--------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and between
▇▇▇▇▇▇ ▇▇▇▇▇▇
and
CYBERSHOP INTERNATIONAL, INC.
Dated March 24, 1999
--------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated March 24, 1999 by and
between CYBERSHOP INTERNATIONAL, INC., a Delaware corporation (the "Purchaser")
and ▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Stockholder").
W I T N E S S E T H :
WHEREAS, the Stockholder owns all of the issued and outstanding shares of
common stock, par value of $.01 per share (the "Shares") of Deal-A-Day, Inc., a
Massachusetts corporation (the "Company");
WHEREAS, the Stockholder desires to sell, and the Purchaser desires to
purchase, all of the Shares pursuant to the provisions of this Agreement;
WHEREAS, for federal income tax purposes it is intended that the purchase
of the Shares shall qualify as a reorganization within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes it is intended that the transaction meet
the requirements to qualify as a "pooling."
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
ARTICLE I
SALE OF THE SHARES
Section 1.1 Sale of the Shares. Subject to the terms and conditions herein
stated, the Stockholder hereby assigns, transfers and delivers to the Purchaser,
and the Purchaser hereby purchases from the Stockholder, 50,000 Shares
representing all of the issued and outstanding Shares of the Company. All
certificates representing the Shares shall be duly endorsed by the Stockholder
transferring the same, with all necessary transfer tax and other revenue stamps,
acquired at the Stockholder's expense, affixed and canceled.
Section 1.2 Closing. The Closing under this Agreement (the "Closing") is
taking place simultaneously with the execution and delivery of this Agreement at
10:00 A.M., on the
date hereof, at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇. Such date is herein referred to as the "Closing Date".
ARTICLE II
PURCHASE PRICE
Section 2.1 Purchase Price. In full consideration for (i) the purchase by
the Purchaser of the Shares and (ii) the agreement of the Stockholder to be
bound by the non-competition and non-solicitation provisions set forth in the
Employment Agreement attached hereto as Exhibit A, the Purchaser will issue to
the Stockholder 250,000 unregistered shares of its common stock, par value
$0.001 per share ("CYSP Stock"). 25,000 shares of CYSP Stock shall have
registration rights in accordance with the Registration Rights Agreement annexed
hereto as Exhibit B.
ARTICLE III
REPRESENTATIONS OF THE STOCKHOLDER
The Stockholder represents, warrants and agrees to and with the Purchaser
as follows:
Section 3.1 Execution and Validity of Agreement; Restrictive Documents.
3.1.1 Execution and Validity. The Stockholder has the full legal right and
capacity to enter into this Agreement and to perform his obligations hereunder.
This Agreement has been duly and validly executed and delivered by the
Stockholder and, assuming due authorization, execution and delivery by the
Purchaser, constitutes a legal, valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
3.1.2 Stock Ownership. The Stockholder is the true and lawful owner of the
Shares and all of such Shares have been duly and validly authorized and issued
and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof, and such ownership is
free and clear of all mortgages, liens, security interests, pledges,
encumbrances, claims, charges and restrictions of any kind or character
(individually, a "Lien" and collectively, "Liens").
3.1.3 No Options. There are no outstanding subscriptions, options, rights,
warrants, calls, commitments or arrangements of any kind to acquire any Shares
and there are no agreements or understandings with respect to the sale or
transfer of Shares.
3.1.4 No Restrictions. There is no suit, action, claim, or to the best
information,
2
knowledge and belief of the Stockholder, investigation or inquiry by any
administrative agency or governmental body, and no legal, administrative or
arbitration proceeding pending or, to the best knowledge, information and belief
of the Stockholder, threatened against the Stockholder or any of his properties
or assets, with respect to the execution, delivery and performance of this
Agreement or the transactions contemplated hereby or any other agreement entered
into by the Stockholder in connection with the transactions contemplated hereby.
3.1.5 Non-Contravention. The execution, delivery and performance by the
Stockholder of his obligations hereunder and the consummation of the
transactions contemplated hereby, will not (a) result in the violation by the
Stockholder of any statute, law, rule, regulation or ordinance (collectively,
"Laws"), or any judgment, decree, writ or similar order, whether preliminary or
final (collectively, "Orders"), of any court, tribunal, arbitrator, authority,
agency, commission, official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision (a "Governmental or Regulatory Authority"), applicable to
the Stockholder or any of his assets or properties, or (b) conflict with, result
in a violation or breach of, constitute (with or without notice or lapse of time
or both) a default under, or require the Stockholder to obtain any consent,
approval or action of, make any filing with or give any notice to, or result in
or give to any Person (as defined in Section 9.3 below) any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any Lien upon any of the assets or
properties of the Stockholder, under any of the terms, conditions or provisions
of any note, bond, mortgage, security agreement, indenture, license, franchise,
permit, concession, contract, lease or other instrument, obligation or agreement
of any kind (collectively, "Instruments") to which the Stockholder is a party or
by which he or any of his assets or properties are bound.
3.1.6 Approvals and Consents. No consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority or other public or
private third party is necessary or required under any of the terms, conditions
or provisions of any Law or Order of any Governmental or Regulatory Authority or
any Instrument to which the Stockholder is a party or his assets or properties
are bound for the execution and delivery of this Agreement by the Stockholder,
the performance by the Stockholder of his obligations hereunder or the
consummation of the transactions contemplated hereby.
3.1.7 Residence. The Stockholder is a resident of the Commonwealth of
Massachusetts.
Section 3.2 Existence and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, with the full corporate power and authority to
own its property and to carry on its business all as and in the places where
such properties are now owned or operated or such business is now being
conducted. The Company is duly qualified, licensed or admitted to do
3
business and is in good standing in those jurisdictions set forth on Schedule
3.2, which are the only jurisdictions in which the ownership, use or leasing of
its assets and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary.
Section 3.3 Subsidiaries and Investments; Capital Stock.
3.3.1 Subsidiaries and Investments. The Company does not own any capital
stock or other equity or ownership or proprietary interest in any corporation,
limited liability company, association, trust, joint venture or other entity.
3.3.2 Capital Stock. The Company has an authorized capitalization
consisting of 200,000 shares of common stock, $.01 par value of which 50,000
shares are issued and outstanding and no shares are held in the treasury of the
Company. All such shares have been duly authorized and validly issued and are
fully paid and non-assessable, and have not been issued in violation of any
preemptive rights of Stockholder. No other class of capital stock of the Company
is authorized or outstanding. There are no outstanding options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, plans or
other agreements of any character (collectively, "Options") providing for the
purchase, issuance or sale of any shares of the capital stock of the Company, or
outstanding agreements or commitments to grant, extend or enter into any Option
with respect thereto, or outstanding Options providing for settlement in cash.
There are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any
equivalent thereof.
Section 3.4 Financial Statements and No Material Changes. Schedule 3.4(a)
sets forth the audited balance sheets of the Company as at December 31, 1998 and
the related audited statements of income and retained earnings and cash flows
for the calendar year then ended (the balance sheet of the Company as at
December 31, 1998, is hereinafter referred to as the "Balance Sheet"). Such
financial statements, including the footnotes thereto, have been prepared in
accordance with generally accepted accounting principles, consistently applied
throughout the periods indicated ("GAAP"). The Balance Sheet fairly presents the
financial condition of the Company at the date thereof and fairly presents all
claims against and all debts and liabilities of the Company, fixed or
contingent, as at the date thereof, required to be shown thereon under GAAP, and
the related statements of income and retained earnings and cash flows fairly
present the results of operations of the Company, retained earnings and the cash
flows for the period indicated. Except as reflected in the January 31, 1999
balance sheet or as specifically stated in Schedule 3.23, since December 31,
1998 (the "Balance Sheet Date"), there has been no material adverse change in
the assets or liabilities, or in the business or condition, financial or
otherwise, or in the results of operations of the Company.
Section 3.5 Books and Records. All accounts, books, ledgers and official
and other records material to the business of the Company maintained by or on
behalf of the Company of whatsoever kind have been properly and accurately kept
and completed in all material
4
respects, and there are no material inaccuracies or discrepancies of any kind
contained or reflected therein. Except as set forth on Schedule 3.5, the Company
does not have any of its records, systems, controls, data or information
recorded, stored, maintained, operated or otherwise wholly or partly dependent
on or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership and possession of
the Company.
Section 3.6 Personal Property; Encumbrances. The Company has good and
valid title to, or enforceable leasehold interests in or valid rights under
contract to use, all the properties and assets owned or used by it (personal,
tangible and intangible), including, without limitation (a) all the properties
and assets reflected in the Balance Sheet, and (b) all the properties and assets
purchased or otherwise contracted for by the Company since the Balance Sheet
Date (except for properties and assets reflected in the Balance Sheet or
acquired or otherwise contracted for since the Balance Sheet Date that have been
sold or otherwise disposed of in the ordinary course of business), in each case
free and clear of all Liens, except for Liens set forth on Schedule 3.6. The
property, plant and equipment owned or otherwise contracted for by the Company
is in a state of good maintenance and repair (ordinary wear and tear excepted)
and is adequate and suitable in all material respects for the purposes for which
they are presently being used.
Section 3.7 Real Property.
3.7.1 Owned Real Property. The Company does not own a freehold interest in
any real property or any option or right of first refusal or first offer to
acquire real property.
3.7.2 Leased Real Property. Schedule 3.7.2 contains an accurate and
complete list of all real property leases to which the Company is a party (as
lessee, lessor, sublessee or sublessor), including, without limitation, leases
which the Company has subleased or assigned to a third party and as to which the
Company remains liable. Each real property lease set forth on Schedule 3.7.2 (or
required to be set forth on Schedule 3.7.2) is valid, binding and in full force
and effect; all rents and additional rents and other sums, expenses and charges
due on each such lease have been paid; and the lessee has been in peaceable
possession since the commencement of its original possession under such lease
and no waiver, indulgence or postponement of the lessee's obligations thereunder
has been granted by or would be required from the lessor. [Except as set forth
in Schedule 3.7.2, there exists no default or event of default by the Company or
to the best knowledge, information and belief of the Stockholder, by any other
party to such real property lease, or occurrence, condition or act (including
the purchase of the Shares hereunder) which, with the giving of notice, the
lapse of time or the happening of any further event or condition, would become a
default or event of default by the Company under such real property lease, and
there are no outstanding claims of breach or indemnification or notice of
default or termination of any real property lease.] The real property leased by
the Company is, in all material respects, in a state of good maintenance and
5
repair and is, in all material respects, adequate and suitable for the purposes
for which it is presently being used, and to the best knowledge, information and
belief of the Stockholder, there are no material repair or restoration works
likely to be required in connection with any of the leased real properties.
Except as set forth on Schedule 3.7.2, the Company is in physical possession and
actual and exclusive occupation of the whole of their leased properties. No real
property lease is subject or subordinate to any superior lease or mortgage
except as set forth on Schedule 3.7.2. The Company does not owe any brokerage
commission with respect to any such real property leases.
Section 3.8 Contracts. Schedule 3.8 hereto contains an accurate and
complete list of the following agreements to which the Company is a party: (a)
all Plans (as such term is defined in Section 3.19), (b) any personal property
lease with a fixed annual rental of $10,000 or more, (c) any contract relating
to capital expenditures which involve payments of $10,000 or more in any single
or related transaction, (d) any loan or advance to, or investment in, any other
Person or any contract relating to the making of any such loan, advance or
investment, (e) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any other Person (other than the endorsement of
negotiable instruments for collection in the ordinary course of business), (f)
any management service, employment, consulting or any other similar type of
contract, agreement or document relating to services to be provided to the
Company which is not cancelable by the Company without penalty or other
financial obligation within 30 days, (g) any contract limiting its freedom to
engage in any line of business or to compete with any other Person, (h) any
contract (not covered by another subsection of this Section 3.8) which involves
$10,000 or more over the unexpired term thereof and is not cancelable by the
Company without penalty or other financial obligation within 30 days, (i) any
collective bargaining agreement, (j) any contract with any of its officers or
directors or the Stockholder (including indemnification agreements), (k) any
secrecy or confidentiality agreement (other than standard confidentiality
agreements in computer software license agreements or agreements with clients
entered into in the ordinary course of business), (l) any licensing or franchise
agreement (other than license agreements for "off-the-shelf" third party
computer software not included within the Company's products or services), (m)
any agreement with a client which generates annual revenues of $10,000 or more.
Each contract set forth on Schedule 3.8 (or required to be set forth on Schedule
3.8) is in full force and effect, and there exists no default or event of
default by the Company or to the best knowledge, information and belief of the
Stockholder, by any other party, or occurrence, condition, or act (including the
purchase of the Shares hereunder) which, with the giving of notice, the lapse of
time or the happening of any other event or condition, would become a default or
event of default thereunder by the Company, and there are no outstanding claims
of breach or indemnification or notice of default or termination of any such
contracts.
Section 3.9 Non-Contravention; Approvals and Consents.
3.9.1 Non-Contravention. The execution, delivery and performance by the
Stockholder of his obligations hereunder and the consummation of the
transactions
6
contemplated hereby, will not (a) violate, conflict with or result in the breach
of any provision of the Certificate of Incorporation or By-laws of the Company,
or (b) result in the violation by the Company of any Laws or Orders of any
Governmental or Regulatory Authority, applicable to the Company or any of its
assets or properties, except as would not reasonably be expected to have a
"Material Adverse Effect" (as defined below), or (c) conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of time or
both) a default under, or require the Company to obtain any consent, approval or
action of, make any filing with or give any notice to, or result in or give to
any Person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
Lien upon any of the assets or properties of the Company, under any of the
terms, conditions or provisions of any Instruments to which the Company is a
party or by which the Company or any of its assets or properties is bound. For
purposes of this Agreement, "Material Adverse Effect" shall mean any material
and adverse effect on the financial condition, results of operations, assets,
properties or business of the Company or the Purchaser, as applicable.
3.9.2 Approvals and Consents. No consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority or other public or
private third party is necessary or required under any of the terms, conditions
or provisions of any Law or Order of any Governmental or Regulatory Authority or
any Instrument to which the Company is a party or by which its assets or
properties are bound for the execution and delivery of this Agreement by the
Stockholder, the performance by the Stockholder of his obligations hereunder or
the consummation of the transactions contemplated hereby.
Section 3.10 Litigation. There is no action, suit, proceeding at law or in
equity by any Person, or any arbitration or any administrative or other
proceeding by or before (or to the best knowledge, information and belief of the
Stockholder, any investigation by) any governmental or other instrumentality or
agency, pending or, to the best knowledge, information and belief of the
Stockholder, threatened, against the Company with respect to this Agreement or
the transactions contemplated hereby, or against or affecting the Company or its
properties or rights; and no acts, facts, circumstances, events or conditions
occurred or exist which are a basis for any such action, proceeding or
investigation. The Company is not subject to any judgment, order or decree
entered in any lawsuit or proceeding.
Section 3.11 Taxes. The Company has timely filed, or caused to be filed,
taking into account any valid extensions of due dates, completely and accurately
in all material respects, all federal, state, local and foreign tax or
information returns (including estimated tax returns) required under the
statutes, rules or regulations of such jurisdictions to be filed by the Company
with respect to income, franchise, capital stock, employees' income withholding,
back-up withholding, withholding on payments to foreign Persons, social
security, unemployment, disability, real property, personal property, sales,
use, excise, transfer and other taxes (including interest, penalties or
additions to tax in respect of the foregoing) whether disputed or not (all of
the foregoing collectively referred to as "Taxes"). All Taxes
7
shown on said returns to be due and all additional assessments received prior to
the Balance Sheet Date have been paid or are being contested in good faith, in
which case, such contested assessments are set forth on Schedule 3.11. All sales
taxes due and owing prior to the Closing Date have been paid. The amount set up
as an accrual for Taxes on the Balance Sheet is sufficient for the payment of
all unpaid Taxes of the Company, whether or not disputed, for all periods ended
on and prior to the date thereof. Since the Balance Sheet Date, the Company has
not incurred any liabilities for Taxes other than in the ordinary course of
business. The Stockholder has delivered to the Purchaser correct and complete
copies of all U.S. federal and Massachusetts State income tax returns filed with
respect to the Company for all taxable periods since its inception. None of the
federal, state or local tax returns of the Company has ever been audited by the
Internal Revenue Service ("IRS") or any other Governmental or Regulatory
Authority. No examination of any return of the Company is currently in progress,
and the Company has not received notice of any proposed audit or examination. No
deficiency in the payment of Taxes by the Company for any period has been
asserted by any taxing authority and remains unsettled at the date of this
Agreement. The Company has not made any agreement, waiver or other arrangement
providing for an extension of time with respect to the assessment or collection
of any tax against it or filed a consent with the IRS pursuant to Section
341(f)(2) of the Code or with any other governmental agency to any similar
effect or made an election under Section 338 of the Code. The Company has not
been a member of an affiliated group filing consolidated federal income tax
returns nor has it been included in any combined, consolidated or unitary state
or local income tax return. The Company is not a party to any tax allocation or
tax sharing agreement nor does it have any contractual obligation to indemnify
any other Person with respect to Taxes. The Company has not been a United States
real property holding corporation within the meaning or Section 897(c)(2) of the
Code within the period specified in Section 897(c)(1)(A)(ii) of the Code. The
Company will not be required as a result of a change in accounting method for
any period ending on or before the Closing Date to include any adjustment under
Section 481 of the Code (or any similar provision of state, local or foreign
income tax law) in income for any period ending after the Closing Date.
Section 3.12 Liabilities. Except as set forth in the Balance Sheet or
referred to in the footnotes thereto, the Company does not have any outstanding
claims, liabilities or indebtedness of any nature whatsoever (collectively in
this Section 3.12, "Liabilities"), whether accrued, absolute or contingent,
determined or undetermined, asserted or unasserted, and whether due or to become
due, other than (i) Liabilities specifically disclosed in any Schedule hereto;
(ii) Liabilities under contracts, purchase orders and other agreements,
arrangements and commitments of the type required to be disclosed by the
Stockholder on any Schedule and so disclosed or which because of the dollar
amount or other qualifications are not required to be listed on such Schedule;
(iii) Liabilities incurred in the ordinary course of business and consistent
with past practice since the Balance Sheet Date not involving borrowings by the
Company and (iv) liabilities which are fully covered by insurance maintained by
the Company. Schedule 3.8 sets forth a list of all current arrangements of the
Company for borrowed money and all outstanding balances with respect thereto.
The
8
Company is not in default in respect of the terms or conditions of any
borrowings.
Section 3.13 Insurance. Schedule 3.13 is a schedule of all insurance
policies (including life insurance) or binders maintained by the Company. All
such policies are in full force and effect and all premiums that have become due
have been currently paid. The Company has not received any notice of
cancellation or non-renewal of any such policy or binder. The Company has not
filed for any claims exceeding $5,000 against any of its insurance policies.
Section 3.14 Intellectual Property; Customer Lists.
(a) Schedule 3.14 hereto contains an accurate and complete list of all
Intellectual Property (as defined below) owned by the Company and all agreements
under which any Person has granted a license for any Intellectual Property to
the Company (other than license agreements for "off the shelf" third party
computer software not included within the Company's products or services). The
Company has all right, title and interest in, a valid and binding license to
use, or has the requisite permission and authority to use all Intellectual
Property used in the conduct of its business. Except as set forth on Schedule
3.14, no claim of infringement or misappropriation of Intellectual Property is
or has been pending or, to the best knowledge, information and belief of the
Stockholder, threatened against the Company and/or Stockholder and, to the best
knowledge, information and belief of the Stockholder, the Company and/or the
Stockholder are not infringing or misappropriating any Intellectual Property of
any Person. The Company has not granted any license, franchise or permit in
effect on the date hereof to any Person to use any of the trade names or any of
the trademarks owned by it. The term "Intellectual Property" means patents and
patent rights, trademarks and trademark rights, tradenames and tradename rights,
service marks and service ▇▇▇▇ rights, service names and service name rights,
copyright and copyright rights, trade secrets and trade secret rights, rights of
privacy and publicity, and other proprietary intellectual property and personal
rights, including without limitation "▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇," and all pending
applications for and registrations of any of the foregoing.
(b) The customer lists and emails addresses relating to the customer lists
being delivered by the Stockholder are complete and represent all of the
customer lists and email addresses in the Company's possession relating to the
Company's business.
9
Section 3.15 Compliance with Laws; Licenses and Permits.
3.15.1 Compliance. The Company is, and its business has been conducted, in
compliance with all applicable Laws and Orders, except in each case where the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect, including without limitation, (a) all Laws and Orders promulgated by the
Federal Trade Commission or any other Governmental or Regulatory Authority; (b)
all environmental Laws and Orders; and (c) all Laws and Orders relating to
labor, civil rights, and occupational safety and health laws, worker's
compensation, employment and wages, hours and vacations, or pay equity. The
Company has not been charged with, or, to the best information, knowledge and
belief of the Stockholder, threatened with or under any investigation with
respect to, any charge concerning any violation of any Laws or Orders.
3.15.2 Licenses. The Company has all licenses, permits and other
governmental certificates, authorizations and approvals (collectively,
"Licenses") required by a Governmental or Regulatory Authority for the operation
of its business and the use of its properties as presently operated or used or
contemplated to be operated or used, except where the failure to have such
Licenses would not reasonably be expected to have a Material Adverse Effect. All
of the Licenses are in full force and effect and no action or claim is pending,
nor to the best knowledge, information and belief of the Stockholder is
threatened, to revoke or terminate any of such Licenses or declare any such
License invalid in any material respect.
Section 3.16 Suppliers. Schedule 3.16 sets forth for the Company the ten
largest suppliers (measured by volume of product supplied) as at the Balance
Sheet Date. No supplier of the Company has advised the Company or the
Stockholder in writing that it is terminating its relationship or considering
refusing to deal with the Company, and to the best knowledge, information and
belief of the Stockholder, no supplier has orally advised the Company of any of
the foregoing events.
Section 3.17 Accounts Receivable; Inventory; Accounts Payable. Except as
set forth on Schedule 3.17, there are no accounts receivable and outstanding
unbilled invoices (including, without limitation, unbilled invoices for services
and out of pocket expenses) and other debts due all of which, if any, are good
and collectible in full in the ordinary course of business. Except as set forth
in Schedule 3.17, there has been no change since the Balance Sheet Date in the
amount of the inventory, accounts receivable or other debts due to the Company
or the reserves with respect thereto, or accounts payable of the Company except,
in each category outlined above, for changes in an amount not exceeding $10,000
plus or minus.
Section 3.18 Employment Relations. (a) The Company is not engaged in any
unfair labor practice; (b) no unfair labor practice complaint against the
Company is pending before any Governmental or Regulatory Authority; (c) there is
no organized labor strike, dispute, slowdown or stoppage actually pending or to
the best knowledge, information and belief of
10
the Stockholder threatened against or involving the Company; (d) there are no
labor unions representing or, to the best knowledge, information and belief of
the Stockholder, attempting to represent the employees of the Company; (e) no
claim or grievance nor any arbitration proceeding arising out of or under any
collective bargaining agreement is pending and to the best knowledge,
information and belief of the Stockholder, no such claim or grievance has been
threatened; (f) no collective bargaining agreement is currently being negotiated
by the Company; and (g) the Company has not experienced any work stoppage or
similar organized labor dispute during the last three years. There is no legal
action, suit, proceeding or claim pending or, to the best knowledge, information
and belief of the Stockholder, threatened between the Company and any of its
employees, former employees, agents, former agents, job applicants or any
association or group of any of their employees.
Section 3.19 Employee Benefit Plans
3.19.1 List of Plans. Schedule 3.8 to this Agreement lists all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all termination,
severance or other contracts or agreements, whether or not set forth in writing,
whether covering one Person or more than one Person, and whether or not subject
to any of the provisions of ERISA, which are maintained, contributed to or
sponsored by the Company for the benefit of any employee (each item so listed on
Schedule 3.8 being referred to herein individually, as a "Plan" and
collectively, as the "Plans"). The Stockholder has delivered to the Purchaser a
complete and accurate copy (where applicable) of (i) each written Plan and
descriptions of any unwritten Plan (including all amendments thereto whether or
not such amendments are currently effective), (ii) each summary plan description
and summary of material modifications relating to a Plan, (iii) each trust
agreement or other funding arrangement with respect to each Plan, including
insurance contracts, (iv) the most recently filed IRS Form 5500 relating to each
Plan, (v) the most recently received IRS determination letter for each Plan and
(vi) the most recently prepared actuarial reports and the three most recently
prepared financial statements, if applicable, in connection with each Plan.
Except as set forth on Schedule 3.19.1, neither the Stockholder nor the Company
has made any commitment, whether legally enforceable or not (i) to create or
cause to exist any other employee benefit plan, program or arrangement or (ii)
to modify, change or terminate any Plan.
3.19.2 Severance. Except as set forth on Schedule 3.19.2, none of the
Plans, or any employment agreement or other contract to which the Company is a
party or bound, provides for the payment of or obligates the Company to pay
separation, severance, termination or similar-type benefits to any Person or
obligates the Company to pay separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by this Agreement or
as a result of a "change in control," within the meaning of such term under
Section 280G of the Code.
11
3.19.3 Multi-Employer Plans. Neither the Company nor any ERISA Affiliate
(as herein defined) has maintained, contributed to or participated in a
multi-employer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA
or a multiple employer plan subject to Sections 4063 and 4064 of ERISA) nor has
any obligations or liabilities, including withdrawal or successor liabilities,
regarding any such plan. As used herein, the term "ERISA Affiliate" means any
Person that, together with the Company, is considered a "single employer"
pursuant to Section 4001(b) of ERISA.
3.19.4 Welfare Benefit Plans. Schedule 3.8 sets forth a complete and
accurate list of each Plan which provides or promises retiree medical,
disability or life insurance benefits to any current or former employee, officer
or director of the Company. Except as set forth on Schedule 3.19.4, the Company
has expressly reserved the right, in all Plan documents relating to welfare
benefits provided to employees, former employees, officers, directors and other
participants and beneficiaries, to amend, modify or terminate at any time the
Plans which provide for welfare benefits.
3.19.5 Administrative Compliance. Each Plan is now and has been operated
in all material respects in accordance with the requirements of all applicable
law, including, without limitation, ERISA and the Code, and the regulations and
authorities published thereunder. Without limitation of the foregoing, each Plan
has been administered and maintained in all material respects in compliance with
the applicable provisions of Title I of ERISA regarding reporting and disclosure
requirements, and all participants and beneficiaries of each Plan have been
furnished a summary plan description that complies in all material respects with
the requirements of Department of Labor Sections 2520.102-2 and 2520.102-3. The
Company has complied in all material respects with the requirements of Sections
601-609 of ERISA. The Company performed all material obligations required to be
performed by it under, is not in any respect in default under or in violation
of, and the Stockholder has no knowledge of any default or violation by any
party to, any Plan. Except as set forth on Schedule 3.19.5, no legal action,
suit, audit, investigation or claim is pending or to the best knowledge,
information and belief of the Stockholder threatened, with respect to any Plan
(other than claims for benefits in the ordinary course) and, to the best
knowledge, information and belief of the Stockholder, and except as set forth on
Schedule 3.19.5, no fact, event or condition exists that would be reasonably
likely to provide a legal basis for any such action, suit, audit, investigation
or claim. All reports, disclosures, notices and filings with respect to such
Plans required to be made to employees, participants, beneficiaries, alternate
payees and government agencies have been timely made or an extension has been
timely obtained.
3.19.6 Tax-Qualification. Except as set forth on Schedule 3.19.6, each
Plan which is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and each trust established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so
12
exempt, and to the best knowledge, information and belief of the Stockholder, no
fact or event has occurred or condition exists since the date of such
determination letter from the IRS which would be reasonably likely to adversely
affect the qualified status of any such Plan or the exempt status of any such
trust.
3.19.7 Funding; Excise Taxes. There has been no prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) with
respect to any Plan subject to ERISA. The Company has not incurred any liability
for any excise tax arising under Sections 4971, 4972, 4975, 4976, 4977, 4978,
4978B, 4979, 4980 or 4980B of the Code or any civil penalty arising under
Sections 502(i) or 502(l) of ERISA, and, to the best knowledge, information and
belief of the Stockholder, no fact, event or condition exists which could give
rise to any such liability. Neither the Company nor any ERISA Affiliate has
incurred any liability under, arising out of or by operation of Title IV of
ERISA (other than liability for premiums to the Pension Benefit Guaranty
Corporation ("PBGC"), or contributions to a Plan, in either case arising in the
ordinary course), including, without limitation, any liability in connection
with the termination of any employee benefit plan subject to Title IV of ERISA
(a "Title IV Plan"); and, to the best knowledge, information and belief of the
Stockholder, no fact, event or condition exists which could give rise to any
such liability. None of the assets of the Company or any ERISA Affiliate is the
subject of any Lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code; neither the Company nor any ERISA Affiliate has been required to post
any security under Section 307 of ERISA or Section 401(a) (29) of the Code; and
to the best knowledge, information and belief of the Stockholder, no fact or
event exists which could give rise to any such Lien or requirement to post any
such security.
3.19.8 Tax Deductions. All contributions, premiums or payments required to
be made, paid or accrued with respect to any Plan have been made, paid or
accrued on or before their due dates, including extensions thereof. All such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any government entity and to the
best knowledge, information and belief of the Stockholder, no fact or event
exists which could give rise to any such challenge or disallowance.
Section 3.20 Interests in Customers, Suppliers. Neither the Stockholder
nor any entity controlled by the Stockholder nor any officer, director or
employee of the Company, any parent, brother, sister, child or spouse of any
such officer, director or employee or of the Stockholder (collectively, the
"Related Group"), or any entity controlled by anyone in the Related Group:
(i) owns, directly or indirectly, any interest in (excepting less than 1%
stock holdings for investment purposes in securities of publicly held and
traded companies), or received payments from, or is an officer, director,
employee or consultant of, any Person which is, or is engaged in business
as, a competitor, lessor, lessee, supplier, distributor, sales agent,
customer or client of the Company;
13
(ii) owns, directly or indirectly (other than through the ownership of
stock or other securities of the Company), in whole or in part, any
tangible or intangible property (including, but not limited to
Intellectual Property), that the Company uses in the conduct of business
other than immaterial personal items owned and used by employees at their
work stations; or
(iii) has any cause of action or other claim whatsoever against, or owes
any amount to, the Company, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing on the date
hereof.
Section 3.21 Bank Accounts and Powers of Attorney. Set forth in Schedule
3.21 is an accurate and complete list showing (a) the name of each bank in which
the Company has an account, credit line or safe deposit box and the names of all
Persons authorized to draw thereon or to have access thereto, and (b) the names
of all Persons, if any, holding powers of attorney from the Company and a
summary statement of the terms thereof.
Section 3.22 Compensation of Employees. Schedule 3.22 is an accurate and
complete list showing (a) the names and positions of all employees and
consultants, together with a statement of the current annual salary, the bonus
compensation paid or payable with respect to calendar year 1998 and 1999, and
the material fringe benefits of such employees and exclusive consultants not
generally available to all employees of the Company, (b) all bonus compensation
paid or payable (whether by agreement, custom or understanding) to any employee
of the Company not listed in clause (a) above for services rendered during
calendar year 1998 and 1999, and (c) the names of all retired employees, if any,
of the Company who are receiving or entitled to receive any healthcare or life
insurance benefits or any payments from the Company not covered by any pension
plan to which the Company is a party, their ages and current unfunded pension
rate, if any. The Company has not, because of past practices or previous
commitments with respect to its employees, established any rights on the part of
any of its employees to additional compensation with respect to any period after
the Closing Date (other than wage increases in the ordinary course of business).
The current severance and vacation policy of the Company is set forth on
Schedule 3.22.
Section 3.23 No Changes Since the Balance Sheet Date. Since the Balance
Sheet Date except as specifically stated on Schedule 3.23 or the January 31,
1999 balance sheet, the Company has not (i) incurred any liability or obligation
of any nature (whether accrued, absolute, contingent or otherwise), except in
the ordinary course of business, (ii) permitted any of its assets to be
subjected to any Lien, (iii) sold, transferred or otherwise disposed of any
assets except in the ordinary course of business, (iv) made any capital
expenditure or commitment therefor which individually or in the aggregate
exceeded $10,000, (v) declared or paid any dividends or made any distributions
on any shares of its capital stock or
14
equivalent thereof, or redeemed, purchased or otherwise acquired any shares of
its capital stock or equivalent thereof or granted any option, warrant or other
right to purchase or acquire any such shares or equivalent, (vi) made any bonus
or profit sharing distribution, (vii) created or incurred any indebtedness for
borrowed money; (viii) increased or prepaid its indebtedness for borrowed money,
except current borrowings under credit lines listed on Schedule 3.8 from banks
in the ordinary course of business or made any loan to any Person, (ix) written
down the value of any work-in-process, or written off as uncollectible any notes
or accounts receivable, except write-downs and writeoffs in the ordinary course
of business, none of which individually or in the aggregate, is material to the
Company, (x) granted any increase in the rate of wages, salaries, bonuses or
other remuneration of any employee, (xi) canceled or waived any claims or rights
of material value, (xii) made any change in any method of accounting procedures,
(xiii) otherwise conducted its business or entered into any transaction, except
in the usual and ordinary manner and in the ordinary course of its business and
consistent with past practice, (xiv) amended or terminated any agreement which
is material to its business, (xv) renewed, extended or modified any lease of
real property, or except in the ordinary course of business, any lease of
personal property, (xvi) adopted, amended or terminated any Plan or (xvii)
agreed, whether or not in writing, to do any of the foregoing.
Section 3.24 Corporate Controls. Neither the Company nor the Stockholder,
or, to the best knowledge, information and belief of the Stockholder, any
officer, authorized agent, employee or any other Person (who is not a
Stockholder) while acting on behalf of the Company, has, directly or indirectly:
used any corporate fund for unlawful contributions, gifts, or other unlawful
expenses relating to political activity; made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds; established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; made any false
or fictitious entry on its books or records; made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment, or other payment of a
similar or comparable nature, to any Person, whether in money, property, or
services, to obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for business secured or
for special concessions already obtained, and the Company has not participated
in any illegal boycott or other similar illegal practices affecting any of its
actual or potential customers.
Section 3.25 Brokers. No broker, finder, agent or similar intermediary has
acted on behalf of the Stockholder or the Company in connection with this
Agreement or the transactions contemplated hereby, and no brokerage commissions,
finder's fees or similar fees or commissions are payable by the Company or the
Stockholder in connection therewith based on any agreement, arrangement or
understanding with any of them.
Section 3.26 Copies of Documents. The Company has caused to be made
available for inspection and copying by the Purchaser and its advisers, true,
complete and correct copies of all documents referred to in this Article III or
in any Schedule. Summaries of all material oral contracts contained in Schedule
3.8 are complete and accurate in all material respects.
15
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER
The Purchaser, represents, warrants and agrees to and with the Stockholder
as follows:
Section 4.1 Existence and Good Standing. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to own its property
and to carry on its business all as and in the places where such properties are
now owned or operated or such business is now being conducted.
Section 4.2 Execution and Validity of Agreements; Restrictive Documents.
4.2.1 Execution and Validity. The Purchaser has the full corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Purchaser and the
consummation of the transactions contemplated hereby have been duly authorized
by all required corporate action on behalf of the Purchaser. This Agreement has
been duly and validly executed and delivered by the Purchaser and assuming due
authorization, execution and delivery by the Stockholder, constitutes a legal,
valid and binding obligation of the Purchaser, enforceable against it in
accordance with its terms.
4.2.2 Restrictive Documents. There is no suit, action, claim,
investigation or inquiry by any administrative agency or governmental body, and
no legal, administrative or arbitration proceeding pending or, to the
Purchaser's best knowledge, information and belief, threatened against the
Purchaser or any of the Purchaser's properties or assets, with respect to the
execution, delivery and performance of this Agreement or the transactions
contemplated hereby or any other agreement entered into by the Purchaser in
connection with the transactions contemplated hereby.
Section 4.3 Non-Contravention; Approvals and Consents.
4.3.1 Non-Contravention. The execution, delivery and performance by the
Purchaser of its obligations hereunder and the consummation of the transactions
contemplated hereby, will not (a) violate, conflict with or result in the breach
of any provision of the Certificate of Incorporation or By-laws of the
Purchaser, or (b) result in the violation by the Purchaser of any Laws or Orders
of any Governmental or Regulatory Authority, applicable to the Purchaser or any
of its assets or properties, except as would not reasonably be expected to have
a Material Adverse Effect, or (c) conflict with, result in a violation or breach
of, constitute (with or without notice or lapse of time or both) a default
under, or require the Purchaser to obtain any consent, approval or action of,
make any filing with or give any notice to, or result in or
16
give to any Person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of the assets or properties of the Purchaser,
under any of the terms, conditions or provisions of any Instruments to which the
Purchaser is a party or by which the Purchaser or any of its assets or
properties are bound.
4.3.2 Approvals and Consents. No consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority or other public or
private third party is necessary or required under any of the terms, conditions
or provisions of any Law or Order of any Governmental or Regulatory Authority or
any Instrument to which the Purchaser is a party or by which the Purchaser or
any of its assets or properties is bound for the execution and delivery of this
Agreement by the Purchaser, the performance by the Purchaser of its obligations
hereunder or the consummation of the transactions contemplated hereby.
Section 4.4 CYSP Stock The shares of CYSP Stock to be delivered to the
Stockholder pursuant to this Agreement, when delivered as provided herein, will
be validly issued and outstanding shares of voting common stock of the
Purchaser, fully paid and non-assessable, and will not be subject to preemptive
rights of any Person.
Section 4.5 Brokers. No broker, finder, agent or similar intermediary has
acted on behalf of the Purchaser or its affiliates in connection with this
Agreement or the transactions contemplated hereby, and no brokerage commissions,
finders' fees or similar fees or commissions are payable by the Purchaser or its
affiliates in connection therewith based on any agreement, arrangement or
understanding with any of them.
Section 4.6 Copies of Documents; Schedules. The Purchaser has caused to be
made available for inspection and copying by the Stockholder and their advisers,
true, complete and correct copies of all documents referred to in this Article
IV or in any Schedule.
ARTICLE V
ACTIONS AT CLOSING BY THE STOCKHOLDER
Simultaneously herewith:
Section 5.1 Good Standing Certificates. The Stockholder delivered to the
Purchaser: (a) a copy of the Company's Certificate of Incorporation, including
all amendments, certified by the Secretary of State of the Commonwealth of
Massachusetts; and (b) a certificate from the Secretary of State of the
Commonwealth of Massachusetts to the effect that the Company is in good standing
in Massachusetts.
17
Section 5.2 Surrender of Certificates. The Stockholder delivered to the
Purchaser certificates, representing all of the Shares, together with such other
documents and instruments, necessary to permit the Purchaser to acquire the
Shares free and clear of any and all Liens, options, trusts, commitments and
voting or other restrictions of any kind whatsoever adverse to the Purchaser.
Section 5.3 Employment Agreement. The Stockholder executed and delivered
to the Purchaser an Employment Agreement substantially in the form and to the
effect of Exhibit A.
Section 5.4 Letter of Investment Intent. The Stockholder executed and
delivered a Letter of Investment Intent substantially in the form and to the
effect of Exhibit C hereto.
Section 5.5 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement and all documents incident
thereto were reasonably satisfactory in form and substance to the Purchaser and
its counsel, and the Purchaser received copies of all such documents and other
evidences as it or its counsel reasonably requested in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
ARTICLE VI
ACTIONS AT CLOSING BY THE PURCHASER
Simultaneously herewith:
Section 6.1 Certified Resolutions. The Purchaser delivered to the
Stockholder a copy of the resolutions of the Board of Directors of the Purchaser
authorizing the execution, delivery and performance of this Agreement and the
transactions and other agreements contemplated hereby, certified to by the
Secretary of the Purchaser.
Section 6.2 Registration Rights Agreement. The Purchaser executed and
delivered to the Stockholder the Registration Rights Agreement substantially in
the form and to the effect of Exhibit B hereto.
Section 6.3 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement, and all documents incident
thereto were reasonably satisfactory in form and substance to the Stockholder
and their counsel and the Stockholder received copies of all such documents and
other evidences as they or their counsel reasonably requested in order to
establish the consummation of such transaction and the taking of all proceedings
in connection therewith.
18
ARTICLE VII.
OTHER AGREEMENTS.
Section 7.1 Issuance of CYSP Stock. The CYSP Stock issued to the
Stockholder on the date hereof has not been registered under the Securities Act
based upon the "private offering exemption" under the Securities Act, in
reliance on the Letter of Investment Intent delivered by the Stockholder.
Section 7.2 Pooling of Interests. The parties hereto agree that it shall
be a condition of closing that the transaction contemplated by this Agreement
shall meet the requirements to qualify as a pooling for accounting purposes.
Section 7.3 Sales Tax. All sales taxes arising out of sales made prior to
the Closing and not paid prior to the date hereof shall be the responsibility of
and shall be paid by the Stockholder.
ARTICLE VIII
SURVIVAL; INDEMNITY
Section 8.1 Survival. Subject to the limitations set forth below and in
Section 8.4 hereof, the respective representations, warranties, covenants and
agreements of the Stockholder and the Purchaser contained in this Agreement or
in any Schedule, or in any certificate delivered at the Closing, shall survive
the Closing. Notwithstanding any right of any party hereto fully to investigate
the affairs of any other party, and notwithstanding any knowledge of facts
determined or determinable pursuant to such investigation or right of
investigation, each party hereto shall have the right to rely fully upon the
representations, warranties, covenants and agreements of any other party
contained in this Agreement or in any Schedule furnished by another party or in
any certificate delivered at the Closing by any other party.
Section 8.2 Obligation to Indemnify. Subject to the limitations set forth
below and in Section 8.4 hereof, the Stockholder agrees to indemnify the
Purchaser and its affiliates (including the Company) and their directors,
officers and employees (collectively the "Indemnified Parties") against, and to
protect, save and keep harmless the Indemnified Parties from, and to assume
liability for, payment of all liabilities (including liabilities for Taxes),
obligations, losses, damages, penalties, claims, actions, suits, judgments,
settlements, out-of-pocket costs, expenses and disbursements (including
reasonable costs of investigation, and reasonable attorneys', accountants' and
expert witnesses' fees) of whatever kind and nature, to the extent not covered
by insurance maintained for the benefit of the applicable
19
Indemnified Parties (collectively, "Losses"), that may be imposed on or incurred
by the Indemnified Parties as a consequence of or in connection with (i) any
inaccuracy or breach of any representation or warranty or covenant of the
Stockholder contained in each Section of Article III of this Agreement, or (ii)
the breach of or failure by the Stockholder to perform or discharge any of his
obligations under this Agreement. The term "Losses" as used herein is not
limited to matters asserted by third parties against an Indemnified Party but
includes Losses incurred or sustained by an Indemnified Party in the absence of
third party claims.
Section 8.3 Indemnification Procedures.
8.3.1 Notice of Asserted Liability. The Purchaser shall promptly give
notice (the "Claims Notice") to the Stockholder, of any demand, claim or
circumstances which gives rise, or with the lapse of time would or might give
rise to a claim or the commencement (or threatened commencement) of any action,
proceeding or investigation that may result in any Losses (an "Asserted
Liability") without regard to the limitations on indemnification set forth in
Section 8.4 below. The Claims Notice shall describe the Asserted Liability in
reasonable detail, shall indicate the amount (estimated, if necessary, and to
the extent feasible) of the Losses that have been or may be suffered by an
Indemnified Party.
8.3.2 Defense of Asserted Liability. The Stockholder may elect to
compromise, settle or defend, at his own expense and by his own counsel (such
counsel to be reasonably satisfactory to the Purchaser), any Asserted Liability.
If the Stockholder elects to compromise, settle or defend such Asserted
Liability, it shall within 30 days (or sooner, if the nature of the Asserted
Liability so requires) of the Claims Notice notify the Purchaser in writing of
his intent to do so and the Purchaser shall cooperate, at the request and
expense of the Stockholder, in the settlement or compromise of, or defense
against, such Asserted Liability. If the Stockholder elects not to compromise,
settle or defend the Asserted Liability, or fails to notify the Purchaser of
their election as herein provided, the Purchaser may pay, compromise, settle or
defend such Asserted Liability at the expense of the Stockholder and the
Stockholder shall be bound by the results obtained by the Purchaser with respect
to such third party claim. In no event shall the Stockholder settle or
compromise any claim without the prior written consent of the Purchaser, which
consent shall not be unreasonably withheld. The Purchaser shall have the right
to employ its own counsel in any case with respect to an Asserted Liability
(which counsel shall assist counsel selected by the Stockholder if one shall
have been selected to defend the claim), but the fees and expenses of such
counsel shall be at the expense of the Purchaser unless (a) the employment of
such counsel shall have been authorized in writing by the Stockholder in
connection with the defense of such action, (b) the Stockholder shall not have,
as provided above, promptly employed counsel reasonably satisfactory to such
Indemnified Party to take charge of the defense of such action, or (c) the
Purchaser shall have reasonably concluded that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Stockholder, in any of which events such reasonable fees and
expenses shall be borne by the Stockholder and the Stockholder shall not have
the right to direct the defense of such action on behalf of the Purchaser in
respect of such different or additional defenses. If the Stockholder chooses to
defend any claim, the
20
Purchaser shall make available to him any books, records or other documents
within its control that are necessary or appropriate for such defense.
8.3.3 Control by Purchaser. All decisions and determinations to be made by
the Purchaser and/or a Indemnified Party under Article VIII shall be made by
Purchaser in the name of and on behalf of the Purchaser or such other
Indemnified Party and all such decisions and determinations shall be binding
upon the parties hereto and such Indemnified Party.
Section 8.4 Limitations on Indemnification.
8.4.1 Indemnity Basket. The Stockholder shall have no obligation to
indemnify any Indemnified Party with respect to Losses arising out of any
matters referred to in Section 8.2 until such time as the amount of such Losses
shall exceed $25,000 in the aggregate (in which case the Stockholder shall be
liable for all Losses not just those in excess of $25,000).
8.4.2 Termination of Indemnification Obligations. The obligation of the
Stockholder to indemnify shall terminate and be of no further force and effect
on the "Termination Date," which shall occur one year from the Closing Date;
provided, however, that claims for Losses arising under Section 8.2 asserted in
writing on or prior to the Termination Date shall survive until such claim is
finally resolved and any obligations with respect thereto are fully satisfied.
No claim for Losses arising under Section 8.2 may be asserted after the
Termination Date. No claims by Purchaser or any Indemnified Party may be
asserted with respect to any representations, warranties and covenants after
three years from the Closing Date.
8.4.3 Treatment. Any payments to an Indemnified Party under this Article
VIII shall be treated by the parties as an adjustment to purchase price.
21
ARTICLE IX
MISCELLANEOUS
Section 9.1 Expenses. The parties hereto shall pay all of their own
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel and
financial advisers.
Section 9.2 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New Jersey without reference to its conflict of laws provisions.
Section 9.3 "Person" Defined. "Person" shall mean and include an
individual, a Company, a joint venture, a corporation, a trust, an
unincorporated organization and a government or other department or agency
thereof.
Section 9.4 "Knowledge" Defined. Where any representation and warranty
contained in this Agreement is expressly qualified by reference to the best
knowledge, information and belief of the Stockholder, such term shall be limited
to the actual knowledge of the Stockholder and unless otherwise stated such
knowledge that would have been discovered by the Stockholder after reasonable
inquiry. Where any representation and warranty contained in this Agreement is
expressly specified by reference to the best knowledge, information and belief
of the Purchaser, such term shall be limited to the actual knowledge of the
executive officers of the Purchaser, and unless otherwise stated, such knowledge
that would have been discovered by all such Persons after reasonable inquiry.
Section 9.5 "Affiliate" Defined. As used in this Agreement, an "affiliate"
of any Person, shall mean any Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with such Person.
Section 9.6 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 9.7 Publicity. Subject to the provisions of the next sentence, no
party to this Agreement shall, and the Stockholder shall insure that no
representative of the Company shall, issue any press release or other public
document or make any public statement relating to this Agreement or the matters
contained herein without obtaining the prior approval of the Purchaser and the
Stockholder. Notwithstanding the foregoing, the foregoing provision shall not
apply to the extent that the Purchaser is required to make any announcement
relating to or arising out of this Agreement by virtue of the federal securities
laws of the United States or the rules and regulations promulgated thereunder or
other rules of the Nasdaq National Market, or any announcement by any party or
the Company pursuant to applicable law or
22
regulations.
Section 9.8 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to any
other party shall be in writing and shall be deemed to have been given (a) upon
personal delivery, if delivered by hand, (b) three days after the date of
deposit in the mails, postage prepaid, if mailed by certified or registered
mail, or (c) the next business day if sent by facsimile transmission (if receipt
is electronically confirmed) or by a prepaid overnight courier service, and in
each case at the respective addresses or numbers set forth below or such other
address or number as such party may have fixed by notice:
If to the Purchaser, addressed to:
Cybershop International, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Stockholder:
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
375 ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: _______________
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.9 Parties in Interest. This Agreement may not be transferred,
assigned,
23
pledged or hypothecated by any party hereto, other than by operation of law.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
Section 9.10 Severability. In the event any provision of this Agreement is
found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same effect as though the void or unenforceable part had been
severed and deleted.
Section 9.11 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
Section 9.12 Entire Agreement. This Agreement, including the other
documents referred to herein and the Exhibits and Schedules hereto which form a
part hereof, contains the entire understanding of the parties hereto with
respect to the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
Section 9.13 Amendments. This Agreement may not be amended, supplemented
or modified orally, but only by an agreement in writing signed by the Purchaser
and the Stockholder.
Section 9.14 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto and their respective
successors and assigns as permitted under Section 9.9.
Section 9.15 Gender. All words used in this Agreement in the masculine
gender shall extend to and shall include the feminine and neuter genders.
Section 9.16 Jurisdiction. Any judicial proceeding brought against any of
the parties to this Agreement on any dispute arising out of this Agreement or
any matter related hereto shall be brought in the courts of the State of New
Jersey or in the United States District Court for New Jersey, and, by execution
and delivery of this Agreement, each of the parties to this Agreement accepts
for itself or himself the process in any action or proceeding by the mailing of
copies of such process to such party at its address as set forth in Section 9.8,
and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement. Each party hereto irrevocably waives to the
fullest extent permitted by law any objection that it or he may now or hereafter
have to the laying of the venue of any judicial proceeding brought in such
courts and any claim that any such judicial proceeding has been brought in an
inconvenient forum. The foregoing consent to jurisdiction shall not constitute
general consent to service of process in the State of New Jersey for any purpose
except as provided above and shall not be deemed to confer rights on
24
any Person other than the respective parties to this Agreement. EACH PARTY
HERETO WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING UNDER THIS AGREEMENT.
25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on
the day and year first above written.
CYBERSHOP INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman of the Board, Chief Executive
Officer and President
THE STOCKHOLDER:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
26