EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
AMONG
I-VIEW SOFTWARE, INC.,
AS SELLER,
▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
AND
HEMINGFOLD INVESTMENTS, LTD.,
AS PURCHASER
NOVEMBER 21, 1996
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated November 21, 1996 among
I-VIEW SOFTWARE, INC., a Florida corporation (the "Company"), ▇▇▇▇▇ ▇▇▇▇
("▇▇▇▇"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), and HEMINGFOLD INVESTMENTS, LTD.
("Purchaser").
RECITALS:
A. The Company wishes to issue 1,984,127 shares (the "Shares") of its
common stock, par value $0.0001 per share, (the "Common Stock") to Purchaser at
a price of $0.63 per share, in exchange for aggregate consideration in the
amount of $1,250,000, (the "Purchase Price")
B. Purchaser wishes to purchase the Shares in accordance with the terms
and conditions contained herein.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Adult Entertainment" means entertainment which contains sexually
explicit content.
1.2 "Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
Controls, is controlled by, or is under common control with, such specified
Person.
1.3 "Assets" means all the properties and assets used or intended to be
used or required by the Company and each Subsidiary in the conduct of the
Business or a Subsidiary's business and which are material and, with respect to
contract rights, is a party to and enjoys the right to the benefits of all
material contracts and agreements used and/or intended to be used by the Company
or a Subsidiary or required in or relating to the conduct of the Business
1.4 "Bankruptcy" means: (a) an adjudication of bankruptcy under the U.S.
Bankruptcy Reform Act of 1978, as amended, or any successor statute; (b) the
specified Person stops payment of, is deemed unable, or otherwise admits
inability to pay, its debts or becomes or is deemed to be insolvent; (c) the
presentation of a petition for or the making of a winding up or administration
order in respect of the specified Person; (d) an assignment for the benefit of
creditors; (e) the specified Person either does, resolves to do or commences
negotiations with a view to doing any of the following: (i) makes a general or
special arrangement or composition (whether voluntary or compulsory) with its
creditors or any class of creditors, (ii) declares or agrees to a moratorium, or
(iii) issues a notice convening a meeting to resolve to do any of the foregoing;
(f) the filing of a voluntary petition in bankruptcy, winding-up or
reorganization or the passing of a resolution for voluntary liquidation,
reconstruction or winding up; or (g) the
failure to vacate the appointment of a receiver, trustee, provisional liquidator
or administrative receiver for any part or all of the assets or property of a
party within 60 days from the date of such appointment.
1.5 "Board" means the Board of Directors of the Company.
1.6 "Business" means the development, production and distribution of
computer software and hardware, as well as related peripherals.
1.7 "Business Day" means any day that is not a Saturday or a Sunday and on
which banks are open for the conduct of normal banking business in the city of
Miami, Florida.
1.8 "Confidential Information"of any party means all data, reports,
interpretations, forecasts and records containing or otherwise reflecting
information concerning the transactions contemplated hereby which is of a
confidential nature, not available to the general public and which such party
provides or has previously provided to the other party at any time pursuant to
or in connection with this Agreement. "Confidential Information" includes any
information obtained by a meeting with personnel or a representative of a party
or its subsidiaries, together with analyses, compilations, studies or other
documents prepared by the party obtaining the information, which contain the
Confidential Information. However, "Confidential Information" does not include
any information which: (a) at the time of disclosure or thereafter is available
to the public (other than as a result of a disclosure by a party or its
Representative in violation of the terms of this Agreement); or (b) was or
becomes available to a party or its Representatives (collectively, the "Informed
Party") from a source other than the other party, unless the Informed Party
knows that the source is bound by the terms of a confidentiality agreement with
the other party.
1.9 "Control" (including the terms "controlling," "controlled by" and
"under common control with"), with respect to the relationship between or among
two or more Persons, means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
1.10 "Current Number" shall have the meaning set forth in Section
8.2(a)(ii) hereof.
1.11 "Demand Registrable Securities" means, the Shares and any other
shares of Common Stock received by Purchaser as a result of the preemption,
anti-dilution and ratchet rights contained herein. However, any such shares
shall be "Demand Registrable Securities" only so long as they are "Restricted
Securities". Any share or other security shall be deemed a "Restricted Security"
until such time as such share or other security: (a) has been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement
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covering it; or (b) has been sold pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act.
1.12 "Demand Registration" shall have the meaning set forth in Section
6.2(a) hereof.
1.13 "Dilution Shares" means, collectively, the Dilutive Shares, the
Dilutive Rights Shares and Excess Existing Rights Shares.
1.14 "Dilutive Rights Shares" has the meaning set forth in Section
1.16(a)(ii) hereof.
1.15 "Dilutive Shares" has the meaning set forth in Section 1.16(a)(i)
hereof
1.16 "Dilutive Issuance" means the occurrence of:
(a) any sale or issuance by the Company, at any time, or the entering
into by the Company of any agreement, arrangement or understanding (whether
conditional or unconditional) for the sale or issuance by the Company of:
(i) any shares ("Dilutive Shares") of Common Stock for
consideration per share (the "Issue Price") of less than the Per Share Purchase
Price, other than (A) the issuance of Existing Rights Shares upon the exercise
of Existing Rights; (B) any sale or issuance to Purchaser pursuant to Section
8.1 or (C) any issuance as a dividend upon or by reason of a split-up of the
Common Stock in which Purchaser participates on the same basis as all other
holders of Common Stock receiving such dividend or shares on consummation of
such split-up;
(ii) any Rights to acquire (conditionally or unconditionally) any
shares ("Dilutive Rights Shares") of Common Stock where the sum (the "Rights
Issue Price") of (A) the consideration paid or payable for any such Right
entitling the holder thereof to acquire one share of Common Stock, plus (B) such
additional consideration paid or payable upon exercise of such Right to acquire
on share of Common Stock, is less than the Per Share Purchase Price; or
(b) any sale or issuance by the Company, at any time, of any Excess
Existing Rights Shares for consideration per share (the "Excess Existing Rights
Exercise Price") of less than the Per Share Purchase Price.
For purposes of this Agreement, (a) each Dilutive Issuance of Common
Stock shall be deemed to involve the issuance of the maximum number of Dilutive
Shares which are sold or issued in such Dilutive Issuance or which are the
subject of the agreement, arrangement, or understanding for sale or issuance
involved in such Dilutive Issuance, regardless of whether all or any of such
shares are actually sold or issued and regardless of whether such agreement is
legally binding and enforceable; (b) each Dilutive Issuance of Rights shall be
deemed to involve the issuance of the maximum number of Dilutive Rights Shares
issuable upon exercise of such Rights (regardless of whether such Rights are
presently exercisable or are ever exercised or of the existence of any
provisions for adjustment in the number of shares of Common Stock issuable
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upon exercise of such Rights or in the applicable Rights Issue Price); and (c)
the date of occurrence of any Dilutive Issuance shall be the date of the sale or
issuance or the entering into of the agreement, arrangement or understanding for
the sale or issuance of the shares of Common Stock or Rights involved.
1.17 "Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, option, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
1.18 "Environmental Laws" means any foreign, federal, state or local
statute, code, ordinance, rule, regulation, permit, consent, approval, license,
judgment, order, writ, judicial decision, common law rule, decree, agency
interpretation, injunction or other authorization or requirement whenever
promulgated, issued, or modified, including the requirement to register
underground storage tanks, relating to:
(a) emissions, discharges, spills, releases or threatened releases of
pollutants, contaminants, Hazardous Substances (as hereinafter defined),
materials containing Hazardous Substances, or hazardous or toxic materials or
wastes into ambient air, surface water, groundwater, watercourses, publicly or
privately owned treatment works, drains, sewer systems, wetlands, septic systems
or onto land;
(b) the use, treatment, storage, disposal, handling, manufacturing,
transportation, or shipment of Hazardous Substances, materials containing
Hazardous Substances or hazardous and/or toxic wastes, material, products or
by-products (or of equipment or apparatus containing Hazardous Substances) as
defined in or regulated under the following statutes and their implementing
regulations: the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq.,
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. ss. 9601
et seq., and/or the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.,
each as amended from time to time; or
(c) otherwise relating to pollution or the protection of human health
or the environment.
1.19 "Excess Existing Rights Shares" means either:
(a) the number of shares (if any) of Common Stock issuable upon
exercise of an Existing Right after a Modification, which are in excess of the
number of share issuable upon exercise of a an Existing Right without such
Modification; or
(b) the number of shares (if any) of Common Stock issuable upon the
exercise of an Existing Right after a Modification, where the consideration per
share at which the shares
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of Common Stock are issuable, is less than the consideration per share at which
the shares would have been issued without such Modification.
1.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.21 "Existing Right" means any of the Rights set forth on SCHEDULE 1.21
hereto.
1.22 "Existing Rights Shares" means, as of any time, the shares of Common
Stock issuable at such time upon exercise of any of the Existing Rights pursuant
to the terms of such Existing Rights as in effect on the date hereof. .
1.23 "GAAP" means United States generally accepted accounting principles
and practices as in effect during the relevant period and applied consistently
throughout the periods involved.
1.24 "Governmental Authority" means any federal, state or local, or
foreign government, governmental, regulatory or administrative authority (or
subdivision thereof) and any agency or commission or any court, tribunal or
judicial or arbitral body that has jurisdiction over Purchaser, the Business,
the "Company" or their respective assets.
1.25 "Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
1.26 "Intellectual Property" means: (a) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications; (b) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications; (c) national and multinational statutory invention registrations,
patents, patent registrations and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations)
and all rights therein provided by international treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent or
application; (d) trademarks, service marks, trade dress, logos, trade names and
corporate and partnership names, whether or not registered, including all common
law rights, and registrations and applications for registration thereof; (e)
copyrights (registered or otherwise) and registrations and applications for
registration thereof, and all rights therein provided by international treaties
or conventions; (f) moral rights (including, without limitation, rights of
paternity and integrity), and waivers of such rights by others; (g) trade
secrets and confidential, technical and business information; (h) copies and
tangible embodiments of all the foregoing, in whatever form or medium; (i) all
rights to obtain and rights to apply for patents, and to register trademarks and
copyrights; (j) all rights to ▇▇▇ or recover and retain damages and costs and
attorneys' fees for present and past infringement of any of the foregoing; and
(k) all goodwill associated with the foregoing.
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1.27 "Issue Price" has the meaning set forth in Section 1.16(a)(i) hereof.
1.28 "Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law
issued by any Governmental Authority.
1.29 "Material Adverse Effect" means any circumstance, change in, or
effect on the business of any party hereto that could reasonably be expected to
have a materially adverse effect on the business, operations, assets or
liabilities, results of operations or the financial condition of such party.
1.30 "Merger" means the merger of the Company and ▇▇▇▇▇▇▇ Technologies,
Inc.
1.31 "Modification" means the amendment, modification, supplementation,
extension, renewal or replacement of Existing Rights, at time after the date
hereof.
1.32 "Per Share Purchase Price" shall have the meaning set forth in
Section 8.2(a)(ii).
1.33 "Person" means any individual, partnership, firm, corporation,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
1.34 "Piggyback Registrable Securities" means the Shares and any other
shares of Common Stock received by Purchaser as a result of the preemption,
anti-dilution and ratchet rights contained herein. However, any such shares
shall be "Registrable Securities" only so long as they are "Restricted
Securities". Any share or other security shall be deemed a "Restricted Security"
until such time as such share or other security (i) has been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering it, or (ii) has been sold pursuant to Rule 144
(or any similar provision then in force) under the Securities Act.
1.35 "Piggyback Registration" shall have the meaning set forth in Section
6.1(a) hereof.
1.36 "Purchase Price" shall have the meaning set forth in Recital A
hereof.
1.37 "Receivables" means any and all accounts, notes and other receivables
of the Company or a Subsidiary from third parties, including, without
limitation, customers, arising from the conduct of the Business or otherwise
before the date hereof, whether or not in the ordinary course, together with all
unpaid financing charges accrued thereon.
1.38 "Registration Expenses" shall have the meaning set forth in Section
6.3(d) hereof.
1.39 "Representative" means, with respect to a party hereto, such party's
directors, officers, employees or attorneys, accountants and other agents and
representatives who have need
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to know Confidential Information of the other party hereto, in order to perform
their duties or services.
1.40 "Request Securities" shall have the meaning set forth in Section 6.3
hereof.
1.41 "Rights" means any options, warrants or other agreements for the
purchase of Voting Stock.
1.42 "Rights Issue Price" shall have the meaning set forth in Section
1.16(a)(ii).
1.43 "SEC" means the United States Securities and Exchange Commission.
1.44 "Securities Act" means the Securities Act of 1933, as amended.
1.45 "Shares" shall have the meaning set forth in Recital A hereof.
1.46 "Subsidiary" means a Person which is Controlled by the Company
1.47 "Tax" or "Taxes" means any and all taxes, stamp duties, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority or taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs duties, tariffs, and
similar charges.
1.48 "Voting Stock" means any class of capital stock of the Company with
general voting rights for the election of directors.
1.49 "Weighted Average Price" means, when used in any calculation herein,
the quotient obtained by dividing:
(a) the sum of (i) the aggregate Issue Price of all Dilutive Shares,
if any, issued in a Dilutive Issuance and in all prior Dilutive Issuances (if
any) plus (ii) the aggregate Rights Issue Price of all Dilutive Rights Shares,
if any, issued in such Dilutive Issuance and in all prior Dilutive Issuances (if
any) plus (iii) the aggregate Excess Existing Rights Exercise Price of all
Excess Existing Rights Shares, if any, issued in a Dilutive Issuance and in all
prior Dilutive Issuances (if any) ; by
(b) the aggregate number of Dilutive Shares (if any) and Dilutive
Rights Shares (if any) issued in such Dilutive Issuance and in all prior
Dilutive Issuances (if any)
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ARTICLE II
PURCHASE AND SALE
Based upon the representations and warranties, set forth herein, Purchaser
hereby purchases from the Company, and the Company hereby sells and issues to
Purchaser, the Shares free and clear of any and all Encumbrances other than
those restrictions imposed by this Agreement or by applicable United States
federal and state securities laws. In consideration of and in full payment for
the Shares, Purchaser hereby pays the Purchase Price to the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, ▇▇▇▇ AND ▇▇▇▇▇▇▇
As of the date hereof, each of ▇▇▇▇ (solely with regard to the Company, as
in existence immediately prior to the Merger), ▇▇▇▇▇▇▇ (solely with regard to
▇▇▇▇▇▇▇ Technologies, Inc. ("TTI"), as in existence immediately prior to the
Merger) and the Company severally, represent and warrant to Purchaser, as
follows:
3.1 ORGANIZATION, QUALIFICATION, ETC. OF THE COMPANY. Each of the Company
and each Subsidiary is a duly organized and validly existing corporation under
the Laws of the State of Florida and have all necessary corporate power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on its business as it has been, is currently and is
anticipated to be conducted. The Company and each Subsidiary are duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the properties owned or leased by them or the operation of their
respective businesses makes such licensing or qualification necessary, except
where the failure to be so licensed, qualified or in good standing does not have
a Material Adverse Effect. All material corporate actions taken by the Company
and each Subsidiary have been duly authorized and neither the Company nor any
Subsidiary has taken any action that in any respect conflicts with, constitutes
a default under or results in a violation of any provision of their respective
Articles of Incorporation or Bylaws (collectively, the "Articles of
Incorporation").
3.2 AUTHORITY OF THE COMPANY. The Company has all necessary power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and (assuming due authorization,
execution and delivery by Purchaser) constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforcement may be subject to (a) Bankruptcy or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
3.3 NO CONFLICT. The execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated hereby do
not and will not: (a)
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conflict with or violate any Law or Governmental Order applicable to the Company
or a Subsidiary, which violation or conflict would, individually or in the
aggregate, have a Material Adverse Effect on the Company or a Subsidiary, the
Business or on the transactions contemplated hereby; or (b) conflict with,
result in any breach of, constitute a default (or an event which with the giving
of notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Company or
a Subsidiary, or the Business pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument, agreement or arrangement to which the Company or a Subsidiary
is a party or by which any of such assets or properties is bound or affected,
which conflict or violation would, individually or in the aggregate, have a
Material Adverse Effect on the ability of the Company to consummate the
transactions contemplated hereby or on a Subsidiary or the Business.
3.4 CAPITALIZATION OF THE COMPANY. SCHEDULE 3.4 accurately sets forth the
names of the holders of: (a) all of the outstanding capital stock of the Company
and the number of shares owned by each such stockholder; (b) all Rights relating
to the issuance of capital stock of the Company. SCHEDULE 3.4 also sets forth
the material terms of each of the Rights. Each outstanding share of capital
stock of the Company has been duly and validly authorized and issued and is
fully paid and owned, beneficially and of record, by the stockholder(s) listed
on SCHEDULE 3.4.
3.5 THE SHARES. All of the Shares are duly authorized and validly issued,
fully paid, non-assessable, with all documentary stamp taxes of any kind prepaid
and free and clear of all Encumbrances, other than those restrictions imposed by
this Agreement or by applicable United States federal and state securities laws.
3.6 REGISTRATION OF SHARES. Assuming that Purchaser's representations and
warranties contained herein are true and correct, the offering, issuance, sale
and delivery of the Shares are and shall be exempt from the registration
requirements of the Securities Act.
3.7 SUBSIDIARIES. SCHEDULE 3.7 is a true and complete list of all of the
Company's Subsidiaries. For each Subsidiary, SCHEDULE 3.7 sets forth: (a) the
Subsidiary's name; (b) the Subsidiary's jurisdiction of incorporation; (c) the
Subsidiary's principal office address; (d) the Subsidiary's principal business;
and (d) the percentage of the Subsidiary owned by the Company.
3.8 TITLE TO THE ASSETS. The Company, TTI and each Subsidiary has good
title to or, in the case of leased or subleased Assets, valid and subsisting
leasehold interests in, all of their respective Assets, free and clear of all
Encumbrances. All the Assets are in good operating condition and repair,
ordinary wear and tear excepted, and are suitable for the purposes for which
they are used and intended.
3.9 CONSENTS AND APPROVALS. The execution, delivery and performance of
this Agreement by the Company do not and will not require any consent, approval,
authorization or
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other order of, action by, filing with or notification to any Governmental
Authority or any third party.
3.10 FINANCIAL INFORMATION. All balance sheets, profit and loss accounts
and all other financial information of which have been made available to
Purchaser by or on behalf of the Company, TTI and each Subsidiary for the
purposes of or in connection with this Agreement or any transaction contemplated
hereby have been prepared in accordance with GAAP, consistently applied
throughout the periods involved (except as disclosed therein) and give a true
and fair view of the state of affairs of the Company, TTI and each Subsidiary as
of the dates thereof and the results of its operations for the periods then
ended, subject to year-end adjustments consisting only of normal recurring
accruals.
3.11 BOOKS AND RECORDS. The books of account and other financial records
of the Company, TTI and each Subsidiary: (a) reflect all items of income and
expense and all assets and liabilities required to be reflected therein, except
to the extent that the omission to reflect such items could not, individually or
in the aggregate, have a Material Adverse Effect on the Business or the business
of TTI or a Subsidiary; (b) are complete and correct, not misleading and do not
contain or reflect any inaccuracies or discrepancies; and (c) have been
maintained in accordance with good business and accounting practices.
3.12 RECEIVABLES. All Receivables reflected on the most recent balance
sheets of the Company, each Subsidiary and TTI arose from, and the Receivables
existing as of the date hereof have arisen from, the sale of services to persons
not Affiliated with the Company, ▇▇▇▇ or ▇▇▇▇▇▇▇ and in the ordinary course of
its business consistent with past practice and constitute or will constitute, as
the case may be, only valid, undisputed claims of the Company, each Subsidiary
and TTI, respectively, not subject to valid claims of set-off, off-set or other
defenses or counterclaims. The financial statements of the Company, each
Subsidiary and TTI make full provision for all doubtful debts and all bad debts
have been written off.
3.13 LITIGATION. There are no actions, disputes or claims being brought or
threatened by or against the Company, TTI or any Subsidiary (or any of the
directors, officers, employees or agents of the Company, TTI or any Subsidiary),
or affecting any of the Assets which, if adversely determined, could reasonably
be expected to have a Material Adverse Effect. None of the Company, TTI, any
Subsidiary or the Assets are subject to any Law or Governmental Order which has
or could reasonably be expected to have a Material Adverse Effect.
3.14 CONDUCT OF BUSINESS IN THE ORDINARY COURSE. The Company, TTI and each
Subsidiary have conducted the Business only in the ordinary course and
consistent with past practice.
3.15 COMPLIANCE WITH LAWS. The Company, TTI and each Subsidiary have
conducted and continue to conduct their respective businesses in all material
respects in accordance with all Laws and all Governmental Orders entered by or
with any Governmental Authorities, and the Company, TTI and each Subsidiary are
in compliance with all such Laws or Governmental Orders.
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3.16 ENVIRONMENTAL COMPLIANCE. The Company, TTI and each Subsidiary and
the Real Property (as hereinafter defined) are, and at all times have been, in
compliance with all applicable Environmental Laws.
3.17 CONTRACTS.
(a) The Company has, or has caused to be, made available to Purchaser
for review and duplication, correct and complete copies (or in the case of oral
contracts, summaries thereof) of all of the following contracts and agreements
of the Company and each Subsidiary, together with all material contracts,
agreements, leases and subleases to which the Company and each Subsidiary is a
party concerning the management or operation of any real property and all
material agreements relating to Intellectual Property (such material contracts
and agreements, listed on SCHEDULE 3.17(A), collectively, "Material Contracts"):
(i) each contract and agreement for the purchase of inventory or
personal property with any supplier or for the furnishing of services to the
Company or a Subsidiary, or otherwise related to the Business under the terms of
which the Company or a Subsidiary; (A) is reasonably anticipated to pay or
otherwise give consideration of more than $5,000 in the aggregate over the
remaining term of such contract or (B) cannot cancel without penalty or further
payment and without more than 30 days' notice;
(ii) each contract and agreement for the sale of inventory or
other personal property or for the furnishing of services by the Company or a
Subsidiary which: (A) is reasonably anticipated to involve consideration of more
than $5,000 in the aggregate during the fiscal year ending December 31, 1996 or
in any fiscal year thereafter, (B) is reasonably anticipated to involve
consideration of more than $5,000 in the aggregate over the remaining term of
the contract or (C) cannot be cancelled by the Company or a Subsidiary without
penalty or further payment and without more than 30 days' notice;
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research, marketing,
consulting and advertising contracts and agreements to which the Company or a
Subsidiary is a party;
(iv) all management contracts and contracts with independent
contractors, consultants or other persons (including Affiliates) (or similar
arrangements) involving exclusive rights or requiring payments in excess of
$5,000 individually to which the Company or a Subsidiary is a party and which
are not cancelable without penalty or further payment on 30 days' or less
notice;
(v) all contracts and agreements relating to indebtedness of the
Company or a Subsidiary in excess of $5,000 individually or $5,000 in the
aggregate;
(vi) all contracts and agreements with any Governmental Authority
to which the Company or a Subsidiary is a party;
11
(vii) all contracts and agreements that limit or purport to limit
the ability of the Company or a Subsidiary to compete in any line of business,
or with any person, or in any geographic area or during any period of time;
(viii) all contracts and agreements between or among the Company
or a Subsidiary on the one hand and any Affiliate of the Company or a Subsidiary
on the other hand;
(ix) all leases and subleases for tangible personal property
having a value in excess of $5,000; for purposes of this Agreement, the term
"lease" shall include any and all leases, subleases, sale/leaseback agreements
or similar arrangements;
(x) all contracts relating to Intellectual Property and all
contracts relating to real property owned, leased or used by the Company or a
Subsidiary; and
(xi) all other contracts and agreements whether or not made in
the ordinary course of business, which are material to the Company, a Subsidiary
or the conduct of the Business.
(b) Each Material Contract: (i) is valid and binding on the
respective parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated hereby shall continue in full
force and effect without penalty or other adverse consequence. Neither the
Company nor any Subsidiary is, and no other party to any Material Contract is,
in breach of or default under any Material Contract, which breach or default
would have a Material Adverse Effect on the Company or any Subsidiary.
(c) There is no contract, agreement or other arrangement granting any
person any preferential right to purchase, other than in the ordinary course of
Business consistent with past practice, any of the properties, assets or
services of the Company or any Subsidiary.
(d) There is not now outstanding any guarantee or agreement for
indemnity or for suretyship either given by or for the benefit of the Company or
any Subsidiary.
3.18 INTELLECTUAL PROPERTY.
(a) The Company has heretofore made available to Purchaser a true and
complete list of all Intellectual Property which the Company and each Subsidiary
own or have the right to use. The Company and each Subsidiary have full
ownership thereof or the right to use all such rights, in each case except to
the extent heretofore disclosed in writing to Purchaser, and the Company has no
knowledge that the conduct of the Business and the business of each Subsidiary
as now operated, as of the date hereof, conflicts with, misappropriates or
infringes, or has been alleged to infringe, any Intellectual Property rights or
franchises of any person (including patents, trade secrets or other proprietary
rights of any third party). The Company has heretofore made available to
Purchaser a true and complete copy of every material license or
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other material agreement, including all amendments thereto, pursuant to which
the Company or any Subsidiary agreed to grant or has granted rights with respect
to the Intellectual Property, or pursuant to which the Company or any Subsidiary
enjoys rights in any Intellectual Property of any person. No current or former
consultant, employee or Affiliate of the Company or any Subsidiary, or any of
their respective shareholders, officers or directors has any right, title or
interest in any of the Intellectual Property used and/or owned by the Company or
any Subsidiary.
(b) None of the Intellectual Property owned by or licensed to the
Company or any Subsidiary is being infringed by any person.
(c) The Intellectual Property heretofore disclosed in writing to
Purchaser comprises all of the Intellectual Property required to enable the
Company and each Subsidiary to lawfully carry on their respective businesses, as
now conducted.
3.19 REAL PROPERTY. The particulars of the real property set forth on
SCHEDULE 3.19 attached hereto (the "REAL PROPERTY") are true and correct in all
respects and the Company and each Subsidiary have good and marketable title to
their respective Real Property free from Encumbrances and other adverse rights.
The Real Property comprises all the real property owned, used or occupied by the
Company and each Subsidiary in connection with their respective businesses and
neither the Company nor any Subsidiary has ever owned any interest in any other
real property other than the Real Property. There is no violation of any Law
(including, without limitation, any building, planning, zoning law or
environmental law) or any covenants, stipulations or conditions relating to any
of the Real Property and the Company and each Subsidiary are in peaceful and
undisturbed possession of each parcel of Real Property. There are no contractual
or legal restrictions that preclude or restrict in any material manner the
ability to use any of the Real Property in the manner in which they are
currently being used and the Real Property has all rights and easements
reasonably necessary for their use and enjoyment for the purposes of the
Business. Neither the Company nor any Subsidiary is leasing or subleasing and
has not leased or sublet any parcel or any portion of any parcel of Real
Property to any other Person, nor has the Company or any Subsidiary assigned its
interest under any lease or sublease for any leased Real Property to any third
party. There are no outstanding material disputes with any Person relating to
the Real Property or its use and no notices have been given or received by the
Company or any Subsidiary which would adversely affect the use and enjoyment of
the Real Property.
3.20 TAXES.
(a) Except as disclosed on SCHEDULE 3.20(A): (i) all returns and
reports in respect of all Taxes required to be filed with respect to the
Company, TTI and each Subsidiary and the Business have been timely filed; (ii)
all Taxes required to be shown on such returns and reports or otherwise due have
been timely paid; (iii) all such returns and reports are true, correct and
complete; (iv) no adjustment relating to such returns has been proposed by any
tax authority and no basis exists for any such adjustment; (v) there are no
pending or threatened actions or proceedings for the assessment or collection of
Taxes against the Company, TTI or any
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Subsidiary; (vi) there are no Encumbrances on any Assets; (vii) none of the
Company, TTI or any Subsidiary has been at any time a member of any partnership
or joint venture or the holder of a beneficial interest in any trust for any
period for which the statute of limitations for any Tax has not expired; and
(viii) all Taxes required to be withheld, collected or deposited by or with
respect to the Company, TTI, each Subsidiary and the Business have been timely
withheld, collected or deposited, as the case may be, and, to the extent
required, have been paid to the relevant taxing authority.
(b) Except as disclosed on SCHEDULE 3.20(B): (i) there are no
outstanding waivers or agreements extending the statute of limitations for any
period with respect to any Tax to which the Company, TTI or any Subsidiary may
be subject; (ii) there are no proposed reassessments of any property owned by
the Company, TTI or any Subsidiary or other proposals that could increase the
amount of any Tax to which the Company, TTI or any Subsidiary would be subject;
and (iii) no power of attorney that is currently in force has been granted with
respect to any matter relating to Taxes that could affect the Company, TTI or
any Subsidiary.
(c) The Company has made available to Purchaser correct and complete
copies of all federal, state and foreign income, franchise and similar tax
returns of the Company, TTI and each Subsidiary since 1993, and correct and
complete summaries of all examination reports, and statements of deficiencies
assessed against or agreed to by the Company, TTI and each Subsidiary since
1993.
3.21 DIVESTMENT OF ADULT ENTERTAINMENT BUSINESS. Each of the Company,
▇▇▇▇, ▇▇▇▇▇▇▇ and their respective Affiliates have divested themselves of any
legal or beneficial interest in any business which is involved in Adult
Entertainment.
3.22 MERGER WITH ▇▇▇▇▇▇▇ TECHNOLOGIES. The Company and TTI have completed
the Merger.
3.23 BROKERS. Except as disclosed on SCHEDULE 3.23, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement or
the Concurrent Transactions based upon arrangements made by or on behalf of the
Company.
3.24 FULL DISCLOSURE. No representation or warranty with respect to the
Company contained in this Agreement and no written statement contained in any
financial or operating data or certificate furnished to Purchaser pursuant to
this Agreement, or in connection with the transactions contemplated by this
Agreement (including the Concurrent Transactions), contains any untrue statement
of a material fact, or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As of the date hereof, Purchaser represents and warrants to the Company,
as follows:
4.1 ORGANIZATION, QUALIFICATION, ETC. OF PURCHASER. If not an individual,
Purchaser is duly organized and validly existing company under the Laws of its
place of incorporation and has all necessary corporate power and authority to
own, operate or lease the properties and assets now owned, operated or leased by
it and to carry on its business as it has been, is currently and is anticipated
to be conducted. If not an individual, Purchaser is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing does not have, or could not reasonably
be expected to have, a Material Adverse Effect.
4.2 AUTHORITY OF PURCHASER. If not an individual, Purchaser has all
necessary corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. If not an individual, the execution and delivery of this Agreement by
Purchaser, the performance by Purchaser of its obligations hereunder and the
consummation by Purchaser of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser and (assuming due
authorization, execution and delivery by the Company) constitutes the legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as such enforcement may be subject to: (a)
Bankruptcy or other similar laws now or hereafter in effect relating to
creditors' rights generally; and (b) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
4.3 NO CONFLICT. The execution, delivery and performance of this Agreement
by Purchaser and the consummation of the transactions contemplated hereby do not
and will not: (a) if not an individual, violate, conflict with or result in the
breach of any provision of Purchaser's organizational documents; or (b) conflict
with or violate any Law or Governmental Order applicable to Purchaser, which
violation or conflict could, individually or in the aggregate, have a Material
Adverse Effect on Purchaser.
4.4 CONSENTS AND APPROVALS. The execution, delivery and performance of
this Agreement by Purchaser do not and will not require any consent, approval,
authorization or other order of, action by, filing with, or notification to, any
Governmental Authority or any third party.
4.5 INVESTOR STATUS. Purchaser is a sophisticated investor and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Company represented by
the Shares. Purchaser is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
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4.6 INVESTMENT INTENT AND RESTRICTION ON TRANSFER. Purchaser is acquiring
the Shares for its own account and for investment and not with a view towards,
or for sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling the Shares. However, the Company, ▇▇▇▇ and
▇▇▇▇▇▇▇ understand that the disposition of any of Purchaser's property is within
its discretion, subject to compliance with federal and state securities laws and
the restrictions contained herein.
4.7 NON U.S. PERSON. Purchaser is not a U.S Person ("U.S. Person"), as
such term is defined in Rule 902(o) under Regulation S promulgated under the
Securities Act.
4.8 OFFSHORE TRANSACTION. No offer of the Shares was made to Purchaser in
the United States. At the time the offer for the Shares was made, Purchaser was
located outside the United States.
4.9 RESTRICTIONS ON TRANSFER. Purchaser understands that the Shares have
not been registered under the Securities Act. During the period commencing on
the date hereof and terminating one (1) year after the date hereof (the
"Restricted Period"), Purchaser shall not offer or sell the Shares in the United
States, to a U.S. Person or for the account or benefit of a U.S. Person. After
the expiration of the Restricted Period, Purchaser may offer, sell, pledge or
otherwise transfer the Shares only if registered under the Securities Act or if,
in the opinion of counsel reasonably satisfactory to the Company, an exemption
from registration is available.
4.10 NO SCHEME TO AVOID REGISTRATION. The transactions contemplated by
this Agreement: (i) have not been pre-arranged with a purchaser that is located
in the United States or is a U.S. Person; and (ii) are not part of a plan or
scheme to evade the registration provisions of the Securities Act.
4.11 BROKERS. Except as disclosed on SCHEDULE 4.11 hereto, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Purchaser.
ARTICLE V
LEGEND
Purchaser understands that a legend, in substantially the following form,
will be placed on the certificate representing the Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). PRIOR TO THE EXPIRATION OF
THE ONE (1) YEAR RESTRICTED PERIOD (AS DEFINED BY RULE 902(m) ADOPTED
UNDER REGULATION S OF THE ACT), THESE SECURITIES CANNOT BE OFFERED OR SOLD
IN THE UNITED STATES OR TO U.S. PERSONS (AS
16
DEFINED BY RULE 902(o) ADOPTED UNDER REGULATION S OF THE ACT), UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT, OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE. PRIOR TO THE EXPIRATION
OF THE ONE (1) YEAR RESTRICTED PERIOD, THE PURCHASER OF THE SECURITIES
(WHO IS NOT A DISTRIBUTOR, DEALER, OR SUBUNDERWRITER) MAY RESELL THE
SHARES ONLY IN A TRANSACTION EFFECTED OUTSIDE OF THE UNITED STATES AND
PROVIDED THE PURCHASER DOES NOT SOLICIT PURCHASERS IN THE UNITED STATES OR
OTHERWISE ENGAGE IN SELLING EFFORTS IN THE UNITED STATES. AFTER THE ONE
YEAR RESTRICTED PERIOD EXPIRES, THE SECURITIES CAN BE SOLD IN THE UNITED
STATES ONLY IF REGISTERED OR IF, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
ARTICLE VI
REGISTRATION RIGHTS
6.1 PIGGYBACK REGISTRATION RIGHTS.
(a) RIGHT TO PIGGYBACK. Subject to the limitations set forth in
Section 6.1(e) hereof, whenever the Company, in its sole discretion, proposes to
file a registration statement (a "Proposed Registration") under the Securities
Act with respect to any equity security (as defined in the Securities Act)
(other than a registration statement on Form ▇-▇, ▇▇▇▇ ▇-▇ or any successor form
for the registration of securities to be offered in a transaction subject to
Rule 145 under the Securities Act or to employees of, and/or consultants and
advisors to, the Company and/or its subsidiaries pursuant to any "employee
benefit plan," as such term is defined in Rule 405 promulgated under the
Securities Act) and the registration form to be used may be used for the
registration (a "Piggyback Registration") of Piggyback Registrable Securities,
the Company will give written notice (the "Piggyback Notice") to Purchaser as
soon as practicable (but in no event less than thirty days) before the initial
filing with the Securities and Exchange Commission (the "Commission") of such
registration statement, which notice will (i) specify the kind and number of
securities proposed to be registered and the proposed offering price or prices
and distribution arrangements; (ii) include such other information that at the
time and under the circumstances would be appropriate to include in such notice;
and (iii) subject to the provisions of this Section 6.1(a), offer Purchaser the
opportunity to include in such filing all Piggyback Registrable Securities which
Purchaser may request in accordance with subsection 6.1(b) below.
(b) REQUESTS TO PIGGYBACK. Purchaser shall advise the Company in
writing (a "Piggyback Registration Request") within twenty days after the date
of receipt of the Piggyback Notice of the number or amount of each class or
series of Piggyback Registrable Securities which Purchaser desires to have
registered.
17
(c) SELECTION OF UNDERWRITERS. If the Piggyback Registration is an
underwritten offering, the Board of Directors of the Company will select a
managing underwriter or underwriters to administer the offering.
(d) PIGGYBACK EXPENSES. Subject to the limitations set forth in
Section 6.1(e) hereof, all Registration Expenses of the Piggyback Registration
will be paid solely by the Company.
(e) LIMITATIONS ON PIGGYBACK RIGHTS. Purchaser will be entitled to
request four (4) Piggyback Registrations. A registration will not count as the
permitted Piggyback Registrations until it has become effective, and no
registration will count as the permitted Piggyback Registration unless Purchaser
is able to register and sell at least 55% of the Piggyback Registration
Securities requested to be included in such registration. The exercise of a
Piggyback Registration shall not affect Purchaser's Demand Registration rights
under Section 6.2 hereof. Purchaser shall not be permitted to exercise its
Piggyback Registration rights with regard to any underwritten Piggyback
Registration where a first or second tier underwriter, or underwriters, provides
Purchaser with a reasonable determination, in writing that the amount or kind of
Purchaser's Shares to be included in such offering would materially and
adversely affect the success of all securities proposed to be distributed for
the account of the Company in such offering.
6.2 DEMAND REGISTRATION RIGHTS.
(a) REQUESTS FOR REGISTRATION. Subject to the limitations set forth
in Section 6.2(d) hereof, Purchaser may request registration under the
Securities Act of all or part of its Demand Registrable Securities on Form S-1
or any other registration form available for use by the Company (a "Demand
Registration"). The request for a Demand Registration shall specify the number
of Demand Registrable Securities requested to be registered and the anticipated
per share price range for such offering. However, the Company may postpone, for
a reasonable period of time not to exceed 90 days (but in any event not to
extend beyond the date of public disclosure of the information, or the date of
abandonment or termination of the transactions or negotiations, hereinafter
referred to), the filing of a registration statement otherwise required to be
prepared and filed by it pursuant to this subsection 6.2(a) if: (i) at the time
the Company receives a registration request, the Board determines, in good faith
and in its reasonable business judgment, that (A) such Demand Registration would
require the public disclosure of material non-public information concerning any
pending or ongoing material transaction or negotiations involving the Company
which, in the opinion of the Company's outside legal counsel, is not yet
required to be publicly disclosed, and (B) such disclosure would materially
interfere with such transaction or negotiations or have a Material Adverse
Effect on the Company, and (ii) the Company diligently and in good faith
continues to pursue such transaction or negotiations throughout the period of
such postponement.
18
(b) SELECTION OF UNDERWRITERS. If the Demand Registration is for or
includes an underwritten offering, Purchaser shall select the managing
underwriter or underwriters to administer such offering, who shall be reasonably
satisfactory to the Company.
(c) DEMAND EXPENSES. Subject to the limitations set forth in Section
6.3(d) hereof, the Company shall pay for all Registration Expenses relating to
the Demand Registration.
(d) LIMITATIONS ON DEMAND RIGHTS. Purchaser may only request one (1)
Demand Registration. A registration will not count as the permitted Demand
Registration: (a) until it has become effective; and (b) unless Purchaser is
able to register and sell at least 55% of the Demand Registrable Securities
requested to be included in such registration. After the Demand Registrable
Securities have been registered, Purchaser shall have no obligation to sell any
or all of such securities. For a period of three (3) years from the date hereof,
Purchaser may not request a Demand Registration if, at the time of such request,
none of the Company's equity securities are publicly traded. However, after the
period ending three (3) years from the date hereof, Purchaser may request a
Demand Registration at any time, even if none of the Company's equity securities
are then publicly traded.
6.3 PROCEDURE. With respect to any Piggyback Registration or Demand
Registration, the Company shall use its best efforts to effect the registration
of all the Piggyback Registrable Securities or Demand Registrable Securities, as
the case may be (collectively, the Request Securities"), which Purchaser has
requested to be included therein, as quickly as practicable. In connection with
any such request, the Company shall do the following as expeditiously as
possible:
(i) prepare and file with the Commission a registration statement
on any form for which the Company then qualifies and which is available for the
registration of the Request Securities;
(ii) include in the registration on such form all the Request
Securities and use its best efforts to cause such registration statement to
become effective; PROVIDED, HOWEVER, that at least ten days before filing such
registration statement or any prospectus or any amendment or supplement thereto,
including documents to be incorporated by reference upon or after the initial
filing of such registration statement, the Company will furnish to Purchaser
copies of all such documents proposed to be filed (including documents to be
incorporated by reference therein), which documents will be subject to the
reasonable review and comments of Purchaser;
(iii) unless the Company qualifies to use a Form S-3 registration
statement or any similar form then in effect, prepare and file with the
Commission such amendments and post-effective amendments and supplements to the
registration statement or any prospectus as may be necessary to keep the
registration statement effective for a period of not more than one hundred and
eighty (180) days and comply with the provisions of the Securities Act
applicable to the Company with respect to the disposition of all the Request
Securities, covered by such registration statement or any supplement to any such
prospectus;
19
(iv) if the Company qualifies to use a Form S-3 registration
statement or any similar form then in effect and if the Company receives a
request for a Demand Registration, prepare and file with the Commission such
registration statement to permit the offering of the Demand Registrable
Securities to be made on a continuous basis pursuant to Rule 415 (or any similar
rule that may be adopted by the Commission) under the Securities Act (a "Shelf
Registration") and keep the Shelf Registration current and continuously
effective until Purchaser can sell all of the Demand Registrable Securities;
(v) furnish to Purchaser such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement and such other documents as Purchaser
may reasonably request;
(vi) use its best efforts to register or qualify such Request
Securities under such other securities or blue sky laws of such jurisdiction as
Purchaser reasonably requests and do any and all other acts and things which may
be reasonably necessary or advisable to enable Purchaser to consummate the
disposition in such jurisdiction (provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(vii) notify Purchaser at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement contains an untrue statement of material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
Purchaser, the Company will prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to subsequent purchasers of such Request
Securities, such prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading;
(viii) cause all such Request Securities, to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on one of the following (in order of
priority and assuming that the Company qualifies for such listing): (A) the New
York Stock Exchange, (B) the American Stock Exchange; (C) the NASDAQ National
Market System; or (D) the NASDAQ SmallCap Market System;
(ix) provide a transfer agent and registrar for all such Request
Securities, not later than the effective date of such registration statement;
(x) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as Purchaser or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Request Securities, (including, without limitation,
effecting a stock split or a combination of shares);
20
(xi) make available for inspection by Purchaser, any underwriter
participating in any distribution pursuant to such registration statement and
any attorney, accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records") to the extent reasonably
necessary to enable such person to exercise their due diligence responsibilities
and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement. Records and other information which the Company determines, in good
faith, to be confidential and of which determination Purchaser is notified shall
not be disclosed by Purchaser unless (i) the disclosure of such Records or other
information, in the opinion of counsel reasonably acceptable to the Company, is
necessary to avoid or correct a misstatement or omission in the registration
statement, any preliminary prospectus, any prospectus or prospectus supplement,
or (ii) the release of such Records or other information is ordered pursuant to
subpoena, court order or request by a governmental authority or otherwise is
required by applicable law or (iii) the information in such Records or such
other information is generally available to the public. Purchaser shall, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction or by governmental authority, give notice to the Company and allow
the Company, at the expense of the Company, to undertake appropriate action to
prevent disclosure of the Records deemed confidential;
(xii) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, use its reasonable best efforts promptly to obtain the withdrawal
of such order;
(xiii) use its best efforts to obtain a "cold comfort" letter
from the independent public accountants of the Company which is addressed to
Purchaser and any underwriters and contains such matters of the type customarily
covered by "cold comfort" letters; and
(xiv) use its best efforts to obtain an opinion from counsel for
the Company which is addressed to Purchaser and underwriter and contains such
matters of the type customarily covered by counsel for the issuer of securities.
(a) AFFIDAVITS OF PURCHASER. With respect to any Piggyback
Registration or Demand Registration, Purchaser shall furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with the registration of the Request Securities.
(b) PUBLIC SALE BY PURCHASER. Purchaser shall not effect any public
sale or distribution of Request Securities, of any class or series being
registered in a Demand Registration or Piggyback Registration for offering to
the public, any similar security issued by
21
the issuer ofsuch class or series or any security exchangeable or exercisable
for or convertible into any such class or series of any such Request Securities
or any such similar security, including a sale pursuant to Rule 144 (or any
similar rule then in force) under the Securities Act, during, in the case of a
Piggyback Registration, the fourteen (14) days prior to, and during the ninety
(90) day period beginning on, the effective date of the Piggyback Registration
(except as part of such registration or pursuant to registrations on Form S-4 or
S-8 or any successor form to either such form) and, in the case of any Demand
Registration, the period commencing on the date of filing the Demand
Registration and ending on the 120th day following the effective date of the
Demand Registration (except as part of such Demand Registration), if and to the
extent requested by the Company, in the case of a non-underwritten public
offering, or if and to the extent requested by the managing underwriter or
underwriters, in the case of an underwritten public offering.
(c) PUBLIC SALE BY THE COMPANY AND OTHERS. Neither the Company nor
any of its Affiliates (other than Purchaser, if deemed to be an Affiliate) will
effect any public sale or distribution of any securities of any class or series
being registered in a Piggyback Registration or Demand Registration for offering
to the public, any similar security issued by the issuer of such class or series
or any security convertible into or exchangeable or exercisable for any such
security during, in the case of a Piggyback Registration, the fourteen (14) days
prior to, and during the ninety (90) day period beginning on, the effective date
of the Piggyback Registration (except as part of such registration or pursuant
to registrations on Form S-4 or S-8 or any successor form to either such form)
and, in the case of any Demand Registration, the period commencing on the date
of filing the Demand Registration and ending on the 120th day following the
effective date of the Demand Registration.
(d) REGISTRATION EXPENSES. The Company shall pay for all costs and
expenses ("Registration Expenses") of each registration hereunder, including,
but not limited to, the following: (i) registration and filing fees, (ii) fees
and expenses relating to the Company's compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection with
blue sky qualifications), (iii) expenses incident to the preparation, printing
and filing of the registration statement, each preliminary prospectus and
definitive prospectus and each amendment or supplement to any of the foregoing
and copies thereof, (iv) internal expenses (including, without limitation, all
salaries and expenses of officers and employees of the Company performing legal
or accounting duties), (v) fees and expenses incurred in connection with the
listing of the Request Securities, (vi) fees and disbursements of counsel for
the Company and fees and expenses of independent certified public accountants
retained by the Company, (vii) fees and expenses of any special experts retained
by the Company in connection with such registration, (viii) fees and expenses
associated with any filings with or submission to the NASD (including, if
applicable, the fees and expenses of any "qualified independent underwriters,"
as such term is defined in Schedule E of the By-laws of the NASD, and its
counsel), (ix) fees of each investment banking firm required to be retained or
consulted pursuant to the terms hereof; and (x) fees and disbursements of one
law firm for the underwriters, in any underwritten offering. The Company shall
not have any obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Request Securities, as the
22
case may be, by Purchaser, or, except as otherwise provided in the immediately
precedingsentence, any out-of-pocket expenses of Purchaser (or any agents who
manage their accounts) or fees and disbursements of any counsel for Purchaser.
6.4 INDEMNIFICATION REGARDING REGISTRATION RIGHTS.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify
Purchaser and, if applicable, its officers and directors and each Person who
controls Purchaser (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, preliminary prospectus or definitive prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by Purchaser specifically for
use in the preparation thereof or by Purchaser's failure, if required, to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished Purchaser with a sufficient
number of copies of the same.
(b) INDEMNIFICATION BY PURCHASER. In connection with any registration
statement in which Purchaser is participating, Purchaser shall indemnify the
Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, preliminary prospectus
or definitive prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in information furnished by
Purchaser to the Company specifically for use in the preparation of such
registration statement or prospectus.
(c) PROCEDURE. Any Person entitled to indemnification hereunder will:
(a) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification, provided that the failure of any
indemnified party to give notice shall not relieve the indemnifying party of its
obligations hereunder except to the extent the indemnifying party is actually
prejudiced by such failure; and (b) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
23
(d) SURVIVAL. The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and will survive the transfer of securities.
(e) CONTRIBUTION. If the indemnification provided for in this Section
6.4 from the indemnifying party is unavailable to the indemnified party, then
the indemnifying party, instead of indemnifying the indemnified party, shall
contribute to and pay the amount paid or payable by such indemnified party as a
result of the loss, claim, damage, liability or expenses (collectively, the
"Claim") giving rise to indemnification hereunder in such proportion as is
appropriate to reflect the relative fault of the indemnifying and indemnified
party in connection with the actions which gave rise to the Claim. The relative
fault of the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the action in question has been made
by, or relates to, information supplied by such indemnifying party or
indemnified party, and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such action. The Company and
Purchaser agree that it would not be just and equitable if contribution and
payment pursuant to this Section 6.4 were determined by pro rata allocation or
by any other allocation method which does not take into account the equitable
considerations referred to in the preceding sentence. The amount paid or payable
as a result of a Claim shall include any legal or other fees and expenses
reasonably incurred by such party in connection with such Claim. However, no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contributions and payment from
any Person who was not guilty of such fraudulent misrepresentation.
6.5 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate
in any underwritten registration hereunder unless such Person: (a) agrees to
sell its securities on the basis provided in any underwriting arrangements
reasonably approved by the Persons entitled hereunder to approve such
arrangements; and (b) accurately completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customarily required under the terms of such underwriting arrangements.
6.6 RULE 144. The Company shall file, on a timely basis, any reports
required to be filed by it under the Securities Act and the Exchange Act so as
to enable a Purchaser to sell the Piggyback Registrable Securities and Demand
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by: (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time; or (b) any similar rule adopted
by the Commission.
ARTICLE VII
TAG ALONG RIGHTS AND BRING ALONG RIGHTS
7.1 TAG ALONG RIGHT. With respect to any proposed transfer of shares of
Common Stock by ▇▇▇▇ or ▇▇▇▇▇▇▇ to a third party (the "Third Party"), ▇▇▇▇ and
▇▇▇▇▇▇▇ shall not be
24
permitted to effect such a transfer without first offering Purchaser the right
to sell its shares of Common Stock, pro rata with ▇▇▇▇ and/or ▇▇▇▇▇▇▇, to the
Third Party, at the same price per share and upon the same terms and conditions
of the proposed transfer by ▇▇▇▇ or ▇▇▇▇▇▇▇. However the "tag along" rights
granted under this Section 7.1 shall not apply to: (a) the first 800,000 shares
of Common Stock which are sold by ▇▇▇▇ and/or ▇▇▇▇▇▇▇ after the date hereof; (b)
shares of Common Stock which are sold by ▇▇▇▇ and/or ▇▇▇▇▇▇▇ after the date
hereof in accordance with Rule 144 promulgated under the Securities Act, unless
such shares are sold in a block (as such term is defined in Rule 10b-18
promulgated under the Exchange Act. In this regard, each of ▇▇▇▇▇▇▇ and ▇▇▇▇
shall promptly notify Purchaser of any such disposition of shares which is not
subject to the "tag along" rights granted hereunder pursuant to subsection (a)
of the preceding sentence. Furthermore, Purchaser shall not be able to exercise
its rights under this Section 7.1 with regard to any of its shares of Common
Stock, if such shares are not registered with the SEC and Purchaser previously
failed to exercise its right to register such shares in a Piggyback
Registration.
7.2 BRING ALONG RIGHT. If ▇▇▇▇ or ▇▇▇▇▇▇▇, or both (collectively, the
"Principals") receive a bona fide offer from an unaffiliated third party (the
"Third Party Offer") to purchase (for cash or securities) all of the then
outstanding shares of Common Stock and the Principals wish to accept such offer,
then the Principals shall, within ten (10) days of accepting the Third Party
Offer, notify Purchaser, in writing, of such offer. Upon receipt of such notice,
Purchaser shall then sell shares of Common Stock, pro rata with ▇▇▇▇ and/or
▇▇▇▇▇▇▇, at the same price per share and upon the same terms and conditions of
the Third Party Offer. However, the bring along rights granted hereunder shall
not be available to ▇▇▇▇ or ▇▇▇▇▇▇▇ unless, the exercise of such right, would
cause the Purchaser to receive an amount from the unaffiliated party equal to at
least four (4) times the Purchase Price. The "bring along" rights granted in
this Section 7.2 shall expire on the third anniversary hereof.
ARTICLE VIII
PREEMPTIVE RIGHTS AND ANTI DILUTION RIGHTS
8.1 PREEMPTIVE RIGHTS.
(a) GRANT OF RIGHT. If the Company proposes to and does issue (the
"Third Party Issuance") additional shares of Voting Stock or any Rights to
acquire Voting Stock, to any Person, other than Purchaser or its respective
Affiliates, then Purchaser shall have the right (the "Preemptive Right") to
purchase shares of Voting Stock or Rights, as the case may be, so that,
immediately after such purchase and the Third Party Issuance, Purchaser shall
own the same percentage of shares of the Company's issued and outstanding Voting
Stock (or the right to own such percentage), as it had owned prior to the
proposed Third Party Issuance.
(b) PROCEDURE. The Company shall give Purchaser ten (10) Business
Day's prior written notice of any proposed issuance of Voting Stock or Rights
which would entitle Purchaser to exercise the Preemptive Right. Upon receipt of
such notice, Purchaser shall have ten (10) Business Days (the "Exercise Period")
to exercise the Preemptive Right. If by the
25
expiration of the Exercise Period, Purchaser notifies the Company that it does
not wish to exercise the Preemptive Right or has failed to give a notice to the
Company, then the Company may continue with and effect the proposed Third Party
Issuance. If Purchaser chooses to exercise the Preemptive Right during the
Exercise Period, the Company shall take all actions reasonably necessary to
issue such Voting Shares or Rights to Purchaser in accordance with this Section,
and may continue with and effect the proposed Third Party Issuance.
(c) EXERCISE PRICE. In connection with the exercise of the Preemptive
Right: (i) the exercise price shall be the same price at which the shares of
Voting Stock or Rights are being issued pursuant to the Third Party Issuance;
and (ii) the terms and conditions of the purchase shall be, as nearly as
reasonably practicable, the same as the terms and conditions of the Third Party
Issuance. If all or part of the Third Party Issuance offering price consists of
any consideration other than cash, then the per share, or per Right, price at
which Purchaser is offered the Preemptive Right shall be the amount determined
by dividing the total number of Voting Stock or Rights which are the subject of
the Third Party Issuance into the sum of (i) the aggregate amount of cash, if
any, proposed to be paid for such securities; and (ii) the aggregate fair market
value of the non-cash consideration proposed to be paid for such securities
(taking into account, in determining such fair market value, any liabilities
associated with such non-cash consideration).
(d) EXCEPTIONS. If the Third Party Issuance involves the borrowing of
money from the proposed purchaser, then Purchaser shall not have the Preemptive
Right with regard to such Third Party Issuance unless Purchaser agrees to
participate in such debt financing, on a pro rata basis and pursuant to the same
terms and conditions. Furthermore, the Preemptive Rights shall not apply to any
public offering of securities by the Company which is registered with the SEC.
8.2 ANTI-DILUTION RIGHTS.
(a) RIGHT. Promptly after each Dilutive Issuance, the Company shall
issue to Purchaser without the payment of any additional consideration by
Purchaser, the aggregate number of shares of Common Stock calculated by:
(i) multiplying (A) the Weighted Average Price, calculated after
giving effect to such Dilutive Issuance, by (B) the lesser of (x) the aggregate
number of Dilution Shares, if any, issued, or deemed to be issued, in such
Dilutive Issuance and in all prior Dilutive Issuances (if any) and (y) the
number of shares issued to Purchaser on the date hereof (the "Current Number");
(ii) adding to the resulting product, the product of (A) $0.63
(the "Per Share Purchase Price") multiplied by (B) either (x) if the number of
Dilution Shares issued, or deemed to be issued, in such Dilutive Issuance and in
all prior Dilutive Issuances (if any) is less than the Current Number, the
excess of the Current Number over the number of Dilution
26
Shares; or (y) if the number of Dilution Shares is equal to, or greater than,
the Current Number, zero (0);
(iii) dividing the resulting sum by the Current Number;
(iv) dividing the Purchase Price by the quotient resulting from
the division referred to in (iii); and
(v) subtracting from the resulting quotient the sum of (A) the
Current Number plus (B) the number of shares of Common Stock, if any previously
issued to Purchaser pursuant to this Section 8.2.
(b) ISSUANCES IN CONNECTION WITH OTHER ISSUANCES. If the Company
issues shares of Common Stock or Rights for shares of Common Stock in connection
with the issue or sale of other securities of the Company or in connection with
the delivery by the Company of any other property or assets, which together
comprise one integral transaction in which no specific consideration is
allocated to such shares or Rights, then such shares or Rights shall be deemed
to have been issued without consideration.
(c) ISSUANCES FOR CASH. If the Company issues, for cash, any shares
of Common Stock or any Rights for shares of Common Stock, the consideration
received shall be deemed to be the net amount received by the Company therefor,
after deduction of any accrued interest, dividends or any expenses incurred in
any underwriting commissions or concessions paid or allowed by the Company in
connection therewith.
(d) ISSUANCES FOR NON-CASH CONSIDERATION. If the Company issues, for
non-cash consideration, any shares of Common Stock or any Rights for shares of
Common Stock, the amount of the non-cash consideration shall be deemed the fair
market value of such non-cash consideration on the date of issue of the
securities, as reasonably determined by the Board, less any expenses or
liabilities incurred by the Company in connection therewith.
(e) ISSUANCES IN CONNECTION WITH MERGERS OR CONSOLIDATIONS. If the
Company issues any shares of Common Stock or any Rights for shares of Common
Stock, in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration shall be deemed to be the
fair market value of the portion of the assets and business of the non-surviving
corporation acquired in connection with such merger or consolidation, as
reasonably determined in good faith by the Board. In the event of any
consolidation or merger of the Company in which the Company is not the surviving
corporation, the Company shall be deemed to have issued a number of shares of
Common Stock for stock or securities of the other corporation computed on the
basis of the actual exchange ratio on which the transaction was predicated and
for a consideration equal to the fair market value, on the date of such
transaction, of such stock or securities of the other corporation.
27
(f) STOCK-SPLITS. If the Company subdivides its outstanding shares of
Common Stock into a greater number of shares, the Per Share Purchase Price in
effect immediately prior to such division shall be proportionately reduced.
Conversely, if the Company combines the outstanding shares of Common Stock into
a smaller number of shares, then the Per Share Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
(g) NON-CIRCUMVENTION. The Company shall not, directly or indirectly,
engage or participate in any transaction or otherwise by any act or omission
(including amending its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, or the issue or sale of
securities) avoid or attempt to avoid the observance and performance of the
provisions of Section 8.1 or 8.2. Instead, the Company shall carry out all such
terms and provisions, in good faith, and take all such actions as may be
reasonably necessary or appropriate to protect and preserve the rights and
benefits intended to be conferred in Section 8.1 and 8.2.
(h) FULLY PAID; NO ENCUMBRANCES. All shares of Common Stock issued to
Purchaser pursuant to Section 8.2, shall, when issued, be: (A) duly authorized,
valid issued and outstanding,and fully paid and non-assessable; and (B) be free
from all Encumbrances.
(i) DOCUMENTARY TAX STAMPS. The Company shall pay any for any
documentary tax stamps required in connection with any issue of shares of Common
Stock to the Purchaser pursuant to this Section 8.2.
(j) NO FRACTIONAL SHARES. The Company shall not issue any fractional
shares in connection with any issuance pursuant to this Section 8.2. Instead, to
the extent that the calculation of the number of shares of Common Stock to be
issued to Purchaser pursuant to this Section 8.2 would result in the issuance of
a fractional share, then the number of shares issued to Purchaser shall be
rounded to the nearest number of whole shares.
8.3 RACHET RIGHT.
(a) Depending on the Company's after tax earnings, as determined in
accordance with GAAP and for the year ending December 31, 1997, the Company
shall issue to Purchaser, for no additional consideration, the following number
of shares of Common Stock:
AFTER TAX EARNINGS NO. OF SHARES OF COMMON STOCK
Less than $1,000,000 0.2529 shares for each share of Common
Stock then held by Purchaser
$1,000,000 to $1,500,000 0.12645 shares for each share of Common
Stock then held by Purchaser
Over $1,500,000 0
28
(b) PROCEDURE. If applicable, and subject to applicable Federal and
State securities laws, the Company shall issue the shares of Common Stock
referred to in Section 8.3(a) hereof, within thirty (30) days of the completion
of audited financial statements for the year ending December 31, 1997, but in no
event later than April 15, 1998.
ARTICLE IX
DELIVERIES
9.1 DELIVERIES BY PURCHASER. Contemporaneous with the signing hereof,
Purchaser has executed (where necessary) and delivered or caused to be delivered
to the Company the following documents, certificates and agreements:
(a) PURCHASE PRICE. The Purchase Price;
(b) LOAN. The amount of money which Purchaser has agreed to loan to
the Company pursuant to the terms of that certain Convertible Promissory Note
between the Company and Purchaser, of even date hereof (the "Note"); and
(c) SECURITY AGREEMENT. The Security Agreement between the Company
and Purchaser, of even date herewith, (the "Security Agreement"), duly executed
by Purchaser.
(d) INTERCREDITOR AGREEMENT. The Intercreditor Agreement among the
Company, Purchaser, Union Atlantic, L.C. and the other investors in the Company,
of even date herewith, (the "Intercreditor Agreement"), duly executed by
Purchaser.
9.2 DELIVERIES BY THE COMPANY. Contemporaneous with the signing hereof,
the Company has executed or caused to be executed and delivered or caused to be
delivered to Purchaser the following documents, certificates and agreements:
(a) STOCK CERTIFICATE. A certificate for Purchaser, representing all
of the Shares;
(b) NOTE. The Note, duly signed by an authorized representative of
the Company;
(c) SECURITY AGREEMENT. The Security Agreement, duly signed by an
authorized representative of the Company.
(d) INTERCREDITOR AGREEMENT. The Intercreditor Agreement, duly signed
by an authorized representative of the Company.
(e) ▇▇▇▇ EMPLOYMENT AGREEMENT. The Employment Agreement between the
Company and ▇▇▇▇, of even date herewith, duly signed by the Company and ▇▇▇▇;
29
(f) ▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT. The Employment Agreement between
the Company and ▇▇▇▇▇▇▇, of even date herewith, duly signed by the Company and
▇▇▇▇▇▇▇;
(g) FEES OF PURCHASER'S ATTORNEYS. Payment of the fees of Purchaser's
attorneys, relating to this transaction.
(h) REPRESENTATIONS AND WARRANTIES. A certificate executed by a duly
authorized officer of the Company certifying that the representations and
warranties relating to the Company contained in this Agreement are true and
correct in all material respects as of the date hereof, except for any
representations or warranties that relate solely to an earlier date (in which
case such representations and warranties were true and correct as of such
earlier date);
(i) RESOLUTIONS OF THE COMPANY. A true and complete copy,
certified by the President of the Company, of the resolutions duly and validly
adopted by the Board evidencing its authorization of the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby;
and
(j) INCUMBENCY CERTIFICATE OF THE COMPANY. A certificate of the
Secretary of the Company certifying the names and signatures of the officers of
the Company authorized to sign this Agreement and the other documents to be
delivered hereunder on behalf of the Company.
ARTICLE X
INDEMNIFICATION
10.1 SURVIVAL. All representations and warranties contained herein and
made in writing by or on behalf of the parties hereto in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement for a period of two (2) years after the date hereof, regardless
of any investigation made at any time with respect to any of the foregoing or
any information the parties may have in respect thereto.
10.2 PURCHASER'S RIGHT TO INDEMNIFICATION. Subject to the provisions of
this Article X and in addition to any other rights and remedies available to
Purchaser under applicable law, the Company, ▇▇▇▇ (solely with regard to
representations, warranties, covenants and agreements made by ▇▇▇▇ hereunder)
and ▇▇▇▇▇▇▇ (solely with regard to representations, warranties, covenants and
agreements made by ▇▇▇▇▇▇▇ hereunder) shall severally indemnify and hold
harmless Purchaser and, if applicable, any of its officers, directors,
shareholders, employees, agents, representatives, attorneys, successors,
predecessors and assigns from and against: (a) any and all losses, obligations,
liabilities, damages, claims, deficiencies, costs and expenses (including, but
not limited to, the amount of any settlement entered into pursuant hereto and
all reasonable legal and other expenses incurred in connection with the
investigation, prosecution or defense of the matter) (collectively "Claims"),
which may be asserted against or sustained or incurred by Purchaser in
connection with, arising out of, or relating to (i) any breach of any, or any
false, incorrect or misleading, representation or warranty that is made by the
Company, ▇▇▇▇ or ▇▇▇▇▇▇▇
30
herein or in any Exhibit, Schedule, certificate or other document delivered to
Purchaser by the Company, ▇▇▇▇ or ▇▇▇▇▇▇▇ in connection with this Agreement, or
(ii) any breach of any agreements and covenants made by the Company, ▇▇▇▇ or
▇▇▇▇▇▇▇ herein or in any Exhibit, Schedule, certificateor other document
delivered to Purchaser by the Company, ▇▇▇▇ or ▇▇▇▇▇▇▇ in connection with this
Agreement; and (b) any and all costs and expenses incurred by Purchaser in
connection with the enforcement of its rights under this Agreement.
10.3 THE COMPANY'S RIGHT TO INDEMNIFICATION. Subject to the provisions of
this Article X and in addition to any other rights and remedies that may be
available to the Company under applicable law, Purchaser shall indemnify and
hold harmless the Company and any of its officers, directors, shareholders,
employees, agents, representatives, attorneys, successors, predecessors and
assigns from and against: (a) Claims which may be asserted against or sustained
or incurred by the Company in connection with, arising out of, or relating to
(i) any breach of any, or any false, incorrect or misleading, representation or
warranty that is made by Purchaser herein or in any Exhibit, Schedule,
certificate or other document delivered to the Company by Purchaser in
connection with this Agreement, or (ii) any breach of any agreements and
covenants made by Purchaser herein or in any Exhibit, Schedule, certificate or
other document delivered to the Company by Purchaser in connection with this
Agreement; and (b) any and all costs and expenses incurred by the Company in
connection with the enforcement of its rights under this Agreement. However,
Purchaser's aggregate liability under this Article X shall not exceed such
Purchaser's Purchase Price.
10.4 PROCEDURE FOR CLAIMS.
(a) NOTICE OF CLAIM. Promptly, but in any event within 30 days after
obtaining knowledge of any claim or demand which may give rise to, or could
reasonably give rise to, a claim for indemnification hereunder (any such claim
an "Indemnification Claim"), the party or parties entitled to indemnification
hereunder (the "Indemnified Party") shall give written notice to the party or
parties subject to indemnification obligations therefor (the "Indemnifying
Party") of such Indemnification Claim (a "Notice of Claim"). A Notice of Claim
shall be given with respect to all Indemnification Claims. However, the failure
to timely give a Notice of Claim to the Indemnifying Party shall not relieve the
Indemnifying Party from any liability that it may have to the Indemnified Party
hereunder to the extent that the Indemnifying Party is not prejudiced by such
failure. Subject to Section 10.1, no Indemnified Party shall be entitled to give
a Notice of Claim with respect to any representation and warranty after the
second anniversary of the Closing Date. The Notice of Claim shall set forth the
amount (or a reasonable estimate) of the loss, damage or expense suffered, or
which may be suffered, by the Indemnified Party as a result of such
Indemnification Claim and a brief description of the facts giving rise to such
Indemnification Claim. The Indemnified Party shall furnish to the Indemnifying
Party such information (in reasonable detail) as the Indemnified Party may have
with respect to such Indemnification Claim (including copies of any summons,
complaint or other pleading which may have been served on it and any written
claim, demand, invoice, billing or other document evidencing or asserting the
same).
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(b) THIRD PARTY CLAIMS.
(i) If the claim or demand set forth in the Notice of Claim is a
claim or demand asserted by a third party (a "Third Party Claim"), the
Indemnifying Party shall have 15 days (or such shorter period if an answer or
other response or filing with respect to the pleadings served by the third party
is required prior to the 15th day) after the date of receipt by the Indemnifying
Party of the Notice of Claim (the "Notice Date") to notify the Indemnified Party
in writing of the election by the Indemnifying Party to defend the Third Party
Claim on behalf of the Indemnified Party.
(ii) If the Indemnifying Party elects to defend a Third Party
Claim on behalf of the Indemnified Party, the Indemnified Party shall make
available to the Indemnifying Party and its agents and representatives all
records and other materials in its possession which are reasonably required in
the defense of the Third Party Claim and the Indemnifying Party shall pay any
expenses payable in connection with the defense of the Third Party Claim as they
are incurred (whether incurred by the Indemnified Party or Indemnifying Party).
(iii) In no event may the Indemnifying Party settle or compromise
any Third Party Claim without the Indemnified Party's consent, which shall not
be unreasonably withheld.
(iv) If the Indemnifying Party elects to defend a Third Party
Claim, the Indemnified Party shall have the right to participate in the defense
of the Third Party Claim, at the Indemnified Party's expense (and without the
right to indemnification for such expense under this Agreement). However, the
reasonable fees and expenses of counsel retained by the Indemnified Party shall
be at the expense of the Indemnifying Party if: (A) the use of the counsel
chosen by the Indemnifying Party to represent the Indemnified Party would
present such counsel with a conflict of interest; (B) the parties to such
proceeding include both the Indemnified Party and the Indemnifying Party and
there may be legal defenses available to the Indemnified Party which are
different from or additional to those available to the Indemnifying Party; (C)
within 10 days after being advised by the Indemnifying Party of the identity of
counsel to be retained to represent the Indemnified Party, the Indemnified Party
objects to the retention of such counsel for valid reasons (which shall be
stated in a written notice to Indemnifying Party), and the Indemnifying Party
does not retain different counsel reasonably satisfactory to the Indemnified
Party; or (D) the Indemnifying Party authorizes the Indemnified Party to retain
separate counsel at the expense of the Indemnifying Party.
(v) If the Indemnifying Party does elect to defend a Third Party
Claim, or does not defend a Third Party Claim in good faith, the Indemnified
Party may, in addition to any other right or remedy it may have hereunder, at
the sole and exclusive expense of the Indemnifying Party, defend such Third
Party Claim. However, such expenses shall be payable by the Indemnifying Party
only if and when such Third Party Claim becomes payable.
32
(vi) To the extent that an Indemnified Party recovers on a Third
Party Claim, the amount of such recovery (after deduction of all costs and
expenses incurred in connection with such Third Party Claim) shall reduce,
dollar-for-dollar, the indemnification obligation otherwise owing by the
Indemnifying Party.
(c) COOPERATION IN DEFENSE. The Indemnified Party shall cooperate
with the Indemnifying Party in the defense of a Third Party Claim. Subject to
the foregoing, (i) the Indemnified Party shall not have any obligation to
participate in the defense of or to defend any Third Party Claim, and (ii) the
Indemnified Party's defense of or its participation in the defense of any Third
Party Claim shall not in any way diminish or lessen its right to indemnification
as provided in this Agreement.
ARTICLE XI
CONFIDENTIAL INFORMATION
11.1 Each party shall keep confidential all Confidential Information
obtained from the other party hereto in connection with the negotiation of this
Agreement and the transactions contemplated hereby. Except as expressly
permitted by the Company in writing, neither Purchaser nor any of its Affiliates
shall use the Company's Confidential Information to develop or operate a
business which is directly competitive with the Business as operated by the
Company or any of its Affiliates.
11.2 Notwithstanding the restrictions of Section 11.1, any party (the
"Disclosing Party") may disclose the other party's Confidential Information: (a)
to the Disclosing Party's Representatives so long as the Representatives are
informed of the confidential nature of the Confidential Information; (b) if in
the opinion of the Disclosing Party's legal counsel, disclosure is required
pursuant to any applicable Law, including the Securities Act and the Exchange
Act; (c) if legally compelled by Governmental Order, judicial or administrative
order, deposition, interrogatory, request for documents, subpoena, investigative
demand or other discovery process. However, in the case of the foregoing clause
(c), the Disclosing Party shall use its reasonable best efforts to prevent
disclosure of the Confidential Information by legal means including, if
applicable, attempting to obtain a protective order.
11.3 Each party shall be responsible for a breach of this Article XI by
its Representatives.
ARTICLE XII
ADDITIONAL COVENANTS
12.1 USE OF PROCEEDS. The Company shall only use the Purchase Price for
the acquisition of Galacticomm, Inc. and as general working capital. The Company
shall not use any part of the Purchase Price for: (a) loans to any Person; or
(b) dividends or other distributions to the Company's shareholders.
33
12.2 AUDIT. The Company shall, as soon as reasonably practicable after the
date hereof, retain a "Big 6" accounting firm to conduct an audit of the Company
and its Subsidiaries.
12.3 KEY-MAN LIFE INSURANCE. The Company shall promptly obtain life
insurance policies on the lives of each of ▇▇▇▇ and ▇▇▇▇▇▇▇, in the amount of
$1,000,000 per policy.
ARTICLE XIII
GENERAL PROVISIONS
13.1 EXPENSES. Except as otherwise specified in this Agreement, all costs
and expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.
13.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made) upon the earliest to occur of
(a) receipt, if made by personal service, (b) three days after dispatch, if made
by reputable overnight courier service, (c) upon the delivering party's receipt
of a written confirmation of a transmission made by cable, by telecopy, by
telegram, or by telex or (d) seven days after being mailed by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 13.2):
(a) if to the Company:
▇▇▇▇ ▇.▇. ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇, President
(b) if to ▇▇▇▇:
c/o I-View Software, Inc.
▇▇▇▇ ▇.▇. ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
34
(c) if to ▇▇▇▇▇▇▇:
c/o I-View Software, Inc.
▇▇▇▇ ▇.▇. ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(d) if to Purchaser:
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇'▇ House
Don Road
St. Helier
Jersey JE1 4HP, Channel Islands
Telephone: (▇▇) ▇▇▇▇-▇▇▇▇▇
Facsimile: (▇▇) ▇▇▇▇-▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
13.3 PUBLIC ANNOUNCEMENTS. Except as required by Law or any applicable
Governmental Authority, no party to this Agreement shall make, or cause to be
made, any press release or public announcement in respect of this Agreement or
the transactions contemplated hereby or otherwise communicate with any news
media without the prior written consent of the other party. Except to the extent
prohibited by applicable law, the parties shall cooperate as to the timing and
contents of any such press release or public announcement.
13.4 HEADINGS. The descriptive headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.5 PRONOUNS. As used herein, all pronouns shall include the masculine,
feminine, neuter, singular and plural wherever the context and facts require
such construction.
13.6 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party.
13.7 ENTIRE AGREEMENT. This Agreement, including all of the Exhibits and
Schedules attached hereto which are incorporated herein by this reference,
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersedes all prior
35
agreements and undertakings, both written and oral, among the Company, ▇▇▇▇,
▇▇▇▇▇▇▇ and Purchaser with respect to the subject matter hereof and thereof.
13.8 ASSIGNMENT. This Agreement and the rights and duties hereunder may
not be assigned or assumed by operation of law or otherwise without the express
prior written consent of the other parties hereto (which consent may be granted
or withheld in the sole discretion of such other parties, as applicable).
13.9 AMENDMENT; WAIVER. This Agreement may not be amended or modified
except by an instrument in writing signed by, or on behalf of, each party
hereto. Each party to this Agreement may: (a) extend the time for the
performance of any of the obligations or other acts of the other parties; (b)
waive any inaccuracies in the representations and warranties of the other
parties contained herein or in any document delivered by the other party
pursuant hereto; or (c) waive compliance with any of the agreements or
conditions of the other parties contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by all of
the other parties to be bound thereby. Any waiver of any term or condition shall
not be construed as a waiver of any subsequent breach or a subsequent waiver of
the same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder shall
not constitute a waiver of any of such rights.
13.10 GOVERNING LAW AND FORUM SELECTION. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Florida (without
regard to its principles regarding conflicts of law). All actions or proceedings
initiated by any party hereto and arising directly or indirectly out of this
Agreement which are brought to judicial proceedings shall be litigated in
Florida state courts sitting in Broward County, Florida.
13.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
13.12 ATTORNEYS' FEES. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
13.13 FURTHER ACTION. Each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all appropriate action, do or cause to be
done all things reasonably necessary, proper or advisable under applicable Law,
and execute and deliver such documents and other papers, as may be required to
carry out the provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.
36
IN WITNESS WHEREOF, the Company, ▇▇▇▇, ▇▇▇▇▇▇▇ and Purchaser have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
I-VIEW SOFTWARE, INC.
By: /s/ YANNICH ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇
-------------------- ------------------------------
Name: Yannich ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
Title: President
HEMINGFOLD INVESTMENTS, LTD.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇ CREAPEL
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ---------------------------
Name: ▇▇▇▇▇▇ CREAPEL
-------------------------
Title: DIRECTOR
-----------------------
37
SCHEDULE 1.21
NONE
I-VIEW SOFTWARE, INC. - SCHEDULE 3.4
STOCKHOLDERS iView
Shares Percent
▇▇▇▇▇ ▇▇▇▇ 4,938,095 45.75%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 4,938,095 45.75%
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 539,683 5.00%
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 215,873 2.00%
▇▇▇▇▇ ▇▇▇▇▇ 107,937 1.00%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 53,968 0.50%
--------- ------
10,793,651 100.00%
SCHEDULE 3.7
Subsidiaries
1. Soley for purposes of the Representations and Warranties contained in
Article III:
Galacticomm, Inc.
SCHEDULE 3.17 (A)
Material Contracts
1. Stock Purchase Agreement, dated October 29, 1996, among the Company,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and the law firm of ▇▇▇▇▇, Mandler,
Croland, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.
2. Promissory Note, dated April 2, 1996 and in the principal amount of
$37,500, from the Company in favor of Skyline, Inc.
3. Promissory Note, dated August 3, 1996 and the principal amount of $50,000,
from ▇▇▇▇▇▇▇ Technologies, Inc., in favor of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
4. Promissory Note, dated February 2, 1996 and in the principal amount of
$25,000, from the Company in favor of ▇▇▇ ▇▇▇▇▇▇▇.
5. Agreement to Distribute Proceeds, dated February 2, 1996, between the
Company and ▇▇▇ ▇▇▇▇▇▇▇.
6. Promissory Note, dated February 7, 1996 and in the principal amount of
$25,000, from the Company in favor of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
7. Agreement to Distribute Proceeds, dated February 7, 1996, between the
Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
8. Promissory Note, dated December 28, 1995, and in the principal amount of
$10,000, from the Company in favor of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
9. Agreement to Distribute Proceeds, dated December 28, 1995, between the
Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
10. Promissory Note, dated December 29, 1995 and in the principal amount of
$10,000, from the Company in favor of ▇▇▇ ▇▇▇▇▇▇.
11. Agreement to Distribute Proceeds, dated December 29, 1995, between the
Company and ▇▇▇ ▇▇▇▇▇▇.
12. Promissory Note, undated and in the principal amount of $10,000, from the
Company in favor of ▇▇▇▇▇ ▇▇▇▇▇▇▇.
13. Agreement to Distribute Proceeds, undated, between the Company and ▇▇▇▇▇
▇▇▇▇▇▇▇.
SCHEDULE 3.19
Real Property
1. ▇▇▇▇ ▇.▇. 47 Avenue, Suite 101, Ft. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE 3.20(A)
NONE
SCHEDULE 3.20(B)
NONE
SCHEDULE 3.23
Brokers
In connection with the transactions contemplated by this Agreement, Union
Atlantic, L.C. will receive a consulting fee equal to 10% of the aggregate
investment in the Company, plus a non-accountable expense allowance of 3% of the
aggregate investment in the Company.
SCHEDULE 4.11
Brokers
In connection with the transactions contemplated by this Agreement, Union
Atlantic, L.C. will receive a consulting fee equal to 10% of the aggregate
investment in the Company, plus a non-accountable expense allowance of 3% of the
aggregate investment in the Company.