AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is made this 25th day of May, 2004, by
and between XXXXX XXXXXX and XXXXXXX XXXXXXX (collectively, the "Sellers")
SPIDERBOY INTERNATIONAL, INC., a Minnesota corporation (the "Company"), and
XXXXX X. XXX, XX. (the "Purchaser").
WHEREAS, on February 27, 2004, the Sellers, the Company, and the Purchaser
executed that certain Stock Purchase Agreement; and
WHEREAS, the parties desire to amend and restate the Stock Purchase
Agreement as hereinafter provided; and
WHEREAS, the Sellers are stockholders of the Company; and
WHEREAS, the Sellers desire to sell to the Purchaser 21,851,503 shares of
the common stock of the Company, no par value per share (the "Company Common
Stock") and 1,000,000 shares of the preferred stock of the Company, no par value
per share (the "Company Preferred Stock"); and
WHEREAS, the Purchaser desires to purchase the Company Common Stock and the
Company Preferred Stock from the Sellers as hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties hereto agree as follows:
1. Purchase of Stock. At the closing of this Agreement (the "Closing"),
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upon the terms and conditions set forth in this Agreement, free and clear of all
liens and encumbrances, except as otherwise may be permitted hereunder, the
Sellers shall sell, transfer, assign, and deliver to the Purchaser 21,851,503
shares of the Company Common Stock (the "Initial Common Shares") and 1,000,000
shares of the Company Preferred Stock (the "Initial Preferred Shares"), and the
Purchaser, upon the basis of the covenants, warranties and representations of
the Sellers set forth herein, shall purchase from the Sellers the Initial Common
Shares and the Initial Preferred Shares for the sum of $250,000 pursuant to that
certain promissory in the form attached hereto as Attachment A (the "Note").
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The shares to be transferred to the Purchaser and the Note shall contain a
legend restricting the transfer thereof as required by the Securities Act of
1933, as amended (the "Securities Act"). Payment of the Note is secured by that
certain Stock Pledge Agreement in the form attached hereto as Attachment B (the
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"Stock Pledge Agreement").
2. Escrow. Upon the date hereof, the Sellers have placed in escrow with
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Xxxxxx X. Xxxxxxxx, Esq. (the "Escrow Agent"), pursuant to the terms of that
certain Escrow Agreement attached hereto as Attachment C (the "Escrow
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Agreement") the Initial Common Shares and the Initial Preferred Shares
(sometimes hereinafter collectively referred to as the "Escrowed Shares"). The
Escrowed Shares have been accompanied by stock powers duly executed by the
Sellers in favor of the Purchaser in the form attached hereto as Attachment D,
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which will be utilized to transfer the Escrowed Shares to the Purchaser upon
satisfaction of all of the terms of the Note, the Stock Pledge Agreement, the
Escrow Agreement, the Consulting Agreements hereinafter described (collectively,
the "Other Agreements") and this Agreement. At the Closing hereunder and upon
the payment in full of the Note the Escrow Agent shall deliver the Initial
Common Shares to the Purchaser free and clear of all liens and encumbrances
other than the legend required by the Securities Act. Upon completion and
satisfaction of all of the terms hereof and the Other Agreements, the Escrow
Agent shall deliver the Initial Preferred Shares to the Purchaser free and clear
of all liens and encumbrances other than the legend required by the Securities
Act.
3. Conditions Precedent to the Closing and the Obligations of the
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Sellers. All obligations of the Sellers under this Agreement are subject to the
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fulfillment or waiver (where permissible) of each of the following conditions
specified in this paragraph. If the Purchaser does not satisfy all of the
following conditions, then only for so long as any portion of the Note remains
unpaid, the Sellers will have the option to terminate this Agreement and have
the Initial Common Shares returned to them (the "Common Shares Termination
Option"). If the Purchaser does not satisfy any of the other conditions then
for so long as the Subsequent Acquisition described in Paragraph
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3(d) hereof remains incomplete, the Sellers will have the option to terminate
this Agreement and have the Initial Preferred Shares returned to them (the
"Preferred Shares Termination Option"). The condition specified in Paragraph
3(i) hereof shall only be a condition to the Purchaser's right to the Additional
Shares set forth in Paragraph 3(e) hereof. To exercise the Common Shares
Termination Option or the Preferred Shares Termination Option, the Sellers shall
provide the Purchaser with written notice of election of the Common Shares
Termination Option or the Preferred Shares Termination Option, as the case may
be, within five business days of the date of the Purchaser's failure to fulfill
the applicable condition (the "Termination Option Notice Period"). In the event
the Sellers fail to exercise the Common Shares Termination Option or the
Preferred Shares Termination Option, as the case may be, within the Termination
Option Notice Period, then the applicable condition precedent shall be deemed to
have been waived. Further, if the Sellers elect to exercise the Common Shares
Termination Option or the Preferred Shares Termination Option, as the case may
be, and terminate this Agreement, the Purchaser will have the right to reacquire
any assets conveyed to the Company after the date hereof and prior to the
Closing upon the assumption of any liabilities after the date hereof, whereupon
the Purchaser will transfer, assign, and convey to the Company any of the shares
of the Company Common Stock and the Company Preferred Stock issued to the
Purchaser or any other party, other than the Sellers or the Consultants,
hereinafter defined, after the date hereof, and all designees of the Purchaser
shall resign immediately as officers and directors of the Company. The
conditions are as follows:
(a) Representations and Warranties True at the Closing. The
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representations and warranties of the Purchaser herein shall be deemed to have
been made again at the Closing, and then be true and correct, subject to any
changes contemplated by this Agreement. The Purchaser shall have performed all
of the obligations to be performed by the Purchaser hereunder following the date
hereof.
(b) No Orders. There has not been issued, and there is not in
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effect, any injunction or similar legal order prohibiting or restraining
consummation of any of the transactions herein contemplated, and no legal or
governmental action, proceeding or investigation which might reasonably be
expected to result in any such injunction or order is pending.
(c) Election of Directors. For so long as the Purchaser owns the
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Initial Common Shares, Purchaser agrees to vote the Initial Common Shares (i) to
not increase the number of directors to more than 11 members, and (ii) to elect
or retain as directors Xxxxxxx Xxxxxxxxxxx and Xxxx Xxxxxx for a period of three
years from the date hereof.
(d) Subsequent Acquisition. The Company must have acquired new
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business providing for $15,000,000 in annualized gross sales in the aggregate,
with a pretax annualized profit of $500,000, within 240 days after the vote by
the shareholders of the Company to approve this Agreement pursuant to the
Schedule 14A to be filed with the Securities and Exchange Commission as
described in Paragraph 3(e) hereof, but in no event later than March 31, 2005.
For the purposes of this Agreement, the term "gross sales" shall mean all
revenues from sales of the Company based upon all business conducted by the
Company, whether such sales be evidenced by check, cash, credit, charge account,
exchange or otherwise, and shall include, but not be limited to, the amounts
received from the sale of goods, wares and merchandise, including sales of
tangible property of every kind and nature, promotional or otherwise, and for
services performed by the Company, together with the amount of all orders taken
or received by the Company. Gross sales shall not include sales of merchandise
for which cash has been refunded, provided that they shall have previously been
included in gross sales. There shall be deducted from gross sales the price of
merchandise returned by customers for exchange, provided that such returned
merchandise shall have been previously included in gross sales, and provided
that the sales price of merchandise delivered to the customer in exchange shall
be included in gross sales.
Gross sales shall not include the amount of any sales tax imposed by any
governmental authority directly on sales and collected from customers, provided
that the amount thereof is added to the selling price or absorbed therein, and
actually paid by the Company to such governmental authority. Each charge or
sale upon credit shall be treated as a sale for the full price in the month
during which such charge or sale shall be made, irrespective of the time when
the Company shall receive payment (whether full or partial) therefor.
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The measurement of gross sales shall be in accordance with generally
accepted accounting principles as set forth in the opinions, statements and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, the Financial Accounting Standards Board and such
other persons who shall be approved by a significant segment of the accounting
profession and concurred in by the independent public accountants certifying any
financial statements of the Company.
(e) Issuance of Additional Shares of the Company Common Stock. In
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order to achieve the gross sales and debt or equity financing guidelines
referred to in subparagraph 3(d) herein, the Purchaser may cause the Company to
issue no more than 155,372,225 additional shares of the Company Common Stock,
including 22,372,225 shares of the Company Common Stock which may be issued to
the Purchaser, beginning on the day after the vote by the shareholders of the
Company to change the domicile of the Company pursuant to the Schedule 14A to be
filed with the Securities and Exchange Commission as described in Paragraph 3(e)
hereof, so that following the completion of the acquisition of such gross sales
and the debt or equity funding contemplated hereunder, the Company will have no
more than 204,000,000 shares of the Company Common Stock and 1,000,000 shares of
the Company Preferred Stock issued and outstanding. In that regard, the
Purchaser may cause the Company to have shares of the Company Common Stock
issued and outstanding as follows:
Description of Stockholder Number of Shares
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The Consultants . . . . . . . . . . . 43,000,000
The Purchaser (additional shares) . . 22,372,225
The Purchaser (Initial Common Shares) 21,851,503
Shares issued for Acquisitions. . . . 53,000,000
Shares issued for Funding . . . . . . 37,000,000
Existing Stockholders . . . . . . . . 48,627,775
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Total . . . . . . . . . . . . . . . . 204,000,000
================
In order to carry out the intent of this Agreement with respect to the
issuance of shares of the Company Common Stock and the Company Preferred Stock,
following the date hereof, the Purchaser shall amend the Articles of
Incorporation of the Company to provide that the Company is authorized to issue
300,000,000 shares of the Company Common Stock and 5,000,000 shares of the
Company Preferred Stock. In that regard the Purchaser shall cause the Company to
prepare and file a Schedule 14A as required by the Securities Exchange Act of
1934, as amended (the "Exchange Act"), for the purpose of soliciting proxies
from the shareholders of the Company to approve the change in the capital
structure of the Company, and the approval of this transaction in lieu of a
previously approved transaction for the Company to acquire Big Vault, Inc., a
Delaware corporation.
Any additional shares which may be issued to the Purchaser hereunder shall
be for such consideration as the Board of Directors of the Company may
determine, but not greater than the valuation assigned to such shares when
issued. Any such shares may be issued to the Purchaser in three equal
increments, at the same time as shares are issued to the Consultants as
described in Paragraph 3(j) hereof.
(f) Exchange Act Filings. Following the date hereof, for a period of
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two years, the Company shall timely file with the Securities and Exchange
Commission all reports required under the Exchange Act.
(g) Dilution of the Sellers. Following the date hereof and the
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satisfaction of all of the terms of this Agreement and the Other Agreements, the
Company may issue any additional shares of the Company Common Stock up to
250,000,000 shares with approval by a majority of the Company's Board of
Directors. The Company may issue additional shares of the Company Common Stock
in excess of 250,000,000 with the unanimous approval of the Company's board of
directors.
(h) Reverse Split of the Shares of the Company. The Company may
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implement a one for 10 reverse split of the Company Common Stock in connection
with the change of the Company's domicile from Minnesota to Delaware pursuant to
a merger with Charys Holding Company, Inc., a Delaware corporation, whereby the
current shareholders of the Company will be entitled to receive one share of the
common stock of Charys Holding Company, Inc. for every 10 shares of the Company
Common Stock held by the common shareholders of the Company (in effect, a one
for 10 reverse split). In addition, the currently issued one share of common
stock of Charys Holding Company, Inc. will be cancelled. As a result, following
the merger, the current common shareholders of the Company will hold all of the
issued and outstanding shares of the common stock of Charys
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Holding Company, Inc. No other reverse splits of the Company Common Stock or
any other capital stock of the Company may be permitted within 36 months
following the date of this Stock Purchase Agreement.
(i) Purchase of Xxxxxxxxx.xxx, Inc. Following the Closing, the
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Company will sell 100 percent of the issued and outstanding shares of the
capital stock of Xxxxxxxxx.xxx, Inc., the Company's wholly-owned subsidiary, to
the Sellers for $1,000, in cash.
(j) Consulting Agreements. Before the Closing, each of the Sellers
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and Xxxx Xxxxxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxxxx, and Ash
Xxxxxxxxxxx (each of such other persons, which may include the Sellers if the
context requires, being sometimes collectively referred to herein as the
"Consultants") will enter into a consulting agreement with the Company (the
"Consulting Agreement") in the form described in Attachment E hereto, which will
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provide for payment in shares of the Company Common Stock following date of this
Stock Purchase Agreement, as amended, for services to be rendered to the Company
by each of the Consultants. Each Consulting Agreement will be for general
business consulting and cannot be canceled other than pursuant to the applicable
terms thereof. One-third of the shares of the Company Common Stock to be issued
under each Consulting Agreement will be registered securities pursuant to a
registration statement on Form S-8 under the Securities Act to be filed by the
Company with the Securities and Exchange Commission (the "S-8 Shares").
One-third of such shares of the Company Common Stock to be issued pursuant to a
Consulting Agreement will be restricted in their resale under Rule 144
promulgated under the Securities Act ("Rule 144"), but possessing piggyback
registration rights. The remaining one-third will be restricted in their resale
under Rule 144 and will have no registration rights. Moreover, at no time will
the number of shares of the Company Common Stock to be issued to a Consultant
under a Consulting Agreement be in such an amount that following the issuance of
such shares such Consultant will own more than 9.9 percent of the issued and
outstanding shares of the Company Common Stock.
Upon the later of July 1, 2004, or the vote of the shareholders of the
Company to approve the change in the capital structure of the Company as
provided in Paragraph 3(e) hereof, the Company will issue 4,000,000 S-8 Shares
to each of Xxxxx Xxxxxx and Xxxxxxx Xxxxxxx and 333,333 S-8 Shares to each of
Xxxx Xxxxxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxxxx, and Ash
Xxxxxxxxxxx. Thereafter, as the Company increases its outstanding shares of the
Company Common Stock, the Company, within 15 days, will issue additional shares
of the Company Common Stock to the Consultants on a pro-rata basis to the
204,000,000 referenced in Paragraph 3(e) hereof.
(k) Other Matters. All corporate and other proceedings and actions
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taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned herein
or incident to any such transaction shall be satisfactory in form and substance
to the Sellers and their counsel, whose approval shall not be unreasonably
withheld.
4. Representations, Warranties, and Covenants of the Sellers and the
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Company. Where a representation contained in this Agreement is qualified by the
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phrase "to the best of the Sellers' or the Company's knowledge" (or words of
similar import), such expression means that, after having conducted a due
diligence review, the Sellers or the Company, as the case may be, believe the
statement to be true, accurate, and complete in all material respects.
Knowledge shall not be imputed nor shall it include any matters which such
person should have known or should have been reasonably expected to have known.
The Sellers, and the Company as to Paragraphs 4(b), (c), (e), (f), (g), (h),
(i), (k), (l), (m), and (n), represent, warrant, and covenant as follows:
(a) Power and Authority. The Sellers have full power and authority
---------------------
to execute, deliver, and perform this Agreement and all other agreements,
certificates or documents to be delivered in connection herewith, including,
without limitation, the Other Agreements.
(b) Organization and Standing of the Company. The Company is a duly
-----------------------------------------
organized and validly existing Minnesota corporation in good standing, with all
requisite corporate power and authority to carry on its business as presently
conducted.
(c) Capitalization. The Company is authorized by its Articles of
--------------
Incorporation to issue 50,000,000 shares of the Company Common Stock and
5,000,000 shares of the Company Preferred Stock. As of the date of this
Agreement, there are 48,627,775 shares of the Company Common Stock duly and
validly issued and outstanding, fully paid, and non-assessable, and 1,000,000
shares of the Company Preferred Stock issued and
-4-
outstanding, fully paid, and non-assessable. There are no outstanding options,
contracts, commitments, warrants, preemptive rights, agreements or any rights of
any character affecting or relating in any manner to the issuance of the Company
Common Stock and the Company Preferred Stock or other securities or entitling
anyone to acquire the Company Common Stock and the Company Preferred Stock or
other securities of the Company.
(d) Liabilities. The Company does not have liabilities in excess of
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$5,000.00 as of the date hereof.
(e) No Employees. The Company has no employees as of the date
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hereof.
(f) Binding Effect. Upon execution and delivery by the Sellers, this
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Agreement and the Other Agreements shall be and constitute the valid, binding
and legal obligations of the Sellers, enforceable against the Sellers, in
accordance with the terms hereof and thereof, except as the enforceability
hereof or thereof may be subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
(g) No Consents. No consent, approval or authorization of, or
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registration, declaration or filing with any third party, including, but not
limited to, any governmental department, agency, commission or other
instrumentality, will, except such consents, if any, delivered or obtained on or
prior to the Closing, be obtained or made by the Sellers prior to the date
hereof to authorize the execution, delivery and performance by the Sellers of
this Agreement or the Other Agreements.
(h) Stock Ownership. The Sellers have good, absolute, and marketable
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title to the Initial Common Shares and the Initial Preferred Shares. The
Sellers have the complete and unrestricted right, power and authority to cause
the sale, transfer, and assignment of the Initial Common Shares and the Initial
Preferred Shares pursuant to this Agreement. The delivery of the Initial Common
Shares and the Initial Preferred Shares to the Purchaser as herein contemplated
will vest in the Purchaser good, absolute and marketable title to the Initial
Common Shares and the Initial Preferred Shares, free and clear of all liens,
claims, encumbrances, and restrictions of every kind, except those restrictions
imposed by applicable securities laws or this Agreement.
(i) Restrictions on Shares. The Initial Common Shares and the
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Initial Preferred Shares will carry a restrictive legend under Rule 144.
(j) Litigation. There is no claim pending or, to the best knowledge
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of the Sellers or the Company threatened against the Sellers or the Company
pertaining directly or indirectly to the matters set forth in this Agreement.
(k) Disclosure. Neither this Agreement nor any of the exhibits,
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attachments, written statements, documents, certificates or other items prepared
for or supplied to the Purchaser by or on behalf of the Sellers or the Company
with respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to make each
statement contained herein or therein not misleading. There is no fact which
the Sellers or the Company have not disclosed to the Purchaser in writing and of
which the Sellers or the Company or any of their respective officers, directors
or executive employees is aware and which could reasonably be anticipated to
have a material adverse effect on the Company or the ability of the Purchaser or
the Company to consummate the transaction contemplated hereby.
(l) Contracts. Except as set forth on Exhibit 4(l) or as expressly
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contemplated by this Agreement, the Company is not a party to any written or
oral contract or agreement including but not limited to any (i) pension, profit
sharing, stock option, employee stock purchase or other plan providing for
deferred or other compensation to employees or any other employee benefit plan,
or any contract with any labor union; (ii) contract for the employment of any
officer, individual employee or other person on a full-time, part-time,
consulting or other basis or contract relating to loans to officers, directors
or Affiliates; (iii) contract relating to the borrowing of money or the
mortgaging, pledging or otherwise placing a lien on any asset of the Company;
(iv) guarantee of any obligation; (v) contract under which the Company has
advanced or loaned any person any amount; (vi) contract under which the Company
is lessee of or holds or operates any property, real or personal, owned by any
other party; (vii) contract under which the Company is lessor of or permits any
third party to hold or operate any property, real
-5-
or personal, owned or controlled by the Company; (viii) assignment, license,
indemnification or contract with respect to any intangible property (including,
without limitation, any proprietary rights); (ix) warranty, contract with
respect to services rendered or products sold or leased; (x) contract under
which it has granted any person any registration rights (including piggyback
rights) with respect to any securities; (xi) contract prohibiting it from freely
engaging in any business or competing anywhere in the world; (xii) contract for
the purchase, acquisition or supply of property and assets, whether for resale
or otherwise; (xiii) contracts with independent agents or brokers; (xiv)
marketing contracts; and (xv) any contract not in the ordinary course of
business.
(m) Tax Matters. Except as disclosed on Exhibit 4(m), the Company
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has filed all federal, state, and local tax reports, returns, information
returns and other documents required to be filed and has duly paid all relevant
taxes, including without limitation income, premium, gross receipts, net
proceeds, alternative or add-on minimum, ad valorem, value added, turnover,
sales, use, property, personal property (tangible and intangible), stamp,
leasing, lease, user, excise, duty, franchise, transfer, license, withholding,
payroll, employment, fuel, excess profits, occupational and interest
equalization, windfall profits, severance, and other charges due claimed to be
due or may be due by federal, state, or local authorities.
(n) Compliance with Law and Applicable Government Regulations. The
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Company is presently complying in respect of its operations, practices, real
property, plants, structures, and other property, and all other aspects of its
business, with all applicable federal state or local law.
5. Representations and Warranties of the Purchaser. Where a
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representation contained in this Agreement is qualified by the phrase "to the
best of the Purchaser's knowledge" (or words of similar import), such expression
means that, after having conducted a due diligence review, the Purchaser
believes the statement to be true, accurate, and complete in all material
respects. Knowledge shall not be imputed nor shall it include any matters which
the Purchaser should have known or should have been reasonably expected to have
known. The Purchaser hereby represents and warrants to the Sellers as follows:
(a) Power and Authority. The Purchaser has full power and authority
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to execute, deliver and perform this Agreement and the Other Agreements.
(b) Binding Effect. Upon execution and delivery by the Purchaser,
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this Agreement and the Other Agreements shall be and constitute the valid,
binding and legal obligations of the Purchaser enforceable against the Purchaser
in accordance with the terms hereof and thereof, except as the enforceability
hereof and thereof may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally, and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
6. Conditions Precedent to Obligations of the Purchaser. All obligations
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of the Purchaser under this Agreement are subject to the fulfillment or waiver
(where permissible) prior to or at the Closing, of the following conditions:
(a) Representations and Warranties True at the Closing. The
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representations and warranties of the Sellers and the Company herein shall be
deemed to have been made again as of the Closing, and then be true and correct,
subject to any changes contemplated by this Agreement. The Sellers shall have
performed all of the obligations to be performed by them hereunder as of the
date hereof or prior to the Closing, as called for hereunder.
(b) Deliveries at the Closing. The Sellers shall have delivered to
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the Purchaser all of the documents required to be delivered hereunder.
(c) Other Matters. All corporate and other proceedings and actions
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taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned herein
or incident to any such transaction shall be satisfactory in form and substance
to the Purchaser and its counsel, whose approval shall not be unreasonably
withheld.
7. Protection Against Dilution, Etc. In any of the following events,
-----------------------------------
occurring after the date hereof, and subject to the terms of Paragraph 3(e)
hereof, appropriate adjustment shall be made in the number of shares of the
Company Common Stock held by the Sellers or the Consultants and the purchase
price per share to be paid, so
-6-
as to maintain the proportionate interest of the Sellers and the Consultants
from and after the date hereof: (a) recapitalization of the Company through a
split-up or reverse split of the outstanding shares of the Company Common Stock
or the Company Preferred Stock into a greater or lesser number, as the case may
be, or (b) declaration of a dividend on the shares of the Company Common Stock
or the Company Preferred Stock, payable in shares or other securities of the
Company convertible into shares of the Company Common Stock or the Company
Preferred Stock, or (c) any of the events described in Paragraph 8 hereof. See
Exhibit 7 attached hereto for an example of the effect of the issuance of new
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shares on dilution.
8. Merger, Etc. In case the Company, or any successor, shall be
------------
consolidated or merged with another company, or substantially all of its assets
shall be sold to another company in exchange for stock, cash or other property
with the view to distributing such stock, cash or other property to its
stockholders, each of the shares of the Company Common Stock or the Company
Preferred Stock held by the Sellers or the Consultants shall be replaced for the
purposes hereof by the securities of the Company or cash or property issuable or
distributable in respect of one share of the Company Common Stock or the Company
Preferred Stock, as the case may be, of the Company, or its successors, upon
such consolidation, merger, or sale, and adequate provision to that effect shall
be made at the time thereof.
9. No Contracts, Arrangements, Understandings or Relationships with
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Respect to Securities. Other than the Stock Pledge Agreement and the Escrow
-----------------------
Agreement between the Sellers and the Purchaser, there are no contracts,
arrangements, understandings or relationships (legal or otherwise) by any party
to this Agreement, including any of the Consultants, or any other person with
respect to the Company Common Stock or the Company Preferred Stock, or any other
securities of the Company, including but not limited to transfer or voting of
any of the Company Common Stock or the Company Preferred Stock, or any other
securities of the Company, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies.
10. The Nature and Survival of Representations, Covenants and Warranties.
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All statements and facts contained in any memorandum, certificate, instrument,
or other document delivered by or on behalf of the parties hereto for
information or reliance pursuant to this Agreement, shall be deemed
representations, covenants and warranties by the parties hereto under this
Agreement. All representations, covenants and warranties of the parties shall
survive the Closing.
11. Default by the Purchaser. If the Sellers do not default hereunder and
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the Purchaser defaults hereunder, the Sellers may assert any remedy, including
specific performance, which the Sellers may have by reason of any such default.
From and after the Closing, subject to the terms and provisions hereof, in the
event of a breach by any party of the terms of this Agreement or any obligation
of a party which survives the Closing hereunder, the non-defaulting party may
assert any remedy, either at law or in equity to which such non-defaulting party
may be entitled.
Neither the Purchaser nor any of his employees, or agents and or attorneys
or professional advisers representing any of them in this transaction, or the
Company or Xxxxxxxxx.xxx, Inc (the "Paragraph 11 Parties') shall have any
liability to the Sellers or to those individuals who are parties to the
Consulting Agreements, or to the Company, with respect to any obligations under
this Agreement, or the Other Agreements, or otherwise, for consequential,
exemplary, special, incidental or punitive damages even if any of them have been
advised of the possibility of such damages. In any event, the joint and several
liability of the Paragraph 11 Parties to the Sellers or to the Company or
Xxxxxxxxx.xxx, Inc. or any other party for any reason and upon any cause of
action shall be limited to the aggregate amount of $250,000. This limitation
applies to all causes of action in the aggregate, including without limitation
to breach of contract, breach of warranty, negligence, strict liability,
misrepresentations, and other torts. In the event the terms of this paragraph
conflict with any of the other terms hereof or with the terms of any of the
Other Agreements, the terms of this paragraph shall control and the provisions
of this paragraph shall survive the Closing for five years.
12. Default by the Sellers. If the Purchaser does not default hereunder
------------------------
and the Sellers default hereunder, the Purchaser may assert any remedy,
including specific performance, which the Purchaser may have by reason of any
such default. From and after the Closing, subject to the terms and provisions
hereof, in the event of a breach by any party of the terms of this Agreement or
any obligation of a party which survives the Closing
-7-
hereunder, the non-defaulting party may assert any remedy, either at law or in
equity to which such non-defaulting party may be entitled.
13. Cooperation. The Purchaser and the Sellers will each reasonably
-----------
cooperate with the other, at the other's request and expense, in furnishing
information, testimony, and other assistance in connection with any actions,
proceedings, arrangements, disputes with other persons or governmental inquiries
or investigations involving the Sellers or the Purchaser, conduct of the
business of the Company, or the transactions contemplated hereunder.
14. Further Conveyances and Assurances. After the Closing, the Sellers
-------------------------------------
and the Purchaser, each, will, without further cost or expense to, or
consideration of any nature from the other, execute and deliver, or cause to be
executed and delivered, to the other, such additional documentation and
instruments of transfer and conveyance, and will take such other and further
actions, as the other may reasonably request as more completely to sell,
transfer and assign to and fully vest in the Purchaser ownership of the Company
Common Stock and the Company Preferred Stock.
15. Closing. The Closing of the sale and purchase contemplated hereunder
-------
shall be on the date of the payment in full of the Note and the satisfaction of
all of the other terms hereof. The Closing shall be held at the offices of the
Sellers, 0000 Xx Xxxxxx Xxxxx, Xxxxx X, Xxxxx, Xxxxxxxxxx 00000 at 2:00 p.m.,
Pacific Time, on the date of the Closing, unless another hour or place is
mutually agreed upon by the Sellers and the Purchaser.
16. Deliveries at the Closing by the Sellers. At the Closing the Sellers
-----------------------------------------
shall deliver:
(a) Certificates representing 21,851,503 shares of the Company Common
Stock duly endorsed by the Sellers, free and clear of all liens, claims,
encumbrances, and restrictions of every kind except for the restrictive legend
required by Rule 144.
(b) Certificates representing 1,000,000 shares of the Company
Preferred Stock duly endorsed by the Sellers, free and clear of all liens,
claims, encumbrances, and restrictions of every kind except for the restrictive
legend required by Rule 144.
(c) The Sellers shall deliver any other document which may be
necessary to carry out the intent of this Agreement.
All documents reflecting any actions taken, received or delivered by the
Sellers pursuant to this Paragraph 16 shall be reasonably satisfactory in form
and substance to the Purchaser and his counsel.
17. No Assignment. This Agreement shall not be assignable by any party
--------------
without the prior written consent of the other parties, which consent shall be
subject to such parties' sole, absolute and unfettered discretion.
18. Brokerage. The Sellers and the Purchaser agree to indemnify and hold
---------
harmless each other against, and in respect of, any claim for brokerage or other
commissions relative to this Agreement, or the transactions contemplated hereby,
based in any way on agreements, arrangements, understandings or contracts made
by either party with a third party or parties whatsoever.
19. Mediation and Arbitration. All disputes arising or related to this
---------------------------
Agreement must exclusively be resolved first by mediation with a mediator
selected by the parties, with such mediation to be held in Vista, California.
If such mediation fails, then any such dispute shall be resolved by binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association in effect at the time the arbitration proceeding commences, except
that (a) California law and the Federal Arbitration Act must govern construction
and effect, (b) the locale of any arbitration must be in Vista, California, and
(c) the arbitrator must with the award provide written findings of fact and
conclusions of law. Any party may seek from a court of competent jurisdiction
any provisional remedy that may be necessary to protect its rights or assets
pending the selection of the arbitrator or the arbitrator's determination of the
merits of the controversy. The exercise of such arbitration rights by any party
will not preclude the exercise of any self-help remedies (including without
limitation, setoff rights) or the exercise of any non-judicial foreclosure
rights. An arbitration award may be entered in any court having jurisdiction.
-8-
20. Attorney's Fees. In the event that it should become necessary for any
---------------
party entitled hereunder to bring suit against any other party to this Agreement
for enforcement of the covenants herein contained, the parties hereby covenant
and agree that the party who is found to be in violation of said covenants shall
also be liable for all reasonable attorney's fees and costs of court incurred by
any other parties subject to the limitation in Paragraph 11.
21. Benefit. All the terms and provisions of this Agreement shall be
-------
binding upon and inure to the benefit of and be enforceable by the parties
hereto, and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
22. Notices. All notices, requests, demands, and other communications
-------
hereunder shall be in writing and delivered personally or sent by registered or
certified United States mail, return receipt requested with postage prepaid, by
facsimile, or by e-mail, if to the Sellers, addressed to Xx. Xxxxx Xxxxxx at
X.X. Xxx 000, Xxxxxx Xxxxx Xx, Xxxxxxxxxx 00000, and to Mr. Xxxxxxx Xxxxxxx at
0000 Xxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxxxxxxx 00000; if to the Company, addressed
to Xx. Xxxxx X. Xxx, Xx. at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000, Xxxxxxx,
Xxxxxxx 00000; and if to the Purchaser, addressed to Xx. Xxxxx X. Xxx, Xx. at
0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000, Xxxxxxx, Xxxxxxx 00000. Any party
hereto may change its address upon 10 days' written notice to any other party
hereto.
23. Construction. Words of any gender used in this Agreement shall be
------------
held and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise.
24. Waiver. No course of dealing on the part of any party hereto or its
------
agents, or any failure or delay by any such party with respect to exercising any
right, power or privilege of such party under this Agreement or any instrument
referred to herein shall operate as a waiver thereof, and any single or partial
exercise of any such right, power or privilege shall not preclude any later
exercise thereof or any exercise of any other right, power or privilege
hereunder or thereunder.
25. Cumulative Rights. The rights and remedies of any party under this
------------------
Agreement and the instruments executed or to be executed in connection herewith,
or any of it, shall be cumulative and the exercise or partial exercise of any
such right or remedy shall not preclude the exercise of any other right or
remedy.
26. Invalidity. In the event any one or more of the provisions contained
----------
in this Agreement or in any instrument referred to herein or executed in
connection herewith shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect the other provisions of this Agreement or any such other
instrument.
27. Time of the Essence. Time is of the essence of this Agreement.
----------------------
28. Incorporation by Reference. The Attachments to this Agreement
----------------------------
referred to or included herein constitute integral parts to this Agreement and
are incorporated into this Agreement by this reference.
29. Multiple Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto.
30. Controlling Agreement. In the event of any conflict between the terms
---------------------
of this Agreement or any of the Other Agreements or the Attachments referred to
herein, the terms of this Agreement shall control.
31. Law Governing; Jurisdiction. This Agreement shall be governed by and
----------------------------
construed in accordance with the laws of the State of California, without regard
to any conflicts of laws provisions thereof. Each party hereby irrevocably
submits to the personal jurisdiction of the United States District Court for the
Southern District of California, as well as of the Superior Courts of the State
of California in San Diego County, California over any suit, action or
proceeding arising out of or relating to this Agreement. Each party hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such mediation,
arbitration, suit, action or proceeding brought in any such county and any claim
that any such mediation, arbitration, suit, action or proceeding brought in such
county has been brought in an inconvenient forum.
-9-
32. Ratification and Republication. Except as amended by this Agreement,
-------------------------------
the parties do hereby ratify and republish the Stock Purchase Agreement.
33. Entire Agreement. This instrument and the attachments hereto contain
-----------------
the entire understanding of the parties and may not be changed orally, but only
by an instrument in writing signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
IN WITNESS WHEREOF, this Agreement has been executed in multiple
counterparts on the date first written above.
-----------------------------------
XXXXX XXXXXX
-----------------------------------
XXXXXXX XXXXXXX
SPIDERBOY INTERNATIONAL, INC.
By
--------------------------------
Xxxxx X. Xxx, Xx., President
-----------------------------------
XXXXX X. XXX, XX.
Attachments:
-----------
Attachment A The Note
Attachment B The Stock Pledge Agreement
Attachment C The Escrow Agreement
Attachment D The Stock Powers
Attachment E Form of Consulting Agreement
Exhibits:
--------
Exhibit 4(l) Contracts
Exhibit 4(m) Tax Matters
Exhibit 7 Example of the Effect of the Issuance of New Shares on Dilution
-10-
ATTACHMENT A
THE NOTE
AMENDED PROMISSORY NOTE
$250,000.00 February 27, 2004
After date, without grace, for value received, XXXXX XXX, (the "Maker")
hereby promises to pay to the order of XXXXX XXXXXX and XXXXXXX XXXXXXX,
residents of San Diego County, California (collectively, the "Payee") the
original principal amount of TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($250,000.00). Except as may be otherwise provided herein, the unpaid principal
of this Note shall bear no interest. All payments of principal and interest
hereunder are payable in lawful money of the United States of America at 0000 Xx
Xxxxxx Xxxxx, Xxxxx X, Xxxxx, Xxxxxxxxxx 00000, or such other place as the Payee
may designate in writing to the Maker.
The principal of this Note shall be due and payable as follows:
1. The sum of $25,000.00 shall be due and payable on or before 30 days
after the vote by the shareholders of the Company pursuant to the Schedule 14A
to be filed with the Securities and Exchange Commission as described in
Paragraph 3(e) of that certain Stock Purchase Agreement dated February 27, 2004,
as amended on even date herewith, by and between the Payee, Spiderboy
International, Inc., a Minnesota corporation, and the Maker hereof, but in no
event later than July 31, 2004. The Stock Purchase Agreement, as amended, is
expressly incorporated herein by reference for all purposes.
2. Thereafter, this Note shall be due and payable in nine monthly
installments of $25,000.00 each, payable on the last day of each and every
calendar month, beginning on August 31, 2004, and continuing regularly
thereafter until the whole of said principal amount has been duly paid.
3. All payments hereunder shall be first applied to expenses and other
charges then to any accrued interest, and the balance, if any to principal.
Any interest on this Note shall be computed for the actual number of days
elapsed and on the basis of a year consisting of 360 days, unless the maximum
legal interest rate would thereby be exceeded, in which event, to the extent
necessary to avoid exceeding such maximum rate, interest shall be computed on
the basis of the actual number of days elapsed in the applicable calendar year
in which it accrued. It is the intention of the Maker and the Payee to conform
strictly to applicable usury laws. It is therefore agreed that (i) the
aggregate of all interest and other charges constituting interest under
applicable law and contracted for, chargeable or receivable under this Note or
otherwise in connection with this loan transaction, shall never exceed the
maximum amount of interest, nor produce a rate in excess of the maximum contract
rate of interest the Payee may charge the Maker under applicable law and in
regard to which the Maker may not successfully assert the claim or defense of
usury, and (ii) if any excess interest is provided for, it shall be deemed a
mistake and the same shall be refunded to the Maker or credited on the unpaid
principal balance hereof and this Note shall be automatically deemed reformed so
as to permit only the collection of the maximum legal contract rate and amount
of interest.
If, for any reason whatever, the interest paid on this Note shall exceed
the maximum non-usurious amount permitted by law, the Payee shall refund to the
Maker such portion of said interest as may be necessary to cause the interest
paid on this Note to equal the maximum non-usurious amount permitted by law, and
no more. All sums paid or agreed to be paid to the Payee for the use,
forbearance or detention of the indebtedness evidenced hereby shall to the
extent permitted by applicable law be amortized, prorated, allocated and spread
throughout the full term of this Note until payment in full.
This Note may be prepaid in whole or in part at any time without premium or
penalty by the Maker. Prepayments shall be applied to installments of principal
in the inverse order of maturity so that they will pay the last maturing
principal installments first, and these payments will not reduce the amount or
time of payment of the remaining installments. Any interest on any prepaid
installment of principal shall immediately cease to accrue.
1
Except as provided herein, the Maker and each surety, endorser, and
guarantor waives all demands for payment, presentations for payment, notices of
intention to accelerate maturity, notices of acceleration of maturity, protests,
notices of protest, grace, and diligence in the collection of this Note, and in
filing suit hereon, and agrees that its liability for the payment hereof shall
not be affected or impaired by any release or change in the security or by any
extension or extensions of time of payment.
Any check, draft, money order or other instrument given in payment of all
or any portion of this Note may be accepted by the Payee or any other holder
hereof and handled in collection in the customary manner, but the same shall not
constitute payment hereunder or diminish any rights of the Payee or any other
holder hereof, except to the extent that actual cash proceeds of such instrument
are unconditionally received by the Payee or any other holder hereof and applied
to the indebtedness as herein provided.
In the event of default in the payment of this Note or under any instrument
executed in connection with this Note, the Maker agrees to pay on demand all
costs incurred by the Payee (i) in the collection of any sums, including, but
not limited to, principal, interest, expenses, and reimbursements due and
payable on this Note, and (ii) in the enforcement of the other terms and
provisions of this Note or any instrument securing payment of this Note, whether
such collection or enforcement be accomplished by suit or otherwise, including
the Payee's reasonable attorney's fees.
It is agreed that time is of the essence of this Note, and upon the failure
of the Maker to cure an event of default in the payment of any fixed monthly
payment when due hereunder within 30 days after receipt of notice from the Payee
or other holder of such failure, or upon the failure of the Maker to cure any
event of default within 30 days after receipt of notice from the Payee or other
holder of such failure, the Payee may declare the whole sum of the principal of
this Note remaining at the time unpaid, together with the accrued interest,
charges, and, to the extent permitted under applicable law, costs and reasonable
attorney's fees incurred by the Payee in collecting or enforcing the payment
thereof, immediately due and payable without further notice, and failure to
exercise said option shall not constitute a waiver on the part of the Payee of
the right to exercise the same at any other time.
If this Note is not paid at maturity, however maturity may be brought
about, all principal and interest due on the date of such maturity shall bear
interest from the date of such maturity at the maximum contract rate of interest
which the Payee may charge the Maker under applicable law.
Except as otherwise provided for herein, each maker, surety, guarantor and
endorser of this Note expressly waives all notices, including, but not limited
to, all demands for payment, presentations for payment, notice of opportunity to
cure default, notice of intention to accelerate the maturity, notice of protest
and notice of acceleration of the maturity, notice of protest and notice of
acceleration of the maturity of this Note, and consents that this Note and the
security interest securing its payment may be renewed and the time of payment
extended without notice and without releasing any of the parties.
This Note is secured by that certain Stock Pledge Agreement dated February
27, 2004 executed by the Maker, as the Debtor, in favor of the Payee, as the
Secured Party (the "Stock Pledge Agreement").
Any check, draft, money order or other instrument given in payment of all
or any portion of this Note may be accepted by the Payee or any other holder
hereof and handled in collection in the customary manner, but the same shall not
constitute payment hereunder or diminish any rights of the Payee or any other
holder hereof, except to the extent that actual cash proceeds of such instrument
are unconditionally received by the Payee or any other holder hereof and applied
to the indebtedness as herein provided.
This Note shall be governed by and construed in accordance with the laws of
the State of California and applicable federal law.
-----------------------------------
XXXXX XXX
2
ATTACHMENT B
THE STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT
THIS AGREEMENT is made this 27th day of February, 2004, by and between
XXXXX XXXXXX and XXXXXXX XXXXXXX (collectively, the "Secured Party") and XXXXX
XXX (the "Debtor").
WHEREAS, the Secured Party, pursuant to that certain Stock Purchase
Agreement of even date herewith (the "Stock Purchase Agreement") with respect to
SPIDERBOY INTERNATIONAL, INC., a Minnesota corporation (the "Company") has
agreed to sell to the Debtor 21,851,503 shares of the issued and outstanding
common stock of the Company, no par value per share (the "Company Common
Stock"), and 1,000,000 shares of the issued and outstanding preferred stock of
the Company, no par value per share (the "Company Preferred Stock"); and
WHEREAS, pursuant to the Stock Purchase Agreement, the Debtor has executed
and delivered to the Secured Party that one certain promissory note of even date
herewith in the original principal amount of $250,000 payable to the order of
the Secured Party (the "Note"); and
WHEREAS, pursuant to the Stock Purchase Agreement, the Debtor and the
Company have executed or will execute that certain Escrow Agreement (the "Escrow
Agreement") and various Consulting Agreements (collectively, the "Consulting
Agreements") as described therein;
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties hereto do hereby agree as follows:
1. Security Interest. The Debtor hereby grants to the Secured Party a
------------------
security interest and agrees and acknowledges that the Secured Party has and
shall continue to have a security interest in the Company Common Stock and the
Company Preferred Stock and in any other shares of the capital stock of the
Company now owned or hereafter acquired by the Debtor, all present and future
issued and outstanding shares of capital stock or other equity and/or investment
securities issued by the Company, together with all monies, income, proceeds,
increases, substitutions, replacements, additions, accessions and benefits
attributable or accruing to said property, including, but not limited to, all
stock rights, rights to subscribe, liquidating dividends, stock dividends,
dividends paid in stock, new securities or other properties or benefits for
which the Debtor is or may hereafter become entitled to receive on account of
said property, and in the event that the Debtor shall receive any of such, the
Debtor shall hold same as trustee for the Secured Party and will immediately
deliver same to the Secured Party to be held hereunder in the same manner as the
properties specifically described above are held hereunder. All property of all
kinds in which the Secured Party is herein granted a security interest,
including, but not limited to, the Company Common Stock and the Company
Preferred Stock, shall hereinafter be referred to as the "Collateral."
The Debtor agrees to execute such stock powers, endorse such instruments,
or execute such additional pledge agreements or other documents as may be
required by the Secured Party in order to effectively grant to the Secured Party
the security interest in the Collateral. The security interest granted hereby
is to secure the payment of any and all indebtedness, liabilities, obligations,
and duties whatsoever of the Company and/or the Debtor to the Secured Party
whether direct or whether now existing or hereafter arising, and howsoever
evidenced or acquired, and whether joint or several, including, but not limited
to, the Stock Purchase Agreement, the Note, the Escrow Agreement, the Consulting
Agreements, and all costs incurred by the Secured Party to enforce this
Agreement or any of the above described agreements and instruments, including
but not limited to attorney's fees and expenses (all of such obligations,
indebtedness and liabilities being hereinafter collectively referred to as the
"Obligations").
2. Warranties and Covenants of the Debtor. The Debtor, for so long as he
--------------------------------------
has any duty with respect to the Obligations, hereby warrants and covenants as
follows:
(a) The security interest granted hereby will attach to the
Collateral on the date hereof.
1
(b) Except for the security interest granted hereby and for taxes not
yet due, the Debtor will defend the Collateral against all claims and demands of
all persons at any time claiming the same or any interest therein.
(c) The Debtor authorizes the Secured Party to file a financing
statement, if desired by the Secured Party in any applicable jurisdiction,
signed only by the Secured Party covering the Collateral, and at the request of
the Secured Party, the Debtor will join the Secured Party in executing one or
more financing statements pursuant to the Uniform Commercial Code in effect in
any such jurisdiction on the date hereof in a form satisfactory to the Secured
Party, and the Secured Party will pay the cost of filing the same, or filing or
recording the financing statements in all public offices wherever filing or
recording is deemed by the Secured Party to be necessary or desirable. It being
further stipulated in this regard that the Secured Party may also at any time or
times sign a counterpart of this Agreement signed by the Debtor and file same as
a financing statement if the Secured Party shall elect to do so.
(d) The Debtor will not sell or offer to sell or otherwise transfer
or encumber the Collateral or any interest therein.
(e) Subject to the Stock Purchase Agreement, the Debtor will keep the
Collateral free from any adverse lien, security interest, or encumbrance, except
the security interest granted hereby and for taxes not yet due.
(f) The Debtor will pay to the Secured Party all costs and expenses,
including reasonable attorney's fees, incurred or paid by the Secured Party in
exercising or protecting its interests, rights and remedies under this Agreement
in the event of default by the Debtor hereunder or under the Stock Purchase
Agreement, the Note, the Escrow Agreement, and the Consulting Agreements or any
of the Attachments referred to therein.
(g) The Debtor will pay all expenses incurred by the Secured Party in
preserving, defending, and enforcing this security interest in the Collateral
and in collecting or enforcing the Obligations. Expenses for which the Debtor
is liable include, but are not limited to, taxes, assessments, reasonable
attorney's fees, and other legal expenses. These expenses will bear interest
from the dates of payment at the highest rate stated in the Obligations, and the
Debtor will pay the Secured Party this interest on demand at a time and place
reasonably specified by the Secured Party. These expenses and interest will be
part of the Obligations and will be recoverable as such in all respects.
(h) The Debtor will immediately notify the Secured Party of any
change in the Debtor's name, address, or location, change in any matter
warranted or represented in this Agreement, change that may affect this security
interest, and any Event of Default.
(i) The Debtor appoints the Secured Party as the Debtor's
attorney-in-fact, effective if an Event of Default as hereinafter defined is not
cured within 30 days after receipt by the Debtor from the Secured Party of
notice thereof, to do any act that the Debtor is obligated to do by this
Agreement, to exercise all rights of the Debtor in the Collateral, to make all
collections, to execute any papers and instruments, and to do all other things
necessary to preserve and protect the Collateral and to make collections and to
protect the Secured Party's security interest in the Collateral.
3. General Covenants. The security interest granted hereby shall in no
------------------
way be affected by any indulgence or indulgences, extension or extensions,
change or changes in the form, evidence, maturity, rate of interest or otherwise
of the Obligations, or by want of presentment, notice, protest, suit, or
indulgence upon the Obligations, or shall any release of any security for any of
the parties liable for the payment of the Obligations in any manner affect or
impair this Agreement, and same shall continue in full force and effect in
accordance with their terms until the Obligations have been fully paid.
Any and all securities and other properties of the Debtor heretofore, now
or hereafter delivered to the Secured Party or in the Secured Party's
possession, shall also secure the Obligations and shall be held and construed to
be a part of the Collateral hereunder to the same extent as fully described
herein.
2
4. Events of Default. The Debtor shall be in default under this
-------------------
Agreement upon the happening of any of the following events or conditions
(hereinafter severally referred to as an "Event of Default" and collectively
referred to as the "Events of Default"):
(a) Default by the Debtor with respect to any of the Obligations.
(b) The levy of any attachment, execution or other process against
the Debtor, the Company, or any of the Collateral that is not stayed or
dismissed within 30 days.
(c) Dissolution, termination of existence, insolvency or business
failure of the Debtor, the Company, or any endorser, guarantor or surety of the
Obligations, or commission of the act of bankruptcy by, or the appointment of a
receiver or other legal representative for any part of the property of,
assignment for the benefit of creditors by, or commencement of any proceedings
under any bankruptcy or insolvency law by or against, the Debtor, the Company or
any endorser, guarantor, or surety for the Obligations that are not stayed or
dismissed within 30 days of filing.
(d) Default in the performance of any covenant or agreement of the
Debtor or the Company to the Secured Party, whether under this Agreement, the
Note, the Escrow Agreement, or any of the Consulting Agreements, or any other
instrument executed in connection with said agreements or otherwise.
(e) The occurrence of any event which under the terms of any evidence
of indebtedness, indenture, loan agreement, security agreement, or similar
instrument permits the acceleration of maturity of any indebtedness of the
Company or the Debtor to the Secured Party, or to persons other than the Secured
Party, or the Secured Party receives notification that another person has or
expects to acquire a security interest in the Collateral or any part thereof.
(f) If any warranty, covenant, or representation made to the Secured
Party by or on behalf of the Debtor or the Company proves to have been false in
any material respect when made.
(g) If any lien attaches to any of the Collateral.
5. Remedies. Upon the failure of the Debtor or the Company to cure an
--------
Event of Default within 30 days after receipt of notice from the Secured Party
of such Event of Default and at any time thereafter, at the option of the holder
thereof, any or all of the Obligations shall become immediately due and payable
without presentment or demand or any further notice to the Debtor, the Company
or any other person obligated thereon and the Secured Party shall have and may
exercise with reference to the Collateral any and all of the rights and remedies
of a secured party under the Uniform Commercial Code as adopted in the State of
California, and as otherwise granted herein or under any other agreement
executed by the Debtor, including, without limitation, the right and power to
sell at public or private sale or sales, or otherwise dispose of or utilize the
Collateral and any part or parts thereof in any manner authorized or permitted
under this Agreement or under the Uniform Commercial Code as adopted in the
State of California after default by the Debtor or the Company and to apply the
proceeds thereof toward the payment of any costs and expenses and attorney's
fees thereby incurred by the Secured Party and toward payment of the
Obligations, in such order or manner as the Secured Party may elect, including,
without limiting the foregoing:
(a) The Secured Party is hereby granted the right, at its option,
upon the occurrence of an Event of Default hereunder, to transfer at any time to
itself or to its nominee securities or other property hereby pledged, or any
part thereof, and to thereafter exercise all voting rights with respect to such
security so transferred and to receive the proceeds, payments, monies, income or
benefits attributable or accruing thereto and to hold the same as security for
the Obligations hereby secured or at the Secured Party's election, to apply such
amounts to the Obligations, whether or not then due, in such order as the
Secured Party may elect, or, the Secured Party may, at its option, without
transferring such securities or properties to its nominee, exercise all voting
rights with respect to the securities pledged hereunder and vote all or any part
of such securities at any regular or special meeting of the stockholders of the
Company, and the Debtor does hereby name, constitute and appoint as a proxy of
the Debtor the Secured Party, in the Debtor's name, place and stead to vote any
and all such securities, as said proxy may elect for and in the name, place and
stead of the Debtor, such proxy to be irrevocable and deemed coupled with an
interest.
3
(b) Sell, lease, or otherwise dispose of any of the Collateral in
accordance with the rights, remedies, and duties of a secured party under
Chapters 2 and 9 of the California Uniform Commercial Code after giving notice
as required by those chapters; unless the Collateral threatens to decline
speedily in value, is perishable, or would typically be sold on a recognized
market. The Secured Party will give the Debtor reasonable notice of any public
sale of the Collateral or of a time after which it may be otherwise disposed of
without further notice of the Debtor. In such event, notice will be deemed
reasonable if it is mailed, postage prepaid, to the Debtor at the address
specified in this Agreement at least 30 days before any public sale or 30 days
before the time when the Collateral may be otherwise disposed of without further
notice to the Debtor.
(c) Apply any proceeds from disposition of the Collateral after
default in the manner specified in Chapter 9 of the California Uniform
Commercial Code, including payment of the Secured Party's reasonable attorney's
fees and court expenses.
(d) If, after disposition of the Collateral, the Obligations remain
unsatisfied, collect the deficiency from the Debtor.
6. Voting Rights. So long as no Event of Default has occurred and
--------------
remains uncured for the applicable grace period under the Stock Purchase
Agreement, the Note, the Escrow Agreement, and the Consulting Agreements or any
of the Attachments referred to therein, or hereunder, the Debtor shall have the
right to vote all of the shares of the Company Common Stock and the Company
Preferred Stock or items of the Collateral subject to this Agreement, and the
Secured Party shall on demand execute and deliver an effective proxy or proxies
in favor of the Debtor, whenever demand is made upon the Secured Party for such
proxy or proxies by the Debtor.
7. Payment of the Note. Simultaneously with the payment in full of the
--------------------
Note, the Secured Party shall execute and file at its own expense any and all
instruments necessary to terminate the security interest in the 21,851,503
shares of the Company Common Stock created by this Agreement and also execute
any and all other instruments deemed reasonably necessary by the Debtor to vest
in the Debtor title in the 21,851,503 shares of the Company Common Stock, free
from any claim by the Secured Party.
8. Satisfaction of the Other Obligations. Simultaneously with the
-------------------------------------
satisfaction of all of the Obligations, and after the payment in full of the
Note, or the Obligations other than the Note are otherwise deemed to have been
satisfied in full pursuant to the terms of the Stock Purchase Agreement, the
Note, the Escrow Agreement, and the Consulting Agreements or any of the
Attachments referred to therein, the Secured Party shall execute and file at its
own expense any and all instruments necessary to terminate the security interest
in the 1,000,000 shares of the Company Preferred Stock created by this Agreement
and also execute any and all other instruments deemed reasonably necessary by
the Debtor to vest in the Debtor title in the 1,000,000 shares of the Company
Preferred Stock, free from any claim by the Secured Party.
9. No Usury. It is the intention of the parties hereto to comply with
---------
the usury laws of the State of California. Accordingly, it is agreed that
notwithstanding any provision to the contrary in this Agreement or in any of the
documents evidencing the Obligations or otherwise relating thereto, no such
provision shall require the payment or permit the collection of interest in
excess of the maximum permitted by law. If any excess of interest in such
respect is provided for, or shall be adjudicated to be so provided for, in this
Agreement, or any of the documents evidencing the Obligations or otherwise
relating thereto, then in such event:
(a) The provisions of this paragraph shall govern and control;
(b) Neither the Debtor, the Company nor their successors or assigns,
or any other party liable for the payment of the Obligations, shall be obligated
to pay the amount of such interest to the extent that it is in excess of the
maximum amount permitted by law;
(c) Any such excess interest which may have been collected shall be,
at the option of the holder of the instrument evidencing the Obligations, either
applied as a credit against the unpaid principal amount thereof or refunded to
the maker thereof; and
4
(d) The effective rate of interest shall be automatically subject to
reduction to the maximum lawful contract rate allowed under the usury laws of
the State of California as now or hereafter construed by any court of competent
jurisdiction.
10. Attorney's Fees. In the event that it should become necessary for any
---------------
party entitled hereunder to bring suit against the other party to this Agreement
for enforcement of the covenants herein contained, the parties hereby covenant
and agree that the party who is found to be in violation of said covenants shall
also be liable for all reasonable attorney's fees and costs of court incurred by
the other party hereto.
11. Benefit. All the terms and provisions of this Agreement shall be
-------
binding upon and inure to the benefit of and be enforceable by the parties
hereto, and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
12. Notices. All notices, requests, demands, and other communications
-------
hereunder shall be in writing and delivered personally or sent by registered or
certified United States mail, return receipt requested with postage prepaid, by
facsimile, or by e-mail, if to the Secured Party, addressed c/o Xx. Xxxxx Xxxxxx
at P. O. Xxx 000, Xxxxxx Xxxxx Xx, Xxxxxxxxxx 00000, telecopier (000) 000-0000,
and e-mail xxxxxxx@xxxxxxxxxxxx.xxx; and if to the Debtor, addressed to Xx.
Xxxxx Xxx at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000, Xxxxxxx, Xxxxxxx 00000. Any
party hereto may change its address upon 10 days' written notice to any other
party hereto.
13. Construction. Words of any gender used in this Agreement shall be
------------
held and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise. In addition, the pronouns used in this Agreement shall be understood
and construed to apply whether the party referred to is an individual,
partnership, joint venture, corporation or an individual or individuals doing
business under a firm or trade name, and the masculine, feminine and neuter
pronouns shall each include the other and may be used interchangeably with the
same meaning.
14. Waiver. No course of dealing on the part of any party hereto or its
------
agents, or any failure or delay by any such party with respect to exercising any
right, power or privilege of such party under this Agreement or any instrument
referred to herein shall operate as a waiver thereof, and any single or partial
exercise of any such right, power or privilege shall not preclude any later
exercise thereof or any exercise of any other right, power or privilege
hereunder or thereunder.
15. Cumulative Rights. The rights and remedies of any party under this
------------------
Agreement and the instruments executed or to be executed in connection herewith,
or any of them, shall be cumulative and the exercise or partial exercise of any
such right or remedy shall not preclude the exercise of any other right or
remedy.
16. Invalidity. In the event any one or more of the provisions contained
----------
in this Agreement or in any instrument referred to herein or executed in
connection herewith shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect the other provisions of this Agreement or any such other
instrument.
17. Time of the Essence. Time is of the essence of this Agreement.
----------------------
18. Headings. The headings used in this Agreement are for convenience and
--------
reference only and in no way define, limit, simplify or describe the scope or
intent of this Agreement, and in no way effect or constitute a part of this
Agreement.
19. Excusable Delay. None of the parties hereto shall be obligated to
----------------
perform and none shall be deemed to be in default hereunder, if the performance
of a non-monetary obligation is prevented by the occurrence of any of the
following, other than as the result of the financial inability of the party
obligated to perform: acts of God, strikes, lock-outs, other industrial
disturbances, acts of a public enemy, terrorists, wars or war-like action
(whether actual, impending or expected and whether de jure or de facto), arrest
or other restraint of governmental (civil or military) blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes, storms,
floods, washouts, sink holes, civil disturbances, explosions, breakage or
accident to equipment or machinery,
5
confiscation or seizure by any government of public authority, nuclear reaction
or radiation, radioactive contamination or other causes, whether of the kind
herein enumerated, or otherwise, that are not reasonably within the control of
the party claiming the right to delay performance on account of such occurrence.
20. Incorporation by Reference. The Stock Purchase Agreement, the Note,
----------------------------
the Escrow Agreement, and the Consulting Agreements or any of the Attachments
referred to therein, constitute integral parts to this Agreement and are
incorporated into this Agreement by this reference.
21. Multiple Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. Controlling Agreement. In the event of any conflict between the terms
---------------------
of this Agreement, the Stock Purchase Agreement, the Note, the Escrow Agreement,
and the Consulting Agreements or any of the Attachments referred to therein, the
terms of the Stock Purchase Agreement shall control.
23. Law Governing. This Agreement shall be construed and governed by the
--------------
laws of the State of California, and all obligations hereunder shall be deemed
performable in San Diego County, California.
24. Perfection of Title. The parties hereto shall do all other acts and
---------------------
things that may be reasonably necessary or proper, fully or more fully, to
evidence, complete or perfect this Agreement, and to carry out the intent of
this Agreement.
25. Entire Agreement. This instrument contains the entire Agreement of
-----------------
the parties with respect to the subject matter hereof, and may not be changed
orally, but only by an instrument in writing signed by the party against whom
enforcement of any waiver, change, modification, extension, or discharge is
sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
THE SECURED PARTY:
-----------------------------------
XXXXX XXXXXX
-----------------------------------
XXXXXXX XXXXXXX
THE DEBTOR:
-----------------------------------
XXXXX XXX
6
ATTACHMENT C
THE ESCROW AGREEMENT
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into this 27th day of February,
2004 by and between XXXXX XXXXXX and XXXXXXX XXXXXXX (collectively, the
"Sellers"), XXXXX XXX (the "Purchaser"), and XXXXXX X. XXXXXXXX (the "Escrow
Agent").
WHEREAS, on even date herewith, the Sellers, pursuant to that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement") with
respect to SPIDERBOY INTERNATIONAL, INC., a Minnesota corporation (the
"Company") have agreed to sell to the Purchaser 21,851,503 shares of the issued
and outstanding common stock of the Company, no par value per share (the
"Company Common Stock"), and 1,000,000 shares of the issued and outstanding
preferred stock of the Company, no par value per share (the "Company Preferred
Stock"); and
WHEREAS, pursuant to the Stock Purchase Agreement, the Purchaser has
executed and delivered to the Sellers that one certain promissory note of even
date herewith in the original principal amount of $250,000 payable to the order
of the Sellers (the "Note"); and
WHEREAS, to secure the payment of the Note, the Purchaser has executed and
delivered to the Sellers that one certain Stock Pledge Agreement of even date
herewith (the "Stock Pledge Agreement"); and
WHEREAS, pursuant to the Stock Purchase Agreement, the Company will execute
various Consulting Agreements (collectively, the "Consulting Agreements"); and
WHEREAS, the Stock Purchase Agreement provides for an escrow as therein
provided; and
WHEREAS, capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Stock Purchase Agreement, the Note, the
Stock Pledge Agreement, and the Consulting Agreements or any of the Attachments
referred to therein;
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties hereto agree as follows:
1. Creation of Escrow. The Sellers have delivered into escrow with the
--------------------
Escrow Agent, the receipt of which is hereby acknowledged by the Escrow Agent,
21,851,503 shares of the Company Common Stock and 1,000,000 shares of the
Company Preferred Stock (the "Escrowed Shares"). The Escrowed Shares have been
accompanied by stock powers duly executed by the Sellers in favor of the
Purchaser, which will be utilized to transfer the Escrowed Shares to the
Purchaser upon satisfaction of all of the terms of the Stock Purchase Agreement,
the Note, the Stock Pledge Agreement, and the Consulting Agreements or any of
the Attachments referred to therein, and this Agreement.
2. Voting Rights. So long as no Event of Default has occurred and
--------------
remains uncured for the applicable grace period under the Stock Purchase
Agreement, the Note, the Stock Pledge Agreement, and the Consulting Agreements
or any of the Attachments referred to therein, or hereunder, the Purchaser shall
have the right to vote all of the Escrowed Shares, and the Sellers shall on
demand execute and deliver an effective proxy or proxies in favor of the
Purchaser, whenever demand is made upon the Sellers for such proxy or proxies by
the Purchaser.
3. Duty of the Escrow Agent. The sole duty of the Escrow Agent, other
---------------------------
than as hereinafter specified, shall be to receive the Escrowed Shares and hold
them subject to release, in accordance with this Agreement.
4. Release of the Escrowed Shares and Termination. The Escrow Agent
---------------------------------------------------
shall release the Escrowed Shares upon receipt of written notice of the payment
of the Note and the satisfaction of all of the terms of the Stock Purchase
Agreement, the Stock Pledge Agreement, and the Consulting Agreements or any of
the Attachments referred to therein, and this Agreement. Upon the complete
delivery of the Escrowed Shares by the Escrow Agent to
1
the Purchaser in accordance with the distribution terms hereinabove set forth,
the Escrow Agent shall be relieved of all liabilities in connection with the
Escrow Account and this Agreement shall terminate.
5. Liability of the Escrow Agent. The duties of the Escrow Agent
---------------------------------
hereunder will be limited to observance of the express provisions of this
Agreement. Furthermore, the Escrow Agent is not expected or required to be
familiar with the provisions of any other writing, understanding or agreement,
and shall not be charged with any responsibility or liability in connection with
the observance or non-observance of the provisions of such other writing,
understanding or agreement, and no implied covenant of any type whatsoever shall
be read into this Agreement. The Escrow Agent may rely and act upon any
instrument received by it pursuant to this Agreement which it reasonably
believes to be in conformity with the requirements of this Agreement and the
Escrow Agent shall not be responsible for determining the genuineness,
authenticity of authority from any such instrument or the person signing same.
The Escrow Agent will not be liable for any action taken or not taken by it
under the terms of this Agreement in the absence of fraud or gross negligence on
its part.
The further provisions shall govern the Escrow Agent's liabilities
hereunder:
(a) In receiving the Escrowed Shares, the Escrow Agent acts only as a
depository and thereby assumes no responsibility, except pursuant to the terms
of this Agreement.
(b) The Escrow Agent may act or refrain from acting in respect of any
matter covered by this Agreement in full reliance upon and with the advice of
counsel which may be selected by it, and shall be fully protected in so acting
or in refraining from acting upon the advice of such counsel. Furthermore, the
Escrow Agent may rely and shall be protected in acting upon any writing that may
be submitted to it in connection with its duties hereunder without determining
the genuineness, authenticity or due authority from any such writing or the
person signing same and shall have no liability or responsibility with respect
to the form, content or validity thereof.
(c) The Escrow Agent shall have no responsibility or liability for
any act or omission on its part, notwithstanding any demand or notice to the
contrary by the Sellers or any other person or entity, all subject to the sole
limitation that the Escrow Agent exercises its best judgment. Except as herein
expressly provided, none of the provisions of this Agreement shall require the
Escrow Agent to expend or risk its own funds or otherwise incur financial
liability or expense in the performance of any of its duties hereunder.
(d) The Escrow Agent is hereby authorized to comply with and obey all
orders, judgments, decrees or writs entered or issued by any court, and in the
event the Escrow Agent obeys or complies with any such order, judgment, decree
or writ, in whole or in part, it shall not be liable to the Sellers and the
Purchaser or any other parties to this Agreement, or to any other person or
entity, by reason or such compliance, notwithstanding that it shall be
determined that any such order, judgment, decree or writ be entered without
jurisdiction or be invalid for any reason or be subsequently reversed, modified,
annulled, satisfied or vacated.
(e) The Escrow Agent shall not be required to institute or defend any
action or legal process involving any matter referred to herein which in any
manner affects its duties or liabilities hereunder to take any other action with
reference to the Escrowed Shares not specifically agreed to herein, and the
Escrow Agent shall not be responsible for any act or failure to act on its part
except in the case of its own fraud or gross negligence.
(f) Should any controversy arise between the Escrow Agent, the
Sellers, or the Purchaser or between any other person or entity with respect to
this Agreement, or with respect to the ownership of or the right to receive the
Escrowed Shares, the Escrow Agent shall have the right to institute a plea of
interpleader in any court of competent jurisdiction to determine the rights of
the parties. Should a plea of interpleader be instituted, or should the Escrow
Agent become involved in litigation in any manner whatsoever connected with or
pertaining to this Agreement or the Escrowed Shares, the Sellers and the
Purchaser hereby agree to pay the Escrow Agent, on demand, in addition to any
charge made hereunder for acting as escrow agent, reasonable attorneys' fees
incurred by the Escrow Agent, and any other disbursements, expenses, losses,
costs, and damages in connection with or resulting from such litigation.
2
6. Indemnification. The Sellers and the Purchaser hereby agree to
---------------
indemnify and hold the Escrow Agent harmless from and against any and all
claims, loses, liabilities, costs, damages, fees charges and expenses (including
attorneys' fees) which the Escrow Agent may incur or sustain by reason of its
acting as Escrow Agent under this Agreement, unless same shall result from the
fraud or gross negligence of the Escrow Agent.
7. Resignation. The Escrow Agent may resign as escrow agent at any time
-----------
by giving the Sellers and the Purchaser at least 10 days' prior written notice
of such resignation. If, on the effective date of such resignation, the Escrow
Agent has not received written instructions of appointment of a successor escrow
agent, the Escrow Agent may thereupon deposit the Escrowed Shares and stock
powers into the registry of a court of competent jurisdiction. The parties
hereto intend that a substitute escrow agent will be appointed to fulfill the
duties of the Escrow Agent hereunder for the remaining term of this Agreement in
the event of the Escrow Agent's resignation, and the Sellers and the Purchaser
will use their best efforts to promptly appoint a substitute Escrow Agent who
shall be bound by the terms and provisions of this Agreement.
8. Termination and Amendment. This Agreement shall remain in effect
---------------------------
until the Escrowed Shares are delivered in accordance herewith; provided that
any escrow agent hereunder who resigns in accordance with the terms hereof shall
no longer be bound by this Agreement, but this Agreement shall remain in effect,
notwithstanding such resignation, for purposes of determining the rights and
duties of the Sellers and the Purchaser and any successor escrow agent. No
amendment or modification to this Agreement shall be in force or effect unless
signed by the parties hereto.
9. No Trusteeship. The Sellers and the Purchaser agree that the Escrow
---------------
Agent is acting solely as an escrowee hereunder and not as a trustee and that
the Escrow Agent has no fiduciary duties, obligations or liabilities under this
Agreement.
10. Confidentiality. Except as required by applicable law, legal process
---------------
or other legal compulsion, the Escrow Agent shall hold all information relating
to the transactions contemplated by this Agreement in strict confidence and
under no circumstance shall any of the terms and conditions or the participants
involved be disclosed, unless such disclosure is mandated by applicable law.
11. No Contracts, Arrangements, Understandings or Relationships with
----------------------------------------------------------------------
Respect to Securities. Other than the Stock Pledge Agreement and this Agreement
---------------------
between the Sellers and the Purchaser, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) by any party to this
Agreement or the Stock Purchase Agreement, the Note, the Stock Pledge Agreement,
and the Consulting Agreements or any of the Attachments referred to therein, or
any other person with respect to the Escrowed Shares, or any other securities of
the Company, including but not limited to transfer or voting of any of the
Escrowed Shares, or any other securities of the Company, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
12. Attorneys' Fees. In the event that it should become necessary for any
---------------
party entitled hereunder to bring suit against any other party for enforcement
of the covenants contained herein, the parties hereby covenant and agree that
the party who is found to be in violation of this Agreement shall also be liable
to the other parties for all reasonable attorneys' fees and costs of court
incurred by such other parties.
13. Benefit. The terms and provisions of this Agreement shall be binding
-------
upon, inure to the benefit of and be enforceable by, the parties hereto and
their respective successors and permitted assigns.
14. Notices. All notices, requests, demands, and other communications
-------
hereunder shall be in writing and delivered personally or sent by registered or
certified United States mail, return receipt requested with postage prepaid, by
facsimile, or by e-mail, if to the Sellers, addressed to Xx. Xxxxx Xxxxxx at
X.X. Xxx 000, Xxxxxx Xxxxx Xx, Xxxxxxxxxx 00000, and to Mr. Xxxxxxx Xxxxxxx at
0000 Xxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxxxxxxx 00000; and if to the Purchaser,
addressed to Xx. Xxxxx Xxx at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000, Xxxxxxx,
Xxxxxxx 00000; and if to the Escrow Agent, addressed to Xxxxxx X. Xxxxxxxx, Esq.
at 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, telecopier (713)
237-3202, and e-mail xxxxxxxxx@xxx-xxx.xxx. Any party may change its address for
purposes of receiving notices pursuant to this Agreement upon 10 days written
notice.
3
15. Construction. Words of any gender used in this Agreement shall be
------------
held and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise. In addition, the pronouns used in this Agreement shall be understood
and construed to apply whether the party referred to is an individual,
partnership, joint venture, corporation or an individual or individuals doing
business under a firm or trade name, and the masculine, feminine and neuter
pronouns shall each include the other and may be used interchangeably with the
same meaning.
16. Waiver. No course of dealing on the part of any party hereto or its
------
agents, or any failure or delay by any such party with respect to exercising any
right, power or privilege of such party under this Agreement or any instrument
referred to herein shall operate as a waiver thereof, and any single or partial
exercise of any such right, power or privilege shall not preclude any later
exercise thereof or any exercise of any other right, power or privilege
hereunder or thereunder.
17. Representations, Warranties and Agreements to Survive. All indemnity
------------------------------------------------------
agreements set forth in this Agreement, as well as all representations,
warranties, covenants and other agreements set forth in this Agreement shall
remain operative and in full force and effect at the termination of this
Agreement, and any successor of the parties shall be entitled to the benefit of
the respective representations, warranties and agreements made herein.
18. Cumulative Rights. The rights and remedies contained in this
------------------
Agreement shall be cumulative and the exercise or partial exercise of any such
right or remedy shall not preclude the exercise of any other right or remedy.
19. Invalidity. In the event any one or more of the provisions contained
----------
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement or any such other
instrument.
20. Headings. The headings used in this Agreement are for convenience and
--------
reference only and in no way define, limit, amplify or describe the scope or
intent of this Agreement, and do not effect or constitute a part of this
Agreement.
21. Excusable Delay. The parties shall not be obligated to perform and
----------------
shall not be deemed to be in default hereunder, if the performance of a
non-monetary obligation required hereunder is prevented by the occurrence of any
of the following, other than as the result of the financial inability of the
party obligated to perform: acts of God, strikes, lock-outs, other industrial
disturbances, acts of a public enemy, war or war-like action (whether actual,
impending or expected and whether de jure or de facto), acts of terrorists,
arrest or other restraint of governmental (civil or military), blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
hurricanes, storms, floods, washouts, sink holes, civil disturbances,
explosions, breakage or accident to equipment or machinery, confiscation or
seizure by any government of public authority, nuclear reaction or radiation,
radioactive contamination or other causes, whether of the kind herein enumerated
or otherwise, that are not reasonably within the control of the party claiming
the right to delay performance on account of such occurrence.
22. No Third-Party Beneficiary. Any agreement to pay an amount and any
----------------------------
assumption of liability contained in this Agreement, express or implied, shall
be only for the benefit of the undersigned parties and their respective
successors and assigns (as herein expressly permitted), and such agreements and
assumptions shall not inure to the benefit of the obligees or any other party,
whomsoever, it being the intention of the parties hereto that no one shall be or
be deemed to be a third-party beneficiary of this Agreement.
23. Governing law; Jurisdiction. This Agreement shall be governed by and
----------------------------
construed in accordance with the laws of the State of Texas without regard to
any conflicts of laws provisions thereof. Each party hereby irrevocably submits
to the personal jurisdiction of the United States District Court located in
Houston, Texas, as well as of the District Courts of the State of Texas in
Houston, Texas over any suit, action or proceeding arising out of or relating to
this Agreement. Each party hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such mediation, arbitration, suit, action or proceeding
brought in any such county and any claim that any such mediation, arbitration,
suit, action or proceeding brought in such county has been brought in an
inconvenient forum.
4
24. Incorporation by Reference. The Stock Purchase Agreement, the Note,
----------------------------
the Stock Pledge Agreement, and the Consulting Agreements or any of the
Attachments referred to therein, constitute integral parts to this Agreement and
are incorporated into this Agreement by this reference.
25. Multiple Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
26. Controlling Agreement. In the event of any conflict between the terms
---------------------
of this Agreement, the Stock Purchase Agreement, the Note, the Stock Pledge
Agreement, and the Consulting Agreements or any of the Attachments referred to
therein, the terms of the Stock Purchase Agreement shall control.
27. Entire Agreement. This instrument contains the entire understanding
-----------------
of the parties with respect to the subject matter hereof, and may not be changed
orally, but only by an instrument in writing signed by each of the parties
hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
-----------------------------------
XXXXX XXXXXX
-----------------------------------
XXXXXXX XXXXXXX
-----------------------------------
XXXXX XXX
-----------------------------------
XXXXXX X. XXXXXXXX
5
ATTACHMENT D
THE STOCK POWERS
ASSIGNMENT OF STOCK SEPARATE FROM STOCK CERTIFICATE
The undersigned does hereby assign and transfer to ____________ 500,000
shares of the preferred stock of Spiderboy International, Inc., a Minnesota
corporation (the "Company") standing in my name on the books and records of the
Company, represented by Certificate No _________ and irrevocably appoint
_____________as my attorney-in-fact for the sole purpose of transferring the
shares of such stock on the books and records of the Company. I represent and
warrant that I am the sole and lawful owner of the shares of such stock, and
that they are all of the shares that I own in the Company. I bind myself, my
heirs, and assigns to warrant and defend forever the title to such shares to the
transferee, his successors and assigns against any lawful claims.
Dated: February ___, 2004
WITNESS:
------------------------------- ----------------------------------
Signature Signature
Xxxxx Xxxxxx
------------------------------- ----------------------------------
Printed Name Printed Name
X.X. Xxx 000
------------------------------- ----------------------------------
Street Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxx Xxxxx Xx, Xxxxxxxxxx 00000
------------------------------- ----------------------------------
City, State and Zip Code City, State and Zip Code
ASSIGNMENT OF STOCK SEPARATE FROM STOCK CERTIFICATE
The undersigned does hereby assign and transfer to ____________ 10,925,752
shares of the common stock of Spiderboy International, Inc., a Minnesota
corporation (the "Company") standing in my name on the books and records of the
Company, represented by Certificate No _________ and irrevocably appoint
____________ as my attorney-in-fact for the sole purpose of transferring the
shares of such stock on the books and records of the Company. I represent and
warrant that I am the sole and lawful owner of the shares of such stock, and
that they are all of the shares that I own in the Company. I bind myself, my
heirs, and assigns to warrant and defend forever the title to such shares to the
transferee, his successors and assigns against any lawful claims.
Dated: February ___, 2004
WITNESS:
------------------------------- ----------------------------------
Signature Signature
Xxxxx Xxxxxx
------------------------------- ----------------------------------
Printed Name Printed Name
X.X. Xxx 000
------------------------------- ----------------------------------
Street Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxx Xxxxx Xx, Xxxxxxxxxx 00000
------------------------------- ----------------------------------
City, State and Zip Code City, State and Zip Code
ASSIGNMENT OF STOCK SEPARATE FROM STOCK CERTIFICATE
The undersigned does hereby assign and transfer to ____________ 500,000
shares of the preferred stock of Spiderboy International, Inc., a Minnesota
corporation (the "Company") standing in my name on the books and records of the
Company, represented by Certificate No ___________ and irrevocably appoint
_______________ as my attorney-in-fact for the sole purpose of transferring the
shares of such stock on the books and records of the Company. I represent and
warrant that I am the sole and lawful owner of the shares of such stock, and
that they are all of the shares that I own in the Company. I bind myself, my
heirs, and assigns to warrant and defend forever the title to such shares to the
transferee, his successors and assigns against any lawful claims.
Dated: February ___, 2004
WITNESS:
------------------------------- ----------------------------------
Signature Signature
Xxxxxxx Xxxxxxx
------------------------------- ----------------------------------
Printed Name Printed Name
0000 Xxxxxx Xxxx
------------------------------- ----------------------------------
Street Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxx 00000
------------------------------- ----------------------------------
City, State and Zip Code City, State and Zip Code
ASSIGNMENT OF STOCK SEPARATE FROM STOCK CERTIFICATE
The undersigned does hereby assign and transfer to ____________ 10,925,751
shares of the common stock of Spiderboy International, Inc., a Minnesota
corporation (the "Company") standing in my name on the books and records of the
Company, represented by Certificate No __________ and irrevocably appoint
_______________ as my attorney-in-fact for the sole purpose of transferring the
shares of such stock on the books and records of the Company. I represent and
warrant that I am the sole and lawful owner of the shares of such stock, and
that they are all of the shares that I own in the Company. I bind myself, my
heirs, and assigns to warrant and defend forever the title to such shares to the
transferee, his successors and assigns against any lawful claims.
Dated: February ___, 2004
WITNESS:
------------------------------- ----------------------------------
Signature Signature
Xxxxxxx Xxxxxxx
------------------------------- ----------------------------------
Printed Name Printed Name
0000 Xxxxxx Xxxx
------------------------------- ----------------------------------
Street Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxx 00000
------------------------------- ----------------------------------
City, State and Zip Code City, State and Zip Code
ATTACHMENT E
FORM OF CONSULTING AGREEMENT
CONSULTING AGREEMENT
THIS AGREEMENT is made this ___ day of __________________, 2004 by and
between SPIDERBOY INTERNATIONAL, INC., a Minnesota corporation (the "Company")
and XXXXXXX XXXXXXX (the "Consultant").
WHEREAS, the Company wishes to obtain the advice, contacts and expert
judgment of the Consultant with respect to the conduct of the Company's
business; and
WHEREAS, the Company desires to have the Consultant act as an independent
contractor for the purpose of providing such services to the Company; and
WHEREAS, the Consultant is qualified and willing to provide such services
pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Services. The Company hereby engages and retains the Consultant as an
--------
independent contractor to provide the services set forth herein. The Consultant
hereby agrees to provide all reasonable and necessary services associated with
the following: (a) the development of a comprehensive business plan; (b) future
acquisition strategies; (c) capital development; and (d) any other ancillary
services relating to the aforementioned (collectively, the "Services"). The
Consultant has fully performed all of the Services hereunder.
2. Representations. The Consultant hereby agrees to use its best efforts
---------------
in providing the Services and loyally representing the interests of the Company
in accordance with the Company's reasonable requirements and objectives. The
Consultant and the Company acknowledge that Consultant is experienced in
providing the Services and will provide the Services with the diligence and care
of others in the industry. The Consultant further represents that it has not,
and shall not, enter into any agreement during the term of this Agreement which
might prevent it from performing its obligations hereunder.
3. Fees. In full consideration of the Services provided hereunder, the
----
Company hereby grants to the Consultant _________ shares of the common stock of
the Company, no par value per share (the "Company Common Stock") for general
business consulting to be issued within a reasonable time after the execution of
this Agreement. One-third of the shares of the Company Common Stock to be
issued hereunder will be registered securities pursuant to a registration
statement on Form S-8 under the Securities Act of 1933, as amended, to be filed
by the Company with the Securities and Exchange Commission (the "S-8 Shares").
One-third of such shares of the Company Common Stock will be restricted in their
resale under Rule 144 promulgated under the Securities Act ("Rule 144"), but
possessing piggyback registration rights, pursuant to that certain Registration
Rights Agreement attached hereto as Attachment 1. The remaining one-third will
------------
be restricted in their resale under Rule 144 and will have no registration
rights. Notwithstanding anything herein contained to the contrary, all shares
of the Company Common Stock to be issued hereunder will be issued (i) first, to
satisfy the obligation to issue the S-8 Shares, and (ii) then, the restricted
shares to be issued subject to Rule 144 with registration rights, and (iii)
finally, the shares to be issued subject to Rule 144 with no registration
rights.
The shares of the Company Common Stock to be issued under this Agreement
shall be issued as follows:
(a) Upon the later of July 1, 2004, or the vote of the shareholders
of the Company to approve the change in the capital structure of the Company as
provided in Paragraph 3(e) of that certain Amended and Restated Stock Purchase
Agreement dated May 25, 2004, by and between Xxxxx Xxxxxx and Xxxxxxx Xxxxxxx,
the Company, and Xxxxx X. Xxx, Xx., the Company will issue ___________ shares to
the Consultant.
(b) As the Company increases its outstanding shares of the Company
Common Stock it will issue additional shares of the Company Common Stock to the
Consultant within 15 days of any such increase on a pro-rata basis determined as
follows: ___________ times a fraction, the numerator of which is the total
number of shares of the issued and outstanding Company Stock at the time in
question and before the issuance of any additional shares to the Consultant
hereunder, and the denominator of which is 204,000,000, less the number of
shares of the Company Common Stock previously issued to the Consultant
hereunder; subject, to the limitation that at no time will the number of shares
of the Company Common Stock to be issued to the Consultant hereunder
1
be in such an amount that following the issuance of such shares the Consultant
will own more than 9.9 percent of the issued and outstanding shares of the
Company Common Stock.
The following example shows the operation of the foregoing discussion in
Paragraph 3(b): Say the Company has issued and outstanding 150,000,000 shares of
the Company Common Stock. After allowing for the initial issuance of the
4,000,000 shares of the Company Common Stock, the Consultant would be entitled
to an additional 9,970,588 shares determined as follows:
9,970,588 = 19,000,000 x 150,000,000 - 4,000,000
-----------
204,000,000
4. Representations and Warranties of the Consultant. With respect to the
------------------------------------------------
S-8 Shares to be issued in payment for the Services rendered hereunder, the
Consultant represents and warrants as follows:
(a) The Consultant is a natural person;
(b) He has provided bona fide services to the Company not related or
connected to the resale of the S-8 Shares;
(c) The Services were not in connection with the offer or sale of
securities in a capital-raising transaction, and do not directly or indirectly
promote or maintain a market for the Company's securities;
(d) By prearrangement or otherwise, the Company has not controlled or
directed the resale of the S-8 Shares in the public market;
(e) The Company or its affiliates have not directly or indirectly
received a percentage of proceeds from any resales of the S-8 Shares by the
Consultant, or
(f) The proceeds from the resale of any such shares have not been
applied to pay expenses of the Company that are not related to any service
provided by the Consultant.
5. Restrictions on Transfer. The Consultant understands and agrees that
-------------------------
the following restrictions and limitations are applicable to the shares of the
Company Common Stock issued to the Consultant hereunder, other than the S-8
Shares:
(a) The shares shall not be sold, pledged, hypothecated or otherwise
transferred unless the shares are registered under the Securities Act of 1933,
as amended, and the securities laws of any state or foreign jurisdiction, or are
exempt therefrom;
(b) A legend in substantially the following form has been or will be
placed on any certificate or other document evidencing the shares:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF
ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER
OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER
SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS
AMENDED, THE SECURITIES LAW OF ANY STATE, OR ANY RULE OR
REGULATION PROMULGATED THEREUNDER.
2
(c) Stop transfer instructions to the transfer agent of the shares
have been or will be placed with respect to the shares so as to restrict the
resale, pledge, hypothecation or other transfer thereof, subject to the further
items hereof, including the provisions of the legend set forth in subparagraph
(b) above; and
(d) The legend and stop transfer instructions described in
subparagraphs (b) and (c) above will be placed with respect to any new
certificate or other document issued upon presentment by the Consultant of
certificates or other documents for transfer.
6. Expenses. All expenses, including travel and lodging, incurred by the
--------
Consultant in the performance of the Services shall be the sole responsibility
of the Consultant, unless otherwise agreed to in writing. During the
continuance of this Agreement, the Consultant shall certify as regular and
guarantee the Consultant's situation towards all relevant tax authorities,
social administrations and professional organizations, if applicable, as being
in conformity with the Consultant's status as an independent contractor.
7. Insurance. The parties agree that the Company shall not be required
---------
to carry insurance or in any way insure the activities of the Consultant, its
agents, servants or employees, nor shall the Company be liable for any of the
acts or omissions of the Consultant, its agents, servants or employees. The
Consultant further agrees to indemnify, defend, and hold harmless the Company
from any and all claims, penalties, fines, causes of action, liabilities, or
threats of such actions which arise out of or relate to this Agreement or the
performance of the Services. This provision shall survive the termination of
this Agreement.
8. Duration. This Agreement shall remain in effect for a period of _____
--------
years commencing on the date hereof, but shall automatically renew, if not
terminated as provided for herein, for successive one year periods.
Notwithstanding the foregoing, the Company or the Consultant may terminate this
Agreement at any time upon 10 days' written notice.
9. Confidentiality. All information relating to the business and affairs
---------------
of the Company shall be treated as Confidential Information, as hereinafter
defined, by the Consultant both during and after the term hereof. Except with
the prior approval of the Company, the Consultant shall not disclose any of the
Confidential Information at any time to any person except authorized personnel
of the Company and its affiliated corporations. The Consultant further agrees
not to use any information made available to or coming into its possession or
knowledge in a manner that is adverse to the business of the Company. All data,
records and written material prepared or compiled by the Consultant or furnished
to the Consultant during the term hereof shall be the sole and exclusive
property of the Company, and none of such data, records or written materials, or
copies thereof, shall be retained by the Consultant after the term of this
Agreement.
As used herein, the term "Confidential Information" includes, without
limitation, information and knowledge pertaining to products, inventions,
innovations, designs, ideas, plans, trade secrets, proprietary information,
manufacturing, packaging, advertising, distribution and sales methods and
systems, sales and profit figures, customer and client lists, and relationships
between the Company and its affiliated corporations and dealers, distributors,
customers, clients, suppliers and others who have had or will have had business
dealings with the Company and its affiliated corporations. The term
"Confidential Information" does not include information which (a) becomes
generally available to the public through no wrongful act on the part of the
Consultant, (b) can be shown to have been previously available to the Consultant
on a non-confidential basis prior to its disclosure to the Consultant by the
Company, or its representatives, (c) becomes available to the Consultant on a
non-confidential basis from a source other than the Company or its
representatives, or (d) is required to be disclosed by order of a court of
competent jurisdiction.
Notwithstanding anything herein contained to contrary, the above described
obligation with respect to confidentiality shall survive any termination of the
Consultant's engagement hereunder or the termination of this Agreement.
10. No Contracts, Arrangements, Understandings or Relationships with
----------------------------------------------------------------------
Respect to Securities. There are no contracts, arrangements, understandings or
----------------------
relationships (legal or otherwise) by any party to this Agreement, or any other
person with respect to the Company Common Stock, or any other securities of the
Company, including but not limited to transfer or voting of any of the Company
Common Stock, or any other securities of the Company, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
3
11. Attorneys' Fees. In the event that it should become necessary for any
---------------
party entitled hereunder to bring suit against any other party for enforcement
of the covenants contained herein, the parties hereby covenant and agree that
the party who is found to be in violation of this Agreement shall also be liable
to the other parties for all reasonable attorneys' fees and costs of court
incurred by such other parties.
12. Benefit. The terms and provisions of this Agreement shall be binding
-------
upon, inure to the benefit of and be enforceable by, the parties hereto and
their respective successors and permitted assigns.
13. Conflict. Notwithstanding anything herein contained to the contrary,
--------
in the event of any conflict between the terms of the Registration Rights
Agreement or this Agreement, the terms of the Registration Rights Agreement
shall control.
14. Relationship of Parties. The Consultant is providing services on an
-------------------------
independent contractor basis. Notwithstanding anything to the contrary herein,
this Agreement shall not in any manner be construed to create a joint venture,
partnership, agency or other similar form of relationship, and neither party
shall have the right or authority to: (a) commit the other party to any
obligation or transaction not expressly authorized by such other party, or (b)
act or purport to act as agent or representative of the other, except as
expressly authorized in writing by such other party. Further, the Consultant
shall not be deemed to be an employee of the Company for any reason. The
Company and the Consultant acknowledge that the Consultant shall not be entitled
to any insurance, pension, profit sharing, retirement or other fringe benefits
which the Company may provide to its employees during the term of this
Agreement.
15. Notices. All notices, requests, demands, and other communications
-------
hereunder shall be in writing and delivered personally or sent by registered or
certified United States mail, return receipt requested with postage prepaid, by
facsimile, or by e-mail, if to the Company, addressed to Xx. Xxxxx X. Xxx, Xx.
at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000, Xxxxxxx, Xxxxxxx 00000, and if to the
Consultant, addressed to Mr. _______ at ______________, telecopier (___) ______,
and e-mail __________. Any party may change its address for purposes of
receiving notices pursuant to this Agreement upon 10 days written notice.
16. Construction. Words of any gender used in this Agreement shall be
------------
held and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise. In addition, the pronouns used in this Agreement shall be understood
and construed to apply whether the party referred to is an individual,
partnership, joint venture, corporation or an individual or individuals doing
business under a firm or trade name, and the masculine, feminine and neuter
pronouns shall each include the other and may be used interchangeably with the
same meaning.
17. Waiver. No course of dealing on the part of any party hereto or its
------
agents, or any failure or delay by any such party with respect to exercising any
right, power or privilege of such party under this Agreement or any instrument
referred to herein shall operate as a waiver thereof, and any single or partial
exercise of any such right, power or privilege shall not preclude any later
exercise thereof or any exercise of any other right, power or privilege
hereunder or thereunder.
18. Cumulative Rights. The rights and remedies contained in this
------------------
Agreement shall be cumulative and the exercise or partial exercise of any such
right or remedy shall not preclude the exercise of any other right or remedy.
19. Invalidity. In the event any one or more of the provisions contained
----------
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement or any such other
instrument.
20. Headings. The headings used in this Agreement are for convenience and
--------
reference only and in no way define, limit, amplify or describe the scope or
intent of this Agreement, and do not effect or constitute a part of this
Agreement.
21. Excusable Delay. The parties shall not be obligated to perform and
----------------
shall not be deemed to be in default hereunder, if the performance of a
non-monetary obligation required hereunder is prevented by the occurrence of any
of the following, other than as the result of the financial inability of the
party obligated to perform: acts of God, strikes, lock-outs, other industrial
disturbances, acts of a public enemy, war or war-like action (whether actual,
impending or expected and whether de jure or de facto), acts of terrorists,
arrest or other restraint of governmental (civil or military), blockades,
insurrections, riots, epidemics, landslides, lightning,
4
earthquakes, fires, hurricanes, storms, floods, washouts, sink holes, civil
disturbances, explosions, breakage or accident to equipment or machinery,
confiscation or seizure by any government of public authority, nuclear reaction
or radiation, radioactive contamination or other causes, whether of the kind
herein enumerated or otherwise, that are not reasonably within the control of
the party claiming the right to delay performance on account of such occurrence.
22. No Third-Party Beneficiary. Any agreement to pay an amount and any
----------------------------
assumption of liability contained in this Agreement, express or implied, shall
be only for the benefit of the undersigned parties and their respective
successors and assigns (as herein expressly permitted), and such agreements and
assumptions shall not inure to the benefit of the obligees or any other party,
whomsoever, it being the intention of the parties hereto that no one shall be or
be deemed to be a third-party beneficiary of this Agreement.
23. Governing law; Jurisdiction. This Agreement shall be governed by and
----------------------------
construed in accordance with the laws of the State of California without regard
to any conflicts of laws provisions thereof. Each party hereby irrevocably
submits to the personal jurisdiction of the United States District Court located
in San Diego, California, as well as of the Superior Courts of the State of
California in San Diego County, California over any suit, action or proceeding
arising out of or relating to this Agreement. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such mediation, arbitration,
suit, action or proceeding brought in any such county and any claim that any
such mediation, arbitration, suit, action or proceeding brought in such county
has been brought in an inconvenient forum.
24. Incorporation by Reference. The Attachments to this Agreement
----------------------------
referred to or included herein constitute integral parts to this Agreement and
are incorporated into this Agreement by this reference.
25. Multiple Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto.
26. Entire Agreement. This instrument contains the entire understanding
-----------------
of the parties with respect to the subject matter hereof, and may not be changed
orally, but only by an instrument in writing signed by each of the parties
hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
SPIDERBOY INTERNATIONAL, INC.
By
----------------------------------------------
Xxxxx X. Xxx, Xx., President
----------------------------------------------
-----------------------
Attachment:
----------
Attachment 1 - Registration Rights Agreement
5
ATTACHMENT 1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is entered into as of _______________, 2004, by and between
SPIDERBOY INTERNATIONAL, INC., a Minnesota corporation (the "Company"), and
_______________________ (the "Holder").
WHEREAS, on even date herewith the Company executed and delivered to the
Holder that certain Consulting Agreement (the "Consulting Agreement") whereby
the Company has agreed to issue to the Holder up to ___________ shares of the
Company's common stock, no par value per share (the "Company Common Stock"), in
payment for services as described in the Consulting Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Registration Rights Available. Pursuant to the terms and conditions
-------------------------------
contained herein, and in the Consulting Agreement, the Company agrees to provide
the Holder or any permitted assignee of the Holder (collectively, the "Holder")
with the right to "piggyback" (the "Registration Rights") on a firm commitment
underwritten offering with respect to the Company Common Stock and any other
securities issued or issuable at any time or from time to time in respect of the
Company Common Stock as a result of a merger, consolidation, reorganization,
stock split, stock dividend, recapitalization or other similar event involving
the Company (collectively, the "Registrable Securities").
2. Registration Rights. With respect to the Registration Rights, the
--------------------
parties agree as follows:
(a) Subject to Paragraph 2(b), the Company will (i) promptly give to
the Holder written notice of any registration relating to an Underwritten Public
Offering, and (ii) include in such registration (and related qualification under
blue sky laws or other compliance) such of the Holder's Registrable Securities
as are specified in the Holder's written request or requests, mailed in
accordance with the terms of this Agreement within 30 days after the date of
such written notice from the Company.
(b) The right of the Holder to registration pursuant to the
Registration Rights shall be conditioned upon the Holder's participation in such
underwriting, and the inclusion of the Registrable Securities in the
underwriting shall be limited to the extent provided herein. The Holder shall
(together with the Company) enter into an underwriting agreement in customary
form with the managing underwriter selected for the Underwritten Public Offering
by the Company. Notwithstanding any other provision of this Agreement, if the
managing underwriter determines that marketing factors require a limitation of
the number of the Registrable Securities to be underwritten, the managing
underwriter may limit some or all of the Registrable Securities that may be
included in the registration and the Underwritten Public Offering as follows:
the number of the Registrable Securities that may be included in the
registration and the Underwritten Public Offering by the Holder shall be
determined by multiplying the number of the shares of the Registrable Securities
of all selling shareholders of the Company which the managing underwriter is
willing to include in such registration and the Underwritten Public Offering
times a fraction, the numerator of which is the number of the Registrable
Securities requested to be included in such registration and the Underwritten
Public Offering by the Holder, and the denominator of which is the total number
of the Registrable Securities which all selling shareholders of the Company have
requested to be included in such registration and the Underwritten Public
Offering. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocable to any such
person to the nearest 100 shares. If the Holder disapproves of the terms of any
such underwriting, it may elect to withdraw therefrom by written notice to the
Company and the managing underwriter, delivered not less than seven days before
the effective date of the Underwritten Public Offering. Any of the Registrable
Securities excluded or withdrawn from the Underwritten Public Offering shall be
withdrawn from such registration, and shall not be transferred in a public
distribution prior to 60 days after the effective date of the Registration
Statement relating thereto, or such other shorter period of time as the
underwriters may require.
3. Registration Procedure. With respect to the Registration Rights, the
-----------------------
following provisions shall apply:
1
(a) The Holder shall be obligated to furnish to the Company and the
underwriters such information regarding the Registrable Securities and the
proposed manner of distribution of the Registrable Securities as the Company and
the underwriters may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to herein and shall
otherwise cooperate with the Company and the underwriters in connection with
such registration, qualification or compliance.
(b) With a view to making available the benefits of certain rules and
regulations of the Securities and Exchange Commission (the "SEC") which may at
any time permit the sale of any Restricted Securities as defined in Rule 144
("Rule 144") promulgated under the Securities Act of 1933, as amended (the
"Securities Act") to the public without registration, the Company agrees to use
its best lawful efforts to:
(i) Make and keep public information available, as those terms
are understood and defined in Rule 144 at all times during which the Company is
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(ii) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at all times during which the Company is subject to such reporting
requirements); and
(iii) So long as the Holder owns any Restricted Securities, to
furnish to the Holder upon request a written statement from the Company as to
its compliance with the reporting requirements of Rule 144 and with regard to
the Securities Act and the Exchange Act (at all times during which the Company
is subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as the Holder may reasonably request in availing itself of any rule
or regulation of the SEC allowing the Holder to sell any Restricted Securities
without registration.
(c) The Company agrees that it will furnish to the Holder such number
of prospectuses meeting the requirements of Section 10(a)(3) of the Securities
Act, offering circulars or other documents incident to any registration,
qualification or compliance referred to herein as provided or, if not otherwise
provided, as the Holder from time to time may reasonably request.
(d) All expenses (except for any underwriting and selling discounts
and commissions and legal fees for the Holder's attorneys) of any registrations
permitted pursuant to this Agreement and of all other offerings by the Company
(including, but not limited to, the expenses of any qualifications under the
blue sky or other state securities laws and compliance with governmental
requirements of preparing and filing any post-effective amendments required for
the lawful distribution of the Registrable Securities to the public in
connection with such registration, of supplying prospectuses, offering circulars
or other documents) will be paid by the Company.
(e) In connection with the preparation and filing of any Registration
Statement under the Securities Act pursuant to this Agreement, the Company will
give the Holder and the Holder's attorneys and accountants, the opportunity to
participate in the preparation of any Registration Statement, each prospectus
included therein or filed with the SEC, and each amendment thereof or supplement
thereto, and will give each of them such access to its books and records and
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary to conduct a reasonable investigation within the meaning of
the Securities Act.
(f) The Company shall notify each Holder of Registrable Securities
covered by a Registration Statement, during the time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
2
4. Blackout Period. At any time after the effective date of the
----------------
Registration Statement, if the Company gives to the Holder a notice pursuant to
Paragraph 3(f) hereof and stating that the Company requires the suspension by
the Holder of the distribution of any of the Registrable Securities, then the
Holder shall cease distributing the Registrable Securities for such period of
time (the "Blackout Period"), not to exceed 120 days from the time notice is
sent until the Company informs the Holder that the Blackout Period has been
terminated. Upon notice by the Company to the Holder of such determination, the
Holder will (a) keep the fact of any such notice strictly confidential, (b)
promptly halt any offer, sale, trading or transfer of any of the Registrable
Securities for the duration of the Blackout Period, and (c) promptly halt any
use, publication, dissemination or distribution of each prospectus included
within the Registration Statement, and any amendment or supplement thereto by it
and any of its affiliates for the duration of the Blackout Period.
5. Lock-Up. In connection with any Underwritten Public Offering, the
-------
Holder agrees, if requested, to execute a lock-up letter addressed to the
managing underwriter in customary form agreeing not to sell or otherwise dispose
of the Registrable Securities owned by the Holder (other than any that may be
included in the offering) for a period not exceeding 180 days.
6. Delay of Registration. No Holder shall have any right to obtain or
-----------------------
seek an injunction restraining or otherwise delaying any registration of the
Registrable Securities as the result of any controversy that might arise with
respect to the interpretation or implementation of this Agreement.
7. Indemnification by the Company. In the event of any registration of
--------------------------------
the Registrable Securities of the Company under the Securities Act, pursuant to
the terms of this Agreement, the Company agrees to indemnity and hold harmless
the Holder and each other person who participates as an underwriter in the
offering or sale of the Registrable Securities against any and all claims,
demands, losses, costs, expenses, obligations, liabilities, joint or several,
damages, recoveries and deficiencies, including interest, penalties and
attorneys' fees (collectively the "Claims"), to which the Holder or any such
underwriter may become subject under the Securities Act or otherwise, insofar as
the Claims or actions or proceedings, whether commenced or threatened, in
respect thereto arise out of or are based on any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which the Holder's Registrable Securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, 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, and
the Company will reimburse the Holder and each such underwriter for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any Claim or action or proceeding in respect thereto; provided that
the Company shall not be liable in any such case to the extent that any Claim or
action or proceeding in respect thereof or expense arises out of or is based on
an untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance on and in
conformity with written information furnished to the Company through an
instrument duly executed by the Holder specifically stating that it is for use
in the preparation thereof. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Holder or any
such underwriter and survive the transfer of the Registrable Securities by the
Holder.
8. Indemnification by the Holder. The Company may require, as a
--------------------------------
condition to including the Registrable Securities in any Registration Statement
filed pursuant to this Agreement, that the Company shall have received an
undertaking satisfactory to it from the Holder, to indemnify and hold harmless
(in the same manner and to the same extent as set forth in Paragraph 7 hereof)
the Company, each director and officer of the Company and each other person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement or alleged statement in or
omission or alleged omission from the Registration Statement, any preliminary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance on and in conformity with written information furnished to the Company
through an instrument duly executed by the Holder specifically stating that it
is for use in the preparation of the Registration Statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
Notwithstanding the foregoing, the maximum liability hereunder which the Holder
shall be required to suffer shall be limited to the net proceeds to the Holder
from the Registrable Securities sold by the Holder in any such offering. Such
indemnity shall remain in full force and effect, regardless of any
3
investigation made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer of the Registrable
Securities by the Holder.
9. Notice of Claims. Promptly after receipt by an indemnified party of
------------------
notice of the commencement of any action or proceeding involving a Claim, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under this Agreement except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnifying party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of a Claim the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that 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 a Claim.
10. Indemnification Payments. The indemnification required by this
-------------------------
Agreement shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
11. Assignment of Registration Rights. The rights to cause the Company to
---------------------------------
register Registrable Securities pursuant to this Agreement may be assigned by
the Holder to a transferee or assignee of such securities who shall, upon such
transfer or assignment, be deemed a Holder under this Agreement; provided that
the Company is furnished with written notice of the name and address of such
transferee or assignee and the Registrable Securities with respect to which the
Registration Rights are being assigned; provided, further, that such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act and that such transferee or assignee is either (a) a member
of the immediate family or a trust for the benefit of any Holder that is an
individual or (b) a transferee or assignee that after the transfer or assignment
holds all of the Registrable Securities.
12. Termination of this Agreement. This Agreement shall terminate with
--------------------------------
respect to the Holder when all of the Registrable Securities have been
registered as provided herein.
13. No Contracts, Arrangements, Understandings or Relationships with
----------------------------------------------------------------------
Respect to Securities. There are no contracts, arrangements, understandings or
----------------------
relationships (legal or otherwise) by any party to this Agreement, or any other
person with respect to the Company Common Stock, or any other securities of the
Company, including but not limited to transfer or voting of any of the Company
Common Stock, or any other securities of the Company, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
14. Attorneys' Fees. In the event that it should become necessary for any
---------------
party entitled hereunder to bring suit against any other party for enforcement
of the covenants contained herein, the parties hereby covenant and agree that
the party who is found to be in violation of this Agreement shall also be liable
to the other parties for all reasonable attorneys' fees and costs of court
incurred by such other parties.
15. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or the breach, termination, or validity thereof, shall be
settled by final and binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA Rules") in
effect as of the effective date of this Agreement. The American Arbitration
Association shall be responsible for (a) appointing a sole arbitrator, and (b)
administering the case in accordance with the AAA Rules. The situs of the
arbitration shall be San Diego, California. Upon the application of either
party to this Agreement, and whether or not an arbitration proceeding has yet
been initiated, all courts having jurisdiction hereby are authorized to: (x)
issue and enforce in any lawful manner, such temporary restraining orders,
preliminary injunctions and other interim measures of relief as may be necessary
4
to prevent harm to a party's interest or as otherwise may be appropriate pending
the conclusion of arbitration proceedings pursuant to this Agreement; and (y)
enter and enforce in any lawful manner such judgments for permanent equitable
relief as may be necessary to prevent harm to a party's interest or as otherwise
may be appropriate following the issuance of arbitral awards pursuant to this
Agreement. Any order or judgment rendered by the arbitrator may be entered and
enforced by any court having competent jurisdiction.
16. Benefit. All the terms and provisions of this Agreement shall be
-------
binding upon and inure to the benefit of and be enforceable by the parties
hereto, and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns. Notwithstanding anything
herein contained to the contrary, the Company shall have the right to assign
this Agreement to any party without the consent of the Holder.
17. Conflict. Notwithstanding anything herein contained to the contrary,
--------
in the event of any conflict between the terms of the Consulting Agreement or
this Agreement, the terms of this Agreement shall control.
18. Notices. All notices, requests, demands, and other communications
-------
hereunder shall be in writing and delivered personally or sent by registered or
certified United States mail, return receipt requested with postage prepaid, by
facsimile, or by e-mail, if to the Company, addressed to Xx. Xxxxx X. Xxx, Xx.
at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000, Xxxxxxx, Xxxxxxx 00000, telecopier
(000) 000-0000, and if to the Holder, addressed to __________ at ______________,
telecopier (___) ______, and e-mail __________. Any party may change its
address for purposes of receiving notices pursuant to this Agreement upon 10
days written notice.
19. Construction. Words of any gender used in this Agreement shall be
------------
held and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise. In addition, the pronouns used in this Agreement shall be understood
and construed to apply whether the party referred to is an individual,
partnership, joint venture, corporation or an individual or individuals doing
business under a firm or trade name, and the masculine, feminine and neuter
pronouns shall each include the other and may be used interchangeably with the
same meaning.
20. Waiver. No course of dealing on the part of any party hereto or its
------
agents, or any failure or delay by any such party with respect to exercising any
right, power or privilege of such party under this Agreement or any instrument
referred to herein shall operate as a waiver thereof, and any single or partial
exercise of any such right, power or privilege shall not preclude any later
exercise thereof or any exercise of any other right, power or privilege
hereunder or thereunder.
21. Cumulative Rights. The rights and remedies contained in this
------------------
Agreement shall be cumulative and the exercise or partial exercise of any such
right or remedy shall not preclude the exercise of any other right or remedy.
22. Invalidity. In the event any one or more of the provisions contained
----------
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement or any such other
instrument.
23. General Assurances. The parties agree to execute, acknowledge, and
-------------------
deliver all such further instruments, and do all such other acts, as may be
necessary or appropriate in order to carry out the intent and purposes of this
Agreement.
24. Time of the Essence. Time is of the essence of this Agreement.
----------------------
25. Headings. The headings used in this Agreement are for convenience and
--------
reference only and in no way define, limit, amplify or describe the scope or
intent of this Agreement, and do not effect or constitute a part of this
Agreement.
26. Excusable Delay. The parties shall not be obligated to perform and
----------------
shall not be deemed to be in default hereunder, if the performance of a
non-monetary obligation required hereunder is prevented by the occurrence of any
of the following, other than as the result of the financial inability of the
party obligated to
5
perform: acts of God, strikes, lock-outs, other industrial disturbances, acts of
a public enemy, war or war-like action (whether actual, impending or expected
and whether de jure or de facto), acts of terrorists, arrest or other restraint
of governmental (civil or military), blockades, insurrections, riots, epidemics,
landslides, lightning, earthquakes, fires, hurricanes, storms, floods, washouts,
sink holes, civil disturbances, explosions, breakage or accident to equipment or
machinery, confiscation or seizure by any government of public authority,
nuclear reaction or radiation, radioactive contamination or other causes,
whether of the kind herein enumerated or otherwise, that are not reasonably
within the control of the party claiming the right to delay performance on
account of such occurrence.
27. No Third-Party Beneficiary. Any agreement to pay an amount and any
--------------------------
assumption of liability contained in this Agreement, express or implied, shall
be only for the benefit of the undersigned parties and their respective
successors and assigns (as herein expressly permitted), and such agreements and
assumptions shall not inure to the benefit of the obligees or any other party,
whomsoever, it being the intention of the parties hereto that no one shall be or
be deemed to be a third-party beneficiary of this Agreement.
28. Governing law; Jurisdiction. This Agreement shall be governed by
-----------------------------
and construed in accordance with the laws of the State of California without
regard to any conflicts of laws provisions thereof. Each party hereby
irrevocably submits to the personal jurisdiction of the United States District
Court located in San Diego, California, as well as of the Superior Courts of the
State of California in San Diego County, California over any suit, action or
proceeding arising out of or relating to this Agreement. Each party hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such mediation,
arbitration, suit, action or proceeding brought in any such county and any claim
that any such mediation, arbitration, suit, action or proceeding brought in such
county has been brought in an inconvenient forum.
29. Multiple Counterparts. This Agreement may be executed in one or
----------------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto.
30. Entire Agreement. This instrument contains the entire
-----------------
understanding of the parties with respect to the subject matter hereof, and may
not be changed orally, but only by an instrument in writing signed by each of
the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
SPIDERBOY INTERNATIONAL, INC.
By
----------------------------------------------
Xxxxx X. Xxx, Xx., President
----------------------------------------------
----------------------
6
EXHIBIT 4(l)
CONTRACTS
EXHIBIT 4(l)
CONTRACTS
None
EXHIBIT 4(m)
TAX MATTERS
EXHIBIT 4(m)
TAX MATTERS
None
EXHIBIT 7
EXAMPLE OF THE EFFECT OF THE ISSUANCE OF NEW SHARES ON DILUTION
EXHIBIT 7
The Consultants will have the right to receive up to 43,000,000 shares of
the Company Common Stock under the Consulting Agreements with the first issuance
of 9,666,665 to take place upon the later of July 1, 2004, or the vote of the
shareholders of the Company to approve the change in the capital structure of
the Company as provided in Paragraph 3(e) hereof. Thereafter, the Consultants
will be issued additional shares of the remaining balance of 33,333,335 shares
ratably as new shares are issued as part of acquisitions, financing, employment
contracts and board compensation packages maintaining roughly a 21.5 percentage
ownership interest in the issued and outstanding shares of the Company Common
Stock. For example, if the Company issues 500,000 shares in an acquisition, the
Consultants would be issued approximately 107,500 of the 500,000 shares. All of
these totals would be subject to the reverse split of up to one for 10. If the
Company affects the reverse split as part of the 14A filing at one for 10, then
the 43,000,000 would become 4,300,000, the 9,666,665 would become 966,666 and so
forth. Regardless of whether or not the Consultants sell their stock or hold
their stock the calculations will be based on what has been issued.
As a further example, if the Company has performed a reverse split at one
for 10, the most stock that would be issued under the Consulting Agreements
would be 4,300,000 if and only if the Company had increased the total number of
shares issued to 20,000,000 inclusive of the shares issued to the Consultants.
If the Company has only increased the outstanding shares to 10,000,000 then the
only shares that would be issued to the Consultants would be 2,150,000 inclusive
in the 10,000,000.
