Exhibit 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of May 19, 2000 by and between
Compuces, Inc., a Delaware corporation,18 West 18th Street, 10th Floor, New
York, New York 10011 (the "Buyer"), and YouNetwork Corporation, a Delaware
corporation, 115 W. 23rd Street, New York, New York 10010 (the "Corporation").
W I T N E S S E T H:
WHEREAS, the Corporation desires to sell, assign, transfer and convey, and
the Buyer desires to purchase from the Corporation, shares of Common Stock,
constituting eighty (80%) percent of the outstanding shares of Class C common
stock of the Corporation, on a fully diluted basis, assuming full conversion on
the date hereof of all Class A shares, Class B shares, options,warrants and all
future equity grants or rights granted under contracts currently in effect
(including, by way of example, but not limitation, pursuant to agreements with
Success Marketing, Inc., Leasing Technologies, Inc. and Sheffield Resource
Network) of the Corporation, as increased from time to time pursuant to the last
sentence of Paragraph 2 below ("Shares")upon the express terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereby agree as follows:
1.1 Purchase and Sale of the Shares. Subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties
contained herein, at the Closing (as hereinafter defined), the Corporation
hereby sells, conveys, assigns, transfers and delivers to the Buyer, and the
Buyer will purchase from the Corporation, the Shares, free and clear of all
liens, charges, encumbrances, equities, claims and options of whatever nature.
1.2 Deliveries by Corporation. At or prior to the Closing ( as hereinafter
defined), the Corporation will deliver or cause to be delivered to the Buyer the
following
(a) A representation letter from Silverman, Collura and Chernis,
P.C. ("SCC") that it will unconditionally deliver a stock certificate(s)
prepared for execution representing the Shares, and any other documents prepared
for execution that are necessary to transfer to the Buyer good and marketable
title to the Shares within seven (7) days of the date hereof, subject to
additional issuances which the Corporation shall make to Buyer pursuant to the
last sentence of Paragraph 2 below; and
(b) All other documents, instruments and writings required to be
delivered by the Corporation at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith.
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1.3 Deliveries By Buyer. At or prior to the Closing, the Buyer will
deliver or cause to be delivered to the Corporation the following:
(a) The payment of the Purchase Price provided for in Section 2
hereof; and
(b) All other documents, instruments and writings required to be
delivered by the Buyer at or prior to the Closing pursuant to this Agreement or
otherwise required in connection herewith.
2. Purchase Price.
(a) In full and final consideration for the Shares, the Corporation
shall receive funding by Buyer for the accounts payable of the Corporation as of
May 15, 2000 listed on Schedule 2, which in no event for any reason shall exceed
$300,000. Additionally, Buyer agrees to: (a) allow ten (10%) percent of the
Class C Common Stock to be reserved for a company stock option plan to be
adopted by the Board of Directors and (b) except for the options issued pursuant
to subparagraph (a) above, the Corporation will not dilute the other Class C
stockholders' equity interest after the Closing Date until such time as the
Corporation raises at least $300,000 in capital in a private or public financing
based upon a $5 million post-money valuation of the Corporation. In the event
the Corporation is in breach of any of the representations or warranties
contained herein which results in a claim, liability or expense to the
Corporation or the Buyer in excess of $75,000 or if the payables actually funded
by Buyer exceed $375,000 for any reason whatsoever, the anti-dilution
restrictions contained in the previous sentence will be void and have no force
and effect, and the Buyer will, in no way, be bound thereby. To the extent the
Corporation issues equity securities in connection with the issuances of
securities in settlement of claims and agreements relating to matters prior to
the date hereof, the Corporation shall issue, and the Buyer shall receive, for
no additional consideration, additional shares so that its eighty (80%) percent
equity interest in the Corporation is maintained.
(b) In connection with Schedule 2, the Corporation represents and
warrants that: (i) the debt listed thereon to B. Platnik, P.C. represents a debt
to George Santacroce under his employment agreement which has been fully
released; (ii) the payable to International Computing, LLC ("ICL") is a payable
to an affiliate, and will not be a current payable of the Corporation, but
booked as a long-term debt to an affiliate repayable in a lump-sum payment of
principal and interest at a rate of six (6%) percent on the fifth (5th)
anniversary of the date hereof (said long-term debt to be accelerated if the
Corporation attains $5,000,000 in cumulative net revenue, or if the Corporation
raises more than $3,000,000 of gross proceeds in any one private placement of
equity securities within the next two years; provided, however, that to the
extent Buyer makes more than $300,000 in payments for payables or other
liabilities under this Agreement for any reason or is entitled to be indemnified
under Section 8 of this Agreement for any reason whatsoever, Buyer may, without
otherwise limiting any claim it may have against the Corporation or third
parties, set-off against this long term liability any amounts claimed or paid by
the Corporation or Buyer. Conversely, to the extent that the Corporation
succeeds in negotiating all of the Corporation's payables listed on Schedule 2
below $300,000 ("Final Payable Amount"), then the amount which is the difference
between $300,000 and the Final Payable Amount will be added to the long-term
debt
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to ICL; (iii) the debt to SCC was released pursuant to an agreement dated May
18, 2000, except for $2,000 payable in connection with services rendered arising
out of, or in connection with, this Agreement; and (iv) to the extent the
aggregate payroll liability for any reason exceeds $35,000, any excess liability
over $35,000 shall, in all events, be set-off against the long-term liability as
described more fully under subparagraph (ii) above.
3. Closing. The closing of the transactions provided for in this Agreement
(the "Closing") shall take place on or about May 19, 2000. The Buyer shall have
the right to waive any condition or other agreement contained herein which are
to its benefit in order to close this agreement on the designated Closing Date.
4. Representations and Warranties. The Corporation hereby represents,
warrants and covenants to the Buyer as follows:
4.1 Corporate Organization, Etc. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to carry on its business as
it is now being conducted and to own, lease and operate its properties and
assets as and in the places where such business is now conducted and such
properties and assets are now owned, leased or operated. The Corporation is duly
qualified and in good standing to do business in the State of New York which is
the only jurisdiction in which the failure to be so qualified and in good
standing to do business could reasonably be expected to have an adverse effect
(an "Adverse Effect") on the business, assets, operations, results of
operations, condition (financial or otherwise) or prospects or affairs of the
Corporation. The Corporation has delivered to the Buyer true and correct copies
of the Corporation's Certificate of Incorporation and By-laws, in each case as
in effect on the date hereof (the "Certificate of Incorporation" and "By-laws").
4.2 Capitalization of the Corporation: Title to Shares The authorized
capital stock of the Corporation consists solely of the following classes of
Common Stock: Class A Common Stock; Class B Common Stock and Class C Common
stock. The Disclosure Schedule sets forth a true and complete list of the
holders of shares of the Corporation's Common Stock and the number of shares
owned of record and beneficially by each such holder. All of such issued and
outstanding shares have been validly issued and are fully paid and
non-assessable and except as set forth on the Disclosure Schedule, there are no
outstanding (i) securities convertible into or exchangeable for capital stock of
the Corporation; (ii) options, warrants, or other rights to purchase or
subscribe for capital stock of the Corporation or securities convertible into or
exchangeable for capital stock thereof; or (iii) contracts, commitments,
agreements, understandings, or arrangements of any kind relating to the issuance
of any capital stock of the Corporation, any such convertible or exchangeable
securities or any such options, warrants, or rights. There are no shares of
stock or other securities of the Corporation reserved for issuance for any
purpose. The Corporation is transferring good and marketable title to such
Shares free and clear of (i) any and all security interests, liens, pledges,
claims of third parties of any nature whatsoever, charges, escrows,
encumbrances, options, rights of first refusal, mortgages, indentures, security
arrangements, contracts, commitments, understandings, or obligations, whether
written or oral (collectively, "Encumbrances"); and (ii) any and all other
agreements,
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understandings, or restrictions affecting the voting rights and other incidents
of record or beneficial ownership pertaining thereto.
4.3 Authorization, Etc. The Corporation has the full right, power and
authority to enter into and perform this Agreement and all other agreements,
certificates and documents executed or delivered, or to be executed and
delivered, by the Corporation in connection herewith and to carry out the
transactions contemplated hereby and thereby. The Corporation's execution,
delivery and performance of this Agreement and all other agreements,
certificates and documents executed or delivered, or to be executed and
delivered, by the Corporation in connection herewith and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action or as otherwise required by law. This
Agreement has been duly executed and delivered by the Corporation, and this
Agreement and all other agreements and documents executed or delivered by the
Corporation in connection herewith are (or when executed and delivered by such
the Corporation will be) legal, valid and binding agreements of the Corporation,
enforceable in accordance with their respective terms.
4.4 No Violation. Neither the execution, delivery or performance of this
Agreement (or any of the other agreements or documents which have been or will
be executed or delivered by The Corporation in connection herewith) nor the
consummation of the transactions contemplated hereby (or thereby) nor compliance
by the Corporation with any provision hereof or thereof will conflict or result
in a breach or violation of any provision of the Certificate of Incorporation or
By-Laws or other organizational document of the Corporation or be in conflict
with, or constitute a default (or an event which, with or without notice, lapse
of time or both, would constitute a default) under, or result in the termination
or invalidity of, or accelerate the performance required by, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any encumbrance upon either the Corporation's or
the Corporation's property or assets under any agreement or commitment to which
the Corporation or the Corporation is a party or by which either of them may be
bound, or to which the Corporation's or the Corporation's property is subject,
or violate any statute or law or any judgment, injunction, writ, decree, order,
regulation or rule of any domestic or foreign court, governmental authority or
administrative agency.
4.5 Financial Statements; Tax Returns.
(a) The Balance Sheet dated December 31, 1999 contained in the Form
10-KSB and the 10QSB for the three months ended, March 31, 2000 is the most
recent audited financial statement available of the Corporation (the "`99
Balance Sheet"). The Corporation shall provide such additional financial
statements and tax returns to the Buyer as the Buyer shall require through the
Closing Date. The '99 Balance Sheet and any additional financial statements as
attached hereto are herein collectively called the "Financial Statements".
(b) The Financial Statements are and shall at all times be true,
complete and accurate, are in accordance with the books and records of the
Corporation,
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fairly present the assets, liabilities and financial condition of the
Corporation, and fairly present the results of operations of the Corporation for
the periods referred to therein, in all cases in accordance with generally
accepted accounting principles consistently applied, except as indicated
therein, and subject to changes resulting from normal year-end audit
adjustments, which adjustments shall not in any event result in a material
adverse change.
(c) Except as set forth on the Disclosure Schedule or as otherwise
contemplated by this Agreement, since December 31, 1999, the Corporation 's
business has been operated in the ordinary course and consistent with past
practice and there has not been any material adverse change in or to the
business or the assets of the Corporation, except for the current need for
immediate funding
4.6 No Undisclosed Liabilities, Etc. Except as set forth on Schedule 2,
the Corporation has no liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise, known or unknown) which were not fully
disclosed or reserved against on the '99 Balance Sheet and the reserves
reflected in the '99 Balance Sheet are adequate, appropriate and reasonable in
accordance with generally accepted accounting principles consistently applied.
There were no material loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March, 1975 ("FAS No. 5")) which were not adequately provided
for on the 99 Balance Sheet, as required by FAS No. 5.
4.7 Interim Operations. Between the date hereof and the Closing Date, the
Corporation shall not have suffered any adverse change in its working capital,
financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), business, earnings, operations or prospects.
4.8 Title to Properties; Encumbrances.
(a) The Corporation has and will have at the Closing, good, valid
and marketable title to all of its assets, all of which are set forth in the
Disclosure Schedule.
(b) Except as set forth on Disclosure Schedule, all properties and
assets of the Corporation are free and clear of all title defects or objections,
security interests, judgments, restrictions, prior assignments, or other
encumbrances of any nature whatsoever, including without limitation, any liens,
pledges, leases, escrows, security or other deposits, chattel mortgages,
conditional sales contracts, collateral security arrangements and other title or
interest retention arrangements, except for liens for current taxes not yet due
and payable, and (ii) all work required to be done by the Corporation as tenant
of any real property has been duly performed.
(c) The rights, properties and other assets presently owned, leased
or licensed by Corporation include all rights, properties and other assets
necessary to conduct the Corporation's business after the Closing in the same
manner as its business has been and is now being conducted.
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4.9 Equipment and Operations.
(a) The equipment of the Corporation is structurally sound with no
material defects and is in good operating condition and repair.
(b) The Corporation has received no notification that it is in
violation of any applicable building, zoning, environmental, health and safety
or other law, ordinance or regulation in respect of its assets or its operations
and no such violation exists.
4.10 Leases. The Disclosure Schedule sets forth a true, complete and
accurate list of all leases, subleases, conditional sales agreements or other
title retention agreements (collectively, the "Leases" and individually, a
"Lease") to which the Corporation is a party or by which the Corporation or its
assets are bound. All Leases are valid, binding and enforceable in accordance
with their respective terms, and are in full force and effect; there are no
existing defaults thereunder and there exists no event or condition which
(whether with or without notice, lapse of time or both, or the happening of any
other event) would constitute a default thereunder, give rise to a right to
accelerate or terminate any provision thereof or give rise to any lien, claim or
encumbrance on any of the assets or properties of the Corporation. All Leases
(i) are free and clear of all encumbrances and (ii) are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, easements (recorded or unrecorded), reservations or limitations of
any nature whatsoever. The Corporation does not own any real property. All
amounts payable under the Leases have been paid by the Corporation for the
period through and including the date hereof. Except as set forth on the
Disclosure Schedule, to the best knowledge of the Corporation, all improvements
on the leased premises conform in all material respects to applicable federal,
state, local and foreign laws and regulations (including applicable
environmental and occupational safety and health laws and regulations) and
zoning and building ordinances, and the properties are zoned for the various
purposes for which the leased premises are presently being used. Except as set
forth on the Disclosure Schedule, there are no agreements, written or oral, to
which the Corporation is a party, granting to any party or parties the right of
use or occupancy of any portion of the parcels of the leased property.
4.11 Taxes.
(a) The Corporation has duly and properly filed, or will file when
due, all federal, state, local and other tax reports and returns required to be
filed by it and such reports and returns were, or when filed will be, true,
correct and complete. The Corporation has duly paid all taxes, interest,
penalties and other charges due from it to any federal, state, local or foreign
taxing authority (including, without limitation, those due in respect of
properties, income or payrolls). Any reserves for taxes reflected on the
Financial Statements are adequate; and there are no tax liens upon any of the
assets or property of the Corporation except liens for current taxes not yet
due. The Corporation has made all required declarations of estimated federal,
state or local income taxes and has paid all taxes as shown on such
declarations. There are no facts which exist or have existed which would
constitute grounds for the assessment of any tax liability and neither the
Internal Revenue Service nor any other taxing authority is now asserting against
the Corporation any deficiency or claim for additional taxes or interest
thereon, or penalties in connection therewith, nor are there or have there been
any such discussions with respect thereto. All taxes and other
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assessments and levies required to be withheld by the Corporation from or on
behalf of employees for income, social security and unemployment insurance taxes
have been collected or withheld and either paid to the appropriate governmental
agency or set aside and held in accounts for such purpose.
4.12 Specific Contracts and Commitments.
(a) Except as set forth on the Disclosure Schedule, the Corporation
has no outstanding contracts, agreements or arrangements providing for the
payment of any bonus or commission based on sales or earnings;
(b) Except as set forth on the Disclosure Schedule, the Corporation
has no (i) employment, consulting or bonus agreement, (ii) non-competition
agreement, or (iii) other agreement, that contains any severance or termination
pay liabilities or obligations;
(c) The Corporation has no collective bargaining, or union contracts
or agreements;
(d) The Corporation has no powers of attorney outstanding or any
obligations or liabilities (whether absolute, accrued, contingent or otherwise),
as guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any other person, corporation, partnership, joint
venture, association, organization or other entity;
(e) The Corporation is not a party to any partnership or joint
venture.
4.13 Agreements, Etc. The Disclosure Schedule sets forth a true and
complete list and brief description of all written or oral contracts, licenses,
leases, agreements, commitments, purchase orders, sales orders, and other
agreements to which the Corporation is a party. Except as set forth on the
Disclosure Schedule, the Corporation has in all material respects performed all
the obligations required to be performed by the Corporation to date and is not
in default nor has the Corporation been alleged to be in default, under any
agreement, lease, contract, commitment, instrument or obligation, and there
exists no event, condition or occurrence which, after notice or lapse of time,
or both, would constitute such a default by it of any of the foregoing and which
would adversely affect the Corporation or its assets. The Corporation has
furnished to the Buyer true and correct copies of all documents set forth on the
Disclosure Schedule. All contracts, agreements, plans, leases, policies, and
licenses of the Corporation are valid and in full force and effect, will
continue to be so on the same terms and conditions immediately after the Closing
without the need for any consent or other action on the part of any party
thereto or the Buyer, and true and complete copies thereof, including all
amendments thereto, have been heretofore delivered or will be delivered to the
Buyer before Closing.
4.14 Insurance. The Disclosure Schedule sets forth a true, complete and
accurate list of all policies of life, fire, theft, business interruption,
employee fidelity, liability, workers' compensation and other forms of insurance
of any kind or nature, owned, paid for, or held by or on behalf of the
Corporation, indicating the type of coverage, name of insured, the insurer, the
premium, the expiration date of each policy and the amount of coverage. True and
complete copies of all such
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policies shall be delivered to the Buyer. All such policies are in full force
and effect, all premiums with respect thereto covering all periods up to and
including the date of the Closing have been or will be paid when and as due, and
no notice of cancellation or termination has been received with respect to any
such policy. Such policies are sufficient for compliance with all requirements
of law and of all agreements to which the Corporation is a party, are valid,
outstanding and enforceable policies, and provide adequate insurance coverage
for the assets and operations of the Corporation.
4.15 Labor Relations; Employees. Except as set forth in the Disclosure
Schedule, (A) the Corporation 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 date or amounts required to
be reimbursed to such employees, (B) upon termination of the employment of any
such employees, the Corporation will not, by reason of anything done prior to
the Closing, be liable to any of such employees for so-called "severance pay" or
any other payments, (C) the Corporation is in compliance in all material
respects with all material Federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices, terms and
conditions of employment and wages and hours and any related laws which would
result in personal liability to stockholders , (D) no employee of the
Corporation has notified the Corporation that such employee will terminate his
or her employment or engagement with the Corporation. No employee of the
Corporation is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Corporation or any other party because of
the nature of the business conducted or proposed to be conducted by the
Corporation. Except as set forth in the Disclosure Schedule, there are no rights
which relate to bonuses, deferred compensation, pension, profit-sharing,
retirement, stock purchase, stock option, stock appreciation, other forms of
incentive compensation, excess benefit, supplemental pension insurance
(including any self-insured arrangements), workers' compensation, disability,
supplemental unemployment, vacation benefits, medical or post-retirement
insurance, compensation or benefit, welfare or any other employee benefit plans,
arrangements or practices, whether written or oral (each an "Employee Benefit
Plan"), applicable to employees or former employees of the Corporation or for
which the Corporation has any liability.
4.16 Litigation, Judgments, Decrees, Etc. There has not been to the date
hereof, nor is there or will there be, any claim, action, suit, inquiry,
proceeding, investigation, attachment, replevin or execution of any kind or
nature whatsoever (including, but not limited to, products liability), by or
before any domestic or foreign court or governmental or other regulatory or
administrative agency or commission or tribunal pending or threatened against or
involving the Corporation or its assets (including without limitation any
bankruptcy or insolvency proceeding), or which could question or challenge the
validity of this Agreement or any action taken or to be taken by The Corporation
pursuant to this Agreement or in connection with the transactions contemplated
hereby; and, except for the matters disclosed to the Buyer in writing, there is
no valid basis for any such action, suit, inquiry, proceeding, investigation,
attachment, replevin or execution. The Corporation is not subject to any
judgment, order, decree or legal requirement which may have an adverse effect on
its business practices or on its ability to acquire any property or conduct its
business in any area.
4.17 Consents and Approvals of Governmental Authorities and Others. No
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consent, permit, approval or authorization of, or declaration, filing or
registration with, or the giving of notice to, any domestic or foreign
governmental or regulatory authority or any other person or entity is required
in connection with the execution, delivery and performance by the Corporation of
this Agreement or the consummation by the Corporation of the transactions
contemplated hereby.
4.18 Brokers and Finders. No person has been authorized by the
Corporation, or by anyone acting on behalf of the Corporation to act as a
broker, finder or in any other similar capacity in connection with the
transactions contemplated by this Agreement in such manner as to give rise to
any valid claim against the Buyer or the Corporation for any broker's or
finder's fee or commission or similar type of compensation.
4.19 Disclosure. No representation, warranty, covenant or agreement by the
Corporation in this Agreement and no statement contained in any document,
including without limitation, financial statements, certificates, or other
writing furnished or to be furnished to The Buyer or any of its representatives
pursuant to the provisions hereof contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact necessary in
order to make the statements made herein or therein not misleading. All copies
of contracts, agreements and other documents delivered to the Buyer or any of
its representatives pursuant hereto are true, complete and accurate and reflect
the complete understanding between the parties thereto.
4.20 Compliance with Law; Necessary Authorizations.
(a) The Corporation has, in all respects, duly complied and is
presently in all respects duly complying, in respect of its business, operations
and properties, with all applicable laws, rules, regulations, orders, building
and other codes, zoning and other ordinances, permits, licenses, authorizations
and decrees of all federal, state, local foreign or other governmental or
quasi-governmental authorities.
(b) The Corporation has duly obtained all permits, concessions,
grants, franchises, licenses and other governmental authorizations and approvals
necessary for the conduct of its business; each of the foregoing is in full
force and effect; there are no proceedings pending or threatened which may
result in the revocation, cancellation, suspension or modification thereof; and
the consummation of the transactions contemplated hereby will not result in any
such revocation, cancellation, suspension or modification.
4.21 Equity Investments. The Corporation does not currently have
subsidiaries, nor has the Corporation owned, nor does the Corporation currently
own, any capital stock or other proprietary interest, directly or indirectly, in
any corporation, association, trust, partnership, limited liability company or
other entity.
4.22 Related Transactions. Except as set forth in the Disclosure Schedule:
(a) no current director, officer, stockholder, unitholder or
affiliate of the Corporation or any associate thereof is now a party to any
transaction with the Corporation (including, but not limited to, any contract,
agreement or other arrangement providing for the furnishing of services by, or
rental of real or personal property from, or borrowing money from,
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or otherwise requiring payments to, any such director, officer or affiliated
stockholder of the Corporation or associate thereof, other than compensation as
employees in the ordinary course of business), or
(b) no current officer or director of the Corporation is now the
direct or indirect owner of an interest in any corporation, firm, association or
business organization which is a present competitor, supplier or customer of the
Corporation (other than less than 5% non-affiliated holdings in publicly-held
companies), nor does any such person receive income from any source other than
the Corporation which relates to the business of, or should properly accrue to,
the Corporation.
4.23 Accounts and Notes Receivable. All the accounts receivable and notes
receivable owing to the Corporation as of the date hereof constitute valid and
enforceable claims arising from bona fide transactions in the ordinary course of
business, have been collected and are currently being collected by the
Corporation in the ordinary course of business consistent with past practice,
and there are no known or asserted claims, refusals to pay or other rights of
set-off against any thereof. Except as set forth on the Disclosure Schedule, as
of the date hereof, there is (i) no account debtor or note debtor delinquent in
its payment by more than 90 days, (ii) no account debtor or note debtor that has
refused or threatened to refuse to pay its obligations for any reason, (iii) to
the best knowledge of the Corporation, no account debtor or note debtor that is
insolvent or bankrupt and (iv) no account receivable or note receivable pledged
to any third party by the Corporation.
4.24 Accounts and Notes Payable. Except as set forth in the Disclosure
Schedule, all accounts payable and notes payable by the Corporation to third
parties as of the date hereof arose, and as of the Closing will have arisen, in
the ordinary course of business, have been paid and are currently being paid by
the Corporation in the ordinary course of business consistent with past
practice, and, except as set forth on the Disclosure Schedule, there is no such
account payable or note payable delinquent in its payment, except those
contested in good faith and already disclosed on the Disclosure Schedule.
4.25 Intellectual Property Rights.
(a) Except as set forth on the Disclosure Schedule:
(i) the Corporation owns, free and clear of all liens and
encumbrances of any kind or nature, possesses, has the exclusive right to use,
sell, license (or sublicense), transmit, broadcast, deliver (electronically or
otherwise) and dispose of, has the right to bring actions for the infringement
of, or where necessary, has made timely and proper application for, all
Intellectual Property Rights (as hereinafter defined) that are used in the
Corporation's business as currently conducted and as proposed to be conducted
assuming the Corporation's business is conducted in the future as it is
currently being conducted (collectively, the "Requisite Rights"), and such
rights to use, sell, license (or sublicense), transmit, broadcast, deliver
(electronically or otherwise), dispose of and bring actions are exclusive with
respect to Requisite Rights developed by the Corporation (which rights are
identified on the Disclosure Schedule) and to the best knowledge of the
Corporation are sufficient for the conduct of the Corporation's business in the
case of all other Requisite Rights;
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(ii) the execution, delivery and performance of this
Agreement, and the consummation of the other transactions contemplated hereby,
will not breach, violate or conflict with any instrument or agreement governing
any Requisite Rights, will not cause the forfeiture or termination or give rise
to a right of forfeiture or termination of any Requisite Right or in any way
impair the right of the Corporation to use, sell, license (or sublicense),
transmit, broadcast, deliver (electronically or otherwise) or dispose of or to
bring any action for the infringement of, any Requisite Right or portion
thereof;
(iii) no royalties, honorariums or fees are payable by the
Corporation to other persons by reason of the ownership, use, sale, license (or
sublicense), transmission, broadcast, delivery (electronically or otherwise) or
disposition of the Requisite Rights other than the sales commissions paid in the
ordinary course of business;
(iv) neither the manufacture, marketing, license, sale,
transmission, broadcast, delivery (electronically or otherwise) or use of any
product or service currently or currently proposed to be licensed, sold,
marketed, transmitted, broadcast, delivered (electronically or otherwise) or
used by the Corporation or currently under development by the Corporation,
violates any license or agreement of the Corporation with any third party or
infringes any common law or statutory rights of any other party, including,
without limitation, rights relating to defamation, contractual rights,
Intellectual Property Rights and rights of privacy or publicity; nor is any
third party infringing upon, or violating any license or agreement with the
Corporation relating to, any Requisite Right; and there is no pending or
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license, transmit, broadcast, deliver (electronically or otherwise)
or dispose of any Requisite Right, nor is there a basis for any such claim, nor
has the Corporation received any notice asserting that any Requisite Right or
the proposed use, manufacture, sale, license, transmission, broadcast, delivery
(electronically or otherwise) or disposition thereof conflicts or will conflict
with the rights of any other party, nor is there any basis for any such
assertion;
(v) all officers and employees of the Corporation, and all
independent contractors and consultants to the Corporation who have had access
to confidential and proprietary information of or to the Corporation, have
executed and delivered to and in favor of the Corporation an agreement regarding
the protection of confidential and proprietary information and the assignment to
the Corporation of all Intellectual Property Rights arising from the services
performed for the Corporation by such persons (collectively, the
"Confidentiality Agreements"). The Corporation has made commercially reasonable
efforts to safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all Requisite Rights; and
(vi) the Corporation has not sent to any third party nor
otherwise communicated to another person any notice, charge, claim or other
assertion of, or has any knowledge of, present, impending or threatened
infringement by, or misappropriation of any Intellectual Property Right of the
Corporation by such other person or any acts of unfair competition by such other
person.
(b) The Disclosure Schedule sets forth (A) all actions taken and all
applications and filings made pursuant to applicable Federal, state, local and
foreign laws by the Corporation to perfect or protect its interest in the
Requisite Rights; (B) all actions the
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Corporation requires to be taken by the employees of the Corporation to assign
or otherwise transfer to the Corporation all of their respective right, title
and interest in and to any Intellectual Property Rights owned by them which is
necessary, appropriate or desirable for the conduct of the Corporation's
business as presently conducted and as proposed to be conducted; (C) the name of
all persons (whether or not employed by the Corporation) known to the
Corporation to whom any proprietary and confidential source code (other than
source code that is ordinarily freely accessible to the public over the
internet) comprising Requisite Rights has been disclosed and (D) all of the
Corporation's patents, patent applications, trademarks, trademark applications,
trade names, service marks, service mark applications, copyrights and copyright
applications.
(c) As used herein, the term "Intellectual Property Rights" shall
mean all industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service mark applications, copyrights,
copyright applications, franchises, licenses, databases, computer programs and
other computer software (including, but not limited to, the Software, as
hereinafter defined), user interfaces, know-how, trade secrets, customer lists,
proprietary technology, processes and formulae, source code, object code,
algorithms, architecture, structure, display screens, layouts, development
tools, instructions, templates, marketing materials, inventions, trade dress,
logos and designs and all documentation and media constituting, describing or
relating to the foregoing.
4.26 Software Rights.
(a) The Disclosure Schedule sets forth a true and complete list and
description of all software systems and applications (A) designed or developed
by employees of the Corporation within the scope of their employment with the
Corporation or otherwise on behalf of the Corporation or by consultants or
independent contractors on the Corporation's behalf or otherwise within the
scope of their engagement and that have a fair market value of at least $1,000
(the "Owned Software") or (B) licensed by the Corporation from any third party
(the "Licensed Software"), in each case that is manufactured or used by the
Corporation in the operation of its business or marketed, licensed or sold or
proposed to be marketed, licensed or sold by the Corporation to third parties
(collectively, the "Software") and, in the case of Licensed Software, the
Disclosure Schedule identifies each license agreement with respect thereto.
(b) All of the Owned Software is original. The Corporation owns the
Owned Software free and clear of encumbrances (other than valid third party
patent rights of which the Corporation is unaware) and has not sold, assigned,
licensed, distributed or in any other way disposed of or encumbered the Owned
Software other than licenses granted in the ordinary course of business as
disclosed on the Disclosure Schedule.
(c) The Licensed Software is validly held and used by the
Corporation and is currently, and will be, fully utilizable pursuant to the
applicable license agreement with respect thereto without the consent of or
notice to any third party. All of the Corporation's computer hardware has
validly licensed software installed therein.
(d) The Corporation has not knowingly altered its data, or any
Software or supporting software that may in turn damage the integrity of the
data, whether stored in
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electronic, optical or magnetic or other form. The Software does not contain any
viruses (the Corporation having installed in each of its computers standard
virus checkers to identify the same).
4.27 Bank Accounts. The Disclosure Schedule sets forth: (i) the names and
addresses of all banks and other financial institutions at which the Corporation
maintains safe deposit boxes or accounts of any nature; (ii) the names of all
persons authorized to draw thereon, make withdrawals therefrom or have access
thereto; and (iii) account or other identifying numbers relating thereto.
4.28 Directors, Officers and Employees.
The Disclosure Schedule sets forth an accurate and complete list:
(a) the names and current salaries of the Corporation's directors,
officers, and key managerial employees;
(b) the names and wage rates for its non-salaried and non-executive
salaried employees, by classification; and
(c) the customary increases on a periodic basis in the compensation
of each of the foregoing or any increases required by any arrangement or
understanding with each of the foregoing.
4.29 Customers and Suppliers.
The Disclosure Schedule sets forth:
(a) an accurate and complete list of the five largest customers of
the Corporation and the total sales in dollars to each such customer during the
previous three (3) year period; and
(b) an accurate and complete list of the five largest suppliers of
the Corporation and the total purchases in dollars by the Corporation during the
previous three (3) year period.
(c) except to the extent set forth in the Disclosure Schedule, there
has not been any adverse change and there are no facts known to the Corporation
which indicates that any adverse change is reasonably foreseeable in the
business relationship of the Corporation with any customer or supplier named in
the Disclosure Schedule. Except for the customers and suppliers named in the
Disclosure Schedule, the Corporation has not had any customer which accounted
for more than five (5%) percent of its sales for (i) its fiscal year ending
December 31, 1998; or (ii) the fiscal year ending December 31, 1999, or any
supplier from whom it purchased more than five (5%) percent of the goods and
services which it purchased during each such period.
4.30 Filings. The Corporation has timely filed with the United States
Securities and Exchange Commission (the "SEC") all filings required by the
Securities Act of 1933, as amended (the "Act"), and/or the rules and regulations
promulgated under the Act; and all such
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filings are materially correct in all respects. No notification or reporting
requirements to the SEC are required relating to this Agreement or the
transactions contemplated hereby.
5. Representations and Warranties of the Buyer. The Buyer hereby
represents, warrants and covenants to the Corporation as follows:
5.1 Corporate Organization, Etc. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
5.2 Authorization, Etc. The Buyer has full corporate power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. The Buyer has taken all action required by law or otherwise to be taken
by the Buyer to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and this Agreement is a
valid and binding Agreement of the Buyer enforceable in accordance with its
terms.
5.3 No Violation. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provisions of the Certificate of Incorporation or By-Laws of the Buyer, or be in
conflict with, or constitute a default under, or cause the acceleration of the
maturity of any debt or obligation pursuant to, any agreement or commitment to
which the Buyer is a party or by which the Buyer is bound, or violate any
statute or law or any judgement, decree, or order, regulation or rule of any
court or governmental authority.
6. Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
the appropriate parties will take all such necessary action, including without
limitation, the execution and delivery of such further instruments and documents
as may be reasonably requested by the other party or parties for such purposes
or otherwise to complete or perfect the transactions contemplated hereby.
7. Additional Conditions to Purchase by Buyer. Each and every obligation
of the Buyer under this Agreement to be performed on or before the Closing shall
be subject to the satisfaction, on or before the Closing, of each of the
following conditions, unless waived in writing by the Buyer:
7.1 Performance. The Corporation shall have performed, fulfilled and
complied with all agreements, obligations and conditions required by this
Agreement to be performed, fulfilled or complied with by it on or prior to the
Closing.
7.2 No Proceeding, Litigation, Injunction, Etc. No suit, action,
investigation, inquiry or other proceeding by any governmental body or other
person shall have been instituted or threatened which arises out of or relates
to this Agreement or the transactions contemplated hereby or seeks to obtain
damages in respect thereof, and, on the date of the Closing, there shall be no
effective permanent or preliminary injunction, writ, temporary restraining order
or any order of any nature issued by a court of competent jurisdiction directing
that the transactions provided for herein not be consummated as so provided.
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7.3 Consents. The Corporation shall have delivered to the Buyer all
licenses, consents, permits, approvals, authorizations, qualifications, orders
and waivers of all governmental entities and third parties (collectively,
"Consents") required to consummate the transactions contemplated hereunder or
required by law or by administrative interpretation to fully operate the
business and affairs of the Corporation.
7.4 Investigations, Etc. Neither any investigation of the Corporation by
the Buyer nor any other document delivered to the Buyer after the date of this
Agreement as contemplated by this Agreement, shall have revealed any facts or
circumstances which, in the sole discretion of the Buyer, reflect in an adverse
way upon the business, financial condition, assets, licensing, liabilities,
(absolute, accrued, contingent or otherwise), working capital, reserves,
operations or prospects of the Corporation after the Closing.
7.5 Additional Documents, Etc. The Corporation shall have delivered to the
Buyer such other documents, instruments and certificates as shall be requested
by the Buyer or the Buyer's counsel for the purpose of effecting the
transactions provided for and contemplated by this Agreement.
7.6 Post-Closing Requirements. The law firm of SCC shall, within seven (7)
days of the date hereof, provide Buyer a final capitalization table, list of
stockholders, stockholder information, and any other information in its
possession reasonably requested by Buyer.
8. Survival of Representations andWarranties; Indemnification:
8.1 Survival of Representations and Warranties. Notwithstanding any
investigation at any time made by or on behalf of any party hereto, all
representations and warranties of the Corporation contained in this Agreement
shall survive the Closing Date until a date (the "General Survival Date") which
shall be the sixth (6th) anniversary of the Closing.
8.2 Statements as Representations and Warranties. All statements contained
herein, in the Disclosure Schedule, or in any other schedule, certificate, list
or other document delivered or to be delivered pursuant to this Agreement shall
be deemed representations and warranties as such terms are used in this
Agreement and any misstatement or omission in any representation or warranty
shall be deemed a breach of such representation or warranty hereunder and in the
event of any such breach, the Buyer shall be entitled to indemnification in the
manner and to the extent set forth in this Article 8.
8.3 Indemnification by Corporation. The Corporation agrees to indemnify,
defend and hold harmless The Buyer and any parent, subsidiary or affiliate
hereof and all directors, officers, employees and representatives of The Buyer,
at any time after the Closing until the General Survival Date (except that such
indemnification obligations shall continue beyond the General Survival Date if a
notice of claim for indemnification shall be delivered to the Corporation prior
thereto, in which case such indemnification obligations shall continue until the
claim as to which such notice has been given is resolved and any applicable
indemnification obligations have been satisfied), from and against all demands,
claims, actions or causes of action, assessments,
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losses, damages, liabilities, costs and expenses, including without limitation,
interest, penalties and reasonable attorneys' fees and expenses (collectively,
"Losses") asserted against, resulting to, imposed upon or incurred by the Buyer
or any member thereof, directly or indirectly, arising out of or in connection
with:
(a) the inaccuracy of any of the representations, warranties,
covenants or agreements of the Corporation made in or pursuant to this
Agreement; and
(b) the breach or alleged breach of any warranty or representation
of the Corporation of any covenant, obligation, condition or agreement of the
Corporation to be performed, fulfilled or complied with by the Corporation in or
pursuant to this Agreement; and
(c) any brokers or finders fees and expenses. Any claim for
indemnification may be used as a setoff against any monies owed to the
Corporation until such claim is finally resolved.
9. Miscellaneous Provisions:
9.1 Amendment and Modification. This Agreement may be amended, modified
and supplemented by the parties hereto only by written instrument signed by or
on behalf of each of the parties hereto by their duly authorized officers or
representatives.
9.2 Waiver of Compliance. Any failure of the Corporation, on the one hand,
or the Buyer, on the other hand, to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the other
party hereto but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
9.3 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay the fees and
expenses of their respective counsel, accountants and other experts, and shall
pay all other expenses incurred by each of them incident to the negotiation,
preparation, execution and consummation of this Agreement.
9.4 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or on the third day after being mailed by
certified or registered mail, to the addresses set forth at the heading of this
Agreement.
9.5 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, administrators, executors, legal representatives, successors and
permitted assigns. This Agreement is not assignable by either party without the
consent of the other party.
9.6 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein, and supersedes
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all prior agreements or understandings between the parties with respect hereto.
The Disclosure Schedule, any exhibits and all certificates, documents and other
instruments delivered or to be delivered pursuant to the terms hereof are hereby
expressly made a part of this Agreement as fully as though set forth herein, and
all references herein to the terms "this Agreement", "hereunder", "herein",
"hereby" or "hereto" shall be deemed to refer to this Agreement and to all such
writings. Any breach of covenant, misrepresentation or default under any
provision of any such writings shall for all purposes constitute a breach of
covenant, misrepresentation or default under this Agreement.
9.7 Third Parties. Except as specifically set forth above or referred to
herein, nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon or give to any person or corporation other than the
parties hereto and their successors or permitted assigns, any rights or remedies
under or by reason of this Agreement.
9.8 Severability. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible under
the law applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without affecting the
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
9.9 Noncircumvention. The parties hereto agree not to directly or
indirectly circumvent the purposes of this agreement which is for the Buyer to
acquire the Shares in the most effective manner possible.
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9.10 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
COMPUCES, INC.
By: /s/ Henry Kauftheil
--------------------------------------------
Henry Kauftheil, Chairman
YOUNETWORK CORPORATION
By: /s/ Don S. Senerath
--------------------------------------------
Don S. Senerath, Officer and Director
As to paragraph 2(b)(ii):
INTERNATIONAL COMPUTING, LLC
By: /s/ Don S. Senerath
-----------------------------------
Don S. Senerath, Authorized Signatory
As to Paragraphs 1.2, 2(b)(iii) and 7.6:
SILVERMAN, COLLURA AND CHERNIS, P.C.
By: /s/ Peter Silverman
---------------------------------
Peter Silverman, Partner
