eB2B Commerce, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
November 10, 1999
Xxxxxx X. Xxxxxxxxxx, Xx.
Chief Executive Officer
DynamicWeb Enterprises, Inc.
271 Route 00 Xxxx
Xxxxxxxx X, Xxxxx 000
Xxxxxxxxx, XX 00000
Re: Letter Agreement - Merger of eB2B Commerce, Inc. with
DynamicWeb Enterprises, Inc.
Dear Xx. Xxxxxxxxxx:
This letter sets forth the terms upon which eB2B Commerce, Inc. ("eCom"),
proposes to merge with and into DynamicWeb Enterprises, Inc. (the "Company").
This binding agreement ("Agreement") describes certain material terms and
conditions of the Transaction. This Agreement may be superseded only by the
"Definitive Agreement" (as defined below).
1 The Transaction. eCom will enter into the Definitive Agreement with the
Company, whereby the shareholders of eCom upon the closing of the merger will
receive capital stock of the Company in exchange for their capital stock in
eCom. The terms of the capital stock exchange are set forth below (the
"Transaction"). The Transaction is contemplated to be a tax-free merger of eCom
with and into the Company in a reorganization pursuant to Section 368 of the
Internal Revenue Code with the Company being the surviving corporation (the
"Surviving Corporation"). The terms of the Transaction to be included in a
definitive agreement are as follows:
1.1 Conversion of Shares. Immediately prior to the closing of the
Transaction, the Company's outstanding capital stock will be comprised of
approximately 4,800,000 shares (but in no event shall there be more than
5,400,000 shares) of common stock (inclusive of the conversion of all
outstanding Series A and Series B Preferred Stock, and assuming the conversion
of all other warrants, options or other convertible instruments). The Company
will issue unregistered shares of its capital stock equivalent to not less than
25 million shares of common stock in exchange for all of the outstanding shares
of capital stock of eCom (including the capital stock issued by eCom in
connection with the private placement of eCom's securities referred to below).
In addition, (i) for each outstanding share of common stock of the Company (or
common stock equivalent) in excess of 4,800,000 shares, the Company shall issue
to eCom stockholders 5.2083 additional shares of its common stock to eCom
stockholders in connection with the Transaction, and (ii) in the event eCom
receives in excess of $15 million in gross proceeds from the private placement
of its securities, for each additional dollar in excess of the $15 million gross
proceeds received by eCom, the Company will issue to eCom stockholders .484 of a
share of its common stock and a warrant to purchase .242 of a share of the
Company's common stock at an exercise price of $2.06 (subject to appropriate
adjustment as may be
required by (i) above). In furtherance of the foregoing, prior to entering into
the "Definitive Agreement" (as defined below) regarding the Transaction, the
Company will provide eCom with evidence of the agreement of the holders of the
Company's outstanding Series A and Series B Preferred Stock (the "Preferred
Holders") to (i) convert their holdings to the Company's common stock prior to
the closing of the Transaction, and (ii) enter into the Lock-Up Agreement (as
defined below) with the modifications and provisions acceptable to eCom.
1.2 Directors and Officers. The directors and officers of eCom in office
at and as of the date of the closing of the Transaction will remain the
directors and officers of the Surviving Corporation (retaining their respective
positions and terms of office). One additional member of the Board of Directors
of the Surviving Corporation will be designated by the Company.
1.3 Completion of Private Placement. Prior to the closing of the
Transaction, eCom will have received a minimum of $15 million in gross proceeds
in a private placement of its securities.
1.4 Lock-Up Agreement. Each officer, director and principal shareholder of
the Company who owns shares of the Company's capital stock which have not been
registered under the Securities Act of 1933 (the "Act") will enter into an
agreement, satisfactory to eCom, to the effect that such individual or entity
will not sell, assign or transfer any shares of the Company's capital stock for
a period commencing on the date of this Agreement and continuing, unless this
Agreement is terminated, for the longer of (i) 12 months from the closing of the
Transaction, or (ii) up to 12 months from the closing of a "Qualified Offering"
by the Surviving Corporation which occurs within the initial 12 month period
referred to in (i) above, as may be required by the managing underwriter or
placement agent of the Qualified Offering. For purposes of this Agreement, a
"Qualified Offering" means a private or public offering of the securities of the
Surviving Corporation conducted subsequent to the closing of the Transaction
which results in gross proceeds to the Surviving Corporation of at least $20
million. Shareholders of the Company which hold more than 10% of the outstanding
capital stock (or securities which are convertible into shares of capital stock)
which have been registered under the Act will enter into agreements satisfactory
to eCom regarding restrictions on their right to sell shares of the Company's
capital stock following the date of this Agreement. For purposes of this
Agreement, the term "Lock Up Agreement" shall mean any agreement referred to in
this Section 1.4 regarding a restriction on the right to sell the Company's
capital stock following the date of this Agreement.
1.5 Shareholder Approval. Each party shall use their best efforts to
obtain the appropriate shareholder approval of the Transaction including the
solicitation by the Company of proxies, and any and all other approvals and
consents necessary to close the Transaction. In furtherance of the foregoing,
Xxxxxx X. Xxxxxxxxxx, Xx. and Xxxxxx X. Xxxxxxxxxx, Xx., the Company?s Chief
Executive Officer and Secretary/Treasurer, respectively, and owners of an
aggregate total of 549,491 shares of the Company?s common stock, hereby each
individually agree to vote their shares to approve the Transaction. Nothing
herein shall be construed as limiting the fiduciary obligations of Xxxxxx X.
Xxxxxxxxxx, Xx. and Xxxxxx X. Xxxxxxxxxx, Xx. as members of the Company?s Board
of Directors.
1.6 Change of Name etc. The Certificate of Merger will provide that the
Surviving Corporation will change its name to "eB2B Commerce, Inc." In addition,
the Articles of Incorporation and the By-laws of the Surviving Corporation will
be amended in a form acceptable to eCom.
2 No Solicitation, Exclusive Dealing, etc. In order to induce eCom to proceed
with the Transaction, the Company, agrees that for the period from the date of
this Agreement through and including the date on which eCom and the Company
shall agree in writing to terminate this
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Agreement, but in no event later than four months from the date hereof, the
Company shall not (nor shall they permit any of the Company's officers,
directors, agents, or affiliates to) directly or indirectly solicit, encourage
(including by way of providing any nonpublic information concerning the Company
to any person), initiate or participate in any negotiations or discussions or
otherwise cooperate with in any way or provide information to any corporation,
partnership, person or other entity, or enter into (or authorize) any agreement
or agreement in principal, or announce any intention to do any of the foregoing,
with respect to any expression of interest, offer or proposal to acquire (i) all
or a substantial part of the Company's business, or (ii) any of its capital
stock, whether by stock purchase, merger, consolidation, purchase of assets,
tender offer or otherwise except in the exercise by the Board of Directors of
its fiduciary obligation to its shareholders to consider unsolicited offers, if
any, received by the Company for its acquisition. The Company acknowledges that
if one or more of the Company's affiliates or the Company were to cause a breach
of this provision, eCom would suffer damages that would be difficult to
ascertain and that, in the event of such breach, eCom shall be entitled to an
injunction restraining such breach and the Company and affiliates shall be
jointly and severally liable to eCom for any reasonable attorney"s fees incurred
in connection with obtaining such injunction. Any such equitable relief shall be
in addition to any other relief available to eCom. The Company shall immediately
notify eCom regarding any discussions between the Company and any other third
party as to any offer or proposal.
3 Transaction Costs. In the event either party withdraws from or terminates this
Agreement, then the withdrawing party shall be liable to the other for the
Transaction Costs incurred by such non withdrawing party which shall be payable
upon demand. In the event both parties mutually agree to terminate the
Agreement, then each party shall be responsible for their respective Transaction
Costs. For purposes of this paragraph, "Transaction Costs" means any all costs
and expenses including, without limitation, reasonable fees and disbursements of
consultants, financial advisors, counsel, accountants and investment bankers,
incurred in connection with the Transaction.
4 Break-up Fee. If the Company either withdraws from or terminates this
Agreement (other than by reason of mutual agreement by both parties to terminate
the Agreement) then, within 30 days of such event, the Company will pay to eCom
the sum of $500,000 as liquidated damages, provided however, no such liquidated
damages shall be due and payable in the event the Company does not enter into a
Definitive Agreement by November 15, 1999 solely as a result of either its due
diligence investigation of eCom, or the failure of the Preferred Holders to
agree to convert their securities to common stock prior to the closing of the
Transaction and/or enter into the Lock-Up Agreement; and, provided further, if
prior to such date, the Company receives an unsolicited offer to participate in
a Transaction which would result in a "change of control" of the Company, and
the Company subsequently accepts such offer, the Company will pay eCom the sum
of $500,000 as liquidated damages within 30 days of the acceptance of the offer.
In the event the liquidated damages described in the previous two sentences are
not paid within 30 days of the due date, the $500,000 due to eCom will be
convertible, at the discretion of the eCom, into 750,000 shares of the Company's
common stock issuable immediately upon written notice to the Company to that
effect.
5 Conduct of Business. Pending execution of the Definitive Agreement, the
Company agrees that it will:
a) Conduct its business in the ordinary course, and not engage in any
extraordinary transactions without informing eCom prior thereto.
b) Not dispose of any assets of the Company, except in the ordinary course
of business.
c) Not materially increase the annual level of compensation of any
employee, and not
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materially increase at all the annual level of compensation of any person
and not materially grant any unusual or extraordinary bonuses, benefits or
other forms of direct or indirect compensation to any employee, officer,
director or consultant except in the ordinary course of business.
d) Not increase, terminate, amend or otherwise modify any plan for the
benefit of employees.
e) Not pay any dividends, redeem any securities, or otherwise cause assets
of the Company to be distributed to any of its shareholders except by way
of compensation.
6 Definitive Agreement. The definitive agreement regarding the Transaction (the
"Definitive Agreement") will contain customary mutual covenants,
representations, warranties, indemnities and conditions to closing of each party
acceptable to the other party. Commencing immediately upon the execution of this
Agreement, the parties will negotiate, in good faith, the complete terms and
provisions of the Definitive Agreement. The parties further agree to enter into
the Definitive Agreement by the close of business on November 15, 1999.
7 Termination. This Agreement will automatically terminate upon the earlier of
(i) a closing of the Transaction or (ii) four months from the date hereof; or
(iii) the date of the mutual agreement of the parties or the withdrawal of a
party ("Termination Date").
8 Employee Solicitation. For the period from the date of this Agreement through
and including (a) nine months from the date of this Agreement, or (b) such
earlier date on which eCom and the Company shall agree in writing to terminate
this Agreement, the parties hereto shall not, directly or indirectly, solicit,
hire or otherwise retain as an employee or independent contractor, any full-time
employee of the other party.
9 Confidentiality. Except as and to the extent required by law, no party hereto
will disclose to a third party (other than to other representatives of the
Company or eCom who need to know such information for purposes of evaluating the
Transaction) any information, including Confidential Information, regarding the
existence of this Agreement, the terms of the Transaction, or the existence or
status of negotiations with respect thereto without the prior consent of eCom
and the Company. For purposes of this paragraph, "Confidential Information"
means any information about either party stamped "confidential" or identified in
writing as such to the other party promptly following its disclosure, unless (a)
such information is already known to such non-disclosing party or its
representatives or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of the non-disclosing
party or its representatives, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Transaction, or (c) the furnishing or use of such
information is required by or necessary or appropriate in connection with legal
proceedings. Notwithstanding the foregoing provisions of this Section 9, in the
event a party is requested or required to disclose any of the Confidential
Information, such party will provide the other with prompt written notice of any
such request or requirement so that the disclosing party may seek a protective
order or other appropriate remedy. If, in the absence of a protective order or
other remedy, a party is nonetheless legally compelled to disclose Confidential
Information, such party may, without liability hereunder, disclose that portion
of the Confidential Information which is legally required to be disclosed,
provided that such party exercises reasonable efforts to preserve the
confidentiality of the Confidential Information, including, without limitation,
by cooperating with the other party to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Confidential Information. Upon the written request of the disclosing party, the
non-
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disclosing party will promptly return to the disclosing party or destroy any
Confidential Information in its possession and certify in writing to the
disclosing party that it has done so.
10 Disclosure. Except as and to the extent required by law, without the prior
written consent of the other party, neither eCom nor the Company will, and each
will direct its representatives not to make, directly or indirectly, any public
comment, statement, or communication with respect to, or otherwise to disclose
or to permit the disclosure of the existence of discussions regarding, the
Transaction or any of the terms, conditions, or other aspects of the
Transaction. If a party is required by law to make any such disclosure, it must
first provide to the other party the content of the proposed disclosure, the
reasons that such disclosure is required by law, and the time and place that the
disclosure will be made. Notwithstanding the foregoing, the parties agree that
the Company will make a public announcement and required public filings
regarding this Agreement and the Definitive Agreement.
11 Miscellaneous.
11.1 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be original, but all of which
together shall constitute one and the same document. This Agreement shall be
effective upon the exchange by telefax of executed signature pages.
11.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (regardless of the laws that
might otherwise govern under applicable principles of conflicts of law).
11.3 Access to Information. From the date hereof, each party shall (and
shall cause its respective officers, directors, employees, accountants and
agents to) afford the officers, employees and agents of the other party,
reasonable access at all reasonable times to its officers, employees, agents,
properties, offices and other facilities, and books and records, and furnish
such party with all financial, operating and other data and information as may
be reasonably requested.
11.4 Finders Fee. The parties hereby agree that a finders fee will be paid
upon the closing of the Transaction, to Commonwealth Associates, L.P., as
exclusive agent for eCom, for services rendered in the introduction of the
parties to this Transaction and assistance in negotiating and closing the
Transaction. The Company represents to eCom that no other broker or advisor is
or will be entitled to any fee as a result of the closing of the Transaction;
provided, however, Sands Brothers & Co., Ltd. is asserting that it is entitled
to a fee.
11.5 Entire Agreement, etc. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any prior written or oral understandings or agreements among eCom or
the Company. This Agreement may be amended, modified or supplemented only by
written agreement executed by both parties.
11.6 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
11.7 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
11.8 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.9 Notices. All notices, requests, demands, claims, and other
communications
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hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two (2) business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Company: Copy to:
Xxxxxx X. Xxxxxxxxxx, Xx. Xxxxx Xxxxxx, Esq.
Chief Executive Officer Xxxxx Raysman Xxxxxxxxx Xxxxxx
DynamicWeb Enterprises, Inc. & Xxxxxxx LLP
000 Xxxxx 00 Xxxx 120 West 45th Street
Building F, Suite 209 New York, New York 10036
Xxxxxxxxx, Xxx Xxxxxx 00000
If to eCom: Copy to:
Xxxxx Xxxxxxxx Xxxx Xxxxxx, Esq.
Chief Executive Officer Xxxxxxxxx Xxxxxx & Xxxxxx LLP
eB2B Commerce, Inc. 00 Xxxx 00xx Xxxxxx
00 Xxxx 00xx Xxxxxx Xxxxx 000
Xxx Xxxx, Xxx Xxxx 10018 Xxx Xxxx, Xxx Xxxx 00000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
11.10 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
11.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK
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Please indicate your agreement to the terms set forth herein by executing
the enclosed copy of this Agreement. This Agreement shall be null and void if it
has not been executed by all parties and returned to eCom before 5:00 p.m., New
York time, on November 10, 1999.
Very truly yours,
eB2B Commerce, Inc.
By: /s/ Xxxxx Xxxxxxxx
--------------------------------
Xxxxx Xxxxxxxx
Chief Executive Officer
ACKNOWLEDGED AND AGREED TO:
This 10th day of November, 1999
DynamicWeb Enterprises, Inc.
By: /s/ Xxxxxx X. Xxxxxxxxxx, Xx.
--------------------------------
Xxxxxx X. Xxxxxxxxxx, Xx.
Chief Executive Officer
For purposes of Section 1.5 only:
/s/ Xxxxxx X. Xxxxxxxxxx, Xx.
------------------------------------
Xxxxxx X. Xxxxxxxxxx, Xx.
/s/ Xxxxxx X. Xxxxxxxxxx, Xx.
------------------------------------
Xxxxxx X. Xxxxxxxxxx, Xx.
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