PLAN AND AGREEMENT OF REORGANIZATION
This Plan and Agreement of Reorganization (this "Agreement") is entered
into on this 22 day of May, 1998, by and among SoftLock Services, Inc, a
Delaware corporation ("SoftLock"), Fieldcrest Corp., a Delaware corporation
subject to the reporting requirements imposed pursuant to Section 15(d) of the
Securities Exchange Act of 1934 ("Fieldcrest"), and Xxxxxxxx Xxxxxx
("Principal Stockholder").
PLAN OF REORGANIZATION
The transaction contemplated by this Agreement is to be a reorganization
under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Fieldcrest will acquire up to 100% of SoftLock's issued and outstanding common
stock, $.01 par value per share (the "SoftLock Stock" or the "SoftLock
Shares"), in exchange for up to 354,861,000 shares of Fieldcrest's common
stock, par value $.00001 per share (the "Common Stock").
AGREEMENT
1. Transfer of SoftLock Shares. All stockholders of SoftLock (the
"Stockholders" or the "SoftLock Stockholders"), as of the date of closing as
such term is defined in Section 3 hereof (the "Closing" or the "Closing
Date"), shall transfer, assign, convey and deliver to Fieldcrest at the date
of Closing, certificates representing 100% of the SoftLock Shares or such
lesser percentage as shall be acceptable to Fieldcrest (95%). The transfer of
the SoftLock Shares shall be made free and clear of all liens, mortgages,
pledges, encumbrances, or charges, whether disclosed or undisclosed, except as
the SoftLock Stockholders and Fieldcrest shall have otherwise agreed in
writing.
2. Issuance of Exchange Stock to SoftLock Stockholders.
(a) As consideration for the transfer, assignment, conveyance and
delivery of the SoftLock Stock hereunder, Fieldcrest shall, at the Closing,
issue to the SoftLock Stockholders, pro rata in accordance with each
Stockholder's percentage ownership of SoftLock immediately prior to the
Closing (in accordance with Exhibit A attached hereto), certificates
representing up to 354,861,000 shares of Fieldcrest Common Stock (the
"Exchange Stock") which shall represent approximately 90% of the outstanding
Common Stock of Fieldcrest immediately following the Closing of this
Agreement. The parties intend that the 354,861,000 shares being issued will
be used to acquire any shares issuable pursuant to any investment in SoftLock
subscribed for prior to the Closing, including any shares issued or to be
issued in connection with the private placement of SoftLock common stock
contemplated by Section 11(w) herein.
(b) The issuance of the Exchange Stock shall be made free and clear
of all liens, mortgages, pledges, encumbrances, or charges, whether disclosed
or undisclosed, except as the SoftLock Stockholders and Fieldcrest shall have
otherwise agreed in writing. As provided herein, and immediately prior to the
Closing, Fieldcrest shall have issued and outstanding not more than 39,429,000
shares of Common Stock and not more than 34,725,000 Class A Warrants,
34,725,000 Class B Warrants, 1,000,000 Class C Warrants, and 1,000,000 Class D
Warrants, and shall not have any shares of preferred stock issued and
outstanding.
(c) None of the Exchange Stock issued to the Stockholders, nor any of
the SoftLock Stock transferred to Fieldcrest hereunder shall, at the time of
Closing, be registered under federal securities laws but, rather, shall be
issued pursuant to an exemption therefrom and be considered "restricted stock"
within the meaning of Rule 144 promulgated under the Securities Act of 1933,
as amended (the "Act"). All of such shares shall bear a legend worded
substantially as follows:
"The shares represented by this certificate have not been registered under the
Securities Act of 1933 (the "Act") and are 'restricted securities' as that
term is defined in Rule 144 under the Act. The shares may not be offered for
sale, sold or otherwise transferred except pursuant to an effective
registration statement under the Act, or pursuant to an exemption from
registration under the Act, the availability of which is to be established to
the satisfaction of the Company."
The respective transfer agents of Fieldcrest and SoftLock shall annotate their
records to reflect the restrictions on transfer embodied in the legend set
forth above. There shall be no requirement that Fieldcrest register the
Exchange Stock under the Act, nor shall SoftLock or the Stockholders be
required to register any SoftLock Shares under the Act.
3. Closing. The Closing of the exchange shall take place on a date
chosen by mutual agreement of SoftLock and Fieldcrest within sixty (60)
days from the date of this Agreement, unless a later time shall be mutually
agreed upon by the parties.
4. Deliveries at Closing.
(a) SoftLock and the Stockholders shall deliver to Fieldcrest, at
Closing:
(1) certificates representing all shares, or an amount of
shares acceptable to Fieldcrest (95%), of the SoftLock Stock as described in
Section 1, each endorsed in blank by the registered owner;
(2) an agreement from each Stockholder surrendering their
shares agreeing to a restriction on the transfer of the Exchange Stock as
described in Section 11(c);
(3) a copy of a consent of SoftLock's board of directors
authorizing SoftLock to take the necessary steps toward Closing the
transaction described by this Agreement;
(4) a copy of a Certificate of Good Standing for SoftLock
issued not more than thirty days prior to Closing by the Secretary of State of
Delaware;
(5) an agreement from that number of Stockholders owning, in the
aggregate, immediately prior to the Closing, at least 60% of the SoftLock
Shares to vote the Exchange Stock issued to them in favor of a proposal to
amend Fieldcrest's Certificate of Incorporation to adjust the authorized
shares of Common Stock to a number as would permit the recipients of the
Fieldcrest Options (as that term is defined in subsection (e) herein) to
exercise their respective options.
(b) Fieldcrest shall deliver to the SoftLock Stockholders, at
Closing, certificates representing the Exchange Stock, in the names of the
appropriate Stockholders, each in the appropriate denomination, as described
in Section 2.
(c) Fieldcrest shall deliver to the new Fieldcrest Board, appointed
pursuant to Section 11(l) below, at Closing:
(1) all of Fieldcrest's corporate records;
(2) a copy of a consent of Fieldcrest's board of directors
authorizing Fieldcrest to take the necessary steps toward Closing the
transaction described by this Agreement and electing the new directors
designated by SoftLock effective as of the Closing; and
(3) a copy of a Certificate of Good Standing for Fieldcrest
issued not more than thirty days prior to Closing by the Secretary of State of
Delaware.
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(d) Each holder of more than 1,000,000 restricted shares of Fieldcrest
Common Stock, as of the date of Closing, shall deliver to the new Fieldcrest
Board at the Closing an agreement as described in Section 11(r).
(e) Fieldcrest shall deliver, as soon as practicable after Closing,
to such persons as shall then be holders of options to purchase SoftLock
common stock, options to purchase Common Stock of Fieldcrest (individually, a
"Fieldcrest Option") to replace the outstanding options to purchase SoftLock
common stock (individually, a "SoftLock Option"), if any, that are listed on
Exhibit A to this Agreement. Each Fieldcrest Option shall have the same
aggregate exercise price as the respective SoftLock Option and shall entitle
the respective SoftLock Option holder to purchase that number of shares of
Fieldcrest Common Stock that is equal to the product of the following two
numbers: (1) the conversion ratio applicable to the SoftLock Stockholders in
the Exchange, and (2) the number of SoftLock shares issuable under the
SoftLock Option immediately prior to the Closing. Fieldcrest's obligation to
deliver the Fieldcrest Options to each holder of SoftLock Options shall be
conditioned upon: (i) obtaining approval from Fieldcrest stockholders for an
amendment to its Certificate of Incorporation to adjust the authorized shares
of Common Stock to a number as would permit the recipients of the Fieldcrest
Options to exercise their respective options, (ii) receipt of certificates
representing the SoftLock Options, and (iii) receipt of agreements from those
persons surrendering their SoftLock Options similar to the agreements required
pursuant to Section 11(c).
5. Representations and Warranties of SoftLock and Principal
Stockholder, Limitation on Recourse. Subject to the schedule of exceptions,
attached hereto as Exhibit B and incorporated herein by this reference, which
schedule shall be acceptable to Fieldcrest, SoftLock represents and warrants
to Fieldcrest, and Principal Stockholder represents and warrants to
Fieldcrest, to his best knowledge, as follows:
(a) Organization and Standing of SoftLock. SoftLock is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware. SoftLock's books and records are complete and correct and
have been maintained with good business practice since November 1, 1996 and
since that date accurately reflect in all material respects the transactions
to which they relate. Copies of SoftLock's Certificate of Incorporation, and
all amendments thereof to date, certified by the proper Delaware officials and
of SoftLock's bylaws as amended to date, together with all minutes of
stockholder and directors' meetings since November 1, 1996, certified by
SoftLock's acting secretary, will be delivered to Fieldcrest prior to Closing
and will be complete and correct as of the date of delivery of said
documents. The same shall be subject to the review and approval of counsel
for Fieldcrest.
(b) Capitalization. The aggregate number of shares of common stock,
$.01 par value per share, which SoftLock is authorized to issue is 6,000,000,
of which 1,510,764 shares are currently issued and outstanding. All of such
outstanding shares are validly issued, fully paid and nonassessable.
SoftLock's Certificate of Incorporation does not authorize the issuance of any
other classes of stock. SoftLock also has outstanding the following options
as of the date of this Agreement:
(i) options to purchase 22,200 shares of SoftLock common
stock at exercise prices ranging from $1.08 to $3.50 per share;
(ii) options to purchase 139,017 shares of SoftLock common
stock at exercise prices ranging from $0.35 to $3.50 per share, granted to
outside directors and consultants; and
(iii) options to purchase 225,000 shares of SoftLock common
stock at an exercise price of $0.8133 per share.
According to SoftLock's books and records, SoftLock currently has
sixty-three (63) stockholders, and all stockholders are currently residents
of one of the following jurisdictions: California, Colorado, Connecticut,
District of Columbia, Florida, Kansas, Kentucky, Maryland, Massachusetts, New
Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island,
Tennessee, Texas, Utah, Virginia or Washington. To the best of SoftLock's
knowledge and no claim or notice of any such claim has been
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received by SoftLock, all securities issued by SoftLock as of the date of this
Agreement, and in the current private placement, have been and will be issued
in compliance with all applicable state and federal laws
(c) Financial Statements. SoftLock will deliver to Fieldcrest, prior
to Closing, a copy of SoftLock's audited financial statements for the past two
fiscal years ending December 31, 1997, which will be true and complete and
will have been prepared in accordance with generally accepted accounting
principles and Regulation S-X appearing in Title 17 of the Code of Federal
Regulations ("Regulation S-X").
(d) Absence of Undisclosed Liabilities. Except to the extent
reflected in this Agreement including in the Exhibits or reserved against in
SoftLock's audited balance sheet as of December 31, 1997, which will be
delivered to Fieldcrest prior to Closing in accordance with the immediately
preceding paragraph, SoftLock as of such date had no contractual liabilities
of any nature, whether accrued, absolute, contingent, or otherwise.
(e) Absence of Certain Changes. Except as disclosed in Exhibit B, since
December 31, 1997, there has not been, and as of the Closing there will not
be, (i) any change in SoftLock's financial condition, assets, liabilities, or
business other than changes in the ordinary course of business, none of which,
taken individually or considered together with other changes, has been
materially adverse, and (ii) any damage, destruction, or loss, whether or not
covered by insurance, materially and adversely affecting SoftLock's properties
or business.
(f) Intellectual Property; Computer Software.
i) Exhibit C sets forth a complete and correct list of (A) all
trademarks, trade names, service marks, user names, service names and brand
names (whether or not any of the same are registered), and all copyrights and
patents, together with all registrations and applications for registrations of
the foregoing, if any, applicable to or used in the business of SoftLock; (B)
the owner of such intellectual property and any registration thereof; and (C)
a complete list of all licenses granted by or to SoftLock with respect to any
of the above. Except as set forth in Exhibit C, all such trademarks, trade
names, service marks, service names, user names, brand names, copyrights, and
patents are owned by SoftLock free and clear of all liens, claims, security
interests, and encumbrances. SoftLock is not currently in receipt of any
notice of any violation of, and, to the best of its knowledge, SoftLock is not
violating, the rights of others in any trademark, trade name, service xxxx,
user name, copyright, patent, trade secret, know-how, or other intangible
asset, except such as would not have a material adverse effect.
ii) Exhibit C contains a complete and accurate list of all software owned
by SoftLock, ("Owned Software"). Except as set forth on Exhibit C, SoftLock
has title to the Owned Software, free and clear of all claims, including
claims or rights of employees, agents, consultants, customers, licensees, or
other parties involved in the development, creation, marketing, maintenance,
enhancement or licensing of such computer software. Except as set forth on
Exhibit C, and except for commercially available, over-the-counter
"shrink-wrap" software, the Owned Software is not dependent on any Licensed
Software (as defined in subsection (iii) below) in order to fully operate in
the manner in which it is intended. No Owned Software which is considered by
SoftLock to be a trade secret has been published or disclosed to any other
parties, except pursuant to contracts requiring such other parties to keep the
Owned Software confidential. To the best of Softlock's knowledge, no such
other party has breached any such obligation of confidentiality, except such
breaches as would not have a material adverse effect.
iii) Exhibit C contains a complete and accurate list of all software (other
than commercially available over-the-counter software) under which SoftLock is
a licensee, lessee, or otherwise has obtained the right to use (the "Licensed
Software"). Exhibit C also sets forth a list of all license, fees, rents,
royalties, or other charges that SoftLock is required or obligated to pay with
respect to Licensed Software. SoftLock has the right and license to use,
sublicense, modify and copy Licensed Software as set forth in the respective
license, lease or similar agreement pursuant to which the Licensed Software is
licensed to SoftLock, free of any other limitations or encumbrances, and
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SoftLock is in compliance in all material respects with all applicable
provisions of such agreements. Except as disclosed in Exhibit C, none of the
Licensed Software has been incorporated into or made a part of any Owned
Software or any other Licensed Software. SoftLock has not published or
disclosed any Licensed Software to any other party except, in the case of
Licensed Software that SoftLock leases or markets to others, in accordance
with and as permitted by any license, lease, or similar agreement relating to
the Licensed Software and except pursuant to contracts requiring such other
parties to keep the Licensed Software confidential or as would not have a
material adverse effect on SoftLock's business or financial condition. To the
best of SoftLock's knowledge, no party to whom SoftLock has disclosed Licensed
Software has breached such obligation of confidentiality, except such breaches
as would not have a material adverse effect on SoftLock's business or
financial condition.
iv) The Owned Software and Licensed Software and commercially available
over-the-counter "shrink-wrap" software constitute all software used in the
business of SoftLock (collectively, the "SoftLock Software"). The Exchange
contemplated herein will not cause a breach or default under any licenses,
leases or similar agreements relating to the SoftLock Software or impair
SoftLock's or Fieldcrest's ability to use the SoftLock Software in the same
manner as such computer software is currently used by SoftLock. To the best
of its knowledge, SoftLock is not infringing any intellectual property rights
of any other person or entity with respect to the SoftLock Software.
(g) Title to Properties. SoftLock has good and marketable title to
all of its properties and assets, real and personal, tangible and intangible,
none of which is subject to any security interest, mortgage, pledge, lien,
encumbrance, or charge, except for liens, if any, shown on SoftLock's audited
balance sheet as of December 31, 1997, or on Exhibit D prepared in compliance
with subsection (j) below as securing specified liabilities set forth therein
(with respect to which no default exists) and, except for minor imperfections
of title and encumbrances, if any, which are not substantial in amount, do not
materially detract from the value of the properties subject thereto, or
materially impair SoftLock's operations and have arisen in the ordinary course
of business.
(h) Accounts Receivable. SoftLock represents that, except to the
extent disclosed in Exhibit B to this Agreement or reserved against on its
balance sheet as of December 31, 1997, it is not aware of any material
accounts and contracts receivable existing that in its judgment would be
uncollectible.
(i) Litigation. Except as disclosed in Exhibit B to this Agreement,
there is no litigation or proceeding pending, or to SoftLock's knowledge
threatened, against or relating to SoftLock, its properties, or business, nor
does SoftLock know or have reasonable grounds to know, of any basis for any
such action, or of any governmental investigation relative to SoftLock, its
properties, or business. SoftLock is not, and on the Closing Date will not
be, in default under or with respect to any judgment, order, writ, injunction
or decree of any court or of any federal, state, municipal or other
governmental authority, department, commission, board, agency or other
instrumentality; and, to the best of SoftLock's knowledge, SoftLock has, and
on the Closing Date will have, complied in all material respects with all
laws, rules, regulations and orders applicable to it and to its business, if
any, except as disclosed in Exhibit B.
(j) Exhibits Relating to Certain Matters. Exhibit D, attached
hereto, contains a complete and accurate recitation of the following
documents: a description of all liens, mortgages, charges, and encumbrances
that are outstanding with respect to any of the properties and assets of
SoftLock; a list of all leases wherein SoftLock is either lessor or lessee; a
description of all other written or oral contracts, commitments, agreements,
and other contractual obligations to which SoftLock is a party (other than
those already listed in Exhibit C attached hereto); a list of all insurance
policies carried by SoftLock; a description of all bonus, pension, profit
sharing, retirement, stock purchase, stock option, hospitalization, insurance,
and other executive or employee compensation or benefit plans to which
SoftLock is a party; a list of all notes payable of SoftLock; and, a list of
all notes and contracts receivable of SoftLock.
(k) Contracts. SoftLock is not a party to any contract, except
contracts described in Exhibits C or D. To the best of its knowledge,
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SoftLock has in all material respects performed all obligations required to be
performed by it to date and is not in default in any material respect under
any agreements, leases, or other documents to which it is a party, except as
disclosed in Exhibit C or D to this Agreement.
(l) Taxes. Except as described in Exhibit B, since 1996 SoftLock has
filed in correct form, or has received proper extensions to file, all federal
and state income tax returns due with respect to all periods through the end
of its last fiscal year, and all real and personal property tax schedules,
franchise, sales or use tax returns, and all federal and state employment and
withholding tax returns that are required to be filed, and has paid all taxes
as shown on the said returns and all assessments received by it to the extent
that such taxes and assessments have become due. The Internal Revenue Service
("IRS") has not examined any income tax returns of SoftLock, nor has the IRS
notified SoftLock of its intent to audit any federal income tax returns of
SoftLock that have been filed with the IRS.
(m) Authority to Execute Agreement. The Board of Directors of
SoftLock, pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by SoftLock of this Agreement, and has
duly authorized each of the transactions hereby contemplated. A copy of the
Consent of Board of Directors of SoftLock authorizing such action is attached
hereto as Exhibit E and incorporated herein by this reference. SoftLock has
the power and authority to execute and deliver this Agreement, to consummate
the transactions hereby contemplated and to take all other actions required to
be taken by it pursuant to the provisions hereof. SoftLock has taken all
actions required by law, its Certificate of Incorporation, as amended, its
Bylaws, as amended, or otherwise to authorize the execution and delivery of
this Agreement. This Agreement is valid and binding upon SoftLock and the
Principal Stockholder in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will constitute a violation or breach of the Certificate
of Incorporation, as amended, or the Bylaws, as amended, of SoftLock, or any
agreement, stipulation, order, writ, injunction, decree, law, rule or
regulation applicable to SoftLock.
(n) Finder's Fees. SoftLock and the Principal Stockholder are not,
and on the Closing Date will not be, liable or obligated to pay any finder's,
agent's or broker's fee arising out of or in connection with this Agreement or
the transactions contemplated by this Agreement.
(o) Disclosure. No representation or warranty by SoftLock in this
Agreement, nor any statement or certificate hereto, or in connection with the
transactions contemplated hereby, knowingly contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading.
(p) Compliance. To the best of its knowledge and, except as
described in the Exhibits hereto, SoftLock has complied in all material
respects with all applicable laws, orders and regulations of federal, state,
municipal and/or other governments and/or any instrumentality thereof,
domestic or foreign, currently applicable to its assets and to the business
conducted by it.
The liability of SoftLock and of the Principal Stockholder for the breach of
any representation or warranty made herein shall not exceed $1 million. No
claim shall be made against SoftLock and/or the Principal Stockholder for the
breach of any representation or warranty made herein unless the claim exceeds
$5,000 ("Eligible Claim") and all Eligible Claims in the aggregate exceed
$100,000. Any claim shall be decided by arbitration in accordance with
Section 20 herein. Any claim against SoftLock shall be satisfied by SoftLock
by payment of cash, transfer of assets or issuance of shares of Fieldcrest
(based on the fair market value of the shares at the time of issuance and, in
any event, the number of shares issuable to satisfy a claim against SoftLock
shall not exceed 62,000,000 shares), which method shall be at SoftLock's sole
option. The only remedy that Fieldcrest shall have against the Principal
Stockholder under this Agreement shall be the right to receive the return and
surrender to Fieldcrest, by binding arbitration as provided in Section 20, of
up to 62,000,000 of the Exchange Stock received by the Principal Stockholder
(based upon the fair market value of the shares at the date of the
arbitrator's decision) pursuant to the terms and conditions of this
Agreement. Principal Stockholder agrees to refrain from transferring,
pledging or otherwise assigning a total of 62,000,000 shares of his Exchange
Stock until the expiration of the claims period set forth in Section 14
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herein; however, if any Eligible Claims are made prior to expiration of the
claims period set forth, the Principal Stockholder agrees to the continued
restrictions on transfer until such time as those Eligible Claims are finally
determined. Consistent with the intent of this provision, the Principal
Stockholder agrees that the certificate(s) evidencing such shares shall bear a
legend as to the special transfer restrictions imposed by this paragraph.
6. Access and Information. Subject to the protections provided by
Section 13 herein, SoftLock shall give to Fieldcrest and to Fieldcrest's
counsel, accountants, and other representatives full access during normal
business hours throughout the period prior to the Closing, to all of
SoftLock's properties, books, contracts, commitments, and records, including
information concerning products and customer base, and patents held by, or
assigned to, SoftLock, and furnish Fieldcrest during such period with all such
information concerning SoftLock's affairs as Fieldcrest reasonably may
request.
7. Representation and Warranties of Fieldcrest. Fieldcrest
represents and warrants as follows:
(a) Organization and Standing of Fieldcrest. Fieldcrest is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Fieldcrest's books and records are complete
and correct and have been maintained with good business practice and
accurately reflect in all material respects the transactions to which they
relate. Copies of Fieldcrest's Certificate of Incorporation, and all
amendments thereof to date, certified by the proper Delaware officials, and of
Fieldcrest's bylaws as amended to date, together with all minutes of
stockholders' and directors' meetings, certified by Fieldcrest's Secretary,
will be delivered to SoftLock prior to Closing and shall be complete and
correct as of the date of delivery of said documents. The same shall be
subject to the review and approval of counsel for SoftLock.
(b) Subsidiaries. Fieldcrest has, as of the date of this Agreement,
no subsidiaries.
(c) Capitalization. As of the date of this Agreement, the aggregate
number of shares of common stock, par value $.00001 per share, which
Fieldcrest is authorized to issue is 500,000,000 of which 39,429,000 shares
are currently issued and outstanding. In addition, there are 34,725,000 Class
A Common Stock Purchase Warrants and 1,000,000 Class C Common Stock Purchase
Warrants issued and outstanding, each of which warrant is exercisable for one
share of common stock at a price of $.08 per share and 34,725,000 Class B
Common Stock Purchase Warrants and 1,000,000 Class D Common Stock Purchase
Warrants issued and outstanding, each of which warrant is exercisable for one
share of common stock at a price of $.10 per share. Except for those Class A,
Class B, Class C and Class D Common Stock Purchase Warrants, no options or right
s to purchase common stock or preferred stock are currently, or will be as of
the Closing, outstanding. The aggregate number of shares of preferred stock,
par value $.00001 per share, which Fieldcrest is authorized to issue is
20,000,000, of which no shares are issued and outstanding.
(d) Financial Statements. Fieldcrest has delivered to SoftLock
copies of all of Fieldcrest's audited financial statements for the fiscal
years ended March 31, 1996 and 1997 and will deliver, prior to Closing,
audited financial statements for the fiscal year ended March 31, 1998, all of
which are (or, as to the financial statements not yet delivered, will be) true
and complete and have been prepared, or will have been prepared as the case
may be, in accordance with generally accepted accounting principles and
Regulation S-X.
(e) Absence of Undisclosed Liabilities. Except to the extent
reflected or reserved against in Fieldcrest's balance sheet as of March 31,
1998, which will be delivered to SoftLock prior to Closing in accordance with
the immediately preceding paragraph, Fieldcrest as of such date had no
liabilities of any nature, whether accrued, absolute, contingent, or
otherwise.
(f) Absence of Certain Changes. Fieldcrest is engaged in no business
and conducts no operations. Since March 31, 1998, there has not been any
material change in Fieldcrest's financial condition, assets or liabilities,
except the incurring of expenses in connection with securities laws compliance
matters and the acquisition of SoftLock.
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(g) Litigation. There is no litigation or proceeding pending, or to
Fieldcrest's knowledge threatened, against or relating to Fieldcrest, nor does
Fieldcrest know or have reasonable grounds to know, of any basis for any such
action, or of any governmental investigation relative to Fieldcrest.
Fieldcrest is not, and on the Closing Date will not be, in default under or
with respect to any judgment, order, writ, injunction or decree of any court
or of any federal, state, municipal or other governmental authority,
department, commission, board, agency or other instrumentality; and Fieldcrest
has, and on the Closing Date will have, complied in all material respects with
all laws, rules, regulations and orders applicable to it, if any.
(h) Contracts. Fieldcrest is not a party to any contract (except a
letter agreement with Fieldcrest's auditors in connection with an audit of
Fieldcrest's financial statements for the fiscal year ended March 31, 1998 and
a certain Warrant Agent Agreement, dated Agust 20, 1991), nor is Fieldcrest a
party to any written or oral commitment for capital expenditures. Fieldcrest
has in all material respects performed all obligations required to be performed
by it to date and is not in default in any material respect under any
agreements or other documents to which it was a party.
i) SEC Filings. As of the date of this Agreement, Fieldcrest has filed
with the Securities and Exchange Commission ("SEC") all registration
statements, financial statements, applications, reports, schedules, forms,
proxy statements and all other instruments, documents and written information
(collectively, the "SEC Filings") required to be filed by Fieldcrest under the
Act and the Securities Exchange Act of 1934. At the date hereof, none of the
SEC Filings contains or, on the Closing Date, will contain any untrue
statement of a material fact or omits or, on the Closing Date, will omit to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances in which they were made or shall have
been made, not misleading.
(j) Authority to Execute Agreement. The Board of Directors of
Fieldcrest, pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by Fieldcrest of this Agreement and the
Exchange Stock, and has duly authorized each of the transactions hereby
contemplated. A copy of the Consent of Board of Directors of Fieldcrest
authorizing such action is attached hereto as Exhibit F and incorporated
herein by this reference. Fieldcrest has the power and authority to execute
and deliver this Agreement, to consummate the transactions hereby contemplated
and to take all other actions required to be taken by it pursuant to the
provisions hereof. Fieldcrest has taken all the actions required by law, its
Certificate of Incorporation, as amended, its bylaws, as amended, or otherwise
to authorize the execution and delivery of the Exchange Stock pursuant to the
provisions hereof. This Agreement is valid and binding upon Fieldcrest in
accordance with its terms. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute a violation or breach of the Certificate of Incorporation, as
amended, or the bylaws, as amended, of Fieldcrest, or any agreement,
stipulation, order, writ, injunction, decree, law, rule or regulation
applicable to Fieldcrest. Upon issuance, the Exchange Stock shall be validly
issued, fully paid and non-assessable.
(k) Finder's Fees. Fieldcrest is not, and on the Closing Date will
not be, liable or obligated to pay any finder's, agent's or broker's fee
arising out of or in connection with this Agreement or the transactions
contemplated by this Agreement.
(l) Disclosure. No representation or warranty by Fieldcrest in this
Agreement, nor any statement or certificate furnished or to be furnished to
SoftLock or the Stockholders pursuant hereto, or in connection with the
transactions contemplated hereby, knowingly contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading.
(m) Taxes. Fieldcrest has filed in correct form, or has received
proper extensions to file, all federal and state income tax returns due with
respect to all periods through the end of its last fiscal year, and all real
and personal property tax schedules, franchise, sales or use tax returns, and
all federal and state employment and withholding tax returns that are required
to be filed, and has paid all taxes as shown on the said returns and all
assessments received by it to the extent that such taxes and assessments have
8
become due. The Internal Revenue Service ("IRS") has not examined any income
tax returns of Fieldcrest, nor has the IRS notified Fieldcrest of its intent
to audit any federal income tax returns of Fieldcrest that have been filed
with the IRS.
(n) Registration Rights. Except to the extent set forth on page iii of
Fieldcrest's Prospectus, dated February 12, 1991, which pertains to
Fieldcrest's obligations in favor of its Class A and B warrantholders, and
except its obligations to Class C and D warrantholders which have certain
piggyback registration rights, Fieldcrest has not granted any registration
rights to holders of Fieldcrest warrants or to holders of restricted Common
Stock.
(o) Cooperation After Closing. Fieldcrest will use its best efforts to
cause its sole officer and director, who will be resigning all such positions
with Fieldcrest as a condition to the Closing, to cooperate, after Closing, in
all reasonable respects with Fieldcrest's new management by providing, upon
request, background and information about Fieldcrest. Notwithstanding any of
the foregoing, Fieldcrest disclaims liability with respect to any SoftLock
information provided to SoftLock shareholders in connection with the Exchange.
8. Access and Information. Subject to the protections provided by
Section 13 herein, Fieldcrest shall give to SoftLock, the SoftLock
Stockholders and their counsel, accountants, and other representatives full acce
ss, during normal business hours throughout the period prior to the Closing,
to all of Fieldcrest's properties, books, contracts, commitments, and records,
if any, and shall furnish SoftLock and the SoftLock Stockholders during such
period with all such information concerning Fieldcrest's affairs as SoftLock
and the SoftLock Stockholders reasonably may request.
9. Conduct of SoftLock Business Pending Closing. SoftLock and the
Principal Stockholder, to the extent within the Principal Stockholder's
control, covenant that pending the Closing:
(a) SoftLock's business will be conducted only in the ordinary
course.
(b) No change will be made in SoftLock's Certificate of Incorporation
or bylaws and, except as described in the next sentence, no change will be
made in SoftLock's issued shares of stock, other than such changes as may be
first approved in writing by Fieldcrest. Fieldcrest hereby acknowledges and
agrees that SoftLock will continue its efforts to raise additional capital
through the sale of its common stock throughout the period prior to the
Closing in order to satisfy the condition precedent to Closing described in
subsection 11 (w).
(c) No contract or commitment will be entered into by or on behalf of
SoftLock, or indebtedness otherwise incurred, except in the ordinary course
or as may be pre-approved in writing by Fieldcrest.
(d) No dividends shall be declared, no stock options shall be granted
no, other than normal, increases in compensation to employees, including
officers, shall be declared and no new employment agreements, shall be entered
into with officers or directors of SoftLock, except as may be first approved
in writing by Fieldcrest.
(e) Except as otherwise requested by Fieldcrest, SoftLock will use
its best efforts (without making any commitment on Fieldcrest's behalf) to
preserve SoftLock's business organization intact; to keep available to
SoftLock the services of its present officers and employees; and to preserve
the goodwill of those having business relations with SoftLock.
(f) Neither SoftLock nor the Principal Stockholder may discuss or
negotiate with any other corporation, firm or person, or entertain or consider
any inquiries or proposals relating to the possible disposition of its shares
of capital stock, or its assets, and SoftLock and the Principal Stockholder
will cause SoftLock to conduct business only in the ordinary course.
Notwithstanding the foregoing, SoftLock shall be free to engage in activities
mentioned in the preceding sentence which are designed to further the mutual
9
interests of the parties to this Agreement and are not inconsistent with the
reorganization contemplated by this Agreement.
10. Conduct of Fieldcrest Pending Closing. Fieldcrest covenants
that, pending the Closing:
(a) No change will be made in Fieldcrest's Certificate of
Incorporation or bylaws or in Fieldcrest's authorized or issued shares of
stock, except as may be first approved in writing by SoftLock.
(b) Fieldcrest will not discuss or negotiate with any other
corporation, firm or other person, or entertain or consider any inquiries or
proposals relating to the possible disposition of its shares of capital stock,
or its assets, and will conduct business only in the ordinary course.
Notwithstanding the foregoing, Fieldcrest shall be free to engage in
activities mentioned in the preceding sentence which are designed to further
the mutual interests of the parties to this Agreement and are not inconsistent
with the reorganization contemplated by this Agreement.
(c) No dividends shall be declared, no stock options granted and no
employment agreements shall be entered into with officers or directors of
Fieldcrest, except as may be first approved in writing by SoftLock.
11. Conditions Precedent to Closing. All obligations of Fieldcrest,
SoftLock and the Principal Stockholder under this Agreement are subject to the
fulfillment, prior to or at the Closing, of all conditions elsewhere herein
set forth, including, but not limited to, receipt by the appropriate party of
all deliveries required by Section 4 herein, and fulfillment, prior to the
Closing, of each of the following conditions:
(a) SoftLock's, the Principal Stockholder's and Fieldcrest's
representations, warranties and covenants contained in this Agreement shall be
true at the time of Closing as though such representations, warranties and
covenants were made at such time.
(b) SoftLock, the Principal Stockholder and Fieldcrest shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by each prior to or at the Closing.
(c) Each SoftLock Stockholder acquiring Exchange Stock will be
required, at Closing, to submit an agreement confirming that all the Exchange
Stock received will be acquired for investment and not with a view to, or for
sale in connection with, any distribution thereof, and agreeing not to
transfer any of the Exchange Stock for a period of one year from the date of
the Closing, except to those persons approved by legal counsel to Fieldcrest
as falling within an exemption from registration under the Securities Act of
1933 and any applicable state securities laws, which transfers do not
constitute a public distribution of securities, and in which the transferees
execute an investment letter in form and substance satisfactory to counsel for
Fieldcrest. Each SoftLock Stockholder acquiring Exchange Stock will be
required to transfer to Fieldcrest at the Closing his/her respective SoftLock
Shares, free and clear of all liens, mortgages, pledges, encumbrances or
changes, whether disclosed or undisclosed.
(d) Each of the SoftLock Stockholders who shall tender SoftLock Stock
at Closing shall have provided Fieldcrest with a "Letter of Acceptance and
Investor Qualification," substantially in the form of Exhibit H hereof
("Acceptance Letter") and dated as of the date of the Closing. Upon
inspection of the Acceptance Letters, Fieldcrest must be satisfied that each
such Stockholder, together with his investment advisors, if any, (i) has been
provided by Fieldcrest with such information and such access to the respective
books and records and management of Fieldcrest and SoftLock as to warrant a
conclusion that the issuance of Exchange Stock to the Stockholder will enjoy
an exemption under Regulation D from the registration requirements of the Act
and (ii) has availed himself of such information and access to the degree he
thought necessary or desirable for purposes of making an investment in the
Exchange Stock.
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(e) Fieldcrest shall have been presented with, and shall have
approved, an updated version of Xxxxxxxx X,X,X and D, prepared by SoftLock,
current as of the Closing.
(f) Each party shall have received favorable opinions from the other
party's counsel on such matters in connection with the transactions
contemplated by this Agreement as are reasonable.
(g) Each party shall have satisfied itself that since the date of
this Agreement the business of the other party has been conducted in the
ordinary course. In addition, each party shall have satisfied itself that no
withdrawals of cash or other assets have been made, other than in the ordinary
course, and no indebtedness has been incurred since the date of this
Agreement, except with respect to services rendered or expenses incurred in
connection with the Closing of this Agreement, unless said withdrawals or
indebtedness were either authorized by the terms of this Agreement or
subsequently consented to in writing by the parties.
(h) Except as disclosed in the Exhibits hereto, each party covenants
that, to the best of its knowledge, it has complied in all material respects
with all applicable laws, orders and regulations of federal, state, municipal
and/or other governments and/or any instrumentality thereof, domestic or
foreign, applicable to their assets, to the business conducted by them and to
the transactions contemplated by this Agreement.
(i) Fieldcrest shall have provided to SoftLock audited financial
statements of Fieldcrest for the three most recently completed fiscal years
prepared in accordance with generally accepted accounting principles and with
Regulation S-X.
(j) SoftLock shall have provided to Fieldcrest audited financial
statements of SoftLock for the two most recently completed fiscal years,
prepared in accordance with generally accepted accounting principles and
Regulation S-X, together with unaudited financial statements in the same form
for the quarter ended March 31, 1998. Such unaudited financial statements of
SoftLock shall include the following schedules: Schedule of Assets; Schedule
of Notes Payable; Schedule of Accounts Payable; and Schedule of Notes
Receivable or, in their absence, an affirmation that such items do not exist.
SoftLock shall also provide, as of a date within ten days of Closing, an
update of any material change in the aforementioned schedules.
(k) Each party shall have granted to the other party (acting through its
management personnel, counsel, accountants or other representatives designated
by it) full opportunity to examine its books and records, properties, plants
and equipment, proprietary rights and other instruments, rights and papers of
all kinds in accordance with Sections 6 and 8 hereof; and each party shall be
satisfied to proceed with the transactions contemplated by this Agreement upon
completion of such examination and investigation.
(l) Effective as of the Closing Date, Fieldcrest's sole executive
officer and sole director shall resign her respective positions and/or offices
by tendering a written resignation. Immediately prior to said resignations,
Fieldcrest's sole director shall appoint as members of Fieldcrest's new board,
those persons designated by SoftLock to fill said director positions, with
such appointments to be effective as of the Closing. Fieldcrest's sole
officer and director may designate, at any time within twelve months following
the Closing, one person to serve in the capacity as an advisor to the Board of
Directors. The Fieldcrest advisor so designated shall be entitled to notice
of, and to attend, all Board meetings for a minimum period of one year
following the Closing and shall have the right to be reimbursed for all travel
expenses to attend meetings and shall receive the same compensation as any
"outside" director or advisor, if any, of Fieldcrest is entitled to receive.
(m) All press releases, stockholder communications, SEC Filings and
other publicity generated by Fieldcrest or SoftLock regarding the transactions
contemplated by this Agreement shall have been reviewed and approved by the
other party before their release to the public or any governmental agency.
11
(n) If Stockholders, who in the aggregate own five percent (5%) or
more of the SoftLock Shares, dissent from the proposed share exchange, or are
unable or for any reason refuse to transfer any or all of their SoftLock
Shares to Fieldcrest in accordance with Section 1 of this Agreement,
Fieldcrest, at its option, may terminate this Agreement.
(o) Each party shall have satisfied itself that all transactions
contemplated by this Agreement, including those contemplated by the exhibits
attached hereto, shall be legal and binding under applicable statutory and
case law of the State of Delaware, including, but not limited to, Delaware's
securities laws and all other applicable state securities laws.
(p) The Exchange shall be approved by the stockholders of SoftLock,
or by the stockholders of Fieldcrest, if deemed necessary or appropriate by
counsel for the same, within thirty (30) days following execution of this
Agreement. If such a meeting is deemed necessary, the management of SoftLock,
or of Fieldcrest as the case may be, agrees to recommend approval to their
Stockholders and to solicit proxies in support of the same.
(q) Either Fieldcrest or SoftLock shall have entered into an
employment contract with Xxxxxxxx Xxxxxx, such contract to be satisfactory to
the parties and have a term lasting at least two years from the date of this
Agreement, and, if the contract be with SoftLock, that Fieldcrest shall have
ratified, adopted, and confirmed the contract.
(r) All holders of Fieldcrest restricted common stock in excess of
one million shares shall execute agreements in form and substance satisfactory
to SoftLock and Fieldcrest whereby they agree that 75% of their restricted
shares shall not be sold for a period of twelve months following Closing,
except that private sales may be made to purchasers who agree to be bound by
the provisions of the lock-up agreement.
(s) SoftLock agrees, immediately following the closing of this
Agreement, to use its best efforts to amend Fieldcrest's Certificate of
Incorporation to: (i) change Fieldcrest's name to SoftLock Services, Inc., or
to a name that is substantially similar; and (ii) adjust the authorized
number of shares of common stock in such a manner as to establish a
sufficient reserve of shares issuable upon exercise of the Fieldcrest Options
to be granted as a replacement for the SoftLock Options.
(t) SoftLock shall have raised at least $500,000 in connection with
the private placement of 142,857 shares of SoftLock common stock at a purchase
price of $3.50 per share.
12. Termination. This Agreement may be terminated prior to Closing,
and the contemplated transactions abandoned, without liability to either
party, except with respect to the obligations of Fieldcrest, SoftLock and the
SoftLock Stockholders under Section 13 hereof:
(a) by mutual consent of the parties;
(b) by Fieldcrest or SoftLock, if in the reasonable belief of either
party there has been a material misrepresentation or breach of warranty on the
part of any other party in the representations and warranties set forth in the
Agreement;
(c) by the Principal Stockholder if, in his reasonable belief, there
has been a material misrepresentation or breach of warranty on the part of
Fieldcrest in the representations and warranties set forth in the Agreement;
(d) by either Fieldcrest, SoftLock or the Principal Stockholder if
the Closing of the Exchange shall not have occurred by the Closing Date;
12
(e) by Fieldcrest or SoftLock if, one party shall determine in its
opinion or that of its counsel, the Exchange does not qualify for exemption
from registration under applicable federal and state securities laws, or
qualification, if obtainable, cannot be accomplished, in Fieldcrest's or
SoftLock's opinion or that of its counsel, without unreasonable expense or
effort;
(f) by Fieldcrest or SoftLock if one party shall determine in its
opinion or that of its counsel, the Exchange cannot be consummated under
Delaware or other relevant state corporate law or, if consummation is
possible, that it cannot be accomplished, in Fieldcrest's opinion or that of
its counsel, without unreasonable expense or effort;
(g) by Fieldcrest, SoftLock or the Principal Stockholder if one party
shall determine in its sole discretion that the Exchange has become
inadvisable or impracticable by reason of the institution or threat by state,
local, or federal governmental authorities or by any other person of material
litigation or proceedings against any party [it being understood and agreed
that a written request by any governmental authority for information with
respect to the Exchange, which information could be used in connection with
such litigation or proceedings, may be deemed to be a threat of material
litigation or proceedings regardless of whether such request is received
before or after the signing of the Agreement];
(h) by Fieldcrest or SoftLock if the business or assets or financial
condition of the other, taken as a whole, have been materially and adversely
affected, whether by the institution of litigation or by reason of changes or
developments or in operations in the ordinary course of business or otherwise;
(i) by Fieldcrest if it shall appear to Fieldcrest that SoftLock
shall not be able to obtain within a reasonable amount of time after Closing
all consents and approvals of all governmental authorities, having any
jurisdiction over the business of SoftLock, or if such authorities shall
withdraw any approvals, licenses, or permits given to SoftLock;
(j) by Fieldcrest if, in its sole discretion, it should appear that
the combined entity will not be auditable;
(k) by SoftLock if Fieldcrest fails to perform material conditions
set forth in Section 11 herein;
(l) by SoftLock if examination of Fieldcrest's books and records
pursuant to Section 8 herein uncovers a material deficiency;
(m) by Fieldcrest if SoftLock fails to perform material conditions
set forth in Section 11 herein; and,
(n) by Fieldcrest if examination of SoftLock' books and records
pursuant to Section 6 herein uncovers a material deficiency.
13. Confidentiality. While each party is obligated to provide access
to and furnish information in accordance with Sections 6 and 8 herein, it is
understood and agreed that such disclosures and information subsequently
obtained as a result of such disclosures are proprietary and confidential in
nature. Each party agrees to hold such information in confidence and not to
reveal any such information to any person who is not a party to this
Agreement, or an officer, director or key employee thereof, and not to use the
information obtained for any purpose other than assisting in its due diligence
inquiry precedent to the Closing. Upon request of any party, a
confidentiality agreement, acceptable to the disclosing party, will be
executed by any person selected to receive such proprietary information, prior
to receipt of such information.
14. Nature and Survival of Representations; Limitation for Claims
All statements contained in any certificate or other instrument delivered by
or on behalf of SoftLock, the Principal Stockholder or Fieldcrest, pursuant
hereto, or in connection with the transactions contemplated hereby, shall be
deemed representations and warranties by SoftLock, the Principal Stockholder
or Fieldcrest, respectively, and shall survive the closing for a period of
13
fourteen (14) months. There shall be an additional two month period
(sixteen(16) months total) in which a claim may be asserted against SoftLock,
Fieldcrest or the Principal Stockholder hereunder in accordance with Section
20 herein, after which all claims hereunder of any kind or nature or for
whatever cause shall be barred.
15. Binding Agreement.
(a) This Agreement shall become binding upon the parties when, but only
when, it shall have been signed on behalf of all parties.
(b) Subject to the condition stated in subsection (a), above, this
Agreement shall be binding upon, and inure to the benefit of, the respective
parties and their legal representatives, successors and assigns.
16. Construction. This Agreement is intended to be performed in the
State of New York, and shall be construed and enforced in accordance with the
laws of that State.
17. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing, and shall be deemed to have been
duly given if delivered or mailed, first class postage, prepaid, to SoftLock,
at 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000, Attention: Xxxxxxxx
Xxxxxx, President, or if to Fieldcrest, at 00 Xxxxxxxxx Xxxxx, Xxxxxxxx,
Xxxxxxxx 00000, Attention: Xxxxxxx Xxxx Xxxxxxxx, President; or if to the
SoftLock Stockholders, to the addresses indicated beneath each Stockholder's
name as set forth in Exhibit A hereto.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. [Reserved]
20. Arbitration.
Any controversy, claim or dispute arising out of or relating to this Agreement
or the breach, termination, enforcement, interpretation or validity thereof,
including the determination of the scope or applicability of this Agreement,
shall be determined by arbitration in the City of Rochester, New York, in
accordance with the law of the State of New York, provided, however, that
nothing in this Section shall restrict the right of either party to apply to a
court of competent jurisdiction for emergency relief pending final
determination of a claim by arbitration in accordance with this Section. All
arbitration shall be conducted in accordance with the rules and regulations of
the American Arbitration Association by a panel of three arbitrators, one
selected by each party and the third selected by the other two arbitrators.
Each party shall pay their own expenses associated with such arbitration,
including the expenses of any arbitrator selected by such party and 50% of the
expenses of the third arbitrator. The decision of the arbitrator shall be
binding upon the parties and judgment in accordance with that decision may be
entered in any court having jurisdiction thereof.
21. Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. To the
extent permitted by applicable law, the parties hereto hereby waive any
provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
SOFTLOCK SERVICES, INC. FIELDCREST CORP.
By:\s\Xxxxxxxx Xxxxxx By:\s\Xxxxxxx Xxxx Xxxxxxxx
Xxxxxxxx Xxxxxx, President Xxxxxxx Xxxx Xxxxxxxx,
President
14
PRINCIPAL STOCKHOLDER
Xxxxxxxx Xxxxxx
EXHIBIT LIST
Exhibit A -- Stockholders of SoftLock Services, Inc. and Allocation
of Exchange Stock; Holders of SoftLock Options
Exhibit B -- Schedule of Exceptions to Representations and Warranties
of SoftLock Services, Inc.
Exhibit C -- Description of Intellectual Property
Exhibit D -- Description of Liens, Mortgages, Charges and Encumbrances of
SoftLock Services, Inc.
Exhibit E -- Consent of Board of Directors of SoftLock Services, Inc.
Exhibit F -- Consent of Board of Directors of Fieldcrest Corp.
Exhibit G -- Fieldcrest Stockholders - Shares Subject to Lock-up
Exhibit H -- Letter of Acceptance and Investor Qualification
15
