AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
By and Among
SMALL BUSINESS WORLDWIDE, INC.
SMALL BUSINESS RESOURCES, INC.
HISPANIC BUSINESS RESOURCES, INC.
and
ASTA XXXXXXX.XXX, LLC
_____________________________
Dated as of October 12, 2000
________________________________
TABLE OF CONTENTS
Page
ARTICLE I. PURCHASE AND SALE
SECTION 1.1 Agreement to Sell and Purchase Capital Stock; Consideration
SECTION 1.2 Closing
SECTION 1.3 Right of First Refusal
ARTICLE II. REPRESENTATION AND WARRANTIES OF THE SELLER
SECTION 2.1 The Purchased Shares
SECTION 2.2 Due Authorization
SECTION 2.3 No Conflict; Consents and Approval
SECTION 2.4 Corporate Existence and Power: Capitalization
SECTION 2.5 Charter Documents and Corporate Records
SECTION 2.6 Fiscal Information
SECTION 2.7 Properties; Title
SECTION 2.8 Material Contracts
SECTION 2.9 Intangible Property and Warranties
SECTION 2.10 Claims and Proceedings
SECTION 2.11 Taxes
SECTION 2.12 Employee Benefit Plans
SECTION 2.13 Employee-Related Matters
SECTION 2.14 Insurance
SECTION 2.15 Compliance with Laws
SECTION 2.16 Permits and Licenses
SECTION 2.17 Environmental Matters
SECTION 2.18 Finders' Fee
SECTION 2.19 Depositories; Power of Attorney, Etc.
SECTION 2.20 Principal Investment
SECTION 2.21 No Activities
SECTION 2.22 Subsequent Debt of the Seller
SECTION 2.23 Seller's Web-Site
SECTION 2.24 Disclosure; Schedules
ARTICLE III. REPRESENTATION AND WARRANTIES OF THE PURCHASER
SECTION 3.1 Authority Relative to This Agreement
SECTION 3.2 No Conflicts; Consents
SECTION 3.3 Corporate Existence and Power
SECTION 3.4 Finders' Fee
SECTION 3.5 Investment
ARTICLE IV. COVENANTS AND AGREEMENTS PRIOR TO AND SUBSEQUENT TO CLOSING
SECTION 4.1 Corporate Examinations and Investigations
SECTION 4.2 Consents, Filings and Authorizations; Effort to Consummate
SECTION 4.3 Negotiations with Others
SECTION 4.4 Notices of Certain Events
SECTION 4.5 Public Announcements
SECTION 4.6 Confidentiality
SECTION 4.7 Expenses
SECTION 4.8 Financial Statements and Other Information
SECTION 4.9 Further Assurances
SECTION 4.10 Tax Matters
SECTION 4.11 Purchaser's Board Representations
SECTION 4.12 Affiliate Transactions
SECTION 4.13 Approval of Certain Transactions
SECTION 4.14 Fiscal Years
SECTION 4.15 Negative Covenants
SECTION 4.16 Call Right
ARTICLE V. CONDITIONS TO CLOSING
SECTION 5.1 Conditions to the Obligations of Sellers and Purchaser
SECTION 5.2 Conditions to the Obligations of Sellers
SECTION 5.3 Conditions to the Obligations of Purchaser
ARTICLE VI. TERMINATION
SECTION 6.1 Termination
SECTION 6.2 Effect of Termination; Right to Proceed
ARTICLE VII. INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties
SECTION 7.2 Obligations of Sellers to Indemnify
SECTION 7.3 Obligations of Purchaser to Indemnify
SECTION 7.4 Notice and Opportunity to Defend Third Party Claims
SECTION 7.5 Payment of Indemnification Amounts
SECTION 7.6 Other Remedies
ARTICLE VIII. MISCELLANEOUS
SECTION 8.1 Notices
SECTION 8.2 Entire Agreement
SECTION 8.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies
SECTION 8.4 Governing Law
SECTION 8.5 Arbitration
SECTION 8.6 Binding Effect; No Assignment
SECTION 8.7 Exhibits
SECTION 8.8 Severability
SECTION 8.9 Counterparts
ARTICLE IX. DEFINITIONS
SECTION 9.1 Definitions
SECTION 9.2 Interpretation
EXHIBITS
Exhibit A - intentionally omitted
Exhibit B - Forms of Confirmation of Guarantee and Guarantee Agreement
Exhibit C - Opinion of Seller's Counsel
Exhibit D - [intentionally omitted.]
Exhibit E - [intentionally omitted.]
Exhibit F - Form of Registration Rights Agreement
Exhibit G - Form of Management Agreement
Exhibit H - Security Agreement
Exhibit I - Form of Warrant
SCHEDULES
Schedule 1.1 - Projections; Principals
Schedule 2.3 - Required Consents
Schedule 2.4 - Capitalization
Schedule 2.6 - Financial Information [Budget; Tax Returns; Xxxxxx'x]
Schedule 2.7 - Properties
Schedule 2.8 - Material Contracts
Schedule 2.9 - Intellectual Property
Schedule 2.10 - Litigation
Schedule 2.11 - Taxes
Schedule 2.12 - Employee Benefit Plans
Schedule 2.13 - Employee-Related Matters
Schedule 2.14 - Insurance
Schedule 2.16 - Permits and Licenses
Schedule 2.17 - Environmental Matters
Schedule 2.18 - Broker
Schedule 2.19 - Powers of Attorney
Schedule 2.20 - Principal Investments
Schedule 3.2 - Consents
Schedule 4.6 - Confidential Information
Schedule 4.12 - Affiliated Transactions
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
This AMENDED AND RESTATED STOCK PURCHASE AGREEMENT is made as of
October 12, 2000 by and among between SMALL BUSINESS WORLDWIDE, INC., a Delaware
corporation ("Parent"), SMALL BUSINESS RESOURCES, INC., a Georgia corporation
and wholly-owned subsidiary of Parent ("SBR"), HISPANIC BUSINESS RESOURCES, INC.
a Delaware corporation and wholly-owned subsidiary of the Parent ("HBR", and
collectively with SBR, the Parent, the "Sellers"), and XXXXXXXXXXX.XXX, LLC (the
"Purchaser" or "Buyer").
W I T N E S S E T H :
WHEREAS, SBR provides online services for small businesses; and
WHEREAS, the Parent has formed HBR to provide similar services to the
Hispanic community; and
WHEREAS, SBR and the Purchaser entered into a Stock Purchase Agreement
dated as of February 14, 2000 and Amendments Xx. 0, 0, 0, 0, 0, 0, 0 and 8
thereto (as so amended, the "Old Stock Purchase Agreement"); and
WHEREAS, the Old Stock Purchase Agreement provides for the Purchaser
to purchase (the "Transaction") one-third of the capital stock of SBR and 51% of
the capital stock of HBR; and
WHEREAS, SBR has reorganized as a wholly-owned subsidiary of Parent
since the date of the Old Stock Purchase Agreement; and
WHEREAS, the Purchaser has advanced, pursuant to Promissory Notes
dated February 14, 2000, February 28, 2000, April 10, 2000, May 3, 2000, June 7,
2000, July 11, 2000, August 11, 2000, August 18, 2000 and September 12, 2000 an
aggregate of $2,100,000, all of which the Sellers and guarantors acknowledge to
be due and owing in full, without defense, claim, counterclaim, or set-off of
any kind (the "Existing Buyer Loans"), to SBR pursuant to the Old Stock Purchase
Agreement;
WHEREAS, SBR, the Purchaser and Parent wish to amend, modify,
supplement and restate the terms of the Old Stock Purchase Agreement on the
conditions set forth herein; and
WHEREAS, the board of directors of each of the Parent and HBR has
determined that the disposition of their capital stock pursuant to the terms and
conditions of this Agreement are in the best interests of such companies and
their respective stockholders; and
WHEREAS, in furtherance of the consummation of the Transaction and the
other transactions contemplated hereby (the "Other Contemplated Transactions"),
the parties hereto desire to enter into this Agreement (certain capitalized
terms used herein have the respective meanings set forth in Article IX).
NOW, THEREFORE, in consideration of the foregoing premises, the
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the parties
hereto agree to amend and restate the Old Stock Purchase Agreement in its
entirety as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.1 Agreement to Sell and Purchase Capital Stock;
Consideration
(a) Subject to the terms and conditions of this Agreement the Parent
agrees to issue and sell and the Purchaser agrees to purchase (i) One Million
Six Hundred Seventy Seven Thousand One Hundred and Thirteen (1,677,113) shares
(the "Parent Purchased Shares") of the Parent's common stock, par value $0.01
("Parent Common Stock"), (ii) a warrant in the form of Exhibit I (the "Warrant")
to purchase, for only nominal consideration, on the terms and conditions therein
set forth One Million Six Hundred Ninety Eight Thousand and One Hundred Eighty
Four (1,698,184) shares of Parent Common Stock, (iii) options to purchase for
$0.01 per share 345,000 shares of Parent Common Stock (the "Options"), provided
that such Options shall be exercisable only for such number of shares equal to
the Percentage of Funding times one half of the number of shares purchased upon
exercise of options by the persons listed on Schedule 2.4 as holding options on
the date hereof (other the Board of Advisors and Digital Insight); and (iv) One
Million and Twenty Thousand (1,020,000) shares of HBR's common stock, (the "HBR
Purchased Shares" and, together with the Parent Purchased Shares, the "Purchased
Shares"). The parties hereto agree that in consideration of the Purchased
Shares, the Warrant, and the Options the Purchaser will release $750,000 of the
Existing Buyer Loans as a contribution to the capital of the Parent (the "Equity
Investment") and lend to SBR (for its benefit and the benefit of certain other
SBW Companies) an additional $400,000 (the "New Buyer Loans" and together with
the Existing Buyer Loans (other than the Existing Buyer Loans being canceled on
the date hereof in connection with the Equity Investment), the "Buyer Loans") to
be advanced to SBR as follows (each a "Closing"): (i) $175,000 as a Buyer Loan
to SBR, guaranteed by the Parent, Xxxxxxxx.xxx ("Xxxxxxxx.xxx"), HBR and Xxxxxx
Xxxxxx and secured under the Security Agreement attached to this Agreement as
Exhibit H (the "Security Agreement"), and the Equity Investment on the date
hereof (the "Tenth Closing"); (ii) $125,000 as a Buyer Loan to SBR, guaranteed
by the Parent, Xxxxxxxx.xxx and Xxxxxx Xxxxxx and secured by the Security
Agreement, on November 12, 2000 (the "Eleventh Closing"); and (iii) $100,000 as
a Buyer Loan to SBR, guaranteed by the Parent, Xxxxxxxx.xxx, HBR and Xxxxxx
Xxxxxx and secured by the Security Agreement, on December 12, 2000 (the "Final
Closing"), provided, however, (x) the Sellers have delivered to the Purchaser a
satisfactory opinion of counsel subject to the reasonable satisfaction of the
Purchaser, and the other closing document called for by Article V at each
closing and (y) the Sellers shall have met the projections attached to this
Agreement as Schedule 1.1 as required by subsection (c) below, or all further
obligations of the Sellers and the Purchaser arising under this Agreement shall
terminate to the extent provided in subsection (c), below, other than the
conversion described in subsection (c) below. For financial statement purposes,
of such Buyer Loans and Existing Buyer Loans, an aggregate of $1,600,000 is to
be a loan on the books of SBR; and $150,000 is to be a loan on the books of
Xxxxxxx.xxx. The Buyer Loans and the Equity Investment is hereinafter referred
to as the "Purchase Price").
(b) Sellers acknowledge that Xxxxxxx.xxx has received not less than
$150,000 in value from the proceeds of the Buyer Loans. The guarantees will be
made pursuant to the form of guaranty and confirmation of guaranty (the
"Guaranty Agreements"), substantially in the forms attached hereto as Exhibit
B, provided that the guarantees of Xxxxxx Xxxxxx shall be limited to $900,000 in
the aggregate and the first $900,000 of principal repayments under the Buyer
Loans (other than the Equity Investment) shall be credited against that $900,000
limited on those guarantees. Xxxxxx Xxxxxx shall be released from (i) all such
guarantees upon the Parent and its subsidiaries on a consolidated basis having
positive net income in accordance with GAAP for three (3) consecutive months,
agreeing to a repayment schedule providing for equal payments of principal and
interest over a twenty-four month period, and demonstrating to Purchaser's
reasonable satisfaction, based upon the positive net income for such three month
period and reasonable projections derived therefrom, that Sellers shall have
cash flow to satisfy such repayment schedule or (ii) from a portion of such
guarantees prior to such time, to the extent that the Parent obtains an equity
or subordinated debt (with terms of subordination and forbearance acceptable to
Asta, the understanding being that any subordination will include a forbearance
period for the subordinated lender of 120 days or more) investment based on a
pre-money valuation of the Parent of at least $10 million, the portion of such
guarantees to be released to be determined by a fraction, the numerator of which
is the amount of such equity investment and the denominator of which is
$5,000,000. Subject to the terms and conditions of this Agreement, an aggregate
of $800,000 of outstanding loans (the "Seller Loans") have been advanced to SBR
by Xxxxxx Xxxxxx and other principals listed on Schedule 1.1 attached hereto
(the "Principals") of SBR in the amounts listed on Schedule 1.1. No Seller Loan
may be prepaid prior to the repayment of all Buyer Loans and Existing Buyer
Loans without the Purchaser's prior written consent, so long as no Event of
Default has occurred and is continuing except as follows (w) the Seller Loan to
Xxxxxxx Xxxx in the amount of $75,000 may be repaid in accordance with the
following schedule of repayment - $25,000 in each of October and December 2000
and February 2001 (x) Xxxxxx X. Xxxxxx shall on the Tenth Closing occurring on
the date hereof contribute $500,000 of the principal amount of the Seller Loan
advanced by him in exchange for 500,000 shares of Parent Common Stock; (y) the
next $100,000 applied to repayment of loans shall be applied to repayment of
Seller Loans ($75,000 of which will be repaid to Xxxxxx Xxxxxx and $25,000 of
which will be repaid to Xxxxx Xxxxx) and (z) the balance of the Seller Loans
shall be repaid pari passu and in proportion with repayment made on the Buyer's
Loans outstanding after the date hereof to the extent that the Sellers have
positive cash flow sufficient to make such repayment. The Buyer Loans shall be
evidenced by promissory notes (the "Notes"), substantially in the form of the
notes heretofore delivered in connection with the Old Stock Purchase Agreement.
Xxxxxx Xxxxxx and Xxxxxxx Xxxx shall enter into subordination agreements in a
form reasonably acceptable to Purchaser with respect to their Seller Loans.
(c) Notwithstanding anything herein to the contrary, Purchaser shall
have no obligation to advance the Buyer Loan at the scheduled date for the Tenth
Closing, Eleventh Closing or Final Closing or make any cash payments or the
Equity Investment if any Event of Default shall have occurred or is continuing
or Parent is unable to demonstrate pursuant to Monthly Financial Statements
delivered pursuant to Section 4.8 or otherwise to the reasonable satisfaction of
Buyer that the total revenues of SBR for the previous calendar month were not at
least 95% of the projected total revenues for that month set forth on Schedule
1.1, or the total expenses of SBR for the previous calendar month exceeded 105%
of the projected total expenses for that month, as set forth on Schedule 1.1. In
either such event, (x) the number of shares subject to the Warrant shall equal
3,375,296 multiplied by the Percentage of Funding, minus the number of Parent
Purchased Shares and (y) the number of Options shall be reduced to 345,000
multiplied by the Percentage of Funding.
(d) After the Final Closing until March 31, 2001, Purchaser shall have
the right to contribute up to $500,000 of Buyer Loans to the Parent in exchange
for the issuance of Parent Common Stock at a price of $1.00 per share.
SECTION 1.2 Closing. Each Closing of the Transaction and the Other
Contemplated Transactions shall take place at the offices of Snow Xxxxxx Xxxxxx
P.C., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as the
parties hereto shall agree. Each date of each Closing is hereinafter called a
"Closing Date." All events which shall occur at a Closing shall be deemed to
occur simultaneously.
SECTION 1.3 Right of First Refusal. (a) Should any SBW Company desire
to offer to issue securities to another purchaser or should Xxxxxx Xxxxxx,
Xxxxxxx Xxxx or their legatee or legatees, as the case may be (each being
referred to herein as a "Selling Stockholder"), desire to sell or transfer
Parent Common Stock or SBR's common stock that either Selling Stockholder may
now or hereafter own (an "Offer"), the SBW Company or the Selling Stockholder,
as the case may be, shall, prior to accepting an Offer, deliver to the Purchaser
a written Notice of Bona Fide Offer accompanied by a duplicate original of a
written bona fide offer (the "Bona Fide Offer") setting forth the name of the
proposed purchaser, the purchase price or other consideration for the Offer and
all other terms and conditions of the Offer signed by the proposed purchaser.
For a period of ten (10) business days following delivery of the Notice of Bona
Fide Offer, the Purchaser shall have the right to accept such Offer by delivery
of a written Notice of Acceptance to the Seller or the Selling Stockholder, as
the case may be. If the Purchaser shall reject or not respond to the Bona Fide
Offer within the time period provided, the SBW Company or the Selling
Stockholder, as the case may be, may accept such Offer. The acceptance of an
Offer by the Purchaser under this Section 1.3 shall be upon the terms and
conditions and at the price specified in the Bona Fide Offer.
(b) Should a Selling Stockholder desire to purchase additional shares
of capital stock of any SBW Company, such Selling Stockholder shall deliver to
the Purchaser a written notice of such Selling Stockholder's intention to
purchase additional shares of such capital stock setting forth the terms and
conditions of such Selling Stockholder's purchase (the "Stockholder Notice").
Thereafter, and for a period of ten (10) business days after the delivery of the
Stockholder Notice, the Purchaser shall have the right to purchase that amount
of capital stock of the Parent, on the same terms and conditions as stated in
the Stockholder Notice, that would allow the Purchaser to maintain the
Purchaser's ownership interest in the Parent.
(c) In the event the Parent or a Selling Stockholder, as the case may
be, elects to sell their capital stock pursuant to an Offer not accepted by the
Purchaser pursuant to Section 1.3(a), the Purchaser shall have the right to
participate in the sale of the shares of Common Stock, on a pro rata basis, with
the Company or the Selling Stockholder, as the case may be.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Sellers hereby, jointly and severally, represent and warrant to
the Purchaser, as of the date hereof and as of each Closing Date (as if each
such representation and warranty was remade on and as of, such Closing Date),
that:
SECTION 2.1 The Purchased Shares. (a) All of the issued and
outstanding shares of Parent Common Stock and of the common stock of HBR and SBR
have been duly and validly authorized, are validly issued, fully paid,
non-assessable, and the issuances thereof were exempt from registration under
state and federal securities laws. The Purchased Shares hereunder will be duly
authorized, reserved for issuance at or before the applicable closing and when
issued, will be validly issued, fully paid, nonassessable and exempt from
registration under federal and state securities laws, free and clear of any and
all Liens (other than restrictions on transfer arising under applicable
securities law).
(b) Except as disclosed on Schedule 2.4, there are no options,
warrants, rights, convertible securities or other agreements or commitments
obligating any SBW Company, with respect to the shares of capital stock of any
SBW Company , to issue, transfer or sell, or cause the issuance, transfer or
sale of, any shares of capital stock of or any SBW Company.
SECTION 2.2 Due Authorization. Each of the SBW Companies has full
corporate power and authority to execute and deliver this Agreement and each
other Transaction Document to which it is a party and to consummate the
Transaction and the Other Contemplated Transactions. The execution, delivery and
performance by each SBW Company of this Agreement and the consummation by it of
the Transaction and Other Contemplated Transactions have been duly and validly
authorized and approved by each such SBW Company board of directors and no other
corporate proceedings on the part any such SBW Company are necessary to
authorize the execution and delivery by or on behalf of any SBW Company of this
Agreement or the other Transaction Documents to which it is a party or the
consummation of the Transaction and the Other Contemplated Transactions. This
Agreement and each other Transaction Document to which each SBW Company is a
party has been duly and validly executed and delivered by each SBW Company, and
(assuming the valid execution and delivery thereof by the other parties hereto)
constitutes the legal, valid and binding agreement of each SBW Company,
enforceable against each SBW Company in accordance with its terms, except as
such obligations and their enforceability may be limited by applicable
bankruptcy and other similar Laws (as defined herein) affecting the enforcement
of creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought (whether at law or in equity). Each SBW Company that is
a party to this Agreement acknowledges the Existing Buyer Loans to be due and
owing in full, without defense, claim, counterclaim, or set-off of any kind.
SECTION 2.3 No Conflicts; Consents and Approvals. Except as set forth
in Schedule 2.3 attached hereto (the "Required Consents"), neither the
execution, delivery and performance by the Sellers of this Agreement and each
other Transaction Document to which they are a party, nor the consummation of
the Transaction and the Other Contemplated Transactions, (i) violates any
provision of the certificate of incorporation or by-laws (or comparable charter
documents) of any SBW Company; (ii) requires any SBW Company to obtain any
consent, approval, Permit or action of or waiver from, or make any filing with,
or give any notice to, any Governmental Body or any other Person; (iii)
violates, conflicts with or results in a breach or default under (after the
giving of notice or the passage of time or both), or permits the termination of,
any Contract, right, other obligation or restriction relating to or which
affects the Purchased Shares or any SBW Company to which a SBW Company is a
party or its Assets or the Business may be bound or subject, or results in the
creation of any Lien upon the Purchased Shares or upon any of the Assets of the
Sellers pursuant to the terms of any such Contract; (iv) violates or conflicts
with any Law or Order of any Governmental Body against, or binding upon, the SBW
Companies or upon their Assets or the Business or the Purchased Shares; or
(v) violates or results in the revocation or suspension of any Permit.
SECTION 2.4 Corporate Existence and Power; Capitalization. (a) Each
SBW Company is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has all
requisite power and all material Permits required to own, lease and operate its
respective properties and to conduct its business as currently conducted. Except
in any such jurisdiction where failure to so qualify would not have a Material
Adverse Effect upon the applicable SBW Company, each SBW Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary.
(b) The entire authorized capital stock of SBR consists solely of
10,000,000 shares of common stock, $.01 par value per share (the "SBR Common
Stock"). Of such authorized shares, 5,986,742 shares of Common Stock are issued
and outstanding, all of which are owned by Parent. No shares of SBR Common Stock
were issued in violation of the preemptive rights of any stockholder.
(c) The entire authorized capital stock of Parent consists solely of
20,000,000 shares of Parent Common Stock and 1,000,000 shares of Preferred
Stock, per value $0.01 per share. Of such authorized shares, 6,649,242 shares of
Parent Common Stock and no shares of Preferred Stock are issued and outstanding,
and owned and held by the persons set forth on Schedule 2.4. No shares of Parent
Common Stock were issued in violation of the preemptive rights of any
stockholder.
(d) The entire authorized capital stock of HBR consists solely of
10,000,000 shares of common stock, $0.01 par value per share and 1,000,000
shares of Preferred Stock, per value $0.01 per share. Of such authorized shares
980,000 shares of common stock and no shares of Preferred Stock are issued and
outstanding, all of which are owned and held by the Parent and held by the
persons set forth on Schedule 2.4. No such shares were issued in violation of
the preemptive rights of any stockholder.
(e) The entire authorized capital stock of Xxxxxxxx.xxx consists
solely of 4,000,000 shares of Common Stock and owned by the Persons set forth on
Schedule 2.4. No such shares were issued in violation of the preemptive rights
of any stockholder.
(f) Except for the options issued hereunder and as set forth in
Schedule 2.4 attached hereto, there are no options, warrants, rights,
convertible securities or other agreements or commitments obligating or any SBW
Company to issue, transfer or sell, or cause the issuance, transfer or sale of,
any shares of its capital stock or to make any payments in respect of the value
of any such shares.
(g) Except as listed in this Section 2.4 or Schedule 2.4, none of the
Parent, SBR, HBR, or Xxxxxxxx.xxx holds any equity interest in any other Person.
SECTION 2.5 Charter Documents and Corporate Records. The Sellers and
Xxxxxxxx.xxx have delivered to the Purchaser true and complete copies of the
Certificate of Incorporation and by-laws (or comparable charter documents) of
each Seller, as in effect on the date hereof.
SECTION 2.6 Financial Information. True capable and current copies of
Tax Returns of SBR for fiscal year 1997, fiscal year 1998 and fiscal year 1999
have been furnished to Purchaser; Schedule 2.6 attached hereto contains (i)
financial statements of SBR for fiscal years 1997, 1998 and 1999, and for the
fiscal period ending June 30, 2000 and (ii) a budget (the "Budget") of Parent
and SBR outlining the use of the Purchase Price for fiscal year 2000. After the
date hereof, any deviation of 5% or more from the outlined expenditures listed
in the Budget attached as Schedule 2.6 must be approved by Purchaser in writing.
SECTION 2.7 Properties; Title. (a) The Sellers do not own any real
property. There are no leases under which any Seller is a lessee.
(b) To the knowledge of the Sellers, all structures and buildings of
the Business are in good operating condition (subject to normal wear and tear).
(c) Each SBW Company has good, valid, marketable, legal and beneficial
title to (or valid leasehold interest in) all of its Assets and is the lawful
owner of its Assets, free and clear of all Liens. The machinery, equipment and
other tangible personal property constituting part of the Assets of the SBW
Companies (whether owned or leased) have been maintained in a commercially
reasonable manner, are in generally good condition and repair (subject to normal
wear and tear). There are no outstanding options, warrants, commitments,
agreements or any other rights of any character, entitling any Person other than
the Purchaser to acquire any interest in all, or any part of, such Assets. There
is no (i) equipment, and (ii) other tangible personal property of the Sellers
with a book value (before depreciation) of $50,000 or more, in each case,
excluding Inventory.
SECTION 2.8 Material Contracts. Attached hereto as Schedule 2.8 is a
list of and true and correct copies of all material contracts entered into by
the Sellers and Xxxxxxxx.xxx
SECTION 2.9 Intangible Property and Warranties. (a) Schedule 2.9
attached hereto together with the licenses set forth in the Material Contracts
listed on Schedule 2.8 sets forth a true, correct and complete list of all
material patents, trademarks, copyrights, service marks (and all applications
for any of the foregoing), Permits, license agreements, grants and licenses
running to or from, or used by, each Seller and Xxxxxxxx.xxx in the conduct of
their business, and there are no other material patents, trademarks, material
copyrights, material service marks, or other material intangible assets,
properties or rights that are used in the Business (the "Intellectual Property
Rights"). All of the URLs listed on Schedule 2.9 are registered in the name of
the SBW Companies. The SBR Companies have no material trade names other than the
URLs and their corporate names.
(b) (i) The Sellers and Xxxxxxxx.xxx own the entire right, title and
interest in and to the respective Intellectual Property Rights and HBR is and
will remain the sole owner of all existing and future Intellectual Property
Rights used, or to be used, by HBR;
(ii) the Intellectual Property Rights are either valid and
enforceable;
(iii) the business activities of the Sellers and Xxxxxxxx.xxx
have not and do not infringe or conflict with patent or any other intellectual
property rights of any third party;
(iv) The Sellers and Xxxxxxxx.xxx have not granted any license or
permission to any third party to use the Intellectual Property Rights except
that SBR has granted to HBR the licenses that are attached as Schedule 2.9; and
(v) the Transaction and the Other Contemplated Transactions will
not adversely affect any right of the Purchaser to enjoy as owner or licensee
all of the Intellectual Property Rights in the same manner thereof as if the
Purchaser were the applicable SBW Company.
SECTION 2.10 Claims and Proceedings. Except as set forth in Schedule
2.10 attached hereto, there are no outstanding Orders of any Governmental Body
against or directly involving by name any of the Sellers or Xxxxxxxx.xxx, their
Assets, or the Business. Except as set forth in Schedule 2.10 attached hereto,
there are no actions, suits, asserted claims or counterclaims or legal,
administrative or arbitral proceedings or, to the Sellers' knowledge,
investigations (collectively, "Claims") (whether or not the defense thereof or
Liabilities in respect thereof are covered by insurance), pending or, to the
knowledge of the Seller, threatened on the date hereof, against or involving any
of the Sellers or Xxxxxxxx.xxx, the Purchased Shares, the Assets of any of the
Sellers or the Business. Schedule 2.10 attached hereto also indicates those
Claims the defense thereof or Liabilities in respect thereof are covered by
insurance. Except as set forth on Schedule 2.10 attached hereto, on the date
hereof there are no Claims pending or, to the knowledge of the Sellers,
threatened, other than Claims that would not have a Material Adverse Effect upon
the applicable Seller or Xxxxxxxx.xxx. There are no Claims pending or, to the
knowledge of the Sellers, threatened that would give rise to any right of
indemnification on the part of any director or officer of a Seller or the heirs,
executors or administrators of such director or officer, against such Seller.
SECTION 2.11 Taxes. (a) Except as set forth in Schedule 2.11 attached
hereto:
(i) the SBW Companies have timely filed or, if not yet due, will
timely file, all federal, state or foreign Tax Returns required to be filed by
it for all taxable periods ending on or before a Closing Date and all such Tax
Returns are, or will be when filed, true, correct and complete in all material
respects. Copies of all such Tax Returns have been given to the Purchaser;
(ii) the SBW Companies have paid or, if payment is not yet due,
have established, in accordance with GAAP and consistent with past practice,
accruals that are reflected on Schedule 2.6 attached hereto for the payment of,
all Taxes imposed on the SBW Companies or for which the SBW Companies are
liable, whether to taxing authorities or to other Persons (pursuant to a tax
sharing agreement or otherwise);
(iii) no extension of time has been requested or granted for a
SBW Company to file any Tax Return that has not yet been filed or to pay any Tax
that has not yet been paid;
(iv) the SBW Companies have not received notice of a
determination by a Tax Authority that Taxes are owed by the SBW Companies (such
determination to be referred to as a "Tax Deficiency") and, to the knowledge of
the SBW Companies, no Tax Deficiency is proposed or threatened;
(v) no issue has been raised in any examination, investigation,
audit, suit, action, claim or proceeding relating to Taxes (a "Tax Audit")
which, by application of similar principles to any past, present or future
period, would result in a Tax Deficiency for such period;
(vi) there are no pending or, to the knowledge of the Sellers,
threatened, Tax Audits of the SBW Companies;
(b) The Sellers have (i) income reportable for a period ending after
the Closing Date, but attributable to a transaction (e.g., installment sale) or
a change in accounting method occurring in or made for a period ending on or
prior to the Closing Date which resulted in a deferred reporting on income from
such transaction or from such change in accounting method (other than a deferred
intercompany transaction), or (ii) a deferred gain or loss arising out of any
deferred intercompany transaction, which income, gain or loss has been reflected
on Schedule 2.6 attached hereto in accordance with GAAP, but for which no Tax
liability accrual has been reflected on Schedule 2.6 attached hereto.
(c) Schedule 2.11 attached hereto contains (i) a schedule of the
filing dates of all Tax Returns required to be filed by the SBW Companies, (ii)
a description of all past Tax Audits involving the SBW Companies, (iii) a list
of the states, territories and jurisdictions (whether foreign or domestic) to
which any Tax is properly payable by the SBW Companies. The SBW Companies have
retained all supporting and backup papers, receipts, spreadsheets and other
information necessary for (i) the preparation of all Tax Returns that have not
yet been filed, and (ii) the defense of all Tax Audits involving taxable periods
either ending on or during the four (4) years prior to the Initial Closing or
from which there are unutilized net operating loss, capital loss or investment
tax credit carryovers.
(d) Except for sales, use and similar Taxes which do not exceed
$100,000, the SBW Companies have collected and remitted to the appropriate Tax
Authority all sales and use or similar Taxes required to have been collected,
including any interest and any penalty, addition to tax or additional amount
unpaid, and has been furnished properly completed exemption certificates for all
exempt transactions. To the knowledge of the SBW Companies, the Sellers have
collected and/or remitted to the appropriate Tax Authority all withholding,
payroll, employment, property, customs duty, fee, assessment or charge of any
kind whatsoever (including Taxes assessed to real property and water and sewer
rents relating thereto), including any interest and any penalty, addition to tax
or additional amount unpaid.
SECTION 2.12 Employee Benefit Plans. (a) Set forth in Schedule 2.12
attached hereto is a list of each employee benefit plan (within the meaning of
Section 3(3) of ERISA), current, accurate and complete copies of each to be
delivered to Purchaser at the Initial Closing, written or oral employment or
consulting agreement, severance pay plan or agreement, employee relations policy
(or practice, agreement or arrangement), agreements with respect to leased or
temporary employees, vacation plan or arrangement, sick pay plan, stock purchase
plan, stock option plan, fringe benefit plan, incentive plan, bonus plan,
cafeteria or flexible spending account plan and any deferred compensation
agreement (or plan, program, or arrangement) covering any present or former
employee of a Seller and which is, or at any time during the last two (2) years
was, sponsored or maintained by (or to which contributions are required to be,
were during the last two (2) years or were required to have been during the last
two (2) years) a Seller. Each and every such plan, program, policy, practice,
arrangement and agreement included on the list set forth in Schedule 2.12
attached hereto is hereinafter referred to as an "Employee Benefit Plan".
(b) With respect to any employee benefit plan (within the meaning of
Section 3(3) of ERISA), stock purchase plan, stock option plan, fringe benefit
plan, bonus plan or any deferred compensation agreement, plan or program
(whether or not any such plan, program or agreement is currently in effect):
there are no actions, suits or claims (other than routine claims for benefits in
the ordinary course) pending or, to the knowledge of the Sellers, threatened,
and the Sellers have no knowledge of any facts which could reasonably give rise
to any such actions, suits or claims (other than routine claims for benefits in
the ordinary course), which could subject any Sellers to any liability.
(c) (i) except as set forth in Schedule 2.12 attached hereto, the
Sellers are not subject to any legal, contractual, equitable or other obligation
to (1) establish as of any date any employee benefit plan of any nature,
including any pension, profit sharing, welfare, post-retirement welfare, stock
option, stock or cash award, non-qualified deferred compensation or executive
compensation plan, policy or practice, or (2) continue any employee benefit plan
of any nature, including any Employee Benefit Plan or any other pension, profit
sharing, welfare or post-retirement welfare plan, or any stock option, stock or
cash award, non-qualified deferred compensation or executive compensation plan,
policy or practice (or to continue their participation in any such benefit plan,
policy or practice) on or after the date hereof;
(ii) the Sellers may, in any manner, subject to the limitations
imposed by applicable law, and without the consent of any employee, beneficiary
or other Person, prospectively terminate, modify or amend any such Employee
Benefit Plan or any other plan, program or practice (or its participation in
such Employee Benefit Plan or any other plan, program or practice) effective as
of any date on or after the date hereof; and
(iii) except as set forth in Schedule 2.12 attached hereto, to
the knowledge of the Sellers, no representations or communications (directly or
indirectly, orally, in writing or otherwise) with respect to participation,
eligibility for benefits, vesting, benefit accrual coverage or other material
terms of any Employee Benefit Plan have been made to any employee, beneficiary
or other Person other than those which are in accordance with the terms and
provisions of each such Plan as in effect immediately prior to the date hereof
and the Initial Closing.
SECTION 2.13 Employee-Related Matters. (a) There are no officers or
employees of the Sellers whose aggregate compensation exceeds $150,000 per annum
except as set forth on Schedule 2.13. There are no severance, accrued vacation
obligations or retiree benefits of any current or former director, officer or
employee including, but not limited to, stay-in-place bonuses whom the Purchaser
has agreed to continue to employ. The employment or contractual arrangement of
all such Persons is terminable at will without additional or further economic
obligation on the part of any Seller.
(b) (i) the Sellers are not a party to any Contract with any labor
organization or other representative of its employees; (ii) there is no unfair
labor practice charge or complaint pending or, to the knowledge of the Sellers,
threatened against any Seller, nor has any been pending or threatened within the
past three (3) years; (iii) the Sellers have not experienced any labor strike,
picketing, hand billing, slowdown, work stoppage or similar labor controversy
within the past three (3) years; (iv) no representation question is pending or
has been raised respecting any of the employees of a Seller working within the
past three (3) years, nor, to the knowledge of the Sellers, are there any
campaigns being conducted to solicit authorization from the employees of any
Seller to be represented by any labor organization; (v) no Claim before any
Governmental Body brought by or on behalf of or relating to any employee,
prospective employee, former employee, retiree, labor organization or other
representative of the employees of the Sellers or relating to their employment
practices, is pending or, to the knowledge of the Sellers, threatened against
any Seller; (vi) no Seller is a party to, or otherwise bound by, any Order
relating to its employees or employment practices; and (vii) the Sellers have
paid in full to all of their employees all wages, salaries, commissions,
bonuses, benefits and other compensation due and payable to such employees
consistent with past practices (except for disputed amounts).
SECTION 2.14 Insurance. Schedule 2.14 attached hereto sets forth a
list of all insurance policies, fidelity and surety bonds and fiduciary
liability policies (the "Insurance Policies") covering the Assets, the Business,
operations, employees, officers and directors of the Sellers and true and
complete copies of all such Insurance Policies have been delivered to the
Purchaser. Schedule 2.14 attached hereto also sets forth a true and complete
list of Claims made in respect of Insurance Policies during the two (2) years
prior to the date hereof (other than under health or other employee benefit
policies). All Insurance Policies are in full force and effect and will remain
in effect up to the Closing and thereupon terminate. To the knowledge of the
Sellers, there is not any threatened termination of, premium increase with
respect to, or uncompleted requirements under, any material Insurance Policy.
SECTION 2.15 Compliance with Laws. To the knowledge of the Sellers, no
Seller or Xxxxxxxx.xxx is in violation of any order, judgment, injunction,
award, citation, decree, consent decree or writ (collectively, "Orders"), or any
law, statute, code, ordinance, rule, regulation or other requirement
(collectively, "Laws"), of any government or political subdivision thereof,
whether federal, state, local or foreign, or any agency or instrumentality of
any such government or political subdivision, or any court or arbitrator
(collectively, "Governmental Bodies"), except where any such violation would not
have a Material Adverse Effect upon such Seller or Xxxxxxxx.xxx.
SECTION 2.16 Permits and Licenses. Each Seller and Xxxxxxxx.xxx has
obtained all licenses, permits (including environmental permits), certificates,
certificates of occupancy, orders, authorizations and approvals (collectively,
"Permits"), and has made all required registrations and filings with, any
Governmental Body that are required for the conduct of its Business. There are
no Permits that are required for the conduct of the Business (the "Required
Permits").
SECTION 2.17 Environmental Matters.
(i) to the best knowledge of the Sellers, the Sellers are in
material compliance with all Environmental Laws;
(ii) to the best knowledge of the Seller, there have been no
Releases of Hazardous Substances by the Sellers or violations of Environmental
Laws by the Sellers;
(iii) the Sellers have not received oral or written notice of a
violation or of a claim of potential or actual liability by any Governmental
Body or third-party against a Seller under Environmental Laws, nor are any such
potential claims known to the Sellers;
SECTION 2.18 Finders' Fees. Except Xxxxxxx Xxxxxxxxx, who has been
engaged by the Seller, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of SBR
who might be entitled to any fee or commission from the Purchaser or any Sellers
upon consummation of the Transaction and the Other Contemplated Transactions.
The Sellers have agreed to pay Xxxxxxx Xxxxxxxxx a fee of 6% of the Purchase
Price as follows: (i) $75,000 in cash, of which $25,000 has been paid and the
balance in shares as set forth on Schedule 2.4. Except as set forth in this
Section 2.18, Xxxxxxx Xxxxxxxxx is entitled to no further fees or commissions in
connection with the Transaction.
SECTION 2.19 Depositories; Powers of Attorney, Etc. Schedule 2.19
attached hereto sets forth (i) the name of each bank or similar entity in which
each Seller has an account, lock box or safe deposit box and the names of all
Persons authorized to draw thereon or to have access thereto, and (ii) the name
of each Person holding a general or special power of attorney from a Seller and
a description of the terms thereof.
SECTION 2.20 Principals Investment. The Principals have made
investments in the Sellers in the aggregate of at least $1,200,000 since
inception and such investment has not been withdrawn except as set forth on
Schedule 2.20. Such investments are duly reflected on the Sellers' 1997, 1998
and 1999 tax returns.
SECTION 2.21 No Activities. HBR and the Parent have not conducted any
business or activities, other than those incidental to their formation and
organization.
SECTION 2.22 Subsequent Debt of the Seller. From and after the date of
this Agreement and so long as the Buyer Loans are outstanding, the Sellers shall
not incur any debt senior to the Buyer Loans or Existing Buyer Loans, or any
secured debt other than the Buyer Loans and Existing Buyer Loans, with the
exception of trade debt, without the prior written consent of the Purchaser,
which consent shall be granted or withheld within seven (7) business days
following Buyer's receipt of the terms of, and all legal documents relating to,
such debt.
SECTION 2.23 Seller's Web-Site. As of the date of this Agreement,
SBR's web-site at xxx.xxxxxxxxxxx.xxx is operational.
SECTION 2.24 Disclosure; Schedules. Neither this Agreement nor the
Schedules, nor any audited or unaudited financial statements, documents or
certificates furnished or to be furnished to the Purchaser or any of its Agents
or Affiliates by or on behalf of the Sellers pursuant to this Agreement or in
connection with the Transaction and the Other Contemplated Transactions contain
or will contain any untrue statement of a material fact or omit or will omit a
material fact necessary in order to make the statements contained herein or
therein not misleading. All representations and warranties made by the Sellers
will be deemed to have been relied on by the Purchaser (notwithstanding any
investigation by the Purchaser).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser, represents and warrants to the Sellers as of the date
of this Agreement and as of each Closing Date (as if each such representation
and warranty was made on such Closing Date), that:
SECTION 3.1 Authority Relative to This Agreement. The Purchaser has
full limited liability company power and authority to execute and deliver this
Agreement and each other Transaction Document to which it is a party and to
consummate the Transaction and the Other Contemplated Transactions. The
execution, delivery and performance by the Purchaser of this Agreement and the
other Transaction Documents to which it is a party and the consummation by it of
the Transaction and the Other Contemplated Transactions have been duly and
validly authorized and approved by the Purchaser, and no other proceeding on the
part of the Purchaser is necessary to authorize the execution and delivery by
the Purchaser of this Agreement or the other Transaction Documents to which the
Purchaser is a party or the consummation of the Transaction and the Other
Contemplated Transactions to which the Purchaser is a party. This Agreement has
been duly and validly executed and delivered by the Purchaser and (assuming the
valid execution and delivery of this Agreement by the other parties hereto)
constitutes the legal, valid and binding agreement of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as such obligations
and their enforceability may be limited by applicable bankruptcy and other
similar laws affecting the enforcement of creditors' rights generally and except
that the availability of equitable remedies is subject to the discretion of the
court before which any proceeding therefor may be brought (whether at law or in
equity).
SECTION 3.2 No Conflicts; Consents. Neither the execution, delivery
and performance by the Purchaser of this Agreement and each other Transaction
Document to which it is a party nor the consummation of the Transaction and the
Other Contemplated Transactions to which the Purchaser is a party (i) violates
any provision of the Certificate of Incorporation or by-laws (or comparable
charter documents) of the Purchaser; (ii) requires the Purchaser to obtain any
consent, approval or action of or waiver from, or make any filing with, or give
any notice to, any Governmental Body or any other Person; (iii) violates,
conflicts with or results in the breach or default under (after the giving of
notice or the passage of time), or permits the termination of, any material
Contract to which the Purchaser is a party or by which any of them or any of
their respective assets may be bound or subject; or (iv) violates any Law or
Order of any Governmental Body against, or binding upon, the Purchaser or upon
its assets or businesses.
SECTION 3.3 Corporate Existence and Power. The Purchaser is a limited
liability corporation duly formed, and validly existing under the laws of the
State of Delaware and has all requisite powers and all material Permits required
to own, lease and operate its properties and to conduct its business as
currently conducted. The Purchaser is duly qualified to do business as a foreign
limited liability company in each jurisdiction where the character of the
property owned or leased by the Purchaser or the nature of its activities, makes
such qualification necessary, except for those jurisdictions where the failure
to be so qualified would not have a material adverse effect on the business,
assets, financial condition or the results of operations of the Purchaser.
SECTION 3.4 Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Purchaser who might be entitled to any fee or commission from
the Seller upon consummation of the Transaction and the Other Contemplated
Transactions.
SECTION 3.5 Investment. The Purchaser is not acquiring the Purchased
Shares with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act of 1933, as amended.
ARTICLE IV
COVENANTS AND AGREEMENTS PRIOR TO
AND SUBSEQUENT TO CLOSING
SECTION 4.1 Corporate Examinations and Investigations. So long as the
Purchaser holds or has the right to purchase at least ten percent (10%) of the
outstanding Parent Common Stock, the Sellers agree that the Purchaser shall be
entitled, through its directors, officers, attorneys, and accountants
(collectively, the "Agents") to make such investigation of the Business and the
Assets and operations of the Sellers (and any other SBW Company), and such
examination of the books, records and financial condition of the Sellers (and
any other SBW Company), as the Purchaser shall deem necessary or appropriate.
Any such investigation and examination shall be conducted at reasonable times,
under reasonable circumstances and upon ten (10) days written notice to the
Sellers (and any other SBW Company), and the Sellers (and any other SBW Company)
shall, cooperate fully therein. In that connection, the Sellers (and any other
SBW Company) shall make available to the Agents during such period, without
however causing any unreasonable interruption in the operations of the Business,
all such information and copies of such documents and records concerning the
affairs of the Sellers (and any other SBW Company) as the Agents may reasonably
request, shall permit the Agents access to the Assets of the Sellers and all
parts thereof and to the Sellers' Agents, customers, suppliers and others, and
shall cause the Sellers' Agents to cooperate fully in connection with such
review and examination. No investigation by the Purchaser shall diminish or
obviate any of the representations, warranties, covenants or agreements of the
Sellers contained in this Agreement.
SECTION 4.2 Consents, Filings and Authorizations; Efforts to
Consummate. As promptly as practicable after the date hereof, the Purchaser and
the Sellers shall make all filings and submissions under such Laws as are
applicable to them or to their respective Affiliates, as may be required for
them to consummate the Transaction and the Other Contemplated Transactions in
accordance with the terms of this Agreement and shall furnish copies thereof to
each other party prior to such filing and shall not make any such filing or
submission to which the Sellers or the Purchaser, as the case may be, reasonably
objects in writing. All such filings shall comply in form and content in all
material respects with applicable Law. Subject to the terms and conditions
herein, each party hereto, without payment or further consideration, shall use
its best efforts to take or cause to be taken all action and to do or cause to
be done all things necessary, proper or advisable under applicable Laws, Permits
and Orders, to consummate and make effective, as soon as reasonably practicable,
the Transaction and the Other Contemplated Transactions, including the obtaining
of all Required Consents and Permits or consents of any third party, whether
private or governmental, required in connection with such party's performance of
such transactions and each party hereto shall cooperate with the other in all of
the foregoing.
SECTION 4.3 Negotiations With Others. So long as the Purchaser holds
or has the right to purchase at least ten percent (10%) of the outstanding
Parent Common Stock, the Sellers hereby agree that the Sellers shall immediately
notify the Purchaser of the receipt of any letter of intent, term sheet or
similar document related to any sale of any interest in any Sellers (and any
other SBW Company), or any substantial portion of the Business, or the Assets or
the capital stock of any Sellers (and any other SBW Company), directly or by
merger or consolidation.
SECTION 4.4 Notices of Certain Events. The Sellers and the Purchaser
shall promptly notify each other of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
Transaction and the Other Contemplated Transactions;
(b) any notice or other communication from any Governmental Body in
connection with the Transaction, any Collateral and the Other Contemplated
Transactions; and
(c) any event, condition or circumstance that would constitute a
material breach of any representation or warranty, whether made as of the date
hereof or as of a Closing Date, or that would constitute a violation or breach
of any covenant of any party contained in this Agreement or any other
Transaction Document; and
(d) the default by any SBW Company in any obligation for borrowed
money or any other material indebtedness or obligation.
(e) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect with respect to any SBW
Company.
SECTION 4.5 Public Announcements. The Sellers and the Purchaser will
consult with each other before issuing any press release or otherwise making any
public statement with respect to the Transaction and the Other Contemplated
Transactions, and will not issue any such press release or make any such public
statement without the prior approval of the Sellers or the Purchaser, as the
case may be, except as may be required by applicable Law in which event the
other party shall have the right to review and comment upon (but not approve)
any such press release or public statement prior to its issuance.
SECTION 4.6 Confidentiality. (a) The Purchaser shall hold in strict
confidence, and shall use its best efforts to cause all of its Agents to hold in
strict confidence, unless compelled to disclose by judicial or administrative
process, or by other requirements of Law, all Confidential Information (defined
below) concerning the Sellers which any of them has obtained from the Sellers or
their Agents prior to, on or after the date hereof, in connection with the
Transaction and the Other Contemplated Transactions, and the Purchaser shall not
use or disclose to others, or permit the use of or disclosure of, any such
Confidential Information so obtained, and will not release or disclose such
information to any other Person, except the Agents who need to know such
information in connection with this Agreement (and who shall be advised of the
provisions of this Section 4.6). The foregoing provisions shall not apply to any
such information to the extent (i) known by Purchaser prior to the date such
information was provided to Purchaser by or on behalf of the Sellers in
connection with the Transaction and the Other Contemplated Transactions, (ii)
made known to the Purchaser from a third party, to the knowledge of the
Purchaser, not in breach of any confidentiality requirement, or (iii) made
public through no fault of the Purchaser or any of its Agents.
(b) If this Agreement is terminated as provided herein and the
Transaction and the Other Contemplated Transactions are not consummated and if
requested by the Sellers, the Purchaser shall return to the Sellers all tangible
evidence of such information regarding the Sellers, or provide, at the
Purchaser's option, a certificate to the Sellers stating that such information
has been destroyed.
(c) The term "Confidential Information" shall mean all written
information provided to the Purchaser by, for or on behalf of the Sellers or
their Agents and will also include, without limitation, any Confidential
Information obtained through due diligence activities, as well as all notes,
compilations and analyses derived therefrom and all copies, summaries, notes and
other written materials so provided.
(d) In the event that the Purchaser or any of their Agents are
requested in any legal or governmental proceeding to disclosure any of the
Confidential Information, the Purchaser or such Agents, as the case may be,
shall give the Sellers prompt written notice of such request so that the Sellers
may seek an appropriate order or decree restricting such disclosure. If, in the
absence of such an order or decree, the Purchaser or its Agents are nonetheless
compelled to disclose any Confidential Information, the Purchaser or such Agent,
as the case may be, may disclose such information in such proceeding without
liability hereunder provided that the Purchaser or such Agent gives the Sellers
written notice of the Confidential Information to be disclosed as far in advance
of its disclosure as is practicable and, upon the Seller's request and at its
expense, the Purchaser or such Agent shall use its reasonable commercial efforts
to assist the Sellers to obtain assurances that confidential treatment will be
accorded to such information.
(e) The Confidential Information will be kept confidential by the
Purchaser and will not be photocopied, distributed or disclosed to any person
other than their Agents for the sole purpose of the Transaction and the Other
Contemplated Transactions. Each Agent of the Purchaser shall be advised of this
Agreement by the Purchaser, and shall agree to be bound by the terms of this
Agreement and shall not disclose such information to any other individual or
entity other than to another Agent or to the Purchaser or as permitted by
Section 4.6(a). The Purchaser agrees to be responsible for the breach of this
Section 4.6 by its Agents.
(f) For a period of two years from the date hereof, without the prior
written consent of the Sellers, the Purchaser will not, and will direct its
Agents not to hire or solicit the employment of any employees of the Sellers
listed in Schedule 4.6 attached hereto.
SECTION 4.7 Expenses. Documented paid fees and expenses of Xxxxxxxxxx
Xxxxxxx PC as the Purchaser's counsel in connection with the preparation,
execution and performance of this Agreement and the Transaction and the Other
Contemplated Transactions shall be deemed to be an additional Buyer Loan and
shall be repaid upon the repayment of the Buyer Loans.
SECTION 4.8 Financial Statements and Other Information. The Parent
will furnish to the Purchaser:
(a) within 90 days after the end of its fiscal year, for each of the
Parent and of SBR, an audited consolidated balance sheet and related statements
of operations, stockholders' equity and cash flows as of the end of and for such
year, setting forth in comparative form the figures for the previous fiscal
year, all prepared by independent public accountants reasonably acceptable to
the Purchaser (without any qualification or exception as to the scope of such
audit), to the effect that such financial statements present fairly in all
material respects the financial condition and results of operating of the Parent
(and its consolidated subsidiaries) on a consolidated basis and of HBR in
accordance with GAAP, consistently applied, with an accompanying certification
to the same effect from the president of the Parent and of HBR.
(b) beginning with months completed after the Eleventh Closing, within
20 days after the end of each such month, a consolidated balance sheet and
related statements of operations of the Parent (and its consolidated
subsidiaries) and of HBR ("Monthly Financial Statement") as of the end of and
for such fiscal month and the then elapsed portion of the fiscal year, all
prepared on a compilation basis by independent certified public accountants
reasonably acceptable to Purchaser and certified by the president of the Parent
and of HBR as presenting in all material respects the financial condition and
results of operations of the Parent (and its consolidated subsidiaries) and of
HBR in accordance with GAAP consistently applied.
(c) promptly after request by the Purchaser, such further financial
statements and reports in such form as the Purchaser may request including,
without limitation, such statements and reports that the Purchaser may require
to permit the Purchaser to comply with applicable securities and other laws in
connection with its investment in the Sellers.
SECTION 4.9 Further Assurances. Each Seller hereby agrees, without
further consideration, to execute and deliver, or to cause to be executed and
delivered on its behalf, such other instruments of transfer or granting of
perfection of liens or assignments and take such other action as the Purchaser
may reasonably request in order to put the Purchaser in possession of, and to
vest in the Purchaser, good, valid, and unencumbered title to the Purchased
Shares, and valid, duly perfected liens and assignments of the Collateral in
accordance with this Agreement and to consummate the Transaction and the Other
Contemplated Transactions. The Purchaser hereby agrees, without further
consideration, to take such other action following a Closing and execute and
deliver such other documents as the Sellers may reasonably request in order to
consummate the Transaction and the Other Contemplated Transactions in accordance
with this Agreement.
SECTION 4.10 Tax Matters. All sales Taxes (including any penalties and
interest) incurred in connection with the transfer of the Purchased Shares or
the consummation of the Transaction and the Other Contemplated Transactions
shall be borne and paid by the Sellers when due, and the Sellers will, at their
own expense, file all necessary Tax Returns and other documentation with respect
to all such Taxes and fees.
SECTION 4.11 Purchaser's Board Representation. Promptly after the
execution hereof, each of the Parent and SBR shall cause to be elected to its
board of directors, one person appointed by the Purchaser and such person or his
or her replacement as shall from time to time be designated by Purchaser, such
designee to be reasonably approved by Sellers, shall serve as long as Buyer owns
not less than 15% of the outstanding voting stock of Parent.
SECTION 4.12 Affiliate Transactions. No SBW Company shall engage in
any transactions with any Affiliate except with the express prior written
consent of a majority of the members of the Board of Directors of the Parent who
are not Affiliates or employed by an Affiliate, except as set forth on Schedule
4.12
SECTION 4.13 Approval of Certain Transactions. No Seller shall effect
any merger or consolidation of such Seller into another corporation or entity
(whether or not such Seller is the surviving corporation) or sell a material
portion of its assets, unless such Seller (or its stockholders in their capacity
as stockholder) shall receive in such transaction at least $22,000,000 or the
Purchaser shall have consented in writing to such transaction. No Seller shall
reclassify or redeem the stock of the Selling Stockholders without the written
consent of the Purchaser. No Seller shall issue any of its equity securities (or
securities convertible into or exchangeable for equity securities) unless such
issuance shall be at a pre-money valuation of at least $15,000,000 or the
Purchaser shall have consented in writing to such transaction. No Selling
Stockholder shall sell any equity securities of a Seller unless such the
valuation of such Seller, determined by the price of such sale, is at least
$15,000,000 or the Purchaser shall have consented in writing to such sale.
Purchaser shall grant or withhold its consent within seven (7) business days of
Purchaser's receipt of the terms of and all legal documents relating to such
transactions.
SECTION 4.14 Fiscal Years. The Parent and its consolidated
subsidiaries have a fiscal year that ends on December 31.
SECTION 4.15 Negative Covenants. (a) The Sellers agree that from the
date hereof to the date that the Purchaser has made its last payment required
under Section 1.1, none of the Sellers, without the written consent of the
Purchaser, shall:
(i) change any provision of its Certificate of Incorporation or
Bylaws or any similar governing documents;
(ii) change the number of shares of its authorized capital stock;
(iii) grant any option, warrant, call, commitment, subscription,
right to purchase or agreement of any character (collectively "Purchase Rights")
relating to the authorized or issued capital stock of the Sellers any securities
convertible into shares of such stock, or split, combine or reclassify any
shares of its capital stock, or declare, set aside or pay any dividend, or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any shares of such
capital stock, except for the grant of stock options or warrants to be issued to
employees, consultants and strategic customers for up to 500,000 shares of
Parent Common Stock and in connection with capital raising transactions
expressly permitted by the Agreement.
(iv) sell, dispose of, or encumber in any matter any substantial
asset (including with respect to the Parent, the stock of HBR, SBR and
Xxxxxxxx.xxx) or incur any significant liabilities;
(v) acquire in any manner whatsoever any business or entity;
(vi) increase the rate of compensation for, or amend any
employment agreement or noncompetition between any SBW Company and, Xx. Xxxxxx,
Xx. Xxxx or any other officer, provided however that if no Event of Default has
occurred and is continuing, the Board of Directors of Parent or SBR may increase
annually the future compensation of Xx. Xxxxxx and Xx. Xxxx by up to fifteen
percent per year, beginning after April 15, 2001; or
(vii) agree to do any of the foregoing.
(b) In the event that the Sellers do not have positive cash flow and
do not obtain a minimum of $1.5 million of equity or debt financing on or before
January 15, 2001, the Sellers shall defer all compensation payments due to
Messrs. Boorin and Xxxx for a period of six months. Boorin and Xxxx, by
execution of this Agreement, agree to such deferral and that such deferral shall
not be deemed a default of their employment or non-competition agreements.
Notwithstanding the previous sentence, as soon as financing is obtained or there
is positive cash flow in any calendar month, Sellers may pay deferred
compensation to the extent of such positive cash flow (whether from operations
or additional financing).
SECTION 4.16 Call Right. Prior to March 31, 2000, Purchaser shall be
required to sell to a third party investor or SBW in the Parent its equity in
the Parent representing up to twenty-three percent of the Parent's Common Stock
outstanding if all of the Buyer Loans and Existing Buyer loans are repaid in
full and such sale price is based upon a valuation of the Parent of at least $15
million.
SECTION 4.17 Default. Seller hereby agree that if an Event of Default
shall occur, the Purchaser shall be entitled to exercise (in any order and in
any combination) all rights and remedies available to Purchaser, including
without limitation those under the Security Agreement, those under the Guaranty
Agreements (subject to Section 1.1(b)) and the acceleration of the maturity of
the Buyer Loans, and all rights and remedies available at law or in equity or
any other agreement involving a Seller.
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1 Conditions to the Obligations of Sellers and Purchaser.
The obligations of the Sellers and the Purchaser to consummate the Transaction
and the Other Contemplated Transactions are subject to the satisfaction of the
following conditions on or prior to each Closing Date:
(a) No Injunction. No provision of any applicable Law and no Order
shall prohibit the consummation of the Transaction and the Other Contemplated
Transactions.
(b) No Proceeding or Litigation. No Claim instituted by any Person
shall have been commenced or pending against the Seller, or the Purchaser or any
of their respective Affiliates, officers or directors which Claim seeks to
restrain, prevent, change or delay in any material respect the Transaction and
the Other Contemplated Transactions or seeks to challenge any of the material
terms or provisions of this Agreement or seeks material damages in connection
with any of such transactions, except as would not have a Material Adverse
Effect.
SECTION 5.2 Conditions to the Obligations of Sellers. All obligations
of the Sellers to consummate the Transaction and the Other Contemplated
Transactions are subject to the fulfillment (or waiver by the Seller) on or
prior to each Closing Date of each of the following further conditions:
(a) Performance. The Purchaser shall have performed and complied with
all agreements, obligations and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date, provided that
if the Purchaser does not fund any Buyer Loan or contribute any cash due to the
circumstances described in Section 1.1(c), Sellers shall remain obligated for
all its duties and obligations hereunder and the other Transaction Documents,
but the Purchaser's only obligation to issuer's are to obtain any additional
Parent Common Stock shall be limited as provided in Section 1.1(c).
(b) Representations and Warranties. The representations and warranties
of the Purchaser contained in this Agreement and in any certificate or other
writing delivered by the Purchaser pursuant hereto shall be true in all material
respects at and as of the Closing Date as if made at and as of such time.
(c) Purchase Price. The portion of Purchase Price then due shall have
been paid by the Purchaser in accordance with Section 1.1 on the applicable
Closing Date.
SECTION 5.3 Conditions to the Obligations of Purchaser. All
obligations of the Purchaser to consummate the Transaction and the Other
Contemplated Transactions hereunder are subject to the fulfillment (or waiver by
the Purchaser) on or prior to a Closing of each of the following further
conditions:
(a) Performance. The Sellers shall have performed and complied with
all agreements, obligations and covenants required by this Agreement to be
performed or complied with by them on or prior to a Closing Date; provided,
however, that this condition shall be deemed to have not been fulfilled if the
failure to perform and comply with such agreements, obligations and covenants
causes a Material Adverse Effect.
(b) Representations and Warranties of the Sellers. The representations
and warranties of the Sellers contained in this Agreement and in any certificate
or other writing delivered by the Sellers pursuant hereto shall be true at and
as of a Closing Date as if made at and as of such time, in all material
respects, provided, however, that those representations and warranties which are
qualified by references to "material", "Material Adverse Effect" or "to the
knowledge of the Seller" shall be deemed not to include such qualifications.
(c) No Adverse Change. During the period from the Latest Balance Sheet
Date to a Closing Date, there shall not have been (x) any change in the
financial condition, results of operation or prospects of the Business; (y) any
damage, destruction, casualty, determination or other event to or affecting the
Assets of the Sellers; or (z) any Claims or Liens filed or threatened against or
affecting the Sellers or their Assets which in the case of (x), (y) and (z)
above would violate this Agreement or otherwise have a Material Adverse Effect.
(d) Required Consents. The Sellers shall deliver written evidence that
all Required Consents shall have been obtained.
(e) Required Permits. All Required Permits shall be in full force and
effect.
(f) Releases. The Sellers shall have obtained and delivered to the
Purchaser general releases and discharges of the Principals in form and
substance reasonably acceptable to the Purchaser and its legal counsel.
(g) Documentation. There shall have been delivered to the Purchaser
the following:
(i) A certificate, dated the date of the applicable Closing ., of
the Sellers confirming the matters set forth in Sections 5.3(a), (b), (c) and
(d);
(ii) A certificate, dated the date hereof, of each Seller
certifying that attached to such certificate (A) is a true and correct copy of
the Certificate of Incorporation and by-laws (or comparable instruments) of such
Seller and all amendments, if any, thereto as of the date thereof; (B) are the
names of the directors and officers of the Seller; (C) is a true copy of all
corporate actions taken by the board of directors of the Sellers (which actions
shall have been taken prior to the date of entering into this Agreement) to
authorize the Transaction and the Other Contemplated Transactions; and (D) are
the names and signatures of the duly elected or appointed officers of such
Seller who are authorized to execute and deliver this Agreement, the other
Transaction Documents to which such Seller is a party and any certificate,
document or other instrument in connection herewith;
(iii) True, correct and complete copies of all the Required
Consents and Permits;
(iv) Good standing certificates of the Sellers from the Secretary
of State (or comparable authority) of each jurisdiction in which each Seller is
organized dated a date not more than 60 days prior to the date hereof;
(v) A signed opinion of Sellers' counsel, dated a Closing Date,
addressed to the Purchaser, substantially in the form and to the effect of
Exhibit C attached hereto; to be delivered on the date hereof and to be updated
at the time of the Final Closing;
(vi) Executed Notes of SBR and any other appropriate borrower
issued to the order of the Purchaser evidencing the Buyer Loans on such Closing
Date;
(vii) Executed Guarantee Agreements of the Parent, the
Subsidiaries or Xxxxxx Xxxxxx, as the case may be, guaranteeing the Notes issued
on such Closing Date;
(viii) Executed UCC-1 financing statements, URL assignments and
other documents from the Sellers in favor of the Purchaser to perfect the
security interests in URL assignments, and assignments of the collateral under
the Security Agreement;
(ix) [Intentionally Omitted.]
(x) Secretary's certificate that the Employment Agreement and
Non-Competition Agreement of Xxxxxx Xxxxxx remain in full force and effect to be
delivered on the date hereof;
(xi) Secretary's certificate that the Employment Agreement and
Non-Competition Agreement of Xxxxxxx Xxxx remain in full force and effect to be
delivered on the date hereof;
(xii) Executed Registration Rights Agreement of the Parent
providing the Purchaser with certain registration rights with respect to the
Parent Purchased Shares;
(xiii) Evidence of key-man life insurance for Xxxxxx Xxxxxx,
President of the Seller, in the amount of $2,000,000, naming SBR as beneficiary;
(xiv) Consent by the Purchaser as to the retention of the
independent auditors of the Seller, which consent will not be unreasonably
withheld;
(xv) Execution of a consent by Xxxxxx Xxxxxx and Xxxxxxx Xxxx to
be bound by Sections 1.3, 4.3 and 4.15 of this Agreement;
(xvi) Certificates evidencing all of the Parent Purchased Shares
and HBR Purchased Shares;
(xvii) Blue Sky memorandum from Sellers counsel addressing state
laws that are relevant to the issuance of the Parent Common Stock;
(xviii) Canceled stock certificates and releases of options for
all SBW Companies, except for the remaining interests set forth on Schedule 2.4;
(xix) Financial statements for the period ending on August 31,
2000 (provided that there shall be no requirement to deliver this statement
until the Eleventh Closing); and
(xx) the Warrant; and
(xxi) an agreement evidencing the Options.
(xxii) evidence of exchange of $750,000 of Buyer Loans for Parent
Purchased Shares and Warrants.
ARTICLE VI
TERMINATION
SECTION 6.1 Termination. This Agreement may be terminated and the
Transaction and the Other Contemplated Transactions may be abandoned at any time
prior to the Closing:
(a) By mutual written consent of the parties hereto.
(b) By the Sellers, if (i) there has been a misrepresentation or
breach of warranty on the part of the Purchaser in the representations and
warranties contained herein (ii) the Purchaser has committed a breach of any
covenant imposed upon it hereunder or (iii) any condition to Sellers'
obligations hereunder becomes incapable of fulfillment through no fault of a
Seller and is not waived by the Sellers.
(c) By the Purchaser if (i) there has been a misrepresentation or
breach of warranty on the part of the Sellers in the representations and
warranties contained herein; (ii) the Sellers have committed a breach of any
covenant imposed upon it hereunder and fails to cure such breach; or (iii) any
condition to the Purchaser's obligations hereunder becomes incapable of
fulfillment through no fault of the Purchaser and is not waived by the
Purchaser.
(d) By the Purchaser, on the one hand, or by the Sellers, on the other
hand, if there shall be any Law that makes consummation of the Transaction and
the Other Contemplated Transactions illegal or otherwise prohibited, or if any
Order enjoining the Purchaser, on the one hand, or the Seller, on the other
hand, from consummating the Transaction and the Other Contemplated Transactions
is entered and such Order shall have become final and nonappealable.
SECTION 6.2 Effect of Termination; Right to Proceed. (a) In the event
of termination of this Agreement by the Sellers, on the one hand, or the
Purchaser, on the other hand, as provided in Section 6.1, this Agreement
forthwith shall become null and void and there shall be no liability on the part
of the Sellers or the Purchaser, except that upon termination of this Agreement
pursuant to:
(i) Section 6.1(b), the Purchaser shall have no further obligation
to the Sellers under this Agreement or otherwise, except with respect to the
agreements contained in Sections 4.6, 4.7 and 4.8; and
(ii) Section 6.1(c), the Sellers shall remain liable to the
Purchaser for any misrepresentation or breach of warranty or nonfulfillment of
or failure to perform any covenant or agreement of the Sellers existing at the
time of such termination, and in such event the Purchaser may seek such
remedies, including Losses against the Sellers with respect to any such breach
as are provided in this Agreement or as are otherwise available at Law or in
equity and, without limiting the generality of the foregoing, the Sellers shall
reimburse the Purchaser for all costs and expenses resulting from any such
breach.
(b) The agreements contained in Sections 4.6, 4.7, and 4.8 and
Articles VII and VIII shall survive the termination of this Agreement.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties. (a)
Notwithstanding any right of the Purchaser fully to investigate the affairs of
the Sellers and any knowledge of facts determined or determinable by the
Purchaser pursuant to such investigation or right of investigation, the
Purchaser has the right to rely fully upon the representations, warranties,
covenants and agreements of the Sellers contained in this Agreement, or listed
or disclosed on any Schedule attached hereto or in any instrument delivered in
connection with or pursuant to any of the foregoing.
(b) All representations, warranties, covenants and agreements shall
survive the execution and delivery of this Agreement and the Closing hereunder
for a period of two (2) years following the Closing Date; provided, however,
that the representations and warranties contained in Section 2.1 (Title to
Shares) shall survive in perpetuity and the representations and warranties
contained in Sections 2.15 (Taxes), 2.16 (Employee Benefit Plans) and 2.21
(Environmental Matters) shall survive for any applicable statute of limitations.
SECTION 7.2 Obligation of Sellers to Indemnify. Subject to the
limitations set forth in Section 7.5, the Sellers, jointly and severally, hereby
agree to indemnify, defend and hold harmless the Purchaser (and their directors,
officers, employees, Affiliates, successors, assigns and Agents) from and
against all Claims, losses, liabilities, damages, deficiencies, judgments,
settlements, costs of investigation or other expenses (including interest,
penalties and reasonable attorneys' fees and disbursements and expenses incurred
in enforcing this indemnification or in any litigation between the parties or
with third parties) (collectively, the "Losses") suffered or incurred by the
Purchaser or any of the foregoing Persons arising out of (a) any breach of the
representations, warranties, covenants and agreements of the Sellers or
contained in this Agreement, the Schedules attached hereto or any other
Transaction Document, or (b) any Claim, including any Claim arising out of or
relating to Environmental Laws, whether made before or after the date of this
Agreement, or any litigation, proceeding or governmental investigation,
including any Claim arising out of or relating to Environmental Laws, whether
commenced before or after the date of this Agreement, arising out of the
Business, or otherwise relating to the Sellers, prior to a Closing, or otherwise
arising out of any act or occurrence prior to, or any state or facts existing as
of, a Closing.
SECTION 7.3 Obligation of Purchaser to Indemnify. Subject to the
limitations set forth in Section 7.5, the Purchaser hereby agrees, to indemnify,
defend and hold harmless the Sellers from and against any Losses suffered by the
Sellers by reason of any breach of the representations and warranties of the
Purchaser or of the covenants and agreements of the Purchaser contained in this
Agreement, the Schedules attached hereto or any other Transaction Document.
SECTION 7.4 Notice and Opportunity to Defend Third Party Claims. (a)
Promptly after receipt by any party hereto (the "Indemnitee") of notice of any
demand, claim, circumstance or Tax Audit which would or might give rise to a
claim or the commencement (or threatened commencement) of any action, proceeding
or investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give prompt notice thereof (the "Claims Notice") to the party
or parties obligated to provide indemnification pursuant to Section 7.2 or 7.3
(the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail and shall indicate the amount (estimated, if
necessary, and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) The Indemnifying Party may elect to defend, at its own expense and
with its own counsel satisfactory to Indemnitee, any Asserted Liability, unless
(i) the Asserted Liability seeks an Order, injunction or other equitable or
declaratory relief against the Indemnitee, or (ii) the Indemnitee shall have
reasonably concluded that (x) there is a conflict of interest between the
Indemnitee and the Indemnifying Party in the conduct of such defense, or (y) the
Indemnitee shall have one or more defenses not available to the Indemnifying
Party; provided, however, that the Indemnifying Party shall not be permitted to
make such election if the Indemnifying Party fails to provide Indemnitee with
evidence reasonably acceptable to Indemnitee that the Indemnifying Party will
have the financial resources to defend against the Asserted Liability and
fulfill its indemnification obligations hereunder. If the Indemnifying Party
elects to defend such Asserted Liability, it shall within thirty (30) calendar
days (or sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the
expense of the Indemnifying Party, in the defense of such Asserted Liability. If
the Indemnifying Party assumes the defense against any Asserted Liability it
will be conclusively established for purposes of this Agreement that such
Asserted Liability is within the scope of, and subject to, indemnification. If
the Indemnifying Party elects not to defend the Asserted Liability, is not
permitted to defend the Asserted Liability by reason of the first sentence of
this Section 7.4(b), fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement with
respect to such Asserted Liability, the Indemnitee may pay, compromise or defend
such Asserted Liability at the sole cost and expense of the Indemnifying Party.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim over the reasonable written objection of the
other, provided, however, that the Indemnitee may settle or compromise any claim
as to which the Indemnifying Party has failed to notify the Indemnitee of its
election as herein provided or is contesting its indemnification obligations
hereunder. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of such Asserted Liability. If
the Indemnifying Party chooses to defend any Asserted Liability, the Indemnitee
shall make available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for such defense.
Any expenses of any Indemnitee for which indemnification is available hereunder
shall be paid upon written demand therefor.
SECTION 7.5 Payment of Indemnification Amounts. (a) The parties hereto
will act in good faith so that any amounts payable by an Indemnifying Party to
an Indemnitee pursuant to this Article VII shall be treated, for Tax purposes,
as an adjustment to the Purchase Price, unless a Final Determination with
respect to an Indemnitee or any of its Affiliates causes any such payment not to
be treated as an adjustment to Purchase Price for United States federal income
tax purposes. If such payment cannot be treated as an adjustment to the Purchase
Price for Tax purposes, then such indemnification payment shall be increased to
take account of any net Tax cost incurred by the Indemnitee as a result of the
receipt or accrual of such payments.
(b) Any amounts payable under this Article VII shall be calculated
after giving effect to any net proceeds actually received from insurance
policies covering the damage, loss, liability or expense that is the subject to
the claim for indemnity.
SECTION 7.6 Other Remedies. The provisions of this Article VII shall
not restrict or otherwise limit the legal remedies that a party to this
Agreement may seek under applicable law or otherwise for any breaches of the
representations, warranties, covenants or agreements contained herein.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. (a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally by
hand or by recognized overnight courier, telecopied or mailed (by registered or
certified mail, postage prepaid) as follows:
If to the Purchaser, one copy to:
XxxxXxxxxxx.xxx, LLC
c/o Asta Funding Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xx. Xxxx Xxxxx
with a simultaneous copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
If to the Sellers one copy to:
Small Business Resources, Inc.
00 Xxxxxxxxx Xxxxxx
Xxxx #0
Xxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xx. Xxxxxx X. Xxxxxx
with a simultaneous copy to:
Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxx Xxxxxx, Esq.
(b) Each such notice or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in Section 8.1(a) (with confirmation of transmission), or (ii) if
given by any other means, when received at the address specified in Section
8.1(a). Any party by notice given in accordance with this Section 8.1 to the
other party may designate another address (or telecopier number) or Person for
receipt of notices hereunder. Notices by a party may be given by counsel to such
party.
SECTION 8.2 Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto) and the collateral agreements executed in connection with
the consummation of the Transaction and the Other Contemplated Transactions
contain the entire agreement between the parties with respect to the subject
matter hereof and related transactions and supersede all prior agreements,
written or oral, with respect thereto, and there are no other obligations of the
Purchaser to any Seller and vice-versa.
SECTION 8.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, canceled,
renewed or extended only by a written instrument signed by the parties hereto.
The provisions hereof may be waived in writing by the parties hereto. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. Except as otherwise
provided herein, the rights and remedies herein provided are cumulative and are
not exclusive of any rights or remedies that any party may otherwise have at law
or in equity.
SECTION 8.4 Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be governed and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed entirely within such State, without regard to the conflict of laws
rules thereof.
(b) Each party hereto hereby irrevocably and unconditionally submits,
for itself and its property, to the exclusive jurisdiction of any New Jersey
State court or Federal court of the United States of America sitting in Newark,
New Jersey, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or the other Transaction
Documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
Jersey State or, to the extent permitted by law, in such Federal court.
(c) Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Transaction Documents in any New Jersey State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 8.5 Arbitration. The parties hereby covenant and agree that
any legal suit, dispute, claim, demand, controversy or cause of action of every
kind and nature whatsoever, known or unknown, fixed or contingent, that any
party may now have or at any time in the future claim to have based in whole or
in part, or arising from or out of or that in any way is related to the
negotiations, execution, interpretation or enforcement of this Agreement
(collectively, the "Disputes") shall be completely and finally settled by
submission of any such Disputes to arbitration under the rules of the American
Arbitration Association ("AAA") then in effect. There shall be one arbitrator,
and such arbitrator shall be chosen by mutual agreement of the parties in
accordance with AAA rules. Unless the parties agree otherwise, the arbitration
proceedings shall take place in New York, New York. The arbitrator shall apply
New York law to all issues in dispute. Notice of demand for arbitration shall be
filed in writing with the other party to this Agreement and with the AAA. In no
event shall the demand for arbitration be made after the date when institution
of legal or equitable proceedings based on such Dispute would be barred by the
applicable statute of limitations. The findings of the arbitrator shall be final
and binding on the parties. Judgment on such award may be entered in any court
of competent jurisdiction, or application may be made to that court for a
judicial acceptance of the award and an order or enforcement, as the party
seeking to enforce that award may elect. The prevailing party in any such action
shall be entitled to receive from the losing party all reasonable costs and
expenses, including the reasonable fees of attorneys, accountants, and other
experts, incurred by the prevailing party in investigating and prosecuting (or
defending) such action, together with any such fees which may be incurred in
enforcing any award of judgment.
SECTION 8.6 Binding Effect; No Assignment. This Agreement and all of
its provisions, rights and obligations shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors, heirs and
legal representatives. This Agreement may not be assigned (including by
operation of Law) by a party without the express written consent of the
Purchaser (in the case of assignment by the Sellers) or the Sellers (in the case
of assignment by the Purchaser) and any purported assignment, unless so
consented to, shall be void and without effect. Nothing herein express or
implied is intended or shall be construed to confer upon or to give anyone other
than the parties hereto and their respective heirs, legal representatives and
successors any rights or benefits under or by reason of this Agreement and no
other party shall have any right to enforce any of the provisions of this
Agreement.
SECTION 8.7 Exhibits. All Exhibits and Schedules attached hereto are
hereby incorporated by reference into, and made a part of, this Agreement.
SECTION 8.8 Severability. If any provision of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such illegal, invalid or unenforceable provision had never
been included herein.
SECTION 8.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
ARTICLE IX
DEFINITIONS
SECTION 9.1 Definitions. (a) The following terms, as used herein, have
the following meanings:
"Affiliate" of any Person means any other Person directly or
indirectly through one or more intermediary Persons, controlling, controlled by
or under common control with such Person including, as to any SBW Company, any
Principal or any family member of any Principal.
"Agreement" or "this Agreement" means, and the words "herein",
"hereof" and "hereunder" and words of similar import refer to, this agreement as
it from time to time may be amended.
"Assets" means properties, rights, interests and assets of every kind,
real, personal or mixed, tangible and intangible, used or usable in the
Business.
The term "audit" or "audited" when used in regard to financial
statements means an examination of the financial statements by a firm of
independent certified public accountants in accordance with generally accepted
auditing standards for the purpose of expressing an opinion thereon.
"Bona Fide Offer" is defined in Section 1.3.
"Budget" is defined in Section 2.6.
"Business" means the businesses of the SBW Companies as presently
conducted or proposed to be conducted.
"Buyer Loans" is defined in Section 1.1(a).
"Certificate of Incorporation" means, in the case of any corporation,
the certificate of incorporation, articles of incorporation or charter of a
corporation, howsoever denominated under the laws of the jurisdiction of its
incorporation.
"Closing" is defined in Section 1.1(a).
"Closing Date" shall mean each date of each Closing
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any contract, agreement, indenture, note, bond,
lease, conditional sale contract, mortgage, license, franchise, instrument,
commitment or other binding arrangement, whether written or oral.
The term "control", with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Environmental Laws" means any and all Laws (including common law),
Orders, Permits, agreements or any other requirement or restriction promulgated,
imposed, enacted or issued by any federal, state, local and/or foreign
Governmental Bodies relating to human health or the environment, including the
emission, discharge or Release of pollutants, contaminants, Hazardous Substances
or wastes into the environment (which includes ambient air, surface water,
ground water, or land), and the remediation thereof, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof, including the Clean Air
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Emergency Planning and Community Right To Know Act, the Federal Water
Pollution Control Act, the Oil Pollution Act of 1990, the Pollution Prevention
Act of 1990, the Resource Conservation and Recovery Act, the Safe Drinking Water
Act, the Endangered Species Act, the Toxic Substances Control Act, each as
amended, any state or local counterparts thereof and any state or local laws of
a similar nature for the protection of human health and welfare.
"Environmental Permits" with respect to any SBW Companies means those
Permits, authorizations, approvals and permission required to be obtained by the
Sellers under Environmental Laws in connection with the Business or the use and
operation of the Assets owned or leased by them.
"Event of Default" means any event, condition or circumstance that
would constitute a material breach of any representation or warranty by or
behalf of any SBW Company or Xxxxxx Xxxxxx in connection with the Transaction,
or that would constitute a violation or breach of any covenant (other than
Section 4.2, the breach of which shall be an Event of Default only if it results
in a Material Adverse Effect) of any SBW Company or Xxxxxx Xxxxxx contained in
this Agreement or any other Transaction Document, or the failure of any SBW
Company to pay when due (subject to any applicable cure period) any borrowed
money or any sums due under capital leases or the failure of any SBW Company to
pay within forty-five (45) days of being due any amounts that are due and
payable for payroll, including without limitation, wages, salary, unemployment
insurance, social security payments, pension payments and the like, excluding in
each case any condition or circumstance that would be otherwise an Event of
Default of HBR if it is caused by activities directed by Purchaser (directly or
indirectly).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted accounting principles in effect on the
date hereof as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States.
"Guaranty Agreements" is defined in Section 1.1(a).
"Hazardous Substances" means any dangerous, toxic, reactive,
corrosive, ignitable, radioactive, caustic or otherwise hazardous material,
pollutant, contaminant, chemical, waste or substance defined, listed or
described as any of such in or governed by any Environmental Law, including
urea-formaldehyde, solvents, acids, bases, heavy metals, polychlorinated
biphenyls, asbestos or asbestos-containing materials, radon, explosives, known
carcinogens, petroleum and its derivatives or petroleum products.
"Intellectual Property Rights" is defined in Section 2.9.
"Inventory" means, as of any date, collectively, all inventories of
merchandise and other products owned by the Sellers and held for resale or for
distribution, together with packaging and samples thereof owned by the Sellers
as of such date.
"IRS" means the Internal Revenue Service.
"Knowledge of the Seller" shall mean actual knowledge, after
performance of the duties reasonably within the scope of each such person's
responsibility in the position held, of any officer of the Seller.
"Latest Balance Sheet Date" means June 30, 2000.
"Liability" means any direct or indirect indebtedness, liability,
assessment, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, xxxxxx or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, actual or potential, contingent or otherwise
(including any liability under any guaranties, letters of credit, performance
credits or with respect to insurance loss accruals).
"Lien" means, with respect to any Asset, any mortgage, lien (including
mechanics, warehousemen, laborers and landlords liens), claim, pledge, charge,
security interest, preemptive right, right of first refusal, option, judgment,
title defect or encumbrance of any kind in respect of or affecting such Asset.
"Material Adverse Effect" shall mean an effect on the financial
condition or results of operation which is or would be materially adverse to the
applicable party.
"Other Contemplated Transactions" is defined in the recitals to this
Agreement.
"Old Stock Purchase Agreement" is defined in the recitals to this
Agreement.
"Other Contemplated Transactions" is defined in the Recitals to this
Agreement.
"Parent" is defined in the caption of this Agreement.
"Parent Common Stock" is defined in Section 2.1.1(a).
"Parent Purchased Shares" is defined in Section 1.1(a).
"Percentage of Funding" means the fraction, the numerator of which is
(x) $750,000 plus the aggregate principal amount advanced of the Buyers Loans
(not including the $750,000 being contributed to the Parent today in exchange
for the Parent Purchased Shares) and the denominator of which is (y) $2,500,000.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity, including a government or political subdivision or
an agency or instrumentality thereof.
"Purchased Shares" means the Parent Purchased Shares and the HBR
Purchased Shares.
"Principals" is defined in Section 1.1(b).
"Purchase Price" is defined in Section 1.1(a).
"Regulatory Actions" means any claim, demand, action, suit or
proceeding brought or instigated by any Governmental Body in connection with any
Environmental Law, including civil, criminal and/or administrative proceedings,
whether or not seeking costs, damages, penalties, expenses or injunctive relief.
"Release" means the intentional or unintentional, spilling, leaking,
disposing, discharging or disturbance of, or emitting, depositing, injecting,
leaching, escaping or any other release or threatened release, however defined,
of any Hazardous Substance.
"Required Consents" is defined in Section 2.3.
"Required Permits" is defined in Section 2.16.
"SBR Common Stock" is defined in Section 1.1(a).
"SBW Company" means the Parent or any Person in which the Parent owns
or controls, directly or indirectly, twenty (20%) percent or more of the equity
or voting rights.
"SBR Loans" is defined in Section 1.1(a).
"SBR Purchased Shares" is defined in Section 1.1(a).
"Sellers" means HBR, SBR and the Small Business Worldwide, Inc.
"Selling Stockholders" is defined in Section 1.3.
"Stockholder Notice" is defined in Section 1.3.
"Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") means (i) any net income, gross income, gross receipts, sales, use,
ad valorem, transfer, transfer gains, franchise, profits, license, withholding,
payroll, employment, social security (or similar), unemployment, disability,
excise, severance, stamp, rent, recording, registration, occupation, premium,
real or personal property, intangibles, environmental (including taxes under
Code Section 59A) or windfall profits tax, alternative or add-on minimum tax,
capital stock, customs duty or other tax, fee, duty, levy, impost, assessment or
charge of any kind whatsoever (including taxes assessed to real property and
water and sewer rents relating thereto), together with any interest and any
fine, penalty, addition to tax or additional amount or deductions imposed by any
Governmental Body (domestic or foreign) (a "Tax Authority") responsible for the
imposition of any such tax, whether disputed or not, including any liability
arising under any tax sharing agreement, with respect to the Seller, the
Business or the Assets (or the transfer thereof); (ii) any liability for the
payment of any amount of the type described in the immediately preceding clause
(i) as a result of the Sellers being a member of an affiliated or combined group
with, or as a successor to or transferee from, any other corporation at any time
on or prior to a Closing Date; and (iii) any liability of the Sellers for the
payment of any amounts of the type described in the immediately preceding clause
(i) as a result of a contractual obligation to indemnify any other person.
"Tax Return" means any return or report (including elections,
declarations, disclosures, schedules, attachments, estimates and information
returns) relating to Taxes required to be supplied to any Tax Authority, and
including any amendment thereof.
"Transaction" is defined in the recitals to this Agreement.
"Transaction Documents" means, collectively, this Agreement and each
of the other agreements, instruments, certificates and other documents to be
executed and delivered by all or some of the parties hereto in connection with
the consummation of the Transaction and the Other Contemplated Transactions.
"Xxxxxxxx.xxx" is defined in Section 1.1(a).
SECTION 9.2 Interpretation. Unless the context otherwise requires, the
terms defined in Section 9.1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms defined herein. All accounting terms defined in Section 9.1,
and those accounting terms used in this Agreement not defined in Section 9.1,
except as otherwise expressly provided herein, shall have the meanings
customarily given thereto in accordance with GAAP. When a reference is made in
this Agreement to Sections or Exhibits, such references shall be to a Section of
or Exhibit to this Agreement, unless otherwise indicated. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
ARTICLE X
RELEASES
SECTION 10.1 Releases. (a) Each of the Sellers releases, discharges
and gives up any and all claims and rights that it has against Purchaser, its
affiliates, directors, officers, employees, agents and representatives from any
cause whatsoever relating to any action, inaction, agreement, purported
agreement, understanding, statement or condition occurring or existing prior to
the date of this Agreement.
(b) Each of Xx. Xxxxxx and Xx. Xxxx releases, discharges and gives up
any and all claims and rights that it has against Purchaser, its affiliates,
directors, officers, employees, agents and representatives from any cause
whatsoever relating to any action, inaction, agreement, purported agreement,
understandings, statements or conditions occurring or against any Seller, other
than accrued but unpaid compensation and benefits, in each case or existing
prior to the date of this Agreement.
ARTICLE XI
JURY TRIAL WAIVER
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR THE RELATED TRANSACTIONS. EACH PARTY HERETO (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THIS FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS ARTICLE.
(Signature Pages to Follow)
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
SMALL BUSINESS WORLDWIDE, INC.
By /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
HISPANIC BUSINESS RESOURCES, INC.
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
SMALL BUSINESS RESOURCES, INC.
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
XXXXXXXXXXX.XXX, LLC
By: /s/ Xxxxxxxx Xxxxxx
Name: Xxxxxxxx Xxxxxx
Title: Manager
As to Section 1.3 and Section 4.15(b), Articles X
WITNESS: (Releases) and Article XI (Jury Waiver)
/s/ Xxxxxx X. Xxxx /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxx Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxx /s/ Xxxxxxx Xxxx
Name: Xxxxxx X. Xxxx Xxxxxxx Xxxx
