Contract
This
STOCK
PURCHASE AGREEMENT (this
"Agreement") is dated as of January 1, 2005 and is by and between The Xxxxxxx
Xxx Xxxxxxx 2004 Trust dated July 31, 2004 ("Seller"), and Xxxxxxx Enterprises,
Inc., a California corporation ("Purchaser").
RECITALS
WHEREAS, Seller
desires to sell to Purchaser, and Purchaser desires to purchase from Seller
certain shares of the Common Stock of Netword Publishing, Inc., a California
corporation ("Company"), on the terms and conditions set forth in this
Agreement.
WHEREAS, in
further consideration of and concurrently with the execution of this Agreement,
Seller and Purchaser have entered into (i) an Exclusive License Agreement dated
as of January 1, 2005 (with Company as an additional party), a copy of which is
attached hereto as Exhibit "A" and incorporated herein by this reference (the
"License Agreement"), and a Shareholders Agreement dated as of January 1, 2005,
a copy of which is attached hereto as Exhibit "B" and incorporated herein by
this reference (the "Shareholders Agreement") (together with a Secured
Promissory Note dated as of January 1, 2005 in the amount of $89,520.32 executed
by Purchaser in favor of Company [the "Shareholders Agreement Note"]), and
Company and Xxxx Xxxxxxx have entered into an Employment Agreement dated as of
January 1, 2005, a copy of which is attached hereto as Exhibit "C" and
incorporated herein by this reference (the "Employment Agreement").
NOW,
THEREFORE, in
consideration of the foregoing Recitals, the mutual promises hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section
1
Agreement
to Purchase and Sell Shares of Common Stock
1.1
Agreement to Purchase and Sell. Upon the
terms and subject to the conditions of this Agreement, and effective as of
January 1, 2005, Seller hereby agrees to sell to Purchaser at the Closing (as
defined below), and Purchaser hereby agrees to purchase from Seller at the
Closing, 3,990 shares of Common Stock of the Company (the "Shares") for the
purchase price of $460,000.00.
1.2
Purchase Price; Document Deliveries. In
consideration of the sale to Purchaser of the Shares, Purchaser shall have
executed and delivered the following to Seller before the Closing, and fully and
timely comply with the terms and conditions thereof: (i) a cash down payment of
$8,893.09; (ii) the Secured Promissory Note in the form of Exhibit "D" attached
hereto and incorporated herein by this reference for the remaining principal
balance plus interest at 6% per annum payable in equal monthly installments of
principal and interest of $8,893.09 commencing on February 5, 2005 and ending on
December 5, 2009; (iii) the Stock Pledge Agreement in the form of Exhibit "E"
attached hereto and incorporated herein by this reference, securing Purchaser's
obligations hereunder, under the Shareholders Agreement, under the Shareholders
Agreement Note, and under the License Agreement; (iv) the Shareholders Agreement
and the Shareholders Agreement Note; (v) the License Agreement; (vi) Stock
Certificate No. 6 issued to Purchaser in the amount of 3,990 shares of the
Company together with the stock powers required under the Stock Pledge
Agreement; and (vii) such other agreements and documents as Seller may
reasonably request. This Agreement and the promissory notes, agreements and
other documents referenced in this section 1.2(i) through (vii) and within those
documents themselves shall collectively be referred to herein as the
"Transaction Documents."
Section
2
Closing
2.1
Closing. The
Closing of the purchase and sale of the Shares hereunder (the "Closing") shall
be held on a date in January 2005 and at a time and place mutually agreed upon
by Seller and Purchaser.
Section
3
Representations
and Warranties of the Seller
Seller
hereby represents and warrants to the Purchaser as follows:
3.1
Company Financial Statement. A copy
of a balance sheet pertaining to the Company dated December 31, 2004 (together
with a profit and loss statement), prepared by the Company's accountant, Xxxxxx
X. Xxxxxx, CPA, will be provided to Purchaser (Attn: Will Xxxxxxx) on or before
February 28, 2005 (the "Financial Statement"), accompanied by Seller's
representation to its actual current knowledge that the assets and liabilities
set forth on the balance sheet of the Financial Statement are substantially true
and correct as of December 31, 2004 (except as may otherwise be disclosed by
Seller to Purchaser in writing).
3.2
Shares.
Immediately prior to the transactions contemplated hereunder and under the
Shareholders Agreement, Seller is the owner of the Shares, beneficially and of
record, free and clear of all liens, encumbrances, security agreements,
equities, options, claims, charges and restrictions other than under applicable
federal and state corporation and securities laws. In connection with that
certain judgment of dissolution entered by the Orange County Superior Court on
July 20, 2004, Section 3.1.1 of the Marital Settlement Agreement attached
thereto between Xxxx Xxxxxxx and his former spouse, Xxxxx X. Xxxxxxx, provides
for Xx. Xxxxxxx'x receipt of all right, title and interest in the shares of
Company (including the Shares). On July 31, 2004, Xx. Xxxxxxx contributed such
shares (including the Shares) to the Xxxxxxx Trust.
3.3 No
Conflict. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with or result
in any violation of or default under (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or to a loss of a material benefit under, any mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Seller, its properties or assets, the effect of which
would have a material adverse effect on Seller or materially impair or restrict
Seller's power to perform its obligations as contemplated under the
above-referenced instruments.
3.4
Authority. Seller
has the full power and authority to execute and deliver the Transaction
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby. The Transaction Documents to which Seller is a party have
been duly executed and delivered by Seller and constitute legal, valid and
binding obligations of Seller enforceable against Seller in accordance with
their respective terms. The execution and delivery by Seller of the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby will not violate any law, or conflict with,
result in any breach of, constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or result in the creation
of an encumbrance on any of the properties or assets of Seller pursuant to, any
indenture, mortgage, lease, agreement or other instrument to which Seller is a
party or by which its properties or assets are bound. No material approval,
authorization, consent or other order or action of or filing with any person,
entity or court, administrative agency or other governmental body in the United
States of America is required for the execution and delivery by Seller of the
Transaction Documents to which it is a party or the consummation by Seller of
the transactions contemplated hereby or thereby.
3.5
Litigation. Except
as may be disclosed on a schedule to this Agreement signed by both parties, to
Seller's actual current knowledge, Company is not subject to any judgment,
order, writ, injunction or decree of any court or any federal, state, local or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator that materially affects
the operation of Company.
3.6
Accuracy. To
Seller's actual current knowledge, the disclosures of Seller in this Agreement
and in any schedule attached hereto are complete and accurate in all material
respects, and they do not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements or facts
contained therein, in light of the circumstances under which they were made, not
misleading.
3.7
Brokers. No
broker, investment banker or other person is entitled to any broker's, finder's
or similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of
Seller.
Section
4
Representations
and Warranties Of Purchaser
Purchaser
hereby represents and warrants to Seller as follows:
4.1
Organization.
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization.
4.2
Authority.
Purchaser has the full corporate power and authority to execute and deliver the
Transaction Documents and to consummate the transactions contemplated hereby and
thereby. All corporate acts and other proceedings required to be taken by or on
the part of Purchaser to authorize such execution, delivery and consummation
have been duly and properly taken. The Transaction Documents have been duly
executed and delivered by Purchaser and constitute legal, valid and binding
obligations of Purchaser enforceable against Purchaser in accordance with their
respective terms. The execution and delivery by Purchaser of the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby will not violate any law, or conflict with, result in any breach of,
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or result in the creation of an encumbrance on
any of the properties or assets of Purchaser pursuant to, the corporate charter
or by-laws of Purchaser or any indenture, mortgage, lease, agreement or other
instrument to which Purchaser is a party or by which its properties or assets
are bound. No material approval, authorization, consent or other order or action
of or filing with any person, entity or court, administrative agency or other
governmental body in the United States of America is required for the execution
and delivery by Purchaser of the Transaction Documents or the consummation by
Purchaser of the transactions contemplated hereby or thereby.
4.3 No
Legal Proceedings. Except
as may be disclosed on a schedule to this Agreement signed by both parties,
there is no action, suit, investigation, order, judgment or proceeding pending
or, to the knowledge of Purchaser, threatened against or affecting Purchaser
that, individually or when aggregated with one or more other actions, suits,
orders, judgments or proceedings, has or might reasonably be expected to have a
material adverse effect on Purchaser's ability to perform any of its obligations
hereunder or under any of the Transaction Documents.
4.4
Brokers. No
broker, investment banker or other person is entitled to any broker's, finder's
or similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Purchaser.
4.5
Accuracy. To
Purchaser's current actual knowledge, the disclosures made in this Agreement and
any schedules attached hereto are complete and accurate in all material
respects, and such disclosures do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements or
facts contained therein, in light of the circumstances under which they were
made, not misleading.
4.6
Investment. Purchaser
is acquiring the Shares for investment for its own account, not as a nominee or
agent, and not with a view to, or for resale in connection with, any
distribution thereof. Purchaser understands that the Shares have not been
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of
Purchaser's representations and warranties contained herein. Nothing contained
in this Section 4.6 shall limit in any respect the Company's representations and
warranties contained in this Agreement or any other written instrument delivered
by the Company to the Purchaser hereunder or thereunder.
4.7
Disclosure of Information.
Purchaser has had full access to all information it considers necessary or
appropriate to make an informed investment decision with respect to the Shares
to be purchased by Purchaser under this Agreement.
4.8
Investment Experience.
Purchaser understands that the purchase of the Shares involves substantial risk.
Purchaser has experience as an investor in securities of companies and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment in the Shares and has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and risks of
this investment in the Shares and protecting its own interests in connection
with this investment.
4.9
Accredited Investor Status.
Purchaser is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act.
4.10
Restricted Securities.
Purchaser understands that the Shares to be purchased by the Purchaser hereunder
are characterized as "restricted securities" under the Securities Act inasmuch
as they are being acquired in a transaction not involving a public offering and
that under the Securities Act and applicable regulations thereunder such
securities may be resold without registration under the Securities Act only in
certain limited circumstances. Purchaser is familiar with Rule 144 of the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act. Purchaser understands that the
Company is under no obligation to register any of the Shares sold hereunder.
4.11
No Conflict. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or to a loss of a material benefit under, any provision of the
Articles of Incorporation or Bylaws of Purchaser or any mortgage, indenture,
lease or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Purchaser, its properties or assets, the effect of which would have a
material adverse effect on Purchaser and its subsidiaries, taken as a whole, or
materially impair or restrict Purchaser's power to perform its obligations as
contemplated under the above-referenced instruments.
Section
5
Further
Covenants and Agreements
5.1
Access; Information; Confidentiality. (a) Each
party covenants and agrees, and shall cause each of its officers, employees,
attorneys, accountants and other authorized representatives, to treat all
information obtained or developed by them concerning the other party in strict
confidence. (b) If at any time it is necessary that a party be furnished with
additional information, documents or records relating to this Agreement in order
properly to prepare or support its tax returns or other documents or reports
required to be filed with governmental authorities or any securities exchanges
or otherwise for any purpose in connection with the performance or discharge by
the parties of their obligations hereunder, and such information, documents or
records are in the possession or control of the other party, such other party
agrees to use all reasonable efforts to furnish or make available such
information, documents or records (or copies thereof).
5.2
Fees and Expenses. Each
party shall bear its own expenses incurred in connection with the transactions
contemplated hereby; provided, however, that Purchaser shall pay in full when
due the reasonable legal fees of Seller in connection with this Agreement and
the other Transaction Documents.
5.3
Indemnification. Each of
Seller and Purchaser (the "Indemnifying Party") shall promptly protect, defend,
indemnify and hold harmless the other party (the "Indemnified Party") against
and in respect of all actions, suits, demands, judgments, costs and expenses
(including reasonable attorneys' fees) initiated by any third party, exceeding
in the aggregate $2,000.00, and for which the Indemnified Party is held
responsible, relating to any misrepresentation, breach of any representation or
warranty or non-fulfillment of any agreement on the part of the Indemnifying
Party in any Transaction Document. Without limitation on the foregoing, Seller
shall promptly protect, defend, indemnify and hold harmless Purchaser against
all actions, suits, demands, judgments, costs and expenses (including reasonable
attorneys' fees) initiated by any third party, exceeding in the aggregate
$2,000.00, and for which Purchaser is held responsible, relating to any Company
liabilities incurred prior to January 1, 2005.
5.4
Public Announcements. Except
to the extent otherwise required by law or the rules and regulations of the
Securities and Exchange Commission, the parties hereto shall not, nor shall they
permit the Corporation nor any of their respective parent, subsidiary of
affiliated entities to, issue any press release or make any public statement
with respect to this Agreement, the Employment Agreement or any of the other
Transaction Documents, or any of the transactions contemplated hereby or
thereby, except for any press releases that may be mutually agreed to by the
parties in writing.
Section
6
General
Provisions
6.1
Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given upon receipt through personal delivery, overnight courier,
facsimile transmission, or U.S. first class mail, return receipt requested, to
the parties at the following addresses and facsimile numbers (or at such other
address or facsimile number for a party as shall be specified by like
notice):
If to
Purchaser:
Xxxxxxx
Enterprises, Inc.
00
Xxxxxxxx, Xxxxx 000
Xxxxx
Xxxxx, XX 00000
Attention:
Xxxxxxx X. Xxxxxxx and J. Xxxx Xxxxx
Title:
President and General Counsel
Facsimile:
(000) 000-0000
If to
Seller:
The
Xxxxxxx Xxx Xxxxxxx 2004 Trust
c/o
Carlsmith Ball LLP
000 Xxxxx
Xxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxxxxx, XX 00000
Attn:
Xxxxx Xxxxxxxx
Facsimile: (000) 000-0000
6.2
Interpretation. When a
reference is made in this Agreement to a section, such reference shall be to a
section of this Agreement unless otherwise indicated, and the words "hereof,"
"herein" and "hereunder" and similar terms refer to this Agreement as a whole
and not to any particular provision of this Agreement, unless the context
otherwise requires. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
6.3
Counterparts. This
Agreement may be executed in counterparts, all of which shall be considered one
and the same agreement and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to all the
parties.
6.4
Entire Agreement. This
Agreement (including, without limitation, the Recitals, Exhibits and any
schedules hereof and hereto) contains the entire agreement between the parties
hereto in connection with subject matter hereof and supersedes all prior
agreements or understandings or communications (including, without limitation,
any faxed or e-mailed communications) that they may have had regarding this
Agreement or such subject matter, either oral or in writing. In this regard, the
parties hereto specifically disavow and repudiate any other purported stock
purchase agreement document which Xxxx Xxxxxxx may have signed as a
representative of Company as a purported party to such document. No variations,
modifications, supplements, waivers, or changes shall be binding upon any party
hereto unless set forth in a written agreement duly executed and delivered by
such party.
6.5
Governing Law. This
Agreement shall be governed, interpreted and enforced pursuant to the internal
laws of the State of California, without reference to its conflicts of law
principles. The parties hereto consent to the personal and subject matter
jurisdiction of the Courts of the State of California and consent to venue, for
all purposes, to be held in and for the County of Los Angeles.
6.6
Assignment. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties without the prior written consent of the other
parties. Notwithstanding anything to the contrary, Purchaser may assign its
rights hereunder to any affiliate, parent or subsidiary entity. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the befit of,
and be enforceable by, the parties and their respective successors and assigns.
6.7
Severability. If any
term or other provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other conditions and
provisions of this agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby are not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions be
consummated as originally contemplated to the fullest extent
possible.
6.8
Enforcement of this Agreement. The
parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in
equity.
6.9
Prevailing Party. The
non-prevailing party in any judicial proceeding arising out of or relating to
this Agreement, including for breach, interpretation, or enforcement, shall be
fully responsible for and pay the prevailing party's reasonable attorneys' fees,
costs, and expenses, including, without limitation, those incurred preliminary
to the institution of any such action or proceeding, which attorneys' fees,
costs, or expenses awarded hereunder shall be included as part of any ruling,
award or judgment, which sums, if desired by the prevailing party and
permissible, shall be deemed items of cost. The parties hereto specifically
agree that the determination of any attorney fee, cost or expense award
permitted hereunder shall not be limited by any attorney fee schedule or method
of computation of fees or definition of recoverable costs established by statute
or court rule.
IN
WITNESS WHEREOF, Purchaser and Seller have executed this Agreement as of the
date first written above.
"Purchaser"
Xxxxxxx
Enterprises, Inc.
By:
--------------------------------------------------------------
Name/Title:
Xxxxxxx X. Xxxxxxx, President
By:
--------------------------------------------------------------
Name/Title:
Xxxxxx Xxxx Xxxxx, Secretary
"Seller"
The
Xxxxxxx Xxx Xxxxxxx 2004 Trust dated July 31, 2004
By:
--------------------------------------------------------------
Name/Title:
Xxxxxxx Xxx Xxxxxxx, Trustee
The
undersigned hereby disavows and repudiates as of January 1, 2005 any other
purported stock purchase agreement document that Xxxx Xxxxxxx may have signed as
a representative of the undersigned:
Netword
Publishing, Inc.
By:_______________________
Xxxx
Xxxxxxx, Chairman & CEO
Exhibit
"A" to Stock Purchase Agreement
COPY
OF LICENSE AGREEMENT
Exhibit
"B" to Stock Purchase Agreement
COPY
OF SHAREHOLDERS AGREEMENT
Exhibit
"C" to Stock Purchase Agreement
COPY
OF EMPLOYMENT AGREEMENT
Exhibit
"D" to Stock Purchase Agreement
FORM
OF SECURED PROMISSORY NOTE
Stock
Purchase Agreement
-
of
-
_________ _________
Initials
Initials
4825-3865-3952.6
Exhibit
"E" to Stock Purchase Agreement
FORM
OF STOCK PLEDGE AGREEMENT
