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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
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(Name of Issuer)
Common Stock, $.01 Par Value
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(Title of Class of Securities)
378927107
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(CUSIP Number)
Thomas R. Burton, III
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
One Financial Center, Boston, MA 02111
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 29, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for the other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 9 pages
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SCHEDULE 13D
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13D
CUSIP NO. 378927107 PAGE 2 OF 9 PAGES
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1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
GOGO Holdings, Inc.
04-3410410
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF (see response to Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES 0
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BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 10,377,093
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING 8,000,000
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PERSON 10 SHARED DISPOSITIVE POWER
WITH 0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,377,093
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
50.9%
Page 2 of 9 pages
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING
EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
Page 3 of 9 pages
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Item 1. SECURITY AND ISSUER
This statement of beneficial ownership on Schedule 13D (the
"Statement") relates to shares of the common stock, $.01 par value (the "Common
Stock"), of Global One Distribution & Merchandising Inc., a Delaware corporation
(the "Company"). The Company's principal executive offices are located at 5548
Lindbergh Lane, Bell, California 90201-6410.
Item 2. IDENTITY AND BACKGROUND
This statement is being filed by GOGO Holding, Inc. a Delaware
corporation ("GOGO"), a wholly owned subsidiary of 2d Interactive, Inc., a
Delaware corporation ("2d"). GOGO acts as a holding company for 2d and 2d's
principal business is advertising and poster sales through interactive media
kiosks. The address of GOGO is 1013 Centre Road, Wilmington, County of New
Castle, Delaware. The principal business address of 2d is 186 South Street,
Boston, Massachusetts 02111.
During the past five years none of GOGO or 2d or any of their officers
or directors has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
During the past five years none of GOGO or 2d or any of their officers
or directors have been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which any such
person was or is subject to a judgment, decree or final order enjoining future
violations of or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Pursuant to a Stock Purchase and Sale Agreement dated April 6, 1998 and
effective April 29, 1998 by and among 2d, GOGO and Erekesef Securities Limited,
a British Virgin Islands corporation ("Erekesef ") (the "Stock Purchase
Agreement"), GOGO is acquiring the shares of Common Stock in exchange for
$1,640,000 cash and 15% of the outstanding shares of 2d Common Stock, subject to
certain adjustments. The cash portion of the consideration shall be provided
from three sources:
a) an initial deposit of $75,000, was provided by a six month term
loan due September 26, 1998 granted to 2d by Manufacturers Life
Insurance Company ("ManuLife") pursuant to a Note Purchase
Agreement by and between 2d and ManuLife dated as of March 26,
1998 ("Note
Page 4 of 9 pages
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Purchase Agreement"). The Secured Convertible Promissory Note
bears interest at an annual percentage rate of 13.5%, is secured
by a first priority lien on the accounts receivables of 2d and
GOGO and may be converted into equity securities of 2d.
Additionally, ManuLife was granted a warrant to purchase 26,785
shares of Common Stock of 2d, $.01 par value per share. Finally,
pursuant to a Registration Rights Agreement between 2d and
ManuLife dated March 26, 1998, ManuLife was granted registration
rights with respect to the securities subject to the Note
Purchase Agreement;
b) a second payment due on April 30, 1998 of $215,000 was provided
from the proceeds of the loan between 2d and ManuLife, as fully
described in part a of this Item; and
c) a conditional payment of $1,350,000, due at closing which must
occur on or before July 28, 1998, is to be provided from the
proceeds of a private placement of equity securities of 2d. The
terms of such private placement are currently under negotiation.
Item 4. PURPOSE OF TRANSACTION
GOGO is to acquire the Common Stock pursuant to the terms of the Stock
Purchase Agreement. Upon the closing of the transactions contemplated by the
Stock Purchase Agreement, GOGO shall be entitled to the rights granted to
Erekesef pursuant to that certain Share Exchange Agreement by and between
Erekesef and the Company, dated as of October 24, 1997 (the "Share Exchange
Agreement"). Such rights include representation on the Board of Directors of the
Company by up to three designees of GOGO, which rights GOGO intends to exercise.
In connection with the acquisition contemplated by the Stock Purchase Agreement,
GOGO may determine, either contemporaneously with the acquisition of the Common
Stock or following the acquisition of the Common Stock to acquire additional
shares of common stock of the Company, in privately negotiated transactions or
open market purchases. Such acquisitions would be made with the intent to gain a
control position in the Company. Although currently GOGO has no firm plans to
acquire additional common stock of the Company or to dispose of the Common
Stock, either wholly or partially, GOGO reserves the right from time to time to
acquire additional shares of Common Stock of the Company, or to dispose of some
or all of its Common Stock.
Except as set forth above, GOGO does not have any plan or proposal
which relates or would result in, any of the matters referred to in paragraphs
(a) through (j) of Item 4 of the General Instructions for Schedule 13D.
Page 5 of 9 pages
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Item 5. INTEREST IN SECURITIES OF THE ISSUER
<TABLE>
<S> <C> <C>
(a) Amount beneficially owned by GOGO: 10,377,093
Percent of class: 50.9%
(b) Number of shares as to which such person has:
(i) Sole power to vote or to
direct the vote of: 0
(ii) Shared power to vote or
to direct the vote of: 10,377,093
(iii) Sole power to dispose of
or direct the disposition of: 8,000,000
(iv) Shared power to dispose of
or direct disposition of: 0
(c) Not applicable
(d) Not applicable
(e) Not applicable
</TABLE>
Page 6 of 9 pages
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Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Pursuant to the Stock Purchase Agreement referenced in Item 3, GOGO is
acquiring the Common Stock in exchange for $1,640,000 in cash and Common Stock
of 2d representing 15% of the outstanding Common Stock of 2d, subject to certain
adjustments. Pursuant to the Stock Purchase Agreement and in addition to
acquiring the Common Stock, GOGO is also acquiring Erekesef's rights under the
Share Exchange Agreement and a Voting Agreement and Conditional Irrevocable
Proxy, effective December 10, 1997, between Erekesef and Joseph C. Angard (the
"Voting Agreement").
The Stock Purchase Agreement grants GOGO the option to purchase the
Common Stock. Following execution of the Stock Purchase Agreement, GOGO
furnished $75,000 cash consideration pursuant to a letter agreement among 2d,
GOGO and Erekesef dated April 15, 1998. Following the effectiveness of the
contract and in connection with a letter agreement among 2d, GOGO and Erekesef
dated April 29, 1998, GOGO furnished $215,000 cash consideration. At any time
prior to the closing and after the deposit of $215,000, GOGO and 2d have the
option to terminate the Agreement, at the expense of $290,000, subject to
certain limitations. At the closing, which must occur on or before July 28,
1998, GOGO shall furnish $1,350,000 cash consideration and the stock
consideration.
Pursuant to the Stock Purchase Agreement, at the closing of the
transactions contemplated by the Stock Purchase Agreement, Erekesef will assign
its voting rights to 2,377,093 shares of Common Stock of the Company pursuant to
the Voting Agreement. Such Voting Agreement provides for shared voting power
over all of the Common Stock, whereby all of the shares of Common Stock shall be
voted in the manner directed by the holders of a majority of the shares of
Common Stock. In order to secure the obligations to vote the shares of Common
Stock in accordance with the Voting Agreement, each party to the Voting
Agreement appointed the other as the proxy and attorney to vote their shares of
Common Stock in the event the appointing party fails to do so in accordance with
the Voting Agreement. The term of the Agreement is one year, commencing on
December 10, 1997.
Pursuant to the Stock Purchase Agreement, at the closing of the
transactions contemplated by the Stock Purchase Agreement, Erekesef will assign
its rights under the Share Exchange Agreement. The Share Exchange Agreement
provides for representation on the Board of Directors of the Company of up to
three designees of GOGO, resale and piggyback registration rights, preemptive
rights in the event of the issuance of debt or equity securities by the Company,
rights to meetings with the management of the Company, and prohibitions against
affiliate transactions and dilutive securities issuances without the consent of
GOGO.
Page 7 of 9 pages
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Item 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit A: Stock Purchase and Sale Agreement between 2d
Interactive, Inc., GOGO Holdings, Inc. (a wholly owned
subsidiary of 2d Interactive, Inc.) and Erekesef
Securities Limited dated as of April 6, 1998 and effective
April 29, 1998
Exhibit B: Letter Agreement between 2d Interactive, Inc., GOGO
Holdings, Inc. (a wholly owned subsidiary of 2d
Interactive, Inc.) and Erekesef Securities Limited dated
April 15, 1998.
Exhibit C: Letter Agreement between 2d Interactive, Inc., GOGO
Holdings, Inc. (a wholly owned subsidiary of 2d
Interactive, Inc.) and Erekesef Securities Limited dated
April 29, 1998.
Exhibit D: Voting Agreement and Conditional Irrevocable Proxy by
and among Joseph C. Angard and Erekesef Securities
Limited, effective December 10, 1997.
Exhibit E: Share Exchange Agreement between Global One
Distribution and Merchandising Inc. and Erekesef
Securities Limited, dated as of October 24, 1997.
Exhibit F: Note Purchase Agreement by and between 2d Interactive,
Inc. and Manufacturers Life Insurance Company, dated March
26, 1998.
Exhibit G: Secured Convertible Promissory Note dated, March 26,
1998.
Exhibit H: Warrant for 26,785 share of Common Stock of 2d
Interactive, Inc. to Gerlach and Co., as nominee of the
Manufacturer's Life Insurance Company, (U.S.A.).
Exhibit I: Registration Rights Agreement by and between 2d
Interactive, Inc. and Manufacturers Life Insurance
Company, dated March 26, 1998.
Page 8 of 9 pages
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Signature
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
GOGO HOLDINGS, INC.
DATE: MAY 8, 1998 BY: /s/ Dominic Ianno
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DOMINIC IANNO, PRESIDENT
Page 9 of 9 pages
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EXHIBIT A
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STOCK PURCHASE AND SALE AGREEMENT
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April 6, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I: PURCHASE AND SALE OF THE GLOBAL ONE SHARES.......................1
SECTION 1.01 Purchase and Sale of the Global One Shares................1
SECTION 1.02 Purchase Price............................................2
SECTION 1.03 Advance and Further Advance...............................2
SECTION 1.04 Closing...................................................2
SECTION 1.05 Substitution of Shares; Repurchase........................4
SECTION 1.06 Further Assurances........................................5
SECTION 1.07 Adjustment to Consideration...............................5
SECTION 1.08 Initial Advance, Disclosure and Termination Option........6
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF THE SELLER....................7
SECTION 2.01 Title to and Ownership of Global One Shares...............7
SECTION 2.02 Authority to Enter into and Perform this Agreement........7
SECTION 2.03 Purchase For Investment...................................7
SECTION 2.04 Organization and Qualification; Ownership; Residence......8
SECTION 2.05 Seller Power and Authority................................8
SECTION 2.06 Compliance with Law.......................................8
SECTION 2.07 Share Exchange and Voting Agreement; Disclosure...........8
SECTION 2.08 Accredited Investor.......................................8
SECTION 2.09 Opportunity to Investigate; Review of Documents and
2d and Buyer.............................................8
SECTION 2.10. Experience and Suitability................................9
SECTION 2.11 No Need for Liquidity.....................................9
SECTION 2.12 Legends...................................................9
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF BUYER AND 2D.................9
SECTION 3.01 Organization and Qualification............................9
SECTION 3.02 Buyer's Power and Authority; Authorization...............10
SECTION 3.03 Validity, Etc............................................10
SECTION 3.04 Capital Structure of 2d: Issuance of Securities.........10
SECTION 3.05 Subsidiaries of 2d.......................................10
SECTION 3.06 Financial Statements.....................................11
SECTION 3.07 Affiliate Transactions...................................11
SECTION 3.08 Absence of Changes.......................................11
SECTION 3.09 Tax Returns and Audits...................................11
SECTION 3.10 Pending Litigation or Proceedings........................11
SECTION 3.11 Employee Benefits........................................11
SECTION 3.12 Investment Representation; Restrictions Upon Resale......12
SECTION 3.13 Compliance with Law......................................12
ARTICLE IV: COVENANTS......................................................12
SECTION 4.01 Best Efforts Cooperation.................................12
SECTION 4.02 Global One's Business Prior to Closing...................12
SECTION 4.03 Notice of Changes and Litigation.........................12
SECTION 4.04 No Negotiations..........................................13
i
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 4.05 Non-Competition..........................................13
SECTION 4.06 Publicity................................................13
SECTION 4.07 Board Representation.....................................14
SECTION 4.08 Registration Rights......................................15
SECTION 4.09 Co-Sale..................................................17
SECTION 4.10 Private Placement; Public Offering.......................17
SECTION 4.11 Charter and By-Law Amendments............................18
SECTION 4.12 Rights of First Refusal..................................18
SECTION 4.13 Management Agreements....................................20
SECTION 4.14 Capitalization of Global One.............................20
SECTION 4.15 Additional Covenants of 2d and Buyer.....................20
SECTION 4.16 Relationship Between 2d and Global One...................22
SECTION 4.17 Loan to Global One.......................................22
SECTION 4.18 Lawsuit Committee........................................22
ARTICLE V: CONDITIONS TO THE BUYER'S AND 2d's OBLIGATIONS..................23
SECTION 5.01 Representations and Warranties True......................23
SECTION 5.02 Performance..............................................23
SECTION 5.03 Escrow Agreement.........................................23
SECTION 5.04 Opinion of the Seller's Counsel..........................23
SECTION 5.05 Closing Documents........................................23
ARTICLE VI: CONDITIONS TO THE SELLER'S AND BERMEISTER'S OBLIGATIONS........24
SECTION 6.01 Representations and Warranties True......................24
SECTION 6.02 Performance..............................................24
SECTION 6.03 Consents.................................................24
SECTION 6.04 No Actions, Suits or Proceedings.........................24
SECTION 6.05 No Material Adverse Change...............................24
SECTION 6.06 Co-Sale Agreement........................................25
SECTION 6.07 Escrow Agreement.........................................25
SECTION 6.08 Opinion of the Buyer's and 2d's Counsel..................25
SECTION 6.09 Closing Documents........................................25
SECTION 6.10 Amendments Certificate of Incorporation or By-Laws.......25
ARTICLE VII: INDEMNIFICATION...............................................25
SECTION 7.01 Survival.................................................25
SECTION 7.02 Indemnification..........................................25
SECTION 7.03 Separate Counsel; Notice, Etc............................26
SECTION 7.04 Claims for Indemnification...............................26
SECTION 7.05 Limit of Recourse to the Buyer and 2d....................27
ARTICLE VIII: TERMINATION..................................................28
SECTION 8.01 Termination..............................................28
SECTION 8.02 Effect of Termination....................................29
ii
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE IX: MISCELLANEOUS..................................................29
SECTION 9.01 Notices..................................................29
SECTION 9.02 Entire Agreement.........................................30
SECTION 9.03 Modifications and Amendments.............................31
SECTION 9.04 Waivers and Consents.....................................31
SECTION 9.05 Assignment...............................................31
SECTION 9.06 Parties in Interest; Knowledge of the
Seller; Affiliates......................................31
SECTION 9.07 Governing Law............................................32
SECTION 9.08 Arbitration..............................................32
SECTION 9.09 Severability.............................................33
SECTION 9.10 Interpretation...........................................33
SECTION 9.11 Headings and Captions....................................33
SECTION 9.12 Enforcement..............................................33
SECTION 9.13 Reliance.................................................33
SECTION 9.14 Expenses.................................................33
SECTION 9.15 No Broker or Finder......................................33
SECTION 9.16 Confidentiality..........................................34
SECTION 9.17 Costs and Attorneys' Fees................................34
SECTION 9.18 Counterparts.............................................34
iii
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EXHIBITS
1.04(c) - Escrow Agreement
1.04(a)(3) -A- Assignment of Share Exchange Agreement
1.04(a)(3)(B) - Assignment of Voting Agreement
1.08 - Confidentiality Agreement
4.09 - Co-Sale Agreement
5.04 - Opinion of Kinsella, Boesch, Fujikawa & Towle, LLP
6.08 - Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC
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This Stock Purchase and Sale Agreement (this "Agreement") entered into this
6th day of April, 1998 and effective on April 29, 1998 by and among GOGO
Holdings, Inc. (the "Buyer"), a Delaware corporation and a wholly-owned
subsidiary of 2d Interactive, Inc., also a Delaware Corporation ("2d"), 2d and
Erekesef Securities Limited, a British Virgin Islands corporation (including any
permitted assignee, the "Seller").
W I T N E S E T H :
WHEREAS the Seller is the record and beneficial owner of 8,000,000 shares
of the Common Stock, $.01 par value per share (the "Global One Shares"), of
Global One Distribution & Merchandising, Inc., a Delaware corporation ("Global
One"), and, under a certain Voting Agreement dated as of December 10, 1997 with
Joseph and Susan Angard (the "Angards") currently controls the voting of at
least 2,000,000 additional shares of Global One Common Stock (the "Voting
Agreement");
WHEREAS the Seller and Global one are parties to a certain Share Exchange
Agreement dated as of October 24, 1997 (the "Share Exchange Agreement"), which
agreement provides by its terms that the rights of the Seller thereunder are
assignable by the Seller;
WHEREAS 2d has undertaken a private placement of its equity securities,
which may be consummated prior to, contemporaneously with or after the Closing
(as hereinafter defined) (the "Private Placement");
WHEREAS the Seller, desires to sell the Global One Shares, the Buyer
desires to purchase the Shares and 2d desires to have the Buyer purchase the
Global One Shares, upon the terms and conditions set forth herein; and
WHEREAS the Buyer, 2d and the Seller desire to enter into certain other
agreements for their mutual benefit;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby mutually
acknowledged, intending to be legally bound, the Buyer, 2d and the Seller hereby
agree as follows:
ARTICLE I: PURCHASE AND SALE OF THE GLOBAL ONE SHARES
SECTION 1.01 PURCHASE AND SALE OF THE GLOBAL ONE SHARES On the basis of the
representations, warranties and undertakings, and on the terms and subject to
the conditions set forth in this Agreement, the Seller shall sell the Global One
Shares to the Buyer, and the Buyer shall purchase the Global One Shares from the
Seller, free and clear of all adverse claims, charges, pledges, liens, security
interests, other interests of third parties and other encumbrances and
restrictions of every kind and nature ("Claims"), other than those imposed
pursuant to this
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Agreement, the Voting Agreement, the Share Exchange Agreement and securities
laws of general application.
SECTION 1.02 PURCHASE PRICE Subject to the provisions of Section 1.04, the
total purchase price for the Global One Shares (the "Purchase Price") shall be
$3,890,000, or $3,490,000, if at the election of the Buyer the Purchase Price is
paid all in cash, as provided in Section 1.04(b)(2)(iii), consisting of the
following and payable as follows:
(a) $75,000 by bank check shall be paid by the Buyer to the Seller on the
date hereof (the "Effective Date") and subject to the terms set forth
in Section 1.08 hereof, as the initial advance of a cash portion of
the purchase price, which amount shall be non-refundable to the Buyer
except under the circumstances provided for in Section 8.02(b) (the
"Initial Advance").
(b) Subject to the Termination Option (as defined in Section 1.08 herein),
$215,000, by wire transfer or bank check, shall be paid by Buyer to
the Seller on the third full business day following the Delivery Date
(as defined in Section 1.08 herein) , as an advance of a cash portion
of the Purchase Price, which amount shall be non-refundable to the
Buyer except under the circumstances provided for in Section 8.02(b)
(the "Advance");
(c) Reserved
(d) $1,350,000 by wire transfer or bank check, shall be paid by the Buyer
to the Seller, at the Closing, of which $860,000 shall be delivered by
the Buyer directly to the Escrow Agent (as defined in Section
1.04(c)); and
(e) That number of shares of capital stock of 2d determined as provided in
Section 1.04(b)(2)(i) or Section 1.04(b)(2)(ii), as applicable, shall
be issued and delivered to the Seller, at the Closing, subject to a
possible post-closing repurchase thereof at the election of the Buyer
for cash in the aggregate amount of $2,250,000 plus the dollar values
pursuant to the schedule set forth in Section 1.07 or a substitution
thereof for shares of capital stock of 2d of the class to be sold and
issued to investors in the Private Placement, as more particularly
provided in Section 1.05 (the shares so issued and any shares so
substituted are hereinafter referred to as the "2d Stock"), OR,
alternatively $1,850,000, by wire transfer or bank check, shall be
paid to the Sellers at the Closing, if, at the election of the Buyer
the Purchase Price is all cash, as provided in Section
1.04(b)(2)(iii), at the Closing.
SECTION 1.03 ADVANCE AND FURTHER ADVANCE The Initial Advance, the Advance
and Further Advance shall be non-refundable to the Buyer, except under certain
circumstances as provided in Section 8.02(b) upon termination of this Agreement.
SECTION 1.04 CLOSING Subject to the satisfaction or waiver of each of the
conditions set forth in Articles V and VI of this Agreement, the closing of the
transactions contemplated hereby
2
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(the "Closing") shall take place at the offices of Kinsella, Boesch, Fujikawa &
Towle, LLP in Los Angeles, California at such time and on such date as may be
agreed upon by the parties as soon as practicable after the date hereof and upon
the satisfaction or waiver of all conditions to Closing as provided herein;
provided that the parties hereto shall use their reasonable best efforts to
cause the Closing to occur on or before July 28, 1998 (such time and date being
hereinafter called the "Closing Date"). At the Closing:
(a) The Seller shall deliver or cause to be delivered to the Buyer the
following:
(1) Stock certificates representing the Global One Shares registered
in the names of the Seller, duly endorsed to the Buyer or
accompanied by duly executed stock assignments separate from such
certificates and sufficient to transfer ownership of the Shares
to the Buyer;
(2) If the Private Placement shall have been consummated theretofore,
except as provided in Section 4.10, any registration rights,
stockholders, co-sale and/or other agreements (other than the
applicable investment or securities purchase agreement) entered
into by the Buyer and the investors in the Private Placement,
executed by the Seller in each instance;
(3) Assignments of the Share Exchange Agreement and the Voting
Agreement in the forms attached hereto as EXHIBITS 1.04(A)(3)-A
AND 1.04(A)(3)-B, duly executed on behalf of the Seller;
(4) The certificates required by Sections 5.01 and 5.02; and
(5) The opinion of counsel required by Section 5.04.
(b) The Buyer shall pay and deliver, and 2d shall cause the Buyer to pay
and deliver, the following to the Seller:
(1) $1,350,000 or $1,550,000, representing the balance of the cash
portion of the Purchase Price after taking into account the
Advance and the Further Advance by wire transfer of same day
federal funds, of which $860,000 shall be delivered by the Buyer
directly to the Escrow Agent;
(2) (i) Stock certificates representing 71,631 shares of 2d Common
Stock, which represents fifteen percent (15%) of the outstanding
shares of 2d Common Stock as of the date hereof, unless the
Private Placement shall have been consummated theretofore, OR,
(ii) if the Private Placement shall have been consummated
theretofore, except as provided in Section 4.10, stock
certificates representing that number of
3
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shares of the capital stock of 2d of the class sold and issued to
investors in the Private Placement (rounded upward to the nearest
whole share) which, on the basis of the price paid for such
securities pursuant to the Private Placement, then have a value
of $2,250,000 plus the additional dollar values pursuant to the
schedule set forth in Section 1.07 and, except as provided in
Section 4.10, any registration rights, stockholders, co-sale
and/or other agreements (other than the applicable investment or
securities purchase agreement) entered into by 2d and such
investors, in each case executed by or on behalf of all of the
parties thereto other than the Seller, OR, (iii) if 2d so elects
by written notice to the Seller not less than two (2) business
days prior to the Closing Date, $1,850,000 plus the amount
determined in accordance with Section 1.07, by wire transfer of
same day federal funds;
(3) The certificates required by Sections 6.01 and 6.02; and
(4) The opinion of counsel required by Section 6.08.
(c) In addition to the $860,000 referred to in Sections 1.02(d) and
1.04(b)(1), the 2d Stock delivered to Seller pursuant to paragraph (b)
of this Section shall be immediately transferred to Kinsella, Boesch,
Fujikawa & Towle, LLP and Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. (the "Escrow Agent") under an escrow agreement (the
"Escrow Agreement") substantially in the form attached hereto as
Exhibit 1.04(c). The 2d Stock shall thereafter be released from escrow
in accordance with the terms of the Escrow Agreement.
SECTION 1.05 SUBSTITUTION OF SHARES; REPURCHASE
(a) In the event that, at the Closing, 2d issues and delivers to the
Seller 2d Stock consisting of shares of 2d Common Stock pursuant to
Section 1.04(b)(2)(i) and thereafter the Private Placement is
consummated, the Seller shall, at the closing of the Private
Placement, re-deliver the stock certificates representing such shares
of 2d Common Stock and 2d shall issue and deliver to the Seller in
substitution therefor stock certificates representing that number of
shares of 2d capital stock of the kind being issued and sold in the
Private Placement which, on the post-Private Placement valuation of
2d, then have a value of $2,250,000 plus any additional stock
certificates deliverable pursuant to the schedule set forth in Section
1.07 herein.
(b) Notwithstanding the foregoing, 2d may elect, by written notice to the
Seller, to repurchase the 2d Stock from the Seller at any time within
sixty (60) days after the Closing Date in consideration of the payment
of $2,250,000 plus the amount determined pursuant to Section 1.07 by
wire transfer or bank check. In such a case,
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the closing of such repurchase shall be held at such time on such date
not less than three (3) and not more than ten (10) days after such
notice by 2d to the Seller as 2d shall set forth in such notice, at
the offices of Kinsella, Boesch, Fujikawa & Towle, LLP or, if such law
firm is not agreeable thereto, at the offices of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., in Boston, Massachusetts. At such a
closing, the Seller shall deliver to 2d Stock certificates
representing the 2d Stock being repurchased, together with duly
executed stock assignments separate from certificates sufficient to
transfer title to such 2d Stock of 2d, free and clear of all Claims,
and 2d shall deliver payment therefor or evidence of payment in the
case of payment by wire transfer of same day federal funds.
SECTION 1.06 FURTHER ASSURANCES Further, at any time and from time to time
after the Closing Date, at the request of 2d and without further consideration,
the Seller, on the one hand, and the Buyer and 2d, on the other hand, shall
execute and deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation as may be reasonably requested in order to more
effectively transfer, convey and assign to the Buyer and to confirm the Buyer's
title to and ownership of the Global One Shares, and the Buyer and 2d shall
perform the reciprocal for the Seller with respect to the 2d Stock, if any,
received by the Seller hereunder.
SECTION 1.07 ADJUSTMENT TO CONSIDERATION In the event that the gross
proceeds to 2d from the Private Placement are at least $7,500,0000, Buyer shall
deliver to Seller Stock Certificates representing that number of additional
shares of capital stock of 2d of the class sold and issued to investors in the
Private Placement in accordance with the following schedule (or, in the event of
a repurchase of the 2d Stock from Seller or a cash payment pursuant to Section
1.04(b)(2)(iii), the payment price therefor shall be increased by the amount set
forth below in parentheses):
(a) upon a pre-Private Placement valuation determined by the Board of
Directors of 2d less than $15.0 million, no additional shares (or
$0.00);
(b) upon a pre-Private Placement valuation determined by the Board of
Directors of 2d between $15.0 and $17.49 million, that number of
shares purchasable with $675,000 (or $675,000);
(c) upon a pre-Private Placement valuation determined by the Board of
Directors of 2d between $17.50 and $19.99 million, that number of
shares purchasable with $900,000 (or $900,000);
(d) upon a pre-Private Placement valuation determined by the Board of
Directors of 2d between $20.00 and $24.99 million, that number of
shares purchasable with $1,125,000 (or $1,125,000); or
(e) upon a pre-Private Placement valuation determined by the Board of
Directors of 2d above $25 million, that number of shares purchasable
with $1,350,000 (or $1,350,000).
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SECTION 1.08 DISCLOSURE AND TERMINATION OPTION
(a) The Seller acknowledges that it possesses, and hereby informs Buyer
of, additional material information concerning the business,
operations, properties, assets, liabilities, condition (financial and
otherwise) and prospects of Global One, which the Seller is obligated
to keep confidential. Subject to a mutually satisfactory
confidentiality agreement having been executed and delivered among the
Buyer, 2d and Global One, substantially in the form of Exhibit 1.08
hereto, with such amendments, deletions and other changes as such
three parties thereto may agree (the "Confidentiality Agreement"),
which the Seller shall request Global One to negotiate in good faith
to enter into, as soon as practicable after the date hereof, the
Seller shall deliver and communicate to 2d and Buyer all material
non-public information related to Global One in its possession other
than the Excluded Global Information (as hereinafter defined) (the
"Global Information"); provided, however, it is mutually understood
and agreed that Global Information shall not include information which
relates to discussions, negotiations or other matters relating to
existing or prospective contracts between 2d and Global One (the
"Excluded Global Information"). The date upon which the Buyer receives
the Global Information shall be defined as the "Delivery Date." Upon
receipt of the Global Information, 2d and Buyer shall have three full
business days following the Delivery Date to evaluate the Global
Information. After evaluation of the Global Information, 2d shall have
the unconditional right to terminate the Agreement (the "Termination
Option"). In the event that 2d wishes to exercise the Termination
Option, 2d shall inform the Seller no later than 5:00 p.m. Eastern
Standard Time on the third full business day following the Delivery
Date via telephone call followed by fascimile transmission that it
will terminate the Agreement; thereafter, the Termination Option shall
expire and cease to have any force or effect.
(b) Buyer acknowledges that it has reviewed all reports filed by Global
One with the Securities and Exchange Commission (the "Commission").
Except for the information to be provided on the Delivery Date, the
Seller has heretofore disclosed to 2d all material information which
it possesses regarding the business, operations, properties, assets,
liabilities, condition (financial or otherwise) and prospects of
Global One and regarding the Seller, the Global One Shares and the
transactions contemplated hereby (excluding information that is
included in reports filed by Global One with the Commission and the
Excluded Global Information). Except as disclosed in the Global
Information or in Global One's reports filed with the Commission, to
the Seller's knowledge, since the date of the last of such reports
which have been filed, there has not occurred any material adverse
change in the business, operations, properties, assets, liabilities,
condition (financial or otherwise) or prospects of Global One. The
Seller does not represent or warrant that any of the information filed
with the Commission or provided to the Seller by Global One (and
provided to the Buyer hereunder) is true and correct (although the
Seller represents and warrants that it has no knowledge that any of
such information is not true and correct as of the date hereof).
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ARTICLE II: REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Buyer and 2d to enter into this Agreement and to
consummate the transactions contemplated hereby, the Seller hereby represents
and warrants to the Buyer and 2d that:
SECTION 2.01 TITLE TO AND OWNERSHIP OF GLOBAL ONE SHARES The Seller owns
the Global One Shares, of record and beneficially, free and clear of all Claims
and to the knowledge of the Seller, the Global One Shares represent
approximately forty percent of the total issued and outstanding Shares of Global
One, on a non-diluted basis (i.e., not subject to dilution as a result of the
issuance of shares of Global One pursuant to options, warrants or other rights
disclosed by Global One in reports it has filed with the Commission or by the
Seller to the Buyer not later than the Delivery Date). There is no restriction
affecting the ability of the Seller to transfer the record title and beneficial
ownership of the Global One Shares to the Buyer and, upon delivery thereof to
the Buyer in accordance with the provisions of this Agreement and of payment of
the Purchase Price, the Buyer will acquire good record title to and sole
beneficial ownership of the Global One Shares, free and clear of all Claims,
other than those imposed pursuant to this Agreement, the Voting Agreement and
securities laws of general application.
SECTION 2.02 AUTHORITY TO ENTER INTO AND PERFORM THIS AGREEMENT The Seller
has the full legal right and power and all authority and approval required by
law to enter into this Agreement and to perform their obligations hereunder. The
Seller has duly executed and delivered this Agreement, and this Agreement is the
legal, valid and binding obligation of the Seller, enforceable against it in
accordance with its terms. On the Closing Date, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor the performance of this Agreement in compliance with
its terms and conditions by the Seller will (a) conflict with or result in any
violation of any charter document, by-law, judgment, decree, order, statute or
regulation applicable to the Seller or the Global One Shares, or any breach of
any agreement to which the Seller is a party or by or to which the Seller or any
of the Global One Shares is bound or subject, or constitute a default
thereunder, or result in the creation of any Claim on, or with respect to, any
of the Global One Shares, or (b) result in any violation of, or be in conflict
with, or constitute a default under, any agreement, instrument, judgment, order,
decree, law, rule or regulation applicable to the Seller or the Global One
Shares.
SECTION 2.03 PURCHASE FOR INVESTMENT The Seller is acquiring any 2d Stock
which it is receiving, as provided in Section 1.04(b)(2), for investment, for
its own account and not with a view to the distribution thereof in violation of
the Securities Act or applicable state securities laws. The Seller understands
and accepts that such 2d Stock will not have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
or transferred without such registration or an exemption therefrom. The Seller
understands and accepts that the certificates for such 2d Stock will bear an
appropriate legend to the foregoing effect. The Seller is sufficiently
experienced in financial and business matters to be capable of evaluating the
risks of investment in the 2d Stock and to make an informed decision relating
thereto. The Seller has the
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financial capability for making the investment, can afford a complete loss of
the investment, and the investment is a suitable one for the Seller. The Seller
is an "accredited investor" within the meaning of Rule 501 of the General Rules
and Regulations of the Commission under the Securities Act. Prior to the
execution and delivery of this Agreement, the Seller has had an opportunity to
ask questions of and receive answers from representatives of 2d concerning the
business, operations, properties, assets, liabilities, condition (financial and
otherwise) and prospects of 2d deemed by them to be adequate.
SECTION 2.04 ORGANIZATION AND QUALIFICATION; OWNERSHIP; RESIDENCE The
Seller is a corporation duly incorporated, validly existing and in good standing
under the laws of the British Virgin Islands.
SECTION 2.05 SELLER POWER AND AUTHORITY The Seller has the corporate power
and authority to own and hold its assets and to carry on its business of being a
securities holding company as currently conducted.
SECTION 2.06 COMPLIANCE WITH LAW The Seller has not failed to comply with,
and is not in default under, any law, ordinance, rule, regulation, judgment,
order or decree applicable to it or any of its assets which would impair the
ability of the Seller to consummate the transactions contemplated hereby.
SECTION 2.07 SHARE EXCHANGE AND VOTING AGREEMENT; DISCLOSURE The Share
Exchange Agreement and Voting Agreement are valid and binding agreements, in
full force and effect, and enforceable against the parties thereto in accordance
with their terms. To the Seller's knowledge, without having conducted any
additional investigation or inquiry in connection herewith, the representations
and warranties of Global One set forth in the Share Exchange Agreement and the
representations and warranties of Joseph and Susan Angard under the Voting
Agreement are true and correct and no party to any of such agreements is in
default of any of his, her or its obligations thereunder. Other than the Global
One Shares and rights under the Share Exchange Agreement and the Voting
Agreements, neither the Seller nor any affiliate of Seller has any ownership of
or other rights in or with respect to shares of capital stock of Global One or
of or in any of the assets of Global One.
SECTION 2.08 ACCREDITED INVESTOR The Seller is an "accredited investor" as
such term is defined in Regulation D promulgated under the Securities Act of
1933, as amended (the "Act").
SECTION 2.09 OPPORTUNITY TO INVESTIGATE; REVIEW OF DOCUMENTS AND 2D AND
BUYER Prior to the execution of this Agreement, the Seller has had the
opportunity to (i) read in full this Agreement and its Exhibits, and has
thoroughly reviewed, become familiar with and understands the Agreement and its
Exhibits; and (ii) ask questions of, and receive answers from, representatives
of 2d and the Buyer concerning the terms and conditions of this transaction, and
the finances, operations, business and prospects of 2d and the Buyer. The Seller
has also had the opportunity to obtain additional information necessary to
verify the accuracy of information furnished about 2d and the Buyer.
Accordingly, the Seller has independently evaluated the risks
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of purchasing the 2d Stock, and the Seller is satisfied that the Seller has
received from the Buyer and 2d information with respect to all matters that the
Seller considers material to the Seller's decision to make this investment.
SECTION 2.10. EXPERIENCE AND SUITABILITY The Seller is qualified by the
Seller's knowledge and experience in financial and business matters to evaluate
the merits and risks of an investment in the 2d Stock and to make an informed
decision relating thereto. The Seller has the financial capability for making
the investment and protecting the Seller's interests, and can afford a complete
loss of the investment. The investment is a suitable one for the Seller.
SECTION 2.11 NO NEED FOR LIQUIDITY The Seller is aware that the Seller will
be unable to liquidate the Seller's investment readily in case of an emergency
and that the 2d Stock being purchased may have to be held for an indefinite
period of time. The Seller's overall commitment to investments which are not
readily marketable is not excessive in view of the Seller's net worth and
financial circumstances and the purchase of the 2d Stock will not cause such
commitment to become excessive. In view of such facts, the Seller acknowledges
that the Seller has adequate means of providing for the Seller's current needs,
anticipated future needs and possible contingencies and emergencies and has no
need for liquidity in the investment in the 2d Stock. The Seller is able to bear
the economic risk of this investment.
SECTION 2.12 LEGENDS The Seller understands that until the 2d Stock has
been registered under the Securities Act and applicable state securities laws
each certificate representing the 2d Stock shall bear a legend substantially
similar to the following;
The securities represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by any person,
including a pledgee, in the absence of an effective registration statement
for the shares under the Securities Act of 1933, as amended, and applicable
state securities laws or unless an exemption from such registration is
available.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF BUYER AND 2D
As an inducement to the Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, the Buyer and 2d, jointly and
severally, represent and warrant to the Seller as follows:
SECTION 3.01 ORGANIZATION AND QUALIFICATION Each of the Buyer and 2d is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own and hold under lease the properties and assets, if any, it purports to
own and hold under lease and to carry on its business as now being conducted and
as currently proposed to be conducted, and is duly qualified or licensed as a
foreign corporation and is in good standing in each jurisdiction where the
character of the properties owned or leased by it or the nature of the business
transacted by it makes qualification therein necessary, except where the failure
to be so licensed or qualified would not have a material adverse effect on the
business, operations, properties, assets, liabilities, condition (financial or
otherwise) or prospects
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of 2d. 2d has heretofore delivered to the Seller accurate and complete copies of
the Buyer's and 2d's certificates of incorporation and by-laws, together, in
each case, with any amendments thereto to the date thereof.
SECTION 3.02 BUYER'S POWER AND AUTHORITY; AUTHORIZATION Each of the Buyer
and 2d has the corporate power and authority to execute, deliver and perform
this Agreement and the other agreements and documents provided for herein or
contemplated hereby. The execution, delivery and performance of this Agreement
and the other documents provided for herein or contemplated hereby have been
approved by the Boards of Directors of the Buyer and 2d and by 2d as the sole
stockholder of the Buyer and no other corporate action is required to be taken
by the Buyer or 2d to authorize them to execute and deliver this Agreement. This
Agreement, and each of the other agreements, documents and instruments to be
executed and delivered by the Buyer or 2d pursuant hereto have been duly
executed and delivered by, and constitute the valid and binding obligation of
Buyer or 2d, as the case may be, enforceable against Buyer or 2d in accordance
with their terms.
SECTION 3.03 VALIDITY, ETC. Neither the execution and delivery of this
Agreement and the other agreements and documents provided for herein or
contemplated hereby, the consummation of the transactions contemplated hereby or
thereby, nor the performance of this Agreement and such other agreements in
accordance with the terms and conditions hereof and thereof, will: (i) conflict
with or result in any breach of any certificate of incorporation, bylaw,
judgment, decree, order, statute or regulation applicable to the Buyer, 2d or
the 2d Stock (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority or
other third party (iii) result in a breach of or default (or give rise to any
right of termination, cancellation or acceleration) under any law, rule or
regulation or any judgment, decree, order, governmental permit, license or order
or any of the terms, conditions or provisions of any contract, mortgage,
indenture, note, license, agreement or other instrument to which the Buyer or 2d
is a party or (v) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Buyer, 2d or the 2d Stock which would materially
impair the Buyer's ability to consummate the transactions contemplated hereby.
SECTION 3.04 CAPITAL STRUCTURE OF 2D: ISSUANCE OF SECURITIES The authorized
and outstanding capital stock of 2d is as set forth on SCHEDULE 3.04 hereto. All
outstanding shares of such capital stock are validly issued, fully paid and
non-assessable. Except as set forth on SCHEDULE 3.04, there do not exist any
other authorized or outstanding securities, options, warrants, calls,
commitments, rights to subscribe for or other instruments, agreements or rights
of any character exercisable for, convertible into or exchangeable for, or
requiring or relating to the issuance, transfer or sale of, any shares of
capital stock or other securities of 2d ("Rights"). SCHEDULE 3.04 sets forth a
description of the material terms of all Rights. The issuance and sale of the 2d
Stock to the Seller has been duly authorized and if, when and as delivered to
the Seller, the 2d Stock will be duly and validly issued and outstanding, fully
paid and non-assessable and will be free and clear of all Claims, other than
those imposed pursuant to this Agreement and securities laws of general
application.
SECTION 3.05 SUBSIDIARIES OF 2D SCHEDULE 3.05 sets forth a list of all
entities in which 2d has an equity or profit interest (each a "Subsidiary"). The
Company owns 100% of the capital
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stock of each Subsidiary. Except for the Subsidiaries, 2d does not hold any
equity or profit interest in any other entities.
SECTION 3.06 FINANCIAL STATEMENTS 2d has provided to the Seller complete
and accurate copies of 2d consolidated financial statements for the one year
period ended December 31, 1997 (the "2d Financial Statements"). The 2d Financial
Statements, subject to normal year-end adjustments and the absence of footnotes,
(i) have been prepared from and on the basis of, and are in accordance with, the
books and records of 2d and in accordance with generally accepted accounting
principles applied on a basis consistent with prior accounting periods; and (ii)
fairly present the financial condition of 2d as of the date of the 2d Financial
Statements and the results of its operations for the period therein specified.
There are no material undisclosed liabilities which should be disclosed in the
2d Financial Statements pursuant to generally accepted accounting principles.
SECTION 3.07 AFFILIATE TRANSACTIONS Except as set forth on SCHEDULE 3.07,
2d is not a party to any transaction involving, and has no direct or indirect
obligation or liability to, any of its affiliates (as defined in Section 9.06).
SECTION 3.08 ABSENCE OF CHANGES Except as disclosed on SCHEDULE 3.08 or in
the documents and other information referred to thereon, since December 31,
1997, there has not occurred any material adverse change on an overall net basis
in the business, operations, properties, assets, liabilities, condition
(financial or otherwise) or prospects of 2d.
SECTION 3.09 TAX RETURNS AND AUDITS 2d has filed all tax returns and
reports required to be filed by it with federal and state tax authorities and
paid all taxes, if any, due thereunder. 2d has no unpaid tax liabilities except
as adequately reserved against in the 2d Financial Statements or as have arisen
in the ordinary course of business since November 30, 1997 and which are not
required to be paid, on as estimated or otherwise, since such date. Without
limiting the generally of the foregoing, 2d has paid all employment withholding
taxes required to be paid by it to date.
SECTION 3.10 PENDING LITIGATION OR PROCEEDINGS Except as disclosed on
SCHEDULE 3.10, there is no pending or, to the best knowledge of 2d, threatened
action, suit, or legal, administrative, arbitration or other proceeding or
governmental investigation, or any change in zoning or building ordinances
affecting the real property or leasehold interests of 2d, its properties, assets
or business, nor any facts which constitute a valid basis for any thereof, which
has had, is having or is reasonably likely to have a material adverse effect on
the business, operations, properties, assets, liabilities, condition (financial
or otherwise) or prospects of 2d.
SECTION 3.11 EMPLOYEE BENEFITS 2d is not, and has never been, subject to
any retirement, pension, profit sharing or other similar plan which is or was
subject to the Employee Retirement Income Securities Act of 1974, as amended
("ERISA"); no "prohibited transaction" within the meaning of Section 4.06(a) of
ERISA, and no "reportable event" within the meaning of Section 4.043 (b) of
ERISA, has occurred with respect to any employee benefit plan of 2d; and all
employee benefit plans of 2d have been established and operated in full
compliance with all applicable laws, rules and regulations.
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SECTION 3.12 INVESTMENT REPRESENTATION; RESTRICTIONS UPON RESALE 2d shall
acquire the Global One Shares only for 2d's own account, for investment and not
with a view to distribution thereof in violation of the Securities Act or
applicable state securities laws. 2d acknowledges that the Global One Shares
have not been registered under the Securities Act of 1933 and can be transferred
only if so registered or if an exemption from registration is available. 2d has
such knowledge and experience in financial and business matters that it is
capable of protecting its own interests in connection with the acquisition of
the Global One Shares.
SECTION 3.13 COMPLIANCE WITH LAW Neither the Buyer nor 2d has failed to
comply with, or is in default under, any law, ordinance, rule, regulation,
judgment, order or decree applicable to it or its assets which would impair the
ability of the Buyer or 2d to consummate the transactions contemplated hereby.
ARTICLE IV: COVENANTS
The Buyer, 2d and the Seller covenant and agree as follows:
SECTION 4.01 BEST EFFORTS COOPERATION Each of the Buyer, 2d and the Seller
shall use his or its respective reasonable best efforts in good faith to cause
to be satisfied all conditions to the others' obligations to consummate the
transactions contemplated hereby to be satisfied, to the end that the
transactions contemplated hereby will be fully and timely consummated.
Additionally, the Seller shall use reasonable best efforts to attend two to
three prospective investor meetings in connection with the Private Placement.
Without limiting the generality of the foregoing, the Seller shall use its
reasonable best efforts to obtain and furnish to 2d, or cause to be obtained and
furnished to 2d, such information regarding Global One in connection with 2d's
due diligence investigation thereof as 2d may reasonably request.
SECTION 4.02 GLOBAL ONE'S BUSINESS PRIOR TO CLOSING The Seller shall use
its reasonable best efforts to cause the Seller and its representatives to cause
Global One to conduct its business pending the Closing in a prudent manner and
in the ordinary course of business. 2d shall conduct its business pending the
Closing in a prudent manner and in the ordinary course of business.
SECTION 4.03 NOTICE OF CHANGES AND LITIGATION At any time prior to the
Closing, the Seller shall notify 2d of any material adverse change in the
business, operations, properties, assets, liabilities, condition (financial or
otherwise) or prospects of Global One as soon as they, or either of them, become
or becomes aware that any such change has occurred or is reasonably likely to
occur. Similarly, at any time prior to the Closing, 2d shall notify the Seller
of any material adverse change in the business, operations, properties, assets,
liabilities, condition (financial or otherwise) or prospects of 2d as soon as 2d
becomes aware that any such change has occurred or is reasonably likely to
occur. At any time prior to the Closing, each of the parties hereto shall also
notify the other parties hereto as soon as such party becomes aware of any
lawsuits, claims, proceedings or investigations which are threatened or
commenced against or by such party or any of the other parties hereto or any of
their respective affiliates, directors, officers, employees, consultants, agents
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or representatives, relating to the Shares or otherwise to the Seller, Global
One, 2d or the transactions contemplated hereby.
SECTION 4.04 NO NEGOTIATIONS Until June 1, 1998, or the earlier termination
of this Agreement in accordance with its terms, the Seller shall not, directly
or indirectly, initiate or engage in discussions or negotiations with, or
provide any information to, any person or entity regarding the possible sale,
pledge or grant of rights with respect to any of the Global One Shares or any
other matter inconsistent with the consummation of the transactions contemplates
hereby or the possible sale, pledge or grant of rights with respect to any of
the shares of Common Stock, $0.01 par value per share, of Global One held by the
Seller, or any similar transaction.
SECTION 4.05 NON-COMPETITION Except to the extent the public policy of any
state applicable hereto renders the provisions of this Section 4.05
unenforceable, the Seller hereby agrees that, until the date (the "Disposition
Date") that the Seller, together with its affiliates, owns less than one-half of
the 2d Stock issued to the Seller pursuant hereto (or securities of 2d issued in
exchange therefor) and for a period of two years following the end of such time
or the time of the Seller's irrevocable surrender of all rights to which it is
otherwise entitled by reason of its owning not less than one-half of 2d Stock
issued to the Seller pursuant hereto, not to engage or permit their affiliates
to engage, directly or indirectly, in any business competitive with the business
of computer-based media kiosk advertising in connection with poster sales;
provided that, after the Disposition Date or the date the Seller irrevocably
surrenders the rights to which it is otherwise entitled by reason of holding not
less than one-half of the 2d Stock issued to the Seller pursuant hereto, the
restrictions set forth in the preceding clauses of this Section 4.05 shall apply
for the ensuing two years only within the United States of America. In the event
that Bermeister desires to enter into the business of computer-based media kiosk
advertising in connection with poster sales in Australia, 2d shall enter into
good-faith discussions with Bermeister related to such business, it being
understood and agreed that 2d and Bermeister will negotiate in good faith the
terms and conditions under which 2d would provide rights, know-how and
cooperation for the conduct of such business in Australia by Bermeister under an
agreement with 2d; provided that, if Bermeister and 2d do not conclude such an
agreement after such good-faith discussions, Bermeister shall be permitted to
conduct such business independently of 2d. Except to the extent that the public
policy of any state applicable hereto renders such provisions unenforceable, the
Seller acknowledges and accepts that the provisions of this Section 4.05 are
reasonable and valid in geographical and temporal scope and in all other
respects. Subject to the provisions of this Section 4.05 being rendered
unenforceable by any such public policy, if any court determines that any of
such restrictive covenants, or any part thereof, is invalid or unenforceable,
the remainder of such restrictive covenants shall not be affected thereby and
shall be given full effect, without regard to the invalid or unenforceable
portions; provided that, if any court determines that any of such provisions or
any part thereof, is invalid or unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or geographic scope of such provision, as the case may be, and, in
its reduced form, such provision shall then be valid and enforceable.
SECTION 4.06 PUBLICITY Between the date hereof and the Closing Date, each
of the Buyer, 2d and the Seller agrees that, except as required by applicable
federal and state securities
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laws and regulations, he or it or any of their affiliates: (a) will make no
public announcement or filing regarding the transactions contemplated hereby
without the prior written consent of the other, provided however, 2d may make
communications related to the transactions contemplated hereby without the
consent of Seller in connection with the Private Placement, (b) will respond to
all inquiries regarding the transactions contemplated hereby by stating that it
is its policy not to comment on such matters, (c) will institute reasonable
procedures to restrict knowledge of the transactions contemplated hereby to
those who need to know, and (d) will use his or its best efforts to ensure that
no person who has knowledge regarding the transactions contemplated hereby
through him or it will trade in the securities of Global One or, if 2d's
securities are then publicly traded, 2d. In the event the Seller, or 2d
determines that public disclosure, by announcement or the making of a filing, of
the transactions contemplated hereby is necessary in public documents required
to be filed by any of them or by Global One or pursuant to the exception in the
preceding sentence, it agrees to notify the others of such party's intention to
make or cause to be made such disclosure and provide the others with the text of
the proposed disclosure reasonably in advance of its release to the public and
to consult with the others regarding the proposed disclosure.
SECTION 4.07 BOARD REPRESENTATION
(a) At the Closing, unless the Purchase Price is, at the election of the
Buyer, paid all in cash, as provided in Section 1.04(b)(2)(iii),
Seller shall have the right to Board representation proportionate to
the ownership percentage represented by its holdings relative to the
total outstanding shares of 2d Stock, calculated on a non-diluted
basis (as hereinabove defined) and rounded downward to the nearest
whole number but not less than one ("Proportionate Representation");
provided, however, such representation shall be by Mark Dyne ("Dyne")
or Kevin Bermeister ("Bermeister") or any other person designated by
the Seller and approved by 2d each in its complete discretion.
Thereafter, so long as the Seller continues to hold not less than
one-half of the 2d Stock issued to the Seller pursuant hereto, the
Seller will be entitled to at least one seat on the Board of Directors
of 2d, and at the request of the Seller, 2d shall hold meetings of its
Board of Directors not less frequently than four times a year, at
which management of 2d shall discuss 2d's performance, prospects and
strategies. Until the Disposition Date, 2d shall also cause Dyne,
Bermeister or a designee of the Seller approved by 2d to be nominated
as a member of the Board of Directors of 2d as one of the nominees
nominated by 2d's Board of Directors, and shall use its reasonable
best efforts to cause Dyne, Bermeister or a designee of the Seller
approved by 2d to be elected as such. So long as the Seller is
entitled to Board representation, Seller shall also be entitled to
proportionate representation, as determined by the first sentence of
this Section 4.07(a), on each committee of the Board of Directors and
on the Board of Directors and each committee of each subsidiary of 2d.
At least one of Dyne, Bermeister or the designee of the Seller
approved by 2d shall initially hold a Board seat with the longest
remaining term prior to the next election of Directors, if the 2d
Board of Directors is divided into classes of Directors having
multiple-year terms expiring in successive years. Notwithstanding the
foregoing, in the event of a transfer of shares of 2d Stock issued to
the Seller pursuant hereto and of the rights of the Seller granted
hereunder
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other than an assignment in accordance with Section 9.05 of this
Agreement, the Seller's right to one or more Board seats and related
rights shall terminate, and the Board representative(s) of the Seller
shall resign forthwith or, failing such resignation, shall be subject
to removal by the vote of the 2d stockholders in which event the
Seller hereby agrees to vote the 2d Stock in the same proportion as
the other 2d stockholders cast their votes, or to the extent provided
in the By-laws, and in accordance with applicable law, by a majority
vote of the Board of Directors in which the Seller shall direct its
representative(s) on the Board of Directors not to vote.
(b) The foregoing provisions of this Section 4.07 are subject to the
provisions of Section 4.10.
SECTION 4.08 REGISTRATION RIGHTS
(a)(i) From the date on which 2d first becomes eligible to use Form S-3 (or
such other form as the Commission may from time to time prescribe for such
purpose), until the third anniversary of the date on which 2d first becomes
eligible to use Form S-3 (or such other form as the Commission may from time to
time prescribe for such purpose) for the resale of shares of its capital stock
by holders thereof or the Seller becomes eligible to resell the 2d Stock
pursuant to subsection 144(k) of Rule 144 of the General Rules and Regulations
of the Commission, the Seller shall have the right to require 2d to file with
the Commission a single registration statement on Form S-3 (or such other form)
covering all or such portion of the 2d Stock as the Seller then determines and
notifies 2d it desires to resell (the "Resale Registration Statement") and to
use its reasonable best efforts to cause the Resale Registration Statement to
become effective within 90 days thereafter and to maintain the effectiveness of
the Resale Registration Statement until the earlier of (i) the completion of the
offering covered by the Resale Registration Statement and (ii) the date on which
the Seller shall become entitled to resell the 2d Stock pursuant to subsection
(k) of such Rule 144; in the event 2d proposes to register an underwritten
offering of its Common Stock for its own account under the Securities Act, it
shall have the right to delay or suspend the filing or effectiveness of the
Resale Registration Statement for up to an aggregate of 104 days in any 12-month
period to facilitate such registration. If the Seller proposes to effect an
underwritten offering of the 2d Stock, 2d and the Seller shall enter into an
underwriting agreement in customary form with the underwriters of recognized
national or regional standing selected by the Seller and reasonably acceptable
to 2d.
(ii) Notwithstanding the foregoing, in the event of a material development
in the business of, or otherwise related to, 2d which 2d determines, with the
advice of counsel, requires it to suspend the offering covered by the Resale
Registration Statement until public disclosure is made of such material
development, 2d shall notify the Seller of such suspension and the Seller shall
cease using the prospectus included in the Resale Registration Statement until
forty-eight hours following the public disclosure of such material development.
2d shall promptly publicly disclose all such material developments; provided
that it shall be entitled to delay such disclosure for a reasonable period of
time for valid business purposes as determined by its Board of Directors or if,
with the advice of counsel, it is required to do so under applicable law or in
the
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exercise of 2d's Board of Directors' fiduciary duties; provided that such delay
shall not exceed five (5) business days without the consent of the Seller which,
shall not be unreasonably withheld.
(iii) 2d shall pay the registration filing fee and legal costs of the 2d's
counsel's related to the preparation of the Resale Registration Statement, and
2d shall also pay all expenses related to 2d's preparation and filing of reports
to the Commission and all other documents of the Buyer incorporated by reference
into the Resale Registration Statement, including the fees and expenses of 2d's
counsel in responding to comments of the Commission relating to the Resale
Registration Statement, including but not limited to the documents which have
been incorporated by reference into the Resale Registration Statement.
(b) If, at any time or from time to time, 2d determines to register the
offer and sale of its equity securities for its own account or the account of
any other stockholder(s) of 2d, other than a registration relating to an
employee benefit plan (or the resale of securities acquired pursuant thereto) or
a transaction pursuant to Rule 145 of the Commission's General Rules and
Regulations, 2d shall include in such registration statement such number of
shares of the 2d Stock as the Seller shall elect by notice to 2d in writing
(which election may be rescinded at any time prior to the sale of such
securities) within twenty (20) business days following receipt by the Seller of
notice from 2d of such registration; provided that, if the offering covered by
such registration is underwritten, it shall be a condition of the inclusion in
such underwritten offering of shares of the 2d Stock as to which the Seller
shall have made such election that the Seller shall have entered into an
underwriting agreement in customary form with the underwriters selected by 2d or
such other stockholder(s) for such offering. If the managing underwriter of such
offering determines that the inclusion in such underwritten offering of all or
any portion of the 2d Stock as to which the Seller has made such election would
be detrimental to the offering of the equity securities being offered by 2d or
such other stockholder(s), the number of shares of such 2d Stock as to which the
Seller has made such election to be included in such underwritten offering shall
be limited pari passu with the equity securities of 2d of all other stockholders
of 2d which are proposed to be included in the underwritten offering.
(c) All registration expenses, including the fees and expenses of 2d's
counsel, incurred in connection with the registrations contemplated by this
Section 4.08 shall be borne by 2d, but all direct selling expenses of the Seller
(including broker's fees and underwriting commissions proportionate to the 2d
Stock of the Seller included therein) and the legal fees and expenses of the
Seller's counsel shall be borne by the Seller. In connection with any such
registration statement, the Seller shall promptly furnish 2d with such
representations, information, consents and indemnifications regarding the Seller
and the 2d Stock proposed to be included therein and the method of distribution
of such 2d Stock as shall be necessary and/or customary for inclusion in such
registration statement. In addition in the case of an underwritten offering, the
Seller shall deliver into the custody of the managing underwriter, the stock
certificates representing such 2d Stock as the seller proposes to be included
therein, under a customary custody agreement and power-of-attorney.
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(d) The foregoing provisions of this Section 4.08 are subject to the
provisions of Section 4.10.
SECTION 4.09 CO-SALE The stockholders of the Buyer who are currently
members of 2d's management and who are named on SCHEDULE 4.09 (the "Management
Stockholders") and the Seller shall enter into a Co-Sale Agreement in the form
attached hereto as EXHIBIT 4.09. The foregoing provisions of this Section 4.09
are subject to the provisions of Section 4.10.
SECTION 4.10 PRIVATE PLACEMENT; PUBLIC OFFERING
(a) As a condition of the applicability of the purchase price paid in the
Private Placement for determining the number of shares of 2d capital
stock which the Seller is entitled to receive as the non-cash portion
of the Purchase Price, not more than one-half of the equity securities
sold in the Private Placement shall be sold to pre-existing
stockholders of 2d, affiliates of pre-existing stockholders of 2d or
affiliates of 2d and investors who have an existing or prospective
material commercial relationship with 2d.
(b) In the event the condition set forth in the preceding subsection (a)
of this Section 4.10 is not satisfied and the Seller and 2d do not
agree upon the valuation of the securities to be delivered to Seller
(the "Valuation")within three (3) business days after the date of the
closing of the Private Placement, the Valuation shall be determined by
a single arbitrator who shall be jointly selected by 2d and the Seller
or, if they shall not agree on such selection within ten (10) business
days after the date of the closing of the Private Placement, such
determination and the resulting determination of the number of shares
of 2d Stock to be issued to the Seller shall be made by three
arbitrators, one of whom shall be selected by each of the Seller and
2d and the third of whom shall be selected by agreement of the two
arbitrators so selected by the Seller and 2d. All such arbitrators
shall be accountants who are partners in one or more nationally
recognized accounting firms or investment bankers employed by
nationally or regionally recognized investment banking firms who are
experienced in performing company valuations. In the case of such a
determination by three arbitrators, the applicable post-Private
Placement valuation of 2d shall be the average of such valuations
determined by the two of such arbitrators whose valuations are closest
to one another. The parties shall use good faith efforts to provide
each other and the arbitrators all information they possess bearing on
the Valuation.
(c) If the Private Placement is consummated, the conditions set forth in
the first sentence of this Section 4.10 are satisfied, and the
purchasers of securities of 2d in the Private Placement are granted
registration rights with respect to such securities, then the Seller
shall enter into the agreement(s) granting such rights on a PARI PASSU
basis with such purchasers and the provisions of such agreement(s)
shall then supersede the provisions of Section 4.08, which shall
thereafter be of no further force or effect. Similarly, if the
purchasers of such securities in the Private
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Placement are granted co-sale or tag-along rights or any other rights
vis-a-vis any other stockholders of 2d, then the Seller shall enter
into the agreement(s) granting such rights on a PARI PASSU basis with
such purchasers and such agreement(s) shall then supersede the
provisions of Section 4.09, which shall thereafter be of no further
force or effect.
(d) Notwithstanding the provisions of any of Sections 4.07 and 4.09 or the
foregoing provisions of this Section 4.10 to the contrary, in the
event that 2d consummates an initial public offering (an "IPO") of its
equity securities, the rights granted to the Seller under Sections
4.07 and 4.09, if otherwise then applicable, shall lapse and be of no
further force or effect.
(e) In addition, if an investor or a group of affiliated investors
acquires greater than twenty-five percent of the securities sold in
the Private Placement, and if the Seller notifies 2d within ten (10)
days after the date of closing of the Private Placement that, as a
result of the concentration of ownership by such investor's or group's
acquisition of greater than twenty-five percent of the securities sold
in the Private Placement, the Seller believes that the value of the 2d
Stock issued to the Seller pursuant hereto is less than the PRO RATA
value of stock sold in the Private Placement, then the Valuation of
the 2d Stock otherwise issuable to the Seller pursuant hereto shall be
finally and conclusively determined by a single arbitrator selected in
accordance with the terms and procedures set forth in paragraph (b) of
this Section 4.10. If the value of the securities otherwise issuable
to the Seller pursuant hereto, as so determined, is less than
$2,250,000, then 2d shall forthwith issue to the Seller an additional
amount of such securities which will have a value, when held by the
Seller, equal to such shortfall in value below $2,250,000.
SECTION 4.11 CHARTER AND BY-LAW AMENDMENTS At or prior to the Closing, 2d
covenants that it will amend its Certificate of Incorporation or its By-laws, as
applicable, in order to provide Seller the rights set forth on SCHEDULE 4.11
attached hereto. In the event of any repeal of the provisions set forth in
SCHEDULE 4.11, 2d hereby agrees to continue to provide to Seller the rights set
forth in SCHEDULE 4.11, which are hereby incorporated by reference, until the
Disposition Date.
SECTION 4.12 RIGHTS OF FIRST REFUSAL
(a) The Seller and all Stockholders of 2d whose terms of investment
provide for rights of first refusal shall have the right of first
refusal to purchase all or any part of their PRO RATA shares of Equity
Securities, as defined below, that a member of the Senior Management
(persons holding Vice Presidential positions or positions of greater
seniority with 2d), may from time to time propose to sell after the
date of this Agreement, and the members of Senior Management and all
such stockholders of 2d who have given reciprocal rights to the Seller
shall have a right of first refusal to purchase all or any part of
their PRO RATA share of all Equity Securities that the Seller may from
time to time propose to sell after the date of this Agreement. The PRO
RATA
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share of a holder of such rights shall be calculated as the percentage
of Equity Securities held by the holder in relation to all Equity
Securities held by the stockholders of 2d. The term "Equity
Securities" shall mean the following securities held by Senior
Management the Seller or (i) any Common Stock, Preferred Stock or
other capital stock of 2d, (ii) any security convertible, with or
without consideration, into any Common Stock, Preferred Stock or other
capital stock (including any option to purchase such a convertible
security) of 2d, (iii) any security carrying any option, warrant or
other right to subscribe to or purchase any Common Stock, Preferred
Stock or other capital stock of 2d or (iv) any option, warrant or
other right to purchase shares of Common Stock, Preferred Stock or
other capital stock of 2d. The foregoing PRO RATA rights shall be
determined on a non-diluted basis (i.e., without giving affect to the
exercise of any rights to acquire Common Stock or Preferred Stock of
2d through the exercise of options, warrants, rights of exchange or
other similar rights other than the exercise of rights to acquire
securities held pursuant to options granted pursuant to the Company's
stock option plan to its executive officers holding the title of vice
president or higher).
(b) If any member of Senior Management proposes to sell any Equity
Securities, it shall give written notice to the Seller of the terms
and conditions upon which the member of Senior Management proposes to
sell the same. The Seller shall have ten (10) days from the giving of
such notice to agree to purchase all or a portion of the Equity
Securities from the member of Senior Management selling Equity
Securities and stating therein the quantity of Equity Securities to be
purchased. In addition, failure to exercise such right of first
refusal within such ten (10) day period shall waive all rights of
first refusal with respect to such sale. If the Seller proposes to
sell any Equity Securities, it shall comply with the same conditions
set forth in the preceding provisions of this Section 4.12(b)
vis-a-vis to members of Senior Management.
(c) If less than all of the eligible participants elect to purchase their
pro rata share of the Equity Securities, then the selling party shall
promptly notify in writing the participants who do so elect and shall
offer such participants the right to acquire such unsubscribed shares.
Such participants shall have five (5) days after receipt of such
notice to notify the other eligible participants of their election to
purchase all or a portion thereof of the unsubscribed shares. If the
participants fail to exercise in full the rights of first refusal, the
selling party shall have ninety (90) days thereafter to sell the
Equity Securities in respect of which the participants' rights of
first refusal were not exercised, at a price and upon the terms and
conditions specified in the notice to the participants pursuant to
subsection (b) hereof. If the selling party has not sold such Equity
Securities within such ninety day period, the selling party shall not
thereafter sell any Equity Securities, without first offering such
securities in the manner provided above.
(d) The rights of first refusal provided for in this Section 4.12 shall
terminate upon the earlier of (i) seven years after the date hereof,
(ii) the effectiveness of a registration
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statement under the Securities Act for a public offering of 2d's
equity securities having an aggregate offering price to the public of
not less than $7,000,000, (iii) the Disposition Date, or (iv) any
consolidation or merger of 2d with or into any other corporation or
other entity or person, or any other corporate reorganization, in
which the stockholders of 2d immediately prior to such consolidation,
merger or reorganization, own less than 50% of the combined voting
power of 2d or its successor immediately after such consolidation,
merger or reorganization. An event described in the immediately
preceding clause (iv) shall be deemed a "Change of Control" for
purposes of this Agreement, including Schedule 4.11 hereto.
SECTION 4.13 MANAGEMENT AGREEMENTS 2d shall use its reasonable best efforts
to cause Dominic Ianno, Lewis Chester, Rick Weiler, and Rosanna Giacalone to
enter into management agreements, the material terms of which are set forth on
SCHEDULE 4.13.
SECTION 4.14 CAPITALIZATION OF GLOBAL ONE The Seller is not aware of any
plan or proposed agreement or transaction relating to the issuance of particular
securities or any securities to a particular investor pursuant to which Global
One has issued or will issue additional securities or has engaged or will engage
in a recapitalization which has resulted or will result in the Global One Shares
representing less than forty percent of the outstanding capital stock of Global
One on a non-diluted basis (as hereinabove defined). In the event of any
offering of debt or equity securities by Global One, Seller shall use best
efforts to provide to 2d the right to participate in any such offering, either
by transferring to 2d any preemptive or other rights it has or acquires as a
shareholder of Global One, or, if such rights are not transferable, by
exercising such rights for the account of, and at the expense of, 2d; provided
that (a) Seller shall not be required to advance funds or to subject itself to
any potential loss (including any potential Section 16 liability), (b) 2d shall
advance to Seller sufficient funds to compensate Seller for all out of pocket
costs including Section 16 liabilities to be incurred by Seller in acquiring any
such securities or providing to 2d the right to acquire such securities, and (c)
if the transaction contemplated by this Agreement does not close for any reason,
Seller shall have the right (but not the obligation) to repurchase from 2d all
such securities, at 2d's cost therefor.
SECTION 4.15 ADDITIONAL COVENANTS OF 2D AND BUYER 2d and Buyer covenant and
agree with Seller that, unless otherwise consented to in writing by the Seller,
2d and the Buyer shall:
(a) Operate and conduct its business in the ordinary course of
business, and use reasonable efforts to maintain its business and
properties.
(b) ACCOUNTING; FINANCIAL STATEMENTS
(i) maintain a system of accounting established and administered
in accordance with generally accepted accounting principles consistently
applied, and shall set aside on its books all such proper reserves as shall
be required by generally accepted accounting principles.
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(ii) deliver to the Seller:
(A) Within 30 days after the end of each monthly accounting
period in each fiscal year of 2d, a consolidated balance sheet of 2d and
its subsidiaries and at the end of each such period, and consolidated
statements of operations and shareholders' equity (deficit) for each such
period and for the period from the beginning of the current fiscal year to
the end of such monthly period, and the corresponding periods of the
previous fiscal year, accompanied by a certificate of an officer of 2d
certifying that such financial statements have been prepared from and on
the basis of, and are in accordance with, the books and records of 2d and
with generally accepted accounting principles applied on a basis consistent
with prior accounting periods; are true, correct, complete and fairly and
accurately present the financial condition of 2d as of the date of each
such financial statement and the results of its operations for the periods
therein specified.
(B) Within 90 days after the end of each fiscal year of 2d,
a consolidated balance sheet of 2d and its subsidiaries as at the end of
such year and consolidated statements of operations and shareholders'
equity (deficit) and changes in consolidated financial position of 2d for
such year, all in reasonable detail and accompanied by a report of 2d's
certified public accountants that such financial statements have been
audited in accordance with generally accepted auditing standards, that it
is the opinion of 2d's certified public accountants that such financial
statements present fairly, in all material respects, the financial
position, results of operations and cash flows of 2d for the year, in
conformity with generally accepted accounting principles and in a
consistent manner with prior periods, and that 2d's certified public
accountants believe that their audit provides a reasonable basis for such
opinion.
(C) Within ten (10) days after receipt by 2d, a copy of any
management letter delivered to 2d by its certified public accountants.
(D) Promptly (but in any event within ten (10) days) after
the discovery of any material adverse event or circumstance affecting 2d or
any of its subsidiaries (including, but not limited to, the filing of any
material litigation against 2d or any subsidiary or the discovery that 2d
or any subsidiary is not, or with the passage of time will not be, in
material compliance with any provision of this Agreement, its Certificate
of Incorporation, its Bylaws, or any other material agreement of 2d), a
notice specifying the nature and period of existence thereof, and what
actions 2d has taken and/or proposes to take with respect thereto.
(c) INSPECTION RIGHTS 2d shall permit any authorized representative
designated by the Seller, at the Seller's expense, to visit and inspect any
of the properties of 2d or any of its subsidiaries, and to discuss its and
their affairs, finances and accounts with its and their officers or
employees; all at such reasonable times and as often as may be reasonably
requested; provided that such rights shall be exercised in a manner so as
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not to materially and adversely disrupt the ordinary course of business of
2d or any of its subsidiaries.
(d) AFFILIATE TRANSACTIONS Neither 2d nor any subsidiary shall enter
into any transaction with any director, officer, stockholder or any of
their affiliates other than transactions of a type which are in the
ordinary course of business and which are on terms no less favorable to 2d
or such subsidiary, as the case may be, than could be obtained from an
independent third party.
(e) LAPSE OF RIGHTS In the event that at any time the Seller holds
less than one-half of the 2d Stock issued to the Seller pursuant hereto,
the provisions of this Section 4.15 (a), (c) and (d) shall thereupon and
forever cease to have any force or effect. In the event that at any time
the Seller ceases to hold 2d Stock, the provisions of this Section 4.15(d)
shall thereupon and forever cease to have any force or effect.
SECTION 4.16 RELATIONSHIP BETWEEN 2D AND GLOBAL ONE. 2d has advised
Erekesef that it has certain existing and potential commercial relationships
with Global One, 2d is aware of the conflict of interest that will exist between
2d and other shareholders of Global One with respect to transactions between 2d
and Global One; to the extent required by 2d's fiduciary duties as a stockholder
of Global One under Delaware law, 2d agrees that it will not attempt to
influence the terms of any such transactions through its shareholdings or
ability to nominate directors of Global One; and 2d agrees that it will seek the
advice of counsel regarding all material matters relating to the commercial
relationship between Global One and 2d and to its fiduciary obligations as a
shareholder of Global One and related competitive issues. The foregoing is not
intended to enlarge the obligations required of 2d by Delaware law as a
stockholder of Global One.
SECTION 4.17 LOAN TO GLOBAL ONE: Within seven business days (unless
otherwise agreed to by the Parties) of the Buyer furnishing the Advance to the
Seller, the Seller shall loan the Advance (the "Loan") to Global One
Distribution and Merchandising, Inc. ("Global One") in exchange for a 120 day
term secured subordinated promissory note at an annual interest rate of eight
(8) percent pursuant to an existing loan agreement between the Seller and Global
One or in exchange for a secured subordinated promissory note at an annual
interest rate of twelve (12) percent (or such lower rate as may be approved by
Erekesef in its sole discretion) which will provide for a single balloon payment
of the of the outstanding principal and interest at the expiration of a 120 day
term. Such notes shall be subordinated to the current secured indebtedness
(including future Safcor, Inc. advances) of Global One. Upon receipt by the
Seller of the full amount of the principal outstanding under the Loan, the
Seller shall deposit $100,000 with the Escrow Agent pursuant to the Escrow
Agreement. Refusal by the Seller to loan the Advance to Global One on the terms
described above shall constitute a material breach of the Agreement pursuant to
Section 8.01(b)(iii) of the Agreement for which the Buyer shall be entitled to a
refund of the Advance pursuant to Section 8.02(b) of the Agreement.
SECTION 4.18 LAWSUIT COMMITTEE: The Parties shall create or cause to be
created a committee comprised of the President of 2d, Dyne, acting as
representative of the Seller and the
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President of Global One (the "Lawsuit Committee"), whose purpose shall be to
approve strategic decisions and final settlements regarding pending or
threatened litigation against Global One and/or its subsidiaries in connection
with the creditors of OSP Publishing, Inc., a subsidiary of Global One (the
"Lawsuits"). A good faith vote based on the merits and risks of particular
Lawsuits by the majority of the members comprising the Lawsuit Committee shall
be required to approve such strategic decisions and final settlements. Erekesef
agrees that certain of the funds deposited into the Escrow Account may be used
to fund loans from Erekesef to Global One.
ARTICLE V: CONDITIONS TO THE BUYER'S AND 2D'S OBLIGATIONS
The obligations of the Buyer to pay, and of 2d to cause the Buyer to pay,
the Purchase Price to the Seller on the Closing Date and to consummate the other
transactions contemplated hereby are subject to the satisfaction, on or before
the time of the Closing, of the following conditions, each of which may be
waived by 2d in its sole discretion:
SECTION 5.01 REPRESENTATIONS AND WARRANTIES TRUE All of the representations
and warranties of the Seller set forth in this Agreement, including in any of
the Schedules hereto or other agreements or documents attached hereto or
referred to herein or delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be true and correct as of the time of the
Closing, as if made at and as of such time, in all material respects unless
qualified as to materiality by their terms, in which case they shall be true and
correct. On the Closing Date, the Seller shall have executed and delivered to 2d
a certificate, in form and substance reasonably satisfactory to 2d and its
counsel, to such effect.
SECTION 5.02 PERFORMANCE The Seller shall have performed and complied with
all covenants and agreements contained herein required to be performed or
complied with by them prior to or at the Closing Date. The Seller shall have
executed and delivered to 2d a certificate, in form and substance reasonably
satisfactory to 2d and its counsel, to such effect and to the further effect
that all of the conditions set forth in this Article V have, to the best of
their knowledge, been satisfied.
SECTION 5.03 ESCROW AGREEMENT The Escrow Agreement shall have been entered
into and shall be in full force and effect.
SECTION 5.04 OPINION OF THE SELLER'S COUNSEL The Buyer shall have received
the opinion of Kinsella, Boesch, Fujikawa & Towle, LLP, in substantially the
form attached hereto as EXHIBIT 5.08.
SECTION 5.05 CLOSING DOCUMENTS The Seller shall have delivered the
certificates representing the Shares, duly endorsed to the Buyer or accompanied
by stock assignments separate from the certificates duly executed by the Seller
and sufficient to transfer ownership of the Shares to the Buyer, free and clear
of all Claims, and all of the resolutions, certificates, documents and
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instruments required by this Agreement to be executed and delivered by the
Sellers shall have been so executed and delivered.
ARTICLE VI: CONDITIONS TO THE SELLER'S AND BERMEISTER'S OBLIGATIONS
The obligations of the Seller to sell the Shares to the Buyer and to
consummate the other transactions contemplated hereby, are subject to the
satisfaction, on or before the time of the Closing, of the following conditions,
each of which may be waived by the Seller in his discretion:
SECTION 6.01 REPRESENTATIONS AND WARRANTIES TRUE All of the representations
and warranties of the Buyer and 2d set forth in this Agreement, including in any
of the Schedules hereto or other agreements or documents attached hereto or
referred to herein or delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be true and correct as of the time of the
Closing, as if made at and as of such time, in all material respects unless
qualified as to materiality by the terms, in which case they shall be true and
correct. On the Closing Date, the Buyer and 2d shall have executed and delivered
to Seller a certificate, in form and substance reasonably satisfactory to Seller
and its counsel, to such effect.
SECTION 6.02 PERFORMANCE The Buyer and 2d shall have performed and complied
with all agreements contained herein required to be performed or complied with
by them prior to or at the time of the Closing, and the Buyer and 2d shall have
delivered a certificate to the Seller, in form and substance reasonably
satisfactory to the Seller and its counsel, to such effect.
SECTION 6.03 CONSENTS All governmental approvals and consents of third
parties required to be received to prevent any material license, permit or
agreement relating to the business of 2d from terminating prior to its scheduled
termination, or any indebtedness of 2d from becoming due or being subject to
becoming due, in each case as a result of the consummation of the transactions
contemplated hereby, shall have been obtained.
SECTION 6.04 NO ACTIONS, SUITS OR PROCEEDINGS As of the Closing Date, no
action, suit, investigation or proceeding brought by any person, corporation,
governmental agency or other entity (other than the Seller or an affiliate of
the Seller) shall be pending or, to the knowledge of any of the parties to this
Agreement, threatened, before any court or governmental body to restrain,
prohibit, restrict or delay, or to obtain damages or a discovery order in
respect of this Agreement or the consummation of the transactions contemplated
hereby. No judgment, order or decree of any court or governmental body shall
have been issued restraining, prohibiting, restricting or delaying, the
consummation of the transactions contemplated by this Agreement. No insolvency
proceeding of any character, including, without limitation, bankruptcy,
receivership, reorganization, dissolution or arrangement with creditors,
voluntary or involuntary, affecting the Buyer or 2d shall be pending, and
neither the Buyer nor 2d shall have taken any action in contemplation of, or
which would constitute the basis for, the institution of any such proceedings.
SECTION 6.05 NO MATERIAL ADVERSE CHANGE No change shall have occurred since
the date hereof which has had, is having or is reasonably likely to have a
material adverse effect on
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2d's business, operations, properties, assets, liabilities, condition (financial
or otherwise) or prospects, other than a change which results, directly or
indirectly, from the public announcement or disclosure of the transactions
contemplated hereby, and 2d shall have delivered to the Seller a certificate
dated the Closing Date and executed by its chief executive officer and chief
financial officer, to the effect that, to their best knowledge, no such material
adverse change has occurred.
SECTION 6.06 CO-SALE AGREEMENT The Management Stockholders shall have
subscribed to the provisions of Section 4.09 by entering into an agreement with
2d and the Seller to the effect of such provisions, in substantially the form of
EXHIBIT 4.09.
SECTION 6.07 ESCROW AGREEMENT The Escrow Agreement shall have been
entered into and shall be in full force and effect.
SECTION 6.08 OPINION OF THE BUYER'S AND 2D'S COUNSEL. The Seller shall have
received from Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., an opinion
dated the Closing Date, in substantially the form attached hereto as EXHIBIT
6.08.
SECTION 6.09 CLOSING DOCUMENTS The Buyer, and the Escrow Agent in the case
of that portion thereof represented by the Further Advance, shall have delivered
the Purchase Price to the Sellers and all of the resolutions, certificates,
documents and instruments required by this Agreement to be executed and
delivered by the Buyer and/or 2d shall have been so executed and delivered.
SECTION 6.10 AMENDMENTS CERTIFICATE OF INCORPORATION OR BY-LAWS 2d shall
have amended its Certificate of Incorporation or By-Laws in the manner described
in Schedule 4.11.
ARTICLE VII: INDEMNIFICATION
SECTION 7.01 SURVIVAL. All representations and warranties in this
Agreement, or in any instrument or document furnished in connection with this
Agreement or the transactions contemplated hereby, shall survive the Closing and
any investigation at any time made by or on behalf of any party for a period of
twelve (12) months after the Closing Date. All such representations and
warranties shall expire the date which is twelve (12) months after the Closing
Date, except that (a) claims, if any, asserted in writing prior to such date
identified as a claim for indemnification pursuant to this Article VII shall
survive until finally resolved and satisfied in full, and (b) claims, if any,
which are based upon fraud, which are based on Article IV hereof, which relate
to title to the Shares or which assert tax liability shall survive for the full
period of the applicable statute of limitations, and until finally resolved and
satisfied in full if asserted on or prior to such date or the end of such
period. All covenants and agreements contained herein shall survive until fully
performed in accordance with their terms.
SECTION 7.02 INDEMNIFICATION. Each of the parties hereto (jointly and
severally, in the case of the Buyer and 2d) (the "Indemnifying Parties" when
indemnification by them hereunder is required) agrees to indemnify, defend and
hold harmless the other, the other's affiliates, directors,
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officers, employees, stockholders, consultants and representatives and the
successors and assigns thereof (the "Indemnified Parties") from, against and
with respect to any claim, liability, obligation, loss, damage, assessment,
judgment, cost or expense (including, without limitation, reasonable attorneys'
and accountants' fees and costs and expenses reasonably incurred in
investigating, preparing, defending against or prosecuting any litigation or
claim, action, suit, proceeding or demand) of any kind or character, arising out
of or in any manner incident, relating or attributable to:
(a) Any breach of any representation or warranty of such party
contained in this Agreement or in any certificate, instrument of transfer
or other agreement or document executed or otherwise made or given by such
party in connection with this Agreement;
(b) Any failure by such party to perform or observe, or to cause to be
performed or observed, in full, any covenant or agreement to be performed
or observed or caused to be performed or observed, by such party under this
Agreement or under any other agreement or documents executed and delivered
by such party in connection with this Agreement;
SECTION 7.03 SEPARATE COUNSEL; NOTICE, ETC. If any indemnifiable event
under Section 7.02 may also entail claims for relief by a third party as to
which an Indemnified Party is not entitled to indemnification hereunder, such
Indemnified Party shall give the Indemnifying Party prompt notice thereof and
shall have the right, at such Indemnified Party's expense, to appoint separate
counsel to contest any such claim as to which such Indemnified Party is not
entitled to indemnification hereunder; provided that the failure to give such
notice shall not relieve any Indemnifying Party of the obligation to provide
indemnification hereunder for indemnifiable matters.
SECTION 7.04 CLAIMS FOR INDEMNIFICATION. In the event of the occurrence of
any event which any party hereto asserts is an indemnifiable event under this
Article VII, such party shall provide prompt notice to the other party or
parties asserted to be required to provide indemnification, specifying in
reasonable detail the facts and circumstances with respect to such claim and the
basis for which indemnification is available hereunder. If such event involves
the claim of any third party, the Indemnifying Party in such a case shall have
the right to control the defense or settlement of such claim; provided, however,
that (a) if the Indemnifying Party elects to exercise such rights, it shall
assume such defense by written notice to the Indemnified Party, (b) the
Indemnified Party shall be entitled to participate in the defense of such claim
at its own expense, (c) the Indemnifying Party shall obtain the prior written
consent of the Indemnified Party (which consent may be withheld in the sole and
absolute discretion of the Indemnified Party) before entering into any
settlement of such claim if, pursuant to or as a result of such settlement,
injunctive or other non-monetary relief would be imposed against the Indemnified
Party, (d) the Indemnifying Party shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the
Indemnified Party shall be entitled to have sole control over, at the
Indemnifying Party's sole expense, the defense or settlement of any claim to the
extent such claim seeks an order, injunction or other equitable relief against
the Indemnified Party which, if successful, could materially interfere with the
business, operations, properties, assets, liabilities, condition (financial or
otherwise) or prospects of the Indemnified Party or any of the Indemnified
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Party's affiliates, provided that the Indemnified Party shall provide written
notice to the Indemnifying Party of its election to assume control over the
defense of such claim pursuant to this Section 7.04. If the Indemnifying Party
is entitled but fails to assume control over the defense of any claim as
provided in this Section 7.04, the Indemnified Party shall have the right to
defend and settle such claim at the Indemnifying Party's expense. The
Indemnifying Party shall promptly pay or reimburse the Indemnified Party for all
amounts paid or payable by the Indemnified Party for which the Indemnifying
Party is obligated to provide indemnification hereunder, without set-off for any
amount asserted by the Indemnifying Party to be owed to the Indemnifying Party
by the Indemnified Party. In the event that the Indemnifying Party shall be
obligated to indemnify the Indemnified Party pursuant to this Article VII, the
Indemnifying Party shall, upon payment of such indemnity in full, be subrogated
to all rights of the Indemnified Party with respect to the claim to which such
indemnification relates.
SECTION 7.05 LIMIT OF RECOURSE TO THE BUYER AND 2D.
1. (a) In any event, if 2d terminates this Agreement on the basis that any of
the conditions to the Buyer's and 2d's obligations to pay the Purchase
Price and to consummate the transactions contemplated hereby shall not have
been satisfied, or the Buyer and 2d otherwise fail to pay the full Purchase
Price and to consummate such transactions, the maximum recourse of the
Seller to the Buyer and/or 2d, under this Agreement or otherwise, shall be
the retention of the Advance and the Further Advance, which shall
constitute mutually agreed-upon liquidated damages owing by the Buyer and
2d to the Seller and Bermeister as a result of such termination. Recovery
for any claims, other than fraud, by the Buyer or 2d in which
indemnification is sought, shall be limited as set forth in the Escrow
Agreement, the form of which is attached hereto as Exhibit 1.03(b).
(b) The parties shall not bring any action, suit, arbitration or other
proceeding arising from this Agreement unless the damages alleged by the party
bringing the action, suit, arbitration or other proceeding exceed $400,000. In
no event shall any party be required to pay the first $400,000 in liabilities
recoverable by another party. The maximum aggregate liability for 2d and the
Buyer to the Seller resulting from any and all claims, actions, suits,
arbitrations and other proceedings arising from this Agreement shall be the
amount of the consideration being delivered by the Buyer to the Seller under
this Agreement, less $400,000. The maximum aggregate liability of the Seller to
2d and the Buyer resulting from any and all claims, actions, suits, arbitrations
and other proceedings arising from this Agreement shall be the $500,000 of funds
and the 2d Stock to be deposited in escrow with the Escrow Agent. Any amounts
recoverable by the Buyer or 2d against the Seller shall be paid in cash,
provided that at the option of the Seller up to 65% may be paid by delivery of
2d Stock valued at a per-share price equal to the greater of the amount paid by
Erekesef and the fair market value of such shares on the date the damages are
determined, established by the agreement of the parties or established by
arbitration as provided for in Section 4.10(b), with the remainder payable in
cash. Any amounts recoverable by the Seller shall be paid entirely in cash,
unless 2d and the Seller shall then otherwise agree.
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ARTICLE VIII: TERMINATION
SECTION 8.01 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of the Seller's and 2d, duly authorized
by the Board of Directors;
(b) By 2d or the Seller if:
(i) any court of competent jurisdiction or other governmental
body shall have issued a judgment, order or decree, or taken
any other action restraining, enjoining or otherwise
prohibiting the limiting or delaying beyond July 28, 1998
the consummation of the transactions contemplated hereby;
provided that this Agreement shall not be terminated by a
party hereto pursuant to this clause if such court's or
other body's action is based on any action or failure to act
of such party;
(ii) the Closing has not occurred on or prior to July 28, 1998;
provided that this Agreement shall not be terminated by a
party if any such failure so to close is the result of any
action or failure to act of such party constituting breach
of any provision of this Agreement by such party;
(iii) the Seller, on the other hand, or 2d and/or Buyer, on the
other hand breaches any of his or its representations,
warranties, covenants or agreement hereunder a (breach by
the Buyer being deemed a breach by 2d for purposes of this
Section 8.01) and such breach is not cured not later than
the earlier of ten (10) business days after written
notification of such breach to the other party by the
terminating party or July 28, 1998; or
(iv) a condition to the obligation of the terminating party to
consummate the transactions contemplated hereby becomes
impossible to satisfy on or prior to July 28, 1998;
(c) By 2d, (i) by virtue of the fact that the Buyer fails to
consummate the transactions contemplated hereby for any reason even though
the conditions to its obligations to do so shall have been satisfied or
waived, and without notice to the Seller, or (ii) if 2d notifies the Seller
in writing that the Buyer will not consummate the transactions contemplated
hereby in any event.
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(d) By 2d pursuant to the Termination Option set forth in Section 1.08
herein.
Upon the occurrence of any of the events set forth in this Section 8.01 and of a
determination of the notifying party to terminate this Agreement (other than
pursuant to Paragraph A hereof), written notice of such event shall forthwith be
given to the other parties to this Agreement, whereupon this Agreement shall
terminate.
SECTION 8.02 EFFECT OF TERMINATION. (a) Subject to Section 8.02(b), in the
event of the termination of this Agreement pursuant to Section 8.01, this
Agreement, except as hereinafter provided, shall forthwith become void and be of
no further force or effect. Subject to the provisions of Article VIII, nothing
in this Section 8.02 shall relieve any party to this Agreement, however, from
liability for any breach of this Agreement which shall have occurred prior to
such termination; and, (b) in the event of any such termination, the following
provision shall nonetheless remain in full force and effect: this Section 8.02
and Sections 1.02(a), 1.02(b), 1.02 (c), 1.03, 4.06, 7.01 through 7.05,
inclusive, and 9.1 through 9.16, inclusive.
(b) Upon termination of this Agreement, the Seller shall be entitled to
retain the Initial Advance, the Advance and the Further Advance unless this
Agreement is terminated by Buyer or 2d upon a breach by the Seller pursuant to
Section 8.01(b)(iii) hereof, in which case the entire Advance and Further
Advance shall be repaid to Buyer; provided that the Initial Advance shall not be
repayable unless the Seller shall have breached any of its representations and
warranties set forth in Section 1.08, in which case the Initial Advance shall
also be repaid to the Buyer. Otherwise, the Initial Advance, the Advance and the
Further Advance shall be retained by the Seller (or with respect to the Further
Advance, if the Agreement is terminated prior to the payment, paid to the
Seller) as liquidated damages. The parties agree that it would be extremely
difficult or impractical to estimate the actual damages that would result from
the failure of 2d and the Buyer to consummate the transactions contemplated
hereby and that the retention of the Initial Advance, the Advance and the
Further Advance by the Seller as set forth above constitutes a reasonable
estimate of and agreed stipulation to such damages, and shall be the Seller's
sole recourse for the failure of 2d and the Buyer to consummate the transactions
contemplated hereby.
ARTICLE IX: MISCELLANEOUS
SECTION 9.01 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) made by telex, telecopy or facsimile transmission, (iii) sent by recognized
overnight courier, or (iv) sent by registered or certified mail, return receipt
requested, postage prepaid.
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If to the Buyer or 2d:
2d Interactive, Inc.
186 South Street
Boston, MA 02111
Attn: President
Fax: (617) 574-7326
With a copy to:
Richard R. Kelly, Esq.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Fax: (617) 542-2241
If to the Seller or Bermeister:
Erekesef Securities Limited
6355 Topanga Canyon Boulevard, Suite 331
Woodland Hills, California 91367
Attn: President
Fax: (818) 712-0810
with a copy to:
Joseph P. Bartlett, Esq.
Kinsella, Boesch, Fujikawa & Towle, LLP
1901 Avenue of the Stars, Seventh Floor
Los Angeles, California 90067-6009
Fax: (310) 284-6018
All notices, requests, consents and other communications hereunder shall be
deemed to have been (i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth above, (ii) if made by
telex, telecopy or facsimile transmission, at the time that receipt thereof has
been acknowledged by electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next business day following the day such notice is
delivered to the courier service, or (iv) if sent by registered or certified
mail, on the fifth business day following the day such mailing is made.
SECTION 9.02 ENTIRE AGREEMENT. This Agreement, together with the Exhibits
and Schedules hereto and the other agreements and documents executed in
connection herewith and the
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Share Exchange Agreement and the Voting Agreement, embodies the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior or contemporaneous oral or written agreements
and understandings relating to the subject matter hereof No statement,
representation, warranty, covenant or agreement of any kind not expressly set
forth herein or therein shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this Agreement.
SECTION 9.03 MODIFICATIONS AND AMENDMENTS. The terms and provisions of this
Agreement may be modified or amended only by written agreement executed by all
parties hereto.
SECTION 9.04 WAIVERS AND CONSENTS. No failure or delay by a party hereto in
exercising any right, power or remedy under this Agreement, and no course of
dealing between the parties hereto, shall operate as a waiver of any such right,
power or remedy of the party. No single or partial exercise of any right, power
or remedy under this Agreement by a party hereto, nor any abandonment or
discontinuance of steps to enforce any such right, power or remedy, shall
preclude such party from any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The election of any remedy by a
party hereto shall not constitute a waiver of the right of such party to pursue
other available remedies. No notice to or demand on a party not expressly
required under this Agreement shall entitle the party receiving such notice or
demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand. The terms and provisions of this Agreement may be waived,
or consent for the departure therefrom granted, only by written document
executed by the party entitled to the benefits of such terms or provisions. No
such waiver or consent shall be deemed to be or shall constitute a waiver or
consent with respect to any other terms or provisions of this Agreement, whether
or not similar. Each such waiver or consent shall be effective only in the
specific instance and for the purpose for which it was given, and shall not
constitute a continuing waiver or consent.
SECTION 9.05 ASSIGNMENT Neither this Agreement, nor any right hereunder,
may be assigned by any of the parties hereto without the prior written consent
of the other parties. Notwithstanding the foregoing, it is expressly agreed that
(a) the Seller may freely transfer the 2d Stock acquired hereunder (but not the
other rights hereunder), subject to applicable state and federal securities laws
and (b) if Seller transfers the Global One shares to Bermeister or to an entity
directly or indirectly controlled and majority-owned by Bermeister, the Seller
may assign this Agreement and all rights hereunder to such purchaser or
transferee on the condition that such purchaser or transferee agrees in writing
with 2d to become bound hereby (in which case, such purchaser or transferee
shall be deemed to be the "Seller" hereunder).
SECTION 9.06 PARTIES IN INTEREST; KNOWLEDGE OF THE SELLER; AFFILIATES This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto and their permitted assigns, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. Nothing in this
Agreement shall be construed to create any rights or obligations except among
the parties hereto, and no person or entity shall be regarded as a third-party
beneficiary of this
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Agreement. In any instance in which reference is made herein to the "knowledge"
of the Seller or that the Seller is "aware", such knowledge or awareness shall
be deemed to include the knowledge or awareness of Dyne or Bermeister or of any
of the other agents and representatives of the Seller who are knowledgeable
about or acting in connection with this Agreement and the transactions
contemplated hereby. Without limiting the foregoing, possession of the Global
Information by the Seller referred to in Section 1.07 shall include material,
non-public information related to Global One in the possession of Dyne or
Bermeister or any of their agents or representatives (except any Excluded Global
Information). For purposes of this Agreement, the term "affiliate" when used
with respect to a person or entity shall mean (a) any person or entity who is an
"affiliate" of such person or entity as defined in Rule 12b-2 of the General
Rules of the Commission under the Securities Exchange Act of 1934, as amended,
(b) any director, officer or partner of such person or entity or a person who
holds a similar position with any entity in which such person or entity has a
10% or greater equity or profit interest, and (c) any family member of a person
referred to in clause (a) or clause (b). Notwithstanding the foregoing, each of
Dyne and Bermeister and their respective affiliates shall be deemed an
"affiliate" of the Seller for purposes of this Agreement, and any action by Dyne
or Bermeister or any of their respective affiliates which, if committed by the
Seller would constitute a breach of this Agreement by the Seller shall be deemed
a breach of this Agreement by the Seller.
SECTION 9.07 GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be construed in accordance with and governed by
the internal law of the State of Delaware, without giving effect to the conflict
of law principles thereof.
SECTION 9.08 ARBITRATION.
(a) All disputes arising in connection with this Agreement, other than
matters pertaining to injunctive relief, shall be finally settled by arbitration
in the State of Delaware, in accordance with the rules (the "Arbitration Rules")
of the American Arbitration Association. Judgment on the award rendered by the
arbitration panel appointed as hereinafter provided (the "Arbitration Panel")
may be entered in any court of competent jurisdiction.
(b) Any party which desires to initiate arbitration proceedings may do so
by delivering written notice to the other parties (the "Arbitration Notice") in
accordance with the Arbitration Rules. Unless otherwise agreed by all parties
hereto, any dispute shall be resolved by a three-person arbitration panel.
(c) All decisions of the Arbitration Panel shall be final, conclusive and
binding on all parties and shall not be subject to judicial review, except to
the extent set forth in the Rules of Civil Procedure for the State of Delaware.
(d) Any proceeding for injunctive relief (including temporary restraining
orders, preliminary injunctions and permanent injunctions) may be brought in any
court of competent jurisdiction, and the parties consent to the non-exclusive
jurisdiction of the Delaware courts for such purpose.
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SECTION 9.09 SEVERABILITY. In the event that any court of competent
jurisdiction shall finally determine that any provision, or any portion thereof,
set forth in this Agreement shall be void or unenforceable in any respect, then
such provision shall be deemed limited to the extent that such court determines
it enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall determine any such provision, or portion thereof,
wholly unenforceable, the remaining provisions of this Agreement shall
nevertheless remain in full force and effect.
SECTION 9.10 INTERPRETATION. The parties hereto acknowledge and agree that:
(i) each party and its counsel reviewed and negotiated the terms and provisions
of this Agreement and have contributed to its revision; (ii) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.
SECTION 9.11 HEADINGS AND CAPTIONS. The headings and captions of the
various subdivisions of this Agreement are for convenience of reference only and
shall in no way modify, or affect, or be considered in construing or
interpreting the meaning or construction of any of the terms or provisions
hereof.
SECTION 9.12 ENFORCEMENT Each of the parties hereto acknowledges and agrees
that the rights acquired by each party hereunder are unique and that substantial
immediate and irreparable damage would occur in the event that any of the
provisions of this Agreement to be performed by the other party were not
performed in accordance with their specific terms or were otherwise breached.
Accordingly, in addition to any other remedy to which the parties hereto are
entitled at law or in equity, each party hereto shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement by the other
party and to enforce specifically the terms and provisions hereof in any state
or federal court to which the parties have agreed hereunder to submit to
jurisdiction and which has jurisdiction over any such matter.
SECTION 9.13 RELIANCE. The parties hereto agree that, notwithstanding any
investigation of the affairs of any other party to this Agreement, the party so
investigating shall have the right to rely fully upon the representations and
warranties of the other party expressly set forth in this Agreement and on the
accuracy of any Schedule or Exhibit document attached hereto or referred to
herein or delivered by such other party pursuant to this Agreement.
SECTION 9.14 EXPENSES Subject to the provisions of Section 4.08, Article
VII and Section 9.08, each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby, whether or not the transactions contemplated hereby are
consummated.
SECTION 9.15 NO BROKER OR FINDER. Each of the parties hereto represents and
warrants to the other that no broker, finder or other financial consultant has
acted on its behalf in connection with this Agreement or the transactions
contemplated hereby in such a way as to create any
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liability. Each of the parties hereto agrees to indemnify, defend and save the
other harmless from and against any claim or demand for commission or other
compensation by any broker, finder, financial consultant or similar agent
claiming to have been employed by or on behalf of such party and to bear the
cost of legal expenses incurred in defending against any such claim.
SECTION 9.16 CONFIDENTIALITY. The Seller acknowledges and agrees, and shall
cause Dyne and Bermeister to agree in writing for themselves, that any
information or data which it (or they) has (have) acquired, or which it (they)
will acquire as a result of the exercise of rights under Sections 4.07, 4.08 and
4.15 or otherwise, regarding Global One or 2d not otherwise already in the
public domain, if any, was or will be, as the case may be, acquired in
confidence. The Seller hereby agrees, and agrees to cause Dyne and Bermeister to
agree in writing for themselves, not to divulge, communicate or disclose, except
as may be required by law or for the performance of this Agreement, or use to
the detriment of Global One or 2d or for the benefit of any other person or
persons, or misuse in any way, any such confidential information, including any
trade or business secrets of Global One or 2d and any technical or business
materials that are treated by Global One or 2d as confidential or proprietary,
including, without limitation, information (whether in written, oral or
machine-readable form) concerning: general business operations; methods of doing
business, servicing clients, client relations, and of pricing and making charge
for services and products; financial information, including costs, profits and
sales; marketing strategies; business forms developed by or for the disclosing
party; names of suppliers, personnel, customers, clients and potential clients;
negotiations or other business contacts with suppliers, personnel, customers,
clients and potential clients; form and content of bids, proposals and
contracts; the disclosing party's internal reporting methods; technical and
business data, documentation and drawings; software programs, however embodied;
manufacturing processes; inventions; techniques; and information obtained by or
given to Global One or 2d about or belonging to a third party and with respect
to which Global One or 2d is under a confidentiality obligation.
SECTION 9.17 COSTS AND ATTORNEYS' FEES. If any action, suit, arbitration
proceeding or other proceeding is instituted arising out of this Agreement, the
prevailing party, in proportion to the degree to which such party prevails,
shall recover such party's costs, including, without limitation, the court costs
and attorneys' fees incurred therein, including any and all appeals or petitions
therefrom. As used herein, "attorneys' fees" shall mean the full and actual
costs of any legal services actually rendered in connection with the matters
involved, calculated on the basis of the usual rates of fees charged by the
attorneys performing such services.
SECTION 9.18 COUNTERPARTS This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the Buyer, 2d and the Seller have executed this
Agreement as of the day and year first above written.
ATTEST: GOGO HOLDINGS, INC.
/s/ Lewis Chester By: /s/ Dominic A. Ianno
- ---------------------------------- ------------------------------------
ATTEST: 2d INTERACTIVE, INC.
/s/ Lewis Chester By: /s/ Dominic A. Ianno
- ---------------------------------- ------------------------------------
EREKESEF SECURITIES LIMITED
By: /s/ Kevin Bermeister
------------------------------------
35
<PAGE> 1
EXHIBIT B
Erekesef Securities
6355 Topanga Canyon Blvd.
Suite 331
Woodland Hills, CA 91367
April 15, 1998
C1836-001
2d Interactive, Inc.
186 South Street
Boston, MA 02111
GOGO Holdings, Inc.
186 South Street
Boston, MA 02111
Re: Stock Purchase & Sale Agreement
-------------------------------
Gentlemen:
Reference is made to the Stock Purchase & Sale Agreement (the "Agreement")
between the undersigned ("Erekesef"), 2d Interactive, Inc. ("2d") and GOGO
Holdings, Inc. ("GOGO"). The parties to the agreement agree as follows
(Capitalized terms not defined in herein shall have the meanings ascribed to
terms in the Agreement):
1. The parties shall hold in escrow pursuant to the terms hereof the
signature pages to the Agreement.
2. Erekesef shall comply with its obligations set forth in Section 1.08
of the Agreement and the parties shall use their best efforts to cause 2d and
Global One to enter into the Non-Disclosure Agreement relating to the Global
Information and to effect the disclosure of the Global Information to 2d.
3. 2d has previously delivered to Erekesef $75,000, which shall be
refunded to 2d only under the circumstances described in the Agreement.
4. Upon receipt of the Global Information, 2d and Buyer shall have 3
full business days following the Delivery Date to evaluate the Global
Information. After evaluation of the
<PAGE> 2
Global Information, 2d shall have the right to proceed with the transactions
contemplated by the Agreement, by written notice ("Notice") to Erekesef at the
end of such period. If 2d determines to proceed, the signature pages previously
delivered shall, without further action, be released and delivered by and among
the parties, the Termination Option shall be waived, and the Agreement shall
become effective, as of the date the Notice is given to Erekesef. 2d shall also
have the unconditional right to terminate all further discussions with Erekesef
in which case the transactions contemplated by the Agreement shall be
terminated as if 2d had exercised the Termination Option. If 2d does not
deliver the Notice affirming its determination to proceed prior to the
expiration of the third business day following receipt of the Global
Information, 2d shall be deemed to have terminated the proposed transaction.
5. Any dispute relating to the terms or performance of this letter
agreement shall be resolved in the manner provided in the Agreement.
Please sign the enclosed copy of this letter and return it to the
undersigned to indicate that the foregoing is consistent with your
understanding.
Very truly yours,
/s/ Kevin Bermeister
----------------------------
Kevin Bermeister, President
ACKNOWLEDGED AND AGREED TO:
GOGO Holdings, Inc.
By: /s/ Dominic Ianno
--------------------------
Name: Dominic Ianno
------------------------
Title: President
-----------------------
2d Interactive, Inc.
By: /s/ Dominic Ianno
--------------------------
Name: Dominic Ianno
------------------------
Title: President
-----------------------
<PAGE> 1
EXHIBIT C
2D INTERACTIVE, INC.
186 SOUTH STREET
BOSTON, MA 02111
April 29, 1998
Erekesef Securities Limited
6355 Topanga Canyon Blvd., Suite 331
Woodland Hills, CA 91367
Re: STOCK PURCHASE AND SALE AGREEMENT
Reference is made to that certain STOCK PURCHASE AND SALE AGREEMENT dated
April 6, 1998 (the "Agreement") and subject to that certain Letter Agreement
dated April 15, 1998 (the "Letter Agreement") by and among 2d Interactive, Inc.,
a Delaware Corporation, ("2d"), GOGO Holdings, Inc., a Delaware Corporation and
wholly owned subsidiary of 2d (the "Buyer") and Erekesef Securities Limited, a
British Virgin Islands Corporation (including any permitted assignee, the
"Seller"). 2d, the Buyer and the Seller shall be collectively referred hereto as
the "Parties." Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Agreement.
The Parties seek to change the terms of the Agreement to alter the
consideration offered, the closing date and the escrow arrangements in
connection with the transactions contemplated thereby.
The Parties agree as follows:
1. The aggregate cash consideration in connection with the purchase of the
Global One Shares shall be $1,640,000;
2. The first sentence of SECTION 1.02 is hereby amended by deleting the
reference to "$3,990,000, or $3,590,000" and substituting in its place the
following: "$3,890,000 or $3,490,000";
3. Clause (b) of SECTION 1.02 is hereby amended by deleting the reference to
the dollar amount "$115,000" and substituting in its place the dollar
amount "$215,000";
4. Clause (c) of SECTION 1.02 is hereby deleted in its entirety and all
references to the "Further Advance" and the "Further Advance Guaranty" are
hereby deleted in their entirety;
5. Clause (d) of SECTION 1.02 is hereby amended by deleting the reference to
the dollar amount "$500,000" and substituting in its place the dollar
amount "$860,000";
6. The proviso at the end of the first sentence of SECTION 1.04 is hereby
amended by deleting the words "June 1, 1998 and in any event, not later
than June 1, 1998" and substituting in their place the words "July 28,
1998";
7. Sub-clause (b)(1) of SECTION 1.04 is hereby amended by deleting the
reference to the dollar amount "$500,000" and substituting in its place the
dollar amount "$860,000";
8. Clause (c) of SECTION 1.04 is hereby amended by deleting the reference to
the dollar amount "$500,000" and substituting in its place the dollar
amount "$860,000";
<PAGE> 2
9. The following language shall be added to the Agreement as SECTION 4.17 LOAN
TO GLOBAL ONE: "Within seven business days (unless otherwise agreed to by
the Parties) of the Buyer furnishing the Advance to the Seller, the Seller
shall loan the Advance (the "Loan") to Global One Distribution and
Merchandising, Inc. ("Global One") in exchange for a 120 day term secured
subordinated promissory note at an annual interest rate of eight (8)
percent pursuant to an existing loan agreement between the Seller and
Global One or in exchange for a secured subordinated promissory note at an
annual interest rate of twelve (12) percent (or such lower rate as may be
approved by Erekesef in its sole discretion) which will provide for a
single balloon payment of the of the outstanding principal and interest at
the expiration of a 120 day term. Such notes shall be subordinated to the
current secured indebtedness (including future Safcor, Inc. advances) of
Global One. Upon receipt by the Seller of the full amount of the principal
outstanding under the Loan, the Seller shall deposit $100,000 with the
Escrow Agent pursuant to the Escrow Agreement. Refusal by the Seller to
loan the Advance to Global One on the terms described above shall
constitute a material breach of the Agreement pursuant to Section
8.01(b)(iii) of the Agreement for which the Buyer shall be entitled to a
refund of the Advance pursuant to Section 8.02(b) of the Agreement."
10. The following language shall be added to the Agreement as SECTION 4.18
LAWSUIT COMMITTEE: "The Parties shall create or cause to be created a
committee comprised of the President of 2d, Dyne, acting as representative
of the Seller and the President of Global One (the "Lawsuit Committee"),
whose purpose shall be to approve strategic decisions and final settlements
regarding pending or threatened litigation against Global One and/or its
subsidiaries in connection with the creditors of OSP Publishing, Inc., a
subsidiary of Global One (the "Lawsuits"). A good faith vote based on the
merits and risks of particular Lawsuits by the majority of the members
comprising the Lawsuit Committee shall be required to approve such
strategic decisions and final settlements. Erekesef agrees that certain of
the funds deposited into the Escrow Account may be used to fund loans from
Erekesef to Global One."
11. The Escrow Agreement, created pursuant to SECTION 1.04(c) of the Agreement,
shall contain provisions substantially in the form of those set forth in
EXHIBIT A attached hereto;
12. SECTION 7.05 is hereby amended by added the following sentence to the end
of the section: "Recovery for any claims, other than fraud, by the Buyer or
2d in which indemnification is sought, shall be limited as set forth in the
Escrow Agreement, the form of which is attached hereto as Exhibit 1.03(b)"
13. SECTION 8.01 is hereby amended by deleting all references to "June 1, 1998"
and substituting in their place "July 28, 1998."
14. At any time that the Seller has loaned funds to Global One, the Seller
shall allow 2d or the Buyer to pay any amounts due under such loans on
behalf of Global One and the Parties shall use reasonable efforts to enter
into a credit coordination agreement with respect to such loan payments by
2d or the Buyer.
15. 2d acknowledges that Erekesef seeks to have Nathan Peck made an executive
officer of Global One for a term of six months at a reasonable compensation
level and agrees to support such appointment.
16. Upon execution of this letter agreement, the parties shall release the
signature pages to the Agreement held in escrow pursuant to the Letter
Agreement and the Agreement shall be declared effective as of the date
hereof.
2
<PAGE> 3
Sincerely,
/s/ Dominic Ianno
----------------------------------------
Dominic Ianno
President, 2d Interactive, Inc.
President, GOGO Holdings, Inc.
ACCEPTED AND AGREED:
Erekesef Securities, Inc.
By: /s/ Kevin Bermeister
----------------------------
Kevin Bermeister, President
3
<PAGE> 1
EXHIBIT D
VOTING AGREEMENT
AND CONDITIONAL IRREVOCABLE PROXY
This Voting Agreement and Conditional Irrevocable Proxy (the
"Agreement") is entered into and effective as of December 10, 1997 by and among
Joseph C. Angard and Erekesef Securities Limited, a British Virgin Islands
Company (collectively, the "Shareholders").
R E C I T A L S
WHEREAS, the Shareholders desire to enter into an agreement to be
specifically enforceable against each of them pursuant to which they agree to
vote all shares of Common Stock of Global One Distribution & Merchandising,
Inc., a Delaware corporation (the "Company") currently held by them (the
"Shares"), in the manner and for the purpose specified herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Shareholders hereby agree as follows:
1. Voting Agreement. Each of the Shareholders hereby agrees, on all
matters which are submitted to the Shareholders of the Company for their
approval, to vote in the manner directed by holders of a majority of the Shares
held by the Shareholders. In the event that a Shareholder (or any transferee
described below) shall sell, transfer or assign any interest in the Shares to:
(a) a spouse, lineal ascendant or descendant, or adopted child of such
Shareholder (collectively, "Family Shareholders");
(b) any trustee of an inter vivos trust primarily for the benefit of
such Shareholder or any of such Shareholder's Family Shareholders;
(c) any executor, trustee or beneficiary of such Shareholder under his
or her will or other instrument taking effect at death or under applicable laws
of descent and distribution; or
(d) any person which, directly or indirectly, is in control of, is
controlled by or is under the common control with, or which is a member of a
group (as such term is defined in Section 13(d)(3)
<PAGE> 2
of the Securities Exchange Act of 1934, as amended) which includes, such
Shareholder (an "Affiliate"), or any person who is a director, officer or
partner of an Affiliate,
then Shareholder shall cause the transferee to agree to vote all Shares in
accordance with, and to otherwise be bound by, the terms of this Agreement. This
Agreement shall terminate with respect to any Shares sold in a bona fide
arms-length transaction to a transferee other than a transferee described above.
Except for such a transaction, each Shareholder agrees not to take any action
which would impair such Shareholder's ability to perform such Shareholder's
obligations hereunder.
2. Conditional Irrevocable Proxy. In order to secure the obligations of
the Shareholders to vote their Shares in accordance with the provisions of
Section 1 hereof, each of the Shareholders hereby appoints the other as such
Shareholder's true and lawful proxy and attorney, with full power of
substitution, to vote all of such Shareholder's Shares in accordance with the
provisions and intent of Section 1 hereof if, and only if, such Shareholder
fails to comply with the provisions of Section 1. The proxy and powers granted
by such Shareholder pursuant to this Section 2 are coupled with an interest and
are given by such Shareholder to secure such Shareholder's duties to the other
Shareholder hereunder. Such proxy shall be irrevocable for the term of this
Agreement and shall survive the death, incompetency and disability of such
Shareholder.
3. Changes in Shares. In the event that, subsequent to the date of this
Agreement, any Shares or other securities are issued on, or in exchange for, any
of the Shares, such securities shall be deemed to be Shares for purposes of this
Agreement and shall be subject to the terms and provisions hereof.
4. Representations of Shareholders. Each Shareholder hereby represents
and warrants to the other Shareholder that such Shareholder owns and has the
right to vote the Shares owned by such Shareholder, (b) has full power and
authority to enter into this Agreement and has not, prior to the date of this
Agreement, executed or delivered any proxy or entered into any other voting
agreement or similar arrangement in respect of the Shares and (c) will not take
any action inconsistent with the purposes and provisions of this Agreement.
5. Enforceability. Each Shareholder expressly agrees that this Agreement
shall be specifically enforceable against such Shareholder, in accordance with
its terms, in any court of competent jurisdiction.
2
<PAGE> 3
6. General Provisions.
(a) Except as expressly set forth in Section 1 hereof, all of the
covenants and agreement contained in this Agreement shall be binding upon, and
inure to the benefit of, the respective parties and their successors, assigns,
heirs, executors, administrators and other legal representatives, as the case
may be.
(b) This Agreement, and the rights of the parties hereto, shall
be governed by and construed in accordance with the laws of the State of
Delaware.
(c) This Agreement may be executed in one or more counterparts,
each of which will be deemed an original but all of which together shall
constitute one and the same instrument.
(d) This Agreement shall remain in effect for a period of one (1)
year measured from the date hereof unless sooner terminated in writing by
Shareholders owning 66-2/3% or more of the Shares subject to this Agreement.
(e) If any provision of this Agreement shall be declared void or
unenforceable by any court or administrative body of competent jurisdiction,
such provision shall be deemed to have been severed from the remainder of this
Agreement and this Agreement shall continue in all respects to be valid and
enforceable.
(f) No waivers of any breach of this Agreement extended by any
party hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
(g) If any action, suit, arbitration proceeding or other
proceeding is instituted arising out of this Agreement, the prevailing party
shall recover all of such party's costs, including, without limitation, the
court costs and attorneys' fees incurred therein, including any and all appeals
or petitions therefrom. As used herein, "attorneys' fees" shall mean the full
and actual costs of any legal services actually rendered in connection with the
matters involved, calculated on the basis of the usual fee charged by the
attorneys performing such services.
3
<PAGE> 4
(h) Whenever the context of this Agreement shall so require, the
use of the singular number shall include the plural and the use of any gender
shall include all genders.
IN WITNESS WHEREOF, the Shareholders have executed this Voting Agreement
as of the date first above written.
Joseph C. Angard Erekesef Securities Limited
/s/Joseph C. Angard /s/Kevin Bermeister
- ------------------------------- -----------------------------
4
<PAGE> 1
EXHIBIT E
SHARE EXCHANGE AGREEMENT
BETWEEN
GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
AND
EREKESEF SECURITIES LIMITED
DATED AS OF OCTOBER 24, 1997
<PAGE> 2
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is made and entered
into as of October 24, 1997, by and between Erekesef Securities Limited, a
British Virgin Islands company, and Global One Distribution & Merchandising
Inc., a Delaware corporation ("Global"). Certain capitalized terms used herein
are defined in Section 8 hereof.
R E C I T A L S
A. Erekesef is the owner of all the outstanding shares (the "LJR
Shares") of the Common Stock of L.J.R. Trading, Inc., a California corporation
("LJR");
B. Erekesef desires to sell to Global and Global desires to
purchase from Erekesef, the LJR Shares, on the terms and subject to the
conditions set forth herein;
C. In consideration for the LJR Shares, Global will issue to
Erekesef Common Stock, par value $0.01 per share, of Global (the "Global
Shares") as described in Section 1.2; and
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties and covenants herein contained, Global and Erekesef
hereby agree as follows:
I. SHARE EXCHANGE.
A. AGREEMENT TO SELL AND PURCHASE LJR SHARES. Subject
to the terms and conditions of this Agreement, Erekesef agrees to sell, and
Global agrees to purchase from Erekesef, the LJR Shares, in exchange for the
Global Shares described in Section 1.2.
B. AGREEMENT TO SELL AND PURCHASE GLOBAL SHARES.
Subject to the terms and conditions of this Agreement, Global agrees to issue,
and Erekesef agrees to purchase from Global, in exchange for the LJR Shares,
eight million (8,000,000) Global Shares.
C. SHARES TO BE DELIVERED AT CLOSING. The purchase and
sale of the LJR Shares and the Global Shares shall take place at a closing (the
"Closing") to be held at the offices of Kinsella, Boesch, Fujikawa & Towle, LLP
at 11:00 A.M., local time, on October 24, 1997, or on such other date as may be
agreed upon in writing by Global and Erekesef (the "Closing Date"). At the
Closing, (a) Erekesef shall deliver to Global a certificate or certificates
representing the LJR Shares and stock powers executed in favor of Global
sufficient to validly transfer title to the LJR Shares, and ownership thereof,
to Global, and (b) Global shall deliver to Erekesef a certificate or
certificates representing the Global Shares to be issued at the Closing to
Erekesef.
D. LEGENDS. All certificates representing the LJR
Shares and the Global Shares shall bear a legend in substantially the following
form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
OR ANY APPLICABLE STATE LAW, AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE ACT AND THE RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION
<PAGE> 3
THEREUNDER AND WITH APPLICABLE STATE LAWS AND REGULATIONS.
II. REPRESENTATIONS AND WARRANTIES OF GLOBAL. As a material
inducement to Erekesef to enter into and execute this Agreement and to perform
its covenants, agreements, duties and obligations hereunder, and in
consideration therefor, Global hereby makes the following representations and
warranties (as used in this Section 2 the term "Global" shall be deemed to
refer also to any Subsidiary of Global (as defined in Section 2.3)).
A. ORGANIZATION, ETC. OF GLOBAL; AUTHORIZATION;
ENFORCEABILITY. Global is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to own and hold under lease the properties and
assets it purports to own and hold under lease and to carry on its business as
now being conducted and as presently proposed to be conducted, and is duly
qualified or licensed as a foreign corporation and is in good standing in each
jurisdiction where the character of the properties owned or leased by it or the
nature of the business transacted by it makes qualification therein necessary,
except where the failure to be so licensed or qualified would not have a
material adverse effect on the business or properties of Global. Global has
heretofore delivered to Erekesef accurate and complete copies of Global's
certificate of incorporation and bylaws, together, in each case, with any
amendments thereto to the date hereof. All corporate and other actions
required to be taken by or on the part of Global to authorize Global to execute
and deliver this Agreement (including, without limitation, approval by the
Board of Directors of Global) and to perform its obligations hereunder have
been duly and validly taken. This Agreement constitutes the legal, valid and
binding obligation of Global and is enforceable against Global in accordance
with its terms, subject to applicable bankruptcy, insolvency or other similar
laws or proceedings limiting creditors' rights generally and to general
equitable principles.
B. CAPITAL STRUCTURE OF GLOBAL; ISSUANCE OF SECURITIES.
The authorized and outstanding capital stock of Global is as set forth on
Schedule 2.2 hereto. All outstanding shares are validly issued, fully paid and
non-assessable. Except as set forth on Schedule 2.2, there do not exist any
other authorized or outstanding securities, options, warrants, calls,
commitments, rights to subscribe or other instruments, agreements or rights of
any character convertible into or exchangeable for, or requiring or relating to
the issuance, transfer or sale of, any shares of capital stock or other
securities (collectively, "Equity Securities") of Global. The issuance and
sale of the Global Shares to Erekesef has been duly authorized and if, when and
as delivered to Erekesef, the Global Shares will be duly and validly issued and
outstanding, fully paid and nonassessable and will be free of any Lien, other
than those imposed pursuant to this Agreement and securities laws of general
application.
C. SUBSIDIARIES OF GLOBAL. Schedule 2.3 sets forth a
list of all Persons in which Global has an equity or profit interest (each a
"Subsidiary"). The Company owns 100% of the capital stock of each Subsidiary.
Except for the Subsidiaries, Global does not hold any equity or profit interest
in any other Person.
D. FINANCIAL STATEMENTS.
1. Global has provided to Erekesef complete and accurate
copies of Global's Annual Report on Form 10-K for the year ended December 31,
1996, the Quarterly Reports on Form 10-Q for the two fiscal quarters ending
June 30, 1997, and its Current Reports on Form 8-K dated October 6, 1997 and
October 8, 1997, each, as amended to date (collectively, the "Reports"), which
include the consolidated financial statements of Global for the fiscal year
ended December 31, 1996 and for the quarters ended June 30, 1997 (collectively,
the "Global Financial Statements"). Each of the Reports complied in all
material respects with the rules of the SEC applicable to such Report on the
date filed with the SEC, and none of the Reports contained, on the date of
filing with the SEC, any untrue statement of a material fact, or omitted to
state any material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not materially misleading. Except
for the Reports, Global has not
2
<PAGE> 4
filed any other report with the SEC since June 30, 1997. All of the Global
Financial Statements (subject to year-end accruals in the case of the 1997
financial statements): (i) have been prepared from and on the basis of, and
are in accordance with, the books and records of Global and with generally
accepted accounting principles applied on a basis consistent with prior
accounting periods; (ii) fairly and accurately present the financial condition
of Global as of the date of each such Global Financial Statement and the
results of its operations for the periods therein specified; and (iii) except
in the case of the 1997 financial statements, are accompanied by the audit
opinion of Global's independent public accountants. There are no undisclosed
liabilities which should be disclosed in the Global Financial Statements
pursuant to generally accepted accounting principles.
E. AFFILIATE TRANSACTIONS. Except as set forth in the
Reports or in Schedule 2.5, Global is not a party to any transaction involving,
and has no direct or indirect obligation or liability to, any of its Affiliates
(as defined in Section 8).
F. ABSENCE OF CHANGES. Except (a) as set forth on
Schedule 2.6, (b) as disclosed in Reports filed with the SEC and (c) the Public
Sale referred to in Section 3.5, since June 30, 1997, there has not been nor is
there currently pending any material change in the business, business plan,
operations, commercial practices, prospects, properties, assets or condition,
financial or otherwise, of Global other than changes in the ordinary course of
business, none of which, singly or in the aggregate, has been materially
adverse;
G. TAX RETURNS AND AUDITS. Global has paid all
employment withholding taxes required to be paid by it to date.
H. PENDING LITIGATION OR PROCEEDINGS. Except as
disclosed in the Reports or as set forth on Schedule 2.8, there is not pending,
or, to the best knowledge of Global, threatened, any action, suit, or legal,
administrative, arbitration or other proceeding or Governmental investigation,
or any change in zoning or building ordinances affecting the real property or
leasehold interests of Global, its properties, assets or business, nor any
facts which might result in such action, which may result in any adverse change
in the business, operations, prospects, properties, assets or conditions,
financial or otherwise, of Global.
I. EMPLOYEE BENEFITS. Global is not, and has never been
subject to any retirement, pension, profit sharing or other similar plan which
is or was subject to the Employee Retirement Income Securities Act of 1974, as
amended ("ERISA"); no "prohibited transaction" within the meaning of Section
406(a) of ERISA, and no "reportable event" within the meaning of Section
4043(b) of ERISA, has occurred with respect to any employee benefit plan of
Global; all employee benefit plans have been established and operated in full
compliance with all applicable laws, rules and regulations.
J. INVESTMENT REPRESENTATION; RESTRICTIONS UPON RESALE.
Global shall acquire the LJR Shares only for Global's own account for
investment and not with a view to, or for resale in connection with, any
"distribution" thereof for purposes of the United States Securities Act of
1933, as amended (the "Act") or in violation of applicable state securities
laws. Global acknowledges that the LJR Shares have not been registered under
the Act and can be transferred only if so registered or if an exemption from
such registration is available. Global has such knowledge and experience in
financial and business matters that it is capable of protecting its own
interests in connection with the acquisition of the LJR Shares. Global has
executed and delivered to Erekesef a letter of investment intent in the form
attached as Exhibit "A" hereto.
III. REPRESENTATIONS AND WARRANTIES OF EREKESEF. As a material
inducement to Global to enter into and execute this Agreement and to perform
its covenants, agreements, duties and obligations hereunder, and in
consideration therefor, Erekesef hereby makes the following representations and
warranties, each of which (a) is material and is being relied upon by Global as
a material inducement to
3
<PAGE> 5
enter into this Agreement and (b) is true at and as of the date hereof and
shall be true at and as of the Closing Date with the same effect as if such
representations and warranties had been made at and as of the Closing Date.
A. ORGANIZATION, ETC. OF LJR. LJR is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, has all requisite corporate power and authority to own and hold
under lease the properties and assets it purports to own and hold under lease
and to carry on its business as now being conducted and as presently proposed
to be conducted, and is in good standing in each jurisdiction where the
character of the properties owned or leased by it or the nature of the business
transacted by it makes qualification therein necessary, except where the
failure to be so licensed or qualified would not have a material adverse effect
on the business or properties of LJR.
B. CAPITAL STRUCTURE OF LJR. The LJR Shares have been
validly issued, are fully paid and non-assessable and are owned by Erekesef,
free and clear of any Liens. Except for the LJR Shares, there do not exist any
other authorized or outstanding securities, options, warrants, calls,
commitments, rights to subscribe or other instruments, agreements or rights of
any character convertible into or exchangeable for, or requiring or relating to
the issuance, transfer or sale of, any shares of capital stock or other
securities of LJR.
C. SUBSIDIARIES OF LJR. LJR does not have an equity or
profit interest in any other Person.
D. BUSINESS OPERATIONS. Except for the assets and
liabilities described in Section 3.5 and Section 3.6, LJR has conducted no
operations, and has no material assets or liabilities.
E. OWNERSHIP OF ASSETS. LJR is the owner of all of the
following assets (the "OSP Assets") acquired by Senoral, Inc. ("Senoral") from
OSP Publishing Inc. at a public sale conducted on October 8, 1997 (the "Public
Sale"):
1. all receivables outstanding and not paid on
October 22, 1997, at 6:00 p.m., plus any amounts in the OSP lockbox account, in
each case acquired by Senoral at the Public Sale, subject to the obligation of
LJR to pay to Joseph C. Angard, if, as and when collected, 45% of the
receiveables, up to the total amount of approximately $720,000 due to Joseph C.
Angard pursuant to an intercreditor agreement between Angard and Senoral;
2. all goods, merchandise and other personal
property acquired by Senoral at the Public Sale;
3. all machinery, equipment, furniture and
fixtures acquired by Senoral at the Public Sale;
4. all ledger sheets, files, records, documents
and instruments (including but not limited to computer programs, tapes and
related electronic data processing software) evidencing an interest in or
relating to the above, in each case to the extent acquired by Senoral at the
Public Sale; and
5. all patents, patent applications, copyrights,
and royalties acquired by Senoral at the Public Sale.
Notwithstanding the foregoing, the OSP Assets do not include any assets
acquired from Senoral to the extent that such assets have been physically
altered, damaged, lost or converted. Global acknowledges that it has
maintained possession of all such assets at all times since the Public Sale.
F. TITLE TO PROPERTIES OF LJR. Subject to receipt of
all consents described in
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Section 4.3, LJR has title to all of the OSP Assets, free and clear of all
Liens other than Liens for sales taxes and Liens on the OSP Assets which
existed immediately prior to the Public Sale or which attached to the OSP
Assets as a result of actions taken by the owner or owners of such assets prior
to the Public Sale. Global acknowledges that except as set forth above,
Erekesef makes no representations regarding the assets of LJR, and, through
ownership of the LJR Shares, Global shall acquire indirect title to the OSP
Assets on an "as is" basis. Global acknowledges that no agent, employee or
representative of Erekesef has made any representation or warranty concerning
the OSP Assets, and it is the intent of the parties to provide in this
Agreement an effective disclaimer of all express warranties with respect to the
OSP Assets. Both parties are represented by counsel and have reduced the
entire agreement of the parties to this writing. No statement of fact,
promise, representation, affirmation or other indication has been made with
respect to the quality of the OSP Assets, the collectibility of the
receivables, the enforceability of intellectual property rights, the condition
of the machinery, equipment, furniture and fixtures, the condition of the
records or any other matter, except as is expressly set forth in this
Agreement.
G. PENDING LITIGATION OR PROCEEDINGS. There is not
pending, or, to the best knowledge of Erekesef, threatened, any action, suit,
or legal, administrative, arbitration or other proceeding or Governmental
investigation, or any change in zoning or building ordinances affecting the
real property or leasehold interests of LJR, its properties, assets or
business, nor any facts which might result in such action, which may result in
any adverse change in the business, operations, prospects, properties, assets
or conditions, financial or otherwise, of LJR.
H. AUTHORITY OF EREKESEF TO SELL THE SHARES. This
Agreement has been duly executed and delivered by Erekesef and constitutes
Erekesef's legal, valid and binding agreement, enforceable against Erekesef in
accordance with its terms, except to the extent that enforceability may be
limited by applicable reorganization, insolvency, liquidation, readjustment of
debt or other similar laws and judicial decisions generally affecting the
enforcement of rights of creditors and by general principles of equity.
Erekesef owns and holds of record the LJR Shares to be delivered by Erekesef at
the Closing in accordance with Section 1.2 hereof, and Erekesef has full voting
power over such shares, subject to no proxy, shareholders' agreement or voting
trust, and has full right, power and authority to sell and deliver such shares
to Global in the manner provided for in this Agreement. Upon delivery of the
certificates representing the LJR Shares by Erekesef to Global, Erekesef will
transfer to Global and Global will acquire good title to the LJR Shares, free
and clear of all Liens other than Liens created by this Agreement and by
securities laws of general application.
I. INVESTMENT REPRESENTATION; RESTRICTIONS UPON RESALE.
Erekesef shall acquire the Global Shares only for Erekesef's own account for
investment and not with a view to, or for resale in connection with, any
"distribution" thereof for purposes of the United States Securities Act of
1933, as amended (the "Act") or in violation of applicable state securities
laws. Erekesef acknowledges that the Global Shares have not been registered
under the Act and can be transferred only if so registered or if an exemption
from such registration is available. Erekesef has executed and delivered to
Global a Letter of Investment Intent in the form attached as Exhibit "B"
hereto.
IV. CONDUCT PENDING CLOSING.
A. CONDUCT OF THE AFFAIRS OF GLOBAL PENDING THE CLOSING.
From the date of this Agreement until October 31, 1997, Global is authorized,
without notice to Erekesef, to purchase from Erekesef such items of inventory
included in the OSP Assets as it actually ships during such period, in exchange
for a payment to LJR equal to one-half the net sales price received for such
inventory by Global; provided, that upon the Closing of the transactions
contemplated hereby, such assets shall instead be deemed to be sold to Global
in consideration of the Global Shares described herein. The purchase of
Inventory by Global shall be made upon the following terms and conditions:
1. Global shall only purchase such Inventory as it
ships, on a day-to-day basis, in
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the ordinary course of business, consistent with past practices;
2. Global shall not sell any Inventory for less than 75%
of the customary sales price of such Inventory;
3. Global shall not sell any Inventory in a bulk sale or
to any Affiliate of Global. As used herein, the term, "Affiliate" means (1)
any person who is an "affiliate" of a person as defined in Rule 12b-2 of the
United States Securities Exchange Commission under the United States Securities
and Exchange Act of 1934, as amended, (2) any person who is a director, officer
or partner or holds a similar position with any entity in which such person has
a 10% or greater equity or profit interest, and (3) any family member of a
person referred to in (1) or (2);
4. Global shall provide to LJR a weekly report, within 3
business days following the end of each week, describing all items of Inventory
purchased hereunder and setting forth Global's sales price therefore;
5. Global covenants and agrees that it shall not
purchase any item of Inventory until it has received and provided to LJR proof
that it has received adequate written consents to sell the Inventory from the
copyright holders, licensors and others with intellectual property rights
relating to the Inventory;
6. Global agrees to fully indemnify and hold LJR and
Erekesef harmless from and to defend LJR and Erekesef and their affiliates (the
"Indemnified Parties") against, any and all Damages (as defined below) incurred
or suffered by the Indemnified Parties arising out of Global's failure to
obtain all consents described in Section 4.1(e). No investigation by LJR or
Erekesef at or prior to the date hereof shall relieve Global of any liability
hereunder. "Damages" as used herein shall mean any and all claims, actions,
demands, losses, costs, expenses, liabilities, damages and recoveries to the
full amount of the actual damage occasioned by each deficiency,
misrepresentation, inaccuracy, omission or breach in each case including
interest, penalties or other damage (including, without limitation, reasonable
attorneys' fees and other costs and expenses reasonably incurred in
investigating or in attempting to avoid the same or oppose the imposition
thereof or of enforcing this indemnity); and
(g) Subject to receipt of all consents described in Section
4.1(e), LJR shall convey to Global title to each item of Inventory purchased
hereunder, free and clear of any lien other than liens for sales taxes or liens
created as a result of actions taken prior to the public sale of the Inventory
on October 8, 1997.
If the Closing does not occur within seven days following the date
hereof, all payments for inventory due under this Section 4.1 shall be
immediately due and payable. Subject to the express limitations and
restrictions set forth in this Agreement, Global shall not act or fail to act
in a manner which is likely to result in any representation or warranty of
Global hereunder not to be true and correct as of the Closing or which, if
occurring after the Closing Date, would violate the covenants of Global set
forth herein or require the approval of Erekesef pursuant to the terms hereof.
B. COVENANT TO USE BEST EFFORTS TO CLOSE. Erekesef and
Global hereby covenant and agree to use their respective best efforts to
perform each of their obligations hereunder, to satisfy all of the conditions
set forth in this Agreement and to close the transactions contemplated by this
Agreement on the Closing Date.
C. CONSENTS TO SALES. Global covenants and agrees that
it shall not sell any item of Inventory until it has received and provided to
LJR proof that it has received adequate written consents to sell the Inventory
from the copyright holders, licensors and others with intellectual property
rights relating to the Inventory.
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V. COVENANTS OF GLOBAL. Global covenants and agrees with
Erekesef that during the term of this Agreement, unless otherwise consented to
in writing by Erekesef:
A. BOARD OF DIRECTORS; VOTING OF GLOBAL SHARES.
1. APPOINTMENTS. At the Closing, Global shall cause
three persons nominated by Erekesef to be appointed to the Board of Directors
of Global, and shall set and maintain the size of the Board of Directors of
Global at seven (7). In addition, Global shall cause the Board of Directors to
be maintained as a classified board of three classes, with directors of each
class serving for a period of three years. Each of Erekesef's nominees shall
be appointed to serve in a separate class. At least one of Erekesef's nominees
shall be appointed to and maintained as a member of each Board of Directors of
each Subsidiary of Global, and of each Committee of the Board of Directors of
Global and each Subsidiary of Global.
2. VOTING. For a period of three years and for so long
as Erekesef maintains at least a 5% interest in the Equity Securities of
Global, at the request of Erekesef, from time to time, up to three designees of
Erekesef shall be appointed to the Board of Directors of Global: (i) upon
expiration of the term of any such designee, Global shall include and support a
designee of Erekesef as part of management's nominees for Directors, and (ii)
upon the termination of either such designee's services as a director other
than upon the expiration of term of office, Global shall appoint in the place
of such director a replacement designated by Erekesef. Notwithstanding the
foregoing, if Erekesef's interest in the outstanding Global Shares falls below
20%, it shall be entitled to have only two nominees appointed, maintained and
supported as nominees to be directors of Global, as described above, and if
Erekesef's interest in the outstanding Global Shares falls below 10%, it shall
be entitled to have only one nominee appointed, maintained and supported as a
director of Global, as described above.
3. ATTENDANCE AT BOARD MEETINGS. For a period of three
years, and at any time when Erekesef does not have a nominee sitting on the
Board of Directors of Global, then Erekesef shall have the right, directly or
through an agent, to attend all meetings of the Board of Directors of Global
and each Subsidiary, and all committees thereof, and shall be provided prior
written notice of all such meetings in the manner notices are provided to
directors, provided that if advance notice is not provided to directors, Global
shall provide advance notice to Erekesef, via fax as set forth below and shall
use its best efforts to allow Erekesef or its agent to attend such meetings
telephonically or otherwise. In addition, Global shall deliver to Erekesef
copies of all actions by written consent of the directors of Global and each
subsidiary, and each committee thereof. Erekesef shall execute a
confidentiality agreement in form reasonably acceptable to Global.
Notwithstanding the foregoing, Erekesef may be excluded from those portions of
meetings which are conducted solely for the purpose of (a) discussing
transactions between the company and/or any Subsidiary, on one hand, and
Erekesef and its affiliates, on the other hand, or (b) communicating to and
receiving advice from counsel.
B. REGISTRATION RIGHTS.
1. RESALE REGISTRATION. Until the earlier of the third
anniversary of the Closing Date and the date Erekesef shall become entitled to
sell the Global Shares pursuant to subsection (k) of Rule 144, Erekesef shall
have the right to require Global to file with the Securities and Exchange
Commission (the "SEC"), a registration statement on Form S-3 (or such other
form as the SEC may from time to time prescribe for such purposes) covering the
Global Shares (the "Resale Registration Statement") and to cause the Resale
Registration Statement to be declared effective by the SEC within 90 days
thereafter and to maintain the effectiveness of the Resale Registration
Statement until the earlier of (i) the completion of the offering covered by
the Resale Registration Statement, and (ii) the date Erekesef shall become
entitled to sell the Global Shares pursuant to subsection (k) of Rule 144; in
the event Global proposes to register an underwritten offering of its Common
Stock for its own account under the Act, it
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shall have the right to delay or suspend the filing or effectiveness of the
Resale Registration Statement for up to an aggregate of 104 days in any
12-month period to facilitate such registration. If Erekesef proposes to
effect an underwritten offering, Global shall enter into an underwriting
agreement in customary form with the managing underwriter selected by Erekesef.
Notwithstanding the foregoing, in the event of a material development
in the business of Global, Global shall advise Erekesef of such event and
Erekesef shall cease using the prospectus included in the Resale Registration
Statement until forty-eight (48) hours following the public disclosure of such
event. Global shall promptly disclose all such material developments provided
that it shall be entitled to delay such disclosure for a reasonable period of
time for valid business purposes, not to exceed five (5) business days without
the consent of Erekesef, not to be unreasonably withheld.
Erekesef shall pay the registration filing fee and legal costs related
to the preparation of the Resale Registration Statement (provided that Global
shall use lawyers reasonably designated by Erekesef for such purpose), and
Global shall pay all expenses related to the preparation and filing of reports
to the Securities and Exchange Commission under the Securities Exchange Act of
1934 and all other documents incorporated by reference into the registration
statement, including the cost of responding to comments of the SEC relating to
the documents which have been incorporated by reference into the registration
statement.
2. PIGGY BACK REGISTRATION RIGHTS. If, at any time or
from time to time, Global determines to register any of its securities for its
own account or the account of any other shareholder, other than a registration
relating to employee benefit plans (or the resale of securities acquired
pursuant thereto) or a transaction pursuant to Rule 145 of the SEC, Global
shall include in such registration such number of the Global Shares as Erekesef
shall elect in writing (which election may be rescinded at any time prior to
the sale of such securities) within twenty (20) business days following receipt
of notice of such registration, provided that, if such registration is
underwritten, it shall be a condition that Erekesef participate in such
underwriting and enter into an underwriting agreement in customary form with
the managing underwriter selected by Global. If the managing underwriter
determines that market forces require limitation of the number of shares to be
underwritten, then, so long as Global is not in violation of its obligations
pursuant to Section 5.2(a), the number of Global Shares owned by Erekesef to be
included in the registration may be limited to no less on a pari passu basis
with other shareholders; if Global is in violation of such obligations, then
Erekesef shall be entitled to cause all Global Shares held by it to be included
in the registration in preference to all other shareholders of Global.
Erekesef shall have the right to approve the underwriter of any offering by
Global, such approval not to be unreasonably withheld.
All registration expenses (excluding the cost of special legal counsel
to be retained by Erekesef) in connection with the registrations contemplated
by this Section 5.2 shall be borne by Global, but all direct selling expenses
of Erekesef (including broker fees and underwriting commissions) shall be borne
by Erekesef. In connection with any such registration statement, Erekesef
shall promptly furnish Global with such written representations, information
and consents regarding Erekesef, the Global Shares and the intended method of
distribution of the Global Shares as shall be necessary for inclusion in the
Registration Statement.
C. MANAGEMENT MEETINGS. At the request of Erekesef, no
more than four (4) times per year, management of Global shall meet (the
"Management Meetings") with Erekesef at Global's offices to discuss the
performance, prospects and strategies of Global. The Management Meetings shall
be utilized to discuss the general business and prospects of Global and its
Subsidiaries. The management of Global shall attend such meetings, and Global
shall use good faith efforts to discuss any concerns of Erekesef with respect
to the business and prospects of Global. Erekesef shall bear its own expenses
in connection with such meetings.
D. PREEMPTIVE RIGHTS.
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1. RIGHT TO PURCHASE. Except for the transaction
currently contemplated between Global and Michael Malm, substantially on the
terms set forth in the draft provided to Erekesef's counsel on October 15, 1997
(the "Malm Transaction"), for three years following the date hereof, in the
event Global determines to issue additional debt securities or Equity
Securities or rights therefor, Global shall so inform Erekesef, and Erekesef
shall have the right, exercisable within twenty (20) days of receipt of written
notice from Global, to elect to purchase (which election may be rescinded at
any time prior to the issuance of such securities), at a price per share equal
to the purchase price at which such securities are proposed to be offered by
Global, a percentage of such securities equal to Erekesef's then current
percentage ownership interest in the Global Shares. The foregoing rights shall
not apply to an issuance of Equity Securities which are outstanding on the date
hereof or which are issuable upon the exercise, exchange or conversion of such
outstanding Equity Securities in accordance with their terms on the date
hereof.
2. NON-CASH CONSIDERATION. If Global proposes to issue
Global Shares for non-cash consideration, Global shall be deemed to have issued
such Global Shares for cash in an amount equal to the fair market value of the
cash, securities and other property received by Global for such Global Shares.
If Global proposes to issue Shares for non-cash consideration, Global shall
provide to Erekesef a description of the transaction which shall specify
Global's estimate of the fair market value of such consideration, which
estimate shall conclusively bind Global, but not Erekesef. Erekesef may, by
giving written notice to Global, challenge such estimate in which case the
parties shall endeavor in good faith to negotiate and agree upon the fair
market value of the non-cash consideration. Erekesef shall have the right to
request and receive responses to inquiries and such other information from
Global as it may reasonably request to allow it to ascertain the fair market
value of the non-cash consideration. All such documents and information shall
be supplied promptly. If the parties are unable to reach agreement on such
issue within ten (10) days following the delivery of notice to Global of the
challenge of the fair market value of the non- cash consideration, the parties
shall submit such issue for resolution to a mutually agreeable national
accounting firm with whom neither party then has a professional relationship
(the "Independent Accountant") for final determination using the following
procedures. Each party shall submit its determination of the fair market value
of the non-cash consideration, together with reasonable supporting materials,
including materials reasonably requested by the Independent Accountant. The
Independent Accountant shall promptly thereafter choose between the submitted
valuations and declare one valuation as the conclusive and binding valuation.
No party may challenge, dispute or otherwise contest the Independent
Accountant's choice (judicially or otherwise) except on the grounds of actual
fraud or manifest error. Erekesef shall have ten (10) days following the
determination by the Independent Accountant to elect to exercise its right to
purchase securities as described above. The party whose valuation is not
selected shall pay the costs and fees of the Independent Accountant.
E. AFFILIATE TRANSACTIONS. Except for the Malm
transaction, for a period of three years following the date hereof, neither
Global nor any Subsidiary shall enter into any transaction (other than the
employment relationships currently existing) with any director, officer,
shareholder or any of their Affiliates other than transactions in the ordinary
course of business on terms no less favorable to Global or such Subsidiary, as
the case may be, than could be obtained from an independent third party.
F. ANTIDILUTION RIGHTS. Except for the Malm
transaction, prior to the date of the next shareholders meeting, Global shall
not issue or sell, or enter into any agreement to issue or sell, any debt or
equity securities, or rights therefor, or amend its certificate of
incorporation or bylaws in a manner which affects its outstanding securities,
without the prior written consent of Erekesef, which consent may be withheld in
its absolute discretion.
VI. CONDITIONS TO THE OBLIGATIONS OF EREKESEF. The obligation of
Erekesef to consummate the transactions under this Agreement shall be subject
to the satisfaction of each of the conditions set forth in this Section 6,
unless waived by Erekesef.
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A. ACCURACY OF REPRESENTATIONS AND WARRANTIES OF GLOBAL
AND RELATED CERTIFICATE. The representations and warranties of Global set
forth in Section 2 shall be true and correct as of the Closing Date as though
made on and as of such date; and Erekesef shall have received from Global a
certificate to such effect, dated the Closing Date, signed by an officer duly
authorized to act on its behalf.
B. PERFORMANCE AND RELATED CERTIFICATES. Global shall
have performed all obligations and complied with all covenants required to be
performed or to be complied with by Global under this Agreement on or prior to
the Closing Date, and all conditions to the obligations of Erekesef shall have
been satisfied, and Erekesef shall have received from Global a certificate to
such effect, dated the Closing Date, signed by an officer duly authorized to
act on its behalf.
C. NO PENDING OR THREATENED LEGAL ACTION. No order,
injunction, decree or other action or legal, administrative, arbitration or
other proceeding or investigation by any Government shall be pending or
threatened, challenging or imposing a material limitation on the execution,
delivery or performance of this Agreement, the consummation of any of the
transactions contemplated hereby or the operation by Global of its business as
now conducted or as presently proposed to be conducted.
D. AUTHORIZATION OF AGREEMENTS BY GLOBAL. Global shall
deliver to Erekesef resolutions of the Board of Directors of Global authorizing
the Global to enter into the agreements contemplated by this Agreement,
accompanied by a certificate of the Secretary of the Company certifying that
such resolutions have been duly adopted by the Board of Directors of Global,
have not been amended or superseded by any other action of the Board of
Directors of Global, and remain in full force and effect.
E. PROCEEDINGS AND DOCUMENTS. All proceedings taken in
connection with the transactions contemplated hereby and all documents incident
to such transactions shall be reasonably satisfactory in form and substance to
Erekesef and its counsel.
F. APPOINTMENT OF DIRECTORS. Nominees of Erekesef shall
have been appointed to the Board of Directors of Global as specified in Section
5.1(a).
VII. CONDITIONS TO THE OBLIGATIONS OF GLOBAL. The obligations of
Global to consummate the transactions under this Agreement shall be subject to
the satisfaction of each of the conditions set forth in this Section 7, unless
waived by Global.
A. ACCURACY OF REPRESENTATIONS AND WARRANTIES OF
EREKESEF; PERFORMANCE OF OBLIGATIONS AND RELATED CERTIFICATES. The
representations and warranties of Erekesef set forth in Section 3 shall be true
and correct as of the Closing Date as though made on and as of such date;
Erekesef shall have performed all obligations and complied with all covenants
required to be performed or complied with by it under this Agreement and Global
shall have received on the Closing Date from Erekesef a certificate dated the
Closing Date, to such effect, which certificate or certificates shall be signed
by Erekesef.
B. PERFORMANCE AND RELATED CERTIFICATES. Erekesef shall
have performed all obligations and complied with all covenants required to be
performed or to be complied with by it under this Agreement on or prior to the
Closing Date and all conditions to the obligations of Global shall have been
satisfied, and Global shall have received from Erekesef a certificate to such
effect, dated the Closing Date, signed by Erekesef.
C. NO PENDING OR THREATENED LEGAL ACTION. No order,
injunction, decree or other action or legal, administrative, arbitration or
other proceeding or investigation by any Government shall be pending or
threatened, challenging or imposing a material limitation on the execution,
delivery or
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performance of this Agreement, or the consummation of any of the transactions
contemplated hereby.
D. PROCEEDINGS AND DOCUMENTS. All proceedings taken in
connection with the transactions contemplated hereby and all documents incident
to such transactions shall be reasonably satisfactory in form and substance to
Global and its counsel.
VIII. DEFINITIONS
A. "AFFILIATE" means, with respect to any Person: (A)
any Person who is an "affiliate" of such Person as defined in Rule 12b-2 of the
United States Securities Exchange Commission under the United States Securities
and Exchange Act of 1934, as amended, (B) any Person who is a director, officer
or partner or holds a similar position with any entity in which such Person has
a 10% or greater equity or profit interest, and (C) any family member of a
person referred to in (A) or (B).
B. "CONTRACTUAL OBLIGATION" means, in respect of any
Person, any agreement or instrument, written or oral, to which such Person is a
party or by which it or any of its properties or assets are bound, including,
without limitation, (i) any charter, bylaw, trust instrument, indenture or
evidence of indebtedness and (ii) any lease, contract, guarantee, indemnity or
other obligation or commitment either by the Person or by any other person
which relates to the property, assets, obligations or commitments of the
Person.
C. "GOVERNMENT" means the government of the United
States of America, or any political subdivision of the United States of America
(including, without limitation, any state, territory, federal district, county,
municipality or possession), and any department, agency or instrumentality of
any of the foregoing; and "Governmental" means of, by, or pertaining to any
Government.
D. "INTANGIBLE" means any trademark, service mark, trade
name (whether registered or unregistered), copyright, license, patent or design
patent, or pending application therefor, trade secret, process, recipe or
formula, and any right with respect to the foregoing and with respect to the
use of any brand name, distinctive emblem or devices of merchandising and
design.
E. "LIEN" means any mortgage, lien, charge, security
interest, encumbrance, pledge, adverse claim, interest of third parties or
other encumbrance or restriction of any nature whatsoever, including, without
limitation, any of the foregoing arising under any title retention or
conditional sale agreement but does not include Liens for current Taxes not yet
due and payable or being contested in good faith by appropriate proceedings
(and for which adequate reserves have been set aside on the books of the person
subject to such taxes).
F. "PERSON" means any individual, corporation,
partnership, joint venture, trust, estate, unincorporated organization,
Government or Governmental body.
G. "REQUIREMENT OF LAW" in respect of any Person means
(i) any law, rule, regulation, restriction, order, writ, judgment, award,
determination, injunction or decree of any court or Government, or any decision
or ruling of any arbitrator, applicable to such Person or any of its properties
or assets, and (ii) the certificate of incorporation or other charter document
or bylaws of such Person.
H. "TAXES" means all Governmental taxes, assessments,
fees, levies, imposts, duties, license and registration fees, charges or
withholdings of any nature whatsoever arising in connection with or in respect
of any assets, income, profits, businesses or other properties of any nature
whatsoever.
IX. BROKERS AND FINDERS. Neither Global nor Erekesef, or any of
them (whether individually or as a representative), nor any Person acting on
behalf of any of them has employed any broker, agent or
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finder, or incurred any liability for any brokerage fees, agents' commissions,
finders' fees or advisory fees in connection with the transactions contemplated
hereby; and Erekesef agrees that it shall indemnify and hold Global harmless in
respect of any damages (as defined in Section 10.4) arising out of any
agreements or arrangements or understandings claimed to have been made by
Erekesef, or any Person acting on its behalf, with any third party; and Global
shall indemnify and hold Erekesef harmless in respect of any damages arising
out of any agreements or arrangements or understandings claimed to have been
made by Global, or any Person acting on its behalf, with any third party.
X. INDEMNIFICATION.
A. INDEMNIFICATION BY EREKESEF. Erekesef hereby
indemnifies Global and/or its Affiliates (collectively the "Erekesef
Indemnified Parties" and each individually a "Erekesef Indemnified Party")
against, and agrees to hold the Erekesef Indemnified Parties harmless from, and
to defend Erekesef Indemnified Parties against, any and all Damages (as defined
below) incurred or suffered by the Erekesef Indemnified Parties arising out of
any misrepresentation, inaccuracy or omission in any representation or warranty
made by Erekesef under this Agreement or any agreement delivered in connection
herewith, or any breach of any warranty, covenant or agreement made or to be
performed by Erekesef pursuant to this Agreement. No investigation by Global
at or prior to the date hereof shall relieve Erekesef of any liability
hereunder.
B. INDEMNIFICATION BY GLOBAL. Global hereby indemnifies
Erekesef and/or its Affiliates (collectively, the "Global Indemnified Parties"
and each individually a "Global Indemnified Party") against, and agrees to hold
the Global Indemnified Parties from, and to defend the Global Indemnified
Parties against, any and all Damages incurred or suffered by the Global
Indemnified Parties arising out of any misrepresentation, inaccuracy or
omission in any representation or warranty of Global under this Agreement or
any agreement delivered in connection herewith, or any breach of any warranty,
covenant or agreement made or to be performed by Global pursuant to this
Agreement. No investigation by Erekesef at or prior to the date hereof shall
relieve Global of any liability hereunder.
C. RIGHTS CUMULATIVE; SEVERABILITY. No right granted to
the parties hereunder on default or breach is intended to be in full or
complete satisfaction of any damages arising out of such default or breach, and
each and every such right hereunder, or under any other document delivered
hereunder, or allowed by law or equity, shall be cumulative and may be
exercised from time to time. If any provision of this Agreement or the
application thereof to any person or circumstance is held unconstitutional or
otherwise invalid, the unconstitutionality or invalidity thereof shall not
affect other provisions or applications which can be given reasonable effect
without the unconstitutional or invalid provision or application, and to this
end the provisions of this Agreement are severable.
D. DAMAGES. "Damages" as used herein shall mean any and
all claims, actions, demands, losses, costs, expenses, liabilities, damages and
recoveries to the full amount of the actual damage occasioned by each
deficiency, misrepresentation, inaccuracy, omission or breach in each case
including interest, penalties or other damage (including, without limitation,
reasonable attorneys' fees and other costs and expenses reasonably incurred in
investigating or in attempting to avoid the same or oppose the imposition
thereof or of enforcing this indemnity).
E. RIGHT TO DEFEND, ETC. If the facts giving rise to
any such indemnification shall involve any actual claim or demand by any third
Person against an Erekesef Indemnified Party or a Global Indemnified Party
(referred to hereinafter as an "Indemnified Party"), the indemnifying party
shall be entitled to notice of and entitled (without prejudice to the right of
any Indemnified Party to participate at its own expense through counsel of its
own choosing) to defend or prosecute such claim at its expense and through
counsel of its own choosing and to control such defense if it gives written
notice of its intention to do so no later than the time by which the interests
of the Indemnified Party would be materially prejudiced as a result of its
failure to have received such notice; provided, however, that if the defendants
in any
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<PAGE> 14
action shall include both the indemnifying party and an Indemnified Party, and
the Indemnified Party shall have reasonably concluded that counsel selected by
the indemnifying party has a conflict of interest because of the availability
of different or additional defenses to the Indemnified Party, each Indemnified
Party shall have the right to select separate counsel to participate in the
defense of such action on its behalf, at the expense of the indemnifying party.
The Indemnified Party shall cooperate fully in the defense of such claim and
shall make available to the indemnifying party pertinent information under its
control relating thereto, but shall be entitled to be reimbursed, as provided
in this Section 10, for all costs and expenses incurred by it in connection
therewith.
F. SUBROGATION. If the Indemnified Party receives
payment or other indemnification from the indemnifying party hereunder with
respect to any claim or demand by any third Person against the Indemnified
Party, the indemnifying party shall be subrogated to the extent of such payment
or indemnification to all rights in respect of the subject matter of such claim
to which the Indemnified Party may be entitled, to institute appropriate action
for the recovery thereof, and the Indemnified Party agrees to provide
reasonable levels of assistance and cooperation to the indemnifying party (but
only if such does not involve expense to the Indemnified Party) in enforcing
such rights.
XI. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties hereto and
their respective successors and assigns, nor relieve or discharge the
obligation or liability of any third party to either party to this Agreement,
nor give any third party any right of subrogation or action against any party
to this Agreement.
XII. TERM. The term of this Agreement shall commence on the date
hereof and shall terminate upon date that Erekesef owns less than 5% of the
issued and outstanding equity securities of the Corporation.
XIII. TERMINATION. The transactions contemplated herein may be
terminated at any time prior to the Closing, by mutual written consent of
Global and Erekesef or by either party if the satisfaction of the conditions to
the obligation of such party to effect the transactions contemplated hereby
becomes impossible.
XIV. WAIVER AND AMENDMENT. Any of the terms and provisions of this
Agreement may be waived at any time by the party which is entitled to the
benefit thereof, but only by a written instrument executed by such party. This
Agreement may be amended only by an agreement in writing executed by Global and
Erekesef.
XV. NOTICES. All notices, requests, demands, deliveries and other
communications hereunder shall be in writing and, except as otherwise
specifically provided in this Agreement, shall be deemed to have been duly
given, upon receipt, if delivered personally or via fax, or ten business days
after deposit in the mail, if mailed, first class with postage prepaid
(confirmed by telex if the addressee is in a country other than that of the
sender) to the parties at the following addresses:
If to Global:
Global One Distribution & Merchandising Inc.
5548 Lindbergh Lane
Bell, California 90201
Attn: President
Fax (213) 263-9258
with a copy to:
13
<PAGE> 15
Kampf & Associates, Inc.
Suite 901
821 Marquette Avenue South
Minneapolis, Minnesota 55402-2903
Attn: Mr. William I. Kampf, Esq.
with a copy to:
Jeffrey P. Grogin, Esq.
Samaha Grogin LLP
911 East Colorado Boulevard
Third Floor
Pasadena, California 91106
Fax: (626) 584-6664
If to Seller:
Erekesef Securities Limited
6355 Topanga Canyon Boulevard
Suite 331
Woodland Hills, California 91367
Attn: President
Fax: (818) 712-0810
with a copy to:
Joseph P. Bartlett, Esq.
Kinsella, Boesch, Fujikawa & Towle, LLP
1901 Avenue of the Stars, Seventh Floor
Los Angeles, California 90067-6009
Fax: (310) 284-6018
Any of the parties hereto may, from time to time, change its address for
receiving notices by giving written notice thereof in the manner outlined
above.
XVI. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
XVII. ENTIRE AGREEMENT. This Agreement and the other agreements
entered into in connection herewith supersede all prior and contemporaneous
negotiations and agreements (whether written or oral) and constitute the entire
understanding among the parties hereto.
XVIII. SUCCESSORS. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective successors and
assigns.
XIX. HEADINGS. The section headings contained in this Agreement
are for convenience only and shall not control or affect the meaning or
construction of any of the provisions of this Agreement.
XX. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of California applicable to Agreements
to be entered into and entirely performed within such State.
XXI. ARBITRATION.
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<PAGE> 16
A. RULES OF ARBITRATION. All disputes arising in
connection with this Agreement, other than matters pertaining to injunctive
relief, shall be finally settled by arbitration by the American Arbitration
Association ("AAA") in Los Angeles, California, in accordance with the rules of
the AAA provided that to the extent necessary to render the decision of the
Arbitrator enforceable in the courts of the State of California, the
arbitration rules set forth in the California Code of Civil Procedure, Section
1280 et seq. (the "Rules of Arbitration") and the provisions of Section 1283.05
of the Rules of Arbitration concerning rights of discovery shall govern.
Judgment on the award rendered by the arbitration panel (the "Arbitration
Panel") may be entered in any court of competent jurisdiction.
B. INITIATION OF ARBITRATION. Any party which desires
to initiate arbitration proceedings may do so by delivering written notice to
the other party (the "Arbitration Notice") specifying (x) the nature of the
dispute or controversy to be arbitrated; (y) the name and address of the
arbitrator appointed by the party initiating such arbitration; and (z) such
other matters as may be required by the Rules of Arbitration. The party who
receives an Arbitration Notice shall appoint an arbitrator and notify the
initiating party of such arbitrator's name and address within 30 days after
delivery of the Arbitration Notice; otherwise, a second arbitrator shall be
appointed at the request of the party who delivered the Arbitration Notice.
The two arbitrators so appointed shall appoint a third arbitrator who shall be
chairman of the Arbitration Panel and the "neutral arbitrator" for purposes of
the Rules of Arbitration.
C. DECISIONS FINAL. All decisions of the Arbitration
Panel shall be final, conclusive and binding on all parties and shall not be
subject to judicial review except to the extent set forth in the California
Code of Civil Procedure, Section 1285 et seq.
D. INJUNCTIVE RELIEF. Any proceeding for injunctive
relief (including temporary restraining orders, preliminary injunctions and
permanent injunctions) may be brought in any court of competent jurisdiction,
and the parties consent to the non-exclusive jurisdiction of the California
courts for such purpose.
XXII. DELAY, ETC. No delay or omission to exercise any right, power
or remedy accruing to any party hereto shall impair any such right, power or
remedy of such party nor be construed to be a waiver of any such right, power
or remedy nor constitute any course of dealing or performance hereunder.
XXIII. COSTS AND ATTORNEYS' FEES. If any action, suit, arbitration
proceeding or other proceeding is instituted arising out of this Agreement, the
prevailing party shall recover all of such party's costs, including, without
limitation, the court costs and attorneys' fees incurred therein, including any
and all appeals or petitions therefrom. As used herein, "attorneys' fees"
shall mean the full and actual costs of any legal services actually rendered in
connection with the matters involved, calculated on the basis of the usual fee
charged by the attorneys performing such services.
XXIV. SPECIFIC PERFORMANCE. The parties hereto agree that the
parties will be irreparably damaged in the event that this Agreement is not
specifically enforced. Accordingly, in the event of any controversy concerning
the LJR Shares or the Global Shares which are the subject of this Agreement,
such rights or obligations shall be enforceable in a court of equity by a
decree of specific performance. Such remedy shall be cumulative and not
exclusive, and shall be in addition to any and all remedies which the parties
hereto may have hereunder at law or in equity.
XXV. ASSIGNMENT. Neither this Agreement nor any right pursuant
hereto or interest herein shall be assignable by Global without the prior
written consent of Erekesef, which may be withheld in Erekesef's absolute
discretion; Erekesef may assign its rights hereunder to any person.
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<PAGE> 17
IN WITNESS WHEREOF, the undersigned parties hereto have duly
executed this Agreement as of the date first above written.
Global One Distribution & Merchandising Inc.
By /s/ Douglass E. Coy
------------------------------------------
Title: Chief Executive Officer
--------------------------------------
Erekesef Securities Limited
By /s/ Kevin Bermeister
-----------------------------------------
Title: President
-------------------------------------
16
<PAGE> 1
EXHIBIT F
NOTE PURCHASE AGREEMENT
This Agreement dated as of March 26, 1998, between 2d Interactive, Inc., a
Delaware corporation (the "Company"), and The Manufacturers Life Insurance
Company (U.S.A.), a Michigan Corporation (the "Purchaser"),
WITNESSETH,
WHEREAS, the parties hereto desire to provide for the purchase and
sale of certain securities of the Company as set forth herein, in anticipation
of the consummation of an equity financing of the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF SECURITIES
1.1 PURCHASE AND SALE OF SECURITIES. Subject to the terms and conditions of
this Agreement, at the Closing (as defined herein) the Company will sell and
issue to the Purchaser, and the Purchaser will purchase from the Company, the
following securities (the "Securities"):
(a) Convertible Secured Promissory Note in the form attached hereto as
EXHIBIT A in the aggregate principal amount of $1,500,000 (the
"Note"), secured by a grant to the Purchaser of a security interest in
certain assets of the Company pursuant to the Security Agreement in
the form attached hereto as EXHIBIT B; and
(b) Warrant, in the form attached hereto as EXHIBIT C, to purchase 26,785
shares of Common Stock of the Company (the "Warrant").
1.2 CLOSING. The closing of the sale and purchase of the Securities (the
"Closing") is taking place simultaneously with the execution of this Agreement
at the offices of Peabody & Brown, in Boston, Massachusetts at 10:00 am on the
date first written above or at such other time and place as the parties shall
agree upon in writing. The date of the Closing is hereinafter referred to as the
"Closing Date." At the Closing:
<PAGE> 2
(a) The Company will execute and deliver to Gerlach & Co., the Purchaser's
nominee, the Note and the Warrant;
(b) The Company will execute and deliver to the Purchaser the Security
Agreement and such financing statements on form UCC-1 as counsel to
the Purchaser shall reasonably request;
(c) The Company and the Purchaser shall execute and deliver the
Registration Rights Agreement and the Voting Agreement in the forms of
EXHIBIT D and E hereto;
(d) The Purchaser shall pay to the Company $1,500,000 by wire transfer of
funds to the account of the Company pursuant to instructions provided
by the Company to the Purchaser in writing;
(e) The Company shall pay to the Purchaser's affiliate, MF Private
Capital, Inc., a fee of $15,000, and shall pay at the Closing the
reasonable fees and expenses of the Purchaser's counsel; and
(f) The Company shall direct its subsidiary, GOGO Holdings, Inc., to
execute and deliver to the Purchaser a Guaranty, Security Agreement,
financing statements on form UCC-1 and such other documents as counsel
to the Purchaser shall reasonably request.
SECTION 2. CONVERSION OF NOTE
2.1 DEFINITIONS. For purposes of this Section 2, the following terms shall
have the following respective meanings:
"EQUITY FINANCING" means the issuance and sale by the Company of any shares
of capital stock of any class or any securities convertible into, exchangeable
for or granting rights to acquire shares of capital stock of the Company on or
after the date hereof, which offering raises a minimum of $1,000,000, except
that the issuance and sale of shares of capital stock in connection with the
Company's offering of Common Stock to existing shareholders commenced on January
23, 1998 shall not constitute an Equity Financing for purposes hereof unless the
Company shall raise an amount in excess of $2,000,000.
2
<PAGE> 3
"CONVERSION RIGHT TERMINATION DATE" means the date on which the Company
shall have paid all amounts due pursuant to the Note.
2.2 NOTICE OF EQUITY FINANCING. Until the Conversion Right Termination
Date, the Company will give the Purchaser at least thirty days' prior written
notice of an Equity Financing, and shall provide the Purchaser with copies of
the definitive documentation pursuant to which each such Equity Financing is to
be effected at least five days prior to closing.
2.3 CONVERSION RIGHTS.
(a) The Purchaser by written notice delivered to the Company at any time
prior to the closing of an Equity Financing described in a notice
delivered pursuant to Section 2.2 shall have the right, but no
obligation, to convert all or any portion of the outstanding balance
due pursuant to the Note (including, without limitation, both
principal and interest) into such securities, including, without
limitation, shares of Common Stock, as the Company shall issue and
sell in such Equity Financing at a conversion price equal to 80% of
the lowest price paid by any investors in such Financing and upon the
most favorable terms and conditions as shall apply to any of such
investors.
(b) In the event that Company shall not have closed an Equity Financing on
or before the Maturity Date the Purchaser shall have the right, but no
obligation, by written notice to the Company to convert all or any
portion of the outstanding balance due pursuant to the Note (including
without limitation both principal and interest) into shares of Common
Stock at a conversion price of $22.40 per share.
The conversion prices specified in subparagraphs (a) and (b) shall be subject to
proportionate adjustment in the event of any stock dividend, stock split,
combination or division of shares, recapitalization, merger, consolidation,
reorganization occurring after the date hereof.
2.4 EXERCISE OF CONVERSION RIGHT. The conversion rights of the Purchaser
hereunder may be exercised in full or in part by the holder of this Note by
surrender of this
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<PAGE> 4
Note together with written notice to the Company directing the Company to
convert all or a part of the outstanding balance hereunder into shares of
capital stock of the Company together with such completed investor questionnaire
or other documents as the Company may reasonably request for purposes of
insuring compliance with applicable securities laws, each dated as of the date
of such exercise and duly executed by such holder, to the Company at its
principal office. The Company shall thereupon issue and deliver to the holder of
the Note a certificate representing the securities to which the holder shall be
entitled upon such conversion together with such agreements and other documents
as shall be necessary or appropriate to provide the holder, subject to the
execution of such documents by the holder, with the most favorable terms and
conditions as shall apply to any other persons acquiring such securities. On any
partial conversion, the Company at its expense shall forthwith issue and deliver
to the holder of the Note a new Note of like tenor in the name of such holder
evidencing the remaining outstanding balance due pursuant to the Note.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to conduct its business as now
conducted and as now proposed to be conducted by it and to enter into and
perform this Agreement and the transactions contemplated hereby. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in the Commonwealth of Massachusetts. The Company has furnished to the Purchaser
true and complete copies of its Certificate of Incorporation and By-laws, each
as amended to date and now in effect.
3.2 CAPITALIZATION. The authorized capital stock of the Company consists of
3,000,000 shares of Common Stock, $.01 par value per share (the "Common Stock"),
of which 268,431 shares are issued and outstanding, and 500,000 shares of
preferred stock, $.01 par value per share. Of the authorized preferred stock,
the Company has designated 300 shares of preferred stock as Convertible
Preferred Stock Series 1, of which 193.5 shares are issued and outstanding. All
of the issued and outstanding shares of capital stock of the Company have been
duly authorized and validly issued. Except as described
4
<PAGE> 5
on SCHEDULE 3.2 hereto, (i) No subscription, warrant, option, convertible
security or other right (contingent or otherwise) to purchase or acquire any
shares of capital stock of the Company is authorized or outstanding, (ii) there
is not any commitment of the Company to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock, (iii) the Company has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any other
distribution in respect hereof and (iv) to the best of the Company's knowledge,
no stockholder of the Company has granted options or other rights to purchase
any shares of Common Stock from such stockholder. Except as provided in this
Agreement, and in the Company's Certificate of Incorporation, as amended, no
person or entity is entitled to (x) any preemptive or similar right with respect
to the issuance or sale of any capital stock of the Company, or (y) any rights
with respect to the registration of any capital stock of the Company under the
Securities Act of 1933, as amended (the "Securities Act") except in connection
with warrants issued in connection with previous rounds of bridge financing. All
of the issued and outstanding shares of capital stock of the Company have been
offered, issued and sold by the Company in compliance with applicable Federal
and state securities laws.
3.3 FINANCING DOCUMENTS. The Company has provided to the Purchaser true,
accurate and complete copies of all Promissory Notes, Warrants and other
agreements pursuant to which the Company has borrowed money or undertaken any
obligation to issue shares of its capital stock, each of which is listed on
SCHEDULE 3.3 hereto.
3.4 STOCKHOLDER LIST. SCHEDULE 3.4 contains a true and complete list of the
stockholders of the Company, showing the number of shares of Common Stock or
Series 1 Preferred Stock of the Company held by each stockholder immediately
prior to the Closing.
3.5 ISSUANCE OF SHARES. The issuance, sale and delivery of the shares of
Common Stock upon exercise of the Warrant and upon conversion of the Note have
been duly authorized, and such shares have been reserved for issuance, by all
necessary corporate action on the part of the Company, and such shares when so
issued and delivered against payment therefor in accordance with the provisions
of the Warrant and the Note, will be duly and validly issued, fully paid and
non-assessable.
5
<PAGE> 6
3.6 AUTHORITY FOR AGREEMENT. The execution, delivery and performance by the
Company of this Agreement and the other agreements executed in connection
herewith (the "Agreements") have been duly authorized by all necessary corporate
action, and each of the Agreements has been duly executed and delivered by the
Company. Each of the Agreements constitutes the valid and binding obligation of
the Company enforceable in accordance with its terms subject to bankruptcy laws
and equitable principles affecting the rights of creditors generally.
3.7 NO CONFLICT. The execution of the Agreements and the performance by the
Company of its obligations thereunder and the consummation of the transactions
contemplated thereby will not violate any provision of law and will not conflict
with or result in any breach of any of the terms, conditions or provisions of,
or constitute a default under, the Company's Certificate of Incorporation or
By-laws, each as amended to date and now in effect, or any indenture, lease,
agreement or other instrument to which the Company is a party or by which the
Company or any of its properties is bound, or any decree, judgment, order,
statute, rule or regulation applicable to the Company, except where any such
violation, conflict, breach or default could not reasonably be expected to have
a material adverse effect on the condition (financial or otherwise), business or
properties of the Company.
3.8 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of the Company in connection with
the execution and delivery of the Agreements, the offer, issue, sale and
delivery of the Shares, or the other transactions to be consummated at the
Closing, except (i) requisite filings with appropriate state securities
authorities, if any, which the Company hereby covenants to make on a timely
basis, and (ii) such filings as shall have been made prior to and shall be
effective on and as of the Closing. Based on the representations made by the
Purchaser in Section 4 of this Agreement, and the making of such filings, the
offer and sale of the Shares to the Purchaser will not be in violation of
applicable Federal and state securities laws.
3.9 LITIGATION. There is no action, suit, proceeding or investigation
pending, or, to the best of the Company's knowledge, threatened in writing,
against the Company which questions the validity of the Agreements or the right
of the Company to enter into any such
6
<PAGE> 7
agreement, or which might result, either individually or in the aggregate, in
any material adverse change in the assets, condition (financial or otherwise),
business or prospects of the Company.
3.10 FINANCIAL STATEMENTS. The Company has delivered to the Purchaser true
and complete copies of the unaudited balance sheets of the Company as of
December 31, 1996 and 1997, and the related statements of income, stockholders'
equity and cash flows and the notes thereto for the years then ended (the
"Financials"). The Company has delivered to the Purchaser complete copies of the
unaudited balance sheet and related statement of income of the Company for the
two months ended February 28, 1998 (the "Balance Sheet Date"), as prepared by
the Company (the "Interim Financials"). The Financials and the Interim
Financials fairly present the financial position of the Company as of the dates
thereof and the results of its operations and its cash flows for the periods
then ended in accordance with generally accepted accounting principles applied
on a consistent basis except as stated therein or in the notes thereto. Such
financial statements show all material liabilities and commitments of the
Company, direct or contingent, as of such dates. To the knowledge of the
Company, the Company has no material liabilities or commitments, direct or
contingent, that are not reflected in such financial statements, except for such
current liabilities as have been incurred since the dates of such financial
statements in the ordinary course of business, contractual obligations described
in documents listed on the Schedules hereto and liabilities incurred in
connection with or otherwise contemplated by this Agreement.
3.11 ERISA. The Company makes no contributions to any employee pension
benefit plans which are subject to the Employee Retirement Income Security Act
of 1974.
3.12 COMPLIANCE. The Company has, in all material respects, complied with
all laws, regulations and orders applicable to its present and proposed business
and has all material permits and licenses required thereby. There is no term or
provision of any material mortgage, indenture, contract, agreement or instrument
to which the Company is a party or by which it is bound or, to the knowledge of
the Company, of any provision of any state of Federal judgment, decree, order,
statute, rule or regulation applicable to or binding upon the Company, which, in
the absence of a breach or violation of any such provision, law or judgment,
decree or regulation, materially adversely affects the business,
7
<PAGE> 8
prospects, or operations of the Company or its properties or assets. To the best
of the Company's knowledge, none of the employees of the Company is in violation
of any term of any employment contract, patent or other proprietary information
disclosure agreement or any other contract or agreement relating to the
employment of such employee by the Company.
3.13 ABSENCE OF CHANGES. Since the Balance Sheet Date, there has been no
material adverse change in the financial condition of the Company, other than
changes occurring in the ordinary course of business which changes have not,
individually or in the aggregate, had a material adverse effect on the business,
prospects, properties or condition, financial or otherwise, of the Company.
3.14 TAXES. The Company has filed or has obtained currently effective
extensions with respect to all Federal, state, county, local and foreign tax
returns which are required to be filed by it, such returns are true and correct
and all taxes shown thereon to be due have been timely paid with exceptions not
material to the Company. Federal income tax returns of the Company have not been
audited by the Internal Revenue Service, and no controversy with respect to
taxes of any type is pending or, to the best of the Company's knowledge,
threatened against the Company by the IRS.
3.15 ENVIRONMENTAL PROTECTION. The Company has not caused or allowed, nor
has the Company contracted with any party for, the generation, use,
transportation, treatment, storage or disposal of any Hazardous Substances (as
defined below) in connection with the operations of its business or otherwise.
The Company, the operations of its business, and any real property that the
Company owns, leases, or otherwise occupied or uses (the "Premises") are in
compliance with all applicable Environmental Laws (as defined below) and orders
or directives of any governmental authorities having jurisdiction under such
Environmental Laws, including, without limitation, any Environmental Laws or
orders or directives with respect to any cleanup or remediation of any release
or threat of release of Hazardous Substances. The Company has not received any
citation, directive, letter or other communication, written or oral, or any
notice of any proceedings, claims or lawsuits, from any person, entity or
governmental authority arising out of the ownership or occupation of the
Premises, or the conduct of its operations, nor is it aware of any basis
therefor. The Company has obtained and is maintaining in full force and effect
all, if any,
8
<PAGE> 9
necessary permits, licenses and approvals required by any Environmental Laws
applicable to the Premises and the business operations conducted thereon
(including operations conducted by tenants on the Premises), and is in
compliance with all such permits, licenses and approvals. The Company has not
caused or allowed a release, or a threat of release, of any Hazardous Substance
into, at or near the Premises nor, to the best of the Company's knowledge, has
the Premises or any property at or near the Premises ever been subject to a
release, or a threat or release, of any Hazardous Substance. For purposes of
this Section, the term "Environmental Laws" shall mean any federal, state or
local law, ordinance or regulation pertaining to the protection of human health
or the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601,
ET SEQ., Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections
11001, ET SEQ., and the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6902, ET SEQ. For purposes of this Section, the term "Hazardous
Substances" shall include oil and petroleum products, asbestos, polychlorinated
biphenyls and urea formaldehyde, and any other materials classified as hazardous
or toxic substances under any Environmental Laws
3.16 BROKERS OR FINDERS. No Person has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or valid claim
against or upon the Company for any commission, fee or other compensation as a
finder or broker because of any act or omission by the Company or its agents.
3.17 DISCLOSURE. Neither this Agreement, nor any financial statement, list,
or other written statement pertaining to the Company or to any officer,
director, key employee or principal shareholder, made or delivered to the
Purchaser by the Company or by its officers, directors, or employees, or the
authorized agents thereof, taken as whole, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. There exists no fact or circumstance
which, to the knowledge of any executive officer of the Company, materially
adversely affects or will materially adversely affect (so far as such persons
can now reasonably foresee) the business, assets, operations, properties,
financial condition or
9
<PAGE> 10
prospects of the Company, both at the present and as proposed, other than
general economic conditions.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
4.1 ORGANIZATION AND AUTHORITY. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of Michigan and
has full corporate power and authority to enter into and perform this Agreement
and the transactions contemplated hereby.
4.2 AUTHORITY FOR AGREEMENT. The execution, delivery and performance by the
Purchaser of this Agreement and the other agreements executed in connection
herewith (the "Agreements") have been duly authorized by all necessary corporate
action, and each of the Agreements has been duly executed and delivered by the
Purchaser. Each of the Agreements constitutes the valid and binding obligation
of the Purchaser enforceable in accordance with its terms subject to bankruptcy
laws and equitable principles affecting the rights of creditors generally.
4.3 NO CONFLICT. The execution of the Agreements and the performance by the
Purchaser of its obligations thereunder and the consummation of the transactions
contemplated thereby will not violate any provision of law and will not conflict
with or result in any breach of any of the terms, conditions or provisions of,
or constitute a default under, the Purchaser's Certificate of Incorporation or
By-laws, each as amended to date and now in effect, or any indenture, lease,
agreement or other instrument to which the Purchaser is a party or any decree,
judgment, order, statute, rule or regulation applicable to the Purchaser.
4.4 ACCREDITED INVESTOR. The Purchaser is an "accredited investor" as such
term is defined in Regulation D under the Securities Act of 1933, as amended
(the "Securities Act"), because the Purchaser is a corporation with total assets
in excess of $5,000,000, not formed for the specific purpose of acquiring the
Securities, whose purchase of the Securities will be directed by a person whose
knowledge and experience in financial and business matters is such that he or
she is capable of evaluating the merits and risks of the investment in the
Securities, and because the Purchaser is a bank, savings and loan
10
<PAGE> 11
association, broker, dealer, insurance company, investment company, business
development company, or small business investment company.
4.5 OPPORTUNITY TO INVESTIGATE; REVIEW OF DOCUMENTS AND COMPANY. The
Purchaser has independently evaluated the risks of purchasing the Securities,
and the Purchaser is satisfied that the Purchaser has received from the Company
information with respect to all matters that the Purchaser considers material to
the Purchaser's decision to make this investment.
4.6 INVESTMENT PURPOSE. The Purchaser is acquiring the Securities in the
name of its nominee, Gerlach & Co., for the Purchaser's own account for the
purpose of investment and not with a view to, or for resale in connection with,
the distribution thereof, nor with any present intention of distributing or
selling the Securities. The Purchaser understands that the Securities have not
been registered under the Securities Act or the securities laws of any state,
and the Purchaser hereby agrees not to make any sale, transfer or other
disposition of any such Securities unless either (i) the Securities first shall
have been registered under the Securities Act and all applicable state
securities laws, or (ii) an exemption from such registration is available, and
the Company has received such documents and agreements from the transferee as
the Company requests at such time or pursuant to the terms of the Warrant or the
Note, as applicable.
4.7 NO REGULATORY APPROVAL OF MERITS. The Buyer understands that neither
the United States Securities and Exchange Commission nor the commissioner or
department of securities or attorney general of any state has passed upon the
merits or qualifications of, nor recommended nor approved, the Note, Warrant or
Common Stock underlying the Warrant. Any representation to the contrary is a
criminal offense.
4.8 BROKERS OR FINDERS. No Person has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or valid claim
against or upon the Company for any commission, fee or other compensation as a
finder or broker because of any act or omission by the Purchaser or its agents.
11
<PAGE> 12
SECTION 5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to purchase the shares at the Closing is
subject to the fulfillment, or the waiver by the Purchaser, of each of the
following conditions on or before the Closing Date:
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 3 of this Agreement shall be true
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of that date.
5.2 PERFORMANCE. The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by the Company prior to or at the Closing.
5.3 OPINION OF COUNSEL. The Purchasers shall have received an opinion from
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel for the Company,
dated the Closing Date, addressed to the Purchaser, in the form attached as
EXHIBIT F.
5.4 SECURITIES FILINGS. The Company shall have made any requisite filings
with state and federal securities authorities and any necessary approvals shall
be in full force and effect on the Closing Date, other than filings required to
be made after the Closing Date, which the Company covenants to make on a timely
basis.
5.5 CERTIFICATES AND DOCUMENTS. The Company shall have delivered to the
Purchasers:
(a) The Certificate of Incorporation of the Company, as amended and in
effect prior to the Closing Date, certified, as of the most recent
practicable date, by the Secretary of State of the State of Delaware;
(b) Certificate, as of the most recent practicable date, as to the
corporate good standing of the Company issued by the Secretary of
State of the State of Delaware;
12
<PAGE> 13
(c) By-laws of the Company as amended and in effect immediately prior to
the Closing Date, certified by its Secretary or Assistant Secretary as
of the Closing Date; and
(d) Resolutions of the Board of Directors authorizing and approving all
requisite matters in connection with this Agreement and the
transactions contemplated hereby, certified by the Secretary or
Assistant Secretary of the Company as of the Closing Date.
5.6 OTHER MATTERS. 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 reasonably satisfactory in
substance and form to the Purchaser, and the Purchaser shall have received all
such counterpart originals or certified or other copies of such documents as the
Purchaser may reasonably request.
5.7 VOTING AGREEMENT. The Voting Agreement, in the form of EXHIBIT E hereto
shall have been executed and delivered by the parties thereto.
SECTION 6. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company under Section 1 of this Agreement are
subject to the fulfillment or the waiver by the Company, on or before the
Closing Date, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser contained in Section 4 shall be true on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of that date.
6.2 PERFORMANCE. The Purchaser shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by the Purchaser prior to or at the Closing.
13
<PAGE> 14
SECTION 7. COVENANTS OF THE COMPANY
For so long as the Note is outstanding and held by the Purchaser or a
person controlled by or under common control with the Purchaser (an "Affiliate")
the Company will comply with each of the following covenants. For so long as the
Purchaser or an Affiliate owns at least 50% of the Purchaser's Original Equity
Position, the Company will comply with each of Sections 7.1 and 7.5 hereof. The
Purchaser or an Affiliate shall be deemed to hold 50% of the Purchaser's
Original Equity Position as long as such persons hold in the aggregate (i) at
least 50% of the securities issued or issuable upon conversion of the Note or
upon conversion of any shares of capital stock of the Company issued to the
Purchaser or an affiliate pursuant to the Note and (ii) hold at least a 50%
interest in the Warrant or in any shares of Common Stock issued or issuable
pursuant to the Warrant.
7.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company will deliver to
the Purchaser,
(a) Within 120 days after the end of each fiscal year of the Company, an
audited balance sheet of the Company as at the end of such year and
audited statements of income and of changes in financial condition of
the Company for such year, examined by certified public accountants
selected by the Company and reasonably acceptable to the Purchaser,
prepared in accordance with generally accepted accounting principles;
(b) within 30 days after the end of each calendar month, an unaudited
balance sheet of the Company as at the end of such quarter, and
unaudited statements of income and of changes in financial condition
of the Company for such fiscal quarter and for the current fiscal year
to the end of such fiscal quarter;
(c) with reasonable promptness, such other notices, information and data
with respect to the Company as the Company delivers to the holders of
its Common Stock and such other information and data as the Purchaser
may from time to time reasonably request.
14
<PAGE> 15
7.2 USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Securities for working capital and the acquisition of a control block of
stock in its principal distributor and supplier.
7.3 PREPAYMENT OF INDEBTEDNESS. The company shall not prepay any of its
existing indebtedness.
7.4 OTHER DEBT OBLIGATIONS. The Company shall not borrow money on terms
senior to or pari passu with the rights of the Purchaser pursuant to the Note or
the Security Agreement.
7.5 BOARD OBSERVER STATUS. The Company shall (a) provide the Purchaser with
notices of meetings, copies of written consents for execution by members of the
Board of Directors, reports and other information when and as the same are
provided to Board members generally, (b) permit a person designated by the
Purchaser to attend all Board Meetings and participate fully in Board
discussions (but not vote) as if such person were a member of the Board, and (c)
at the request of the Purchaser or the Purchaser's designee provide the
Purchaser with any information or access to any officer of the Company to the
same extent as any member of the Board of Directors would be entitled.
SECTION 8. GENERAL
8.1 NOTICES. All notices, requests, consents and other communications under
this Agreement shall be in writing and shall be delivered:
if to the Purchaser to:
The Manufacturers Life Insurance
Company (U.S.A.)
c/o MF Private Capital, Inc.
73 Tremont Street, Suite 1300
Boston, MA 02111
Attention: Stephen Brackett, Managing Director
with a copy to:
Peabody & Brown
101 Federal Street
Boston, MA 02110
Telecopier: (617) 345-1300
Attention: Craig D. Mills, Esq.
15
<PAGE> 16
If to the Company to:
2d Interactive, Inc.
186 South Street
Boston, MA 02111
Attn: Lewis Chester
with a copy to:
Mintz, Levin, Cohn, Ferris
Glovsky & Popeo
One Financial Center
Boston, MA 02111
Attention: Thomas R. Burton, III
Notices provided in accordance with this Section 8 shall be deemed delivered if
delivered in hand, sent by certified mail, postage prepaid, sent by telecopier
or by express courier service, to the appropriate address set forth above, or to
such other address as any party shall designate in a written notice to the other
parties.
SECTION 9. GENERAL
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder shall be binding upon and shall inure to the benefit of the parties
hereto, their respective successors and assigns.
9.2 ENTIRE AGREEMENT. This Agreement, (including the Schedules and Exhibits
attached hereto), and the documents and instruments delivered pursuant hereto
constitute the entire agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersede all prior understandings and
agreements, whether written or oral, with respect to the subject matter hereof.
This Agreement may be modified or amended only by a written instrument executed
by the parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts which together shall constitute one instrument.
9.4 GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts without regard to conflicts of laws
principles.
16
<PAGE> 17
9 .5 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
9.6 LOST, STOLEN OR MUTILATED NOTE AND WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Note or Warrant, the Company at its expense shall issue and deliver to the
Purchaser a new Note or Warrant of like tenor, in lieu of such lost, stolen or
mutilated Note or Warrant.
17
<PAGE> 18
9.7 HEADINGS. The headings of this Agreement are for reference purposes
only and shall not be deemed to have any substantive effect.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
date first above written.
2d INTERACTIVE, INC.
By: /s/ Dominic A. Ianno
---------------------------------
Its: PRESIDENT
--------------------------------
THE MANUFACTURERS LIFE INSURANCE
COMPANY (U.S.A.)
By: /s/ Ray Britt
---------------------------------
Its: V.P.
--------------------------------
18
<PAGE> 1
EXHIBIT G
THIS NOTE AND ANY SHARES OF CAPITAL STOCK ACQUIRED UPON THE CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THIS
NOTE AND SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR ANY EXEMPTION THEREFROM UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS.
SECURED CONVERTIBLE PROMISSORY NOTE
$1,500,000 March 26, 1998
Boston, Massachusetts
FOR VALUE RECEIVED, 2d Interactive, Inc., a Delaware corporation (the
"Borrower"), with a principal business address at 186 South Street, Boston,
Massachusetts 02111, hereby promises to pay to the order of Gerlach & Co., as
nominee for The Manufacturers Life Insurance Company (U.S.A.) (the "Lender") at
the office of MF Private Capital, Inc., 73 Tremont Street, Suite 1300, Boston,
MA 02108-3915, or such other place as the holder hereof shall designate, the
principal amount of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000), in
lawful money of the United States in immediately available funds upon the
earlier of (i) thirty (30) days after the Borrower closes an equity capital
financing in an amount equal to or in excess of Five Million Dollars; and (ii)
six months from the date of this Note (the "Maturity Date"). Interest shall
accrue on the unpaid principal hereof from the date hereof at the rate per annum
of thirteen and one-half percent (13.5%) (the "Stated Rate"). Interest shall be
payable monthly in arrears beginning on May 1, 1998, and thereafter on the first
business day of each calendar month, and upon the Maturity Date. Interest shall
be calculated on the basis of actual days elapsed and a 360 day year. In the
absence of demonstrable error, the books and records of the Lender shall
constitute conclusive evidence of the unpaid principal balance hereof from time
to time.
This Note shall be subject to the terms and conditions of that certain Note
Purchase Agreement dated March 26, 1998 (the "Purchase Agreement") by and
between the Borrower and the Lender, including but not limited to such terms
relating to the conversion of this Note into equity securities of the Borrower.
This Note and the Borrower's obligations hereunder shall be secured by a
Security Agreement dated of even date herewith in favor of the Lender (the
"Security Agreement").
The Borrower may, at its option, at any time and from time to time, prepay
all or any part of the principal balance of this Note, without penalty or
premium, upon 30 days prior written notice to the Borrower, during which time
the Lender shall be entitled to exercise its conversion rights under the
Purchase Agreement.
The Borrower shall pay to the Lender upon demand an amount equal to three
percent (3%) of any payment (including the principal payment) due hereunder
which is not paid in full when due.
<PAGE> 2
If (a) the Borrower shall fail to make any payment required hereunder
within five (5) calendar days after such payment shall be due; or (b) any Event
of Default (as defined in the Security Agreement) shall occur; then and in any
such event and at any time thereafter, the Lender may, at its option, declare
any and all amounts owing under this Note, to be due and payable, whereupon the
maturity of the then unpaid balance hereof shall be accelerated and the
principal of this Note, together with all interest accrued thereon, shall
forthwith become due and payable and the Lender shall have the right to enforce
any of its rights and remedies as set forth in the Purchase Agreement and the
Security Agreement.
The Borrower will pay on demand all costs and expenses, including
reasonable attorneys' fees, incurred or paid by the Lender in enforcing or
collecting any of the obligations of the Borrower hereunder or under the
Security Agreement or the Purchase Agreement. The Borrower agrees that all such
costs and expenses and all other expenditures by the Lender on account hereof,
other than advances of principal, which are not reimbursed by the Borrower
immediately upon demand, all amounts due under this Note after maturity, and any
amounts due hereunder if an Event of Default shall occur hereunder, shall bear
interest at the Stated Rate plus four (4) percent until such expenditures are
repaid or this Note and such amounts as are due are paid to the Lender.
In the event of liquidation, dissolution or winding up of the Borrower, or
in the event of any insolvency proceeding involving the Borrower, whether
instituted by the Borrower or some other party, the Note shall be senior debt
and shall rank in parity with or be senior to all other obligations of the
Company in or with respect to, right of payment and exercise of claims, rights
and remedies.
Each taker and holder of this Note, by taking or holding the same, consents
and agrees that when this Note shall have been endorsed in blank, the holder
hereof may be treated by the Company and all other persons dealing with this
Note as the absolute owner hereof for any purpose and as the person entitled to
exercise this rights represented hereby.
The Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgence,
without notice.
No act, omission or delay by the Lender or course of dealing between the
Lender and the Borrower shall constitute a waiver of the rights and remedies of
the Lender hereunder. No single or partial waiver by the Lender of any default
or right or remedy which it may have shall operate as a waiver of any other
default, right or remedy or of the same default, right or remedy on a future
occasion.
This Note shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts (without giving effect to the conflict of laws
principles thereof).
2
<PAGE> 3
No provision hereof shall be modified, altered or limited except by a
written instrument expressly referring to this Note and to such provision, and
executed by the Borrower and the Lender.
In the event that any court of competent jurisdiction shall determine that
any provision, or any portion thereof, contained in this Note shall be
unreasonable or unenforceable in any respect, then such provision shall be
deemed limited to the extent that such court deems it reasonable and
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall deem any such provision, or portion thereof, wholly
unenforceable, the remaining provisions of this Note shall nevertheless remain
in full force and effect.
This Note and all obligations evidenced hereby shall be binding upon the
successors and assigns of the Borrower and shall, together with the rights and
remedies of the Lender hereunder, inure to the benefit of the Lender, its
successors, endorsees and assigns.
2d INTERACTIVE, INC.
By: /s/ Dominic A. Ianno
-----------------------------------
Name: Dominic A. Ianno
Title: PRESIDENT
3
<PAGE> 1
EXHIBIT H
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (the "ACT"). THIS WARRANT AND
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.
For the Purchase
of 26,785 Shares
of Common Stock
No. W-98-9
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK
OF
2d INTERACTIVE, INC.
(A Delaware Corporation)
VOID AFTER 12:00 NOON, EASTERN STANDARD TIME, ON MARCH 26, 2003
2d Interactive, Inc., a Delaware corporation (the "Company") hereby
certifies that Gerlach & Co., as nominee of The Manufacturers Life Insurance
Company (U.S.A.), or its registered assigns (the "Registered Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company, at
any time or from time to time on or before the earlier of March 26, 2003 at not
later than 12:00 NOON (Eastern Standard time) and the termination of this
Warrant as provided in Section 8 below, 26,785 shares of Common Stock, $.01 par
value, of the Company ("Common Stock"), at a purchase price of $28 per share.
The number of shares purchasable upon exercise of this Warrant, and the purchase
price per share, each as adjusted from time to time pursuant to the provisions
of this Warrant, are hereinafter referred to as the "Warrant Stock" and the
"Purchase Price," respectively.
1. EXERCISE.
(a) This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form appended hereto
as Exhibit I duly executed by such Registered Holder, at the principal office of
the Company, or at such other office or agency as the Company may designate,
accompanied by payment in full, in lawful money of the United States, of the
Purchase Price payable in respect of the number of shares of Warrant Stock
purchased upon such exercise.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in subsection
1(a) above. At such time, the person or
<PAGE> 2
persons in whose name or names any certificates for Warrant Stock shall be
issuable upon such exercise as provided in subsection 1(c) below shall be deemed
to have become the holder or holders of record of the Warrant Stock represented
by such certificates.
(c) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the Company at its
expense will cause to be issued in the name of, and delivered to, the Registered
Holder, or, subject to the terms and conditions hereof, as such Registered
Holder (upon payment by such Registered Holder of any applicable transfer taxes)
may direct:
(i) a certificate or certificates for the number of full shares
of Warrant Stock to which such Registered Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such Registered Holder
would otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on the face of this Warrant minus the number of such shares purchased by the
Registered Holder upon such exercise as provided in subsection 1(a) above.
2. FRACTIONAL SHARES. The Company shall not be required upon the exercise
of this Warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the mean between the low bid and high asked
prices of the Warrant Stock on the over-the-counter market as reported by the
National Association of Securities Dealers Automated Quotations System or the
closing market price of the Warrant Stock on a national securities exchange on
the trading day immediately prior to the date of exercise, whichever is
applicable, or if neither is applicable, then on the basis of the then market
value of the Warrant Stock as shall be reasonably determined by the Board of
Directors of the Company.
3. LIMITATION ON SALES, ETC. Each holder of this Warrant acknowledges that
this Warrant and the Warrant Stock have not been registered under the Securities
Act of 1933, as now in force or hereafter amended, or any successor legislation
(the "Act"), and agrees not to sell, pledge, distribute, offer for sale,
transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon
its exercise in the absence of (a) an effective registration statement under the
Act as to this Warrant or such Warrant Stock and registration or qualification
of this Warrant or such Warrant Stock under any applicable Blue Sky or state
securities law then in effect, or (b) an opinion of counsel, satisfactory to the
Company, that such registration and qualification are not required.
2
<PAGE> 3
Without limiting the generality of the foregoing, unless the offering and
sale of the Warrant Stock to be issued upon the particular exercise of the
Warrant shall have been effectively registered under the Act, the Company shall
be under no obligation to issue the shares covered by such exercise unless and
until the Registered Holder shall have executed an investment letter in form and
substance satisfactory to the Company, including a warranty at the time of such
exercise that it is acquiring such shares for its own account, for investment
and not with a view to, or for sale in connection with, the distribution of any
such shares, in which event the Registered Holder shall be bound by the
provisions of the following legend or a legend in substantially similar form
which shall be endorsed upon the certificate(s) evidencing the Warrant Stock
issued pursuant to such exercise:
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by any
person, including a pledgee, in the absence of an effective
registration statement for the shares under the Securities Act of
1933, as amended, or an opinion of counsel satisfactory to the Company
that an exemption from registration is then available."
In addition, without limiting the generality of the foregoing, the Company
may delay issuance of the Warrant Stock until completion of any action or
obtaining of any consent, which the Company deems necessary under any applicable
law (including without limitation state securities or "blue sky" laws).
4. DILUTIVE ISSUANCES.
4.1 ADJUSTMENTS UPON DILUTIVE ISSUANCES OF COMMON STOCK OR CONVERTIBLE
SECURITIES. If the Company shall issue or sell any shares of Common Stock or
Common Stock Equivalents (as hereinafter defined), except for shares issued
pursuant to employee stock options or stock purchase plans as set forth more
particularly in Section 4.3(a), without consideration or at a price per share
which is less than the Purchase Price in effect immediately prior to such
issuance or sale, then in each case the Purchase Price shall be reduced,
concurrently with such issuance or sale, to the price per share determined by
multiplying the then current Purchase Price by a fraction, the numerator of
which is the sum of (i) the number of shares of Common Stock outstanding
immediately prior to such issuance (assuming the conversion into Common Stock of
all outstanding Common Stock Equivalents), plus (ii) the number of shares of
Common Stock which the aggregate consideration received for such issuance would
purchase at the Purchase Price, and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such issuance (assuming
the conversion into Common Stock of all outstanding Common Stock Equivalents).
In the event of such an adjustment of the Purchase Price, the number of shares
of Warrant Stock issuable upon exercise of the Warrant shall be increased to a
number determined by multiplying the number of shares subject to this Warrant by
a fraction the numerator of which is the Purchase Price in effect immediately
before the foregoing adjustment and the denominator of which is the Purchase
Price in effect immediately after the foregoing adjustment. Each such adjustment
of
3
<PAGE> 4
the Purchase Price shall be calculated to the nearest cent, and adjustments to
the number of warrant shares shall be calculated to the nearest whole share.
As used herein, the term "Common Stock Equivalents" includes any securities
convertible into or exchangeable for shares of Common Stock, or any warrants,
options, subscriptions or purchase rights with respect to such convertible or
exchangeable securities, in any case the sum of the consideration for which
received by the Company upon both issuance and exercise thereof on a per share
basis is equal to an amount which is less than the Purchase Price at the
applicable time.
4.2 CONSIDERATION. In case the Company shall issue shares of its
Common Stock or Common Stock Equivalents for a consideration wholly or partly
other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair market value of such consideration as
determined reasonably and in good faith by the Board of Directors of the
Company. The determination of the Board shall be conclusive unless challenged by
the Registered Holder within thirty (30) days of receipt of notification of such
determination.
In case Common Stock shall be deemed to have been issued upon the issuance
by the Company of any right to acquire such Common Stock in connection with the
issue or sale of other securities or assets of the Company, together comprising
one integrated transaction, such rights shall be deemed to have been issued for
such portion of the consideration received as may be reasonably determined in
good faith by the Board of Directors to be allocable thereto.
4.3 EXCEPTIONS TO ANTI-DILUTION. Anything herein notwithstanding, no
adjustments in the Purchase Price or number of shares of Warrant Stock as set
forth in this Section 4 shall be made by reason of or in connection with the
issuance of shares of Common Stock (including options to purchase such shares
whether such options are issued before, at the same time as or after the
issuance of the Warrant) up to an aggregate of two percent of the outstanding
stock of the Company calculated on a fully diluted basis pursuant to employee
stock option agreements, or employee stock option or stock purchase plans
adopted by the Board of Directors of the Company for the issuance of shares of
Common Stock to employees, directors or consultants.
4.4 CHANGES IN COMMON STOCK. If the Company shall (i) combine the
outstanding shares of Common Stock into a lesser number of shares, (ii)
subdivide the outstanding shares of Common Stock into a greater number of
shares, or (iii) issue additional shares of Common Stock as a dividend or other
distribution with respect to the Common Stock, the number of shares of Warrant
Stock shall be equal to the number of shares which the Registered Holder would
have been entitled to receive after the happening of any of the events described
above if such shares had been issued immediately prior to the happening of such
event, such adjustment to become effective concurrently with the effectiveness
of such event. The Purchase Price in effect immediately prior to any such
combination of Common Stock shall, upon the effectiveness of such combination,
be proportionately increased. The Purchase Price in effect immediately prior to
any such subdivision of Common Stock or at the record date of such dividend
shall upon the effectiveness of such subdivision or immediately after the record
date of such dividend be proportionately reduced.
4
<PAGE> 5
4.5 REORGANIZATIONS AND RECLASSIFICATIONS. If there shall occur any
capital reorganization or reclassification of the Common Stock (other than a
change in par value or a subdivision or combination as provided for in Section
4.4), then, as part of any such reorganization or reclassification, lawful
provision shall be made so that the Registered Holder shall have the right
thereafter to receive upon the exercise hereof the kind and amount of shares of
stock or other securities or property which such Registered Holder would have
been entitled to receive if, immediately prior to any such reorganization or
reclassification, such Registered Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of this Warrant. In any such
case, appropriate adjustment (as reasonably determined by the Board of Directors
of the Company) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the Registered
Holder such that the provisions set forth in this Section 4 (including
provisions with respect to adjustment of the Purchase Price) shall thereafter be
applicable, as nearly as is reasonably practicable, in relation to any shares of
stock or other securities or property thereafter deliverable upon the exercise
of this Warrant.
4.6 CERTIFICATE OF ADJUSTMENT. When any adjustment is required to be
made in the Purchase Price, the Company shall promptly mail to the Registered
Holder a certificate setting forth the Purchase Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Delivery
of such certificate shall be deemed to be a final and binding determination with
respect to such adjustment unless challenged by the Registered Holder within ten
(10) days of receipt thereof. If the Company and the Registered Holder cannot
reach agreement with respect to the determination of any particular adjustment
to the Purchase Price, the parties hereby agree to accept the determination of a
certified public accounting firm of national stature, selected by mutual
agreement of the parties. The costs of the accounting firm shall be paid (i) by
the Company if the calculation of the adjustment in the original certificate is
determined to be incorrect; (ii) by the Registered Holder if such calculation is
determined to be correct or (iii) ratably apportioned between the Company and
Registered Holder as determined by the certified public accounting firm. Such
certificate shall also set forth the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable following
the occurrence of any of the events specified in this Section 4.
5. NOTICES OF RECORD DATE, ETC. In case:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company
with or into another
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corporation (other than a consolidation or merger in which the Company is the
surviving entity), or any transfer of all or substantially all of the assets of
the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then, and in each such case, the Company will mail or
cause to be mailed to the Registered Holder of this Warrant a notice specifying,
as the case may be, (i) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (ii) the effective date on
which such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or such other
stock or securities at the time deliverable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice.
6. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such shares of Warrant Stock and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
7. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
8. TERMINATION IN CERTAIN EVENTS
In the event of a sale of substantially all the assets of the Company
or a merger or consolidation of the Company with or into any other entity (other
than a merger the sole purpose of which is to change the state of incorporation
of the Company) or a dissolution or the adoption of a plan of liquidation of the
Company, this Warrant shall terminate on the effective date of such sale,
merger, consolidation, dissolution or adoption (the "Effective Date") and become
null and void, PROVIDED, HOWEVER, that if this Warrant shall not have otherwise
terminated or expired, the Registered Holder hereof shall have the right until
5:00 p.m Eastern Standard time on the day immediately prior to the Effective
Date to exercise its rights hereunder to the extent not previously exercised.
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9. TRANSFERS, ETC.
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its, his or her address as shown on the warrant register by written
notice to the Company requesting such change.
(b) Without the prior written consent of the Company, the Warrant
shall not be assigned, pledged, transferred or hypothecated in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process. In the event that the Warrant is transferred with
the consent of the Company, the transferee shall remain subject to the terms of
this Warrant, and the transferee shall so acknowledge in writing as a condition
precedent to the effectiveness of such transfer. Any attempted transfer,
assignment, pledge, hypothecation or other disposition of the Warrant or of any
rights granted hereunder contrary to the provisions of this Paragraph, or the
levy of any attachment or similar process upon the Warrant or such rights, shall
be null and void. This Warrant shall be exercisable only by the Registered
Holder.
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
10. MAILING OF NOTICES, ETC. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its offices at 186 South Street,
Boston, MA 02111, or such other address as the Company shall so notify the
Registered Holder.
11. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
12. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
13. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
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14. GOVERNING LAW. This Warrant will be governed by and construed in
accordance with the laws of the State of Massachusetts.
2d Interactive, Inc.
By /s/ Dominic A. Ianno
---------------------------------
[Corporate Seal]
ATTEST
/s/ Richard Weiler
- ------------------------------
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EXHIBIT I
PURCHASE FORM
-------------
To: 2d Interactive, Inc.
186 South Street
Boston, MA 02111 Dated:
The undersigned pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase ______ shares of the
Common Stock (the "Common Stock") covered by such Warrant and herewith makes
payment of $ ______, representing the full purchase price for such shares at the
price per share provided for in such Warrant.
The undersigned is aware that the Common Stock has not been registered
under the Securities Act of 1933, as amended (the "1933 Act") or any state
securities laws. The undersigned understands that the reliance by the Company on
exemptions under the 1933 Act is predicated in part upon the truth and accuracy
of the statements of the undersigned in this Purchase Form.
The undersigned represents and warrants that (1) it has been furnished with
all information which it deems necessary to evaluate the merits and risks of the
purchase of the Common Stock; (2) it has had the opportunity to ask questions
concerning the Common Stock and the Company and all questions posed have been
answered to its satisfaction; (3) it has been given the opportunity to obtain
any additional information it deems necessary to verify the accuracy of any
information obtained concerning the Common Stock and the Company; and (4) it has
such knowledge and experience in financial and business matters that it is able
to evaluate the merits and risks of purchasing the Common Stock and to make an
informed investment decision relating thereto.
The undersigned hereby represents and warrant that it is purchasing the
Common Stock for its own account for investment and not with a view to the sale
or distribution of all or any part of the Common Stock.
The undersigned understands that because the Common Stock have not been
registered under the 1933 Act, it must continue to bear the economic risk of the
investment for an indefinite time and the Common Stock cannot be sold unless the
Common Stock is subsequently registered under applicable federal and state
securities laws or an exemption from such registration is available.
The undersigned agrees that it will in no event sell or distribute or
otherwise dispose of all or any part of the Common Stock unless (1) there is an
effective registration statement under the 1933 Act and applicable state
securities laws covering any such transaction involving the Common Stock or (2)
the Company receives an opinion of its legal counsel (concurred in by legal
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counsel for the Company) stating that such transaction is exempt from
registration or the Company otherwise satisfies itself that such transaction is
exempt from registration.
The undersigned consents to the placing of a legend on its certificate for
the Common Stock stating that the Common Stock has not been registered and
setting forth the restriction on transfer contemplated hereby and to the placing
of a stop transfer order on the books of the Company and with any transfer
agents against the Common Stock until the Common Stock may be legally resold or
distributed without restriction.
The undersigned understands that the Company has no obligation to the
undersigned to register the Common Stock with the SEC and has not represented
that it will register the Common Stock.
The undersigned understands the terms and restrictions on the right to
dispose of the Common Stock set forth in the Note Purchase Agreement, Note and
Warrant dated March ____, 1998 which the undersigned has carefully reviewed. The
undersigned consents to the placing of a legend on its certificate for the
Common Stock referring to such restrictions and the placing of stop transfer
orders until the Common Stock may be transferred in accordance with the terms of
such restrictions.
The undersigned has considered the Federal and state income tax
implications of the exercise of the Warrant and the purchase and subsequent sale
of the Common Stock.
GERLACH & CO., AS NOMINEE OF THE
MANUFACTURERS LIFE INSURANCE
COMPANY (U.S.A.)
By:
----------------------------------
Title:
--------------------------------
Dated:
--------------------------------
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EXHIBIT I
REGISTRATION RIGHTS AGREEMENT
This Agreement dated as of March 26, 1998, is entered into by and between
2d Interactive, Inc., a Delaware corporation (the "Company"), and The
Manufacturers Life Insurance Company (U.S.A.), a Michigan corporation (the
"Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Note Purchase
Agreement dated the date hereof (the "Purchase Agreement");
WHEREAS, the Company and the Purchaser desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933, as amended, as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" means the Securities and Exchange Commission, or any other
Federal agency at the time administering the Securities Act.
"COMMON STOCK" means the Common Stock, $.01 par value per share, of the
Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"NOTE" means the Secured Convertible Promissory Note of even date herewith
in the principal amount of $1,500,000 issued by the Company to Gerlach & Co., as
nominee of the Purchaser.
<PAGE> 2
"REGISTRATION STATEMENT" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any registration statement covering only securities proposed to
be issued in exchange for securities or assets of another corporation).
"REGISTRATION EXPENSES" means the expenses described in Section 5.
"REGISTRABLE SHARES" means (i) the shares of Common Stock issued or
issuable upon conversion of the Note, or, in the event the Note is converted
into shares of convertible preferred stock, the shares of Common Stock issued or
issuable upon conversion of such shares of preferred stock, (ii) the shares of
Common Stock issued or issuable upon exercise of the Warrant, and (iii) any
other shares of Common Stock of the Company issued in respect of such shares
(because of stock splits, stock dividends, reclassifications, recapitalizations
or similar events); provided, however, that shares of Common Stock which are
Registrable Shares shall cease to be Registrable Shares upon any sale pursuant
to a Registration Statement or Rule 144 under the Securities Act, or any sale in
any manner to a person or entity which, by virtue of Section 12 of this
Agreement, is not entitled to the rights provided by this Agreement. Wherever
reference is made in this Agreement to a request or consent of holders of a
certain percentage of Registrable Shares, the determination of such percentage
and the holder or holders thereof shall include shares of Common Stock issuable
upon conversion of the Note, or preferred stock issued pursuant to the Note, and
issuable upon exercise of the Warrant even if such conversion or exercise has
not yet been effected, and shall be deemed to include the holder or holders of
the Note or such shares of convertible preferred stock and the Warrant.
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<PAGE> 3
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"STOCKHOLDERS" means the Purchaser and any persons or entities to whom the
rights granted under this Agreement are transferred by the Purchaser, its
nominee or its successors or assigns pursuant to Section 12 hereof.
"WARRANT" means the Warrant of even date herewith for the purchase of
26,785 shares of Common Stock issued by the Company to the Purchaser.
2. REQUIRED REGISTRATIONS.
(a) At any time after the earlier of June 30, 2002, or 12 months after the
closing of a sale of shares of Common Stock in a bona fide firm commitment
public offering pursuant to an effective Registration Statement under the
Securities Act resulting in at least $10,000,000 of gross proceeds to the
Company, a Stockholder or Stockholders holding in the aggregate at least 50% of
the voting power of the Registrable Shares may request, in writing, that the
Company effect the registration of the Registrable Shares owned by such
Stockholder or Stockholders. If the holders initiating the registration intend
to distribute the Registrable Shares by means of an underwriting, they shall so
advise the Company in their request. Upon receipt of any such request, the
Company shall promptly give written notice of such proposed registration to all
Stockholders. Such Stockholders shall have the right, by giving written notice
to the Company within 30 days after the Company provides its notice, to elect to
have included in such registration such of their Registrable Shares as such
Stockholders may request in such notice of election. Thereupon, the Company
shall, as expeditiously as possible, use its best efforts to effect the
registration of all Registrable Shares which the Company has been requested to
so register.
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(b) At any time after the Company becomes eligible to file a Registration
Statement on Form S-3 (or any successor form relating to secondary offerings), a
Stockholder or Stockholders holding Registrable Shares may request the Company,
in writing, to effect the registration on Form S-3 (or such successor form) of
Registrable Shares. Upon receipt of any such request, the Company shall promptly
give written notice of such proposed registration to all Stockholders. Such
Stockholders shall have the right, by giving written notice to the Company
within 30 days after the Company provides its notice, to elect to have included
in such registration such of their Registrable Shares as such Stockholders may
request in such notice of election. Thereupon, the Company shall, as
expeditiously as possible, use its best efforts to effect the registration on
Form S-3, or such successor form, of all Registrable Shares which the Company
has been requested to register.
(c) The Company shall not be required to effect more than one registration
pursuant to paragraph (a) above and no more than four registrations pursuant to
paragraph (b) above.
(d) If at the time of any request to register Registrable Shares pursuant
to this Section 2, the Company is engaged or has fixed plans to engage within 30
days of the time of the request in a registered public offering as to which the
Stockholders may include Registrable Shares pursuant to Section 3 or is engaged
in any other activity which, in the good faith determination of the Company's
Board of Directors, would be adversely affected by the requested registration to
the material detriment of the Company, then the Company may at its option direct
that such request be delayed for a period not in excess of six months from the
effective date of such offering or the date of commencement of such other
material activity, as the case may be.
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(e) In connection with any offering under this Section 2 involving an
underwriting, the Company shall not be required to include any Registrable
Shares in such underwriting unless the holders thereof participate in such
underwriting. Further, if in the opinion of the underwriter managing any
underwritten offering the registration of all the Registrable Shares sought to
be included would materially and adversely affect such public offering, then the
Company shall be required to include in the underwriting only that number of
Registrable Shares that the managing underwriter believes may be sold without
causing such material adverse effect, and any limitation on participation in the
offering will be imposed pro rata with respect to all such Registrable Shares.
3. INCIDENTAL REGISTRATION.
(a) Whenever the Company proposes to file a Registration Statement (other
than pursuant to Section 2) at any time and from time to time, it will, prior to
such filing, give written notice to all Stockholders of its intention to do so
and, upon the written notice of a Stockholder or Stockholders given within 20
days after the Company provides such notice, the Company shall use its best
efforts to cause all Registrable Shares which the Company has been requested by
such Stockholder to Stockholders or register to be included in such Registration
Statement; provided, that the Company shall have the right to postpone or
withdraw any registration effected pursuant to this Section 3(a) without
obligation to any Stockholder.
(b) In connection with any offering under this Section 3 involving an
underwriting, the Company shall not be required to include any Registrable
Shares in such underwriting unless the holders thereof participate in such
underwriting. Further, if in the opinion of the managing underwriter the
registration of all, or part of, the securities whose holders have a contractual
incidental right to include them in the
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Registration Statement and as to which inclusion has been requested pursuant to
such right would materially and adversely affect such public offering, then the
Company shall be required to include in the underwriting only that number of
Registrable Shares, if any, which the managing underwriter believes may be sold
without causing such adverse effect. If the number of Registrable Shares to be
included in the underwriting in accordance with the foregoing is less than the
total number of shares which the holders of Registrable Shares have requested to
be included, then the holders of Registrable Shares who have requested
registration shall participate in the underwriting pro rata based upon their
total ownership of Registrable Shares. If any holder would thus be entitled to
include more shares that such holder requested to be registered, the excess
shall be allocated among other requesting holders pro rata based upon their
total ownership of Registrable Shares.
4. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Shares under the Securities Act, the Company shall:
(a) file with the Commission a Registration Statement with respect to such
Registrable Shares and use its best efforts to cause that Registration Statement
to become and remain effective.
(b) as expeditiously as possible prepare and file with the Commission any
amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective until the earlier of such time as all such
Registrable Shares are sold and the date that is 120 days from the effective
date.
(c) as expeditiously as possible furnish to each selling Stockholder such
reasonable number of copies of the prospectus, including a preliminary
prospectus, in
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<PAGE> 7
conformity with the requirements of the Securities Act, and such other documents
as the selling Stockholder may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Shares owned by the selling
Stockholder; and
(d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the selling Stockholders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; PROVIDED, HOWEVER, that the Company shall not be
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company will promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
5. ALLOCATION OF EXPENSES. The Company will pay all Registration Expenses
of a registration under Section 2(a) of this Agreement, up to a maximum of
$75,000; provided however, that if a registration under Section 2(a) is
withdrawn at the request of the Stockholders requesting such registration (other
than as a result of material adverse information concerning the business or
financial condition of the Company which is made known to the Stockholders after
the date on which such registration was
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requested), and if the requesting Stockholders elect not to have such
registration counted as the registration requested under Section 2(a), the
requesting Stockholders shall pay the Registration Expenses of such registration
pro rata in accordance with the number of their Registrable Shares included in
such registration. For purposes of this Section, the term "Registration
Expenses" shall mean all expenses incurred by the Company in complying with this
Agreement, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and disbursements of counsel for
the Company and the fees and expenses of one counsel selected by the selling
Stockholders to represent the selling Stockholders, state Blue Sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, but excluding underwriting discounts, selling commissions and
the fees and expenses of selling Stockholders' own counsel (other than the
counsel selected to represent all selling Stockholders).
6. INDEMNIFICATION.
(a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Shares were registered under the
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Securities Act, any preliminary prospectus or final prospectus contained in the
Registration Statement or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse each such
seller, underwriter and controlling person for any legal or any other expenses
reasonably incurred by such seller, underwriter or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission made in such
Registration Statement, preliminary prospectus or prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of such seller,
underwriter or controlling person specifically for use in the preparation
thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such
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Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise out of or are
based upon any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such seller
specifically for use in connection with the preparation of such Registration
Statement, prospectus, amendment or supplement; provided, however, that the
obligations of such Stockholders hereunder shall be limited to an amount equal
to the proceeds to each Stockholder of Registrable Shares sold in connection
with such registration.
(c) Each party entitled to indemnification under this subsection 6(c)
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 6. The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party
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represented by such counsel in such proceeding. No Indemnifying Party, in the
defense of any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified party of a release from all liability
in respect of such claim or litigation, and no Indemnified Party shall consent
to entry of any judgment or settle such claim or litigation without the prior
written consent of the Indemnifying Party.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 6 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 6 provides for
indemnification in such case or (ii) contribution under the Securities Act may
be required on the part of any such selling Stockholder or any such controlling
person in circumstances for which indemnification is provided under this Section
6; then, in each such case, the Company and such Stockholder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportions so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the proceeds to it
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of all Registrable Shares sold by it pursuant to such Registration Statement and
(B) no person or entity guilty of fraudulent misrepresentation, within the
meaning of Section 11(f) of the Securities Act, shall be entitled to
contribution from any person or entity who is not guilty of such fraudulent
misrepresentation.
7. INDEMNIFICATION WITH RESPECT TO UNDERWRITTEN OFFERING. In the event that
Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Section 2, the Company agrees to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of the securities being
registered and customary covenants and agreements to be performed by such
issuer, including without limitation customary provisions with respect to
indemnification by the Company of the underwriters of such offering.
8. INFORMATION BY HOLDER. Each holder of Registrable Shares included in any
registration shall furnish to the Company such information regarding such holder
and the distribution proposed by such holder as the Company may request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
9. [Intentionally Omitted.]
10. RULE 144 REQUIREMENTS. After the earliest of (i) the closing of the
sale of securities of the Company pursuant to a Registration Statement, (ii) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act or (iii) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:
(a) Comply with the requirements of Rule 144(c) under the Securities
Act with respect to current public information about the Company;
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(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) Furnish to any holder of Registrable Shares upon request a written
statement by the Company as to its compliance with the requirements of such Rule
144 (c) and of the reporting requirements of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company as such holder may reasonably request
to avail itself of any similar rule or regulation of the Commission allowing it
to sell any such securities without registration.
11. TERMINATION OF THIS AGREEMENT. The rights provided to any Stockholder
under this Agreement shall terminate, and be of no further force or effect, on
the earliest to occur of (a) of the tenth anniversary of the date of this
Agreement; (b) the sale of all or substantially all of the assets or business of
the Company by merger, sale of assets, sale of securities or otherwise; and (c)
the written agreement of holders of at least 50% of the voting power of the
Registrable Shares to terminate this Agreement.
12. TRANSFERS OF RIGHTS. This Agreement, and the rights and obligations of
the Purchaser hereunder, may be assigned by the Purchaser to any person or
entity to which Registrable Shares or the Note, any shares of preferred stock
issued upon conversion of the Note, or Warrant are transferred by the Purchaser
provided that each assignee agrees in writing to be bound by the provisions of
this Agreement; and each such transferee shall be deemed a "Purchaser" for
purposes of this Agreement. A
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transferee to whom rights are transferred pursuant to this Section 12 may not
again transfer such rights to any other person or entity, other than as provided
in this Section.
13. NOTICES. All notices, requests, consents and other communications under
the Agreement shall be in writing and shall be delivered:
The Manufacturers Life Insurance
Company (U.S.A.)
c/o MF Private Capital, Inc.
73 Tremont Street, Suite 1300
Boston, MA 02111
Attention: Stephen Brackett, Managing Director
with a copy to:
Peabody & Brown
101 Federal Street
Boston, MA 02110
Telecopier: (617) 345-1300
Attention: Craig D. Mills, Esq.
If to the Company to:
2d Interactive, Inc.
186 South Street
Boston, MA 02111
Attn: Lewis Chester
with a copy to:
Mintz, Levin, Cohn, Ferris
Glovsky & Popeo
One Financial Center
Boston, MA 02111
Attention: Thomas R. Burton, III, Esq.
Notices provided in accordance with this Section 13 shall be deemed delivered if
delivered in hand, sent by certified mail, postage prepaid, sent by telecopier
or by express courier service, to the appropriate address set forth above, or to
such other address as any party shall designate in a written notice to the other
parties.
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14. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
15. AMENDMENTS AND WAIVERS. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the holders of at least 50% of the voting power of the
Registrable Shares; provided, that this Agreement may be amended with the
consent of the holders of less than all Registrable Shares only in a manner
which affects all Registrable Shares in the same fashion.
16. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
17. HEADINGS. The headings of the sections, subsections and paragraphs of
this Agreement have been added for convenience only and shall not be deemed to
be a part of this Agreement.
18. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision.
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the day
and year first above written.
COMPANY:
2d INTERACTIVE, INC.
By: /s/ Dominic A. Ianno
---------------------------------
PRESIDENT
PURCHASER:
THE MANUFACTURERS LIFE INSURANCE
COMPANY (U.S.A.)
By: /s/ Ray Britt
---------------------------------
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