STOCK EXCHANGE AGREEMENT
AMONG
eCom xXxx.xxx, Inc.
AND
Xxxxx and Xxxxxxx Xxxxxxx, as Trustees U/A/D October 10, 1996, as amended,
creating the Xxxxxxx-Xxxxxxx Trust, as the sole separate property of Xxxxx
Xxxxxxx-Xxxxxxx, Xxxx Xxxxxxx and the Estate of Xxxxxxxx X. Xxxxxxx
As the sole Shareholders of
Star Dot Marketing, Inc.
January 21, 2000
TABLE OF CONTENTS
Page
1. Definitions 1
2. Exchange of eCom Shares for Star Dot Shares 4
2.1 Basic Transaction 4
2.2 Exchange 5
2.3 The Closing 5
2.4 Deliveries at the Closing 5
3. Due Diligence Review Period 5
3.1 Due Diligence Review 5
3.2 Termination 5
4. Representations and Warranties Concerning the Transaction 6
4.1 Representations and Warranties of the Shareholders 6
4.2 Representations and Warranties of eCom 7
5. Representations and Warranties Concerning Star Dot 8
5.1 Organization, Qualification, and Corporate Power 8
5.2 Capitalization 8
5.3 Noncontravention 8
5.4 Brokers' Fees 9
5.5 Title to Assets 9
5.6 Subsidiaries 9
5.7 Financial Statements 9
5.8 Events Subsequent to Most Recent Fiscal Year End and
Most Recent Fiscal Month End 9
5.9 Undisclosed Liabilities 11
5.10 Legal Compliance 11
5.11 Tax Matters 11
5.12 Real Property 13
5.13 Intellectual Property 15
5.14 Tangible Assets 16
5.15 Inventory 16
5.16 Contracts 17
5.17 Notes and Accounts Receivable 18
5.18 Powers of Attorney 18
5.19 Insurance 18
5.20 Litigation 18
5.21 Product Warranty 19
5.22 Product Liability 19
5.23 Employees 19
5.24 Employee Benefits 19
5.25 Guaranties 19
5.26 Environment, Health, and Safety 20
5.27 Certain Business Relationships with Star Dot 20
5.28 Disclosure 20
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6. Pre-Closing Covenants 20
6.1 General 20
6.2 Notices and Consents 20
6.3 Operation of Business 21
6.4 Working Capital Requirements 21
6.5 Preservation of Business 22
6.6 Full Access 22
6.7 Notice of Developments 22
6.8 Exclusivity 22
6.9 Title Insurance 23
6.10 Surveys 23
7. Post-Closing Covenants 24
7.1 General 24
7.2 Litigation Support 24
7.3 Transition 24
7.4 Confidentiality 24
7.5 Covenant Not to Compete 25
7.6 eCom Shares Restricted Securities 25
8. Conditions to Obligation to Close 26
8.1 Conditions to Obligation of eCom 26
8.2 Conditions to Obligation of the Shareholders 27
9. Remedies for Breaches of This Agreement 28
9.1 Survival of Representations and Warranties 28
9.2 Indemnification Provisions for Benefit of eCom 28
9.3 Indemnification Provisions for Benefit of the Shareholders 28
9.4 Matters Involving Third Parties 29
9.5 Other Indemnification Provisions 30
10. Termination 30
10.1 Termination of Agreement 30
10.2 Effect of Termination 31
11. Registration Rights 31
11.1 Piggy Back Registration 31
11.2 Termination of Piggy Back Registration 31
12. Miscellaneous 31
12.1 Amendments and Waivers 31
12.2 Counterparts 31
12.3 Construction 31
12.4 Entire Agreement 32
12.5 Expenses 32
12.6 Facsimile Execution 32
12.7 Governing Law 32
12.8 Headings 32
12.9 Incorporation of Exhibits, Annexes, and Schedules 32
12.10 Nature of Certain Obligations 32
12.11 No Third-Party Beneficiaries 32
12.12 Notices 33
12.13 Press Releases and Public Announcements 33
12.14 Severability 33
12.15 Specific Performance 34
12.16 Submission to Jurisdiction 34
12.17 Succession and Assignment 34
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STOCK EXCHANGE AGREEMENT
Stock Exchange Agreement (the "Agreement") entered into on January 21,
2000, by and among eCom xXxx.xxx, a Florida corporation ("eCom") and Xxxxx and
Xxxxxxx Xxxxxxx, as Trustees U/A/D October 10, 1996, as amended, creating the
Xxxxxxx-Xxxxxxx Trust, as the sole separate property of Xxxxx Xxxxxxx-Xxxxxxx
("A & W Xxxxxxx"), Xxxx Xxxxxxx ("X. Xxxxxxx") and the Estate of Xxxxxxxx X.
Xxxxxxx (the "Estate"). Hereinafter, A & W Xxxxxxx, X. Xxxxxxx and the Estate
shall be referred to collectively as the "Shareholders". eCom and the
Shareholders are hereinafter referred to collectively as the "Parties."
The Shareholders in the aggregate own all of the outstanding capital
stock of Star Dot Marketing, Inc., a California corporation ("Star Dot").
This Agreement contemplates a transaction in which eCom will exchange Six
Hundred Seventy Five Thousand of the $.00001 par value common shares of eCom
(the "eCom Shares") with Shareholders for all of the issued and outstanding no
par value common stock of Star Dot (the "Star Dot Shares").
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Sec. 1504, or any similar group defined under a similar provision of state,
local or foreign law.
"Applicable Rate" means the prime rate of interest announced from time to
time by First Union National Bank of Florida.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Closing" has the meaning set forth in Paragraph 2.3 below.
"Closing Date" has the meaning set forth in Paragraph 2.3 below.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Confidential Information" means any information concerning the
businesses and affairs of Star Dot and its Subsidiaries, if any, that is not
already generally available to the public.
"Controlled Group of Corporations" has the meaning set forth in Code Sec.
1563.
"Deferred Intercompany Transaction" has the meaning set forth in Treas.
Reg. Sec. 1.1502-13.
"Disclosure Schedule" has the meaning set forth in Paragraph 5 below.
"eCom" has the meaning set forth in the preface above.
"eCom Shares" has the meaning set forth in the preface above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, California and local governments (and all
agencies thereof) concerning pollution or protection of the environment,
public health and safety, or employee health and safety, including laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Loss Account" has the meaning set forth in Treas. Reg.
Sec. 1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
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"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statement" has the meaning set forth in Paragraph 5.7, 6
below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Paragraph 9.4 below.
"Indemnifying Party" has the meaning set forth in Paragraph 9.4 below.
"Intellectual Property" means (a) 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, (b) 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, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith, (d)
all mask works and all applications, registrations, and renewals in connection
therewith, (e) 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), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any 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.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Paragraph
5.7, 6 below.
"Most Recent Fiscal Month End" has the meaning set forth in Paragraph
5.7, 6 below.
"Most Recent Fiscal Year End" has the meaning set forth in Paragraph 5.7,
6 below.
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"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Process Agent" has the meaning set forth in Paragraph 12.16 below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Requisite Shareholders" means Shareholders holding all of the interest
in the Star Dot Shares as set forth in Paragraph 2 of the Disclosure Schedule.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable, or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(c) purchase money liens and liens securing rental payments under capital
lease arrangements, and (d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
"Shareholders" has the meaning set forth in the preface above.
"Star Dot" has the meaning set forth in the preface above
"Star Dot Shares" has the meaning set forth in the preface above
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Survey" has the meaning set forth in Paragraph 6.10 below.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
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similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Paragraph 9.4 below.
2. Exchange of eCom Shares for Star Dot Shares.
2.1 Basic Transaction. On and subject to the terms and conditions
of this Agreement, eCom agrees to acquire from each of the Shareholders, and
each of the Shareholders agrees to transfer to eCom, all of the Star Dot
Shares owned by each such Shareholder for the number of eCom Shares specified
below in this Paragraph 2. It is the intent of the Parties that the
acquisition by eCom of the Star Dot Shares from the Shareholders and the
transfer by eCom of the eCom Shares to the Shareholders shall qualify as a
tax-free reorganization pursuant to Section 368(a)(1)(B) of the Code, the
Treasury Regulations promulgated thereunder and the common law governing same.
Each of the Parties hereby expressly agrees to use its best efforts to take
all necessary or desirable steps, do all things and execute all documents
reasonably necessary or desirable to effectuate the foregoing expressed
intention, including without limitation, the requirement upon eCom to continue
the business of Star Dot in such manner as will satisfy the "continuity of
business enterprise" requirement under Code section 368(a)(1)(B), the Treasury
Regulations promulgated thereunder and the common law governing same.
2.2 Exchange. eCom agrees to deliver to each Shareholder the
number of ecom Shares equal to the proportion of the respective holdings of
Star Dot Shares of each Shareholder as set forth in Paragraph 2 of the
Disclosure Schedule.
2.3 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Xxxxxx X.
Xxxxxxx, P.A. in Boca Raton, Florida, commencing at 10:00 a.m. local time on
the second business day following the satisfaction or waiver of all conditions
to the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as eCom and the Requisite
Shareholders may mutually determine (the "Closing Date"); provided, however,
that the Parties shall use their mutual best efforts to establish a Closing
Date as soon as reasonably practicable.
2.4 Deliveries at the Closing. At the Closing:
(a) the Shareholders will deliver to eCom the various
certificates, instruments, and documents referred to in Paragraph 8
below;
(b) eCom will deliver to the Shareholders the various
certificates, instruments, and documents referred to in Paragraph 8.2
below;
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(c) each of the Shareholders will deliver to eCom stock
certificates representing all of such Shareholder's Star Dot Shares,
endorsed in blank or accompanied by duly executed assignment documents;
and
(d) eCom will deliver to each of the Shareholders the
eCom Shares specified in Paragraph 2.2 above.
3. Due Diligence Review Period.
3.1 Due Diligence Review. eCom shall have a period of time (the
"Due Diligence Period") commencing upon the date of execution hereof by the
Parties hereto and ending at 5:00 P.M. sixty (60) days thereafter (the "Due
Diligence Period Expiration Date") to continue the review of the business,
legal and accounting due diligence matters, in such manner as eCom may deem
necessary or appropriate, directly relating to Star Dot and the Star Dot
Shares (collectively, the "Due Diligence Review").
3.2 Termination. eCom shall have the absolute right to terminate
this Agreement, in the exercise of the sole and exclusive discretion of eCom,
at any time prior to the expiration of the Due Diligence Review Period. If
eCom elects to cancel this Agreement, eCom shall deliver written notice to
Shareholders of such election prior to the expiration of the Due Diligence
Review Period, and thereupon, this Agreement shall terminate and the Parties
hereto shall be released from any further obligation hereunder.
4. Representations and Warranties Concerning the Transaction.
4.1 Representations and Warranties of the Shareholders. Each of
the Shareholders represents and warrants to eCom that the statements contained
in this Paragraph 4.1 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Paragraph 4.1) with respect to such Shareholder,
except as set forth in Annex I attached hereto or as otherwise disclosed in
writing to eCom after the date of execution of this Agreement.
(a) Authorization of Transaction. Each Shareholder has full
power and authority (including, if the Shareholder is a corporation or
other organization, full organizational power and authority) to execute
and deliver this Agreement and to perform the obligations of Shareholder
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Shareholder, enforceable in accordance with its terms
and conditions. The Shareholder 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 to consummate the transactions
contemplated by this Agreement.
(b) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which any
Shareholder is subject or, if a Shareholder is an entity, any provision
of its organizational documents, or conflict with, result in a breach of,
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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 the Shareholder is a party or by which any
Shareholder is bound or to which any of the assets of such Shareholder is
subject.
(c) Brokers' Fees. No Shareholder has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
eCom could become liable or obligated.
(d) Investment. Each Shareholder (A) understands that eCom
Shares have not been, and will not, except as otherwise provided for
hereinafter, be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering,
(B) is acquiring eCom Shares solely for the account of such Shareholder
for investment purposes, and not with a view to the distribution thereof,
(C) is a sophisticated investor with knowledge and experience in business
and financial matters, (D) has received certain information concerning
eCom, including but not limited to the Form 10-KSB for the fiscal year
ended May 31, 1999 (the "Most Current Form 10-KSB"), which Most Current
Form 10-KSB is incorporated by reference hereto, and has had the
opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in acquiring and holding eCom
Shares, (E) is able to bear the economic risk and lack of liquidity
inherent in holding eCom Shares, and (F) is an Accredited Investor for
the reasons set forth on Annex I.
(e) Star Dot Shares. Each Shareholder holds of record and
owns beneficially the number of Star Dot Shares set forth next to the
name of such Shareholder in Paragraph 2 of the Disclosure Schedule, free
and clear of any restrictions on transfer (other than any restrictions
under the Securities Act and state securities laws), Taxes, Security
Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. No Shareholder is a party to any option,
warrant, purchase right, or other contract or commitment that could
require the Shareholder to sell, transfer, or otherwise dispose of Star
Dot Share (other than this Agreement). No Shareholder is a party to any
voting trust, proxy, or other agreement or understanding with respect to
the voting of any Star Dot Share. The Star Dot Shares held by the
Shareholders represents all of the issued and outstanding capital stock
of Star Dot.
4.2 Representations and Warranties of eCom. eCom represents and
warrants to the Shareholders that the statements contained in this Paragraph
4.2 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout
this Paragraph 4.2), except as set forth in Annex II attached hereto or as
otherwise disclosed in writing to eCom after the date of execution of this
Agreement.
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(a) Organization of eCom. eCom is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. eCom is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction
where such qualification is required. eCom has full corporate power and
authority and all licenses, permits and authorizations necessary to carry
on the business in which it is engaged and to own and use the properties
owned and used by it. eCom is not in default under or in violation of
any provision of its organizational documents or bylaws.
(b) Authorization of Transaction. eCom has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of eCom,
enforceable in accordance with its terms and conditions. eCom 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 to
consummate the transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
eCom is subject or any provision of its charter or bylaws or 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 eCom is a party
or by which it is bound or to which any of its assets is subject.
(d) Brokers' Fees. eCom 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 for which any
Shareholder could become liable or obligated.
(e) Investment. eCom is not acquiring Star Dot Shares with
a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act.
5. Representations and Warranties Concerning Star Dot. The
Shareholders represent and warrant to eCom to the best of Shareholders' actual
knowledge after due inquiry that the statements contained in this Paragraph 5
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Paragraph 5), except as set forth in the disclosure schedule (the "Disclosure
Schedule") delivered by the Shareholders to eCom on or after the date hereof
and initialed by the Parties. Nothing set forth in the Disclosure Schedule
shall be deemed as an exception to a representation or warranty made herein,
unless the Disclosure Schedule identifies any such exception with
particularity and describes the relevant facts in specific detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item in the Disclosure Schedule shall not be
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deemed adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the existence of
the document or other item itself). The Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained
in this Paragraph 5.
5.1 Organization, Qualification, and Corporate Power. Star Dot is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Star Dot is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Star Dot has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. Paragraph 1 of the Disclosure Schedule lists the directors
and officers of Star Dot. The Shareholders have delivered to eCom correct and
complete copies of the charter and bylaws of each of Star Dot (as amended to
date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of Star
Dot are correct and complete. Star Dot is not in default under or in
violation of any provision of its charter or bylaws.
5.2 Capitalization. The entire authorized capital stock of Star
Dot consists of Two Million (2,000,000) no par value common shares, of which
only the Star Dot Shares are issued and outstanding. All of the issued and
outstanding Star Dot Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the respective
Shareholders as set forth in Paragraph 2 of the Disclosure Schedule. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require Star Dot to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to Star Dot. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the capital
stock of Star Dot.
5.3 Noncontravention. Star Dot is not required to 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. Neither the execution and
the delivery of this Agreement nor the consummation of the transactions
contemplated hereby will:
(a) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which Star Dot is
subject or any provision of the charter or bylaws of any of Star Dot; or
(b) 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 Star Dot is a party or by which it is bound or to
9
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets).
5.4 Brokers' Fees. Star Dot 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.
5.5 Title to Assets. Star Dot has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it,
located on its premises, or shown on the Most Recent Balance Sheet or acquired
after the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet.
5.6 Subsidiaries. Star Dot has no Subsidiaries, and Star Dot does
not control directly or indirectly, nor does Star Dot have any direct or
indirect equity participation in any corporation, partnership, trust, or other
business association which is not a Subsidiary of Star Dot.
5.7 Financial Statements. Paragraph 5.7, 6 of the Disclosure
Schedule sets forth certain financial statements of Star Dot (collectively the
"Financial Statements"). The Financial Statements (including the notes
thereto) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, present fairly the financial
condition of Star Dot as of such dates and the results of operations of Star
Dot for such periods, are correct and complete, and are consistent with the
books and records of Star Dot (which books and records are correct and
complete); provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material
individually or in the aggregate) and lack footnotes and other presentation
items. Accordingly, the Financial Statements are as follows:
(a) audited consolidated, if applicable, balance sheets,
statements of income, changes in stockholders' equity, and cash flow for
the fiscal years ended December 31, 1997 and 1998 (the "Most Recent
Fiscal Year End") for Star Dot; and
(b) unaudited consolidated, if applicable, balance sheets,
statements of income, changes in stockholders' equity, and cash flow as
of and for the month ended October, 1999 (the "Most Recent Fiscal Month
End") for Star Dot.
5.8 Events Subsequent to Most Recent Fiscal Year End and Most
Recent Fiscal Month End. Since the Most Recent Fiscal Year End and the Most
Recent Fiscal Month End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of any of Star Dot. Without limiting the generality of the
foregoing, since such dates:
(a) Star Dot has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(b) Star Dot has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
10
and licenses) either involving more than $25,000.00 or outside the
Ordinary Course of Business;
(c) no party (including Star Dot) has accelerated,
terminated, modified, or cancelled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) involving more than $5,000.00 to which Star Dot is a party or
by which it is bound;
(d) Star Dot has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(e) Star Dot has not made any capital expenditure (or series
of related capital expenditures) either involving more than $10,000.00 or
outside the Ordinary Course of Business;
(f) Star Dot has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and
acquisitions) either involving more than $5,000.00 or outside the
Ordinary Course of Business;
(g) Star Dot has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving more
than $5,000.00 singly or $20,000.00 in the aggregate;
(h) Star Dot has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(i) Star Dot has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $5,000.00 or outside the Ordinary Course of
Business;
(j) Star Dot has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(k) there has been no change made or authorized in the
charter or bylaws of any of Star Dot;
(l) Star Dot has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(m) Star Dot has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(n) Star Dot has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
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(o) Star Dot has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(p) Star Dot has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(q) Star Dot has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(r) Star Dot has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(s) Star Dot has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(t) Star Dot has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
(u) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving any of Star Dot; and
(v) Star Dot has not committed to any of the foregoing.
5.9 Undisclosed Liabilities. Star Dot has no Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability), except for :
(a) Liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto); and
(b) Liabilities which have arisen after the Most Recent
Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement,
or violation of law).
5.10 Legal Compliance. No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against Star Dot and its respective predecessors and Affiliates
alleging any failure to comply with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state and local governments (and all
agencies thereof).
5.11 Tax Matters.
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(a) Star Dot has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all respects.
All Taxes owed by any of Star Dot (whether or not shown on any Tax
Return) have been paid. Star Dot currently is not the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever
been made by an authority in a jurisdiction where any of Star Dot does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
Star Dot that arose in connection with any failure (or alleged failure)
to pay any Tax.
(b) Star Dot has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other
third party.
(c) No Shareholder or director or officer (or employee
responsible for Tax matters) of Star Dot expects any authority to assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of any
of Star Dot either (A) claimed or raised by any authority in writing or
(B) as to which any of the Shareholders and the directors and officers
(and employees responsible for Tax matters) of Star Dot has Knowledge
based upon personal contact with any agent of such authority. Paragraph
9 of the Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to any of Star Dot for taxable
periods ended on or after December 31 1997, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently
are the subject of audit. The Shareholders have delivered to eCom
correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by any of Star Dot since December 31, 1997.
(d) Star Dot has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) Star Dot has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. Star Dot has not made any payments,
is not obligated to make any payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments
that will not be deductible under Code Sec. 280G. Star Dot has not been
a United States real property holding corporation within the meaning of
Code Sec. 897(c)(2) during the applicable period specified in Code Sec.
897(c)(1)(A)(ii). Star Dot is not a party to any Tax allocation or
sharing agreement. Star Dot (A) has not been a member of an Affiliated
Group filing a consolidated federal income Tax Return (other than a group
the common parent of which was Star Dot) or (B) has any Liability for the
Taxes of any Person (other than any of Star Dot and its Subsidiaries)
under Treas. Reg. Sec. 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise.
(f) Paragraph 9 of the Disclosure Schedule sets forth the
following information with respect to Star Dot as of the most recent
practicable date:
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(1) the basis of Star Dot in its assets;
(2) the amount of any net operating loss, net capital
loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to Star Dot; and
(3) the amount of any deferred gain or loss allocable
to Star Dot arising out of any Deferred Intercompany unpaid Taxes of Star
Dot:
(A) did not, as of the Most Recent Fiscal Month
End, exceed the reserve for 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 (rather than in any notes thereto); and
(B) do not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with the
past custom and practice of Star Dot in filing its Tax Returns.
5.12 Real Property.
(a) Paragraph 11 of the Disclosure Schedule lists and
describes briefly all real property that Star Dot owns. With respect to
each such parcel of owned real property:
(1) the identified owner has good and marketable title
to the parcel of real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for installments of
special assessments not yet delinquent and recorded easements, covenants,
and other restrictions which do not impair the current use, occupancy, or
value, or the marketability of title, of the property subject thereto;
(2) there are no pending or, to the Knowledge of any
of the Shareholders and the directors and officers (and employees with
responsibility for real estate matters) of Star Dot threatened
condemnation proceedings, lawsuits, or administrative actions relating to
the property or other matters affecting materially and adversely the
current use, occupancy, or value thereof;
(3) the legal description for the parcel contained in
the deed thereof describes such parcel fully and adequately, the
buildings and improvements are located within the boundary lines of the
described parcels of land, are not in violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties or
buildings or improvements thereon are subject to "permitted non-
conforming use" or permitted non-conforming structure" classifications),
and do not encroach on any easement which may burden the land, and the
land does not serve any adjoining property for any purpose inconsistent
with the use of the land, and the property is not located within any
flood plain or subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have not been obtained;
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(4) all facilities have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been operated
and maintained in accordance with applicable laws, rules, and
regulations;
(5) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any party
or parties the right of use or occupancy of any portion of the parcel of
real property;
(6) there are no outstanding options or rights of
first refusal to purchase the parcel of real property, or any portion
thereof or interest therein;
(7) there are no parties (other than Star Dot) in
possession of the parcel of real property, other than tenants under any
leases disclosed in Paragraph 11 of the Disclosure Schedule who are in
possession of space to which they are entitled;
(8) all facilities located on the parcel of real
property are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of which services are
adequate in accordance with all applicable laws, ordinances, rules, and
regulations and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the parcel of real
property; and
(9) each parcel of real property abuts on and has
direct vehicular access to a public road, or has access to a public road
via a permanent, irrevocable, appurtenant easement benefitting the parcel
of real property, and access to the property is provided by paved public
right-of-way with adequate curb cuts available.
(b) Paragraph 11 of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to Star Dot.
Paragraph 11 of the Disclosure Schedule also identifies the leased or
subleased properties for which title insurance policies are to be
procured in accordance with Paragraph 6.9(b) below. The Shareholders
have delivered to eCom correct and complete copies of the leases and
subleases listed in Paragraph 11 of the Disclosure Schedule (as amended
to date). With respect to each lease and sublease listed in Paragraph 11
of the Disclosure Schedule:
(1) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(2) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical
terms immediately following the Closing;
(3) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time,
15
would constitute a breach or default or permit termination, modification,
or acceleration thereunder;
(4) no party to the lease or sublease has repudiated
any provision thereof;
(5) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(6) Star Dot has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold
or subleasehold;
(7) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses
and permits) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws, rules,
and regulations;
(8) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of
said facilities; and
5.13 Intellectual Property.
(a) Star Dot owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
currently utilized by Star Dot as a part of the business that it
conducts. Each such item of Intellectual Property so owned or used by
Star Dot immediately prior to the Closing hereunder will be owned or
available for use by Star Dot on identical terms and conditions
immediately subsequent to the Closing hereunder. Star Dot has taken all
necessary and desirable action to maintain and protect each item of
Intellectual Property that it owns or uses.
(b) Star Dot has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and to the Knowledge of the directors
and officers (and employees with responsibility for Intellectual Property
matters) Star Dot has never received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Star Dot must
license or refrain from using any Intellectual Property rights of any
third party). To the Knowledge of any of the Shareholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of Star Dot, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of any of Star Dot.
(c) Paragraph 12 of the Disclosure Schedule identifies each
patent or registration which has been issued to Star Dot, with respect to
any of its Intellectual Property, identifies each pending patent
application or application for registration which any of Star Dot has
made with respect to any of its Intellectual Property, and identifies
each license, agreement, or other permission which Star Dot has granted
16
to any third party with respect to any of its Intellectual Property
(together with any exceptions). The Shareholders have delivered to eCom
correct and complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as amended to date)
and have made available to eCom correct and complete copies of all other
written documentation evidencing ownership and prosecution (if
applicable) of each such item. Paragraph 12 of the Disclosure Schedule
also identifies each trade name or unregistered trademark used by any of
Star Dot in connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in Paragraph 12
of the Disclosure Schedule:
(1) Star Dot possess all right, title, and interest in
and to the item, free and clear of any Security Interest, license, or
other restriction;
(2) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(3) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of any of the directors and officers (and employees with
responsibility for Intellectual Property matters) of Star Dot is
threatened which challenges the legality, validity, enforceability, use,
or ownership of the item; and
(4) Star Dot has never agreed to indemnify any Person
for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(d) Paragraph 12 of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that Star Dot
uses pursuant to license, sublicense, agreement, or permission. Star Dot
has delivered to eCom correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified
in Paragraph 12 of the Disclosure Schedule:
(1) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(2) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms immediately following the Closing;
(3) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(4) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
17
(5) with respect to each sublicense, the
representations and warranties set forth in subsections (1) through (4)
above are true and correct with respect to the underlying license;
(6) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of any of the Shareholders and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Star
Dot is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property; and
(7) Star Dot has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.
(e) To the Knowledge of any of the Shareholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters), the continued operation of the business
of Star Dot as presently conducted will not interfere with, infringe
upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties.
5.14 Tangible Assets. Star Dot owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
its businesses as presently conducted. To the Knowledge of the directors and
officers (and employees with responsibility for such matters) each such
tangible asset has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear
and tear), and is suitable for the purposes for which it presently is used.
5.15 Inventory. Any inventory maintained by Star Dot is
merchantable and fit for the purpose for which it was procured, and none of
which is obsolete, damaged, or defective, subject only to the reserve for
inventory writedown set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of Star Dot.
5.16 Contracts. The Shareholders have delivered to eCom a correct
and complete copy of each written agreement listed in Paragraph 15 of the
Disclosure Schedule (as amended to date) and a written summary setting forth
the terms and conditions of each oral agreement referred to in Paragraph 15 of
the Disclosure Schedule. With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(B) the agreement will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms immediately following the Closing;
(C) no party is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) no
party has repudiated any provision of the agreement. Accordingly, Paragraph
15 of the Disclosure Schedule lists the following contracts and other
agreements to which any of Star Dot is a party:
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $1,000.00 per annum;
18
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one year,
result in a material loss to Star Dot or involves consideration in excess
of $5,000.00;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$5,000.00 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(e) any agreement concerning confidentiality or
noncompetition;
(f) any agreement with any of the Shareholders and their
Affiliates (other than Star Dot);
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $10,000.00 or providing severance benefits;
(j) any agreement under which it has advanced or loaned any
amount to any of its directors, officers and employees outside the
Ordinary Course of Business;
(k) any agreement under which the consequences of a default
or termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of any of Star Dot; or
(l) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.00.
5.17 Notes and Accounts Receivable. All notes and accounts
receivable of Star Dot are reflected properly on their 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 Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of Star Dot.
5.18 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of any of Star Dot.
19
5.19 Insurance. Paragraph 18 of the Disclosure Schedule sets forth
certain information regarding insurance policies for the benefit of Star Dot.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms immediately following the Closing; (C) neither Star Dot nor
any other party to the policy is in 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 breach or
default, or permit termination, modification, or acceleration, under the
policy; and (D) no party to the policy has repudiated any provision thereof.
Star Dot has been covered during the past 5 years by insurance in scope and
amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period. Paragraph 18 of the Disclosure Schedule
describes any self-insurance arrangements affecting Star Dot. Furthermore,
paragraph 18 of the Disclosure Schedule sets forth the following information
with respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which any of Star Dot has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past 5 years:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(e) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
5.20 Litigation. Paragraph 19 of the Disclosure Schedule sets
forth information regarding litigation matters (the "Litigation Matters").
Except for the Litigation Matters, none of the Shareholders and the directors
and officers (and employees with responsibility for litigation matters) of
Star Dot has any reason to believe that any other action, suit, proceeding,
hearing, or investigation may be brought or threatened against Star Dot. As
to the Litigation Matters, Paragraph 19 of the Disclosure Schedule sets forth
each instance in which Star Dot:
(a) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge; or
(b) is a party, or to the Knowledge of any of the directors
and officers (and employees with responsibility for litigation matters)
of Star Dot is 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. None of the actions,
suits, proceedings, hearings, and investigations set forth in Paragraph
20
19 of the Disclosure Schedule could result in any material adverse change
in the business, financial condition, operations, results of operations,
or future prospects of Star Dot.
5.21 Product Warranty. Each product manufactured, sold, leased, or
delivered by any of Star Dot has been in conformity with all applicable
contractual commitments and all express and implied warranties, and Star Dot
has no Liability (and there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for product warranty claims set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Star Dot. No product manufactured, sold, leased, or delivered by Star Dot is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease. Paragraph 20 of the
Disclosure Schedule includes copies of the standard terms and conditions of
sale or lease for Star Dot (containing applicable guaranty, warranty, and
indemnity provisions).
5.22 Product Liability. Star Dot has no Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) arising out of any injury to individuals or property as
a result of the ownership, possession, or use of any product manufactured,
sold, leased, or delivered by Star Dot.
5.23 Employees. To the Knowledge of any of the Shareholders and
the directors and officers (and employees with responsibility for employment
matters) of Star Dot no executive, key employee, or group of employees has any
plans to terminate employment with any of Star Dot. Star Dot is not a party
to or bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. Star Dot has not committed any unfair labor practice.
None of the Shareholders and the directors and officers (and employees with
responsibility for employment matters) of Star Dot has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of
any labor union with respect to employees of Star Dot.
5.24 Employee Benefits. Star Dot does not maintain or contribute
to any Employee Benefit Plan.
5.25 Guaranties. Star Dot is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any other
Person.
5.26 Environment, Health, and Safety.
(a) Each of Star Dot and its respective predecessors and
Affiliates has complied with all Environmental, Health, and Safety Laws,
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. Without limiting the
generality of the preceding sentence, Star Dot and its predecessors and
21
Affiliates has obtained and been in compliance with all of the terms and
conditions of all permits, licenses, and other authorizations which are
required under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental, Health, and Safety Laws.
(b) Star Dot has no Liability (and none of Star Dot and its
respective predecessors and Affiliates has handled or disposed of any
substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or owned or
operated any property or facility in any manner that could form the
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Star Dot
giving rise to any Liability) for damage to any site, location, or body
of water (surface or subsurface), for any illness of or personal injury
to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(c) All properties and equipment used in the business of
Star Dot and its predecessors and Affiliates have been free of asbestos,
PCB's, methylene chloride, trichloroethylene, 1,2-trans-
dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances.
5.27 Certain Business Relationships with Star Dot. None of the
Shareholders and their Affiliates has been involved in any business
arrangement or relationship with Star Dot within the past 12 months, and none
of the Shareholders and their Affiliates owns any asset, tangible or
intangible, which is used in the business of any of Star Dot.
5.28 Disclosure. The representations and warranties contained in
this Paragraph 5 do not contain any untrue statement of a fact or omit to
state any fact necessary in order to make the statements and information
contained in this Paragraph 5 not misleading.
6. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
6.1 General. Each of the Parties will use its best efforts to
take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction of the closing conditions set forth in
Paragraph 8 below).
6.2 Notices and Consents. The Shareholders will cause Star Dot to
give any notices to third parties, and will cause each of Star Dot to use its
best efforts to obtain any third-party consents, that eCom may reasonably
request in connection with the matters referred to in Paragraph 5.3 above.
Each of the Parties will (and the Shareholders will cause Star Dot) to give
any notices to, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Paragraph
?, 4.1(a), 4.1(b), and Paragraph 5.3 above. Without limiting the generality
of the foregoing, each of the Parties will file (and the Shareholders will
22
cause Star Dot to file) any Notification and Report Forms and related material
that any such Party may be required to file with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice under
the Xxxx-Xxxxx-Xxxxxx Act, will use such Parties' reasonable best efforts to
obtain (and the Shareholders will cause Star Dot to use their reasonable best
efforts to obtain) an early termination of the applicable waiting period, and
will make (and the Shareholders will cause Star Dot to make) any further
filings pursuant thereto that may be necessary or proper in connection
therewith.
6.3 Operation of Business. The Shareholders will not, without the
consent of eCom, cause or permit any of Star Dot to engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Shareholders
will not cause or permit Star Dot to:
(a) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock; or
(b) otherwise engage in any practice, take any action, or
enter into any transaction of the sort described in Paragraph 5.8 above.
6.4 Working Capital Requirements.
(a) Advancement of Funds. eCom acknowledges that during the
period commencing November 1, 1999 and continuing through January 30,
2000 (the "Advancement Period") Star Dot may not have sufficient funds
to satisfy the working capital or other financial requirements of Star
Dot (the "Requirements Deficit"). Accordingly, Xxxxxxx Xxxxxxx Xxxxxxx
("X. Xxxxxxx") hereby agrees to advance (on a revolving basis) such
funds to Star Dot as may be necessary to satisfy the Requirements
Deficit (an "Advance"), provided that maximum amount required to be
Advanced by X. Xxxxxxx shall not exceed One Hundred Fifty Thousand and
No/100 Dollars ($150,000.00). The determination of whether or not Star
Dot requires an Advance shall be determined by Xxxxx Xxxxxxxxx
("Xxxxxxxxx"), in the exercise of the reasonable business judgement of
Xxxxxxxxx. In the event that Xxxxxxxxx determines that an Advance is
required by Star Dot, Xxxxxxxxx shall advise X. Xxxxxxx of such
requirement, and X. Xxxxxxx shall, within five (5) days after a request
therefore but subject to the monetary limitation provided hereinabove,
provide an Advance to Star Dot in the amount so requested by Xxxxxxxxx.
(b) Upon expiration of the Advancement Period, X. Xxxxxxx
shall no longer have the obligation to make any additional Advance.
Furthermore, on the expiration of the Advancement Period, the then
balance due from Star Dot to X. Xxxxxxx as a result of any unpaid
Advance shall be determined (the "Advance Balance") and such Advance
Balance shall accrue interest thereon at the rate of eight percent (8%)
per annum from the date of expiration of the Advancement Period until
the Advance Balance is repaid to X. Xxxxxxx by Star Dot or as otherwise
provided hereinafter.
(c) The Advance Balance and any and all accrued interest
thereon (collectively, the "Aggregate Advance Balance") shall be due in
full from Star Dot to X. Xxxxxxx two (2) years from the date of
expiration of the Advancement Period (the "Due Date").
23
(d) At any time prior to the Due Date and provided that the
Closing has occurred, X. Xxxxxxx shall have the right, exercisable as
may be determined by X. Xxxxxxx in the sole and exclusive discretion of
X. Xxxxxxx, to elect to cancel the then outstanding Aggregate Advance
Balance, if any, in exchange for a number of the $.00001 par value
common shares of eCom (the "Payment Shares) determined by multiplying
the Aggregate Advance Balance by two (2) and dividing the result
obtained by two (2). It is specifically understood and agreed that the
Payment Shares will be restricted securities and will be subject to all
of the same requirements as set forth hereinafter in Paragraph 7.6. In
the event X. Xxxxxxx so elects to accept the Payment Shares in lieu of
payment of the Advance Balance, X. Xxxxxxx shall notify eCom in writing
(the "Payment Shares Notice"), and eCom shall, as soon as reasonably
practical after receipt of the Payment Shares Notice, issue to X.
Xxxxxxx the Payment Shares, and upon receipt of the Payment Shares from
eCom, the Aggregate Advance Balance shall be deemed to have been paid in
full.
(c) Notwithstanding anything herein contained to the
contrary, in the event that the Closing has occurred, then at any time
after a date which is six (6) months after the expiration of the
Advancement Period until the Due Date, eCom shall have the right,
exercisable as may be determined by eCom in the sole and exclusive
discretion of eCom, to elect to pay to X. Xxxxxxx the then outstanding
Aggregate Advance Balance, if any, in readily available U.S. funds (the
"eCom Payment Election"). In the event eCom so elects the eCom Payment
Election, eCom shall notify X. Xxxxxxx in writing (the "eCom Payment
Election Notice"), and within seven (7) days after the date of the
Payment Election Notice, X. Xxxxxxx shall have the right, exercisable as
may be determined by X. Xxxxxxx in the sole and exclusive discretion of
X. Xxxxxxx, to elect to accept the Payment Shares in lieu of payment by
eCom of the then outstanding Aggregate Advance Balance (the "Alternative
Payment Shares Notice"). In the event, after receipt of a Payment
Election Notice, X. Xxxxxxx provides an Alternative Payment Shares
Notice, eCom shall, as soon as reasonably practical after receipt of the
Alternative Payment Shares Notice, issue to X. Xxxxxxx the Payment
Shares, and upon receipt of the Payment Shares from eCom, the Aggregate
Advance Balance shall be deemed to have been paid in full, otherwise eCom
shall pay the then outstanding Aggregate Advance Balance to X. Xxxxxxx in
readily available U.S. funds.
6.5 Preservation of Business. The Shareholders will cause each of
Star Dot to keep its business and properties substantially intact, including
its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees.
6.6 Full Access. Each of the Shareholders will permit, and the
Shareholders will cause Star Dot to permit, representatives of eCom to have
full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of Star Dot, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to each of Star Dot.
6.7 Notice of Developments. The Shareholders will give prompt
written notice to eCom of any material adverse development causing a breach of
24
any of the representations and warranties in Paragraph 5 above. Each Party
will give prompt written notice to the others of any material adverse
development causing a breach of any of such Parties' own representations and
warranties in Paragraph4 above. No disclosure by any Party pursuant to this
Paragraph 6.7, however, shall, unless provided in writing and accepted by
eCom, be deemed to amend or supplement Annex I, Annex II, or the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
6.8 Exclusivity. None of the Shareholders will (and none of the
Shareholders will vote their Star Dot Shares in favor of), nor will the
Shareholders cause or permit Star Dot to do (and the Shareholders will notify
eCom immediately if any Person does any) of the following:
(a) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of
the assets of Star Dot (including any acquisition structured as a merger,
consolidation, or share exchange); or
(b) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate
in, or facilitate in any other manner any effort or attempt by any Person
to do or seek any of the foregoing.
6.9 Title Insurance.
(a) The Shareholders will cause Star Dot to obtain with
respect to each parcel of real estate that Star Dot owns, an ALTA Owner's
Policy of Title Insurance Form B-1992 (or equivalent policy reasonably
acceptable to eCom if the real property is located in a state in which an
ALTA Owner's Policy of Title Insurance Form B-1992 is not available)
issued by a title insurer satisfactory to eCom, in such amount as eCom
reasonably may determine to be the fair market value of such real
property (including all improvements located thereon), insuring title to
such real property to be in Star Dot as of the Closing (subject only to
the title exceptions described above in Paragraph 5.12 and in Paragraph
11 of the Disclosure Schedule).
(b) Each title insurance policy delivered under Paragraphs
6.9(a) and 6.9(b) above shall:
(1) insure title to the real property and all recorded
easements benefitting such real property;
(2) contain an "extended coverage endorsement"
insuring over the general exceptions contained customarily in such
policies;
(3) contain an ALTA Zoning Endorsement 3.1 (or
equivalent);
(4) contain an endorsement insuring that the real
property described in the title insurance policy is the same real estate
as shown on the Survey delivered with respect to such property;
25
(5) contain an endorsement insuring that each street
adjacent to the real property is a public street and that there is direct
and unencumbered pedestrian and vehicular access to such street from the
real property; and
(6) if the real property consists of more than one
record parcel, contain a "contiguity" endorsement insuring that all of
the record parcels are contiguous to one another.
6.10 Surveys. With respect to each parcel of real property that
Star Dot owns and as to which a title insurance policy is to be procured
pursuant to Paragraph 6.9 above, the Shareholders will cause Star Dot to
procure in preparation for the Closing a current survey of the real property
certified to eCom, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the
location of all improvements, easements, party walls, sidewalks, roadways,
utility lines, and other matters shown customarily on such surveys, and
showing access affirmatively to public streets and roads (the "Survey"). The
Survey shall not disclose any survey defect or encroachment from or onto the
real property which has not been cured or insured over prior to the Closing.
7. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.
7.1 General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Paragraph 9 below). The Shareholders acknowledge and agree that from
and after the Closing, eCom will be entitled to possession of all documents,
books, records (including Tax records), agreements, and financial data of any
sort relating to Star Dot.
7.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with:
(a) any transaction contemplated under this Agreement; or
(b) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to
act, or transaction on or prior to the Closing Date involving Star Dot;
each of the other Parties will cooperate with such other Party or its counsel
in the contest or defense, make available their personnel, and provide such
testimony and access to their books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Paragraph 9
below).
26
7.3 Transition. None of the Shareholders will take any action
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of Star Dot from
maintaining the same business relationships with Star Dot after the Closing as
it maintained with Star Dot prior to the Closing. Each of the Shareholders
will use its reasonable efforts to refer all customer inquiries relating to
the businesses of Star Dot to eCom from and after the Closing.
7.4 Confidentiality. Each of the Shareholders will treat and hold
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to eCom or destroy, at the request and option of eCom, all tangible
embodiments (and all copies) of the Confidential Information which are in such
Parties' possession. In the event that any of the Shareholders is requested
or required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, then such
Shareholder will notify eCom promptly of the request or requirement so that
eCom may seek an appropriate protective order or waive compliance with the
provisions of this Paragraph 7.4. If, in the absence of a protective order or
the receipt of a waiver hereunder, any of the Shareholders is, on the advice
of counsel, compelled to disclose any Confidential Information to any tribunal
or else stand liable for contempt, then such Shareholder may disclose the
Confidential Information to the tribunal; provided, however, that the
disclosing Shareholder shall use such Shareholder's reasonable best efforts to
obtain, at the reasonable request of eCom, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as eCom shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
7.5 Covenant Not to Compete. For a period of five (5) years from
and after the Closing Date, none of the Shareholders will engage directly or
indirectly in any business that Star Dot conducts as of the Closing Date;
provided, however, that no owner of less than two percent (2%) of the
outstanding stock of any publicly traded corporation shall be deemed to engage
solely by reason thereof in any of its businesses. If the final judgment of a
court of competent jurisdiction declares that any term or provision of this
Paragraph 7.5 is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be appealed.
7.6 eCom Shares Restricted Securities. Shareholders specifically
understand that the eCom Shares will be restricted securities. Accordingly,
the Shareholders understand the following:
(a) Restrictions on Transferability. No transfer or other
disposition of the eCom Shares to be acquired by Shareholders at the
Closing shall be valid unless:
27
(1) there is an effective registration statement under
the Securities Act of 1933 (the "Act") covering the eCom Shares; or
(2) the Shareholders' counsel shall have furnished
eCom with an opinion to the effect that registration is not required
under the Act.
(b) Legend. There shall be imprinted on the face of each
certificate representing the eCom Shares acquired by Shareholders the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF A CURRENT AND
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT WITH RESPECT TO SUCH
SECURITIES, OR AN OPINION OF THE ISSUER'S COUNSEL TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE ACT.
(c) Investment. Shareholders hereby represent and warrant
to the eCom that the eCom Shares are being acquired for investment for
Shareholders' own account, not as a nominee or agent, and not with the
view toward or for resale in connection with any distribution thereof.
Shareholders understand that the eCom Shares will not have been
registered under the Act by reason of a specific exemption from the
registration provisions of the Act which depends upon, among other
things, the accuracy of the required representations and warranties of
Shareholders.
(d) Rule 144. Shareholders understand that the eCom Shares
must be held indefinitely unless subsequently registered under the Act or
an exemption from such registration is available, and Shareholders
acknowledge that eCom shall have no obligation whatsoever to register the
eCom Shares under that Act. Shareholders understand the provisions of
Rule 144 (the "Rule") promulgated under the Act which permit limited
resale of securities purchased in a private transaction, subject to the
satisfaction of certain conditions as set forth in the Rule.
8. Conditions to Obligation to Close.
8.1 Conditions to Obligation of eCom. The obligation of eCom to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions, unless eCom
waives any condition specified in this Paragraph 8.1 by executing a writing so
stating at or prior to the Closing, provided, however, that in the event the
Shareholders, or any of them, breach, violate or fail to satisfy any covenant,
representation, warranty, term or condition set forth in this Agreement, and
prior to Closing any such breach, violation or failure has been disclosed in
writing to eCom or is specifically acknowledged by eCom to be known, and
notwithstanding such disclosure or actual knowledge Closing occurs, then such
breach, violation, or failure shall be deemed fully, completely and
irrevocably waived by eCom in all respects and the Shareholders shall have no
liability whatsoever to eCom by reason thereof:
28
(a) this Agreement has not be cancelled by eCom prior to the
expiration of the Investigation Period;
(b) the representations and warranties set forth in
Paragraphs 4.1 and 5 above shall be true and correct in all material
respects at and as of the Closing Date;
(c) the Shareholders shall have performed and complied with
all of their covenants hereunder in all material respects through the
Closing;
(d) Star Dot shall have procured all of the third party
consents specified in Paragraph 6.2 above, and, if required, all of the
title insurance commitments, policies, and riders specified in Paragraph
6.9 above and all of the surveys specified in Paragraph 6.10 above;
(e) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of eCom to own Star Dot
Shares and to control Star Dot or (D) affect adversely the right of Star
Dot to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(f) the Shareholders shall have delivered to eCom a
certificate to the effect that each of the conditions specified above in
Paragraphs 8.1(b) through 8.1(e) is satisfied in all respects;
(g) the relevant parties shall have entered into employment
agreements in form and substance as set forth in Exhibits 8.1(g) attached
hereto and the same shall be in full force and effect;
(h) eCom shall have received from counsel to the
Shareholders an opinion in form and substance as set forth in Exhibit
8.1(h) attached hereto, addressed to eCom, and dated as of the Closing
Date;
(i) eCom shall have received the resignations, effective as
of the Closing, of each director and officer of Star Dot other than those
whom eCom shall have specified in writing at least five (5) business days
prior to the Closing; and
(j) all actions to be taken by the Shareholders in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to eCom.
8.2 Conditions to Obligation of the Shareholders. The obligation
of the Shareholders to consummate the transactions to be performed by them in
29
connection with the Closing is subject to satisfaction of the following
conditions, unless the Requisite Shareholders waive any condition specified in
this Paragraph 8.2 by executing a writing so stating at or prior to the
Closing, provided, however, that in the event eCom breaches, violates or fails
to satisfy any covenant, representation, warranty, term or condition set forth
in this Agreement, and prior to Closing any such breach, violation or failure
has been disclosed in writing to any Shareholder or is specifically
acknowledged by any Shareholder to be known, and notwithstanding such
disclosure or actual knowledge Closing occurs, then such breach, violation, or
failure shall be deemed fully, completely and irrevocably waived by
Shareholders in all respects and eCom shall have no liability whatsoever to
Shareholders by reason thereof:
(a) the representations and warranties set forth in
Paragraph 4.2 above shall be true and correct in all material respects at
and as of the Closing Date;
(b) eCom shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending against
eCom before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation
(and no such injunction, judgment, order, decree, ruling, or charge shall
be in effect) (C) adversely affect the right of any of the Shareholders
to own the eCom Shares or (D) materially and adversely affect the right
of eCom to own its assets and to operate its business;
(d) eCom shall have delivered to the Shareholders a
certificate to the effect that each of the conditions specified above in
Paragraph 8.2(a)-8.2(c) is satisfied in all respects; and
(e) the Shareholders shall have received from counsel to
eCom an opinion in form and substance as set forth in Exhibit 8.2(e)
attached hereto, addressed to the Shareholders and dated as of the
Closing Date; and
(f) all actions to be taken by eCom in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be [reasonably]
satisfactory in form and substance to the Requisite Shareholders.
9. Remedies for Breaches of This Agreement.
9.1 Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement,
including but not limited to the representations and warranties of the
Shareholders contained in Paragraphs 5.1 through 5.28 shall survive the
Closing hereunder and continue in full force and effect for a period of two
(2) years thereafter.
30
9.2 Indemnification Provisions for Benefit of eCom. In the event
any of the Shareholders breaches any of the representations, warranties, and
covenants of such Shareholders contained herein (other than the covenants in
Paragraph 2.1 above and the representations and warranties in Paragraph 4.1
above), and, if there is an applicable survival period pursuant to Paragraph
9.1 above, provided that eCom makes a written claim for indemnification
against any of the Shareholders pursuant to Paragraph 12.12 below within such
survival period, then each of the Shareholders agrees to indemnify eCom from
and against the entirety of any Adverse Consequences eCom may suffer through
and after the date of the claim for indemnification (including any Adverse
Consequences eCom may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by
the breach; provided, however, that the Shareholders shall not have any
obligation to indemnify eCom from and against any Adverse Consequences
resulting from, arising out of, relating to, in the nature of, or caused by
the breach of any representation or warranty of the Shareholders contained in
this Agreement until eCom has suffered Adverse Consequences by reason of all
such breaches in excess of a $25,000.00 aggregate threshold (at which point
the Shareholders will be obligated to indemnify eCom from and against all such
Adverse Consequences relating back to the first dollar). The Shareholders'
obligation to indemnify eCom as provided by this paragraph 9.2 is expressly
conditioned upon delivery by eCom to the Shareholders of a written claim for
indemnification for each claim for which indemnification is being sought
within a reasonable time after eCom becomes aware of the cause for any such
claim for indemnification. Notwithstanding the foregoing or any other
provision in this Agreement, in no event shall the Shareholders, in the
aggregate, have any liability, or be obligated pursuant to this paragraph 9.2
or otherwise under this Agreement, for any amount which is in excess of the
fair market value, determined on the date on which a claim for indemnification
is filed in accordance with this paragraph 9.2, of the eCom Shares received by
such Shareholders hereunder.
9.3 Indemnification Provisions for Benefit of the Shareholders.
In the event eCom breaches any of its representations, warranties, and
covenants contained herein, and, if there is an applicable survival period
pursuant to Paragraph 9.1 above, provided that any of the Shareholders makes a
written claim for indemnification against eCom pursuant to Paragraph 12.12
below within such survival period, then eCom agrees to indemnify each of the
Shareholders from and against the entirety of any Adverse Consequences the
Shareholder may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Shareholder may suffer
after the end of any applicable survival period) resulting from, arising out
of, relating to, in the nature of, or caused by the breach (or the alleged
breach). eCom's obligation to indemnify the Shareholders as provided by this
paragraph 9.3 is expressly conditioned upon delivery by Shareholders to eCom
of a written claim for indemnification for each claim for which
indemnification is being sought within a reasonable time after Shareholders
become aware of the cause for any such claim for indemnification.
9.4 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Paragraph 9, then the
31
Indemnified Party shall promptly notify each Indemnifying Party thereof
in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely
to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
fifteen (15) days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third Party Claim,
(B) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party
Claim and fulfill its indemnification obligations hereunder, (C) the
Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential
custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Paragraph 9.4(b)
above:
(1) the Indemnified Party may retain separate co-
counsel at its sole cost and expense and participate in the defense of
the Third Party Claim;
(2) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnifying
Party (not to be withheld unreasonably); and
(3) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Paragraph 9.4(b)
above is or becomes unsatisfied, however:
(1) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain
any consent from, any Indemnifying Party in connection therewith);
32
(2) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses); and
(3) the Indemnifying Parties will remain responsible
for any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Paragraph 9.
9.5 Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant. Each of the Shareholders hereby agrees
that such Shareholder will not make any claim for indemnification against Star
Dot by reason of the fact that such Shareholder was a director, officer,
employee, or agent of Star Dot or was serving at the request of any such
entity as a partner, trustee, director, officer, employee, or agent of another
entity (whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether such
claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or
demand brought by eCom against such Shareholder (whether such action, suit,
proceeding, complaint, claim, or demand is pursuant to this Agreement,
applicable law, or otherwise).
10. Termination.
10.1 Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(a) eCom and the Requisite Shareholders may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) eCom may terminate this Agreement prior to the
expiration of the Due Diligence Review Period by giving written notice to
the Requisite Shareholders as provided in Paragraph 3.2 if eCom is not
satisfied, in the exercise of the sole and absolute discretion of eCom,
with the results of the Due Diligence Review;
(c) eCom may terminate this Agreement by giving written
notice to the Requisite Shareholders at any time prior to the Closing (A)
in the event any of the Shareholders has breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, eCom has notified the Requisite Shareholders of the
breach, and the breach has continued without cure for a period of ten
(10) days after the notice of breach or (B) if the Closing shall not have
occurred on or before January 31, 2000, by reason of the failure of any
condition precedent under Paragraph 8.1 hereof (unless the failure
results primarily from eCom itself breaching any representation,
warranty, or covenant contained in this Agreement); and
(d) the Requisite Shareholders may terminate this Agreement
by giving written notice to eCom at any time prior to the Closing:
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(1) in the event eCom has breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, any of the Shareholders has notified eCom of the
breach, and the breach has continued without cure for a period of ten
(10) days after the notice of breach; or
(2) if the Closing shall not have occurred on or
before January 31, 2000, by reason of the failure of any condition
precedent under Paragraph 8.2 hereof (unless the failure results
primarily from any of the Shareholders themselves breaching any
representation, warranty, or covenant contained in this Agreement).
10.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Paragraph 10.1 above, all rights and obligations of the Parties
hereunder shall immediately terminate without any Liability of any Party to
any other Party (except for any Liability of any Party then in breach).
11. Registration Rights.
11.1 Piggy Back Registration. For a period of two (2) years after
the date of issuance of the eCom Shares to Shareholders, if eCom proposes to
file a registration statement under the Act with respect to any security (the
"Xxxxxx Shares To Be Registered") owned by Xxxxx X. Xxxxxx ("Xxxxxx"), then
the Issuer shall give written notice of such proposed filing to Shareholders
at least twenty (20) days before the anticipated filing date, and such notice
shall offer each Shareholder the opportunity to register a number of the eCom
Shares held by such Shareholder (the "Shareholder Registerable Shares") in an
amount determined as follows:
(a) Determine the percentage (the "Registerable Percentage")
that the Xxxxxx Shares To Be Registered bears to the total number of
shares of eCom owned by Xxxxxx.
(b) Multiply the Registerable Percentage by the total number
of eCom Shares owned by a Shareholder to determine the Shareholder
Registerable Shares.
11.2 Termination of Piggy Back Registration. eCom shall have the
right to terminate or withdraw any registration initiated by eCom Issuer
pursuant to paragraph 11.1 prior to the effective date of such registration
statement.
12. Miscellaneous.
12.1 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
eCom and the Requisite Shareholders. 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.
12.2 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.
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12.3 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. The Parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
12.4 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
12.5 Expenses. Each of the Parties and Star Dot will bear their
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Shareholders agree that Star Dot has not borne or will bear any of the
Shareholders' costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
12.6 Facsimile Execution. Facsimile signatures on counterparts of
this Agreement are hereby authorized and shall be acknowledged as if such
facsimile signatures were an original execution, and this Agreement shall be
deemed as executed upon transmission of an executed facsimile.
12.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Florida or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Florida.
12.8 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.9 Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
12.10 Nature of Certain Obligations.
(a) The covenants of each of the Shareholders in Paragraph
2.1 above concerning the sale of such Shareholder's Star Dot Shares to
eCom and the representations and warranties of each of the Shareholders
35
in Paragraph 4.1 above concerning the transaction are several
obligations. Accordingly, the particular Shareholder making the
representation, warranty, or covenant will be solely responsible to the
extent provided in Paragraph 9 above for any Adverse Consequences eCom
may suffer as a result of any breach thereof.
(b) The remainder of the representations, warranties, and
covenants in this Agreement are joint and several obligations.
Accordingly, each Shareholder will be responsible to the extent provided
in Paragraph 9 above for the entirety of any Adverse Consequences eCom
may suffer as a result of any breach thereof.
12.11 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.
12.12 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any Party may send any notice,
request, demand, claim, or other communication hereunder to the intended
recipient at the address set forth below using registered or certified mail,
return receipt requested, postage prepaid, personal delivery, recognized
overnight delivery service, telecopy or electronic mail, and such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given three (3) days after mailing if sent by registered or certified
mail, on the day same is provided to the party undertaking personal delivery,
provided that such party provides an acknowledgment of the delivery thereof at
the address indicated thereon, on the day after same is provided to the
recognized overnight delivery service, provided that such party provides an
acknowledgment of the delivery thereof at the address indicated thereon and on
the day same is transmitted by telecopy or electronic mail, provided that the
party sending same obtains a written confirmation of the electronic delivery
thereof. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth. The addresses
of the Parties are as set forth below:
If to the Shareholders: __________________________________
__________________________________
___________________________________
With a Copy to: Jordan X. Xxxx, Esq.
Steefel Xxxxxx & Xxxxx
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
If to eCom: 0000 XXX Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxx Xxxxxxx, Xxxxxxx 00000
With a Copy to: Xxxxxx X. Xxxxxxx, P.A.
Xxxxxx X. Xxxxxxx, P.A.
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
36
If to Star Dot: 000 Xxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
12.13 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of eCom; provided,
however, that any Party may make any public disclosure it believes in good
faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable best efforts to advise the other Parties prior to
making the disclosure). After the Closing, eCom shall make such press
releases or public announcements as may be determined by eCom, in the exercise
of the reasonable judgement of eCom.
12.14 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.
12.15 Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or
injunctions (without the necessity of posting a bond therefor) to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in Paragraph 12.16
below), in addition to any other remedy to which they may be entitled, at law
or in equity.
12.16 Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Palm Beach County,
Florida, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and may be
enforced by suit on the judgment or in any other manner provided by law or at
equity. Each Party also agrees not to bring any action or proceeding arising
out of or relating to this Agreement in any other court. Each of the Parties
waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security that
might be required of any other Party with respect thereto. Any Party may make
service on any other Party by sending or delivering a copy of the process as
follows (or in any other manner permitted by law or at equity) to the
Party to be served at the address and in the manner provided for the giving of
notices in Paragraph 12.12 above.
12.17 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 such Parties' rights, interests, or obligations hereunder without
the prior written approval of eCom and the Requisite Shareholders.
37
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
eCom xXxx.xxx, Inc.
By: /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx, President
SHAREHOLDERS:
/s/ Xxxxxxx Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx Xxxxxxx, as Trustee U/A/D
October 10, 1996, as amended, creating the
Xxxxxxx-Xxxxxxx Trust, as the sole
separate property of Xxxxx Xxxxxxx-Xxxxxxx
/s/ Xxxxx Xxxxxxx Xxxxxxx
Xxxxx Xxxxxxx, as Trustee U/A/D October 10,
1996, as amended, creating the Xxxxxxx-Xxxxxxx
Trust, as the sole separate property of Xxxxx
Xxxxxxx-Xxxxxxx
/s/ Xxxx Xxxxxxx
Xxxx Xxxxxxx
The Estate of Xxxxxxxx Xxxxxxx
By: Xxxxx Xxxxxxx Xxxxxxx
Authorized Representative
38
