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EXHIBIT 10.1
STOCK PURCHASE AND INVESTOR RIGHTS AGREEMENT ***
This STOCK PURCHASE AND INVESTOR RIGHTS AGREEMENT (this "Agreement") is
made and entered into as of March 30, 2000, by and between ▇▇▇▇▇▇▇.▇▇▇, INC., a
Nevada corporation (the "Company"), and GATEWAY COMPANIES, INC., a Delaware
corporation (the "Investor"), and is made with reference to the following facts:
A. The Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, shares of Common Stock, par value $0.001
per share, of the Company ("Common Stock"), on the terms and conditions set
forth in this Agreement.
B. The Company wishes to provide certain other agreements with respect
to the Investor's investment.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
(a) AUTHORIZATION. The Company's Board of Directors (the "Board") will,
prior to the Closing, authorize the issuance, pursuant to the terms and
conditions of this Agreement, of shares of Common Stock in an amount equal to
the number of Purchased Shares (as defined in Section 1(b)).
(b) AGREEMENT TO PURCHASE AND SELL THE PURCHASED STOCK. The Company
hereby agrees to issue to the Investor, and the Investor hereby agrees to
acquire from the Company, at the times set forth in Section 2, a number of
shares of Common Stock (collectively, the "Purchased Shares") equal to
$10,000,000 (the "Purchase Price") divided by the Per Share Purchase Price (as
defined below), rounded up to the nearest whole share. As used in this
Agreement, "Per Share Purchase Price" means the lower of (i) the ten consecutive
trading day average of the Market Prices (as defined in Section 7(f)(iii)) of
the Common Stock for the period ending on ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) the ten
consecutive trading day average of the Market Prices (as defined in Section
7(f)(iii)) of the Common Stock ending two trading days prior to the public
announcement of this transaction and (iii) the ten consecutive trading day
average of the Market Prices (as defined in Section 7(f)(iii)) of the Common
Stock for the period ending two trading days before the Closing Date (as defined
in Section 2). The Per Share Purchase Price shall be payable as set forth in
Section 2 and will be adjusted within 10 days following the Closing if required
by Section 1(b)(ii).
2. CLOSING. The purchase and sale of the Purchased Shares shall take place
at the offices of Gateway, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
at 10:00 a.m., California time, on the date mutually agreed (which time and
place are referred to in this Agreement as the "Closing"). At the Closing, the
Company will deliver to the Investor certificates representing the Purchased
Shares and the Investor will deliver to the Company the Purchase Price in cash
paid by wire transfer of same-day funds to the Company. Closing documents may be
delivered by facsimile with original signature pages sent by overnight courier.
The date of the Closing sometimes is referred to herein as the "Closing Date."
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*** CERTAIN INFORMATION IN THE PURCHASE AGREEMENT BETWEEN GATEWAY COMPANIES,
INC. AND ▇▇▇▇▇▇▇.▇▇▇, INC., WHICH IS INCLUDED AS PART OF THIS EXHIBIT 10.1, HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that the statements in this Section 3
are true and correct on the date hereof and will be true and correct on the
Closing Date, except as set forth in the Disclosure Schedule (as defined in
Section 7(a)):
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all corporate power and authority required to (i)
own or lease its properties and assets and carry on its business as presently
conducted, and (ii) enter into this Agreement and the other agreements,
instruments and documents contemplated hereby, and to consummate the
transactions contemplated hereby and thereby. Each of the Company's subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all corporate power and
authority required to own or lease its properties and assets and carry on its
business as presently conducted. Each of the Company and its subsidiaries is
qualified to do business and is in good standing in each jurisdiction in which
the failure to so qualify or be in good standing, either individually or in the
aggregate, would have a Material Adverse Effect on the Company. As used in this
Agreement, "Material Adverse Effect" means a material adverse effect on, or a
material adverse change in, or a group of such effects on or changes in, the
business, operations, financial condition, results of operations, prospects,
assets or liabilities of the applicable party and its subsidiaries, taken as a
whole.
(b) CAPITALIZATION. The capitalization of the Company, without giving
effect to the transactions contemplated by this Agreement, is as follows. The
authorized capital stock of the Company consists only of 50,000,000 shares of
Common Stock and 5,000,000 shares of preferred stock, $0.001 par value
("Preferred Stock"), of which 17,401,734 shares of Common Stock and no shares of
Preferred Stock were issued and outstanding as of March 22, 2000. All such
shares of Common Stock have been duly authorized, and all such issued and
outstanding shares of Common Stock have been validly issued, are fully paid and
nonassessable and are free and clear of all liens, claims and encumbrances,
other than any liens, claims or encumbrances created by or imposed upon the
holders thereof. As of March 22, 2000 the Company had also reserved: (i)
2,067,202 shares of Common Stock for issuance upon exercise of outstanding
options granted to officers, directors, employees, independent contractors or
affiliates of the Company or its subsidiaries under the Company's equity
incentive plans; and (ii) 2,067,202 shares of Common Stock issuable upon
exercise of the Company's outstanding warrants (the "Outstanding Warrants"). As
of March 22, 2000, the 2,081,818 shares of Common Stock reserved for issuance
upon exercise of options have a weighted average exercise price of approximately
$9.00, and 3,932,798 shares were reserved for future grant. All shares of Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There are
no other equity securities, options, warrants, calls, rights, commitments or
agreements of any character to which the Company is a party or by which it is
bound obligating the Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of the Company or obligating the Company to grant, extend or enter
into any such equity security, option, warrant, call, right, commitment or
agreement. The issuance of the Purchased Shares to the Investor will not (i)
trigger any rights of first refusal, maintenance rights, preemptive rights or
any other rights of any stockholder of the Company, or (ii) trigger any change
in control provisions in any of the Company's equity incentive plans or stock
option plans.
(c) DUE AUTHORIZATION. All corporate actions on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
the Company under, this Agreement, and the authorization, issuance, reservation
for issuance and delivery of all of the Purchased Shares being sold under this
Agreement, have been taken, and this Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except (i) as may be limited by (A) applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (B) the effect of rules of law governing the availability of
equitable remedies and (ii) as rights to indemnity or contribution may be
limited under federal or state securities laws or by principles of public policy
hereunder.
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(d) VALID ISSUANCE OF STOCK.
(i) VALID ISSUANCE. The Purchased Shares to be issued pursuant to
this Agreement are duly authorized and, upon payment of the Purchase Price by
the Investor in accordance with this Agreement, will be validly issued, fully
paid and non-assessable.
(ii) COMPLIANCE WITH SECURITIES LAWS. Assuming the correctness of
the representations made by the Investor in Section 4, the Purchased Shares will
be issued to the Investor in compliance with applicable exemptions from (A) the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "Securities Act"), and (B) the registration and qualification
requirements of all applicable securities laws of the states of the United
States.
(e) GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, or
notice to, any federal, state or local governmental authority on the part of the
Company or any of its subsidiaries is required in connection with the issuance
of the Purchased Shares to the Investor, or the consummation of the other
transactions contemplated by this Agreement
(f) NON-CONTRAVENTION. The execution, delivery and performance of this
Agreement by the Company, and the consummation by the Company of the
transactions contemplated hereby (including the issuance of the Purchased
Shares), do not (i) contravene or conflict with the Company's Certificate of
Incorporation or Bylaws, in each case as amended; (ii) constitute a violation of
any provision of any federal, state, local or foreign law binding upon or
applicable to the Company or any of its subsidiaries; or (iii) constitute a
default or require any consent under, give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to which the
Company or any of its subsidiaries is entitled under, or result in the creation
or imposition of any lien, claim or encumbrance on any assets of the Company or
any of its subsidiaries under, any contract to which the Company or such
subsidiary is a party or any permit, license or similar right relating to the
Company or such subsidiary or by which the Company or such subsidiary may be
bound or affected.
(g) LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation (each an "Action") pending or, to the best of the
Company's knowledge, threatened: (i) against the Company or any of its
subsidiaries, or any of their respective activities, properties or assets, or
any of their respective officers, directors or employees of the Company or any
of its subsidiaries in connection with such officer's, director's or employee's
relationship with, or actions taken on behalf of, the Company or such
subsidiary, or (ii) that seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement (including the issuance of the
Purchased Shares). Neither the Company nor any of its subsidiaries is a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. No Action by the Company
or any of its subsidiaries is currently pending nor does the Company or any of
its subsidiaries intend to initiate any Action that could reasonably be expected
to have a Material Adverse Effect on the Company.
(h) COMPLIANCE WITH LAW AND CHARTER DOCUMENTS. The Company is not in
violation or default of any provisions of its Articles of Incorporation or
Bylaws, in each case as amended. The Company and its subsidiaries have complied
and are in compliance with all applicable statutes, laws, rules, regulations and
orders of the United States of America and all states thereof, foreign countries
and other governmental bodies and agencies having jurisdiction over their
respective businesses or properties, except where such failure to comply would
not reasonably be likely to have a Material Adverse Effect on the Company.
(i) SEC DOCUMENTS.
(i) REPORTS. Each report, registration statement, proxy statement
or other document filed by the Company with the Securities and Exchange
Commission (the "SEC Documents"), as of the respective date thereof (or if
amended or superseded by a filing prior to the Closing Date, then on the date of
such filing), did not, and each of the registration statements, reports and
proxy statements filed by the Company with the SEC after the date hereof and
prior to the Closing will not, as of the date thereof (or if amended or
superseded by a filing after the date of this Agreement, then on the date of
such filing), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Neither the
Company nor any of its subsidiaries is a party to any material
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contract, agreement or other arrangement that was required to have been filed as
an exhibit to the SEC Documents that was not so filed.
(ii) FINANCIAL STATEMENTS. The audited and unaudited consolidated
financial statements of the Company included in the SEC Documents filed prior to
the date hereof fairly present, in conformity with generally accepted accounting
principles ("GAAP") (except, in the case of the Forms 10-Q and 8-K, as may
otherwise be permitted by Form 10-Q and Forms 8-K) applied on a consistent basis
(except as otherwise may be stated in the notes thereto), the consolidated
financial position of the Company as at the dates thereof and the consolidated
results of its operations and cash flows for the periods then ended (subject to
normal year-end audit adjustments in the case of unaudited interim financial
statements).
(j) ABSENCE OF CERTAIN CHANGES SINCE BALANCE SHEET DATE. Since
September 30, 1999, the businesses and operations of the Company and its
subsidiaries have been conducted in the ordinary course consistent with past
practice, and there has not been:
(i) any declaration, setting aside or payment of any dividend or
other distribution of the assets of the Company or any of its subsidiaries with
respect to any shares of capital stock of the Company or such subsidiary (except
for any such distribution by a wholly-owned subsidiary to the Company) or any
repurchase, redemption or other acquisition by the Company or any of its
subsidiaries of any outstanding shares of the Company's capital stock;
(ii) any damage, destruction or loss, whether or not covered by
insurance, except for such occurrences, individually and collectively, that are
not material to the Company and its subsidiaries, taken as a whole;
(iii) any waiver by the Company or any of its subsidiaries of a
valuable right or of a material debt owed to it, except for such waivers,
individually and collectively, that are not material to the Company and its
subsidiaries, taken as a whole;
(iv) any material change or amendment to, or any waiver of any
material right under a material contract or arrangement by which the Company or
any of its subsidiaries or any of their respective assets and properties is
bound or subject, except for changes, amendments or waivers that are expressly
provided for or disclosed in this Agreement;
(v) any change by the Company in its accounting principles, methods
or practices or in the manner it keeps its accounting books and records, except
any such change required by a change in GAAP; or
(vi) any other event or condition of any character, except for such
events and conditions that have not resulted, and could not reasonably be
expected to result, either individually or in the aggregate, in a Material
Adverse Effect on the Company.
(k) INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENTS. Each employee
and consultant or independent contractor of the Company or any of its
subsidiaries whose duties include the development of products or Intellectual
Property (as defined below), and each former employee and consultant or
independent contractor whose duties included the development of products or
Intellectual Property, has entered into and executed an invention assignment and
confidentiality agreement in customary form or an employment or consulting
agreement containing substantially similar terms.
(l) INTELLECTUAL PROPERTY.
(i) OWNERSHIP OR RIGHT TO USE. Each of the Company and its
subsidiaries has sole title to and owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents or patent applications, software,
know-how, registered or unregistered trademarks and service marks and any
applications therefor, registered or unregistered copyrights, trade names, and
any applications therefor, trade secrets or other confidential
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or proprietary information (collectively, "Intellectual Property") necessary to
enable it to carry on its business as currently conducted, except where any
deficiency, or group of deficiencies, would not be reasonably likely to have a
Material Adverse Effect on the Company.
(ii) LICENSES; OTHER AGREEMENTS. Neither the Company nor any of its
subsidiaries is currently the licensee of any material portion of the
Intellectual Property of the Company and its subsidiaries. There are not
outstanding any licenses or agreements of any kind relating to any Intellectual
Property owned by the Company or any of its subsidiaries, except for agreements
with customers entered into in the ordinary course of its business and other
licenses and agreements that, collectively, are not material. Neither the
Company nor any of its subsidiaries is obligated to pay any royalties or other
payments to third parties with respect to the marketing, sale, distribution,
manufacture, license or use of any Intellectual Property, except as the Company
or any such subsidiary may be so obligated in the ordinary course of its
business, as disclosed in the Company's SEC Documents or where the aggregate
amount of such payments could not reasonably be expected to be material.
(iii) NO INFRINGEMENT. Neither the Company nor any of its
subsidiaries has violated or infringed in any material respect, neither the
Company nor any of its Subsidiaries is currently violating or infringing in any
material respect, and neither the Company nor any of its subsidiaries has
received any communications alleging that it (or any of its employees or
consultants) has violated or infringed, any Intellectual Property of any other
person or entity, except for any such violations or infringements that would not
be reasonably likely to have a Material Adverse Effect on the Company.
(iv) EMPLOYEES AND CONSULTANTS. To the best of the Company's
knowledge, no employee of or consultant to the Company or any of its
subsidiaries is in material default under any term of any material employment
contract, agreement or arrangement relating to Intellectual Property of the
Company or any such subsidiary or any material non-competition arrangement,
other contract or restrictive covenant relating to the Intellectual Property of
the Company or any such subsidiary. The Intellectual Property of the Company or
any of its subsidiaries (other than any Intellectual Property duly acquired or
licensed from third parties) was developed entirely by the employees of or
consultants to the Company or one of its subsidiaries during the time they were
employed or retained by it (or by entities acquired in whole by the Company or
any of its subsidiaries), and to the best knowledge of the Company, at no time
during conception or reduction to practice of such Intellectual Property of the
Company or any of its subsidiaries were any such employees or consultants
operating under any grant from a government entity or agency or subject to any
employment agreement or invention assignment or non-disclosure agreement or any
other obligation with a third party that would materially and adversely affect
the Company's or such subsidiary's rights in its Intellectual Property. Such
Intellectual Property of the Company or any of its subsidiaries does not, to the
best knowledge of the Company, include any invention or other intellectual
property of such employees or consultants made prior to the time such employees
or consultants were employed or retained by the Company, any such subsidiary or
any such acquired entity nor any intellectual property of any previous employer
of such employees or consultants (other than any such acquired entity) nor the
intellectual property of any other person or entity.
(m) SUBSIDIARIES. Section 3(m) of the Disclosure Schedule sets forth
all other persons, entities, or businesses in which the Company presently owns
or controls, directly or indirectly, more than a 19.9 percent interest.
(n) ENVIRONMENTAL MATTERS. To the Company's knowledge, there have been
no disposals, releases or threatened releases of Hazardous Materials on, from or
under any properties or facilities owned or leased by the Company which, either
individually or in the aggregate, would have a Material Adverse Effect on the
Company. Neither the Company, any of its subsidiaries nor, to the Company's
knowledge, any other person or entity, has used, generated, manufactured or
stored on, under or about such properties or facilities or transported to or
from such properties or facilities any Hazardous Materials, where such use,
generation, manufacture or storage, either individually or in the aggregate,
would
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have a Material Adverse Effect on the Company. The Company has no knowledge of
any presence, disposals, releases or threatened releases of Hazardous Materials
on, from or under any of such properties or facilities, which may have occurred
prior to the Company or any of its subsidiaries having taken possession of any
of such properties or facilities and which, either individually or in the
aggregate, would have a Material Adverse Effect on the Company. For purposes of
this Agreement, the terms "disposal," "release," and "threatened release" shall
have the definitions assigned thereto by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et
seq., as amended ("CERCLA"). For purposes of this Agreement, "Hazardous
Materials" means any hazardous or toxic substance, material or waste which is
regulated under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous material," "toxic substance" or
"hazardous chemical" under (A) CERCLA; (B) the Emergency Planning and Community
Right-to- Know Act, 42 U.S.C. Section 11001 et seq.; (C) the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq.; (D) the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq.; (E) the Occupational Safety and
Health Act of 1970, 29 U.S.C. Section 651 et seq.; (F) regulations promulgated
under any of the above statutes; or (G) any applicable state or local statute,
ordinance, rule, or regulation that has a scope or purpose similar to those
statutes identified above.
(o) REGISTRATION RIGHTS. The Company is not currently subject to any
agreement providing any person or entity with any rights (including piggyback
registration rights) to have any securities of the Company registered with the
SEC or registered or qualified with any other governmental authority.
(p) TITLE TO PROPERTY AND ASSETS. The properties and assets of the
Company or any of its subsidiaries are owned by the Company or such subsidiary
free and clear of all mortgages, deeds of trust, liens, charges, encumbrances
and security interests except for statutory liens for the payment of current
taxes that are not yet delinquent and liens, encumbrances and security interests
that arise in the ordinary course of business and do not in any material respect
affect the properties and assets of the Company or such subsidiary. With respect
to the property and assets it leases, each of the Company and its subsidiaries
is in compliance with such leases in all material respects.
(q) TAX MATTERS. Each of the Company and its subsidiaries has filed all
material tax returns required to be filed, which returns are true and correct in
all material respects, and each of the Company and its subsidiaries has paid in
full all taxes that have become due on or prior to the date hereof, including
penalties and interest, assessments, fees and other charges, other than those
being contested in good faith and for which adequate reserves have been provided
or those currently payable without interest that were payable pursuant to said
returns or any assessments with respect thereto.
(r) BROKERS AND FINDERS. None of the Company, its subsidiaries, their
respective directors or officers and their respective agents has incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement or any of the transactions contemplated hereby. The Company will
indemnify and hold the Investor harmless from any brokerage or finder's fees or
agents' commissions or other similar payment alleged to be due by or through the
Company or any of such other persons and entities as a result of the action of
the Company, its subsidiaries, their respective directors or officers or their
respective agents.
(s) INTERESTED PARTY TRANSACTIONS. Except as disclosed in the Company's
SEC Documents, to the best knowledge of the Company, no officer or director of
the Company or any of its subsidiaries or any "affiliate" or "associate" (as
those terms are defined in Rule 405 promulgated under the Securities Act) of any
such person or entity has had, either directly or indirectly, a material
interest in: (i) any person or entity which purchases from or sells, licenses or
furnishes to the Company or any of its subsidiaries any goods, property,
technology, intellectual or other property rights or services; or (ii) any
contract or agreement to which the Company or any of its subsidiaries is a party
or by which it or any of its properties and assets may be bound or affected.
(t) FULL DISCLOSURE. The information contained in this Agreement, the
Disclosure Schedule and the SEC Documents with respect to the business,
operations, assets, results of operations and financial condition of the Company
and its subsidiaries, and the transactions contemplated by this Agreement , are
true and complete in all material respects and do not omit to state any material
fact or facts necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE INVESTOR.
The Investor hereby represents and warrants to the Company, and agrees that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Investor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all corporate power and authority required to
own or lease its properties and assets and carry on its business as presently
conducted. The Investor is qualified to do business and is in good standing in
each jurisdiction in which the failure to so qualify or be in good standing,
either individually or in the aggregate, would have a Material Adverse Effect on
the Investor.
(b) DUE AUTHORIZATION. The execution of this Agreement has been duly
authorized by all necessary corporate action on the part of the Investor. This
Agreement constitutes the Investor's legal, valid and binding obligation,
enforceable against the Investor in accordance with its terms, except (i) as may
be limited by (A) applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (B) the effect of rules of law
governing the availability of equitable remedies and (ii) as rights to indemnity
or contribution may be limited under federal or state securities laws or by
principles of public policy hereunder.
(c) GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Investor is
required in connection with the purchase of the Purchased Shares by the Investor
pursuant to this Agreement.
(d) NON-CONTRAVENTION. The execution, delivery and performance of this
Agreement by the Investor, and the consummation by the Investor of the
transactions contemplated hereby, do not (i) contravene or conflict with the
Certificate of Incorporation or Bylaws of the Investor, in each case as amended;
(ii) constitute a violation of any provision of any federal, state, local or
foreign law binding upon or applicable to the Investor; or (iii) constitute a
default or require any consent under, give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to which the
Investor is entitled under, or result in the creation or imposition of any lien,
claim or encumbrance on any assets of the Investor under, any contract to which
the Investor is a party or any permit, license or similar right relating to the
Investor or by which the Investor may be bound or affected.
(e) LITIGATION. There is no Action pending that seeks to prevent,
enjoin, alter or delay the transactions contemplated by this Agreement.
(f) PURCHASE FOR OWN ACCOUNT. The Purchased Shares are being acquired
for investment for the Investor's own account, not as a nominee or agent, and
not with a view to the public resale or distribution thereof within the meaning
of the Securities Act, and the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. The Investor
also represents that it has not been formed for the specific purpose of
acquiring the Purchased Shares.
(g) INVESTMENT EXPERIENCE. The Investor understands that the purchase
of the Purchased Shares involves substantial risk. The Investor has experience
as an investor in securities of companies and acknowledges that it is able to
fend for itself, can bear the economic risk of its investment in the Purchased
Shares and has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of this investment in the
Purchased Shares and protecting its own interests in connection with this
investment.
(h) ACCREDITED INVESTOR STATUS. The Investor is an "accredited
investor" within the meaning of Regulation D promulgated under the Securities
Act. The Investor's headquarters are located in the State of California.
(i) RESTRICTED SECURITIES. The Investor understands that the Purchased
Shares are characterized as "restricted securities" under the Securities Act,
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under the Securities Act and applicable
regulations thereunder such securities may be resold without registration under
the Securities Act only in certain limited circumstances.
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The Investor is familiar with Rule 144 of the SEC, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
(j) LEGENDS. The Investor agrees that the certificates for the
Purchased Shares shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is defined in Rule 144 under
the Act. The shares may not be offered for sale, sold, or otherwise
transferred except pursuant to an effective registration statement
under the Act or pursuant to an exemption from registration under
the Act, the availability of which is to be established to the
satisfaction of the Company."
In addition, the Investor agrees that the Company may place stop
transfer orders with its transfer agents with respect to such certificates. The
appropriate portion of the legend and the stop transfer orders will be removed
promptly upon delivery to the Company of such satisfactory evidence as
reasonably may be required by the Company that such legend or stop orders are
not required to ensure compliance with the Securities Act.
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING.
(a) The obligations of the Investor under this Agreement are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions:
(i) REPRESENTATIONS AND WARRANTIES TRUE. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct in and as of the date of this Agreement, on and as of the
Closing Date, except as set forth in the Disclosure Schedule, with the same
effect as though such representations and warranties had been made as of the
Closing Date.
(ii) PERFORMANCE. The Company shall have performed and complied in
all material respects with all agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on or
before the Closing and shall have obtained all approvals, consents and
qualifications necessary to complete the purchase and sale described herein.
(iii) SECURITIES EXEMPTIONS. The offer and sale of the Purchased
Shares to the Investor pursuant to this Agreement shall be exempt from the
registration requirements of the Securities Act and the registration and/or
qualification requirements of all applicable state securities laws.
(iv) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor, and the Investor shall have received all such
counterpart originals and certified or other copies of such documents as it may
reasonably request. Such documents shall include but not be limited to the
following:
(A) CERTIFIED CHARTER DOCUMENTS. A copy of (x) the Certificate
of Incorporation certified as of a recent date by the Secretary of State of
Nevada as a complete and correct copy thereof, and (y) the Bylaws of the Company
(as amended through the Closing Date) certified by the Secretary of the Company
as a true and correct copy thereof as of the Closing Date.
(B) BOARD RESOLUTIONS. A copy, certified by the Secretary of
the Company, of the resolutions of the Board providing for the approval of this
Agreement and the issuance of the Purchased Shares and the other matters
contemplated hereby.
(v) OPINIONS OF COMPANY COUNSEL. The Investor will have received
opinions on behalf of the Company, dated the Closing Date, from each of ▇▇▇▇▇▇
Kaemfer ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel to the
Company, in the form attached hereto as Exhibits B-1 and B-2.
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(vi) PC PURCHASE AGREEMENT. The Company and the Investor shall have
entered into an Agreement for the purchase of personal computers in the form of
Exhibit A hereto (the "PC Purchase Agreement").
(vii) MARKETING FEE. In consideration of Gateway's participation in
the Company's marketing initiatives, including personal appearances and
providing personal computers, Spanish language services and technical support,
at the Closing Date, the Company shall pay the Investor a prepaid twelve month
marketing fee of $1,000,000 in cash.
(viii) OTHER ACTIONS. The Company shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary or reasonably requested by the Investor in
connection with the transactions contemplated hereby.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.
(a) The obligations of the Company to the Investor under this Agreement
are subject to the fulfillment or waiver, on or before the Closing, of each of
the following conditions:
(i) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Investor contained in Section 4 shall be true and correct in
all material respects on and as of the date hereof and on and as of the date of
the Closing with the same effect as though such representations and warranties
had been made as of the Closing.
(ii) PERFORMANCE. The Investor shall have performed and complied in
all material respects with all agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on or
before the Closing and shall have obtained all approvals, consents and
qualifications necessary to complete the purchase and sale described herein.
(iii) PAYMENT OF PURCHASE PRICE. The Investor shall have delivered
to the Company the Purchase Price.
(iv) SECURITIES EXEMPTIONS. The offer and sale of the Purchased
Shares to the Investor pursuant to this Agreement shall be exempt from the
registration requirements of the Securities Act and the registration and/or
qualification requirements of all applicable state securities laws.
(v) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Company, and the Company will have received all such counterpart
originals and certified or other copies of such documents as it may reasonably
request.
(vi) OTHER ACTIONS. The Investor shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary or reasonably requested by the Company in
connection with the transactions contemplated hereby.
7. COVENANTS OF THE PARTIES.
(a) DISCLOSURE SCHEDULE. Simultaneously with the execution of this
Agreement, the Company is delivering to the Investor a disclosure schedule,
which sets forth exceptions, if any, to the representations and warranties made
by the Company in Article 3. Such disclosure schedule is organized such that any
exceptions specifically identify the representation and warranty, by section, to
which they relate, and clearly identify the nature of the exception, to the
Investor's reasonable satisfaction (the "Disclosure Schedule"). In any
determination of whether the Investor is entitled to indemnification for the
breach of any representations or warranties set forth in this Agreement, only
the Disclosure Schedule (i.e., the final disclosure letter agreed upon by the
Company and the
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Investor) shall be relevant, and the identification of any matters on any drafts
of the Disclosure Schedule shall not be introduced as evidence or otherwise used
in any manner in connection therewith.
(b) INFORMATION RIGHTS.
(i) FINANCIAL INFORMATION. The Company covenants and agrees that,
commencing on the Closing Date and continuing for so long as the Investor holds
any Purchased Shares, the Company shall:
(A) ANNUAL REPORTS. Furnish to the Investor promptly following the
filing of such report with the SEC a copy of the Company's Annual Report on Form
10-K for each fiscal year, which shall include a consolidated balance sheet as
of the end of such fiscal year, a consolidated statement of income and a
consolidated statement of cash flows of the Company for such year, setting forth
in each case in comparative form the figures from the Company's previous fiscal
year, all prepared in accordance with GAAP and generally accepted accounting
practices, and audited by nationally- recognized independent certified public
accountants. In the event the Company shall no longer be required to file Annual
Reports on Form 10-K, the Company shall, within 90 days following the end of
each respective fiscal year, deliver to the Investor a copy of such balance
sheets, statements of income and statements of cash flows.
(B) QUARTERLY REPORTS. Furnish to the Investor promptly following
the filing of such report with the SEC, a copy of each of the Company's
Quarterly Reports on Form 10-Q, which shall include a consolidated balance sheet
as of the end of the respective fiscal quarter, consolidated statements of
income and cash flows of the Company for the respective fiscal quarter and for
the year to-date, setting forth in each case in comparative form the figures
from the comparable periods in the Company's immediately preceding fiscal year,
all prepared in accordance with GAAP and generally accepted accounting practices
(except, in the case of any Form 10-Q, as may otherwise be permitted by Form
10-Q), but all of which may be unaudited. In the event the Company shall no
longer be required to file Quarterly Reports on Form 10-Q, the Company shall,
within 45 days following the end of each of the first three fiscal quarters of
each fiscal year, deliver to the Investor a copy of such balance sheets,
statements of income and statements of cash flows.
(c) REGISTRATION RIGHTS.
(i) DEFINITIONS. For purposes of this Section 7(c):
(A) REGISTRATION. The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(B) REGISTRABLE SECURITIES. The term "Registrable Securities"
means: (x) the Purchased Shares; (y) any other shares of Common Stock acquired
by the Investor after the date hereof which are not already freely tradable
under the Securities Act (pursuant to Rule 144(k) promulgated under the
Securities Act); and (z) any shares of Common Stock or other securities of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security that is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, any of the securities
described in the immediately preceding Clause (x) or (y). Notwithstanding the
foregoing, "Registrable Securities" shall exclude any Registrable Securities
sold by a person or entity in a transaction in which rights under this Section
7(c) are not assigned in accordance with this Agreement or any Registrable
Securities sold in a public offering, whether sold pursuant to Rule 144
promulgated under the Securities Act, or in a registered offering, or otherwise
or eligible to be sold pursuant to Rule 144(k) promulgated under the Securities
Act.
(C) REGISTRABLE SECURITIES THEN OUTSTANDING. The number of shares
of "Registrable Securities then outstanding" shall mean the number of Purchased
Shares, other shares of Common Stock and other securities that are Registrable
Securities and are then issued and outstanding.
(D) HOLDER. For purposes of this Section 7(c), the term "Holder"
means any person or entity owning of record Registrable Securities that have not
been sold to the public or pursuant to Rule 144
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promulgated under the Securities Act or any permitted assignee of record of such
Registrable Securities to whom rights under this Section 7(c) have been duly
assigned in accordance with this Agreement.
(E) FORM S-3. The term "Form S-3" means such form under the
Securities Act as is in effect on the date hereof or any successor registration
form under the Securities Act subsequently adopted by the SEC that permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(ii) AUTOMATIC REGISTRATION.
(A) REGISTRATION STATEMENT. On or before July 1, 2000, the Company
shall use its commercially reasonable best efforts to file a registration
statement under the Securities Act on Form S-3, or any successor form, for the
registration of all of the Registrable Securities so that such registration
statement becomes effective not later than November 1, 2000, and to cause such
Registrable Securities to be listed on the Nasdaq National Market by such date.
Such registration statement shall be filed and maintained as a "shelf"
registration statement until the date that Rule 144 is first available as an
exemption for the sale in a single 90-day period of all of the outstanding
Registrable Securities.
(B) UNDERWRITING. If the Holders of at least 25 percent of the
Registrable Securities ("Initiating Holders") intend to distribute the
Registrable Securities by means of an underwriting, then they shall so advise
the Company and the Company shall thereafter notify all of the Holders thereof.
In such event, the right of any Holder to include his or her Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the initiating Holders and such Holder determined
based on the number of Registrable Securities held by such Holders being
registered). All Holders proposing to distribute their Registrable Securities
through such underwriting shall enter into an underwriting agreement in
customary form with the managing underwriter or underwriters selected for such
underwriting by the Holders of a majority of the Registrable Securities being
registered and reasonably acceptable to the Company (including a market
stand-off agreement of up to 90 days if required by such underwriters but only
if the Company's executive officers and directors also execute substantially
similar agreements).
(C) EXPENSES. All expenses incurred in connection with any
registration pursuant to this Section 7(c)(ii), including all federal and "blue
sky" registration, filing and qualification fees, printer's and accounting fees,
and fees and disbursements of counsel for the Company (but excluding
underwriters' discounts and commissions relating to shares sold by the Holders
and the fees and disbursements of counsel for the Holders), shall be borne by
the Company. Each Holder participating in a registration pursuant to this
Section 7(c)(ii) shall bear such Holder's proportionate share (based on the
total number of shares sold in such registration other than for the account of
the Company or any of its directors, officers, employees, consultants and
affiliates) of all discounts, commissions or other amounts payable to
underwriters or brokers in connection with such offering by the Holders.
(D) MAINTENANCE. Subject to Section 7(c)(vi), the Company shall use
all commercially reasonable efforts to maintain the effectiveness of any Form
S-3 registration statement filed under this Section 7(c)(ii) until the earlier
of: (1) the date on which all of the Registrable Securities have been sold; and
(2) the second anniversary of the effective date of such registration statement.
If the Company receives written notice from the Investor that, after
consultation with counsel, the Investor reasonably believes that it may be
deemed to be an "affiliate" of the Company for purposes of the Securities Act,
the date in this Clause (2) shall be extended until the Investor advises the
Company that it no longer believes it may be deemed such an "affiliate."
(E) PAYMENTS IF REGISTRATION STATEMENT NOT TIMELY FILED. In the
event that the Company fails to file the Registration Statement referred to in
Section 7(c)(ii)(A) on or before July 1, 2000, until such Registration Statement
is filed the Company will pay the Investor in cash $25,000 on July 7, 2000,
$50,000 on July 14, 2000, $75,000 on July 21, 2000, and $100,000 per week
beginning on July 28, 2000. In the event that such Registration Statement has
not been declared
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effective and the Registrable Securities registered thereunder shall not have
been listed on the Nasdaq National Market by November 1, 2000, until such
Registration Statement is declared effective and such Registrable Securities
have been listed on the Nasdaq National Market the Company agrees to pay the
Investor in cash $25,000 on November 7, 2000, $50,000 on November 14, 2000,
$75,000 on November 21, 2000, and $100,000 per week beginning November 28, 2000.
Such amounts are in addition to any amounts payable by the Company due to the
fact that a Registration Statement had not been filed by July 1, 2000. If by
January 1, 2001, such Registration Statement has not been declared effective or
the Registrable Securities have not been listed on the Nasdaq National Market,
the Company shall issue to the Investor additional shares of common stock equal
in amount to 20 percent of the number of Purchased Shares issued to the Investor
on the Closing Date, subject to adjustment for any subsequent stock splits,
stock dividends, recapitalizations or other similar events.
(iii) PIGGYBACK REGISTRATIONS. The Company shall notify all Holders
of Registrable Securities in writing at least 15 days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (including registration statements
relating to secondary offerings of securities of the Company, but excluding
registration statements (i) relating to employee benefit plans, (ii) with
respect to corporate reorganizations or other transactions under Rule 145 of the
Securities Act or any similar rule of the Commission, (iii) a registration on
any form that does not include substantially the same information as would be
required to be included in a registration statement covering the Registrable
Securities (including Form S-4 or any form substituted therefor) or (iv) being
filed for the account of other holders of the Company's Common Stock who are
entitled by right to exclude the Registrable Securities in such registration
statement), and will afford each such Holder an opportunity to include in such
registration statement all or any part of the Registrable Securities then held
by such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by such Holder
shall, within ten business days after receipt of the above-described notice from
the Company, so notify the Company in writing, and in such notice shall inform
the Company of the number of Registrable Securities such Holder wishes to
include in such registration statement. If a Holder decides not to include all
of its Registrable Securities in any registration statement thereafter filed by
the Company, such Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(A) UNDERWRITING. If a registration statement under which the
Company gives notice under this Section 7(c)(iii) is for an underwritten
offering, then the Company shall so advise the Holders of Registrable
Securities. In such event, the right of any such Holder's Registrable Securities
to be included in such a registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected for such underwriting
(including a market stand-off agreement of up to 90 days if required by such
underwriters, but only if the Company's executive officers and directors also
execute substantially similar agreements); provided, however, that it shall not
be considered customary to require any of the Holders to provide representations
and warranties regarding the Company or indemnification of the underwriters for
material misstatements or omissions in the registration statement or prospectus
for such offering other than with respect to information furnished by or on
behalf of the Holders. Notwithstanding any other provision of this Agreement, if
the managing underwriter determine(s) in good faith that marketing factors
require a limitation of the number of shares to be underwritten, then the
managing underwriter(s) may exclude shares from the registration and the
underwriting; provided, however, that the securities to be included in the
registration and the underwriting shall be allocated as follows: (1) first to
the Company; (2) second, to holders of securities that have registration rights
superior to those of the Holders; (3) third, to each of the Holders requesting
inclusion of their Registrable Securities in such registration statement on a
pro rata basis based on the total number of Registrable Securities and other
securities with pari passu registration rights whose holders wish to include in
the registration; and (4) fourth, any other shares of Common Stock or other
securities of the Company. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder that is a partnership, the Holder and the partners and retired partners
of such Holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing persons,
and for any Holder that is a corporation, the Holder and all corporations that
are affiliates of such Holder, shall be deemed to be a single "Holder," and any
pro rata reduction with respect to such "Holder" shall be based
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upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "Holder," as defined in this sentence.
(B) EXPENSES. All expenses incurred in connection with a
registration pursuant to this Section 7(c)(iii) (excluding underwriters' and
brokers' discounts and commissions relating to shares sold by the Holders and
the fees and disbursements of counsel for the Holders), including all federal
and "blue sky" registration, filing and qualification fees, printers' and
accounting fees, and fees and disbursements of counsel for the Company shall be
borne by the Company.
(C) NO LIMIT. Except as otherwise provided herein, there shall be
no limit on the number of times the Holders may request registration of
Registrable Securities under this Section 7(c)(iii).
(iv) INTENTIONALLY OMITTED.
(v) OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities under this Agreement the Company
shall, as expeditiously as reasonably possible:
(A) REGISTRATION STATEMENT. Prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use all
commercially reasonable efforts to cause such registration statement to become
effective.
(B) AMENDMENTS AND SUPPLEMENTS. Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.
(C) PROSPECTUSES. Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(D) BLUE SKY. Use all commercially reasonable efforts to register
and qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(E) UNDERWRITING. In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement in usual
and customary form (including customary indemnification of the underwriters by
the Company) with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(F) NOTIFICATION. Notify each Holder of Registrable Securities
covered by such registration statement 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, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, in which event no Holder shall use such prospectus in connection
with any offer or sale of its Registrable Securities until such prospectus has
been appropriately amended (which the Company shall promptly under the
circumstances do and deliver new prospectuses, as requested by the Holders,
promptly thereafter).
(G) OPINION AND COMFORT LETTER. With respect to an underwritten
offering of Registrable Securities only, furnish, at the request of the
underwriteres of such offering, on the date that such Registrable Securities are
delivered to the underwriters for sale (1) an opinion, dated as of such date, of
the counsel
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representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering addressed to the underwriters, and (2) a "comfort" letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering addressed to the
underwriters and to the Holders requesting registration of Registrable
Securities.
(vi) FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 7(c)(ii),
(iii) or (v) that the selling Holders shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them, and
the intended method of disposition of such securities as shall be required to
timely effect the registration of their Registrable Securities.
(vii) INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Section 7(c)(ii) or (iii):
(A) BY THE COMPANY. To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the partners, officers,
shareholders, employees, representatives, agents and directors of each Holder,
any underwriter (as determined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"):
(x) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto;
(y) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or
(z) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
federal or state securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, officer, shareholder,
employee, representative, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
paragraph shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation that
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by or on behalf of such
Holder, partner, officer, shareholder, employee, representative, director,
underwriter or controlling person of such Holder.
(B) BY THE SELLING HOLDERS. To the extent permitted by law, each
selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
representative and agent of the Company, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter and any other
Holder selling securities under such registration statement or any of such other
Holder's partners, officers, shareholders, employees, representatives, agents
and directors and any person who controls such Holder within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities (joint or several) to which the Company
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or any such officer or director, controlling person, underwriter or other such
Holder, partner, officer, shareholder, employee, representative, agent, director
or controlling person of such other Holder may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by or on behalf of such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such officer
or director, representative, agent, controlling person, underwriter or other
Holder, partner, officer, representative, agent, shareholder, employee, director
or controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this paragraph shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; and provided further, that the total amounts
payable in indemnity by a Holder under this subsection or otherwise in respect
of any and all Violations shall not exceed in the aggregate the net proceeds
received by such Holder in the registered offering out of which such Violations
arise.
(C) NOTICE. Promptly after receipt by an indemnified party
under of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this section, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, to the extent that representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential conflict of interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
liability except to the extent the indemnifying party is prejudiced as a result
thereof.
(D) DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing
indemnity agreements of the Company and Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was timely furnished to the indemnified
party and was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
(E) CONTRIBUTION. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (1) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
section, but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this section provides for
indemnification in such case, or (2) contribution under the Securities Act may
be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this
section; then, and in each such case, the Company and such Holder will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that such
Holder is responsible for the portion represented by the percentage that the
public offering price of its Registrable Securities offered by and sold under
the registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
that, in any such case: (X) no such Holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (Y)
no
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person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
(F) SURVIVAL. The obligations of the Company and Holders
under this Section 7(c)(vii) shall survive until the first anniversary of the
completion of any offering of Registrable Securities in a registration
statement, regardless of the expiration of any statutes of limitation or
extensions of such statutes.
(viii) TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall
have no obligations pursuant to this Section 7(c) with respect to any
Registrable Securities proposed to be sold by a Holder in a registration
pursuant to Section 7(c)(ii) or (iii) if in the written opinion of counsel to
the Company, reasonably acceptable to counsel for a Holder, all such Registrable
Securities proposed to be sold by a Holder may then be sold under Rule 144 in
any three month period without exceeding the volume limitations thereunder.
(ix) LIMITATION OF REGISTRATION RIGHTS TO THIRD PARTIES. Without
the prior written consent of the Investor, the Company covenants and agrees that
it shall not grant, or cause or permit to be created, for the benefit of any
person or entity any registration rights that would obligate the Company to file
a registration statement prior to the filing of the registration statement
required to be filed pursuant to Section 7(c)(ii)(A).
(d) PUBLICITY. The Investor and the Company shall jointly prepare a
joint press release for issuance upon the Closing. Without the other party's
prior written consent, neither party will issue any other press release after
the date hereof or publicize the other party's name in any public documents
except in compliance with the Confidentially Agreement referred to below.
Investor agrees to use commercially reasonably efforts to approve or disapprove
any press release or other public announcement or statement that includes such
party's name within two business days of being provided (including by facsimile
or email) the text of such release, announcement or statement. The provisions of
this Section 7(d) shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by any of the
parties hereto with respect to the transactions contemplated hereby, including
without limitation, the Confidentiality Agreement between the Company and the
Investor dated October 1, 1999. Additional disclosures and exchange of
confidential information between the Company and the Investor shall be governed
by the terms of such Confidentiality Agreement.
(e) RIGHTS OF PARTICIPATION.
(i) GENERAL. Until such time as the Investor, together with its
subsidiaries, no longer holds any of the outstanding voting securities of the
Company (such period from the date hereof through such time being referred to
herein as the "Initial Rights Period"), the Investor and each other person or
entity to whom rights under this Section 7(e) have been duly assigned (each of
the Investor and each such assignee, a "Participation Rights Holder") shall have
a right of first refusal to purchase such Participation Rights Holder's Pro Rata
Share (as defined below) of all New Securities (as defined below) that the
Company may from time to time issue during the Initial Rights Period. Such New
Securities shall be allocated among the Participation Rights Holders who elect
to exercise their right to purchase such New Securities on a pro rata basis
according to the number of Purchased Shares held by each such Participation
Rights Holder. The rights described in the preceding sentence, as further
described in this subsection (e), are referred to as the "Right of
Participation."
(ii) PRO RATA SHARE. "Pro Rata Share" means, with respect to each
Participation Rights Holder, the ratio of the following numbers calculated
immediately prior to the issuance of the New Securities giving rise to the Right
of Participation: (A) the Participant Share Number (as defined below) for such
Participation Rights Holder, to (B) the sum of (1) the total number of shares of
Common Stock and other voting capital stock of the Company then outstanding,
plus (2) the number of shares of voting capital stock issuable upon the
exercise, conversion or exchange of any other security of the Company then
outstanding.
(iii) NEW SECURITIES. "New Securities" means any Common Stock,
preferred stock or other voting capital stock or security of the Company,
whether now authorized or not, and rights, options or warrants to purchase such
Common Stock or preferred stock or other voting capital stock or security, and
securities of any type
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whatsoever that are, or may become, convertible into or exchangeable or
exercisable for Common Stock, preferred stock or other voting capital stock or
security; provided, however, that the term "New Securities" shall not include:
(A) any shares of Common Stock (or options or warrants
therefor) issued to employees, officers, directors or consultants of the Company
pursuant to any stock purchase or stock option incentive plans approved by the
Board;
(B) the Purchased Shares issued under this Agreement;
(C) any securities issued in connection with any stock split,
stock dividend or other similar event in which all Participation Rights Holders
are entitled to participate on a pro rata basis;
(D) any securities issued upon the exercise, conversion or
exchange of (1) any options, warrants or other securities convertible or
exchangeable into shares of Common Stock that are outstanding on the date of
this Agreement, (2) any shares of Common Stock issued as payment of accrued
interest on the securities listed in Clause (1) above, or (3) any outstanding
security if such outstanding security constituted a New Security; or
(E) any securities issued pursuant to the acquisition of
another person or entity by the Company by consolidation, merger, purchase of
assets, or other reorganization or issued in connection with the Company's
participation in a joint venture or similar form of alliance, so long as such
securities represent no more than five percent of the Company's voting
securities at the time of each such issuance and no more than an aggregate of
ten percent of the Company's outstanding voting securities in any 12 month
period (calculated as of the closing of each such transaction).
(iv) PARTICIPANT SHARE NUMBER. "Participant Share Number," with
respect to a Participant Rights Holder, means the sum of (A) the number of
Purchased Shares held by such Participant Rights Holder, (B) the number of
shares of other voting capital stock or securities of the Company held by such
Participant Rights Holder, and (C) the number of shares of Common Stock or other
voting capital stock or securities issuable upon the exercise, conversion or
exchange of any other security of the Company held by such Participant Rights
Holder.
(v) PROCEDURES. If the Company proposes to undertake an issuance of
New Securities (in a single transaction or a series of related transactions) in
circumstances that entitled a Participation Rights Holder to participate therein
in accordance with this subsection (e), the Company shall give to each
Participation Rights Holder written notice of its intention to issue New
Securities (the "Participation Notice"), describing the amount and the type of
New Securities and the price and the general terms upon which the Company
proposes to issue such New Securities. Each Participation Rights Holder shall
have five business days from the date of receipt of any such Participation
Notice to agree in writing to purchase up to the maximum number of such New
Securities that such Participation Rights Holder is entitled to purchase for the
price and upon the terms and conditions specified in the Participation Notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased (not to exceed such maximum). If any Participation
Rights Holder fails to so agree in writing within such five business day period,
then such Participation Rights Holder shall forfeit the right hereunder to
participate in such sale of New Securities; provided, however, that any
Participation Rights Holders that have elected to exercise their Right of
Participation shall be entitled to exercise such right with respect to any New
Securities where such right has been forfeited by such other Participation
Rights Holder(s). All sales hereunder shall be consummated concurrently with the
closing of the transaction triggering the Right of Participation.
(vi) FAILURE TO EXERCISE. Upon the expiration of such five business
day period, the Company shall have 90 days thereafter, subject to extensions for
regulatory compliance, to sell the New Securities described in the Participation
Notice (with respect to which the Participation Rights Holders' rights of first
refusal hereunder were not exercised) at the price (or a higher price) and upon
non-price terms not materially more favorable to the purchasers thereof than
specified in the Participation Notice. If the Company has not issued and sold
such New Securities within such 90-day period, then the Company shall not
thereafter issue or sell any New Securities without again first offering such
New Securities to the Participation Rights Holders pursuant to this Section
7(e).
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(f) [Intentionally Omitted]
(g) EQUAL RIGHTS. Notwithstanding anything contained herein, if the
terms, conditions, representations and warranties, covenants and provisions
taken as a whole contained in any other stock purchase documents executed by the
Company in connection the sale of ten percent or less of the Company's
outstanding voting securities at the time of such purchase ("Other Purchase
Documents") entered into prior to the date hereof (unless disclosed in the SEC
Documents filed on or prior to March 17, 2000 or disclosed in full to the
Investor prior to the Closing) or entered into on or after the date hereof and
before September 30, 2000, then this Agreement shall be deemed to contain the
terms, conditions, representations and warranties, covenants and provisions
contained in such Other Purchase Documents.
(h) RIGHTS RELATING TO A CORPORATE EVENT.
(i) CORPORATE EVENTS. A "Corporate Event" shall mean any of the
following, whether accomplished directly or indirectly through one or a series
of related transactions: (A) any reorganization, merger or consolidation, or
sale or other disposition of all or substantially all of the assets of the
Company, or (B) a shareholder, or group of affiliated shareholders, or group of
shareholders acting in concert, shall have the ability to control or direct the
votes of at least 30% of the voting power of the Company.
(ii) NOTICE OF CORPORATE EVENTS. Until expiration of the
Notification Period (as defined below), the Company shall provide the Investor
with written notice of terms of any written agreement entered into with any
person or entity for a proposed Corporate Event. Any notice shall be delivered
to the Investor as soon as practicable but no later than two business days after
the date the Company first executes such written agreement. Without limiting the
generality of the foregoing, such notice shall subject to applicable
confidentiality provisions, set forth the identity(ies) of the person(s) or
entity(ies) involved, the consideration to be paid and all other material terms
and conditions, and the Company shall deliver a copy thereof to the Investor.
(iii) RIGHT OF RESALE PERIOD DEFINED. "Right of Resale Period"
means the period commencing on the Closing Date and ending on September 30,
2000.
(iv) GUARANTEED PRICE DEFINED. "Guaranteed Price" means the Per
Share Purchase Price.
(v) RIGHT OF RESALE. During the Right of Resale Period, the
Investor shall, upon the Company's consummation of a Corporate Event, have the
following rights with respect to the shares of Purchased Shares and New
Securities then owned by the Investor (the "Owned Shares"):
(A) If a Corporate Event results in any or all of the Owned
Shares being acquired at less than the Guaranteed Price, the Investor shall
receive from the Company the difference between the Guaranteed Price with
respect to the Owned Shares so acquired and the price at which such Owned Shares
are acquired, such payment to be made in cash upon the consummation of such
Corporate Event.
(B) If a Corporate Event results in some of the Owned Shares
being acquired at less than the Guaranteed Price, the Investor shall have the
right to sell to the Company for cash any or all of the Owned Shares not so
acquired at the Guaranteed Price, such sale to occur upon consummation of such
Corporate Event.
(C) If in connection with a Corporate Event the Owned Shares
are not purchased on a pro rata basis with the Company's other then-outstanding
voting securities, the Investor shall have the right to sell to the Company for
cash any or all of the pro rata portion of the Owned Shares not so purchased at
the Guaranteed Price.
Notwithstanding the foregoing, the Investor shall not have the right to sell to
the Company any Owned Shares pursuant to this Section 7(g)(iv) if the person
affecting a Corporate Event
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offers to acquire all of such Owned Shares (or the Investor's pro rata portion
of such Owned Shares in the event the person affecting such Corporate Event
offers to acquire less than all of the Company's outstanding voting securities)
for cash or in exchange for registered, readily tradable securities listed on
the Nasdaq National Market, the New York Stock Exchange or another national
securities exchange, at a purchase price that is not less than the Guaranteed
Price.
(vi) DELIVERY OF CERTIFICATES FOR OWNED SHARES. Within 15 days
prior to the consummation of the Corporate Event, the Investor shall deliver to
the Company the certificate or certificates representing shares to be sold to
the Company pursuant to Section 7(g)(iv), each such certificate to be properly
endorsed for transfer.
(i) RIGHTS RELATING TO COMPETITORS.
(i) Until such time as the Investor, together with its
subsidiaries, no longer hold the equivalent of at least one percent of the
outstanding voting securities of the Company (such period from the date hereof
through such time being referred to herein as the "PC/OEM Period"), unless such
transaction constitutes a Corporate Event, and the Investor elects not to
exercise the right of first refusal provided in Section 7(h)(ii), the Company
will not issue any securities to another PC/OEM. A "PC/OEM" means a personal
computer original equipment manufacturer or any entity that derives at least
five percent of its annual gross sales from the manufacturer or sale of personal
computers, including but not limited to Dell, Apple, Compaq, IBM, Hewlett
Packard, Micron and Acer.
(ii) RIGHT OF FIRST REFUSAL. During the PC/OEM Period, the
Company shall, prior to effecting or entering into any agreement for any
Corporate Event involving a PC/OEM, present to the Investor in writing the final
terms and conditions of the proposed Corporate Event, including the name of the
other party or parties to the Corporate Event and a copy of the definitive
agreements that the Company is prepared to enter into (such information and
agreements, a "Final Notice"). The Investor shall have ten business days after
the date of receipt of the Final Notice to deliver written notice to the Company
agreeing to enter into a written agreement with the Company on substantially the
same terms and conditions specified in the Final Notice, which agreement shall
nevertheless provide for consummation of the transaction within 90 days after
the date of delivery of the Final Notice (such 90-day period subject to
extensions for regulatory compliance). During such ten business day period, the
Investor shall be entitled to conduct due diligence with the reasonable
cooperation of the Company. If the Investor fails to enter into a definitive
agreement within such 10 business day period, for a period of 90 days
thereafter, the Company shall have the right to enter into an agreement
regarding such Corporate Event with the party or parties specified in the
applicable Final Notice; provided, however, that such definitive agreement is
entered into within 90 days following termination of such ten business day
period; provided further, that if during such ten business day period, the
Investor shall have made a written offer for the acquisition of the Company, the
Corporate Event with such a third party shall be for at least 95 percent of the
price offered by the Investor and on other terms no less favorable to
shareholders of the Company than the terms of the offer proposed by the Investor
with respect to shareholders other than the Investor.
(j) E-COMMERCE; EXCLUSIVE SALES RIGHTS.
(i) The Company will add a ▇▇▇▇▇▇▇.▇▇▇ icon on its website,
▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇.▇▇▇, and any other website hosted by the Company during the
term of this agreement (the "Company Website"), and shall provide an electronic
link from such icon to ▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇.▇▇▇ or any successor website (the
"Investor Website"). For a one-year period from the Closing Date, the Investor
will have the exclusive right in the United States to market, sell, lease and
finance personal computer hardware and related products on the Company Website
and any successor website hosted by the Company during the term of this
Agreement. For a one-year period from the Closing Date, the Investor will retain
all revenues from products sold on the Investor Website and the Investor will
pay the Company a bounty of two percent of the gross sales (net of returns) of
the Investor's goods and services sold through the link to the Company Website
as well as two percent of the gross sales (net of returns) of the Investor's
goods and services sold on the Company Website. The Company agrees that no other
PC/OEM shall advertise or have access to any of the Company's sales channels
during such period.
(ii) Until the later of the expiration of the PC/OEM Period and
the second anniversary of the Closing Date, the Investor will have the exclusive
right to provide personal computers and related hardware to
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the Company and any direct or indirect subsidiary, joint venture, limited
liability company, partnership or other entity controlled by the Company, at
prices no less favorable than the prices offered by the Investor to similarly
situated customers.
(iii) The Investor shall have the right to terminate its
obligations under this Section 7(i) upon the occurrence of a Corporate Event.
(k) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PROMOTIONAL ACTIVITIES. The Company agrees
that the Investor shall participate in any public relations and promotional
events or opportunities in connection with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ Community and
Educational Initiative, subject to the consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ if required
under her existing contract with the Company. In the event such consent is
required, the Company will use its best efforts to obtain such consent.
(l) TRAINING PROGRAMS. The Company and the Investor agreed to work
together to develop Spanish language training programs for computer-related
applications.
(m) INTERNATIONAL RIGHTS. During the Initial Rights Period, if the
Company shall expand its operations beyond the United States, the Company will
negotiate in good faith with the Investor to finalize an agreement concerning
personal computer purchases and e-commerce for such operations prior to
contacting or negotiating with any other PC/OEM.
(n) OPTION FOR ADDITIONAL INVESTMENTS. The Company hereby grants
the Investor an option to acquire up to 483,495 additional shares of the
Company's Common Stock (which number of shares shall be appropriately adjusted
for stock splits, stock dividends and similar transactions) for cash at a price
per share equal to the Per Share Purchase Price. The option may be exercised in
whole (but not in part) in writing delivered to the Company on or prior to May
30, 2000, and the closing with respect to the issuance of such shares shall
occur as soon as practicable thereafter. Upon receipt of payment for the shares
issuable as a result of such option, the Company shall simultaneously use 67.5
percent of the gross proceeds paid by the Investor to purchase personal
computers, as contemplated by the PC Purchase Agreement, and at the closing of
such option exercise, the Company will pay the Investor ten percent of the gross
proceeds received for such shares as a prepaid marketing fee.
8. INDEMNIFICATION.
(a) AGREEMENT TO INDEMNIFY.
(i) COMPANY INDEMNITY. The Investor, its Affiliates and
Associates, and each officer, director, shareholder, employer, representative
and agent of any of the foregoing (collectively, the "Investor Indemnitees")
shall each be indemnified and held harmless to the extent set forth in this
Section 8 by the Company with respect to any and all Damages (as defined below)
incurred by any Investor Indemnitee as a proximate result of any inaccuracy or
misrepresentation in, or breach of, any representation, warranty, covenant or
agreement made by the Company in this Agreement (including any exhibits and
schedules hereto). Indemnification claims arising from the registration of the
Purchased Shares under Federal and state securities laws are covered by Section
7(c) and not this Section 8.
(ii) INVESTOR INDEMNITY. The Company, its respective Affiliates
and Associates, and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively, the "Company
Indemnitees") shall each be indemnified and held harmless to the extent set
forth in this Section 8, by the Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a proximate result of any inaccuracy or
misrepresentation in, or breach of, any representation, warranty, covenant or
agreement made by the Investor in this Agreement. Indemnification claims arising
from the registration of the Purchased Shares under Federal and state securities
laws are covered by Section 7(c) and not this Section 8.
(iii) EQUITABLE RELIEF. Nothing set forth in this Section 8
shall be deemed to prohibit or limit any Investor Indemnitee's or Company
Indemnitee's right at any time before, on or after the Closing, to seek
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injunctive or other equitable relief for the failure of any Indemnifying Party
to perform or comply with any covenant or agreement contained herein.
(b) SURVIVAL. All representations and warranties of the Investor and
the Company contained herein and all claims of any Investor Indemnitee or
Company Indemnitee in respect of any inaccuracy or misrepresentation in or
breach hereof, shall survive the Closing until the second anniversary of the
date of this Agreement, regardless of whether the applicable statute of
limitations, including extensions thereof, may expire, and no claim for any
breach therefore may be made unless notice thereof is given to the other party
prior to such date. All covenants and agreements of the Investor and the Company
contained in this Agreement shall survive the Closing in perpetuity (except to
the extent any such covenant or agreement shall expire by its terms).
(c) CLAIMS FOR INDEMNIFICATION. If any Investor Indemnitee or Company
Indemnitee (an "Indemnitee") shall believe that such Indemnitee is entitled to
indemnification pursuant to this Section 8 in respect of any Damages, such
Indemnitee shall give the appropriate Indemnifying Party (which for purposes
hereof, in the case of an Investor Indemnitee, means the Company, and in the
case of a Company Indemnitee, means the Investor) prompt written notice thereof.
Any such notice shall set forth in reasonable detail and to the extent then
known the basis for such claim for indemnification. The failure of such
Indemnitee to give notice of any claim for indemnification promptly shall not
adversely affect such Indemnitee's right to indemnity hereunder except to the
extent that such failure adversely affects the right of the Indemnifying Party
to assert any reasonable defense to such claim. As soon as practicable following
receipt of such notice, if the Indemnifying Party objects to such claim, the
senior management of the Company and the Investor shall meet to attempt to
resolve such dispute. If the dispute cannot be resolved by the senior
management, either party may make a written demand for formal dispute resolution
and specify therein the scope of the dispute. Within 30 days after such written
notification, the parties agree to meet for one day with an impartial mediator
and consider dispute resolution alternatives other than litigation. If an
alternative method of dispute resolution is not agreed upon within thirty days
after the one day mediation, either party may begin litigation proceedings.
Nothing in this section shall be deemed to require arbitration.
(d) DEFENSE OF CLAIMS. In connection with any claim that may give rise
to indemnity under this Section 8 resulting from or arising out of any claim or
Proceeding against an Indemnitee by a person or entity that is not a party
hereto, the Indemnifying Party may (unless such Indemnitee elects not to seek
indemnity hereunder for such claim) but shall not be obligated to, upon written
notice to the relevant Indemnitee, assume the defense of any such claim or
Proceeding if the Indemnifying Party with respect to such claim or Proceeding
acknowledges to the Indemnitee the Indemnitee's right to indemnity pursuant
hereto to the extent provided herein (as such claim may have been modified
through written agreement of the parties); provided, however, that nothing set
forth herein shall be deemed to require the Indemnifying Party to waive any
crossclaims or counterclaims the Indemnifying Party may have against the
Indemnified Party for damages. The Indemnified Party shall be entitled to retain
separate counsel, reasonably acceptable to the Indemnifying Party, if the
Indemnified Party shall determine, upon the written advice of counsel, that an
actual or potential conflict of interest exists between the Indemnifying Party
and the Indemnified Party in connection with such Proceeding. The Indemnifying
Party shall be obligated to pay the reasonable fees and expenses of such
separate counsel to the extent the Indemnified Party is entitled to
indemnification by the Indemnifying Party with respect to such claim or
Proceeding under this Section 8(d). If the Indemnifying Party assumes the
defense of any such claim or Proceeding, the Indemnifying Party shall select
counsel reasonably acceptable to such Indemnitee to conduct the defense of such
claim or Proceeding, shall take all steps necessary in the defense or settlement
thereof and shall at all times diligently and promptly pursue the resolution
thereof. If the Indemnifying Party shall have assumed the defense of any claim
or Proceeding in accordance with this Section 8(d), the Indemnifying Party shall
be authorized to consent to a settlement of, or the entry of any judgment
arising from, any such claim or Proceeding, with the prior written consent of
such Indemnitee, not to be unreasonably withheld; provided, however, that the
Indemnifying Party shall not be authorized to encumber any of the assets of any
Indemnitee or to agree to any restriction that would apply to any Indemnitee or
to its conduct of business; and provided further, that a condition to any such
settlement shall be a complete release of such Indemnitee and its
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Affiliates, directors, officers, employees and agents with respect to such
claim, including any reasonably foreseeable collateral consequences thereof.
Such Indemnitee shall be entitled to participate in (but not control) the
defense of any such action, with its own counsel and at its own expense. Each
Indemnitee shall, and shall cause each of its Affiliates, directors, officers,
employees and agents to, cooperate fully with the Indemnifying Party in the
defense of any claim or Proceeding being defended by the Indemnifying Party
pursuant to this Section 8(d). If the Indemnifying Party does not assume the
defense of any claim or Proceeding resulting therefrom in accordance with the
terms of this Section 8(d), such Indemnitee may defend against such claim or
Proceeding in such manner as it may deem appropriate, including settling such
claim or Proceeding after giving notice of the same to the Indemnifying Party,
on such terms as such Indemnitee may deem appropriate. If any Indemnifying Party
seeks to question the manner in which such Indemnitee defended such claim or
Proceeding or the amount of or nature of any such settlement, such Indemnifying
Party shall have the burden to prove by a preponderance of the evidence that
such Indemnitee did not defend such claim or Proceeding in a reasonably prudent
manner.
(e) CERTAIN DEFINITIONS. As used in this Agreement, (a) "Affiliate"
means, with respect to any person or entity, any person or entity directly or
indirectly controlling, controlled by or under direct or indirect common control
with such other person or entity; (b) "Associate" means, when used to indicate a
relationship with any person or entity, (1) any other person or entity of which
such first person or entity is an officer, director or partner or is, directly
or indirectly, the beneficial owner of ten percent or more of any class of
equity securities, membership interests or other comparable ownership interests
issued by such other person or entity, (2) any trust or other estate in which
such first person or entity has a ten percent or more beneficial interest or as
to which such first person or entity serves as trustee or in a similar fiduciary
capacity, and (3) any relative or spouse of such first person or entity who has
the same home as such first person or entity or who is a director or officer of
such first person or entity; (c) "Damages" means all demands, claims, actions or
causes of action, assessments, losses, damages, costs, expenses, liabilities,
judgments, awards, fines, response costs, sanctions, taxes, penalties, charges
and amounts paid in settlement, including (1) interest on cash disbursements in
respect of any of the foregoing at the prime rate of Bank of America, as in
effect from time to time, compounded quarterly, from the date each such cash
disbursement is made until the date the party incurring such cash disbursement
shall have been indemnified in respect thereof, and (2) reasonable out-of-pocket
costs, fees and expenses (including reasonable costs, fees and expenses of
attorneys, accountants and other agents of, or other parties retained by, such
party), and (d) "Proceeding" means any action, suit, hearing, arbitration,
audit, proceeding (public or private) or investigation that is brought or
initiated by or against any federal, state, local or foreign governmental
authority or any other person or entity.
9. ASSIGNMENT. The rights of the Investor under Sections 7(b), (c), (e)
and (g) are transferable only to a subsidiary, limited liability company, or
partnership of the Investor who acquires at least 20 percent of the Purchased
Shares issued on the Closing Date (subject to appropriate adjustment for all
stock splits, dividends, combinations, recapitalizations and the like where all
holders of Common Stock participate on a pro rata basis); provided, however,
that no person or entity may be assigned any of the foregoing rights unless the
Company is given written notice by the assigning party at the time of such
assignment stating the name and address of the assignee and identifying the
securities of the Company as to which the rights in question are being assigned;
and provided further, that any such assignee shall receive such assigned rights
subject to all the terms and conditions of this Agreement (including all terms
and conditions governing the duration and termination of rights of the
Investor).
10. EXCLUSIVE NEGOTIATION PERIOD. Until the earlier of the Closing, April
30, 2000 or the date on which the Investor advises the Company in writing that
the Investor is terminating this Agreement, the Company shall immediately cease
and cause to be terminated any existing discussions or negotiations with any
other PC/OEM concerning transactions similar to those contemplated by this
Agreement, and during this period neither the Company nor any of its affiliates
or its or their agents, representatives or employees shall directly or
indirectly (except relating to the transaction between the Company and the
Investor contemplated hereby) initiate, solicit, consider or engage in any
discussions or negotiations or enter into or endorse any agreement,
understanding or arrangement with any PC/OEM concerning any transactions similar
to those contemplated herein.
11. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
will inure to the benefit of and be binding upon the respective successors and
assigns of the parties.
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(b) GOVERNING LAW. This Agreement will be governed by and construed
under the internal laws of the State of New York.
(c) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(d) HEADINGS. The headings and captions used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
(e) NOTICES. Any notice required or permitted under this Agreement
shall be given in writing, shall be effective when received, and shall in any
event be deemed received and effectively given upon personal delivery to the
party to be notified or three business days after deposit with the United States
Post Office, by registered or certified mail, postage prepaid, or one business
day after deposit with a nationally recognized courier service such as FedEx for
next business day delivery under circumstances in which such service guarantees
next business day delivery, or upon electronic confirmation of receipt of
facsimile sent to the facsimile number indicated for such party on the signature
page hereof or at such other address as the Investor or the Company may
designate by giving at least ten days advance written notice pursuant to this
Section 11(e).
(f) AMENDMENTS AND WAIVERS. This Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor, which may be withheld in either
of their sole and absolute discretion.
(g) SEVERABILITY. If any provision of this Agreement is held to be
unenforceable under applicable law, such provision will be excluded from this
Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
(h) ENTIRE AGREEMENT. This Agreement, and all exhibits and schedules
hereto (including the Disclosure Schedule), which are hereby incorporated by
reference into and made an integral part of this Agreement, together with the
Confidentiality Agreement between the Company and the Investor dated October 1,
1999 (the "Confidentiality Agreement"), constitute the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersede any and all prior negotiations, correspondence, agreements,
understandings duties or obligations between the parties with respect to the
subject matter hereof.
(i) FURTHER ASSURANCES. From and after the date of this Agreement upon
the request of the Company or the Investor, the Company and the Investor will
execute and deliver such instruments, documents or other writings, and take such
other actions, as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
(j) MEANING OF INCLUDE AND INCLUDING; ARTICLE AND SECTION REFERENCES.
Whenever in this Agreement the word "include" or "including" is used, it shall
be deemed to mean "include, without limitation" or "including, without
limitation," as the case may be, and the language following "include" or
"including" shall not be deemed to set forth an exhaustive list. All "Article",
"Section", "subsection", "paragraph" and "Clause" references herein are
references to Articles, Sections, subsections, paragraphs and clauses,
respectively, of this Agreement unless otherwise specified.
(k) FEES, COSTS AND EXPENSES. All fees, costs and expenses (including
attorneys' fees and expenses) incurred by either party hereto in connection with
the preparation, negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby and thereby (including the
costs associated with any filings with, or compliance with any of the
requirements of, any governmental authorities), shall be the sole and exclusive
responsibility of such party.
(l) COMPETITION. Subject to the terms of the Confidentiality Agreement,
nothing set forth herein shall be deemed to preclude, limit or restrict the
Company's or the Investor's ability to compete with the other.
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(m) STOCK SPLITS, DIVIDENDS AND OTHER SIMILAR EVENTS. The provisions of
this Agreement (including the number of shares of Common Stock (including the
Purchased Shares) and other securities described herein) shall be appropriately
adjusted to reflect any stock split, stock dividend, reorganization or other
similar event that may occur with respect to the Company after the date hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.
▇▇▇▇▇▇▇.▇▇▇, INC. GATEWAY COMPANIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------ ----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CEO Title: Senior Vice President,
General Counsel and Secretary
Address: Address:
One Arizona Center ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ Attn: General Counsel
Attn: President
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
26
EXHIBIT A
PC PURCHASE AGREEMENT
27
PURCHASE AGREEMENT
BETWEEN
GATEWAY COMPANIES, INC.
AND
▇▇▇▇▇▇▇.▇▇▇ INC.
This Purchase Agreement ("Agreement") is made this 30th day of March,
2000 (the "Effective Date"), between Gateway Companies, Inc., a Delaware
corporation, acting through its Gateway Business division with principal offices
at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ("Gateway"), and ▇▇▇▇▇▇▇.▇▇▇, inc.
("Buyer"), a Nevada corporation, with its principal place of business at Arizona
Center ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, Buyer and Gateway have entered into a Letter of Intent that
identifies various commitments of the parties that will be negotiated in good
faith in an expedited manner, and
WHEREAS, one element of the Letter of Intent requires the Buyer to
purchase the Gateway branded Astro ("Product") at prices and quantities
identified below, and
WHEREAS, the parties desire to enter into this Agreement establishing
the terms and conditions of sale that will be applicable to the Product.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth below, the parties agree as follows:
1. PURCHASING, ORDERING AND SHIPPING
1.1 This Agreement with its terms and conditions applies to all
purchase orders and other documents of purchase ( "Orders") which Buyer may
place with Gateway for the Products during the term of this Agreement.
1.2 Buyer will initially purchase a quantity of *** of the Product
identified for the price of $*** each. Shipping of the Product into segregated
inventory will be Gateway's responsibility and at Gateway's cost. Shipping of
Buyer's Product from segregated inventory as instructed by Buyer will be
Gateway's responsibility for the prepaid price of $*** each Product. Subsequent
Orders are subject to the availability of Product.
1.3 Delivery shall be FOB Gateway segregated inventory location. Title
and risk of loss shall pass from Gateway to Buyer at the time the Product is
delivered to Gateway's segregated inventory location. Upon completing each
Product, the Product will be stored by Gateway in segregated inventory at a cost
to Buyer of $1 per Product per month payable monthly
----------------
*** CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"). CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
28
in arrears. Buyer will pay third party storage providers directly. Buyer's
Products will be shipped from time to time in accordance with shipment
instructions to be provided by Buyer. Buyer will have the benefit of any
insurance coverage provided by third party shippers that is included in the
shipping cost.
1.3 Buyer shall pay all shipping costs for returned Products, except in
the case of shipments made in error by Gateway or returns of
defective Products.
2. RESPONSIBILITIES OF BUYER
2.1 Orders submitted by Buyer pursuant to this Agreement (other than
the initial Order described in Section 1.2) shall include the following
information:
a) A description of the Products ordered, including any Gateway
numerical/alphabetical part number or configuration
identification, quantity, unit price and total price.
b) The location where the Products are to be shipped or the
services to be performed and the "▇▇▇▇ To" address.
c) Buyer's Unique ID Code which is 22938583.
2.2 Buyer shall not cancel Orders placed pursuant to this agreement
unless Gateway cannot deliver the ordered Product within 10 days of
the promised delivery date.
2.3 Gateway acknowledges and agrees that Buyer may engage in the
following limited charitable and promotional activities involving
Products:
a) Auctioning Products through Buyer's auction website in order
to stimulate activity and traffic through the website for
charity/nonprofit purposes; provided that (i) the website
shall clearly state that such auction of Products is for
charitable purposes and (ii) 100% of the proceeds of any
auctioned Products shall be donated to charity.
b) Using Products as contest prizes based on straight
giveaways, essay contests, raffles, drawings, etc., either on
a stand alone basis or in conjunction with promotions
involving third party relationships.
c) Distributing Products for free in connection with promotional
opportunities at live events, training sessions, etc. d)
Donations of Products to non-profit organizations.
2.3 Except as specifically set forth in Section 2.3, Buyer shall not,
without prior written authorization from Gateway, re-sell, market,
rent, lease, install or engage in the business of providing
services for Gateway Products in any way or through any channel,
whether direct or indirect, wholesale or retail, including but not
limited to any type of retail environment, including but not
limited to any type of store, shop, physical premises or by direct
mail advertising, newspaper advertising, electronic commerce or
solicitation over the Internet, or any other manner.
2
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2.4 Buyer shall be responsible for damage to Products while being
shipped from the segregated inventory to the ship to address that
will be provided by Buyer. Buyer will have the benefit of any
insurance coverage provided by third-party shippers that is
included in the cost of shipping.
3. RESPONSIBILITIES OF GATEWAY
3.1 With respect to ordering, shipping and billing, Gateway shall
undertake the following responsibilities:
a) Ship the Products listed on the Order complete into segregated
inventory at Gateway's cost.
b) Ship Buyer's Product from the segregated inventory location at a
prepaid cost to Buyer of $*** per Product. The risk of loss
associated with the shipment from the segregated inventory
location to the location to be identified by the Buyer is the
responsibility of the Buyer. Buyer will have the benefit of any
insurance coverage provided by third party shippers that is
included in the cost of shipping.
c) Enclose one itemized packing list with each shipment.
d) ▇▇▇▇ the Order number on subordinate documents and shipping
papers and on all packages.
e) Submit invoices showing the Order number and send to the
directed location for payment.
f) Submit a separate invoice for each shipment or Order.
g) Subject to paragraph 12 and the availability of the Products,
Gateway shall use commercially reasonable efforts to ship the
Products in accordance with the Order.
h) Subject to any landlord requirements, Gateway will use
commercially reasonable efforts to provide Buyer access to the
Products while in segregated inventory for the purpose of Buyer
installing software on the Products. Buyer is responsible for
any damage to any Products resulting from Buyer's installation
of such software.
4. PRICING
4.1 Gateway agrees to furnish *** units of the Product at a prepaid
price of $*** each. Shipping into segregated inventory shall be Gateway's
responsibility. Shipping Buyer's Product from segregated inventory as instructed
by Buyer will be Gateway's responsibility for the prepaid price of $*** each
Product. The price does not include applicable taxes that shall be borne by the
Buyer.
--------------------
*** CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
3
30
4.2 Gateway is responsible for collecting all state taxes unless a
valid exemption certificate is provided. If Gateway is required by law to pay,
collect or withhold state or local sales and use tax, excise, value-added or
similar taxes from Buyer, Gateway shall separately state the amounts, if any, in
Gateway's invoice. Buyer shall pay the additional amounts to Gateway unless a
valid exemption certificate has previously been filed with Gateway.
5. PAYMENT
5.1 Gateway shall invoice Buyer or its affiliates for future Orders.
Payment of $6,710,890 with respect to the Products described in Section 1.2
above is due immediately upon execution of this agreement.
6. WARRANTY AND SERVICES
6.1 The Products are covered under the warranty in effect at the time
the Products are delivered. Warranty support and services shall be provided in
accordance with the current warranty, which will be included with the delivered
Products. The following warranty, including its terms and conditions, is
currently in effect as of the date of this Agreement and is incorporated herein
by this reference attached hereto as Exhibit A:
Gateway (TM) Products Terms of Sale and Limited Warranty
6.2 Buyer acknowledges and agrees that the warranty and terms and
conditions described in Exhibit A may be modified by Gateway, from time to time,
in Gateway's sole discretion but any such modification shall only apply to
Products purchased after the date of such modification.
7. AFFILIATES
Any affiliate of Buyer may place an Order with Gateway, provided the
affiliate is at least fifty percent (50%) owned or controlled by the Buyer. The
affiliate's Order shall be governed by the same terms and conditions as this
Agreement.
8. INDEMNIFICATION
8.1 Gateway warrants that the Products and any parts thereof shall be
delivered free of any rightful claim of any third party for infringement of any
United States patent, copyright, or trademark or other intellectual property
right. Gateway shall defend Buyer from any and all claims, suits, damages,
costs, expenses or liabilities, including, without limitations, reasonable fees
and expenses of attorneys and other professionals, actually incurred by Buyer as
a result of any United States claim of infringement by a third party. In the
event that the Products, or part thereof, are held to constitute an infringement
and the use for the intended purposes of the Products or part is enjoined,
Gateway shall, at its expense and sole option, either procure for Buyer the
right to continue using the Products or part; or replace same with
non-infringing Products or part; or modify same so it becomes non-infringing; or
remove the Products or part
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and refund the Product purchase price (less reasonable depreciation and/or
amortization). Gateway assumes no responsibility or liability under this Section
8.1 for (a) any product or part not supplied by it; (b) for any Product or part
supplied by it which has been changed, modified, adapted or refitted without the
express written authorization of Gateway; (c) any Product or part not within
Gateway's standard inventory, but purchased by Gateway at the specific direction
of Buyer; (d) any Product or part manufactured to Buyer's design or (e) any
claim of infringement arising from the use of any Product in conjunction with
any other products as a combination not furnished by Gateway. THIS INDEMNITY IS
GATEWAY'S SOLE LIABILITY AND BUYER'S SOLE REMEDY FOR INFRINGEMENT OF ANY PATENT,
COPYRIGHT, TRADEMARK OR TRADE SECRET.
8.2 Gateway shall defend Buyer from any and all claims, suits, damages,
costs, expenses or liabilities, including, without limitation, reasonable fees
and expenses of attorneys and other professionals actually incurred by Buyer,
arising out of the death or injury to any person or damage to tangible property
which is the result of Gateway's negligence.
8.3 Buyer shall defend Gateway from any and all damages, costs,
expenses or liabilities, including, without limitation, reasonable fees and
expenses of attorneys and other professionals, actually incurred by Gateway
arising out of or relating to (i) misrepresentation, or breach of warranty or
covenant by Buyer under this Agreement, (ii) any actual or alleged act or
omission of Buyer related to its performance of its obligations, (iii) death or
injury to any person or damage to any tangible property which is the result of
(a) any Products or part not supplied by Gateway, (b) any Products or part
supplied by Gateway which has been changed, modified, adapted or refitted
without the express written authorization of Gateway, (c) any Products or part
not within Gateway's standard inventory, but purchased by Gateway at the
specific direction of Buyer, (d) any Products or part manufactured to Buyer's
design, or (e) any claim of infringement arising from the use of any Products in
conjunction with any other products as a combination not furnished by Gateway.
8.4 Notice of Claim, Right to Control Defense.
a) If an indemnified party receives notice of the assertion of a
claim, the commencement of a suit, action or proceeding, or the
imposition of any penalty or assessment by a third party as set
forth in Sections 8.1, 8.2 and 8.3 above (collectively "Third
Party Claim") and the indemnified party intends to seek
indemnification, then the indemnified party shall promptly give
written notice to the indemnifying party of the Third Party
Claim, but in any event within seven (7) days of the Third Party
Claim. The failure by an indemnified party to notify the
indemnifying party of a Third Party Claim will not relieve the
indemnifying party of any indemnification responsibility under
this Section 8, except to the extent the failure, if any, to
provide the notice materially prejudices the ability of the
indemnifying party to defend the Third Party Claim.
b) Upon receipt of written notice of a Third Party Claim, the
indemnifying party shall have the right to exclusively control
the defense, compromise or settlement with its own counsel and
at its own expense. The
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indemnified party will be entitled (at the indemnified party's
expense) to participate in the defense of any Third Party Claim
with its own counsel.
c) In the event that the indemnifying party does not undertake the
defense, compromise or settlement of a Third Party Claim in
accordance with Section 8, the indemnified party shall have the
right to control the defense or settlement of a Third Party
Claim with counsel of its own choosing; provided, however, that
the indemnified party shall not settle or compromise any Third
Party Claim without the indemnifying party's prior written
consent.
8.5 Any damage, loss, injury, cost or expense indemnified against in
this Section 8 shall be for actual, out-of-pocket costs of the indemnified party
and shall not include any amount representing loss of profit or loss of business
or special, indirect, consequential or punitive damages to the indemnified party
of any nature whatsoever.
8.6 No party to this Agreement shall be required to defend or indemnify
any other party under this Section 8, if the damage, loss, injury, cost or
expense is finally adjudged to have been caused by the indemnified party's own
negligence or willful misconduct.
9. TERM
The term ("Term") of this Agreement shall be for one (1) year from the
date of this Agreement and may be renewable for additional one-year terms upon
mutual written agreement of the parties unless terminated pursuant to Section
10. In no case shall this Agreement remain in effect longer than five (5) years
from the date of this Agreement.
10. TERMINATION
This Agreement may be terminated at any time, without cause, by either
party giving thirty (30) days written notice to the other party, provided,
however, that the parties may agree in writing to a shorter notice period. The
termination of this Agreement shall not affect the obligations of either party
under any Orders dated and accepted prior to the effective date of termination.
11. CONFIDENTIALITY
Each party agrees and covenants that it will keep in confidence and
prevent the acquisition, disclosure, use or misappropriation by any person or
persons of all types of and/or quantities of components, types of systems, new
Products development, technical information, data, formulas, patterns,
compilations, programs, devices, methods, techniques, marketing plans, business
procedures, customer and supplier lists, agreements with any suppliers,
techniques or know-how, processes or other proprietary or confidential or
intellectual proprietary information received in writing (hereafter
"Confidential Information") which is received from or concerns the
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other party; provided, however, that neither party shall be liable for
disclosure of any Confidential Information if the same is disclosed with the
prior written approval of the other party or is otherwise publicly available.
Each party agrees that if it breaches this confidentiality covenant, the other
party shall suffer irreparable injury and shall be entitled immediately to a
temporary and permanent injunction.
12. FORCE MAJEURE
In the event that either party is prevented from performing or is
unable to perform any of its obligations under this Agreement, except for
payment, due to any Act of God, fire, casualty, flood, war, strike, lockout,
epidemic, destruction of the production facilities, riot, insurrection,
production material or personnel unavailability, or any other cause beyond the
reasonable control of the party invoking this section, and if such party shall
have used reasonable efforts to mitigate its effects and given prompt written
notice to the other party, its performance shall be excused, and the time for
performance shall be extended for the period of delay or inability to perform
due to such occurrences.
13. COMMUNICATIONS
Any notice, request, consent or other communication required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given (a) when received if personally delivered, (b) within five (5)
days after being sent by registered or certified mail, return receipt requested,
postage prepaid, to the parties (and to the persons to whom copies shall be
sent), or (c) when a confirmation of proper transmission has been printed if
sent by fax or telegram (but only if followed up by prompt confirmation by
personal delivery or mail in accordance with the foregoing clauses), at the
respective addresses of the parties set forth below:
If to Buyer: If to Gateway:
▇▇▇▇▇▇▇.▇▇▇, inc. Gateway Companies, Inc.
Arizona Center 26110 Enterprise Way LF-04
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attn: Chief Operating Officer Attn: Contract Management
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇ ▇▇▇-▇▇▇-▇▇▇▇ (phone)
▇▇▇-▇▇▇-▇▇▇▇ (fax)
14. WAIVER
Failure of either party to enforce at any time, or for any period of
time, any provision of this Agreement, shall not constitute a waiver of that
provision or in any way affect the validity of this Agreement.
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15. INDEPENDENT CONTRACTOR
The parties to this Agreement are independent contractors and are in no
way the other party's legal representative, or agent. Neither party under any
circumstances shall be deemed to be the agent or representative of the other
party, nor shall either party have the right to enter into any contracts or
commitments in the name of the other party or otherwise to bind or commit the
other party.
16. SURVIVAL OF OBLIGATIONS
Upon termination of this Agreement pursuant to Section 10, the parties
shall have no further rights and obligations under this Agreement, except with
respect to Sections 5, 6, 7, 8, 10, 11, 13, 14, 15, 16, 17 and 18 which shall
survive the termination of this Agreement.
17. DISPUTE RESOLUTION
17.1 All disputes arising out of or in connection with this Agreement
shall be handled as follows. A representative of the party who raises the
dispute will notify the other party's representative in writing of the dispute,
and the non-complaining party will exercise good faith efforts to resolve the
matter by mutual agreement as expeditiously as possible within ten (10) business
days. Failing such resolution, the matter will be submitted to a senior manager
of each party for resolution by mutual agreement as expeditiously as possible
within ten (10) business days. Failing such resolution, the matter will be
submitted to an executive officer of each party for resolution by mutual
agreement as expeditiously as possible within thirty (30) calendar days.
17.2 Failing resolution by the parties' executive officers, the dispute
shall be submitted to arbitration in accordance with the provisions contained in
Section 9, Dispute Resolution, of the Gateway(TM) Business Products Limited
Warranty and Terms & Conditions Agreement as in effect at the time of purchase
of the Products subject to the dispute, the current version being attached
hereto as Exhibit A.
17.3 Notwithstanding the foregoing procedures, each party shall have
the right to seek immediate injunctive or other judicial relief against or from
any ongoing or impending injury or damage which the foregoing dispute resolution
procedure would not reasonably avoid.
18. COMPLETE AGREEMENT
This Agreement, together with Exhibit A, sets forth the entire
Agreement between the parties and supersedes all previous communications,
representations or agreements, whether oral or written, with respect to the
subject matter hereof. Terms and conditions inconsistent with, contrary to or in
addition to the terms and conditions of this Agreement shall not be added to or
incorporated into this Agreement, by subsequent Order or otherwise, and any such
attempts to add or incorporate such terms and conditions are hereby rejected.
The terms and conditions of this Agreement shall prevail and govern in the case
of any such inconsistent or additional terms
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referenced or included in any other agreements or documentation related to this
Agreement. Any such terms and conditions that purport to modify this Agreement
in any way may only be added or incorporated by a written modification of this
Agreement that is signed by both parties.
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IN WITNESS WHEREOF, THIS AGREEMENT HAS BEEN EXECUTED BY THE DULY AUTHORIZED
REPRESENTATIVES OF THE RESPECTIVE PARTIES, AS OF THE DATE FIRST WRITTEN ABOVE.
GATEWAY COMPANIES, INC. ▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------- -------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CEO Title: Senior Vice President, General
Counsel and Secretary
Date: 3/30/00 Date: 3/30/00
10
