ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made this
8th day of Nov. 2000 by and among Sales OnLine Direct, Inc. ("SOLD"), a
Delaware corporation, ChannelSpace Entertainment, Inc. ("CSEI"), a Virginia
corporation, and CSEI's wholly-owned Canadian subsidiary Discribe, Ltd.
("Discribe") (CSEI and Discribe are hereinafter referred to collectively as the
"Sellers").
EXPLANATORY STATEMENT
Sellers are converged internet content providers and leading
producers of affinity portals, including Sellers' main offerings consisting of
the XxxxxxxxxxXxxxxxx.xxx and the Celtic Xxxxxxx.xxx websites (the "Websites").
Such business of Sellers is hereinafter referred to as the "Business." Sellers
desire to sell to SOLD, and SOLD desires to purchase and acquire from the
Sellers, the assets comprising the Business other than the "electronic Content
Management System" ("eCMS") technology, as more particularly described herein.
SOLD and Sellers have reached agreement on the terms and conditions of such
purchase and sale, and on certain other related transactions, as more
particularly set forth herein.
NOW THEREFORE, in consideration of the foregoing Explanatory
Statement and the mutual covenants, agreements, representations and warranties
contained in this Agreement, the receipt and sufficiency of such consideration
being hereby acknowledged and agreed, the parties hereto covenant, agree,
represent and warrant as follows:
1. Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at 5 p.m. on November 8, 2000 (the "Closing
Date") or such other date and time as the parties may agree upon, provided that
all conditions precedent to the Closing set forth in this Agreement shall have
been fulfilled, or waived by the party for benefit the condition exists, time
being of the essence of this Agreement. In no event shall the Closing take place
on or after the closing of CSEI's sale of its "electronic Content Management
System" ("eCMS") technology to 3D Xxxxxxxx.xxx d/b/a O2, Essential Marketing
Technologies ("O2").
2. Sale and Purchase of Assets. On the terms and subject to the conditions
set forth in this Agreement, Sellers shall sell, assign, convey and transfer to
SOLD, and SOLD shall purchase from Sellers, at the Closing, the assets of
Sellers comprising the Business as such assets are more particularly described
in this Section 2 (the "Assets"), free and clear of all liens and encumbrances;
provided that SOLD shall not purchase and acquire from Sellers the excluded
assets described on Schedule 2 hereto (the "Excluded Assets"). The Assets to be
sold, assigned, conveyed and transferred hereunder shall be all of the assets of
Sellers other than the Excluded Assets, including the following:
2.1. All of Sellers' right, title and interest in and to the Websites,
including the domain names of the Websites, the tradenames under which the
Websites and the Business are operated, all (except as excluded on Schedule 2)
domain names owned by Sellers including those listed on Schedule 2.1, and all
other intellectual property owned by Sellers and used or useful in the operation
of the Websites or the Business other than the Excluded Assets;
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2.2. All of the fixed assets and equipment listed on Schedule 2.2
attached hereto (the "Fixed Assets");
2.3. All of the books and records of the Sellers identified by SOLD
within ten (10) days following the Closing pertaining solely to the Assets and
Business, including files, statistics, financial information, operating data,
sales, distribution and marketing information, information related to suppliers
and related items, and such other and further information as is maintained by
the Seller relating solely to the Assets and Business, but not including
Sellers' corporate records or income tax records ("Books"); provided that
Sellers shall retain copies of any original Books SOLD removes from Sellers'
offices;
2.4. All of Sellers' lists of registered users of the Websites, which
shall include such information regarding registered users as is maintained by
Sellers (the "Registered User Lists"). Such Registered User Lists shall be
maintained by SOLD in accordance with the terms and conditions of any privacy
policies set forth on Sellers' Websites;
2.5. To the extent assignable, all of Sellers' permits, licenses,
consents and approvals required under any applicable law, statute, ordinance,
code, rule or regulation, and required to operate the Business;
2.6. Sellers' goodwill associated with the Assets and the Business,
including the exclusive right to use the name "ChannelSpace Entertainment" and
all variations and derivations thereof;
2.7. Sellers' rights under those certain contracts identified on
Schedule 2.7 attached hereto, as such schedule may be updated or modified by
SOLD in SOLD's sole discretion prior to or at the Closing by written notice to
CSEI (as so updated or modified, the "Assigned Contracts");
2.8. To the extent owned by Sellers, options for 2,000,000 shares of
GavelNet, Inc. stock, options related to the Copernicus search engine,
Xxxxxxxxxxx.xxx options and RealMedia, Inc. options (collectively, the
"Options"). CSEI represents and warrants that the Options constitute all options
for the purcahse of securities owned by Sellers. SOLD acknowledges and agrees
that the Options are being transferred to SOLD "as is" without any
representations or warranties as to ownership, title, value or marketability;
2.9. The issued and outstanding capital stock of Discribe if SOLD in
its sole discretion determines, by written notice to CSEI within forty-five (45)
days following closing, to acquire such stock; and
2.10. Any other tangible or intangible assets of the Sellers used or
useful in the Business, other than the Excluded Assets.
3. Grant of Licenses. At the Closing, CSEI shall execute and deliver to
SOLD two written license agreements substantially in the form attached hereto as
Exhibit 1 with respect to the eCMS technology (the "eCMS License"). In
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connection with the license granted with respect to the furniture-related online
businesses of SOLD, CSEI agrees to pay to SOLD, either prior to the Filing Date
(as defined below) or within ten (10) days thereafter pursuant to a procedure
reasonably acceptable to the parties, the sum of Fifty Thousand Dollars
($50,000). In the event that SOLD fails to make the payment to O2 as set forth
in Section 2.3 of the license agreement relating to the furniture-related online
businesses of SOLD, SOLD shall, within ten (10) days of the date such payment is
due, refund to CSEI the Fifty Thousand Dollar ($50,000) payment described in the
second sentence of this Section 3.
4. Consideration. In consideration for Sellers' sale and conveyance of the
Assets to SOLD and CSEI's grant of the eCMS License to SOLD:
4.1. Assumed Liabilities. Provided the Closing occurs, SOLD shall
assume, pay and perform those certain liabilities of the Sellers listed or
described in detail on Schedule 4.1 attached hereto (the "Assumed Liabilities")
and Sellers' obligations arising from and after the Closing under any Assigned
Contracts;
4.2. Closing Shares. SOLD shall issue and deliver to CSEI at the
Closing seven million five hundred thirty thousand (7,530,000) shares of SOLD
common stock (the "Closing Shares");
4.3. Registrable Shares. SOLD shall additionally issue and deliver to
CSEI on the Filing Date (as hereinafter defined) that number of shares of SOLD
common stock that shall have a value of $300,000 calculated using the average of
the closing bid price of SOLD common stock on the five trading days immediately
preceding the date on which SOLD files a registration statement for such shares
with the SEC (the "Filing Date"), which Filing Date shall be as soon as
practicable after the Closing but in any event not later than 90 days after the
Closing. The shares of SOLD common stock issued pursuant to this Section 4.3 are
hereinafter referred to as the "Registrable Shares" (the Closing Shares and the
Registrable Shares are referred to herein collectively and without distinction
as the "CSEI Shares"). In the event that SOLD, acting in good faith, is unable
to enter into an employment arrangement with Xxxxx Xxxxxxx prior to the Filing
Date on terms reasonably satisfactory to SOLD and CSEI, the number of
Registrable Shares issuable to CSEI on the Filing Date shall be reduced by that
number of shares of SOLD common stock that shall have a value of $50,000
calculated using the method described in the first sentence of this Section 4.3;
4.4. No Other Assumption. Other than the Assumed Liabilities and the
obligations of Sellers arising from and after the Closing under any Assigned
Contracts, SOLD shall not assume and does not agree to pay or perform any debts,
obligations, duties or liabilities of Sellers of any nature, and Sellers shall
continue to be responsible for all such debts, obligations, duties or
liabilities.
5. Provisions Respecting the Closing Shares and the Registrable Shares.
5.1. Escrow. Immediately upon issuance of the Closing Shares to CSEI at
the Closing, CSEI shall deposit such shares into an escrow established in
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accordance with an escrow agreement substantially in the form attached hereto as
Exhibit 3 (the "Escrow Agreement") naming Olde Monmouth Stock Transfer Company,
Inc. as escrow agent, which SOLD and CSEI shall execute and deliver at the
Closing. The Closing Shares shall thereafter be held and released as provided in
the Escrow Agreement and this Agreement.
5.2. Restriction on Transfer of the CSEI Shares. Subject to SOLD's
obligations pursuant to Section 4.3, CSEI acknowledges that the CSEI Shares have
not been registered under the Securities Act of 1933 (the "1933 Act") or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless registered thereunder or CSEI shall have delivered to SOLD an
opinion by counsel reasonably satisfactory to SOLD, in form, scope and substance
reasonably satisfactory to SOLD, to the effect that the securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration. CSEI further acknowledges that any sale of the
CSEI Shares made in reliance on Rule 144 as amended (or any applicable rule
which operates to replace said Rule), promulgated under the 1933 Act ("Rule
144") may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of the CSEI Shares under circumstances in
which the seller (or the person though whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations thereunder and applicable state securities laws.
Notwithstanding anything above to the contrary, SOLD acknowledges and agrees
that CSEI will adopt and consummate a plan of dissolution and liquidation within
one (1) year following the Closing Date and, pursuant to such plan, will assign
any rights remaining effective hereunder to such creditors and shareholders.
SOLD hereby approves the assignment of the right to receive CSEI Shares to
CSEI's shareholders and creditors pursuant to the Plan of Liquidation
notwithstanding any restrictions set forth in this Section 5; provided that the
Closing Shares transferred and distributed pursuant to the Plan of Liquidation
shall remain in escrow subject to the terms of the Escrow Agreement. CSEI shall
use reasonable efforts to cause its shareholders and creditors to approve, as
part of any such Plan of Liquidation, a designee for purposes of receiving
notice and providing consents as may be required under the Escrow Agreement.
5.3. Legend on Certificates Evidencing CSEI Shares. Until such time as
the CSEI Shares have been registered under the 1933 Act, the stock certificates
representing the CSEI Shares will bear a restrictive legend (the "Legend") in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
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NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
The Legend shall be removed and SOLD shall issue a certificate without such
Legend to the holder of any certificate evidencing a CSEI Share upon which it is
stamped, and a certificate for a CSEI Share shall be originally issued without
the Legend, if, unless otherwise required by state securities laws, (x) the sale
of such CSEI Share is registered under the 1933 Act, or (y) such holder provides
SOLD with an opinion by counsel reasonably satisfactory to SOLD, that is in
form, substance and scope reasonably satisfactory to SOLD, to the effect that a
public sale or transfer of such CSEI Share may be made without registration
under the 1933 Act. CSEI agrees that its sale or transfer of all CSEI Shares,
including those represented by a certificate(s) from which the Legend has been
removed, or which were originally issued without the Legend, shall be made only
pursuant to an effective registration statement or in compliance with an
exemption from the registration requirements of the 1933 Act. In the event the
Legend is removed from any certificate evidencing any CSEI Share or any
certificate evidencing any CSEI Share is issued without the Legend and
thereafter the effectiveness of a registration statement covering the sale of
such CSEI Share is suspended or SOLD determines that a supplement or amendment
thereto is required by applicable securities laws, then upon reasonable advance
notice to the holder of such CSEI Share, SOLD shall be entitled to require that
the Legend be placed upon any certificate evidencing such CSEI Share which
cannot then be sold pursuant to an effective registration statement or an
available exemption from registration or with respect to which the opinion
referred to in clause (y) next above has not been rendered, which Legend shall
be removed when such CSEI Share may be sold pursuant to an effective
registration statement or an available exemption from registration (or such
holder provides the opinion with respect thereto described in clause (y) next
above).
5.4. Registration of the Registrable Shares. Pursuant to the
Registration Rights Agreement substantially in the form attached hereto as
Exhibit 4 (the "Registration Rights Agreement"), which SOLD and CSEI shall
execute and deliver at the Closing, as soon as practicable after the Closing,
but in no event later than 60 days after the Closing, SOLD shall prepare and
file with the Securities and Exchange Commission (the "SEC") a registration
statement for a secondary offering or resale of the Registrable Shares.
6. Deliveries by Sellers. At the Closing, Sellers shall execute and deliver
the following to SOLD:
6.1. a xxxx of sale in form reasonably satisfactory to SOLD pursuant to
which the Sellers shall transfer the Assets to SOLD; an assignment of contracts
in form reasonably satisfactory to SOLD pursuant to which Sellers shall assign
the Assigned Contracts to SOLD and SOLD shall assume Sellers' obligations under
the Assigned Contracts to the extent such obligations arise from and after the
Closing except as otherwise provided in the Schedules hereto ("Assignment
Agreement"); and such other documents of conveyance as SOLD may reasonably
require to transfer any of the Assets to SOLD (and from and after the Closing,
Sellers shall execute such other and further documents of conveyance as SOLD may
reasonably request from time to time to effect and perfect SOLD's interest in
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the Assets and Assumed Liabilities, for no additional consideration, including
domain name assignments with respect to the Websites, assignments of any
registered tradenames, copyrights and patents, the filing of any tax forms,
including the allocation of the purchase price to the Assets, and, if SOLD
determines to acquire the stock of Discribe as provided in Section 2.9,
certificates representing all of the issued and outstanding shares of capital
stock of Discribe endorsed in blank or endorsed as SOLD may direct);
6.2. the eCMS License;
6.3. the Escrow Agreement;
6.4. the Registration Rights Agreement;
6.5. good standing certificates of the Sellers in their jurisdictions
of formation;
6.6. an opinion of counsel in the form agreed to by counsel for the
parties; and
6.7. certificates representing all of the issued and outstanding shares
of capital stock of Discribe, Ltd. endorsed in blank, or endorsed as SOLD may
direct, if SOLD in its sole discretion determines to acquire such stock at the
Closing.
7. Deliveries by SOLD. At the Closing, SOLD shall execute and deliver the
following to CSEI:
7.1. certificates evidencing the Closing Shares; provided that
immediately upon the CSEI's receipt of such certificates, CSEI shall deposit
such certificates into escrow in accordance with the provisions of Section 5.1
of this Agreement;
7.2. the Escrow Agreement;
7.3. the Registration Rights Agreement;
7.4. the Assignment Agreement;
7.5. good standing certificate of SOLD in its jurisdiction of
formation; and
7.6. an opinion of counsel in the form agreed to by the parties.
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8. Conditions to Closing.
8.1. Conditions to SOLD's Obligation to Close. SOLD's obligation to
complete the transactions contemplated hereby shall be subject to the complete
satisfaction and fulfillment of all of the following conditions, any or all of
which may be waived in whole or in part by SOLD:
8.1.1. Those persons listed on Schedule 8.1.1 attached hereto
shall have accepted full-time employment with SOLD, on an at-will basis, and
shall have entered into written confidentiality and non-compete agreements in
form reasonably satisfactory to SOLD; and Sellers shall have waived and released
in writing, to SOLD's reasonable satisfaction, any obligation which any of such
persons may have (under non-competition agreements or otherwise) to refrain from
accepting such employment.
8.1.2. All SOLD Required Consents and Sellers Required Consents
(as hereinafter defined) shall have been obtained.
8.1.3. All representations and warranties made by Sellers in this
Agreement shall be complete and accurate in all material respects as of the
Closing Date.
8.1.4. All covenants and agreements made by Sellers in this
Agreement and all other actions required to be performed or complied with by
Sellers under this Agreement prior to or at the Closing shall have been fully
performed or complied with in all material respects by Sellers.
8.1.5. There shall not have occurred any material adverse change
in or casualty loss of the Assets from the date of this Agreement. (All risk of
loss or damage to or destruction of the Assets, in whole or in part, shall be
and remain with Sellers until the Closing has been concluded. In the event of
any substantial casualty loss prior to Closing, SOLD shall have the right to
close and take an assignment of the insurance proceeds, or terminate this
Agreement.)
8.1.6. No order shall have been entered by any court or other
governmental authority prohibiting the transactions contemplated by this
Agreement.
8.2. Conditions to Sellers' Obligation to Close. Sellers' obligation to
complete the transactions contemplated hereby shall be subject to the complete
satisfaction and fulfillment of all of the following conditions, any or all of
which may be waived in whole or in part by Sellers:
8.2.1. Those persons listed on Schedule 8.1.1 attached hereto
shall have been offered full-time employment with SOLD, on an at-will basis,
subject to the requirement that such persons enter into written confidentiality
and non-compete agreements in form reasonably satisfactory to SOLD.
8.2.2. All SOLD Required Consents and Sellers Required Consents
(as hereinafter defined) shall have been obtained.
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8.2.3. All representations and warranties made by SOLD in this
Agreement shall be complete and accurate in all material respects as of the
Closing Date.
8.2.4. All covenants and agreements made by SOLD in this Agreement
and all other actions required to be performed or complied with by SOLD under
this Agreement prior to or at the Closing shall have been fully performed or
complied with in all material respects by SOLD.
8.2.5. The closing of CSEI's sale of the "eCMS" technology to 3D
Xxxxxxxx.xxx d/b/a O2, Essential Marketing Technologies shall not have occurred.
8.3. No order shall have been entered by any court or other
governmental authority prohibiting the transactions contemplated by this
Agreement.
9. Covenants Pending the Closing. Sellers covenant and agree that from the
date of this Agreement and until the Closing, Sellers shall:
9.1. Continue to operate the Business and not take any action, omit to
take any action, or engage in any transaction, other than in the ordinary course
of business and consistent with the practices of the Business over the last
thirty (30) days, or as consented to by SOLD;
9.2. Cooperate with SOLD to achieve an orderly transition of the
Business to SOLD and an orderly transfer of the Assets to SOLD, including, but
not limited to, providing SOLD and its representatives with: (i) full access
during normal business hours to all of Sellers' properties, the Assets and the
Books; (ii) such financial and operating data and other information with respect
to the Business as SOLD shall from time to time request; and (iii) permission to
consult with the Sellers' representatives, officers, employees and accountants;
9.3. Except for CSEI's sale of the "eCMS" technology to O2, not engage
in or enter into any discussions or agreements with any other person or entity
relating to the sale of any or all of the Assets, or the Business or the stock
of Sellers, except sales made in the ordinary course of the Business;
9.4. Not take any action which shall cause any of the Sellers'
representations in Section 10 below not to be true in all material respects as
of the Closing.
10. Representations and Warranties of Sellers. Sellers, jointly and
severally, hereby represent and warrant to SOLD as of the date hereof and as of
the Closing Date, as follows:
10.1. Good Standing. CSEI is a corporation duly incorporated, validly
existing and in good standing, under the laws of Virginia, with full right,
power and authority to own, lease and operate its properties and assets and to
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conduct its business as now being conducted. Discribe is a corporation duly
incorporated, validly existing and in good standing, under the laws of Canada,
with full right, power and authority to own, lease and operate its properties
and assets and to conduct its business as now being conducted.
10.2. Qualification. Sellers are duly licensed, qualified or authorized
to do business in each jurisdiction in which their properties and assets or the
nature of the business conducted by them make such licensing, qualification or
authorization legally necessary.
10.3. Compliance with Law. To Sellers' knowledge, Sellers are
conducting the Business in compliance with all applicable laws in all material
respects, and have no notice, nor any reason to believe, that Sellers or any of
the Assets are in violation of any applicable law in any material respect.
10.4. Taxes. Sellers have paid all required taxes and filed all
required tax returns.
10.5. Proceedings. Except for litigation currently pending in New York
regarding matters relating to CSEI's involvement in "Treasures in Your Home: The
World of Collecting," there is no order, proceeding, action or investigation
pending or, to the best of Sellers' knowledge, threatened, with respect to
Sellers or the Assets or this Agreement.
10.6. Approvals. Except for those consents listed or described in
Schedule 10.6 hereto, no consent, authorization, approval, license or permit of,
or action by, any governmental agency or authority, or any private person or
entity, is necessary in any jurisdiction to permit Sellers to carry out the
transactions contemplated by this Agreement except those consents, the absence
of which will not have a material adverse effect on the Assets or the Business.
Only those consents identified as required to be secured prior to Closing shall
be required as of Closing (the "Sellers' Required Consents") and the remaining
consents will be secured promptly after the Closing.
10.7. Agreement. Sellers each have the legal capacity, right, power,
and authority to enter into this Agreement and perform their obligations
hereunder. The execution, delivery and performance of this Agreement by Sellers
has been duly and validly authorized by all necessary corporate action of
Sellers and this Agreement constitutes the legal, valid and binding obligation
of Sellers, enforceable against Sellers in accordance with its terms. The
execution, delivery and performance of this Agreement by Sellers will not: (a)
violate any applicable laws, any judgment, injunction, order, writ or decree of
any court, arbitrator, or governmental agency or authority by which Sellers or
any of the Assets are bound; or (b) result in the breach or termination of any
provision of, constitute a default under, or result in the creation of any
claim, security interest, lien, charge, or encumbrance upon any of the Assets
pursuant to (i) Sellers' Articles of Incorporation or By-Laws, or (ii) any
indenture, mortgage, deed of trust, license, permit, approval, consent,
franchise, lease, contract, or other instrument, document or agreement which is
binding upon Sellers or any of the Assets.
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10.8. The Assets. With respect to the Assets:
10.8.1. Title. Sellers have and at Closing shall convey to SOLD
good and marketable title to the Assets, free and clear of all liens and
encumbrances except those certain liens or encumbrances described on Schedule
10.8.1 attached hereto (the "Permitted Liens").
10.8.2. Fixed Assets. Sellers have no knowledge that any item of
equipment included in the Assets and having a cost in excess of $5,000 is not
functional.
10.8.3. Intellectual Property. None of the rights granted to SOLD
under the eCMS License and none of the Websites, the Website domain names or the
trade names "ChannelSpace Entertainment, Inc.", "xxxxxxxxxxxxxxxxx.xxx" and
"xxxxxxxxxxxxx.xxx" infringe on any intellectual property rights of any person
or entity. To the knowledge of Sellers, none of the other Assets sold to SOLD
hereunder infringes on any intellectual property rights of any person or entity.
Except for the eCMS technology which is being sold to O2, Schedule 10.8.3
attached hereto contains a list of all licenses and other rights granted by
Sellers' with respect to any of Sellers' intellectual property, pursuant to
which any third person is granted the right to use, prevent the use by others
of, or collect any moneys in connection with the use of, any intellectual
property rights of Sellers acquired by SOLD hereunder. Sellers have not granted
to O2 the right to use the trade names "ChannelSpace Entertainment, Inc." or
"Xxxxxxxxxxxxxxxxx.xxx."
10.8.4. Limitation. Except for the express representations and
warranties set forth in this Agreement, Sellers make no representation or
warranty as to the functionality, marketability or fitness for a particular
purpose of the Assets.
10.9. Insurance. Schedule 10.9 attached hereto identifies all policies
of insurance maintained by Sellers with respect to the Assets or the conduct of
the Business, including the names of the carriers, the policy numbers, policy
coverages and coverage limits.
10.10. Access to Information. Sellers have had the opportunity to ask
questions and receive answers from SOLD as to SOLD's business records and
documents, and SOLD's affairs.
10.11. Discribe Financial Statements. In the event that SOLD determines
to acquire Discribe stock pursuant to Section 2.9 hereof (i) the financial
statements of Discribe provided by CSEI to SOLD ("Discribe Financial
Statements") are true and correct in all material respects, present fairly the
financial position of Discribe as of the respective dates thereof and the
results of operations and changes in financial position for the respective
periods thereof and (ii) except as set forth on Schedule 10.12, Discribe has not
incurred any liabilities (whether absolute, accrued, contingent or otherwise)
that are material and that are not reflected on or reserved against in the
Discribe Financial Statements or that were not incurred in the ordinary course
of business since the respective dates thereof.
10.12. Employment Matters. As of the date of this Agreement, the
current combined workforce of Sellers consists of less than 10 employees.
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Sellers have made no agreement with or in respect of any employee which would
bind SOLD after the Closing. Sellers are not party to any collective bargaining
agreement, and are not in the process of negotiating any such agreement.
11. Representations and Warranties of SOLD. SOLD hereby represents and
warrants to Sellers as of the date hereof and as of the Closing Date as follows:
11.1. Good Standing. SOLD is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware, with full right, power
and authority to own, lease and operate it properties and assets and to conduct
its business and to perform its obligations hereunder.
11.2. Qualification. SOLD is duly licensed, qualified or authorized to
do business in each jurisdiction in which its properties and assets or the
nature of the business conducted by it makes such licensing, qualification or
authorization legally necessary.
11.3. Compliance with Law. To SOLD's knowledge, SOLD is conducting its
business in compliance with all applicable laws in all material respects, and
has no notice, nor any reason to believe, that SOLD is in violation of any
applicable law in any material respect.
11.4. Taxes. SOLD has paid all required taxes and filed all required
tax returns.
11.5. Proceedings. There is no order, proceeding, action or
investigation pending or, to the best of SOLD's knowledge, threatened, with
respect to SOLD, other than the Lawsuits (as defined herein).
11.6. Approvals. Except for those consents listed or described in
Schedule 11.6 (the "SOLD Required Consents"), no consent, authorization,
approval, license or permit of, or action by, any governmental agency or
authority, or any private person or entity, is necessary in any jurisdiction to
permit SOLD to carry out the transactions contemplated by this Agreement.
11.7. Agreement. SOLD has the legal capacity, right, power, and
authority to enter into this Agreement and perform its obligations hereunder.
The execution, delivery and performance of this Agreement by SOLD has been duly
and validly authorized by all necessary corporate action of SOLD and this
Agreement constitutes the legal, valid and binding obligation of SOLD,
enforceable against SOLD in accordance with its terms. The execution, delivery
and performance of this Agreement by SOLD will not: (a) violate any applicable
laws, any judgment, injunction, order, writ or decree of any court, arbitrator,
or governmental agency or authority by which SOLD or any of its assets are
bound; or (b) result in the breach or termination of any provision of,
constitute a default under, or result in the creation of any claim, security
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interest, lien, charge, or encumbrance upon any of SOLD's assets pursuant to (i)
SOLD's Articles of Incorporation or By-Laws, or (ii) any indenture, mortgage,
deed of trust, license, permit, approval, consent, franchise, lease, contract,
or other instrument, document or agreement which is binding upon SOLD or any of
SOLD's assets.
11.8. Capitalization. SOLD's authorized capital stock consists of
100,000,000 shares of common stock. As of August 1, 2000, there were 47,056,140
shares issued and outstanding. In addition, SOLD has outstanding a $3,000,000
Convertible Promissory Note; a Warrant to Purchase 300,000 shares of common
stock; a Warrant to Purchase 100,000 shares of common stock; and various stock
options in favor of employees and consultants for the aggregate amount of
579,000 shares of common stock.
11.9. Access to Information. SOLD has afforded Sellers full access to
all of SOLD's business records and documents, and has offered Sellers the
opportunity to ask questions and receive answers about SOLD.
11.10. CSEI Shares. The CSEI Shares, upon their delivery, shall be duly
authorized, validly issued and fully paid and non-assessable. None of the CSEI
Shares has been issued in violation of any preemptive right, right of first
refusal, or other restriction of any kind. Subject to the terms of the Escrow
Agreement, SOLD is conveying good title, free and clear of any lien, to the CSEI
Shares.
12. Indemnification by CSEI. CSEI shall indemnify and hold harmless SOLD,
its officers, directors, stockholders and employees, from and against any and
all claims, actions, liabilities, damages, losses, costs and expenses (including
attorneys' and experts' fees and court costs) ("Losses") arising out of,
resulting from, or in connection with:
12.1. Any material misrepresentation or breach by Sellers of any
representation or warranty made by either of them in this Agreement;
12.2. Any material non-performance, failure to comply or breach by
Sellers of any covenant or agreement made by them in this Agreement;
12.3. All debts, obligations, duties and liabilities of Sellers, except
for the Assumed Liabilities and Sellers' obligations arising from and after the
Closing under any Assigned Contracts.
12.4. The lawsuit filed by Interactive Holdings Corporation in the
Supreme Court of the State of New York, County of New York, styled Interactive
Holdings Corporation x. Xxxxxx Communications, Inc., ChannelSpace Entertainment,
Inc., et al., currently pending in the United States District Court for the
Southern District of New York as Case No. 99CV11593.
For the purposes of sections 12.1 and 12.2 above, the term "material" shall
mean a matter or a series of matters which, in the aggregate, results in Losses
in excess of Thirty Five Thousand Dollars ($35,000).
12
13. Indemnification by SOLD. SOLD shall indemnify and hold harmless Sellers
from and against any and all claims, actions, liabilities, damages, losses,
costs and expenses (including attorneys' and experts' fees and court costs)
arising out of, resulting from, or in connection with:
13.1. Any material misrepresentation or breach by SOLD of any
representation or warranty made by SOLD in this Agreement;
13.2. Any material non-performance, failure to comply or breach by SOLD
of any covenant or agreement made by SOLD contained in this Agreement;
13.3. The Assumed Liabilities and Sellers' obligations arising from and
after the Closing under any Assigned Contracts; and
13.4. the lawsuit filed by SOLD in the United States District Court for
the District of Maryland styled Sales OnLine Direct, Inc. v. Xxxx Xxxxxxx,
Xxxxxx Xxxxxx and Whirl Wind Collaborative Designs, Inc. and Silesky Marketing,
Inc., Case No. WMN-00-CV-1621, and the related lawsuit filed by Xxxx Xxxxxxx in
the Chancery Court of Delaware styled Xxxx Xxxxxxx v. Xxxxxxx Xxxxxx, Xxxxxxx
Xxxxxx and Sales OnLine Direct, Inc., Case No. 18109 (collectively, the
"Lawsuits") or any action related thereto.
For the purposes of sections 13.1 and 13.2 above, the term "material" shall
mean a matter or a series of matters which, in the aggregate, results in Losses
in excess of Thirty Five Thousand Dollars ($35,000).
14. Limitations on Indemnification.
14.1. Anything in this Agreement to the contrary notwithstanding,
Sellers shall be entitled to indemnification under this Agreement only for
Losses suffered directly by Sellers, and not for any diminution of value of the
Closing Shares which may result from any matter with respect to which
indemnification is provided hereunder.
14.2. Anything in this Agreement to the contrary notwithstanding,
CSEI's indemnity obligations shall be satisfied out of, but only out of, the
Closing Shares subject to the Escrow Agreement at the time of any claim made in
accordance with the procedures set forth in the Escrow Agreement, and such
satisfaction shall be SOLD's sole remedy for any of CSEI's indemnity obligations
hereunder notwithstanding the release from time to time of Closing Shares from
such escrow. Further, except for an indemnification expressly provided by this
13
Agreement, in no event shall Sellers or their assigns be liable to SOLD or any
other party, or any third party, for any Losses arising out of or related to the
Assets or the eCMS License, including any lost revenue, lost profits,
replacement goods, loss of technology, rights or services, incidental, punitive,
exemplary, indirect or consequential damages, loss of data, or interruption or
loss of use or service of any equipment, web-site or business activity, even if
advised of the possibility of such damages.
14.3. Any indemnification provided under this Agreement shall be net of
any tax savings, insurance proceeds or other benefits enjoyed by the indemnified
party with respect to the indemnified Loss.
15. Access to Books and Records. For a period of three years after the
Closing, Sellers shall provide SOLD with reasonable access to the Books (defined
in Section 2.3 of this Agreement) pertaining to the Assets purchased from
Sellers hereunder and maintained by Sellers, including the right to make copies
at SOLD's expense, for use by SOLD in connection with any legal, tax or
accounting matter which may arise.
16. Confidentiality. Until such time as SOLD makes a public disclosure of
this Agreement in accordance with applicable securities laws, Sellers shall not
make any public announcement or disclosure of this Agreement or the transactions
contemplated hereby without SOLD's prior written approval. SOLD and CSEI further
agree that the Confidentiality Agreement entered into by them dated March 22,
2000 shall continue in full force and effect except for Section 7 thereof, which
is modified by the provisions in the Miscellaneous Section below.
17. Expenses of Transaction. Each party to this Agreement shall bear and
pay its own expenses in connection with the negotiation and preparation of this
Agreement and the conclusion of the transactions contemplated hereby.
18. Arbitration. Any disputes arising out of this Agreement or the
transactions contemplated hereby shall be resolved by binding arbitration in
Delaware in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. In the event that an arbitration proceeds to a written
decision of the arbitrators, the prevailing party shall be entitled to recover
its reasonable attorneys fees and expenses and costs of arbitration from the
losing party, at the discretion of the arbitrators.
19. CSEI Corporate Name. Within 90 days after the Closing, CSEI shall
change its name to a name which does not contain the words ChannelSpace
Entertainment or any variations or derivations thereof.
20. Miscellaneous Provisions.
20.1. Entire Agreement. This Agreement constitutes the entire,
integrated agreement among the parties hereto with respect to the subject matter
hereof, and supersedes all prior negotiations, correspondence, understandings
and agreements among the parties hereto respecting the subject matter hereof.
14
20.2. Assignability. This Agreement may not be assigned by any of the
parties without the written consent of the other parties hereto, except that
SOLD may assign the right to acquire any or all of the Assets, and the right to
acquire the eCMS License, to one or more subsidiaries or other affiliates of
SOLD, provided that no such assignment shall relieve SOLD of SOLD's obligations
hereunder.
20.3. Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
personal representatives, guardians, successors and permitted assigns. Nothing
in this Agreement, express or implied, is intended to confer upon any other
person any rights, remedies, obligations, or liabilities.
20.4. Applicable Law. This Agreement shall be construed in accordance
with and shall be governed by the laws of the State of Delaware, exclusive of
any conflicts of law principle which would apply the substantial law of another
jurisdiction.
20.5. Survival. All representations and warranties contained herein
shall survive the Closing and shall continue for a period of two (2) years
following the Closing Date.
20.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed as of the date first written above.
ChannelSpace Entertainment, Inc.
By: /s/ Xxx X. Xxxxxxxxxx
-----------------------------------------------------
Name: Xxx X. Xxxxxxxxxx
Title: EVP
Discribe, Ltd.
By: /s/ Xxx X. Xxxxxxxxxx
-----------------------------------------------------
Name: Xxx X. Xxxxxxxxxx
Title: VP
Sales OnLine Direct, Inc.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------------------------
Name: Xxxxxxx Xxxxxx
Title: CEO
15
LIST OF EXHIBITS AND SCHEDULES
Exhibits
1 eCMS License
2 [Left Intentionally Blank]
3 Escrow Agreement
4 Registration Rights Agreement
Schedules
2 Excluded Assets
2.1 Domain Names
2.2 Fixed Assets (included)
2.7 Assigned Contracts
4.1 Assumed Liabilities
8.1.1 Persons to be Employed by SOLD
10.6 Sellers' Required Consents
10.8.1 Permitted Liens
10.8.3 Intellectual Property Rights Granted to Others
10.9 Insurance
10.11 Financial Statements
11.6 SOLD Required Consents
EXHIBIT 1
SOFTWARE LICENSE AGREEMENT
This Software License Agreement (this "Agreement") is made as of this 8th
day of Nov. 2000 by and between ChannelSpace Entertainment, Inc. ("CSEI"),
a Virginia corporation, and Sales Online Direct, Inc. ("SOLD"), a Delaware
corporation.
EXPLANATORY STATEMENT
The parties hereto have entered into an Asset Purchase Agreement ("Asset
Purchase Agreement"), dated as of Nov. 8, 2000, pursuant to which, among
other things, CSEI has agreed to sell and SOLD has agreed to purchase
substantially all CSEI's assets other than the Software. In connection with that
transaction, the parties intend for CSEI to license to SOLD certain software,
upon the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of One Dollar ($1.00) cash in hand paid by
SOLD to CSEI, the additional consideration payable by SOLD to CSEI pursuant to
the Asset Purchase Agreement, the mutual promises set forth herein and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, CSEI and SOLD hereby agree as follows:
1. Definitions.
1.1 Software. "Software" shall mean the "electronic content management
system" software developed by CSEI, as such software exists on the date of this
Agreement, and shall include all Documentation for the Software.
1.2 Documentation. "Documentation" shall mean the instructions, manuals
and other information concerning the Software which is intended to assist users
of the Software in such use but shall not include architectural and design
documents, project plans, time lines and presentations.
2. License.
2.1 Scope. CSEI, on behalf of itself and its successors and assigns,
including any assignee of CSEI's interest in the Software (the "Licensors"),
hereby grants to SOLD and SOLD's affiliates, and SOLD's permitted successors and
assigns as set forth in this Agreement (the "Licensees"), a perpetual,
royalty-free, non-exclusive license to use the Software, including source code
and object code, in connection with the collecting-related online businesses of
Licensees.
In no event shall any Licensee sublicense or in any other way transfer
any of the Software other than to a wholly owned subsidiary that is engaged in
the line of business specified in this paragraph 2.1.
1
2.2 Delivery. Concurrently with the execution and delivery of this
Agreement, CSEI shall deliver to SOLD one electronic version of the Software,
including the source code and the object code and related Documentation.
3. Future Development of the Software by Licensees. With respect to the
license granted pursuant to Section 2.1, Licensees shall have the right to copy,
modify, enhance, disassemble, reassemble, and in every other respect further
develop the Software, and all further developments of or to the Software made by
any Licensee shall be the exclusive property of such Licensee; provided however
(i) Licensee shall use the Software only as permitted hereunder and (ii) any
such modification, enhancement, development or improvement shall not be
commercially licensed, sold or otherwise transferred.
4. Warranty and Indemnification.
4.1 CSEI warrants that it owns the Software and has the full right,
authority and ability to grant the rights in the Software granted to SOLD
hereby. CSEI further warrants that the Software shall be delivered free of any
rightful claim of any third party for infringement of any patent, copyright,
trademark, trade secret, or other intellectual property right.
4.2 CSEI shall indemnify and hold harmless SOLD and its affiliates, and
its permitted successors and assigns, and their respective directors, officers,
employees and agents, against any and all losses, liabilities, judgments, awards
and costs (including legal fees and expenses) arising out of or related to any
breach of the warranties set forth above. CSEI shall defend and settle at its
sole expense all suits or proceedings arising out of the foregoing, provided
that SOLD gives CSEI prompt notice of any such claim of which it learns. No such
settlement which prevents SOLD from continuing to use the Software as provided
herein shall be made without SOLD's prior written consent. In case the Software,
or any part thereof, is conclusively held to constitute such an infringement and
the use for the purpose intended of said Software is finally enjoined, CSEI
shall, at its reasonable expense and option, either procure for SOLD the right
to continue using same, or replace same with a non-infringing product, or modify
same so it becomes non-infringing.
4.3 Anything in this Section to the contrary notwithstanding, CSEI's
monetary indemnification obligations under this Agreement shall be satisfied
only out of the SOLD stock that is deposited into escrow pursuant to the Escrow
Agreement entered into pursuant to the Asset Purchase Agreement.
5. Open Sourcing of Software. Under no circumstances will SOLD permit the
Software, including the source code and object code, to be utilized as an open
source. SOLD will prohibit and prevent the use of the Software, its source code
and object code, by anyone other than SOLD's authorized employees, contractors,
agents and/or representatives, for any purpose other than the business purposes
of SOLD as reflected in Section 2.1.
2
6. Assignment; Binding Effect.
6.1 Assignment by SOLD. SOLD may assign this Agreement or sublicense
the Software to any wholly-owned subsidiary, subject to the restrictions on use
of the Software contained herein and as set forth in Section 2.1. SOLD shall not
otherwise have the right to sublicense or sell independently any interest in the
Software.
6.2 Assignment by CSEI. CSEI may assign or transfer its rights in the
Software to any third party provided that CSEI's obligations hereunder bind the
assignee or transferee. The parties hereto acknowledge CSEI's intent to sell the
Software to 3D Xxxxxxxx.xxx d/b/a O2, Essential Marketing Technologies ("O2"),
subject to the license set forth in this Agreement and, therefore, O2 will be
entitled to enforce the restrictions contained herein.
7. General
7.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware.
7.2 Severability. If any provision of this Agreement or any Schedule
attached hereto is held invalid or otherwise unenforceable, the enforceability
of the remaining provisions of this Agreement and the Schedules will not be
impaired thereby.
7.3 No Waiver. The failure by any party to exercise any right or remedy
provided for herein will not be deemed a waiver of any right or remedy
hereunder.
7.4 Remedies. The rights and remedies of SOLD set forth in this
Agreement are not exclusive and are in addition to any other rights and remedies
available to it in law or in equity.
7.5 Successors and Assigns. This Agreement shall inure to the benefit
of, and shall be binding upon, the parties hereto and their successors and
permitted assigns.
IN WITNESS WHEREOF the parties have executed this Agreement on the date
first set forth above.
CHANNEL SPACE ENTERTAINMENT, INC.
By: /s/ Xxx X. Xxxxxxxxxx (SEAL)
-----------------------------------------
Name: EVP Xxx X. Xxxxxxxxxx
---------------------------------------
SALES ONLINE DIRECT, INC.
By: /s/ Xxxxxxx Xxxxxx (SEAL)
-----------------------------------------
Name: Xxxxxxx Xxxxxx
---------------------------------------
3
SOFTWARE LICENSE AGREEMENT
This Software License Agreement (this "Agreement") is made as
of this 8th day of Nov. 2000 by and between ChannelSpace Entertainment,
Inc. ("CSEI"), a Virginia corporation, and Sales Online Direct, Inc. ("SOLD"), a
Delaware corporation.
EXPLANATORY STATEMENT
The parties hereto have entered into an Asset Purchase
Agreement ("Asset Purchase Agreement"), dated as of Nov. 8, 2000, pursuant
to which, among other things, CSEI has agreed to sell and SOLD has agreed to
purchase substantially all CSEI's assets other than the Software. In connection
with that transaction, the parties intend for CSEI to license to SOLD certain
software, upon the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of One Dollar ($1.00) cash in
hand paid by SOLD to CSEI, the additional consideration payable by SOLD to CSEI
pursuant to the Asset Purchase Agreement, the additional consideration payable
pursuant to Section 2.3 hereof, the mutual promises set forth herein and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, CSEI and SOLD hereby agree as follows:
1. Definitions.
1.1 Software. "Software" shall mean the "electronic content management
system" software developed by CSEI, as such software exists on the date of this
Agreement, and shall include all Documentation for the Software.
1.2 Documentation. "Documentation" shall mean the instructions, manuals and
other information concerning the Software which is intended to assist users of
the Software in such use but shall not include architectural and design
documents, project plans, time lines and presentations.
2. License.
2.1 Scope. CSEI, on behalf of itself and its successors and assigns,
including any assignee of CSEI's interest in the Software (the "Licensors"),
hereby grants to SOLD and SOLD's affiliates, and SOLD's permitted successors and
assigns as set forth in this Agreement (the "Licensees"), a perpetual,
non-exclusive license to use the Software, including source code and object
code, in connection with the furniture-related online businesses of Licensees.
In no event shall any Licensee sublicense or in any other way transfer
any of the Software other than to a wholly owned subsidiary that is engaged in
the line of business specified in this paragraph 2.1.
1
2.2 Delivery. Concurrently with the execution and delivery of this
Agreement, CSEI shall deliver to SOLD one electronic version of the Software,
including the source code and the object code and related Documentation.
2.3 Royalty. In consideration of the license granted hereunder, SOLD shall
pay to 3D Xxxxxxxx.xxx d/b/a O2, Essential Marketing Technologies ("O2") the sum
of Fifty Thousand Dollars ($50,000) on or before March 31, 2001. If SOLD fails
to make the payment set forth in this Section 2.3, the license granted hereunder
shall automatically expire and terminate.
3. Future Development of the Software by Licensees. With respect to the
license granted pursuant to Section 2.1, Licensees shall have the right to copy,
modify, enhance, disassemble, reassemble, and in every other respect further
develop the Software, and all further developments of or to the Software made by
any Licensee shall be the exclusive property of such Licensee; provided however
(i) Licensee shall use the Software only as permitted hereunder and (ii) any
such modification, enhancement, development or improvement shall not be
commercially licensed, sold or otherwise transferred.
4. Warranty and Indemnification.
4.1 CSEI warrants that it owns the Software and has the full right,
authority and ability to grant the rights in the Software granted to SOLD
hereby. CSEI further warrants that the Software shall be delivered free of any
rightful claim of any third party for infringement of any patent, copyright,
trademark, trade secret, or other intellectual property right.
4.2 CSEI shall indemnify and hold harmless SOLD and its affiliates, and its
permitted successors and assigns, and their respective directors, officers,
employees and agents, against any and all losses, liabilities, judgments, awards
and costs (including legal fees and expenses) arising out of or related to any
breach of the warranties set forth above. CSEI shall defend and settle at its
sole expense all suits or proceedings arising out of the foregoing, provided
that SOLD gives CSEI prompt notice of any such claim of which it learns. No such
settlement which prevents SOLD from continuing to use the Software as provided
herein shall be made without SOLD's prior written consent. In case the Software,
or any part thereof, is conclusively held to constitute such an infringement and
the use for the purpose intended of said Software is finally enjoined, CSEI
shall, at its reasonable expense and option, either procure for SOLD the right
to continue using same, or replace same with a non-infringing product, or modify
same so it becomes non-infringing.
4.3 Anything in this Section to the contrary notwithstanding, CSEI's
monetary indemnification obligations under this Agreement shall be satisfied
only out of the SOLD stock that is deposited into escrow pursuant to the Escrow
Agreement entered into pursuant to the Asset Purchase Agreement.
5. Open Sourcing of Software. Under no circumstances will SOLD permit the
Software, including the source code and object code, to be utilized as an open
source. SOLD will prohibit and prevent the use of the Software, its source code
2
and object code, by anyone other than SOLD's authorized employees, contractors,
agents and/or representatives, for any purpose other than the business purposes
of SOLD as reflected in Section 2.1.
6. Assignment; Binding Effect.
6.1 Assignment by SOLD. SOLD may assign this Agreement or sublicense the
Software to any wholly-owned subsidiary, subject to the restrictions on use of
the Software contained herein and as set forth in Section 2.1. SOLD shall not
otherwise have the right to sublicense or sell independently any interest in the
Software.
6.2 Assignment by CSEI. CSEI may assign or transfer its rights in the
Software to any third party provided that CSEI's obligations hereunder bind the
assignee or transferee. The parties hereto acknowledge CSEI's intent to sell the
Software to O2 subject to the license set forth in this Agreement and,
therefore, O2 will be entitled to enforce the restrictions contained herein.
7. General
7.1 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware.
7.2 Severability. If any provision of this Agreement or any Schedule
attached hereto is held invalid or otherwise unenforceable, the enforceability
of the remaining provisions of this Agreement and the Schedules will not be
impaired thereby.
7.3 No Waiver. The failure by any party to exercise any right or remedy
provided for herein will not be deemed a waiver of any right or remedy
hereunder.
7.4 Remedies. The rights and remedies of SOLD set forth in this Agreement
are not exclusive and are in addition to any other rights and remedies available
to it in law or in equity.
7.5 Successors and Assigns. This Agreement shall inure to the benefit of,
and shall be binding upon, the parties hereto and their successors and permitted
assigns.
IN WITNESS WHEREOF the parties have executed this Agreement on the date
first set forth above.
CHANNEL SPACE ENTERTAINMENT, INC.
By: /s/ Xxx X. Xxxxxxxxxx (SEAL)
-----------------------------------------
Name: EVP Xxx X. Xxxxxxxxxx
---------------------------------------
SALES ONLINE DIRECT, INC.
By: /s/ Xxxxxxx Xxxxxx (SEAL)
-----------------------------------------
Name: Xxxxxxx Xxxxxx
---------------------------------------
3
EXHIBIT 3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is dated as of Nov. 8,
2000, by and among Sales Online Direct, Inc., a corporation organized under the
laws of the State of Delaware, U.S.A. (the "Company"), ChannelSpace
Entertainment, Inc., a Virginia corporation ("CSEI"), and Olde Monmouth Stock
Transfer Co., Inc., as escrow agent (the "Escrow Agent").
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in that Asset Purchase Agreement between the Company
and CSEI dated Nov. 8, 2000 (the "Asset Purchase Agreement").
W I T N E S S E T H:
WHEREAS, CSEI and the Company have entered into the Asset Purchase
Agreement, pursuant to which CSEI has sold certain assets to the Company and in
consideration therefore, (i) the Company has issued 7,530,000 shares of the
Company's common stock to CSEI (referred to in the Asset Purchase Agreement as
the "Closing Shares"), and (ii) the Company has agreed to issue additional
shares of common stock of CSEI having a value of $300,000 determined as set
forth in the Asset Purchase Agreement (referred to in the Asset Purchase
Agreement as the "Registrable Shares"). For purposes of this Agreement, the
Closing Shares are referred to as the "Escrow Shares." The Registrable Shares
are not included in the Escrow Shares and are not subject to this Agreement; and
WHEREAS, as set forth in the Asset Purchase Agreement, CSEI and the
Company have agreed that the Escrow Shares shall be deposited and held in escrow
pursuant to this Agreement; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth below, the parties hereto hereby agree as follows:
1. ESCROW DEPOSIT
On the Closing Date, pursuant to the Asset Purchase Agreement, the
Company shall issue the Closing Shares to CSEI and CSEI shall immediately
deposit the Closing Shares into escrow with the Escrow Agent, to be held and
released in accordance with this Agreement.
2. MAINTENANCE OF ESCROW; RIGHTS WITH RESPECT TO ESCROW SHARES
2.1. The Escrow Agent shall hold the Escrow Shares in certificate form
or in a brokerage account, as the Escrow Agent deems appropriate to fulfill its
duties hereunder, in either case registered in the name of the Escrow Agent as
escrow agent under this Agreement. CSEI (or its assignees if CSEI's rights with
respect to any Escrow Shares have been assigned pursuant to Section 4.3 hereof)
shall be the beneficial owner of the Escrow Shares unless and until any Escrow
Shares become releasable to the Company in accordance with this Agreement.
1
2.2. While held in escrow, CSEI (or its assignees if CSEI's rights with
respect to any Escrow Shares have been assigned pursuant to Section 4.3 hereof)
shall have the right to direct the voting of the Escrow Shares and the right to
receive any cash dividends paid with respect to the Escrow Shares.
2.3. In the event that any stock or other securities become issuable
with respect to any Escrow Shares, or any stock split, share exchange or other
recapitalization shall occur with respect to any Escrow Shares, the stock or
other securities issued in connection therewith shall be deposited into escrow
with the Escrow Agent and held in accordance with this Agreement, and such stock
or other securities shall be deemed included within the meaning of the term
"Escrow Shares" as used herein.
3. RELEASE OF ESCROW SHARES
Escrow Shares shall be released from Escrow only as follows, or as
otherwise ordered by a court of competent jurisdiction:
3.1. Joint Instructions. Escrow Shares shall be released in accordance
with any joint written instructions signed by both the Company and CSEI and
delivered to the Escrow Agent; provided that if CSEI has assigned it rights with
respect to any Escrow Shares pursuant to Section 4.3 hereof, any release of
Escrow Shares other than in accordance with this Agreement shall require the
consent of such assignees.
3.2. AOL Canada. If CSEI is unable to obtain the consent of America
Online ("AOL") or AOL Canada to the assignment of the Interactive Services
Agreement dated as of February 1, 1997, the Agreement for AOL's Studio Affiliate
Program dated as of November 18, 1997 and the AOL Studio Affiliate Letter
Agreement dated as of November 18, 1997 or if the Company, acting in good faith,
is unable to enter into a new agreement with AOL or AOL Canada on terms
reasonably satisfactory to the Company and AOL within one year from the date of
this Agreement, as certified in writing to CSEI and the Escrow Agent, 500,000
Escrow Shares shall be released from escrow to the Company. Pending CSEI's
obtaining such consent or the Company entering into such new agreement, 500,000
Escrow Shares shall be reserved and held in escrow for purposes of satisfying
any release due to the Company under this Section. If CSEI obtains such consent
within one year, CSEI shall so certify in writing to the Company and the Escrow
Agent, including a copy of the consent, and the 500,000 shares shall be released
from the reserve.
3.3. Indemnification Claims.
3.3.1. At any time prior to the one-year anniversary of the date
of this Agreement, upon the Company's commencement of any arbitration or court
proceeding seeking an award of Escrow Shares in satisfaction of a claim for
indemnification made by the Company pursuant to the Asset Purchase Agreement (an
"Indemnification Claim"), and written notice of the Indemnification Claim being
given to the Escrow Agent, an amount of Escrow Shares sufficient to satisfy the
claim (calculated as provided herein) shall be reserved by the Escrow Agent
pending resolution of the Indemnification Claim, even if the reserved Escrow
2
Shares otherwise become eligible for release under this Agreement. Upon
resolution of the Indemnification Claim by settlement agreement, arbitral award
or court order, all or a portion of the Escrow Shares shall be released to the
Company in satisfaction of the Indemnification Claim to the extent provided in
the settlement agreement, arbitral award or court order, provided that any
arbitral award or court order has become final and unappealable.
3.3.2. For purposes of determining the number of shares to be
reserved for any Indemnification Claim, the Company shall make a good faith
calculation of the number of shares required to satisfy the Indemnification
Claim using the average of the closing bid price of the Company's common stock
on the five trading days immediately preceding the date notice of the
Indemnification Claim is given to the Escrow Agent. The number of shares so
determined by the Company shall be reserved by the Escrow Agent.
3.3.3. The Company shall "xxxx to market" the number of reserved
Escrow Shares on the first trading day of each month (using the average of the
closing bid price of the Company's common stock on the last five trading days of
the prior month) as long as any Escrow Shares are held in reserve by the Escrow
Agent for an Indemnification Claim. If at the beginning of any month the value
of the reserved Escrow Shares has changed based upon such xxxx to market
calculation by more than ten percent (10%) of the value as of the last required
xxxx to market calculation, the Company shall deliver an instruction to the
Escrow Agent increasing or decreasing, as applicable, the number of Escrow
Shares held in reserve by the Escrow Agent. The Company shall send a copy of the
instruction and calculation to CSEI. If CSEI has assigned its rights with
respect to any Escrow Shares and the assignees have appointed a designee for
purposes of receiving notice and giving consent (a "Designee"), CSEI also shall
send a copy of the instruction and calculation to the Designee.
3.4. Registration of Escrow Shares. Upon the Escrow Agent's receipt of
written notice from counsel to the Company that a registration statement
covering any Escrow Shares has become effective, provided that no stop order or
suspension order has been issued, the Escrow Agent shall release to CSEI (or its
assignees if CSEI's rights with respect to any Escrow Shares have been assigned
pursuant to Section 4.3 hereof) the Escrow Shares that have been registered
pursuant to such registration statement.
3.5. Rule 144 Releases. Upon the Escrow Agent's receipt of an opinion
of the Company's counsel, or the opinion of another law firm reasonably
acceptable to the Company and the Escrow Agent, to the effect that a public sale
or transfer of any Escrow Shares may be made without registration, in accordance
with the provisions of Rule 144 adopted under the Securities Act of 1933, as
amended, or such other exemption from registration which permits a public sale
of unregistered securities as may then be in effect, the Escrow Agent shall
release to CSEI (or its assignees if CSEI's rights with respect to any Escrow
Shares have been assigned pursuant to Section 4.3 hereof) the Escrow Shares
covered by such opinion; provided that for a period of two years after the date
of this Agreement, the number of unregistered Escrow Shares released from escrow
in any one calendar month may not exceed ten percent (10%) of the reported
aggregate monthly trading volume in the Company's common stock during the
preceding calendar month (the "Contractual Volume Limitation"). The parties
acknowledge that the Contractual Volume Limitation shall expire two years after
the date of this Agreement.
4
4. TRANSFERS OF BENEFICIAL INTEREST PRIOR TO RELEASE FROM ESCROW
4.1. Prohibition on Transfers. No Escrow Shares may be sold short, made
the subject of put options, or otherwise beneficially sold, transferred, pledged
or otherwise alienated or encumbered while held in escrow, except in accordance
with this Section 4.
4.2. Pledge of Right to Receive Escrow Shares.
4.2.1. CSEI shall have the right to grant to a lender (a
"Pledgee") a security interest in CSEI's right to receive Escrow Shares if and
when Escrow Shares become releasable under this Agreement, provided that the
Pledgee first enters into such subordination, standstill and similar agreements
as may be reasonably acceptable to the Company providing that the Pledgee's
rights with respect to the Escrow Shares are completely subordinate to the
Company's rights to the Escrow Shares and that the Pledgee shall have no right
to take any action or exercise any remedy with respect to any Escrow Shares
prior to the release of such Escrow Shares pursuant to this Agreement. CSEI may
not grant any such security interest with respect to any Escrow Shares as to
which CSEI has assigned its rights pursuant to Section 4.3 of this Agreement.
4.2.2. No grant of any security interest shall be binding upon the
Escrow Agent unless and until the Escrow Agent shall have received written
notice of the security interest signed by CSEI and the Pledgee, stating the
number of Escrow Shares covered by the security interest and stating the name,
address, tax identification number and telephone number of the Pledgee, which
notice shall include a copy of the security agreement and all other
documentation pertaining to the security interest.
4.2.3. If at the time any Escrow Shares become releasable pursuant
to this Agreement, a security interest has been granted with respect to such
Escrow Shares as described in Section 4.2.1 above, then the Escrow Shares that
have become releasable, up to the number of Escrow Shares covered by such
security interest, shall be released directly to the Pledgee or as the Pledgee
may otherwise direct, provided that the Pledgee shall have provided to the
Escrow Agent and the Company an opinion of the Pledgee's counsel reasonably
acceptable to the Company, or other counsel reasonably acceptable to the Escrow
Agent and the Company, to the effect that the release of Escrow Shares to the
Pledgee or as directed by the Pledgee does not constitute a public distribution
of such Escrow Shares or otherwise require registration of such Escrow Shares.
4.3. Plan of Liquidation.
4.3.1. The Company acknowledges that CSEI intends to adopt and
consummate a plan of liquidation and dissolution within one year after the
Closing Date, and that pursuant to such plan, CSEI may assign to various of its
creditors and stockholders all of CSEI's right, title and interest in and to the
right to receive Escrow Shares if and when any Escrow Shares become releasable
under the provisions of this Agreement ("Liquidating Assignments"). CSEI shall
give the Company and the Escrow Agent written notice of the adoption of a plan
of liquidation and dissolution and any Liquidating Assignment included therein
(the "Notice of Liquidating Assignment"), stating the name, address, tax
5
identification number or social security number and telephone number of CSEI's
creditors and stockholders who are to receive Escrow Shares pursuant to the
Liquidating Assignment, stating the number of shares to be received by each, the
priority of distribution (if any) and the pro rata share of each release the
creditor or stockholder shall be entitled to receive. The Notice of Liquidating
Assignment shall include a copy of the plan of liquidation and dissolution and
all documentation pertinent to such plan. CSEI may amend its plan of liquidation
and dissolution and any Liquidating Assignment contained therein by giving
written notice to the Escrow Agent, provided that no such amendment may change
or revoke an earlier Liquidating Assignment if the Escrow Shares covered by such
Liquidating Assignment have already been released from escrow. Upon the Escrow
Agent's and the Company's receipt of a Notice of Liquidating Assignment, each
assignee listed in the Notice of Liquidating Assignment shall be deemed to be
the beneficial owner of the right to receive that number of Escrow Shares
assigned to such assignee, subject however in all respects to all of the terms
and conditions of this Agreement. Upon CSEI making Liquidating Assignments with
respect to CSEI's right to receive all of the Escrow Shares, CSEI shall have no
further right, title or interest in or to the Escrow Shares.
4.3.2. Anything in this Agreement to the contrary notwithstanding,
the Escrow Agent shall not make any distribution of unregistered Escrow Shares
pursuant to any Liquidating Assignment until the Escrow Agent shall have
received an opinion of counsel to CSEI reasonably acceptable to the Escrow Agent
and the Company, or the opinion of such other counsel as may be reasonably
acceptable to the Escrow Agent and the Company, to the effect that the Escrow
Agent's release of unregistered Escrow Shares pursuant to such Liquidating
Assignment does not constitute a public distribution of such unregistered Escrow
Shares or otherwise require registration of such Escrow Shares.
4.3.3. Anything in this Agreement to the contrary notwithstanding,
no Escrow Shares shall be released pursuant to any Liquidating Assignment in the
event that a security interest in CSEI's right to receive the Escrow Shares
subject to the Liquidating Assignment has been granted and remains in effect.
5. ORDER OF PRIORITY OF RELEASE OF ESCROW SHARES
Upon any Escrow Shares becoming releasable under this Agreement, such
Escrow Shares shall be released in accordance with the following priorities:
5.1. First, to the Company in satisfaction of any unsatisfied
entitlement under this Agreement.
5.2. Second to any Pledgee up to the amount of Escrow Shares with
respect to which a security interest has been granted under this Agreement.
5.3. Third to any assignees who have been designated in a Notice of
Liquidating Assignment as having priority over other such assignees, until the
assignees having priority have received the number of shares stated in the
Notice of Liquidating Assignment or the value stated in the Assignment. (If
value as opposed to number of shares is stated, value shall be determined by the
Company in good faith using the average of the closing bid price of the
Company's common stock on the five trading days immediately preceding the date
6
on which all requirements for the release of Escrow Shares pursuant to this
Section 5.3 were satisfied, and the Company shall give written notice of such
computation to the Escrow Agent and to the Designee, if a Designee has been
appointed.)
5.4. Fourth to the remaining assignees designated in any Notice of
Liquidating Assignment according to each assignee's pro-rata share as designated
in the Notice of Liquidating Assignment, until such assignees shall have
received the number of shares or the value stated in the Notice of Liquidating
Assignment. (If value as opposed to number of shares is stated, value shall be
determined by the Company in good faith using the average of the closing bid
price of the Company's common stock on the five trading days immediately
preceding the date on which all requirements for the release of Escrow Shares
pursuant to this Section 5.4 were satisfied, and the Company shall give written
notice of such computation to the Escrow Agent and to the Designee, if a
Designee has been appointed.)
5.5. Fifth, to CSEI if it then exists or, if not, to any other person
lawfully entitled to receive any Escrow Shares.
6. ESCROW AGENT
The acceptance by the Escrow Agent of its duties hereunder is subject
to the following terms and conditions, which the parties to this Agreement
hereby agree shall govern and control with respect to the rights, duties,
liabilities and immunities of the Escrow Agent:
6.1. Validity of Communications. The Escrow Agent shall not be
responsible or liable in any manner whatever for the sufficiency,
correctness, genuineness or validity of any communication given to the
Escrow Agent.
6.2. Genuineness. The Escrow Agent shall be protected in acting upon
any written notice, certificate, instruction, request or other paper or document
believed by the Escrow Agent to be genuine and to have been signed or presented
by the proper party or parties.
6.3. Limitation on Liability. The Escrow Agent shall not be liable for
any act done hereunder except in the case of the Escrow Agent's willful
misconduct or bad faith. Any release of Escrow Shares by the Escrow Agent
pursuant to this Agreement shall fully discharge the Escrow Agent's duties with
respect to such shares, and the Escrow Agent shall have no further obligation
with respect to such shares.
6.4. No Investigation. The Escrow Agent shall not be obligated to
investigate the correctness or accuracy of any document or to determine whether
or not the signatures contained in such documents are genuine or to require
documentation or evidence substantiating any such document or signature.
6.5. Duties. The Escrow Agent shall have no duties as Escrow Agent
except those that are expressly set forth herein or in any modification or
amendment hereof; provided, however, that no such modification or amendment
hereof shall affect the Escrow Agent's duties unless the Escrow Agent shall have
given written consent thereto.
6.6. Controversies. If any controversy arises between two or more of
the parties hereto, or between any of the parties hereto and any person not a
7
party hereto, as to whether or not or to whom the Escrow Agent shall deliver any
Escrow Shares or as to any other matter arising out of or relating to this
Escrow Agreement, the Escrow Agent shall not be required to determine the same
and need not make any delivery of the Escrow Shares in dispute or any portion
thereof but may retain the same until the rights of the parties to the dispute
shall have been finally determined by agreement, by final arbitral decision or
by final judgment of a court of competent jurisdiction after all appeals have
been finally determined (or the time for further appeals has expired without an
appeal having been made). The Escrow Agent shall deliver, in accordance with the
terms hereof, that portion of the Escrow Shares not subject to such dispute. The
Escrow Agent shall deliver that portion of the Escrow Shares covered by such
agreement or final decision or order within five days after the Escrow Agent
receives a copy thereof. The Escrow Agent shall assume that no such controversy
has arisen unless and until it receives written notice from the Company, CSEI or
an interested third party that such controversy has arisen, which refers
specifically to this Agreement and identifies the adverse claimants to the
controversy.
6.7. Indemnification. The Company and CSEI each agree, jointly and
severally, to indemnify the Escrow Agent for, and to hold the Escrow Agent
harmless from and against, any loss incurred without gross negligence, willful
misconduct, or bad faith on the Escrow Agent's part, arising out of or in
connection with the administration of this Agreement, including the costs and
expenses of defending the Escrow Agent against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. This indemnification shall not apply to a direct claim against the
Escrow Agent by the Company or CSEI alleging in good faith a breach of this
Agreement by the Escrow Agent, which claim results in a final non-appealable
judgment against the Escrow Agent with respect to such claim.
6.8. Interpleader. In the event of any dispute as to the nature of the
rights or obligations of the CSEI, the Company or the Escrow Agent hereunder,
the Escrow Agent may at any time or from time to time interplead and/or deposit
all or any part of the Escrow Shares with or to a court of competent
jurisdiction, in accordance with the procedural rules thereof. The Escrow Agent
shall give notice of such action to the Company and CSEI. Upon such interpleader
or deposit, the Escrow Agent shall immediately be relieved and discharged from
all further obligations and responsibilities hereunder with respect to the
Escrow Shares deposited, including the decision to interplead or deposit such
Escrow Shares.
7. TERMINATION
This Agreement shall terminate upon the release from escrow in
accordance with this Agreement of all of the Escrow Shares, provided that the
provisions of this Agreement for the benefit of the Escrow Agent shall survive
any termination of this Agreement.
8
8. MISCELLANEOUS
8.1. Amendment; Third Party Interests. This Agreement may be modified
or amended by a written instrument executed by the Company and the Escrow Agent
and, as long as CSEI owns a beneficial interest in any Escrow Shares, by CSEI.
If CSEI ceases to be the beneficial owner of any Escrow Shares, modification or
amendment of this Agreement also shall require the written consent of any
Designee, if a Designee has been appointed. Any Pledgee or assignee pursuant to
a Liquidating Assignment shall have the right to consent to any amendment which
adversely affects its rights under this Agreement, and shall have the right to
enforce this Agreement for the limited purpose of requiring the release of
Escrow Shares in accordance with this Agreement. No Pledgee or assignee pursuant
to a Liquidating Assignment shall have any other rights under or with respect to
this Agreement.
8.2. Notices. All communications required or permitted to be given
under this Agreement to any party hereto shall be sent by first class mail,
return receipt requested, or facsimile transmission with confirmation of
transmission, to the following addresses and facsimile numbers, or such other
addresses as the parties may specify by giving written notice:
If to the Company: 000 Xxxxxxx Xx.
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxx, CEO
Fax No. 000-000-0000
with copies to: Xxxxxx, Feinblatt, Rothman, Hoffberger & Xxxxxxxxx, LLC
The Xxxxxxx Building
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Fax No. 000-000-0000
Attention: Abba X. Xxxxxxxxx
If to CSEI: 000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx Xxxx
Fax No. 000-000-0000
with copies to: Xxx X. Xxxxxxxxxx, Esq.
0000 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Fax No. 000-000-0000
Xxxxx X. Xxxxxxxx, Esq.
Hirschler, Fleischer, Xxxxxxxx, Xxx & Xxxxx
Xxxx Xxxxxx Xxx 000
Xxxxxxxx, Xxxxxxxx 00000-0000
Fax No. 000-000-0000
9
If to the
Escrow Agent: Olde Monmouth Stock Transfer Co., Inc.
00 Xxxxxxxx Xxxxxxx, 0xx Xxxxx
Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxxx
Fax No. 000-000-0000
8.3. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that the Escrow Agent shall not assign its duties under this Agreement
and CSEI shall not assign any right or interest in any Escrow Shares except in
accordance with the provisions of this Agreement.
8.4. Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Delaware, excluding
any conflicts of law principle that would apply the law of another jurisdiction.
8.5. Counterparts and Facsimile. This Agreement may be executed in two
or more counterparts, each of which shall be an original, and all of which
together shall constitute one and the same agreement. This Agreement may be
executed by facsimile transmission, which shall be deemed an original for all
purposes.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE COMPANY:
SALES ONLINE DIRECT, INC.
By: /s/ Xxxxxxx Xxxxxx
---------------------------------------------------
Xxxxxxx Xxxxxx, CEO
CSEI:
CHANNELSPACE ENTERTAINMENT, INC.
By: /s/ Xxx X. Xxxxxxxxxx
---------------------------------------------------
Xxx X. Xxxxxxxxxx, EVP
ESCROW AGENT:
OLDE MONMOUTH STOCK TRANSFER CO., INC.
By: /s/ Xxxx X. Xxxxxxx
---------------------------------------------------
Xxxx X. Xxxxxxx
President
10
EXHIBIT 4
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of
Nov. 8, 2000, by and between Sales Online Direct, Inc., a corporation
organized under the laws of the State of Delaware, U.S.A., with headquarters
located at 0 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "Company"),
and ChannelSpace Entertainment, Inc. with its headquarters located at 000 Xxxx
Xxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000 (the "Purchaser").
This Agreement is being entered into pursuant to that certain Asset
Purchase Agreement dated Nov. 8, 2000, to which the Company and the
Purchaser are parties (the "Purchase Agreement").
The Company and the Purchaser hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Advice" shall have the meaning set forth in Section 4(d).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section 5(d).
"Board" means the Company's Board of Directors.
"Business Day" means any day except Saturday, Sunday and any day that
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, $.001 par value per
share.
"Effectiveness Date" means the date on which the Registration Statement
is declared effective by the Commission.
1
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the earliest practicable date on which the Company
can file a Registration Statement with the Commission, which shall be not later
than the 90th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 7(c).
"Indemnifying Party" shall have the meaning set forth in Section 7(c).
"Losses" shall have the meaning set forth in Section 7(a).
"OTC Bulletin Board" shall mean the over-the-counter electronic
bulletin board market or exchange.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock issued
pursuant to Section 4.3 of the Purchase Agreement (defined therein as the
"Registrable Securities"), and upon any stock split, stock dividend,
recapitalization or similar event with respect to such shares.
"Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2(a), including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
2
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
2. Registration.
(a) Required Registration. Not later than the Filing Date, the Company
shall prepare and file with the Commission a Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith). The Company shall use its best efforts (subject to
Section 5 hereof) to cause the Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, and
to keep such Registration Statement continuously effective under the Securities
Act until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold pursuant to the Registration Statement and
(ii) the date on which all of the remaining Registrable Securities (in the
reasonable opinion of counsel to the Holders) may be immediately sold to the
public without any restriction pursuant to Rule 144(k) (the "Effectiveness
Period")
3. Company Registration Obligations.
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith) in
accordance with the method or methods of distribution thereof as specified by
the Holder (except if otherwise directed by the Holder), and cause the
Registration Statement to become effective and remain effective as provided
herein.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period, or as may be reasonably
3
requested within a reasonable time prior to any proposed sale by a Holder in
order to incorporate information concerning such Holder or such Holder's
intended method of distribution; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; and (iii) respond as promptly as
possible to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as possible
provide the Holder true and complete copies of all correspondence from and to
the Commission relating to the Registration Statement.
(c) Notify the Holder of Registrable Securities to be sold and its
counsel as promptly as possible (i) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (ii) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement; (iii) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to the Registration Statement or Prospectus or for additional
information; (iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; or (vii) of the occurrence of any event that
makes any statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires any revisions to the Registration
Statement, Prospectus or other documents so that, in the case of the
Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(d) Within two (2) business days after the Registration Statement, or
any post-effective amendment, which includes the Registrable Securities is
ordered effective by the Commission, deliver, and cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities and to
the Purchaser (with copies to the Holders whose Registrable Securities are
included in such Registration Statement, if other than the Purchaser)
confirmation that the Registration Statement has been declared effective by the
Commission in the form attached hereto as Exhibit A.
(e) Furnish to the Holder and its counsel, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
4
(f) Promptly deliver to the Holder and its counsel, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(g) Use its best efforts to register or qualify the Registrable
Securities under the securities or "blue sky" laws of such jurisdictions within
the United States as shall be reasonably requested from time to time by a
Holder, and do any and all other acts or things which may be necessary or
advisable to enable such Holder to consummate the public sale or other
disposition of the Registrable Securities in such jurisdictions; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction.
(h) Cooperate with the Holder to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to a Registration Statement, which certificates shall be free of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any Holder may request at least two (2) Business
Days prior to any sale of Registrable Securities.
(i) Upon the occurrence of any event contemplated by Section 3(c)(vi),
as promptly as possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(j) In the event of any underwritten public offering of the Registrable
Securities, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter(s) of such
offering, provided that if the underwriter so requests the underwriting
agreement will contain customary contribution provisions.
(k) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on the OTC Bulletin Board and any
other securities exchange, quotation system, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Company are then listed
as and when required pursuant to the Purchase Agreement.
(l) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the
Effectiveness Date of such registration.
5
(m) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make generally available to its security
holders, as soon as reasonably practicable, but not later than the Availability
Date (as defined below), an earnings statement covering the period of at least
12 months, but not more than 18 months after the Effectiveness Date, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158. "Availability Date" means 45 days after the end of
any 12-month period (or 90 days after the end of any 12-month period if such
period is a fiscal year) commencing on the first day of the first fiscal quarter
of the Company after the Effectiveness Date of the Registration Statement.
4. Holder Obligations.
------------------
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities that the Holder shall furnish in writing to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it, as
shall be reasonably required to effect the registration of such Registrable
Securities, and shall execute such documents in connection with such
registration as the Company may reasonably request. The Company may exclude from
such registration the Registrable Securities of any such Holder who fails to
furnish such information within a reasonable time prior to the filing of each
Registration Statement, supplemented Prospectus and/or amended Registration
Statement.
(b) The Holder, by its acceptance of the Registrable Securities agrees
to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of a Registration Statement
hereunder, unless such Holder has notified the Company in writing of its
election to exclude all of its Registrable Securities from the Registration
Statement.
(c) Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(f) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(d), and (ii) it and its officers, directors or Affiliates, if any,
will comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
(d) Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Sections 3(c)(iii), 3(c)(iv), 3(c)(v),
3(c)(vi) or 5(b)(iii) and 5(b)(iv), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement contemplated by Section 3(i), or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
6
(e) The Holder may not participate in any underwritten registration
hereunder unless it (i) agrees to sell the Registrable Securities on the basis
provided in any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to the terms of this
Agreement.
(f) To the extent required by applicable law, deliver a prospectus to
the purchaser of Registrable Securities.
(g) Notify the Company when it has sold all of the Registrable
Securities theretofore held by it.
(h) Promptly notify the Company in the event that any information
supplied by such Holder in writing for inclusion in the Registration Statement
or related prospectus is untrue or omits to state a material fact required to be
stated therein or necessary to make such information not misleading in light of
the circumstances then existing.
5. Suspension Period; Blackout Period.
----------------------------------
(a) Commission Stop Order. The Company shall promptly give notice to
all Holders of the issuance by the Commission of any stop order suspending the
effectiveness of any Registration Statement filed pursuant to this Agreement or
the initiation of any proceedings for that purpose. The Company shall use its
best efforts to obtain the withdrawal of any order suspending the effectiveness
of any such registration statement at the earliest possible time.
(b) Suspension Events. Notwithstanding anything to the contrary set
forth in this Agreement, the Company's obligation under this Agreement to
register any Registrable Securities shall be suspended upon notice by the
Company to all Holders of the occurrence of any one or more of the following
events ("Suspension Events"):
(i) a certificate, signed by the President of the
Company, stating that the Board has determined in its good faith
judgment that such registration would be expected to have (x) a
material adverse effect on (or require premature disclosure of)
any proposal or plan by the Company to engage in any material
acquisition of assets (other than in the ordinary course) or stock
or any material merger, consolidation, tender offer,
reorganization or similar transaction, or (y) a material adverse
effect on a registration of securities of the Company which is
proposed to be filed within 90 days of such request, in which case
the Company shall have an additional period of not more than 90
days within which to register such Registrable Securities; or
(ii) the issuance of a stop order.
(c) Duration of Suspension Period. Any suspension pursuant to
Subsection (b) shall commence on the date notice ("Suspension Notice") is given
7
by the Company to all Holders of such Suspension Event, and shall continue in
effect until such time that (i) notice is given by the Company that such
Suspension Event or its effect no longer exists, or (ii) the passage of 90 days
after the Suspension Notice was given (the "Suspension Period"), whichever is
earlier. After the expiration of any Suspension Period, another Suspension
Period may not occur in the ensuing 12 months.
(d) Blackout Period. Following the effectiveness of any Registration
Statement hereunder, each Holder agrees that no offers or sales of any
Registrable Securities owned or held by such Person will be effected after the
Company shall have given notice ("Blackout Notice") of any Suspension Event
which states that no offers or sales shall be made, until such time that (i)
notice is given by the Company that offers and sales may recommence, or (ii) the
passage of 90 days after the Blackout Notice has been given ("Blackout Period"),
whichever is earlier.
6. Registration Expenses.
---------------------
All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, all federal and Blue Sky registration and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company. Each Holder shall bear a proportionate share of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering and of the expenses of counsel for Holders.
7. Indemnification.
---------------
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities and reasonable out-of-pocket expenses (whether joint or several)
(collectively, including legal or other expenses reasonably incurred in
connection with investigating or defending same, "Losses"), insofar as any such
Losses arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement, any
Prospectus, or any preliminary prospectus or any amendment or supplement
thereto, or any document incorporated by reference therein, any other disclosure
document (including without limitation reports and other documents filed under
the Exchange Act and any document incorporated by reference therein), any
application or other document or communication executed on behalf of the Company
filed in any jurisdiction in order to qualify any securities covered by a
registration statement under the "blue sky" or securities laws of such
jurisdiction; (ii) the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; or
(iii) any violation by the Company of the Securities Act, the Exchange Act, any
federal or state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any federal or state securities law in
8
connection with the offering covered by any Registration Statement, any
Prospectus, or any preliminary prospectus or any amendment or supplement
thereto. Subject to the provisions of Section 7(c) below, the Company will
reimburse such Holder, and each such officer, director, employee, agent or
controlling Person for any legal or other expenses as reasonably incurred by any
such entity or person in connection with investigating or defending any Loss;
provided, however, that the foregoing indemnity shall not apply to amounts paid
in settlement of any Loss if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld), nor shall the
Company be obligated to indemnify any Person for any Loss to the extent that
such Loss arises out of or is based upon and in conformity with written
information furnished by such person expressly for use in such Registration
Statement; and provided, further, that the Company shall not be required to
indemnify any person to the extent that any Loss results from such Person
selling Registrable Securities (i) to a Person to whom there was not sent or
given, at or prior to the written confirmation of the sale of such shares, a
copy of the prospectus, as most recently amended or supplemented, if the Company
has previously furnished or made available copies thereof or (ii) during any
period following written notice by the Company to such Holder of an event
described in Sections 3(c)(iii), 3(c)(iv), 3(c)(v), 3(c)(vi) or 5(b).
(b) Indemnification by Holder. Each Holder shall, notwithstanding any
termination of this Agreement, severally and not jointly, indemnify and hold
harmless the Company, the directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law, from and against any Losses, as incurred, arising out of or
based upon any untrue statement of a material fact or any omission of a material
fact required to be stated in the Registration Statement, any Prospectus, or any
preliminary prospectus, amendment or supplement thereto or necessary to make the
statements therein (in the case of any Prospectus or preliminary prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in or omitted from any information so
furnished in writing by such Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus or any amendment or supplement
thereto and that such information was reasonably relied upon by the Company for
use in the Registration Statement, such Prospectus or any amendment or
supplement thereto. The Holder will reimburse any legal or other expenses as
reasonably incurred by the Company and any such officer, director, employee,
agent, representative, or controlling Person, in connection with investigating
or defending any such Loss; provided, however, that the foregoing indemnity
shall not apply to amounts paid in settlement of any such Loss if such
settlement is effected without the consent of such Holder, which consent shall
not be unreasonably withheld.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party) in writing, and the
Indemnifying Party shall have the right to participate in, and, to the extent
the Indemnifying Party so desires, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided however, that an Indemnified
9
Party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the Indemnifying Party, if representation of such indemnified
party by the counsel retained by Indemnifying Party would be inappropriate due
to actual or potential differing interest between such Indemnified Party and any
other party represented by such counsel in the Proceeding. The failure to
deliver written notice to the Indemnifying Party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such Indemnifying Party of any liability to the
Indemnified Party under this Section, but only to the extent of such prejudice,
and provided further the omission so to deliver written notice to the
Indemnifying Party shall not relieve it of any liability that it may have to any
Indemnified Party otherwise than under this Section.
(d) Applicable to Preliminary Prospectus. The foregoing is subject to
the condition that, insofar as the foregoing indemnities relate to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
preliminary prospectus or Prospectus that is eliminated or remedied in any
Prospectus or amendment or supplement thereto, the above indemnity obligations
of the Company shall not inure to the benefit of any Indemnified Party if a copy
of such corrected Prospectus or amendment or supplement thereto had been made
available to such Indemnified Party and was not sent or given by such
indemnified party at or prior to the time such action was required of such
Indemnified Party by the Securities Act and if delivery of such Prospectus or
amendment or supplement thereto would have eliminated (or been a sufficient
complete defense to) any liability of such Indemnified Party with respect to
such statement or omission.
(e) Contribution. If a claim for indemnification under Section 7(a) or
7(b) is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying, Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 7(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(e) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
10
The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
(f) Survival. The obligations of the Company and the Holders under this
Section shall survive the completion of any offering of Registrable Securities
in a registration statement, and otherwise.
8. Rule 144.
--------
As long as any Holder owns any Registrable Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act and to promptly furnish the Holder with true and complete copies of all such
filings. As long as any Holder owns any Registrable Securities, if the Company
is not required to file reports pursuant to Section 13(a) or 15(d) of the
Exchange Act, it will prepare and furnish to the Holder and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act, as well as any other
information required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company further
covenants that it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Person to
sell any Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including providing any legal opinions of counsel to the
Company referred to in the Purchase Agreement. Upon the request of any Holder,
the Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.
9. Miscellaneous.
-------------
(a) Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof entered into and currently in effect,
nor shall the Company or any of its subsidiaries, on or after the date of this
11
Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holder in this Agreement or
otherwise conflicts with the provisions hereof .
(c) Specific Enforcement, Consent to Jurisdiction.
(i) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the Purchase Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement or the Purchase Agreement and to
enforce specifically the terms and provisions hereof or thereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.
(ii) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the Chancery Court of Delaware for the purposes
of any suit, action or proceeding arising out of or relating to this Agreement
and (ii) hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Each of
the Company and the Purchaser consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 9(c) shall affect or limit any right to serve process in any other
manner permitted by law.
(d) Amendments and Waivers. Any provision of this Agreement may be
amended only pursuant to a written instrument executed by the Company and the
Holder. Any waiver of the provisions of this Agreement may be made only pursuant
to a written instrument executed by the party against whom enforcement is
sought. The failure of any party to exercise any right or remedy under this
Agreement or otherwise, or the delay by any party in exercising such right or
remedy, shall not operate as a waiver thereof.
(e) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., eastern standard time,
on a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., eastern standard time, on any
date and earlier than 11:59 p.m., eastern time, on such date, (iii) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be with
respect to each party at such party's address as set forth in the Purchase
Agreement, or to such other address or addresses or facsimile number or numbers
as any such party may most recently have designated in writing to the other
parties hereto by such notice.
12
(f) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of the Holder and its successors and assigns. The
Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of the Holder.
(g) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Registrable Securities if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, and (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement. In addition, each Holder shall have the right to assign its
rights hereunder to any other Person with the prior written consent of the
Company, which consent shall not be unreasonably withheld. The rights to
assignment shall apply to the Holders (and to subsequent) successors and
assigns.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to principles
of conflicts of law thereof.
(j) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
13
(l) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
Sales Online Direct, Inc.
By: /s/ Xxxxxxx Xxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxx
Title: Chief Executive Officer
ChannelSpace Entertainment, Inc.
By: /s/Xxx X. Xxxxxxxxxx
--------------------------------
Xxx X. Xxxxxxxxxx, EVP
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT
[NAME AND ADDRESS OF TRANSFER AGENT]
Attention: ___________________
ChannelSpace Entertainment, Inc.
000 Xxxx Xxx Xxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: __________________
Re: Sales Online Direct, Inc.
Ladies and Gentlemen:
We are counsel to Sales Online Direct, Inc., a Delaware corporation
(the "Company"), and have represented the Company in connection with that
certain Registration Rights Agreement (the "Registration Rights Agreement"),
dated _____________, 2000, pursuant to which the Company agreed, among other
things, to register the Registrable Securities (as defined in the Registration
Rights Agreement), under the Securities Act of 1933, as amended (the "1933
Act"). In connection with the Company's obligations under the Registration
Rights Agreement, on , 2000, the Company filed a Registration Statement on Form
___ (File No. 333- ) (the "Registration Statement") with the Securities and
Exchange Commission (the "SEC") relating to the resale of the Registrable
Securities which names the Holder as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[COMPANY COUNSEL]
By:
SCHEDULE 2
Excluded Assets
1. Accounts receivable.
2. Cash in bank and on hand, cash equivalents, notes and other receivables,
including shareholder receivables, causes of action and contract claims.
3. Subject to CSEI's obligation to grant to SOLD the eCMS License as provided
in this Agreement, all of Seller's right, title and interest in and to the
eCMS software and technology and all intellectual property rights
associated therewith including, without limitation, architectural and
design documents, project plans, time lines and presentations.
4. [Intentionally omitted from the Asset Purchase Agreement].
5. Fixed assets listed on the attached list. [Attached list omitted]
6. Assets associated with Xxxxxxxxxxxxxxxx.xxx.
7. Rights under contracts other than the Assigned Contracts. The parties
acknowledge and agree that any and all rights under any Dell Computer
leases (other than Lease No. 502) and Lucent leases are Excluded Assets.
8. The domain names listed below:
XXXXXXXXXXXXXX.XXX XXXXXXXXXXXX.XXX
XXXXXXXXXXX.XXX XXXXXXXXXXX.XXX
XXXXXXXXXXXXX.XXX XXXXXXXXXX.XXX
XXXXXXXXXXXXXXXX.XXX XXXXXXXXXXX.XXX
XXXXXXXXXXXX.XXX XXXXXXXXXXXXXX.XXX
XXXXXXXXX.XXX XXXX.XXX
XXXXXXXXX.XXX XXXXXXXXXXXXXX.XXX
XXXXXXXX.XXX XXXXXXXXXXXXXXX.XXX
JPG.STORECOM XXXXXXXXXX.XXX
XXXXXXXXXXX.XXX XXXXXXXXXXXXXX.XXX
XXXXXXXXXXXX.XXX XXXXXXXXXXXXXXX.XXX
XXXXXXXX0XX.XXX XXXXXXXXXXXXXX.XXX
XXXXXXXXXX.XXX XXXXXXXXXXXX.XXX
XXXXXXXXXX.XXX XXXXX.XXX
XXXXXXXXXXXX.XXX XXXXXXXXXX.XXX
XXXXXXXXXX.XXX XXXXXXXXXXXXXX.XXX
XXXXXXXXXXXXXXX.XXX XXXXXXXXXXXXXXXXXXXX.XXX
XXXXXXX.XXX
SCHEDULE 2.1
Domain Names
XXXXXXXXXXX.XXX XXXXXXXXXXXXX.XXX
XXXXXXXXXXXXXX.XXX XXXXXXXXXXXX.XXX
XXXXXXXXXX0XX.XXX XXXXXXXXXX.XXX
XXXXXXXXXXX.XXX XXXXXXXXXX.XXX
XXXXXXXXXXXXX.XXX XXXXXXXXXX.XXX
XXXXXXXXXXXXXXXXXXX.XXX XXXXXXXXXXXXX.XXX
XXXXXXXXXXXXXXXX.XXX XXXXXXXXXXXX.XXX
XXXXXXXXXXXXXXXXX.XXX XXXXXXXXXXX.XXX
XXXXXXXXXXX.XXX XXXXXXXXXXXXXXX.XXX
XXXXXXXXXX0XX.XXX XXXXXXXXXX.XXX
XXXXXXXXXX.XXX XXXXXXXXX.XXX
XXXXXXXXXXXXXXXXXX.XXX XXXXXXXXXXXXXXX.XXX
XXXXXXXXXXXXX.XXX XXXXXXXXXXXXX.XXX
XXXXXXXXXXXXXX.XXX XXXXXXXXXXXXXX.XXX
XXXXXXXXXXXXXXXXXX.XXX XXXXXXXXXXXXXXXXX.XXX
XXXXXXXXXXX0XX.XXX XXXXXXXXXXXXXXXX.XXX
XXXXXXXXXX.XXX XXXXXXXXX.XXX
XXXXXXXXXXXXXXXXXX.XXX XXXXXXXXX.XXX
XXXXXXXXXXXXXXXXX.XX XXXXXXXXXXXXXXXXXXX.XXX
XXXXXXXXXXXXXXXXXXXX.XXX XXXXXXXXXXXXXXXX.XXX
XXXXXXXXXX0XX.XXX XXXXXXXXXX.XXX
XXXXXXXXXXXXXXXXXX.XXX XXXXXXXXXXX.XXX
XXXXXXXXXXXXXXXXX.XXX XXXXXXXXXXXXX.XXX
XXXXXXXXX.XXX XXXXXXXX.XXX
XXXXXXXXXXXXXXX.XXX XXXXXXXXXXXXXXXXXXX.XXX
XXXXXXXXXXXXX.XXX XXXXXXX.XXX
XXXXXXXXXXX.XXX XXXXXXXXXXXXXXXXX.XXX
XXXXXXXXXXXXXXX.XXX XXXXXXXXXXXXX.XXX
XXXXXXXXX.XXX XXXXXXXXXXXX.XXX
XXXXXXXXXXXXX.XXX XXXXXXXXXXXXXXX.XXX
XXXXXXXXXXXX.XXX XXXXXXXXXXX.XXX
XXXXXXXXXXXXXXXXX.XXX XXXXXXXXXXXXXX.XXX
XXXXXXXXXXXXXXXXXXX.XXX
SCHEDULE 2.2
Fixed Assets
See Attached
[Schedule intentionally omitted]
SCHEDULE 2.7
Assigned Contracts
1. FirstCom Music-- (licensing agreement dated 12/16/1998)
2. Sales OnLine Direct-- (agreement dated 9/24/1999)
3. CollecTech, Inc.-- (terms sheet agreement dated 7/14/1999)
4. Collector'sWeb.com-- (binding terms sheet agreement dated 6/8/1999)
5. The Collector News Magazine-- (binding terms sheet agreement dated
7/15/1999)
6. Collector Glass News, Inc.-- (binding terms sheet agreement dated
5/12/1999)
7. Artfact, Inc.-- (agreement dated 1/21/1993)
8. LucasArts-- (email dated 3/31/2000)
9. AuctionFlow Inc.-- (content agreement dated 4/5/2000)
10. Franklin Mint -- (convergent media advertising agreement dated 3/2000)
11. Franklin Mint -- (eCommerce agreement dated 4/12/2000)
12. Andale -- (convergent media advertising proposal dated 4/1/2000)
13. Xxxxxx Productions, Inc.-- (television program & co-branded web site
development agreement dated 6/7/1999)
14. Xippix, Inc.-- (consulting agreement dated 3/22/2000)
15. Hobby House Press-- (eCommerce agreement dated 5/2/2000)
16. Hobby House Press-- (partnership proposal dated 2/25/2000)
17. Collectors Universe-- (co-branded site agreement dated 5/9/2000)
18. GoCollect.com-- (agreement dated 6/1/2000)
19. Antiques and Collectibles Association-- (eCommerce agreement dated
5/5/2000)
20. Schylling-- (agreement dated 5/5/2000)
21. Dell Financial Services-- (master lease agreement No. 502 dated 8/25/1999)
22. Landmark Specialty Publications-- (author-publisher agreement dated
11/18/1998)
23. American Federation of Television and Radio Artists-- (basic cable
agreement dated 7/26/1999)
24. Xxxxxx X. Xxxxxxx -- (Appraisal Provider Agreement dated 4/18/2000)
25. Xxxxxx Xxxx-Xxxxxxxx -- (Appraisal Provider Agreement dated 5/10/2000)
26. Me and the Mrs., Inc. -- (Appraisal Provider Agreement dated 4/18/2000)
27. Xxxxxxx X. Xxxxxx -- (Appraisal Provider Agreement dated 4/18/2000)
28. C. Xxxxxxxx Xxxx -- (Appraisal Provider Agreement dated 4/18/2000)
29. Xxxxx X. Xxxxxxxxxx -- (Appraisal Provider Agreement dated 4/18/2000)
30. Xxxx Xxxxxx -- (Appraisal Provider Agreement dated 5/30/2000)
31. Telepraiser, Inc. -- (Appraisal Provider Agreement dated 5/3/2000)
32. USID, Inc. -- (Stampfinder eCommerce agreement dated 3/31/2000)
33. AOL Canada-- (assignment letter to CSEI dated 1/11/1999)
34. AOL Canada-- (AOL studio affiliate program letter of agreement dated
11/18/1997)
35. AOL Canada-- (agreement for AOL's studio affiliate program dated
11/18/1997)
36. AOL Canada-- (confidential interactive services agreement dated 1999)
37. To the extent assignable, any confidentiality agreements between CSEI and
its employees.
SCHEDULE 4.1
Assumed Liabilities
1. Obligations arising from and after the closing under Dell Financial Services
LP Lease No. 502.
2. Contract obligations under the following Appraiser contracts: Xxxxxx X.
Xxxxxxx, Xxxxxx Xxxx-Xxxxxxxx, Me and the Mrs., Inc., Xxxxxxx X. Xxxxxx, C.
Xxxxxxxx Xxxx, Xxxxx X. Xxxxxxxxxx, Xxxx Xxxxxx and Telepraiser, Inc.
SCHEDULE 8.1.1
Persons to be Employed by SOLD
1. Xxxxx Xxxxxxxx
2. Xxxxxx Xxxxxxx
SCHEDULE 10.6
Sellers Required Consents
1. Board of Directors of ChannelSpace Entertainment, Inc. (secured prior to
Closing).
2. Dell Financial Services, L.P.
3. Xxxxxx Communications, Inc. (including extending indemnity for Interactive
Services litigation to SOLD) (secured prior to Closing).*
4. FirstCom Music.
5. AOL Canada. If Sellers are unable to obtain the consent of AOL or AOL
Canada to the assignment of the Interactive Services Agreement dated as of
February 1, 1997, the Agreement for AOL's Studio Affiliate Program dated as
of November 18, 1997 and the AOL Studio Affiliate Letter Agreement dated as
of November 18, 1997 or if SOLD, acting in good faith, is unable to enter
into a new agreement with AOL or AOL Canada on terms reasonably
satisfactory to SOLD and AOL within one (1) year following Closing, SOLD
shall be entitled to a release of 500,000 Closing Shares from escrow.
6. Xxxxxxxxxxx.xxx options.
* SOLD waives the requirement of obtaining consent to the assignment of this
contract. Sellers agree to indemnify SOLD for reasonable attorneys' fees
incurred in connection with seeking such consent.
SCHEDULE 10.8.1
Permitted Liens
1. Dell Financial Services, L.P. Lease no. 502.
2. Transleasing (GE) lien (in an amount not to exceed $15,000) to be satisfied
by Sellers within one year following closing.
3. Bank loan secured by van to be satisfied by Sellers within one year
following closing.
4. All liens relating to the obligations set forth in Schedule 4.1.
SCHEDULE 10.8.3
Intellectual Property Rights Granted to Others
1. All right, title and interest in eCMS will be transferred to O2 Essential
Marketing Technologies, Inc. subject to the eCMS License.
2. Limited licenses set forth in Assigned Contracts to use certain
intellectual property owned by Sellers in connection with such contract
party's performance under Assigned Contracts.
SCHEDULE 10.9
Insurance
CNA Insurance Companies provides:
1. Property insurance covering Business Personal property ($410,400) and
Blanket Business Income ($150,000)
2. Inland Marine covering video production equipment ($216,850 scheduled,
$34,000 unscheduled) and electronic data processing ($570,000)
3. Commercial Crime covering employee dishonesty ($100,000) and general
theft ($5,000)
4. Commercial General Liability with an aggregate limit of $2,000,000,
products completed aggregate limit of $2,000,000 and personal/advertising limit
of $1,000,000 with a limit of $1,000,000 for each occurrence
5. Commercial Automobile coverage with a limit of $1,000,000 for each
accident and $1,000,000 for uninsured motorist coverage
6. Workers' Compensation coverage with a limit of $100,000 for each bodily
injury by accident, $500,000 aggregate limit for bodily injury by disease and
$100,000 for each bodily injury by disease
7. Umbrella policy with limits of $2,000,000 for each occurrence and
$2,000,000 annual aggregate
8. Directors, officers and employee liability coverage with a limit of
$3,000,000
SCHEDULE 10.11
Financial Statements
Liabilities of Discribe, Ltd. as of November 1, 2000 not reflected in Financial
Statements:
NBTel $5,265.65 phone
NBPower $308.16 power
Xxxxxxxxx $772.06 rent
C& H Consultants $540.48 computer parts and maintenance
Atlantic Security $69.00 monitoring of security system
Federal Express $13.95 shipping
Synthetic Technology $608.00 scanning slides
Rent $1,840.00 per month till Sept 26, 2002 (3 year lease)
Executive Deferred Compensation $6,057.66 Xxxxxx Xxxxxxx' deferred salary
Vacation Owed to Xxxxxx Xxxxxxx $6,923.08
Total $22,398.04
SCHEDULE 11.6
SOLD Required Consents
1. Board of Directors
2. All consents that may be required for a non-Canadian entity to acquire the
stock of a Canadian entity, which consents shall be SOLD's sole
responsibility if it elects to acquire the stock of Discribe, Ltd.
