or any of its Subsidiaries as a result of the
Transactions that could have a material adverse effect on the Condition of the
Company and its Subsidiaries taken as a whole. Except as disclosed in Schedule
3.12, there exist no employment, consulting, severance or indemnification
agreements between the Company and any director, officer or employee of the
Company or any agreement that would give any Person the right to receive any
payment from the Company as a result of the Merger.
3.13 CLIENT RELATIONS. There has not been, and to the best
knowledge of the Company and the Principal Sellers, there will not be, any
change in relations with franchisees, customers or clients of the Company or any
of its Subsidiaries as a result of the Transactions that could have a material
adverse effect on the Condition of the Company and its Subsidiaries taken as a
whole.
14
3.14 TAXES. The Company has filed or caused to be filed, within the
times and in the manner prescribed by law, all federal, state, local and foreign
Tax Returns and tax reports that are required to be filed by, or with respect
to, the Company or any of its Subsidiaries. Such returns and reports are true,
correct and complete in all material respects and reflect accurately all
liability for Taxes of the Company and its Subsidiaries for the periods covered
thereby. All federal, state, local and foreign Taxes (including interest and
penalties) payable by, or due from, the Company or any of its Subsidiaries have
been fully paid or adequately disclosed and fully provided for in the books and
financial statements of the Company and its Subsidiaries. All deficiencies
assessed as a result of any examination of such Tax Returns by federal, state,
local or foreign tax authorities have been paid, and deficiencies for all taxes
that have been proposed or asserted against the Company or any Subsidiary do not
exceed $10,000 in the aggregate for all periods. The Company has not received
any notice of any issue being raised since the date incorporation of the Company
by any federal, state, local or foreign taxing authority that, if raised with
respect to any other period not so examined, could reasonably be expected to
result in a proposed deficiency for any other period not so examined. No
examination of any Tax Return of the Company or any of its Subsidiaries is
currently in progress. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Return of the Company
or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code. The Company and each of its Subsidiaries
have complied (and until the Closing will comply) in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of taxes (including, without limitation, withholding of taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws. "Taxes" means all taxes, charges, fees, levies or other
assessments, including without limitation income, gross receipts, excise,
property, sales, transfer, license, payroll, withholding, capital stock and
franchise taxes, imposed by the United States or any state, local or foreign
government or subdivision or agency thereof, including any interest, penalties
or additions thereto; and "Tax Return" means any report, return or other
information or document required to be supplied to a taxing authority in
connection with taxes.
3.15 LIABILITIES. Neither the Company nor any of its Subsidiaries
has any outstanding claims, liabilities or indebtedness, whether absolute,
accrued, condensed, contingent or otherwise, except as set forth in the Balance
Sheet or referred to in the footnotes thereto, other than liabilities incurred
subsequent to the Balance Sheet Date in the ordinary course of business not
involving borrowings by the Company. Neither the Company nor any of its
Subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement.
3.16 INTELLECTUAL PROPERTIES. "Intellectual Property" means
domestic and foreign patents, patent applications, patent licenses, software
licenses, knowhow licenses, trade names, trademarks, copyrights, unpatented
inventions, service marks, trademark registrations and applications, service
xxxx registrations and applications, copyright registrations and applications,
trade secrets, Internet domain names and other confidential proprietary
information. Schedule 3.16 contains an accurate and complete list of all
Intellectual Property which is of material importance to the operation of the
15
business of the Company or any of its Subsidiaries. Unless otherwise indicated
in Schedule 3.16 the Company (or the Subsidiary indicated) owns the entire
right, title and interest in and to the Intellectual Property listed on Schedule
3.16 used in the operation of its business (including, without limitation, the
right to use and license the same) and each item constituting part of the
Intellectual Property which is owned by the Company or a Subsidiary and listed
on Schedule 3.16 has been, to the extent indicated in Schedule 3.16, duly
registered with, filed in or issued by, as the case may be, the United States
Patent and Trademark Office or such other government entities, domestic or
foreign, as are indicated in Schedule 3.16 and, to the best knowledge of the
Company and the Principal Sellers, such registrations, filings and issuances
remain in full force and effect. To the best knowledge of the Company and the
and the Principal Sellers, except as stated in such Schedule 3.16, there are no
pending or threatened proceeding or litigation or other adverse claims affecting
or with respect to the Intellectual Property. Schedule 3.16 lists all notices or
claims currently pending or received by the Company or any of its Subsidiaries
during the past two years which claim infringement, contributory infringement,
inducement to infringe, misappropriation or breach by the Company or any of its
Subsidiaries of any domestic or foreign patents, patent applications, patent
licenses and know-how licenses, trade names, trademark registrations and
applications, service marks, copyrights, copyright registrations or
applications, trade secrets or other confidential proprietary information.
Except as set forth in Schedule 3.16 hereto, to the best knowledge of the
Company and the Principal Sellers, the Company has received no demand, claim,
notice or inquiry from any Person in respect of any Intellectual Property that
challenges, threatens to challenge or inquires as to whether there is any basis
to challenge, the validity of, or the rights of the Company in any such
Intellectual Property, and the Company knows of no basis for any such challenge,
and the Company is not in violation or infringement of, and has not violated or
infringed, any Intellectual Property of any other Person, and no Person is
currently infringing any such Intellectual Property. To the best knowledge of
the Company and the Principal Sellers, except as indicated on Schedule 3.16, no
Person is infringing the Intellectual Property.
3.17 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for agreements specifically identified on other
Schedules, Schedule 3.17 sets forth a complete and correct list of the
following:
(i) All agreements (or groups of agreements with one or
more related entities) between the Company or any of its Subsidiaries and any
customer or supplier in excess of $25,000 and all agreements extending beyond
twelve months;
(ii) All agreements that relate to the borrowing or
lending by the Company (or any of its Subsidiaries) of any money or that create
or continue any material claim, lien, charge or encumbrance against, or right of
any third party with respect to, any asset of the Company or any of its
Subsidiaries;
(iii) All agreements by which the Company or any of its
Subsidiaries leases any real property, has the right to lease any real property
or leases capital equipment and all other leases involving the Company or any of
its Subsidiaries as lessee or lessor;
16
(iv) All agreements to which the Company or any of its
Subsidiaries is a party not in the ordinary course of business;
(v) All agreements to which the Company or any of its
Subsidiaries, on the one hand, and any of Sellers or any of their respective
Affiliates (as defined in Section 3.19) or Related Parties (as defined in
Section 3.19), on the other hand, are parties or by which they are bound;
(vi) All contracts or commitments relating to the
employment of any Person or any commission or finder's fee arrangements with
others;
(vii) All material license agreements, whether as licensor
or licensee;
(viii) All other agreements to which the Company or any of
its Subsidiaries is a party or by which it is bound and that involve $25,000 or
more or that extend for a period of one year or more; and
(ix) All other agreements to which the Company or any of
its Subsidiaries is a party or by which it is bound and that are or may be
material to the Condition of the Company or any of its Subsidiaries.
As used in this Section 3.17 the word "agreement" includes both oral and written
contracts, leases, understandings, arrangements and all other agreements; and
the term "Material Contracts" means the agreements of the Company or any of its
Subsidiaries required to be disclosed on Schedule 3.17, including agreements
specifically identified in other Schedules.
(b) All of the Material Contracts are in full force and
effect, are valid and binding and are enforceable in accordance with their terms
in favor of each of the Company and its Subsidiaries, subject as to
enforceability to applicable bankruptcy, insolvency, moratorium and similar laws
affecting creditors' rights generally and to general principals of equity. There
are no material liabilities of the Company or to the best knowledge of the
Company and the Principal Sellers any other party to any Material Contract
arising from any breach or default of any provision thereof and no event has
occurred that, with the passage of time or the giving of notice or both, would
constitute a breach or default by the Company or to the best knowledge of the
Company and the Principal Sellers any other party thereto.
(c) The Company and each of its Subsidiaries has fulfilled all
material obligations required pursuant to each Material Contract to have been
performed by the Company or its Subsidiaries prior to the date hereof, and to
the best knowledge of the Principal Sellers and the Company, the Company and
each of its Subsidiaries will be able to fulfill, when due, all of its
obligations under each of the Material Contracts that remain to be performed
after the date hereof.
(d) Schedules 3.17(c) and (d) set forth a complete and correct
list of each (i) customer (or related group of customers) with whom the Company
or any of its Subsidiaries did $25,000 or more of business during the last
fiscal year, (ii) supplier (or related group of suppliers) with whom the Company
or any of its Subsidiaries did $25,000 or more of business during the last
fiscal year, and (iii) agent (or related group of agents) or representative (or
related group of representatives) who was paid $25,000 or more by the Company
and its Subsidiaries during the last fiscal year, respectively, which lists
itemize the actual dollar amounts.
17
(e) To the best knowledge of the Company and the Principal
Sellers, the Company and each of its Subsidiaries has maintained and continues
to maintain good relations with its customers, suppliers and agents.
3.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company nor
any of its Subsidiaries nor any employee, agent or other Person acting on the
Company's or any of its Subsidiaries' behalf, including, but not limited to, any
Seller, has, directly or indirectly, given or agreed to give any gift or similar
benefit to any customer, supplier, competitor or governmental employee or
official (domestic or foreign) (i) that would subject the Company or its any of
its Subsidiaries to any damage or penalty in any civil, criminal or governmental
litigation or proceeding or (ii) that, if not given in the past, would have had
a material adverse effect on the Condition of the Company or any of its
Subsidiaries.
3.19 TRANSACTIONS WITH RELATED PARTIES. Except as set forth on
Schedule 3.19, there have been no transactions, including purchases or sales of
assets or entities, by or between the Company (or any of its Subsidiaries) and
any Seller or Related Party since the date of incorporation of the Company and
there are no agreements or understandings now in effect between the Company and
any Seller or Related Party. Schedule 3.19 also (i) states the amounts due from
the Company (or any of its Subsidiaries) to any Seller or Related Party and the
amounts due from any Seller or Related Party to the Company or any of its
Subsidiaries, (ii) describes the transactions out of which such amounts due
arose and (iii) describes any interest of any Seller or Related Party in any
supplier or customer of, or any other entity that has had business dealings
with, the Company or any of its Subsidiaries since the date of incorporation of
the Company. After the Closing, there will be no obligations or other
liabilities between each of the Company and any of its Subsidiaries, on the one
hand, and any Seller or Related Party, on the other hand, other than pursuant to
this Agreement and the Transactions. "Related Party" means the Company and each
of its Subsidiaries and Affiliates, including but not limited to each of the
Sellers and any member of the immediate family of any of the Sellers; and
"Affiliate" means, in respect of any specified Person, any other Person that,
directly or indirectly, controls, is controlled by, or is under common control
with, such specified Person or if such specified Person bears a familial
relationship with such other Person.
3.20 BROKER'S OR FINDER'S FEE. No agent, broker, Person or firm
acting on behalf of the Company is, or will be, entitled to any fee, commission
or broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the Transactions.
3.21 ACCOUNTS RECEIVABLE. The accounts receivable of the Company as
reflected in the Balance Sheet, to the extent uncollected on the date of this
Agreement, and the accounts receivable reflected on the books of the Company
are, on the basis of existing facts, valid and existing and fully collectible
(except for a reserve of $75,000 and except as the collectibility thereof is
affected by any future bankruptcy, insolvency or similar proceeding with respect
18
to any account debtor) within one year from the Closing Date, represent monies
due for goods sold and delivered or services rendered, and (subject to the
aforesaid reserve) are subject to no refunds or other adjustments (except
discounts for prompt payment given in the ordinary course of business) and to
the best knowledge of the Company and the Principal Sellers no defenses, rights
of setoff, assignments, restrictions, encumbrances or conditions enforceable by
third parties on or affecting any thereof. The Company has never factored any of
its accounts receivable.
3.22 INVENTORIES. The inventories reflected in the Balance Sheet
were, and those reflected on the books of the Company since such date have been,
determined and valued in accordance with generally accepted accounting
principles applied on a consistent basis as reflected in the consolidated
balance sheet, and existed on the respective dates. The inventories of the
Company consist of items which are good and merchantable, and are of a quality
and quantity presently usable or salable in the ordinary course of business.
3.23 INSURANCE. Schedule 3.23 sets forth a complete and correct
list of all insurance policies and of all claims made by each of the Company or
any of its Subsidiaries on any liability or other insurance policies since the
date of incorporation of the Company (other than worker's compensation claims).
In the reasonable business judgment of the Company and the Sellers, the Company
(together with its Subsidiaries) has adequate liability and other insurance
policies insuring it against the risks of loss arising out of or related to its
assets and business. Without limitation, as to the tangible real and personal
property of the Company and its Subsidiaries, such insurance is, in the
reasonable business judgment of the Company and the Sellers, adequate to cover
the full replacement cost, less deductible amounts, of such tangible real and
personal property. Schedule 3.23 is a complete and correct list of all insurance
currently in place and accurately sets forth the coverages, deductible amounts,
carriers and expiration dates thereof. Schedule 3.23 is a complete and correct
list of all insurance with respect to which the policy period has expired, but
for which certain of the coverage years are still subject to audit or
retrospective adjustment by the carrier, and accurately sets forth such coverage
years and the coverages, deductible amounts, carriers and expiration dates
thereof. There are no outstanding requirements or recommendations by any
insurance company that issued any policy of insurance to the Company or any of
its Subsidiaries or by any board of or by any governmental authority exercising
similar functions that require or recommend any changes in the conduct of the
business of the Company or its Subsidiaries or any repairs or other work to be
done on or with respect to any of the Company's or any of its Subsidiaries'
assets. Except as set forth on Schedule 3.23, no notice or other communication
has been received by the Company or its Subsidiaries from any insurance company
since the date of incorporation of the Company canceling or materially amending
or materially increasing the annual or other premiums payable under any of its
insurance policies, and, to the best knowledge of the Company and the Principal
Sellers, no such cancellation, amendment or increase of premiums is threatened.
3.24 NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth on
Schedule 3.24, (a) the Company (together with its Subsidiaries) has not granted
any general or special powers of attorney and (b) the Company (together with its
Subsidiaries) does not have any obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any Person.
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3.25 BANKING FACILITIES. Schedule 3.25 sets forth a complete and
correct list of: (a) each bank, savings and loan or similar financial
institution in which the Company or any of its Subsidiaries has an account or
safety deposit box and the numbers of such accounts or safety deposit boxes
maintained thereat; and (b) the names of all persons authorized to draw on each
such account or to have access to any such safety deposit box, together with a
description of the authority (and conditions thereto, if any) of each person
with respect thereto.
3.26 ENVIRONMENTAL LIABILITIES.
(a) Except as set forth on Schedule 3.26 hereto, neither the
Company nor any of its Subsidiaries has used, stored, treated, transported,
manufactured, refined, handled, produced or disposed of any Hazardous Materials
on, under, at, from, or in any way affecting, any of their properties or assets,
or otherwise, in any manner which at the time of the action in question violated
any Environmental Law, governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous Materials
and to the best knowledge of the Company and the Principal Sellers, no prior
owner of such property or asset or any tenant, subtenant, prior tenant or prior
subtenant thereof has used Hazardous Materials on or affecting such property or
asset, or otherwise in any manner which at the time of the action in question
violated any Environmental Law governing the use, storage, treatment,
transportation, manufacture, refinement, handling, production or disposal of
Hazardous Materials. "Environmental Laws" means any and all federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees or requirements of any governmental authority regulating,
relating to or imposing liability or standards of conduct concerning any
Hazardous Material or environmental protection or health and safety, as now or
may at any time hereafter be in effect, including without limitation, the Clean
Water Act also known as the Federal Water Pollution Control Act ("FWPCA"), 33
U.S.C. ss. 1251 et seq., the Clean Air Act ("CAA"), 42 U.S.C. xx.xx. 7401 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C.
xx.xx. 136 et seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30
U.S.C. xx.xx. 1201 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the
Superfund Amendment and Reauthorization Act of 1986 ("XXXX"), Public Law 99-499,
100 Stat. 1613, the Emergency Planning and Community Right to Know Act
("EPCRKA"), 42 U.S.C. ss. 11001 et seq., the Resource Conservation and Recovery
Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., the Occupational Safety and Health Act
as amended ("OSHA"), 29 U.S.C. ss. 655 and ss. 657, together, in each case, with
any amendment thereto, and the regulations adopted and the official publications
promulgated thereunder and all substitutions thereof. "Hazardous Materials"
means any flammable materials, explosives, radioactive materials, hazardous
materials, hazardous wastes, hazardous or toxic substances, or similar materials
defined in any Environmental Law.
(b) To the best knowledge of the Company and the Principal
Sellers (i) neither the Company nor any of its Subsidiaries has any obligations
or liabilities, known or unknown, matured or not matured, absolute or
contingent, assessed or unassessed, where such would reasonably be expected to
have a materially adverse effect on the Condition of the Company or any of its
20
Subsidiaries, and (ii) no claims have been made against the Company or any of
its Subsidiaries since the date of incorporation of the Company and no presently
outstanding citations or notices have been issued against the Company or any of
its Subsidiaries, where such could reasonably be expected to have a materially
adverse effect on the Condition of the Company or any of its Subsidiaries, which
in either case have been or are imposed by reason of or based upon any provision
of any Environmental Law, including, without limitation, any such obligations or
liabilities relating to or arising out of or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any Hazardous Materials by the Company or any of
its Subsidiaries, or any of their employees, agents, representatives or
predecessors in interest in connection with or in any way arising from or
relating to the Company or any of its Subsidiaries or any of their respective
properties, or relating to or arising from or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any such substance, by any other Person at or on
or under any of the real properties owned or used by the Company or any of its
Subsidiaries or any other location where such could have a materially adverse
effect on the business or condition (financial or otherwise) of the Company (or
any of its Subsidiaries).
3.27 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY, ETC. The
Company (together with its consolidated Subsidiaries) owns or leases all of the
machinery, equipment, vehicles, furniture, fixtures, leasehold improvements,
repair parts, tools and other property (collectively, the "Personal Property")
used by or relating to the Company or its Subsidiaries. All such Personal
Property is in good operating condition, except for reasonable wear and tear,
and sufficient to carry on the business of the Company and its Subsidiaries in
the normal course as it is presently conducted and is free from defects, whether
patent or latent. Except as set forth in Schedule 3.27, it is not necessary for
the Company or any of its Subsidiaries to acquire or obtain the use of any
additional personal property to carry on its business as presently and
foreseeably to be conducted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF EMKT AND FMI
Each of EMKT and FMI represents and warrants to the Company and the
Sellers as follows:
4.1 DUE ORGANIZATION; GOOD STANDING AND CORPORATE POWER. Each of
EMKT and FMI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted or proposed to be conducted. Each of EMKT and
FMI is duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except in
such jurisdictions where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on the Condition of EMKT and
its Subsidiaries taken as a whole.
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4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of EMKT and FMI
has full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions. The
execution, delivery and performance of this Agreement by EMKT and FMI, and the
consummation by each of them of the Transactions, have been duly authorized by
the respective Boards of Directors of EMKT and FMI. No other corporate action on
the part of either of EMKT or FMI is necessary to authorize the execution,
delivery and performance of this Agreement by each of EMKT and FMI and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by each of EMKT and FMI and is a valid and binding obligation of each
of EMKT and FMI, enforceable against each of EMKT and FMI in accordance with its
terms, except that such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally, and general equitable principles.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) The execution and delivery of this Agreement by EMKT and
FMI and the consummation by EMKT and FMI of the Transactions will not: (1)
violate any provision of the Certificate of Incorporation or By-Laws of EMKT or
of FMI; (2) violate any statute, ordinance, rule, regulation, order or decree of
any court or of any governmental or regulatory body, agency or authority
applicable to EMKT or FMI or by which either of their respective properties or
assets may be bound; (3) require any filing with, or permit, consent or approval
of, or the giving of any notice to any governmental or regulatory body, agency
or authority; or (4) result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of EMKT, FMI or any of their Subsidiaries
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease or other instrument or
obligation to which EMKT or FMI or any of their Subsidiaries is a party, or by
which they or their respective properties or assets may be bound, excluding from
the foregoing clauses (3) and (4) filings, notices, permits, consents and
approvals the absence of which, and violations, breaches, defaults, conflicts
and liens which, in the aggregate, would not have a material adverse effect on
the Condition of EMKT and its Subsidiaries taken as a whole.
(b) Neither EMKT nor any Subsidiary thereof is in default or
in violation of, and no event has occurred that, with notice or the lapse of
time or both, would constitute a default or violation of any term, condition or
provision of (i) its Certificate of Incorporation or By-Laws, as amended, (ii)
any note, bond, mortgage, indenture, license, agreement, contract, lease,
commitment or other obligations which EMKT or any of its Subsidiaries is a party
or by which they or any of their properties or assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to EMKT
or any of its subsidiaries, except, in the case of clauses (i) and (ii) above,
for defaults or violations that would not have a material adverse effect on the
Condition of EMKT and its Subsidiaries taken as a whole.
4.4 EMKT REPORTS AND FINANCIAL STATEMENTS. The consolidated
balance sheets as of the end of the fiscal year ended June 30, 1999 and the
fiscal quarter ended March 31, 2000 as set forth in EMKT's annual report on Form
22
10-KSB and Quarterly Report on Form 10-QSB, as filed with the Securities and
Exchange Commission, and the consolidated statements of operations, consolidated
statements of shareholders' equity and consolidated statements of cash flow for
the fiscal year and quarter then ended, were prepared in accordance with GAAP,
except as may be indicated therein or in the notes or schedules thereto, and
fairly present the consolidated financial position of EMKT and its consolidated
subsidiaries as of the date thereof and the results of their operations and cash
flows for the fiscal year then ended. Neither EMKT's annual report on Form
10-KSB for the fiscal ended June 30, 1999 nor its quarterly report on Form
10-QSB for the fiscal quarter ended March 31, 2000 contained, at the time of
filing, any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. EMKT
has timely filed all required forms, reports and exhibits thereto as required by
the Securities Exchange Act of 1934.
4.5 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule
4.5, since June 30, 1999 there has not been any material adverse change in the
Condition of EMKT and its Subsidiaries taken as a whole.
4.6 COMPLIANCE WITH LAWS. To the best knowledge of EMKT, EMKT and
each of its Subsidiaries are in compliance with all applicable laws,
regulations, orders, judgments and decrees except where the failure to so comply
would not have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
4.7 LIABILITIES. Neither EMKT nor any of its Subsidiaries has any
outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in its balance sheet for
the fiscal year ended March 31, 2000 or referred to in the footnotes thereto,
other than liabilities incurred subsequent to such date in the ordinary course
of business not involving borrowings by EMKT. Neither EMKT nor any of its
Subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement.
4.8 LITIGATION. Except as set forth in the EMKT's Form 10-KSB for
the fiscal year ended June 30, 1999, there is no action, suit, proceeding, at
law or in equity, or any arbitration or any administrative or other proceeding
by or before (or to the best knowledge, information and belief of EMKT, any
investigation by or before) any governmental or other instrumentality or agency,
pending or, to the best of knowledge, information and belief of EMKT, threatened
against or affecting EMKT or any of its Subsidiaries or any of their properties
or rights which could have a material adverse effect on Condition of EMKT and
its Subsidiaries taken as a whole. There are no such suits, actions, claims,
proceedings or investigations pending, or to the best knowledge, information and
belief of the Company and the Principal Sellers, threatened, seeking to prevent
or challenge the Transactions. Except as disclosed in such Form 10-K, neither
EMKT nor any of its Subsidiaries, is subject to any judgment, order or decree in
any lawsuit or proceeding which could have a material adverse effect on the
Condition of EMKT and its Subsidiaries, taken as a whole, or on the ability of
EMKT or any Subsidiary to conduct its business as presently conducted.
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4.9 CAPITALIZATION.
(a) The authorized capital stock of EMKT consists of
50,000,000 shares of EMKT Stock, par value $0.0001 per share, and 1,000,000
shares of preferred stock, par value $0.0001 per share. As of the date of this
agreement, (i) 16,772,190 shares of EMKT Stock are issued and outstanding, (ii)
2,369,833 shares of EMKT Stock are reserved for issuance pursuant to outstanding
options granted under EMKT stock option plans, (iii) no shares of EMKT Stock are
reserved for issuance pursuant to outstanding warrants and (iv) no shares of
EMKT preferred stock are issued and outstanding.
(b) The authorized capital stock of FMI consists of 30,000,000
shares of FMI Stock and 1,000,000 shares of preferred stock, par value $0.001
per share. As of the date of this agreement, (i) 11,467,641 shares of FMI Stock
are issued and outstanding, (ii) 3,887,750 shares of FMI Stock are reserved for
issuance pursuant to outstanding options granted under FMI stock option plans,
(iii) 187,500 shares of FMI Stock are reserved for issuance pursuant to
outstanding warrants; (iv) 250,000 shares of FMI preferred stock are issued and
outstanding and (iv) rights to purchase 5,400,000 shares of FMI Stock at an
exercise price of $5.00 per share are outstanding.
4.10 TAXES. EMKT has filed or caused to be filed, within the times
and in the manner prescribed by law, all federal, state, local and foreign Tax
Returns and tax reports that are required to be filed by, or with respect to,
EMKT or any of its Subsidiaries. Such returns and reports are true, correct and
complete in all material respects and reflect accurately all liability for Taxes
of EMKT and its Subsidiaries for the periods covered thereby. All federal,
state, local and foreign Taxes (including interest and penalties) payable by, or
due from, EMKT or any of its Subsidiaries have been fully paid or adequately
disclosed and fully provided for in the books and financial statements of EMKT
and its Subsidiaries. All deficiencies assessed as a result of any examination
of such Tax Returns by federal, state, local or foreign tax authorities have
been paid, and deficiencies for all taxes that have been proposed or asserted
against EMKT or any Subsidiary do not exceed $10,000 in the aggregate for all
periods. EMKT has not received any notice of any issue being raised since the
date incorporation of EMKT by any federal, state, local or foreign taxing
authority that, if raised with respect to any other period not so examined,
could reasonably be expected to result in a proposed deficiency for any other
period not so examined. No examination of any Tax Return of EMKT or any of its
Subsidiaries is currently in progress. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any Tax
Return of EMKT or any of its Subsidiaries. Neither EMKT nor any of its
Subsidiaries is party to any agreement, contract or arrangement that would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code. EMKT and each of its
Subsidiaries have complied (and until the Closing will comply) in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of taxes (including, without limitation, withholding of taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws.
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4.11 INTELLECTUAL PROPERTY. The Company and its Subsidiaries own
the entire right, title and interest in and to all material Intellectual
Property necessary for the operation of their business as currently conducted.
To the best knowledge of EMKT, there is no pending or threatened proceedings or
litigation or other adverse claims affecting or with respect to such material or
Intellectual Property. EMKT and its subsidiaries during the past two years have
not received any notices or claims that claim infringement, contributory
infringement, inducement to infringe, misappropriation or breach by EMKT or any
of its subsidiaries of any domestic or foreign patents, patent applications,
patent licenses and no-how licenses, trade names, trademark registrations and
applications, service marks, copyrights, copyright registrations or
applications, trade secrets or other confidential proprietary information.
ARTICLE V
ACTIONS PRIOR TO CLOSING DATE
5.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS.
During the period commencing on the date hereof and ending on the Closing Date,
each of the Company and EMKT shall, and shall cause each of its Subsidiaries to,
upon reasonable notice, afford the other, and their respective counsel,
accountants and other authorized representatives, full access during normal
business hours to the properties, books and records of the Company and its
Subsidiaries or EMKT and its Subsidiaries (as applicable) in order that they may
have the opportunity to make such investigations as they shall desire of the
affairs thereof; such investigation shall not, however, affect the
representations and warranties made by the Company or EMKT in this Agreement.
The Company acknowledges and agrees that FMI's auditors will be performing an
audit or review of the Company's financial statements for the fiscal year ended
October 31, 1999 (the "Audit"), and will provide all information and documents
and cooperate in any reasonable way so as to permit the Audit to be completed
promptly. The Company agrees to cause its officers and employees to furnish such
additional financial and operating data and other information and respond to
such inquiries as EMKT and FMI shall from time to time reasonably request.
5.2 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING
DATE.
(a) The Company agrees that, except as permitted, required or
specifically contemplated by, or otherwise described in, this Agreement or
otherwise consented to or approved in writing by EMKT, during the period
commencing on the date hereof and ending on the Closing Date:
(i) The Company and each of its Subsidiaries will
conduct their respective operations only according to their ordinary and usual
course of business and will use their commercially reasonable best efforts to
preserve intact their respective business organization, keep available the
services of their officers and employees and maintain satisfactory relationships
with licensers, suppliers, distributors, clients and others having business
relationships with them;
(ii) Neither the Company nor any of its Subsidiaries
shall, except as may be necessary to effect the Transactions, (A) make any
change in or amendment to the Company Articles or the By-Laws of the Company (or
comparable governing documents of any Subsidiary); (B) issue or sell any shares
of its capital stock (other than in connection with the exercise of Company
25
Options outstanding on the date hereof) or any of its other securities, or issue
any securities convertible into, or options, warrants or rights to purchase or
subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of, any shares of its capital stock or any of its other
securities, or make any other changes in its capital structure; (C) declare, pay
or make any dividend or other distribution or payment with respect to, or split,
redeem or reclassify, any shares of its capital stock; (D) enter into any
contract or commitment, except for contracts in the ordinary course of business,
including without limitation, any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or
release or relinquish any material contract rights; (E) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently, or otherwise) for the obligations of any other Person other than a
Subsidiary in the ordinary course of business and consistent with past practice;
(F) incur, assume or prepay any indebtedness or other material liabilities other
than in the ordinary course of business and consistent with past practices; (G)
make any loans, advances or capital contributions to, or investments in, any
other Person, other than to Subsidiaries and employees in the ordinary course of
business and not to exceed $25,000 in the aggregate outstanding at any time; (H)
authorize capital expenditures in excess of the amount currently budgeted
therefor; (I) permit any insurance policy naming the Company or any Subsidiary
as a beneficiary or a loss payee to be canceled or terminated other than in the
ordinary course of business; (J) amend any employee or nonemployee benefit plan
or program, employment agreement, license agreement or retirement agreement, or
pay any bonus or contingent compensation, except in each case in the ordinary
course of business consistent with past practice prior to the date of this
Agreement; (K) agree, in writing or otherwise, to take any of the foregoing
actions; or (L) agree to the settlement of any litigation.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to (i) take any action, engage in any transaction or enter into any
agreement which would cause any of the representations or warranties set forth
in Article III to be untrue as of the Closing Date, or (ii) purchase or acquire,
or offer to purchase or acquire, any shares of capital stock of the Company and
the Company shall not sell or pledge or agree to sell or pledge any stock owned
by it in any of the Subsidiaries, or allow any Subsidiary to pledge or agree to
sell or pledge any stock owned by it in any other Subsidiary;
(c) The Company shall use reasonable efforts to operate its
business in a manner consistent with prior practice and maintain the goodwill of
its employees and other persons with which it has commercial dealings. In
addition, the Company agrees that: (i) effective as of January 1, 2000, there
will no increases in salary or other payments, disbursements or distributions in
any manner or form to shareholders, directors, officers, or employees (or
related parties thereto) of the Company or affiliated or related entities, or
changes in the cash or cash equivalent account of the Company, other than normal
and necessary transactions in the ordinary course of business; (ii) revenues and
accounts receivable will be maintained on a normal basis and there will no
changes in its methods or procedures for billing, collection or recording of
customer accounts receivable or reserves for doubtful accounts; (iii)
inventories will be maintained on a normal basis, purchases of inventory items
will be made in accordance with past practices and no changes will be made in
other normal inventory procedures; (iv) property, plant, and equipment will be
maintained and serviced in accordance with normal policies, and repairs,
maintenance to such plant and equipment will be made as necessary in the normal
course of business (v) accounts payable and accrued expenses of the Company will
26
be maintained on a current basis; (vi) all normal and recurring installment
payments of bank debt, leases, contractual obligations and other amounts due
third parties, if any, will be made by the Company as they become due, except to
the extent suspended, withheld or terminated by the Company due to a bona fide
dispute; (vii) the Company shall not incur any new blank debt, leases, loans,
encumbrances, liens, attachments, contractual obligations or other indebtedness,
except those incurred in the ordinary course of business; (viii) all federal,
state, municipal and other tax returns, reports and declarations required to be
filed, and all taxes, interest, penalties, fines or assessments related thereto
will be satisfied by with respect to periods of time prior to the closing of the
Transaction, except to the extent suspended, withheld or terminated by the
Company due to a bona fide dispute.
5.3 BEST EFFORTS. Each of the Company, EMKT and FMI shall, and the
Company shall cause each of its Subsidiaries to, cooperate and use their
respective commercially reasonable best efforts to take, or cause to be taken,
all appropriate action, and to make, or cause to be made, all filings necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Transactions, including, without limitation, their respective
commercially reasonable best efforts to obtain, prior to the Closing Date, all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company and
its Subsidiaries as are necessary for consummation of the Transactions and to
fulfill the conditions to the Transactions; provided, however, that no loan
agreement or contract for borrowed money shall be repaid except as currently
required by its terms, in whole or in part, and no contract shall be amended to
increase the amount payable thereunder or otherwise to be more burdensome to the
Company or any of its Subsidiaries in order to obtain any such consent, approval
or authorization without first obtaining the written approval of EMKT and FMI.
FMI shall use its commercially reasonable best efforts to obtain releases or
replacements for the personal guaranties by X. Xxxx Winter of obligations of the
Company.
5.4 NO SOLICITATION OF OTHER OFFERS. Neither the Company nor any
of its Subsidiaries, shall, directly or indirectly, take (and the Company shall
not authorize or permit its or its Subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to so take) any action to encourage, solicit, initiate or, subject
to the fiduciary duties of the Board of Directors under applicable law as
advised in writing by counsel, participate in any way in discussions or
negotiations with, or furnish any information to, any Person (other than EMKT,
FMI or their respective officers, directors, representatives, agents, affiliates
or associates) in connection with any possible or proposed merger or other
business combination, sale or other disposition of assets, sale of shares of
capital stock or similar transactions involving the Company or any Subsidiary or
division of the Company. The Company will promptly communicate to EMKT and FMI
the terms of any proposal or inquiry that it may receive in respect of any such
transaction, or of any such information requested from it or of any such
negotiations or discussions being sought to be initiated with the Company.
5.5 EMPLOYEE BENEFITS. Following the Effective Time, EMKT and FMI
intend that the Surviving Corporation will provide, for a period of not less
than one year after the Effective Time, employees of the Company with employee
benefits following the Effective Time which are, in the aggregate, substantially
comparable to the benefits provided under the Employee Benefit Plans (other than
Employee Benefit Plans which are Stock Option Plans or similar arrangements)
disclosed on Schedule 3.11 that were maintained for such employees by the
Company as of the Balance Sheet Date.
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5.6 OFFICERS' AND DIRECTORS' INSURANCE; INDEMNIFICATION. The
Surviving Corporation will, for a period of one year commencing at the Effective
Time (i) maintain all rights to indemnification now existing in favor of the
directors and officers of the Company as provided in the Company Articles or the
By-Laws of the Company, with respect to acts and omissions occurring prior to
the Effective Time; provided, however, that the Surviving Corporation will not
be liable for any settlement effected without its consent; and (ii) maintain a
policy or policies of directors' and officers' liability insurance covering
directors and officers of the Company and having such terms no less favorable
than the policies presently maintained by the Company on the date of this
Agreement (true and correct copies of which have been delivered to EMKT) with
respect to acts and omissions occurring prior to the Effective Time; provided
further that such insurance coverage shall continue to be available and provided
that the annual premium therefor shall not exceed $50,000 (the "Maximum Amount")
to maintain or procure such insurance coverage; and provided further that if the
Surviving Corporation shall be unable to maintain or obtain such insurance
coverage as called for by this Section 5.6(ii), the Surviving Corporation will
maintain or obtain, for the remainder of such one year period, as much
comparable insurance as shall be available for the Maximum Amount.
ARTICLE VI
CONDITIONS PRECEDENT TO TRANSACTIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT, FMI AND THE
COMPANY AND THE SELLERS. The respective obligations of EMKT and FMI, on the one
hand, and the Company and the Sellers, on the other hand, to effect the
Transactions are subject to the satisfaction or waiver (subject to applicable
law) on or prior to the Closing Date of each of the following conditions:
(a) Approval of Company' s and FMI' s Shareholders. This
Agreement and the Transactions shall have been approved and adopted by the
requisite vote or consent of (i) the shareholders of the Company in accordance
with the California GCL, the Company Articles, the By-Laws of the Company and
any agreements between the Company and its shareholders or among its
shareholders and (ii) the Shareholders of FMI in accordance with the Delaware
GCL, the Certificate of Incorporation and By-Laws of FMI and any agreements
between FMI and its shareholders or among its shareholders;
(b) Injunction. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Transactions and which is in effect on the Closing Date;
(c) Statutes. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the consummation
of the Transactions or has the effect of making the purchase of the Company
Stock illegal; and
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(d) Blue Sky. The issuance of the Merger Consideration and the
Transactions shall have been qualified or exempt from qualification under the
California Law and any other applicable state securities or blue sky laws.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT AND FMI. The
obligations of EMKT and FMI to effect the Transactions are also subject to the
satisfaction or waiver, on or prior to the Closing Date, of each of the
following conditions:
(a) Accuracy of Representations and Warranties. All
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing
Date;
(b) Performance by Company. The Company shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to the Closing Date;
(c) Employment Agreements. X. Xxxx Winter and Xxxxx Xxxxx
shall have entered into employment agreements with FMI in form and substance
satisfactory to FMI;
(d) Legal Opinion. EMKT and FMI shall have received an opinion
of Xxxxxxx Xxxxx & Xxxxx LLP, counsel to the Company in form and substance
acceptable to EMKT and FMI;
(e) Joinder Agreements. Each Seller (other than the Principal
Sellers) and each Exercising Optionee shall have executed a Joinder Agreement in
form and substance satisfactory to EMKT, whereby such Exercising Optionee and
Seller agrees to make the representations and warranties set forth in Article
II;
(f) Audit. The Audit shall have been completed;
(g) Shareholders Loan. The Loan in the amount of $439,845 owed
by the Company to X. Xxxx Winter shall have been converted into 175,938 shares
of Series C Stock;
(h) Convertible Note. The Amended and Restated Subordinated
Convertible Promissory Notes of the Company in the aggregate outstanding
principal amount of approximately $726,000 shall have been canceled and
exchanged for 282,000 shares of Series C Stock;
(i) Series C Warrants. The Canceled Warrants, as identified on
Schedule 1.4, shall have been exercised with respect to 73,860 shares of Company
Common Stock, and the Company shall have used the entire proceeds thereof to pay
down its existing credit line; and
(j) Net Worth. If required by Section 1.2(d), the Principal
Sellers shall have taken the actions described in such section in order to
insure that the net worth of the Company at Closing will be at least $0.00.
29
(k) Other Documents. EMKT and FMI shall have received such
other documents, opinions, agreements, certificates and instruments as they
shall reasonably require in connection with the consummation of the
Transactions.
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
SELLERS. The obligation of the Company and the Sellers to effect the
Transactions is also subject to the satisfaction or waiver, on or prior to the
Closing Date, of each of the following conditions:
(a) Accuracy of Representations and Warranties. All
representations and warranties of EMKT and FMI contained herein shall be true
and correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing
Date;
(b) Performance by EMKT and FMI. Each of EMKT and FMI shall
have performed in all material respects all obligations and agreements, and
complied in all material respects with all covenants and conditions, contained
in this Agreement to be performed or complied with by it prior to the Closing
Date;
(c) Employment Agreements. X. Xxxx Xxxxxxx and Xxxxx Xxxxx
shall have entered into employment agreements with FMI in form and substance
satisfactory to X. Xxxx Xxxxxxx and Xxxxx Xxxxx, respectively;
(d) Release of Personal Guaranties. FMI shall have obtained
written commitments from the obligees to release or accept replacements of X.
Xxxx Winter with respect to any commercial leases or other contracts of the
Company that he has personally guaranteed;
(e) Registration Rights. EMKT and the Sellers shall have
entered into an agreement regarding registration rights for the EMKT Stock
constituting a part of the Purchase Consideration substantially in the terms of
Exhibit A; and
(f) Legal Opinion. The Company and the Sellers shall have
received an opinion of Xxxx, Scholer, Fierman, Xxxx and Handler, LLP, counsel to
EMKT and FMI, in form and substance acceptable to the Company and the Principal
Sellers.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated and the
Transactions may be abandoned, at any time prior to the Closing Date:
(a) by mutual consent of the Company and the Principal
Sellers, on the one hand, and of EMKT and FMI, on the other hand;
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(b) by EMKT and FMI, on the one hand, or the Company and the
Principal Sellers, on the other hand, if the Closing shall not have occurred
within 60 days after the date of this Agreement or there has been a material
breach of any representation, warranty, obligation, covenant or agreement set
forth in this Agreement on the part of the other party;
(c) by EMKT and FMI, if any of the conditions specified in
Sections 6.1 or 6.2 have not been met or waived by EMKT and FMI prior to or at
such time as such condition can no longer be satisfied; or
(d) by the Company and the Principal Sellers, if any of the
conditions specified in Sections 6.1 or 6.3 have not been met or waived by the
Company and the Principal Sellers prior to or at such time as such condition can
no longer be satisfied.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1 by EMKT or FMI, on the one hand, or the
Company and the Principal Sellers, on the other hand, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
become void and have no effect, and there shall be no liability hereunder on the
part of EMKT, FMI or the Company or the Principal Sellers, except that Section
9.1, Article VIII and this Section 7.2 shall survive any termination of this
Agreement. Nothing in this Section 7.2 shall relieve any party to this Agreement
of liability for breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLERS. Each Seller shall, severally and
not jointly, indemnify and hold harmless EMKT, FMI and the Surviving Corporation
and each of their affiliates, directors, officers, employees, attorneys, agents
and representatives (collectively, the "Affiliated Parties") in respect of any
and all claims, losses, damages, liabilities, declines in value, penalties,
interest, costs and expenses (including, without limitation, any attorneys',
accountants' and consultants' fees and other expenses) reasonably incurred by
EMKT, FMI, the Surviving Corporation or their respective Affiliated Parties,
together with interest on cash disbursements in connection therewith, at an
annual rate equal to the prime rate as reported from time to time by Bank of
America NT & SA (the "Prime Rate") then in effect, from the date such cash
disbursements were made by EMKT, FMI, the Surviving Corporation or any of their
Affiliated Parties until paid by such Seller, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by such
Seller in Article II of this Agreement;
(b) Any misrepresentation contained in any certificate
furnished by such Seller individually pursuant to this Agreement or in
connection with the Transactions, including without limitation the Joinder
Agreements; and
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(c) Any breach of any covenant, agreement or obligation of
such Seller individually contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought
against such Seller under this Section 8.1 unless and until the aggregate amount
of claims under Sections 8.1 and 8.2 exceeds $10,000, in which event EMKT and
FMI and their respective Affiliated Parties shall be entitled to indemnification
from such Seller for all claims hereunder in excess of $10,000.
8.2 INDEMNIFICATION BY PRINCIPAL SELLERS JOINTLY AND SEVERALLY.
The Principal Sellers shall, for a period of 12 months from the date hereof,
jointly and severally indemnify and hold harmless EMKT, FMI and the Surviving
Corporation and each of their respective Affiliated Parties in respect of any
and all claims, losses, damages, liabilities, declines in value, penalties,
interest, costs and expenses (including, without limitation, any attorneys,
accountants' and consultants' fees and other expenses) reasonably incurred by
EMKT, FMI, the Surviving Corporation or their respective Affiliated Parties,
together with interest on cash disbursements in connection therewith, at an
annual rate equal to the Prime Rate then in effect, from the date such cash
disbursements were made by EMKT, FMI, the Surviving Corporation or any of their
Affiliated Parties until paid by the Sellers, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by the
Principal Sellers or the Company in Article III of this Agreement or pursuant
hereto;
(b) Any misrepresentation contained in any certificate
furnished by the Principal Sellers and/or the Company pursuant to this Agreement
or in connection with the Transactions;
(c) Any breach of any covenant, agreement or obligation of the
Principal Sellers and/or the Company contained in this Agreement or any other
instrument contemplated by this Agreement; or
(d) The amounts, if any, by which the negative net worth of
the Company shown on the Closing Date Audit exceeds the sum of the Estimated Net
Worth plus the amount contributed to the Company pursuant to Section 1.2(d);
No claim, demand, suit or cause of action shall be brought
against the Principal Sellers under this Section 8.2 unless and until the
aggregate amount of claims under Sections 8.1 and 8.2 exceeds $10,000, in which
event EMKT and FMI and their respective Affiliated Parties shall be entitled to
indemnification from the Principal Sellers for all claims hereunder in excess of
$10,000.
8.3 INDEMNIFICATION BY EMKT AND FMI. EMKT and FMI shall, for a
period of 12 months from the Closing Date, jointly and severally, indemnify and
hold harmless each of the Sellers in respect of any and all claims, losses,
damages, liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys', accountants' and consultants'
fees and other expenses) reasonably incurred by Sellers, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
Prime Rate then in effect, from the date that such cash disbursements were made
by Sellers until paid by EMKT or FMI, in connection with each and all of the
following:
32
(a) Any breach of any representation or warranty made by EMKT
or FMI in this Agreement or pursuant hereto; or
(b) Any breach of any covenant, agreement or obligation of
EMKT or FMI contained in this Agreement or any other instrument contemplated by
this Agreement; or
(c) Any misrepresentation contained in any statement or
certificate furnished by EMKT or FMI pursuant to this Agreement or in connection
with the Transactions.
No claim, demand, suit or cause of action shall be brought
against EMKT or FMI under this Section 8.3 unless and until the aggregate amount
of claims under this Section 8.3 exceeds $10,000, in which event, Sellers shall
be entitled to indemnification from EMKT or FMI for all claims hereunder in
excess of $10,000.
8.4 INDEMNIFICATION BY SELLERS FOR TAX LIABILITIES. In addition
to, and not by way of limitation on, the indemnities set forth in this Article
VIII, the Principal Sellers shall jointly and severally indemnify and hold
harmless on an after-tax basis (and after taking into account any insurance
proceeds to which EMKT or FMI is entitled hereunder) EMKT and FMI against all
Taxes of the Company (together with its consolidated Subsidiaries) for all
taxable periods ending on or before the date hereof or otherwise attributable to
the operations, transactions, assets, or income of the Company or its
Subsidiaries prior to the date hereof, together with any expenses (including,
without limitation, settlement costs and any legal, accounting and other
expenses) incurred in connection with the contesting, collection or assessment
of such Taxes, and together with interest at an annual rate equal to the Prime
Rate then in effect. Notwithstanding Sections 8.1 and 8.2, the Principal
Sellers' obligation to indemnify EMKT and FMI pursuant to this Section 8.4 shall
continue until 90 days after all applicable statutes of limitations have
expired. For purposes of this Section 8.4, the term "after-tax basis" means
determined after giving effect to (i) the receipt by the indemnified party of
such payment, if such receipt is taxable and (ii) any tax deduction available on
account of the payment of such Taxes; and assuming that Taxes are payable at a
combined effective rate of 45% of taxable income.
8.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"indemnified party") shall promptly notify the party obligated to provide
indemnification (the "indemnifying party") of the claim and, when known, the
facts constituting the basis for such claim; provided, however, that the failure
to so notify the indemnifying party shall not relieve the indemnifying party of
its obligation hereunder to the extent such failure does not materially
prejudice the indemnifying party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. If any
claims shall arise against Sellers hereunder, EMKT and FMI may (but shall not be
required to) set-off against any amount then or thereafter payable (but not yet
paid) to such Seller.
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8.6 DEFENSE CLAIMS. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party to this Agreement, the indemnifying
party at its sole cost and expense and with counsel reasonably satisfactory to
the indemnified party may, upon written notice to the indemnified party, assume
the defense of any such claim or legal proceeding if (a) the indemnifying party
acknowledges to the indemnified party in writing, within 15 days after receipt
of notice from the indemnifying party, its obligations to indemnify the
indemnified party with respect to all elements of such claim, (b) the
indemnifying party provides the indemnified party with evidence reasonably
acceptable to the indemnified party that the indemnifying party will have the
financial resources to defend against such third-party claim and fulfill its
indemnification obligations hereunder, (c) the third-party claim involves only
money damages and does not seek an injunction or other equitable relief, and (d)
settlement or an adverse judgment of the third party claim is not, in the good
faith judgment of the indemnified party, likely to establish a pattern or
practice adverse to the continuing business interests of the indemnified party.
The indemnified party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense; provided,
however, that if there are one or more legal defenses available to the
indemnified party that conflict with those available to the indemnifying party,
or if the indemnifying party fails to take reasonable steps necessary to defend
diligently the claim after receiving notice from the indemnified party that it
believes the indemnifying party has failed to do so, the indemnified party may
assume the defense of such claim; provided, further, that the indemnified party
may not settle such claim without the prior written consent of the indemnifying
party, which consent may not be unreasonably withheld. If the indemnified party
assumes the defense of the claim, the indemnifying party shall reimburse the
indemnified party for the reasonable fees and expenses of counsel retained by
the indemnified party and the indemnifying party shall be entitled to
participate in (but not control) the defense of such claim, with its counsel and
at its own expense. The parties agree to render, without compensation, to each
other such assistance as they may reasonably require of each other in order to
insure the proper and adequate defense of any action, suit or proceeding,
whether or not subject to indemnification hereunder. Notwithstanding the
foregoing, if any of Sellers assumes the defense of a claim for Taxes for which
they are obligated to indemnify EMKT, FMI or any of its Subsidiaries, then such
indemnifying party shall not settle or otherwise agree to a resolution of a
dispute with respect to such claim if that settlement or resolution would have
an adverse impact on the liability of EMKT, FMI or any of their respective
Subsidiaries for any taxable period ending after the date hereof without the
express written consent of EMKT, FMI or such affected Subsidiary, which consent
will not be unreasonably withheld or delayed.
8.7 MANNER OF INDEMNIFICATION.
(a) If EMKT, FMI or the Surviving Corporation shall have an
indemnity claim under any provision of this Agreement, then, provided that they
comply with the proceedure st forth in Section 8.7(b), they shall be entitled to
receive out of the Indemnification Holdback that number of shares of FMI Stock,
valued at $13.50 per share, as is required to satisfy such indemnification
obligation to the extent such indemnification obligation is not fully paid or
reimbursed by insurance.
(b) EMKT or FMI shall give written notice to the Principal
Sellers specifying the nature and extent of any indemnification claim and
requesting payment therefor. Within ten days of receipt of such notice the
Principal Sellers shall either (i) provide written instructions to EMKT or FMI
34
with a copy to Sellers to make the indemnification payment on a date which is
mutually agreed to but which shall be at least within 30 days of the date of
such notice or (ii) provide written notice to EMT or FMI objecting to such
indemnification payment. If EMKT or FMI and Principal Sellers cannot reach an
agreement regarding an indemnification payment within ten days of notice
objecting to such indemnification payment, then the matter shall be submitted to
arbitration pursuant to Section 9.16.
(c) Any claims for payment in respect of indemnity during the
period between the Closing and 18-month anniversary of the Closing ( the
"Holdback Release Date") shall be satisfied out of the Indemnification Holdback
unless and until the Indemnification Holdback shall be depleted, in which case
EMKT, FMI or the Surviving Corporation, as the case may be, shall be entitled to
payment directly from the Sellers. Any right of FMI, EMKT or the Surviving
Corporation to payment out of the Indemnification Holdback is, in all cases, in
addition to and not in substitution of any other rights or remedies available
thereto under this Agreement, any other agreement in respect of the Transactions
or by operation of law or in equity, including the right to specific performance
or injunctive relief. On the Holdback Release Date, any shares of FMI Stock
remaining in the Indemnification Holdback shall be released to the Sellers. All
indemnification payments required to be made in cash hereunder shall be effected
by with payment of cash or delivery of a certified or official bank check in the
amount of the indemnification liability.
8.8 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the provisions
of Section 8.1, 8.2 and 8.3 to the effect that an indemnifying party's
obligation under such section shall expire 12 months after the date hereof, such
obligation shall continue (i) as to any matter as to which a claim is submitted
in writing to the indemnifying party prior to such 12 months after the date
hereof identified as a claim for indemnification pursuant to this Agreement or
(ii) as to any matter that is based upon willful fraud by the indemnifying
party, until such time as such claims and matters are resolved. The liability of
any Seller shall not exceed the value at the time of Closing of the
Consideration received by such Seller.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES.
(a) Except as provided in paragraph (b) below, all costs and
expenses incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such costs and expenses. The
costs of the Transactions incurred by the Sellers shall not be paid by or
charged to the Company.
(b) If either (i) at any time while this Agreement is in
effect, the Company shall have consummated, or entered into an agreement
providing for, a merger of the Company with, sale of all or a substantial part
of the assets of the Company to, or any other business combination involving the
Company with, another Person, or (ii) this Agreement is terminated other than
solely because of a material breach of the representations or warranties of EMKT
or FMI or a failure of EMKT or FMI to fulfill a material covenant contained
35
herein, then, in the case of clause (i) or (ii) above, the Company shall, within
two days after the first of such events has occurred, pay EMKT a fee in lieu of
reimbursement for its expenses incurred in connection with this Transaction
equal to $40,000. Payment of such fee shall not limit the right or ability of
EMKT or FMI to pursue any other available remedies at law or in equity.
9.2 REPRESENTATIONS AND WARRANTIES. The respective representations
and warranties of the Company and the Sellers, on the one hand, and EMKT and
FMI, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party.
9.3 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, EMKT or FMI, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
9.4 PUBLIC ANNOUNCEMENTS. The Company and the Sellers, on the one
hand, and EMKT and FMI, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Transactions, and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement, unless required by
applicable law.
9.5 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
(a) if to the Company, to it at:
BayWeb, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: X. Xxxx Winter, Chief Executive Officer
Fax: 000-000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxx, LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
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(b) if to either Principal Seller, to his address on the
signature pages hereof
with a copy to:
Xxxxxxx Xxxxx & Xxxxx, LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
(c) if to either EMKT or FMI, to it at:
c/o Full Moon Interactive Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Fax: 000-000-0000
with a copy to:
eMarketplace, Inc.
000 X. Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Chairman
Fax: 000-000-0000
And to:
Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
1999 Avenue of the Stars
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: X.X. Xxxxxxxxx, Esq.
Fax: 000-000-0000
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
9.6 ENTIRE AGREEMENT. This Agreement and the exhibits, schedules
and other documents referred to herein or delivered pursuant hereto,
collectively contain the entire understanding of the parties hereto with respect
to the subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
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9.7 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
Nothing in this Agreement, expressed or implied, is intended to confer on any
Person other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
9.8 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in writing by the parties
hereto in any and all respects before the Closing Date.
9.9 FURTHER ACTIONS. Each of the parties hereto agrees that,
subject to its legal obligations, it will use its best efforts to fulfill all
conditions precedent specified herein, to the extent that such conditions are
within its control, and to do all things reasonably necessary to consummate the
Transactions.
9.10 HEADINGS. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. References to Articles, Sections, Exhibits and
Schedules, unless otherwise specified, are to Articles, Sections, Exhibits and
Schedules of and to this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
9.12 APPLICABLE LAW. This Agreement and the legal relations between
the parties hereto shall be governed by and construed in accordance with the
laws of the State of California, without regard to the conflict of laws rules
thereof.
9.13 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
9.14 "PERSON" DEFINED. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
9.15 ATTORNEYS' FEES. In the event any action is instituted by a
party to enforce any of the terms and provisions contained herein, the
prevailing party in such action shall be entitled to such reasonable attorneys'
fees, costs and expenses as may be fixed by the court.
38
9.16 ARBITRATION PERIOD. The parties agree that in the event of any
dispute arising between or among any of the parties in connection with this
Agreement or the Transactions, such dispute shall be settled only by arbitration
to be conducted in Santa Xxxxx County, California in accordance with the rules
of Judicial Arbitration and Mediation Services, Inc. ("JAMS") applying the laws
of California. The parties agree that such arbitration shall be conducted by one
or more retired judges who are experienced in dispute resolution regarding
mergers and acquisitions, that pre-arbitration discovery shall be limited to the
greatest extent provided by the rules of JAMS, that the arbitration award shall
not include factual findings or conclusions of law, and that no punitive damages
shall be awarded. The parties understand that any party's rights to appeal or to
seek modification of rulings in an arbitration is severely limited. Any awarded
rendered by the arbitrator shall be final and binding and judgment may be
entered upon it in any court of competent jurisdiction in Santa Xxxxx County,
California at the time such award is rendered.
IN WITNESS WHEREOF, each of EMKT, FMI, the Principal Sellers and the
Company have caused this Agreement to be executed by their respective officers
(if applicable) hereunto duly authorized, all as of the date first above
written.
EMKT: EMARKETPLACE, INC.
By /s/ XXXXX XXXXX
----------------------------------------
Xxxxx Xxxxx, Vice President
FMI: FULL MOON INTERACTIVE, INC.
By: /s/ XXXXX XXXXX
---------------------------------------
Xxxxx Xxxxx, Vice President
THE COMPANY: BAYWEB, INC.
By: /s/ X. XXXX WINTER
---------------------------------------
X. Xxxx Winter, Chief Executive Officer
PRINCIPAL SELLERS: /s/ X. XXXX WINTER
---------------------------------------
X. Xxxx Winter
/s/ XXXXXXXX XXXXXX
---------------------------------------
Xxxxxxxx Xxxxxx
00
SCHEDULE 1.2
THE SELLERS AND EXERCISING OPTIONEES
No. of Shares of No. of Shares of No. of Shares of
No. of Shares Company Stock to be EMKT Stock to be FMI Stock
Class of of Company canceled in the Received in the to be Received in the
Name Stock Stock Owned Merger Merger Merger
---------------------------------------------------------------------------------------------------------
X. Xxxx Winter
Xxxxxxxx Xxxxxx
40
EXHIBIT A
REGISTRATIONRIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of ____, 2000, is between
EMARKETPLACE, INC., a Delaware corporation (the "Company") and the persons who
are identified as the "Shareholders" on the signature pages hereof.
The parties hereto agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings:
"Advice": See Section 4.
"Business Day": Any day other than a day on which banks are
authorized or required to be closed in the State of New York.
"Commission": The Securities and Exchange Commission.
"Common Stock": The common stock, par value $.001 per share, of
the Company.
"Demand Registration Rights": See Section 2.
"Exchange Act": The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Holder or Holders": Any holder of the Registrable Securities.
"Holders' Counsel" means a law firm representing the Selling
Holders collectively.
"Majority Holders" means the Holders of a majority of the then
outstanding Registrable Securities.
"NASD": See Section 4(m).
"Objecting Notice": See Section 4(a).
"Objecting Party": See Section 4(a).
"Optionee" has the meaning set forth in the SPC Agreements.
"Person": Any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Piggyback Registration Rights": See Section 3(a).
"Prospectus": The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such prospectus.
"Records": See Section 4(m).
"Registrable Securities": The shares of Common Stock issued
pursuant to each of the SPC Agreements to the Sellers and, if applicable to each
Optionee who has executed a Joinder Agreement pursuant to a SPC Agreement, until
such time as (i) a Registration Statement covering such Registrable Securities
has been declared effective by the Commission and such Registrable Securities
have been disposed of pursuant to such effective Registration Statement or (ii)
such Registrable Securities are held by one or more Persons who could sell all
Registrable Securities held by each such Person in a single sale pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act,
whichever is earlier. Registrable Securities does not include any Common Stock
issued to eMarketplace, Inc. pursuant to the SPC Agreements.
"Registration Expenses": See Section 5.
"Registration Statement": Any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statements, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
"Securities Act": The Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Sellers": Collectively the Sellers party to each of the SPC
Agreements.
"Selling Holders": See Section 4(a).
"Shelf Registration": See Section 3.
"SPC Agreements" means each of the agreements set forth on
Schedule I hereto.
"Target Effective Period": See Section 3.
A-2
2. DEMAND REGISTRATION.
(a) The Company will use commercially reasonable efforts to
commence by December 31, 2000 the process to register a public offering of its
Common Stock under the Securities Act (other than an offering pursuant to a
registration statement on Forms S-4 or S-8 or on another form not available for
registering the Registrable Securities for sale to the public), and to commence
within 60 days of the effectiveness of such registration statement the process
to register a secondary offering of its securities under the Securities Act in
which the registration rights under Section 3 would be available to the Holders;
provided, however, that the Company shall not be obligated to file any such
registration statement if it reasonably believes that because of market
conditions or the status of the Company's business or financial condition, the
filing at such time of such registration statement and the sale of its
securities is not in the best interests of the Company, in which case the
Company will use commercially reasonable efforts to file such registration
statement as soon as in the reasonable belief of the Company market conditions
or and its business and financial condition warrant.
(b) In the event the Company does not commence the process to
register any of its securities under the Securities Act for sale to the public
for its own account (for which the Holders have piggyback registration rights
under Section 3 hereof and for which at least 50 percent of such Holders' shares
have not been excluded by the underwriters pursuant to Section 3(b) hereof) or
the account of the security holders (except with respect to registration
statements on Forms S-4 or S-8 or on another form not available for registering
the Registrable Securities for sale to the public) by September 1, 2000, then
the Majority Holders shall have the right by written request to require that the
Company effect a registration of the Registrable Securities and the Company
will: (a) promptly give written notice of the proposed registration to all other
Holders; and (b) as soon as practicable, use its commercially reasonable best
efforts to effect all such registrations, qualifications and compliances
(including, without limitations, the execution of an undertaking to file
post-effective amendments, appropriate qualifications under the applicable blue
sky or other state securities laws and appropriate compliance with exemptive
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holders'
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in the written request given within 30 days after
receipt of such written notice from the Company ("Demand Registration Rights");
provided, however, that the Company shall not be obligated to take any action to
effect such registration, qualification or compliance pursuant to this
paragraph: (i) after the Company has effected one such registration pursuant to
this Section 2 and such registration has been declared or ordered effective; or
(ii) if the amount of securities being offered by the Holders for registration
hereunder is less than 75 percent of the Registrable Securities.
(c) Subject to clauses (i) and (ii) of Section 2(b), the Company
shall file a Registration Statement covering the Registrable Securities so
requested to be registered as soon as reasonably practicable, after receipt of
the request of the initiating Majority Holders; provided, however, that if the
Company shall furnish to such Holders a certificate signed by the president of
the Company stating that in the good faith judgment of the Board of Directors,
it would be materially detrimental to the Company and its shareholders for such
Registration Statement to be filed at the date filing would be required and it
is therefore essential to defer the filing of such Registration Statement, the
Company shall have an additional period of not more than 90 days within which to
file such Registration Statement.
A-3
(d) In addition to the foregoing, to the extent such terms and
procedures are not inconsistent with the provisions of this Section 2, the terms
and procedures of the registration process for the sale of the Registrable
Securities shall also be in accordance with Section 3 of this Agreement (other
than Section 3(b)) as if the Holders were selling their Registrable Securities
pursuant to the Piggyback Registration referred to in Section 3. If a
registration pursuant to this Section 2 involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of equity securities (including all Registrable Securities) which the
Company, the Holders and any other persons intended to be included in such
registration exceeds the largest number of securities which can be sold without
having an adverse effect on such offering, including the price at which such
securities can be sold, the Company will include in such registration (i) first,
all the securities the Holders have elected to sell, and (ii) second, to the
extent that the number of securities which the Holders have elected to sell
pursuant to this Section 2 is less than the number of securities which the
Company has been advised can be sold in such offering without having the adverse
effect referred to above, the number of securities determined to be included in
such offering by the Company and any other holders of Common Stock to the extent
they have registration rights under agreements with the Company.
3. PIGGYBACK REGISTRATION.
(a) Piggyback Registration Rights. If, at any time prior to
September 30, 2001, the Company proposes to register any of its securities under
the Securities Act for sale to the public for its own account or for the account
of other security holders (except with respect to registration statements on
Forms S-4 or S-8 or another form not available for registering the Registrable
Securities for sale to the public), each such time it will give written notice
thereof to Holders of its intention so to do (such notice to be given at least
15 days prior to the filing thereof). Upon the written request of any such
Holder (which request shall specify the number of Registrable Securities
intended to be disposed of by such Holder and the intended method of disposition
thereof, received by the Company within ten days after giving of any such notice
by the Company, to register any of such Holder's Registrable Securities, the
Company will use its reasonable efforts, subject to Section 3(b) below, to cause
the Registrable Securities as to which registration shall have been so requested
to be included in the securities to be covered by the Registration Statement
proposed to be filed by the Company, all to the extent requisite to permit the
sale or other disposition by the Holder (in accordance with its written request)
of such Registrable Securities so registered ("Piggyback Registration Rights");
provided that (i) if such registration involves an underwritten offering, all
Holders requesting to be included in the Company's registration must sell their
Registrable Securities to the underwriters selected by the Company on the same
terms and conditions as apply to the Company; and (ii) if, at any time after
giving written notice of its intention to register any securities pursuant to
this Section 3(a) and prior to the effective date of the Registration Statement
filed in connection with such registration, the Company shall determine for any
reason not to register such securities, the Company shall give written notice to
all Holders and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration.
A-4
If a registration pursuant to this Section 3(a) involves an underwritten public
offering, any Holder requesting to be included in such registration may elect,
in writing prior to the effective date of the registration statement filed in
connection with such registration, not to register such securities in connection
with such registration. The foregoing provisions notwithstanding, (i) the
Company may withdraw any registration statement referred to in this Section 3(a)
without thereby incurring any liability to the Holders, and (ii) the inclusion
of shares of Registrable Securities under such Piggyback Registration Rights is
subject to the cut-back provisions of Section 3(b) below.
(b) Priority in Piggyback Registration. If a registration pursuant
to Section 3(a) hereof involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
equity securities (including all Registrable Securities) which the Company, the
Holders and any other persons intended to be included in such registration
exceeds the largest number of securities which can be sold without having a
material adverse effect on such offering, including the price at which such
securities can be sold, the Company will include in such registration (i) first,
all the securities the Company proposes to sell for its own account, and (ii)
second, to the extent that the number of securities which the Company proposes
to sell for its own account pursuant to Section 3(b)(i) hereof is less than the
number of securities which the Company has been advised can be sold in such
offering without having the material adverse effect referred to above, the
number of securities requested to be included in such registration by security
holders as a result of their exercise of "demand" registration rights by such
other holders. Any such reductions shall be pro rata in relation to the number
of shares of Common Stock to be registered by each person participating in the
offering.
(c) Holdback Agreements. If any registration of Registrable
Securities shall be in connection with an underwritten public offering, each
Holder agrees not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Registrable Securities,
and not to effect any such public sale or distribution of any other equity
security of the Company or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case, other than as
part of such underwritten public offering) during the 30 days prior to, and
during the 90-day period beginning on, the effective date of such Registration
Statement (except as part of such registration).
(d) Exceptions. Notwithstanding the foregoing, the Company may
delay the registration of Registrable Securities following a written request
pursuant to Section 3(a) hereof for the time periods described in Section 3(e)
hereof upon the occurrence of any of the following:
(i) The Company shall have previously entered into an
agreement or letter of intent contemplating an underwritten public
offering on a firm commitment basis of Common Stock or securities
convertible into or exchangeable for Common Stock and the managing
underwriter of such proposed public offering advises the Company
in writing that in its opinion such proposed underwritten offering
would be materially and adversely affected by a concurrent
registered offering of Registrable Securities (such opinion to
state the reasons therefor);
A-5
(ii) During the two-month period immediately preceding such
request, the Company shall have entered into an agreement or
letter of intent, which has not expired or otherwise terminated,
contemplating a material business acquisition by the Company or
its subsidiaries whether by way of merger, consolidation,
acquisition of assets, acquisition of securities or otherwise;
(iii) The Company is in possession of material nonpublic
information that the Company would be required to disclose in the
Registration Statement and that is not, but for the registration,
otherwise required to be disclosed at the time of such
registration, the disclosure of which, in its good faith judgment,
would have a material adverse effect on the business, operations,
prospects or competitive position of the Company;
(iv) The Company shall receive the written opinion of the
managing underwriter of the underwritten public offering pursuant
to which Common Stock has been registered within the three-month
period prior to the receipt of a registration request that the
registration of additional Common Stock will materially and
adversely affect the market for the Common Stock (such opinion to
state the reasons therefor); or
(v) At the time of receipt of a registration request, the
Company is engaged, or its board of directors has adopted by
resolution a plan to engage, in any program for the purchase of
shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock and, in the opinion of
counsel, reasonably satisfactory to the requesting Holders, the
distribution of the Common Stock to be registered would cause such
purchase of shares to be in violation of Regulation M promulgated
under the Exchange Act.
(e) Period of Delay. If an event described in clauses (i) through
(iv) of Section 3(d) shall occur, the Company may, by written notice to the
Holders, delay the filing of a Registration Statement with respect to the
Registrable Securities to be covered thereby for a period of time not exceeding
90 days, in which case the December 31, 2000 deadline for exercising the Demand
Registration Rights under Section 2 shall be extended for a like period of time.
If an event described in clause (v) of Section 3(d) shall occur,
the filing of a Registration Statement with respect to the Registrable
Securities to be covered thereby shall be delayed until the first date that the
Registrable Securities to be covered thereby can be sold without violation of
Regulation M of the Exchange Act, in which case the December 31, 2000 deadline
for exercising the Demand Registration Rights under Section 2 shall be extended
for a like period of time.
4. REGISTRATION PROCEDURES.
In connection with the registration obligations of the Company
pursuant to the terms and conditions of this Agreement, the Company shall:
A-6
(a) prior to filing a Registration Statement or Prospectus or any
amendments or supplements thereto, including documents incorporated by reference
after the initial filing of the Registration Statement, the Company will furnish
to the Holders covered by such Registration Statement (the "Selling Holders"),
Holders' Counsel and the underwriters, if any, draft copies of all such
documents proposed to be filed at least five Business Days prior thereto, which
documents will be subject to the review of such Holders' Counsel and the
underwriters, if any, and the Company will not, unless required by law, file any
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto (including such documents incorporated by reference) to which Selling
Holders of at least a majority of the Registrable Securities (the "Objecting
Party") shall object, pursuant to notice given to the Company prior to the
filing of such amendment or supplement (the "Objection Notice"). The Objection
Notice shall set forth the objections and the specific areas in the draft
documents where such objections arise. The Company shall have five Business Days
after receipt of the Objection Notice to correct such deficiencies to the
satisfaction of the Objecting Party, and will notify each Selling Holder of any
stop order issued or threatened by the Commission in connection therewith and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered;
(b) as promptly as practicable prepare and file with the
Commission such amendments and post-effective amendments to the Registration
Statement as may be necessary to keep such Registration Statement effective for
the period required pursuant to Sections 2 and 3; cause the Prospectus to be
supplemented by any required Prospectus supplement, and, as so supplemented, to
be filed pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act applicable to it with respect to the
disposition of all Registrable Securities covered by such Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Selling Holders set forth in such Registration Statement or
supplement to the Prospectus;
(c) as promptly as practicable furnish to any Selling Holder and
the underwriters, if any, without charge, such number or conformed copies of
such Registration Statement and any post-effective amendment thereto and such
number of copies of the Prospectus (including each preliminary Prospectus) and
any amendments or supplements thereto, and any documents incorporated by
reference therein, as such Selling Holder or underwriter may reasonably request
in order to facilitate the disposition of the Registrable Securities being sold
by such Selling Holder (it being understood that the Company consents to the use
of the Prospectus and any amendment or supplement thereto by each Selling Holder
and the underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto); provided, that before filing a Registration Statement or Prospectus
relating to the Registrable Securities or any amendments or supplements thereto,
the Company will furnish to Holders' Counsel copies of all documents proposed to
be filed at least three Business Days prior to the filing thereof, which
documents will be subject to the review of such counsel;
(d) on or prior to the date on which the Registration Statement is
declared effective, register or qualify such Registrable Securities under such
other securities or "blue sky" laws of such jurisdictions as any Selling Holder,
Holders' Counsel or underwriter reasonably requests and do any and all other
acts and things which may be necessary or advisable to enable such Selling
A-7
Holder to consummate the disposition in such jurisdictions of such Registrable
Securities owned by such Selling Holder; keep each such registration or
qualification (or exemption therefrom) effective during the period which the
Registration Statement is required to be kept effective; and do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided that the Company shall not be required to (i)
qualify to do business as a foreign corporation or as a broker-dealer in any
jurisdiction where it is not then so qualified or (ii) take any action which
would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject;
(e) cause the Registrable Securities covered by such Registration
Statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and operations of
the Company to enable the Selling Holders to consummate the disposition of such
Registrable Securities;
(f) as promptly as practicable notify each Selling Holder,
Holders' Counsel and any underwriter and (if requested by any such Person)
confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission or any other federal or state
governmental authority for amendments or supplements to a Registration Statement
or related Prospectus or for additional information to be included in any
Registration Statement or Prospectus or otherwise, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement or the initiation or threatening of any proceedings for that purpose,
(iv) of the issuance by any state securities commission or other regulatory
authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Securities under state securities or
"blue sky" laws or the initiation of any proceedings for that purpose and (v) of
the happening of any event which makes any statement made in a Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated by reference therein untrue or which requires the making of any
changes in such Registration Statement, Prospectus or documents so that they
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and, as promptly as practicable thereafter, prepare and
file with the Commission and furnish a supplement or amendment to such
Prospectus so that, as thereafter deliverable to the purchasers of such
Registrable Securities, such Prospectus will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(g) make generally available to the Holders an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act no later than
30 days after the end of the 12-month period beginning with the first day of the
Company's first fiscal quarter commencing after the effective date of a
Registration Statement;
(h) use its reasonable efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement, and, if one is
issued, to obtain the withdrawal of any order suspending the effectiveness of a
Registration Statement at the earliest possible moment;
A-8
(i) as promptly as practicable after filing with the Commission of
any document which is incorporated by reference into a Registration Statement,
deliver a copy of such document to Holders' Counsel;
(j) cooperate with the Selling Holders and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates (which shall not bear any restrictive legends and shall
be in a form eligible for deposit with the Depository Trust Company)
representing securities sold under such Registration Statement, and enable such
securities to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or such Selling Holders may
request and make available prior to the effectiveness of such Registration
Statement a supply of such certificates;
(k) if applicable, enter into such customary agreements (including
an underwriting agreement in customary form) and take such other actions as the
Selling Holders of at least a majority of the aggregate number of the
Registrable Securities being sold or the underwriters retained by the Selling
Holders participating in an underwritten public offering, if any, may request in
order to expedite or facilitate the disposition of such Registrable Securities;
(l) if requested by Selling Holders of at least a majority of the
aggregate amount of the Registrable Securities being sold to cause the
Registrable Securities included in such Registration Statement to be (i) listed
or admitted for trading or otherwise included on each securities exchange, if
any, (including, without limitation, the Nasdaq Stock Market) on which similar
securities issued by the Company are then listed or (ii) authorized to be quoted
on the National Association of Securities Dealers, Inc. Automated Quotation if
the Registrable Securities so qualify;
(m) cooperate with each Selling Holder and each underwriter
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. ("NASD"); and
(n) during the period when the Prospectus is required to be
delivered under the Securities Act, ,rapidly file all documents required to be
filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act.
Each Selling Holder, upon receipt of any notice from the Company of the
happening of any event of the kind described in subsection (f) of this Section
4, shall forthwith discontinue disposition of the Registrable Securities until
such Selling Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by subsection (f) of this Section 4 or until it is
advised in writing (the "Advice") by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated by reference in the Prospectus, and, if so
directed by the Company, such Selling Holder will, or will request the managing
underwriter or underwriters, if any, to, deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Selling Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event that the
Company shall give any such notice, the time periods for which a Registration
Statement is required to be kept effective pursuant to Sections 2 and 3 hereof
shall be extended by the number of days during the period from and including the
date of the giving of such notice to and including the date when each Selling
Holder shall have received (i) the copies of the supplemented or amended
Prospectus contemplated by Section 4(f) or (ii) the Advice.
A-9
5. REGISTRATION EXPENSES.
All expenses incident to the Company's performance of, or
compliance with, the provisions hereof, including without limitation, all
Commission and securities exchange or NASD registration and filing fees, fees
and expenses of compliance with securities or "blue sky" laws (including fees
and disbursements of counsel in connection with "blue sky" qualifications of the
Registrable Securities), printing expenses, messenger and delivery expenses,
internal expenses (including, without limitation, all salaries and expenses of
the Company's officers and employees performing legal or accounting duties),
fees and expenses incurred in connection with the listing of the securities to
be registered, if any, on each securities exchange on which similar securities
issued by the Company are then listed, fees and disbursements of counsel for the
Company and its independent certified public accountants (including the expense
of any special audit or "cold comfort" letters required by, or incident to, such
performance), Securities Act liability insurance (if the Company elects to
obtain such insurance), any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities, reasonable fees and expenses
of any special experts retained by the Company in connection with such
registration, fees and expenses of other Persons retained by the Company in
connection with each registration hereunder (but not including the fees and
expense of Holders' Counsel) are herein called "Registration Expenses."
The Company will pay all Registration Expenses in connection with
each Registration Statement filed pursuant to Section 2 or Section 3 except as
otherwise set forth therein. All expenses to be borne by the Holders (including
the expenses of Holders' Counsel) in connection with any Registration Statement
filed pursuant to Section 2 shall be borne by the participating Holders pro rata
in relation to the number of shares of Registrable Securities to be registered
by each Holder.
6. INDEMNIFICATION; CONTRIBUTION.
(a) Indemnification by the Company. The Company agrees to
indemnity and hold harmless, to the full extent permitted by law, each Holder,
its officers, directors and each Person who controls such Holder (within the
meaning of the Securities Act), and any agent or investment adviser thereof,
against all losses, claims, damages, liabilities and expenses (including
reasonable attorneys' fees and costs of investigation) arising out of or based
upon any untrue or alleged untrue statement of material fact contained in any
Registration Statement, any amendment or supplement thereto, any Prospectus or
preliminary Prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same arise out of or are based
upon any such untrue statement or omission based upon information with respect
to such Holder furnished in writing to the Company by or on behalf of such
Holder expressly for use therein; provided that, in the event that the
Prospectus shall have been amended or supplemented and copies thereof as so
amended or supplemented, shall have been furnished to a Holder prior to the
confirmation of any sales of Registrable Securities, such indemnity with respect
to the Prospectus shall not inure to the benefit of such Holder if the Person
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asserting such loss, claim, damage or liability and who purchased the
Registrable Securities from such holder did not, at or prior to the confirmation
of the sale of the Registrable Securities to such Person, receive a copy of the
Prospectus as so amended or supplemented and the untrue statement or omission of
a material fact contained in the Prospectus was corrected in the Prospectus as
so amended or supplemented.
(b) Indemnification by Holders of Registrable Securities. In
connection with any Registration Statement in which a Holder is participating,
each such Holder will furnish to the Company in writing such information with
respect to the name and address of such Holder and such other information as may
be reasonably required for use in connection with any such Registration
Statement or Prospectus and agrees to indemnity, to the full extent permitted by
law, the Company, its directors and officers and each Person who controls the
Company (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue statement of a
material fact or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein not misleading, to the
extent, but only to the extent, that such untrue or alleged untrue statement is
contained in or such omission or alleged omission relates to any information
with respect to such Holder so furnished in writing by such Holder specifically
for inclusion in any Prospectus or Registration Statement; provided, however,
that such Holder shall not be liable in any such case to the extent that prior
to the filing of any such Registration Statement or Prospectus or amendment
thereof or supplement thereto, such Holder has furnished in writing to the
Company information expressly for use in such Registration Statement or
Prospectus or any amendment thereof or supplement thereto which corrected or
made not misleading information previously furnished to the Company. In no event
shall the liability of any Selling Holder hereunder be greater in amount than
the dollar amount of the proceeds received by such Selling Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such Person of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which such Person will claim indemnification or contribution
pursuant to the provisions hereof and, unless in the judgment of counsel of such
indemnified party a conflict of interest may exist between such indemnified
party and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claim. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party will not be
subject to any liability for any settlement made without its consent (but such
consent will not be unreasonably withheld). No indemnifying party will consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. If the indemnifying party is not entitled to, or elects not to,
assume the defense of a claim, it will not be obligated to pay the fees and
expenses of more than one counsel (plus such local counsel, if any, as may be
reasonably required in other jurisdictions) with respect to such claim, unless
in the judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels. For the
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purposes of this Section 6(c), the term "conflict of interest" shall mean that
there are one or more legal defenses available to the indemnified party that are
different from or additional to those available to the indemnifying party or
such other indemnified parties, as applicable, which different or additional
defenses make joint representation inappropriate.
(d) Contribution. If the indemnification from the indemnifying
party provided for in this Section 6 is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 6(c), any
reasonable legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6(d), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such Selling Holder were
offered to the public exceeds the amount of any damages which such Selling
Holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) If indemnification is available under this Section 6, the
indemnifying parties shall indemnity each indemnified party to the full extent
provided in Sections 6(a) and (b) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 6(d).
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7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Holder may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell its Registrable Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
8. TRANSFER OR AS AN IMMINENT RIGHT.
The rights to cause the Company to register Registrable Securities
granted pursuant to the provisions hereof may be transferred or assigned by any
Holder to a transferee or assignee; provided; however, that the transferee or
assignee of such rights assumes the obligations of such transferor or assignor,
as the case may be, hereunder.
9. AMENDMENT.
Except as otherwise provided herein, the provisions hereof may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of at least a majority of the aggregate number of the
Registrable Securities then outstanding.
10. MISCELLANEOUS.
(a) Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mail, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, to the address set forth in Section 9.5 of the SPC
Agreement.
(b) Entire Agreement. This Agreement and any other document
referred to herein or delivered pursuant hereto collectively contain the entire
understanding of the parties hereto with respect to the subject matter contained
herein and supersede all prior agreements and understandings, oral and written,
with respect thereto.
(c) Binding Effects; Benefits; Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests, or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
Nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
(d) Headings. The descriptive headings of the various sections and
subsections of this Agreement are inserted for convenience only, and do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement. Reference to sections and subsections,
unless otherwise specified, are to sections and subsections of this Agreement.
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(e) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
(f) Applicable Law. This Agreement and the legal relations between
the parties hereto shall be governed and construed with the laws of the State of
California, without regard to the conflict of laws thereof.
(g) Severability. If any term, provision, covenant or restriction
contained in this agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against regulatory policy,
the remainder of the terms, provisions, covenants and restrictions contained in
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(h) Joinder. Any person who becomes a party to the SPC Agreement
to which the Shareholders are a party pursuant to a Joinder Agreement referred
to therein may, pursuant to the terms of such Joinder Agreement, be made a party
to this Agreement, and thereupon shall be considered to be a Shareholder for all
purposes hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
COMPANY: EMARKETPLACE, INC.
By: /s/ XXXXXX XXXXXXX
---------------------------------------
Xxxxxx Xxxxxxx, Chairman of the Board
of Directors
SHAREHOLDERS: /s/ X. XXXX WINTER
---------------------------------------
X. Xxxx Winter
/s/ XXXXXXXX XXXXXX
---------------------------------------
Xxxxxxxx Xxxxxx
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SCHEDULE I
SPC AGREEMENTS
1. Stock Purchase and Contribution Agreement, dated November 5, 1999,
among eMarketplace, Inc., Top Team, Inc., Full Moon Interactive Group, Inc. and
the Sellers identified therein.
2. Stock Purchase and Contribution Agreement, dated November 10, 1999,
among eMarketplace, Inc., Top Team, Inc., Xxxxxxx Data Systems, Inc.. and the
Sellers identified therein.
3. Stock Purchase and Contribution Agreement, dated November 10, 1999,
among eMarketplace, Inc., Top Team, Inc., Xxxxxx Communications, Inc. and the
Sellers identified therein.
4. Stock Purchase and Contribution Agreement, dated November 10, 1999,
among eMarketplace, Inc., Top Team, Inc., Xxxxxxx Design Group, Inc. and the
Sellers identified therein.
5. Stock Purchase and Contribution Agreement, dated November 10, 1999,
among eMarketplace, Inc., Top Team, Inc., Image Network, Inc. and the Sellers
identified therein.
6. Stock Purchase and Contribution Agreement, dated November 23 1999,
among eMarketplace, Inc., Top Team, Inc., Oncourse Network, Inc. and Xxxx
Xxxxxx.
7. Stock Purchase and Merger Agreement among eMarketplace, Inc., Full Moon
Interactive, Inc., Acclaim Technologies, Inc., Acclaim Technologies Acquisition
Corp. and the Sellers identified therein.
8. Merger Agreement, dated as of June 26, 2000, among eMarketplace, Inc.,
Full Moon Interactive, Inc., BayWeb, Inc. and the Principal Sellers identified
therein.
