STOCK PURCHASE AGREEMENT
BY AND AMONG
▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
AND
AUGMENT SYSTEMS, INC.
MARCH , 2000
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, DATED AS OF MARCH , 2000, BY AND BETWEEN
AUGMENT SYSTEMS, INC., A DELAWARE CORPORATION ("SELLER" OR THE "COMPANY"), AND
▇▇▇▇▇▇▇▇▇.▇▇▇, INC., A NEW YORK CORPORATION ("PURCHASER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to
purchase from the Seller, such number of shares of the Series A Convertible
Preferred Stock of the Seller (the "Shares") which, assuming conversion thereof
at the Closing (as hereinafter defined), shall represent 92% of all issued and
outstanding common stock par value $.01 (the "Common Stock") in the Company,
computed on a fully diluted basis assuming the exercise of presently outstanding
warrants, options and convertible notes of the Company, upon the terms and
conditions hereafter set forth;
WHEREAS, a copy of the Certificate of Designation of Preferences and
Rights for the Series A Convertible Preferred Stock of the Company (the
"Preferred Stock") is attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the premises and the respective
mutual covenants, representations and warranties herein contained, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
terms when used in this Agreement shall have the meanings indicated below:
"AFFILIATE" shall have the meaning specified in Rule 144 of the
Commission under the Securities Act.
"AGREEMENT" shall mean this Stock Purchase Agreement together with all
exhibits and schedules referred to herein.
"CLOSING" shall have the meaning set forth in Section 6.1.
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"CLOSING DATE" shall mean the date that the Closing takes place.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the Securities and Exchange Commission.
"COMMON STOCK" shall mean the common stock of Seller, par value $.01
per share.
"COMPANY PLANS" shall have the meaning set forth in Section 4.26(b).
"EMPLOYMENT AGREEMENTS" shall have the meaning set forth in Section
4.26(a).
"ENVIRONMENTAL LAWS" shall have the meaning set forth in Section 4.31.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"GOVERNMENTAL AUTHORIZATIONS" shall have the meaning given such term in
Section 4.19.
"Guaranty" shall mean, as to any Person, all liabilities or obligations
of such Person in respect of any indebtedness or other obligations of any other
person guaranteed, directly or indirectly, in any manner by such Person, or in
effect guaranteed, directly or indirectly, by such Person through an agreement,
contingent or otherwise, to purchase such indebtedness or obligation, or to
purchase or sell property or services, primarily for the purpose of enabling the
debtor to make payment of such indebtedness or obligation or to assure the owner
of such indebtedness or obligation against loss, or to supply funds to or in any
manner invest in the debtor, or otherwise.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5.3(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
5.3(c).
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"INTANGIBLE PROPERTY" shall mean the Rights and each invention,
formula, software, trade secret, technology, product, composition, formula,
method or process used by Seller.
"INVESTMENTS" shall mean, with respect to any Person, all advances,
loans or extensions of credit to any other Person, all purchases or commitments
to purchase any stock, bonds, notes, debentures or other securities of any other
Person, and any other investment in any other Person, including partnerships or
joint ventures (whether by capital contribution or otherwise) or other similar
arrangement (whether written or oral) with any Person, including but not limited
to arrangements in which (i) the Person shares profits and losses, (ii) any such
other Person has the right to obligate or bind the Person to any third party, or
(iii) the Person may be wholly or partially liable for the debts or obligations
of such partnership, joint venture or other arrangement.
"LEASED PROPERTY" shall have the meaning set forth in Section 4.17.
"LEASES" shall have the meaning set forth in Section 4.17.
"MATERIAL AGREEMENTS" shall have the meaning set forth in Section 4.28.
"MINORITY SHAREHOLDERS" shall mean those stockholders of Seller owning
21.31% of the Common Stock of Seller.
"PBGC" shall have the meaning set forth in Section 4.26(b).
"PERSON" shall mean any natural person, corporation, unincorporated
organization, partnership, association, joint stock company, joint venture,
trust or government, or any agency or political subdivision of any government or
any other entity.
"PRODUCT" shall mean each product, computer software, computer hardware
or component thereof, developed, manufactured, packaged, marketed, licensed,
distributed or sold by Seller.
"RELATED PARTY" shall have the meaning set forth in Section 4.22.
"RIGHTS" shall mean all domestic and foreign licenses, distributorship,
patents, patent rights, trademarks, service marks, tradenames, brands and
copyrights (whether or not registered and, if applicable, including pending
applications for registration) owned, used or controlled by any of Seller.
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"SECURITIES" shall mean all of the issued and outstanding capital stock
of Seller.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHARES" shall mean all of the shares of Common Stock of Seller which
are owned by the Seller.
"SUBSIDIARY" of any Person shall mean any Person, whether or not
capitalized, in which such Person owns, directly or indirectly, an equity
interest of more than 50%, or which may effectively be controlled, directly or
indirectly, by such Person.
ARTICLE II
PURCHASE OF SHARES; CONSIDERATION
2.1 SHARES TO BE PURCHASED. Subject to the terms and
conditions set forth herein, on the Closing Date, the Seller shall sell to
Purchaser, and Purchaser shall purchase from the Seller, all of such Seller'
right, title and interest in and to the Shares. At the Closing, Seller shall
deliver to Purchaser all of the certificates representing the Shares, together
with stock powers separate from the certificates duly executed by the Seller in
blank and sufficient to convey to Purchaser good and marketable title to the
Shares free and clear of any and all claims, liens, charges, security interests,
pledges or encumbrances of any nature whatsoever and together with all accrued
benefits and rights attaching thereto.
2.2 CONSIDERATION. The aggregate purchase price for the Shares
shall be Fifty Thousand Dollars ($50,000.00) (the "Purchase Price"), payable by
Purchaser at the Closing by delivery to the Seller of a Promissory Note in the
principal amount of Fifty Thousand Dollars ($50,000) in the form annexed hereto
as Exhibit 2.2 (the "Note").
ARTICLE III
COVENANTS, REPRESENTATIONS AND WARRANTIES OF PURCHASER
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In order to induce the Seller to enter into this Agreement and
to consummate the transactions contemplated hereby, Purchaser makes the
representations and warranties set forth below to the Seller.
3.1 ORGANIZATION; STANDING AND POWER. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York. Purchaser has all requisite right, power and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby.
3.2 AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by Purchaser of
the transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser, and constitutes the legal, valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except to the
extent that its enforcement is limited by bankruptcy, insolvency, reorganization
or other laws relating to or affecting the enforcement of creditors' rights
generally and by general principles of equity.
3.3 NO VIOLATION OR CONFLICT. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by Purchaser of
the transactions contemplated hereby: (a) do not violate or conflict with any
provision of law or regulation (whether federal, state or local), or any writ,
order or decree of any court or governmental or regulatory authority, the
violation of which would interfere in any material respect with Purchaser's
ability to consummate the transactions contemplated hereby, or any provision of
Purchaser's Certificate of Incorporation or Bylaws; and (b) do not, with or
without the passage of time or the giving of notice, result in the breach of, or
constitute a default, cause the acceleration of performance, or require any
consent under, or result in the creation of any lien, charge or encumbrance upon
any property or assets of Purchaser pursuant to any material instrument or
agreement to which Purchaser is a party or by which Purchaser or its properties
may be bound or affected, in any material respect, other than instruments or
agreements as to which consent shall have been obtained at or prior to the
Closing.
3.4 ASSUMPTION OF LIABILITIES. Purchaser expressly agrees to
the assumption of the liabilities of Seller disclosed specifically in this
Agreement and the Schedules annexed hereto and to satisfy, resolve or pay-off
such liabilities as Purchaser.
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3.5 SECURITIES LAWS. Right2Web understands that the Company
Shares are not being registered under the Securities Act, on the ground that the
offer and sale of the Company Shares under this Agreement are exempt from the
registration provisions of Section 5 of the Securities Act pursuant to Section
4(2) thereof, as transactions by an issuer not involving any public offering,
and/or may be deemed not to involve an offer or sale within the meaning of
Section 5 of the Securities Act pursuant to Regulation D promulgated thereunder,
and that the Company Shares may not be resold in any transaction subject to
Section 5 of the Securities Act unless registered or any exemption from
registration is available for such sale, and that the certificates representing
the Company Shares will bear a legend to that effect, substantially in the form
set forth on Schedule 3.4 attached hereto. Right2Web is acquiring the Company
Shares for investment purposes only and not with a view to distribution or
resale thereof, except that the Company Shares may be distributed to the
shareholders of Right2Web in complete liquidation of Right2Web provided that
each such shareholder delivers to the Company a written representation
substantially to the effect of this Section 3.5.
3.6. INTERNET START-UP VENTURE. Seller acknowledges that
Purchaser is a start-up internet venture and as such, is subject to various
risks, including, but not limited to, the need to raise substantial capital, the
need to hire and retain personnel, intense competition, rapidly evolving
technology, etc. Seller acknowledges that it is not relying on Purchaser's
Business Plan and that Purchasers representations and warranties herein shall
supersede said Business Plan.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
In order to induce Purchaser to enter into this Agreement and
to consummate the transactions contemplated hereby, the Seller makes the
representations and warranties set forth below to Purchaser.
4.1 Organization. Seller and Seller are corporations duly
organized, validly existing and in good standing under the laws of the States of
Delaware. To the best of Seller's knowledge, Seller is duly qualified to
transact business as a foreign corporation in all jurisdictions where the
ownership or leasing of its properties or the conduct of its present business
requires such qualification, except where the failure to so qualify would not
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have a material adverse effect on the business, operations or properties of
Seller. Seller has the requisite power and authority to (a) own or lease and
operate its properties, (b) conduct its business as presently conducted and (c)
to execute, deliver, perform and engage in this Agreement and consummate the
transactions contemplated hereby (subject to Paragraph 5.3(d)(1)).
4.2 AUTHORIZATION; ENFORCEABILITY. Seller has the capacity to
execute, deliver and perform this Agreement. This Agreement and all other
documents to be executed and delivered by the Seller pursuant to this Agreement
have been and will be duly executed and delivered and constitute the legal,
valid and binding obligations of the Seller, enforceable in accordance with
their respective terms.
4.3 NO VIOLATION OR CONFLICT. The execution, delivery and
performance of this Agreement by the Seller and the consummation by the Seller
of the transactions contemplated hereby: (a) do not violate or conflict with any
provision of law or regulation (whether federal, state or local) to the best of
Seller's knowledge, or any writ, order or decree of any court or governmental or
regulatory authority, or any provision of any of Seller or Seller's respective
Certificates of Incorporation or Bylaws; and (b) do not, with or without the
passage of time or the giving of notice, result in the breach of, or constitute
a default, cause the acceleration of performance or require any consent under,
or result in the creation of any lien, charge or encumbrance upon any property
or assets of Seller pursuant to any instrument or agreement to which Seller is a
party or by which the Seller's properties may be bound or affected in any
material respect, other than instruments or agreements as to which consent shall
have been obtained at or prior to the Closing as set forth on SCHEDULE 4.3 or if
not obtained, as specifically set forth on SCHEDULE 4.3.
4.4 CONSENTS OF GOVERNMENTAL AUTHORITIES AND OTHERS. To the
best of Seller's knowledge, no consent, approval or authorization of, or
registration, qualification or filing with any federal, state or local
governmental or regulatory authority, NASDAQ or any other Person, is required to
be made by Seller in connection with the execution, delivery or performance of
this Agreement by the Seller or the consummation by the Seller of the
transactions contemplated hereby, subject to stockholder approval of Seller, if
required and to Seller's obligations to obtain same and as set forth in
Paragraphs 5.3 and 7.5.
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4.5 CONDUCT OF BUSINESS. Since March 31, 1999, Seller has
conducted its businesses only to wind down its operations and has not (a)
incurred any liability in excess of $10,000; (b) has not amended its Certificate
of Incorporation or Bylaws; (c) issued, sold or authorized for issuance or sale,
shares of any class of its securities (including, but not limited to, by way of
stock split or dividend) or any subscriptions, options, warrants, rights or
convertible securities or entered into any agreements or commitments of any
character obligating it to issue or sell any such securities; (d) redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of its
capital stock or any option, warrant or other right to purchase or acquire any
such shares; (d) declared or paid any dividends or other distribution (whether
in cash, stock or other property) with respect to its capital stock; (f)
suffered any physical damage, destruction or loss, whether or not covered by
insurance, which has had or could have a material adverse effect on any of its
properties, assets (taken as a whole), business or prospects; (g) granted or
made any mortgage or pledge or subjected itself or any of its properties or
assets to any lien, charge or encumbrance of any kind, (h) made or committed to
make any capital expenditures in excess of $5,000; (i) become subject to any
Guaranty; (j) granted any increase in the compensation payable or to become
payable to directors, officers, employees (including, without limitation, any
such increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment); (k) entered into any agreement which would be a Material Agreement,
or amended or terminated any existing Material Agreement; (k) experienced any
strike, work stoppage or slowdown; or (l) experienced any other event or
condition of any character which has had or could have a material adverse effect
on the condition (financial or otherwise), results of operations, assets,
liabilities, properties, business or, to the best of its knowledge, prospects of
Seller, or on any of their employee, customer or supplier relations, except as
set forth in the first sentence of this Paragraph 4.5.
4.6 LITIGATION. Except as set forth in detail on SCHEDULE 4.6,
there are no actions, suits, investigations, claims or proceedings pending or,
to the knowledge of Seller, threatened before any court, governmental or
regulatory authority or arbitrator, (a) affecting Seller or any Person or
Related Party (as plaintiff or defendant) which could, individually or in the
aggregate, have a material adverse effect on the condition (financial or
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otherwise), results of operations, properties, assets, liabilities, business or
prospects of Seller or (b) against the Seller relating to the Shares, the Common
Stock or the transactions contemplated by this Agreement or (c) against Seller
or for which Seller is currently defending or prosecuting such dispute; and (d)
there exist no facts or circumstances known to Seller creating any reasonable
basis for the institution of any such action, suit, investigation, claim or
proceeding described above.
4.7 BROKERS. Seller has not employed any financial advisor,
broker or finder, and none of them has incurred or will incur any broker's,
finder's, investment banking or similar fees, commissions or expenses in
connection with the transactions contemplated by this Agreement.
4.8 COMPLIANCE. a) To the best of Seller's knowledge, Seller
is in compliance in all material respects, with all federal, state, local and
foreign laws, ordinances, regulations, judgments, rulings, orders and other
requirements applicable to it, including without limitation, those relating to
(a) the development, packaging, distribution and marketing of Products, (b)
employment, safety and health, and (c) building, zoning and land use. Seller is
not subject to any judicial, governmental or administrative order, judgment or
decree. Purchaser has been furnished with true and correct copies of all
material reports of inspections of Seller's business and properties (which
occurred during the past five (5) years) through the date hereof, under all
applicable federal, state, foreign and local laws and regulations.
b) Seller has not been de-listed as a public company under the
Exchange Act and has complied with all reporting requirements to its
stockholders under the Exchange Act. Seller has filed all SEC reports although
its Form 10-KSB for the year ended December 31, 1998 was filed late.
4.9 CHARTER, BYLAWS AND CORPORATE RECORDS. A true and complete
copy of (a) the Certificate of Incorporation of Seller, as amended and in effect
on the date hereof, (b) the Bylaws of Seller, as amended and in effect on the
date hereof, and (c) to the best of Seller's knowledge, the minute books of the
Seller (containing all corporate proceedings since inception of Seller) are
annexed hereto have been previously delivered to Purchaser. Such minute books
contain complete and accurate records of all meetings and other corporate
actions of the board of directors, committees of the board of directors,
incorporators and shareholders of the Seller from the date of its incorporation
to the date hereof.
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4.10 SUBSIDIARIES AND INVESTMENTS. Seller does not have any
Subsidiaries or Investments, except as set forth on Schedule 4.10. Schedule
4.10, also sets forth the names of the officers and directors of Seller.
4.11 CAPITALIZATION. The authorized capital stock of the
Seller is as set forth on SCHEDULE 4.11. The names and address and stockholdings
of the stockholders as of December 31, 1999 of Seller of the issued and
outstanding shares of Common Stock of Seller are set forth on SCHEDULE 4.11.
Seller will cooperate with Purchaser after Closing to provide information
regarding the stockholder list. No shares of capital stock of Seller since the
date of its incorporation, were issued in violation of any statutory or common
law preemptive rights. There are no dividends which have accrued or been
declared, but are unpaid on the capital stock of any of Seller. To the best of
Seller's knowledge, all taxes (including documentary stamp taxes) required to be
paid in connection with the issuance and any transfers of Seller capital stock
have been paid. To the best of Seller's knowledge, all permits or authorizations
required to be obtained from or registrations required to be effected with any
Person in connection with any and all issuances of securities of Seller from the
date of the Seller's date of incorporation to the date hereof have been obtained
or effected and all securities of Seller have been issued and are held in
accordance with the provisions of all applicable securities or other laws. The
Common Stock constitute all of the issued and outstanding capital stock of
Seller except as set forth on SCHEDULE 4.11.
4.12 RIGHTS, WARRANTS, OPTIONS. Except as set forth on
SCHEDULE 4.12, there are no outstanding (a) securities or instruments
convertible into or exercisable for any of the capital stock or other equity
interests of Seller; (b) options, warrants, underwriter's warrants,
subscriptions or other rights to acquire capital stock or other equity interests
of Seller or owned by an Affiliate, Person or officer, director or employee of
Seller; or (c) commitments, agreements or understandings of any kind, including
employee benefit arrangements, relating to the issuance or repurchase by Seller
or Seller of any capital stock or other equity interests of Seller, any such
securities or instruments convertible into or exercisable for capital stock or
other equity interests of any of Seller, or any such options, warrants or
rights.
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4.13 FINANCIAL STATEMENTS. The Seller will deliver to
Purchaser, true and complete copies of the Financial Statements of Seller, which
are annexed hereto as Exhibit 4.13. The Financial Statements: (a) have been
prepared in accordance with the books of account and records of the Seller; (b)
fairly present, and are true, correct and complete statements in all material
respects of Seller's financial condition and the results of, their respective
operations at the dates and for the periods specified in those statements.
4.14 ABSENCE OF UNDISCLOSED LIABILITIES. Other than as
disclosed on SCHEDULE 4.6 hereto, Seller does not have any material direct or
contingent liabilities, commitments or obligations or any unrealized losses from
any commitments, and there is no basis known to Seller, for assertion against
Seller of any such liability, commitment or obligation.
4.15 TITLE TO SHARES. Seller is the record and beneficial
owner of the Shares, and all of such Shares are owned free and clear of any
liens, encumbrances, pledges, security interests and claims whatsoever,
including, without limitation, claims or rights under any voting trust
agreements, shareholder agreements, pledges or other agreements. At the Closing,
the Seller will deliver the Shares, with a stock power, transfer tax stamps and
an affidavit of lost stock certificate (if a replacement certificate is issued),
which will transfer and convey, and Purchaser will acquire, good and marketable
title to the Shares, free and clear of all liens, encumbrances, pledges,
security interests and claims whatsoever.
4.16 TITLE TO AND CONDITION OF PERSONAL PROPERTY. Seller has
good and marketable title to each item of inventory, equipment and/or other
personal property, tangible and intangible, included as an asset in its
Financial Statements dated December 31, 1999 , free and clear of any security
interests, liens, claims, charges or encumbrances whatsoever, except as set
forth in SCHEDULE 4.16 hereto. There are no assets owned by any third party
which are used in the operation of the business of Seller, as presently
conducted or proposed to be conducted.
4.17 REAL PROPERTY. Seller does not own any real property.
Seller does not hold nor is a party to any option, right of first refusal or
other contractual right to purchase, acquire, sell or dispose of any interest in
real property. Seller does not lease or sublease any real property other than
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Leased Property"),
which is a month to month lease. The Seller have previously delivered to
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Purchaser a true and complete copy of all of the lease and sublease agreements,
as amended to date (the "Leases") relating to the Leased Property. Seller enjoys
peaceful and undisturbed possession of the Leased Property. Seller will
terminate the Lease as of the Closing Date and deliver at Seller's sole cost and
expense all books, records, equipment and any other assets of Seller to
Purchaser.
To the best of the Seller' knowledge, there are no liabilities
on the part of Seller (other than rent and other sums and charges payable)
associated with any of the Leases including, without limitation, any liability
under any Environmental Law or regulation, which is or which may become payable
by Purchaser.
4.18 INSURANCE. SCHEDULE 4.18 sets forth a true and complete
list of all insurance policies providing insurance coverage of any nature to
Seller. Such policies are sufficient for compliance by Seller with all
requirements of law (to the best of its knowledge) and all agreements to which
Seller is a party or by which any of its assets is bound. All of such policies
are in full force and effect and are valid and enforceable in accordance with
their terms, and Seller has complied in all material respects with all terms and
conditions of such policies, including premium payments. None of the insurance
carriers has indicated to the Seller an intention to cancel any such policy.
Seller does not have any claim pending against any of the insurance carriers
under any of such policies and there has been no actual or alleged occurrence of
any kind which may give rise to any such claim.
4.19 LICENSES. There are no authorizations, consents,
approvals, franchises, licenses and permits required under applicable law or
regulation which are material for the operation of the businesses of Seller as
presently operated (the "Governmental Authorizations"). All of the Governmental
Authorizations, which Seller does have are duly issued or obtained and are in
full force and effect, and Seller is in compliance with the terms of all the
Governmental Authorizations. The Seller has no knowledge of any facts which
could reasonably be expected to cause them to believe that the Governmental
Authorizations will not be renewed by the appropriate governmental authorities
in the ordinary course. Neither the execution, delivery nor performance of this
Agreement shall adversely affect the status of any of the Governmental
Authorizations.
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4.20 PROPRIETARY RIGHTS. Set forth on Schedule 4.20 is a list
and description of all foreign and domestic patents, patent rights, licenses,
distributorship, trademarks, service marks, trade names, brands and copyrights
(whether or not registered and, if applicable, including pending applications
for registration) owned, used or controlled by Seller (collectively, the
"Rights"). Except as set forth on Schedule 4.20: (a) Seller is the owner of all
right, title and interest in and to all of the Rights or has the legal right and
in and to each invention, software, trade secret, technology, product,
composition, formula, method of process used by Seller (together with the
Rights, hereinafter collectively referred to as "Intangible Property"), and has
the right to use and license the same, free and clear of any claim or conflict
with the rights of others; (b) no royalties, honorariums or fees (license or
otherwise) are payable by Seller to any Person by reason of the ownership or use
of any of the Intangible Property; (c) there have been no claims made against
any of Seller asserting the invalidity, abuse, misuse, or unenforceability of
any of the Intangible Property, and to the best of Seller' knowledge, there are
no reasonable grounds for any such claims; (d) Seller has not made any claim of
any violation or infringement by others of its rights in the Intangible
Property, and to the best of Seller' knowledge, no reasonable grounds for such
claims exist; (e) Seller has not received any written notice or, other type of
notice that it is in conflict with or infringing upon the asserted rights of
others in connection with the Intangible Property and neither the use of the
Intangible Property by any of Seller, the operation of their respective
business, the manufacture of their respective products, nor any formula, method,
process, part or material employed by Seller in connection therewith, is
infringing or has infringed upon any rights of others; (f) the Intangible
Property includes all rights necessary for Seller to be legally entitled to
conduct its business as presently being conducted; (g) the consummation of the
transactions contemplated hereby will not alter or impair any of the Intangible
Property EXCEPT AS SET FORTH ON SCHEDULE 4.20; (h) no interest of any of Seller'
rights to any Intangible Property has been assigned, transferred, licensed or
sublicensed by Seller to third parties; (i) to the extent that any item
constituting part of the Intangible Property has been registered with, filed in
or issued by, as the case may be, any governmental or other regulatory
authority, such registrations, filings or issuances are listed on SCHEDULE 4.20,
and were duly made and remain in full force and effect except in the ordinary
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course of business; (j) Seller does not have any actual knowledge of any act or
failure to act by Seller or any of their respective directors, officers,
employees, attorneys or authorized agents during the prosecution or registration
of, or any other proceeding relating to, any of the Intangible Property or of
any other fact which could render invalid or unenforceable, or negate the right
to issuance of any of the Intangible Property.
4.21 MAJOR CUSTOMERS AND SUPPLIERS; SUPPLIES. The Seller has
no customers or suppliers.
4.22 RELATED PARTIES. Except as set forth on Schedule 4.22,
neither Seller, nor any current director, officer or employee of Seller
(individually a "Related Party" and collectively the "Related Parties") or any
Affiliate of any of the Seller or any Related Party: (a) owns, directly or
indirectly, any interest in any person which is a competitor or potential
competitor of any of Seller, or of a supplier or customer of any of Seller; (b)
owns, directly or indirectly, in whole or in part, any property, asset or right,
real, personal or mixed, tangible or intangible (including, but not limited to,
any of the Intangible Property) which is utilized in the operation of the
business of any of Seller; or (c) has an interest in or is, directly or
indirectly, a party to any contract, agreement, lease or arrangement pertaining
or relating to Seller.
4.23 LIST OF ACCOUNTS. Set forth on SCHEDULE 4.23 is: (a) the
name and address of each bank or other institution in which any of Seller
maintain an account (cash, securities or other) or safe deposit box; (b) the
name and phone number of the Seller' contact person at such bank or institution
and (c) the account number of the relevant account and a description of the type
of account.
4.24 PERSONNEL. AS OF JANUARY 1, 1999, SCHEDULE 4.24 contains
the names, job descriptions, benefits, perquisites and annual salary rates and
other compensation of all officers, directors and consultants of the Seller
earning in excess of $10,000 per year (including compensation paid or payable by
the Seller under the Company Plans). All employee policies, employee manuals or
other written statements of rules or policies of Seller as to working
conditions, vacation and sick leave have been made available to Purchaser.
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4.25 LABOR RELATIONS. There is no strike, work stoppage or
slowdown or labor disturbance pending or, to the best of the Seller's knowledge
threatened, that involves any employees of any of Seller. There are no unions
and/or collective bargaining or labor agreements which any of the employees of
Seller are members or to which Seller is a party. Seller is not a party to,
otherwise bound by or threatened with any labor or collective bargaining
agreement and to the best of the Seller' knowledge, there have been no attempts
to organize a labor union or to seek recognition as a collective bargaining unit
by or with respect to any employees of any of Seller. To the best of Seller's
knowledge, no unfair labor practice complaints have been filed against Seller
with any governmental or regulatory agency, (ii) Seller has not received any
notice or communication reflecting an intention or threat to file any such
complaint, and (iii) no Person has made any claim, and to the best of the
Seller' knowledge there is no basis for any claim, against Seller under any
statute, regulation or ordinance relating to discrimination with respect to
employees or employment practices.
4.26 EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS.
(A) EMPLOYMENT AGREEMENTS. Except as set forth on SCHEDULE
4.26A, there are no written or oral employment, consulting, severance or
indemnification arrangements, agreements or understandings (including
perquisites or benefits) between Seller and any current or former officer,
director, consultant or employee ("Employment Agreements"). Seller has
previously delivered to Purchaser true and complete copies of (or summaries in
the event that such Employment Agreement is oral) all of the Employment
Agreements. Except as disclosed in SCHEDULE 4.26A, no such Employment Agreement
(i) will require any payment by Seller or Purchaser to any director, officer or
employee of any of Seller, or any other party, by reason of the change in
control of Seller resulting from the transactions contemplated by this
Agreement, or (ii) provides for the acceleration or change in the award, grant,
vesting or determination of options, warrants, rights severance payments, or
other contingent obligations of any nature whatsoever of Seller in favor of any
such parties. Except as set forth in SCHEDULE 4.26A, the terms of employment or
engagement of all directors, officers, employees, agents, consultants and
professional advisers of Seller are such that their employment or engagement may
be terminated upon not more than thirty (30) days notice given at any time
without liability for payment of compensation or damages and Seller have not
entered into any agreement or arrangement for the management of its business or
any part thereof other than with their respective directors or employees.
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(B) EMPLOYEE BENEFIT PLANS. Seller has no pension, retirement,
stock purchase, stock bonus, stock ownership, stock option, profit sharing,
savings, medical, disability, hospitalization, 501(c)(9) Trust (voluntary
employee benefit associations), insurance, deferred compensation, bonus,
incentive, welfare or any other employee benefit plan, policy, agreement,
commitment, arrangement or practice currently maintained or previously
maintained by any of Seller for any of their respective directors, officers,
consultants, employees or former employees (the "Company Plans"). Seller has no
"employee pension benefit plan" as defined in Section 3(3) of ERISA ("Pension
Plan") or an "employee welfare benefit plan" ("Welfare Plan"), as such terms are
defined in ERISA. Seller does not have a contributing employer to any
"multiemployer plan", (as such term is defined in Section 4001(a)(3) of ERISA),
nor does Seller have any multiemployer plan liability with respect to any such
plans or any Company Plan (including, but not limited to, any "withdrawal
liability" (including any contingent or secondary withdrawal liability) within
the meaning of Sections 4201 and 4204 of ERISA, to any Company Plan, which is a
multiemployer plan, or otherwise.
4.27 TAX MATTERS. Seller have previously delivered to
Purchaser true, correct and complete copies of the federal, state and local
income, sales, use franchise and all other tax returns required to be filed by
the Seller for the past five (5) fiscal years, 1993 through 1998 (except for
December 31, 1993 which Seller can not locate). Except as set forth on SCHEDULE
4.27A, all tax returns and tax reports required to be filed with respect to the
business and assets of Seller have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed, all of the foregoing documents as filed are true, correct
and complete in all material respects and reflect accurately all liability for
taxes of Seller for the periods to which such returns relate, and all amounts
shown as owing thereon have been paid. Except as specifically set forth on
SCHEDULE 4.27A, all income, profits, franchise, sales, use, value added,
occupancy, property, excise, payroll, FICA, FUTA and other taxes (including
interest and penalties), if any, collectible or payable by Seller or relating to
or chargeable against any of their respective assets, revenues or income through
the Closing Date were fully collected and paid by such date or provided for by
adequate reserves the Financial Statements, and are not under-accrued, and all
similar items due through the Closing Date will have been fully paid by that
date or provided for by adequate reserves. Except as set forth on SCHEDULE
16
4.27B, no taxation authority has sought to audit the records of Seller for the
purpose of verifying or disputing any tax returns, reports or related
information and disclosures provided to such taxation authority by Seller.
Except as set forth on SCHEDULE 4.27B, no claims or deficiencies have been
asserted against Seller with respect to any taxes or other governmental charges
or levies which have not been paid or otherwise satisfied or for which accruals
or reserves have not been made in the or Financial Statements, and there exists
no reasonable basis for the making of any such claims. Seller has not waived any
restrictions on assessment or collection of taxes or consented to the extension
of any statute of limitations relating to taxation. All taxes, including sales
taxes due and owing through the Closing Date have been paid or Seller is holding
such funds in escrow in the accounts and amounts set forth (except as set forth
on SCHEDULE 4.27B). SCHEDULE 4.27B annexed hereto (i) lists the amount and
expiration dates of any net operating loss, net capital loss, unused business
credit, unused foreign tax credit, or excess charitable contribution allocable
to Seller as of Seller's most recently completed year end.
17
4.28 MATERIAL AGREEMENTS.
(a) SCHEDULE 4.28 sets forth a brief description of all
material written and oral contracts or agreements relating to the Seller
including, without limitation, any: (i) contract resulting in a commitment or
potential commitment for expenditure or other obligation or potential
obligation, or which provides for the receipt or potential receipt, involving in
excess of $5,000 in any instance, or series of related contracts that in the
aggregate give rise to rights or obligations exceeding such amount; (ii)
indenture, mortgage, promissory note, loan agreement, guarantee or other
agreement or commitment for the borrowing or lending of money or encumbrance of
assets involving more than $5,000 in each except as set forth on SCHEDULE 4.28;
(iii) agreement which restricts Seller from engaging in any line of business or
from competing with any other Person; (iv) warranties made with respect to
products manufactured, packaged, distributed or sold by Seller; (v) any other
contract, agreement, instrument, arrangement or commitment that is material to
the condition (financial or otherwise), results of operation, assets,
properties, liabilities, business or prospects of any of Seller (collectively,
and together with the Leases, Employment Agreements, Company Plans and all other
agreements required to be disclosed on any Schedule to this Agreement, the
"MATERIAL AGREEMENTS"). The Seller have previously furnished to Purchaser true,
complete and correct copies of all written agreements, as amended, required to
be listed on SCHEDULE 4.28.
(b) Except as set forth on Schedule 4.28, none of the Material
Agreements was entered into outside the ordinary course of business of Seller,
contains any unusual, onerous or burdensome provisions that will impair or
adversely effect in any material way the operations of Seller, or is reasonably
likely to be performed at a material loss.
(c) The Material Agreements are each in full force and effect
and are the valid and legally binding obligations of Seller, enforceable in
accordance with their respective terms. Seller has not received or has no
knowledge of any notice of default by Seller under any of the Material
Agreements and to the best knowledge of Seller, after due inquiry, no event has
occurred which, with the passage of time or the giving of notice or both, would
constitute a default by Seller thereunder. To the best of Seller's knowledge,
none of the other parties to any of the Material Agreements is in default
18
thereunder, nor has an event occurred which, with the passage of time or the
giving of notice or both would constitute a default by such other party
thereunder. Neither Seller nor Seller has received notice of any pending or
threatened cancellation, revocation or termination of any of the Material
Agreements, nor are any of them aware of any facts or circumstances which could
reasonably be expected to lead to any such cancellation, revocation or
termination.
(d) To the best of Seller's knowledge, the continuation,
validity and effectiveness of the Material Agreements under the current terms
thereof will in no way be affected by the consummation of the transactions
contemplated by this Agreement.
4.29 GUARANTIES. Except as set forth on SCHEDULE 4.29, Seller
is not a party to any Guaranty, and no Person is a party to any Guaranty for the
benefit of Seller.
4.30 PRODUCTS
(a) To the best of Seller's knowledge, each Product sold by
Seller has been sold in accordance with the specifications under which such
Product normally is and has been manufactured and the provisions of all
applicable laws or regulations.
(b) Except as set forth on SCHEDULE 4.30B, to the best of
Seller's knowledge, no Products have at any time been recalled, withdrawn or
suspended by Seller in the United States or elsewhere, voluntarily or otherwise,
and there are no completed or pending proceedings or, to the best of Seller'
knowledge, threatened proceedings, in the United States or elsewhere, seeking
the recall, withdrawal, suspension or seizure of any Product. Neither Seller nor
any of their agents have received any regulatory letters, warning letters or
letters of adverse findings relating to any of Seller or any of their existing
products or products under development.
(c) Except as set forth on SCHEDULE 4.30C, to the best
knowledge of Seller after due inquiry, there exists no set of facts (i) which
could furnish a reasonable basis for the recall, withdrawal or suspension of any
19
product registration, product license, manufacturing license, wholesale dealers
license, export license or other governmental license, approval or consent of
any governmental or regulatory authority with respect to any Product, (ii) which
could furnish a reasonable basis for the recall, withdrawal or suspension by
order of any state, federal or foreign court of law of any Product, or (iii)
which could have a material adverse effect on the continued operation of any
facility of any of Seller or which could otherwise cause any of Seller to
recall, withdraw or suspend any such Product from the market.
4.31 ENVIRONMENTAL MATTERS. To the best of Seller's knowledge,
neither the Leased Property nor any other property used by any of Seller in the
past, has been used by any of Seller or any other Person to manufacture, treat,
store, or dispose of any hazardous substance or any other regulated material,
and such property is free of all such substances and materials.
4.32 DISCLOSURE. No representation or warranty of the Seller
contained in this Agreement, and no statement, report, or certificate furnished
by or on behalf of the Seller or any of Seller to Purchaser or its agents
pursuant hereto or in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading or omits or will omit to state a material fact
necessary in order to provide a prospective purchaser of the Shares with full
and proper information as to the business, financial condition, assets, results
of operation or prospects of Seller and the value of their respective
properties. Furthermore, Seller acknowledge that they are aware that Purchaser
is expressly relying upon the accuracy of the representations and warranties
contained in this Agreement in connection this transaction.
4.33 NO WINDING UP. There has been no resolution, petition or
order for the winding up of the Company and no receiver has been appointed in
respect thereof or any part of the assets thereof, nor are any such resolutions,
orders and appointments imminent or likely.
4.34 CONVERSION/GENERAL RELEASE. As additional consideration
for the sale of the Shares pursuant to this Agreement, Seller shall cause its
noteholders to convert to Common Stock and to unconditionally and irrevocably
release and forever discharges, effective as of the Closing Date, Seller and
their representatives, officers, directors, employees and agents, from any and
20
all rights, claims, demands, judgments, obligations, liabilities and damages,
whether accrued or unaccrued, asserted or unasserted, and whether known or
unknown, relating to Seller which ever existed, now exist, or may hereafter
exist, by reason of any tort, breach of contract, violation of law or other act
or failure to act which shall have occurred at or prior to the Closing Date, or
in relation to any other liabilities of the Seller.
Intentionally Omitted.
4.35 ACCOUNTS AND NOTES RECEIVABLE. The Seller or Seller have
delivered to Purchaser a true and complete aged list of unpaid accounts and
notes receivable (collectively, the "Receivables") owing to the Seller as of
September 30, 1999 and shall deliver to Purchaser, as of December 31, 1999, a
complete list of such Receivables. All of such Receivables constitute only bona
fide, valid and binding claims arising in the ordinary course of Seller'
respective business at the aggregate recorded amount thereof, not subject to any
valid counterclaims or set-offs known to Seller, other than rebates, discounts,
allowances and returns arising in the ordinary course of Seller' respective
business, consistent with past practices. The reserves accrued and maintained in
the September 30, 1999, Financial Statements to provide for doubtful accounts
of, valid counterclaims or set-offs by, rebates, discounts and allowances to,
and returns from, any customers of Seller with respect to Receivables existing
at September 30, 1999, were established in a manner consistent with Seller'
collection experience in prior years. The Seller further agree that if any
Receivables of Seller provided for in the September 30, 1999 Financial
Statements are not collected by Purchaser then the provisions of Paragraph 5.3
and the Note shall be controlling with respect to Purchaser's right of off-set.
4.36 INVENTORIES. Except as set forth on SCHEDULE 4.36, the
inventories of Seller (raw materials, work-in-process and finished goods) shown
on the balance sheets included in the Financial Statements do not and will not
include any items below standard quality, or any damaged or obsolete items or
items not salable in the ordinary course of the business of Seller as currently
conducted or the value of which, taken as a whole, has not been fully written
down or reserved against in the Financial Statements. Seller have and will
continue to have adequate quantities and types of inventory to enable it to
conduct its business consistent with past practices and anticipated operations.
21
4.37 AVAILABILITY OF INFORMATION. The Seller have had an
opportunity to meet personally or by telephone conference with officers or
representatives of Purchaser and have been provided with a full opportunity to
ask questions of and receive answers from such persons concerning the business
and affairs of Purchaser, its past and current operations and financial
condition, its future plans and projections and the transactions provided for in
this Agreement.
4.38 CUSTOMER CREDITS. The amounts set forth on the Closing
Balance Sheet relating to amounts due customers for credits or charge-backs
("Customer Credits") are detailed in Schedule 4.38 annexed hereto. To the best
of Seller's knowledge, the Customer Credits are the only credits or charge-backs
which Seller owes to its customers. The Customer Credits are valid and made have
been given by Seller in its ordinary course of business, consistent with past
business practices.
4.39 BANKRUPTCY. Seller is not and has not filed for
bankruptcy.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 SURVIVAL OF THE REPRESENTATIONS AND WARRANTIES. The
covenants, representations and warranties of Purchaser and the Seller set forth
in this Agreement shall survive the Closing Date and thereafter for a period of
two (2) years (except for tax obligations which shall have no limitation) and
further subject to Paragraph 5.3, et. seq.
5.2 INVESTIGATION. The representations, warranties, covenants
and agreements set forth in this Agreement shall not be affected or diminished
in any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. All statements contained herein or in any
schedule, certificate, exhibit or list delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties for purposes of this Agreement.
22
5.3 INDEMNIFICATION
(a) BY SELLER. Subject to Paragraph 5.3(d), Seller agrees, to
indemnify and hold harmless Purchaser and its directors, shareholders, officers,
employees and agents, and its Affiliates from, against and in respect of, the
full amount of any and all liabilities, damages, claims, deficiencies, fines,
assessments, losses, taxes, penalties, interest, costs and expenses, including,
without limitation, reasonable fees and disbursements of counsel (all of the
foregoing being collectively referred to herein as the "Losses"), arising from,
in connection with, or incident to (i) any breach or violation of any of the
representations, warranties, covenants or agreements of the Seller contained in
this Agreement or in any document or certificate delivered by Seller to
Purchaser pursuant hereto or in connection with the Closing to the extent such
breach exceeds $5,000 for any one item or $5,000 in the aggregate; (ii) any and
all liabilities relating to Seller or Seller or their respective businesses not
specifically disclosed in the Financial Statements; (iii) any claims against
Purchaser by a third party (i.e., stockholder lawsuits) under the Securities
Act, the Exchange Act or other state laws, rules or regulations (collectively,
the "Applicable Laws"), (iv) any claims of Related Parties or Affiliates (v) any
and all actions, suits, claims, proceedings, demands, assessments or judgments,
costs and expenses incidental to any of the foregoing.
(b) BY PURCHASER. Subject to the limitations set forth in
Section 5.3(d), Purchaser agrees to indemnify and hold harmless the Seller from,
against and in respect of, the full amount of any and all Losses arising from,
in connection with, or incident to any breach or violation of any of the
representations, warranties, covenants or agreements of Purchaser contained in
this Agreement or in any document or certificate delivered by Purchaser at or in
connection with the Closing.
(c) INDEMNITY PROCEDURE. A party or parties hereto agreeing to
be responsible for or to indemnify against any matter pursuant to this Agreement
is referred to herein as the "Indemnifying Party" and the other party or parties
claiming indemnity is referred to as the "Indemnified Party".
An Indemnified Party under this Agreement shall, with respect
to claims asserted against such party by any third party, give written notice to
each Indemnifying Party of any liability which might give rise to a claim for
indemnity under this Agreement within forty-five (45) business days of the
receipt of any written claim from any such third party, but not later than
twenty (20) days prior to the date any answer or responsive pleading is due, and
23
with respect to other matters for which the Indemnified Party may seek
indemnification, give prompt written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity; provided, however,
that any failure to give such notice will not waive any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
materially prejudiced thereby.
The Indemnifying Party shall have the right at its election to
take over the defense or settlement of such claim by giving written notice to
the Indemnified Party at least three (3) business days prior to the time when an
answer or other responsive pleading or notice with respect thereto is required.
If the Indemnifying Party makes such election, it may conduct the defense of
such claim through counsel or representative of its choosing (subject to the
Indemnified Party's approval of such counsel or representative, which approval
shall not be unreasonably withheld), shall be responsible for the expenses of
such defense, and shall be bound by the results of its defense or settlement of
the claim. The Indemnifying Party shall not settle any such claim without prior
notice to and consultation with the Indemnified Party, and no such settlement
involving any equitable relied or which might have a material adverse effect on
the Indemnified Party may be agreed to without its written consent, (which shall
not be unreasonably withheld). So long as the Indemnifying Party is diligently
contesting any such claim in good faith, the Indemnified Party may pay or settle
such claim only at its own expense. If the Indemnifying Party does not make such
election, or having made such election does not in the reasonable opinion of the
Indemnified Party proceed diligently to defend such claim, then the Indemnified
Party may, (after written notice to the Indemnifying Party) at the expense of
the Indemnifying Party, take over the defense of and proceed to handle such
claim in its reasonable discretion and the Indemnifying Party shall be bound by
any defense or settlement that the Indemnified Party may make in good faith with
respect to such claim. The parties agree to cooperate in defending such third
party claims and the defending party shall have access to records, information
and personnel in control of the other party or parties which are pertinent to
the defense thereof.
With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be paid by the
Indemnifying Party upon the earlier to occur of: (i) the entry of a judgment
against the Indemnified Party and the expiration of any applicable appeal
period, or if earlier, five (5) days prior to the date that the judgment
24
creditor has the right to execute the judgment; (ii) the entry of an
unappealable judgment or final appellate decision against the Indemnified Party;
or (iii) a settlement of the claim. Notwithstanding the foregoing, provided that
there is no dispute as to the applicability of indemnification, expenses of
counsel to the Indemnified Party shall be reimbursed on a current basis by the
Indemnifying Party if such expenses are a liability of the Indemnifying Party.
With regard to other claims for which indemnification is payable hereunder, such
indemnification shall be paid promptly by the Indemnifying Party upon demand by
the Indemnified Party.
(d) LIMITATIONS. Indemnification of Seller by Purchaser is up
to purchase price actually received by Seller and shall include indemnification
for losses incurred by Seller as a result of Purchaser's failure to assume and
fulfill Seller's stated liabilities (to the extent that Seller has any liability
at law to such creditors).
(1) Notwithstanding the foregoing, Seller to also defend,
indemnify and hold Purchaser and its affiliates harmless from all stockholder
lawsuits arising prior to or as a result of this transaction. In the event that
Seller's and or its officers and directors actions are judicially determined to
be ultra ▇▇▇▇▇ or are unenforceable under law or equity and Purchaser is
required to return the shares in Seller to Seller or its stockholder, then,
Seller shall pay a break-up fee equal to $500,000. Seller acknowledges that the
foregoing is fair and reasonable under the circumstances.
5.4 ESCROW OF COMPANY SHARES. Notwithstanding anything herein
to the contrary, the parties hereto agree that, as of the Closing, up to
$150,000 in liabilities of the Company may remain. Accordingly, at the Closing,
the Company shall issue in the name of Right2Web Company Shares representing an
additional 2% of the issued and outstanding shares of the Company's Common Stock
on a fully diluted basis (the "Escrow Shares"). The Escrow Shares shall be
delivered to ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP to be held in escrow and applied in
accordance with the provisions of this Section . To the extent that, after the
Closing, the Company is required to pay any liability which existed as of the
Closing, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP is hereby authorized to deliver to the Company
such number of Escrow Shares (valued at $______ per share) equivalent to the
amount of liabilities so paid. To the extent that ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP retains
any Escrow Shares after eighteen months from date of Closing, such Shares shall
be returned to the Company for retirement or as treasury shares. The foregoing
25
shall be in addition to any remedies available to Right2Web set forth in Section
5.3 hereof. The parties acknowledge that ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP presently
represents Right2Web and will represent the Company after the Closing and hereby
consent to having ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP act as escrow agent hereunder and agree
to indemnify and hold harmless ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP from any liability, loss or
damage suffered or incurred by ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP acting hereunder.
5.5 REGISTRATION RIGHTS AGREEMENT. The Seller and Purchaser
shall enter into at Closing, a Registration Rights Agreement in the form
attached as Exhibit 5.5.
ARTICLE VI
CLOSING; DELIVERIES; CONDITIONS PRECEDENT
6.1 CLOSING AND DELIVERIES. Subject to the terms and
conditions set forth herein, The transfers and deliveries to be made pursuant to
this Agreement shall take place at the offices of ▇▇▇▇▇ & Tetelman, LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ on March 15, 2000 (the "Closing"), or on
such other date and at such other place as may be agreed to by the parties. All
proceedings to be taken and all documents to be executed at the Closing shall be
deemed to have been taken, delivered and executed simultaneously, and no
proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed.
(A) At Closing, the Seller shall deliver to Purchaser the
following documents :
(i) the certificates representing the Shares, together with
stock powers duly executed in blank;
(ii) the effective written resignations of each of the
directors and officers of Seller;
(iii) the minute books of Seller, including their corporate
seals, unissued stock certificates, stock registers, Certificates of
Incorporation, bylaws and corporate minutes;
26
(iv) the Seller shall issue to Purchaser and deliver to ▇▇▇▇▇
& ▇▇▇▇▇▇▇▇, LLP a certificate representing the Escrow Shares (as defined below);
(v) an original Registration Rights Agreement;
(vi) certificates issued by the Secretary of State or other
similar appropriate governmental department, as to the good standing of Seller;
(vii) the books, records, files and remaining assets of
Seller;
(viii) such other documents as Purchaser may reasonably
request (including resignation of ▇▇▇▇▇ ▇▇▇▇ as a director and officer and
change of bank account signatory authority as may be directed by Purchaser);
(ix) a certificate of an officer of Seller as to certain of
the representations and warranties set forth in Section 4 hereof (as Purchaser
may request), being true and correct on the date of Closing and such other
matters as Purchaser may reasonably request;
(B) At Closing, Purchaser shall deliver to Seller the following
documents from Purchaser:
(i) the Note;
(ii) a counterpart of the Registration Rights Agreement;
(iii) such other documents and instruments as the Seller
may reasonably request.
6.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. All
of the obligations of Purchaser under this Agreement are subject to the
satisfaction or waiver by Purchaser at or prior to the Closing of each and every
one of the following conditions.
(A) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of the Seller contained herein or in any
certificate or other document delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be true and correct
in all material
27
respects (except for representations and warranties which are by their terms
qualified by materiality (or except to the Seller's knowledge), which shall be
true and correct in all respects) as of the Closing Date with the same force and
effect as though made on and as of such date.
(b) PERFORMANCE. The Seller shall have performed and
complied in all material respects with all of the agreements, covenants and
obligations required under this Agreement to be performed or complied with by
them on or prior to the Closing Date.
(c) NO MATERIAL ADVERSE CHANGE. Except as set forth
herein, there shall not have occurred any event or condition of any character
which has affected or may adversely affect in any material respect Purchaser's
ability to operate the business of Purchaser as such business is currently being
operated, and no event or condition shall have occurred which has adversely
affected or may adversely affect in any material respect the condition
(financial or otherwise) of any Seller or any of Seller' assets, liabilities
(whether accrued, absolute, contingent or otherwise), earnings, book value,
business or operations .
(d) SELLER'S CERTIFICATE. The Seller shall have delivered
to Purchaser a certificate dated the Closing Date, certifying in such detail as
Purchaser may reasonably request, that the conditions specified in Section
6.2(a), (b) and (c) above have been fulfilled and as to such other matters as
Purchaser may reasonably request.
(e) NO LITIGATION. No litigation, arbitration or other
legal or administrative proceeding shall have been commenced or be pending by or
before any court, arbitration panel or governmental authority or official, and
no statute, rule or regulation of any foreign or domestic, national or local
government or agency thereof shall have been enacted after the date of this
Agreement, and no judicial or administrative decision shall have been rendered
which enjoins or prohibits, or seeks to enjoin or prohibit, the consummation of
all or any of the transactions contemplated by this Agreement.
(f) CONSENTS. Purchaser and the Seller shall have obtained
all material authorizations, consents, waivers and approvals as may be required
to consummate the transactions contemplated by this Agreement.
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(g) RECEIPT OF DOCUMENTS. Purchaser shall have received
each item set forth in Section 6.1(A) herein, required to be delivered by the
Seller to Purchaser on or prior to the Closing Date.
(h) PURCHASER BOARD APPROVAL. The Board of Directors of
Purchaser shall have approved the execution, delivery and performance of this
Agreement by Purchaser.
(i) CREDITOR APPROVAL. Deutsche Bank shall have consented
to the transactions contemplated by this Agreement in a manner satisfactory to
Purchaser in its sole discretion..
(j) FINANCIAL STATEMENTS. Purchaser shall have received
the unaudited Financial Statements of Seller for the period ended December 31,
1999 , which Financial Statements shall reflect results which are consistent
with the projections of the management of Seller relating to such Financial
Statements.
(h) ISSUANCE OF STOCK. Seller shall cause all warrants,
options, notes or other instruments to converted into equity or cancelled prior
to Closing.
6.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. All of
the obligations of the Seller under this Agreement are subject to the
satisfaction of or waiver by Seller at or prior to the Closing of each and every
one of the following conditions.
(a) REPRESENTATIONS AND WARRANTIES TRUE. Each of the
representations and warranties of Purchaser contained herein or in any
certificate or other document delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be true and correct
in all material respects (except for representations and warranties which are by
their terms qualified by materiality, which shall be true and correct in all
respects) as of the Closing Date with the same force and effect as though made
on and as of such date.
(b) PERFORMANCE. Purchaser shall have performed and
complied in all material respects with all of the agreements, covenants and
obligations required under this Agreement to be performed or complied with by it
on or prior to the Closing Date.
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(c) NO MATERIAL ADVERSE CHANGE. No event or condition
shall have occurred which has adversely affected or may adversely affect in any
material respect the condition (financial or otherwise) of Purchaser or any of
its Subsidiaries.
(d) OFFICERS' CERTIFICATE. Purchaser shall have delivered
to Seller a certificate executed by its President or Chief Executive Officer,
dated the Closing Date, certifying in such detail as Seller may reasonably
request, that the conditions specified in Sections 6.3(a), (b) and (c) above
have been fulfilled.
(e) NO LITIGATION. No litigation, arbitration or other
legal or administrative proceeding shall have been commenced or be pending by or
before any court, arbitration panel or governmental authority or official, and
no statute, rule or regulation of any foreign or domestic, national or local
government or agency thereof shall have been enacted after the date of this
Agreement, and no judicial or administrative decision shall have been rendered
which enjoins or prohibits, or seeks to enjoin or prohibit, the consummation of
all or any of the transactions contemplated by this Agreement.
ARTICLE VII
COVENANTS
7.1 ACCESS. The Seller shall, and shall cause Seller to,
afford to Purchaser and its agents and representatives, access throughout the
period prior to the Closing Date to the properties, books, records and contracts
of Seller, for the purpose of permitting Purchaser to fully investigate and
perform a due diligence review of Seller, their respective businesses, assets
and properties, and financial condition, provided that such access shall be
granted during normal business hours in such a manner as to not unreasonably
interfere with Seller' normal business operations. During such period the Seller
shall furnish promptly to Purchaser copies of (i) all correspondence received or
sent by or on behalf of Seller from or to any governmental authority and (ii)
all other information and documents concerning its business, assets,
liabilities, properties and personnel as Purchaser may reasonably request.
Purchaser (or its agents) will not, prior to Closing, orally or in writing,
discuss the terms and conditions of the transactions contemplated by this
Agreement with any employees, officers, agents, vendors, customers, lenders or
directors of Seller without the prior consent of Purchaser being obtained.
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7.2 GENERAL CONFIDENTIALITY. The Seller acknowledges that the
Intangible Property and all other confidential or proprietary information with
respect to the business and operations of the Seller are valuable, special and
unique assets of the Seller. The Seller shall not, at any time after the Closing
Date, disclose, directly or indirectly, to any Person, or use or purport to
authorize any Person to use any confidential or proprietary information with
respect to Seller or Purchaser, whether or not for a Seller' own benefit,
without the prior written consent of Purchaser or unless required by law,
including without limitation, information as to the financial condition, results
of operations, customers, suppliers, products, products under development,
inventions, sources, leads or methods of obtaining new products or business,
Intangible Property, pricing methods or formulas, cost of supplies, marketing
strategies or any other information relating to Seller or Purchaser, which could
reasonably be regarded as confidential. The Seller acknowledges that Purchaser
would not enter into this Agreement without the assurance that all such
confidential and proprietary information will be used for the exclusive benefit
of Seller.
7.3 ISSUANCE OF SHARES. Seller shall, prior to Closing, cause
to be issued and issue or terminated, as the case may be, all certificates for
shares required to be issued by Seller pursuant to any options, warrants, notes,
purchase or other agreement requiring the issuance of Common Stock or additional
Common Stock.
7.4 POST-CLOSING TAX MATTERS. Seller shall assist Purchaser,
as required by Purchaser, in filing, challenging or responding to all
governmental authorities concerning all taxes, interest and penalties which have
been paid, are due or may be due for all periods arising prior to the Closing
Date. Seller shall prepare the 1995 tax returns for Seller and shall provide
Purchaser with sufficient time to provide input into same. Seller will not take
any deductions not consistent with past practices on Seller's 1995 tax returns
without obtaining Purchaser's consent. Seller will assist Purchaser and Seller
in preparing for and complying with all taxing authority audit and document
requests, in a timely fashion.
ARTICLE VIII
MISCELLANEOUS
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8.1 NOTICES. Any notice, demand, claim or other communication
under this Agreement shall be in writing and shall be deemed to have been given
upon the delivery, mailing or transmission thereof, as the case may be, if
delivered personally or sent by certified mail, return receipt requested,
postage prepaid, or sent by facsimile or prepaid overnight courier to the
parties at the addresses set forth below their names on the signature pages of
this Agreement (or at such other addresses as shall be specified by the parties
by like notice). A copy of any notices shall be sent as follows:
Copies of all notices delivered to Purchaser shall also be
sent to:
▇▇▇▇▇ & Tetelman
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Copies of all notices delivered to the Seller shall be sent
to:
▇▇. ▇▇▇▇▇ ▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
8.2 ENTIRE AGREEMENT. This Agreement (including the exhibits
and schedules hereto) contains every obligation and understanding between the
parties relating to the subject matter hereof and merges all prior discussions,
negotiations and agreements, if any, between them, and none of the parties shall
be bound by any conditions, definitions, understandings, warranties or
representations other than as expressly provided herein. All exhibits and
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schedules attached to this Agreement are expressly made a part of, and
incorporated by reference into, this Agreement. Any matter disclosed on any
exhibit or schedule to this Agreement shall be deemed to have been disclosed on
all other exhibits or schedules to this Agreement (if such has been specifically
cross-referenced) to the extent that it should have been disclosed on such other
exhibits or schedules.
8.3 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
heirs, personal representatives, legal representatives, and permitted assigns.
8.4 PUBLICITY. The parties hereto agree to cooperate in
issuing any press release or other public announcement concerning this Agreement
or the transactions contemplated hereby. Nothing contained herein shall prevent
any party from at any time furnishing any information to any governmental
authority which they are by law or otherwise so obligated to disclose or from
making any disclosure which its counsel deems necessary or advisable in order to
fulfill such party's disclosure obligations under applicable law or the rules of
the American Stock Exchange.
8.5 ASSIGNMENT. This Agreement may not be assigned by any
party without the written consent of the other party, provided that, Purchaser
may assign this Agreement to an Affiliate, without such written consent.
8.6 FURTHER ASSURANCES. The parties hereto shall deliver any
and all other instruments or documents required to be delivered pursuant to, or
necessary or proper in order to give effect to, all of the terms and provisions
of this Agreement including, without limitation, all necessary stock powers and
such other instruments of transfer as may be necessary or desirable to transfer
ownership of the Shares. Seller shall cause to be delivered to Purchaser at a
place designated by Purchaser all files, records, documents, assets (tangible or
intangible) of Seller.
8.7 WAIVER AND AMENDMENT. Any representation, warranty,
covenant, term or condition of this Agreement which may legally be waived, may
be waived, or the time of performance thereof extended, at any time by the party
hereto entitled to the benefit thereof, and any term, condition or covenant
hereof (including, without limitation, the period during which any condition is
to be satisfied or any obligation performed) may be amended by the parties
thereto at any time. Any such waiver, extension or amendment shall be evidenced
33
by an instrument in writing executed by Seller (in the case of a waiver,
extension or amendment agreed to by Seller) or, in the case of a waiver,
extension or amendment agreed to by Purchaser, on behalf of Purchaser by its
Chairman, President or any Vice President or other person, who has been
authorized by its Board of Directors to execute waivers, extensions or
amendments on its behalf. No waiver by any party hereto, whether express or
implied, of its rights under any provision of this Agreement shall constitute a
waiver of such party's rights under such provisions at any other time or a
waiver of such party's rights under any other provision of this Agreement. No
failure by any party thereof to take any action against any breach of this
Agreement or default by another party shall constitute a waiver of the former
party's right to enforce any provision of this Agreement or to take action
against such breach or default or any subsequent breach or default by such other
party.
8.8 NO THIRD PARTY BENEFICIARY. Except for the provisions of
Section 5.3, nothing expressed or implied in this Agreement is intended, or
shall be construed, to confer upon or give any Person other than the parties
hereto and their respective heirs, personal representatives, legal
representatives, successors and permitted assigns, any rights or remedies under
or by reason of this Agreement.
8.9 SEVERABILITY. In the event that any one or more of the
provisions contained in this Agreement shall be declared invalid, void or
unenforceable, the remainder of the provisions of this Agreement shall remain in
full force and effect, and such invalid, void or unenforceable provision shall
be interpreted as closely as possible to the manner in which it was written.
8.10 EXPENSES. Each party agrees to pay, without right of
reimbursement from the other party, the costs incurred by it incident to the
performance of its obligations under this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, costs incident
to the preparation of this Agreement, and the fees and disbursements of counsel,
accountants and consultants employed by such party in connection herewith.
8.11 HEADINGS. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of any provisions of this Agreement.
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8.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
8.13 TIME OF THE ESSENCE. Wherever time is specified for the
doing or performance of any act or the payment of any funds, time shall be
considered of the essence.
8.14 INJUNCTIVE RELIEF. It is possible that remedies at law
may be inadequate and, therefore, the parties hereto shall be entitled to
equitable relief including, without limitation, injunctive relief, specific
performance or other equitable remedies in addition to all other remedies
provided hereunder or available to the parties hereto at law or in equity.
8.15 REMEDIES CUMULATIVE. No remedy made available by any of
the provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity.
8.16 GOVERNING LAW. This Agreement has been entered into and
shall be construed and enforced in accordance with the laws of the State of New
York without reference to the choice of law principles thereof.
8.17 JURISDICTION AND VENUE. This Agreement shall be subject
to the exclusive jurisdiction of the courts of New York County, New York. The
parties to this Agreement agree that any breach of any term or condition of this
Agreement shall be deemed to be a breach occurring in the State of New York by
virtue of a failure to perform an act required to be performed in the State of
New York and irrevocably and expressly agree to submit to the jurisdiction of
the courts of the State of New York for the purpose of resolving any disputes
among the parties relating to this Agreement or the transactions contemplated
hereby. The parties irrevocably waive, to the fullest extent permitted by law,
any objection which they may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement, or any
judgment entered by any court in respect hereof brought in New York County, New
York, and further irrevocably waive any claim that any suit, action or
proceeding brought in New York County, New York has been brought in an
inconvenient forum.
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8.18 MUTUAL COOPERATION. The parties hereto will cooperate
with each other, and will use all reasonable efforts to cause the fulfillment of
the conditions to the parties' obligations hereunder, and to obtain as promptly
as possible all consents, authorizations, orders or approvals from each and
every third party, whether private or governmental, required in connection with
the transactions contemplated by this Agreement.
8.19 REPRESENTATION BY COUNSEL. Seller represents that it has
been represented by ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. and Purchaser has been represented by
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP in connection with this Stock Purchase Agreement. Seller
and Purchaser acknowledge that ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP has previously acted as
special counsel to Seller and that ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP shall have no duty and
shall in fact be permitted to disclose any confidential information (if any),
regarding the Seller to Purchaser. Seller also expressly consents to permit
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP to act as counsel to Purchaser. Purchaser and Seller
acknowledge that ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, was responsible for the introduction of
Purchaser to Seller and that Purchaser will be compensating ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
LLP for such introduction. ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP has advised both Seller and
Purchaser that they should seek independent counsel in this transaction and that
by their respective signature below, they are expressly consenting to the terms
of this transaction and to ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP's potential inherent conflict
of interest in the transaction.
IN WITNESS WHEREOF, the parties hereto have each executed
and delivered this Agreement as of the day and year first above written.
Purchaser
▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
By: S/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: PRESIDENT
Seller:
Augment Systems, Inc.
By: S/▇▇▇▇▇ ▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Chief Financial Officer
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SCHEDULES
4.3 No Violation or Conflict
4.6 Litigation
4.9 Charter and By-Laws of Seller
4.10 Subsidiaries/Investment
4.11 Capitalization/List of Stockholders
4.13 Financial Statements, List of Accounts Receivable and Inventory
4.16 Personal Property
4.17 Leased Property
4.18 Insurance
4.20 Rights/Intangible Property
4.22 Related Parties
4.23 Accounts
4.24 Personnel
4.26A Employment Agreements
4.27A Taxes Paid
4.27B Tax Audits
4.27C Names of Officers and Directors, Addresses, SS Nos.
4.28 Material Agreements
4.29 Guaranties
4.30B Product Recalls
4.30C Warranties
4.31 Environmental Matters
4.36 Inventories
4.38 Customer Credits
EXHIBITS
Promissory Note
Stock Certificate
Stock Power
Officer's Certificate
5.5 Registration Rights Agreement
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