SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
(Mark One)
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): April 8, 2002
HouseHold Direct, Inc.
(Name of Small Business Issuer in its charter)
Delaware 51-0388634
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
HOUSEHOLD DIRECT, INC.
3 Glen Road
SANDY HOOK, CONNECTICUT 06482
(Address of Principal Executive Offices)
(203) 426-2312
(Issuer's Telephone Number Including Area Code)
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
On April 2, 2002, the Company announced the acquisition of eDemnify Systems
Corporation.
Business Description
On behalf of large and medium-sized banks, eDemnify has successfully developed
transactional websites that embody the functions of life insurance point-of-sale
and servicing operations. Customers include banks, credit unions, insurance and
securities brokers, and insurance companies. Sales may be completed through
platform agents, call centers, kiosks, or home banking through proprietary
websites. The digital revolution "transactionalizes" the sales, underwriting,
and service processes, thereby enabling more efficient and profitable sales
cycles.
eDemnify growth opportunities exist in three areas: (1) the streamlining of
industry business processes through substantive automation of operations, (2)
the addition of a wide range of insurance products from whole and universal life
products to deferred and immediate annuities, auto and homeowners insurance and
multiple affinity product and service offerings, thereby creating a virtual
Insurance Mall, and (3) the integration of advanced multimedia for the training
and education of agents and consumers.
Deregulation of the financial services industry has eliminated historic barriers
to the distribution of risk-based insurance - allowing the free pursuit of some
eighty billion dollars in life insurance premiums generated annually in the
United States.
Perceiving extraordinary growth and systems integration opportunities, eDemnify
has assembled an experienced and balanced management and technical team, created
a sophisticated and secure technological infrastructure, and established the
strategic marketing and technical relationships capable of capturing a
significant share of the revenues generated from the sale of life insurance and
other products through banks and other financial institutions.
As a complete sales system, an eDemnify customized website provides end-to-end
support for market conduct and compliance, agent contracting, new business
functions, case processing and management, and financial reporting. When
operating in a secure environment accessible by agent password, an eDemnify
website offers online training, communication, and marketing tools, needs
analysis and premium quoting, preliminary health screening and application,
underwriting reports, and sales analysis. eDemnify represents significant
leadership in the deployment of these vast engines of opportunity, change and
new revenues.
Identity of the Persons from which the Assets were Acquired
John Hilgers, President of eDemnify
Date and Manner of Acquisition
April 2, 2002
eDemnify Systems Corporation is a corporation duly organized, validly existing
and currently in good standing under the laws of the State of Nevada, with full
power and authority, and with all licenses, permits, certifications,
registrations, approvals, consents and franchises necessary to own or lease and
operate its properties and to conduct its business as presently being conducted.
HHD desires to acquire all of the issued and outstanding capital stock of
eDemnify in exchange for shares of the Common Stock, $.001 par value, of HHD
("HHD Stock") in a tax-free type "B" reorganization pursuant to the Internal
Revenue Code ("Code"); and the Shareholder desires to exchange his shares of
eDemnify for shares of HHD Stock.
Subject to the terms and conditions of this agreement ("Agreement") the
Shareholder shall, at the Closing (as defined) exchange all of the issued and
outstanding shares of the capital stock of eDemnify ("eDemnify Stock") for
shares of HHD Stock.
"Initial Shares" shall be and mean 1,500,000 shares of HHD Stock. All of the
shares of HHD Stock to be issued to the Shareholder pursuant to this Agreement
shall be "restricted securities".
Nature and Amount of Consideration
In consideration for the conveyance of the eDemnify Stock to HHD, HHD shall
issue and deliver to the Shareholder: (A) at the Closing (as defined) the
Initial Shares (as defined), (B) within 90 days following the end of the First
Measuring Period, the First Measuring Period Shares, (C) within 90 days
following the end of the Second Measuring Period, the Second Measuring Period
Shares and (D) within 90 days following the end of the Third Measuring Period,
the Third Measuring Period Shares.
Acquisition Conditions
The obligation of HHD to implement this Agreement and consummate the subject
acquisition is, at its election, subject to and conditioned upon the
satisfaction (and/or written waiver) of each of the following conditions:
A. At the Closing, HHD shall have received a certificate, executed by the
President and Secretary of eDemnify and the Shareholder (effective as of the
Closing), and in form and content reasonably acceptable to HHD, certifying the
truth and accuracy of the representations and warranties of eDemnify and the
Shareholder herein contained.
B. Prior to the Closing there shall not have occurred any material adverse
change in the Business and/or Operating Assets, nor shall any event have
occurred or condition exist which, with the passage of time or the giving of
notice, may cause or create any such adverse material change.
C. Prior to the Closing, all corporate and other proceedings in connection
with the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be in the form annexed hereto
and/or in form acceptable to HHD and HHD and its counsel shall have received all
counterpart originals or certified or other copies of such documents and
instruments as they may reasonably request.
D. No action or proceeding shall have been instituted and be pending by any
private party and/or governmental agency or authority challenging the legality
of this Agreement or the subject acquisition and/or seeking to prevent or delay
consummation of the transactions herein contemplated; which action or proceeding
shall have resulted in preliminary or permanent injunctive relief prohibiting
consummation of this Agreement and/or the subject acquisition.
E. All statutory requirements (including, without limitation "bulk sales")
for the valid consummation by the Shareholder and eDemnify of the transactions
herein described shall have been fully and timely satisfied; all authorizations,
consents and approvals of all Federal, state and local governmental agencies and
authorities required to be obtained in order to permit consummation of the
transactions herein described, and/or to permit the Business to continue
unimpaired in all material respects immediately following the Closing shall have
been obtained and shall be in full force and effect; and no action or proceeding
to suspend, revoke, cancel, terminate, modify or alter any of such
authorizations, consents or approvals shall be pending or threatened.
F. HHD shall have received all of the documentation required to be
delivered to it pursuant to the provisions of this Agreement.
G. The satisfaction of HHD with the Financial Statements.
H. The satisfaction of HHD with the results of its due diligence
investigation of eDemnify and its business, operations and financial condition.
I. The individuals described on Exhibit "J" shall have executed employment
agreements with eDemnify on terms and condition acceptable to HHD and an
executed counterpart of each of the same shall have been delivered to HHD.
Description of Assets
OPERATING ASSETS
(a) IPOS System software and documentation (as represented by DimeQuote, a
System installation at Dime Bank of New York).
(b) Personnel to operate, maintain, and market the IPOS System. eDemnify
will be free to hire and/or contract with any past or current LSI officers,
employees, or vendors.
(c) A contract with Dime Bank of New York governing the installation and
deployment of DimeQuote in its branch banking system.
(d) All marketing contacts and leads, past and current, developed by
eDemnify during the course of its operations and marketing efforts.
INDEPENDENT AUDITORS' REPORT
AUDITED FINANCIALS
Within 30 days of the date hereof the Shareholder shall deliver to HHD audited
financial statements for eDemnify for the period from inception through December
31, 2001 prepared in accordance with generally accepted accounting principals
applied on a consistent basis (the "Financial Statements") including, without
limitation a statement of the results of operations for the period ended
December 31, 2001, a source and application of funds and a balance sheet as of
December 31, 2001; and the date upon which such Financial Statements shall be
delivered to HHD shall be referred to herein as the "Delivery Date".
The notes identified below will be an integral part of the "Financial
Statements."
(1) Mature of Business and Summary of Significant Accounting Policies
Organization and Description of the Company
Going Concern
Basis of Presentation
Use of Estimates
Cash and Cash Equivalents
Other Assets
Income Taxes
Revenue Recognition
Segment Information
Research and Development
Property and Equipment
Equity Based Compensation
(2) Related Party Transactions
(3) Property and Equipment
(4) Short Term Debt
(5) Commitments and Contingencies
Lease Commitments
(6) Member Equity
(7) Subsequent Events
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
April 2, 2002 /s/ John Folger
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Date President and
Chief Executive Officer
CONTENTS
ACQUISITION AGREEMENT
WITNESSETH
I. STOCK TRANSFER
II. CONSIDERATION
III. DEFINITIONS
IV. RESTRICTED SECURITIES
V. ARBITRATION
VI. AUDITED STATEMENTS
VII. CLOSING
VIII. DELIVERIES
IX. eDEMNIFY REPRESENTATIONS AND WARRANTIES
X. HHD REPRESENTATIONS AND WARRANTIES
XI. HOUSEHOLD DIRECT BEST EFFORTS
XII. HOUSEHOLD DIRECT ACQUISITION CONDITIONS
XIII. eDEMNIFY ACQUISITION CONDITIONS
XIV. HOUSEHOLD DIRECT OR eDEMNIFY TERMINATION
XV. RESTRICTIVE COVENANT
XVI. ADDITIONAL COVENANTS
XVII. eDEMNIFY INDEMNIFICATION
XVIII. HOUSEHOLD DIRECT INDEMNIFICATION
XIX. HOUSEHOLD DIRECT EQUITABLE RELIEF
XX. eDEMNIFY EQUITABLE RELIEF
XXI. NOTICES
XXII. WAIVER OF OBLIGATIONS
XXIII. PUBLIC DISCLOSURE
XXIV. MODIFICATION
XXV. JURISDICTION
XXVI. BINDING EFFECT
XXVII. ENTIRE AGREEMENT
XXVIII. MULTIPLE ORIGINALS
XXIX. SEVERABILITY
XXX. EXHIBITS
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT dated as of April 2, 2002, between and among
HouseHold Direct, Inc., a Delaware corporation ("HHD"), and eDemnify Systems
Corporation, a Nevada corporation ("eDemnify"), and John Hilgers (the
"Shareholder").
WITNESSETH:
WHEREAS, eDemnify is engaged in the business described on Exhibit "B"
annexed hereto ("Business") and in connection therewith utilizes and owns those
assets (tangible and intangible) described on Exhibit "C" annexed hereto
("Operating Assets") free and clear of all liens, claims and encumbrances and
rights and options of others except as set forth on the Schedule of Exceptions
annexed hereto as Exhibit "D" ("Exception Schedule"); and
WHEREAS, HHD desires to acquire all of the issued and outstanding capital
stock of eDemnify in exchange for shares of the Common Stock, $.001 par value,
of HHD ("HHD Stock") in a tax-free type "B" reorganization pursuant to the
Internal Revenue Code ("Code"); and the Shareholder desires to exchange his
shares of eDemnify for shares of HHD Stock upon the terms and conditions
hereinbelow set forth.
NOW THEREFORE, in consideration of the premises and the covenants, terms
and conditions hereinbelow set forth and for One ($1.00) Dollar and other good
and valuable consideration each to the other in hand paid, the parties hereto do
hereby agree as follows:
I. STOCK TRANSFER
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Subject to the terms and conditions of this agreement ("Agreement") the
Shareholder shall, at the Closing (as defined) exchange all of the issued and
outstanding shares of the capital stock of eDemnify ("eDemnify Stock") for
shares of HHD Stock as hereinbelow provided.
II. CONSIDERATION
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In consideration for the conveyance of the eDemnify Stock to HHD, HHD shall
issue and deliver to the Shareholder: (A) at the Closing (as defined) the
Initial Shares (as defined), (B) within 90 days following the end of the First
Measuring Period, the First Measuring Period Shares, (C) within 90 days
following the end of the Second Measuring Period, the Second Measuring Period
Shares and (D) within 90 days following the end of the Third Measuring Period,
the Third Measuring Period Shares.
III. DEFINITIONS
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A. For purposes of this Agreement the term:
(1) "EBITA" shall be and mean, with respect to each applicable measuring
period, the net pre tax income of eDemnify determined in accordance
with generally accepted accounting principals applied on a consistent
basis and on a basis consistent with prior practices exclusive of
income tax, depreciation and amortization;
(2) "Initial Shares" shall be and mean 1,500,000 shares of HHD Stock;
(3) "First Measuring Period" shall be and mean the period commencing on
the Closing and terminating 365 days after the closing;
(4) "Second Measuring Period" shall be and mean the period commencing on
the first day after the end of the "First Measuring Period" and
terminating 365 days later.
(5) "Third Measuring Period" shall be and mean the period commencing on
the first day after the end of the "Second Measuring Period" and
terminating 365 days later;
(6) "First Measuring Period Income" shall be an mean the EBITDA of
eDemnify for the First Measuring Period multiplied by 3;
(7) "Second Measuring Period Income" shall be an mean the EBITDA of
eDemnify for the Second Measuring Period multiplied by 3 and reduced
by the First Measuring Period Income;
(8) "Third Measuring Period Income" shall be an mean the EBITDA of
eDemnify for the Third Measuring Period multiplied by 3 and reduced by
the sum of the First Measuring Period Income and the Second Measuring
Period Income;
(9) "First Target Price" shall be and mean the average of the closing bid
and asked prices of the HHD Stock on its primary exchange during the
last 10 trading days in the month of December 2002;
(10) "Second Target Price" shall be and mean the average of the closing bid
and asked prices of the HHD Stock on its primary exchange during the
last 10 trading days in the month of December 2003;
(11) "Third Target Price" shall be and mean the average of the closing bid
and asked prices of the HHD Stock on its primary exchange during the
last 10 trading days in the month of December 2004;
(12) "First Measuring Period Shares" shall be and mean the number of shares
of HHD Stock determined by dividing the First Measuring Period Income
by the First Target Price;
(13) "Second Measuring Period Shares" shall be and mean the number of
shares of HHD Stock determined by dividing the Second Measuring Period
Income by the Second Target Price;
(14) "Third Measuring Period Shares" shall be and mean the number of shares
of HHD Stock determined by dividing the Third Measuring Period Income
by the Third Target Price;
(15) Closing shall be and mean the closing of the transaction contemplated
by this agreement;
(16) Closing Date shall be and mean no earlier than ten (10) days nor later
than thirty (30) days following the transmittal of the Closing Notice;
(17) Closing Notice shall be and mean a written notice transmitted by HHD
to the Shareholder within thirty (30) days following the Delivery
Date;
(18) Delivery Date shall be and mean the date upon which the "Financial
Statements" shall be delivery to HHD (including, without limitation a
statement of the results of operations for the period ended December
31, 2001, a source and application of funds and a balance sheet as of
December 31, 2001).
IV. RESTRICTED SECURITIES
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All of the shares of HHD Stock to be issued to the Shareholder pursuant to
this Agreement shall be "restricted securities" and may not be transferred,
sold, assigned, conveyed, mortgaged, pledged or hypothecated except in
accordance with the applicable provisions of the Securities Act of l933, as
amended (the "Act") and the rules and regulations promulgated thereunder by the
Securities and Exchange Commission; provided however that the Shareholder, and
all assignees and transferees of the Shareholder, shall, at the Closing, be
granted the registration rights with respect to the shares of HHD Stock acquired
by the Shareholder hereunder as set forth on Exhibit "E" annexed hereto;
V. ARBITRATION
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Any dispute as to any computation made pursuant to this Paragraph V shall
be submitted to and settled by arbitration to be held in the City of Stamford,
State of Connecticut in accordance with the commercial rules and regulations of
the American Arbitration Association then obtaining. The arbitrators shall, in
the award, have authority to allocate costs to the prevailing party.
VI. AUDITED STATEMENTS
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Within 30 days of the date hereof the Shareholder shall deliver to HHD
audited financial statements for eDemnify for the period from inception through
December 31, 2001 prepared in accordance with generally accepted accounting
principals applied on a consistent basis (the "Financial Statements") including,
without limitation a statement of the results of operations for the period ended
December 31, 2001, a source and application of funds and a balance sheet as of
December 31, 2001; and the date upon which such Financial Statements shall be
delivered to HHD shall be referred to herein as the "Delivery Date".
VII. CLOSING
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The closing of the transaction contemplated by this Agreement (the
"Closing") shall take place at the offices of HHD at 10:00 A.M. in the forenoon
on a date ("Closing Date") designated by HHD in a written notice ("Closing
Notice") transmitted by HHD to the Shareholder within 30 days following the
Delivery Date; which Closing Date shall be no earlier than 10 days nor later
than 30 days following the transmittal of the Closing Notice.
VIII. DELIVERIES
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At the Closing each of the following deliveries shall be made by the
parties as hereinbelow indicated and each such delivery shall be and be deemed
to be made simultaneously.
A. HHD shall deliver or cause to be delivered to the Shareholder:
(1) Certificates representing the Initial Shares registered in the
name of the Shareholder;
(2) Executed counterparts of the instruments and documents required
to be delivered at the Closing as set forth in Paragraph XII
hereof.
B. The Shareholder shall deliver or cause to be delivered to the HHD:
(1) Certificates representing all of the issued and outstanding
capital stock of eDemnify, duly endorsed in blank or accompanied
by duly executed stock assignment powers;
(2) Executed counterparts of the instruments and documents required
to be delivered at the Closing as set forth in Paragraph XII
hereof:
(3) Certificates of Good Standing of eDemnify in the state of
formation and in each state where the conduct of its businesses
or ownership of assets requires qualification to do business;
(4) The books and records of eDemnify; and
(5) Keys to all of the offices and filing cabinets of eDemnify and
all security codes and devices; provided however that access to
any office of eDemnify maintained in a personal residence shall
be subject to access only during normal business hours;
IX. eDEMNIFY REPRESENTATIONS AND WARRANTIES
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In order to induce HHD to execute and perform this Agreement each of
eDemnify and the Shareholders does hereby jointly and severally represent,
warrant, covenant and agree (which representations, warranties, covenants and
agreements shall be and be deemed to be continuing and survive the execution and
delivery of this Agreement and the Closing) as follows:
A. eDemnify is a corporation duly organized, validly existing and in
good standing under the laws of State of Nevada, with full power
and authority, corporate and otherwise, and with all licenses,
permits, certifications, registrations, approvals, consents and
franchises necessary to own or lease and operate its properties
and to conduct its business as presently being conducted.
eDemnify is duly qualified to do business and is in good
standing, in each jurisdiction where the conduct of its business
or the ownership of its assets requires such qualification;
B. (i) eDemnify owns and has good and marketable title in and to the
Business and the Operating Assets free and clear of all liens,
claims and encumbrances and rights and option of others; (ii)
upon the acquisition by HHD of the eDemnify Stock as herein
provided, HHD acquire good and marketable title in and to the
eDemnify Stock and each part and portion thereof free and clear
of all liens, claims and encumbrances and rights and option of
others;
C. (i) Each of the Shareholder and eDemnify has the full power and
authority, corporate and otherwise, to execute, deliver and
perform this Agreement and to consummate the transactions
contemplated hereby; (ii) The execution, delivery and performance
of this Agreement and the consummation of the transactions herein
contemplated by eDemnify and the Shareholder have been duly
authorized by all necessary corporate and other action, and this
Agreement has been duly and properly authorized, executed and
delivered by the Shareholder and eDemnify, as the case may be;
(iii) This Agreement is the valid and binding obligation of the
Shareholder and eDemnify, enforceable in accordance with its
terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and the discretion of
courts in granting equitable remedies; (iv) The execution,
delivery and performance of this Agreement does not, and will
not, with or without the giving of notice or the lapse of time,
or both, (A) result in any violation of the Certificate of
Incorporation or By-Laws of eDemnify , (B) result in a breach of
or conflict with any of the terms or provisions of, or constitute
a default under, or result in the modification or termination of,
or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or
assets of the Shareholder or eDemnify and/or pursuant to, any
indenture, mortgage, note, contract, commitment or other
agreement or instrument to which the Shareholder or eDemnify is a
party or by which the Shareholder or eDemnify or any of their
respective properties or assets are or may be bound or affected;
(C) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or
department, domestic or foreign, having jurisdiction over the
Shareholder or eDemnify or any of their respective properties or
businesses; or (D) have any effect on any permit, certification,
registration, approval, consent, license or franchise necessary
for eDemnify to own or lease and operate its properties and to
conduct its businesses or the ability of eDemnify to make use
thereof. No consent, approval, authorization or order of any
court, governmental agency, authority or body and/or any party to
an agreement to which the Shareholder or eDemnify is a party
and/or by which any of them is bound, is required in connection
with the execution, delivery and performance of this Agreement,
and/or the consummation of the transactions contemplated by this
Agreement;
D. eDemnify is not in violation of, or in default under, (i) any
term or provision of its constitutional documents; (ii) any
material term or provision or any financial covenant of any
indenture, mortgage, contract, commitment or other agreement or
instrument to which it is a party or by which it or any or its
properties or business is or may be bound or affected; or (iii)
any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign,
having jurisdiction over it or any of its properties or business.
eDemnify owns, possesses or has obtained all governmental and
other licenses, permits, certifications, registrations, approvals
or consents and other authorizations necessary to own or lease,
as the case may be, and to operate its properties and to conduct
its business or operations as presently conducted and all such
governmental and other licenses, permits, certifications,
registrations, approvals, consents and other authorizations are
outstanding and in good standing, and there are no proceedings
pending or, to the best of its knowledge, threatened, or any
basis therefor existing, seeking to cancel, terminate or limit
such licenses, permits, certifications, registrations, approvals
or consents or authorizations, or related to the breach or
failure to comply of eDemnify with any law, rule, regulation,
judgment, order or decree;
E. None of the Shareholders of eDemnify has incurred any liability
for any finder's fees or similar payments in connection with the
transactions herein contemplated except as set forth herein;
F. Except as set forth on the Exception Schedule, eDemnify is not in
default, in any material respect, under the terms of any
outstanding agreement relating to the Business or Operating
Assets or any part thereof, as the case may be; and to the best
knowledge and belief of the Shareholder and eDemnify, there
exists no event of default or event which, with notice and/or the
passage of time, or both, would constitute any such default;
G. Except as set forth on the Schedule of Exceptions, there are no
claims, actions, suits, proceedings, arbitrations, investigations
or inquiries before any court or governmental agency, court or
tribunal, domestic, or foreign, or before any private arbitration
tribunal, pending, or, to the best of the knowledge of the
Shareholder or eDemnify, threatened against the Shareholder or
eDemnify, as the case may be. As to those items listed on the
Schedule of Exceptions none, if determined adversely to eDemnify,
as the case may be, would, individually or in the aggregate, have
a material adverse effect on the Business or Operating Assets of
eDemnify as the case may be, or which question the validity of
this Agreement or of any action taken or to be taken by the
Shareholder or eDemnify pursuant to, or in connection with, this
Agreement; nor, to the best of the knowledge of the Shareholder
or eDemnify, after inquiry, is there any basis for any such
claim, action, suit, proceeding, arbitration, investigation or
inquiry to be made by any person and/or entity, including without
limitation any customer, supplier, lender, stockholder, former or
current employee, agent or landlord. Other than as set forth on
the Schedule of Exceptions, there are no outstanding orders,
judgments or decrees of any court, governmental agency or other
tribunal specifically naming the Shareholder or eDemnify and/or
enjoining any of them from taking, or requiring any of them to
take, any action, and/or by which any of them and/or their
respective properties or businesses are bound or subject;
H. eDemnify has paid and/or provided for the payment (at or prior to
the Closing) of all employment related taxes (including
withholding taxes) with respect to its employees;
I. There are no benefit programs, collective bargaining agreements,
or pension plans applicable to eDemnify's employees other than as
set forth on the Schedule of Exceptions;
J. All compensation and benefit payments including vacation, holiday
and sickness payments (but exclusive of accruals) required to be
paid to employees of eDemnify prior to the Closing has been paid;
K. The Financial Statements fairly present the financial position of
eDemnify as of the respective dates thereof and the results of
operations, and changes in financial position of eDemnify, for
each of the periods covered thereby. The Financial Statements
have been prepared in conformity with generally accepted
accounting principles, applied on a consistent basis throughout
the entire periods involved. As of the date of the balance sheet
forming a part of the Financial Statements, and except as and to
the extent reflected or reserved against therein, eDemnify has no
material liabilities, debts, obligations or claims (absolute or
contingent) asserted against it and/or which should have been
reflected in a balance sheet or the notes thereto; and all assets
reflected thereon are properly reported and present fairly the
value of the assets therein stated in accordance with generally
accepted accounting principles;
L. The financial and other books and records of eDemnify (i) are in
all material respects true, complete and correct and have, at all
times, been maintained in accordance with good business and
accounting practices; (ii) contain a complete and accurate
description, and specify the location, of all trucks,
automobiles, machinery, equipment, furniture, supplies, tools,
drawings and all other tangible property (collectively the "
Property") owned by, in the possession of, or used by eDemnify in
connection with the operation of Business; (iii) except as set
forth on Schedule of Exceptions, none of such Property is leased
or subject to a security agreement, conditional sales contract or
other title retention or security agreement or is other than in
the possession of, and under the control of, eDemnify; and (iv)
the Property reflected in such books and records constitutes all
of the tangible and intangible property necessary for the conduct
of the Business; and all of the same is in normal operating
condition and the use thereof as presently employed conforms to
all applicable laws and regulations;
M. eDemnify owns and has good and marketable title in and to all of
its assets, properties and interests in properties (both real and
personal) which are reflected in the balance sheet included in
the Financial Statements and/or utilized in connection with the
operation of the Business and/or acquired after that date (except
to the extent any of the same were disposed of since such date in
the ordinary course of business), in all cases, free and clear of
all liens, security interests, claims and encumbrances of every
kind, nature and description and rights and options of others
except as expressly set forth in such balance sheet;
N. Annexed hereto as Exhibit "F" is a schedule setting forth a
description of (i) each parcel of improved or unimproved real
property owned by or leased to eDemnify; (ii) all buildings,
fixtures and other improvements situated on or affixed to each
designated parcel; and (iii) each title insurance policy insuring
any of such parcels. Exhibit "F" is true correct and complete in
all respects; each of such leases are in full force and effect
with no event of default in existence or event or occurrence
which, with the passage of time and/or giving of notice, would or
could mature into an event of default thereunder;
O. eDemnify owns all trademarks, service marks, trade names,
copyrights, similar rights and their registrations, trade
secrets, methods, practices, systems, ideas, know how and
confidential materials used or proposed to be used in the conduct
of Business (collectively the "Intangibles") free and clear of
all liens, claims and encumbrances and rights and options of
third parties (including, without limitation, former or present
officers, directors, shareholders, employees and agents);
eDemnify has not licensed or leased any of the Intangibles and/or
any interest therein to any person and/or entity; eDemnify has
not infringed, nor is infringing, upon the rights of others with
respect to the Intangibles; and eDemnify has not received any
notice of conflict with the asserted rights of others with
respect to the Intangibles which could, singly or in the
aggregate, materially adversely affect its business as presently
conducted or prospects, financial condition or results of
operations, and neither eDemnify nor the Shareholder knows of any
basis therefore; and, to the best of the knowledge of the
Shareholder eDemnify, no others have infringed upon the
Intangibles;
P. Annexed hereto as Exhibit "G" is a true, correct and complete
schedule of all insurance policies maintained by eDemnify; and
eDemnify has insured its properties against loss or damage by
fire or other casualty, including liability insurance for acts or
omissions of employees, in an amount sufficient to preclude
eDemnify from being a co-insurer with respect to any claim;
Q. Except as and to the extent reflected or reserved against in the
Financial Statements, eDemnify did not have, as at date of such
Financial Statements, any material liabilities, debts,
obligations or claims asserted against it, whether accrued,
absolute, contingent or otherwise, and whether due or to become
due, including, but not limited to, liabilities on account of due
and unpaid taxes, other governmental charges or lawsuits;
R. eDemnify has filed all federal, state, municipal and local tax
returns (whether relating to income, sales, franchise,
withholding, real or personal property or otherwise) required to
be filed under the laws of the United States and all applicable
states, and has paid in full all taxes which are due pursuant to
such returns or claimed to be due by any taxing authority or
otherwise due and owing. No penalties or other charges are or
will become due with respect to the late filing of any such
return. To the best of the knowledge of eDemnify and the
Shareholder, after due investigation, each such tax return
heretofore filed by eDemnify correctly and accurately reflects
the amount of its tax liability thereunder. eDemnify has
withheld, collected and paid all other levies, assessments,
license fees and taxes to the extent required and, with respect
to payments, to the extent that the same have become due and
payable;
S. Since December 31, 2000 eDemnify has not sustained any material
loss or interference with its business of any kind, nature or
description including, without limitation, from fire, storm,
explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree; nor have there been, and prior to the
Closing, there will not be, any material adverse change in or
affecting the general affairs, management, financial condition,
equity, results of operations or properties of eDemnify;
T. Other than as set forth on Exhibit "H" annexed hereto and made a
part hereof, eDemnify is not a party (i) to any contract or
agreement calling for the payment of more than $10,000 per annum
or $25,000 in the aggregate and/or which cannot be terminated on
not more than 90 days' prior written notice to the other party
thereto; (ii) to any profit sharing, bonus, deferred
compensation, pension or retirement plan, severance policy or
other similar agreement or arrangement; (iii) to any collective
bargaining agreement; or (iv) to any agreement not entered into
in the ordinary course of business except those related to the
transactions contemplated by this Agreement;
U. The authorized and outstanding capitalization of eDemnify is as
set forth on Exhibit "I" annexed hereto and made a part hereof;
as of the date hereof and the Closing there shall not be
authorized and/or issued and outstanding any shares of capital
stock of eDemnify and/or rights to purchase shares of capital
stock of eDemnify except as set forth on Exhibit "I". The issued
and outstanding shares of eDemnify capital stock have been duly
authorized and validly issued and are fully paid and
nonassessable. There are no preemptive rights;
V. The copies of the constitutional documents of eDemnify heretofore
delivered to HHD are true, correct and complete in all respects;
are, and shall remain, in full force and effect; and shall not be
altered, amended, modified, terminated or rescinded prior to the
Closing without the prior written consent of HHD in each
instance;
W. The Shareholder has adequate means for providing for his current
needs, has no need for liquidity of his investment in the HHD
Stock (collectively the "Securities") and has the financial
capacity to bear the economic risk of any investment in the
Securities for an indefinite period of time; and has sufficient
means to bear the economic risk and/or entire loss of his
investment in the Securities;
X. The Shareholder has been afforded an opportunity to ask questions
of and receive answers from HHD and its counsel concerning the
terms and conditions of an investment in the Securities, and all
such questions have been answered to the full satisfaction of the
Shareholders;
Y. The Shareholder has examined and/or has had the opportunity to
examine, prior to the date hereof, all documents and such
applicable information as it has requested (to the extent such
information and documentation are (i) relevant to this
transaction, and (ii) possessed by HHD or obtainable by HHD
without unreasonable effort or expense);
Z. The Shareholder has sufficient knowledge and experience in
business matters to evaluate the merits and risks of an
investment in the Securities;
AA. The Shareholder is an accredited investor as such term is defined
in the Act and is acquiring the Securities for its own account
and for investment purposes only and without a view towards or
agreement with respect to the transfer, sale, assignment, or
other disposition thereof, and none of the Shareholders shall
sell, assign, transfer, pledge, hypothecate or deal in and with
the Securities in violation of the Act or the rules and
regulations promulgated thereunder by the Securities and Exchange
Commission; and
BB. The representations, warranties, covenants and agreements of the
Shareholder and eDemnify contained in this Agreement, including,
without limitation, those contained in this Paragraph IX, are
true, accurate and correct in all respects as of the date hereof
and shall be true, accurate and correct and complete, in all
respects, as of the Closing; and at the Closing the Shareholder
and eDemnify shall deliver to HHD a certificate, executed by the
chief executive officer of eDemnify and the Shareholders,
respectively, under oath, remaking, each of the representations,
warranties, covenants and agreements set forth in this Agreement,
including without limitation, those set forth in this Paragraph
IX hereof.
X. HOUSEHOLD DIRECT REPRESENTATIONS AND WARRANTIES
-----------------------------------------------
In order to induce the Shareholder and eDemnify to execute and perform this
Agreement, HHD does hereby represent, warrant, covenant and agree (which
representations, warranties, covenants and agreements shall be and be deemed to
be continuing and survive the execution and delivery of this Agreement and the
Closing) as follows:
A. HHD is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full power
and authority, corporate and otherwise, and with all licenses,
permits, certifications, registrations, approvals, consents and
franchises necessary to own or lease and operate its properties
and to conduct its business as presently being conducted;
B. (i) HHD has the full power and authority, corporate and
otherwise, to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby; (ii) The
execution, delivery and performance of this Agreement, the
consummation by HHD of the transactions herein contemplated and
the compliance by it with the terms of this Agreement have been
duly authorized by all necessary corporate action, and this
Agreement has been duly and properly authorized, executed and
delivered by HHD; (iii) This Agreement is the valid and binding
obligation of HHD, enforceable in accordance with its terms,
subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting
the rights of creditors generally and the discretion of courts in
granting equitable remedies; (iv) The execution, delivery and
performance of this Agreement by HHD and the consummation by HHD
of the transactions herein contemplated does not, and will not,
with or without the giving of notice or the lapse of time, or
both, (A) result in any violation of the Articles of
Incorporation or By-Laws of HHD, (B) result in a breach of or
conflict with any of the terms or provisions of, or constitute a
default under, or result in the modification or termination of,
or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or
assets of HHD pursuant to any indenture, mortgage, note,
contract, commitment or other agreement or instrument to which
HHD is a party or by which it or its properties or assets are or
may be bound or affected; or (C) to the best knowledge of HHD,
after due investigation, violate any existing applicable law,
rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over
HHD or its assets. No consent, approval, authorization or order
of any court, governmental agency, authority or body and/or any
party to an agreement to which HHD is a party and/or by which it
is bound, is required in connection with the execution, delivery
and performance of this Agreement, and/or the consummation by HHD
of the transactions contemplated by this Agreement, which has not
already been received or will be received by the Closing;
C. HHD is not in violation of, or in default under, (i) any term or
provision of its Articles of Incorporation or By-Laws; (ii) any
material term or provision or any financial covenant of any
indenture, mortgage, contract, commitment or other agreement or
instrument to which it is a party or by which it or any or its
assets is or may be bound or affected; or (iii) to the best
knowledge of HHD, any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over it or any of its
assets;
D. Upon the execution and delivery of the certificates evidencing
shares of HHD Stock in accordance with the terms and conditions
of this Agreement, such shares and certificates shall be duly,
properly and validly authorized and issued, fully paid and
non-assessable; and
E. The representations, warranties, covenants and agreements of HHD
contained in this Agreement, including, without limitation, those
contained in this Paragraph X, are true, accurate and correct in
all respects as of the date hereof and shall be true, accurate
and correct and complete, in all respects, as of the Closing; and
at the Closing HHD shall deliver to the Shareholders a
certificate, executed by the chief executive officer of HHD, as
the case may be, under oath, remaking, on behalf of HHD each of
the representations, warranties, covenants and agreements set
forth in this Agreement, including without limitation, those set
forth in this Paragraph X hereof.
F. During the period from the date hereof until the earlier to occur
of the Closing or the termination of this Agreement by HHD, the
Shareholder and eDemnify shall:
(1) Permit the officers and other authorized representatives of HHD
(i) full and unrestricted access, from time to time and at one or
more times, to the offices and books and records of eDemnify
situated at its offices during normal business hours, and in
connection with such books and records, such inspection shall be
at the offices where such records are normally maintained, and
such parties shall be entitled to make copies of and abstracts
from any of such books and records; (ii) the opportunity to meet,
correspond and communicate with the officers, directors,
employees, counsel and accountants to eDemnify , and to secure
from each such information as such parties shall deem necessary
or appropriate; and (iii) to review and copy such other, further
and additional financial and operating date, materials and
information as to the business as may be requested by such
parties;
(2) Take and perform any and all actions necessary to render accurate
and/or maintain the accuracy of, all of the representations and
warranties of the Shareholder and eDemnify herein contained
and/or satisfy each covenant or condition required to be
performed or satisfied by the Shareholder and eDemnify at or
prior to the Closing and/or to cause or permit the implementation
of the within acquisition.
(3) Not take or perform any action which would or might cause any
representation or warranty made by the Shareholder or eDemnify
herein to be rendered inaccurate, in whole or in part and/or
which would prevent, inhibit or preclude the satisfaction, in
whole or in part of any covenant required to be performed or
satisfied by the Shareholder or eDemnify at or prior to the
Closing and/or the implementation of the within acquisition.
(4) Carry on and maintain the Business in the ordinary course of
business and in substantially the same form, style and manner as
heretofore operated by eDemnify; perform, in all material
respects all of eDemnify's obligations under all material
agreements, leases and documents; use its best efforts to
preserve, intact, the relationships with its suppliers,
customers, employees and others having business relations with
eDemnify; not voluntarily engage in any material transaction not
in the ordinary course of business without the prior written
consent of HHD; and not amend any benefit plans to increase
benefits or otherwise increase compensation of their employees
other than in the ordinary course of business. Without limiting
the generality of the foregoing eDemnify shall not:
(a) change its business, operations or financial condition, or
the manner of managing or conducting its business and
operations if such changes, if any, have a material adverse
effect on such business, operations or financial condition,
taken as a whole;
(b) change its accounting methods or practices (including,
without limitation, any change in depreciation, amortization
and/or good will policies or rates;
(c) incur any damage, destruction or loss (whether or not
covered by insurance) which materially and adversely affects
its assets, business, operations or financial condition;
(d) make any declaration, setting, or payment of a dividend or
other distribution with respect to the capital stock of
eDemnify, or any direct or indirect redemption, purchase or
other acquisition by eDemnify of any of its share of capital
stock;
(e) make any issuance or sale of any share of eDemnify capital
stock of any class, or any other securities;
(f) permit any increase in the salary or other compensation
payable or to become payable to any of their respective
officers, directors, employees or agents, or the
declaration, payment or commitment or obligation of any
kind, nature or description for the payment by any of them
of a bonus or other additional salary or compensation to any
person;
(g) make any loan to any person or entity and/or issue any
guaranty for or with respect to its own or another's
obligations;
(h) waive or release any right or claim;
(i) sell, lease, abandon, assign, transfer, license or otherwise
dispose (including any agreement and/or option for or with
respect to any of the foregoing) of any real property or
tangible or intangible assets, property or rights (and/or
interest therein);
(j) incur any material obligation or liability, absolute or
contingent;
(k) experience any labor problems and/or other events or
conditions of any character which materially and/or
adversely affect, or which might materially and/or adversely
affect, its financial condition, business, assets or
prospects; and
(l) amend, terminate or modify any material agreement or license
to which it is a party which has or may have a material
affect on its financial condition, business, assets or
prospects;
(5) Use its best efforts in good faith, to obtain and/or maintain all
licenses, consents or approvals (from every governmental or
regulatory body, or other person) required to be obtained and/or
held by eDemnify for or with respect to its (i) assets,
businesses and/or operations; and/or (ii) in connection with the
implementation of the transactions herein contained; and/or (iii)
the continued operation, following the Closing, of its business
in the manner presently conducted;
(6) Immediately advise HHD of any event, condition or occurrence
which inhibits or limits or is likely to prevent, inhibit or
limit the Shareholder or eDemnify from satisfying, in full and on
a timely basis, any covenant, term or condition herein contained
and/or implementing this Agreement; and
(7) Not issue any public announcement dealing in or with this
Agreement and/or the transactions herein described without the
prior written consent of HHD.
XI. HOUSEHOLD DIRECT BEST EFFORTS
-----------------------------
During the period from the date hereof until the earlier to occur of the
Closing or the termination of this Agreement by HHD, HHD shall:
A. Use its best efforts in good faith take and perform any and all
actions necessary to render accurate and/or maintain the accuracy of,
all of the representations and warranties of HHD herein contained
and/or satisfy each covenant or condition required to be performed or
satisfied by HHD at or prior to the Closing and/or to cause or permit
the implementation of the within acquisition.
B. Use its best efforts in good faith not to take or perform any action
which would or might cause any representation or warranty made by HHD
herein to be rendered inaccurate, in whole or in part and/or which
would prevent, inhibit or preclude the satisfaction, in whole or in
part of any covenant required to be performed or satisfied by HHD at
or prior to the Closing and/or the implementation of the within
acquisition.
C. Immediately advise the Shareholder and eDemnify of any event,
condition or occurrence which constitutes or may, with the passage of
time and/or giving of notice constitute, a breach of any
representation or warranty of HHD herein contained and/or which
prevents, inhibits or limits or is likely to prevent, inhibit or limit
HHD from satisfying, in full and on a timely basis, any covenant, term
or condition herein contained and/or implementing this Agreement.
XII. HOUSEHOLD DIRECT ACQUISITION CONDITIONS
---------------------------------------
The obligation of HHD to implement this Agreement and consummate the
subject acquisition is, at its election, subject to and conditioned upon the
satisfaction (and/or written waiver) of each of the following conditions:
A. At the Closing, HHD shall have received a certificate, executed by the
President and Secretary of eDemnify and the Shareholder (effective as
of the Closing), and in form and content reasonably acceptable to HHD,
certifying the truth and accuracy of the representations and
warranties of eDemnify and the Shareholder herein contained, including
without limitation those set forth in Paragraph IX hereof and the
complete and timely satisfaction by eDemnify and the Shareholder of
all of their respective covenants and obligations herein contained,
including without limitation those set forth in Paragraph XIII hereof.
B. Prior to the Closing there shall not have occurred any material
adverse change in the Business and/or Operating Assets, nor shall any
event have occurred or condition exist which, with the passage of time
or the giving of notice, may cause or create any such adverse material
change.
C. Prior to the Closing, all corporate and other proceedings in
connection with the transactions contemplated by this Agreement and
all documents and instruments incident to such transactions shall be
in the form annexed hereto and/or in form acceptable to HHD and HHD
and its counsel shall have received all counterpart originals or
certified or other copies of such documents and instruments as they
may reasonably request.
D. No action or proceeding shall have been instituted and be pending by
any private party and/or governmental agency or authority challenging
the legality of this Agreement or the subject acquisition and/or
seeking to prevent or delay consummation of the transactions herein
contemplated; which action or proceeding shall have resulted in
preliminary or permanent injunctive relief prohibiting consummation of
this Agreement and/or the subject acquisition.
E. All statutory requirements (including, without limitation "bulk
sales") for the valid consummation by the Shareholder and eDemnify of
the transactions herein described shall have been fully and timely
satisfied; all authorizations, consents and approvals of all Federal,
state and local governmental agencies and authorities required to be
obtained in order to permit consummation of the transactions herein
described, and/or to permit the Business to continue unimpaired in all
material respects immediately following the Closing shall have been
obtained and shall be in full force and effect; and no action or
proceeding to suspend, revoke, cancel, terminate, modify or alter any
of such authorizations, consents or approvals shall be pending or
threatened.
F. HHD shall have received all of the documentation required to be
delivered to it pursuant to the provisions of this Agreement.
G. The satisfaction of the HHD with the Financial Statements.
H. The satisfaction of HHD with the results of its due diligence
investigation of eDemnify and its business, operations and financial
condition.
I. The individuals described on Exhibit "J" shall have executed
consulting agreements with eDemnify on terms and condition acceptable
to HHD and an executed counterpart of each of the same shall have been
delivered to HHD.
XIII. eDEMNIFY ACQUISITION CONDITIONS
-------------------------------
The obligations of the Shareholder to implement this Agreement and
consummate the subject acquisition is subject to and conditioned upon the
satisfaction (and/or written waiver) of each of the following conditions:
A. At the Closing, the Shareholder shall have received a certificate,
executed by the President and Secretary of HHD (effective as of the
Closing), and in form and content reasonably acceptable to the
Shareholder, certifying, the truth and accuracy of the representations
and warranties of HHD herein contained, including without limitation
those set forth in Paragraph X hereof and the complete and timely
satisfaction by HHD of all of its covenants and obligations herein
contained, including without limitation those set forth in Paragraph
XII hereof.
B. Prior to the Closing, all corporate and other proceedings in
connection with the transactions contemplated by this Agreement and
all documents and instruments incident to such transactions shall be
in the form annexed hereto or in form acceptable to the Shareholder,
and the Shareholder and his counsel shall have received all
counterpart originals or certified or other copies of such documents
and instruments as they may reasonably request.
C. No action or proceeding shall have been instituted and be pending by
any private party and/or governmental agency or authority challenging
the legality of this Agreement or the subject merger and/or seeking to
prevent or delay consummation of the transactions herein contemplated;
which action or proceeding shall have resulted in preliminary or
permanent injunctive relief prohibiting consummation of this Agreement
and/or the subject acquisition.
D. All statutory requirements for the valid consummation by HHD of the
transactions herein described shall have been fully and timely
satisfied; all authorizations, consents and approvals of all Federal,
state and local governmental agencies and authorities required to be
obtained in order to permit consummation by HHD of the transactions
herein described, shall have been obtained and shall be in full force
and effect; and no action or proceeding to suspend, revoke, cancel,
terminate, modify or alter any of such authorizations, consents or
approvals shall be pending or threatened.
E. The Shareholder shall have received all of the documentation required
to be delivered to them pursuant to the provisions of this Agreement.
F. The individuals described on Exhibit "J" shall have executed
consulting agreement with eDemnify on terms and condition acceptable
to such individuals.
XIV. HOUSEHOLD DIRECT or eDEMNIFY TERMINATION
----------------------------------------
This Agreement may be terminated by (a) HHD if at the Closing all of the
representations and covenants of the Shareholder and eDemnify set forth in
Paragraphs IX and XIII hereof shall not have been timely and fully satisfied,
waived or cured, or (c) the Shareholder if at the Closing all of the
representations and covenants of HHD set forth in Paragraphs X and XII hereof,
respectively, shall not have been timely and fully satisfied, waived and/or
cured. The rights of the parties hereto for or with respect to any breach of
this Agreement and/or injunctive relief shall survive any termination.
XV. RESTRICTIVE COVENANT
--------------------
The Shareholder shall not (a) during the three year period commencing on
the Closing from a location within 15 miles from any office, store or other
facility of the HHD (including for purposes of this Paragraph XV, its
subsidiaries) engage, directly or indirectly (whether as stockholder, owner,
partner, employee, agent, consultant, officer or director) in whole or in part
in any business activity in which the HHD is then involved and/or (b) at any
time utilize, or authorize another to utilize, any of the confidential
information, materials, systems, procedures and/or proprietary information or
materials of eDemnify and/or HHD for any purpose other than in connection with
the business and operations of eDemnify and/or HHD. Without limiting the
generality of the foregoing each of the Shareholder does hereby acknowledge and
confirm that all of the materials, systems and procedures of eDemnify and HHD
(including customers, customer representatives and employees) are proprietary
and were communicated to him in the course of a confidential relationship.
XVI. ADDITIONAL COVENANTS
--------------------
Subject to eDemnify not exceeding Budget (as defined); satisfying its Pro
Forma (as defined); and not engaging in any business except as set forth in the
Business Plan (as defined) and/or undertaking any activity other than in the
ordinary course of business without the prior written consent of the Board of
Directors of HHD in each instance:
A. the individuals described on Exhibit "J" shall be employed by eDemnify
for the compensation respectively indicated and shall hold the
officerships and directorships similarly respectively indicated;
B. until no earlier than December 31, 2004, eDemnify shall operate as an
independent entity(s);
C. eDemnify shall utilize its existing assets to the extent possible
within the context of the Budget and the Business Plan and in a manner
consistent with achieving economies of scale;
D. HHD shall not prior to December 31, 2004, pledge the capital stock of
eDemnify and/or encumber the assets of eDemnify; and the certificates
evidencing the shares of capital stock of eDemnify shall be legended
with a reference to this paragraph XVI;
E. HHD shall establish an Executive Oversight Committee ("Committee") to
review and comment on any potential acquisition presented to HHD and
to review and evaluate all subsidiaries owned and operated by HHD. The
Committee may recommend to the Board of Directors the disposition of
any subsidiary which does not perform within 80% of its pro forma
operations for a period of more than 24 consecutive months; which
disposition may consist of either liquidation, sale or "spin off" to
the stockholders of HHD as their respective interests may appear. In
the latter case, the investment of HHD (equity and/or debt) in the
"spun off" entity may be reflected, at the option of HHD, in a
continued equity interest in the entity and/or debt secured by all of
the assets of the entity;
F. HHD shall advance, in equal monthly installments, commencing on the
Closing, to eDemnify (by capital contribution and/or debt), the
aggregate amount of not less than two hundred forty thousand dollars
($240,000). HHD shall also advance eDemnify the additional sum of
thirty thousand dollars ($30,000). The sum of ten thousand dollars
($10,000) shall be paid on or before April 15, 2002 and the sum of
twenty thousand dollars ($20,000) shall be paid within fifteen (15)
days of the date the Acquisition Agreement is executed. In the event
that HHD and eDemnify fail, after prudent efforts, to reach a mutually
acceptable definitive acquisition agreement, all advance proceeds
shall be converted into a loan by HHD to eDemnify repayable on the
first anniversary of the date hereof together with interest computed
at the rate of 6% per annum.
G. For purposes of this Agreement:
(1) "Budget" shall be and mean the budget for the operations of
eDemnify during each of the First, Second and Third Measuring
Periods delivered by the management of eDemnify to HHD at least
30 days prior to the Closing and the commencement of each of the
Second and Third Measuring Periods, respectively;
(2) "Pro Forma" shall be and mean the pro forma statement of
operations of eDemnify for each of the First, Second and Third
Measuring Periods, respectively; and
(3) "Business Plan" shall be and mean the business plan delivered by
eDemnify to HHD at least 30 days prior to the Closing;
H. The Shareholder, or any assignee or transferee of the original one
million five hundred thousand shares of HHD issued to eDemnify or of
any HHD shares earned by eDemnify during any of the measuring periods
and subsequently transferred by eDemnify, shall have the right,
exercisable during the 24 month period following the Closing, subject
to the provisions of applicable law, to exchange all, but not less
than all of the shares of HHD Stock issued to him pursuant to the
provisions of this Agreement for 100% of the capital stock of eDemnify
in the event that HHD (a) has not substantially achieved its Business
Plan through the date of the exercise of such option, or (b) files a
petition in bankruptcy, has filed against it any involuntary petition
in bankruptcy which is not discharged within 90 days of filing,
executed a general assignment for the benefit of creditors or
otherwise seeks protection pursuant to Federal or State bankruptcy
statutes during such 24 month period;
I. HHD and eDemnify shall, within 90 following the Closing, adopt a
compensation and bonus plan for employees of eDemnify keyed to
achieving operating results in excess of the Pro Forma Statements;
J. At the Closing the Shareholder will be granted warrants to purchase
1,000,000 shares of HHD Stock at any time during the 12 month period
following the Closing at the following exercise prices: (i) $.05 per
share during the first 90 days following the Closing, (ii) $.10 per
share during the second 90 days following the Closing, (iii) $.15 per
share during the third 90 days following the Closing and (iv) $.20 per
share during the fourth 90 days following the Closing; and
K. At the Closing the Shareholder will be permitted to subscribe to
purchase 250,000 shares of HHD Stock at the rate of $.01 per share.
L. Notwithstanding any provision of this Acquisition Agreement, the
Shareholder or any assignee or transferee of the Shareholder shall
have the right, exercisable at any time commencing 30 days following
the Closing to exchange all of the HHD Stock issued to them pursuant
to the provisions of this Agreement for 100% of the eDemnify Stock and
a return of all Operating Assets listed in this Agreement in the event
HHD does not make a monthly installment payment within five days of
its due date as defined in Section XVI(F) of this Agreement.
XVII. eDEMNIFY INDEMNIFICATION
------------------------
Each of eDemnify, and the Shareholder, does hereby jointly and severally
agree to indemnify and hold harmless HHD from and against any and all costs,
expenses, losses, claims, demands and liabilities of every kind, nature and
description (including without limitation reasonable attorney's fees) arising
out of or relating to any breach or anticipatory breach of this Agreement by
eDemnify or the Shareholder.
XVIII. HOUSEHOLD DIRECT INDEMNIFICATION
--------------------------------
HHD does hereby agree to indemnify and hold harmless each of eDemnify and
the Shareholder from and against any and all costs, expenses, losses, claims,
demands and liabilities of every kind, nature and description (including without
limitation reasonable attorney's fees) arising out of or relating to any breach
or anticipatory breach of this Agreement by HHD.
XIX. HOUSEHOLD DIRECT EQUITABLE RELIEF
---------------------------------
Inasmuch as the damages which may accrue to HHD arising out of a breach or
anticipatory breach of this Agreement by the Shareholder or eDemnify may be
irreparable and/or unascertainable, HHD shall have the right, in addition to and
not in lieu of any other right and/or remedy it may have, to seek and secure
equitable relief, including, without limitation, temporary and/or permanent
injunctive relief with respect to any breach or anticipatory breach of this
Agreement by eDemnify or the Shareholder.
XX. eDEMNIFY EQUITABLE RELIEF
-------------------------
Inasmuch as the damages which may accrue to eDemnify or the Shareholder
arising out of a breach or anticipatory breach of this Agreement by HHD may be
irreparable and/or unascertainable, each of the Shareholder and eDemnify shall
have the right, in addition to and not in lieu of any other right and/or remedy
it may have, to seek and secure equitable relief, including, without limitation,
temporary and/or permanent injunctive relief with respect to any breach or
anticipatory breach of this Agreement by HHD.
XXI. NOTICES
-------
Any and all notices, requests or instructions desired or required to be
given by any party hereto to any other party hereto shall be in writing and
shall either be hand delivered or mailed to the recipient first class, postage
prepaid, certified, return receipt requested at the following respective
addresses:
To: eDemnify 120 Village Square
Suite 56
Orinda, CA 94563
To: HouseHold Direct 3 Glen Road
Sandy Hook, CT 06482
With a copy to:
Martin J. Gersten, Esq.
90 Birch Hill Road
Newtown, CT 06470
or to such other address as any party hereto shall designate in a writing
complying with the provisions of this Paragraph XXI.
XXII. WAIVER OF OBLIGATIONS
---------------------
Each of the parties hereto may, by written instrument to the party against
whom enforcement is sought (a) extend the time for the performance of any of the
obligations or other acts of any party hereto; (b) waive any inaccuracies of
such other party in the representations and warranties contained herein or in
any document delivered pursuant to this Agreement; (c) waive compliance with any
of the covenants of such other party contained in this Agreement; (d) waive such
other party's performance of any of such party's obligations set out in this
Agreement; and (e) waive any condition to its obligation to effect the within
acquisition.
XXIII. PUBLIC DISCLOSURE
-----------------
Except to the extent required by applicable law no party shall make any
disclosure with respect to this Agreement and/or the within transactions without
the prior consent of all parties to this Agreement.
XXIV. MODIFICATION
------------
This Agreement may only be modified, altered or amended by a writing
executed by all of the parties hereto. Any waivers, consents or notices must be
in writing.
XXV. JURISDICTION
------------
This Agreement shall be governed and construed in accordance with the laws
of the State of Connecticut applicable to contracts executed and to be fully
performed therein and without regard to principles of conflicts of laws.
XXVI. BINDING EFFECT
--------------
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors, transferees, heirs, assigns and
beneficiaries.
XXVII. ENTIRE AGREEMENT
----------------
This Agreement (including the Exhibits hereto, the documents and
instruments delivered by the parties hereto and initialed for identification as
herein provided and any other documents executed and delivered and/or to be
executed and delivered pursuant to the provisions of this Agreement as herein
provided) sets forth the entire agreement among the parties hereto with respect
to the subject matter herein contained; and there are no covenants, promises,
agreements, conditions or understandings, either oral or written, between or
among the parties hereto with respect to the subject matter hereof except as
herein and in such ancillary documents provided.
XXVIII. MULTIPLE ORIGINALS
------------------
This Agreement may be executed in multiple copies, each of which shall
constitute an original, but all of which shall constitute one and the same
agreement.
XXIX. SEVERABILITY
------------
If any term, covenant or condition in this Agreement, or the application
thereof to any person or circumstance shall be invalid or unenforceable, the
remainder of this Agreement or the application of such term, covenant or
condition to persons or circumstances, other than those as to which it is held
invalid, shall be unaffected thereby and each term, covenant or condition of
this Agreement shall be enforced to the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
HouseHold Direct, Inc.
By s/s John Folger, President
eDemnify Systems Corporation
By s/s Jon Hilgers, President
s/s Jon Hilgers, Shareholder
EXHIBITS
--------
EXHIBIT A LIST OF INDIVIDUALS OWNING ALL OF THE ISSUED AND OUTSTANDING
CAPITAL STOCK OF eDEMNIFY
EXHIBIT B eDEMNIFY BUSINESS DESCRIPTION
EXHIBIT C eDEMNIFY OPERATING ASSETS
EXHIBIT D EXCEPTION SCHEDULE
EXHIBIT E LIST OF SHAREHOLDERS HAVING RESTRICTED REGISTRATION RIGHTS
EXHIBIT F LIST OF eDEMNIFY's REAL PROPERTY
EXHIBIT G LIST OF ALL INSURANCE POLICIES MAINTAINED BY eDEMNIFY
EXHIBIT H SCHEDULE RELATING TO A CONTRACT OR AGREEMENT EXCEEDING
$10,000 PER ANNUM
EXHIBIT I THE AUTHORIZED AND OUTSTANDING CAPITALIZATION OF eDEMNIFY
EXHIBIT J INDIVIDUALS EXECUTING EMPLOYMENT AGREEMENTS WITH eDEMNIFY
EXHIBIT A
LIST OF INDIVIDUALS OWNING ALL OF THE
ISSUED AND OUTSTANDING CAPITAL STOCK OF eDEMNIFY
JON HILGERS
EXHIBIT B
[OBJECT OMITTED] eDemnify Systems Corporation
On behalf of large and medium-sized banks, eDemnify has successfully developed
transactional websites that embody the functions of life insurance point-of-sale
and servicing operations. Customers include banks, credit unions, insurance and
securities brokers, and insurance companies. Sales may be completed through
platform agents, call centers, kiosks, or home banking through proprietary
websites. The digital revolution "transactionalizes" the sales, underwriting,
and service processes, thereby enabling more efficient and profitable sales
cycles.
eDemnify growth opportunities exist in three areas: (1) the streamlining of
industry business processes through substantive automation of operations, (2)
the addition of a wide range of insurance products from whole and universal life
products to deferred and immediate annuities, auto and homeowners insurance and
multiple affinity product and service offerings, thereby creating a virtual
Insurance Mall, and (3) the integration of advanced multimedia for the training
and education of agents and consumers.
Deregulation of the financial services industry has eliminated historic barriers
to the distribution of risk-based insurance - allowing the free pursuit of some
eighty billion dollars in life insurance premiums generated annually in the
United States.
Perceiving extraordinary growth and systems integration opportunities, eDemnify
has assembled an experienced and balanced management and technical team, created
a sophisticated and secure technological infrastructure, and established the
strategic marketing and technical relationships capable of capturing a
significant share of the revenues generated from the sale of life insurance and
other products through banks and other financial institutions.
As a complete sales system, an eDemnify customized website provides end-to-end
support for market conduct and compliance, agent contracting, new business
functions, case processing and management, and financial reporting. When
operating in a secure environment accessible by agent password, an eDemnify
website offers online training, communication, and marketing tools, needs
analysis and premium quoting, preliminary health screening and application,
underwriting reports, and sales analysis. eDemnify represents significant
leadership in the deployment of these vast engines of opportunity, change and
new revenues.
EXHIBIT C
OPERATING ASSETS
(b) IPOS System software and documentation (as represented by DimeQuote, a
System installation at Dime Bank of New York).
(b) Personnel to operate, maintain, and market the IPOS System. eDemnify will
be free to hire and/or contract with any past or current LSI officers,
employees, or vendors.
(c) A contract with Dime Bank of New York governing the installation and
deployment of DimeQuote in its branch banking system.
(d) All marketing contacts and leads, past and current, developed by eDemnify
during the course of its operations and marketing efforts.
EXHIBIT D
EXCEPTION SCHEDULE
Not applicable.
EXHIBIT E
LIST OF SHAREHOLDERS HAVING RESTRICTIVE REGISTRATION RIGHTS
Jon Hilgers or any assignee or transferee
EXHIBIT F
LIST OF eDEMNIFY'S
REAL PROPERTY
eDEMNIFY OWNS NO REAL PROPERTY
EXHIBIT G
LIST OF ALL INSURANCE POLICIES MAINTAINED BY eDEMNIFY
eDEMNIFY DOES NOT MAINTAIN ANY INSURANCE POLICIES
EXHIBIT H
SCHEDULE RELATING TO A CONTRACT
AGREEMENT EXCEEDING $10,000.00 PER ANNUM
eDEMNIFY HAS NO CONTRACTS OR AGREEMENTS EXCEEDING $10,000.00 PER ANNUM
EXHIBIT I
THE AUTHORIZED AND OUTSTANDING
CAPITALIZATION OF eDEMNIFY
ONE HUNDRED DOLLARS ($100.00)
EXHIBIT J
INDIVIDUALS EXECUTING CONSULTING
AGREEMENTS WITH eDEMNIFY
1. Julie Abrams
2. Doug Gettler
3. Patricia Helsby
4. Jon Hilgers
5. Genji Schmeder
6. Oliver Trigg
7. Thomas Verb
8. William Weagle