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EXHIBIT 99(ii)
July 19, 2001
Modern Interactive Technology, Inc.
00000 Xxxxxx Xxxx.
Suite G
Los Angeles, CA 90066
Attention: Xx. Xxxx X. Xxxx
Re: Proposed Stock Purchase Agreement ("Agreement") by and among
Infotopia, Inc., an Ohio corporation ("Infotopia") and
Infomercial Management Corporation, a California corporation
("IMC") and Modern Interactive Technology, Inc., a California
corporation ("MIT")
The purpose of this letter agreement (sometimes referred to as "LOI")
is to confirm our discussions to date, and to set forth an outline, relating to
the proposed Agreement by and among Infotopia, IMC, and MIT, as well as the
Shareholders (as defined below).
IMC and MIT must accept this letter agreement on or before 11:59 p.m.,
New York City time, on July 19, 2001, in order for this letter agreement to
constitute a binding agreement among the parties, in accordance with the terms
provided herein.
1. Acquisition of Stock Option
Upon the due execution of this letter agreement by IMC and MIT,
Infotopia shall pay the sum of One Million Dollars ($1,000,000), payable to
Messrs. Xxxx Xxxxxxxx, Xxxx Xxxxxx and Xxxx X. Xxxx (collectively, the
"Shareholders"), in proportion to the Shareholders' holdings in IMC and MIT. By
payment of such amount, Infotopia shall acquire an exclusive option to purchase
the stock in IMC and MIT held by the Shareholders. This option to acquire the
stock in IMC and MIT held by the Shareholders shall expire at 5:59 p.m., New
York City time, on October 15, 2001, unless extended by IMC and MIT in writing
prior to such date and time.
The payment called for by this section shall be made by increasing the
inventory and accounts receivable funding loan from IMC to Infotopia, effective
June 1, 2001.
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2. Acquisition of Exclusive Marketing Rights
No licensing or marketing rights shall be assigned or transferred by
IMC or MIT prior to the earlier of (a) the Closing, as defined in paragraph 6(a)
below, or (b) January 1, 2002, unless the parties mutually agree to extend the
Closing date for the acquisition of the stock of IMC and MIT ("Outside Closing
Date").
3. Co-development Agreement
As soon as possible after this LOI is signed by all parties, Infotopia
shall enter into a co-development agreement with IMC and MIT. As part of such
co-development agreement, Infotopia shall pay for all of the research and
development costs and expenses and production costs and expenses (collectively
"Co-development Costs") for the Projects jointly developed under the
co-development agreement(collectively "Projects" and individually "a
Project")and shall reimburse IMC and MIT for all costs and expenses already
incurred by MIT and IMC for any Projects that have been started prior to the
execution of the co-development agreement, which are continued as part of such
agreement. Attached to the co-development agreement shall be list of all
Projects (including all Projects existing or in development as of the date
hereof, and existing or in development between the date hereof and the date of
the co-development agreement), which IMC, MIT and the Shareholders will
represent and warrant will be a full and complete list of all Projects. IMC, MIT
and the Shareholders agree that any Projects developed, whether in conjunction
with Infotopia or not, after the date of this LOI, and while the co-development
agreement is in effect, shall be deemed to be Projects. If Infotopia does not
acquire the stock of IMC and MIT ("Stock Acquisition") by the Outside Closing
Date, then (i) the co-development agreement shall terminate, (ii) IMC and MIT
shall be entitled to retain the $1,000,000 option payment, and (iii) all
outstanding Projects shall be transferred as follows: (1) Subject to payment by
Infotopia of the $4,000,000 payment called for in Section 9(b) hereof (no later
than October 15, 2001) and an additional payment of $3,000,000 (no later than
January 1, 2002), all Projects (as of January 1, 2002) shall become the property
of Infotopia; provided, however, Infotopia shall further assign (as of October
15, 2001, and as per the instructions of the Shareholders) the right to
one-third of the net profits from such Projects, the term "net profits" having
the same meaning as ascribed to such term in management agreements that have
previously entered into between Infotopia and IMC and/or MIT; (2) in the event
that Infotopia fails to make the $4,000,000 payment (no later than October 15,
2001, and the additional payment of $3,000,000 no later than January 1, 2002),
all Projects shall be transferred as per the instructions of the Shareholders,
subject to IMC and MIT reimbursing Infotopia for all of its Co-Development
Costs; provided, however, that IMC and MIT shall not be obligated to reimburse
Infotopia for all of its Co-Development Costs and, in such event, all Projects
shall remain the property of Infotopia, subject to Infotopia's obligation to
continue payment of 1/3 of the net profits from such Projects; provided,
further, that IMC and MIT shall have the right to designate fewer than all of
the Projects to be transferred as per the Shareholders' instructions, and, in
such event, IMC and MIT shall only be obligated to reimburse Infotopia for all
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of its Co-Development Costs directly related to those Projects that are actually
transferred.
While the co-development agreement is in effect, the Shareholders shall
provide reasonable nonexclusive consulting services to Infotopia.
4. Limitation on Asset Transfers
From and after the date of the due execution of this letter agreement
by both IMC and MIT, the Shareholders agree that they shall not cause any
material assets or revenue-producing assets to be transferred from either IMC or
MIT to any third party, for any purpose whatsoever, other than transactions in
the normal course of business and except for all cash, receivables and
marketable securities of IMC and MIT which will be transferred out of such
entities prior to the Closing. For the purposes of this provision, the term
"material asset" means any asset or class of assets that individually or in the
aggregate total Twenty-Five Thousand Dollars ($25,000). The foregoing limitation
shall terminate upon the earlier of (a) the termination of this LOI, (b) the
failure of Infotopia to exercise its option to acquire the stock of IMC and MIT
by October 15, 2001 or (c) the Outside Closing Date.
5. Due Diligence
Each of Infotopia (on the one hand), and IMC and MIT (on the other
hand) shall have the right to conduct due diligence on the other party prior to
the execution of any definitive agreement (sometimes referred to as
"Agreement").
In order to accommodate such due diligence review, each party shall
grant to the other party's respective representatives access, during normal
business hours, to all of their respective books and records, with respect to
ownership, properties, and other assets relating to their respective businesses,
as the case may be. Each of Infotopia, IMC and MIT agree to conduct their due
diligence review in such a manner so as not to interfere unduly with the
operation of the business providing the due diligence materials.
In connection with such a review, each of Infotopia, IMC and MIT, as
well as their representatives, shall be permitted to contact and communicate
with customers, suppliers, employees and others, provided prior written consent
(which shall not be unreasonably withheld) shall have been obtained.
Infotopia, IMC and MIT agree that they will use all information
obtained in such due diligence solely for the purposes of evaluating the
transactions contemplated in the Agreement, will hold such information in
confidence, and will not disclose such information except to their respective
employees, agents and representatives. Said employees, agents and
representatives shall be advised of the foregoing obligations by each of the
parties. Upon the earlier of (a) the termination of this LOI or (b) if the Stock
Acquisition does not close by the Outside Closing Date, each party shall return
any documents, records or information of the other, including all copies and
discs. The confidentiality requirements shall survive the termination of this
LOI.
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In the event that any party, in the course of its due diligence review,
discovers material which makes improbable the material truth or accuracy of the
representations and warranties made by the other party, and contained in this
letter agreement or the Agreement, the discovering party shall notify the other
party in writing of such discovery, and shall give such other party an
opportunity to take (or commence in good faith) any necessary remedial action,
within ten (10) days of the discovering party's notice. The party required to
take such action will have forty-five (45) days from its commencement to
complete such remedial action.
6. Conditions to the Consummation of the Transaction
The following provisions set forth the conditions to the obligations of
Infotopia, IMC and MIT to consummate the transactions contemplated by this
letter agreement and the Agreement.
(a) If the Agreement is executed and delivered, all of the
representations and warranties of the respective parties set forth in the
Agreement shall be true and correct in all material respects, and all agreements
of the respective parties set forth in the Agreement have been performed in all
material respects as of the closing of the transactions contemplated by the
Agreement ("Closing").
(b) All consents and approvals required by law and contract have been
obtained, including, without limitation, director and shareholder approval and
any approvals required by third parties, and all necessary governmental and
exchange filings having been made including, without limitation, appropriate
filings with the United States Securities and Exchange Commission.
(c) A written fairness opinion has been rendered by an independent
third party chosen by Infotopia, at Infotopia's expense, and such opinion has
been approved by the Shareholders. Such fairness opinion shall opine as to the
fairness of the Purchase Price and the transaction contemplated by the
Agreement. In the event that such independent third party shall determine that
the fair market value of the stock being purchased from the Shareholders is less
than the Purchase Price contemplated under the Agreement, each party shall have
an absolute right to terminate this LOI by giving written notice to the other,
non-terminating party; provided however, in such event IMC and MIT shall be
entitled to keep the $1,000,000 option payment referred to, inter alia, in
Section 1 of this LOI. In the alternative and by mutual agreement, the parties
may elect to negotiate with each other, in good faith, for an appropriate
reduction of such Purchase Price, consistent with the disparity between the
Purchase Price and the appraised aggregate fair market value, on mutually
agreeable terms.
(d) The Closing date for the transactions contemplated by the Agreement
may be no earlier than October 15, 2001.
(e) In accordance with paragraph 11, below, Counsel for Infotopia shall
have rendered an opinion with respect to the securities law implications of the
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transactions contemplated by the Agreement, including, but not limited to, any
implications of Section 10(b)(5) of the Securities Exchange Act of 1934.
(f) The transaction shall be structured to produce long-term capital
gain treatment for the Shareholders
7. Contents of the Agreement
Each of Infotopia, IMC and MIT agree, as soon as reasonably practicable
after the due execution of this letter agreement, to use their reasonable best
efforts to negotiate, execute and deliver the Agreement, which shall be
consistent with, and shall reflect the terms set forth in, this letter
agreement.
Among other things, the Agreement shall contain provisions that
include:
(a) Representations, warranties and agreement of the parties that are
customary and appropriate for a transaction of the type and size contemplated by
the Agreement. Specifically, each of the parties shall represent, among other
things, that other than as set out in the Agreement, there are no pending
material claims or suits against it or its assets, it has performed in all
material respects all of its contractual obligations and has been in compliance
in all material respects with all applicable laws, and it has no undisclosed
material liabilities;
(b) Normal and customary mutual indemnification provisions;
(c) Confidentiality, non-diversion of customers and suppliers, and
non-competition covenants on the part of each of Infotopia, IMC and MIT;
(d) Approval of the transactions contemplated by the Agreement by the
boards of directors of each of Infotopia, IMC and MIT, and by the holders of a
majority of the stock of each of Infotopia, IMC and MIT;
(e) Provisions to the effect that Infotopia shall pledge its assets as
collateral for Infotopia's obligations to the Shareholders, provided, however,
that the Shareholders expressly agree to take any action whatsoever to
subordinate their interests in Infotopia's assets to any lender of Infotopia
and/or to discharge such security interest if required by an underwriter for an
underwritten equity or debt offering to raise not less than $10 million in gross
proceeds.
(f) Provisions to the effect that Infotopia shall not change the
location of the principal executive offices of each of IMC and MIT, so long as
the Shareholders are employees of IMC, MIT and/or Infotopia, or if Infotopia is
still obligated to the Shareholders, including as employees, which obligations
are secured by the stock of IMC and/or MIT, and the assets of Infotopia, without
the prior written approval of each of the Shareholders affected by any such
change in location;
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(g) Provisions to the effect that so long as the Shareholders are owed
money by Infotopia, which obligations are secured by the stock of IMC and/or MIT
and the assets of Infotopia, that except by the decision of the Shareholders or
with the prior written approval of each of the Shareholders, the employees of
IMC and MIT at the Closing shall be retained and that the business and manner of
conducting their businesses as of the Closing shall not be changed. In addition,
there shall be a provision to the effect granting employees of IMC and MIT
(except for the Shareholders) and consultants of IMC and MIT specifically
approved in writing by Infotopia at the Closing stock of Infotopia or stock
options to acquire such stock in a manner generally consistent with grants to
other, comparable Infotopia employees;
(h) Provisions to the effect that the Shareholders shall be entitled to
all of the profits of IMC and MIT until the date of the closing of the
transactions contemplated by the definitive Agreement;
(i) Provisions to the effect that Infotopia shall have an obligation to
obtain directors and officers insurance for the Shareholders and to include them
as named insured on products liability insurance, errors and omissions insurance
and general liability insurance and to obtain all other insurance which is
customary for this type of transaction, including as a result of the employment
of the Shareholders by IMC, MIT and/or Infotopia, after the Closing. All such
insurance shall remain in effect for a minimum of three (3) years after the
termination of the employment of the Shareholders;
(j) A provision to the effect that a bankruptcy action filed by
Infotopia or any of its affiliates or subsidiaries, including, without
limitation, IMC and MIT, without the written approval of the Shareholders, shall
be an event of default;
(k) A provision to the effect that while the stock of IMC and MIT is
pledged and the assets of Infotopia assigned as security for the payments due
from Infotopia as provided herein, neither corporation can be reorganized,
merged or involved in a similar transaction or liquidated or dissolved, without
the prior written approval of the Shareholders, which approval shall not be
unreasonably withheld; and
(l) A provision to the effect that at the Closing Infotopia shall pay
the Shareholders an amount equal to all deposits that have been paid by IMC and
MIT.
The parties will use their best efforts to conclude their respective
due diligence enquiries and, assuming such enquiries are favorable and
Infotopia's option to purchase IMC's and MIT's stock is exercised, enter into
the Agreement in definitive form by October 15, 2001 (unless the parties agree
to extend such date in a writing executed by all parties), and consummate the
transactions contemplated by this letter agreement (other than the payment of
the option price set forth above), as soon as thereafter as possible. The
parties also agree to effect the closing of the transactions contemplated by the
Agreement on a date no later than the Outside Closing Date.
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Failure of the parties to agree upon and execute a definitive Agreement
by October 15, 2001 (unless the parties agree to extend such date in a writing
executed by all parties), will cause this letter agreement to terminate and be
of no further force or effect, and the parties shall have no further obligations
to each other, except as may be specifically provided for in this letter
agreement as post-termination obligations.
8. Acquisition of Stock
The definitive form of the Agreement shall provide that the
Shareholders shall sell all of their interests in IMC and MIT to Infotopia, for
the Purchase Price set forth in the Agreement, which shall be consistent with
the Purchase Price set forth in the next section.
9. Payment Schedule
The definitive form of the Agreement shall provide for a payment
schedule as follows (all payments provided for in this section 9 shall, in the
aggregate, be referred to as the "Purchase Price"):
(a) Confirmation of the payment of the option price of One Million
Dollars ($1,000,000), as set forth in this letter agreement;
(b) Payment of the sum of Four Million Dollars ($4,000,000) upon due
execution by all parties of a definitive Agreement;
(c) Payment of the sum of Five Million Dollars ($5,000,000) upon the
closing of the transactions contemplated in the definitive Agreement;
(d) Payment of the sum of Five Million Dollars ($5,000,000) on December
1, 2001, or upon the closing of the transactions contemplated in the definitive
Agreement, whichever is later;
(e) A promissory note, in the principal amount of Fifteen Million
Dollars ($15,000,000), pursuant to the terms set forth in this letter agreement;
and
(f) An obligation on the part of Infotopia, to the effect that the
Shareholders, in the aggregate, shall be entitled to receive 6% of all of the
gross revenues of Infotopia, its subsidiaries and affiliates, from any and all
sources, including, without limitation, from the sales and exploitation of all
products and services of Infotopia, the subsidiaries and affiliates (whether or
not acquired by Infotopia pursuant to the definitive Agreement), with a cap on
aggregate payments of Forty-Five Million Dollars ($45,000,000). The foregoing
shall be paid on a monthly basis, by the fifteenth (15th) day of each month,
based on the gross revenues received during the prior month. The payment of the
foregoing shall be payable in all events, whether or not the employment
agreements are terminated prior to the payment of the full Forty-Five Million
Dollars ($45,000,000) and shall be payable to the heirs of any deceased
Shareholder. The Shareholders or their representative shall have customary audit
rights. The payment of the Forty-Five Million Dollars ($45,000,000)
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shall be secured by the pledge of IMC and MIT stock and assignment of Infotopia
assets being pledged to secure the payment for such stock.
10. Promissory Note, and Security for Payment of Purchase Price
Infotopia, as part of the Purchase Price to be paid to the
Shareholders, shall issue to the Shareholders a promissory note in the principal
amount of Fifteen Million Dollars ($15,000,000), which shall have a maturity
date of January 1, 2003 and shall provide for installment payments as provided
below.
Such promissory note shall bear interest at the prime rate, plus 1%.
For the purposes of the Agreement, the prime rate shall be the rate set forth in
the Eastern Edition of The Wall Street Journal. Interest payments shall be made
monthly in arrears, commencing on the first day of the calendar month following
the Closing and continuing on the first day of each successive calendar month,
until the principal is paid off at maturity on January 1, 2003 (along with the
last interest payment). Interest payments shall be made on the average
outstanding principal balance during each interest period.
Principal payments, in the amount of One Million, Two Hundred and Fifty
Thousand Dollars ($1,250,000) shall be made on the first calendar day of each
month, commencing on January 1, 2002 (or the first calendar day of the first
calendar month after the closing of the transactions contemplated by the
Agreement, whichever comes later).
To secure the obligations of Infotopia under the promissory note
described above, Infotopia shall pledge the stock of IMC and MIT that it is
purchasing from the Shareholders, and all the assets of Infotopia. Infotopia,
IMC and MIT shall enter into a security agreement providing for such pledge and
assignment of assets.
11. Securities Considerations and Compliance
Infotopia represents and warrants that it has sold shares of its common
stock and other of its securities, and intends to continue to sell shares of its
common stock and other of its securities, to investors in public and/or private
offerings, and that the proceeds therefrom, in whole or in part, have been used
and will be used to make payments to the Shareholders as required in this letter
agreement. In furtherance of the foregoing, Infotopia represents and warrants
that, after reasonable due inquiry and investigation, to the best of its
knowledge, it has complied fully with all federal and state securities laws, and
will continue to comply fully with all federal and state securities laws, both
with respect to all securities offerings it has completed in which the proceeds
therefrom have been used to pay the Shareholders the option price of One Million
Dollars ($1,000,000), and all future securities offerings it intends to conduct
in which the proceeds therefrom, in whole or in part will be used to make future
payments to the Shareholders in accordance with the provisions of this letter
agreement.
Infotopia further represents, warrants and agrees that counsel for
Infotopia shall render an opinion in favor of the Shareholders confirming
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Infotopia's compliance with all federal and state securities laws, including,
without limitation, the registration and/or exemption from registration
provisions of federal and state securities laws, with respect to any offer and
sale of securities by Infotopia to finance the transactions contemplated in this
letter agreement. Counsel's opinion shall also include, without limitation, an
opinion that, after reasonable due inquiry and investigation, to the best of
their knowledge, Infotopia and other entities, if any, involved in the subject
transaction are in full compliance with their reporting obligations pursuant to
the Securities Exchange Act of 1934, as amended, and that any private or public
offering of securities comply fully with all federal and state regulations and
statutes relating thereto, and that all offering materials relating to any offer
or sale of securities by Infotopia do not, after reasonable due inquiry and
investigation, to the best of their knowledge, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make any statement made, in light of the circumstances in which it
was made, not misleading.
Infotopia hereby agrees to indemnify and hold harmless each of the
Shareholders, MIT and IMC and their respective officers, directors, employees,
affiliates, related entities, attorneys, accountants, agents and spouses, heirs,
estates and representatives (collectively the "Selling Parties") against any
losses, claims, damages, fines, penalties, actions or liabilities, joint or
several, to which the Selling Parties, or any of them, may become subject under
the federal and state securities laws or otherwise insofar as such losses,
claims, damages, actions or liabilities in respect thereof arise out of or are
based upon any past, current or future violations of federal and state
securities laws or based upon any untrue or alleged untrue statement of any
material fact made by Infotopia or any of its shareholders, officers, directors,
employees, attorneys, accountants or agents in any past, current or future offer
or sale of its securities, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, including, without limitation, as a result
of a class action lawsuit and/or any other event relating to the conduct of
Infotopia's business; and will pay each of the Selling Parties for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, action or liability, including, without
limitation, any action, proceeding, investigation, arbitration or suit by an
investor or governmental agency.
Any and all materials, statements, disclosures or offering documents
intended to be used by, for or on behalf of Infotopia in securities transactions
contemplated by this letter agreement, where the proceeds in whole or in part
are to be paid to the Shareholders, shall be subject to approval by MIT, IMC and
the Shareholders (which approval shall not be unreasonably withheld), except
that the parties hereto acknowledge and agree that the Shareholders have not
been given an opportunity to approve, nor have they approved, any and all
representations, agreements, statements, disclosures or offering documents
(written or oral), which have already been used by Infotopia to raise funds for
the payment of the option price.
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12. Default on Payment of Purchase Price
In the event that Infotopia does not exercise its option to acquire the
stock of IMC and MIT, by October 15, 2001, or the parties do not enter into a
definitive Agreement by January 1, 2002, or the LOI is terminated before the
parties enter into a definitive Agreement, or Infotopia defaults on the payments
of the Purchase Price called for as of the execution of the definitive
Agreement, or between the time of execution of the definitive Agreement and the
closing of the transactions contemplated by the Agreement, the Shareholders
shall be entitled to keep the One Million Dollars ($1,000,000) representing the
option price paid by Infotopia, as well as any other payments already made by
Infotopia, and the Shareholders, IMC, MIT and Infotopia shall have no further
obligations to each other, except as may be set forth specifically in this
letter agreement or in the definitive Agreement.
In the event that Infotopia defaults on the payments of the portion of
the Purchase Price called for in the promissory note described above in this
letter agreement, or in the payment of any monies due to the Shareholders, as
provided herein, the Shareholders, IMC and MIT shall have the respective rights
as set forth in the security agreement by which Infotopia pledged the stock in
IMC and MIT that it is acquiring and the assets of Infotopia.
13. Non-competition
At the same time as the definitive Agreement is executed by the
Shareholders, IMC, MIT and Infotopia, the Shareholders shall each enter into
non-competition agreements with Infotopia, to become effective at the Closing,
which may form a part of the employment agreements contemplated in the next
section.
These agreements shall provide, in essence, that for two and one-half
(2 1/2) years after the Closing, the Shareholders shall work exclusively for
IMC, MIT and /or Infotopia, and for a further one (1) year period after such two
and one-half (2 1/2) year period, the Shareholders shall agree not to compete
with Infotopia. These agreements shall also provide that, in the event the
Shareholders perform services for Infotopia after such two and one-half (2 1/2)
year period has elapsed, then the one (1) year non-competition period shall be
reduced on a month-for-month basis. Notwithstanding the foregoing, the foregoing
non-competition agreement shall terminate and be of no further force and effect,
if Infotopia breaches its obligations to pay the money owed Shareholders for the
stock, or under their employment agreements or with respect to a Shareholder if
the employment agreement of that Shareholder is terminated by that Shareholder
for cause or by Infotopia without cause.
14. Employment Agreements
The Shareholders shall, at Closing, each enter into employment
agreements with Infotopia and/or IMC and/or MIT, for a period of two and
one-half years (counting from the date of Closing), covering among other things,
their right to continue to operate IMC and MIT while they are employed by any of
the three
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entities. These employment agreements shall be effective at the time of Closing.
The employment provisions shall contain provisions to the effect that
each of the Shareholders shall have a salary, for two and one-half (2 1/2) years
after the closing of the transactions contemplated in the Agreement, of the sum
of One Million Dollars ($1,000,000) per annum, prorated for less than a full
twelve 12) months, and providing for all customary fringe benefits generally
provided executives of Infotopia, including, without limitation, health
insurance benefits and automobile allowances.
15. Payment of IMC and MIT Overhead
As part of the definitive Agreement, Infotopia shall agree to pay all
of the monthly overhead, expenses and salaries of IMC and MIT, for a period of
two and one-half (2 1/2) years from the date of Closing. The salary expenses
shall include the expenses contemplated by the employment agreements of the
Shareholders.
Infotopia, IMC and MIT shall agree, in the form of a schedule attached
to the definitive Agreement, as to what constitutes the monthly overhead,
expenses and salaries Infotopia is responsible for.
Infotopia, IMC and MIT agree that the overhead, expenses and salaries
of IMC and MIT that Infotopia is responsible for may not be increased by more
than six per cent(6%) in any calendar year, without the prior written approval
of Infotopia.
16. Guarantee of Lease
At the Closing, and subject to approval by the landlord, Infotopia
shall cause either: (i) the Shareholders to be released from their personal
guarantee of the Letter of Credit securing payments due under the lease of space
by IMC and MIT, or (ii), Infotopia to substitute its Letter of Credit for the
Letter of Credit presently securing payments under the lease.
17. Termination of Letter Agreement
This letter agreement shall terminate as provided in this LOI,
including, without limitation, that this LOI shall terminate automatically at
5:59 p.m., New York City time, on October 15, 2001, in the event that the
parties have failed to enter into a definitive Agreement by such time, unless
such time shall have been extended in writing by all parties.
This letter agreement may be terminated by mutual written agreement of
Infotopia, IMC and MIT at any time.
This letter agreement may be terminated by Infotopia on ten (10)
calendar days' written notice to IMC, MIT and the Shareholders.
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This letter agreement may be terminated by a party hereto if the other
party hereto shall have materially breached any of its obligations or agreements
hereunder, or upon either party's failure to comply with their respective
obligations under the last paragraph of Section 5 hereof.
Upon termination, this letter agreement shall be null and void and of
no further effect, and the parties shall have no further obligation as a result
hereof, except for: (a) liability for breach of this letter agreement, (b)as
otherwise set forth herein, and (c)for the sections of this LOI following this
section. The Shareholders shall be entitled to keep the One Million Dollar
($1,000,000) option payment in all events.
18. Non-publicity and Confidentiality
Each of the parties hereto agrees not to disclose the existence or
contents of this letter agreement, or the transaction contemplated by the
Agreement or this letter agreement, without the prior written consent of the
other parties hereto, except to such advisors and attorneys who have a need to
know such information, except for the spouses of Shareholders and except as may
be required by law. IMC, MIT and the Shareholders must approve in writing all
press releases, announcements or similar statements to be issued by, for or on
behalf of Infotopia.
19. Expenses; Brokers and Finders
Infotopia agrees that it shall pay all of the legal and accounting fees
and expenses reasonably incurred by IMC and MIT and the Shareholders in
connection with the negotiation, preparation and consummation of this LOI and
the Agreement. In addition, Infotopia shall pay concurrently with the signing of
the LOI, a Fifteen Thousand Dollar ($15,000) back end retainer to each of
Xxxxxxx & Xxxxxxxxx, Xxxxxx/Xxxxxxxx Business Management, Inc. and Xxxxxxx &
Xxxxx, for an aggregate of Forty Five Thousand Dollars ($45,000).
Infotopia also agrees that it will provide a supplemental indemnity to
Xxxx Xxxxxxxx and Xxxx Xxxxxx, and MIT against any loss, damages or costs
incurred by MIT, Xx. Xxxxxxxx and/or Xx. Xxxxxx in connection with the pending
litigation of MIT, Xx. Xxxxxxxx and Xx. Xxxxxx with the Federal Trade
Commission, known as the Enforma litigation. The parties acknowledge that such
indemnity provided by Infotopia is in addition to an indemnity already provided
by Enforma in connection with such litigation, and shall apply only in the event
Enforma does not honor its indemnity.
Each of the parties represents to the other parties that it has not
engaged any broker or finder in connection with the transactions contemplated
herein or in the Agreement.
20. Binding Nature; Covenant to Close
Pending the execution and delivery of the Agreement, this letter
agreement shall constitute a binding agreement between the parties hereto, upon
its execution.
13
Each party covenants to the other to use reasonable best efforts to
effect the transactions contemplated herein and in the Agreement, and to satisfy
the conditions needed for the execution of the Agreement and the closing of the
transactions set forth in the definitive Agreement.
21. Non-assignability
No party hereto may assign any of its rights, or delegate any of its
duties hereunder, without the prior written consent of the other party hereto.
22. Governing Law; Jurisdiction
The provisions of this Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of California, without
reference to choice or conflicts of law principles. Any and all suits or
actions, whether federal or state, for any breach of this Agreement, or
otherwise arising out of this Agreement, shall be filed and prosecuted in any
court of competent jurisdiction in the City of Los Angeles, State of California.
The parties hereto hereby consent and submit to the jurisdiction of the courts
in the City of Los Angeles, State of California, and hereby agree that service
of process on any party may be effected by certified mail, return receipt
requested, postage prepaid. Each of the parties waives any objection which it
may have based on improper venue or forum non conveniens to the conduct of any
such suit or action in any such court.
23. Attorneys' Fees
If any action, suit or other proceeding is instituted to remedy,
prevent or obtain relief from a default in the performance by any party of such
party's obligations under this Agreement, the prevailing party shall recover all
of such party's reasonable attorneys' fees and costs incurred in each and every
such action, suit or other proceeding, including any and all appeals or
petitions therefrom.
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Please indicate your acceptance and approval of this letter agreement,
by having it executed and dated where indicated below, and return an executed
copy to me on or before 11:59 PM, New York City Time, on July 19, 2001.
Very truly yours,
INFOTOPIA, INC.
By: /s/ Xxxxxx Xxxxx
----------------------------
Xxxxxx Xxxxx
Chief Executive Officer
ACCEPTED AND AGREED TO:
INFOMERCIAL MANAGEMENT CORPORATION
By: Xxxx Xxxxxx, President
Dated: July 19, 2001
MODERN INTERACTIVE TECHNOLOGY, INC.
By: Xxxx Xxxxxx, President
Dated: July 19, 2001
/s/ Xxxx Xxxxxxxx
--------------------
Xxxx Xxxxxxxx
Dated: July 19, 2001
/s/ Xxxx Xxxxxx
--------------------
Xxxx Xxxxxx
Dated: July 19, 2001
/s/ Xxxx X. Xxxx
--------------------
Xxxx X. Xxxx
Dated: July 19, 2001
