Execution Copy
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
BY AND AMONG
EMARKETPLACE, INC.,
TOP TEAM, INC.
FULL MOON INTERACTIVE GROUP, INC.
AND
THE SELLERS IDENTIFIED HEREIN
Dated as of November 5, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I THE TRANSACTIONS AND RELATED MATTERS...................................................................1
1.1 Purchase and Exchange..................................................................................1
1.2 Contribution...........................................................................................1
1.3 Stock Certificates.....................................................................................2
1.4 Stock Option and Other Plans...........................................................................2
1.5 Tax Consequences.......................................................................................3
1.6 Closing ..............................................................................................3
1.7 Certificate of Incorporation of Top Team...............................................................3
1.8 By-Laws of Top Team....................................................................................3
1.9 Directors and Officers of Top Team.....................................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY................................................................................3
2.1 Authorization..........................................................................................3
2.2 Ownership of Stock.....................................................................................4
2.3 Consents and Approvals.................................................................................4
2.4 Securities Matters.....................................................................................4
2.5 Brokerage Fees.........................................................................................5
2.6 Disclosure.............................................................................................5
ARTICLE III JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS.........................................................................5
3.1 Due Organization, Good Standing and Corporate Power....................................................5
3.2 Authorization and Validity of Agreement................................................................6
3.3 Capitalization.........................................................................................6
3.4 Consents and Approvals; No Violations..................................................................7
3.5 Company Reports and Financial Statements...............................................................8
3.6 Absence of Certain Changes.............................................................................8
3.7 Minute Books...........................................................................................8
3.8 Title to Properties; Encumbrances......................................................................8
3.9 Compliance with Laws...................................................................................9
3.10 Litigation.............................................................................................9
3.11 Employee Benefit Plans.................................................................................9
3.12 Employment Relations and Agreements...................................................................11
3.13 Client Relations......................................................................................11
3.14 Taxes .............................................................................................11
3.15 Liabilities...........................................................................................12
3.16 Intellectual Properties...............................................................................12
3.17 Material Contracts and Relationships..................................................................13
3.18 Absence of Certain Business Practices.................................................................14
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3.19 Transactions with Related Parties.....................................................................15
3.20 Broker's or Finder's Fee..............................................................................15
3.21 Accounts Receivable...................................................................................15
3.22 Inventories...........................................................................................15
3.23 Insurance.............................................................................................16
3.24 No Powers of Attorney or Suretyships..................................................................16
3.25 Banking Facilities....................................................................................16
3.26 Environmental Liabilities.............................................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM..................................................................................18
4.1 Due Organization; Good Standing and Corporate Power...................................................18
4.2 Authorization and Validity of Agreement...............................................................18
4.3 Consents and Approvals; No Violations.................................................................18
4.4 EMKT Reports and Financial Statements.................................................................19
4.5 Capitalization........................................................................................19
4.6 Absence of Certain Changes............................................................................20
4.7 Compliance with Laws..................................................................................20
4.8 Liabilities...........................................................................................20
4.9 Litigation............................................................................................20
ARTICLE V ACTIONS PRIOR TO CLOSING DATE.........................................................................20
5.1 Access to Information Concerning Properties and Records...............................................20
5.2 Conduct of the Business of the Company Pending the Closing Date.......................................21
5.3 Best Efforts..........................................................................................22
5.4 No Solicitation of Other Offers.......................................................................22
5.5 Credit Facility.......................................................................................22
5.6 EMKT Contribution to Top Team Capital.................................................................23
ARTICLE VI CONDITIONS PRECEDENT TO TRANSACTIONS..................................................................23
6.1 Conditions Precedent to Obligations of EMKT, Top Team and the Company and
the Sellers..................................................................................23
6.2 Conditions Precedent to Obligations of EMKT and Top Team..............................................23
6.3 Conditions Precedent to Obligations of the Company and the Sellers....................................24
ARTICLE VII TERMINATION AND ABANDONMENT...........................................................................25
7.1 Termination...........................................................................................25
7.2 Effect of Termination.................................................................................25
ARTICLE VIII INDEMNIFICATION.......................................................................................26
8.1 Indemnification by Sellers............................................................................26
8.2 Indemnification by Sellers Jointly and Severally......................................................26
8.3 Indemnification by EMKT and Top Team..................................................................27
8.4 Indemnification by Sellers for Tax Liabilities........................................................27
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8.5 Claims for Indemnification............................................................................28
8.6 Defense Claims........................................................................................28
8.7 Manner of Indemnification.............................................................................29
8.8 Limitations on Indemnification........................................................................29
ARTICLE IX MISCELLANEOUS.........................................................................................29
9.1 Fees and Expenses.....................................................................................29
9.2 Representations and Warranties........................................................................29
9.3 Extension; Waiver.....................................................................................30
9.4 Public Announcements..................................................................................30
9.5 Notices .............................................................................................30
9.6 Entire Agreement......................................................................................31
9.7 Binding Effect; Benefit; Assignment...................................................................31
9.8 Amendment and Modification............................................................................32
9.9 Further Actions.......................................................................................32
9.10 Headings .............................................................................................32
9.11 Counterparts..........................................................................................32
9.12 Applicable Law........................................................................................32
9.13 Severability..........................................................................................32
9.14 "Person" Defined......................................................................................32
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
This STOCK PURCHASE AND CONTRIBUTION AGREEMENT, dated as of November 5,
1999 (this "AGREEMENT"), is by and among EMARKETPLACE INC., a Delaware
corporation ("EMKT"), TOP TEAM, INC. a Delaware corporation ("TOP TEAM"), FULL
MOON INTERACTIVE GROUP, INC., a California corporation (the "COMPANY"), and each
of the other persons identified under the heading "Sellers" on the signature
pages of this Agreement (together, the "SELLERS"), and is made with reference to
the following facts:
A. The Sellers own all of all of the issued and outstanding shares of
common stock ("COMPANY STOCK") of the Company.
B. EMKT wishes to acquire from the Sellers and the Optionees referred
to below an aggregate of 642,500 shares of Company Stock in exchange for an
aggregate of 432,000 shares of EMKT common stock, par value $0.001 per share
("EMKT STOCK"). Immediately after such exchange, EMKT, the Sellers and the
Optionees will contribute all of their Company Stock to Top Team in exchange for
an aggregate of 2,800,000 shares of common stock, par value $0.001 per share, of
Top Team ("TOP TEAM STOCK").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE TRANSACTIONS AND RELATED MATTERS
1.1 PURCHASE AND EXCHANGE. On the Closing Date (as defined in Section
1.6), each of the Sellers shall sell, and on the Option Closing Date (as defined
in Section 1.6) the Sellers shall cause each of the Optionees to sell, to EMKT
that number of shares of Company Stock set forth opposite such Seller's or
Optionee's name on Schedule 1.1 (the "PURCHASED COMPANY STOCK"), constituting in
the aggregate 50 percent of the number of outstanding shares of Company Stock
(on a fully diluted basis)(collectively, the "PURCHASE"), for a consideration
equal to that number of EMKT shares set forth opposite such Seller's or
Optionee's name on Schedule 1.1 (the "PURCHASE CONSIDERATION"). The Purchase
Consideration shall be payable on January 3, 2000.
1.2 CONTRIBUTION. On the Closing Date, immediately after the purchase
of the Purchased Company Stock as contemplated by Section 1.1, (i) EMKT shall
contribute the Purchased Company Stock to Top Team in exchange for 1,400,000
shares of Top Team Stock and (ii) each Seller shall contribute to Top Team all
of his, her or its remaining Company Stock constituting (with the Optionee's
remaining stock) in the aggregate the remaining 50 percent of the outstanding
shares of Company Stock (on a fully diluted basis) in exchange for that number
of shares of Top Team Stock set forth opposite such Seller's name on Schedule
1.1. On the Option Closing Date, each Optionee shall contribute to Top Team all
of his, her or its remaining Company Stock . Such exchanges are
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referred to collectively herein as the "EXCHANGE." The Sellers and the Optionees
will receive an aggregate of shares of 1,400,000 shares of Top Team Stock. Such
shares of Company Stock contributed to Top Team are referred to herein as the
"CONTRIBUTED STOCK." Such shares of Top Team Stock received by the Sellers and
EMKT in exchange for the Contributed Stock are referred to herein as the
"EXCHANGE CONSIDERATION."
1.3 STOCK CERTIFICATES. On the Closing Date, each Seller shall
deliver to EMKT, and on the Option Closing Date, each Optionee shall deliver to
EMKT, certificates evidencing their respective shares of Contributed Stock,
which shall be Duly Endorsed. The term "DULY ENDORSED" means duly endorsed by
the person or persons in whose name a stock certificate is registered in blank
or accompanied by a duly executed stock assignment separate from such
certificate. Top Team will deliver to each Seller and EMKT on the Closing Date
and to each Optionee on the Option Closing Date duly issued and authenticated
certificates evidencing the Exchange Consideration issuable to such person
pursuant to Section 1.2.
1.4 STOCK OPTION AND OTHER PLANS.
(a) The Company shall, prior to the Option Closing Date,
accelerate the vesting or exercisability of all outstanding employee stock
options to purchase Company Stock, whether set forth in any stock option plan or
plans of the Company ("COMPANY STOCK OPTION PLANS"), in an option agreement with
the optionee or otherwise. On the Option Closing Date, each such option (each, a
"COMPANY OPTION") granted by the Company to purchase shares of Company Stock
that is outstanding and unexercised immediately prior to Option Closing Date
shall be deemed to be exercised, and the optionees thereunder (the "OPTIONEES")
shall be deemed to be Sellers for purposes of Articles I and II of this
Agreement. As required by Section 6.2(e) hereof, the Sellers shall cause each
Optionee to deliver prior to the Closing a joinder agreement whereby each such
Optionee agrees to be bound by the provisions of Articles I and II of this
Agreement (other than the first sentence of Section 2.4(b)) as if he, she or it
were a Seller hereunder (each, a "JOINDER AGREEMENT"). In addition, the Company
shall cause the Common Stock Warrant Agreements, each dated November 1, 1999
issued to Grand Pacific Financing Corporation and Grand Pacific Finance
Corporation (the "GP WARRANTS") to be exercised prior to or concurrent with the
Closing.
(b) Any then outstanding stock appreciation rights or limited
stock appreciation rights shall be canceled as of immediately prior to the
Closing without any payment therefor. As provided herein, the Company Stock
Option Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Subsidiary, except for the GP Warrants (collectively with the
Company Stock Option Plans, the "COMPANY STOCK INCENTIVE PLANS") shall terminate
as of the Closing Date. The Company will take all steps to ensure that neither
the Company nor any of its Subsidiaries is or will be bound by any Company
Options, other options, warrants, rights or agreements which would entitle any
Person, other than EMKT, Top Team or either of their Affiliated Parties (as
defined in Section 8.1), to own any capital stock of the Company or any of its
Subsidiaries or to receive any payment in respect thereof. The Company will use
its best efforts to obtain all necessary consents to ensure that after the
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Option Closing Date, the only rights of the holders of Options to purchase
shares of Company Stock in respect of such Options will be to receive the
Purchase Consideration and the Exchange Consideration in cancellation and
settlement thereof.
1.5 TAX CONSEQUENCES. It is intended by the parties that the
contribution to Top Team of the Contributed Stock in exchange for the Exchange
Consideration, together with (i) the contributions to be made in connection with
the Roll-Up (as defined in Section 4.5) and (ii) the capital contribution of
EMKT to Top Team referred to in Section 5.5, shall constitute a contribution of
capital under Section 351 of the Internal Revenue Code of 1986 (the "CODE").
1.6 CLOSING. The closing (the "CLOSING") of the purchase of the
Purchased Company Stock from the Sellers and the exchange by the Sellers and
EMKT of the Contributed Stock for the Exchange Consideration shall take place at
the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP, 1999 Avenue of the
Stars, 16th Floor, Los Angeles, California, as soon as practicable after the
last of the conditions set forth in Sections 6.1-6.3 are fulfilled or waived
(subject to applicable law) but in no event later than the fifth business day
thereafter, or at such other time and place and on such other date as EMKT, Top
Team and the Company shall mutually agree (the "CLOSING DATE"). The closing (the
"OPTION CLOSING") of the purchase of the Purchased Company Stock from the
Optionees and the exchange by the Optionees and EMKT of the Contributed Stock
for the Exchange Consideration shall take place at the offices of Kaye, Scholer,
Fierman, Hays & Handler, LLP, 1999 Avenue of the Stars, 16th Floor, Los Angeles,
California, as soon as practicable after the last of the conditions set forth in
Section 6.4 are fulfilled or waived (subject to applicable law) but in no event
later than the fifth business day thereafter, or at such other time and place
and on such other date as EMKT, Top Team and the Company shall mutually agree
(the "OPTION CLOSING DATE").
1.7 CERTIFICATE OF INCORPORATION OF TOP TEAM. The Certificate of
Incorporation of Top Team, as in effect as of the Closing Date, shall be as set
forth in Schedule 1.7.
1.8 BY-LAWS OF TOP TEAM. The By-Laws of Top Team, as in effect as of
the Closing Date, shall be as set forth in Schedule 1.8.
1.9 DIRECTORS AND OFFICERS OF TOP TEAM. As of the Closing Date, the
directors of Top Team shall be Robert Wallace, Fred Walti, Brian Burns and such
additional directors as shall be designated by Top Team, each to hold office,
subject to the applicable provisions of the Certificate of Incorporation and
By-Laws of Top Team, until the next annual stockholders' meeting of Top Team and
until their respective successors shall be duly elected or appointed and
qualified, and the persons set forth on Schedule 1.9 shall hold the offices of
Top Team therein indicated until their respective successors shall be duly
elected or appointed and qualified.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY
Each Seller, severally and not jointly, hereby represents and warrants
to EMKT and Top Team that:
2.1 AUTHORIZATION. Such Seller has full power and authority to enter
into this Agreement and to perform his, her or its obligations under this
Agreement and to consummate the Purchase, the Exchange and the other
transactions contemplated hereby (collectively, the "TRANSACTIONS"). This
Agreement and all agreements or instruments herein contemplated to be executed
by such Seller are the valid and binding agreements of such Seller, enforceable
against such Seller in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of equity.
2.2 OWNERSHIP OF STOCK. Such Seller is the record owner of all of the
Company Stock set forth below such Seller's name on Schedule 1.1, free and clear
of any liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever. Upon consummation of
the Exchange, Top Team shall be the owner, beneficially and of record, of all of
the outstanding shares of capital stock of the Company, free and clear of any
liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever, except as otherwise
created by EMKT or Top Team, except for security interests in favor of the
Company with respect to certain notes issued to the Optionees in connection with
the exercise of their Company Options.
2.3 CONSENTS AND APPROVALS. Neither the execution and delivery of this
Agreement by such Seller nor the consummation of the Purchase and Exchange by
such Seller will violate, result in a breach of any of the terms or provisions
of, constitute a default (or any event that, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of an indebtedness under or result in any right of termination of,
increase any amounts payable under, or conflict with, the trust agreements, if
any, relating to such Seller or any other agreement, indenture or other
instrument to which such Seller is a party or by which any of its properties are
bound, or any judgment, decree, order or award of any court, governmental body
or arbitrator (domestic or foreign) applicable to such Seller. All consents,
approvals and authorizations of, and declarations, filings and registrations
with, and payments of all taxes, fees, fines, and penalties to, any governmental
or regulatory authority (domestic or foreign) or any other Person (either
governmental or private) required in connection with the execution and delivery
by such Seller of this Agreement or the consummation of the Transactions by such
Seller have been obtained, made and satisfied.
2.4 SECURITIES MATTERS. Such Seller acknowledges that the shares of
EMKT Stock that constitute the Purchase Consideration and the shares of Top Team
Stock that constitute the Exchange Consideration have not been and will not be
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registered under (i) the Securities Act of 1933, as amended (the "SECURITIES
ACT") inasmuch as they are being issued pursuant to an exemption from
registration granted under Section 4(2) of the Securities Act and Regulation D
promulgated thereunder relating to transactions not involving any public
offering, (ii) the California Corporate Securities Laws of 1968 (the "CALIFORNIA
LAW") or (iii) any other applicable securities laws, and that EMKT and Top
Team's reliance on such exemption or related exemptions is predicated in part on
the following representations and agreements made to EMKT and Top Team by such
Seller:
(a) Such Seller is acquiring the Purchase Consideration and
the Exchange Consideration (together, the "CONSIDERATION") to be issued to such
Seller hereunder for investment for his or her own account and not with a view
to or for sale in connection with any distribution and resale thereof, with no
intention of distributing or reselling the same; and such Seller is not aware of
any particular occasion, event or circumstance upon the occurrence or happening
of which he or it intends to dispose of such shares;
(b) Such Seller (other than Pamela Flank) is (i) either an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act or (ii) a "qualified purchaser" within the meaning of Section 25102(n)(2) of
the California Law or (iii) has such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks of
the Transactions. Such Seller is aware that the Consideration constitutes
"restricted," "letter" or "investment" securities and such Seller by reason of
his business or financial experience has the capacity to protect his own
interest in connection with the Transactions; and
(c) Such Seller agrees not to sell, transfer, assign, pledge,
hypothecate or otherwise dispose of his or its shares received in this
transaction without registration under the Securities Act and the California
Law, and any other applicable securities laws, or without an opinion of counsel
satisfactory to EMKT and Top Team that the transaction by which such shares are
proposed to be disposed of is exempt from the Securities Act, the California Law
and any other applicable securities laws, and acknowledges that EMKT and Top
Team will place a legend on the certificates representing such shares
substantially to such effect concerning these restrictions.
2.5 BROKERAGE FEES. No Person is entitled to any brokerage or finder's
fee or other commission from such Seller in respect of this Agreement or the
Transactions.
2.6 DISCLOSURE. The information provided by such Seller in this
Agreement and in any other writing furnished pursuant hereto does not and will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated herein or therein or necessary to make the statements
and facts contained herein or therein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available by such Seller to EMKT or Top Team
pursuant hereto were or will be complete and accurate records of such documents.
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ARTICLE III
JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS
The Company and each of the Sellers hereby, jointly and severally,
represents and warrants to EMKT and Top Team as follows:
3.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Schedule
3.1 sets forth the name, state of incorporation or formation and equity
ownership of the Company in each Subsidiary of the Company. (A "SUBSIDIARY" of a
Person is a corporation, partnership, joint venture, limited liability company
and other entity in which such Person owns all or a majority of the equity
interest or is required to be consolidated on such Person's balance sheet
pursuant to GAAP.) The Company and each of its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each such corporation has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. The Company and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except in such jurisdictions where the failure to be so qualified or
licensed and in good standing would not have a material adverse effect on the
business, properties, assets, liabilities, operations, results of operations,
condition (financial or otherwise) or prospects (the "CONDITION") of the Company
and its Subsidiaries taken as a whole.
3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has full
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution,
delivery and performance of this Agreement by the Company, and the consummation
by it of the Transactions, have been duly authorized and approved by its Board
of Directors and no other corporate action on the part of the Company is
necessary to authorize the execution, delivery and performance of this Agreement
by the Company and the consummation of the Transactions (other than the approval
of this Agreement by the holders of a majority of the outstanding shares of
Company Stock and any other classes of capital stock entitled to vote thereon,
as required by the California General Corporation Law). This Agreement has been
duly executed and delivered by the Company and is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of common stock, constituting the Company Stock, and 5,000,000
shares of preferred stock, (the "PREFERRED STOCK"). As of the date of this
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Agreement, (i) 1,041,480 shares of Company Stock are issued and outstanding,
(ii) 243,520 shares of Company Stock are reserved for issuance pursuant to
outstanding Company Options granted under the Company Stock Option Plans and
(iii) no shares of Preferred Stock are issued and outstanding. Except as set
forth on Schedule 3.3, all issued and outstanding shares of Company Stock have
been validly issued and are fully paid and nonassessable, and are not subject
to, nor were they issued in violation of, any preemptive rights. Except as set
forth in this Section 3.3 or on Schedule 3.3, (i) there are no shares of capital
stock of the Company authorized, issued or outstanding and (ii) there are not as
of the date hereof, and on the Closing Date there will not be, any outstanding
or authorized options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, convertible or exchangeable securities, or other
commitments, contingent or otherwise, relating to Company Stock or any other
shares of capital stock of the Company, pursuant to which the Company is or may
become obligated to issue shares of Common Stock, any other shares of its
capital stock or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of the capital stock of the
Company.
(b) All of the outstanding shares of capital stock of each of
the Company's Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to, nor were they issued in
violation of, any preemptive rights, and are owned, of record and beneficially,
by the Company, free and clear of all liens, encumbrances, options or claims
whatsoever. No shares of capital stock of any of the Company's Subsidiaries are
reserved for issuance and there are no outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to the capital stock of any Subsidiary of the
Company, pursuant to which such Subsidiary is or may become obligated to issue
any shares of capital stock of such Subsidiary or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
such Subsidiary. There are no restrictions of any kind that prevent the payment
of dividends by any of the Company's Subsidiaries. Except for the Subsidiaries
listed on Schedule 3.1, the Company does not own, directly or indirectly, any
capital stock or other equity interest in any Person or have any direct or
indirect equity or ownership interest in any Person and neither the Company nor
any of its Subsidiaries is subject to any obligation or requirement to provide
funds for or to make any investment (in the form of a loan, capital contribution
or otherwise) to or in any Person.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth in
Schedule 3.4, (a) the execution and delivery of this Agreement by the Sellers
and the Company and the consummation by the Sellers and the Company of the
Transactions will not: (1) violate any provision of the Amended and Restated of
Incorporation, as amended, or By-Laws of the Company or any of its Subsidiaries;
(2) violate any statute, ordinance, rule, regulation, order or decree of any
court or of any governmental or regulatory body, agency or authority applicable
to such Seller or the Company or any of its Subsidiaries or by which any of
their respective properties or assets may be bound; (3) require any filing with,
or permit, consent or approval of, or the giving of any notice to, any
governmental or regulatory body, agency or authority, except with respect to the
filing of a Form D pursuant to Rule 503 of Regulation D under the Securities Act
and any corresponding state "blue sky filings"; or (4) result in a violation or
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breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
payment or acceleration) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, permit,
agreement, lease, franchise agreement or other instrument or obligation to which
the Company or any of its Subsidiaries is a party, or by which it or any of
their respective properties or assets may be bound, excluding from the foregoing
clauses (3) and (4) filings, notices, permits, consents and approvals the
absence of which, and violations, breaches, defaults, conflicts and liens which,
in the aggregate, would not have a material adverse effect on the Condition of
the Company and its Subsidiaries taken as a whole.
(b) Neither the Company nor any Subsidiary is in default or in
violation (and no event has occurred which would notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its Amended and Restated Articles of Incorporation or ByLaws,
(ii) any note, bond, mortgage, indenture, license, agreement, contract, lease,
commitment or other obligation to which the Company or any of its Subsidiaries
is a party or by which they or any of their properties or assets may be bound,
or (iii) any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its Subsidiaries, except in the case of
clauses (i) and (ii) above for defaults or evaluations, which would not have a
material adverse effect on the Condition of the Company and the Subsidiaries
taken as a whole.
3.5 COMPANY REPORTS AND FINANCIAL STATEMENTS. Each of the consolidated
balance sheet as of the end of the fiscal year ended July 31, 1999 and the
consolidated statement of operations, consolidated statement of stockholders'
equity and consolidated statement of cash flow for the fiscal years ended July
31, 1999 in the form attached as an exhibit to Schedule 3.5 were prepared in
accordance with generally accepted accounting principles (as in effect in the
United States from time to time) applied on a consistent basis ("GAAP"), except
as may be indicated therein or in the notes or schedules thereto, and, in the
case of such interim statements, subject to normal year-end adjustments, and as
may be indicated in the notes thereto, and fairly present the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the results of their operations and cash flows for the period
then ended.
3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3.6,
since July 31, 1999 (the "BALANCE SHEET DATE") (i) there has not been any
material adverse change in the Condition of the Company and its Subsidiaries
taken as a whole; (ii) the businesses of the Company and each of its
Subsidiaries have been conducted only in the ordinary course; (iii) neither the
Company nor any of its Subsidiaries has incurred any material liabilities
(direct, contingent or otherwise) or engaged in any material transaction or
entered into any material agreement outside the ordinary course of business;
(iv) the Company and its Subsidiaries have not increased the compensation of any
officer or granted any general salary or benefits increase to their employees
other than in the ordinary course of business; and (v) neither the Company nor
any of its Subsidiaries has taken any action referred to in Section 5.2 except
as permitted or required thereby.
8
3.7 MINUTE BOOKS. The minute books of the Company and its
Subsidiaries, as previously made available to EMKT and its representatives,
contain accurate records of all meetings of and corporate actions or written
consents by the shareholders and Boards of Directors of the Company and its
Subsidiaries since the date of incorporation of the Company.
3.8 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth on
Schedule 3.8, the Company and each of its Subsidiaries has good, valid and
marketable title, or a valid leasehold interest in, to (i) all its material
tangible properties and assets (real and personal), including, without
limitation, all the properties and assets reflected in the consolidated balance
sheet as of July 31, 1999 delivered pursuant to Section 3.5 (the "BALANCE
SHEET") except as indicated in the notes thereto and except for properties and
assets reflected in the Balance Sheet that have been sold or otherwise disposed
of in the ordinary course of business, and (ii) all the tangible properties and
assets purchased by the Company and any of its Subsidiaries since the Balance
Sheet Date except for such properties and assets which have been sold or
otherwise disposed of in the ordinary course of business; in each case subject
to no encumbrance, lien, charge or other restriction of any kind or character,
except for (1) liens reflected in the Balance Sheet, (2) liens consisting of
zoning or planning restrictions, easements, permits and other restrictions or
limitations on the use of real property or irregularities in title thereto which
do not materially detract from the value of, or impair the use of, such property
by the Company or any of its Subsidiaries in the operation of its respective
business and (3) liens for current taxes, assessments or governmental charges or
levies on property not yet due and delinquent.
3.9 COMPLIANCE WITH LAWS. To the best knowledge of the Company and
the Sellers, the Company and each of its Subsidiaries are in compliance with all
applicable laws, regulations, orders, judgments and decrees except where the
failure to so comply would not have a material adverse effect on the Condition
of the Company and its Subsidiaries taken as a whole.
3.10 LITIGATION. Except as set forth in Schedule 3.10, there is no
action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the best knowledge of the
Company any investigation by) any governmental or other instrumentality or
agency, pending, or, to the best knowledge of the Company, threatened, against
or affecting the Company or any of its Subsidiaries, or any of their properties
or rights which could have a material adverse effect on the Condition of the
Company and its Subsidiaries taken as a whole. There are no such suits, actions,
claims, proceedings or investigations pending or, to the best knowledge of the
Company, threatened, seeking to prevent or challenging the Transactions. Except
as disclosed in Schedule 3.10, neither the Company nor any of its Subsidiaries
is subject to any judgment, order or decree entered in any lawsuit or proceeding
which could have a material adverse effect on the Condition of the Company and
its Subsidiaries taken as a whole or on the ability of the Company or any
Subsidiary to conduct its business as presently conducted.
3.11 EMPLOYEE BENEFIT PLANS.
(a) LIST OF PLANS. Set forth in Schedule 3.11 is an accurate
and complete list of all employee benefit plans ("EMPLOYEE BENEFIT PLANS")
within the meaning of Section 3(3) of the
9
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), whether
or not any such Employee Benefit Plans are otherwise exempt from the provisions
of ERISA, established, maintained or contributed to by the Company or any of its
Subsidiaries (including, for this purpose and for the purpose of all of the
representations in this Section 3.11, all employers (whether or not
incorporated) which by reason of common control are treated together with the
Company as a single employer within the meaning of Section 414 of the Code.
(b) STATUS OF PLANS. Neither the Company nor any of its
Subsidiaries maintains or contributes to any Employee Benefit Plan subject to
ERISA that is not in substantial compliance with ERISA or which has incurred any
accumulated funding deficiency within the meaning of Section 412 or 418B of the
Code, or that has applied for or obtained a waiver from the Internal Revenue
Service of any minimum funding requirement under Section 412 of the Code.
Neither the Company nor any of its Subsidiaries has incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of its
Subsidiaries or ceased operations at any facility or withdrawn from any Employee
Benefit Plan in a manner which could subject it to liability under Section 4062,
4063 or 4064 of ERISA, and the Company knows of no facts or circumstances which
might give rise to any liability of the Company or any of its Subsidiaries to
the PBGC under Title IV of ERISA that could reasonably be anticipated to result
in any claims being made against the Company by the PBGC. Neither the Company
nor any of its Subsidiaries has incurred any withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of Sections
4201 and 4204 of ERISA, to any Employee Benefit Plan that is a Multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA), and no event has occurred, and
there exists no condition or set of circumstances, that presents a material risk
of the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which could result in any
liability to a Multiemployer Plan.
(c) CONTRIBUTIONS. Full payment has been made of all amounts
which the Company or any of its Subsidiaries is required, under applicable law
or under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any of its Subsidiaries is a party, to have
paid as contributions thereto as of the last day of the most recent fiscal year
of such Employee Benefit Plan ended prior to the date hereof. The Company has
made adequate provision for reserves to meet contributions that have not been
made because they are not yet due under the terms of any Employee Benefit Plan
or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided to EMKT and Top Team.
(d) CERTAIN PLANS. The Company has no Employee Benefit Plans
which are subject to Title IV of ERISA and which are Single Employer Plans (as
defined in Section 4001(a)(15) of ERISA).
(e) TAX QUALIFICATION. Each Employee Benefit Plan intended to
be qualified under Section 401(a) of the Code has been determined to be so
10
qualified by the Internal Revenue Service and nothing has occurred since the
date of the last such determination which resulted or is likely to result in the
revocation of such determination.
(f) TRANSACTIONS. No Reportable Event (as defined in Section
4043 of ERISA) for which the 30-day notice requirement has not been waived by
the PBGC has occurred with respect to any Employee Benefit Plan and neither the
Company nor any of its Subsidiaries has engaged in any transaction with respect
to the Employee Benefit Plans which would subject it to a tax, penalty or
liability for prohibited transactions under ERISA or the Code nor has any of
their respective directors, officers or employees to the extent they or any of
them are fiduciaries with respect to such Plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
or would result in any claim being made under or by or on behalf of any such
Plans by any party with standing to make such claim.
(g) OTHER PLANS. Neither the Company nor any of its
Subsidiaries currently maintains any employee or non-employee benefit plans or
any other foreign pension, welfare or retirement benefit plans other than those
listed in Schedule 3.11.
(h) DOCUMENTS. The Company has delivered or caused to be
delivered to EMKT, Top Team and their counsel true and complete copies of (1)
all Employee Benefit Plans as in effect, together with all amendments thereto
which will become effective at a later date, as well as the latest Internal
Revenue Service determination letter obtained with respect to any such Employee
Benefit Plan qualified under Section 401 or 501 of the Code and (2) Form 5500
for the most recently completed fiscal year for each Employee Benefit Plan
required to file such form.
3.12 EMPLOYMENT RELATIONS AND AGREEMENTS. (i) Each of the Company and
its Subsidiaries is in substantial compliance with all federal, state or other
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and is not engaged in
any unfair labor practice; (ii) no unfair labor practice complaint against the
Company or any of its Subsidiaries is pending before the National Labor
Relations Board; (iii) there is no labor strike, dispute, slowdown or stoppage
actually pending or to the best knowledge of the Company and the Sellers
threatened against or involving the Company or any of its Subsidiaries; (iv) no
representation question exists respecting the employees of the Company or any of
its Subsidiaries; (v) no grievance which might have a material adverse effect on
the Condition of the Company and its Subsidiaries as a whole or the conduct of
their respective businesses exists, no arbitration proceeding arising out of or
under any collective bargaining agreement is pending and to the best knowledge
of the Company and the Sellers no claim therefor has been asserted; (vi) no
collective bargaining agreement is currently being negotiated by the Company or
any of its Subsidiaries; and (vii) neither the Company nor any of its
Subsidiaries has experienced any material labor difficulty since the date of
incorporation of the Company. There is not now and to the best knowledge of the
Company and the Sellers, there will not be any change in relations with
employees of the Company or any of its Subsidiaries as a result of the
Transactions that could have a material adverse effect on the Condition of the
Company and its Subsidiaries taken as a whole. Except as disclosed in Schedule
3.12, there exist no employment, consulting, severance or indemnification
agreements between the Company and any director, officer or employee of the
11
Company or any agreement that would give any Person the right to receive any
payment from the Company as a result of the Purchase or Exchange.
3.13 CLIENT RELATIONS. There has not been, and to the best knowledge of
the Company, there will not be, any change in relations with franchisees,
customers or clients of the Company or any of its Subsidiaries as a result of
the Transactions that could have a material adverse effect on the Condition of
the Company and its Subsidiaries taken as a whole.
3.14 TAXES. The Company has filed or caused to be filed, within the
times and in the manner prescribed by law, all federal, state, local and foreign
Tax Returns and tax reports that are required to be filed by, or with respect
to, the Company or any of its Subsidiaries. Such returns and reports are true,
correct and complete in all material respects and reflect accurately all
liability for Taxes of the Company and its Subsidiaries for the periods covered
thereby. All federal, state, local and foreign Taxes (including interest and
penalties) payable by, or due from, the Company or any of its Subsidiaries have
been fully paid or adequately disclosed and fully provided for in the books and
financial statements of the Company and its Subsidiaries. All deficiencies
assessed as a result of any examination of such Tax Returns by federal, state,
local or foreign tax authorities have been paid, and deficiencies for all taxes
that have been proposed or asserted against the Company or any Subsidiary do not
exceed $10,000 in the aggregate for all periods. The Company has not received
any notice of any issue being raised since the date incorporation of the Company
by any federal, state, local or foreign taxing authority that, if raised with
respect to any other period not so examined, could reasonably be expected to
result in a proposed deficiency for any other period not so examined. No
examination of any Tax Return of the Company or any of its Subsidiaries is
currently in progress. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Return of the Company
or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code. The Company and each of its Subsidiaries
have complied (and until the Closing will comply) in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of taxes (including, without limitation, withholding of taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws. For purposes of this Section 3.14, the term "TAXES" means all
taxes, charges, fees, levies or other assessments, including without limitation
income, gross receipts, excise, property, sales, transfer, license, payroll,
withholding, capital stock and franchise taxes, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto; and "TAX RETURN" means
any report, return or other information or document required to be supplied to a
taxing authority in connection with taxes.
3.15 LIABILITIES. Neither the Company nor any of its Subsidiaries has
any outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in the Balance Sheet or
12
referred to in the footnotes thereto, other than liabilities incurred subsequent
to the Balance Sheet Date in the ordinary course of business not involving
borrowings by the Company. Neither the Company nor any of its Subsidiaries is in
default in respect of the material terms and conditions of any indebtedness or
other agreement.
3.16 INTELLECTUAL PROPERTIES. For purposes of this Section 3.11,
"INTELLECTUAL PROPERTY" means domestic and foreign patents, patent applications,
patent licenses, software licenses, knowhow licenses, trade names, trademarks,
copyrights, unpatented inventions, service marks, trademark registrations and
applications, service mark registrations and applications, copyright
registrations and applications, trade secrets and other confidential proprietary
information. Schedule 3.16 contains an accurate and complete list of all
Intellectual Property which is of material importance to the operation of the
business of the Company or any of its Subsidiaries. Unless otherwise indicated
in Schedule 3.16 the Company (or the Subsidiary indicated) owns the entire
right, title and interest in and to the Intellectual Property listed on Schedule
3.16 used in the operation of its business (including, without limitation, the
exclusive right to use and license the same) and each item constituting part of
the Intellectual Property which is owned by the Company or a Subsidiary and
listed on Schedule 3.16 has been, to the extent indicated in Schedule 3.16, duly
registered with, filed in or issued by, as the case may be, the United States
Patent and Trademark Office or such other government entities, domestic or
foreign, as are indicated in Schedule 3.16 and such registrations, filings and
issuances remain in full force and effect. To the best knowledge of the Company
and the Sellers, except as stated in such Schedule 3.16, there are no pending or
threatened proceedings or litigation or other adverse claims affecting or with
respect to the Intellectual Property. Schedule 3.16 lists all notices or claims
currently pending or received by the Company or any of its Subsidiaries during
the past two years which claim infringement, contributory infringement,
inducement to infringe, misappropriation or breach by the Company or any of its
Subsidiaries of any domestic or foreign patents, patent applications, patent
licenses and know-how licenses, trade names, trademark registrations and
applications, service marks, copyrights, copyright registrations or
applications, trade secrets or other confidential proprietary information.
Except as set forth in Schedule 3.16 hereto, there is, to the best knowledge of
the Company, no reasonable basis upon which a claim may be asserted against the
Company or any of its Subsidiaries, for infringement, contributory infringement,
inducement to infringe, misappropriation or breach of any domestic or foreign
patents, patent applications, patent licenses, know-how licenses, trade names,
trademark registrations and applications, common law trademarks, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. To the best knowledge of the Company,
except as indicated on Schedule 3.16, no Person is infringing the Intellectual
Property.
3.17 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for agreements specifically identified on other
Schedules, Schedule 3.17 sets forth a complete and correct list of the
following:
(i) All agreements (or groups of agreements with one
or more related entities) between the Company or any of its
Subsidiaries and any customer or supplier in excess of $25,000 and all
agreements extending beyond twelve months;
13
(ii) All agreements that relate to the borrowing or
lending by the Company (or any of its Subsidiaries) of any money or
that create or continue any material claim, lien, charge or encumbrance
against, or right of any third party with respect to, any asset of the
Company or any of its Subsidiaries;
(iii) All agreements by which the Company or any of
its Subsidiaries leases any real property, has the right to lease any
real property or leases capital equipment and all other leases
involving the Company or any of its Subsidiaries as lessee or lessor;
(iv) All agreements to which the Company or any of
its Subsidiaries is a party not in the ordinary course of business;
(v) All agreements to which the Company or any of its
Subsidiaries, on the one hand, and any of Sellers or any of their
respective Affiliates (as defined in Section 3.19) or Related Parties
(as defined in Section 3.19), on the other hand, are parties or by
which they are bound;
(vi) All contracts or commitments relating to the
employment of any Person or any commission or finder's fee arrangements
with others;
(vii) All material license agreements, whether as
licensor or licensee;
(viii) All other agreements to which the Company or
any of its Subsidiaries is a party or by which it is bound and that
involve $25,000 or more or that extend for a period of one year or
more; and
(ix) All other agreements to which the Company or any
of its Subsidiaries is a party or by which it is bound and that are or
may be material to the Condition of the Company or any of its
Subsidiaries.
As used in this Section 3.17 the word "AGREEMENT" includes both oral and written
contracts, leases, understandings, arrangements and all other agreements; and
the term "MATERIAL CONTRACTS" means the agreements of the Company or any of its
Subsidiaries required to be disclosed on Schedule 3.17, including agreements
specifically identified in other Schedules.
(b) All of the Material Contracts are in full force and
effect, are valid and binding and are enforceable in accordance with their terms
in favor of each of the Company and its Subsidiaries, subject as to
enforceability to applicable bankruptcy, insolvency, moratorium and similar laws
affecting creditors' rights generally and to general principals of equity. There
are no material liabilities of the Company or to the best knowledge of the
Company and the Sellers any other party to any Material Contract arising from
any breach or default of any provision thereof and no event has occurred that,
with the passage of time or the giving of notice or both, would constitute a
breach or default by the Company or to the best knowledge of the Company and the
Sellers any other party thereto.
14
(c) The Company and each of its Subsidiaries has fulfilled all
material obligations required pursuant to each Material Contract to have been
performed by the Company or its Subsidiaries prior to the date hereof, and to
the knowledge of the Sellers and the Company, the Company and each of its
Subsidiaries will be able to fulfill, when due, all of its obligations under
each of the Material Contracts that remain to be performed after the date
hereof.
(d) Schedules 3.17(c) and (d) set forth a complete and correct
list of each (i) customer (or related group of customers) with whom the Company
or any of its Subsidiaries did $25,000 or more of business during the last
fiscal year, (ii) supplier (or related group of suppliers) with whom the Company
or any of its Subsidiaries did $25,000 or more of business during the last
fiscal year, and (iii) agent (or related group of agents) or representative (or
related group of representatives) who was paid $25,000 or more by the Company
and its Subsidiaries during the last fiscal year, respectively, which lists
itemize the actual dollar amounts.
(e) To the best knowledge of the Company, the Company and each
of its Subsidiaries has maintained and continues to maintain good relations with
its customers, suppliers and agents.
3.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company nor any
of its Subsidiaries nor any employee, agent or other Person acting on the
Company's or any of its Subsidiaries' behalf, including, but not limited to, any
Seller, has, directly or indirectly, given or agreed to give any gift or similar
benefit to any customer, supplier, competitor or governmental employee or
official (domestic or foreign) (i) that would subject the Company or its any of
its Subsidiaries to any damage or penalty in any civil, criminal or governmental
litigation or proceeding or (ii) that, if not given in the past, would have had
a material adverse effect on the Condition of the Company or any of its
Subsidiaries.
3.19 TRANSACTIONS WITH RELATED PARTIES. Except as set forth on Schedule
3.19, there have been no transactions, including purchases or sales of assets or
entities, by or between the Company (or any of its Subsidiaries) and any Seller
or Related Party since the date of incorporation of the Company and there are no
agreements or understandings now in effect between the Company and any Seller or
Related Party. Schedule 3.19 also (i) states the amounts due from the Company
(or any of its Subsidiaries) to any Seller or Related Party and the amounts due
from any Seller or Related Party to the Company or any of its Subsidiaries, (ii)
describes the transactions out of which such amounts due arose and (iii)
describes any interest of any Seller or Related Party in any supplier or
customer of, or any other entity that has had business dealings with, the
Company or any of its Subsidiaries since the date of incorporation of the
Company. After the Closing, there will be no obligations or other liabilities
between each of the Company and any of its Subsidiaries, on the one hand, and
any Seller or Related Party, on the other hand, other than pursuant to this
Agreement and the Transactions. "RELATED PARTY" means the Company and each of
its Subsidiaries and Affiliates, including but not limited to each of the
Sellers and any member of the immediate family of any of the Sellers; and
"AFFILIATE" means, in respect of any specified Person, any other Person that,
directly or indirectly, controls, is controlled by, or is under common control
with, such specified Person or if such specified Person bears a familial
relationship with such other Person.
15
3.20 BROKER'S OR FINDER'S FEE. No agent, broker, Person or firm acting
on behalf of the Company is, or will be, entitled to any fee, commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the Transactions.
3.21 ACCOUNTS RECEIVABLE. The accounts receivable of the Company as
reflected in the Balance Sheet, to the extent uncollected on the date of this
Agreement, and the accounts receivable reflected on the books of the Company
are, on the basis of existing facts, valid and existing and fully collectible
(except for a reserve of $100,000 and except as the collectibility thereof is
affected by any future bankruptcy, insolvency or similar proceeding with respect
to any account debtor) within one year from the Closing Date, represent monies
due for goods sold and delivered or services rendered, and (subject to the
aforesaid reserve) are subject to no refunds or other adjustments (except
discounts for prompt payment given in the ordinary course of business) and to
the best knowledge of the Company and the Sellers no defenses, rights of setoff,
assignments, restrictions, encumbrances or conditions enforceable by third
parties on or affecting any thereof. The Company has never factored any of its
accounts receivable.
3.22 INVENTORIES. The Company has no inventories.
3.23 INSURANCE. Schedule 3.23 sets forth a complete and correct list of
all insurance policies and of all claims made by each of the Company or any of
its Subsidiaries on any liability or other insurance policies since the date of
incorporation of the Company (other than worker's compensation claims). In the
reasonable business judgment of the Company and the Sellers, the Company
(together with its Subsidiaries) has adequate liability and other insurance
policies insuring it against the risks of loss arising out of or related to its
assets and business. Without limitation, as to the tangible real and personal
property of the Company and its Subsidiaries, such insurance is, in the
reasonable business judgment of the Company and the Sellers, adequate to cover
the full replacement cost, less deductible amounts, of such tangible real and
personal property. Schedule 3.23 is a complete and correct list of all insurance
currently in place and accurately sets forth the coverages, deductible amounts,
carriers and expiration dates thereof. Schedule 3.23 is a complete and correct
list of all insurance with respect to which the policy period has expired, but
for which certain of the coverage years are still subject to audit or
retrospective adjustment by the carrier, and accurately sets forth such coverage
years and the coverages, deductible amounts, carriers and expiration dates
thereof. There are no outstanding requirements or recommendations by any
insurance company that issued any policy of insurance to the Company or any of
its Subsidiaries or by any board of or by any governmental authority exercising
similar functions that require or recommend any changes in the conduct of the
business of the Company or its Subsidiaries or any repairs or other work to be
done on or with respect to any of the Company's or any of its Subsidiaries'
assets. Except as set forth on Schedule 3.23, no notice or other communication
has been received by the Company or its Subsidiaries from any insurance company
since the date of incorporation of the Company canceling or materially amending
or materially increasing the annual or other premiums payable under any of its
insurance policies, and, to the best knowledge of the Company and the Sellers,
no such cancellation, amendment or increase of premiums is threatened.
16
3.24 NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth on
Schedule 3.24, (a) the Company (together with its Subsidiaries) has not granted
any general or special powers of attorney and (b) the Company (together with its
Subsidiaries) does not have any obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any Person.
3.25 BANKING FACILITIES. Schedule 3.25 sets forth a complete and
correct list of: (a) each bank, savings and loan or similar financial
institution in which the Company or any of its Subsidiaries has an account or
safety deposit box and the numbers of such accounts or safety deposit boxes
maintained thereat; and (b) the names of all persons authorized to draw on each
such account or to have access to any such safety deposit box, together with a
description of the authority (and conditions thereto, if any) of each person
with respect thereto.
3.26 ENVIRONMENTAL LIABILITIES.
(a) Except as set forth on Schedule 3.26 hereto, neither the
Company nor any of its Subsidiaries has used, stored, treated, transported,
manufactured, refined, handled, produced or disposed of any Hazardous Materials
on, under, at, from, or in any way affecting, any of their properties or assets,
or otherwise, in any manner which at the time of the action in question violated
any Environmental Law, governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous Materials
and to the best knowledge of the Company and the Sellers, no prior owner of such
property or asset or any tenant, subtenant, prior tenant or prior subtenant
thereof has used Hazardous Materials on or affecting such property or asset, or
otherwise in any manner which at the time of the action in question violated any
Environmental Law governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials. "ENVIRONMENTAL LAWS" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any governmental authority regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Material or
environmental protection or health and safety, as now or may at any time
hereafter be in effect, including without limitation, the Clean Water Act also
known as the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. ss. 1251
et seq., the Clean Air Act ("CAA"), 42 U.S.C. ss.ss. 7401 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. ss.ss. 136 et
seq., the Surface Mining Control and Reclamation AcT ("SMCRA"), 30 U.S.C. ss.ss.
1201 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Superfund Amendment
and Reauthorization Act of 1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the
Emergency Planning and Community Right to Know Act ("EPCRKA"), 42 U.S.C. ss.
11001 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss. 6901 et seq., the Occupational Safety and Health Act as amended ("OSHA"), 29
U.S.C. ss. 655 and ss. 657, together, in each case, with any amendment thereto,
and the regulations adopted and the official publications promulgated thereunder
and all substitutions thereof. "HAZARDOUS MATERIALS" means any flammable
materials, explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or similar materials defined in any
Environmental Law.
17
(b) To the best knowledge of the Company and the Sellers (i)
neither the Company nor any of its Subsidiaries has any obligations or
liabilities, known or unknown, matured or not matured, absolute or contingent,
assessed or unassessed, where such would reasonably be expected to have a
materially adverse effect on the Condition of the Company or any of its
Subsidiaries, and (ii) no claims have been made against the Company or any of
its Subsidiaries since the date of incorporation of the Company and no presently
outstanding citations or notices have been issued against the Company or any of
its Subsidiaries, where such could reasonably be expected to have a materially
adverse effect on the Condition of the Company or any of its Subsidiaries, which
in either case have been or are imposed by reason of or based upon any provision
of any Environmental Law, including, without limitation, any such obligations or
liabilities relating to or arising out of or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any Hazardous Materials by the Company or any of
its Subsidiaries, or any of their employees, agents, representatives or
predecessors in interest in connection with or in any way arising from or
relating to the Company or any of its Subsidiaries or any of their respective
properties, or relating to or arising from or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any such substance, by any other Person at or on
or under any of the real properties owned or used by the Company or any of its
Subsidiaries or any other location where such could have a materially adverse
effect on the business or condition (financial or otherwise) of the Company (or
any of its Subsidiaries).
3.27 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY, ETC. The Company
(together with its consolidated Subsidiaries) owns or leases all of the
machinery, equipment, vehicles, furniture, fixtures, leasehold improvements,
repair parts, tools and other property (collectively, the "PERSONAL PROPERTY")
used by or relating to the Company or its Subsidiaries. All such Personal
Property is in good operating condition, except for reasonable wear and tear,
and sufficient to carry on the business of the Company and its Subsidiaries in
the normal course as it is presently conducted and is free from defects, whether
patent or latent. Except as set forth in Schedule 3.27, it is not necessary for
the Company or any of its Subsidiaries to acquire or obtain the use of any
additional personal property to carry on its business as presently and
foreseeably to be conducted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM
Each of EMKT and Top Team represents and warrants to the Company and
the Sellers as follows:
4.1 DUE ORGANIZATION; GOOD STANDING AND CORPORATE POWER. Each of EMKT
and Top Team is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted or proposed to be conducted.
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4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of EMKT and Top Team
has full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions. The
execution, delivery and performance of this Agreement by EMKT and Top Team, and
the consummation by each of them of the Transactions, have been duly authorized
by the Boards of Directors of EMKT and Top Team. No other corporate action on
the part of either of EMKT or Top Team is necessary to authorize the execution,
delivery and performance of this Agreement by each of EMKT and Top Team and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by each of EMKT and Top Team and is a valid and binding obligation of
each of EMKT and Top Team, enforceable against each of EMKT and Top Team in
accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and general equitable principles.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and delivery
of this Agreement by EMKT and Top Team and the consummation by EMKT and Top Team
of the Transactions will not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of EMKT or Top Team; (2) violate any statute,
ordinance, rule, regulation, order or decree of any court or of any governmental
or regulatory body, agency or authority applicable to EMKT or Top Team or by
which either of their respective properties or assets may be bound; (3) require
any filing with, or permit, consent or approval of, or the giving of any notice
to any governmental or regulatory body, agency or authority; or (4) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
EMKT, Top Team or any of their Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, franchise,
permit, agreement, lease or other instrument or obligation to which EMKT or Top
Team or any of their Subsidiaries is a party, or by which they or their
respective properties or assets may be bound, excluding from the foregoing
clauses (3) and (4) filings, notices, permits, consents and approvals the
absence of which, and violations, breaches, defaults, conflicts and liens which,
in the aggregate, would not have a material adverse effect on the business,
properties, assets, liabilities, operations, results of operations, conditions
(financial or otherwise) or prospects of EMKT and its Subsidiaries taken as a
whole.
4.4 EMKT REPORTS AND FINANCIAL STATEMENTS. The consolidated balance
sheet as of the end of the fiscal year ended June 30, 1999 as set forth in
EMKT's annual report on Form 10-K, as filed with the Securities and Exchange
Commission, and the consolidated statements of operations, consolidated
statements of stockholders' equity and consolidated statements of cash flow for
the fiscal year then ended, were prepared in accordance with GAAP, except as may
be indicated therein or in the notes or schedules thereto, and fairly present
the consolidated financial position of EMKT and its consolidated subsidiaries as
of the date thereof and the results of their operations and cash flows for the
fiscal year then ended.
4.5 CAPITALIZATION. The authorized capital stock of Top Team consists
of 30,000,000 shares of common stock, par value $0.001 per share, and 1,000,000
shares of Series A Convertible
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Preferred Stock, par value $0.001 per share ("PREFERRED STOCK"). As of the date
of this Agreement 100 shares of Top Team Stock and no shares of Preferred Stock
have been issued, and options to purchase 2,200,000 shares of Top Team Stock are
reserved for issuance pursuant to options that have been or are to be granted
under Top Team stock incentive plans. Except as set forth on Schedule 4.5, in
Section 5.5 and in this Section 4.5, there are not as of the date hereof, and as
of the Closing Date there will not be, any outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to any other shares of capital stock of Top
Team, pursuant to which Top Team is or may become obligated to issue shares of
capital stock or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of the capital stock of Top
Team. Top Team and EMKT have entered into letters of intent or agreements to
acquire five other companies in the interactive architecture business identified
on Schedule 4.5 (together with the Transactions, the "ROLL-UP"). Schedule 4.5
sets forth the PRO FORMA capitalization of Top Team following the Roll-Up and
the contribution by EMKT to the capital of Top Team of certain property, as
described in Section 5.5.
4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 4.6,
since June 30, 1999 there has not been any material adverse change in the
Condition of EMKT and its Subsidiaries taken as a whole.
4.7 COMPLIANCE WITH LAWS. To the best knowledge of EMKT, EMKT and each
of its Subsidiaries are in compliance with all applicable laws, regulations,
orders, judgments and decrees except where the failure to so comply would not
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
4.8 LIABILITIES. Neither EMKT nor any of its Subsidiaries has any
outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in its balance sheet for
the fiscal year ended June 30, 1999 or referred to in the footnotes thereto,
other than liabilities incurred subsequent to such date in the ordinary course
of business not involving borrowings by EMKT. Neither EMKT nor any of its
Subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement.
4.9 LITIGATION. Except as set forth in the EMKT's Form 10-K for the
fiscal year ended June 30, 1999, there is no action, suit, proceeding, at law or
in equity, or any arbitration or any administrative or other proceeding by or
before (or to the best knowledge, information and belief of EMKT, any
investigation by or before) any governmental or other instrumentality or agency,
pending or, to the best of knowledge, information and belief of EMKT, threatened
against or affecting EMKT or any of its Subsidiaries or any of their properties
or rights which could have a material adverse effect on Condition of EMKT and
its Subsidiaries taken as a whole. There are no such suits, actions, claims,
proceedings or investigations pending, or to the best knowledge, information and
belief of the Company, threatened, seeking to prevent or challenge the
Transactions. Except as disclosed in such Form 10-K, neither EMKT nor any of its
Subsidiaries, is subject to any judgment, order or decree in any lawsuit or
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proceeding which could have a material adverse effect on the Condition of EMKT
and its Subsidiaries, taken as a whole, or on the ability of EMKT or any
Subsidiary to conduct its business as presently conducted.
ARTICLE V
ACTIONS PRIOR TO CLOSING DATE
5.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. During the
period commencing on the date hereof and ending on the Closing Date, each of the
Company and EMKT shall, and shall cause each of its Subsidiaries to, upon
reasonable notice, afford the other, and their respective counsel, accountants
and other authorized representatives, full access during normal business hours
to the properties, books and records of the Company and its Subsidiaries or EMKT
and its Subsidiaries (as applicable) in order that they may have the opportunity
to make such investigations as they shall desire of the affairs thereof; such
investigation shall not, however, affect the representations and warranties made
by the Company or EMKT in this Agreement. The Company acknowledges and agrees
that Top Team's auditors will be performing an audit of the Company's financial
statements (the "AUDIT"), and will provide all information and documents and
cooperate in any reasonable way so as to permit the Audit to be completed
promptly. The Company agrees to cause its officers and employees to furnish such
additional financial and operating data and other information and respond to
such inquiries as EMKT and Top Team shall from time to time reasonably request.
5.2 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING DATE.
The Company agrees that, except as permitted, required or specifically
contemplated by, or otherwise described in, this Agreement or otherwise
consented to or approved in writing by EMKT, during the period commencing on the
date hereof and ending on the Closing Date:
(a) The Company and each of its Subsidiaries will conduct
their respective operations only according to their ordinary and usual course of
business and will use their commercially reasonable best efforts to preserve
intact their respective business organization, keep available the services of
their officers and employees and maintain satisfactory relationships with
licensers, suppliers, distributors, clients and others having business
relationships with them;
(b) Neither the Company nor any of its Subsidiaries shall (i)
make any change in or amendment to its Amended and Restated Articles of
Incorporation or By-Laws (or comparable governing documents); (ii) issue or sell
any shares of its capital stock (other than in connection with the exercise of
Company Options outstanding on the date hereof) or any of its other securities,
or issue any securities convertible into, or options, warrants or rights to
purchase or subscribe to, or enter into any arrangement or contract with respect
to the issuance or sale of, any shares of its capital stock or any of its other
securities, or make any other changes in its capital structure; (iii) declare,
pay or make any dividend or other distribution or payment with respect to, or
split, redeem or reclassify, any shares of its capital stock; (iv) enter into
any contract or commitment, except for contracts in the ordinary course of
business, including without limitation, any acquisition of a material amount of
assets or securities, any disposition of a material amount of assets or
21
securities or release or relinquish any material contract rights; (v) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently, or otherwise) for the obligations of any other Person other than a
Subsidiary in the ordinary course of business and consistent with past practice;
(vi) incur, assume or prepay any indebtedness or other material liabilities
other than in the ordinary course of business and consistent with past
practices; (vii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to Subsidiaries and employees in
the ordinary course of business and not to exceed $25,000 in the aggregate
outstanding at any time; (viii) authorize capital expenditures in excess of the
amount currently budgeted therefor; (ix) permit any insurance policy naming the
Company or any Subsidiary as a beneficiary or a loss payee to be cancelled or
terminated other than in the ordinary course of business; (x) amend any employee
or nonemployee benefit plan or program, employment agreement, license agreement
or retirement agreement, or pay any bonus or contingent compensation, except in
each case in the ordinary course of business consistent with past practice prior
to the date of this Agreement; (xi) agree, in writing or otherwise, to take any
of the foregoing actions; or (xii) agree to the settlement of any litigation;
(c) The Company shall not, and shall not permit any of its
Subsidiaries to (i) take any action, engage in any transaction or enter into any
agreement which would cause any of the representations or warranties set forth
in Article III to be untrue as of the Closing Date, or (ii) purchase or acquire,
or offer to purchase or acquire, any shares of capital stock of the Company and
the Company shall not sell or pledge or agree to sell or pledge any stock owned
by it in any of the Subsidiaries, or allow any Subsidiary to pledge or agree to
sell or pledge any stock owned by it in any other Subsidiary.
(d) The Company will use its commercially reasonable best
efforts to deliver to EMKT prior to the Closing a consolidated balance sheet as
of the end of the fiscal year ended July 31, 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, prepared in accordance with GAAP and on a basis consistent with
that of the statements delivered pursuant to Section 3.5.
5.3 BEST EFFORTS. Each of the Company, EMKT and Top Team shall, and the
Company shall cause each of its Subsidiaries to, cooperate and use their
respective commercially reasonable best efforts to take, or cause to be taken,
all appropriate action, and to make, or cause to be made, all filings necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Transactions, including, without limitation, their respective
commercially reasonable best efforts to obtain, prior to the Closing Date, all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company and
its Subsidiaries as are necessary for consummation of the Transactions and to
fulfill the conditions to the Transactions; provided, however, that no loan
agreement or contract for borrowed money shall be repaid except as currently
required by its terms, in whole or in part, and no contract shall be amended to
increase the amount payable thereunder or otherwise to be more burdensome to the
Company or any of its Subsidiaries in order to obtain any such consent, approval
or authorization without first obtaining the written approval of EMKT and Top
Team.
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5.4 NO SOLICITATION OF OTHER OFFERS. Neither the Company nor any of its
Subsidiaries, shall, directly or indirectly, take (and the Company shall not
authorize or permit its or its Subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to so take) any action to encourage, solicit, initiate or, subject
to the fiduciary duties of the Board of Directors under applicable law as
advised in writing by counsel, participate in any way in discussions or
negotiations with, or furnish any information to, any Person (other than EMKT,
Top Team or their respective officers, directors, representatives, agents,
affiliates or associates) in connection with any possible or proposed merger or
other business combination, sale or other disposition of assets, sale of shares
of capital stock or similar transactions involving the Company or any Subsidiary
or division of the Company. The Company will promptly communicate to EMKT and
Top Team the terms of any proposal or inquiry that it may receive in respect of
any such transaction, or of any such information requested from it or of any
such negotiations or discussions being sought to be initiated with the Company.
5.5 EMKT CONTRIBUTION TO TOP TEAM CAPITAL. Simultaneously with the
Closing, EMKT shall contribute $2,000,000 to the capital of Top Team in exchange
for (i) 250,000 shares of Top Team Stock, (ii) 250,000 shares of Top Team
Preferred Stock, having the powers, preferences and rights set forth in Schedule
5.5, and (iii) rights, expiring on the six-month anniversary of the Closing
Date, to purchase 3,600,000 shares of Top Team Stock at a purchase price of
$7.50 per share. $1,000,000 of such cash will be available by Top Team to fund
the line of credit referred to in Section 6.3(f).
ARTICLE VI
CONDITIONS PRECEDENT TO TRANSACTIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT, TOP TEAM AND THE
COMPANY AND THE SELLERS. The respective obligations of EMKT and Top Team, on the
one hand, and the Company and the Sellers, on the other hand, to effect the
Transactions are subject to the satisfaction or waiver (subject to applicable
law) on or prior to the Closing Date of each of the following conditions:
(a) INJUNCTION. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Transactions and which is in effect on the Closing Date; and
(b) STATUTES. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the consummation
of the Transactions or has the effect of making the purchase of the Company
Stock illegal.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT AND TOP TEAM. The
obligations of EMKT and Top Team to effect the Transactions are also subject to
the satisfaction or waiver, on or prior to the Closing Date, of each of the
following conditions:
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(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing
Date;
(b) PERFORMANCE BY COMPANY. The Company shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to the Closing Date;
(c) EMPLOYMENT AGREEMENTS. Fred Walti and Robert Wilson shall
have entered into employment agreements with Top Team in form and substance
satisfactory to Top Team;
(d) LEGAL OPINION. EMKT and Top Team shall have received an
opinion of Troop Steuber Pasich Reddick & Tobey, LLP, counsel to the Company in
form and substance acceptable to EMKT and Top Team;
(e) JOINDER AGREEMENTS. Each Optionee shall have executed a
Joinder Agreement in form and substance satisfactory to EMKT; and
(f) OTHER DOCUMENTS. EMKT and Top Team shall have received
such other documents, opinions, agreements, certificates and instruments as they
shall reasonably require in connection with the consummation of the
Transactions.
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SELLERS.
The obligation of the Company and the Sellers to effect the Transactions is also
subject to the satisfaction or waiver, on or prior to the Closing Date, of each
of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of EMKT and Top Team contained herein shall be
true and correct in all material respects as of the date hereof and at and as of
the Closing, with the same force and effect as though made on and as of the
Closing Date;
(b) PERFORMANCE BY EMKT AND TOP TEAM. Each of EMKT and Top
Team shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or complied with by it
prior to the Closing Date;
(c) EMPLOYMENT AGREEMENTS. Fred Walti and Robert Wilson shall
have entered into employment agreements with Top Team in form and substance
satisfactory to Messrs. Walti and Wilson, respectively;
(d) STOCK INCENTIVE PLANS. Top Team shall have implemented a
stock option plan and restricted stock purchase plan prior to the Closing Date
and shall have reserved for issuance up
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to 100,000 shares of Top Team stock for issuance to former employees of the
Company pursuant to such plan;
(e) REGISTRATION RIGHTS. (i) EMKT and the Sellers shall have
entered into an agreement regarding "piggyback" registration rights for the
Purchase Consideration, which rights shall be subject to customary underwriters'
cut-backs and which shall be PARI PASSU with respect to other registration
rights granted by EMKT, whether prior or subsequent to the Closing Date;
(ii) Top Team and the Sellers shall have entered into an
agreement regarding "piggyback" registration rights for the Exchange
Consideration, which rights shall be subject to customary underwriters'
cut-backs and which shall be PARI PASSU with respect to other registration
rights granted by Top Team, whether prior or subsequent to the Closing Date Such
agreement shall also provide for a single "demand" registration right beginning
September 30, 2000 if Top Team shall not have filed prior to such date a
registration statement under the Securities Act under which the Sellers have had
the opportunity to register the Exchange Consideration;
(f) CREDIT FACILITY. Top Team shall make available to the
Company a line of credit in the amount of $1,000,000, evidenced by a revolving
promissory note having a term of 24 months and bearing interest at a rate of 10%
per annum;
(g) LEGAL OPINION. The Company and the Sellers shall have
received an opinion of Kaye, Scholer, Fierman, Hays and Handler, LLP, counsel to
EMKT and Top Team, in form and substance acceptable to the Company and the
Sellers; and
(h) INDEMNITY AGREEMENT. Top Team and Fred Walti shall have
entered an indemnity agreement with respect to certain obligations of the
Company personally guaranteed by Fred Walti.
6.4 CONDITIONS TO THE OPTION CLOSING. The respective obligations of
EMKT and Top Team, on the one hand, and the Optionees, on the other hand, to
effect the Transactions are subject to the satisfaction or waiver (subject to
applicable law) on or prior to the Option Closing Date of each of the following
conditions:
(a) CLOSING. The Closing shall have occurred; and
(b) SECURITIES LAWS. The Purchase and Exchange with respect to
the Optionee's Company Stock shall have been registered and qualified or exempt
from registration and qualification under the Securities Act, the California Law
and any other applicable securities or "blue sky" law.
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ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated and the Transactions
may be abandoned, at any time prior to the Closing Date:
(a) by mutual consent of the Company and the Sellers, on the
one hand, and of EMKT and Top Team, on the other hand;
(b) by EMKT and Top Team, on the one hand, or the Company and
the Sellers, on the other hand, if the Closing shall not have occurred within 90
days after the date of this Agreement or there has been a material breach of any
representation, warranty, obligation, covenant or agreement set forth in this
Agreement on the part of the other party;
(c) by EMKT and Top Team, if any of the conditions specified
in Sections 6.1 or 6.2 have not been met or waived by EMKT and Top Team prior to
or at such time as such condition can no longer be satisfied; or
(d) by the Company and the Sellers, if any of the conditions
specified in Sections 6.1 or 6.3 have not been met or waived by the Company and
the Sellers prior to or at such time as such condition can no longer be
satisfied.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1 by EMKT or Top Team, on the one hand, or the
Company and the Sellers, on the other hand, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, and there shall be no liability hereunder on the part of
EMKT, Top Team or the Company or the Sellers, except that Section 9.1, Article
VIII and this Section 7.2 shall survive any termination of this Agreement.
Nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLERS. Each Seller shall severally and not
jointly, indemnify and hold harmless EMKT and Top Team and each of their
affiliates, directors, officers, employees, attorneys, agents and
representatives (collectively, the "AFFILIATED PARTIES") in respect of any and
all claims, losses, damages, liabilities, declines in value, penalties,
interest, costs and expenses (including, without limitation, any attorneys',
accountants' and consultants' fees and other expenses) reasonably incurred by
EMKT or Top Team or their respective Affiliated Parties, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
prime rate as reported from time to time by Bank of America NT & SA (the "PRIME
26
RATE") then in effect, from the date such cash disbursements were made by EMKT
or Top Team or any of their Affiliated Parties until paid by such Seller, in
connection with each and all of the following:
(a) Any breach of any representation or warranty made by such
Seller in Article II or III of this Agreement;
(b) Any misrepresentation contained in any certificate
furnished by such Seller individually pursuant to this Agreement or in
connection with the Transactions; and
(c) Any breach of any covenant, agreement or obligation of
such Seller individually contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought
against such Seller under this Section 8.1 unless and until the aggregate amount
of claims under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and
Top Team and their respective Affiliated Parties shall be entitled to
indemnification from such Seller for all claims hereunder in excess of $50,000.
8.2 INDEMNIFICATION BY SELLERS JOINTLY AND SEVERALLY. The Sellers
shall, for a period of 18 months from the date hereof, jointly and severally
indemnify and hold harmless EMKT and Top Team and each of their respective
Affiliated Parties in respect of any and all claims, losses, damages,
liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys, accountants' and consultants'
fees and other expenses) reasonably incurred by EMKT or Top Team or their
respective Affiliated Parties, together with interest on cash disbursements in
connection therewith, at an annual rate equal to the Prime Rate then in effect,
from the date such cash disbursements were made by EMKT or Top Team or any of
their Affiliated Parties until paid by the Sellers, in connection with each and
all of the following:
(a) Any breach of any representation or warranty made by the
Sellers or the Company in Article III of this Agreement or pursuant hereto;
(b) Any misrepresentation contained in any certificate
furnished by Sellers and/or the Company pursuant to this Agreement or in
connection with the Transactions; or
(c) Any breach of any covenant, agreement or obligation of
Sellers and/or the Company contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought against the
Sellers under this Section 8.2 unless and until the aggregate amount of claims
under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and Top Team and
their respective Affiliated Parties shall be entitled to indemnification from
the Sellers for all claims hereunder in excess of $50,000.
8.3 INDEMNIFICATION BY EMKT AND TOP TEAM. EMKT and Top Team shall, for
a period of 18 months from the Closing Date, jointly and severally, indemnify
and hold harmless each of the Sellers in respect of any and all claims, losses,
27
damages, liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys', accountants' and consultants'
fees and other expenses) reasonably incurred by Sellers, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
Prime Rate then in effect, from the date that such cash disbursements were made
by Sellers until paid by EMKT or Top Team, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by EMKT
or Top Team in this Agreement or pursuant hereto; or
(b) Any breach of any covenant, agreement or obligation of
EMKT or Top Team contained in this Agreement or any other instrument
contemplated by this Agreement; or
(c) Any misrepresentation contained in any statement or
certificate furnished by EMKT or Top Team pursuant to this Agreement or in
connection with the Transactions.
No claim, demand, suit or cause of action shall be brought
against EMKT or Top Team under this Section 8.3 unless and until the aggregate
amount of claims under this Section 8.3 exceeds $50,000, in which event, Sellers
shall be entitled to indemnification from EMKT or Top Team for all claims
hereunder in excess of $50,000.
8.4 INDEMNIFICATION BY SELLERS FOR TAX LIABILITIES. In addition to, and
not by way of limitation on, the indemnities set forth in this Article VIII, the
Sellers shall jointly and severally indemnify and hold harmless on an after-tax
basis (and after taking into account any insurance proceeds to which EMKT or Top
Team is entitled hereunder) EMKT and Top Team against all Taxes of the Company
(together with its consolidated Subsidiaries) for all taxable periods ending on
or before the date hereof or otherwise attributable to the operations,
transactions, assets, or income of the Company or its Subsidiaries prior to the
date hereof, together with any expenses (including, without limitation,
settlement costs and any legal, accounting and other expenses) incurred in
connection with the contesting, collection or assessment of such Taxes, and
together with interest at an annual rate equal to the Prime Rate then in effect.
Notwithstanding Sections 8.1 and 8.2, the Sellers' obligation to indemnify EMKT
and Top Team pursuant to this Section 8.4 shall continue until 90 days after all
applicable statutes of limitations have expired. For purposes of this Section
8.4, the term "AFTER-TAX BASIS" means determined after giving effect to (i) the
receipt by the indemnified party of such payment, if such receipt is taxable and
(ii) any tax deduction available on account of the payment of such Taxes; and
assuming that Taxes are payable at a combined effective rate of 45% of taxable
income.
8.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"INDEMNIFIED PARTY") shall promptly notify the party obligated to provide
indemnification (the "INDEMNIFYING PARTY") of the claim and, when known, the
facts constituting the basis for such claim; provided, however, that the failure
to so notify the indemnifying party shall not relieve the indemnifying party of
its obligation hereunder to the extent such failure does not materially
prejudice the indemnifying party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
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a third party, the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. If any
claims shall arise against Sellers hereunder, EMKT and Top Team may (but shall
not be required to) set-off against any amount then or thereafter payable (but
not yet paid) to such Seller.
8.6 DEFENSE CLAIMS. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party to this Agreement, the indemnifying
party at its sole cost and expense and with counsel reasonably satisfactory to
the indemnified party may, upon written notice to the indemnified party, assume
the defense of any such claim or legal proceeding if (a) the indemnifying party
acknowledges to the indemnified party in writing, within 15 days after receipt
of notice from the indemnifying party, its obligations to indemnify the
indemnified party with respect to all elements of such claim, (b) the
indemnifying party provides the indemnified party with evidence reasonably
acceptable to the indemnified party that the indemnifying party will have the
financial resources to defend against such third-party claim and fulfill its
indemnification obligations hereunder, (c) the third-party claim involves only
money damages and does not seek an injunction or other equitable relief, and (d)
settlement or an adverse judgment of the third party claim is not, in the good
faith judgment of the indemnified party, likely to establish a pattern or
practice adverse to the continuing business interests of the indemnified party.
The indemnified party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense; provided,
however, that if there are one or more legal defenses available to the
indemnified party that conflict with those available to the indemnifying party,
or if the indemnifying party fails to take reasonable steps necessary to defend
diligently the claim after receiving notice from the indemnified party that it
believes the indemnifying party has failed to do so, the indemnified party may
assume the defense of such claim; provided, further, that the indemnified party
may not settle such claim without the prior written consent of the indemnifying
party, which consent may not be unreasonably withheld. If the indemnified party
assumes the defense of the claim, the indemnifying party shall reimburse the
indemnified party for the reasonable fees and expenses of counsel retained by
the indemnified party and the indemnifying party shall be entitled to
participate in (but not control) the defense of such claim, with its counsel and
at its own expense. The parties agree to render, without compensation, to each
other such assistance as they may reasonably require of each other in order to
insure the proper and adequate defense of any action, suit or proceeding,
whether or not subject to indemnification hereunder. Notwithstanding the
foregoing, if any of Sellers assumes the defense of a claim for Taxes for which
they are obligated to indemnify EMKT, Top Team or any of its Subsidiaries, then
such indemnifying party shall not settle or otherwise agree to a resolution of a
dispute with respect to such claim if that settlement or resolution would have
an adverse impact on the liability of EMKT, Top Team or any of their respective
Subsidiaries for any taxable period ending after the date hereof without the
express written consent of EMKT, Top Team or such affected Subsidiary, which
consent will not be unreasonably withheld or delayed.
8.7 MANNER OF INDEMNIFICATION. All indemnification payments hereunder
shall be effected by payment of cash or delivery of a certified or official bank
check in the amount of the indemnification liability.
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8.8 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the provisions of
Section 8.1, 8.2 and 8.3 to the effect that an indemnifying party's obligation
under such section shall expire 18 months after the date hereof, such obligation
shall continue (i) as to any matter as to which a claim is submitted in writing
to the indemnifying party prior to such 18 months after the date hereof
identified as a claim for indemnification pursuant to this Agreement or (ii) as
to any matter that is based upon willful fraud by the indemnifying party, until
such time as such claims and matters are resolved. The liability of any Seller
shall not exceed the value of the Consideration received by such Seller.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES.
(a) Except as provided in paragraph (b) below, all costs and
expenses incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such costs and expenses;
provided that Top Team shall reimburse the Sellers for the reasonable fees and
costs of their counsel, not to exceed $50,000.
(b) If either (i) at any time while this Agreement is in
effect, the Company shall have consummated, or entered into an agreement
providing for, a merger of the Company with, sale of all or a substantial part
of the assets of the Company to, or any other business combination involving the
Company with, another Person, or (ii) this Agreement is terminated other than
solely because of a material breach of the representations or warranties of EMKT
or Top Team or a failure of EMKT or Top Team to fulfill a material covenant
contained herein, then, in the case of clause (i) or (ii) above, the Company
shall, within two days after the first of such events has occurred, pay EMKT a
fee in lieu of reimbursement for such expenses equal to the costs of the Audit,
but not to exceed $20,000.
9.2 REPRESENTATIONS AND WARRANTIES. The respective representations
and warranties of the Company and the Sellers, on the one hand, and EMKT and Top
Team, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party.
9.3 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, EMKT or Top Team, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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9.4 PUBLIC ANNOUNCEMENTS. The Company and the Sellers, on the one hand,
and EMKT and Top Team, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Transactions , and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement, unless required by
applicable law.
9.5 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
(a) if to the Company, to it at:
Full Moon Interactive Group, Inc.
1111 Tamarind Avenue
Hollywood, California 90038
Attention: President
Fax: 323-856-3011
with a copy to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, 24th Floor
Los Angeles, California 90067
Attention: V. Joseph Stubbs, Esq.
Fax: 310-728-2243
(b) if to any Seller to his, her or its address on the
signature pages hereof
with a copy to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, 24th Floor
Los Angeles, California 90067
Attention: V. Joseph Stubbs, Esq.
Fax: 310-728-2243
(c) if to either EMKT or Top Team, to it at:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
Attention: President
Fax: 323-856-3011
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with a copy to:
eMarketplace, Inc.
225 W. Julian Street, Suite 100
San Jose, California 95110
Attention: Chairman
Fax 408 275-1958
And to:
Kaye Scholer Fierman, Hays & Handler, LLP
1999 Avenue of the Stars
Los Angeles, California 90067
Attention: B.J. Yankowitz, Esq.
Fax: 310-788-1200
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
9.6 ENTIRE AGREEMENT. This Agreement and the exhibits, schedules and
other documents referred to herein or delivered pursuant hereto, collectively
contain the entire understanding of the parties hereto with respect to the
subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
9.7 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
9.8 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in writing by the parties
hereto in any and all respects before the Closing Date.
9.9 FURTHER ACTIONS. Each of the parties hereto agrees that, subject to
its legal obligations, it will use its best efforts to fulfill all conditions
precedent specified herein, to the extent that such conditions are within its
control, and to do all things reasonably necessary to consummate the
Transactions.
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9.10 HEADINGS. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. References to Articles, Sections, Exhibits and
Schedules, unless otherwise specified, are to Articles, Sections, Exhibits and
Schedules of and to this Agreement.
9.11 COUNTERPARTS.This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
9.12 APPLICABLE LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflict of laws rules thereof.
9.13 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
9.14 "PERSON" DEFINED. "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
IN WITNESS WHEREOF, each of EMKT, Top Team, the Sellers and the Company
have caused this Agreement to be executed by their respective officers (if
applicable) hereunto duly authorized, all as of the date first above written.
EMKT: EMARKETPLACE, INC.
By: /s/ Robert M. Wallace
----------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
TOP TEAM: TOP TEAM, INC.
By: /s/ Robert M. Wallace
----------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
33
THE COMPANY: FULL MOON INTERACTIVE GROUP, INC.
By: /s/ Fred Walti
----------------------------------------
Fred Walti
President
SELLERS:
/s/ Fred Walti
---------------------------------------------
Fred Walti
Address:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
/s/ Nancy Johnston
---------------------------------------------
Nancy Johnston
Address:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
/s/ Randal Walti
---------------------------------------------
Randal Walti, Trustee of the Walti Family
Trust, 1996
Address:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
/s/ Pamela Flank
---------------------------------------------
Pamela Flank
Address:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
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GRAND PACIFIC FINANCING CORPORATION
By: /s/ Michael Lin
----------------------------------------
Michael Lin, President
Address:
3501 Challenger Street, 2nd Floor
Torrance, CA 90503
GRAND PACIFIC FINANCE CORPORATION
By: /s/ Michael Lin
----------------------------------------
Michael Lin, President
Address:
41-99 Main Street, 2nd floor
Flushing, New York 11355
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