STOCK PURCHASE AGREEMENT
BY AND AMONG
XXXXX XXXXXX MULTIMEDIA COMPANY, INC.
XXXXXXXX X. XXXXXXX
AND
XXXXXX XXXXXXX
With respect to the purchase of all of the Capital Stock of
MULTI DIMENSIONAL COMMUNICATIONS, INC. and
NEW MEDIA SCHOOLHOUSE, INC.
NOVEMBER 26, 1997
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement"), dated as of
November 26, 1997, by and among Xxxxxxxx X. Xxxxxxx ("Xxxxxxxx"), Xxxxxx Xxxxxxx
("Xxxxxx") (Xxxxxx and Xxxxxxxx are referred to herein, simply, as a "Seller"
and together as the "Sellers") and Xxxxx Xxxxxx Multimedia Company, Inc., a New
York corporation (the "Purchaser").
W I T N E S E T H:
WHEREAS, Multi Dimensional Communications, a New York
corporation ("MDC") and New Media Schoolhouse, Inc., a New York corporation
("NMS") (MDC and NMS being hereinafter referred to herein as the "Companies")
are engaged principally in the business of producing, publishing and marketing
educational software; and
WHEREAS, the Sellers own all of the issued and outstanding
shares of capital stock of each of the Companies;
WHEREAS, the Sellers desire to sell, and the Purchaser desires
to purchase, all of the Securities (as hereinafter defined) on the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
respective mutual covenants, representations and warranties herein contained,
the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
Definitions
In addition to terms defined elsewhere in this Agreement, the
following terms when used in this Agreement shall have the meanings indicated
below:
"Affiliate" shall have the meaning specified in Rule 144 under
the Securities Act.
"Agreement" shall mean this Stock Purchase Agreement together
with all exhibits and schedules referred to herein.
"Closing" shall have the meaning set forth in Section 6.1.
"Closing Date" shall mean the date that the Closing takes
place.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Company Plans" shall have the meaning set forth in Section
4.26(b).
"Consideration" shall have the meaning set forth in Section
2.2.
"Convertible Note" or "Convertible Notes" shall mean those
Convertible Promissory Notes of even date herewith from the Purchaser to each of
the Sellers, which Convertible Notes represent a portion of the Consideration
for the Securities.
"Xxxxxx Employment Agreement" means that certain Employment
Agreement of even date herewith between Xxxxxx Vazzanna and NMS.
"Employment Agreements" shall have the meaning set forth in
Section 4.26(a).
"Environmental Laws" shall have the meaning set forth in
Section 4.31.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agreement" means that certain Escrow Agreement of even
date herewith among the Sellers, the Purchaser, and the Escrow Agent.
"Escrow Agent" shall mean the person acting as the escrow
agent under the Escrow Agreement.
"Financial Statements" shall mean the balance sheets of the
Companies as of December 31, 1996, and the related statements of income, cash
flow and retained earnings, for the year ended December 31, 1996, including any
related notes, and the balance sheet of the Companies as of September 30, 1997,
and the related statements of income, cash flow and retained earnings for the
nine months ended September 30, 1997.
"Guaranty" shall mean all liabilities or obligations of any
Person, to guaranty, directly or indirectly, any indebtedness or other
obligations of any other Person in any manner by such Person, through an
agreement, contingent or otherwise, to purchase such indebtedness or obligation,
or to purchase or sell property or services, primarily for the purpose of
enabling the debtor to make payment of such indebtedness or obligation or to
guarantee the payment to the owner of such indebtedness or obligation against
loss, or to supply funds to or in any manner invest in the debtor, or otherwise.
"Hazardous Substances" shall have the meaning set forth in
Section 4.31.
"Indemnified Party" shall have the meaning set forth in
Section 5.3(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5.3(c).
"Intellectual Property" shall have the meaning set forth in
Section 4.20.
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"Investments" shall mean, with respect to any Person, all
advances, loans or extensions of credit to any other Person, all purchases or
commitments to purchase any stock, bonds, notes, debentures or other securities
of any other Person, and any other investment in any other Person, including
partnerships or joint ventures (whether by capital contribution or otherwise) or
other similar arrangement (whether written or oral) with any Person, including
but not limited to arrangements in which (i) the Person shares profits and
losses, (ii) any such other Person has the right to obligate or bind the Person
to any third party, or (iii) the Person may be wholly or partially liable for
the debts or obligations of such partnership, joint venture or other
arrangement.
"Leased Property" shall have the meaning set forth in Section
4.17.
"Lease" shall have the meaning set forth in Section 4.17.
"Licenses" shall have the meaning set forth in Section 4.19.
"Litigation" shall have the meaning set forth in Section 3.5.
"Material Agreements" shall have the meaning set forth in
Section 4.28.
"MDC Common Stock" shall mean the common stock of MDC, no par
value per share.
"Xxxxxxxx Employment Agreement" means that certain Employment
Agreement of even date herewith between Xxxxxxxx X. Xxxxxxx and MDC.
"NMS Common Stock: shall mean the common stock of NMS, no par
value per share.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean any natural person, corporation,
unincorporated organization, partnership, limited liability company,
association, joint stock company, joint venture, trust or government, or any
agency or political subdivision of any government or any other entity.
"Pledge Agreement" or "Pledge Agreements" shall mean those
Pledge Agreements of even date herewith between the Purchaser and each of the
Sellers, which Pledge Agreement secures the Purchaser's obligations to the
Sellers under the Convertible Notes.
"Product" shall have the meaning set forth in Section 4.30.
"Purchaser Common Stock" shall mean the common stock of the
Purchaser, par value $.001 per share.
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"Purchaser Financial Statements" shall have the meaning set
forth in Section 3.11.
"Purchaser Shares" shall have the meaning set forth in Section
2.2, which Purchaser Shares constitute a portion of the Consideration for the
Shares.
"Registration Rights Agreements" shall mean that certain
Registration Rights Agreement of such date herewith between the Purchaser and
the Sellers.
"Related Party" shall have the meaning set forth in Section
4.22.
"SEC Documents" shall mean the following documents as filed
with the Commission: (i) Purchaser's Annual Reports on Form 10-KSB for the years
ended December 31, 1996 and December 31, 1995, (ii) the Purchaser's Quarterly
Reports on Form 10-QSB for the quarters ended March 31, 1996, June 30, 1996,
September 30, 1996, March 31, 1997, June 30, 1997 and the Purchaser's Form
10-QSB for the period ended September 30, 1997 (a copy of which is attached to
Schedule 3.12); (iii) the Purchaser's Proxy Statements in connection with the
1996 Annual Meeting of Shareholders and the 1997 Annual Meeting of Shareholders;
(iv) the Registration Statement on Form SB-2 filed with the Commission on or
about May 10, 1996; (vi) the Current Reports on Form 8-K filed with the
Commission during 1997.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securities" shall mean all of the issued and outstanding
capital stock of each of the Companies.
"Subsidiary" of any Person shall mean any Person, in which
such Person owns, directly or indirectly, an equity interest of more than fifty
percent (50%), or which may effectively be controlled, directly or indirectly,
by such Person.
ARTICLE II
Purchase and Sale of Securities; Consideration
2.1 Purchase and Sale of Securities. Subject to the terms and
conditions set forth herein, at the Closing, each of the Sellers shall sell to
Purchaser, and Purchaser shall purchase from each of the Sellers, all of such
Sellers' right, title and interest in and to the Securities indicated next to
such Sellers' name on Schedule A hereto, which shall collectively constitute one
hundred percent (100%) of the issued and outstanding capital stock of each of
the Companies. At the Closing, each of the Sellers shall deliver to Purchaser
all of the certificates representing the Securities indicated next to such
Sellers name on Schedule A, together with stock powers separate from the
certificates duly executed by each of the Sellers in blank and sufficient to
convey to Purchaser good and marketable title to the Securities free and clear
of any
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and all claims, liens, charges, security interests, pledges or encumbrances of
any nature whatsoever and together with all accrued benefits and rights
attaching thereto.
2.2 Consideration. The aggregate consideration to be paid at
the Closing (collectively, the "Consideration") shall consist of (a) the
Convertible Notes, in the original principal amount of Three Hundred
Seventy-Five Thousand Dollars ($375,000.00), which Convertible Notes are secured
by a pledge of the Securities pursuant to the Pledge Agreement; (b) Two Hundred
Twenty-Five Thousand (225,000) shares of unregistered Purchaser Common Stock
(the "Purchaser Shares"); and (c) Thirty Six Thousand One Hundred Thirty Three
Dollars ($36,133) payable in immediately available funds, which shall be
deposited into escrow pursuant to the terms of the Escrow Agreement. The
Consideration shall be allocated as set forth on Schedule B hereto. The
Purchaser shall pay all transfer taxes, stamp taxes, or sales taxes, if any,
arising out of the purchase of the Shares. The Purchaser Shares shall possess
the registration rights set forth in the Registration Rights Agreement.
2.3 Purchase Price Adjustment. Purchaser hereby agrees to
guarantee an aggregate selling price of the Purchaser Common Stock at $2.00 per
share, before commissions or other transaction fees, for each such share
actually sold on a bona fide trade on The NASDAQ Market System or such other
exchange that the Purchaser Common Stock is then listed or traded during the
period beginning one (1) year and ending two (2) years from the date hereof (the
"Determination Period"). To the extent that Sellers sell any or all of the
Purchaser's Shares during the Determination Period, Purchaser will pay to the
Sellers the amount of such Seller's Shortfall in cash or stock (the "Shortfall
Shares"), at Purchaser's sole discretion. For purposes of this Agreement, a
"Shortfall" shall mean the difference between (A) the aggregate sales price,
before commissions or other transaction fees, obtained by a Seller in respect of
all of the Purchaser's Shares sold during the Determination Period less (B) the
number of such Purchaser's Shares sold by such Seller during the Determination
Period multiplied by $2.00. In the event of a Shortfall, the Purchaser shall
deliver either cash or Shortfall Shares to the Sellers, within thirty (30) days
of its receipt of written notice by the Sellers of such Shortfall accompanied
with documentation that is reasonably acceptable to the Purchaser that supports
such Shortfall calculation. In the event of a Shortfall, the Purchaser shall
deliver either cash or Shortfall Shares to the Sellers, within forty (40) days
of its receipt of written notice, which notice shall be given no earlier than at
the end of the Determination Period, by the Sellers of such Shortfall
accompanied with documentation that is reasonably acceptable to the Purchaser
that supports such Shortfall calculation. In the event that Purchaser elects to
make up such Shortfall with Shortfall Shares, the value of a Shortfall Share
shall be the average of the closing bid and ask price of the Common Stock for
the twenty (20) business days immediately following the end of the Determination
Period.
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ARTICLE III
Representations and Warranties of the Purchaser
In order to induce the Sellers to enter into this Agreement
and to consummate the transactions contemplated hereby, the Purchaser makes the
following representations and warranties to the Sellers:
3.1 Organization; Standing and Power. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York. The Purchaser is duly qualified to transact business
as a foreign corporation in all jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on the business, financial condition, results of operations or properties of
Purchaser. The Purchaser has all requisite right, power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The Purchaser has the requisite power and authority to own
or lease and operate its properties and conduct its business as presently
conducted.
3.2 Authorization; Enforceability. The execution, delivery and
performance of this Agreement by the Purchaser and the other documents to which
Purchaser is a signatory thereto entered into pursuant to or in connection with
the transactions contemplated by this Agreement and the consummation by the
Purchaser of the transactions contemplated hereby, including without limitation
the issuance and delivery of the Purchaser Shares and the Convertible Note have
been duly authorized by all requisite corporate action on the part of the
Purchaser. This Agreement, the Convertible Notes, the Pledge Agreements, the
Registration Rights Agreement, and all other documents executed by the Purchaser
in connection with this Agreement have been duly executed and delivered by the
Purchaser and constitute legal, valid and binding obligations of the Purchaser,
enforceable in accordance with their terms, except to the extent that
enforcement is limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity.
3.3 No Violation or Conflict. The execution, delivery and
performance of this Agreement by the Purchaser and the consummation by the
Purchaser of the transactions contemplated hereby: (a) do not violate or
conflict with any provision of law or regulation, or any writ, order or decree
of any court or governmental or regulatory authority (the violation of which
would interfere in any material respect with Purchaser's ability to consummate
the transactions contemplated hereby) applicable to the Purchaser, or any
provision of the Purchaser's Certificate of Incorporation or Bylaws; and (b) do
not, with or without the passage of time or the giving of notice, result in the
breach of, or constitute a default, cause the acceleration of performance or
require any consent under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of the Purchaser pursuant to, any
instrument or agreement to which the Purchaser is a party or by which the
Purchaser or its properties may
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be bound or affected in any material respects, other than instruments or
agreements as to which consent shall have been obtained at or prior to the
Closing (each of which instruments or agreements is specifically identified in
Schedule 3.3 hereto) or the transactions contemplated hereby.
3.4 Consents of Governmental Authorities and Others. Except as
set forth on Schedule 3.4, no consent, approval or authorization of, or
registration, qualification or filing with, any federal, state or local
governmental or regulatory authority, or any other Person, is required to be
made by the Purchaser in connection with the execution, delivery or performance
of this Agreement by the Purchaser or the consummation by the Purchaser of the
transactions contemplated hereby, except where the failure to obtain such would
not have a material adverse effect on the business, financial condition, results
of operations or properties of Purchaser.
3.5 Litigation. Except as set forth on Schedule 3.5, there are
no material actions, suits, investigations, claims or proceedings ("Litigation")
pending or, to the knowledge of the Purchaser, threatened before any court or by
or before any governmental or regulatory authority or arbitrator with respect to
the Purchaser or any of its Subsidiaries.
3.6 Brokers. With the exception of Frost & Xxxxxx, Inc., the
Purchaser has not employed any financial advisor, broker or finder in connection
with the transactions contemplated by this Agreement and has not incurred (and
will not incur) any broker's, finder's, investment banking or similar fees,
commissions or expenses in connection with the transactions contemplated by this
Agreement. The Purchaser will be solely responsible for all fees of Frost &
Xxxxxx, Inc. incurred in connection with this transaction.
3.7 Compliance. The Purchaser is in compliance with all
federal, state, local and foreign laws, ordinances, regulations, judgments,
rulings and orders applicable to it including, without limitation, those
relating to: (a) the development, manufacture, packaging, distribution and
marketing of its products; and (b) employment, safety and health; except where
the failure to be in compliance would not have a material adverse effect on the
business, financial condition, results of operations or properties of Purchaser.
The Purchaser is not subject to any judicial, governmental or administrative
order, judgment or decree.
3.8 Charter, Bylaws and Corporate Records. True and complete
copies of: (a) the Certificate of Incorporation of the Purchaser, as amended and
in effect on the date hereof, and (b) the Bylaws of the Purchaser, as amended
and in effect on the date hereof, have been previously delivered to the Seller.
3.9 Capitalization. The authorized capital stock of the
Purchaser consists of: (a) 30,000,000 shares of common stock, $.001 par value,
of which 7,174,438 shares are issued and outstanding as of the date hereof; and
(b) 5,000,000 shares of preferred stock, of which there are no shares issued and
outstanding. All shares of the Purchaser's issued and outstanding capital stock
have been duly authorized, are validly issued and outstanding, and are fully
paid and nonassessable. No securities issued by the Purchaser from the date of
its incorporation to
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the date hereof were issued in violation of any statutory or common law
preemptive rights. There are no dividends which have accrued or been declared
but are unpaid on the capital stock of the Purchaser. Except as set forth on
Schedule 3.3, all permits or authorizations required to be obtained from or
required to be effected with any Person in connection with the Purchaser Shares
have been obtained or effected.
3.10 Rights, Warrants, Options. Except as set forth on
Schedule 3.10, or disclosed in the SEC Documents, the Purchaser does not have
outstanding any: (a) securities or instruments convertible into or exercisable
for any of the capital stock or other equity interests of the Purchaser; (b)
options, warrants, subscriptions or other rights to acquire capital stock or
other equity interests of the Purchaser; or (c) commitments, agreements or
understandings of any kind, including employee benefit arrangements, relating to
the issuance or repurchase by the Purchaser of any capital stock or other equity
interests of the Purchaser, any such securities or instruments convertible into
or exercisable for capital stock or other equity interests of the Purchaser or
any such options, warrants or rights.
3.11 Financial Statements. The financial statements of the
Purchaser contained in its SEC Documents (collectively, the "Purchaser Financial
Statements"): (a) have been prepared in accordance with the books of account and
records of the Purchaser; (b) fairly present in all material respects the
Purchaser's financial condition and the results of its operations at the dates
and for the periods specified therein; and (c) have been prepared in accordance
with GAAP, consistently applied with prior periods.
3.12 Absence of Undisclosed Liabilities. Except as disclosed
in the Purchaser Financial Statements, or Schedule 3.12, to the best of the
Purchaser's knowledge, (i) the Purchaser does not have any material direct or
contingent liabilities, commitments or obligations (other than nonmaterial
liabilities, commitments or obligations incurred since the date of the Purchaser
Financial Statements solely in the ordinary course of business consistent with
past practices to Persons who are not Affiliates of the Purchaser) or any
unrealized or anticipated losses from any commitments of the Purchaser and (ii)
there is no reasonable basis for assertion against the Purchaser of any such
liability, commitment or obligation.
3.13 Employment Policies. Schedule 3.13 contains a list of all
of the Purchaser's material written employee policies, employee manuals or other
material written statements of rules or policies as to working conditions,
vacation and sick leave, a complete copy of each of which has been made
available to Seller.
3.14 Labor Relations. The Purchaser is not a party to,
otherwise bound by or overtly threatened with any labor or collective bargaining
agreement. Without limiting the generality of this Section 3.14, except as
identified on Schedule 3.14: (a) no unfair labor practice complaints have been
filed against the Purchaser with any governmental or regulatory agency, of which
the Purchaser has received written notice; (b) the Purchaser has not received
any written notice or communication reflecting an intention or threat to file
any such complaint; (c) no Person has made or, to the best of Purchaser's
knowledge, threatened any claim, against
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the Purchaser under any statute, regulation or ordinance relating to
discrimination with respect to employees or employment practices; and (d) no
claim is pending or, to the best of Purchaser's knowledge, threatened against
the Purchaser in connection with the United States Wage and Hour Law, the
Americans with Disabilities Act, the Occupational Safety and Health Act or
similar law.
3.15 Title to Purchaser Shares. Subject to the terms and
conditions of this Agreement, at the Closing the Purchaser will transfer and
convey, and the Sellers will acquire, good and marketable title to the Purchaser
Shares delivered to them pursuant to the terms of this Agreement, free and clear
of all liens, encumbrances, pledges, security interests and claims whatsoever.
ARTICLE IV
Representations and Warranties of the Seller
In order to induce the Purchaser to enter into this Agreement
and to consummate the transactions contemplated hereby, the Sellers, jointly and
severally, make the following representations and warranties to the Purchaser:
4.1 Organization. Each of the Companies is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Each of the Companies is duly qualified to transact business as a
foreign corporation in all jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such qualification and the
failure to so qualify would have a material adverse effect on the business,
financial condition, results of operations or properties of any of the
Companies. Each jurisdiction in which the Companies are so qualified is listed
on Schedule 4.1 hereto. Each of the Companies has all requisite right, power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. Each of the Companies has the requisite power
and authority to own or lease and operate its properties and conduct its
business as presently conducted.
4.2 Authorization; Enforceability. The Sellers each have the
capacity to execute, deliver and perform this Agreement and the other documents
to which the Sellers are a signatory thereto entered into pursuant to or in
connection with the transactions contemplated by this Agreement. All documents
executed and delivered by each of the Companies pursuant to and in connection
with the transactions contemplated by this Agreement have been duly authorized
by all requisite corporate action on the part of the Company, and this Agreement
and all documents to be executed and delivered by the Sellers and the Companies
pursuant to this Agreement have been and will be duly executed and delivered by
each of the Sellers and the Companies and constitute the legal, valid and
binding obligations of the Sellers and the Companies, enforceable in accordance
with their respective terms, except to the extent that their
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enforcement is limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity.
4.3 No Violation or Conflict. The execution, delivery and
performance of this Agreement by each of the Sellers and the consummation by
each of the Sellers of the transactions contemplated hereby: (a) do not violate
or conflict with any law or regulation (whether federal, state or local), writ,
order or decree of any court or governmental or regulatory authority applicable
to any of the Companies, or any provision of the Companies Certificate of
Incorporation or Bylaws; and (b) except as set forth on Schedule 4.3 hereto, do
not, with or without the passage of time or the giving of notice, result in the
breach of, or constitute a default, cause the acceleration of performance or
require any consent under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of any of the Sellers or the Companies
pursuant to any instrument or agreement to which any of the Sellers or the
Companies are a party or by which any of the Sellers or the Companies or their
respective properties may be bound or affected, other than instruments or
agreements as to which consent shall have been obtained at or prior to the
Closing (each of which instruments or agreements is specifically identified in
Schedule 4.3 hereto).
4.4 Consents of Governmental Authorities and Others. Except as
set forth on Schedule 4.4, no consent, approval or authorization of, or
registration, qualification or filing with, any federal, state or local
governmental or regulatory authority, or any other Person, is required to be
made by any of the Sellers or the Companies in connection with the execution,
delivery or performance of this Agreement by the Sellers or the consummation by
the Sellers of the transactions contemplated hereby, except where the failure to
obtain such would not have a material adverse effect on the business, financial
condition, results of operations or properties of the Companies, collectively.
4.5 Conduct of Business. Except as disclosed on Schedule 4.5
hereto or as contemplated by this Agreement, since September 30, 1997, each of
the Companies has conducted its business in the ordinary and usual course
consistent with past practices and there has not occurred any material adverse
effect in the business, financial condition, results of operations or properties
of the Company. Without limiting the generality of the foregoing, except as
disclosed on Schedule 4.5 or as contemplated by this Agreement, since September
30, 1997, none of the Companies has: (a) amended its Certificate of
Incorporation or Bylaws; (b) issued, sold or authorized for issuance or sale,
shares of any class of its securities (including, but not limited to, by way of
stock split or dividend) or any subscriptions, options, warrants, rights or
convertible securities, or entered into any agreements or commitments of any
character obligating it to issue or sell any such securities; (c) redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of its
capital stock or any option, warrant or other right to purchase or acquire any
such shares; (d) suffered any damage, destruction or loss, whether or not
covered by insurance, which has had or could have a material adverse effect on
business, financial condition, results of operations or properties of any of the
Companies; (e) granted or made any mortgage or pledge or subjected itself or any
of its properties or assets to any lien, charge or encumbrance of any kind,
except statutory liens arising in the ordinary course of
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business and liens for taxes not currently due; (f) made or committed to make
any capital expenditures in excess of Five Thousand Dollars ($5,000.00); (g)
become subject to any Guaranty; (h) granted any increase in the compensation
payable or to become payable to directors, officers or employees, except as
disclosed on Schedule 4.24, and has not modified any bonus, pension,
profit-sharing or other material employee benefit plan in a manner that will
materially increase the costs thereof; (i) entered into any Material Agreement
not disclosed in the schedules to this Agreement, or terminated any existing
Material Agreement (except through completion) or received notice of any such
termination; (j) experienced any strike, work stoppage or slowdown; (k) received
notice of any material adverse change in any material relationship with any
financial institution or any customer or supplier required to be identified on
Schedule 4.21, nor is it aware of any circumstances likely to lead to such a
material change; or (l) experienced any other event or condition of any
character (including any delay in the development of the Products) which since
September 30, 1997 has had or is likely to have a material adverse effect on the
business, financial condition, results of operations or properties of the
Company.
4.6 Litigation. Except as set forth on Schedule 4.6, there is
no Litigation pending or to the best of the Sellers or any of the Companies
knowledge threatened before any court or by or before any governmental or
regulatory authority or arbitrator: (a) affecting any of the Companies (as
plaintiff or defendant) which could, individually or in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations or properties of any of the Companies; or (b) against any of the
Sellers or the Companies relating to the Securities or the transactions
contemplated by this Agreement. Schedule 4.6 sets forth a list of any Litigation
commenced against any of the Companies in the past year.
4.7 Brokers. With the exception of JPMC Associates, neither
any of the Sellers nor any of the Companies have employed any financial advisor,
broker or finder, and neither of them has incurred or will incur any broker's,
finder's, investment banking or similar fees, commissions or expenses in
connection with the transactions contemplated by this Agreement. The Sellers
will be solely responsible for all fees of JPMC Association in connection with
this transaction.
4.8 Compliance. Each of the Companies is in compliance with
all federal, state, local and foreign laws, ordinances, regulations, judgments,
rulings and orders applicable to it including, without limitation, those
relating to: (a) the development, manufacture, packaging, distribution and
marketing of the Products; and (b) employment, safety and health, except where
the failure to be in compliance would not have a material adverse effect on the
business, financial condition, results or operations or properties of any of the
Companies. None of the Companies are subject to any judicial, governmental or
administrative order, judgment or decree.
4.9 Charter, Bylaws and Corporate Records. True and complete
copies of: (a) the Certificate of Incorporation of each of the Companies, as
amended and in effect on the date hereof, (b) the Bylaws of each of the
Companies, as amended and in effect on the date hereof,
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and (c) the minute books of each of the Companies have been previously delivered
to the Purchaser. Each of the Companies minute books contain complete and
accurate records of all meetings and other corporate actions of the board of
directors, committees of the board of directors, incorporators and shareholders
of the Company from the date of its incorporation to the date hereof.
4.10 Subsidiaries and Investments. None of the Companies has
Subsidiaries or Investments.
4.11 Capitalization. The authorized capital stock of MDC
consists of 200 shares of common stock, no par value per share, of which 102
shares are issued and outstanding and 20,000 shares of preferred stock par value
$1.00 per share, of which 200 shares are issued and outstanding. The authorized
capital stock of NMS consists of 200 shares of common stock, no par value per
share, of which 10 shares are issued and outstanding. All issued and outstanding
shares of each of the Companies capital stock have been duly authorized, are
validly issued and outstanding, and are fully paid and nonassessable. No
securities issued by any of the Companies from the date of its incorporation to
the date hereof were issued in violation of any statutory or common law
preemptive rights. There are no dividends which have accrued or been declared
but are unpaid on the capital stock of any of the Companies. All taxes required
to be paid in connection with the issuance and any transfers of the Companies
capital stock have been paid. All permits or authorizations required to be
obtained from or required to be effected with any Person in connection with any
and all issuances of securities of any of the Companies from the date of each of
the Companies incorporation to the date hereof have been obtained or effected
and all securities of each of the Companies have been issued and are held in
accordance with the provisions of all applicable securities or other laws. The
Securities constitute one hundred percent (100%) of the issued and outstanding
capital stock of the Companies.
4.12 Rights, Warrants, Options. There are no outstanding: (a)
securities or instruments convertible into or exercisable for any of the capital
stock or other equity interests of any of the Companies; (b) options, warrants,
subscriptions or other rights to acquire capital stock or other equity interests
of any of the Companies; or (c) commitments, agreements or understandings of any
kind, including employee benefit arrangements, relating to the issuance or
repurchase by the Company of any capital stock or other equity interests of any
of the Companies, any such securities or instruments convertible into or
exercisable for capital stock or other equity interests of any of the Companies
or any such options, warrants or rights.
4.13 Financial Statements. The Sellers have previously
delivered to the Purchaser true and complete copies the Financial Statements of
each of the Companies. The Financial Statements: (a) have been prepared in
accordance with the books of account and records of each of the Companies; and
(b) fairly present in all respects each of the Companies financial condition and
results of operations at the dates and for the periods specified in the those
statements; (c) have been prepared in all material respects in accordance with
United States generally accepted accounting principals ("GAAP") in consistently
applied with prior periods. None of the sales reflected on the statement of
income of NMS for the year ended December
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31, 1996 and nine month period ended September 30, 1997, respectively, represent
sales made by NMS to MDC.
4.14 Absence of Undisclosed Liabilities. Except (a) as
disclosed in the Financial Statements, or (b) as disclosed in Schedule 4.14,
none of the Companies have any direct or contingent liabilities, commitments or
obligations (other than nonmaterial liabilities, commitments or obligations
incurred since the date of said Financial Statements solely in the ordinary
course of business consistent with past practices to Persons who are not
Affiliates of the Sellers or the Companies) or any unrealized or anticipated
losses from any commitments of any of the Companies and there is no reasonable
basis for assertion against the Company of any such liability, commitment or
obligation.
4.15 Title to Shares. The Sellers are the record and
beneficial owners of the Securities and the Securities are owned free and clear
of any liens, encumbrances, pledges, security interests and claims whatsoever,
including, without limitation, claims or rights under any voting trust
agreements, shareholder agreements or other agreements. Subject to the terms and
conditions of this Agreement and the Pledge Agreement, at the Closing the
Sellers will transfer and convey, and the Purchaser will acquire, good and
marketable title to the Securities, free and clear of all liens, encumbrances,
pledges, security interests and claims whatsoever. Upon the transfer of the
Securities to Purchaser, each of the Companies will posses ownership of its
respective entire business necessary to operate the Companies as an on-going
concern, as such business is presently being conducted.
4.16 Title to and Condition of Personal Property. Each of the
Companies has good and marketable title to each item of equipment and other
personal property, tangible and intangible, included as an asset in the
Financial Statements dated December 31, 1996 or acquired since such date (other
than property subsequently utilized or disposed of in the ordinary course of
business since December 31, 1996 to persons who are not Affiliates of the
Companies or Sellers), free and clear of any security interests, liens, claims,
charges or encumbrances whatsoever, except as set forth in Schedule 4.16 hereto
or as set forth in the Financial Statements dated December 31, 1996. Except as
set forth in Schedule 4.16, all tangible personal property owned by any of the
Companies or used by any of the Companies on the date hereof in the operation of
its business is in good operating condition and in a good state of maintenance
and repair. Except for the Lease, personal property leased to any of the
Companies and Intellectual Property licensed to any of the Companies, there are
no material assets owned by any third party which are used in the operation of
the business of any of the Companies, as presently conducted or proposed to be
conducted.
4.17 Real Property. None of the Companies own any fee simple
interest in real property or sublease any real property. None of the Companies
lease any real property other than as set forth on Schedule 4.17, which sets
forth the street address of the sole parcel of real property leased by the
Companies (the "Leased Property"). The Sellers have previously delivered to the
Purchaser a true and complete copy of the lease, as amended to date (the
"Lease"), relating to the Leased Property. Each of the Companies enjoy a
peaceful and
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undisturbed possession of the Leased Property. No person other than the
Companies has any right to use or occupy the Leased Property. The Lease is in
full force and effect and is a valid and legally binding obligation of each of
the Companies and, to the best of Sellers knowledge, the landlord thereto. All
rent and other sums and charges payable under the Lease are current, no notice
of default or termination under the Lease is outstanding, no termination event
or condition or uncured default on the part of any of the Companies and, to the
best knowledge of the Sellers, the landlord exists under the Lease, and no event
has occurred and no condition exists which, with the giving of notice or the
lapse of time or both, would constitute such a default or termination event or
condition by the Sellers. None of the Companies have experienced any material
interruption in the services provided to the Leased Property within the past
year. To the best of the Sellers knowledge, the landlord under the Lease has no
plans to make any material alteration to the Leased Property, the cost of which
would be borne in any part by the Companies except as otherwise set forth on
Schedule 4.17.
All permits, licenses, franchises, approvals and
authorizations of all governmental authorities having jurisdiction over the
Leased Property required to have been issued to any of the Companies to enable
the Leased Property to be lawfully occupied and used for all of the purposes for
which it is currently occupied are, as of the date hereof, in full force and
effect. Neither the Sellers nor any of the Companies has received or been
informed by a third party of the receipt by it of any notice from any
governmental authority having jurisdiction over any Leased Property or from any
insurance organization threatening a suspension, revocation, modification or
cancellation of any real property permit or of any insurance policies and, to
the best knowledge and belief of Sellers and the Companies, there is no basis
for the issuance of any such notice or the taking of any such action.
There are no liabilities (other than rent and other sums and
charges regularly payable) associated with the Lease including, without
limitation, any liability under any laws or regulation, which is or which may
become payable by Purchaser, with the exception of any Environmental Laws, which
are addressed in Section 4.31 below.
4.18 Insurance. Schedule 4.18 sets forth a true and complete
list of all insurance policies providing insurance coverage of any nature to any
of the Companies. The Sellers have previously made available to the Purchaser a
true and complete copy of all of such insurance policies, as amended to the date
hereof. All of such policies are in full force and effect and are valid and
enforceable in accordance with their terms, and each of the Companies has
complied with all terms and conditions of such policies, including premium
payments. None of the insurance carriers has indicated to Sellers or any of the
Companies an intention to cancel any such policy. Except as set forth on
Schedule 4.18, none of the Companies has a claim pending against any of the
insurance carriers under any of such policies and there has been no actual or
alleged occurrence of any kind which may give rise to any such claim.
4.19 Licenses. Each of the Companies holds all governmental
franchises, authorizations, permits, certificates, variances, exemptions, orders
and approvals, domestic or foreign (collectively, the "Licenses") which are
required or utilized in the operation of the
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business of the Companies. Schedule 4.19 lists all the Licenses. Each of the
Companies is in substantial compliance with, and has conducted its business so
as to substantially comply with, the terms of its respective Licenses. To the
best knowledge of the Sellers, none of the Companies has engaged in any activity
that would cause revocation or suspension of any such Licenses. No action or
proceeding looking to or contemplating the revocation or suspension of any such
Licenses is pending or, to the knowledge of the Sellers or the Companies,
threatened.
4.20 Proprietary Rights.
(a) Set forth on Schedule 4.20 is a list and
description of all copyrights, copyright registrations, copyright registration
applications, patents, patent registrations, patent registration applications,
trade or service marks, trade or service xxxx registrations or applications,
trade names, trade name registrations, trade name registration applications,
logo types, processes, inventions, designs, technical data, trade secrets,
know-how, formulae, software, source code and documentation and all tangible
embodiments thereof (in whatever form or medium) applied for, issued to or owned
by any of the Companies or which are licensed and franchised to any of the
Companies, or in which any of the Companies has a material interest and all
similar intellectual property rights (whether or not any registration or filing
has been made in respect thereto) (collectively, the "Intellectual Property").
Except as set forth on Schedule 4.20: (a) the Companies are the sole and
exclusive owners of all right, title and interest in and to all of the
Intellectual Property and in and to each invention, software, trade secret,
technology, product, composition, formula, method of process used by the
Companies, and has the exclusive right to use and license the same, free and
clear of any claim or conflict with the rights of others; (b) no royalties or
fees (license or otherwise) are payable by any of the Companies to any Person by
reason of the ownership or use of any of the Intellectual Property; (c) there
have been no claims made against any of the Companies asserting the invalidity,
abuse, misuse, or unenforceability of any of the Intellectual Property, and to
the best of Sellers knowledge, there are no reasonable grounds for any such
claims; (d) none of the Companies has made any claim of any violation or
infringement by others of its rights in the Intellectual Property, and to the
best of Sellers' knowledge, no reasonable grounds for such claims exist; (e)
none of the Companies has received any written notice or, to the knowledge of
the Sellers other type of overt notice that it is in conflict with or infringing
upon the asserted rights of others in connection with the Intellectual Property
and neither the use of the Intellectual Property by any of the Companies, the
operation of its business, the manufacture of its products, nor any formula,
method, process, part or material employed by any of the Companies in connection
therewith, is to the best of the Companies and Sellers' knowledge infringing or
has infringed upon any rights or others; (f) the Intellectual Property includes
all material rights necessary for the Companies to be legally entitled to
conduct its business as presently being conducted; (g) no material interest or
rights of the Companies to any Intellectual Property has been assigned,
transferred, licensed or sublicensed by the Companies to third parties outside
of the ordinary course of business.
(b) Each of the Companies has all necessary
software, copyrights and other rights to publish its existing titles, subject to
the term of the licenses granted to the
-15-
Companies with respect to such titles. Schedule 4.20(b) hereto sets forth a
true, complete and correct list of (i) all titles (both published, unpublished
and in process) and primary licensors, (ii) each license agreement in respect of
Intellectual Property pursuant to which any of the Companies has granted or
licensed rights, (iii) for primary titles or imprints in existence as of the
date hereof, each registration with, filing in or issuance by a governmental
agency or authority of the United States, or of any of the states thereof, or of
foreign jurisdictions by the Companies or any of its employees or consultants
with respect thereto, and (iv) each material agreement with a third party
pursuant to which each such third party is developing in excess of 25% of any
title.
(c) Except as set forth on Schedule 4.20(c) hereto,
(i) subject to and/or with the exception of royalty
obligations and any other contractual restrictions
specifically described in Section 4.20 (including
the Schedules thereto), the Companies own, have the
right to use, sell, license, prepare derivative
works for, or dispose of all Intellectual Property
required for or incident to the development,
manufacture, operation and sale of all products and
services in the manner currently or reasonably
expected to be sold by the Companies free and clear
of any rights, liens or claims of others, and has
the right to bring actions for any infringement or
misappropriation of the Intellectual Property;
(ii) the execution, delivery and performance of
this Agreement and the consummation of the
agreements contemplated herein will not breach,
violate or conflict with any instrument or
agreement governing any Intellectual Property right
or in any way exclude the right of the Companies to
use, sell, license or dispose of or bring any
action for the infringement of, any Intellectual
Property right;
(iii) the manufacture, marketing, modification,
license, sale or use of the Intellectual Property
used by the Companies in connection with the
conduct or operation of any of the Companies
business does not violate any license or agreement
with any third party or infringe any license or
agreement with any third party or infringe any
proprietary right or interest of any other party;
and there are no pending or, to any of the
Companies or the Sellers knowledge, threatened
claims or litigation contesting the validity,
ownership or right to use, sell, license or dispose
of any Intellectual Property that is required in
connection with the conduct or operation of the
Companies' business, nor have the Companies
received any written notice asserting that any
Intellectual Property right, or the proposed use,
sale, license or disposition thereof by it
conflicts or will conflict with the rights of any
other party, nor, to the
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knowledge of the Sellers, is there any reasonable
basis for any such assertion;
(iv) each of the Companies has taken reasonably
prudent measures to protect confidential
Intellectual Property; all persons engaged or
employed by the Companies in any capacity having
access to or knowledge of the Intellectual Property
of a confidential nature that is necessary or
required or otherwise used for or in connection
with the conduct or operation of the Companies
business have entered into appropriate
non-disclosure agreements with the Companies;
(v) to the Sellers' or Companies' knowledge, none
of the Companies has disposed of or permitted to
lapse any rights to the use of any Intellectual
Property;
(vi) no Person (except for employees of the
Companies whose rights are limited to those which
are for the benefit of the Companies) has any
current, conditional or contingent right to have
available to it any Intellectual Property
(including, without limitation, source codes in
respect of software) which is generally not
available to the public and/or which is or ought
reasonably to be considered confidential or
proprietary information; and
(vii) The Companies currently possess all licenses
and sublicenses required to operate the business of
the Companies and are not in default under any said
licenses and sublicenses.
(d) No payments, including maintenance fees, filings or
registrations are required to be made so as to maintain the Intellectual
Property in full force and effect.
4.21 Major customers and Suppliers; Supplies. Set forth on
Schedule 4.21 is a list each of the Companies' largest customers during the
period from January 1, 1996 to the Closing Date of each of the Companies and all
non-employee suppliers of significant goods or services to the Companies for the
year ended December 31, 1996. Except as indicated on Schedule 4.21, no facts,
circumstances or conditions exist which create a reasonable basis for believing
that any of the Companies will be unable to continue to procure the supplies and
services necessary to conduct its business on terms and conditions materially as
favorable to the Companies as the terms and conditions pursuant to which such
supplies and services are currently procured. There has not been any material
adverse change in the relations of any of the Companies or any controversies
with its material customers, suppliers, contractors, licensors and lessors as a
result of the announcement or consummation of the transactions contemplated by
this Agreement, and to the best of each the Companies and the Sellers knowledge
none of
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the Companies major customers or suppliers is contemplating terminating its
relationship with the Companies.
4.22 Related Parties. Except as set forth on Schedule 4.22,
neither the Sellers nor, any other officer or director of the Companies nor any
Affiliate of the foregoing (individually a "Related Party" and collectively the
"Related Parties"): (a) owns, directly or indirectly, any interest in any
competitor, supplier or customer of any of the Companies; (b) owns, directly or
indirectly, in whole or in part, any property, asset or right, real, personal or
mixed, tangible or intangible (including, but not limited to, any of the
Intellectual Property but excluding personal property identified on Schedule
4.16) which is utilized in the operation of the business of any of the
Companies; or (c) has an interest in or is, directly or indirectly, a party to
any contract, agreement, lease or arrangement pertaining or relating to any of
the Companies, except for employment, consulting or other personal service
agreements that may be in effect and which are listed on Schedule 4.26A hereto.
Since December 31, 1996, the Companies have not made any payments or incurred
any liabilities to any Related Party (excluding any inter-company transactions
but including without limitation dividends, distributions or bonuses to the
Sellers) except as set forth on Schedule 4.22 or for compensation at rates not
exceeding the rates set forth on Schedule 4.24.
4.23 List of Accounts. Set forth on Schedule 4.23 is: (a) the
name and address of each bank or other institution in which any of the Companies
maintain an account (cash, securities or other) or safe deposit box; (b) the
name and phone number of each of the Companies contact person at such bank or
institution; (c) the account number of the relevant account and a description of
the type of account; and (d) the signatories to each such account.
4.24 Personnel. Schedule 4.24 contains the names, job
descriptions and annual salary rates and other compensation of all officers,
directors, consultants and employees of any of the Companies (including
compensation paid or payable by each of the Companies under the Company Plans)
and a list of all material written employee policies, employee manuals or other
material written statements of rules or policies as to working conditions,
vacation and sick leave, a complete copy of each of which has been made
available to the Purchaser.
4.25 Labor Relations.
(a) None of the Companies is a party to, otherwise
bound by or overtly threatened with any labor or collective bargaining
agreement. Without limiting the generality of Section 4.6, except as identified
on Schedule 4.25: (i) no unfair labor practice complaints have been filed
against any of the Companies with any governmental or regulatory agency, of
which either the Sellers or the Companies have received written notice; (ii)
none of the Companies has received any written notice or communication
reflecting an intention or threat to file any such complaint; (iii) no Person
has made any claim or to the best knowledge of the Sellers threatened any claim
against any of the Companies under any statute, regulation or ordinance relating
to discrimination with respect to employees or employment practices; and (iv) no
claim is pending or to the best knowledge of the Sellers or any of the Companies
threatened
-18-
against any of the Companies in connection with the United States Wage and Hour
Law, the Americans with Disabilities Act, the Occupational Safety and Health Act
or similar law.
(b) To the best of the Sellers' knowledge, no
employee, consultant or agent of any of the Companies is in violation of any
term of any employment contract, confidentiality or non-disclosure agreement or
any other contract, agreement, commitment or understanding relating to the
relationship of such employee, consultant or agent with any of the Companies or
any other party.
(c) Each employee or consultant of the Companies
with permitted access to confidential or proprietary information of the
Companies has executed an agreement obligating such employee or consultant to
hold confidential the Companies proprietary information.
(d) None of the Companies is aware that any officer
or key employee intends to terminate employment with the Company.
4.26 Employment Agreements and Employee Benefit Plans.
(a) Employment Agreements. Except as set forth on
Schedule 4.26A, or as set forth in each of the Companies articles of
incorporation or bylaws, there are no employment, consulting, severance or
indemnification arrangements, or agreements between any of the Companies and any
officer, director, consultant or employee ("Employment Agreements"). The Sellers
have previously delivered to the Purchaser true and complete copies of all of
the Employment Agreements.
(b) Employee Benefit Plans. For purposes of this
Agreement, "Company Plans" shall mean pension, retirement, stock purchase, stock
bonus, stock ownership, stock option, profit sharing, savings, medical,
disability, hospitalization, insurance, deferred compensation, bonus, incentive,
welfare or other employee benefit plan, policy, agreement, arrangement or
practice currently or previously maintained or contributed to by any of the
Companies for any of its directors, officers, consultants, employees or former
employees. Except for the Company Plans set forth on Schedule 4.26B, the
Companies has no material Company Plans. The Sellers have previously delivered
to the Purchaser: (i) a true and complete copy of all of the material Company
Plans (or, if oral, an accurate written summary thereof); (ii) if available, a
current summary plan description (plus summaries of any subsequent material
modifications thereto) for each material Company Plan; (iii) the latest IRS
determination letter obtained with respect to any Company Plan qualified under
Section 401 of the Code; and (iv) the Form 5500 for the last two (2) plan years
for each Company Plan required to file such form except as set forth on Schedule
4.8. Except as set forth on Schedule 4.26B, none of the Company Plans are
subject to ERISA and except as set forth on Schedule 4.26B, none of the
Companies has established, maintained, made or been required to make any
contributions to, or terminated, and has no liability with respect to, any
"employee benefit plan" within the meaning of ERISA. Except as indicated on
Schedule 4.26B or Schedule 4.8, none of the Companies has
-19-
incurred any liability to the PBGC and no facts or circumstances exist which
might give rise to any liability of the Companies other than the requirement to
pay premiums to the PBGC. Each of the Companies has paid all amounts required
under applicable law and any Company Plan to be paid as a contribution to any
Company Plan through the date hereof. Each of the Companies has set aside
adequate reserves to meet contributions which are not yet due under any Company
Plan. Neither the Sellers, the Companies or to their knowledge any other person
has engaged in any transaction with respect to any Company Plan which would
subject any of the Companies to any tax, penalty or liability for prohibited
transactions. No Company Plan provides post- employment medical, health, or life
insurance benefits for present or future retirees or present or future
terminated employees, except for continuation coverage provided pursuant to the
requirements of Section 4980B of the Code or Sections 601-608 of ERISA or a
similar state law.
4.27 Tax Matters. The Sellers have previously delivered to the
Purchaser true, correct and complete copies of each of the federal, state and
local income tax returns filed by each of the Companies for 1993 through 1996.
All tax returns and tax reports required to be filed with respect to the
business and assets of each of the Companies have been timely filed (or
appropriate extensions have been obtained) with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required to
be filed, all of the foregoing as filed are true, correct and complete and
reflect accurately all liability for taxes of each of the Companies for the
periods to which such returns relate in all material respects, and all amounts
shown as owing thereon have been paid. All income, profits, franchise, sales,
use, value added, occupancy, property, excise, payroll, FICA, FUTA and other
taxes (including interest and penalties), if any, collectible or payable by each
of the Companies or relating to or chargeable against any of its assets,
revenues or income through December 31, 1996 were fully collected and paid by
such date or provided for by adequate reserves in the December 31, 1996
Financial Statements and all similar items due through the Closing Date will
have been fully paid by that date or provided for by adequate reserves. No
taxation authority has sought to audit the records of any of the Companies for
the purpose of verifying or disputing any tax returns, reports or related
information and disclosures provided to such taxation authority. No claims or
deficiencies have been asserted against any of the Companies with respect to any
taxes or other governmental charges or levies which have not been paid or
otherwise satisfied or for which accruals or reserves have not been made in the
December 31, 1996 Financial Statements, and the Sellers and the Companies have
no reasonable basis to believe that such claims will be made. None of the
Companies has waived any restrictions on assessment or collection of taxes or
consented to the extension of any statute of limitations relating to taxation.
4.28 Material Agreements.
(a) Schedule 4.28 sets forth a brief description of
all material binding contracts or agreements relating to any of the Companies,
including without limitation any: (i) executory contracts including a commitment
or potential commitment for expenditure or other obligation or potential
obligation, or which provides for the receipt or potential receipt, involving in
excess of Five Thousand Dollars ($5,000.00) in any instance, or series of
related executory contracts that in the aggregate give rise to rights or
obligations exceeding such amount; (ii)
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indenture, mortgage, promissory note, loan agreement, guarantee or other
agreement or commitment for the borrowing or lending of money or encumbrance of
assets involving more than Three Thousand Dollars ($3,000.00) in each instance;
(iii) agreement which restricts any of the Companies from engaging in any line
of business or from competing with any other Person; (iv) warranties made with
respect to products manufactured, packaged, distributed or sold by any of the
Companies; or (v) any other contract, agreement, instrument, arrangement or
commitment that is material to the condition (financial or otherwise), results
of operations or business of any of the Companies (collectively, and together
with the Lease, the Employment Agreements, the Company Plans and all other
agreements required to be disclosed on any Schedule to this Agreement, the
"Material Agreements"). The Seller has previously furnished or made available to
the Purchaser true, complete and correct copies of all written agreements, as
amended, required to be listed on Schedule 4.28.
(b) Except as set forth on Schedule 4.28, none of
the Material Agreements were entered into outside the ordinary course of
business of the Companies, contains any unusual, onerous or burdensome
provisions that will impair or adversely effect in any material way the
operations of the Company, or is reasonably likely to be performed at a material
loss.
(c) The Material Agreements are each in full force
and effect and are the valid and legally binding obligations of each of the
Companies and, to the best of the Sellers' and the Companies knowledge, the
other parties thereto, enforceable in accordance with their respective terms,
subject only to bankruptcy, insolvency or similar laws affecting the rights of
creditors generally and to general equitable principles. None of the Companies
nor the Sellers has received written notice of default by any of the Companies
under any of the Material Agreements and no event has occurred which, with the
passage of time or the giving of notice or both, would constitute a default by
any of the Companies thereunder. To the Sellers' or the Companies' knowledge,
none of the other parties to any of the Material Agreements is in default
thereunder, nor has an event occurred which, with the passage of time or the
giving of notice or both would constitute a default by such other party
thereunder. Neither the Companies nor the Sellers has received notice of the
pending or threatened cancellation, revocation or termination of any of the
Material Agreements, (nor are any of them aware of any facts or circumstances
which are reasonably likely to lead to any such cancellation, revocation or
termination).
(d) Except as otherwise indicated on Schedule 4.28,
the continuation, validity and effectiveness of the Material Agreements under
the current terms thereof will in no way be affected by the consummation of the
transactions contemplated by this Agreement.
4.29 Guaranties. Except as set forth on Schedule 4.29, none of
the Companies is a party to any Guaranty, and no Person is a party to any
Guaranty for the benefit of any of the Companies.
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4.30 Products. Except as set forth on Schedule 4.30, there
exists no set of facts to the best of Sellers' or the Companies' knowledge which
could furnish a reasonable basis for the recall, withdrawal or suspension of any
title or product distributed or sold by any of the Companies (a "Product").
4.31 Environmental Matters. None of the Leased Property nor
any other property used by any of the Companies in the past has been used to
manufacture, treat, store, or dispose of any Hazardous Substance and such
property is free of all such substances. Each of the Companies is in compliance
in all respects with all laws, regulations and other federal, state or local
governmental requirements, and all applicable judgments, orders, writs, notices,
decrees, permits, licenses, approvals, consents or injunctions relating to the
generation, management, handling, transportation, treatment, disposal, storage,
delivery, discharge, release or emission of Hazardous Substances utilized by the
Companies in its business (collectively, the "Environmental Laws"). For purposes
of this Agreement, "Hazardous Substances" means all substances defined as
Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. ss. 300.5, or defined
as such by, or regulated as such under, any Environmental Law. Except as
described on Schedule 4.31, neither the Sellers nor the Companies have received
any complaint, notice, order, or citation of any actual, threatened or alleged
noncompliance by any of the Companies with any of the Environmental Laws, and
there is no proceeding, suit or investigation pending or, to the Sellers'
knowledge, threatened against any of the Companies with respect to any violation
or alleged violation of the Environmental Laws, and to Sellers' knowledge, there
is no reasonable basis for the institution of any such proceeding, suit or
investigation.
4.32 Insolvency. Each of the Companies is able to pay its
debts as they mature and the transfer of the Securities by the Sellers to the
Purchaser in accordance with the terms of this Agreement shall not constitute a
voidable preference or transfer in fraud against any creditor under applicable
federal or state insolvency law.
4.33 Investment Representations.
(a) Each of the Sellers is an "accredited investor"
as such term is defined in Rule 501 of Regulation D as promulgated under the
Securities Act.
(b) Each of the Sellers understands and
acknowledges that neither the Purchaser Shares nor the Convertible Note has been
registered under the Securities Act. Each of the Sellers hereby represents and
warrants to the Purchaser that: (i) the Purchaser Shares and the Convertible
Note are being acquired only for investment for the Sellers own account, and not
as a nominee or agent and not with a view to the resale or distribution thereof,
and the Sellers have no present intention of selling, granting any participation
in or otherwise distributing any interest therein within the meaning of the
Securities Act, (ii) except as contemplated by the Registration Rights
Agreement, the Sellers does not have any contracts, understandings, agreements
or arrangements with any Person to sell, transfer or grant participation to such
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Person or any third Person, with respect to any of the Purchaser Shares or any
interest in the Convertible Note, and (iii) the Sellers have had an opportunity
to seek outside advice with respect to the terms and conditions of this
Agreement and their investment in the Purchaser Shares and the Convertible Note;
have carefully reviewed the Purchaser Financial Statements; the SEC Documents
and other matters set forth on the Schedules annexed hereto and have had the
opportunity to meet with and ask questions of the officers and representatives
of the Purchaser and have received answers to their satisfaction.
(c) Risk of Investment; Resale. Each of the Sellers
acknowledges that he/she can bear the economic risk of his investment in the
Purchaser Shares and the Convertible Note for an indefinite period of time and
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment therein. The Seller
understands that the Purchaser Shares and the Convertible Note are characterized
as "restricted securities" under federal securities laws since they are being
acquired in a transaction not involving a public offering and that under such
laws and applicable regulations the Purchaser Shares and the Convertible Note
may not be resold without registration or an exemption from registration under
the Securities Act. Each of the Sellers represent that they are generally
familiar with and generally understand the existing resale limitations imposed
by the Securities Act and the rules and regulations promulgated thereunder. Each
of the Sellers understand that, if required by the Purchaser, no disposition of
the Purchase Shares shall be made unless and until (a) the Sellers have each
furnished to the Purchaser an opinion of his counsel that no registration,
post-effective amendment, or notification under the Securities Act is required
with respect to such disposition, and the Purchaser shall have advised the
Sellers that such counsel and such opinion are satisfactory to it (and the
Purchaser agrees that it will not unreasonably delay or withhold its consent to
or approval of said opinion); (b) a post-effective amendment or other
registration or notification has been filed by the Purchaser and has become
effective; or (c) the Sellers have each obtained a "no-action letter" regarding
the proposed disposition from the staff of the Commission and has delivered a
copy thereof to the Purchaser, which no-action letter must be satisfactory to
the Purchaser (and the Purchaser agrees that it will not unreasonably delay or
withhold its consent to or approval of said no-action letter).
(d) Legending of Certificates. Each of the Sellers
understand and agree that the certificates evidencing the Purchaser Shares will
bear an appropriate legend evidencing the restricted nature of the Purchaser
Shares and indicating that no transfer of any of the Purchaser Shares may be
made unless such Purchaser Shares are registered under the Securities Act or an
exemption from such registration is available, and that the Purchaser will
instruct its transfer agents not to transfer any such Purchaser Shares unless
such transfer shall be made in compliance with such legend. The legend shall be
substantially in the form set forth below:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THESE SHARES MAY NOT BE
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SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
DULY REGISTERED UNDER THE ACT OR UNLESS, IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, SUCH
TRANSACTION IS EXEMPT FROM THE REGISTRATION PROVISIONS OF
THE ACT."
ARTICLE V
Additional Agreements
5.1 Survival of Representations and Warranties; Effect of
Representations and Warranties. The representations and warranties of the
Purchaser and of the Sellers set forth in this Agreement shall survive the
Closing Date to the extent provided in Section 5.3(d) hereof.
5.2 Investigation. The representations, warranties, covenants
and agreements set forth in this Agreement shall not be affected or diminished
in any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. All statements contained herein or in any
schedule, certificate, exhibit, list or other document delivered pursuant
hereto, shall be deemed to be representations and warranties for purposes of
this Agreement which are the sole and exclusive representations and warranties
made by the parties.
5.3 Indemnification.
(a) By the Sellers. Subject to Section 5.3(d)
hereof, each of the Sellers agree to indemnify and hold harmless the Purchaser
and its directors, officers, employees and agents from, against and in respect
of, the full amount of any and all liabilities, damages, claims, deficiencies,
fines, assessments, losses, taxes, penalties, interest, costs and expenses,
including, without limitation, reasonable fees and disbursements of counsel,
arising from, in connection with, or incident to (i) any material breach or
violation of any of the representations, warranties, covenants or agreements of
the Sellers or the Companies contained in this Agreement or any agreements
referred to herein and delivered at or prior to the Closing (ii) any and all
third party actions, suits, proceedings, demands, assessments or judgments,
costs and expenses incidental to any of the foregoing.
(b) By the Purchaser. Subject to Section 5.3(d)
hereof, the Purchaser agrees to indemnify and hold harmless each of the Sellers
from, against and in respect of, any and all liabilities, damages, claims,
deficiencies, fines, assessments, losses, taxes, penalties, interest, costs and
expenses, including, without limitation, reasonable fees and disbursements of
counsel, arising from, in connection with, or incident to (i) any material
breach or violation of any of the representations, warranties, covenants or
agreements of the Purchaser contained in this Agreement or any agreement
referred to herein and delivered at or prior to the Closing; (ii)
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any and all claims arising out of, relating to, resulting from or caused by any
transaction, event, condition, occurrence or situation relating to the conduct
of any of the Companies business occurring after the Closing Date; and (iii) any
and all third party actions, suits, proceedings, demands, assessments, or
judgments incidental to any of the foregoing.
(c) Indemnity Procedure. A party or parties hereto
agreeing to be responsible for or to indemnify against any matter pursuant to
this Agreement is referred to herein as the "Indemnifying Party" and the other
party or parties claiming indemnity is referred to as the "Indemnified Party".
An Indemnified Party under this Agreement shall, with respect
to claims asserted against such party by any third party, give written notice to
the Indemnifying Party of any liability which might give rise to a claim for
indemnity under this Agreement promptly after the receipt of any written claim
from any such third party, and not later than twenty (20) days prior to the date
any answer or responsive pleading is due, and with respect to other matters for
which the Indemnified Party may seek indemnification, give prompt written notice
to the Indemnifying Party of any liability which might give rise to a claim for
indemnity; provided, however, that any failure to give such notice will waive
any rights of the Indemnified Party only to the extent the rights of the
Indemnifying Party are materially prejudiced.
The Indemnifying Party shall have the right, at its election,
to take over the defense or settlement of such claim by giving written notice to
the Indemnified Party at least ten (10) days prior to the time when an answer or
other responsive pleading or notice with respect thereto is required. If the
Indemnifying Party makes such election, it may conduct the defense of such claim
through counsel of its choosing (subject to the Indemnified Party's approval of
such counsel, which approval shall not be unreasonably withheld), shall be
solely responsible for the expenses of such defense and shall be bound by the
results of its defense or settlement of the claim. The Indemnifying Party shall
not settle any such claim without prior notice to and consultation with the
Indemnified Party, and no such settlement involving any equitable relief and no
settlement which might otherwise have a material adverse effect on the
Indemnified Party may be agreed to without the written consent of the
Indemnified Party (which consent shall not be unreasonably withheld). So long as
the Indemnifying Party is diligently contesting any such claim in good faith,
the Indemnified Party may pay or settle such claim only at its own expense and
the Indemnifying Party will not be responsible for the fees of separate legal
counsel to the Indemnified Party. If the Indemnifying Party does not make such
election, or having made such election does not in the reasonable opinion of the
Indemnified Party proceed diligently to defend such claim, then the Indemnified
Party may (after written notice to the Indemnifying Party), at the expense of
the Indemnifying Party, elect to take over the defense of and proceed to handle
such claim in its discretion and the Indemnifying Party shall be bound by any
defense or settlement that the Indemnified Party may make in good faith with
respect to such claim. In connection therewith, the Indemnifying Party will
fully cooperate with the Indemnified Party should the Indemnified Party elect to
take over the defense of any such claim.
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The parties agree to cooperate in defending such third party
claims and the Indemnified Party shall provide such cooperation and such access
to its books, records and properties as the Indemnifying Party shall reasonably
request with respect to any matter for which indemnification is sought
hereunder; and the parties hereto agree to cooperate with each other in order to
ensure the proper and adequate defense thereof.
With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be paid by the
Indemnifying Party upon the earlier to occur of: (i) the entry of a judgment
against the Indemnified Party and the expiration of any applicable appeal
period; (ii) the entry of an unappealable judgment or final appellate decision
against the Indemnified Party; or (iii) a settlement of the claim.
Notwithstanding the foregoing, provided that there is no dispute as to the
applicability of indemnification, the reasonable expenses of counsel to the
Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party if such expenses are a liability of the Indemnifying Party. With regard to
other claims for which indemnification is payable hereunder, such
indemnification shall be paid promptly by the Indemnifying Party upon demand by
the Indemnified Party and documentation supporting such demand.
(d) Indemnity Limitations. Notwithstanding anything
to the contrary herein, no claim for indemnification for violation of any
representation or warranty may be asserted after the third anniversary of the
Closing Date and the maximum liability of each of the Purchaser and both of the
Sellers shall be $825,000.
5.4 General Release. As additional consideration for the
purchase and sale of the Securities pursuant to this Agreement, each of the
Sellers hereby unconditionally and irrevocably releases and forever discharges,
effective as of the Closing Date, each of the Companies and officers, directors,
employees and agents, from any and all rights, claims, demands, judgments,
obligations, liabilities and damages, whether accrued or unaccrued, asserted or
unasserted, and whether known or unknown ("Claims"), relating to the Companies
which ever existed, now exist, or may hereafter exist (but excluding any claims
that the Sellers may have against the Companies based upon (i) the failure of
any of the Companies to pay salary or benefits due to him or her after the
Closing Date or (ii) the failure of any of the Companies after the Closing Date
to fulfill any obligation to indemnify the Sellers as employee, officer or
director of any of the Companies), by reason of any tort, breach of contract,
violation of law or other act or failure to act which shall have occurred at or
prior to the Closing Date, or in relation to any other liabilities of any of the
Companies to the Seller as of the Closing Date, except with respect to the
Companies' continuing obligations under the Leased Property and the obligations
of the Companies' described in the Financial Statements. The Sellers expressly
intend that the foregoing release shall be effective regardless of whether the
basis for any claim or right hereby released shall have been known to or
anticipated by the Sellers.
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ARTICLE VI
Closing; Deliveries; Conditions Precedent
6.1 Closing. Subject to the terms and conditions set forth
herein, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Xxxx Xxxxxxx, P.C., 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately upon execution of this
Agreement, or on such other date and at such other place as may be agreed to by
the parties. All proceedings to be taken and all documents to be executed at the
Closing (including this Agreement) shall be deemed to have been taken, delivered
and executed simultaneously, and no proceeding shall be deemed taken nor
documents deemed executed or delivered until all have been taken, delivered and
executed.
(a) At Closing, the Sellers shall deliver the following
documents to the Purchaser, duly executed and satisfy the following conditions:
(i) the certificates representing the Securities,
together with stock powers duly executed in blank;
(ii) the minute books of the Companies, including its
corporate seals, unissued stock certificates, stock registers, Certificate of
Incorporation, bylaws and corporate minutes;
(iii) a certificate of the Secretary of State of the
State of New York, as of a recent date, as to the good standing of MDC and
certifying its Certificate of Incorporation;
(iv) a certificate of the Secretary of State of the
State of New York, as of a recent date, as to the good standing of NMS and
certifying its Certificate of Incorporation;
(v) any written consent (on terms satisfactory to the
Purchaser) that is required under the terms of the Lease for consummation of the
transactions contemplated hereby and an Amendment to the Lease satisfactory to
Purchaser;
(vi) the written consent of any party to any of the
Material Agreements whose consent is required for consummation of the
transactions contemplated hereby;
(vii) the Xxxxxxxx Employment Agreement;
(viii) the Xxxxxx Employment Agreement;
(ix) a certificate, dated the Closing Date, of the
Secretary of each of the Companies, setting forth the authorizing resolutions
adopted by each of the Companies Board of Directors and Shareholders with
respect to the transactions contemplated hereby;
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(x) the Schedules to this Agreement;
(xi) the Pledge Agreement;
(xii) the Registration Rights Agreement;
(xiii)the Companies shall be released of any and all
Guarantees in favor of Chase Manhattan Bank;
(xiv) the Companies will not have any liabilities,
obligations or indebtedness to the Sellers, other than pursuant to the Lease and
the Xxxxxxxx Employment Agreement and the Xxxxxx Employment Agreement.
(xv) an opinion letter from the counsel to the Sellers,
Xxxxx Raysman Xxxxxxxxx Xxxxxx & Xxxxxxx, LLP, addressed to the Purchaser and in
form and substance reasonably acceptable to the Purchaser; and
(xvi) such other documents and instruments as the
Purchaser may reasonably request.
(b) At Closing, the Purchaser shall deliver the following
documents and instruments, duly executed, to the Sellers:
(i) the Convertible Notes;
(ii) the certificates representing the Purchaser
Shares;
(iii) the Xxxxxxxx Employment Agreement;
(iv) the Xxxxxx Employment Agreement;
(v) a certificate of the Secretary of State of the
State of New York, as of a recent date, as to the good standing of the Purchaser
and certifying its Certificate of Incorporation;
(vi) a certificate, dated the Closing Date, of the
Secretary of the Purchaser, setting forth the authorizing resolutions adopted by
the Purchaser's Board of Directors with respect to the transactions contemplated
hereby;
(vii) the Pledge Agreements;
(viii) the Registration Rights Agreement;
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(ix) the Purchaser shall deliver $36,133 by check,
which shall be deposited into escrow pursuant to the terms of the Escrow
Agreement;
(x) the Purchaser shall deliver $88,889.50 plus per
diem interest of $26.93 from November 4, 1997 to the date hereof (the "Payoff
Amount") to Chase Manhattan Bank;
(xi) an Opinion Letter from the Purchaser's counsel,
Xxxx Xxxxxxx, P.C., addressed to the Sellers, in form and substance reasonably
acceptable to the Sellers; and
(xii) such other documents and instruments as the
Seller may reasonably request.
6.2 Best Efforts. Subject to the terms and conditions provided
in this Agreement, each of the parties shall use their respective best efforts
in good faith to take or cause to be taken as promptly as practicable all
reasonable actions that are within his or its power to cause to be fulfilled
those of the conditions precedent to his or its obligations or the obligations
of the other parties to consummate the transactions contemplated by this
Agreement that are dependent upon his or its actions, including obtaining all
necessary consents, authorizations, orders, approvals and waivers.
ARTICLE VII
Covenants
7.1 Non-Competition. (a) Each of the Sellers agree that,
during the Term (as defined in the Xxxxxxxx Employment Agreement) and for a
period of one (1) year after the termination of both of Sellers employment with
the Company (the "restricted period"), each of the Sellers shall not, in the
United States or any other geographic area where any of the Companies do
business, alone or in association with others: (i) engage, directly or
indirectly, in the production, publication or marketing of educational software
(the "Competitive Activities"); and (ii) have any interest in or be employed by
(or act as a consultant to) any company which is engaged in Competitive
Activities. Notwithstanding the foregoing, ownership of any amount of the
securities of the Purchaser, each of the Companies, any company controlled by
the Purchaser and/or each of the Companies or any successors thereof (each, a
"Protected Company") or the ownership of 3% or less of any class of outstanding
securities of a company whose securities are listed on a national securities
exchange (including the NASDAQ Stock Market) or traded on the NASDAQ Small-Cap
Market shall not be deemed to constitute a breach of this Section 7.1.
Notwithstanding anything to the contrary contained herein, in the event that the
Sellers are no longer living as husband and wife, then the aforesaid "restricted
period" shall run as to each Seller for a period of one year after the
termination of each respective Seller.
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(b) During the same period, each of the Sellers shall
not, and shall use their respective best efforts not to allow any Person under
his/her actual control (including employees and agents of the Company or any
affiliated company under his actual control) to, directly or indirectly, on
behalf of himself/herself or any other Person: (i) call upon or accept business
involving the Competitive Activities from or solicit business involving the
Competitive Activities of any Person who is, or who had been at any time during
the preceding two (2) years, a customer of any Protected Company, or otherwise
divert or attempt to divert any business involving the Competitive Activity from
a Protected Company; (ii) recruit or otherwise solicit or induce any Person who
is an employee of, or otherwise engaged by, a Protected Company to terminate his
or her employment or other relationship with such Protected Company or hire any
Person who has left the employ of any Protected Company during the preceding two
(2) years; or (iii) use or purport to authorize any Person to use any name,
xxxx, logo, trade dress or other identifying words or images which are the same
as or confusingly similar to those used at any time by a Protected Company in
connection with any product or service.
(c) The restrictions set forth in this Section 7.1 are
considered by the parties to be fair and reasonable. Each of the Sellers
acknowledge that the restrictions contained in this Section 7.1 will not prevent
him/her from earning a livelihood. Each of the Sellers further acknowledge that
the Purchaser would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of this
Section 7.1. Accordingly, each of the Sellers agree that, in addition to any
other remedies available to the Purchaser, the Purchaser shall be entitled to
specific performance, injunction and other equitable relief to secure the
enforcement of these provisions, [and the party seeking such relief shall not be
required to post bond as a condition thereto.] If any provisions of this Section
7.1 relating to the time period, scope of activities or geographic area of
restrictions is declared by a court of competent jurisdiction to exceed the
maximum permissible time period, scope of activities or geographic area, the
maximum time period, scope of activities or geographic area, as the case may be,
shall be reduced to the maximum which such court deems enforceable. If any
provisions of this Section 7.1 other than those described in the preceding
sentence are adjudicated to be invalid or unenforceable, the invalid or
unenforceable provisions shall be deemed amended (with respect only to the
jurisdiction in which such adjudication is made) in such manner as to render
them enforceable and to effectuate as nearly as possible the original intentions
and agreement of the parties.
(d) This Section 7.1 shall forever terminate and be of
no further force and effect with respect to a Seller in the event that (i) the
Purchaser terminates such Seller's employment without Cause (as defined in
Paragraph 9(c) of such Seller's employment agreement), or the Seller has
terminated his employment for Good Reason (as defined in Paragraph 9(d) of such
Seller's employment agreement); and (ii) the Company fails to pay such Seller,
all amounts when due under his or her employment agreement, which failure
continues for more than thirty (30) days after written notice thereof.
7.2 Preparation of Company Tax Returns Through Date of
Closing. The Company shall file final income tax returns as an S corporation for
the period from January 1,
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1997 through the Closing Date. The Company's federal and state income tax
returns for 1996 and the 1997 period ending on the Closing Date shall be
prepared by Xxxxxxxxxxx, Settler & Co. under the Seller's direction in a manner
similar to previous tax returns.
7.3 Stockholder's Equity, Working Capital. As of September 30,
1997, the Companies had (a) Stockholder's Equity of not less than $95,000, (b)
Working Capital of not less than $290,000, and (c) a cash balance of not less
than $40,000. From the period commencing October 1, 1997 through and including
the Closing Date, the Sellers have caused the Companies to be operated in the
ordinary and usual course consistent with past practices and have not paid or
distributed, directly or indirectly, any cash or property to the Sellers (other
than salary or payments pursuant to the Lease) or taken any action outside the
ordinary and usual course consistent with past practices which would materially
effect the amount of such Stockholder's Equity, Working Capital, the cash
balance or any loans payable to shareholders, as of the date of this Agreement.
In addition, at the Closing Date, (i) the Companies will have loans payable of
not more than $20,000 plus interest accrued from October 10, 1997 and (ii) the
Companies will not have any liabilities, obligations or indebtedness to the
Sellers, other than pursuant to the Lease and the Xxxxxxxx Employment Agreement
and the Xxxxxx Employment Agreement.
7.4 Release of Guaranty. As a condition to the Closing, at the
Closing, the Companies shall be released of their Guaranty in favor of Chase
Manhattan Bank (the "Chase Guaranty") simultaneously with the Purchaser's
delivery of the Payoff Amount to Chase Manhattan Bank.
ARTICLE VIII
Miscellaneous
8.1 Notices. Any notice, demand, claim or other communication
under this Agreement shall be in writing and shall be deemed to have been given
upon the delivery, mailing or transmission thereof, as the case may be, if
delivered personally or sent by certified mail, return receipt requested,
postage prepaid, or sent by facsimile or prepaid overnight courier to the
parties at the addresses set forth below their names on the signature pages of
this Agreement (or at such other addresses as shall be specified by the parties
by like notice). A copy of any notices delivered to the Purchaser shall also be
sent to (i) Xxxx Xxxxxxx, P.C. - 26th Floor, 0000 Xxxxxx xx xxx Xxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxxxx, Esq., Facsimile No. (212)
245-3009. A copy of any notices delivered to the Sellers shall also be sent to
Xxxxx Raysman Xxxxxxxxx Xxxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxx
Xxxx, X.X. 00000, Attention: Xxxxxx X. Xxxxx, Esq. Facsimile No. (212) 840- 2429
8.2 Entire Agreement. This Agreement (including the exhibits
and schedules hereto) contains every obligation and understanding between the
parties relating to the subject
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matter hereof and merges all prior discussions, negotiations and agreements
(including, but not limited to, the Letter of Intent dated May 31, 1997), if
any, between them, and none of the parties shall be bound by any conditions,
definitions, understandings, warranties or representations other than as
expressly provided herein. All exhibits and schedules referenced in this
Agreement are expressly made a part of, and incorporated by reference into, this
Agreement.
8.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
heirs, personal representatives, legal representatives, and permitted assigns.
8.4 Intentionally Omitted.
8.5 Assignment. This Agreement may not be assigned by any
party without the written consent of the other party.
8.6 Waiver and Amendment. Any representation, warranty,
covenant, term or condition of this Agreement which may legally be waived, may
be waived, or the time of performance thereof extended, at any time by the party
entitled to the benefit thereof, and any term, condition or covenant hereof
(including, without limitation, the period during which any condition is to be
satisfied or any obligation performed) may be amended by the parties at any
time. Any such waiver, extension or amendment shall be evidenced by an
instrument in writing executed on behalf of the appropriate party (in the case
of the Purchaser by its President, any Vice President or any other person who
has been authorized by its Board of Directors to execute waivers, extensions or
amendments on its behalf). No waiver by any party hereto, whether express or
implied, of such party's rights under any provision of this Agreement shall
constitute a waiver of such party's rights under such provisions at any other
time or a waiver of such party's rights under any other provision of this
Agreement. No failure by any party to take any action against any breach of this
Agreement or default by another party shall constitute a waiver of the former
party's right to enforce any provision of this Agreement or to take action
against such breach or default or any subsequent breach or default by such other
party.
8.7 No Third Party Beneficiary. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
Person, other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
8.8 Severability. In the event that any one or more of the
provisions contained in this Agreement shall be declared invalid, void or
unenforceable, the remainder of the provisions of this Agreement shall remain in
full force and effect, and such invalid, void or unenforceable provision shall
be interpreted as closely as possible to the manner in which it was written.
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8.9 Expenses. Each party agrees to pay, without right of
reimbursement from the other party, the costs incurred by it incident to the
performance of its obligations under this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, costs incident
to the preparation of this Agreement, and the fees and disbursements of counsel,
accountants and consultants employed by such party in connection herewith. No
expenses of the Sellers relating to the transaction contemplated hereby shall be
paid by any of the Companies, but all such fees shall be paid directly by the
Sellers.
8.10 Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of any provisions of this Agreement.
8.11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
8.12 Time of the Essence. Wherever time is specified for the
doing or performance of any act or the payment of any funds, time shall be
considered of the essence.
8.13 Injunctive Relief. It is possible that remedies at law
may be inadequate and, therefore, the parties hereto shall be entitled to
equitable relief including, without limitation, injunctive relief, specific
performance or other equitable remedies in addition to all other remedies
provided hereunder or available to the parties hereto at law or in equity.
8.14 Remedies Cumulative. No remedy made available by any of
the provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity.
8.15 Governing Law. This Agreement has been entered into and
shall be construed and enforced in accordance with the laws of the State of New
York without reference to the choice of law principles thereof.
8.16 Jurisdiction and Venue. This Agreement shall be subject
to the exclusive jurisdiction of the courts of New York County, State of New
York. The parties to this Agreement agree that any breach of any term or
condition of this Agreement shall be deemed to be a breach occurring in the
State of New York by virtue of a failure to perform an act required to be
performed in the State of New York and irrevocably and expressly agree to submit
to the jurisdiction of the courts of the State of New York for the purpose of
resolving any disputes among the parties relating to this Agreement or the
transactions contemplated hereby. The parties irrevocably waive, to the fullest
extent permitted by law, any objection which they may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or relating
to this Agreement, or any judgment entered by any court in respect hereof
brought in New York County, State of New York, and further irrevocably waive any
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claim that any suit, action or proceeding brought in New York County, State of
New York has been brought in an inconvenient forum.
8.17 Participation of Parties. The parties hereto acknowledge
that this Agreement and all matters contemplated herein have been negotiated by
both parties hereto and their respective legal counsel and that both parties
have participated in the drafting and preparation of this Agreement from the
commencement of negotiations at all times through the execution hereof.
8.18 Further Assurances. The parties hereto shall deliver any
and all other instruments or documents required to be delivered pursuant to, or
necessary or proper in order to give effect to, all of the terms and provisions
of this Agreement including, without limitation, all necessary stock powers and
such other instruments of transfer as may be necessary or desirable to transfer
ownership of the Securities.
8.19 Publicity; Public Company. The parties hereto agree to
cooperate in issuing any press release or other public announcement concerning
this Agreement or the transactions contemplated hereby. Each of the Sellers
acknowledge that the Purchaser is a publicly held company and as such is subject
to certain federal and state securities laws concerning the trading of its
securities. The Sellers, Companies and the Purchaser shall not, and they shall
cause their respective affiliates not to, issue any press release or otherwise
make any public statement or respond to any press inquiry with respect to this
Agreement or the transactions contemplated hereby without the prior approval of
the other parties which approval will not be unreasonably withheld, except that
the Purchaser's may issue press releases or make public statements as they may
reasonably believe to be required by law, in which event prior reasonable notice
will be given to the other party.
8.20 Terms in Context. Whenever from the context it appears
appropriate, each term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in either the masculine, the
feminine or the neuter gender shall include the masculine, feminine and neuter.
8.21 Knowledge of the Parties. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to the
best knowledge of the parties hereto, each of the parties hereto acknowledges
and confirms that it has made "due and diligent inquiry" as to the matters that
are the subject of such representations and warranties. For purposes of this
Section 8.21, "due and diligent inquiry" shall be deemed to mean that such party
has reviewed all appropriate books and records of such party (or of the
Companies and Sellers, if the Sellers are the representing party) and made all
appropriate inquiries of officers of such party (and such other individuals as,
based on the results of the inquiries of such party's officers, a reasonable
person would deem prudent) as to the matters that are the subject of such
representations and warranties, but the term "best knowledge" shall not mean,
require or imply that the representing party has made any further investigation
or inquiry.
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IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Agreement as of the day and year first above written.
Purchaser:
XXXXX XXXXXX MULTIMEDIA COMPANY, INC.
By: /s/ Xxxxx Xxxxxx
-----------------------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
Facsimile No. (000) 000-0000
Sellers:
/s/ Xxxxxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxxxx X. Xxxxxxx
Address: 00 Xxxxxxx Xxxx, Xxxxx Xxxxx, XX 00000
Facsimile No.
/s/ Xxxxxx Xxxxxxx
-----------------------------------------------
Xxxxxx Xxxxxxx
Address: 00 Xxxxxxx Xxxx, Xxxxx Xxxxx, XX 00000
Facsimile No.
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SCHEDULE A
SELLERS SECURITIES
Sellers Securities Owned Percentage
------- ---------------- Interest
--------
Multi Dimensional Communications, Inc.
--------------------------------------
Xxxxxxxx X. Xxxxxxx 102 Shares Common Stock 100%
200 Shares of Preferred Stock
----
TOTAL 100%
New Media Schoolhouse, Inc.
---------------------------
Xxxxxx Xxxxxxx 10 Shares Common Stock 100%
----
TOTAL 100%
