AGREEMENT entered into as of the 30th day of September 1999, by and
between XxxXxxxXxx.xxx, Inc., a Delaware corporation, formerly known as InXsys
Broadcast Networks, Inc. ("BSB") and XxxxXxxxxxx.xxx, Incorporated, a Nevada
corporation ("HMSK").
W I T N E S S E T H:
WHEREAS, HMSK is authorized to issue 50,000,000 shares of common stock,
$.001 par value per share ("HMSK Common Stock"), of which, 16,030,028 shares are
issued and outstanding as of the date hereof; and
WHEREAS, BSB is authorized to issue 100,000,000 shares of common stock,
$.01 par value per share ("BSB Common Stock"), of which, 28,893,844 shares are
issued and outstanding as of the date hereof; and
WHEREAS, HMSK desires to acquire shares of the authorized but unissued
shares of BSB Common Stock, upon the terms and conditions hereinafter set forth;
and
WHEREAS, BSB desires to acquire shares of the authorized but unissued
shares of HMSK Common Stock, upon the terms and conditions hereinafter set
forth; and
NOW, THEREFORE, in consideration of the promises and covenants herein
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
1. Subscription; Acceptance; Payment; Issuance of Shares.
1. Subscription. HMSK hereby subscribes to purchase 1,200,000 shares of
BSB Common Stock (the "BSB Shares"), for a purchase price of $3,000,000, or
$2.50 per share, subject to adjustment as hereinafter provided (the "Purchase
Price").
2. Acceptance. BSB hereby accepts the subscription of HMSK to purchase
the BSB Shares.
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3. Payment of Purchase Price. The Purchase Price for the BSB Shares
shall be paid by the issuance of 250,000 shares of HMSK Common Stock (the "HMSK
Shares"). The number of HMSK Shares was determined by (1) dividing 3,000,000, by
(2) $12. Within three business days following the Effective Date of this
Agreement (as hereinafter defined), the Purchase Price shall be paid by HMSK and
the BSB Shares shall be delivered to HMSK.
4. Adjustment to Purchase Price. In the event that BSB reduces the
purchase price for the shares of BSB Common Stock being offered pursuant to its
private placement memorandum dated July 15, 1999 (the "Private Offering"), then
the Purchase Price shall be adjusted to reflect the lowest price at which BSB
accepts subscriptions in connection with such Private Offering. In connection
with any such adjustment, HMSK shall continue to subscribe to purchase shares of
BSB Common Stock for a purchase price of $3,000,000, however, the number of BSB
Shares to be purchased shall be adjusted to reflect the decreased offering
price.
2. Representations and Warranties Concerning the BSB Shares and the HMSK
Shares.
1. Representations and Warranties of HMSK Concerning the BSB Shares.
HMSK hereby represents and warrants to BSB as follows:
1. HMSK understands that the BSB Shares have not been
registered under the Securities Act of 1933, as amended (the "Act") or the
securities laws of any state, in reliance upon exemptions from the registration
requirements of the Act and such state laws. The issuance of the BSB Shares has
not been passed upon or the merits thereof endorsed or approved by any Federal
or state regulatory authority.
2. HMSK is acquiring the BSB Shares for its own account, for
investment purposes only, and not with a view towards the distribution or resale
of the BSB Shares except in compliance with applicable Federal and state
securities laws. HMSK does not intend to dispose of all or any part of the BSB
Shares, except in compliance with the provisions of the Act and applicable state
securities laws and understands that the BSB Shares are being issued pursuant to
specific exemptions under the provisions of the Act, which exemptions depend,
among other things, upon compliance with the provisions of the Act.
3. HMSK meets all applicable requirements under Federal law to
qualify as an "accredited" investor.
4. HMSK (i) has adequate means of providing for its current
financial needs and known contingencies, and has no need for liquidity of its
investment in the BSB shares; and (ii) can afford (a) to hold the BSB Shares for
an indefinite period of time, as required, and (b) to sustain a complete loss of
the entire amount of its investment in the BSB Shares.
5. HMSK has been afforded the opportunity to ask questions of, and
receive answers from, the officers and/or directors of BSB concerning the terms
and conditions of this transaction and to obtain any additional information, to
the extent that BSB possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the
information furnished; and has availed itself of such opportunity to the extent
it considers it appropriate in order to permit it to evaluate the merits and
risks of an investment in the BSB Shares. It is understood that all documents,
records and books pertaining to HMSK's investment in the BSB Shares have been
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made available for inspection, and that the books and records of BSB will be
available upon reasonable notice for inspection by representatives of HMSK
during reasonable business hours at its principal place of business.
6. HMSK hereby agrees that the following or similar legend will appear
on each certificate evidencing the BSB Shares:
"These securities have not been registered under the Securities Act of
1933, as amended, or under any state securities laws and may not be
sold or otherwise transferred or disposed of except pursuant to an
effective registration statement under the Act and any applicable state
securities laws, or an opinion of counsel satisfactory to counsel to
the issuer that such registration is not required."
2. Representations and Warranties of BSB Concerning the HMSK Shares.
BSB hereby represents and warrants to HMSK as follows:
1. BSB understands that the HMSK Shares have not been registered
under the Securities Act of 1933, as amended (the "Act") or the securities laws
of any state, in reliance upon exemptions from the registration requirements of
the Act and such state laws. The issuance of the HMSK Shares has not been passed
upon or the merits thereof endorsed or approved by any Federal or state
regulatory authority.
2. BSB is acquiring the HMSK Shares for its own account, for
investment purposes only, and not with a view towards the distribution or resale
of the HMSK Shares except in compliance with applicable Federal and state
securities laws. BSB does not intend to dispose of all or any part of the HMSK
Shares, except in compliance with the provisions of the Act and applicable state
securities laws and understands that the HMSK Shares are being issued pursuant
to specific exemptions under the provisions of the Act, which exemptions depend,
among other things, upon compliance with the provisions of the Act.
3. BSB has such knowledge and experience in financial, investment
and business matters that it is capable of evaluating the merits and risks of
its investment in the HMSK Shares.
4. BSB (i) has adequate means of providing for its current financial
needs and known contingencies, and has no need for liquidity of its investment
in the HMSK shares; and (ii) can afford (a) to hold the HMSK Shares for an
indefinite period of time, as may be required until the HMSK Shares may be sold
in compliance with applicable law, and (b) to sustain a complete loss of the
entire amount of its investment in the HMSK Shares.
5. BSB has been afforded the opportunity to ask questions of, and
receive answers from the officers and/or directors of HMSK concerning the terms
and conditions of this transaction and to obtain any additional information, to
the extent that HMSK possesses such information or can acquire it without
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unreasonable effort or expense, necessary to verify the accuracy of the
information furnished; and has availed itself of such opportunity to the extent
it considers it appropriate in order to permit it to evaluate the merits and
risks of an investment in the HMSK Shares. It is understood that all documents,
records and books pertaining to BSB's investment in the HMSK Shares have been
made available for inspection, and that the books and records of HMSK will be
available upon reasonable notice for inspection by representatives of BSB during
reasonable business hours at its principal place of business.
6. BSB hereby agrees that the following or similar legend will
appear on each certificate evidencing the HMSK Shares:
"These securities have not been registered under the Securities Act of
1933, as amended, or under any state securities laws and may not be
sold or otherwise transferred or disposed of except pursuant to an
effective registration statement under the Act and any applicable state
securities laws, or an opinion of counsel satisfactory to counsel to
the issuer that such registration is not required."
3. Representations and Warranties of BSB. BSB represents and warrants to HMSK
that the statements contained in this Section 3 are correct and complete as of
the date of this Agreement, except as set forth in a disclosure schedule
delivered by the BSB to HMSK on the date hereof and initialed by the parties
(the "BSB Disclosure Schedule"). The BSB Disclosure Schedule, to the extent
required, will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 3. All references to BSB shall
refer to BSB and each of its consolidated subsidiaries.
1. Organization, Qualification, and Corporate Power. BSB is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation, and is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of BSB. BSB has full corporate power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it.
2. Capitalization. The entire authorized capital stock of BSB consists
of (i) 100,000,000 shares of BSB Common Stock, of which 28,893,844 shares are
issued and outstanding and (ii) 5,000,000 shares of Preferred Stock, $.01 par
value per share, none of which are issued or outstanding. All of the issued and
outstanding shares of BSB Common Stock, have been duly authorized, are validly
issued, fully paid, and non-assessable, and have not been issued in violation of
the preemptive or other rights of BSB's shareholders. Except as set forth in the
BSB Disclosure, (1) there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require BSB to issue, sell, or
otherwise cause to become outstanding any of its capital stock, (2) there are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to BSB, and (3) there are no
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voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of BSB. The BSB Shares have been duly
authorized, and, upon issuance in accordance with the terms and conditions
hereof, will be validly issued, fully paid, and non-assessable, and will not
have not been issued in violation of the preemptive or other rights of BSB's
shareholders.
3. Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(1) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which BSB is subject or any provision of the
charter or bylaws of BSB or (2) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
BSB is a party or by which it is bound or to which any of its assets is subject
(or result in the imposition of any encumbrance or security interest upon any of
its assets), except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice,
or encumbrance or security interest would not have a material adverse effect on
the business, financial condition, operations, results of operations, or future
prospects of BSB or on the ability of the parties to consummate the transactions
contemplated by this Agreement. BSB need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice, to
file, or to obtain any authorization, consent, or approval would not have a
material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of BSB or on the ability of the
parties to consummate the transactions contemplated by this Agreement.
4. Brokers' Fees. BSB has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
5. Title to Assets. Except as otherwise set forth in the BSB
Disclosure, BSB has good and marketable title to, or a valid leasehold interest
in, the properties and assets used by them, located on their premises, or shown
on the most recent balance sheet ("Most Recent BSB Balance Sheet") included in
the BSB Disclosure (as hereinafter defined) or acquired after the date thereof,
free and clear of all encumbrances and security interests, except for properties
and assets disposed of in the ordinary course of business since the date of the
Most Recent BSB Balance Sheet.
6. Financial Statements. The financial statements of BSB included in
the BSB Disclosure consists of (collectively the "BSB Financial Statements"):
(1) audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flows as of and for the fiscal years ended
December 31, 1998 (the "Most Recent Fiscal Year End") and 1997; and (2)
unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flows (the "Most Recent BSB Financial
Statements") as of and for the six months ended June 30, 1999 (the "Most Recent
BSB Fiscal Month End"). The BSB Financial Statements (including the notes
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thereto) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered thereby
and present fairly the consolidated financial condition of BSB as of such dates
and the results of operations of BSB for such periods; provided, however, that
the Most Recent BSB Financial Statements are subject to normal year-end
adjustments (which will not be material individually or in the aggregate).
7. Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent BSB Fiscal Year End, BSB has conducted its operations only in the
ordinary course of business, and there has not been any material adverse change
in the business, financial condition, operations, results of operations, or
future prospects of BSB taken as a whole.
8. Undisclosed Liabilities. BSB has no material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes), except for
(1) liabilities set forth on the face of the Most Recent BSB Balance Sheet and
(2) liabilities which have arisen after the Most Recent BSB Fiscal Month End in
the ordinary course of business.
9. Legal Compliance. BSB has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply, except
where the failure to comply would not have a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of BSB.
10. Tax Matters. BSB has filed all income tax returns that it was
required to file. All such income tax returns were correct and complete in all
material respects. All income taxes owed by BSB have been paid. There is no
material dispute or claim concerning any income tax liability of BSB claimed or
raised by any authority in writing. BSB has not waived any statute of
limitations in respect of income taxes or agreed to any extension of time with
respect to an income tax assessment or deficiency. BSB is not obligated to make
any material payments, or is a party to any agreement that under certain
circumstances could obligate it to make any material payments that will not be
deductible under Code Section 280G. BSB is not a party to any tax allocation or
sharing agreement. BSB is not liable for the taxes of any person under Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise. The unpaid income taxes of
BSB did not, as of the Most Recent BSB Fiscal Month End, exceed by any material
amount the reserve for income tax liability (rather than any reserve for
deferred taxes established to reflect timing differences between book and tax
income) set forth on the face of the Most Recent BSB Balance Sheet.
11. Real Property. BSB owns no real property. With respect to any lease
for real property to which BSB is a party: (1) the lease or sublease is legal,
valid, binding, enforceable, and in full force and effect in all material
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respects; (2) no party to the lease or sublease is in material breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a material breach or default or permit termination, modification, or
acceleration thereunder; (3) no party to the lease or sublease has repudiated
any material provision thereof; (4) there are no material disputes, oral
agreements, or forbearance programs in effect as to the lease or sublease; (5)
BSB has not assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold; and (6) all facilities
leased or subleased thereunder have received all approvals of governmental
authorities (including material licenses and permits) required in connection
with the operation thereof, and have been operated and maintained in accordance
with applicable laws, rules, and regulations in all material respects.
12. Intellectual Property.
1. For purposes hereof, "Intellectual Property" shall mean (i) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (ii)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (iii) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (iv) all mask works and all applications,
registrations, and renewals in connection therewith, (v) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (vi) all computer software (including data and related
documentation), (vii) all other proprietary rights, and (viii) all copies and
tangible embodiments thereof (in whatever form or medium).
2. BSB has not interfered with, infringed upon, misappropriated, or
violated any material Intellectual Property rights of third parties in any
material respect, and none of BSB and the directors and officers of BSB has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that BSB must license or refrain from using any Intellectual Property rights of
any third party). To the knowledge of BSB and its directors and officers, no
third party has interfered with, infringed upon, misappropriated, or violated
any material Intellectual Property rights of BSB in any material respect.
3. With respect to Intellectual Property owned by BSB: (i) BSB
possess all right, title, and interest in and to the item, free and clear of any
lien, charge, encumbrance or security interest, license, or other restriction;
(ii) the item is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge; (iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of BSB, is threatened which challenges the legality, validity,
7
enforceability, use, or ownership of the item; and (iv) BSB has never agreed to
indemnify any person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
4. With respect to any Intellectual Property used by BSB pursuant to
license, sublicense, agreement or permission: (i) the license, sublicense,
agreement, or permission covering the item is legal, valid, binding,
enforceable, and in full force and effect in all material respects; (ii) no
party to the license, sublicense, agreement, or permission is in material breach
or default, and no event has occurred which with notice or lapse of time would
constitute a material breach or default or permit termination, modification, or
acceleration thereunder; (iii) no party to the license, sublicense, agreement,
or permission has repudiated any material provision thereof; and (iv) BSB has
not granted any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
13. Tangible Assets. The buildings, machinery, equipment, and other
tangible assets that BSB leases are free from material defects (patent and
latent), have been maintained in accordance with normal industry practice, and
are in good operating condition and repair (subject to normal wear and tear).
14. Contracts. Each material agreement, whether written or oral, to
which BSB is a party is identified and described in the BSB Disclosure. With
respect to each such agreement: (1) the agreement is legal, valid, binding,
enforceable, and in full force and effect in all material respects; (2) no party
is in material breach or default, and no event has occurred which with notice or
lapse of time would constitute a material breach or default, or permit
termination, modification, or acceleration, under the agreement; and (3) no
party has repudiated any material provision of the agreement.
15. Notes and Accounts Receivable. All notes and accounts receivable of
BSB are reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for bad debts set forth on the face of the Most Recent BSB
Balance Sheet.
16. Insurance. The assets and operations of BSB are covered by
insurance policies providing coverage deemed by BSB to be adequate to compensate
it for loss that may be reasonably foreseen. With respect to each policy of
insurance: (1) the policy is legal, valid, binding, enforceable, and in full
force and effect in all material respects; (2) neither BSB nor any other party
to the policy is in material breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a material breach or
default, or permit termination, modification, or acceleration, under the policy;
and (3) no party to the policy has repudiated any material provision thereof.
17. Litigation. Except as set forth in the BSB Disclosure, BSB (1) is
not subject to any outstanding injunction, judgment, order, decree, ruling, or
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charge or (2) is not a party or, to its knowledge, threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator.
18. Employees. BSB is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strike or material grievance,
claim of unfair labor practices, or other collective bargaining dispute. BSB has
not committed any material unfair labor practice. BSB has no knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of BSB.
19. Employee Benefits. With respect to each employee benefit plan
maintained by BSB: (1) each such plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all material respects
with the applicable requirements of ERISA, the Code, and other applicable laws;
(2) all required reports and descriptions (including Form 5500 Annual Reports,
summary annual reports, PBGC-l's, and summary plan descriptions) have been
timely filed and distributed appropriately with respect to each such Employee
Benefit Plan, and the applicable requirements of COBRA have been met in all
material respects with respect to each such plan which is an Employee Welfare
Benefit Plan; (3) all contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid; (4) all
premiums or other required payments for all periods ending on or before the date
hereof have been paid.
20. Guaranties. BSB is not a guarantor or otherwise is responsible for
any liability or obligation (including indebtedness) of any other person.
21. Environment, Health, and Safety Matters. BSB has complied and is in
compliance in all material respects, with all environmental, health, and safety
requirements. BSB has obtained, has complied, and is in compliance with, in each
case in all material respects, all material permits, licenses and other
authorizations that are required pursuant to environmental, health, and safety
requirements for the occupation of its facilities and the operation of its
business. BSB has not received any written or oral notice, report or other
information regarding any actual or alleged material violation of environmental,
health, and safety requirements, or any material liabilities or potential
material liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any material investigatory, remedial or corrective
obligations, relating to any of them or its facilities arising under
environmental, health, and safety requirements.
22. Year 2000. None of the computer software, computer firmware,
computer hardware (whether general or special purpose) or other similar or
related items of automated, computerized or software systems that are material
to the businesses of BSB will malfunction, cease to function, generate incorrect
data or produce incorrect results when processing, providing or receiving (1)
date-related data from, into and between the twentieth and twenty-first
centuries or (2) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
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23. Certain Business Relationships With BSB. Except as otherwise set
forth in the BSB Disclosure, neither BSB nor any of its affiliates has been
involved in any material business arrangement or relationship with BSB within
the past 12 months, and no affiliates of BSB own any material asset, tangible or
intangible, which is used in the business of any BSB.
24. Disclosure. BSB hereby acknowledges receipt of the following
documents from HMSK:
1. Annual Report on Form 10-KSB for the year ended
June 30, 1998;
2. Quarterly Reports on Form 10-QSB for the quarters
ended September 30, 1998, December 31, 1998 and March
31, 1999;
3. Final Prospectus dated April 30, 1999; and
4. Annual Report on Form - 10KSB for the year ended
June 30, 1999.
The foregoing documents, as well as the representations and warranties of HMSK
set forth in this Agreement, are hereinafter referred to as the "HMSK
Disclosure".
25. No Misrepresentations. The BSB Disclosure does not contain a
misrepresentation of a material fact or omit to state a material fact necessary
in order to make any of the information set forth in the BSB Disclosure not
misleading; provided, however, that to the extent a more currently dated
document contained in the BSB Disclosure modifies disclosure in a later dated
document included in the BSB Disclosure, the disclosure in such later dated
document shall control.
4. Representations and Warranties of HMSK. HMSK represents and warrants to BSB
that the statements contained in this Section 3 are correct and complete as of
the date of this Agreement, except as set forth in a disclosure schedule
delivered by the HMSK to BSB on the date hereof and initialed by the parties
(the "HMSK Disclosure Schedule"). The HMSK Disclosure Schedule, to the extent
required, will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Article III. All references to HMSK shall
refer to HMSK and each of its consolidated subsidiaries.
1. Organization, Qualification, and Corporate Power. HMSK is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation, and is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of HMSK. HMSK has full corporate
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it.
2. Capitalization. The entire authorized capital stock of HMSK consists
of 50,000,000 shares of HMSK Common Stock, 5,000,000 shares of Class A Preferred
Stock, $.001 par value per share, 200,000 shares of Class B Preferred Stock, par
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value $10 per share and 400,000 shares of Class C Preferred Stock, par value
$.001 per share. There are currently 16,030,028 shares of HMSK Common stock
issued and outstanding and no shares of Class A Preferred Stock, Class B
Preferred Stock or Class C Preferred Stock, issued or outstanding. All of the
issued and outstanding shares of HMSK Common Stock, have been duly authorized,
are validly issued, fully paid, and non-assessable, and have not been issued in
violation of the preemptive or other rights of HMSK's shareholders. Except as
set forth in the HMSK Disclosure, (1) there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require HMSK to
issue, sell, or otherwise cause to become outstanding any of its capital stock,
(2) there are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to HMSK, and (3) there are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of HMSK. The HMSK Shares have been duly
authorized, and, upon issuance in accordance with the terms and conditions
hereof, will be validly issued, fully paid, and non-assessable, and will not
have not been issued in violation of the preemptive or other rights of HMSK's
shareholders.
3. Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(1) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which HMSK is subject or any provision of the
charter or bylaws of HMSK or (2) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which HMSK is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any encumbrance or security interest
upon any of its assets), except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice,
or encumbrance or security interest would not have a material adverse effect on
the business, financial condition, operations, results of operations, or future
prospects of HMSK or on the ability of the parties to consummate the
transactions contemplated by this Agreement. HMSK need not give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the parties to consummate the
transactions contemplated by this Agreement, except where the failure to give
notice, to file, or to obtain any authorization, consent, or approval would not
have a material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of HMSK or on the ability of the
parties to consummate the transactions contemplated by this Agreement.
4. Brokers' Fees. HMSK has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
5. Title to Assets. Except as otherwise set forth in the HMSK
Disclosure, HMSK has good and marketable title to, or a valid leasehold interest
in, the properties and assets used by them, located on their premises, or shown
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on the most recent balance sheet ("Most Recent HMSK Balance Sheet") included in
the HMSK Disclosure (as hereinafter defined) or acquired after the date thereof,
free and clear of all encumbrances and security interests, except for properties
and assets disposed of in the ordinary course of business since the date of the
Most Recent HMSK Balance Sheet.
6. Financial Statements. The financial statements of HMSK included in
the HMSK Disclosure includes (collectively the "HMSK Financial Statements"): (1)
audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flows as of and for the fiscal years ended June
30, 1999 (the "Most Recent Fiscal Year End") and 1998. The HMSK Financial
Statements (including the notes thereto) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby and present fairly the consolidated
financial condition of HMSK as of such dates and the results of operations of
HMSK for such periods.
7. Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, HMSK has conducted its operations only in the ordinary
course of business, and there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of HMSK taken as a whole.
8. Undisclosed Liabilities. HMSK has no material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes), except for
(1) liabilities set forth on the face of the Most Recent HMSK Balance Sheet and
(2) liabilities which have arisen after the Most Recent HMSK Fiscal Month End in
the ordinary course of business.
9. Legal Compliance. HMSK has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply, except
where the failure to comply would not have a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of HMSK.
10. Tax Matters. HMSK has filed all income tax returns that it was
required to file. All such income tax returns were correct and complete in all
material respects. All income taxes owed by HMSK have been paid. There is no
material dispute or claim concerning any income tax liability of HMSK claimed or
raised by any authority in writing. HMSK has not waived any statute of
limitations in respect of income taxes or agreed to any extension of time with
respect to an income tax assessment or deficiency. HMSK is not obligated to make
any material payments, or is a party to any agreement that under certain
circumstances could obligate it to make any material payments that will not be
deductible under Code Section 280G. HMSK is not a party to any tax allocation or
sharing agreement. HMSK is not liable for the taxes of any person under Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
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a transferee or successor, by contract, or otherwise. The unpaid income taxes of
HMSK did not, as of the Most Recent HMSK Fiscal Month End, exceed by any
material amount the reserve for income tax liability (rather than any reserve
for deferred taxes established to reflect timing differences between book and
tax income) set forth on the face of the Most Recent Balance Sheet.
11. Contracts. Each material agreement, whether written or oral, to
which HMSK is a party is identified and described in the HMSK Disclosure. With
respect to each such agreement: (1) the agreement is legal, valid, binding,
enforceable, and in full force and effect in all material respects; (2) no party
is in material breach or default, and no event has occurred which with notice or
lapse of time would constitute a material breach or default, or permit
termination, modification, or acceleration, under the agreement; and (3) no
party has repudiated any material provision of the agreement.
12. Litigation. Except as set forth in the HMSK Disclosure, HMSK (1) is
not subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (2) is not a party or, to its knowledge, threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator.
13. Year 2000. None of the computer software, computer firmware,
computer hardware (whether general or special purpose) or other similar or
related items of automated, computerized or software systems that are material
to the businesses of HMSK will malfunction, cease to function, generate
incorrect data or produce incorrect results when processing, providing or
receiving (1) date-related data from, into and between the twentieth and
twenty-first centuries or (2) date-related data in connection with any valid
date in the twentieth and twenty-first centuries.
14. Disclosure. HMSK hereby acknowledges receipt of the following
documents from BSB:
1. Private Placement Memorandum dated July 15, 1999;
2. Supplement to Private Placement Memorandum dated August 17, 1999;
3. Unaudited Financial Statements of BSB as of June 30, 1999; and
4. Articles of Incorporation, as amended, and By-Laws, as amended,
of BSB.
The foregoing documents, as well as the representations and warranties of BSB
set forth in this Agreement, are hereinafter referred to as the "BSB
Disclosure".
15. No Misrepresentations. The HMSK Disclosure does not contain a
misrepresentation of a material fact or omit to state a material fact necessary
in order to make any of the information set forth in the HMSK Disclosure not
misleading; provided, however, that to the extent a more currently dated
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document contained in the HMSK Disclosure modifies disclosure in a later dated
document included in the HMSK Disclosure, the disclosure in such later dated
document shall control.
5. Covenants.
1. Mutual Covenants. Promptly following the date hereof, the Chief
Executive Officer of BSB, or other designee of BSB reasonably acceptable to
HMSK, shall be appointed to the Board of Directors of HMSK. Thereafter, and for
a period of 18 months from the Effective Date of this Agreement, at each meeting
of shareholders of HMSK at which directors are elected, HMSK shall include the
designee of BSB on management's slate of nominees for election to HMSK's Board
of Directors. Promptly following the date hereof, the Chief Technology Officer
of HMSK, or other designee of HMSK reasonably acceptable to BSB shall be
appointed to the Board of Directors of BSB. Thereafter, and for a period of 18
months from the Effective Date of this Agreement, at each meeting of
shareholders of BSB at which directors are elected, BSB shall include the
designee of HMSK on management's slate of nominees for election to BSB's Board
of Directors.
2. Covenants of BSB.
1. In addition to the rights granted to HMSK pursuant to this
Agreement, HMSK shall be entitled to all of the voting, registration and other
rights afforded to investors in BSB's Private Offering.
2. Following registration of the HMSK Shares being issued to BSB
pursuant to this Agreement, BSB hereby covenants and agrees that it will limit
the number of HMSK Shares it sells during any trading day to no more than 25% of
the trading volume of shares of HMSK Common Stock during the preceding trading
day. The daily number of shares that may be sold by BSB includes all other
shares of HMSK Common Stock that are publicly sold by BSB on such day.
3. BSB shall furnish such information as may reasonably be requested
by HMSK in order to enable it to register the HMSK Shares as contemplated below.
BSB shall comply with all applicable securities laws in connection with any
resale of the HMSK Shares by it.
4. BSB understands that HMSK Common Stock is a class of equity
securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). BSB hereby covenants and agrees that it will
file with the SEC and other applicable regulatory authorities, all reports and
other information required to be filed by it in connection with its acquisition
and/or disposition of the HMSK Shares.
5. BSB hereby agrees to fulfill its obligations to register the BSB
Shares in accordance with the Registration Rights Agreement signed on September
23, 1999.
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6. BSB hereby agrees that it will not vote the HMSK Shares, or any
other shares of HMSK Common Stock the vote of which is controlled by BSB, in
favor of any business combination involving HMSK that has not been endorsed by
the Board of Directors of HMSK.
3. Covenants of HMSK.
1. On or prior to January 31, 2000, HMSK agrees to file a
registration statement on Form S-3 under the Act, or, in the event Form S-3 is
not available to HMSK, then on another applicable form, for the purpose of
registering the HMSK Shares under the Act, for resale by BSB. HMSK agrees to use
its reasonable best efforts to cause such registration statement to become
effective as soon thereafter as is practicable. The costs of preparing and
filing such registration statement shall be borne by HMSK. Resale of the HMSK
Shares shall be subject to BSB's covenant set forth in Section V(B)(2), above.
2. HMSK agrees to be bound by restrictions on resale imposed on all
other shareholders of BSB in connection with any underwritten offering by BSB
covered by the registration statement which includes the BSB Shares; provided,
however, that BSB shall maintain the effectiveness of such registration
statement for a period of at least nine months following the termination of any
such restriction on resale. 1.
3. HMSK hereby agrees that it will not vote the BSB Shares, or any
other shares of BSB Common Stock the vote of which is controlled by HMSK, in
favor of any business combination involving BSB that has not been endorsed by
the Board of Directors of BSB.
6. Indemnification.
1. Indemnification by BSB. Subject to the provisions of subsection 3
hereof, BSB hereby indemnifies and holds harmless HMSK and its officers,
directors, employees, representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage, expense
(including costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with: (1) any
breach of any representation or warranty made by BSB in this Agreement or any
other agreement, certificate or document delivered by BSB pursuant to this
Agreement; (2) any breach by BSB of any of its covenants or obligations in this
Agreement or in any other agreement, document or certificate delivered by BSB
pursuant to this Agreement; and/or (3) any claim by any person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such person with BSB (or any
person acting on its behalf) in connection with any of the transactions
contemplated hereby.
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2. Indemnification by HMSK. HMSK hereby indemnifies and holds harmless
the BSB and its officers, directors, employees, representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any Damages arising,
directly or indirectly, from or in connection with (1) any breach of any
representation or warranty made by HMSK in this Agreement or in any agreement,
certificate or document delivered by HMSK pursuant to this Agreement, (2) any
breach by HMSK of any covenant or obligation of HMSK in this Agreement or in any
other agreement, document or certificate contemplated by this Agreement, or (3)
any claim by any person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
such person with HMSK (or any person acting on its behalf) in connection with
any of the transactions contemplated hereby.
3. Time Limitations. No party to this Agreement shall have any
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the date hereof, unless notice of any such liability is provided on or before
twelve (12) months from the date hereof.
4. Basket. Notwithstanding any conflicting or inconsistent provisions
hereof, BSB shall not be liable in damages, indemnity or otherwise to HMSK in
respect of the inaccuracy or breach of any representations, warranties,
covenants or agreements herein, until such time as the Damages to HMSK,
singularly or in the aggregate, exceed the sum of $15,000, at which time BSB
shall be liable for the full amount of HMSK's Damages. Notwithstanding any
conflicting or inconsistent provisions hereof, HMSK shall not be liable in
damages, indemnity or otherwise to the BSB in respect to the inaccuracy or
breach of any representations, warranties, covenants or agreements herein, until
such time as the Damages to BSB, singularly or in the aggregate, exceed the sum
of $15,000, at which time HMSK shall be liable for the full amount of BSB's
Damages.
7. Miscellaneous.
1. Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing for a period of one year.
2. No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
3. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
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4. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
6. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be addressed to the intended recipient as
set forth below:
If to BSB: XxxXxxxXxx.xxx, Inc.
000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxx Xxxxxxx and Xxxx Xxxx
If to HMSK: XxxxXxxxxxx.xxx, Incorporated
0000 X. XxXxxxxx Xxxx., Xxxxx X-00
Xxxx, Xxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxxxxx and Xxx Xxxxxxx
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using United
States Mail, personal delivery, expedited courier, messenger service or
facsimile, and such notice, request, demand, claim, or other communication shall
be deemed to have been duly given (i) three days following delivery to an
authorized United States Postal Office receptacle, (ii) upon facsimile
transmission, provided that electronic confirmation of receipt is retained by
the transmitting party, or (iii) upon receipt, if by personal delivery, courier
or messenger service. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
8. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Nevada without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Nevada or any other jurisdiction) that would cause the application of
17
the laws of any jurisdiction other than the State of Nevada. The parties
further: (i) agree that any legal suit, action or proceeding arising out of or
relating to this Agreement shall be instituted exclusively in any court of
competent jurisdiction within the County of Washoe, State of Nevada or in the
United States District Court for the District of Nevada, Northern Division, (ii)
waive any objection that they may have now or hereafter to the venue of any such
suit, action or proceeding, and (iii) irrevocably consent to the in personam
jurisdiction of any court of competent jurisdiction within the County of Washoe,
State of Nevada, and the United States District Court for the District of
Nevada, Northern District in any such suit, action or proceeding. The parties
each further agree to accept and acknowledge service of any and all process
which may be served in any such suit, action or proceeding in a court of
competent jurisdiction within the County of Washoe, State of Nevada or in the
United States District Court for the District of Nevada, Northern Division, and
that service of process upon the parties mailed by certified mail to their
respective addresses shall be deemed in every respect effective service of
process upon the parties, in any action or proceeding.
9. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
10. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11. Expenses. Each of the Buyer and the Seller will bear its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby.
12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
13. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
XxxXxxxXxx.xxx, Inc.
By:_______________________________
Name: Xxx Xxxxxxx
Its: Chief Executive Officer
XxxxXxxxxxx.xxx, Incorporated
By:_______________________________
Name: Xxxx Xxxxxxx
Its: Chief Executive Officer
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