US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER 0-25435
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SYMPOSIUM CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-4042921
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
410 PARK AVENUE, SUITE 830, NEW YORK, NEW YORK 10022
(Address of principal executive offices)
Issuer's telephone number, including area code (212) 754-9901
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of issuer's common stock outstanding as of
July 31, 1999: 12,850,464
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Transitional Small Business Disclosure Format Yes [ ] No [X]
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TABLE OF CONTENTS
FORM 10-QSB REPORT
JUNE 30, 1999
PART I-FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-December 31, 1998 & June 30, 1999................. 3
Condensed Consolidated Statement of Operations
Six Months Ended June 30, 1999..................................................... 4
Condensed Consolidated Statement of Stockholders' Equity
Six Months Ended June 30, 1999..................................................... 5
Condensed Consolidated Statement of Cash Flows
Six Months Ended June 30, 1999..................................................... 6
Notes to Condensed Consolidated Financial Statements.................................... 7
Item 2. Management's Discussion and Analysis or Plan of Operation.......................... 9
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.................................................................. 11
Item 2. Changes in Securities and Use of Proceeds.......................................... 11
Item 3. Defaults in Senior Securities...................................................... 12
Item 4. Submission of Matters to Vote of Security Holders.................................. 12
Item 5. Other Information.................................................................. 13
Item 6. Exhibits and Reports on Form 8-K................................................... 13
(a) Exhibits........................................................................... 13
(b) Reports on Form 8-K................................................................ 13
Signatures................................................................................. 14
</TABLE>
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PART I-FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SYMPOSIUM CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------------ ------------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets: $ 1,307,590 $ 292,194
Accounts and other receivables (net of allowance for doubtful
accounts of $36,538 in 1999 and $2,994 in 1998)............. 51,746 10,197
Prepaid insurance............................................. 41,103 --
------------------ ------------------
Total current assets..................................... 1,400,439 302,391
Equipment (at cost, less accumulated depreciation)............... 31,154 22,304
Organization costs............................................... -- 25,110
Deferred business acquisitions and financing costs............... 774,706 --
------------------ ------------------
TOTAL.................................................... $ 2,206,299 $ 349,805
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued expenses................... $ 126,114 $ 71,625
Due to stockholders........................................... 2,580 3,162
------------------ ------------------
Total current liabilities................................ 128,694 74,787
------------------ ------------------
Stockholders' equity:
Preferred stock--par value, $.001 per share, authorized 10,000,000
shares;
-0- shares issued and outstanding............................. -- --
Common stock--par value $.001 per share, authorized 25,000,000
shares; issued and outstanding 12,850,464 shares in 1999 and
7,370,464 shares in 1998.................................... 12,850 7,370
Additional paid-in capital.................................... 6,072,722 587,152
Less note receivable for 2,5000,000 shares of common stock.... (2,500,000) --
(Deficit)..................................................... (1,507,967) (319,504)
------------------ ------------------
STOCKHOLDERS' EQUITY..................................... 2,077,605 275,018
------------------ ------------------
TOTAL.............................................. $ 2,206,299 $ 349,805
================== ==================
</TABLE>
The attached notes are made a part hereof.
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SYMPOSIUM CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, 1999 June 30, 1999
------------------ ------------------
<S> <C> <C>
Sales............................................................. $ 72,145 $ 168,863
Cost of sales..................................................... 28,780 47,812
------------------ ------------------
Gross profit...................................................... 43,365 121,051
Selling and administrative expenses............................... 821,436 1,318,795
------------------ ------------------
Operating (loss).................................................. (778,071) (1,197,744)
Interest and dividend income...................................... 33,194 34,391
------------------ ------------------
(Loss) before cumulative effect of change in accounting principle. (744,877) (1,163,353)
Write off of deferred organization costs at January 1, 1999....... (25,110)
------------------ ==================
Net (loss) $ (744,877) $ (1,188,463)
================== ==================
Net (loss) per basic and diluted share of common stock:
Before cumulative effect of change in accounting principle..... $ (0.07) $ (0.13)
Cumulative effect of change in accounting principle............ -- --
------------------ ------------------
Net (loss) per share....................................... $ (0.07) $ (0.13)
------------------ ------------------
Weighted average common shares outstanding basic and fully diluted 10,646,035 9,064,121
================== ==================
</TABLE>
The attached notes are made a part hereof.
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SYMPOSIUM CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Common Stock Note Receivable
------------------------ -----------------------
Additional
Number of Paid-In Number of
Shares Amount Capital Shares Amount Deficit
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance-January 1, 1999..... 7,370,464 $ 7,370 $ 587,152 $ (319,504)
Net (loss) for the six
months ended June 30,
1999..................... (1,188,463)
Sales of common stock....... 5,085,000 5,085 4,854,915 2,500,000 $(2,500,000)
Stock warrants issued
for services pending
business acquisitions
and financing............ 236,050
Common stock issued for
services pending
business acquisitions
and financing............ 395,000 395 394,605
---------- ---------- ---------- ---------- ---------- ----------
TOTALS 12,850,464 $ 12,850 $6,072,722 2,500,000 $(2,500,000) $ (1,507,96)
========== ========== ========== ========== ========== ==========
</TABLE>
The attached notes are made a part hereof.
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SYMPOSIUM CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1999
-----------------
<S> <C>
NET INCREASE (DECREASE) IN CASH
Cash flows from operating activities
Net (loss)........................................................................... $ (1,188,463)
Adjustments to reconcile results of operations to
net cash effect of operating activities:
Value of 200,000 shares of common stock issued for services...................... 200,000
Value of warrants to purchase 10,000 shares of common stock issued for services.. 26,900
Bad debt expense................................................................. 69,313
Depreciation..................................................................... 6,327
Loss on sale of equipment........................................................ 16,740
Write off of deferred organization costs......................................... 25,110
Net change in asset and liability accounts:
Accounts and other receivables................................................ (110,862)
Prepaid insurance............................................................. (41,103)
Accounts payable and other accrued expenses................................... 54,489
Due to stockholders........................................................... (582)
-----------------
Net cash used for operating activities...................................... (942,131)
-----------------
Cash flows from investing activities:
Purchase of equipment................................................................ (35,417)
Proceeds from sale of equipment...................................................... 3,500
Deferred business acquisition costs.................................................. (370,556)
-----------------
Net cash used for investing activities...................................... (402,473)
-----------------
Cash flows from financing activities:
Net proceeds from sale of common stock............................................... 2,360,000
-----------------
NET INCREASE IN CASH 1,015,396
Cash-January 1, 1999................................................................... 292,194
-----------------
Cash-June 30, 1999..................................................................... $ 1,307,590
=================
Supplemental disclosure of noncash activities:
Common shares issued for note receivable............................................ $ 2,500,000
=================
Value of 195,000 shares of common stock issued as payment for pending business
acquisitions and financing costs....................................................... $ 195,000
=================
Value of warrants to purchase 815,000 shares of common stock issued as payment for
pending business acquisitions and financing costs...................................... $ 209,150
=================
</TABLE>
The attached notes are made a part hereof.
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SYMPOSIUM CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS AT JUNE 30, 1999
1. The attached summarized financial information does not include all
disclosures required to be included in a complete set of financial
statements prepared in conformity with generally accepted accounting
principles. Such disclosures were included with the consolidated
financial statements of the Company at December 31, 1998, included in
Form 10-SB filed with the Securities and Exchange Commission.
2. The financial information reflects all normal recurring adjustments
which, in the opinion of management, are deemed necessary for a fair
presentation of the results for the interim period. The results for the
interim period are not necessarily indicative of the results to be
expected for the year.
3. The Company has adopted the provisions of Statement of Position No.
98-5(SOP 98-5) of the Accounting Standards Division of the American
Institute of Certified Public Accountants, which became effective on
January 1, 1999. SOP 98-5 requires that the cost of start-up activities,
which include organization costs, be written off as incurred and that
any costs previously deferred be written off in the year of adoption of
SOP 98-5 and reflected separately in the statement of operations.
Accordingly, the Company has written-off the $25,110 unamortized balance
of its organization costs at January 1, 1999.
4. In June 1999, the Company entered into a Stock Purchase Agreement to
acquire for $5,000,000 50.1% of the common stock of AmeriNet, Inc.
("AmeriNet"). AmeriNet offers a complete direct electronic debit service
both to merchants selling goods over the Internet as a method of payment
by the customer and as a service for business-to-business transactions.
In connection with the agreement, the Company has made a $250,000 loan
to AmeriNet, which bears interest at 8%. The loan plus accrued interest
will be used to reduce the cash payment made upon the acquisition of the
AmeriNet stock and has been included in deferred acquisition and
financing costs at June 30, 1999. The agreement provides for an
additional loan of $750,000 which would further reduce the cash payment
made at closing. The agreement, which may be terminated by either party,
is contingent upon the Company's ability to obtain financing. There can
be no assurance that the acquisition will occur.
5. In June 1999, the Company entered into an option agreement to acquire
the assets and assume certain liabilities of Direct Sales International,
L.P. ("DSI") and its subsidiaries. DSI is a subscription sales agent
provider for consumer magazines in the United States. The purchase price
is $22.9 million plus an amount equal to DSI's outstanding balance at
the closing under its loan facility divided by .555. The Company may
exercise the option at any time on or before November 30, 1999. The
Company's ability to exercise the option will depend in part on its
ability to obtain sufficient financing.
In connection with the option agreement, the Company entered into a
Stock Purchase Agreement with Richard Prochnow, the sole shareholder of
DSI's general partner. Pursuant to the agreement, the Company issued to
Mr. Prochnow 2,500,000 shares of its common stock at $1.00 per share.
Mr. Prochnow paid for the shares with a promissory note which bears
interest at 7.75% and is payable at the earlier of December 31, 2000 or
the closing date of the Company's purchase of the DSI assets if the
Company elects to exercise its option. The note is secured by the issued
shares and by a 25% limited partnership interest in DSI.
The Stock Purchase Agreement provides that if the Company does not
acquire all or substantially all of the assets or equity interests of
DSI on or before November 30, 1999, Mr. Prochnow may elect to rescind
his purchase by giving the Company notice on or before December 10,
1999. If this occurs, Mr. Prochnow would return the shares to the
Company and the Company would cancel Mr. Prochnow's promissory note. If
Mr. Prochnow does not choose to rescind his purchase of the shares, the
Company would have the right to purchase a 25% limited partnership
interest in DSI from Mr. Prochnow in consideration of the Company's
return to Mr. Prochnow of his promissory note. If Mr. Prochnow does not
elect to rescind his purchase of the shares, the Company would have the
right to repurchase all or any portion of such shares
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SYMPOSIUM CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS AT JUNE 30, 1999
for a purchase price of $1.20 per share. The Company may exercise this
right at any time from December 10, 1999 until June 2, 2000. The Company
may pay the purchase price with a 25% limited partnership interest in
DSI (if the Company owns such interest), or with cash, cancellation of
Mr. Prochnow's promissory note or any combination of cash or note
cancellation that equals the aggregate purchase
price.
If the Company acquires the DSI assets by exercising the option, the
Company will grant Mr. Prochnow registration rights acceptable to Mr.
Prochnow and the Company with respect to the Prochnow shares.
6. In December 1998, the Company entered into an agreement to acquire
Hamilton Telecommunications Limited ("Hamilton"), an international
audiotext service operator. Under the agreement, the Company will pay to
Hamilton's shareholders cash in the amount of $5.75 million at closing
and up to an additional $3.0 million prior to the end of the year based
on Hamilton's results of operations for the year ended June 30, 1999.
7. In July 1999, the Company discontinued the operations of its Publishers
Advantage Corp. ("PAC") subsidiary. The operations of PAC have been
included in the consolidated statement of operations for the three and
six months ended June 30, 1999 and are summarized as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
JUNE 30, 1999 JUNE 30, 1999
------------- -------------
<S> <C> <C>
Sales $ 72,145 $ 168,863
Net loss $(105,011) $(136,511)
</TABLE>
Operations similar to those conducted by PAC are expected to be
conducted by the Company in the future at a new location.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read together with the
Condensed Consolidated Financial Statements of Symposium and the notes to the
Condensed Consolidated Financial Statements included elsewhere in this Form
10-QSB.
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and liquidity and cash flows
of Symposium for the six months ended June 30, 1999. Except for historical
information, the matters discussed in this Management's Discussion and Analysis
or Plan of Operation are forward looking statements that involve risks and
uncertainties and are based upon judgments concerning various factors that are
beyond our control. Actual results could differ materially from those projected
in the forward looking statements.
INTRODUCTION
The Company's principal business strategy is to identify, acquire and
consolidate companies in niche markets and direct marketing financial services.
Symposium targets companies in fragmented industries which management believes
have the following characteristics: (i) require low capital expenditures; (ii)
have prominent positions in niche markets; and (iii) have potential for high
growth rate and high rate of return on investment. In furtherance of this
strategy, Symposium has entered into the following agreements:
(a) In December 1998, the Company entered into an agreement to acquire all
the outstanding shares of Hamilton Telecommunications Limited
("Hamilton"), which is an international audiotext service operator. The
international audiotext business allows customers to access a variety of
types of information by making international direct dial telephone calls
that are billed to their regular monthly telephone bills.
(b) In December 1998, the Company purchased an option to acquire all of the
outstanding capital stock of Automated Communications Limited ("ACL"), a
start up business which intends to engage primarily in the provision of
international audiotext services to customers in the United States.
(c) In June 1999, the Company purchased an option to acquire on or prior to
November 30, 1999 all of the assets of Direct Sales International L.P.
("DSI"), an Atlanta, Georgia based subscription sales agent provider for
consumer magazines in the United States; and
(d) In June 1999, the Company entered into an agreement to acquire shares
representing 50.1% of the outstanding capital stock of AmeriNet, Inc.
("AmeriNet"), a company which offers a complete direct electronic debit
service both to merchants selling goods over the Internet as a method of
payment by the customer and as a service for business to business
transactions.
The Company is still in the process of due diligence with respect to the
potential acquisition of DSI and AmeriNet. Further, the Company does not have
the funds to exercise these options or complete the acquisition of any of these
companies. The Company has begun discussions to raise the necessary funds.
However, the Company has no commitment from, and no understandings with, any
party with regard to purchasing any of the securities offered in the private
placement. No assurance can be given that the Company will be able to raise the
funds on terms acceptable to the Company. If a significant part of these funds
is raised through the sale of equity securities, it is likely that the investors
as a group would acquire a significant equity interest in the Company.
In August 1999 the Company and the shareholders of Hamilton agreed to
extend the date after which either could terminate the purchase agreement (if
the closing had not occurred) from August 14, 1999 to September 30, 1999.
From December 1998 through June 30, 1999, the Company engaged
principally in telemarketing magazine and periodical subscriptions through its
subsidiary Publishers Advantage Corporation. The Company discontinued these
operations as of June 30, 1999 because: (i) the Company did not want to divert
management resources from completing its pending acquisitions; (ii) the Company
terminated its relationship with its provider of "turnkey" telemarketing
services, and did not want to incur the start-up costs of its own telemarketing
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operations, particularly in light of the fact that those operations could be
conducted through DSI if the Company exercised its option to acquire DSI; and
(iii) Publishers Advantage was generating less revenues than anticipated.
RESULTS OF OPERATIONS
During the six months ended June 30, 1999 the Company generated revenues
solely from telemarketing through its Publishers Advantage subsidiary. These
revenues were $20,479, net of $51,666 of cancellations in the quarter ended June
30, 1999 and $99,550, net of $69,313 of cancellations for the six months ended
June 30, 1999. Cost of sales, including commissions to sales agents and to
publishers for their portion of the subscription price, were $28,780 and
$47,812, yielding a gross profit of $43,365 and $121,051 for the three and six
months ended June 30, 1999, respectively.
During the quarter ended June 30, 1999 and the six months ended June 30,
1999, the Company incurred general and administrative expenses at the Publishers
Advantage subsidiary, and also at the New York and London, England offices of
the corporate parent, totaling $821,436 and $1,318,795, respectively. The
general and administrative expenses during the quarter ended June 30, 1999
included, among others, consulting and payroll expenses of $478,719 and legal
and accounting expenses of $68,415. The general and administrative expenses
during the six months ended June 30, 1999 included, among others, consulting and
payroll expenses of $697,724 and legal and accounting expenses of $195,558. As a
result, the Company recorded net operating losses of $744,877 and $1,188,463 for
the quarter ended June 30, 1999 and the six months ended June 30, 1999,
respectively.
FINANCIAL CONDITION AND LIQUIDITY
For the six months ended June 30, 1999, the Company used net cash of
$942,131 in operations. At June 30, 1999 accounts and other receivables were
$51,746 (net of allowance for doubtful accounts). Although the lengths of the
magazine subscriptions can and often do run for more than one year, the entire
amount due for the subscriptions are paid for by the consumer in twelve equal
monthly installments. Accounts payable and other accrued expenses at June 30,
1999 totaled $126,114 primarily due to legal fees incurred in connection with
the Hamilton, DSI and AmeriNet transactions. At June 30, 1999 the Company
recorded as an asset deferred business acquisition and financing costs,
including, among others, legal and consulting services, of $774,706 in
connection with the Hamilton, DSI and AmeriNet transactions.
In June 1999 the Company issued and sold 2,500,000 shares of Common
Stock for a secured promissory note in the amount of $2,500,000. See Note 5 of
Notes to Condensed Consolidated Financial Statements included in this Form
10-QSB.
At June 30, 1999, the Company had cash on hand of $1,307,590. The
Company believes that this cash on hand will be sufficient to fund its operating
expense for the remainder of 1999. However, the Company does not have the funds
to complete any of the potential acquisitions described above.
YEAR 2000 ISSUES
Many existing computer programs were designed and developed without
considering the upcoming change in the century, which could lead to the failure
of computer applications or create erroneous results by or at the Year 2000. The
Year 2000 issue is a broad business issue, whose impact extends beyond
traditional computer hardware and software to possible failure of automated
systems and instrumentation. Based on its current assessment, the Company
believes that the limited amount of software and automated systems and
instrumentation that it owns is Year 2000 compliant. However, the Company relies
on local telephone companies to be able to provide its telemarketing services.
While the Company believes that these telephone companies have devoted
substantial amounts of time and money to ensure that their equipment is Year
2000 compliant, if they are unable to identify Year 2000 issues and are unable
to resolve such issues in a timely manner, it could result in a material
financial risk to the Company. Also, there can be no guarantee that other third
parties of business importance to the Company, will successfully reprogram or
replace, and test, all of their own computer hardware, software and process
control systems to ensure such systems are Year 2000 compliant.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 31, 1999, Symposium issued warrants to purchase 10,000 shares
of common stock for $1.00 per share expiring on March 3, 2002 to Tom Mosey for
telemarketing services. The issuance and sale of these securities was made in
reliance on Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") as a transaction not involving any public offering, based on:
(1) the fact that Tom Mosey was an accredited investor and represented that he
was acquiring the securities for investment purposes; and (2) the Company did
not engage in any general advertisement or general solicitation in connection
with the issuance of the securities.
On June 1, 1999, Symposium issued to M.H. Meyerson & Co., Inc., as
consideration for investment banking services to be provided, warrants to
purchase 125,000 shares of common stock for $4.00 per share and warrants to
purchase 125,000 shares for $8.00 per share. Of these warrants, 62,500 were
immediately vested and the balance vest at various times from December 1999 to
June 2001, subject to continued retention of M. H. Meyerson & Co., Inc. These
warrants expire on June 30, 1999. The issuance and sale of these securities was
made in reliance on Section 4(2) of the Securities Act as a transaction not
involving any public offering, based on: (1) the fact that M.H. Meyerson & Co.,
Inc. represented that it was an accredited investor and was acquiring the
securities for investment purposes; and (2) the Company did not engage in any
general advertisement or general solicitation in connection with the issuance of
the securities.
On June 9, 1999, Symposium issued warrants to purchase 500,000 shares of
common stock for $1.00 per share expiring on June 30, 2002 to Wilshire Boulevard
Partners LLC in connection with the introduction to the Company of DSI and
AmeriNet. Of these warrants, 100,000 warrants vest only if the Company acquires
a majority interest in AmeriNet and 400,000 warrants vest only if the Company
acquires DSI. The issuance and sale of these securities was made in reliance on
Section 4(2) of the Securities Act as a transaction not involving any public
offering, based on: (1) the fact that Wilshire Boulevard Partners LLC
represented that it was an accredited investor and was acquiring the securities
for investment purposes; and (2) the Company did not engage in any general
advertisement or general solicitation in connection with the issuance of the
securities.
On June 9, 1999, Symposium issued warrants to purchase 10,000 shares of
common stock for $1.00 per share expiring on March 31, 2002 to Charles
Spencer-Churchill as a finder's fee for introducing the Company to T. Hoare &
Co. The issuance and sale of these securities was made without registration
under the Securities Act in reliance on Section 4(2) of the Securities Act as a
transaction not involving any public offering based on: (1) the fact that
Charles Spencer-Churchill represented that he was an accredited investor and was
acquiring the securities for investment purposes; and (2) the Company did not
engage in any general advertisement or general solicitation in connection with
the issuance of the securities.
On June 9, 1999, Symposium issued warrants to purchase 10,000 shares of
common stock for $3.50 per share expiring on June 30, 2002 to Orbit Capital
Corporation as rent for the Company's principal offices in New York for an
18-month period. The issuance and sale of these securities was made in reliance
on Section 4(2) of the Securities Act as a transaction not involving any public
offering, based on: (1) the fact that Orbit Capital Corporation represented that
it was an accredited investor and was acquiring the securities for investment
purposes; and (2) the Company did not engage in any general advertisement or
general solicitation in connection with the issuance of the securities.
On June 9, 1999, Symposium issued warrants to purchase 40,000 shares of
common stock for $3.50 per share expiring on June 21, 2004 to The Equity Group
in connection with the retention of The Equity Group as a consultant to provide
financial public relations and investor relations services to the Company. Of
these warrants, 10,000 were immediately vested and the balance vest at various
times from December 1999 through June 2000, subject to continued retention of
The Equity Group. The issuance and sale of these securities was made in reliance
on Section 4(2) of the Securities Act as a transaction not involving any public
offering, based on: (1) the fact that The Equity Group was an accredited
investor and represented that it was acquiring the securities for investment
purposes; and (2) the Company did not engage in any general advertisement or
general solicitation in connection
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with the issuance of the securities.
On June 9, 1999, Symposium issued warrants to purchase 5,000 shares of
common stock for $3.50 per share expiring on June 30, 2002 to Coffin
Communications in consideration for financial public relations services rendered
to the Company. The issuance and sale of these securities was made in reliance
on Section 4(2) of the Securities Act as a transaction not involving any public
offering, based on: (1) the fact that Coffin Communications represented that it
was an accredited investor and was acquiring the securities for investment
purposes; and (2) the Company did not engage in any general advertisement or
general solicitation in connection with the issuance of the securities.
On June 9, 1999, Symposium issued to Hermitage Capital Corporation
35,000 shares of common stock for investment banking services rendered to the
Company. The issuance and sale of these securities was made in reliance on
Section 4(2) of the Securities Act as a transaction not involving any public
offering, based on: (1) the fact that Hermitage Capital Corporation represented
that it was an accredited investor and was acquiring the securities for
investment purposes; and (2) the Company did not engage in any general
advertisement or general solicitation in connection with the issuance of the
securities.
On June 9, 1999, Symposium issued to Nordic Property and Investments
Limited 120,000 shares of common stock for financial public relations services
and investment relations activities rendered to the Company. The issuance and
sale of these securities was made in reliance on Section 4(2) of the Securities
Act as a transaction not involving any public offering, based on: (1) the fact
that Nordic Property represented that it was an accredited investor and was
acquiring the securities for investment purposes; and (2) the Company did not
engage in any general advertisement or general solicitation in connection with
the issuance of the securities.
On June 9, 1999, Symposium issued to LSG Limited 30,000 shares of common
stock for consulting services rendered to the Company and the introduction to
the Company of various potential financing sources in Europe. The issuance and
sale of these securities was made in reliance on Section 4(2) of the Securities
Act as a transaction not involving any public offering, based on: (1) the fact
that LSG Limited represented that it was an accredited investor and was
acquiring the securities for investment purposes; and (2) the Company did not
engage in any general advertisement or general solicitation in connection with
the issuance of the securities.
On June 9, 1999, Symposium issued to Dieter Wicki 10,000 shares of
common stock for introduction to the Company of various potential financing
sources in Europe. The issuance and sale of these securities was made in
reliance on Section 4(2) of the Securities Act as a transaction not involving
any public offering, based on: (1) the fact that Dieter Wicki represented that
he was an accredited investor and was acquiring the securities for investment
purposes; and (2) the Company did not engage in any general advertisement or
general solicitation in connection with the issuance of the securities.
On June 9, 1999, Symposium issued to Richard Prochnow 2,500,000 shares
of common stock for $1.00 per share, paid for by a promissory note in the
principal amount of $2,500,000 bearing interest at an annual rate of 7.75% and
due and payable on the earlier of December 31, 2000 or the closing date of the
Company's purchase of the assets of DSI if the Company decides to exercise its
option to purchase such assets. If Symposium does not acquire all or
substantially all of the assets or equity interests of DSI on or before November
30, 1999, Mr. Prochnow may elect to rescind his purchase of the shares by giving
notice to the Company on or before December 10, 1999. The issuance and sale of
these securities was made in reliance on Section 4(2) of the Securities Act as a
transaction not involving any public offering based on: (1) the fact that
Richard Prochnow represented that he was an accredited investor and was
acquiring the securities for investment purposes; and (2) the Company did not
engage in any general advertisement or general solicitation in connection with
the issuance of the securities.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Shareholders holding 5,999,000 shares of Common Stock, representing 59%
of the issued and outstanding Common Stock, approved the following actions by
written consent in April 1999:
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<PAGE>
(a) An amendment to the Certificate of Incorporation changing the
name of the corporation from "Symposium Telecom Corporation" to
"Symposium Corporation"; and
(b) The 1998 Stock Option Plan.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Stock Purchase Agreement dated June 2, 1999 by and among
Symposium Corporation, AmeriNet,
Inc., Richard Prochnow and David Kerlin.
2.2 Option Agreement dated June 9, 1999 by and among Symposium
Corporation, Direct Sales International L.P., and Richard
Prochnow.
3.1 Amended and Restated Bylaws of Symposium Corporation.
10.1 Employment Agreement dated as of January 1, 1999 with Ronald
Altbach.
10.2 Consulting Agreement dated as of January 1, 1999 with Executive
Management Services.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
1. Form 8-K filed on June 28, 1999 announcing (1) the
purchase of an option to acquire all the assets of
Direct Sales International, L.P., and (2) the entering
into an agreement to acquire 50.1% of the outstanding
common stock of AmeriNet, Inc.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on behalf by the undersigned, thereto duly
authorized.
SYMPOSIUM CORPORATION
Date: August __, 1999 By: /s/ RUPERT GALLIERS-PRATT
-----------------------------
Rupert Galliers-Pratt
CO-CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Date: August __, 1999 By: /s/ RONALD ALTBACH
-----------------------------
Ronald Altbach
CO-CHAIRMAN AND CHIEF OPERATING OFFICER
Page 14
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of June 2, 1999 (the "EFFECTIVE DATE"), by and among Symposium
Corporation, a Delaware corporation (the "PURCHASER"), AmeriNet, Inc., an Oregon
corporation (the "ISSUER"), Richard Prochnow ("PROCHNOW") and David Kerlin
("KERLIN," and together with Prochnow, the "SHAREHOLDERS"), with reference to
the following facts:
A. The Shareholders currently own all of the issued and outstanding
capital stock of the Issuer.
B. On the terms and subject to the conditions set forth in this
Agreement, the Issuer desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Issuer, that number of newly issued
shares of the Issuer's Common Stock as shall equal one share more than the sum
of: (a) the number of outstanding shares of the Common Stock immediately prior
to the Closing; and (b) the maximum number of shares of capital stock of the
Issuer which could be purchased upon exercise of Stock Equivalents of the Issuer
immediately prior to the Closing.
NOW, THEREFORE, with reference to the foregoing facts, the parties
hereto agree as follows:
1. DEFINITIONS.
1.1 CERTAIN DEFINITIONS. All terms defined in this Agreement shall have
the defined meanings when used in this Agreement, unless otherwise defined or
the context otherwise requires. The following terms shall have the following
meanings:
"ACTION" means any litigation, action, suit, proceeding, arbitration or
claim before any court or Governmental Authority, or investigation by any
Governmental Authority.
"ADDITIONAL LOAN" shall mean a loan of $750,000 from Purchaser to
Issuer as contemplated by Section 2.4 of this Agreement.
"AFFILIATE" shall mean, with respect to any specified Person, (i) any
other Person who, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(ii) any other Person who is a director, officer, manager, member, partner or
trustee of the specified Person or a Person described in clause (i) of this
definition or any spouse of the specified Person or any such other Person, (iii)
any relative of the specified Person or any other Person described in clause
(ii) of this definition, or (iv) any Person of which the specified Person and/or
any one or more of the Persons specified in clause (i),(ii) or (iii) of this
definition, individually or in the aggregate, beneficially own 10% or more of
any class of voting securities or otherwise have a substantial beneficial
interest. For purposes of this definition, "control" shall have the meaning for
such term set forth in Rule 405 under the Securities Act.
"ANNUAL FINANCIAL STATEMENTS" shall mean the consolidated balance
sheets of the Issuer as at December 31, 1997 and 1998 and the related
consolidated statements of operations,
<PAGE>
changes in shareholders' equity and cash flows for the fiscal years then ended,
including, without limitation, the notes (and schedules) to these financial
statements.
"BEST EFFORTS" shall mean the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that the result
is achieved as expeditiously as practicable under the circumstances; PROVIDED,
HOWEVER, that an obligation to use Best Efforts under this Agreement does not
require the Person subject to that obligation to (i) take actions that would
result in a material adverse change in the benefits to such Person under this
Agreement or the transactions contemplated by this Agreement, (ii) make any
significant cash payments or (iii) incur any significant liability or
obligation.
"BEST KNOWLEDGE" with respect to any Person shall mean and include (i)
the actual knowledge of the Person, including the actual knowledge of any of the
officers, directors or managers of such Person, and (ii) that knowledge which a
prudent businessperson could have obtained in the management of his business
after making due inquiry, and after exercising due diligence, with respect
thereto.
"BUSINESS" means the providing of ACH payment option solutions for
Internet commerce, audiotext service bureaus, infomercial order processing and
other direct marketing sales, and all business activities of the Issuer relating
thereto, and any other business the Issuer engages in after the date hereof.
"BUSINESS CONDITION" of any Person shall mean the financial condition,
results of operations, business, properties or prospects of such Person.
"BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
are authorized or required by law or executive order to close.
"CHARTER DOCUMENTS" shall mean with respect to the Issuer or the
Purchaser, the Certificate of Incorporation and By-Laws of the Issuer or the
Purchaser.
"CLOSING" shall mean the closing of the purchase and sale of the
Shares.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean the common stock, no par value per share,
of the Issuer.
"CONTRACT" shall mean any written or oral note, bond, debenture,
mortgage, license, agreement, commitment, contract or understanding.
"COPYRIGHTS" shall mean all United States and foreign copyrights,
whether or not registered.
"CURRENT BALANCE SHEET" shall mean the unaudited consolidated balance
sheet of the Issuer as at March 31, 1999.
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<PAGE>
"CURRENT FINANCIAL STATEMENTS" shall mean the Current Balance Sheet and
the related unaudited consolidated statement of operations and cash flows for
the three months ended March 31, 1999.
"EMPLOYEE PLANS" with respect to any Person shall mean any plan,
arrangement or Contract providing compensation or benefits to, for or on behalf
of employees and/or directors of such Person, including employment, deferred
compensation, retirement or severance Contracts; plans pursuant to which Equity
Securities are issued, including, without limitation, stock purchase, stock
option and stock appreciation rights plans; bonus, thrift, pension, savings,
insurance, profit sharing, severance, loan guaranty, employee loan or incentive
compensation plans or arrangements; supplemental unemployment benefit,
hospitalization or other medical, life, dental, vision, health care or other
insurance; and ERISA Plans.
"ENVIRONMENTAL LAWS" shall mean all present and future statutes,
regulations, rules, ordinances, codes, licenses, permits, orders, approvals,
plans, authorizations, concessions, franchises, and similar items, of all
Governmental Authorities and all applicable judicial, administrative, and
regulatory decrees, judgments, and orders relating to Hazardous Substances or
the protection of the environment in any respect, including, without limitation:
(i) all requirements, including, without limitation, those pertaining to
notification, warning, reporting, licensing, permitting, investigation, and
remediation of Hazardous Substances; (ii) all requirements pertaining to the
protection of employees or the public from exposure to Hazardous Substances or
injuries or harm associated therewith; and (iii) the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss.9601 eT Seq.), the
Resource Conservation and Recovery Act (49 U.S.C. ss.6901 eT Seq.), the
Hazardous Materials Transportation Act (49 U.S.C. ss.1801 et SEQ.), the Clean
Air Act (42 U.S.C. ss.7401 et Seq.), the Occupational Safety and Health Act (29
U.S.C. ss.600 eT Seq.), and all similar federal, state, local and municipal laws
as they may from time to time be modified, amended or superseded.
"EQUITY SECURITIES" of any Person shall mean the capital stock,
partnership interests or membership interests of such Person and/or any Stock
Equivalents of such Person.
"EXPLOIT" shall mean manufacture, advertise, license, market,
merchandise, promote, publicize, sell, use, supply or distribute, and
"Exploitation" and "Exploited" shall have a correlative meaning.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"HAZARDOUS SUBSTANCE" means those substances defined as hazardous
substances in 42 U.S.C. ss. 9601(14) and all other substances defined as
hazardous under other applicable Laws.
"INDEBTEDNESS" means, with respect to any Person, (i) any liability,
contingent or otherwise, (a) for borrowed money, capitalized lease obligations,
purchase money obligations or other obligations relating to the deferred
purchase price of assets or property or (b) evidenced by a note, bond,
debenture, letter of credit or similar instrument given in connection with the
acquisition,
Page 3
<PAGE>
other than in the ordinary course of business, of any property, assets,
securities or otherwise, including, without limitation, indebtedness created or
arising under conditional sale or other title retention agreements (even though
the rights and remedies of the seller or lender under the agreements in the
event of default are limited to repossession or sale of the property), (ii) any
liability of others described in the preceding clause which such Person has
guaranteed or which otherwise is its legal liability, (iii) all indebtedness
referred to above secured by (or for which the holder of the indebtedness has an
existing right, contingent or otherwise, to be secured by), any Lien upon the
property of such Person, whether or not the obligations secured thereby have
been assumed, and (iv) any amendment, renewal, extension or refunding of any
liability referred to in clauses (i), (ii) and (iii) above; PROVIDED, however,
that Indebtedness does not include any trade payables of any Person incurred in
the ordinary course of business. The amount of Indebtedness of any Person at any
date shall be the outstanding balance at the date of all unconditional
obligations as described above and the maximum amount of any contingent
obligations at the date.
"INITIAL LOAN" shall mean a loan in the amount of $250,000 from
Purchaser to Issuer as contemplated by Section 2.3 of this Agreement.
"INITIAL NOTE" shall mean the promissory note of the Issuer evidencing
the Initial Loan, which shall be in the form of ANNEX B to this Agreement or
such other form as the Issuer and the Purchaser may agree.
"IP" shall mean Patents, Trademarks, Copyrights, Know-How and other
rights and property commonly referred to as intellectual property, and rights or
licenses to use the same, and any and all applications therefor.
"ISSUER CONTRACT" shall mean any Contract to which the Issuer is a
party or by which any assets or properties of the Issuer is subject.
"ISSUER IP" shall mean all IP that the Issuer owns, licenses and/or
uses.
"KERLIN EMPLOYMENT AGREEMENT" shall mean an employment agreement
effective as of the Closing between Kerlin as employee and the Issuer as
employer, in form and substance satisfactory to Kerlin, the Issuer and the
Purchaser.
"KNOW-HOW" shall mean all inventions, processes, systems,
methodologies, controls, trade secrets, know-how (including, without limitation,
proprietary know-how and use and application know-how), product designs,
drawings, technology, other intangibles, technical information, safety
information, engineering data and design and engineering specifications,
research records, market surveys, promotional literature, supplier lists,
similar data and formulas and processes.
"LAW" shall mean any federal, state or local statute, law, rule,
regulation, ordinance, order, code, policy or rule of common law, now or
hereafter in effect, and in each case as amended, and any judicial or
administrative interpretation thereof by a Governmental Authority or otherwise,
including, without limitation, any judicial or administrative order, consent,
decree or judgment.
"LIEN" shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or
Page 4
<PAGE>
other security agreement or preferential arrangement, charge, or encumbrance of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction to evidence any of the foregoing).
"LOSSES" shall mean losses, liabilities, damages, claims, fines,
penalties, judgments, demands, actions or causes of action, regulatory,
legislative or judicial proceedings or investigations, assessments, levies,
costs and expenses, including, without limitation, reasonable attorneys',
accountants', investigators', and experts' fees and expenses, sustained or
incurred in connection with the defense or investigation of any claim or action.
"NOTE" shall mean the convertible promissory note of the Issuer
evidencing the Additional Loan, the unpaid balance of the Initial Loan at the
Additional Loan Closing Date and all accrued and unpaid interest on the Initial
Loan at the Additional Loan Closing Date, which shall be in the form of Annex C
to this Agreement or such other form as the Purchaser and the Issuer may agree.
"PATENTS" shall mean all patents (including, without limitation, all
reissues, divisions, continuations, continuations in part and extensions
thereof), patent applications and patent disclosures docketed and all other
patent rights.
"PERMITS" shall mean all governmental franchises, licenses, approvals,
authorizations and permits that are held or used by the Issuer in connection
with the Business, the Assets or the Premises.
"PERSON" shall mean an individual or a partnership, corporation, trust,
association, limited liability company, Governmental Authority or other entity.
"PREMISES" shall mean collectively the Issuer's facilities located
at Three Centerpointe Drive, Suite 125, Lake Oswego, Oregon 97035, and at
U.S. 19 North, Clearwater, Florida.
"PRODUCTS" shall mean all items, products or systems of the Issuer used
in the operation of the Business which incorporate the processing of dates and
date-related data (including, without limitation, calculating, comparing and
sequencing) that are operationally material to the Business as conducted by the
Issuer or its agents or other third parties, including, without limitation,
computer systems, infrastructure items, software applications, hardware, and
related equipment and utilities.
"PURCHASE PRICE" shall mean $5,000,000.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHAREHOLDERS AGREEMENT" shall mean a shareholders agreement among the
Issuer, the Purchaser and the Shareholders, which agreement shall be on the
terms and conditions set forth on ANNEX A in form satisfactory to the parties
thereto, or such other terms and conditions as the parties may agree.
Page 5
<PAGE>
"STOCK EQUIVALENTS" of any Person shall mean options, warrants, calls,
rights, commitments, convertible securities and other securities pursuant to
which the holder, directly or indirectly, has the right to acquire (with or
without additional consideration) capital stock, partnership interests or
membership interests of such Person.
"SUBSIDIARY" of any Person shall mean any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly by such Person.
"TAXES" shall mean all taxes, charges, fees, levies or other
governmental assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs, duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign).
"TAX LIABILITIES" shall mean all liabilities related to Taxes.
"TAX RETURNS" shall mean all foreign, federal, state and local returns
relating to Taxes.
"TRADEMARKS" shall mean all trademark, service mark and trade name
rights (including, without limitation, all registrations of trademarks and of
other marks, all registrations of trade names, labels and other trade rights and
applications for any of the foregoing), the name "AmeriNet" and any variation
thereof, and all associated goodwill symbolized thereby or connected therewith.
"TRANSFER" shall mean sell, assign, transfer, pledge, grant a security
interest in, or otherwise dispose of, with or without consideration, and
"TRANSFERRED" shall have a correlative meaning.
"YEAR 2000 COMPLIANT" shall mean that all Products accurately process
dates and date-related data (including, without limitation, calculating,
comparing and sequencing) in all material respects before, during and after the
year 2000.
1.2 OTHER DEFINITIONS. The following terms shall have the meanings
given the terms in the Sections set forth below:
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Acquisition Proposal.............................. Section 7.3
Additional Loan Closing........................... Section 3.2
Additional Loan Closing Date...................... Section 3.2
Agreement......................................... Preamble
</TABLE>
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<PAGE>
Closing........................................... Section 3.3
Closing Date...................................... Section 3.3
Damages........................................... Section 11.2
Effective Date.................................... Preamble
Initial Loan Closing.............................. Section 3.1
Initial Loan Closing Date......................... Section 3.1
Issuer Disclosure Letter.......................... Section 5
Jurisdictions..................................... Section 5.8
Kerlin............................................ Preamble
Material Contract................................. Section 5.7
Notices........................................... Section 14.1
Prochnow.......................................... Preamble
Purchaser......................................... Preamble
Purchaser Indemnified Parties..................... Section 11.2
Shares............................................ Section 2.1
Shareholders...................................... Preamble
1.3 CONSTRUCTION OF CERTAIN TERMS AND PHRASES. Unless the context
otherwise requires, (a) words of any gender include each other gender; (b) words
using the singular or plural number also include the plural or singular number,
respectively; (c) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; (d) the terms "Article" or
"Section" refer to the specified Article or Section of this Agreement; (e) the
terms "and" and "or" include the term "and/or" when the context is appropriate;
and (f) the phrases "ordinary course of business" and "ordinary course of
business consistent with past practice" refer to the business and practice of
the Person specified. Whenever this Agreement refers to a number of days, such
number shall refer to calendar days unless Business Days are specified. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP. Whenever this Agreement refers to an Annex,
Exhibit or Schedule attached hereto, the Annex, Exhibit or Schedule shall be
deemed to be incorporated by reference.
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<PAGE>
2. PURCHASE AND SALE OF SHARES; INITIAL LOAN; ADDITIONAL LOAN.
2.1 PURCHASE AND SALE OF SHARES. On the terms and subject to the
conditions of this Agreement, at the Closing, the Purchaser shall purchase from
the Issuer and the Issuer shall issue and sell to the Purchaser that number of
shares of the Common Stock (the "SHARES") as shall, following such issuance,
represent one share more than the sum of: (a) the number of outstanding shares
of the Common Stock immediately prior to the Closing; and (b) the maximum number
of shares of capital stock of the Issuer which could be purchased upon exercise
or conversion of Stock Equivalents of the Issuer outstanding immediately prior
to the Closing (regardless of whether such Stock Equivalents are then
exercisable or convertible).
2.2 PURCHASE PRICE. The Purchaser shall purchase the Shares from the
Issuer for the Purchase Price. The Purchase Price shall be payable by the
Purchaser as follows:
(a) cancellation of the Initial Loan and the Additional Loan; and
(b) a cash payment in the amount equal to the Purchase Price minus
the outstanding principal and accrued interest on the Initial Loan and the
Additional Loan.
2.3 THE INITIAL LOAN. At the Initial Loan Closing, the Purchaser shall
make the Initial Loan (assuming satisfaction of all conditions to the
Purchaser's obligation to make the Initial Loan).
2.4 THE ADDITIONAL LOAN. At the Additional Loan Closing, the Purchaser
shall make the Additional Loan (assuming satisfaction of all conditions to the
Purchaser's obligation to make the Additional Loan).
3. THE CLOSINGS.
3.1 THE INITIAL LOAN CLOSING. The closing of the Initial Loan by the
Purchaser to the Issuer (the "INITIAL LOAN CLOSING") shall take place at the
offices of Troop Steuber Pasich Reddick & Tobey, LLP, 2029 Century Park East,
24th Floor, Los Angeles, California, at 10:00 A.M., Los Angeles time, not later
than five Business Days following receipt by the Purchaser of the Issuer
Disclosure Letter, or at such other time and place as the Issuer and the
Purchaser mutually agree upon in writing. The date of the Initial Loan Closing
is referred to in this Agreement as the "INITIAL LOAN CLOSING DATE."
3.2 THE ADDITIONAL LOAN CLOSING. The closing of the Additional Loan by
the Purchaser to the Issuer (the "ADDITIONAL LOAN CLOSING") shall take place at
the offices of Troop Steuber Pasich Reddick & Tobey, LLP, 2029 Century Park
East, 24th Floor, Los Angeles, California, at 10:00 A.M., Los Angeles time,
within one Business Day following the execution and delivery of the Shareholders
Agreement, or at such other time and place as the Issuer and the Purchaser
mutually agree upon in writing. The date of the Additional Loan Closing is
referred to in this Agreement as the "ADDITIONAL LOAN CLOSING Date."
3.3 THE CLOSING. The closing of the purchase and sale of the Shares
(the "CLOSING") shall take place at the offices of Troop Steuber Pasich Reddick
& Tobey, LLP, 2029 Century Park East, 24th Floor, Los Angeles, California, at
10:00 A.M., Los Angeles time, on the 45th
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<PAGE>
day (if a Business Day, and if not a Business Day, then on the first Business
Day following such 45th day) following the Issuer's delivery to the Purchaser of
the audited financial statements described in Section 10.1(g), or at such other
time and place as the Issuer and the Purchaser mutually agree upon in writing.
The date of the Closing is referred to in this Agreement as the "CLOSING DATE."
4. DELIVERIES AT THE CLOSINGS.
4.1 DELIVERIES AT THE INITIAL LOAN CLOSING. At the Initial Loan
Closing:
(a) The Purchaser shall deliver to the Issuer $250,000 by wire
transfer of immediately available funds to an account designated by the Issuer
in writing at least two Business Days prior to the Initial Loan Closing Date.
(b) The Issuer shall deliver to the Purchaser (i) the executed
Initial Note, dated the Initial Loan Closing Date and (ii) such documents and
instruments as the Purchaser may reasonably request to evidence the satisfaction
of all conditions precedent set forth in Section 8.1 of this Agreement.
4.2 DELIVERIES AT THE ADDITIONAL LOAN CLOSING. At the Additional Loan
Closing:
(a) The Purchaser shall deliver to the Issuer (i) $750,000 by wire
transfer of immediately available funds to an account designated by the Issuer
in writing at least two Business Days prior to the Additional Loan Closing Date
and (ii) the Initial Note marked "Cancelled."
(b) The Issuer shall deliver to the Purchaser (i) the executed
Note, dated the Additional Loan Closing Date and (ii) such documents and
instruments as the Purchaser may reasonably request to evidence the satisfaction
of all conditions precedent set forth in Section 9.1 of this Agreement.
4.3 DELIVERIES AT THE CLOSING. At the Closing:
(a) The Purchaser shall deliver to the Issuer (i) the cash payment
contemplated by Section 2.2(b) of this Agreement by wire transfer of immediately
available funds to an account designated by the Issuer in writing at least two
Business Days prior to the Closing Date, (ii) the Note marked "Cancelled" and
(iii) such documents and instruments as the Issuer may reasonably request to
evidence the satisfaction of all conditions precedent set forth in Section 10.2
of this Agreement.
(b) The Issuer shall deliver to the Purchaser a certificate or
certificates representing the Shares in the name of the Purchaser and such
documents and instruments as the Purchaser may reasonably request to evidence
the satisfaction of all conditions precedent set forth in Section 10.1 of this
Agreement.
4.4 FURTHER ASSURANCES. At the Initial Loan Closing, the Additional
Loan Closing and the Closing, each party to this Agreement shall deliver or
cause to be delivered, as appropriate, such further certificates, consents and
other documents as may be necessary to carry out the terms of this Agreement.
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<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE ISSUER AND THE SHAREHOLDERS. Except as
set forth in the disclosure letter to be delivered by the Issuer to the
Purchaser not later than June 2, 1999, which letter shall refer to the relevant
Sections of this Agreement (the "ISSUER DISCLOSURE LETTER"), the Issuer and the
Shareholders each represents and warrants to the Purchaser as follows:
5.1 ORGANIZATION, STANDING AND POWER. The Issuer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Oregon and has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as now being
conducted. The Issuer is duly qualified or licensed as a foreign corporation and
is in good standing in each jurisdiction where the nature of its properties
owned or held under lease or the nature of the business conducted by it make
such qualification necessary.
5.2 AUTHORITY; ENFORCEABILITY; EFFECT OF AGREEMENT. Solely with respect
to this Section 5.2, the Issuer represents and warrants to the Purchaser with
respect to the Issuer, and each Shareholder represents and warrants to the
Purchaser with respect to the Issuer and such Shareholder, as follows:
(a) The Issuer and such Shareholder each has full power and
authority to enter into, execute and deliver this Agreement and perform its or
his obligations hereunder. This Agreement has been duly authorized by all
corporate action of the Issuer (including, without limitation, the authorization
and approval by the Shareholders) and by all necessary action of such
Shareholder. This Agreement has been duly executed and delivered by the Issuer
and such Shareholder and, assuming this Agreement is duly executed and delivered
by the Purchaser, constitutes a valid and legally binding obligation of the
Issuer and such Shareholder, enforceable against the Issuer and such Shareholder
in accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally, or the availability of
equitable remedies.
(b) The execution and delivery by the Issuer and such Shareholder
of this Agreement does not, and compliance by the Issuer and such Shareholder
with the provisions of this Agreement will not, (A) conflict with or result in a
breach or default under the Charter Documents of the Issuer or any of the terms,
conditions or provisions of any Contract to which the Issuer or such Shareholder
is a party or otherwise bound, or to which any property or asset of the Issuer
or such Shareholder is subject; (B) violate any Law applicable to the Issuer or
such Shareholder; or (C) result in the creation or imposition of any Lien on any
asset of the Issuer or such Shareholder.
5.3 CAPITALIZATION. The authorized capital stock of the Issuer is as
set forth in the Issuer Disclosure Schedule. Except for the number of shares of
Common Stock shown as outstanding in the Issuer Disclosure Schedule, all of
which are owned of record and beneficially by the Shareholders free and clear of
all Liens, there are no outstanding Equity Securities of the Issuer. After the
issuance and sale of the Shares to the Purchaser at the Closing, the Purchaser
will own one share of Common Stock more than the sum of: (a) the number of
outstanding shares of the Common Stock immediately prior to the Closing; and (b)
the maximum number of shares of capital stock of the Issuer which could be
purchased upon exercise or conversion of Stock Equivalents of the Issuer
outstanding immediately prior to the Closing (regardless of whether such Stock
Equivalents are then exercisable or convertible). All of the issued and
outstanding shares of Common Stock have been, and at the Closing the Shares will
be, duly authorized, validly issued, fully
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paid and non-assessable and not issued in violation of any preemptive rights or
any Federal or state securities laws.
5.4 SUBSIDIARIES AND AFFILIATES AND OTHER NAMES. The Issuer does not
own of record or beneficially any Equity Securities of any Person.
5.5 ASSETS. The Issuer has good and marketable title to all of its
assets free and clear of all Liens. Each item of tangible personal property
included in the assets of the Issuer is in good operating condition and repair,
ordinary wear and tear excepted, for the requirements of the Business as
currently conducted.
5.6 ACCOUNTS RECEIVABLE. The Issuer Disclosure Letter sets forth a true
and complete schedule of the accounts receivable of the Issuer as of the date of
the Current Balance Sheet, setting forth a description of the accounts
receivable including, without limitation, the names and addresses of the account
debtors, the balance amount and aging as of the date indicated therein. The
accounts receivable, whether reflected on the Current Balance Sheet or
subsequently created, and all books, records and documents relating to such
accounts receivable, are genuine and accurate. All accounts receivable of the
Issuer, whether reflected on the Current Balance Sheet or subsequently created:
(A) constitute bona fide and valid rights of the Issuer to collect payments from
other Persons; (B) represent credit extended in a manner consistent with the
Issuer's trade practices; (C) are not subject to any defense, counterclaim or
offset; and (D) except for reserves for bad debts set forth in the Current
Balance Sheet, are fully collectable within 90 days of the respective dates on
which such accounts receivable were billed.
5.7 MATERIAL CONTRACTS.
(a) True and correct copies of each Material Contract of the
Issuer, including, without limitation, all amendments and modifications thereof
and waivers thereunder, have been delivered to the Purchaser or its counsel.
Each Material Contract is in full force and effect, and is the valid and binding
obligation of each party to the Material Contract. The Issuer has performed all
of its obligations required to be performed by it to date under each Material
Contract, and the Issuer is not in breach of or default under any Material
Contract, and no event has occurred or circumstance exists which, with notice or
lapse of time or both, would constitute a breach of or default by the Issuer
under any Material Contract. To the Best Knowledge of the Issuer and the
Shareholders, each party to each Material Contract other than the Issuer has
performed all of the obligations required to be performed by it to date under
the Material Contract and is not in breach of or in default under the Material
Contract, and no event has occurred or circumstance exists which, with notice or
lapse of time or both, would constitute a breach of or default by such other
party under any Material Contract.
(b) For purposes of this Agreement, "MATERIAL CONTRACTS" shall
mean the following Issuer Contracts:
(i) Each Issuer Contract which is to be performed in whole or
in part at or after the date of this Agreement and which (1) cannot be
canceled upon 30 days' notice; (2) involves aggregate future payments by the
Issuer of more than $10,000; (3) involves material nonmonetary obligations
to be performed later than
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one year from the date hereof; (D) otherwise materially affects the Issuer or
the Business; or (E) was not entered into in the ordinary course of business;
(ii) Each Issuer Contract: (1) evidencing Indebtedness of the
Issuer; or (2) pursuant to which the Issuer has lent or committed to lend
money;
(iii) Each Issuer Contract regarding advertising, brokerage,
licensing, management, representative, publishing, clearing house or agency
relationships;
(iv) Each Employee Plan of the Issuer, each Issuer Contract
with or concerning any labor or employee organization, and each employment,
consulting, severance and change of control Contract with any present or
former officer, director, consultant or employee of the Issuer;
(v) Each Issuer Contract for the Transfer of any properties,
assets or rights of the Issuer for consideration in excess of $10,000 or for
the grant of any preferential right to purchase any of such assets,
properties or rights, or which requires the consent of any third party to
the Transfer of such assets, properties or rights;
(vi) Each Issuer Contract with any Shareholder or any
Affiliate of the Issuer or any Shareholder;
(vii) Each Issuer Contract (1) under which the benefits
cannot be retained upon the consummation of the transactions contemplated by
this Agreement without the written consent or approval of other parties, (2)
under which there will be a default as a result of the consummation of the
transactions contemplated by this Agreement unless such other parties
provide written consent or approval or (3) which would require the making of
any payment, other than payments as contemplated by this Agreement, to any
employee of the Issuer or to any other Person as a result of the
consummation of the transactions contemplated herein;
(viii) Each Issuer Contract involving a guarantee by a
Shareholder of any Indebtedness of the Issuer or imposing a Lien on personal
assets of a Shareholder which serve as collateral for Indebtedness of the
Issuer;
(ix) Each Contract providing the Issuer the right to use or
Exploit the IP of any Person; and
(x) Each Contract requiring the Issuer to make capital
expenditures in excess of $5,000.
5.8 INTELLECTUAL PROPERTY.
(a) The Issuer Disclosure Letter contains a true and complete list
of all Patents, Trademarks and registered Copyrights of the Issuer, the
jurisdictions of all registrations and
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the basis of the right of the Issuer to use such Patents, Trademarks and
Copyrights. The Issuer IP constitutes all IP that is required to enable the
Issuer to conduct the Business as now conducted. The Issuer has provided
commercially reasonable safeguards and security for the protection and
confidentiality of the Issuer IP. The Issuer has not received any written notice
of infringement or other written complaint and they are not otherwise aware of
any complaint to the effect that the Issuer or any of its Affiliates have
violated or infringed the IP or any other proprietary rights of others. None of
the Issuer or any of its Affiliates has wrongfully Exploited any IP owned or
licensed by any Person for which the Issuer could suffer any Damages, and none
of the Issuer or any Person employed by or affiliated with the Issuer has
violated any confidential relationship which such Person may have had with any
third party for which the Issuer could suffer any Damages. The Issuer has full
right and authority to utilize the Issuer IP, including, without limitation, the
processes, systems and techniques presently used by the Issuer in the design,
development, marketing, sale and delivery of its present services and related
products, and all rights to any such IP developed by any employee or consultant
of the Issuer have been duly and validly assigned to the Issuer. No royalties,
honoraria, damages or fees are payable by the Issuer to other Persons by reason
of the ownership or use by the Issuer of any Issuer IP. No Affiliate of the
Issuer owns or holds, directly or indirectly, any interests in any Issuer IP. To
the Best Knowledge of the Issuer, no Person has interfered with, infringed upon,
misappropriated, or otherwise violated any IP right of the Issuer. The Issuer
has not Transferred to any Person any right to Exploit any Issuer IP.
(b) The Issuer is the sole and exclusive owner (legal and
beneficial) of the Trademarks identified on Section 5.8(b) of the Issuer
Disclosure Letter in any and all forms and embodiments thereof in each
Jurisdiction, and to the goodwill attached to such Trademarks in each
Jurisdiction, in the class or classes identified on Section 5.8(b) of the Issuer
Disclosure Letter with respect to such Jurisdiction. Section 5.8(b) of the
Issuer Disclosure Letter sets forth a list of all countries, states or other
jurisdictions in which each such Trademark is registered or in which
registration applications are pending (the "JURISDICTIONS"), the date(s) of
registration (or application), the class(es) of registration and the name of the
Person in which each such Trademark is registered.
5.9 FINANCIAL STATEMENTS.
(a) The Issuer has delivered the Annual Financial Statements and
the Current Financial Statements to the Purchaser. The Annual Financial
Statements and the Current Financial Statements have been prepared from the
books and records of the Issuer in accordance with GAAP (with the only
exceptions that no notes have been prepared with respect to the Current
Financial Statements), consistently applied, and fairly present the consolidated
position, results of operations and cash flows of the Issuer as at dates and for
periods set forth therein.
(b) As of the date of this Agreement, the Issuer has no
liabilities or obligations, either accrued, absolute, contingent or otherwise,
which have not been reflected on the Current Balance Sheet, other than
non-monetary obligations under statutes and regulations and accounts payables
incurred in the ordinary course of business. The Current Balance Sheet reflects
adequate reserves for all material losses computed in accordance with GAAP.
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5.10 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since December 31, 1998,
except for this Agreement and changes contemplated by this Agreement, the Issuer
has conducted its business only in the ordinary course of business and there has
not been any:
(a) purchase, redemption, retirement or other acquisition by the
Issuer of any Equity Securities of the Issuer;
(b) declaration or payment of any dividend or other distribution
by the Issuer;
(c) increase by the Issuer in the compensation payable or to
become payable by the Issuer to any director, officer or employee of the Issuer
being paid $50,000 or more at or at any time after December 31, 1998;
(d) payment of any bonus, pension, retirement or insurance payment
or arrangement to or with, or advance or loan of any money to, any Person, or
entry into any employment, severance, loan or similar Contract with any Person;
(e) incurrence by the Issuer of any trade payables other than in
the ordinary course of business;
(f) sale, transfer or lease of any assets to, or entry into any
Contract with, any Shareholder or any officer or director of the Issuer (other
than payment of salaries to officers in the ordinary course of business and
consistent with past practice) or any of their respective Affiliates;
(g) material adverse change in the Business Condition of the
Issuer;
(h) change in accounting methods, principles and practices
employed by the Issuer;
(i) material change in the conduct or nature of any aspect of the
Business;
(j) casualty, damage, destruction or loss, or interruption of use
of any assets or property (whether covered by insurance or not) in excess of
$25,000 individually or in the aggregate or which otherwise has had a material
adverse effect on the Issuer;
(k) Transfer or lease of any assets, except for transfers of cash
applied in the payment of the Issuer's liabilities, in each case in the usual
and ordinary course of business consistent with the Issuer's past practices;
(l) capital expenditures in an amount which exceeds $15,000 in the
aggregate;
(m) discharge of any liability except in the usual and ordinary
course of business in accordance with past practice, or prepayment of any
liability which, in the aggregate, exceeds $15,000;
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(n) incurrence of Indebtedness or other material liability
(whether absolute, accrued, contingent, or otherwise);
(o) cancellation, without full payment, of any note, loan or other
obligation owing to the Issuer;
(p) waiver or release of any right or claim of the Issuer, except
in the ordinary course of business consistent with past practice;
(q) any amendment or termination of any Contract which would be a
Material Contract if such Contract were in effect as of the date of this
Agreement, other than in the ordinary course of business consistent with past
practice;
(r) issuance or sale of any Equity Securities; or
(s) without limitation by the enumeration of the foregoing, entry
into any Contract with respect to any of the foregoing or entry into any
material transactions other than in the ordinary course of business in
accordance with past practices.
5.11 LITIGATION AND PROCEEDINGS. There is no pending or, to the Best
Knowledge of the Issuer and the Shareholders, threatened Action (or basis for
any Action) to which the Issuer is a party or involving any of its assets, and
the Issuer is not subject to any judgment, order, writ, injunction, decree or
regulatory directive or agreement.
5.12 BROKERS. None of the Issuer or either Shareholder has retained or
otherwise engaged or employed any broker, finder or any other person, or paid or
agreed to pay any fee or commission to any agent, broker, finder or other
person, for or on account of acting as a finder or broker in connection with
this Agreement or the transactions contemplated hereby.
5.13 NO CONSENTS REQUIRED. There are no approvals, authorizations,
consents, orders or other actions of, or filings with, any Person that are
required to be obtained or made by the Issuer or either Shareholder in
connection with the execution of, and the consummation of the transactions
contemplated under, this Agreement, including, without limitation, the making of
the Initial Loan and the Additional Loan and the sale and issuance of the
Shares.
5.14 ENVIRONMENTAL COMPLIANCE MATTERS. (a) The Premises constitute all
of the real property now or previously used or occupied by the Issuer or its
predecessors; (b) the Issuer and/or the Shareholders have inspected the Premises
and have no reason to believe that there may be Hazardous Substances
incorporated in or deposited, stored or buried at or upon the Premises; (c) the
Premises have never been used as a waste disposal site or a storage site for
petroleum products or chemicals; (d) no existing structures on the Premises
contain asbestos; (e) there are not now any underground storage tanks on the
Premises; (f) the Issuer has not knowingly allowed any Person occupying the
Premises to bring Hazardous Substances onto the Premises or to process or store
any Hazardous Substances on the Premises and, to the Best Knowledge of the
Issuer, no Hazardous Substance has been released into the environment by the
Issuer that may present an imminent and substantial endangerment to human
health; (g) neither the Issuer nor the Shareholders are aware of any complaints
on file or matters pending in any federal or state environmental protection
offices involving any allegation of Hazardous Substances on the Premises; and
(h) neither the Issuer nor the
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Shareholders have received notice from any environmental board, agency or
authority requiring the removal from the Premises of any Hazardous Substances or
other alleged harmful materials or wastes, or advising of any pending or
contemplated search or investigation of the Premises or any portion of the
Premises with respect the removal of any Hazardous Substances or other alleged
harmful materials or wastes.
5.15 COMPLIANCE WITH APPLICABLE LAW. The Issuer has complied with all
applicable Law except to the extent that such non-compliance could not have
material adverse affect on the Issuer.
5.16 PERMITS. The Issuer Disclosure Letter lists all federal, state,
local and foreign Permits issued by any Governmental Authority to the Issuer.
The Issuer has all Permits and other rights that are required in order to
conduct the Business presently.
5.17 EMPLOYEES. With respect to employees of the Issuer:
(a) The Issuer is and has been in material compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation, any
such laws respecting employment discrimination, occupational safety and health,
immigration status, and unfair labor practices. There are no pending or, to the
knowledge of the Issuer or the Shareholders, threatened unfair labor practice
charges or employee grievance charges.
(b) There is no request for union representation, labor strike,
dispute, slowdown or stoppage pending or, to the knowledge of the Issuer or the
Shareholders, threatened against or directly affecting the Issuer.
(c) No grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claims therefor exist before
any governmental agency.
(d) The employment of each employee of the Issuer is terminable at
will without cost to the Issuer except for payments required under the Employee
Plans and payment of accrued salaries or wages and vacation pay.
(e) There is no collective bargaining agreement that is binding on
the Issuer or other Contract with respect to collective bargaining with any
union or group of employees.
(f) The Issuer has not experienced any material work stoppage.
(g) The Issuer is not delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed by them to the Closing Date or amounts
required to be reimbursed to such employees.
(h) No employee or former employee has any right to be rehired by
the Issuer prior to the Issuer hiring a Person not previously employed by any of
them.
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(i) Section 5.18(i) of the Issuer Disclosure Letter contains a
true and complete list of all employees who were employed by the Issuer as of
April 30, 1999, and such list correctly reflects their salaries, wages, other
compensation (other than benefits under the Employee Plans), dates of employment
and positions. To the Best Knowledge of the Issuer, no "Significant Employee"
(as herein defined) intends to terminate his or her employment with the Issuer.
As used herein "Significant Employee" means the Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer, President or any Vice President of
the Issuer.
5.18 EMPLOYEE BENEFITS. All Employee Plans of any kind or nature
maintained by or on behalf of the Issuer comply with and are and have been
operated in material compliance with all applicable Laws. None of such plans are
subject to regulation under the Employment Retirement Income Security Act of
1974, as amended.
5.19 TAX AUDITS AND PAYMENT OF TAXES. Except as would not, singly or in
the aggregate, have a material adverse effect, (a) all Tax Returns required to
be filed by the Issuer have been filed and all such returns are true, complete,
and correct in all material respects, and (b) all Taxes that are due or claimed
to be due from the Issuer have been paid other than those (i) currently payable
without penalty or interest or (ii) being contested in good faith and by
appropriate proceedings and for which adequate reserves, if necessary, have been
established in accordance with generally accepted accounting principles. None of
the Tax Returns of the Issuer is currently being examined by the United States
Internal Revenue Service or any other Governmental Authority. The Issuer (and
any predecessor of the Issuer) has been a validly electing "S Corporation"
within the meaning of Code Sections 1361 and 1362 at all times during its
existence, and the Issuer will be a validly electing "S Corporation" up to and
including the Closing Date.
5.20 OTHER RELATIONSHIPS. None of the Shareholders has any interest
(other than as a noncontrolling holder of securities of a publicly traded
company), either directly or indirectly, in any Person, including, without
limitation, any Person (whether as an employee, officer, director, shareholder,
partner, member, agent, independent contractor, security holder, creditor,
consultant, or otherwise) that presently (i) provides any services or designs,
produces and/or sells any products or product lines, or engages in any activity
which is the same, similar to or competitive with any activity or business in
which the Issuer is now engaged; (ii) is a supplier of, customer of, creditor
of, or has an existing contractual relationship with the Issuer; or (iii) has
any direct or indirect interest in any asset or property used by the Issuer or
any property, real or personal, tangible or intangible, that is necessary or
desirable for the conduct of the Business. No current or former stockholder,
partner, member, director, officer or employee of the Issuer nor any Affiliate
of any such Person, is at present, or since January 1, 1996, has been, directly
or indirectly through his affiliation with any other person or entity, a party
to any transaction (other than as an employee) with the Issuer providing for the
furnishing of services by, or rental of real or personal property from, or
otherwise requiring cash payments to, any such Person.
5.21 CONFLICTS OF INTEREST. No Shareholder nor any officer, employee,
agent or any other Person acting on behalf of any Shareholder or the Issuer has,
directly or indirectly, given or agreed to give or receive any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to or from any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any Governmental Authority or
other Person who was, is, or may be in a position to help or hinder the Business
(or assist in connection with any
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actual or proposed transaction therewith) which (i) might subject the Issuer to
any Losses in any Action, (ii) if not given in the past, might have had a
material adverse effect on the Business Condition of the Issuer or (iii) if not
continued in the future, might have a material adverse effect on the Business
Condition of the Issuer.
5.22 INSURANCE. The Issuer has in full force and effect insurance
with respect to its assets and businesses against such casualties and
contingencies and of such types and forms and to such extent as is customary in
the case of Persons engaged in its businesses and in its areas. The Issuer
Disclosure Letter contains a true and correct list of all insurance policies
maintained by the Issuer and a general description of such policies.
5.23 YEAR 2000. All Products are Year 2000 Compliant.
5.24 MATERIAL MISSTATEMENTS AND OMISSIONS. No representations and
warranties by the Issuer or the Shareholders in this Agreement, or any exhibit,
schedule or certificate furnished by the Issuer or the Shareholders to the
Purchaser pursuant to this Agreement, contains or will contain any untrue
statement of material fact or omits or will omit to state any material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants (PROVIDED that the representations and warranties
contained in Section 6.4 shall only be deemed to be given at the Closing) that:
6.1 ORGANIZATION, STANDING AND POWER. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as now
being conducted. The Purchaser is duly qualified or licensed as a foreign
corporation and is in good standing in each jurisdiction where the nature of its
properties owned or held under lease or the nature of the business conducted by
it make such qualification necessary, except for any failure to be so qualified
as will not, individually or in the aggregate, impair in any material respect
the Purchaser's performance of its obligations hereunder.
6.2 AUTHORITY; ENFORCEABILITY; EFFECT OF AGREEMENT.
(a) The Purchaser has full power and authority to enter into,
execute and deliver this Agreement and perform its obligations hereunder. This
Agreement has been duly authorized by all corporate action of the Purchaser.
This Agreement has been duly executed and delivered by the Purchaser and,
assuming this Agreement is duly executed and delivered by the Issuer and the
Shareholders, constitutes a valid and legally binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting creditors'
rights generally, or the availability of equitable remedies.
(b) The execution and delivery by the Purchaser of this Agreement
do not, and compliance by the Purchaser with the provisions of this Agreement
will not, (i) conflict with or result in a breach or default under the Charter
Documents of the Purchaser or any of the terms, conditions or provisions of any
Contract to which the Purchaser is a party or otherwise
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bound, or to which any property or asset of the Purchaser is subject; (ii)
violate any Law applicable to the Purchaser; or (iii) result in the creation or
imposition of any Lien on any asset of the Purchaser, except in each case as
will not, individually or in the aggregate, impair in any material respect the
Purchaser's performance of its obligations hereunder.
6.3 NO CONSENTS REQUIRED. There are no approvals, authorizations,
consents, orders or other actions of, or filings with, any Person that are
required to be obtained or made by the Purchaser in connection with the
execution of, and the consummation of the transactions contemplated under, this
Agreement, including, without limitation, the making of the Initial Loan and the
Additional Loan and the sale and issuance of the Shares, except for any matters
as will not, individually or in the aggregate, impair in any material respect
the Purchaser's performance of its obligations hereunder.
6.4 DISCLOSURE OF INFORMATION. The Purchaser believes that it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Shares. The Purchaser further represents that it has had
an opportunity to ask questions and receive answers from the Issuer regarding
the terms and conditions of the Shares and the Business. The foregoing, however,
does not limit or modify the representations and warranties of the Issuer and
the Shareholders in Section 5 of this Agreement or the right of the Purchaser to
rely thereon.
6.5 INVESTMENT EXPERIENCE. The Purchaser acknowledges that it is able
to fend for itself, can bear the economic risk of the purchase of the Shares,
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment in the Shares.
The Purchaser has not been organized for the purpose of acquiring the Shares.
6.6 BROKERS. The Purchaser has not retained or otherwise engaged or
employed any broker, finder or any other person for or on account of acting as a
finder or broker in connection with this Agreement or the transactions
contemplated hereby for which the Issuer could be responsible.
7. TRANSACTIONS PRIOR TO THE CLOSING DATE.
7.1 CONDUCT OF BUSINESS. Prior to the Closing, except as contemplated
by this Agreement or with the prior written consent of the Purchaser, the Issuer
agrees, and the Shareholders agree to cause the Issuer:
(a) to conduct its operations according to its ordinary and usual
course of business;
(b) not to Transfer any assets, other than asset Transfers
incidental to settlement processing according to its ordinary and usual course
of business;
(c) not to declare or pay any dividend or other distribution on
its Equity Securities, and not to purchase, redeem, retire or otherwise acquire
any of its Equity Securities;
(d) not to enter into any Material Contract;
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(e) not to amend, modify or terminate, or grant any waiver of any
right under, any Material Contract, and not to make any payment under any
Material Contract which is not required to be made strictly in accordance with
the terms of the Material Contract;
(f) to comply with all of its obligations and duties under any
Material Contract and not to create or permit to exist any default or event of
default on behalf of the Issuer under any Material Contract, or any event or
circumstance which, with lapse of time or notice, or both, would constitute a
default under a Material Contract;
(g) to use its Best Efforts to preserve intact its business
organization and goodwill, keep available the services of its officers and
employees and maintain satisfactory relationships with those Persons having
business relationships with the Issuer;
(h) to duly comply in all material aspects with all applicable
Laws;
(i) not to incur any fixed or contingent obligation or enter into
any Contract or other transaction or arrangement relating to the Business or the
assets of the Issuer which (i) may not be terminated by the Issuer on 30 days'
notice or less without cost or liability and (ii) which is not in the ordinary
course of the business;
(j) not to commit any act or omit to do any act which would be or
result in a breach of any of its obligations, duties, agreements or
representations under any Contract to which it is a party or to which it enters
into subsequent to the date of this Agreement which would have a material effect
on the Business Condition of the Issuer;
(k) to maintain all properties necessary for the conduct of the
Business, whether owned or leased, in substantially the same condition as they
now are;
(l) to maintain its books, records and accounts in the usual,
regular and ordinary manner, on a basis consistent with prior periods;
(m) not to enter into any Contract of any kind or nature with any
Affiliate, or make any payment or other asset Transfer to or for the benefit of
any Affiliate (other than employment compensation in the ordinary course of
business consistent with past practice);
(n) to use the proceeds of the Initial Loan and the Additional
Loan for working capital and not to repay any loan to any Shareholder;
(o) not to enter into any transaction or perform any act which
would make any of the representations, warranties or agreements of the Issuer
and the Shareholders contained in this Agreement false or misleading in any
material respect if made again immediately after such transaction or act; and
(p) not to take any affirmative action or fail to take any action
within its control that is likely to cause any of the changes or events listed
in Section 7.1 to occur.
7.2 INSPECTION OF RECORDS. Between the date of this Agreement and the
Closing, the Issuer and the Shareholders shall allow the duly authorized
officers, attorneys, accountants and
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other representatives of the Purchaser access at all reasonable times to the
records and files, correspondence, audits and properties, as well as to all
information in each case relating to the business and affairs of the Issuer.
7.3 ACQUISITION PROPOSALS. During the period from the date of this
Agreement and extending through the earlier of the termination of this Agreement
or the Closing, the Issuer and the Shareholders each agree that (i) the Issuer
and the Shareholders shall not, and the Issuer and the Shareholders shall direct
and cause the Issuer's officers, directors, employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant) not to, initiate, solicit, intentionally encourage or accept the
submission of any proposal or offer with respect to a merger, acquisition, sale,
consolidation or similar transaction involving all or any significant portion of
the assets of the Issuer or any Equity Securities of the Issuer (any such
proposal or offer being hereinafter referred to as an "ACQUISITION PROPOSAL") or
engage in any negotiations or discussions concerning, or provide any
confidential information or data to, any Person relating to an Acquisition
Proposal, and (ii) the Issuer and the Shareholders shall notify the Purchaser
immediately if any Acquisition Proposal is received by the Issuer and/or the
Shareholders or any negotiations or discussions relating to a potential
Acquisition Proposal are sought to be initiated or continued with the Issuer
and/or the Shareholders.
7.4 SHAREHOLDERS AGREEMENT. The Shareholders and the Purchaser agree to
negotiate in good faith and use their respective Best Efforts to enter into the
Shareholders Agreement.
7.5 BEST EFFORTS. Between the date of this Agreement and the Closing,
each of the parties to this Agreement will use its or his Best Efforts to cause
the conditions to the obligations of the other parties set forth in Sections 8,
9 or 10 of this Agreement, as the case may be, to be satisfied.
8. CONDITIONS TO THE INITIAL LOAN CLOSING.
8.1 CONDITIONS OF THE PURCHASER. The obligation of the Purchaser to
make the Initial Loan and to take the other actions required to be taken by the
Purchaser at the Initial Loan Closing is subject to the satisfaction, at or
prior to the Initial Loan Closing, of each of the following conditions (any of
which may be waived by the Purchaser in writing, in whole or in part):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Issuer and the Shareholders (contained in this Agreement, any
exhibit or schedule hereto, or any certificate, instrument or other writing
delivered to the Purchaser or its representatives by the Issuer or the
Shareholders or any of their representatives) shall be true and correct in all
material respects on the Initial Loan Closing Date with the same force and
effect as though made on and as of the Initial Loan Closing Date (I.E., with
respect to a representation that a state of facts exists on or as of the date
hereof, it is a condition that such state of facts exists on or as of the
Initial Loan Closing Date, and with respect to a representation that a state of
facts has or has not changed between a date prior to the date hereof and the
date hereof, it is a condition that such state of facts has or has not changed
between such prior date and the Initial Loan Closing Date), except as affected
by the transactions contemplated hereby and except that any such representation
or warranty made as of a specified date (other than the date of this Agreement)
shall only need to have been true on and as of such date.
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(b) PERFORMANCE. The Issuer and the Shareholders each shall have
performed all obligations and complied with in all material respects all
covenants required by this Agreement to be performed or complied with by the
Issuer and the Shareholders on or prior to the Initial Loan Closing Date.
(c) CERTIFICATE. The Issuer and the Shareholders shall have
delivered to the Purchaser a certificate, dated the Initial Loan Closing Date,
certifying that the conditions specified in Sections 8.1(a) and (b) of this
Agreement have been satisfied.
(d) NO PROCEEDINGS. No Action pertaining to the transactions
contemplated by this Agreement or to their consummation shall have been
instituted or threatened on or prior to the Initial Loan Closing Date.
(e) OPINION LETTER. The Purchaser shall have received from counsel
to the Issuer satisfactory to the Purchaser a written opinion, dated as of the
Initial Loan Closing Date and addressed to the Purchaser, in form and substance
satisfactory to the Purchaser.
(f) ISSUER DISCLOSURE LETTER. The Issuer shall have delivered to
the Purchaser the Issuer Disclosure Letter not later than 5:00 p.m. Los Angeles
time on June 2, 1999, which shall be in form and substance satisfactory to the
Purchaser (PROVIDED that if the Purchaser receives the Issuer Disclosure Letter
on or before the Issuer's delivery deadline and does not deliver an objection
notice to the Issuer on or before 5:00 p.m. Los Angeles time on the fifth
Business Day following the Purchaser's receipt of the Issuer Disclosure Letter,
the Purchaser shall be deemed to have approved the Issuer Disclosure Letter).
(g) OTHER MATTERS. All corporate and other proceedings and actions
taken in connection with this Agreement and all agreements, instruments and
documents mentioned in this Agreement or incident to any such transactions shall
be reasonably satisfactory in form and substance to the Purchaser and its
counsel.
9. CONDITIONS TO THE ADDITIONAL LOAN CLOSING.
9.1 CONDITIONS OF THE PURCHASER. The obligation of the Purchaser to
make the Additional Loan and to take the other actions required to be taken by
the Purchaser at the Additional Loan Closing is subject to the satisfaction, at
or prior to the Additional Loan Closing, of each of the following conditions
(any of which may be waived by the Purchaser in writing, in whole or in part):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Issuer and the Shareholders (contained in this Agreement, any
exhibit or schedule hereto, or any certificate, instrument or other writing
delivered to the Purchaser or its representatives by the Issuer or the
Shareholders or any of their representatives) shall be true and correct in all
material respects on the Additional Loan Closing Date with the same force and
effect as though made on and as of the Additional Loan Closing Date (I.E., with
respect to a representation that a state of facts exists on or as of the date
hereof, it is a condition that such state of facts exists on or as of the
Additional Loan Closing Date, and with respect to a representation that a state
of facts has or has not changed between a date prior to the date hereof and the
date hereof, it is a condition that such state of facts has or has not changed
between such prior date and the
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Additional Loan Closing Date), except as affected by the transactions
contemplated hereby and except that any such representation or warranty made as
of a specified date (other than the date of this Agreement) shall only need to
have been true on and as of such date.
(b) PERFORMANCE. The Issuer and the Shareholders each shall have
performed all obligations and complied with in all material respects all
covenants required by this Agreement to be performed or complied with by the
Issuer and the Shareholders on or prior to the Additional Loan Closing Date.
(c) CERTIFICATE. The Issuer and the Shareholders shall have
delivered to the Purchaser a certificate, dated the Additional Loan Closing
Date, certifying that the conditions specified in Sections 9.1(a) and (b) of
this Agreement have been satisfied.
(d) NO PROCEEDINGS. No Action pertaining to the transactions
contemplated by this Agreement or to their consummation shall have been
instituted or threatened on or prior to the Additional Loan Closing Date.
(e) OPINION LETTER. The Purchaser shall have received from counsel
to the Issuer satisfactory to the Purchaser a written opinion, dated as of the
Additional Loan Closing Date and addressed to the Purchaser, in form and
substance satisfactory to the Purchaser.
(f) SHAREHOLDER AGREEMENT. The Shareholders shall have entered
into the Shareholders Agreement.
(g) KERLIN EMPLOYMENT AGREEMENT. Kerlin and the Issuer shall have
entered into the Kerlin Employment Agreement.
(h) APPOINTMENT OF DIRECTOR. The Shareholders shall have appointed
a designee of the Purchaser as a director of the Issuer.
(i) OTHER MATTERS. All corporate and other proceedings and actions
taken in connection with this Agreement and all agreements, instruments and
documents mentioned in this Agreement or incident to any such transactions shall
be reasonably satisfactory in form and substance to the Purchaser and its
counsel.
9.2 CONDITIONS OF THE ISSUER. The obligation of the Issuer to accept
the Additional Loan and to take the other actions required to be taken by the
Issuer at the Additional Loan Closing is subject to the satisfaction, at or
prior to the Additional Loan Closing, of each of the following conditions (any
of which may be waived by the Issuer in writing, in whole or in part):
(a) SHAREHOLDER AGREEMENT. The Purchaser shall have entered into
the Shareholders Agreement.
(b) KERLIN EMPLOYMENT AGREEMENT. Kerlin shall have entered into
the Kerlin Employment Agreement.
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10. CONDITIONS TO THE CLOSING.
10.1 CONDITIONS OF THE PURCHASER. The obligation of the Purchaser to
complete the purchase of the Shares and to take the other actions required to be
taken by the Purchaser at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by the Purchaser in writing, in whole or in part):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Issuer and the Shareholders (contained in this Agreement, any
exhibit or schedule hereto, or any certificate, instrument or other writing
delivered to the Purchaser or its representatives by the Issuer or the
Shareholders or any of their representatives) shall be true and correct in all
material respects on the Closing Date with the same force and effect as though
made on and as of the Closing Date (I.E., with respect to a representation that
a state of facts exists on or as of the date hereof, it is a condition that such
state of facts exists on or as of the Closing Date, and with respect to a
representation that a state of facts has or has not changed between a date prior
to the date hereof and the date hereof, it is a condition that such state of
facts has or has not changed between such prior date and the Closing Date),
except as affected by transactions contemplated hereby and except that any such
representation or warranty made as of a specified date (other than the date of
this Agreement) shall only need to have been true on and as of such date.
(b) PERFORMANCE. The Issuer and the Shareholders each shall have
performed all obligations and complied with in all material respects all
covenants required by this Agreement to be performed or complied with by the
Issuer and the Shareholders on or prior to the Closing Date.
(c) CONSENTS. The Issuer shall have delivered to the Purchaser all
consents and approvals of Governmental Authorities and other Persons necessary
for the purchase and sale of the Shares and the unconditional consummation of
the transactions contemplated hereby at the Closing.
(d) CERTIFICATE. The Issuer and the Shareholders shall have
delivered to the Purchaser a certificate, dated the Closing Date, certifying
that the conditions specified in Sections 10.1(a), (b) and (c) of this Agreement
have been satisfied.
(e) NO PROCEEDINGS. No Action pertaining to the transactions
contemplated by this Agreement or to their consummation shall have been
instituted or threatened on or prior to the Closing Date.
(f) APPOINTMENT OF DIRECTORS. A majority of the Issuer's directors
shall be designees of the Purchaser, whose terms shall commence immediately
following the Closing.
(g) AUDITED FINANCIAL STATEMENTS. The Issuer shall have delivered
to the Purchaser an audited consolidated balance sheet of the Issuer as at
December 31, 1998 and the related audited consolidated statements of operations,
changes in shareholders' equity and cash flows for the fiscal year ended
December 31, 1998, with the report of the independent auditors subject to no
qualifications (other than a going concern qualification) and which otherwise
shall be in form and substance satisfactory to the Purchaser.
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(h) DUE DILIGENCE. The Purchaser shall have completed to its
satisfaction a due diligence investigation of the Issuer (including, without
limitation, a technical audit of the systems relating to the Business) and shall
have approved the results of such investigation.
(i) OPINION LETTER. The Purchaser shall have received from counsel
to the Issuer satisfactory to the Purchaser a written opinion, dated as of the
Closing Date and addressed to the Purchaser, in form and substance satisfactory
to the Purchaser.
(j) OTHER MATTERS. All corporate and other proceedings and actions
taken in connection with this Agreement and all agreements, instruments and
documents mentioned in this Agreement or incident to any such transactions shall
be reasonably satisfactory in form and substance to the Purchaser and its
counsel.
10.2 CONDITIONS OF THE ISSUER. The obligation of the Issuer to complete
the issuance and sale of the Shares and to take the other actions required to be
taken by the Issuer at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by the Issuer in writing, in whole or in part):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser (contained in this Agreement, any exhibit or
schedule hereto, or any certificate, instrument or other writing delivered to
the Issuer or its representatives by the Purchaser, or any of its
representatives) shall be true and correct in all material respects on the
Closing Date with the same force and effect as though made on and as of the
Closing Date (I.E., with respect to a representation that a state of facts
exists on or as of the date hereof, it is a condition that such state of facts
exists on or as of the Closing Date, and with respect to a representation that a
state of facts has or has not changed between a date prior to the date hereof
and the date hereof, it is a condition that such state of facts has or has not
changed between such prior date and the Closing Date), except as affected by
transactions contemplated hereby and except that any such representation or
warranty made as of a specified date (other than the date of this Agreement)
shall only need to have been true on and as of such date.
(b) PERFORMANCE. The Purchaser shall have performed all
obligations and complied with in all material respects all covenants required by
this Agreement to be performed or complied with by the Purchaser on or prior to
the Closing Date.
(c) CERTIFICATE. The Purchaser shall have delivered to the Issuer
a certificate, dated the Closing Date, certifying that the conditions specified
in Sections 10.2(a) and (b) of this Agreement have been satisfied.
(d) SHAREHOLDERS AGREEMENT. The Purchaser shall have entered into
the Shareholders Agreement.
(e) KERLIN EMPLOYMENT AGREEMENT. The Purchaser shall have approved
the Kerlin Employment Agreement.
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(f) NO PROCEEDINGS. There shall not be any temporary, preliminary
or permanent injunction against the Issuer prohibiting it form issuing and
selling the Shares to the Purchaser.
(g) OTHER MATTERS. All corporate and other proceedings and actions
taken in connection with this Agreement and all agreements, instruments and
documents mentioned in this Agreement or incident to any such transactions shall
be reasonably satisfactory in form and substance to the Issuer and its counsel.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY.
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made in this Agreement or made in any document delivered pursuant
to this Agreement by or on behalf of any party shall survive the execution and
delivery of this Agreement and the Closing, regardless of notice of or any
investigation or right of investigation made prior to or after the date of this
Agreement by or on behalf of any party, and shall terminate and expire eighteen
months following the Closing Date, after which date they shall be of no further
force or effect. No Action hereunder for breach of or inaccuracy in any
representation or warranty may be made unless such Action is commenced on or
before the 30th day following the expiration of the eighteen month period
following the Closing Date.
11.2 INDEMNIFICATION. The Issuer and the Shareholders shall indemnify,
save and hold harmless the Purchaser and each of its officers, directors,
employees, agents and Affiliates, and each of their successors and assigns
(individually, a "PURCHASER INDEMNIFIED PARTY" and collectively, the "PURCHASER
INDEMNIFIED PARTIES") from and against any and all costs, losses, claims,
liabilities, fines, penalties, and expenses (including, without limitation,
interest which may be imposed in connection therewith and court costs and
reasonable fees and disbursements of counsel) ("DAMAGES") incurred in connection
with, arising out of, resulting from or incident to any breach of, or any
inaccuracy in any of, the representations or warranties, or any default in any
agreements, made by the Issuer or the Shareholders in this Agreement, any
exhibit or schedule to this Agreement or any certificate, instrument or writing
delivered in connection with this Agreement or in connection with any exhibit or
schedule to this Agreement. Subject to the following sentence, the Issuer and
each Shareholder shall have the right to control and conduct the defense or
settlement of any Action giving rise to any claim for indemnification against
the Issuer or any Shareholder, respectively. None of the Issuer or the
Shareholders shall, without the prior written consent of the Purchaser
Indemnified Party, effect any settlement or compromise of or consent to the
entry of judgment with respect to any pending or threatened Action in respect of
which the Purchaser Indemnified Party is an actual or potential party and
indemnification may be sought hereunder by the Purchaser Indemnified Party,
unless such settlement, compromise or judgment (i) includes an unconditional
release of the Purchaser Indemnified Party from all liability on claims that are
or could have been the subject matter of such Action and (ii) does not include a
statement as to or an admission of fault, culpability or failure to act by or on
behalf of the Purchaser Indemnified Party.
11.3 LIMITATION ON INDEMNIFICATION OBLIGATIONS.
(a) The Purchaser Indemnified Parties shall not be entitled to
recover under Section 11.2 unless the aggregate amount of indemnifiable Damages
incurred by the Purchaser Indemnified Parties exceeds $150,000, at which time
any claim for indemnification may be made only for the excess. Notwithstanding
anything to the contrary herein contained, the limitations contained in this
Section 11.3(a) shall not apply to indemnification for breach of any
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representation and warranty contained in Section 5.3, breach of any covenant or
agreement of any indemnifying party, or fraud by an indemnifying party in
connection with this Agreement and the transactions contemplated hereby.
(b) Neither Shareholder shall be responsible for more than 50% of
the indemnifiable Damages incurred by the Purchaser Indemnified Parties in
connection with, arising out of, resulting from or incident to any breach of, or
any inaccuracy in any of, the representations or warranties made by the Issuer
or the Shareholders in this Agreement, any exhibit or schedule to this Agreement
or any certificate, instrument or writing delivered in connection with this
Agreement or in connection with any exhibit or schedule to this Agreement.
(c) In calculating any amount of Damages payable pursuant to
Section 11.2, the amount of any such Damages shall be reduced by any net Tax
benefit actually realized by the relevant Purchaser Indemnified Party as a
result of such Damages (whether in the form of an actual refund or a reduction
in any Tax that would otherwise have been payable). In computing the amount of
any such Tax cost, the Purchaser Indemnified Party shall be deemed to recognize
all other items of income, gain, loss, deduction or credit before recognizing
any items arising from the receipt or accrual of any indemnification payment
under Section 11.2 or the incurrence of any Damages payable pursuant to Section
11.2. In addition, to the extent not otherwise taken into consideration, in
connection with a claim for indemnification relating to a loss (or other Damage)
incurred by a Purchaser Indemnified Party based on the "value" of the Issuer
being less than was represented to the Purchaser (for example, due to an
undisclosed liability which was required to be disclosed), the value shall
consider any Tax benefit or Tax detriment actually realized or incurred by the
Issuer relating to such loss or Damage.
(d) If the Closing occurs, the Issuer and the Shareholders shall
not have any obligation or liability under Section 11.2 for breaches of or
inaccuracies in representations or warranties that (i) are not intentional and
(ii) are disclosed in the Issuer Disclosure Letter delivered to the Purchaser at
the Closing.
12. NONCOMPETITION.
12.1 PROCHNOW COVENANT NOT TO COMPETE. For a period of three years from
the Closing Date, Prochnow shall not, directly or indirectly, whether
individually or as a member, officer, director, investor, stockholder, employee
or consultant of any Person (other than the Issuer), or in any other capacity,
(i) engage anywhere in the world in a business which competes with the Business
or any other line of business engaged in by the Issuer, or (ii) induce or
attempt to induce (A) any employee of the Purchaser or the Issuer to leave the
employ of the Issuer or in any way interfere adversely with the relationship
between any such employee and the Issuer, (B) any employee of the Issuer to work
for, render services or provide advice to or supply confidential business
information or trade secrets of the Issuer to any Person, or (C) any customer,
supplier, agent, licensee, licensor or other business relation of the Issuer to
cease doing business with the Issuer or in any way interfere with the
relationship between any such customer, supplier, agent, licensee, licensor or
other business relation and the Issuer. The ownership by Prochnow of four
percent or less of the outstanding capital stock of any Person engaged in any
business which competes with any line of business engaged in by the Issuer,
where the capital stock of the Person is listed on a national securities
exchange or actively quoted on the Nasdaq Stock Market, shall not be deemed a
violation by Prochnow of this Section 12, provided that Prochnow is not an
officer,
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director or employee of, or a consultant to, such corporation or otherwise
related in any way to such Person (other than as a shareholder thereof).
12.2 KERLIN COVENANT NOT TO COMPETE. During the Term, Kerlin shall not,
directly or indirectly, whether individually or as a member, officer, director,
investor, stockholder, employee or consultant of any Person (other than the
Issuer), or in any other capacity, (i) engage anywhere in the world in a
business which competes with the Business or any other line of business engaged
in by the Issuer, or (ii) induce or attempt to induce (A) any employee of the
Purchaser or the Issuer to leave the employ of the Issuer or in any way
interfere adversely with the relationship between any such employee and the
Issuer, (B) any employee of the Issuer to work for, render services or provide
advice to or supply confidential business information or trade secrets of the
Issuer to any Person, or (C) any customer, supplier, agent, licensee, licensor
or other business relation of the Issuer to cease doing business with the Issuer
or in any way interfere with the relationship between any such customer,
supplier, agent, licensee, licensor or other business relation and the Issuer.
The ownership by Kerlin of four percent or less of the outstanding capital stock
of any Person engaged in any business which competes with any line of business
engaged in the Issuer, where the capital stock of the Person is listed on a
national securities exchange or actively quoted on the Nasdaq Stock Market,
shall not be deemed a violation by Kerlin of this Section 12, provided that
Kerlin is not an officer, director or employee of, or a consultant to, such
corporation or otherwise related in any way to such Person (other than as a
shareholder thereof). Upon the effectiveness of the Kerlin Employment Agreement,
this Section 12.2 shall be superceded by the covenant not to compete of Kerlin
contained in such agreement and shall cease to have any force or effect. For
purposes of this Section 12.2, the "TERM" shall mean the period commencing on
the Closing Date and ending on the later of (i) three years from the Closing
Date and (ii) one year from termination of Kerlin's employment; PROVIDED that if
the Issuer terminates the Kerlin's employment other than "for cause" (as defined
in the Kerlin Employment Agreement), the "Term" shall mean the period commencing
on the Closing Date and ending on the date Kerlin's severance period ends.
12.3 REMEDIES. Prochnow and Kerlin acknowledge and agree that, in the
event of a violation by Prochnow or Kerlin of the terms and provisions of this
Section 12, the remedies at law would not be adequate; and accordingly, in such
event, each of the Purchaser, the Issuer may proceed to protect and enforce its
rights under this Section 12 by a suit in equity for specific performance and
temporary, preliminary and permanent injunctive relief from violation of any of
the provisions of this Section 12 from any court of competent jurisdiction
without the necessity of proving the amount of any actual damages to the
Purchaser or the Issuer resulting from the breach.
12.4 MODIFICATION. If for any reason there should be a determination by
a court of competent jurisdiction that the provisions of this Section 12 are too
broad or unreasonable (or otherwise objectionable) and therefore unenforceable,
the provisions of this Section 12 shall be deemed modified, and fully
enforceable as so modified, to the extent that the court would find them to be
fair, reasonable and enforceable under the circumstances.
13. TERMINATION.
13.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at
any time prior to the Closing by the mutual agreement, in writing, of each of
the parties to this Agreement.
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13.2 TERMINATION BY THE PURCHASER. The Purchaser may (but shall not be
obligated to) terminate this Agreement prior to the Closing by giving written
notice to the Issuer if:
(a) the Issuer fails to deliver the Issuer Disclosure Letter to
the Purchaser on or before 5:00 p.m. Los Angeles time on June 2, 1999; or
following such timely delivery the Purchaser delivers an objection notice to the
Issuer on or before 5:00 p.m. Los Angeles time on the fifth Business Day
following the Purchaser's receipt of the Issuer Disclosure Letter and the Issuer
fails to deliver an amended Issuer Disclosure Letter in form and substance
satisfactory to the Purchaser on or before 5:00 p.m. Los Angeles time on the
fifth Business Day following the Issuer's receipt of the Purchaser's objection
notice;
(b) there has been a material violation or breach by the Issuer or
a Shareholder of any agreement, covenant, representation or warranty contained
in this Agreement, which violation or breach shall not have been cured or
corrected within ten days after receipt of notice thereof;
(c) the Closing does not occur on or prior to (i) the earlier of
(A) the 45th day following the Issuer's delivery to the Purchaser of the audited
financial statements described in Section 10.1(g) or (B) September 30, 1999, or
(ii) such later date as may be agreed to in writing by the parties;
(d) if the Purchaser is made aware and determines in its
reasonable discretion that any condition in Section 10.1 will not be satisfied
as of the Closing (other than through the failure of the Purchaser to comply
with its obligations under this Agreement) and the Purchaser has not expressly
waived such condition in writing on or before the Closing.
13.3 TERMINATION BY THE ISSUER. The Issuer may (but shall not be
obligated to) terminate this Agreement on behalf of itself and the Shareholders
prior to the Closing by giving written notice to the Purchaser if:
(a) there has been a material violation or breach by the Purchaser
of any agreement, covenant, representation or warranty contained in this
Agreement, which violation or breach shall not have been cured or corrected
within ten days after receipt of notice thereof;
(b) the Closing does not occur on or prior to (i) the earlier of
(A) the 45th day following the Issuer's delivery to the Purchaser of the audited
financial statements described in Section 10.1(g) or (B) September 30, 1999, or
(ii) such later date as may be agreed to in writing by the parties;
(c) if the Issuer is made aware and determines in its reasonable
discretion that any condition in Section 10.2 will not be satisfied as of the
Closing (other than through the failure of the Issuer or the Shareholders to
comply with its or their obligations under this Agreement) and the Issuer has
not expressly waived such condition in writing on or before the Closing.
13.4 EFFECT OF TERMINATION. In the event of the termination of this
Agreement without the Closing occurring, no party shall have any obligation or
liability to any other in respect to this Agreement, except for (i) any material
breach of any covenant occurring prior to such
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termination, or (ii) any material breach of or material inaccuracy in any
representation or warranty occurring prior to such termination that is
intentional; or (iii) the covenant under Section 14.12 shall remain in effect.
Notwithstanding anything to the contrary contained herein, the Purchaser shall
not have any obligation or liability to the Issuer or the Shareholders if the
Purchaser, after the exercise of its Best Efforts, is unable to obtain $4
million on commercially reasonable terms in order to pay the Purchase Price to
the Issuer at the Closing as provided hereunder.
14. MISCELLANEOUS.
14.1 NOTICES. All notices, requests, demands and other communications
(collectively, "NOTICES") given pursuant to this Agreement shall be in writing,
and shall be delivered by personal service, courier, facsimile transmission
(which must be confirmed) or by United States first class, registered or
certified mail, postage prepaid, to the following addresses:
(i) if to the Purchaser, to:
Symposium Corporation
410 Park Avenue, 18th Floor
New York, New York 10022
Facsimile No. (212) 754-9906
Attn: Ronald Altbach
with a copy to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East
Los Angeles, California 90067
Facsimile No. (310) 728-2211
Attn: Alan B. Spatz, Esq.
if to the Issuer or the Shareholders, to:
AmeriNet, Inc.
Three Centerpoint Drive, Suite 125
Lake Oswego, Oregon 97035
Facsimile No. (503) 670-8192
Attn: Richard Boonstra
With a copy to:
Lathrop & Gage, L.C.
2345 Grand Boulevard, Suite 2800
Kansas City, Missouri 64108
Facsimile No. (816) 292-2001
Attn: Tyler Prochnow, Esq.
Any Notice, other than a Notice sent by registered or certified mail, shall be
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effective when received; a Notice sent by registered or certified mail, postage
prepaid return receipt requested, shall be effective on the earlier of when
received or the third day following deposit in the United States mails. Any
party may from time to time change its address for further Notices hereunder by
giving notice to the other parties in the manner prescribed in this Section.
14.2 ENTIRE AGREEMENT. This Agreement, the attached exhibits and
schedules, and the Shareholders Agreement contain the sole and entire agreement
and understanding of the parties with respect to the entire subject matter of
this Agreement, and any and all prior discussions, negotiations, commitments and
understandings, whether oral or otherwise, related to the subject matter of this
Agreement are hereby merged herein. Nothing in this Agreement, express or
implied, is intended to confer upon any person other than the parties hereto any
rights or remedies under or by way of this Agreement.
14.3 ASSIGNMENT. No party may assign its rights or obligations under
this Agreement, and any attempted or purported assignment or any delegation of
any party's duties or obligations arising under this Agreement to any third
party or entity shall be deemed to be null and void, and shall constitute a
material breach by such party of its duties and obligations under this
Agreement; provided that the Purchaser may assign its rights to any Subsidiary
of the Purchaser. This Agreement shall inure to the benefit of and be binding
upon any successors of each party by way of merger or consolidation.
14.4 WAIVER AND AMENDMENT. No provision of this Agreement may be waived
unless in writing signed by all the parties to this Agreement, and waiver of any
one provision of this Agreement shall not be deemed to be a waiver of any other
provision. This Agreement may be amended only by a written agreement executed by
all of the parties to this Agreement.
14.5 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York without giving effect to the principles
of conflicts of law thereof.
14.6 SEVERABILITY. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
14.7 CAPTIONS. The various captions of this Agreement are for reference
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
14.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
14.9 COSTS AND ATTORNEYS' FEES. If any Action is instituted to remedy,
prevent or obtain relief from a default in the performance by any party to this
Agreement of its obligations under this Agreement, the prevailing party shall
recover all of such party's attorneys' fees incurred in each and every such
Action, including, without limitation, any and all appeals or petitions
therefrom. As used in this Section, attorneys' fees shall be deemed to mean the
full and actual costs of any legal services actually performed in connection
with the matters involved calculated on the
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basis of the usual fee charged by the attorney performing such services and
shall not be limited to "reasonable attorneys' fees" as defined in any statute
or rule of court.
14.10 RIGHTS CUMULATIVE. No right granted to the parties under this
Agreement 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 right under this Agreement, or under any other document or instrument
delivered hereunder, or allowed by law or equity, shall be cumulative and may be
exercised from time to time.
14.11 JUDICIAL INTERPRETATION. Should any provision of this Agreement
require judicial interpretation, it is agreed that a court interpreting or
construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against any Person by reason of the rule of construction
that a document is to be construed more strictly against the Person who itself
or through its agent prepared the same, it being agreed that all parties have
participated in the preparation of this Agreement.
14.12 CONFIDENTIALITY.
(a) The Purchaser, the Issuer and the Shareholders hereby
acknowledge to and agree with the other that any and all information which has
been disclosed by one to the other, its directors, partners, members, managers,
employees, consultants, agents and shareholders during the discussions and
negotiations leading to the execution of this Agreement, and all information to
be disclosed by one to the other, its directors, employees, consultants and
agents and shareholders, during the period commencing on the date of execution
of this Agreement through the Closing or termination of this Agreement, shall
constitute confidential information and trade secrets of the disclosing party,
and as such are secret, confidential and unique and constitute the exclusive
trade secrets and property of such party. Such information has been made known
and available to the other party and its respective employees, consultants and
agents strictly in connection with the negotiation and execution of this
Agreement and the consummation of the transactions provided for herein. Each
party hereby acknowledges and agrees that any use or disclosure of any such
confidential information or trade secrets, other than pursuant to this
Agreement, would be wrongful and would cause irreparable injury to the other.
Accordingly, each party hereby expressly agrees, for itself and on behalf of its
shareholders, partners, members and directors, if any, and its principal
officers, managers, employees, agents, consultants and representatives, that it
and they will not at any time prior to the Closing or at any time thereafter,
use or disclose, other than in accordance with the terms and provisions of this
Agreement, any of such confidential information or trade secrets; provided, that
any of the parties hereto may use or disclose such confidential information or
secrets of the other without restriction if such information or secrets (i) were
or are available to such party on a non-confidential basis from a source other
than the other party, or (ii) were or become generally available to the public
(other than as a result of an impermissible disclosure by such party or its
Affiliates); and provided, further, that if either party is requested or
required (by oral question, interrogatories, requests for information or
documents, subpoena or similar process) to disclose any of such information or
secrets of the other, such disclosure be made without liability hereunder
(although notice of such request or requirement shall be given to the other
party so that, if practicable, the other party may seek a protective order
against such disclosure). Each party acknowledges that, in the event of a
violation by the other of the terms and provisions of this Section 14.12, the
remedies at law would not be adequate; and accordingly, in
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such event such party may proceed to protect and enforce its rights under this
Section 14.12 by a suit in equity for specific performance and temporary,
preliminary and permanent injunctive relief from violation of any of the
provisions of this Section 14.12 from any court of competent jurisdiction
without the necessity of proving the amount of any actual damages to the party
resulting from the breach.
(b) The Issuer and Shareholders acknowledge that: the Purchaser
has public reporting obligations under the Securities Exchange Act of 1934, as
amended, and the Purchaser must obtain financing to complete the purchase of the
Shares. In addition, the Shareholders, the Issuer and the Purchaser acknowledge
that, subject to various rights and obligations under the Shareholders
Agreement, each party has the right to sell its shares of the Common Stock.
Accordingly, notwithstanding the preceding paragraph:
(i) The Purchaser may make public disclosures of such
information regarding the Issuer as it deems appropriate under applicable
securities Laws; provided that for the first year following the Closing, the
Purchaser shall make every reasonable effort to give the Issuer an
opportunity to review any such written disclosure (in substantially final
form), but excluding financial information included in the consolidated
financial statements of the Purchaser prior to the filing or other public
disclosure and shall in good faith consider any comments which the Issuer
may have regarding the accuracy and completeness of such disclosure;
(ii) The Purchaser may disclose information regarding the
Issuer to Persons from whom the Purchaser seeks financing to complete the
purchase of the Shares and to underwriters, finders and broker/dealers who
assist in locating such investors; provided that each such Person is under a
confidentiality obligation with respect to such information not materially
less stringent than the confidentiality obligations applicable to the
Purchaser and Shareholders under this Agreement; and
(iii) The Shareholders and the Purchaser may disclose
information regarding the Issuer to any Person in connection with the
proposed sale of shares of Common Stock; provided that each such Person is
under a confidentiality obligation with respect to such information not
materially less stringent than the confidentiality obligations applicable to
the Purchaser and Shareholders under this Agreement.
15. PAYMENT TO PROCHNOW
15.1 At or immediately following the Closing, the Issuer shall pay to
Prochnow an amount equal the outstanding principal and interest owed to Prochnow
on loans made prior to the Initial Loan by Prochnow to the Issuer, up to a
maximum amount of $1.5 million. If the amount of such loans (including accrued
and unpaid interest) exceeds $1.5 million as of the Closing, the balance shall
be payable (without interest) at such time and in such manner (such as cash or
non-voting Equity Securities) as Prochnow and the Board of Directors of the
Issuer shall agree, it being understood that repayment will not occur prior to
two years from the Closing.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
SYMPOSIUM CORPORATION
By: /s/ RUPERT GALLIERS-PRATT
--------------------------------------
Rupert Galliers-Pratt
Co-Chairman and Chief Executive Officer
AMERINET, INC.
By: /s/ DAVID KERLIN
-------------------------------------
David Kerlin
President
RICHARD PROCHNOW
/s/ RICHARD PROCHNOW
--------------------------------------
Richard Prochnow
DAVID KERLIN
/s/ DAVID KERLIN
--------------------------------------
David Kerlin
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ANNEX A
SHAREHOLDERS AGREEMENT
Summary of Terms
1. RIGHT OF FIRST REFUSAL.
(a) The Shareholders and the Purchaser will have a right of first
refusal in connection with any proposed Transfer by the others of
shares of Equity Securities of the Issuer. Prochnow and Kerlin shall
have a priority over the Purchaser in exercising the right of
refusal on the Transfer of Prochnow's or Kerlin's shares. Transfers
by Prochnow and Kerlin for estate planning purposes, and Transfers
by among the Purchaser Group, are not subject to the right of first
refusal. The "Purchaser Group" is Purchaser and its Subsidiaries.
(b) The Issuer may not issue any Equity Securities in a financing
transaction without first offering such Securities to the
Shareholders and the Purchaser on no less favorable conditions than
proposed to be offered to other Persons. If the Shareholders and the
Purchaser elect to purchase more shares than the shares offered, the
offered shares shall be allocated among the electing shareholders
based on the number of shares held by each.
2. PURCHASE RIGHT UPON DEATH OF A SHAREHOLDER. Upon the death of a
Shareholder, the remaining Shareholder and the Purchaser shall have a
right to purchase the shares of Common Stock of the Issuer owned by the
deceased Shareholder, with the surviving Shareholder having priority over
the Purchaser in exercising such right. The purchase price shall be the
fair market value of the shares, and may be paid in cash or by cash and a
4-year note secured by the shares purchased.
3. SUPERMAJORITY VOTE. The following acts require a vote of at least 2/3 of
the outstanding shares of the Common Stock of the Issuer:
(a) Any amendment of the Certificate of Incorporation or By-Laws of the
Issuer;
(b) Any dissolution, liquidation, reorganization of the Issuer;
(c) Any sale or other disposition of all or substantially all of the
assets of the Issuer;
(d) Any merger or consolidation of the Issuer;
(e) The sale of Equity Securities by the Issuer.
4. SHARE TRANSFER LIMITATIONS. Neither Purchaser nor any Shareholder may
Transfer any shares of the Common Stock to a competitor of the Issuer.
5. COSTS INCURRED BY PURCHASER IN CONNECTION WITH THE ISSUER. The Issuer will
reimburse or pay the Purchaser for the costs and expenses incurred by
Purchaser on behalf of Issuer in
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connection with various overhead and administrative functions based on a
formula set forth in or as otherwise determined in accordance with the
Shareholders Agreement.
6. SHAREHOLDER'S OPTION ("PUT"). Each Shareholder shall have the right on up
to two occasions commencing one year following the Closing and ending five
years following the Closing, and provided that the Purchaser Group then
owns a majority interest in the Issuer, to sell to the Purchaser shares of
the Common Stock of the Issuer for the fair market value of the shares. At
the time of exercising the "put," the Shareholder may specify how much of
the purchase price he desires to be paid in cash and how much by common
stock of the Purchaser. However, the Purchaser shall have the right to
determine how much of the purchase price it will pay by cash and by shares
of its common stock PROVIDED that if requested by the Shareholder, the
Purchaser will pay at least $200,000 in cash (in the aggregate per
Shareholder for all exercises by such Shareholder of the "put"). If the
Purchaser's determination of the amount of the purchase price to be paid
by cash varies by more than $100,000 from the amount specified by the
Shareholder, the Shareholder shall have the right not to proceed with the
sale. Any shares of the common stock of the Purchaser used to pay the
purchase price shall be valued at their average market price over a
specified period.
7. PURCHASER'S CALL OPTION. On or after the third anniversary of the Closing
and until the seventh year following the Closing, and provided that the
Purchaser Group then owns a majority interest in the Issuer, the Purchaser
shall have the right to purchase all, and not less than all, of the
Shareholders' shares of Common Stock for the fair market value thereof. At
the time of exercising the "call," the Purchaser may specify how much of
the purchase price it desires pay in cash and how much by common stock of
the Purchaser. However, a Shareholder shall have the right to determine
how much of the purchase price he desires to receive in cash and how much
by shares of the common stock of the Purchaser. If the Shareholder's
determination of the amount of the purchase price to be received in cash
varies by more than $100,000 from the amount specified by the Purchaser,
the Purchaser shall have the right not to proceed with the purchase. Any
shares of the common stock of the Purchaser used to pay the purchase price
shall be valued at their average market price over a specified period.
8. TERMINATION. The Shareholders Agreement shall automatically terminate at
such time as the Issuer becomes a public company. In addition, the
obligations under Sections 1(b), 3, 4, 5, 6, 7, 10 and 12 shall terminate
if the Purchaser Group and the Shareholders (and their Affiliates) own
less than 50% of the outstanding Common Stock.
9. FAIR MARKET VALUE. If the parties are unable to agree on the fair
market value of shares of the Common Stock of the Issuer, such fair
market value shall be determined by obtaining from a mutually agreed
upon investment banking firm (which shall be a major bracket
underwriter unless otherwise agreed) an opinion as to the value of such
shares, which value shall be the price such investment banking firm
would pay to purchase such shares from the Issuer or selling
shareholder in an public offering firmly underwritten by such
investment banking firm, assuming that such underwriter would be unable
to resell such shares in such offering. The cost of such opinion will
be borne equally be the Purchaser on one hand and Prochnow and/or
Kerlin, as the case may be, on the other hand.
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If Symposium pays cash for any shares of the Common Stock of the Issuer
upon exercise of the put or call, if within six months thereafter
Symposium either (i) resells such shares at a price greater than paid to
the Shareholder, or (ii) enters into an agreement to resell the Shares at
a price greater than paid to Shareholder, and then sells such shares
pursuant to such agreement, then in either case Symposium will pay to such
Shareholder such excess within five days following receipt of such excess
consideration.
10. REGISTRATION RIGHTS. At any time after five years from the Closing, the
holder or holders of at least 20% of the outstanding Common Stock covered
by the Agreement may on one occasion demand that the Issuer register
shares of Common Stock of such holder or holders which in the aggregate
exceeds 20% of the outstanding Common Stock of the Issuer in connection
with a firmly underwritten public offering. Notwithstanding who demanded
the registration, the Purchaser and the Shareholders shall have the right
to participate in the offering; if the number of shares which may be
included in the offering is limited by the managing underwriter, the
available shares shall be allocated among the Purchaser and the
Shareholders on a pro rata basis based on the number of shares owned by
each. In addition: (i) the Purchaser and the Shareholders shall receive
piggyback registration rights from the Issuer (which rights shall not
expire upon termination of the Shareholders Agreement but shall not apply
to any person who owns less than 5% of the outstanding Common Stock of the
Issuer); and (ii) the Shareholders shall receive from the Purchaser
piggyback registration rights with respect to the shares of common stock
of Purchaser they receive upon exercise of the put or call (which rights
shall not apply at any time the shares received by such Shareholder
represent less than 5% of the outstanding common stock of Symposium).
11. DRAG ALONG AND TAG ALONG RIGHTS. In connection with any proposed sale or
transfer of shares of Common Stock by the Purchaser, if the Shareholders
do not exercise their right of first refusal with respect to such sale,
the Purchaser shall have "drag-along" rights with respect to the
Shareholders' shares and the Shareholders shall have "tag-along" rights
with respect to the Purchaser's shares.
12. EFFECTIVE DATE. The Shareholders Agreement shall be entered into at the
time of the Additional Loan Closing but shall become effective at the
earlier to occur of the Closing or the date the Purchaser converts the
Initial Note or the Convertible Note into Common Stock. During any period
that the Shareholders Agreement is in effect and the Closing has not
occurred: (a) the put and call options shall not be in effect; (b) the
Shareholders shall have the "drag-along" rights and the Purchaser shall
have the "tag-along" rights contemplated by Section 10; and (c) the
provisions of Sections 3, 4 and 5 shall not be in effect.
13. BOARD OF DIRECTORS. The Board of Directors will be composed of five
directors, three of whom shall be designated by the Purchaser and two of
whom shall be designated by the Shareholders.
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ANNEX B
FORM OF INITIAL NOTE
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO A REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION.
CONVERTIBLE NOTE
Principal Amount: $250,000
Date: _____, 1999
FOR VALUE RECEIVED AmeriNet, Inc., an Oregon corporation ("BORROWER"),
unconditionally promises to pay to Symposium Corporation, a Delaware corporation
("LENDER"), Two Hundred Fifty Thousand Dollars ($250,000) together with interest
thereon at a rate of 8% per annum. This Note is issued pursuant to that certain
Stock Purchase Agreement between Lender, Borrower and the shareholders of
Borrower dated May 27, 1999 (the "STOCK PURCHASE AGREEMENT"). Unless otherwise
defined herein, capitalized terms used in this Note shall have the meanings
ascribed to them in the Stock Purchase Agreement.
1. PAYMENTS.
(a) If Lender makes the Additional Loan to Borrower as contemplated under
the Stock Purchase Agreement, this Note shall be cancelled and the principal and
interest owing under this Note shall become part of the principal of the Note
delivered by Borrower to Lender at the Additional Loan Closing.
(b) If the Additional Loan Closing does not occur, the principal and
interest owing under this Note shall be due and payable upon the earlier of (i)
one year from the date of the Stock Purchase Agreement and (ii) the occurrence
of a Financing Event. A "FINANCING EVENT" shall mean: (i) a merger or
consolidation to which Borrower is a party; (ii) the sale of all or a majority
of the assets of Borrower; (iii) the receipt by Borrower after the date hereof
of gross proceeds of $2,000,000 or more from loans and the issuance of debt
and/or equity securities (excluding loans from Lender); or (iv) the date the
Shareholders together own less than 50% of the outstanding voting securities of
Borrower.
2. PREPAYMENT. Borrower may at any time and from time to time prepay 100% or any
portion of at least $100,000 of the principal owing hereunder, together with the
interest thereon, without penalty or premium.
3. CONVERSION.
(a) If the Additional Loan Closing does not occur and the principal and interest
owing under this Note has not been paid on or before one year from the date of
the Stock Purchase
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Agreement, Lender, in its sole and absolute discretion, may at any time after
one year from the date of the Stock Purchase Agreement convert the amounts then
owing under this Note in accordance with this Section 3 (the "CONVERSION") by
written notice to Borrower. Upon Conversion, the principal amount owing under
this Note shall be converted into that number of fully paid and non-assessable
shares of Common Stock of Borrower, which immediately following Conversion shall
represent 2.5% (rounded up to the nearest whole share) of the sum of: (a) the
number of shares of the Common Stock immediately following Conversion; and (b)
the maximum number of shares of capital stock of Borrower which could be
purchased upon exercise of Stock Equivalents of Borrower immediately following
Conversion (regardless of whether such Stock Equivalents are then exercisable or
convertible). At Borrower's option the interest owing under this Note on the
date of Conversion may be paid in cash or converted into shares of Common Stock
at the rate per share at which the principal is converted (rounded up to the
nearest whole share).
(b) Within five days following the notice of Conversion, Borrower shall
issue to Lender: (i) a certificate or certificates for the number of shares of
Common Stock to which the Lender is entitled upon Conversion; and (ii)
certification signed by the President and the Chief Financial Officer of
Borrower that the proper number of shares shall have been issued to Lender.
4. APPLICATION OF PAYMENT. All payments made under this Note shall be applied
first against payment of interest accrued to the date of any payment and then
against principal due.
5. PAYMENTS AND EXPENSES OF COLLECTION. All amounts payable hereunder are
payable by wire transfer in immediately available funds to the account number
specified by the Lender, in lawful money of the United States. Borrower shall
pay all costs of collection of Lender, together with reasonable attorneys' fees
and costs, to enforce this Note in the event of a default whether or not a suit
is brought. Borrower waives demand, protest and notice of maturity and
non-payment, and all requirements necessary to hold Borrower liable hereunder.
6. MISCELLANEOUS. This Note shall be governed by, and construed in accordance
with, the laws of the State of Oregon.
To the extent that Borrower has or may hereafter acquire any immunity from
the jurisdiction of any court or from any legal process (whether through service
or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to Borrower's property, Borrower hereby
waives such immunity in respect of its obligations under this Note.
BORROWER:
AmeriNet, Inc.
By:
---------------------------------
David Kerlin, President
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ANNEX C
FORM OF CONVERTIBLE NOTE
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO A REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION.
CONVERTIBLE NOTE
Principal Amount: $__________
Date: ______, 1999
FOR VALUE RECEIVED AmeriNet, Inc., an Oregon corporation ("BORROWER"),
unconditionally promises to pay to Symposium Corporation, a Delaware corporation
("LENDER"), __________________($_________) together with interest thereon at a
rate of 8% per annum. This Note is issued pursuant to that certain Stock
Purchase Agreement between Lender, Borrower and the shareholders of Borrower
dated May 27, 1999 (the "STOCK PURCHASE Agreement"). Unless otherwise defined
herein, capitalized terms used in this Note shall have the meanings ascribed to
them in the Stock Purchase Agreement.
1. PAYMENTS. Barring Conversion (as defined in Section 3 below) of this Note,
the principal and interest owing under this Note shall be due and payable as
follows:
(a) If the Stock Purchase Agreement terminates pursuant to Section 13.2(b)
thereof, Borrower shall pay Lender an amount of the principal and interest owing
under this Note equal to the lesser of (i) all of such principal and interest
and (ii) Borrower's cash and cash equivalents in excess of $10,000.
(b) Any principal and interest owing under this Note that is not paid as
provided under Section 1(a) shall become due and payable upon the earlier of (i)
one year from the date of the Stock Purchase Agreement and (ii) the occurrence
of a Financing Event. A "FINANCING EVENT" shall mean: (i) a merger or
consolidation to which Borrower is a party; (ii) the sale of all or a majority
of the assets of Borrower; (iii) the receipt by Borrower after the date hereof
of gross proceeds of $2,000,000 or more from loans and the issuance of debt
and/or equity securities (excluding loans from the Lender); or (iv) the date the
Shareholders together own less than 50% of the outstanding voting securities of
Borrower.
2. PREPAYMENT. Borrower may at any time and from time to time prepay 100% or any
portion of at least $100,000 of the principal owing hereunder, together with the
interest thereon, without penalty or premium (a "Prepayment"), by giving Lender
at least 15 days prior written notice of its
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intention to make the Prepayment. Following receipt of written notice of
Prepayment from Borrower, Lender may at any time during the 15-day period
exercise its right of Conversion.
3. CONVERSION.
(a) The Lender, in its sole and absolute discretion, may at any time
convert the amounts then owing under this Note in accordance with this Section 3
(the "CONVERSION") by written notice to the Lender. Upon Conversion, the
principal amount owing under this Note shall be converted into that number of
fully paid and non-assessable shares of Common Stock of Borrower, which
immediately following Conversion shall represent 10% (rounded up to the nearest
whole share) of the sum of: (a) the number of shares of the Common Stock
immediately following Conversion; and (b) the maximum number of shares of
capital stock of Borrower which could be purchased upon exercise of Stock
Equivalents of Borrower immediately following Conversion (regardless of whether
such Stock Equivalents are then exercisable or convertible); PROVIDED that if
less than 100% of the original principal amount of this Note is being converted,
the number of shares of Common Stock of Borrower issuable upon Conversion shall
be reduced proportionately based on the percentage of the original principal
amount of this Note represented by the amount of this Note being converted. At
Borrower's option the interest owing under this Note on the date of Conversion
may be paid in cash or converted into shares of Common Stock at the rate per
share at which the principal is converted (rounded up to the nearest whole
share).
(b) Subject to Section 3(c) below, within five days following the notice
of Conversion, Borrower shall issue to Lender: (i) a certificate or certificates
for the number of shares of Common Stock to which the Lender is entitled upon
Conversion; and (ii) certification signed by the President and the Chief
Financial Officer of Borrower that the proper number of shares shall have been
issued to Lender.
(c) Within ten days following the notice of Conversion, Borrower shall
deliver to Lender a certificate dated the date of such delivery certifying that
the representations and warranties of Borrower set forth in the Stock Purchase
Agreement are true and correct in all material respects on the delivery date
with the same force and effect as though made on and as of the delivery date;
PROVIDED that any such representation and warranty made as of a specified date
shall only need to have been true on and as of such date; and PROVIDED FURTHER
that such representations and warranties may be subject to matters, if any, set
forth in a disclosure letter delivered by Borrower to Lender concurrently with
the delivery of such certificate. Lender shall have seven days after receipt of
Borrower's certificate (and disclosure letter, if any) to rescind its Conversion
by delivery of written rescission notice to Borrower. Upon delivery of such
rescission notice, the Conversion shall be cancelled and this Note shall remain
in full force and effect. Lender may exercise its Conversion rights hereunder
following one or more rescissions of proposed Conversions (but not with respect
to any portion of the Note that has been paid and with respect to which Lender
did not exercise its conversion right following Borrower's Prepayment notice).
(d) If Borrower delivers a notice to Lender of a partial Prepayment of
this Note pursuant to Section 2, Lender may at its election exercise its
Conversion rights hereunder with
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respect to the entire amount owing under this Note or the portion of such amount
that Borrower intends to prepay as stated in its Prepayment notice.
(e) Notwithstanding anything contained herein to the contrary, Lender
shall have no Conversion rights with respect to this Note if Borrower terminates
the Stock Purchase Agreement pursuant to Section 13.3(a) thereof.
4. APPLICATION OF PAYMENT. All payments made under this Note shall be applied
first against payment of interest accrued to the date of any payment and then
against principal due.
5. PAYMENTS AND EXPENSES OF COLLECTION. All amounts payable hereunder are
payable by wire transfer in immediately available funds to the account number
specified by the Lender, in lawful money of the United States. Borrower shall
pay all costs of collection of Lender, together with reasonable attorneys' fees
and costs, to enforce this Note in the event of a default whether or not a suit
is brought. Borrower waives demand, protest and notice of maturity and
non-payment, and all requirements necessary to hold Borrower liable hereunder.
6. DELIVERY OF MONTHLY FINANCIAL INFORMATION. Commencing upon the termination of
the Stock Purchase Agreement and so long thereafter as this Note remains
outstanding, Borrower shall deliver to Lender within 30 days after the end of
each month a Borrower prepared, unaudited balance sheet and income statement of
Borrower for such month.
7. MISCELLANEOUS. This Note shall be governed by, and construed in accordance
with, the laws of the State of Oregon.
To the extent that Borrower has or may hereafter acquire any immunity from
the jurisdiction of any court or from any legal process (whether through service
or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to Borrower's property, Borrower hereby
waives such immunity in respect of its obligations under this Note.
BORROWER:
AmeriNet, Inc.
By:
---------------------------------
David Kerlin, President
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "AGREEMENT") is made and entered into as
of June 9, 1999, by and among SYMPOSIUM CORPORATION, a Delaware corporation
("SYMPOSIUM"), DIRECT SALES INTERNATIONAL, L.P., a Georgia limited partnership
("SELLER"), the other parties identified on EXHIBIT A to this Agreement (each,
an "OTHER SELLER PARTY" and, together with Seller, the "SELLER PARTIES" and each
a "SELLER PARTY"), and RICHARD PROCHNOW ("Prochnow"), with reference to the
following facts:
A. Prochnow is the sole shareholder of Direct Sales, Inc., the
general partner of Seller, and directly or indirectly owns limited partnership
interests representing 96% of the profits, losses and distributions of Seller.
B. On the terms and subject to the conditions set forth in this
Agreement, the Seller Parties desire to sell to Symposium, and Symposium desires
to purchase from the Seller Parties, an option to purchase the assets of the
Seller Parties.
NOW, THEREFORE, with reference to the foregoing facts, the parties
agree as follows:
1. DEFINITIONS.
All terms defined in this Agreement shall have the defined meanings when
used in this Agreement or in any agreement, note, certificate, report or other
document made or delivered pursuant to this Agreement, unless otherwise defined
or the context otherwise requires. The following terms shall have the following
meanings:
"ACTION" means any litigation, action, suit, proceeding, arbitration
or claim before any court or Governmental Authority, or investigation by any
Governmental Authority.
"AFFILIATE" shall mean, with respect to any specified Person, (i)
any other Person who, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(ii) any other Person who is a director, officer, manager, member, partner or
trustee of the specified Person or a Person described in clause (i) of this
definition or any spouse of the specified Person or any such other Person, (iii)
any relative of the specified Person or any other Person described in clause
(ii) of this definition, or (iv) any Person of which the specified Person and/or
any one or more of the Persons specified in clause (i),(ii) or (iii) of this
definition, individually or in the aggregate, beneficially own 10% or more of
any class of voting securities or otherwise have a substantial beneficial
interest.
"ASSETS" shall mean all of the assets of the Seller Parties except
the Equity Securities of the Other Seller Parties and any assets that Symposium
determines not to acquire.
"ASSUMED LIABILITIES" shall mean the accounts payable, accrued
expenses and deferred revenues of the Seller Parties incurred in the ordinary
course of business and existing on the Closing Date.
<PAGE>
"BUSINESS" means the marketing and sale of magazine subscriptions by
the Seller Parties, whether directly or through third parties, and all business
activities of the Seller Parties relating thereto.
"CHARTER DOCUMENTS" shall mean (i) with respect to Seller, the
Limited Partnership Agreement dated June 1, 1995 of Seller, (ii) with respect to
each Other Seller Party, the Articles or Certificate of Incorporation, By-Laws,
Articles of Organization, Operating Agreement or other organizational documents,
as applicable, of such Party, and (iii) with respect to Symposium, the
Certificate of Incorporation and By-Laws of Symposium.
"CLOSING" shall mean the closing of the purchase and sale of the
Assets, and "CLOSING DATE" shall mean the date of the Closing.
"CONSULTING AGREEMENT" shall mean the consulting agreement to be
entered into between Symposium and Prochnow.
"CONTRACT" shall mean any written or oral note, bond, debenture,
mortgage, license, agreement, commitment, contract or understanding.
"EQUITY SECURITIES" of any Person shall mean the capital stock,
partnership interests or membership interests of such Person and/or any Stock
Equivalents of such Person.
"GENERAL PARTNER" shall mean Direct Sales, Inc., a Georgia
corporation and the general partner of Seller.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"LAW" shall mean any federal, state or local statute, law, rule,
regulation, ordinance, order, code, policy or rule of common law, now or
hereafter in effect, and in each case as amended, and any judicial or
administrative interpretation thereof by a Governmental Authority or otherwise,
including, without limitation, any judicial or administrative order, consent,
decree or judgment.
"LEASE AGREEMENT" shall mean the lease agreement to be entered into
between Symposium and Lessor for the Premises.
"LESSOR" shall mean P&T Properties, LLC.
"LIEN" shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction to evidence
any of the foregoing).
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<PAGE>
"LONG FORM AGREEMENT" shall mean the long form purchase agreement to
be entered into by the parties to this Agreement to formally memorialize the
terms and conditions (consistent with the terms and conditions contained herein)
upon which Symposium shall purchase and the Seller Parties shall sell the
Assets, and shall contain the terms and conditions of this Agreement, such other
terms and conditions as may be contemplated by this Agreement and such other
terms and conditions as may be customary in transactions of this type.
"OPTION" shall mean the option sold by the Seller Parties to
Symposium pursuant to this Agreement.
"OPTION EXPIRATION DATE" shall mean November 30, 1999.
"PERSON" shall mean an individual or a partnership, corporation,
trust, association, limited liability Symposium, Governmental Authority or other
entity.
"PREMISES" shall mean 2550 Heritage Court, Suite 106, Atlanta,
Georgia 30339.
"STOCK EQUIVALENTS" of any Person shall mean options, warrants,
calls, rights, commitments, convertible securities and other securities pursuant
to which the holder, directly or indirectly, has the right to acquire (with or
without additional consideration) capital stock, partnership interests or
membership interests of such Person.
"SUBSIDIARY" of any Person shall mean any entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly by such Person.
"TAX DISTRIBUTIONS" shall mean cash distributions by the Seller to
its partners in an aggregate amount equal to their aggregate federal and state
income tax liability (taking into account the federal tax deduction for state
taxes paid) with respect to the Seller's net income for the period from January
1, 1999 to the Closing Date. The Long Form Agreement shall provide for the
adjustment of the Tax Distributions to the extent that the actual tax
liabilities of the Seller's partners were greater than or less than the amount
of Tax Distributions received.
"TRANSFER" shall mean sell, assign, transfer, pledge, grant a
security interest in, or otherwise dispose of, with or without consideration,
and "TRANSFERRED" shall have a correlative meaning.
2. OPTION.
2.1 SALE OF OPTION. The Seller Parties hereby sell to Symposium, and
Symposium hereby purchases from the Seller Parties, an option to purchase the
Assets from the Seller Parties. Symposium has concurrently herewith delivered to
the Seller Parties its check in the amount of $100 in consideration of the
Option.
2.2 OPTION EXPIRATION DATE. The Option shall terminate and expire on
the Option Expiration Date.
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<PAGE>
2.3 EXERCISE PRICE. The exercise price for the Option (the "EXERCISE
Price") shall be: (i) $22,900,000, payable by wire transfer or certified or bank
cashier's check to the order of Seller; (ii) cash in an amount equal to the
quotient of (A) the Seller's outstanding indebtedness at the Closing for money
borrowed in the ordinary course of business under the Amended and Restated
Revolving Loan Agreement dated as of October 1, 1998 between the Seller and
SouthTrust Bank, N.A., divided by (B) 0.555; and (iii) the assumption of the
Assumed Liabilities.
2.4 EXERCISE. Symposium may exercise the Option by written notice to
the Seller at any time prior to the Option Expiration Date. The notice shall set
forth the Closing Date for the purchase and sale of the Assets, which date shall
not be less than seven days following the date of the notice. The exercise of
the Option shall be contingent upon the satisfaction or waiver of the conditions
to closing to be set forth in the Long-Form Agreement.
2.5 CLOSING DELIVERIES. At the Closing, each Seller Party shall, at
the Seller Party's expense, deliver:
(a) such bills of sale, endorsements, assignments, subleases, and
other good and sufficient instruments of conveyance, transfer and assignment,
including, without limitation, a bill of sale, as shall be necessary to vest in
Symposium good title in and to the Assets free and clear of any and all Liens;
and
(b) possession of the Assets.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND PROCHNOW.
Seller and Prochnow jointly and severally represent and warrant to
Symposium as follows:
3.1 ORGANIZATION, STANDING AND POWER; CAPITALIZATION. Seller is a
limited partnership duly organized, validly existing and in good standing in the
laws in the state of Georgia and has all requisite partnership power and
partnership authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted. Each Other Seller Party is a
corporation or limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and has all
requisite corporate or limited liability company power and authority to own,
lease and operate its properties and assets and to carry on its business as now
being conducted. Each Seller Party is duly qualified or licensed as a foreign
partnership, corporation or limited liability company and is in good standing in
each jurisdiction where the nature of its properties owned or held under lease
or the nature of the business conducted by it make such qualification necessary.
Prochnow owns the General Partner, and directly or indirectly owns 96% of the
profits, losses and distributions of Seller.
3.2 AUTHORITY; ENFORCEABILITY; EFFECT OF AGREEMENT.
(a) Each Seller Party has full power and authority to enter into,
execute and deliver this Agreement and perform its obligations hereunder.
Prochnow has the requisite capacity to enter into, execute and deliver this
Agreement and perform his obligations hereunder. This Agreement has been duly
authorized by all necessary partnership, corporate or limited liability company
action of each Seller Party, including, without limitation, the authorization
and approval by
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<PAGE>
Prochnow. This Agreement has been duly executed and delivered by
each Seller Party and Prochnow and, assuming this Agreement is duly executed and
delivered by Symposium, constitutes a valid and legally binding obligation of
each Seller Party and Prochnow enforceable against each Seller Party and
Prochnow in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally, or the availability
of equitable remedies.
(b) The execution and delivery by each Seller Party and Prochnow
of this Agreement do not, and compliance by each Seller Party and Prochnow with
the provisions of this Agreement will not, (A) conflict with or result in a
breach or default under the Charter Documents of any Seller Party or any of the
terms, conditions or provisions of any Contract to which any Seller Party or
Prochnow is a party or otherwise bound, or to which any property or asset of any
Seller Party or Prochnow is subject; (B) violate any Law applicable to any
Seller Party or Prochnow; or (C) result in the creation or imposition of any
Lien on any asset of any Seller Party or Prochnow.
3.3 ASSETS. Each Seller Party has good and marketable title to all of
the assets of the Seller Party included in the Assets. At the Closing, Symposium
shall receive good and marketable title to the Assets, free and clear of all
Liens other than Liens securing the Seller Parties' obligations under the
Assumed Liabilities.
In addition to the foregoing representations and warranties, Seller and
Prochnow will jointly and severally make in the Long-Form Agreement additional
representations and warranties regarding the business, assets, liabilities,
financial condition, results of operations and other matters pertaining to the
Seller Parties, and the Business as may be customary in transactions of this
type.
4. REPRESENTATIONS AND WARRANTIES OF SYMPOSIUM.
Symposium represents and warrants to Seller as follows:
4.1 ORGANIZATION, STANDING AND CORPORATE POWER. Symposium is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and corporate
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted. Symposium is duly qualified or licensed as
a foreign corporation and is in good standing in each jurisdiction where the
nature of its properties owned or held under lease or the nature of the business
conducted by it make such qualification necessary.
4.2 AUTHORITY; ENFORCEABILITY; EFFECT OF AGREEMENT.
(a) Symposium has full corporate power and corporate authority to
enter into, execute and deliver this Agreement and perform its obligations
hereunder. This Agreement has been duly authorized by all necessary corporate
action of Symposium. This Agreement has been duly executed and delivered by
Symposium and, assuming this Agreement is duly executed and delivered by
Prochnow and each Seller Party, constitutes a valid and legally binding
obligation of Symposium and is enforceable against Symposium in accordance with
its terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally, or the availability of equitable
remedies.
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<PAGE>
(b) The execution and delivery by Symposium of this Agreement do
not, and compliance by Symposium with the provisions hereof will not, (A)
conflict with or result in a breach or default under the Charter Documents of
Symposium or any of the terms, conditions or provisions of any Contract to which
Symposium is a party or otherwise bound, or to which any asset or property of
Symposium is subject; or (B) violate any Law applicable to Symposium; or (C)
result in the creation or imposition of any Lien on any asset of Symposium.
In addition to the foregoing representations and warranties, Symposium
will make in the Long-Form Agreement additional representations and warranties
regarding the business, assets, liabilities, financial condition, results of
operations and other matters pertaining to Symposium and its business as may be
customary in transactions of this type.
5. COVENANTS PRIOR TO CLOSING.
5.1 CONDUCT OF BUSINESS. Prior to the Closing, except as contemplated
by this Agreement or with the prior written consent of Symposium, each Seller
Party agrees, and Prochnow agrees to cause each Seller Party:
(a) to conduct its operations according to its ordinary and usual
course of business;
(b) not to Transfer any Assets,
(c) except for Tax Distributions and distributions by the Other
Seller Parties to the Seller, not to declare or pay any dividend or other
distribution on its Equity Securities, and not to purchase, redeem, retire or
otherwise acquire any of its Equity Securities;
(d) to use its best efforts to preserve intact its business
organization and goodwill, keep available the services of its officers and
employees and maintain satisfactory relationships with those Persons having
business relationships with the Seller Party;
(e) to duly comply in all material respects with all Laws
applicable to the Seller Party and to the conduct of the Business;
(f) to maintain the tangible Assets in a good condition and state
of repair;
(g) not to enter into any Contract of any kind or nature with any
Affiliate of the Seller Party and not to make any payment to Prochnow, or any
Affiliate of Prochnow, except for Tax Distributions to Prochnow, payments of
salary to Prochnow at the rate in effect on January 1, 1999, and reimbursement
for expenses incurred in the ordinary course of business as is customary in
accordance with the past practices of the Seller Parties.
In addition, each Seller Party will agree, and Prochnow will agree to
cause each Seller Party to agree in the Long-Form Agreement to such other
covenants regarding the conduct of its business as may be customary in
transactions of this type.
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<PAGE>
5.2 INSPECTION OF RECORDS. Between the date of this Agreement and the
Closing, each Seller Party shall allow the duly authorized officers, attorneys,
accountants and other representatives of Symposium access at all reasonable
times to the records and files, correspondence, audits and properties, as well
as to all information in each case relating to the business and affairs of the
Seller Party.
5.3 CONSULTING AGREEMENT. Prochnow and Symposium shall negotiate in
good faith the terms of the Consulting Agreement, which will become effective as
of the Closing. The Consulting Agreement will either be entered into on or prior
to the date the parties execute and deliver the Long-Form Agreement or the
principal terms and conditions of the Consulting Agreement shall be set forth in
the Long Form Agreement.
5.4 LEASE AGREEMENT. Symposium and the Lessor shall negotiate in good
faith the terms of the Lease Agreement pursuant to which Symposium will lease
the Premises from the Lessor. The Lease Agreement will either be entered into on
or prior to the date the parties execute and deliver the Long-Form Agreement or
the principal terms and conditions of the Lease Agreement shall be set forth in
the Long Form Agreement. The Lessor and the Seller agree to terminate any
existing lease for the Premises effective as of the Closing.
5.5 AUDIT AND FINANCIAL STATEMENTS. The Seller shall have its
consolidated financial statements for the year ended December 31, 1998 audited
by the Seller's independent accountants as promptly as practicable, but no later
than July 31, 1999, and shall provide a copy of such audited financial
statements to Symposium. Seller shall place no scope limitations on such audit.
As promptly as practicable, but no later than June 30, 1999, the Seller shall
provide to Symposium a consolidated and combined balance sheet and statement of
operations as of and for the quarter ended March 31, 1999. Within 30 days
following the end of each month, commencing May 1999, the Seller shall provide
to Symposium a consolidated balance sheet and consolidated statement of
operations, and a combined balance sheet and combined statement of operations,
as of the end of and for the month then ended and the year-to-date.
5.6 NOTICES. The Seller Parties shall promptly notify Symposium of:
(i) any material development concerning the Business; (ii) any material change
in the financial condition or Assets of the Seller Parties or event which any
Seller Party believes could cause a material change in the financial condition
of Assets of the Seller Parties; and (iii) any Action regarding the Seller
Parties.
5.7 TRANSFER OF EQUITY SECURITIES OF THE SELLER. Prochnow agrees not
to, and agrees to cause the General Partner not to, Transfer any Equity
Securities of the Seller until the earlier to occur of exercise of the Option
and the Option Expiration Date; PROVIDED that Prochnow may Transfer all or any
portion of his Equity Securities of the Seller to the General Partner without
Symposium's consent so long as the General Partner is wholly owned by Prochnow
and agrees in writing to be bound by Prochnow's obligations with respect to such
Equity Securities under this Agreement and Section 6 of the Stock Purchase
Agreement dated as of the date hereof between Prochnow and Symposium.
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<PAGE>
6. CLOSING CONDITIONS.
The Long-Form Agreement will contain customary closing conditions for each
party with respect to the purchase and sale of Assets upon exercise of the
Option.
7. INDEMNIFICATION.
The Long-Form Agreement will contain indemnification provisions acceptable
to the parties.
8. NONCOMPETITION.
The Long-Form Agreement will contain a covenant by Prochnow not to compete
acceptable to the parties.
9. MISCELLANEOUS.
9.1 NOTICES. All notices, requests, demands and other communications
(collectively, "NOTICES") given pursuant to this Agreement shall be in writing,
and shall be delivered by personal service, courier, facsimile transmission
(which must be confirmed) or by United States first class, registered or
certified mail, postage prepaid, to the following addresses:
(i) if to Symposium, to:
Symposium Corporation
410 Park Avenue, 18th Floor
New York, New York 10022
Facsimile No. (212) 754-9906
Attn: Ronald Altbach
with a copy to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, 24th Floor
Los Angeles, California 90067
Facsimile No.: (310) 728-2211
Attn: Alan B. Spatz, Esq.
(ii) if to any Seller Party or Prochnow, to:
Richard Prochnow
2550 Heritage Court, Suite 106
Atlanta, Georgia 30339
Facsimile No. (770) 952-0409
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<PAGE>
with a copy to:
Arnall Golden & Gregory, LLP
1201 West Peachtree Street, Suite 2800
Atlanta, Georgia 33309
Facsimile No.: (404) 873-8501
Attn: S. Jarvin Levison, Esq./Stuart C.
Johnson, Esq.
Any Notice, other than a Notice sent by registered or certified mail, shall be
effective when received; a Notice sent by registered or certified mail, postage
prepaid return receipt requested, shall be effective on the earlier of when
received or the third day following deposit in the United States mails. Any
party may from time to time change its address for further Notices hereunder by
giving notice to the other parties in the manner prescribed in this Section.
9.2 ENTIRE AGREEMENT. This Agreement contains the sole and entire
agreement and understanding of the parties with respect to the entire subject
matter of this Agreement, and any and all prior discussions, negotiations,
commitments and understandings, whether oral or otherwise, related to the
subject matter of this Agreement are hereby merged herein. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto any rights or remedies under or by way of this Agreement.
9.3 ASSIGNMENT. No party may assign its rights or obligations under
this Agreement, and any attempted or purported assignment or any delegation of
any party's duties or obligations arising under this Agreement to any third
party or entity shall be deemed to be null and void, and shall constitute a
material breach by such party of its duties and obligations under this
Agreement; PROVIDED that Symposium may assign its rights to any Subsidiary of
Symposium. This Agreement shall inure to the benefit of and be binding upon any
successors of each party by way of merger or consolidation.
9.4 WAIVER AND AMENDMENT. No provision of this Agreement may be waived
unless in writing signed by all the parties to this Agreement, and waiver of any
one provision of this Agreement shall not be deemed to be a waiver of any other
provision. This Agreement may be amended only by a written agreement executed by
all of the parties to this Agreement.
9.5 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York without giving effect to the principles
of conflicts of law thereof.
9.6 SEVERABILITY. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
9.7 CAPTIONS. The various captions of this Agreement are for reference
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
9
<PAGE>
9.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
9.9 COSTS AND ATTORNEYS' FEES. If any Action is instituted to remedy,
prevent or obtain relief from a default in the performance by any party to this
Agreement of its obligations under this Agreement, the prevailing party shall
recover its reasonable attorneys' fees incurred in each and every such Action,
including, without limitation, any and all appeals or petitions therefrom.
9.10 RIGHTS CUMULATIVE. No right granted to the parties under this
Agreement 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 right under this Agreement, or under any other document or instrument
delivered hereunder, or allowed by law or equity, shall be cumulative and may be
exercised from time to time.
9.11 JUDICIAL INTERPRETATION. Should any provision of this Agreement
require judicial interpretation, it is agreed that a court interpreting or
construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against any Person by reason of the rule of construction
that a document is to be construed more strictly against the Person who itself
or through its agent prepared the same, it being agreed that all parties have
participated in the preparation of this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, this Option Agreement has been made and entered into
as of the date and year first above written.
SYMPOSIUM CORPORATION,
a Delaware corporation
By:
-----------------------------------
Name:
Title:
DIRECT SALES INTERNATIONAL, L.P.
a Georgia limited partnership
By: Direct Sales, Inc., its general
partner
By:
-----------------------------
Name:
Title:
NATIONAL READERS SERVICE, INC.,
a New Jersey corporation
By:
-----------------------------------
Name:
Title:
DSI COMMUNICATIONS, LLC
a Georgia limited liability company
By: /s/ RICHARD PROCHNOW
-----------------------------------
Name:
Title:
RICHARD PROCHNOW
/s/ RICHARD PROCHNOW
--------------------------------------
Richard Prochnow
<PAGE>
EXHIBIT A
TO
OPTION AGREEMENT
DATED AS OF JUNE 9, 1999
OTHER SELLER PARTIES
National Readers Service, Inc.
DSI Communications, LLC
BYLAWS
OF
SYMPOSIUM CORPORATION
A DELAWARE CORPORATION
AMENDED AND RESTATED AS OF JULY 26, 1999
ARTICLE I
STOCKHOLDERS MEETINGS
---------------------
Section 1 PLACE OF MEETING. Meetings of the Stockholders shall be held at
the principal offices of the Corporation or at such place, within or without the
State of Delaware, as may from time to time be designated for that purpose,
either by the Board or by the written consent of all persons entitled to vote
thereat and not present at the meeting, given either before or after the meeting
and filed with the Secretary of the Corporation.
Section 2 ANNUAL MEETINGS. Unless directors are elected by written consent
in lieu of an annual meeting as permitted by this Section 2, an annual meeting
of the Stockholders for the election of directors shall be held on such date and
at such time as may be designated, from time to time, by resolution of the
Board. Stockholders may, unless the Certificate of Incorporation otherwise
provides, act by written consent to elect directors; provided, however, that if
such consent is less than unanimous, such action by written consent may be in
lieu of holding an annual meeting only if all of the directorships to which
directors could be elected at an annual meeting held at the effective time of
such action are vacant and are filled by such action. If the annual meeting for
the election of directors is not held on the date designated therefor or action
by written consent to elect directors in lieu of an annual meeting has not been
taken, the directors shall cause the meeting to be held as soon as is
convenient. Any other proper business may be transacted at the annual meeting.
Section 3 SPECIAL MEETINGS. Special meetings of the Stockholders for the
purpose of taking any action which the Stockholders are permitted to take under
the DGCL may be called at any time by the Chairman of the Board.
Section 4 NOTICE OF MEETINGS. Except as otherwise provided by the DGCL
written notice of each meeting of the Stockholders, whether annual or special,
shall be given not less than ten nor more than sixty days prior to the date upon
which the meeting is to be held to each Stockholder entitled to vote at such
meeting. Such notice shall be deemed delivered when deposited in the United
States mail addressed to the Stockholder at such person's address as it appears
on the stock records of the Corporation, with postage thereon prepaid, or
otherwise actually delivered to such person. Such notice shall state the place,
date and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. If a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken and, at the adjourned meeting, such business may be transacted as might
properly have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
Stockholder of record entitled to vote at the meeting.
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Section 5 QUORUM. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, at each meeting of Stockholders the presence in
person or by proxy of the holders of shares of stock having a majority of the
votes which could be cast by the holders of all outstanding shares of stock
entitled to vote at the meeting shall be necessary and sufficient to constitute
a quorum. The Stockholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough Stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 6 ADJOURNED MEETING. Any Stockholders' meeting, annual or special,
whether or not a quorum is present, may be adjourned by vote of a majority of
the shares present, either in person or by proxy, but in the absence of a quorum
no other business may be transacted at such meeting, except as expressly
provided in Section 5 of this Article.
Section 7 ORGANIZATION. Meetings of Stockholders shall be presided over by
the Chairman of the Board, if any, or in his absence by the Vice Chairman of the
Board, if any, or in his absence by the Chief Executive Officer, or in his
absence by a chairman designated by the Board, or in absence of such designation
by a chairman chosen at the meeting by the Stockholders. The Secretary shall act
as secretary of the meeting, but in his absence, the chairman of the meeting may
appoint any person to act as secretary of the meeting. The chairman of the
meeting shall announce at the meeting of Stockholders the date and time of the
opening and of the polls for each matter upon which the Stockholders will vote.
Section 8 PROXIES. Each Stockholder entitled to vote at a meeting of
Stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for such person
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. Any such proxy shall be
delivered to the secretary of such meeting, at or prior to the time designated
in the order of business for so delivering such proxies. A duly elected proxy
shall be irrevocable if it states that it is irrevocable and if, and only so
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally.
Section 9 STOCKHOLDER LIST. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten days before every
meeting of Stockholders, a complete list of the Stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each Stockholder.
Such list shall be open to the examination of any Stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any Stockholder who is
present.
Section 10 CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless otherwise
provided in the Certificate of Incorporation, any action required to be taken,
or that may be taken, at any annual or special meeting of the Stockholders, may
be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action to be taken, shall have been signed
by
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the holders of outstanding stock eligible to vote on such action, having not
less than the minimum number of votes of each class of stock that would be
necessary to authorize or take such action at a meeting at which all shares of
each class of stock entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or to an officer or agent of the
Corporation having custody of the book in which proceedings of minutes of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the earliest
dated consent delivered in the manner required by this Section to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or to an officer or
agent of the Corporation having custody of the book in which proceedings of
minutes of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested.
The Secretary shall give prompt notice of the taking of any corporate
action without a meeting by less than unanimous written consent to those
Stockholders who have not consented in writing and who, if the action had been
taken at a meeting, would have been entitled to notice of the meeting if the
record date for such meeting had been the date that written consents signed by a
sufficient number of holders to take the action were delivered to the
corporation as provided in this Section 10.
Section 11 INSPECTORS OF ELECTION. In advance of any meeting of the
Stockholders, the Board shall appoint at least one person, other than nominees
for office, as inspectors of election, to act at such meeting or any adjournment
thereof. The number of such inspectors of election shall be one or three. In
case any person appointed as inspector fails to appear or refuses to act, the
vacancy shall be filled by appointment by the Board in advance of the meeting,
or at the meeting by the chairman of the meeting.
The duties of each such inspector shall include: determining the number of
shares outstanding and voting power of each; determining the shares represented
at the meeting; determining the existence of a quorum; determining the
authenticity, validity and effect of proxies; receiving votes, ballots or
consents; hearing and determining all challenges and questions in any way
arising in connection with the right to vote; retaining for a reasonable period
the disposition of any challenges made to the inspector's determinations;
counting and tabulating all votes; determining when the polls shall close;
determining the result of any election; certifying the determination of the
number of shares represented at the meeting, and the count of all votes and
ballots; certifying any information considered in determining the validity and
counting of proxies and ballots if that information is used for the purpose of
reconciling proxies and ballots submitted by or on behalf of banks, brokers,
their nominees or similar persons which represent more votes than the
Stockholder holds of record; and performing such acts as may be proper to
conduct the election or vote with fairness to all Stockholders.
An announcement shall be made at each meeting of the Stockholders by the
chairman of the meeting of the date and time of the opening and closing of polls
for each matter upon which the
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Stockholders will vote at the meeting. No ballot, proxies or votes, nor any
revocations thereof or changes thereto, shall be accepted by the inspectors
after the closing of the polls unless the Delaware Court of Chancery upon
application by a Stockholder shall determine otherwise.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws, this Section 11 shall not apply to the Corporation if the Corporation
does not have a class of voting stock that is:
(a) listed on a national securities exchange;
(b) authorized for quotation on an interdealer quotation system of a
registered national securities association; or
(c) held of record by more than 2,000 stockholders.
Section 12 RECORD DATE. In order that the Corporation may determine the
Stockholders entitled to notice of or to vote at any meeting of Stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
If no record date is fixed:
(a) The record date for determining Stockholders entitled to notice of or
to vote at a meeting of Stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held;
(b) The record date for determining Stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board is necessary, shall be the day on which the first written consent
is expressed;
(c) The record date for determining Stockholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
A determination of Stockholders of record entitled to notice of or to vote
at a meeting of Stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
Section 13 PROCEDURES FOR MEETINGS. The Board may adopt by resolution such
rules and regulations for the conduct of meetings of Stockholders as it shall
deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the Board, the chairman of any meeting shall have the
right and authority to prescribe such rules, regulations and procedures and to
do all such acts as, in the judgment of the chairman, are appropriate for the
proper conduct of the meeting. Such rules, regulations or procedures, whether
adopted by the Board or prescribed by the chairman of the meeting, may include,
without limitation, the following: (i) the establishment of an agenda or order
of business for the meeting; (ii) rules and procedures for maintaining order at
the meeting and the safety of those present; (iii) limitations on attendance at
or participation in the
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meeting to Stockholders of record, their duly authorized and constituted proxies
or such other persons as the chairman of the meeting shall determine; (iv)
restrictions on entry to meeting after the time fixed for commencement thereof;
(v) limitations on the time allotted to questions or comments by participants.
Unless and to the extent determined by the Board or the chairman of meeting,
meeting of Stockholders shall not be required to be held in accordance with the
rules of parliamentary procedure.
ARTICLE II
BOARD OF DIRECTORS
------------------
Section 1 POWERS. The business and affairs of the Corporation shall be
managed by, or under the direction of the Board, except as may be otherwise
provided by the DGCL or in the Certificate of Incorporation or these Bylaws.
Section 2 NUMBER. The Board shall consist of one or more members, the
number thereof to be determined from time to time by resolution of the Board.
Section 3 PLACE OF MEETING. Unless otherwise provided in the Certificate of
Incorporation, meetings, both regular and special, of the Board shall be held at
the Corporation's principal executive offices, or at such other place or places,
as the Board, or the Chairman of the Board may from time to time determine.
Section 4 REGULAR MEETINGS. Immediately following each annual meeting of
the Stockholders the Board shall hold a regular meeting at the same place at
which such Stockholders' meeting is held, or any other place as may be fixed
from time to by the Board or the Chairman of the Board. Notice of such meeting
need not be given.
Other regular meetings of the Board shall be held without call at such
time as the Board may from time to time by resolution determine. If any day
fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day not a
legal holiday. Notice of a regular meeting need not be given.
Section 5 SPECIAL MEETINGS. Except as otherwise provided in the Certificate
of Incorporation, special meetings of the Board for any purpose or purposes may
be called at any time by the Chairman of the Board, the Chief Executive Officer,
the President, the Secretary or by any two directors.
Written notice of the time and place of special meetings shall be
delivered personally to each director or communicated to each director by
telephone or telegraph or telex or cable or mail or other form of recorded
communication, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the Corporation or, if it is not so
shown on such records or is not readily ascertainable, at that director's
residence or usual place of business. In case such notice is mailed, it shall be
deposited in the United States mail at least seven days prior to the time of the
holding of the meeting. In case such notice is delivered personally or by other
form of written communication, it shall be delivered at least 48 hours before
the time of the holding of the meeting.
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The notice shall state the time of the meeting, but need not specify the place
of the meeting if the meeting is to be held at the principal executive office of
the Corporation. The notice need not state the purpose of the meeting unless
expressly provided otherwise by statute.
Section 6 MEETINGS BY COMMUNICATION EQUIPMENT. Members of the Board, or any
committee designated by the Board, may participate in a meeting of the Board or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section shall constitute presence in
person at such meeting.
Section 7 QUORUM AND MANNER OF ACTING. The presence of a majority of the
total number of directors shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at a meeting duly
held shall be the act of the Board. In the absence of a quorum, a majority of
the directors present may adjourn any meeting from time to time until a quorum
is present. Notice of an adjourned meeting need not be given.
Section 8 VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETINGS. The
transactions of any meeting of the Board, however called and noticed or wherever
held, shall be as valid as though made or performed at a meeting duly held after
regular call and notice, if, either before or after the meeting, each of the
directors not present or who, though present, has prior to the meeting or at its
commencement protested the lack of proper notice to such director, signs a
written waiver of notice or a consent to holding such meeting or approval of the
minutes thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 9 ACTION WITHOUT MEETING. Any action required or permitted to be
taken at any meeting of the Board, or of any committee thereof, may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 10 COMPENSATION OF DIRECTORS. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses incurred by them, as may be fixed or determined by
resolution of the Board.
Section 11 COMMITTEES. The Board may, by resolution passed by a majority of
the whole Board, designate one or more committees, each committee to consist of
one or more of the directors of the Corporation. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent permitted by law and to the extent
provided in the resolution of the Board, shall have and may exercise all the
powers and authority of the Board in the management of the business and affairs
of the Corporation, and may authorize the seal of the Corporation to be affixed
to all papers which may require it. The Board may remove any director from a
committee with or without cause at any time.
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ARTICLE III
OFFICERS
--------
Section 1 OFFICERS. The Board may elect such officers with such titles as
the Board deems advisable. Each officer shall have the powers and duties set
forth in these Bylaws and any resolution of the Board appointing such officer
(to the extent such resolution is not inconsistent with these Bylaws), and to
the extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board. The Board may designate two or more persons
as Chairman of the Board, in which case each shall be a Co-Chairman of the
Board. Each such officer shall hold office until his or her successor is elected
and qualified or until his or her earlier resignation or removal. Subject to
contractual obligations to the Company, any officer may resign at any time upon
written notice to the Corporation. The Board may remove any officer with or
without cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the Corporation. Any number of
offices may be held by the same person.
Section 2 CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at all meetings of the Board and
exercise and perform such other powers and duties as may be from time to time
assigned to such person by the Board.
Section 3 CHIEF EXECUTIVE OFFICER. Subject to such supervisory powers, if
any, as may be given by the Board to the Chairman of the Board, the Chief
Executive Officer, if such an officer be elected, shall, subject to the control
of the Board and the Chairman, have general supervision, direction and control
of the business and the officers of the Corporation. The Chief Executive Officer
shall preside at all meetings of the Stockholders and, in the absence of the
Chairman of the Board, or if there be none, at all meetings of the Board. The
Chief Executive Officer shall exercise and perform such other powers and duties
as may be from time to time assigned to such person by the Board.
Section 4 PRESIDENT. Subject to such supervisory powers, if any, as may be
given by the Board to the Chairman of the Board and the Chief Executive Officer,
if there be such officers, the President shall be the chief operating officer of
the Corporation and shall, subject to the control of the Board, have general
supervision, direction, and control of the business and the officers of the
Corporation (other than the Chairman and Chief Executive Officer). The President
shall preside at all meetings of the Stockholders in the absence of the Chairman
and the Chief Executive Officer, and, in the absence of the Chairman and the
Chief Executive Officer, at all meetings of the Board. The President shall have
the general powers and duties of management usually vested in the office of
president and general manager of a Corporation, and shall have such other powers
and duties as may be prescribed by the Board and the Chief Executive Officer.
Section 5 VICE PRESIDENTS. In the absence or disability of the Chairman,
the Chief Executive Officer and the President, the Vice Presidents, if any, in
order of their rank as fixed by the Board, or, if not ranked, the Vice President
designated by the Board shall perform all the duties of such officer, and when
so acting shall have all the powers of, and be subject to all the restrictions
upon, such offices. The Vice Presidents shall have such other powers and perform
such other duties as from time to time may be prescribed for them respectively
by the Board, the Chief Executive Officer or the President.
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Section 6 SECRETARY. The Secretary shall keep, or cause to be kept, at the
principal executive office or such other place as the Board may direct, a book
of minutes of all meetings and actions of directors, committees of directors,
and Stockholders, with the time and place of holding, whether regular or
special, and, if special, how authorized, the notice given, the names of those
present at directors' meetings or committee meetings, the number of shares
present or represented at Stockholders' meetings, and the proceedings.
The Secretary shall give, or cause to be given, notice of all meetings of
the Stockholders and of the Board required by the Bylaws or by law to be given,
and he shall keep the seal of the Corporation, if one be adopted, in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board.
Section 7 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall keep
and maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares, and shall
send or cause to be sent to the Stockholders of the Corporation such financial
statements and reports as are by law or these Bylaws required to be sent to
them. The books of account shall at all reasonable times be open to inspection
by any director.
The Chief Financial Officer shall deposit all monies and other valuables
in the name or to the credit of the Corporation with such depositories as may be
designated by the Board. The Chief Financial Officer shall disburse the funds of
the Corporation as may be ordered by the Board, shall render to the President
and directors, whenever they request it, an account of all transactions
undertaken as Chief Financial Officer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board.
ARTICLE IV
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS
------------------------------------
Section 1 AGENTS, PROCEEDINGS AND EXPENSES. For the purposes of this
Article IV, "agent" means any person who is or was a director, officer, employee
or other agent of the Corporation, or is or was a director, officer, employee or
other agent of the Corporation as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Corporation or
of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or complete action or proceeding,
whether civil, criminal, administrative, or investigative; and "expenses"
includes, without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under Section 2 or Section 3 of this Article IV.
Section 2 ACTIONS OTHER THAN BY THE CORPORATION. The Corporation shall have
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that
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such person is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe such person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contender or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such person's conduct was
unlawful.
Section 3 ACTIONS BY THE CORPORATION. The Corporation shall have power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of such person's duty to the
Corporation unless and only to the extent that the Delaware Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
Section 4 SUCCESSFUL DEFENSE BY AGENT. To the extent that a present or
former director or officer of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 2 and 3 of this Article IV, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith.
Section 5 REQUIRED APPROVAL. Any indemnification under Sections 1 and 2
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Sections 2 and 3 of this Article IV. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (a) by a majority vote of the members of the Board who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(b) by a committee of such disinterested directors designated by majority vote
of such disinterested directors, even though less than a quorum, or (c) if there
are no such disinterested directors, or if such disinterested directors so
direct, by independent legal counsel in a written opinion, or (d) by the
affirmative vote of a majority of Stockholders.
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Section 6 ADVANCE OF EXPENSES. The Corporation may, in its discretion, pay
the expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding, in advance of the final disposition of such action, suit or
proceeding, provided, however, that the payment of expenses incurred by a
director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by or on behalf of such director or
officer to repay all amounts advanced if it should ultimately be determined that
the director or officer is not entitled to be indemnified by the Corporation as
authorized in this Article IV or otherwise. Such expenses (including attorneys'
fees) incurred by former directors and officers or other employees and agents
may be so paid upon such terms and conditions, if any, as the Corporation deems
appropriate.
Section 7 CONTRACTUAL RIGHTS. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other sections of this Article
IV shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of Stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office and shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 8 LIMITATIONS. No indemnification or advance shall be made under
this Article IV, except as provided in Section 4, in any circumstances where it
appears:
(a) That it would be inconsistent with a provision of the Certificate of
Incorporation, a resolution of the Stockholders or an agreement in effect at the
time of accrual of the alleged cause of action asserted in the proceeding in
which the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
Section 9 INSURANCE. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article IV.
Section 10 CONSTITUENT CORPORATIONS. For purposes of this Article IV,
references to "the Corporation" shall include, in addition to the Corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article IV with respect
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to the resulting or surviving corporation as such person would have with respect
to such constituent corporation if its separate existence had continued.
Section 11 DEFINITIONS. For purposes of this Article IV, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article IV.
ARTICLE V
MISCELLANEOUS
-------------
Section 1 INSPECTION OF BOOKS AND RECORDS BY STOCKHOLDERS. Any Stockholder
of record, in person or by attorney or other agent, shall, upon written demand
under oath stating the purpose thereof, have the right during the usual hours
for business to inspect for any proper purpose the Corporation's stock ledger, a
list of its Stockholders, and its other books and records, and to make copies or
extracts therefrom. A proper purpose shall mean a purpose reasonably related to
such person's interest as a Stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
Stockholder. The demand under oath shall be directed to the Corporation at its
registered office in the State of Delaware or at its principal place of
business.
Section 2 INSPECTION OF BOOKS AND RECORDS BY DIRECTORS. Any director shall
have the right to examine the Corporation's stock ledger, a list of its
Stockholders and its other books and records for a purpose reasonably related to
such person's position as a director. Such right to examine the records and
books of the Corporation shall include the right to make copies and extract
therefrom.
Section 3 CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts, or
other orders for payment of money, notes or other evidences of indebtedness,
issued in the name of or payable to the Corporation, shall be signed or endorsed
by such person or persons and in such manner as, from time to time, shall be
determined by resolution of the Board. In the absence of such determination, the
Chief Executive Officer, the President, the Chief Operating Officer and the
Chief Financial Officer shall have the authority to sign or endorse such
instruments and documents.
Section 4 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board,
except as otherwise provided in these Bylaw, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the Corporation, and such person's authority may
be general or confined to specific instances; and, unless so authorized or
ratified by the Board or within the agency power of an officer, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or agreement or to pledge its
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credit or to render it liable for any purpose or for any amount. In the absence
of specific resolution of the Board relating to the authority of officers to
execute contracts generally, the Chief Executive Officer, the President, the
Chief Operating Officer and the Chief Financial shall have the authority to
execute contracts of the Corporation.
Section 5 CERTIFICATES FOR SHARES. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by, or in the name of the
Corporation by the Chairman or the President or a Vice-President, and by the
Chief Financial Officer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation representing the number of shares owned
by such person in the Corporation. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Section 6 TRANSFER OF SHARES. Transfers of shares of the capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof, or by such person's attorney thereunto authorized by a power of
attorney duly executed and filed with the Secretary of the Corporation or a
transfer agent of the Corporation, if any, and on surrender of the certificate
or certificates for such shares properly endorsed. A person in whose name
appears on shares of stock and on the books of the Corporation shall be deemed
the owner thereof as regards the Corporation, and upon any transfer of shares of
stock the person or persons into whose name or names such shares shall have been
transferred, shall enjoy and bear all rights, privileges and obligations of
holders of stock of the Corporation and as against the Corporation or any other
person or persons. The term "person" or "persons" wherever used herein shall be
deemed to include any partnership, corporation, association or other entity.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, such fact, if known to the Secretary or to such transfer agent,
shall be so expressed in the entry of transfer.
Section 7 LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a
new certificate of stock in the place of any certificate theretofore issued by
it, alleged to have been lost, stolen or destroyed, and the Corporation may
require the owner of the lost, stolen or destroyed certificate, or such person's
legal representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
Section 8 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer or any person designated by any of such officers is
authorized, in the absence of authorization by the Board, to vote on behalf of
the Corporation any and all shares of any other corporation or corporations,
foreign or domestic, for which the Corporation has the right to vote. The
authority granted to these officers to vote or represent on behalf of the
Corporation any and all shares held by the Corporation in any other corporation
or corporations may be exercised by any of these officers in person or by any
person authorized to do so by proxy duly executed by these officers.
Section 9 CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise,
the general provisions, rules of construction, and definitions in the DGCL shall
govern the construction
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of these Bylaws. Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the singular. In
addition, as used in these Bylaws, the following terms have the meanings set
forth below:
"Board" means the Board of Directors of the Corporation.
"Corporation" means Symposium Corporation.
"DGCL" means the Delaware General Corporation Law, as the same may from
time to time be amended.
"Stockholders" means the stockholders of the Corporation.
Section 10 AMENDMENTS TO BYLAWS. Unless otherwise provided in the
Certificate of Incorporation, these Bylaws may be altered or repealed, and new
Bylaws made, by the Board, but the Stockholders may make additional Bylaws and
may alter and repeal any Bylaws whether adopted by them or otherwise.
Section 11 CONFORMANCE TO THE LAW. In the event that it is determined that
these Bylaws, as now written or as amended, conflict with the DGCL, or any other
applicable law, as now enforced or as amended, these Bylaws shall be deemed
amended, without action of the Board or the Stockholders, to conform with such
law. Such amendment to be so interpreted as to bring these Bylaws within minimum
compliance. For purposes of this section, "amendment" shall include a repeal of,
or a change in interpretation of, the relevant compendium.
Section 12 SEAL. The Board shall have the power to provide a corporate
seal, which shall be in the form of a circle and shall have inscribed thereon
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 13 FISCAL YEAR. The fiscal year of the Corporation shall be
determined by resolution of the Board.
Section 14 DIVIDENDS; SURPLUS. Subject to the provisions of the Certificate
of Incorporation and any restrictions imposed by statute, the Board declare
dividends out of the net assets of the Corporation in excess of its capital or,
in case there shall be no such excess, out of the net profits of the Corporation
for the fiscal year then current and/or the preceding fiscal year, or out of any
funds at the time legally available for the declaration of dividends
(hereinafter referred to as "surplus or net profits") whenever, and in such
amounts as, in its sole discretion, the conditions and affairs of the
Corporation shall render advisable. The Board in its sole discretion may, in
accordance with law, from time to time set aside from surplus or net profits
such sum or sums as it may think proper as a reserve fund to meet contingencies,
or for equalizing dividends, or for the purpose of maintaining or increasing the
property or business of the Corporation, or for any other purpose as it may
think conducive to the best interests of the Corporation.
Section 15 WAIVER OF NOTICE. Whenever notice is required to be given under
these Bylaws or the Certificate of Incorporation or the DGCL, a written waiver,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting,
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except where the person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
Stockholders, Board or any committee of the Board need be specified in any
written waiver of notice unless so required by the Certificate of Incorporation
or these Bylaws.
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<TABLE>
BYLAWS
OF
SYMPOSIUM CORPORATION
A DELAWARE CORPORATION
<CAPTION>
PAGE
<S> <C>
ARTICLE I STOCKHOLDERS MEETINGS..............................................1
SECTION 1 PLACE OF MEETING..............................................1
SECTION 2 ANNUAL MEETINGS...............................................1
SECTION 3 SPECIAL MEETINGS..............................................1
SECTION 4 NOTICE OF MEETINGS............................................1
SECTION 5 QUORUM........................................................2
SECTION 6 ADJOURNED MEETING.............................................2
SECTION 7 ORGANIZATION..................................................2
SECTION 8 PROXIES.......................................................2
SECTION 9 STOCKHOLDER LIST..............................................2
SECTION 10 CONSENT OF STOCKHOLDERS IN LIEU OF MEETING....................2
SECTION 11 INSPECTORS OF ELECTION........................................3
SECTION 12 RECORD DATE...................................................4
SECTION 13 PROCEDURES FOR MEETINGS.......................................4
ARTICLE II BOARD OF DIRECTORS................................................5
SECTION 1 POWERS........................................................5
SECTION 2 NUMBER........................................................5
SECTION 3 PLACE OF MEETING..............................................5
SECTION 4 REGULAR MEETINGS..............................................5
SECTION 5 SPECIAL MEETINGS..............................................5
SECTION 6 MEETINGS BY COMMUNICATION EQUIPMENT...........................6
SECTION 7 QUORUM AND MANNER OF ACTING...................................6
SECTION 8 VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETINGS..........6
SECTION 9 ACTION WITHOUT MEETING........................................6
SECTION 10 COMPENSATION OF DIRECTORS.....................................6
SECTION 11 COMMITTEES....................................................6
ARTICLE III OFFICERS.........................................................7
SECTION 1 OFFICERS......................................................7
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SECTION 2 CHAIRMAN OF THE BOARD.........................................7
SECTION 3 CHIEF EXECUTIVE OFFICER.......................................7
SECTION 4 PRESIDENT.....................................................7
SECTION 5 VICE PRESIDENTS...............................................7
SECTION 6 SECRETARY.....................................................8
SECTION 7 CHIEF FINANCIAL OFFICER.......................................8
ARTICLE IV INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS ..................................................8
SECTION 1 AGENTS, PROCEEDINGS AND EXPENSES..............................8
SECTION 2 ACTIONS OTHER THAN BY THE CORPORATION.........................8
SECTION 3 ACTIONS BY THE CORPORATION....................................9
SECTION 4 SUCCESSFUL DEFENSE BY AGENT...................................9
SECTION 5 REQUIRED APPROVAL.............................................9
SECTION 6 ADVANCE OF EXPENSES...........................................10
SECTION 7 CONTRACTUAL RIGHTS............................................10
SECTION 8 LIMITATIONS...................................................10
SECTION 9 INSURANCE.....................................................10
SECTION 10 CONSTITUENT CORPORATIONS......................................10
SECTION 11 DEFINITIONS...................................................11
ARTICLE V MISCELLANEOUS......................................................11
SECTION 1 INSPECTION OF BOOKS AND RECORDS BY STOCKHOLDERS...............11
SECTION 2 INSPECTION OF BOOKS AND RECORDS BY DIRECTORS..................11
SECTION 3 CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS.....................11
SECTION 4 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.............11
SECTION 5 CERTIFICATES FOR SHARES.......................................12
SECTION 6 TRANSFER OF SHARES............................................12
SECTION 7 LOST, STOLEN OR DESTROYED CERTIFICATES........................12
SECTION 8 REPRESENTATION OF SHARES OF OTHER CORPORATIONS................12
SECTION 9 CONSTRUCTION AND DEFINITIONS..................................12
SECTION 10 AMENDMENTS TO BYLAWS..........................................13
SECTION 11 CONFORMANCE TO THE LAW........................................13
SECTION 12 SEAL..........................................................13
SECTION 13 FISCAL YEAR...................................................13
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<PAGE>
SECTION 14 DIVIDENDS; SURPLUS............................................13
SECTION 15 WAIVER OF NOTICE..............................................13
</TABLE>
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<PAGE>
SYMPOSIUM CORPORATION
EMPLOYMENT AGREEMENT
This Employment Agreement (this "AGREEMENT") is made and entered into as
of January 1, 1999, by and between Symposium Corporation, a Delaware corporation
(the "COMPANY"), and Ronald Altbach ("EMPLOYEE").
1. ENGAGEMENT AND RESPONSIBILITIES
(a) Upon the terms and subject to the conditions set forth in this
Agreement, the Company hereby employs Employee as an officer of the Company.
Employee hereby accepts such employment. Employee shall have the title of Chief
Operating Officer, but may have any executive officer title determined by the
Board of Directors provided that Employee always has a title which is no less
senior than Chief Operating Officer.
(b) Employee agrees to devote all of Employee's business time, energy and
efforts to the business of the Company and will use Employee's best efforts and
abilities faithfully and diligently to promote the Company's business interests.
Employee's duties and responsibilities shall be those incident to those which
are normally and customarily vested in such office(s) of a corporation;
provided, however, that Employee shall report directly to the Board and not to
the Chief Executive Officer of the Company. In addition, Employee's duties shall
include those duties and services for the Company and its affiliates as the
Board shall, in its sole and absolute discretion, from time to time reasonably
direct which are not inconsistent with Employee's position described in Section
1(a). Notwithstanding the foregoing, but subject to Section 1(c) of this
Agreement, Employee shall be permitted to serve on the Board of Directors of, or
in a similar capacity with, other Persons and to manage his personal
investments.
(c) For so long as Employee is employed by the Company, Employee shall
not, directly or indirectly, either as an employee, employer, consultant, agent,
investor, principal, partner, stockholder (except as the holder of less than 5%
of the issued and outstanding stock of a publicly held corporation), corporate
officer or director, or in any other individual or representative capacity,
engage or participate in any business that is in competition in any manner
whatsoever with the business of the Company Group, as such businesses are now or
hereafter conducted.
2. DEFINITIONS
"BOARD" shall mean the Board of Directors of the Company.
"COMPANY GROUP" shall mean the Company and each Person that the Company
directly or indirectly Controls.
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"CONTROL" shall mean, with respect to any Person, (i) the beneficial
ownership of more than 50% of the outstanding voting securities of such Person,
or (ii) the power, directly or indirectly, by proxy, voting trust or otherwise,
to elect a majority of the outstanding directors, trustees or other managing
persons of such Person.
"DISABILITY," with respect to Employee, shall mean that, for physical or
mental reasons, Employee is unable to perform the essential functions of
Employee's duties under this Agreement for 60 consecutive days, or 90 days
during any one six month period. Employee agrees to submit to a reasonable
number of examinations by a medical doctor advising the Company as to whether
Employee shall have suffered a disability and Employee hereby authorizes the
disclosure and release to the Company and its agents and representatives all
supporting medical records. If Employee is not legally competent, Employee's
legal guardian or duly authorized attorney-in-fact will act in Employee's stead
for the purposes of submitting Employee to the examinations, and providing the
authorization of disclosure.
"FOR CAUSE" shall mean, in the context of a basis for termination of
Employee's employment with the Company, that:
(a) Employee breaches any obligation, duty or agreement under this
Agreement, which breach is not cured or corrected within 15 days of written
notice thereof from the Company (except for breaches of Sections 1(c), 6 or 7 of
this Agreement, which cannot be cured and for which the Company need not give
any opportunity to cure); or
(b) Employee commits any act of personal dishonesty, fraud, embezzlement,
breach of fiduciary duty or trust against the Company Group; or
(c) Employee is indicted for, or convicted of, or pleads guilty or nolo
contendere with respect to, theft, fraud, a crime involving moral turpitude, or
a felony under federal or applicable state law; or
(d) Employee commits any act of personal conduct that, in the reasonable
opinion of the Board, gives rise to any member of the Company Group of a
material risk of liability under federal or applicable state law for
discrimination or sexual or other forms of harassment or other similar
liabilities to subordinate employees; or
(e) Employee commits continued and repeated substantive violations of
specific written directions of the Board, which directions are consistent with
this Agreement and Employee's position as a senior or executive officer, or
continued and repeated substantive failure to perform duties assigned by or
pursuant to this Agreement.
"PERSON" shall mean an individual or a partnership, corporation, trust,
association, limited liability company, governmental authority or other entity.
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<PAGE>
3. COMPENSATION AND BENEFITS
For so long as Employee shall be employed by the Company, Employee shall
receive the compensation and benefits set forth in this Section 3.
(a) SALARY. The Company shall pay Employee a salary at an annual rate of
$225,000 through June 30, 1999 and $350,000 thereafter. The Board may, but shall
not be obligated to, increase Employee's salary from time to time. The salary
shall be payable in installments in the same manner and at the same times the
Company pays salaries to other executive officers of the Company, but in no
event less frequently than equal monthly installments.
(b) EXPENSE REIMBURSEMENT. Employee shall be entitled to reimbursement
from the Company for the reasonable out-of-pocket costs and expenses which
Employee incurs in connection with the performance of Employee's duties and
obligations under this Agreement in a manner consistent with the Company's
practices and policies therefor. Employee shall also be reimbursed for the cost
of airfare for his spouse for up to two roundtrip flights per year from the
United States to Europe.
(c) EMPLOYEE BENEFIT PLANS. Employee shall be entitled to participate in
any pension, savings and group term life, medical, dental, disability, and other
group benefit plans that the Company makes available to its employees generally.
(d) VACATION. Employee shall be entitled to four weeks paid vacation,
which shall accrue in accordance with the Company's standard vacation accrual
policy.
(e) AUTOMOBILE ALLOWANCE. Employer shall pay directly to Employee, a
$2,000 per month car allowance during the term of this Agreement or as provided
for in Section 5(a), whichever period lasts longer (the "CAR Payments").
(f) DISABILITY. In the event of any Disability, if Employee shall receive
payments as a result of such Disability under any disability plan maintained by
the Company or from any government agency, the Company shall be entitled to
deduct the amount of such payments received from base salary payable to Employee
during the period of such Disability.
(g) WITHHOLDING. The Company may deduct from any compensation payable to
Employee (including payments made pursuant to Section 5 of this Agreement in
connection with or following termination of employment) amounts it believes are
required to be withheld under federal and state law, including applicable
federal, state and/or local income tax withholding, old-age and survivors' and
other social security payments, state disability and other insurance premiums
and payments.
4. TERM OF EMPLOYMENT
Employee's term of employment pursuant to this Agreement shall commence as
of the date hereof and shall terminate on the earliest to occur of the following
(the "DATE OF TERMINATION"):
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(a) upon the date set forth in a written notice of termination from
Employee to the Company (which date shall at least 60 days after the delivery of
that notice); provided, however, that in the event Employee delivers such notice
to the Company, the Company shall have the right to accelerate such termination
by written notice thereof to Employee (and such termination by the Company shall
be deemed to be a termination of employment pursuant to this Section 4(a), and
not a termination pursuant to Section 4(d) or 4(e) hereof);
(b) upon the death of Employee;
(c) upon delivery to Employee of written notice of termination by the
Company if Employee shall suffer a Disability;
(d) upon delivery to Employee of written notice of termination by the
Company For Cause; or
(e) upon delivery to Employee of written notice of termination by the
Company without cause.
5. SEVERANCE COMPENSATION
(a) If Employee's employment is terminated pursuant to Section 4(e) (by
the Company without cause), the Company shall, for the two-year period
commencing on the Date of Termination, continue to (i) pay to Employee salary at
the rate in effect on the Date of Termination; (ii) pay for Employee's (and his
immediate family's) participation in group medical, life, dental, disability and
similar plans to the extent permitted by the plan; and (iii) pay to the Employee
the Car Payments.
(b) If Employee's employment is terminated for any reason other than by
the Company without cause, the Company shall pay to Employee (or Employee's
estate or beneficiary, as the case may be) any unpaid base salary through the
Date of Termination. All rights and benefits which Employee or his estate may
have under employee benefit plans in which Employee shall be participating at
the date of termination of employment shall be determined in accordance with
such plans.
(c) If Employee's employment is terminated by the Company pursuant to
Section 4(d) (by the Company For Cause), and subject to applicable law and
regulations, the Company shall be entitled to offset against any payments due
Employee any loss or damage which the Company shall suffer as a result of the
acts or omissions of Employee giving rise to termination under Section 4(d).
(d) Employee acknowledges that the Company has the right to terminate
Employee's employment without cause and that such termination shall not be a
breach of this Agreement or any other express or implied agreement between the
Company and Employee. Accordingly, in the event of such termination, Employee
shall be entitled only to those benefits specifically provided in
Page 4
<PAGE>
this Section 5, and shall not have any other rights to any compensation or
damages from the Company for breach of contract.
(e) Employee acknowledges that in the event of termination of Employee's
employment for any reason, Employee (nor Employee's estate, heirs, beneficiaries
or others claiming through Employee) shall not be entitled to any severance or
other compensation from the Company except as specifically provided in this
Section 5. Without limitation on the generality of the foregoing, this Section
supersedes any plan or policy of the Company which provides for severance to its
officers or employees, and Employee shall not be entitled to any benefits under
any such plan or policy.
6. COVENANT NOT TO SOLICIT
From the date hereof until one year from the Date of Termination:
(a) Employee will not, directly or indirectly, influence or attempt to
influence any customer of the Company Group to reduce or discontinue its
purchases of any products or services from the Company Group or to divert such
purchases to any Person other than the Company Group.
(b) Employee will not, directly or indirectly, interfere with, disrupt or
attempt to disrupt the relationship, contractual or otherwise, between the
Company Group and any of its respective suppliers, principals, distributors,
lessors or licensors; and
(c) Employee will not, directly or indirectly, solicit any employee of the
Company Group to work for any Person.
7. CONFIDENTIALITY
Employee agrees not to disclose or use at any time (whether during or
after Employee's employment with the Company) for Employee's own benefit or
purposes or the benefit or purposes of any other Person any trade secrets,
information, data, or other confidential information relating to customers,
development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, financial methods, plans, or the business
and affairs of the Company Group generally, PROVIDED that the foregoing shall
not apply to information which is not unique to the Company Group or which is
generally known to the industry or the public other than as a result of
Employee's breach of this covenant. Employee agrees that upon termination of his
employment with the Company for any reason, he will return to the Company
immediately all memoranda, books, papers, plans, information, letters and other
data, and all copies thereof or therefrom, in any way relating to the business
of the Company Group except that he may retain personal notes, notebooks,
diaries, rolodexes and addresses and phone numbers. Employee further agrees that
he will not retain or use for his account at any time any trade names, trademark
or other proprietary business designation used or owned in connection with the
business of any member of the Company Group.
8. MISCELLANEOUS
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(a) NOTICES. All notices, requests, demands and other communications
(collectively, "NOTICES") given pursuant to this Agreement shall be in writing,
and shall be delivered by personal service, courier, facsimile transmission or
by United States first class, registered or certified mail, addressed to the
following addresses:
If to the Company, to:
Symposium Corporation
Bennet House
54 St. James's Street
London SW1A 1JT England
Attn: Chief Executive Officer and Board of Directors
If to Employee, to:
Employee's address as set forth on the books
and records of the Company
Any Notice, other than a Notice sent by registered or certified mail, shall be
effective when received; a Notice sent by registered or certified mail, postage
prepaid return receipt requested, shall be effective on the earlier of when
received or the third day following deposit in the United States mails. Any
party may from time to time change its address for further Notices hereunder by
giving notice to the other party in the manner prescribed in this Section.
(b) ENTIRE AGREEMENT. This Agreement contains the sole and entire
agreement and understanding of the parties with respect to the entire subject
matter of this Agreement, and any and all prior discussions, negotiations,
commitments and understandings, whether oral or otherwise, related to the
subject matter of this Agreement are hereby merged herein. No representations,
oral or otherwise, express or implied, other than those contained in this
Agreement have been relied upon by any party to this Agreement.
(c) SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
(d) GOVERNING LAW. This Agreement has been made and entered into in the
State of New York and shall be construed in accordance with the laws of the
State of New York.
(e) CAPTIONS. The various captions of this Agreement are for reference
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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(g) ATTORNEYS' FEES. If any action or proceeding is brought to enforce or
interpret any provision of this Agreement, the prevailing party shall be
entitled to recover as an element of its costs, and not its damages, its
reasonable attorneys' fees, costs and expenses. The prevailing party is the
party who is entitled to recover its costs in the action or proceeding. A party
not entitled to recover its costs may not recover attorneys' fees. No sum for
attorneys' fees shall be counted in calculating the amount of a judgment for
purposes of determining whether a party is entitled to recover its costs or
attorneys' fees.
In Witness Whereof, the parties have executed this Agreement as of the
date first above written.
Symposium Corporation
By: /s/ RUPERT GALLIERS-PRATT
---------------------------
Rupert Galliers-Pratt
Chief Executive Officer
/s/ RONALD ALTBACH
------------------------------
Ronald Altbach
Page 8
SYMPOSIUM CORPORATION
CONSULTING AGREEMENT
This Consulting Agreement (this "AGREEMENT") is made and entered into as
of January 1, 1999, by and between Symposium Corporation, a Delaware corporation
(the "COMPANY"), and Executive Management Services ("CONSULTANT").
1. ENGAGEMENT AND RESPONSIBILITIES
(a) Upon the terms and subject to the conditions set forth in this
Agreement, the Company hereby engages Consultant as a consultant, and Consultant
hereby accepts such engagement.
(b) Consultant hereby agrees that all duties and responsibilities of
Consultant set forth in this Agreement shall be performed by Rupert
Galliers-Pratt ("GALLIERS-PRATT").
(c) Galliers-Pratt shall have the title of Chief Executive Officer.
(d) Galliers-Pratt shall devote all of his business time, energy and
efforts to the business of the Company and will use his best efforts and
abilities faithfully and diligently to promote the Company's business interests.
Galliers-Pratt's duties and responsibilities shall be those incident to those
which are normally and customarily vested in the office of chief executive
officer of a corporation. In addition, Galliers-Pratt's duties shall include
those duties and services for the Company and its affiliates as the Board shall,
in its sole and absolute discretion, from time to time reasonably direct which
are not inconsistent with Galliers-Pratt's position described in Section 1(c).
Notwithstanding the foregoing, but subject to Section 1(e) of this Agreement,
Galliers-Pratt shall be permitted to serve on the Board of Directors of, or in a
similar capacity with, other Persons and to manage his personal investments.
(e) For so long as Consultant is engaged by the Company, neither
Consultant nor Galliers-Pratt shall, directly or indirectly, either as an
employee, employer, consultant, agent, investor, principal, partner, stockholder
(except as the holder of less than 5% of the issued and outstanding stock of a
publicly held corporation), corporate officer or director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition in any manner whatsoever with the business of the Company
Group, as such businesses are now or hereafter conducted.
2. DEFINITIONS
"BOARD" shall mean the Board of Directors of the Company.
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"COMPANY GROUP" shall mean the Company and each Person that the Company
directly or indirectly Controls.
"CONTROL" shall mean, with respect to any Person, (i) the beneficial
ownership of more than 50% of the outstanding voting securities of such Person,
or (ii) the power, directly or indirectly, by proxy, voting trust or otherwise,
to elect a majority of the outstanding directors, trustees or other managing
persons of such Person.
"DISABILITY," with respect to Galliers-Pratt, shall mean that, for
physical or mental reasons, Galliers-Pratt is unable to perform the essential
functions of his duties under this Agreement for 60 consecutive days, or 90 days
during any one six month period. Galliers-Pratt agrees to submit to a reasonable
number of examinations by a medical doctor advising the Company as to whether he
shall have suffered a disability and Galliers-Pratt hereby authorizes the
disclosure and release to the Company and its agents and representatives all
supporting medical records. If Galliers-Pratt is not legally competent, his
legal guardian or duly authorized attorney-in-fact will act in his stead for the
purposes of submitting him to the examinations, and providing the authorization
of disclosure.
"FOR CAUSE" shall mean, in the context of a basis for termination of
Consultant's engagement with the Company, that:
(a) Consultant breaches any obligation, duty or agreement under this
Agreement, which breach is not cured or corrected within 15 days of written
notice thereof from the Company (except for breaches of Sections 1(e), 6 or 7 of
this Agreement, which cannot be cured and for which the Company need not give
any opportunity to cure); or
(b) Galliers-Pratt commits any act of personal dishonesty, fraud,
embezzlement, breach of fiduciary duty or trust against the Company Group; or
(c) Galliers-Pratt is indicted for, or convicted of, or pleads guilty or
nolo contendere with respect to, theft, fraud, a crime involving moral
turpitude, or a felony under federal or applicable state law; or
(d) Galliers-Pratt commits any act of personal conduct that, in the
reasonable opinion of the Board, gives rise to any member of the Company Group
of a material risk of liability under federal or applicable state law for
discrimination or sexual or other forms of harassment or other similar
liabilities to subordinate employees; or
(e) Galliers-Pratt commits continued and repeated substantive violations
of specific written directions of the Board, which directions are consistent
with this Agreement and Galliers-Pratt's position as a senior or executive
officer, or continued and repeated substantive failure to perform duties
assigned by or pursuant to this Agreement.
"PERSON" shall mean an individual or a partnership, corporation, trust,
association, limited liability company, governmental authority or other entity.
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3. COMPENSATION AND BENEFITS
For so long as Consultant shall be engaged by the Company as a consultant,
Consultant shall receive the compensation set forth in this Section 3.
(a) CONSULTING FEES. The Company shall pay Consultant consulting fees at
an annual rate of $250,000 through June 30, 1999 and $350,000 thereafter. The
Company may, but shall not be obligated to, increase the consulting fees from
time to time. The consulting fees shall be payable in installments in the same
manner and at the same times the Company pays salaries to executive officers of
the Company, but in no event less frequently than equal monthly installments.
(b) EXPENSE REIMBURSEMENT. Consultant shall be entitled to reimbursement
from the Company for the reasonable out-of-pocket costs and expenses which
Consultant incurs in connection with the performance of Consultant's duties and
obligations under this Agreement in a manner consistent with the Company's
practices and policies therefor. Consultant shall also be reimbursed for the
cost of airfare for Galliers-Pratt's spouse for up to four roundtrip flights per
year from Europe to the United States.
(c) BENEFIT PLANS. If and to the extent permitted by the relevant plan,
Galliers-Pratt shall be entitled to participate in any pension, savings and
group term life, medical, dental, disability, and other group benefit plans that
the Company makes available to its employees generally.
(d) VACATION. Galliers-Pratt shall be entitled to four weeks paid
vacation, which shall accrue in accordance with the Company's standard vacation
accrual policy.
(e) AUTOMOBILE ALLOWANCE. Employer shall pay directly to Consultant a
$2,000 per month car allowance during the term of this Agreement or as provided
for in Section 5(a), whichever period lasts longer (the "CAR Payments").
(f) DISABILITY. In the event of any Disability, if Consultant or
Galliers-Pratt shall receive payments as a result of such Disability under any
disability plan maintained by the Company or from any government agency, the
Company shall be entitled to deduct the amount of such payments received from
base salary payable to Consultant during the period of such Disability.
(g) WITHHOLDING. The Company may deduct from any compensation payable to
Consultant (including payments made pursuant to Section 5 of this Agreement in
connection with or following termination of engagement) amounts it believes are
required to be withheld under federal and state law, including applicable
federal, state and/or local income tax withholding, old-age and survivors' and
other social security payments, state disability and other insurance premiums
and payments.
4. TERM OF ENGAGEMENT
Consultant's term of engagement pursuant to this Agreement shall commence
as of the date hereof and shall terminate on the earliest to occur of the
following (the "DATE OF TERMINATION"):
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<PAGE>
(a) upon the date set forth in a written notice of termination from
Consultant to the Company (which date shall at least 60 days after the delivery
of that notice); provided, however, that in the event Consultant delivers such
notice to the Company, the Company shall have the right to accelerate such
termination by written notice thereof to Consultant (and such termination by the
Company shall be deemed to be a termination of engagement pursuant to this
Section 4(a), and not a termination pursuant to Section 4(d) or 4(e) hereof);
(b) upon the death of Galliers-Pratt;
(c) upon delivery to Consultant of written notice of termination by the
Company if Galliers-Pratt shall suffer a Disability;
(d) upon delivery to Consultant of written notice of termination by the
Company For Cause; or
(e) upon delivery to Consultant of written notice of termination by the
Company without cause.
It is understood that termination by the Company because Galliers-Pratt
does not personally perform the services required of Consultant shall be
termination For Cause.
5. SEVERANCE COMPENSATION
(a) If Consultant's engagement is terminated pursuant to Section 4(e) (by
the Company without cause), the Company shall, for the two-year period
commencing on the Date of Termination, continue to (i) pay to Consultant
consulting fees at the rate in effect on the Date of Termination, (ii) pay for
Galliers-Pratt's (and his immediate family's) participation in group medical,
life, dental, disability and similar plans to the extent permitted by the plan,
and (iii) pay to Consultant the Car Payments.
(b) If Consultant's engagement is terminated for any reason other than by
the Company without cause, the Company shall pay to Consultant any unpaid
consulting fees through the Date of Termination. All rights and benefits which
Galliers-Pratt or his estate may have under the Company's benefit plans in which
Galliers-Pratt shall be participating at the date of termination of engagement
shall be determined in accordance with such plans.
(c) If Consultant's engagement is terminated by the Company pursuant to
Section 4(d) (by the Company For Cause), and subject to applicable law and
regulations, the Company shall be entitled to offset against any payments due
Consultant any loss or damage which the Company shall suffer as a result of the
acts or omissions of Consultant or Galliers-Pratt giving rise to termination
under Section 4(d).
(d) Consultant acknowledges that the Company has the right to terminate
Consultant's engagement without cause and that such termination shall not be a
breach of this Agreement or any
Page 4
<PAGE>
other express or implied agreement between the
Company and Consultant. Accordingly, in the event of such termination,
Consultant shall be entitled only to those benefits specifically provided in
this Section 5, and shall not have any other rights to any compensation or
damages from the Company for breach of contract.
(e) Consultant acknowledges that in the event of termination of
Consultant's engagement for any reason, Consultant shall not be entitled to any
severance or other compensation from the Company except as specifically provided
in this Section 5. Without limitation on the generality of the foregoing, this
Section supersedes any plan or policy of the Company which provides for
severance to its officers or Consultant, and Consultant shall not be entitled to
any benefits under any such plan or policy.
6. COVENANT NOT TO SOLICIT
From the date hereof until one year from the Date of Termination:
(a) Neither Consultant nor Galliers-Pratt will, directly or indirectly,
influence or attempt to influence any customer of the Company Group to reduce or
discontinue its purchases of any products or services from the Company Group or
to divert such purchases to any Person other than the Company Group.
(b) Neither Consultant nor Galliers-Pratt will, directly or indirectly,
interfere with, disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Company Group and any of its respective suppliers,
principals, distributors, lessors or licensors; and
(c) Neither Consultant nor Galliers-Pratt will, directly or indirectly,
solicit any employees of the Company Group to work for any Person.
7. CONFIDENTIALITY
Each of Consultant and Galliers-Pratt agrees not to disclose or use at any
time (whether during or after Consultant's engagement with the Company) for its
or his own benefit or purposes or the benefit or purposes of any other Person
any trade secrets, information, data, or other confidential information relating
to customers, development programs, costs, marketing, trading, investment, sales
activities, promotion, credit and financial data, financial methods, plans, or
the business and affairs of the Company Group generally, PROVIDED that the
foregoing shall not apply to information which is not unique to the Company
Group or which is generally known to the industry or the public other than as a
result of Consultant's breach of this covenant. Each of Consultant and
Galliers-Pratt agrees that upon termination of Consultant's engagement with the
Company for any reason, it and he will return to the Company immediately all
memoranda, books, papers, plans, information, letters and other data, and all
copies thereof or therefrom, in any way relating to the business of the Company
Group except that it and he may retain personal notes, notebooks, diaries,
rolodexes and addresses and phone numbers. Each of Consultant and Galliers-Pratt
further agrees that it and he will not retain or use for its or his account at
any time any trade names, trademark or
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<PAGE>
other proprietary business designation used or owned in connection with the
business of any member of the Company Group.
8. MISCELLANEOUS
(a) NOTICES. All notices, requests, demands and other communications
(collectively, "NOTICES") given pursuant to this Agreement shall be in writing,
and shall be delivered by personal service, courier, facsimile transmission or
by United States first class, registered or certified mail, addressed to the
following addresses:
If to the Company, to:
Symposium Corporation
410 Park Avenue
18th Floor
New York, NY 10022
Attn: Chief Operating Officer and Board of Directors
If to Consultant, to:
Consultant's address as set forth on the books
and records of the Company
Any Notice, other than a Notice sent by registered or certified mail, shall be
effective when received; a Notice sent by registered or certified mail, postage
prepaid return receipt requested, shall be effective on the earlier of when
received or the third day following deposit in the United States mails. Any
party may from time to time change its address for further Notices hereunder by
giving notice to the other party in the manner prescribed in this Section.
(b) ENTIRE AGREEMENT. This Agreement contains the sole and entire
agreement and understanding of the parties with respect to the entire subject
matter of this Agreement, and any and all prior discussions, negotiations,
commitments and understandings, whether oral or otherwise, related to the
subject matter of this Agreement are hereby merged herein. No representations,
oral or otherwise, express or implied, other than those contained in this
Agreement have been relied upon by any party to this Agreement.
(c) SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
(d) GOVERNING LAW. This Agreement has been made and entered into in the
State of New York and shall be construed in accordance with the laws of the
State of New York.
Page 6
<PAGE>
(e) CAPTIONS. The various captions of this Agreement are for reference
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
(g) ATTORNEYS' FEES. If any action or proceeding is brought to enforce or
interpret any provision of this Agreement, the prevailing party shall be
entitled to recover as an element of its costs, and not its damages, its
reasonable attorneys' fees, costs and expenses. The prevailing party is the
party who is entitled to recover its costs in the action or proceeding. A party
not entitled to recover its costs may not recover attorneys' fees. No sum for
attorneys' fees shall be counted in calculating the amount of a judgment for
purposes of determining whether a party is entitled to recover its costs or
attorneys' fees.
In Witness Whereof, the parties have executed this Agreement as of the
date first above written.
Symposium Corporation
By: /s/ RONALD ALTBACH
-------------------------------
Ronald Altbach
Chief Operating Officer
Executive Management Services
By:
-------------------------------
Its:
This Agreement is executed by Rupert
Galliers-Pratt solely for purpose of making
the agreements set forth in Sections 1(e), 6
and 7.
/s/ RUPERT GALLIERS-PRATT
----------------------------------
Rupert Galliers-Pratt
Page 7
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
interim condensed consolidated statement of Symposium Corporation as of and for
the six months ended June 30, 1999 included in this report on Form 10-QSB and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001069201
<NAME> Symposium Corporation
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,307,590
<SECURITIES> 0
<RECEIVABLES> 88,284
<ALLOWANCES> 36,538
<INVENTORY> 0
<CURRENT-ASSETS> 1,400,439
<PP&E> 32,457
<DEPRECIATION> 1,303
<TOTAL-ASSETS> 2,206,299
<CURRENT-LIABILITIES> 128,694
<BONDS> 0
<COMMON> 12,850
0
0
<OTHER-SE> 2,064,755
<TOTAL-LIABILITY-AND-EQUITY> 2,206,299
<SALES> 168,863
<TOTAL-REVENUES> 168,863
<CGS> 47,812
<TOTAL-COSTS> 47,812
<OTHER-EXPENSES> 1,249,482
<LOSS-PROVISION> 69,313
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,163,353)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,163,353)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (25,110)
<NET-INCOME> (1,188,963)
<EPS-BASIC> (.13)
<EPS-DILUTED> (.13)
</TABLE>
