EXECUTION COPY
MCY AGREEMENT
BY AND BETWEEN
XXX.XXX, INC.
AND
APPLIED DIGITAL SOLUTIONS, INC.
DATED AS OF OCTOBER 19, 2000
i
EXECUTION COPY
MCY AGREEMENT
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MCY AGREEMENT dated as of October 19, 2000 (this "Agreement"), by and
between XXX.xxx, Inc., a Delaware corporation ("MCY"), and Applied Digital
Solutions, Inc., a Missouri corporation ("ADSX").
RECITALS
WHEREAS, MCY Music World, Inc., a Delaware corporation and wholly-owned
subsidiary of MCY ("Music"), owns or has exclusive rights in certain digital
delivery architecture (collectively, the "MCY Technology"); and
WHEREAS, ADSX wishes to obtain from Music an exclusive, perpetual,
fully paid, license for the use of the MCY Technology and Music wishes to grant
such a license to ADSX, on the same basis, for such purposes only; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
legal adequacy of which is hereby acknowledged, the parties hereby agree as
follows:
1. Grant of MCY License; Consideration; etc,
(a) Grant of MCY License to ADSX. For the consideration set forth in
Section 1(b) hereof, MCY shall cause Music to grant to ADSX an exclusive,
perpetual, fully paid, personal, limited and non-transferable license (the "MCY
License") of the MCY Technology pursuant to the terms, provisions and conditions
of a license agreement between Music and ADSX in the form of Exhibit A attached
hereto.
(b) Consideration. In consideration for the grant by Music of the MCY
License, ADSX and the MCY Technology, ADSX agrees to pay to MCY an aggregate of
[11,816,298] shares of ADSX common stock (the "ADSX Shares").
(c) Registration Rights Agreement. ADSX and MCY shall enter into a
registration rights agreement by and between ADSX and MCY (the "ADSX
Registration Rights Agreement") in the form attached hereto as Exhibit B which
shall provide that ADSX shall file a registration statement on Form S-3 with the
Securities and Exchange Commission (the "Commission") as soon as possible and
shall provide that ADSX shall use its best efforts to cause such registration
statement to be declared effective by no later than seventy-five (75) days from
the date hereof (the "Registration Rights Termination Date").
(d) Escrow and Payment Agreement. MCY shall deposit the MCY License and
MCY Technology into an escrow account pursuant to an escrow and payment
agreement of even date herewith (the "Escrow and Payment Agreement") by and
among MCY, ADSX and Xxxxxx Xxxxxx LLP, as the escrow agent (the "Escrow Agent"),
in the form attached hereto as Exhibit C. ADSX shall deposit the ADSX Shares
with the Escrow Agent who shall hold and release the ADSX Shares in accordance
with the Escrow and Payment Agreement.
2. Representations and Warranties.
2.1 MCY hereby represents and warrants to ADSX as follows:
(a) Organization, Good Standing and Power. MCY is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
MCY does not have any subsidiaries except as set forth on Schedule 2.1(a). MCY
and each such subsidiary is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction (alone or in the aggregate) in which the
failure to be so qualified will not have a MCY Material Adverse Effect. For the
purposes of this Agreement, "MCY Material Adverse Effect" means any adverse
effect on the business, operations, properties, prospects, or financial
condition of MCY and its subsidiaries taken as a whole.
(b) Authorization; Enforceability. MCY has the requisite corporate
power and authority to enter into and perform this Agreement, the ADSX
Registration Rights Agreement and the Escrow and Payment Agreement and all other
agreements, certificates, instruments and documents executed in connection
therewith (collectively, the "MCY Transaction Documents"). The execution,
delivery and performance of the MCY Transaction Documents by MCY and the
consummation by it of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action, and no further
consent or authorization of MCY or its Board of Directors or stockholders as
required. The MCY Transaction Documents have been duly executed and delivered by
MCY. Each of the MCY Transaction Documents constitutes a valid and binding
obligation of MCY enforceable against MCY in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of the MCY
Transaction Documents by MCY or Music, as the case may be, and the consummation
by MCY of the transactions contemplated hereby and thereby do not and will not
(i) violate any provision of MCY's Certificate of Incorporation or Bylaws, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which MCY is a party or by which it or its
properties or assets are bound, (iii) create or impose a lien, mortgage,
security interest, charge or encumbrance of any nature on any property or asset
of MCY under any agreement or any commitment to which MCY is a party or by which
MCY is bound or by which any of its respective properties or assets are bound,
or (iv) result in a violation of any federal, state, local or foreign statute,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to MCY or any of its subsidiaries or
by which any property or asset of MCY or any of its subsidiaries are bound or
affected, except, in all cases other than violations pursuant to clause (i)
above, for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a MCY Material Adverse Effect. The business of MCY
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and its subsidiaries is not being conducted in violation of any laws, ordinances
or regulations of any governmental entity, except for possible violations which
singularly or in the aggregate do not and will not have a MCY Material Adverse
Effect. MCY is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the MCY Transaction
Documents in accordance with the terms hereof or thereof (other than any filings
which may be required to be made by MCY with the Commission or state securities
administrators pursuant to the terms hereof and any registration statement which
may be filed pursuant hereto).
(d) No Material Adverse Change. Since September 30, 2000, neither MCY
nor its subsidiaries has experienced or suffered any MCY Material Adverse
Effect, other than a general decline in the stock price of XXX.xxx, Inc. common
stock and that MCY continues to incur losses as a result of its operations.
(e) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of MCY, threatened against MCY or any subsidiary which
questions the validity of this Agreement or any of the other MCY Transaction
Documents or any of the transactions contemplated hereby or thereby or any
action taken or to be taken pursuant hereto or thereto. Except as set forth in
the Commission Filings or on Schedule 2.1(e) hereto, there is no action, suit,
claim, investigation, arbitration, alternate dispute resolution proceeding or
other proceeding pending or, to the knowledge of MCY, threatened, against or
involving MCY, any subsidiary or any of their respective properties or assets
which is likely to have a MCY Material Adverse Effect. There are no outstanding
orders, judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against MCY or any subsidiary or any officers or
directors of MCY or subsidiary in their capacities as such.
(f) Compliance with Law. The business of MCY and the subsidiaries has
been and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except as
set forth on Schedule 2.1(f) hereto or such that, individually or in the
aggregate, do not cause a MCY Material Adverse Effect. MCY and each of its
subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a MCY Material Adverse Effect.
(g) Certain Fees. Except as set forth on Schedule 2.1(g) hereto, no
brokers, finders or financial advisory fees or commissions will be payable by
MCY or any subsidiary with respect to the transactions contemplated by this
Agreement.
(h) Rule 144. MCY understands that the ADSX Shares must be held
indefinitely unless the ADSX Shares are registered under the Securities Act or
an exemption from registration is available. MCY acknowledges that it is
familiar with Rule 144 of the rules and regulations of the Commission, as
amended, promulgated pursuant to the Securities Act ("Rule 144"), and that MCY
has been advised that Rule 144 permits resales only under certain circumstances.
MCY understands that to the extent that Rule 144 is not available, MCY will be
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unable to sell any Shares without either registration under the Securities Act
or the existence of another exemption from such registration requirement.
(i) Acquisition for Investment. MCY is purchasing the ADSX Shares
solely for its own account for the purposes of investment and not with a view to
or for sale in connection with distribution. MCY does not have a present
intention to sell the ADSX Shares, nor a present arrangement (whether or not
legally binding) or intention to effect any distribution of the ADSX Shares to
or through any person or entity; provided, however, that by making the
representations herein, MCY does not agree to hold the ADSX Shares for any
minimum or other specific term and reserves the right to dispose of the ADSX
Shares at any time in accordance with federal and state securities laws
applicable to such disposition. MCY acknowledges that it is able to bear the
financial risks associated with an investment in ADSX Shares and that it has
been given full access to such records of ADSX and the subsidiaries and to the
officers of ADSX and the subsidiaries as it has deemed necessary or appropriate
to conduct its due diligence investigation.
(j) Accredited Investor. MCY is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act and has such knowledge and
experience in financial and business matters that MCY is capable of evaluating
the merits and risks of MCY's investment in ADSX.
(k) No Broker-Dealer Affiliation. MCY is not a broker-dealer registered
with the Commission or an affiliate (as such term is defined in Rule 144(a)
promulgated under the Securities Act) of a broker-dealer registered with the
Commission.
(l) General. MCY understands that the ADSX Shares are being offered and
sold in reliance on a transactional exemption from the registration requirement
of federal and state securities laws and ADSX is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of MCY set forth herein in order to determine the applicability
of such exemptions and the suitability of MCY to acquire the ADSX Shares. MCY
understands that no United States federal or state agency or any government or
governmental agency has passed upon or made any recommendation or endorsement of
the ADSX Shares.
(m) Opportunities for Additional Information. MCY acknowledges that it
has had the opportunity to ask questions of and receive answers from, or obtain
additional information from, the executive officers of ADSX concerning the
financial and other affairs of ADSX, and to the extent deemed necessary in light
of MCY's knowledge of ADSX' affairs, MCY has asked such questions and received
answers to the full satisfaction of MCY, and MCY desires to invest in ADSX.
(n) No General Solicitation. MCY acknowledges that the ADSX Shares were
not offered to it by means of any form of general or public solicitation or
general advertising, or publicly disseminated advertisements or sales
literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which it
was invited by any of the foregoing means of communication
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2.2 Representations and Warranties of ADSX. ADSX hereby represents and
warrants to MCY as follows:
(a) Organization, Good Standing and Power. ADSX is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Missouri and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
ADSX does not have any subsidiaries except as set forth on Schedule 2.2(a)
hereto. ADSX and each such subsidiary is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction (alone or in the aggregate) in which the
failure to be so qualified will not have an ADSX Material Adverse Effect. For
the purposes of this Agreement, "ADSX Material Adverse Effect" means any adverse
effect on the business, operations, properties, prospects, or financial
condition of ADSX and subsidiaries taken as a whole.
(b) Authorization; Enforcement. ADSX has the requisite corporate power
and authority to enter into and perform this Agreement, the MCY License, the
ADSX Registration Rights Agreement and the Escrow and Payment Agreement and all
other agreements, certificates, instruments and documents executed in connection
therewith (collectively, the "ADSX Transaction Documents") and to issue ADSX
Shares in accordance with the terms hereof. The execution, delivery and
performance of the ADSX Transaction Documents by ADSX and the consummation by it
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of ADSX or its Board of Directors or stockholders is required. The
ADSX Transaction Documents have been duly executed and delivered by ADSX. Each
of the ADSX Transaction Documents constitutes a valid and binding obligation of
the ADSX enforceable against ADSX in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of ADSX and the shares
thereof currently issued and outstanding as of September 29, 2000 are set forth
on Schedule 2.2(c) hereto. All of the outstanding shares of ADSX' common stock
have been duly and validly authorized.
(d) Issuance of Shares. The ADSX Shares have been duly authorized by
all necessary corporate action and, when paid for or issued in accordance with
the terms hereof shall be validly issued and outstanding, fully paid and
nonassessable.
(e) No Conflicts. The execution, delivery and performance of the ADSX
Transaction Documents by ADSX and the consummation by ADSX of the transactions
contemplated hereby and thereby do not and will not (i) violate any provision of
the ADSX' Certificate of Incorporation or its Bylaws, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which ADSX is a party or by which it or its properties or assets are bound,
(iii) create or impose a lien, mortgage,
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security interest, charge or encumbrance of any nature on any property or asset
of ADSX under any agreement or any commitment to which ADSX is a party or by
which ADSX is bound or by which any of its respective properties or assets are
bound, or (iv) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to ADSX or any of its
subsidiaries or by which any property or asset of ADSX or any of its
subsidiaries are bound or affected, except, in all cases other than violations
pursuant to clause (i) above, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have an ADSX Material Adverse Effect. The
business of ADSX and its subsidiaries is not being conducted in violation of any
laws, ordinances or regulations of any governmental entity, except for possible
violations which singularly or in the aggregate do not and will not have a ADSX
Material Adverse Effect. ADSX is not required under federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the ADSX Transaction
Documents in accordance with the terms hereof or thereof (other than any filings
which may be required to be made by ADSX with the Commission or state securities
administrators pursuant to the terms hereof and any registration statement which
may be filed pursuant hereto).
(f) No Material Adverse Change. Since September 30, 2000, other than as
reported by ADSX in its Quarterly Report on Form 10-Q for the period ended
September 30, 2000, as amended filed with the Commission, ADSX has not
experienced or suffered any ADSX Material Adverse Effect.
(g) No Undisclosed Liabilities. Except as disclosed on Schedule 2.2(g)
hereto, neither ADSX nor any of its subsidiaries has any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred
in the ordinary course of ADSX' or its subsidiaries respective businesses since
December 31, 1999 and which, individually or in the aggregate, do not or would
not have an ADSX Material Adverse Effect on ADSX or its subsidiaries.
(h) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of ADSX, threatened against ADSX or any subsidiary which
questions the validity of this Agreement or any of the other ADSX Transaction
Documents or any of the transactions contemplated hereby or thereby or any
action taken or to be taken pursuant hereto or thereto. Except as set forth in
the Commission Filings or on Schedule 2.2(h) hereto, there is no action, suit,
claim, investigation, arbitration, alternate dispute resolution proceeding or
other proceeding pending or, to the knowledge of ADSX, threatened, against or
involving ADSX, any subsidiary or any of their respective properties or assets
which is likely to have an ADSX Material Adverse Effect. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against ADSX or any subsidiary or
any officers or directors of ADSX or subsidiary in their capacities as such.
(i) Compliance with Law. The business of ADSX and the subsidiaries has
been and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except as
set forth on Schedule 2.2(i) hereto or such that, individually or in the
aggregate, do not cause an ADSX Material Adverse
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Effect. ADSX and each of its subsidiaries have all franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals necessary for the conduct of its business as now being conducted by it
unless the failure to possess such franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals, individually or
in the aggregate, could not reasonably be expected to have an ADSX Material
Adverse Effect.
(j) Certain Fees. Except as set forth on Schedule 2.2(j) hereto, no
brokers, finders or financial advisory fees or commissions will be payable by
ADSX or any subsidiary with respect to the transactions contemplated by this
Agreement.
3. Covenants
3.1 Sapient Corporation. MCY shall introduce ADSX to Sapient
Corporation ("Sapient") and to use its reasonable best efforts to request
Sapient to enter an agreement with ADSX regarding proposed modifications of
certain digital delivery architecture for ADSX; provided, however, that there
can be no assurances that Sapient will agree to enter into an agreement with
ADSX or that Sapient will agree to make the proposed modifications on terms
acceptable to ADSX; provided, further, that ADSX will be solely responsible for
the cost of such modifications and the delivery of the modified architecture by
Sapient and the maintenance, hosting, bandwidth and all related costs.
3.2 Registration and Listing. ADSX shall cause its common stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange Act,
will comply in all respects with its reporting and filing obligations under the
Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement and will not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. ADSX will take all action
necessary to continue the trading of its common stock on the applicable exchange
or successor market. ADSX will take all action necessary to cause the listing of
the ADSX Shares on Nasdaq or any successor exchange.
4. Conditions, etc.
4.1 Conditions Precedent to the Obligations of ADSX. The obligation
hereunder of ADSX hereunder to deliver the ADSX Shares is subject to the
satisfaction or waiver, at or before the Release Date (as such term is
hereinafter defined), of each of the conditions set forth below. These
conditions are for ADSX' sole benefit and may be waived by ADSX at any time in
its sole discretion. For the purposes of this Agreement, the term "Release Date"
shall mean the date on which all of the conditions set forth in this Section 4.1
and Section 4.2 have been fully satisfied.
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties of MCY shall have been true and correct in all
material respects as of the date hereof and shall be true and correct as of the
Release Date.
(b) Performance. MCY shall have performed, satisfied and complied in
all respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by MCY as of the Release
Date.
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(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
MCY or any subsidiary, or any of the officers, directors or affiliates of MCY or
any subsidiary seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
(e) MCY Agreement. MCY shall have delivered this Agreement to ADSX.
(f) MCY License. MCY shall have executed and delivered the MCY License
to ADSX and delivered it to the Escrow Agent.
(g) ADSX Registration Rights Agreement. MCY shall have delivered the
ADSX Registration Rights Agreement to ADSX.
(h) HSR Clearance. MCY shall have obtained all consents, approvals or
waivers required to be obtained in respect of or filings with any Governmental
Authority (as such term is hereinafter defined) that are required to permit the
consummation of the transactions contemplated herein, and all waiting periods
applicable to this Agreement and the transactions contemplated herein under the
HSR Act (as such term is hereinafter defined), if applicable, shall have expired
or been terminated. For the purposes of this Agreement, the term "Governmental
Authority" means any federal, state or local regulatory authority or
instrumentality, domestic or foreign, or any department or agency thereof
including, without limitation, any authority, department, commission, board,
bureau, agency, court or instrumentality. For the purposes of this Agreement,
the term "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
(i) Secretary's Certificate. MCY shall have delivered to ADSX a
secretary's certificate, dated as of the Release Date, as to (i) resolutions
adopted by its the Board of Directors approving the MCY Transaction Documents
and the transactions contemplate therewith, (ii) the Certificate of
Incorporation of MCY as in effect as of the Release Date, (iii) the Bylaws of
MCY, as in effect as of the Release Date, and (iv) the authority and incumbency
of the officers of MCY executing the MCY Transaction Documents and any other
documents required to be executed or delivered in connection therewith.
4.2 Conditions Precedent to the Obligations of MCY. The obligation of
MCY hereunder to deliver the MCY License and the MCY Technology is subject to
the satisfaction or waiver, at or before the Release Date, of each of the
conditions set forth below. These conditions are for MCY's sole benefit and may
be waived by MCY at any time in its sole discretion.
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties of ADSX shall have been true and correct in all
material respects as of the date hereof and shall be true and correct as of the
Release Date.
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(b) Performance. ADSX shall have performed, satisfied and complied in
all respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by ADSX as of the Release
Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
ADSX or any subsidiary, or any of the officers, directors or affiliates of ADSX
or any subsidiary seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
(e) Effective Registration Statement. MCY shall have received from ADSX
a copy of confirmation from the Commission that a registration statement on Form
S-3 (or such other applicable form contemplated by the ADSX Registration Rights
Agreement) including the ADSX Shares has been declared effective.
(f) ADSX Registration Rights Agreement. ADSX shall have delivered the
ADSX Registration Rights Agreement to MCY.
(g) MCY Agreement. ADSX shall have delivered this Agreement to MCY.
(h) HSR Clearance. ADSX shall have obtained all consents, approvals or
waivers required to be obtained in respect of or filings with any Governmental
Authority that are required to permit the consummation of the transactions
contemplated herein, and all waiting periods applicable to this Agreement and
the transactions contemplated herein under the HSR Act, if applicable, shall
have expired or been terminated.
(i) Secretary's Certificate. ADSX shall have delivered to MCY a
secretary's certificate, dated as of the Release Date, as to (i) resolutions
adopted by its the Board of Directors approving the ADSX Transaction Documents
and the transactions contemplated therewith, (ii) the Certificate of
Incorporation of ADSX as in effect on the Release Date, (iii) the Bylaws of
ADSX, as in effect at the Release Date, and (iv) the authority and incumbency of
the officers of ADSX executing the ADSX Transaction Documents and any other
documents required to be executed or delivered in connection therewith.
(j) ADSX Shares. The ADSX Shares shall have been delivered to the
Escrow Agent.
5. Indemnification.
(a) Survival of Representations and Warranties. The representations and
warranties set forth in Section 2 shall survive until the second anniversary of
the Release Date.
(b) Indemnification by MCY. MCY agrees to indemnify and hold harmless
ADSX and its directors, officers, affiliates, agents, successors and assigns
from and against any and all
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losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorney's fees, charges and disbursements)
incurred by ADSX as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by MCY herein.
(c) Indemnification by ADSX. ADSX agrees to indemnify and hold harmless
MCY and its directors, officers, affiliates, agents, successors and assigns from
and against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorney's fees, charges and
disbursements) incurred by MCY as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by ADSX herein.
(d) Indemnification Procedure. Any party entitled to indemnification
under this Section 5 (an "indemnified party") will give written notice to the
indemnifying party of any matters giving rise to a claim for indemnification;
provided, that the failure of any party entitled to indemnification hereunder to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Section 5 except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the indemnified party a
conflict of interest between it and the indemnifying party may exist with
respect of such action, proceeding or claim, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. In the event that the
indemnifying party advises an indemnified party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party's
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Section 5 to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Section 5 shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The
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indemnity agreements contained herein shall be in addition to (a) any cause of
action or similar rights of the indemnified party against the indemnifying party
or others, and (b) any liabilities the indemnifying party may be subject to
pursuant to the law.
6. Miscellaneous.
(a) Expenses. All expenses incurred in connection with this Agreement
shall be paid by the party incurring such expenses.
(b) Assignment; Pledge. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors (by merger,
consolidation or sale of all or substantially all of the assets of such party)
and permitted assigns. This Agreement may not be assigned, transferred or
pledged by either party, without the prior written consent of the other party
hereto.
(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in that state, without regard to any of its principles of
conflicts of laws or other laws which would result in the application of the
laws of another jurisdiction. This Agreement shall be construed and interpreted
without regard to any presumption against the party causing this Agreement to be
drafted.
(d) Jurisdiction; Waiver of Jury Trial. EACH OF THE PARTIES HERETO
UNCONDITIONALLY AND IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY AND THE FEDERAL
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK WITH RESPECT TO ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
CONTEST THE VENUE OF SAID COURTS OR DISTRICT OR TO CLAIM THAT SAID COURTS
CONSTITUTE AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO AGREES THAT SERVICE
OF ANY SUMMONS, COMPLAINT, NOTICE OR OTHER PROCESS RELATING TO SUCH SUIT, ACTION
OR OTHER PROCEEDING MAY BE EFFECTED IN THE MANNER PROVIDED IN SECTION 6(j). EACH
OF THE PARTIES HERETO UNCONDITIONALLY AND IRREVOCABLY WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(e) Entire Agreement. This Agreement and any exhibits and attachments
hereto, and the other agreements referred to herein, constitute the complete and
exclusive understanding and agreement between the parties with respect to the
subject matter hereof, superseding and replacing any and all prior agreements,
communications, and understandings (both written and oral) regarding such
subject matter including, without limitation, the ADSX Agreement of even date
herewith between the parties and the agreements contemplated thereby, all of
which are merged herein. There are no representations, promises or
understandings regarding such subject matter, except to the extent expressly set
forth herein.
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(f) Remedies Cumulative; Invalidity. All remedies, rights,
undertakings, obligations and agreements contained in this Agreement shall be
cumulative, and none of them shall be in limitation of any other remedy, right,
undertaking, obligation or agreement available to either of the parties hereto.
The invalidity, illegality or unenforceability of any term or provision
contained in this Agreement (as determined by a court of competent jurisdiction)
shall not affect the validity, legality or enforceability of any other term or
provision hereof. It is the intent of the parties that this Agreement be
enforced to the fullest extent permitted by applicable law.
(g) Waiver. No course of dealing or omission or delay of the part of
any party hereto in asserting or exercising any rights hereunder shall
constitute or operation as a waiver of any such right. No waiver of any
provision hereof shall be effective, unless in writing and signed by or on
behalf of the party to be charged therewith. No waiver shall be deemed a
continuing waiver or waiver in respect of any other or subsequent breach or
default, unless expressly so stated in writing.
(h) Amendment. This Agreement may not be modified, amended, altered or
supplemented, except by a written agreement executed by each of the parties
hereto.
(i) Relationship of Parties. Nothing contained herein shall be deemed
to constitute a partnership between, or a joint venture by or employment
relationship between or among the parties hereto. This Agreement is between two
independent contracting parties. Nothing herein is intended nor shall it make
either party a fiduciary of the other party.
(j) Notices. All notices, demands, consents, requests, instructions and
other communications to be given or delivered or permitted under or by reason of
the provisions of this Agreement or in connection with the transactions
contemplated hereby shall be in writing and shall be deemed to be delivered and
received by the intended recipient as follows: (i) if personally delivered, on
the Business Day (as such term is hereinafter defined) of such delivery (as
evidenced by the receipt of the personal delivery service), (ii) if mailed
certified or registered mail return receipt requested, four (4) Business Days
after being mailed, (iii) if delivered by overnight courier (with all charges
having been prepaid), on the Business Day of such delivery (as evidenced by the
receipt of the overnight courier service of recognized standing), or (iv) if
delivered by facsimile transmission, on the Business Day of such delivery if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time,
on the next succeeding Business Day (as evidenced by the printed confirmation of
delivery generated by the sending party's telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance with
this Section 6(j)), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second Business Day the notice is sent (as evidenced by a sworn affidavit of the
sender). For the purposes of this Agreement, the term "Business Day" means a day
other than a Saturday, Sunday or day on which banking institutions in the State
of New York are authorized or obligated by law or executive order to close. For
the purposes of this Agreement, if a day referenced herein is not a Business Day
or if a notice is given or delivered on a day which is not a Business Day, such
day shall be deemed to occur or such notice shall be deemed to be given or
delivered on the next Business Day. All such notices, demands, consents,
requests, instructions and other communications will be sent to the following
addresses or facsimile numbers as applicable:
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If to MCY or Music:
XXX.xxx, Inc.
1133 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-944-6943
Attention: President
with copies to:
MCY Music World, Inc.
1133 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-944-6943
Attention: Xxxxxxxx Xxxxxxx, General Counsel
and to:
Xxxxxx Xxxxxx LLP The Chrysler Building, 000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Telephone: 000-000-0000 Facsimile:
000-000-0000
Attention: Xxxxxx Xxxx Xxxxxxxx, Esq.
If to ADSX:
Applied Digital Solutions, Inc.
000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 561-366-0002
Attention: Xxxxx Xxxxxxx, General Counsel
with a copy to:
Xxxxx Xxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-692-1900
Attention: Xxxxxx XxXxxxxx, Esq.
Xxxxxx X. Xxxxxx, Esq.
or to such other address as any party may specify by notice given to the other
party in accordance with this Section 6(j).
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(k) Counterparts. This Agreement may be executed in counterparts, each
of which, when taken together, shall constitute one and the same instrument.
Section headings have been inserted herein for convenience of reference only and
shall not have any impact on the construction or interpretation of this
Agreement.
(l) Publicity; Joint Statements. Each of the parties hereto agrees that
it will not disclose, and will not include in any public announcement, the names
of the other party hereto without the consent of such party, which consent will
not be unreasonably withheld or delayed or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement; provided, however, that if ADSX makes a public announcement with
regarding the ADSX License, it will not disclose the name of MCY or MCY's
business in such announcement and it will provide MCY with a copy of prior to
the public announcement; provided, further, that ADSX will not disclose the name
of MCY or the MCY License in any such announcement until the Release Date
without MCY's prior written consent. Each of the parties hereto agrees to
cooperate with the other party to prepare and issue a joint statement to the
public regarding the transactions contemplated herein which will be issued
concurrently. Each of the parties hereto agree to cause their respective
chairmen and chief executive officers to meet with securities holders of MCY and
ADSX by no later than forty-five (45) days after the Release Date.
(m) Further Assurances. From and after the date of this Agreement, upon
the request of a party hereto, the other party shall executed and deliver such
instrument, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the other Transaction Documents.
(n) Headings. The section headings in this Agreement are for
convenience only and shall not constitute a part of this Agreement for any other
purpose and shall not be deemed to limit or affect any of the provisions hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, each of MCY and ADSX has duly executed
this Agreement as of the day and year first above written.
XXX.xxx, Inc. Applied Digital Solutions, Inc.
By: /s/ Xxxxxxxx Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------ ---------------------------
Name: Xxxxxxxx Xxxxxxx Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer Title: President
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Exhibit A. MCY License Agreement
--------------------------------
(copy to be attached)
Exhibit B. ADSX Registration Rights Agreement
---------------------------------------------
(copy to be attached)
Exhibit C. Escrow and Payment Agreement
---------------------------------------
(copy to be attached)
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